Pascal Wittet & Sandy Farmer (Orca Equity Partners): Why Orca backs first-time CEOs to buy their own business

0:00So I'd love to do two things. One is talk about the kind of people you're backing. And so people listening to this can have a think about whether they're the right fit. And the other one is maybe... And I almost threw the towel in and I was like, I'm sick of this private equity business. I just, you know, why do we bother with this piece? That's a jealousy, like, period. I was actually, I was quite jealous. I was like, we should just mothball the whole private equity side because we can't buy businesses at this sort of price. Especially in UK culture, it depends on the country. some people don't believe they could be the CEO of a business with no sexual experience there's a lot of different skills that are called upon through this journey but one of the most important is you do need to be able to sit in front of someone win their trust and then actually consummate a deal with them so we look for people have some some experience there and then operating you alluded to it as well so there's three things so so one is stable business the second is a business with a moat around it and the third is is good cash generation got it so those are the the three um sort of key business characteristics that we're looking for i'm quite relieved because i know pascal is a massive fan of high rocks and i was i was worrying you might say for a resident 100 burpees in the corner we've tried so hard to not let make high rocks a thing in oracle but Sadly, I failed.

1:18Hi, welcome to Aung Song, a community for people in career jobs or professions who don't realize how accessible it is to buy your own small business without your own money. And also to help owners of businesses grow, whether that's by top tips in sales or technology.

1:39And today, really lucky to have Pascal and Sandy, who are the co-founders of Orca. Orca was the first and the most active fund of search funds in the UK. It's actively backing first-time CEOs across Europe, not just the UK. I think they've been in just over 60 companies to date. And they're going to kindly share their stories and what they're seeing and explaining what's happening in the world of solving the small business succession issue. So Pascal, Sandy, thank you very much for joining us. Thank you for having us. Sandy, you're a pro. Been in studios before. Some massive expectations for the podcast.

2:12Pascal, newbie. but thank you for giving your time to get things off it it doesn't surprise me but it may surprise you many many people who should know about funds of search funds which sounds a bit of a mouthful don't know about it and what fascinates me is the fact that you're backing first-time CEOs who've normally never been a CEO before who've never worked in a sector before to actually go and buy without their own money a traditional small business across Europe and I love that because most people see that it's high risk but could we maybe start with what brought you into that arena i'm really glad you brought a gilet because that clearly means you used to be in private equity so so do you mind patagonia as well so it ticks all the boxes i'm spanning spanning the worlds at the moment yeah save animals on site yeah yeah could you maybe start there with what like enticed you into into the world of small businesses and funder search funds so my journey is a little bit Securitus.

3:09I, actually both Pascal and I are from northeast of Scotland. I spent the early part of my career in banking and then consulting. 2010, I left consulting, went to London Business School to do an MBA, wanted to go into something that was closer to small businesses, wasn't sure exactly what, and basically stumbled upon private equity when I was at business school and quite quickly gravitated to the smaller end of private equity where you could get really hands-on and involved with small owner managed businesses so that's when you say small because that can mean so many things yes sorry you guys mean a small one to three or four million of profit so people talk about mid-market lower mid-market i think it can mean different things to different people this was very much the lowest end of the lower mid-market so you're often investing in businesses that are owner managed family owned um rarely would they be kind of fast growth tech startups they're often slightly more established, probably slightly more boring.

4:05So you enter the private equity world, but not that many private equity people will then make the decision to jump into the search fund area. So what was the catalyst for that? Pascal and I actually joined, after business school, a startup private equity firm. It was a spin-out from Fidelity. And I actually then left, jumped sides of the table, and I spent about five years in the exec management team of two private equity-backed businesses. So I kind of had a bit of investing, a bit of operating quasi-entrepreneurship experience. And then I went back into an investing role in 2017, so nine years ago, and I co-founded a small private equity business alongside two others.

