Cultural Fit Over EBITDA: How Salas O'Brien Built a 30-Merger Program Without a Single Failure

21:09Nathan Rust:And we always have active participants every year, several hundred people who invest into our shares on an annual basis. There's also a match in our 401k component in Solace or Brian's shares. All right, let's get into some fun stuff. Walk me through your whole sourcing model end to end. Let's start from the beginning. Yeah. So there's really multiple different ways that we're going to source our opportunities. We cast a very broad net. As we mentioned before, we have over 200 introductory calls every single year. It really comes from multiple sources. I kind of bucket them into four different areas.

21:42Nathan Rust:The first is our team member referrals. Our team members have good experiences being part of Solis O 'Brien. A lot of them have worked for other companies before they've joined Solis O 'Brien, or they have sub-consulted for other firms or vice versa. Those firms have sub-consulted for Solis O 'Brien, and they see they're able to have those experiences and say, look, this company would be a good fit for Solis O 'Brien. And so we get tons of employee referrals of you should reach out to this firm or that firm. I've worked with them, so I've got a track record. Like we're looking at more than just their financials.

22:16Nathan Rust:Like we have true real world experience of are these people we want to work with. So we get a lot of those team member referrals. And that's one of our biggest drivers of sourcing. We've got by side representatives who help us out as well. We'll identify the key things that we're looking for from a merger candidate. They'll go out and find opportunities for us. And a lot of those companies want to work with us just because they've heard our experience in M &A. We've been very successful. We're a no-nonsense approach to due diligence. We're not looking for reasons to retrade or not do the deal.

22:51Nathan Rust:We want to get the deal done. So we're a preferred buyer in the space. So we get a lot of first looks at opportunities that often results in other firms not even getting a look at that. That's a good opportunity there. As we continue to grow, we're starting to participate in more competitive sale processes. I would say when I started, probably 90 % or more of our mergers were done proprietary on a proprietary basis, not through a sale process. But as we continue to grow and look at larger opportunities, we're starting to see more through a sale process. So we're still doing probably 70 or 75 % of our mergers through proprietary process, but starting to look at more opportunities brought to us through advisors and bankers and brokers as well.

23:37Then really the last of the four is direct outreach.

23:40Nathan Rust:We're in close contact with our operational leaders on a regular basis. And there's some times where they have needs either for a specific skill set or a specific geography or both. where we've got a software that we can find really quickly, 20 or 30 firms that fit their needs and we can do outreach for them. And of course, we don't get 100 % response rate when we reach out to them, not even close to that. But every time we're gonna get a handful of people who respond and we can have some of those intro calls that make up that total of the 200 and we're able to whittle it down and find an opportunity that helps fit our operational needs and helps grow the business.

24:18Nathan Rust:We'll start typically on outreach and employee referrals. We'll start with an email directly from the CEO. So it's going to come right from him. If there's not a response, we'll connect through LinkedIn. And then again, I've got software that will tell me the conferences they're attending. And if I can't get a response, I'll go attend a conference that I know they're attending and track them down there. We'll find opportunities to make those connections and do the outreach. Okay. So one is the team member referrals. Two is inbound. Just you got a reputation and people come to you like, my buddy sold his company.

24:51He want to talk to you. And then three is a competitive sale process. Some banker brings you a book. Four is direct outreach, like true proprietary. Those are the four, right? That is correct. Yep. Give me the percentage. I want to know what channels are the best. How did you break down percentage-wise from the different channels?

25:06Nathan Rust:I would say our employee referrals and those, I call them buy-side introductions, probably make up the majority of our introductions. It's probably two-thirds to three-quarters of our opportunities. Direct outreach is probably our smallest right now because we've been lucky. We've got an embarrassment of riches of great opportunities in front of us. And we're not making good versus bad decisions. We're making good, better, best decisions. I don't have a shortage of opportunities in front of me. We continue to see them. But I'd like to grow that segment. Direct outreach has been pretty successful with us, for us.

