CPG Due Diligence: The Operator Framework Behind a $1B Exit | Keith Levy Part 1

20:28Keith Levy:So you might have to make smaller acquisitions and build a portfolio, kind of a roll-up strategy of a bunch of small brands that would equal a large portfolio. And then we could take our scale of manufacturing, of purchasing synergy, exporting it around the world to enter new markets and really build up the businesses that we buy. That's how I thought about it. And I met John Sebastiani as part of that process. And when I left, you do what you normally do. You call people and go, hey, I'm leaving. And they go, what are you going to do? And my answer would be like, I don't know. I'm going to ski.

21:00Keith Levy:I'm going to golf. I'm going to do yoga. I'm going to ride my bike. Why? John said, well, would you be interested in being an operating partner in NextFun? And I said, maybe. I don't really know what that is because everybody's definition is a little bit different in regards to that. His answer was really good. He's like, look, here's the thing. We have a lot of smart people around us, and we think we're making some good investments, and we think we can help create value. But the stronger we make the team around us, the more value we create. And the more value we can create, the bigger the pie we get to all share in.

21:27Keith Levy:So he said, I think you have some skills and some experience that could be value added to Sonoma Brand's team. We think if we do this right, then it's going to be good for everybody. The thing is, Keysan, when you retire and you say, I'm pulling the ejection handle on the big corporate jobs, for me anyway, life's about finding balance in terms of my own personal opinion is like kind of mind, body, spirit. If you can't keep your mind occupied, you can't leverage Again, like the time, 35, 36 years of experience I had, then you're probably not keeping your mind alive to the point that you need to.

22:01Keith Levy:So my way of keeping my mind alive was utilizing my experience, working with entrepreneurs, working with the fund, working with businesses to help them maximize their value creation for everybody involved. I found a lot of energy in that, man. And from a guy that spent many, many years in big machines, it sounds crazy for me to say this, but if I were to do it over, I'd probably go into smaller businesses because it's just fun. Yeah, it's risky. And yeah, maybe from one day to the next, you don't know whether you can keep the lights on or not from a cashflow standpoint. But everything you spend your time on matters, man.

22:35Keith Levy:There's no bureaucracy. There's no bullshit meetings. It just, it matters. And I love that about working with entrepreneurs and growth capital businesses because they recognize that. They don't know how to do it any other way. So it's pretty cool. Like you're skiing, like a wild ride where every move matters. That's right. I've always loved speed. Going fast is always my thing. All right. I'm going to give you one more softball question. Then I'll start asking you some tough questions. Enough teasing here. So when we're in the hot tub, one of the things you mentioned was the firm really evolved from the early beginnings to very much of a venture focused.

23:04Now it's more of operating like a growth equity firm. Can we just talk a little bit about that just to get some context in terms of how the firm sort of invests as a pattern? Because you're on what? Fourth Fund right now?

23:14Keith Levy:Yeah, we're getting ready to raise Fund 4. John Sebastiani is the managing partner and founder of the firm. He was a phenomenal entrepreneur. Craved jerky, had more than a quarter billion dollar exit. So he knows how to do it. When you're working with entrepreneurs, it's important to them. There's the check and then there's what sits behind the check. When John first started out, it was much more about a venture capital mindset. Smaller checks, bigger upside, along with bigger risk. And as we've gotten bigger and each fund obviously has gotten larger and the check sizes along with each fund are gotten larger, you look to limit your risk a little bit.

23:50Keith Levy:In a venture capital model, maybe you're going to make 20 bets and 15 are going to zero. Two are going to return capital and you got two moonshots and that returns the whole fund if it works. All 20 go to zero, you got a problem. And that can happen in the venture world. In a growth capital world or a private equity world, the numbers are a little bit different. Let's use the same number, 20 bets, maybe eight go to zero, and maybe six or seven return capital, and the remainder are your moonshots. And so you've got an ability to minimize your risk with a larger check, maybe come in at a later stage, Series A, Series B, you're no longer doing seed, you're no longer doing pre-revenue, maybe even Series C with a quick exit in the horizon.