4:43So at the smallest end of the lower mid-market, we were investing in businesses making one to three of profit. But this was really the segue into the search fund world. We didn't have any sector specialism. Our specialism was much more situational. We were exclusively looking to find situations where there was a management transition or a retirement. So we set up that business called Ethos Partners in 2017, built it up to a team of 11. We were managing about 100 million euros. We'd done 15 buyouts. So we'd had some success in building that up. And on that journey, probably the most consistent problem we saw was we would often find really good businesses that we liked, had all the characteristics we were looking for that we'd be interested to invest in but had quite an acute retirement dynamics so usually an owner manager or a founder that was still heavily involved in running the business wanted to sell but wasn't really interested in you know working for an institutional private equity firm for two or three years so was looking to kind of sell and move on so unless we happen to have the right CEO or the right team that we could put in immediately we'd often find these businesses and have to move on.

5:51So that was the kind of catalyst to kind of prompt us to say, okay, well, how can we think about solving the management problem ex ante, finding CEOs or teams first, and then working alongside or with those teams or supporting those teams to then identify businesses that they would acquire and run. So we were really solving a problem that we saw after setting up this small private equity firm that was investing in succession situations. and Pascal can probably talk about it as well but I'd first become aware of search funds back in 2010 when I was at business school but in 2010 it was you know almost non-existent.

6:26So Pascal for you in private equity small businesses and Sandy brought to life the issue where you got succession owner managed business owners moving on private equity you can't buy it because it's so dependent on the owner so you look to bring someone in what may be anathema to people is why you'd bring in someone young. I can say that because I'm not young anymore with more hair than me. Someone young, intelligent, driven, but zero sector experience, never been a CEO before. Why did that appear as a solution? And why did you guys decide to take that track as opposed to traditional private equity?

7:03So as Sandy alluded, we were both at Ethos Partners together and we were running two divisions. one that focused on traditional private equity and one that focused on surge funds. At the investment committee level, we saw these deals coming through, which we then needed to interrogate and impine on which ones we wanted to participate in. And time and time again, and I was running the PE side of the business, and Sandy and Joe were on the surge fund side of the business. Time and time again, I would see the deals that Sandy was bringing to investment committee. yeah i'd look at them and i'd just be like how is it possible that they're buying a business that's this good uh that's got this sort of ebitda at that price i i can't find businesses like that i'd p i'd be paying 25 30 percent more and they'd have quite a lot more hair on them and the diligence that we would inevitably be able to get into would would always be one layer less deep than that which one of the searches we were backing uh had gone into and after about a year of seeing these come through i remember it was very clear it was uh it was in august and we just had another investment committee and we all as partners went down to uh to go and have lunch together and i almost threw the towel in then i was like i'm sick of this private equity business i just you know why do we bother with this piece that's a jealousy like period i was actually i I was quite jealous.

8:33I said, we should just mothball the whole private equity side because we can't buy businesses at this sort of price. And increasingly, what we had seen when we were on the boards of these businesses that we had backed is we could see the delta and the talent that was running it. You could see that just in the speed at which change was happening in organizations. They could undertake M &A at the same time as hiring, at the same time as getting to understand all the customers and getting around all the customers putting together a property a proper strategy deck so when you're at the board meeting which would be one a quarter you'd be talking about long-sighted decisions that needed to be made is this a winner-take-all market or not i've got to say i think many ceos will be watching this thinking i wish i had a board meeting once a quarter that's interesting because i find especially in uk culture depends on the country some people don't believe they could be the ceo of a business with no sexual experience and i think they they put small business owners on a pedestal probably because of all the the podcasts and blogs and the stories of fantastically successful tech startup founders but while small business owners work incredibly hard and intelligent people actually i think a lot of the talent in the corporate world to your point don't realize what they can just naturally bring with the natural talent hunger drive ability to work through problems quickly and you you don't only see that delta in practice but you see it in the numbers as well yeah am i right in thinking that in private equity land you'd be happy with an 18 to 20 ira so for the viewers it's like yearly return but in the small um search fund space actually from the data so far it's about 35 to getting close to double are those the kind of returns you'd be expecting any kind of seeing come through it's a really interesting question and actually one of the things that you're right that it's it's it's against private equity orthodoxy that you would unleash a relatively inexperienced person totally agree and and they deliver fantastic results but but over time it's now certainly in north america there's 40 years of data suggesting that average returns are in the mid-30s IRR at 4x.