25:40Nathan Rust:and going back to my sales days at Harley-Davidson. I'm just the thrill of going out and doing the direct outreach and seeing what I can get from that. So I'd like to see that grow over time. What about the inbound people just coming to you directly? Is that a significant amount? It's probably 10 or 15 % of the intro calls we have. We've got a good story with we merged with a firm and we call them mergers from a philosophy of partnership, although a lot of them from a legal perspective are structured as an acquisition. We're looking for partners. I'm not looking for someone who I have to tell what to do.

26:12Nathan Rust:So I call them mergers. But we had a merger right when I started called Plus Group that joined our organization. And not long after Plus Group joined, another firm who had a relationship with the leader of that Plus Group reached out to us and said, hey, I know Grant. I really like Grant. He's told me great things about your organization. Can we talk? And one thing led to another. And then Wayne and his team joined our organization. and then another firm reached out and said, hey, I know Wayne and I know Grant and they both had really good experiences. I'd like to talk to you about us joining your firm and Ivan and his team joined our firm last fall and another firm in Atlanta, same thing.

26:52Nathan Rust:So kind of a flywheel effect. I know that's a big private equity term. I don't typically like to use private equity passwords, but I've seen it in Solis O 'Brien where success breeds success. Competitive process, is that a significant percentage? It's probably 10 or 15 % of the opportunities we look at. There's certain opportunities where we know if they're private equity owned and they're looking for top dollar, it might not be the right fit for us going back to, are they going to roll equity in the solid? So Brian, probably not in that case. Are the leaders committed? Maybe not. Of all those competitive deals, like what percentage do you think you actually have a win rate on?

27:28That's what I'm curious about because I feel like it's such a pain in the ass to boil this work, not knowing if you're actually going to win the deal. So what percentage of the competitive?

27:36Nathan Rust:If we decide to participate, I would say our success rate is pretty high. It's probably close to 50%. I don't want to beat a process against you. Thank you. I hope you're not. Goes back to those intro calls. We start out with those type of intro calls. A lot of these people are founder-owned. They've got people who've worked in their organization for 20 or 30 years, and that's made them very successful. So they want to make sure that the lady in accounting or the guy in HR, that they're going to be taken care of after they sell their organization. So when we have that track record and we can show like, hey, here's our experience, it's pretty compelling.

28:13Nathan Rust:And it's something that people want to hear and they want to make sure their team members are taken care of. So most of this business development comes through team member referrals. What's your incentive? What's the model look like to get them to bring those deals to you? They're all shareholders. That's it. There's no kicker. There's no like you get some new Benz or something. We like to win at the end of the day. And like, that's the satisfaction. It's going to grow the business. It's going to give them more opportunities to continue to grow their practice. No financial incentive. How do you activate it?

28:43Are you on a monthly company call and telling everybody, hey, they're emailing me. Yeah. What's the email you?

28:50Nathan Rust:Yeah. We have people who reach out to us almost daily of, hey, here's a firm that I've worked with. You should reach out to them and then I'll have a call with them and say, hey, is it better for me to reach out cold or should you do a warm introduction? Based on your experience, what do you think will work better? And once we get that, yeah, we go from there. How are you activating the team to bring you these deals? What's the pitch? They want to see us succeed. At the end of the day, that's it. Do you communicate that directly? Hey, if you want to see this company succeed, you should be actively looking for companies you can acquire.

29:21Nathan Rust:I don't think we communicate it in that way. We've got a page on our internal website of, hey, here's our mergers. People know that mergers are a big part of our business. And if there's a firm that you know that you think would be a good candidate for Solace O 'Brien, share it here and let's talk. So that's really the crux of it. Almost like in the culture then. People know, they see you announce about deals and they're like, obviously, actively buying. Interesting. Okay, so the direct outreach. You mentioned you got a few different things you're doing there. You're doing emails from your CEO.

29:52You probably found that converts better than reaching out to corp dev.