24:31Keith Levy:and with a larger check, you also have the ability to maybe take the whole round or get a larger percentage of the business. And again, I think businesses evolve to say that, here's where I started, but based on the lessons I've learned, here's where I am today and here's where I'm going. Would you do growth equity over buyout? Yeah, I would. Because I think buyouts sometimes come with an inherent belief that there's value that's yet to be uncovered. In plain and simple terms, it's a lot more turnarounds or a lot of things where you feel like this is a depressed value and I can come in and create value.

25:03Keith Levy:Whereas when you're just adding fuel to a flame that's burning hot already, that's an easier equation. I just got to ask real quick. So the deals that didn't work out, was it the model or the company? When you go into a deal, you're not investing in that deal unless you think this is a moonshot. You just believe that from everything about the product, maybe the margin structure, certainly the founder. Because as you're making investments, you're number one sort of important criteria on that list of things that are important to you is the founder. You're betting on them. And if that one doesn't pass the sniff test, you don't even go to the product.

25:40Keith Levy:You don't go to the margin structure. You don't go to the P &L. You don't go to anything. It's not the product. No. It doesn't matter because a bad founder can just tank everything no matter how good the idea. So, yeah, that would be my answer relative to that. So it is a company. It's either the model. They did pick the right company or the company. Yeah. So ones that did go bad, I would say was, we probably bet on the wrong founder. We had maybe a vision of what we thought this founder was. And when we got in there and started working closely together, we found out that it was something different.

26:14Keith Levy:So that's one. And then secondly, also, look, when you're doing early stage growth investment and seed round and pre-revenue, there's no visibility in the financials. There's only pro formas. Over time, we've gotten smarter to say that, Look, companies have gotten bought on insane multiples of revenue over the years with no EBITDA or no meaningful free cash flow or not even operating break even on just their cash flow. And I think those are mistakes. And we've learned from those. Now we're betting on companies that have recurring revenue, that have real EBITDA, real cash flow, or a very short path to achieving those.

26:54Keith Levy:I think that's the difference from venture. When you're going in, hey, you're just making a bet. You love the founder. You love the product. You think it's going to be a moonshot. There's no revenue. There's no profit. There's nothing to... There's revenue. There's profit. There's growth. There's certainty in team. And that's a safer bet. Is the upside limited? Sure. But that's okay. I was trying to set up the philosophical tone for this interview. It's basically both. A little more in the model in some ways. Your models are really evolved in the way you evaluate companies. Let's walk through this.

27:24A deal comes across Sonoma's desk. walk me through your role. What are you doing in evaluation and diligence that someone from finance wouldn't?

27:32Keith Levy:Yeah. So first of all, if a role comes to me from Sonoma, there's a specific reason why it comes my way. One is that I've had experience in that sector. Is it beverage? Is it alcoholic beverage? Snack and treat? Is it pet food? Is it pet ecosystem? And if it doesn't fit those categories, it goes to somebody else. There's not much I can offer. So that's first and foremost. Then once it comes my way, let's say, let's make this up. Let's say it's a pet food company. Because I ran a very successful pet food company and had experience doing that. I would look at, again, founder, what does he or she have that we feel is something special?

28:09Keith Levy:Secondly, is the product market fit? So do they have a product that's addressing a need in the marketplace or want in the marketplace that others aren't addressing properly? Thirdly, is what does a route to market look like? And how does the strategic choices around that make sense based on the life stage of the product they're in? Because most of the things we're doing in consumer products is you have to have a brand around it. It's great to have a great product that people like and fit something that they're looking for, but do they have a brand that speaks to them, that engages them, that makes them want to lean in?

28:43Keith Levy:And then lastly is, are they making it? Are they paying somebody else to make the product? Are they making it themselves? Are they in the basement of their house? How does all that work? And once I look at all those things, and I think great founder, great product, need in the marketplace, have a handle on how they're going to make it, whether that's themselves or through somebody else. And then how does it get to market? Those are the beginning factors. And then it goes into, okay, what are your gross margins? That's great. You got a great product that people want, but you got a 10 % gross margin.

29:11Keith Levy:I'm not interested in that. Again, are you profitable today? And if you're not, why aren't you? Because you're making investments that will pay off year one, year two. But what is that path to profitability and how soon will that arrive? Because look, in a growth capital business or a private equity business or a venture capital business, you're making investments in companies to help maximize value and create a great exit for everybody. You always have an eye on the prize, which is like, what are we going to sell this for down the road that's going to make everybody happy? But there's a lot of things that happen in between the time that concept originates the time you actually exit and everything that goes on in between.