10:49But to get the maximum equity package, the CEOs we're backing actually have to deliver a net return of 35 % IRR. So I don't think it's any accident that over 40 years, what's roughly shaken out is the average returns are like 34 or 35%. Incentives drive outcomes. Because incentives drive outcomes. And you are taking really high caliber, really ambitious, really focused, driven, aspirational people and unleashing them into a kind of a small business where you're right, actually, and small business owners are probably rightly put on a pedestal for a number of reasons because often they've taken it from, you know, maybe in some of the other startup contexts, that's the zero to one journey.

11:32I'd argue actually quite a lot harder. Now, we're coming into the businesses when they're still small, but they're usually established for a reasonable length of time and they've got a long track record of profit and cash generation. So all that sort of zero to one hard work and risk is gone, but they're still relatively unsophisticated businesses. So when you take someone that has probably operated in a slightly more professional, sophisticated, perhaps sort of digitized, perhaps slightly more system oriented and with all of the good things that goes around that, they can come into these organizations and really make quite transformational change.

12:11It's not the right stage for that change to happen. Yeah, yeah. And so your question is correct insofar as I think an 18 % to 20 % IRR in most small private equity contexts would be a really good outcome. I'm not sure we expect 35 % in everything, but the incentive drive outcome point that you make is very true. And so far we're seeing that in the portfolio today there's some really fantastic outcomes and some really encouraging progress towards fantastic outcomes. Because I'd love to bring to life the incentive structure. So guide me if I'm wrong. But this is applicable across the board. So for anyone watching, Stanford has a, I think, 62-page Bible on funds and search funds that is constantly updated.

12:55And the model is used, whether it's from the US to South Korea to the UK to South Africa, because it works. But it's, for an individual CEO, 8.5 % at the point of acquisition. eight and a half percent um vesting over time as a ceo and then a further eight and a half percent based on performance towards that 35 and then if if you want to bring in um a partner in crime that might be 10 as opposed to eight and a half correct so i can see those incentives like really driving someone's outcomes over that three to five year journey but back to you pascal on having a fresh wet behind the ears CEO come in um why do you think it it like works so it's a pairing actually it's a pairing of a type and a style of business with a talent and that pairing is very deliberate uh and so it's not every business that would suit as you would describe a wet behind the ears uh CEO to come in and run um so so if we start with the first bit which is what's the what's the type of business that typically suits a search fund yeah it's one where we use proxies for these in the business but it's one where you've got really stable really stable core business um it's one where it's got and can i just interpret that so it's a stable as in it's not got lumpy projects with cash coming in i will explain okay thank you thank you um so let me so there's three things so so one is stable business the second is a business with a moat around it, so competitive moat.

14:32And the third is good cash generation. Got it. So those are the three key business characteristics that we're looking for. So on stability, that probably links to recurring revenue, repeat or high recurring revenue. So when you start on the 1st of January, you know you've got a certain level of revenue that's coming into the business. That is absolutely key because that gives the incoming CEO time, time to learn the business, time to learn the people, time to meet the customers, time to figure out where the gaps are in the business without having to rush around and try and find revenue to fill the hopper.

15:14So that time is what this stability of revenue buys. The moat protects your margins. So you haven't got this margin compression occurring. So what we typically look for, the proxy, the read across into the financials would be high gross margin. A high gross margin business typically is a price setter in the industry or in its market. A low gross margin, think FM cleaning business, 20, 25 % gross margin. You're a price taker. Who cleans my office? Well, I'll just negotiate the contract down in tough times and I'll swap it with somebody else who's willing to give me a 10 % discount. That moat protects you through an economic cycle.