29:54Nathan Rust:Definitely converts better for sure. I'd like to think people want to talk to me, but it's very important to see that in the signature line. Do you have like another email of his that you set up or do you somehow have his EA push it through? How do you actually send emails out without bugging the CEO every time to send emails out? Mergers is a big part of our business. So it's important to him. Darren is on every single one of those intro calls that we have. But he meets with every single person post merger. So it is a big part of our business. We will draft an email for him and we'll say, hey, here's how it looks.

30:27Nathan Rust:What do you think? And looks good. Let's send it and we'll send it. Built by dealmakers for dealmakers. The M &A Science Intelligence Hub takes real world practices from over 400 M &A professionals and makes them instantly accessible. No panels to sit through. No generic advice. just AI-powered intelligence that understands your role, your deal stage, and your specific situation. Where M &A mastery needs machine learning. Learn more at mascience.com. Again, that's mascience.com. Are you on that first intro call? Yes. Okay. So the team's coming in. Obviously, they responded because they know the nature of the conversations about.

31:18What does that email sound like? What does it say? Just, hey, you want to talk, get to know you?

31:23Nathan Rust:It depends on how we learned about the organization. If we learned about it from an employee referral, we'll ask that person, like, are you okay if we mention your name or not? And sometimes they say yes and sometimes no. But if they say they do, we'll say, hey, we were talking to Kisan and he mentioned that you would be a great candidate to partner with Solace O 'Brien. We'd love to have a conversation just to talk a little bit more about the ways that we could make each other stronger. Let me know if you're open to an intro call. It's about that simple. General partner is like a pretty positive term.

31:52That's a lot of broad meaning to it. For sure. Let's just have a call, get to know each other. And if that fails, you send to LinkedIn.

31:59Nathan Rust:Yeah, we'll connect on LinkedIn. Are you connecting or the CEO connecting? Who's connecting on LinkedIn? I will do it. Darren does a lot of outreach himself. He is very active on LinkedIn. And yes, he has a lot of connections on LinkedIn as well. We'll do outreach there. And again, it doesn't always work and that's okay. And sometimes I'll try and track them down at a conference, whether it's an M &A conference. I want to start going to more industry type conferences. I just haven't had the bandwidth yet, but that's the next plan is okay. Like I know what conferences you're going to, so I can go there and just say hi to you.

32:30LinkedIn has worked though. You've actually, you know, LinkedIn actually responded on that.

32:34Nathan Rust:It's low success rate for sure. But yes, it has worked. Fair enough. Tell me about the conferences. You mentioned you use software to track which conferences. Can you tell me which software you're using? Yeah, we use a, it's called SourceGrub, but it just got acquired by Grata. So I don't know if they still have that name or not. But yeah, one of the key aspects of their software is it shows conferences that people are attending. So we'll try and if I'm considering a conference, I'm able to go in there and see who's attending or if I know a firm that I'm interested in. If it's a large enough firm, I can go see what conferences they're attending.

33:09Nathan Rust:If it's small, it's harder to get that visibility. But yeah, that's what we'll use to identify conference attendance. You're a real stalker. I am, yeah. It goes back to my Harley Davidson sales. It makes sense. I know Grotto was rolling out a version of that. It's interesting because you'd have targets and it'd tell you like, oh, they're going to this conference. Now when they put together SourceCub, I'm sure they're going to have more coverage of it. I can see that being pretty powerful or the other way around, just going to know who's at these conferences once you find one to go to. For sure.

33:38One thing I really love talking about is getting these deals actionable. And you mentioned that you never talk about numbers in the first call. It's all about the person and their story. Can you walk me through one of those conversations, what it's actually like?

33:52Nathan Rust:My introduction was a little bit intentional. That is often how it starts out, is we will share our backgrounds of what made us who we are today. I want to get to know those leaders. I want to know what makes them tick, how they got to where they are today, how they've overcome adversity or challenges in their lives. I find out a lot about what's important to a person when there's an open-ended request of just telling about yourself. So we always start out, kind of lead by example. Hey, here's me. Here's all the good, bad, and ugly about me. Here's how I got to where I am today. And then we ask them to reciprocate, and we learn a lot about those.