29:48That's kind of how I think about it. So you have first as you're looking to the founder, then product market fit, then go to market, how the sausage is made, and then tying that all to the financials. Is that our framework here? By steps and how operating partners do diligence. Yeah, and you know,

30:04Keith Levy:we call it Keith Levy framework. Sure, and a deal can fall apart in any one of those. Okay, I want to touch on this again from your lens. You got the operator background. Founder, you used to get sussed out. I remember this. I learned early when I hired engineers. A good engineer will hire a good engineer. Kisan cannot hire a good engineer. Period. For you to start thinking about the founder perspective, what does that look like? What are the clear good wins and red flags? Great question, actually, because leadership is a term that gets thrown around a lot. People spend a lot of money reading books and going to courses and stuff.

30:35Keith Levy:But it really is all about leadership when you think about how somebody is going to successfully build a team, build a product, have the energy it takes to get doors slammed in their face and all those types of things. The founder thing as an operator, and again, I've led as many as 1 ,500 people in businesses, and it's about understanding how to create a vision that they can buy into, how to give them the resources they need to get their job done, how to hold them accountable for what it is that you're asking them to do, and how to reward them when they achieve what it is that they're supposed to get done.

31:10Keith Levy:And for me, I look at founders. Do they have that capability? Can they create a great team? Do they have a vision? Can they communicate it well? Does everybody pull on the same end of the rope? Because that founder is right there with them in the trenches, the sleeves rolled up, getting it done. Those are some of the key ingredients I look for because they were what made me successful as an operator. I love leading people. I had a lot of things that I wasn't good at. And those things, I just hired people that are better than me. And if you have a founder that you see has that capability where they go, it's humility.

31:39Keith Levy:You just have to look in the mirror and go, look, I'm really good at this, but I'm really not good at this. Honest recognition of that. And when you say I'm not good at this, but it's an important discipline and skill. When you're sitting talking to them, you're looking for them not to have this God-like mentality that they rule the world, but more of that humbleness and vulnerability of, this is where I'm doing really good, here's not, and even breaking down the business in terms of strengths and weaknesses. I say yes and no. Or is it more intrinsic? Yes and no. I don't tend to want to just hire my own image.

32:07Keith Levy:I'm okay with hiring diversity. I like diversity of thought. People think completely different. Like I've had complete assholes that work for me, but they were really good at what they did. And they're really good at the stuff that I wasn't good at. And that was cool because I just knew they'd get the job done. I could still be okay with them at leadership team. At the end of the day, utopia is sure. Like-minded individuals that see the world the same way, that are humble, that are smart, that have energy, that like to take apart the Rubik's Cube and they just get it done. But reality is that you have to be tolerant that people are different and they look at the world differently.

32:40Keith Levy:And as long as they've got the right skills to complement the ones you don't have, that's going to be your jigsaw puzzle for success. You're not helping me make this into tactical framework. Just so you know what you're saying doesn't mean it comes down to a gut feel either. So between tactical framework and gut feel, like where is your sort of this is a good founder versus not? Oh, man, I wish you could answer that question. So it is a crisp answer, but it's very founder to founder. That is a gut feel. Sure, it's gut feel, but there's demonstrated levels of success around. There is. That's clear.

33:09Let's acknowledge that.

33:10Keith Levy:Your historical pattern can help you predict the future versus, yeah. I mean, who's the people they surround themselves with? What are they like when the bullets are flying and you're in a foxhole together with them? Those are things that are hard to assess in a diligence process. And you have to take some leaps to think about this person could be like this or handle this situation like that. We're getting better at it because we looked at hundreds or thousands of deals over the years very quickly when somebody doesn't do those things. But the hard part is like when you think that they do, they really have those key ingredients that you think they have.

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34:27Keith Levy:Yeah. versus you just meet somebody, just like first date with somebody. You're not like head over heels and trust them and willing to bet on a five, 10-year investment on them. Yeah. Some of that happens in the diligence process for sure, because you're spending a lot of time with people, not just numbers and data rooms. And that's as important part of the equation as the rest of it, not minimizing the importance of the data, because that's super important. And to make sure that you have transparency and financials and potential landmines that are down the road. Here's a good example. When you have a founder that goes, hey, look, I've got like a ton of business with Costco, but that's at risk today.