15:57And what I noticed when I spent the first 10 years investing, I looked back on the businesses we'd invested. The ones with high gross margins just tended to ride knocks way better than the ones with low gross margins. And then the final is this cash. Are you generating enough cash to reinvest? and so we're typically looking for businesses with relatively low capex high sort of cash to sorry EBITDA to cash conversion so where you're looking at EBITDA it's a good proxy for what cash is in the business so avoiding things with very long payment cycles where you're paying staff to in construction for example you're paying staff today and you're getting paid for six months later for the work that you've already done.

16:44And back to the stability of revenue piece, we're trying to avoid sectors with high cyclicality, so exposure to construction or exposure to recruitment. Certain types of recruitment can be very cyclically exposed. We try and avoid those situations. So a searcher, when they're looking for a business, we're trying to guide them towards those sorts of metrics or those sorts of criteria, which ends up leading you towards regulatory-driven businesses, testing and inspection, fire safety, HVAC. Deliciously boring businesses. It's so boring, but as somebody described it once, if you don't do it, you go to jail.

17:28So when you're in an economic downturn, do you not test your fire sprinkler system every year? No, you still test it. So those are the sorts of businesses that we're interested in. They are very boring. and our service lads i'd like to bring to life how how much time you put into the search because you're effectively backing an individual to spend a year and a half to two years searching from these businesses i think some stats i picked up from you guys in the past is on average they do 7 000 letters or outreach to small businesses of which they'll meet quite a high percentage so you guys really do invest time in finding those criteria and de-risking it for investors Is there anything you'd like to add to that in terms of the fine detail you expect of your chosen searches?

18:14No, I'd probably only just correct. I mean, we probably don't deserve any of the credit for that. Good on you. One of the reasons, in my opinion, this is such a compelling model, and this is true as an investor, and it's also true of someone looking to do it, is you have the luxury of being able to dedicate almost all of your time to direct origination. So you mentioned we've backed a little over 60. When you say direct origination, for laypeople that's like finding a small business. Yeah, what you were just describing, basically not necessarily always unsolicited but predominantly unsolicited direct outreach to a potential business that you would look to acquire.

18:53Rather than finding a business that's already in a sale process with an advisor that's kind of running a slightly more competitive situation. At the smaller end of the market, even the processes are usually quasi-competitive. So it's not that there can't be some interesting value opportunities there. But typically people are spending the time directly reaching out, as you were describing, letters or direct mail or email outreach. And so we've backed a little over 60. I think we have a little over 40 currently across. We invest all across Europe looking for the one business that they want to acquire and run for the next five to seven years, maybe longer.

19:31and typically each of those individuals or teams that we back will hire two or three interns or analyst associate type levels to help them find that business and so our 40 have hired another 80 to 100 people so right now there's 140 people all across europe spending essentially 100 of their time doing direct origination so it's not credit to me or pascal or any of the rest of our team that they're finding these fantastic opportunities it's that you've you've sort of unleashed an army of of people that if we were trying to do that if we were trying to replicate that inside our own organization it would be impossible you know the operating cost of hiring 140 people to go and spend all their time looking for a business to acquire is very difficult and then they are in turn leveraging technology and AI which has made this actually a much more efficient exercise and but yeah it would be unfair to say we get the the credit for the the kind of quality of businesses that they managed to uncover off the beaten track that uh that others haven't been able to you've actually reminded me mate because i think that's another thing of why it's so attractive to potential CEOs is you guys take a minority position and so for for listeners or watchers you might expect someone like the Orca team or another fund of search funds to be one of maybe seven to nine investors on on in the company and take maximum 15 which means it's not like you have a boss or private equity company on your shoulders telling you what to do and i think with some of the ceos the fact you do quarterly board meetings i think says a lot as well you really do get that freedom and you're there in a very supporting role you also mentioned tech and ai and i see a lot of people thinking i gotta have some thesis how do i resist ai and they forget that in successful businesses now some don't even have a crm system and they've been around for 20 years so i think it's gonna be a while but would you describe yourself as almost anti-AI because again you're buying really boring businesses and your your value-add is not in huge digital transformation maybe some but how do you react to that like what are you doing with AI or that kind of question it hasn't been deliberate so I'm not not intending sort of be self-deprecating as Pascal said the the kind of the main guide to our portfolio construction is very much bottom-up so we're talent-led so we want to back the best people and And then we're kind of quality of the business opportunity that they find.