34:28Nathan Rust:Most of our calls are 60 to 90 minutes. And oftentimes, after we get through introductions, we might have 10 minutes left where it's really just bouncing off some questions back and forth what are they looking for what are key things for them as they're making a decision from a partnership perspective but yeah in that 60 or 90 minutes or whatever i've generally heard enough to assess whether it makes sense to continue conversations to call it more traditional diligence areas like financial performance at the end of the day like we view this as a marriage if If I can't enjoy getting to know someone in 60 minutes or, like I said before, enjoy having dinner with them and their spouse and my spouse, then it's probably not going to be a very successful marriage.

35:09Nathan Rust:So those intro calls are really just getting to know them, getting to know how they got to where they are today, hearing what they're grateful for and who helped them along the way to help make them the successful person that they are today. So from that intro call, you get a sense of these three key areas, how committed they are as a leader, passion, and likability. Yeah, totally. It's interesting because it's very much around stories and introduction. You typically go first. We do. Yep. I feel like that's setting the tone because you'll come in and tell a story just like you did with this podcast, which made it personal.

35:42Now I feel like I really know you. I know your upbringings. We could talk about Harley, talk about a lot of things, family, all this stuff. Yeah, the same thing. It sounds like a lot of vulnerability is like a part of that story when you mentioned that here's things are good, some things are not. You're being pretty open. Yeah. And is that set the tone for people to reciprocate? They're being a little bit more open with you, given that you were a lot more open on that first intro?

36:06Nathan Rust:For sure. Absolutely. I remember when I was looking for my next opportunity before Saul, Sir Brian, I don't have a traditional M &A background. I don't have an investment banking background. I don't have, call it a top 10 MBA background or anything like that. And some people that was important to it and other people it wasn't. And I remember as I was thinking like, how should I tell about myself? And it's like, you know what? I'm just going to own it. This is who I am. If you don't like it, that's okay. I'm not the right fit for you. But somebody is going to like this about me and like my story.

36:38Nathan Rust:And yeah, and I remember that first interview with Grant and he started out telling about himself and telling about his family. And I was like, holy crap, like this company, it's like they speak me. So that's important to us. Work is hard and family's fun and talking about your accomplishments and the things you do outside of work and things like that. That's what gets people excited and enjoy talking to each other. So yeah, even my first interview, I saw it. So Brian, a lot of it was just like talking background and what do you do outside of work and what makes you tick? Kind of the approach we have.

37:11The underdog story, I can relate because I don't have a college degree. I remember it was like the same dilemma. I remember winning some of these early deals. It was just a little small boutique practice I was building. But the founder, the CEO is like, you know what? You remind me of me when I was your age. I'm not convinced you're going to do anything, but I'm going to give you a shot. It's like, okay. So you're right. It's getting relatable. You're building a relationship, building trust. You do it through the story, sharing, letting people really know you, beyond the business, personally. and then you sort of get back at them in terms of understanding their view, their story about the business, which gives you that sense of how committed they are, what their outlook looks like, the passion and then the likability part of it.

37:53After that, you'll dig into what are you looking for? That's not so much about me, but it's like, what are your goals? Where do you see yourself? I'm curious between any of that, is there some of that part where there's just this part of the story that sort of grabs people or you really spending time and they kind of realize that? I've had inbound inquiries with the last business I was running to acquire the business. And I could tell people would get wrong. It would just be like, oh, we're just better together, this and that. Not once would they ask what I was looking for. Not once they ask, hey, do you have a timeline?

38:24Do you have, what are you trying to do? Are you trying to bootstrap this till the day you die? Are you trying to, you know, and miss the mark completely? Of that, like, do you think there's some real strong parts that really are the sort of key nuggets in this intro call that helps align it from the beginning. This is where it gets interesting. I want to figure out how do you get these deals actionable. There's that, and then there's the readiness because people always say, they always play on that first call. They're always like, oh yeah, it's nice to meet you. You can't tell until they call you up later and they're like, hey, I want to talk to you again.

