James C. Bly, Jr.

An Important Message from James Bly

To Our Clients, Business Associates, and Friends,

Ernst & Young US LLP

I am pleased to announce that Headwaters SC, LP (HWSC) has signed a definitive agreement to sell its Family Enterprise Business Services (FEBS) practice and assets to Ernst & Young US LLP (EY), a leader in assurance, tax, transaction, and advisory services. As part of this transition, I will join EY on a full-time basis as an Executive Director to assure consistency of service to our clients and a smooth evolution, and to be a leader in scaling-up the FEBS practice within EY. Certain of our other Managing Directors and all of our junior professional and administrative team members, who have been part of our FEBS team, will also be joining EY. We will be maintaining our stand-alone executive offices in Sewickley, Pennsylvania and also operating out of certain EY facilities in various cities.

I have put a great deal of thought into the decision to join EY and would like to share my reasoning with you.

Earlier this year, I sent an announcement that HWSC was celebrating its 35th anniversary in 2017. As the Founder of HWSC that was a significant milestone. During that time, HWSC had evolved to become a leading professional services firm in the field of family business advisory. Our services were designed to help business-owning families develop and implement strategies to grow larger, more valuable businesses; secure growth capital while maintaining family control; transition to future generations; and obtain liquidity, when needed, for shareholders. Our years of practice specialization positioned us as a trusted, proven and competent service provider. Also, the integrated nature of our FEBS service offering combined with our experienced professional team, and proprietary tools and methodologies, provided value-added and differentiated services for the benefit of our clients.

Most of HWSC's clients were also multi-generational family enterprises, which typically controlled upper middle market companies, and we had practiced long enough to have assisted a number of clients with two and even three generational transitions for their businesses.

When marking our 35th anniversary, I reflected that we have been blessed to have a tremendous clientele and practice. However, I wanted to be certain that our firm remained relevant in the future and, also, that the continuity of our firm was assured from a succession management standpoint.

During the past five years, it had also become clear to me that the needs of larger family controlled businesses have changed significantly since HWSC was founded 35 years ago. While most such businesses need the types of services we provide, the world is changing rapidly. Companies are more multifaceted and more diverse. Swiftly evolving customer needs or preferences, and stronger competitor responses, are increasingly challenging our clients' businesses. Many of our clients' growth strategies also include expanding outside the US, creating even more complexities when addressing cross-border issues.

I also believe that, because of such factors, during this generation family business consulting will evolve from a cottage industry comprised of many small, boutique firms (like HWSC) to an industry more heavily dominated by larger, global professional services firms. I decided that an optimal outcome for HWSC would be to determine whether we might be able use our proven and differentiated practice to attract the interest of such a larger firm. I was also hoping that it would be a full-service provider able to meet an even wider array of our clients' business and financial needs.

At about this time, roughly 3 years ago, after considering the strategic implications for the future, we began exploratory discussions with EY. Since then, we have very carefully worked through getting to know one another, examining future client needs, and developing a business plan to transfer and grow our practice on the EY platform, while assuring our existing clients consistent and unequaled service.

Another factor that was critically important to me was culture. Most of our clients' businesses are located in smaller cities, towns, or rural areas. When their businesses are growing and profitable, I know that they operate with a purpose beyond profit. They are good employers, typically know their employees, provide competitive wages and benefits, and do things like establishing scholarship funds for employees children, building community centers, and donating to their local churches, schools and hospitals. They are both important contributors to their regional economies and also part of the social glue within their communities.

Building a Better Working World

EY uses the term, 'Building a Better Working World.' I have witnessed first-hand in my dealings with EY that they embrace our traditional approach to doing business. They recognize and respect the important role that family controlled businesses serve. In fact, globally, EY is one of the leading professional services businesses to business owning families. They have also been a leader in giving back and sharing their practice insights through their globally networked Family Business Center of Excellence.

EY also encourages its people to become part of the fabric of their communities. And, they clearly work to 'Build a Better Working World' by celebrating entrepreneurism and helping their clients grow larger, more profitable businesses for both today and the long-term.

Finally, Headwaters and EY have the same goal of providing exceptional client service, and EY has an outstanding reputation for providing quality work products and results across all of their service lines. Our traditional clients will continue to be served by their current HWSC team but, in addition, they will have access to all the domestic and global service offerings EY can provide through the outstanding resources within its Private Client Services group and beyond.

I am committed, as is EY, to completing our transition with no interruption of service to our clients or business associates. Our greatest asset is our close, long-term relationships, and we appreciate your support as we make this change.

In closing, I value tremendously our clients, business associates, and friends, and have been honored to represent and work with so many fine people during the past 35 years. I most sincerely thank each of you.

I, also, enthusiastically look forward to the future with EY, and to continuing our valued relationships.

Sincerely yours,

Ernst & Young US LLP

James C. Bly, Jr. | Executive Director| Family Enterprise Business Services

Ernst & Young LLP
1606 Carmody Court, Blaymore 1, Suite 300, Sewickley, PA 15143
Direct: +1 724 933 6600 | james.bly@ey.com
Website: http://www.ey.com