21:54So the quality of the business led. And we'll kind of maximize for when those two things are really compelling. And then the sort of top-down overlay is we're investing all across Europe. And we're looking for those characteristics that Pascal outlined. Now, those characteristics tend to manifest more in some sectors rather than others. And actually, historically, vertical market software or IT services or cybersecurity services would have been some of the sectors where you would see the characteristics that we would look for. However, we have to date been typically priced out of those types of opportunities.

22:35You find a great vertical market software business that's growing quickly. it tends to get the attention of slightly bigger investors at a smaller stage and we maybe get priced at because back to what we were talking about earlier this for the the ceo or the team that we're backing this is their you know the one business they're going to acquire they want to stack the deck in favor of being able to reach the the maximum 35 irr and if you pay 12 14 times on the way in that just becomes a little bit harder so we've been typically we have a few technology and software investments in our portfolio.

23:09But we've typically been priced out. So what we've ended up with now, we have a skew towards technical BTB services. Pascal was mentioning fire safety, HVAC, testing and inspection. We have a skew towards light niche manufacturing. So think essential business critical products that are typically a very small part of an overall cost. And as part of your value proposition, So if you're looking at that three to five year journey of the CEO coming in, you said they've got time. So they've got like a year to take time because you're protected by that recurrent, that not recurring revenue, the more safe revenue.

23:48But you're not trying to bring in some AI into the business to completely transform it or remove cost. Actually, you're aiming to achieve these returns with the simple stuff. Is that fair to say? Or how do you think about bringing AI and the whole buzz about Vibra coding into the businesses? I'd start by saying Sunny and I are probably the least qualified of the audience to talk about AI. Immediately you're the most honest. So I couldn't possibly hope to comment intelligently on how we bring AI into businesses to make them transformative. We're working at a much more basic level. Most business owners have some core traits, which is what has enabled them to build the business.

24:32They're micromanagers. They are fastidious on detail and on quality, and they are very tight with money. And so what that typically lends itself to is a business that grows well, but under-invests in all the infrastructure that sits behind the business. Really good point. So the point when they come to a sale, and one of the main reasons why there is this wave of retiring shareholders who need to find succession, is because the skills that got them to where they are today do not lend themselves well to doing succession. If I'm very tight with money, I'm not hiring expensive people into my business and I'm not giving them equity.

25:13I can't attract the talent. If I'm under-investing in the business, I've tended to run it really hot. So you've got a workforce that are being sweated to create the value. And so when an incoming CEO comes in, one of the first things they're looking to do is assess the people base at the senior level and understand whether they have both they're good at the job today. they're usually good at the job today. But usually the key gap is, are they still going to be as good at the job tomorrow? So can they grow with this business? And more often than not, there are some really critical gaps in the senior management team which need to be filled.

26:00So that's usually the first place an incoming CEO will look to fill out the senior team. And then once you've got good people in place really good people you need to then give them good data and good mi so good people what's their my data management information so so we're going really basic here so this is about putting an erp system in place we're putting a crm system in place to capture data and i'm just going to translate that for people so crm system is something like their names hubspot salesforce monday.com i think of it as a really pretty but intelligent excel spreadsheet to capture all of your customers and deals.