38:55And you know, like, okay, they're probably serious. People, they do that. They hold their cards to the chest here. Yeah, and I'm just kind of wondering, is there certain elements that you know or certain seeds you plant or some clear indicators that you know that deal is actionable from that first intro call?

39:08Nathan Rust:The more that they're willing to reciprocate and share about themselves, it shows that our approach resonates with them. If people are more open and share experiences, one thing, and I share this because our CEO shares it with everyone, but our CEO is adopted. And he shares that in that first call, and that often brings up like, oh, well, I'm adopted, or oh, I've adopted children, or things like that. And then those type of things kind of show that our values are somewhat aligned. if there's an appreciation of our story and the fact that, hey, we put our pants on the same way as everyone else, one leg at a time.

39:43Nathan Rust:We're just doing the best we can and we're trying to make something successful and you could help us make it more successful because we don't have all the answers, but we're doing pretty good. But with you, we think we could do better. So yeah, it's having those discussions that really help us make sure that this is a good fit for us. And when And there's a good reciprocation of sharing what's important to them. What are their values? What do they do outside of work? Those type of things that kind of increases the likelihood that first call is going to go beyond just a general discussion. Do you have any key cut-through-the-crap questions that you ask?

40:19Like a job interview. People always say the things you want to hear, but then you got to dig in. And I haven't even figured that out in the job interview yet. So if you got it for every minute, it would be great.

40:29Nathan Rust:Yeah, I'm not great at job interviews. We take our job interview approaches to three months of diligence. We know that people can say crap in a quick one-hour call. That's why we don't have behavioral interview questions in our intro calls. I'm going to see that behavior over the next three months. If there's a mutual interest in moving forward, it is highly likely something is going to go wrong in the next three months because that's just the nature of M &A. And then I get to see how you respond to that. And I get to see if you step up and you're successful or if you back off or if you're confrontational.

41:01Nathan Rust:That's that three-month time period of due diligence. It's like the best job interview you can have. I'm going to see experiences. I'm going to dig through your financials for the past five years. And I'm going to see when you had strong times and rough times. And I can talk specifically about what happened here. And I can see how you act as a leader. So yeah, our job interview is basically a three-month-long due diligence process in our view. Fair enough. I was just trying to see if there's early red flags or something that you probe for in that first call. I don't think we probe for anything.

41:33Nathan Rust:But if it comes off kind of selfishly of just how much money are you going to give me? Are you going to pay me top dollar? Not asking about teams and what happens to your team and things like that. That's a little bit of a red flag. Okay, maybe they're not focused on the right things. or maybe the only thing they care about is a big payday. Those are kind of, I wouldn't even call them red flags. They're somewhat yellow flags. I've had that before where I couldn't even get the person to meet because they were just fixated on, I want to know. So what are you going to pay me? I'm going to pay you.

42:01I'm like, I don't know if this is going to work. I don't know if this is going to make sense for us to do. I want to learn more. I want to learn to see if there's a management fee here. That's right. And then these inbound deals, you've obviously become a buyer of choice when companies reach out to you directly and they're skipping a whole action process, they take it, reputation's a big part of it. How do you get that? That's a dream is to get people to come to you.

42:23Nathan Rust:Keep it simple for one thing. We know engineering. We're in the business of engineering. We've been doing it for 50 years. So I don't need to use due diligence to acquaint myself with engineering. Like I know what diligence areas are important and I know which are less important. So I can focus my due diligence on the things that matter. I wouldn't say due diligence is ever easy. It's not. It's always challenging, but I can make it relatively smooth versus a, call it a very broad 500 question list where everything is marked as top priority. I can make it much more specific. Our initial due diligence is 10 questions.