35:04Keith Levy:But here's how I'm going to replace that. I love that candor. When you have a founder goes, I've got Costco, I'm going to get Kroger, I'm going to get Walmart, I'm going to get this. And all of a sudden my spidey sense is going off. They don't know about this one. That's sort of how I think about like evaluating founders and leadership potential and candor and what's really going on underneath the service. because look, a good founder is not going to give you everything. They're going to hold some cards and they should. I respect that. But to the extent that we've got a good relationship, we've got good visibility, we've got candor, and I don't need to read your mind, you don't need to read mine, we're probably going to wind up in a good place.

35:40How do we think through product market fit? We're talking through and I'm the guy in the PE office working on the numbers. Here's my founder fit based on his financial track record. He's obviously a good founder. Hey, counter to what you said, product market fit. Obviously, they got some financial traction. they have some product market fit.

35:55Keith Levy:Product market fit to me is about, again, it's classically trained marketer mindset, like work backwards. What do consumers want? What's the marketplace have? What does it not have? Where is the latent or emerging demand that you think that your product's going to address? And when you look at those things and you find products that actually do that, whether it's a better for you snack or a, because we do a lot of work in nutraceuticals as well as cosmetics, a brand that's probably going to have more efficacy to solve a particular problem than another. Those are kind of product market fits. There's a market looking for this.

36:26Keith Levy:It doesn't have a complete answer for it, but this particular product does. When I see that, it's, oh, thinking that's something we want to be looking hard at maybe being part of because somebody's figured out something that somebody else hasn't. I'll give you a couple examples in our portfolio. Touchland, great one. You know, when I first saw it, by the way, it had nothing to do with this due diligence process because it wasn't in my wheelhouse. I don't know cosmetics. I don't know nutraceuticals, those things I don't know. So this was a very cool sort of packaging concept around hand sanitizer for tweens.

36:59Keith Levy:Places where they would buy this would be places like Sephora or Ulta or whatever. And it was always at the point of purchase. But what they did was they made this kind of like cool colors, cool packaging, cool fragrances. They made hand sanitizer, something different. So there's a need for hand sanitizer, particularly post-COVID. Everybody's crazy germ conscious now, whatever. So if you could create something that was cool in terms of packaging, had a scent that you liked, had a little bit of a brand kind of cachet around it, that's a cool thing that nobody else was really doing. Purell isn't doing that and no one's doing that.

37:33Keith Levy:We made an investment in that business. We were in it two years. I could be wrong, but it was a short period of time. And it was a female founder, amazing founder, had great insights. It's over$800 million last summer. $800 million. We were in it like two years. I won't tell you the X, but it was well beyond our 5X sort of goal. Those types of things have a product market fit. There's a need for it, but it's done in a unique way with a cool founder that has insights behind it. It's bringing fragrance and color and packaging and style and brand. Like the market's pulling you basically. Yeah. We've had a couple of really good ones.

38:05Keith Levy:I know we're probably going to talk about this, but I'm seeing the market turning in favor of companies getting the deadbolt off the checkbook and getting in the mix and buying companies again. That wasn't happening for the last three or four years. We had a pretty good drought going on. We'd sell a company here. We do a SPAC or we do some things to monetize a little bit for LPs. Now we're getting big exits and we have probably three more on the horizon over the next 12 months. That's amazing. And then so everything on top of that is gravy. What were the key things that you look for in product market fit?

38:35You're going to bullet point them.

38:36Keith Levy:Product market fit to me again is about understanding a need in the marketplace. It's either unmet or there's latent demand for. A lot of founders come to us with stuff. I've got the best product, the best idea. And what it is, is a product looking for a market. Instead of going backwards and saying, here's the need in the marketplace. Would you come up bottoms up and saying, here's this profile of a customer. This is why there's this demand from them. This is how we're serving it. Here's this product everybody wants. No, exactly what you described. I'm looking for something. It's not there or it's not there exactly the way I want it.

