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Publications
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Vol. 8, No. 6, July/August 2010
TWO CLOSED DEALS
FOCUS Represents FI Holdings in Acquisition of A-TEK
FOCUS initiated this transaction, assisted in the negotiations, and acted as financial advisor to FI Holdings. Along with a private equity partner, FI Holdings has acquired A-TEK, Inc. in an equity based transaction. Founded in 1996 and headquartered in Leesburg, Virginia, A-TEK, Inc. provides scientific and information technology services and solutions to federal government agencies.
Eric Oganesoff, Managing Director at FOCUS LLC, who led the search and transaction, stated, “We are proud to have represented the Freelands (owners of FI Holdings) in their acquisition of a fine company like A-TEK. Marshall Graham, another Managing Director at FOCUS, and I worked as a team, and initially profiled over 200 companies for the search, interviewing 98 CEOs of candidate companies and qualified 15 finalists. A-TEK was the clear winner.” Read more...
FOCUS Represents Glodyne Technoserve in Acquisition of DecisionOne
Acquisition Creates Leader in U.S. Global Technology IMS Marketplace
FOCUS represented India-based Glodyne Technoserve Limited in its $104 million acquisition of DecisionOne Corporation, one of the largest technology IMS companies in North America with extensive capabilities in providing infrastructure management services. Glodyne, a leading IT services company headquartered in Mumbai, India, offers technology-led businesses solutions in technology infrastructure management services (technology IMS) and application software services.
Manan Shah, Partner and Co-Leader of the Software and IT Services Group of FOCUS LLC stated, “Glodyne’s acquisition of DecisionOne is an indication of the consolidation wave in the IT infrastructure industry and the increasing interest from India-based and other overseas players in the US market for acquisitions.” Read more...
Active FOCUS Deals
Operating nationally and internationally, FOCUS currently is working with buy- and sell-side corporate clients, private equity groups, holding companies and late stage venture capital firms in the following areas:
- Advertising & Marketing
- Building Materials
- Business Consulting Services
- Business Process Outsourcing
- Call Center Services
- Distribution
- Education and Human Capital
- Electronics
- Energy
- Engineering
- Financial Services
- Government, Aeropsace & Defense
- Healthcare & Life Sciences
- Information Technology
- Manufacturing
- Media
- Parking Services
- Retail Franchising
- Semiconductor Equipment
- Telemarketing
- Warehouse Distribution
We have executed dozens of transactions in a range of market segments, but the same fundamentals apply across all of them. Our on-going transaction process provides us with up-to-the-minute market knowledge in these sectors that may be of corporate development interest to you.
Inquiries should be addressed via e-mail to info@focusbankers.com, by telephone to 202-470-1973 or by fax to 202-785-9413.
How Does Health Care Reform Affect Employers?
By Jeremy N. Miller, J.D.
The Patient Protection and Affordable Care Act (P.L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152), which became law in late March 2010; contain a number of provisions that will affect employers in the short and long term.
Three areas of great interest (and concern) for employers are (1) the tax credit for small employers, (2) potential coverage requirements and penalties for larger employers, and (3) the likely impact of health care reform on insurance premiums. Each of these areas is discussed below.
Tax Credits for Small Employers
Small employers, who provide qualifying health insurance for their employees and pay for at least 50 percent of the cost of such coverage, will be eligible for a tax credit starting this year (2010) and continuing through 2016. The tax credit is claimed on the employer’s annual income tax return.
For the tax years 2010-2013, employers with fewer than 25 full-time equivalent (FTE) employees and with an average annual employee compensation of less than $50,000 per FTE, are eligible for a tax credit of up to 35 percent of the employer’s premium expense (not to exceed the average premium for the small group market in the employer’s state). The number of FTEs is calculated by dividing the total number of hours for which the employer pays wages to employees during the year, by 2,080.
The Internal Revenue Service’s website (www.irs.gov) has a helpful “Frequently Asked Questions” section regarding the small employer tax credit. (For those who want more detail, see the IRS’ Notice 2010-44.) The IRS uses the following example of how the credit will work in 2010-2013: A qualified employer in the 2010 tax year has nine FTEs with average annual wages of $23,000 per FTE. The employer pays $72,000 in health care premiums for those employees (and meets other requirements for the credit). The credit for 2010 equals $25,200 (35 percent X $72,000). Please note that the credit is reduced if the number of FTEs exceeds 10, up to a maximum of 25, and average compensation exceeds $25,000, up to a maximum of $50,000.
Because eligibility for the credit is based, in part, upon the number of FTEs, it is possible for an employer with more than 25 employees to qualify. In an example cited by the IRS, an employer with 46 half-time employees (meaning they are paid wages for 1,040 hours) has 23 FTEs and may qualify for the credit.
For tax years 2014-2016, the tax credit will increase to up to 50 percent; but qualifying employers may claim the credit for a maximum of two years.
Generally, the tax credit can only be used to offset an employer’s actual tax liability. Since many professional services corporations “zero out” at the end of the tax year and have limited tax liability, the tax credit may be of little value to such employers. Further, the amount an employer can deduct for health insurance premiums is reduced by the amount of the credit. There are special rules for tax-exempt employers.
Mandatory Coverage and Penalties
Beginning in 2014, with limited exceptions, all individuals and their dependents will be required to have health insurance with “minimum essential coverage.” Those who do not obtain health insurance are subject to annual penalties which begin at the greater of $95 per person or 1 percent of applicable income in 2014, $325 per person or 2 percent of applicable income in 2015, and rise in 2016 to $695 per person (adjusted for inflation after 2016) or 2.5 percent of applicable income.