42:59Nathan Rust:That's it. Here's the 10 items I'd like to have. If you have all 10, cool. If you only have three of them, that's all right. I'll make it work too. Just give me what you have. I don't want to make it hard for you. We'll work with the information you have. If there's any gaps, I'll call you and we'll try and figure out an easy way to fill this gap. And the other thing we do is everyone we speak to, we give them a list of every single merger that's joined the organization with that person's email and phone number. And we say, call anyone you want. Ask them about their experience. Ask them about how it's gone for them.

43:30Nathan Rust:Ask them about whether or not we've fulfilled our commitments, whether or not they've grown, things like that. Don't take my word for it. Call people. Our team members, our legacy shareholders from merged entities are getting called all the time and they answer the questions truthfully and honestly. You're making the diligence process pretty streamlined, straightforward, easy, which helps. And then you're encouraging reverse diligence where it's like, hey, here, go talk to other folks that have sold businesses to us. That is a red flag. If they're not doing that reverse due diligence, it's a red flag to me for long-term alignment and their commitment to the organization.

44:06Nathan Rust:if they don't want to find out about how the experience has gone for others, if there's been layoffs or anything like that, that's a bit of a concern to me. And the more people that they call, the more it shows to me that, again, going back to, you can say anything you want in a one-hour conversation, but it's like, show me your actions. And they're saying, my team members are important, but you don't call anyone. Are you sure? So it really shows that it's important to them. Interesting. You set the cards out and hope to pick them up. Yeah. On these outbound deals, what is the average time it takes to make a deal actionable from first conversation to ready to sign NDA and move forward?

44:44Nathan Rust:There is a long tell. That is hard to say. I know. I just want to get an average and just try to give some realistic perspectives because people ask me these kinds of questions. I keep thinking back to a firm we merged with in New York City that we had. It was a 12-year relationship with them before they were ready to share financials. And obviously that predated me because I've only been here three years. But I would say on average, if someone's willing to take a call and there's mutual interest in moving forward, it takes, I don't know, six to nine months from kind of those initial conversations.

45:17Nathan Rust:If it's me just trying to say hi to someone at a conference and then trying to schedule follow-up calls and stuff like that, I would say it takes longer because anyone's willing and say hi at a conference. But once you send out an email of like, hey, let's reconnect, you don't always get 100 % response rate. If we resort to those and that's okay, it probably takes a little bit longer than that six to nine months, probably 18 months plus. It depends on how it comes in, but it was helpful to get a sense of that. The responding call outreach, obviously there's something in the back of their head they're thinking about.

45:49The spread between what they want and what you want, bid-ask spread. How do you bridge that? Teach me some negotiations here. I work in the software world. I spend the past year looking at a bunch of deals and people see these announcements. And I feel like this is every industry. Sellers just have high expectation. They see the publicly announced deal, which is obviously a great favored deal because a big private equity firm did it, even though there's a big strategy behind why they did it. And now everybody, even though they're like a couple zeros smaller, someone wants that same multiplier.

46:20Teach me how do you negotiate that? I haven't figured that out yet.

46:22Nathan Rust:I don't know if I have to either, to be honest, Kisan. That's a challenge. We take an approach of we want to be fair and reasonable with people. So there is often not a large bid-ask spread. We're not trying to go in and quote-unquote steal any deals because that's not a good start to a marriage. If you feel like you've been taken advantage of or you've taken advantage of someone, it's probably not a good indicator of success for your next 20 or 30 years together. So we try and be fair and reasonable. I wouldn't say that our first offer is our last offer, but we don't have 100 % room. It's not like I can go out and double my offer if they're asking for that.

46:59Nathan Rust:We try and put our best foot forward. We want to be fair and reasonable. We want it to be where it's, again, a benefit for all stakeholders, including our Solace O 'Brien shareholders and them as shareholders as well. And if they can't identify that as a win-win for everyone, then we just simply don't move forward. Pretty fair. You standardized the process of how you value it on these businesses and reasonable wiggle room in there. Yeah, we've got a good indication of market dynamics and what firms go for in our space. We've done one or two deals in our past. We're connected with advisors in the space.