39:11Keith Levy:If somebody could satisfy that in a way that speaks to me, I'm on it. So we look for those products. I'm always going to look from consumer backwards and say, if I come up with something that you want and no one else is satisfying in a way that we can, I got something here. That's product market fit. Okay. Not directly in the financials. Let's talk go-to-market. When you think through go-to-market, how are you looking at that? We've got a lot of products in our portfolio that are better for you or have a niche that's not completely widespread. People have to be smart about how they go to market.

39:43Keith Levy:In other words, if you were a cat food company, let's say, and you said, I've got a really high-end cat food, I could go to Walmart or I could go to PetSmart and Petco and Pet Specialty and try and build it out that way first. Once I got the momentum there, then I go, okay, maybe I'm going to Kroger next. Or maybe I'm going to Publix. Or maybe I am going to Walmart next. I don't know. You have to have a strategic understanding of your roadmap and a methodical patient approach to how you're going to do this in a way that won't have massive spikes in production or demand. I prefer a curve that looks like this versus one that looks like this and like this.

40:22Keith Levy:And so, I don't know if that was on camera. Yeah, so steady progress versus hyper-progress to crash back up again. Yeah. Or just a kind of steady build. And a steady build to me is a thoughtful approach to where am I going first? Where am I going second? Where am I going third? And how do I just penetrate all the ACV I want to penetrate? My take is a founder who's talked to well over 60 growth equity funds. And the number one thing is always TAM. Yeah. TAM means death. Yeah, okay. So when I correlate, as soon as that comes up, and for me, it directly ties to the go-to-market. Yeah. You're almost like building your case on why you're going to hit this TAM in that go-to-market.

40:58And I'm curious because, again, you have the finance folks in the office crunching. How do you sort of look at your lens of here's what I see in the go-to-market versus it's always the TAM and when is this thing going to taper off?

41:09Keith Levy:That's actually a very good point, Kisan. I think TAM is important. You want to know that the size of the addressable market out there is big. But to me, that's a very early sniff test. Is this a big market or not? Yes or no? Okay. And then the more important things are to me, okay, once you know that you're swimming in a big pond, how do you get your fair share of that, whatever that is? Is that because your product is unique? Is that because your distribution is more thoughtful? Is that because your people are better? Do you have stronger R &D? Do you have an innovation pipeline that's going to penetrate?

41:42Keith Levy:Those are all things that I think about. But yeah, the size of the market, that's a quick conversation, right? Big market or not, honestly. So the founder has to build that case to investment committee, basically, or the business case they're building to fund the deal. And it's like, hey, here's, and they have to validate it to some degree, but you're almost giving a little bit more of the how of like why that's actually going to happen. It sounds like there's a bit of a perspective of, yeah, I really do agree with the TAM because I really do feel after all these conversations, investors don't have any idea what TAM is.

42:11It is like very made up. It's very just because to me, there's like present day TAM. And then you were talking, you're five years out. TAM could totally change based on, obviously, you talked about consumer behavior here. So there's a little bit of the bottoms-up approach versus top-down. Here's I look at macro down in terms of this, what I think TAM is, versus here's an operator lens of what I think TAM is. And I think there are two different perspectives that somehow need to converge to sign a check.

42:33Keith Levy:Yeah, fair enough. For me, it's just, okay, big market or not, yes or no. But then there's, okay, let's use a more practical example. Let's say, I don't know, what is the chocolate market worldwide? Is it$100 billion, something like that? But if I'm in a small niche of that, what is that total addressable market within that large, larger TAM? That's a point of debate, for sure, in conversations. We have everything from Yerba Madre, which started out as Guayaquil, which is a packaged Yerba Mate tea, to an animal pharma business, to a topical nutraceutical product. What are the TAMs for those things?

43:16Keith Levy:And again, like they're going to be large, but then... I think it's agreed. You're not betting on the accuracy of TAM and trying to build your model downwards to hit those numbers. Yeah. There's sort of a validation of TAM. And then you're still building off of bottoms up with how the business operates. Yeah. Like big market. I get to swim in that pond. Why do I have a chance to be successful in there? And how much of that market can I actually capture? And what's believable about that? And then there's obviously the strategy and what you're betting on in terms of overall thesis. 100%. Okay, so that's go to market.

43:46You mentioned earlier how to make it was, I guess, pillar number four in Keith Levy's framework and how to diligence CPG companies. Why is that important to know how you make it?