Individuals and families below 400 percent of the federal poverty level may be eligible for tax credits to purchase health insurance from the plans to be offered through the state exchanges which are to be operational by 2014 for individual and small employer plans.
The new law does not directly require that employers provide health insurance for their employees. However, beginning in 2014, employers with at least 50 full-time employees who do not provide coverage will be subject to a penalty if at least one full-time employee receives a premium credit as described above.
The penalty is $2,000 per full-time employee excluding the first 30 employees. For example, if an employer has 100 full-time employees (at least one of whom qualifies for the tax credit) and does not offer qualifying coverage, it is subject to an annual penalty of 100-30 x $2,000 = $140,000.
For employers of at least 50 full-time employees who do offer coverage, but have at least one employee receiving the premium credit, the penalty is the lesser of $3,000 for each full-time employee who receives the credit or $2,000 for each full-time employee in excess of thirty. For example, if the employer has 75 full-time employees, ten of whom receive the tax credit, the annual penalty would be $3,000 x 10 = $30,000.
For purposes of the penalty, a full-time employee is an employee who averages at least 30 hours per week of service. This may result in some employers trying to reduce the number of employees who work 30 or more hours per week.
Beginning in 2015, employers with more than 200 full-time employees that offer coverage must automatically enroll all new full-time employees in a plan and continue coverage for current employees; however, new employees have the right to opt-out of the coverage.
Health Insurance Premiums
It is difficult to predict the impact of health reform on the insurance premiums employers are likely to pay. Some observers believe that premiums will increase dramatically because of new restrictions on insurance companies such as on exclusions for pre-existing conditions, rescissions, and annual and lifetime caps.
Others believe the impact will be more modest, particularly for larger employers. Interestingly, in a recent survey conducted by Mercer, employer’s listed the excise tax on so-called “Cadillac” plans as their top concern even though the tax does not go into effect until 2018.
Conclusions
The rules governing employer responsibilities under the new law are extremely complex, and the impact of health reform is uncertain. However, it seems clear that employers will have less flexibility under the new law when it comes to making insurance coverage decisions, and that the compliance requirements will be an added cost.
Finally, depending upon how the political winds blow, significant changes might be made before coverage mandates and penalties are scheduled to begin in 2014.
FOCUS ADDS THREE EXECUTIVES
Abe Garver Joins FOCUS’ Washington, DC Office as a Principal
Abe Garver has joined FOCUS as a Principal in its Washington, DC office. According to Doug Rodgers, CEO and Managing Partner of FOCUS, “Utilizing a unique combination of M&A, financing, and business development skills, Abe has previously worked as a principal on numerous transactions. We are thrilled that he has joined the FOCUS team.”
About Abe Garver
Mr. Garver has over 20 years of industry experience in acquisitions and divestitures, business valuation, corporate accounting, finance, entrepreneurship, business development, and executive compensation for Fortune 1000 and large private companies. Prior to joining FOCUS, Mr. Garver was a Vice President at Marsh & McLennan. Prior to Marsh, he was an investment banker, and senior business valuation consultant with Merrill Lynch & Co., and Ernst & Young LLP, respectively. Read more...
Peter Vaky Joins FOCUS’ Atlanta Office as a Managing Director
Peter Vaky has joined FOCUS as a Managing Director in its Atlanta, GA office. According to Jonathan Wilfong, FOCUS Managing Partner, Southeast, “Pete’s expertise includes capital raising in the international and domestic public and private debt and equity markets, mergers and acquisitions, valuation services, debt negotiation and restructuring, cross border and international transactions, as well as corporate finance. This vast amount of experience will be of great value to our clients.”
About Peter Vaky
Mr. Vaky has more than 35 years of investment banking experience, managing over 1,000 transactions in the debt and equity markets with an aggregate value exceeding $200 billion. Before joining FOCUS, Mr. Vaky was the co-founder and managing partner of VVS CAPITAL. Previously, he held executive positions with SunTrust Robinson Humphrey, Bank of Montreal, Bank of America Securities, Continental Bank, Continental Illinois Asia Ltd in Hong Kong and Sydney Australia, and Wells Fargo Bank in Mexico City. Read more...
Dr. Christopher Morton Joins FOCUS’ Atlanta Office as a Senior Advisor
Dr. Christopher Morton has joined FOCUS as a Senior Advisor in its Atlanta, GA office. According to Jonathan Wilfong, FOCUS Managing Partner, Southeast, “Chris’ experience in the communications industry and his work with numerous successful commercial companies make him uniquely qualified to serve FOCUS’ client base.”
About Dr. Christopher Morton
Dr. Morton has more than 25 years of entrepreneurial and corporate leadership experience in all aspects of the communications industry, including wireless and wire line applications. As co-founder and Chief Executive Officer of SkyCross, a leading antenna company, he led the company to multi-year high growth. Previously he was Executive in Residence with MILCOM Technologies. Dr. Morton earned his Ph.D. in communication systems from the University of Pennsylvania where he was a national winner of the General Electric Doctoral Fellowship.
Read more...
FOCUS Industry Practice Groups
► Capital Financing -- www.focusbankers.com/capitalfinancing
► Education & Human Capital -- www.focusbankers.com/education
► Energy -- www.focusbankers.com/energy
► General Middle Market Businesses
► Government, Aerospace & Defense -- www.focusbankers.com/gad
► Healthcare & Life Sciences -- www.focusbankers.com/health
► Information Technology -- www.focusbankers.com/technology
► Telecommunications, Wireless & Media
- FOCUS Represents FI Holdings in Acquisition of A-TEK
- FOCUS Represents Glodyne Technoserve in Acquisition of DecisionOne
"How Does Health Care Reform Affect Employers?" by Jeremy N. Miller, J.D.