47:34Nathan Rust:We know what's reasonable. And yeah, sometimes their expectations are unreasonable. If that's the case, sometimes the answer is, well, you might need to go test the market. If your expectation is this, we understand, we wish we could get there. We can't. But if anything changes, let us know. I want to ask you something and see where it goes. But one thing that's really been irking me a lot is retrading. And I'm bringing this up because you made this comment specifically that you have this philosophy, culture of not retrading and just like really sticking to it. I forgot the other analogy you had of treating deals like long-term marriage versus zero sum game.

48:10I bring this up because I've talked to a lot of investors this past year and I feel like that's part baked in the model is retrading where they always come in with this pretty favorable valuation. they go through first pass of diligence and then they come back with this. I know we told you 8X or whatever, we told you 10X, but now it's 6X or 8X. So they drop it down a couple of turns. And I'm like, fuck, I feel like that's all these investors model here. And I know other folks that do that, just part of it. Go through diligence and screen it and come up with all these things. And that's the thing that took me by surprise where you're like, we don't do that.

48:43I'm like, how don't you do that? Because you do the 10 question diligence stuff. And of course, people stop it together and they get it to you. but then you actually start digging in there. Do you do an external QOV or do you do it all in-house? We have an external provider to help us. That comes back and then you're like, wait a minute, we need to adjust and walk you through some sanity on that.

49:02Nathan Rust:That's a great question. I should caveat that like if they gave us financials that aren't accurate, that are just, if they say their EBITDA is$10 million and the QOE comes back and says, that's actually 3 million, then yes, that warrants a discussion. So I wouldn't say we would move forward in a case like that. Our philosophy of we don't retrade is I'm not looking for the last penny. That is not my goal when it comes to a due diligence perspective. I want this to be fair and reasonable. I don't want to understate that it is certainly important that we perform at a high level. And we want to see that performance from day one.

49:37Nathan Rust:Having said that, not every single one of our mergers have grown immediately following closing. Because let's face it, diligence is hard. It's distracting. And you've got one eye on your business and one eye on diligence. And there's a potential that it might dip a little bit. But I'm not buying a firm for the next 12 months of EBITDA. I'm buying it for the next 20 or 30 years. And if there is some slight change, okay, if I need to have a discussion, I will. But that is an exception to the rule. And I don't wake up every morning trying to find an opportunity to retrade. It is very rare that we have to have a discussion where economics need to change.

50:14Nathan Rust:and I'm going to do everything possible I can to hold to the deal that I submitted in the LOI. The fact of the matter is we've built a brand. We're a buyer of choice. And part of being a buyer of choice is you're right. The market, there's a lot of people who love to retrade. People know in our space that is not our goal, that if you get an LOI from us, unless something crazy happens, that's exactly what the deal is going to close out. So we've built a brand. There's a lot of brand equity in that. And again, we're getting direct outreach because of that. Do I want to, quote unquote, win a million dollars in a discussion that's going to cost me four or five people doing direct outreach over the next six months?

50:54Nathan Rust:No, it's not worth it. It's making sure that you see the forest and you're not just focused on that one tree in front of you. You got to look at the bigger picture. Makes sense. You just hold to it. And it sounds like you got a good type process that you are able to stick through. And like I said, as long as it's not a big surprise. This is story time. I talked a lot about the model that you operate on, but walk me through a deal. Walk me through a deal that I'm proud about, I want to talk about, but don't give me the cleanest deal. Give me one that's got some good and bad. There was a firm that we've got a lot of operations in Texas.

51:25Nathan Rust:We've got a client in Texas. We do a lot of work for them. They think very highly of us. One thing that is a requirement for them is they've got operations in different parts of the country. But if we want to do the engineering in that part of the country, we need to have an office in that area. So they had a big operation in there, Charlotte, North Carolina. They had, for lack of better words, a campus there. And they loved Solis O 'Brien and they wanted to do work with us and they wanted us to do that work in Charlotte, North Carolina. But we didn't have an office in Charlotte, North Carolina.