26:37ERP system, enterprise resource planning system, then normally takes it from when you've won a deal or you've got a quote back signed from a customer through to delivery and the finance team. So those tend to be your end-to-end systems in the business and many small businesses don't have them. So it sounds like as part of your value plan, you're not doing amazing things to these companies, you're just running them well, bringing in that driven, incentivized, talented leadership to really take it to the next stage. with some basic transformation yeah i mean it's sorry it's quite an interesting point um because we touched on how the people that we're working with and backing find really good businesses for a compelling price and part of it is that direct origination approach that they take part of it is they are uncovering businesses that are actually otherwise really quite difficult to sell partly for the reasons pascal was was talking about there they don't have basic systems and processes they haven't built out a kind of a well-formed senior team they don't have good monthly management information that allows that senior team to to be informed and take decisions so when someone coming to look at the business looks at all that they think well that's it's not really in a in a state ready for for me to invest or so a large part of what we're doing and the people we're back here doing is they are hopefully they're they're finding a business that has an opportunity to grow and has some decent tailwinds and so can grow profitability and cash generation but they're also professionalizing it on that journey they are building out the team they are introducing basic governance and systems and processes and reporting so that when they come to sell it hopefully it's a bit bigger but also it looks and it feels like a more sophisticated professional business that unleashes a whole kind of segment of potential buyers typically financial buyers typically it's the next stage of private equity yeah and so you're really building up assets that are fit for purpose for private equity to come in and buy and that's as pascal was alluding to when we had our little a b test of trying to do small private equity buyouts and backing these entrepreneurs to acquire businesses we saw we were having to pay sort of two times more on this side hopefully that means when we you know and and the people that were supporting to do this buy a business for four or five six times when they come to sell it into private equity they can realize a little bit of multiple arbitrage and back to your question about returns if you can deliver some growth and a bit of multiple arbitrage, you don't have to do anything too heroic to actually deliver some really quite compelling returns.

29:03And so you get to this place, which is one of the reasons when we started investing in this space, we were sort of like, hold on, we're basically taking buyout risk and you can get venture-like returns and it shouldn't work. I mean, there should be a slightly higher return. There is a bit more risk alongside management transition, but I think it's mispriced. So I'd love to do two things with your permission. One is talk about the kind of people you're backing. And so people listening to this can have a think about whether they're the right fit. And the other one is maybe one or two stories. So on the first part, what I love about you guys and girls is you don't always, and please challenge me if I got this wrong, you don't always go for the classic ex-MBA, ex-maybe mergers and acquisition banking or investment banking experience, or an ex-consultant from, say, Bain and McKinsey.

29:55you also value someone with a bit more experience um running a p &l so being a manager in a small or bigger business um and a bit more life experience to come in yeah what do you look for what are you excited by but i'd love to do it from the sense of our listeners of like who should who should appear in your inbox and be like hey this is what i've always wanted to do like what do you look for when we launched the the strategy was um we spent a lot of time thinking about this And so one of the first things we did is we tried to go and find people. And that was typically meant we were talking to some investors in North America that had done this for a lot longer.

30:34So they had more reps and they had some data. And so we were hoping they could tell us, OK, well, what should we be looking for? What kind of profiles? What kind of behaviors? What kind of previous experiences? And unfortunately, the consistent message that came back was, you know, we've gathered data. And this was mostly investors, but there's some academic research as well. well, we gather some data. There's nothing really instructive. There's no sort of ex-ante indications that suggest this is going to lead to success. So we're like, okay, well, that's not particularly helpful. But we didn't also want to just throw darts at a dartboard randomly.

31:09So we tried to come up with what we think are the types of experiences and attributes and probably most importantly, behaviors that sort of stack the deck in favor of someone being successful. and so over the last four or so years since we've been backing CEOs and teams we're largely testing against this and so it's things like there's a hygiene factor of sort of cognitive, academic, professional performance that to be honest at the point someone comes into doing something like this almost everybody's... If I can make that tangible for people as in they've been to uni? Yeah, they've been to uni.