43:54Keith Levy:Yeah, actually, that's becoming a very relevant conversation today because here's the thing. So we mentioned that I stepped in to run one of our portfolio companies. And one of the things I discovered is we made very little of our product. And when you're a small business and you're in a co-man environment, a lot of stuff can go wrong. What can go wrong? Maybe some bigger player that they make product for. i.e. Walmart decides that they want to step on the gas and all of a sudden they need more production time. They go to me and they go, hey, I know we're committed to producing X amount for you, but we can't because Walmart needs this line.

44:25Keith Levy:That's a problem. Or maybe you're in a 3PL and they say, we've dedicated this much space to you and somebody else, bigger player comes in, they need more space and they're paying more. So you got to go find another 3PL. So you're kind of at the mercy of other people. So 3PL is like one of these shared kitchen. Well, 3PL could be a warehouse in a situation where you're staging. Oh, just like leasing. It could be like in my case, like I was storing ice cream at minus 10 degrees below zero in a 3PL. Yeah, okay. It's not like those exist everywhere. So you have to find those. So you can quickly have a supply chain issue depending on third parties.

44:57Keith Levy:Yeah, if you're outsourcing all this. Now, if you're a founder and you say, look, I'm raising money. I know I've got a great brand and I want to hire people and I want to do X, Y, Z. But I'm going to take my first dollar and I'm going to invest in my supply chain because I can avoid all those problems. somebody kicking me off the line, somebody telling me I want to raise my pick, pack, and ship rate, somebody telling me that I can't meet your payment terms. I want net 14 days now, which puts a lot of pressure on a small business in terms of cash flow. So if you were a founder, you said, I'm going to invest my first dollar in my own manufacturing environment.

45:29Keith Levy:Why? Because I can control how much I make, control quality and food safety. I can control my payment terms. I'm kind of looking at companies now in my due diligence process that I'm asked to participate in. What do they own? Because it used to be like, just be asset-like. Create a product, create a brand. Don't have any of this money in the ground. It's much more attractive to strategic acquirers, whoever. I was convinced that's like the beauty of America. You just build something, get the marketing right, and you'll get rich. I don't know. I think it's changing. And for me, I'm looking at people that are smart and have engineers or putting their first dollar in the ground and they're creating a manufacturing environment.

46:03Keith Levy:Here's the other thing. So when I was in a Mars environment, and I was... So I did a lot of M &A, but I also did incubation. and I go to one of my plant managers and I go, hey man, I need some line time. I'm screwing around with a chickpea and chocolate product and could be cool, but I don't know. I need some time to experiment. He'd say like, fuck you. You're going to screw up all my metrics. I'm compensated on efficiency. If you come in and disrupt that, I know I'm doing you a solid and a favor, but that could be very good for me. Like where's the win-win in that? So again, from a strategic standpoint, it's like if I'm an acquirer, like a Mondelez comes in and go, I want to buy that whatever snack business.

46:38Keith Levy:And they got their own manufacturing environment. I don't have to disrupt my own. That's cool because I got that. And then as it gets bigger and whatever, okay, I'll figure out how to repatriate it. And I'll put it in a line and whatever. But big companies, man, those manufacturing environments run at a massive speed and efficiency. And your managers are compensated on not screwing that up. Oh, yeah. That's just stuff I've learned over years of doing this stuff on both sides. making it in a big company environment and trying to think small and doing something inside the walls of a big company.

47:07Keith Levy:It's more difficult than meets the eye. You look at how they make it. And I think this is when it goes to a fifth pillar of like how this all ties back to your financials or the company's financials. Yeah. Because then this sort of gives you the story about, okay, here's what gross margins are operating at. Understanding like what their whole supply chain is, benefits of their control, factors that impact the business scalability and other threats to the business. You tend to get a full picture between the founder, the product market fit, the go-to-market, and how they make the product. Yeah, I don't think you got it.

47:37It's a good sequence there. Okay, one question was the operating partner role. Is it like sometimes like you're making a real impactful outcome to the business or just theater? And obviously like different portfolio to portfolio.

47:51Keith Levy:Operating partner. So put yourself in the shoes of a guy like John Sebastiani who's started a growth capital business, trying to create a team and surround himself with the right people. I get that's intent. I love that story. This guy's an operator, goes into private equity. He's not purely, I'm just trying to make money. He's like, I'm trying to make an impact. I learned things. I want to impact other growth companies, provide the capital expertise. That model I like. I'm just wondering, because I talked to other ends where I talked to the founders. It's like, hey, I know you worked with so-and-so investors.

