Millions at stake in legal fight over Waukesha business that’s yet to be sold

If one of 18 companies were to buy Waukesha-based heat treating company Therm-Tech before April 2022, a Chicago consulting firm estimates it would be entitled to as much as $2.7 million in commissions.

But Therm-Tech says that firm, Cosmos Consulting Group Inc., failed to do its job over more than two years and should be forced to repay a $15,000 retainer it paid in 2016.

Therm-Tech is located just south of Highway 59 and west of Highway 164 in Waukesha. The company provides hardening, tempering, surface heat treatments, vacuum treatments and annealing services.

The company initially filed a lawsuit in Waukesha County Circuit Court in September, alleging breach of contract and seeking a declaration that CCG would not be entitled to commissions from any prospective buyers. CCG is seeking to move the case to federal court in the U.S. District Court for Eastern Wisconsin.

Attorneys for CCG declined to comment on the case.

Michael Huitink, an attorney with Brookfield-based SBR Law Group representing Therm-Tech, said the company is not currently for sale and “that is not what the lawsuit is about.”

“Therm-Tech terminated (CCG president Irwin Brown) as an employee and a consultant, and terminated a years-old brokerage agreement with Mr. Brown’s company that was really never performed,” Huitink said in an email. “The lawsuit is about resolving contract issues, and does not relate to any current or pending sale of the company.”

The complaint says the two companies entered an agreement in September 2016 that called for CCG to market Therm-Tech for sale and develop a list of potentially interested buyers. CCG would also consult with Therm-Tech on the sale of the business and participate in any negotiations.

In exchange, CCG was eligible for a commission of 5.75% on the first $5 million of a sale, another 6.5% on the next $5 million and 7.25% on any payment above $10 million. Therm-Tech was also to pay CCG for out-of-pocket expenses.

“CCG did virtually nothing with regard to its obligations” after Therm-Tech paid a retainer, including not developing a potential list of buyers, according to the complaint.

In April, an attorney for Therm-Tech sent a letter to CCG terminating the agreement, citing the lack of any activity. Therm-Tech offered to not try to recover the $15,000 retainer if CCG agreed the deal had no ongoing effect.

The agreement entitled CCG to commission on any sale during the term of the contract and on any sale to a company from the list for 36 months after the deal ended.

After not hearing from CCG, Therm-Tech sent a second letter in August confirming the matter was closed, according to the complaint.

The next day, a CCG attorney allegedly claimed for the first time that it had sent a list in May of potential buyers it would be entitled to commissions on if a deal came together by April 2022.

In seeking to move the case to federal court, CCG filed a declaration from Brown, contending he had provided the required services to Therm-Tech and was intimately familiar with Therm-Tech’s strategy, operations and finances.

“Based on my personal knowledge and expertise working with Therm-Tech, I am aware that Therm-Tech’s financials make a sale of the company viable and Therm-Tech would like to consummate such a sale in the near future,” Brown said in the declaration.

He also said he had provided Therm-Tech with a list of companies on May 23 and Aug. 22.

Brown said his experience with other deals and knowledge of Therm-Tech’s valuation would suggest the business “is likely to be sold” to one of the listed companies for $30 million to $39 million.

A sale in that price range would potentially entitle CCG to a commission of $2.06 million to $2.75 million.

The list of companies includes Acasta Enterprises, Bluewater Capital, Blue Point Capital, Bodycote, Calvert Street partners, Capital Resource Partners, Caterpillar Inc., Chem-Plate Industries, Chicago Capital Holdings, Citadel Investments, Equity Group International, High Street Capital, Lubar & Co., Metalco Inc., Onex Corp., Paulo, Rex Heat Treat and Thermal Process Holdings.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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