31:50We tend to look for people that actually have been sort of bumping their heads up against whatever the ceiling is at whatever stage they've been at in their respective careers consistently. So that can look like many different things. But if you observe someone that from an earlier kind of academic stage and through their professional career has consistently sort of done things a bit quicker than would be the norm, you might be moving from analyst to associate in two years rather than three, that type of thing, you can get a sort of a feel for a consistency of past performance that's a good proxy for someone that's just highly competent and quite intelligent and most people kind of clear that and so then we are looking for things like you know leadership capability have they demonstrated now they might not be a ceo almost no one would back that some have but almost no one's been a ceo but leadership capability um negotiating experience because there's a lot of different skills that are um called upon through this journey but one One of the most important is you do need to be able to sit in front of someone, win their trust and then actually consummate a deal with them.

32:54So we look for people who have some experience there and then operating, you alluded to it as well. One of the main differences that is probably a slight misconception from the outside in and maybe a difference between Europe and North America is we're tending to back slightly more experienced people on the whole in Europe. So it's pretty rare, probably even now old school North American model of fresh out of an MBA, late 20s, early 30s, backing someone really quite green, that's really rare. We tend to be backing people actually sort of at the inflection point when they're probably about to become a CEO anyway.

33:28So I think our cohort is typically sort of late 30s to early 50s. And so they're at a point where they'd be credible in most objective people's eyes to become a CEO. But then the main thing we test for is actually behavioral characteristics. and we're mostly looking for grit and resilience because this is hard how do you how do you test that because if you ask me interview yeah are you resilient to be like yes yeah you take that on a bob graham yeah for those who don't know the bob graham is is an awesome event in the late district but miserable yeah um it's it's hard um and and quite honestly that you know you're doing this over the course of um in multiple interviews it's imperfect the good thing is you have a two-stage decision when we as an investor have a two-stage decision when we initially back someone to support them through the search and then a second decision when they ultimately find a business do we want to invest in them to acquire and then run that business so by the time you get to the second decision you have two years maybe 18 months of observing are they actually kind of gritty and resilient have they had some obstacles that they've overcome um but but but in the interview it is actually trying to find out have they had some real meaningful setbacks and how did they handle those?

34:40Did they get knocked down metaphorically and were they able to pick themselves up and what did they do and how did they do that? So we try and tease out, have they got some demonstrable grit and resilience? And then the next two important things that we're looking for are empathy, sort of EQ, because you're buying a business from someone who's probably been their life for most of their life. It's like giving away a child. And it's like giving away a child trust and confidence and a proper empathetic relationship quite quickly to enable to give you an opportunity to consummate a deal with someone like that in that context.

35:20I think empathy is really important. And then self-awareness, because everybody going down this track is going to encounter something that they don't know or they haven't done before. It will be different for different people. But it's really important that we try and find people who know what they don't know and know when to say i i don't know and i you know i actually i would benefit from someone alongside me that does know this so i can learn and it takes a lot of humility so so grit resilience empathy and kind of humility and self-awareness those are probably the big behavioral characteristics that we're testing for um you know i'm quite relieved carno pascal is a massive fan of high rocks and i was i was worrying you might say for a resident it's right 100 burpees in the corner go we've tried so hard to not let make high rocks a thing in order but sadly i failed so i'd love to bring to life a couple of stories i think listeners will understand the kind of people you're looking for um they probably understand what you're trying to do the businesses you're going after a bit of the process and one thing i love to do is just bring it to life with a couple of stories i know some of them but i don't i don't i don't want to trap you is there one or two companies or searches you've backed which you like to bring to life and talk through you thinking water direct here i am thinking water direct yeah where do you want to start at the beginning so the beginning adam how did you meet him who was he so he he was at london business school yeah he previously had a life in the us working in a vc-backed business telco business came to london business school came out of business school i want to go and do a search fund.