48:20That's what I learned. I could go get references.

48:22Keith Levy:Yeah. And I'm like, how are they actually what I've worked with? So everybody pitches a story of, hey, we invest capital because we have a creative way to produce value, co-assiding investing with you and accelerate your value creation, which is great. This is great. And obviously different ways of them digging in actually how they do that, how their sausage is made. And there's definitely ones I've talked to where we didn't get any kind of support and help at the end of the day they offer it, but we don't really use it. And boom, versus big difference, huge. I'm sure you've seen that where in the portfolios you worked with, big impact, no impact.

48:54Keith Levy:People hire operating partners or invite them into their funds for different reasons. So like one you just mentioned, like some people that bring in like, wow, they know a lot of people that have a lot of money in the family office circle or wherever. They can be a great source to raise the next fund. That's not the value I bring. They got that. They've got bankers. They've got people that worked in private equity. They have people that worked on funds in university and they have entrepreneurs. What they don't have is somebody sat in my seat and said, I'm going to buy a company. I've had the Mars hat on.

49:21Keith Levy:I'm going to go buy your company. What am I looking for? What am I not looking for? What pisses me off? What gets me excited? So I bring that mindset. Okay, I know you think you can sell this to McCormick, but here's what McCormick is going to ask you. And here's why they're not going to like what this portfolio company is bringing. But here's what they're really going to like. So how do you shine a light on that? So that's one value. The second value is I've run companies. I've run divisions. I've had big jobs with big budgets to deploy investments, build brands. So when my name and my resume is on their website, people start to check out Sonoma brands.

50:02Keith Levy:It's like, oh, they've got some hitters around them. They don't only have bankers and entrepreneurs. They actually have somebody who lives in the world of big corporate America or wore an M &A hat and acquired companies. That's really valuable. And it adds credibility to the firm. So some of those optics, Kisan, I'm not going to lie. my face, my reputation, my experience, and my resume. That adds a level of credibility. But then when it comes down to the brass tacks of, hey, is this business that we're going to invest in going to be attractive to a strategic acquire or not? I can answer some of those questions.

50:34Keith Levy:Or at least I can help with some of the visibility around whether it will or won't be attractive. I like this ties to some of the coaching you're giving me on the ski lift about having some like prized people on the board because it creates strong optics, credibility, trust. Okay. So we'll check that out. That's like purely there's a mark on goodwill value there to put. And then I love the fact of the perspective that you brought in as the strategic acquire and bringing that to this company. Now you're on the other end of, Hey, let me help you understand, but how do you want an ideal situation is going to be acquired by a strategic acquire.

51:06Most people listen to this podcast know that, but then you're bringing that in early, maybe even helping them think through how to network and get on the radar of those strategic acquires.

51:14Keith Levy:Yeah. Again, like if we're going to make an investment in a pet business, every single one of the guys on the team has very little pet experience. I ran a very successful company for five and a half years, created a ton of value, worked with veterinarians, worked with retailers, worked with suppliers, was on the board of pet food associations. I can quickly come in and go, I know you're looking at this pet food company, but it's a piece of shit. Or I know you're looking at this pet food company and I like it and here's why I like it. And here's what no one else is thinking about or doing. Those are things that I think are important to growth capital businesses or private equity business or VCs or whatever.

51:50Keith Levy:Who do I have on my team that could help me with insights that aren't apparent to me or they're just not obvious? And the good founders get that. John gets that. Other people I'm sure that are successful like John get that. They also recognize that, okay, I'm going to have to share in the wealth creation that we're going to do. And in order to create that wealth, we're going to have to have the right people around the table, pulling on the same end of the rope and bringing in points of view that maybe are not where we look at the world in a typical fashion. Deep operating experience. That wraps up part one of our podcast with Keith Levy.

52:23Hope you enjoyed it. Hope you learned a lot. I know I did. Look for part two coming soon.

52:39Thank you for taking the time to explore the world of M &A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M &A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan, K-I-S-O-N, at mascience.com, or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter.

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53:38Views and opinions expressed on M &A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.