51:56Nathan Rust:So our operational leaders reached out to us and they're like, hey, like we've got this client. They love us. They want to give us more work, but we need an office in Charlotte. I don't want to start one from the ground up. Are there any firms in Charlotte that you think would be a good fit for us? So dug into our CRM because that was one thing I did when I started was tracking everything from a CRM perspective. Looked and saw if there were any firms in Charlotte. There weren't. That were a good fit. Went to our software and found 10 or 15. Reached out to probably five of them. And lo and behold, I reached out to one and the CEO responded almost immediately, which was shocking, but it was awesome.

52:34Nathan Rust:He's actually like, we were considering selling five or six years ago. So before my time, we met with your CEO. We really liked him. However, we decided at that time not to move forward. But we told ourselves if we were ever going to do a transaction, we're only going to do it with them. And that's it. And thanks for reaching out. Now's the right time. That was the start of that conversation. They were in ESOP at that point. So it took a little bit longer to bring them into the organization. But they joined us last year. It's been a great experience for them. ESOPs are more complicated. They have fairness opinions.

53:10Nathan Rust:They have trustees. So it takes a little bit longer from a due diligence perspective. They're doing a fairness opinion on making sure that your stock is valued fairly and all of that as well. So we've got all of these multiple different parties. You're negotiating with management. You're negotiating with the board of the company. And then you're negotiating with the board of the ESOP. And you're negotiating with the fairness opinion firm. So you've got all of these different intricacies that you're working with. And it took a lot of work and it was quite complicated and challenging. But again, it was a win for everyone.

53:43Nathan Rust:Mike and the leadership team joined our company and they're loving it. And there's firms we're talking to today that are a result of Mike saying, hey, now you need to go talk to this firm and this firm. Yeah, we're working those conversations right now and we're getting close on those. So that's a good example. I like this. I crushed you for it. So in this one, the good was, it was a great strategic win. Like it literally fulfilled the strategic objective. Post-close, it turned out to be a success. It sounds like integration, everything went really well. But the hard part was the structure of the deal, that it was an ESOP, that you had a lot of different parties of the exponentially more complicated.

54:19You had the management team, not only management team, the board, the board of the ESOP, and the fairness opinion firm. Was there anything else that drove you crazy in that deal?

54:27Nathan Rust:I think that was about it. But yeah, we've done a couple of deals with ESOPs and it is a bit more complicated. Again, we have a reputation in the ESOP space. There's a lot of engineering firms that are ESOPs and we've got a reputation there of, hey, these guys are fair, they're reasonable. And if you're going to talk to them, they're probably going to put together a good, strong offer for you that's going to achieve your expectations from a fairness opinion. Well, I'd have to hold that for a podcast, How to Acquire an ESOP. I think it's a good one to do a technical dive on. It takes a long time.

54:58Nathan Rust:That's a lot of work, but it's totally worth it. You mentioned earlier, your CEO meets with every single employee, post-close and small groups that get to know them personally. Tell me a little bit about that. You know, we kind of started with the company culture that drew you in while you're pretty happy working there. And I wanted to get a little bit more of that part of it. And then I'm curious about that too, because there's usually a point, like you hear about founders doing that, all these things, you know, doing to meet the employees and you're doing the same thing with all these incoming employees, but there's got to be some point where that it doesn't scale.

55:29Nathan Rust:That's a great question. When I started, we were around 1 ,500 employees and we're around 5 ,000 now. So we've grown a lot in the last three years. But I remember when I started, I had these discussions on, okay, how does the announcement look? And they were telling me like, oh, the CEO goes there and he meets with every single person. And I was new to the company. And honestly, I was thinking to myself like, this is a waste of time. This is the CEO. He's got so many important things. Like, how can he do this? And it really only took one of those meetings for me to realize how important those meetings are.

56:01Nathan Rust:Our organization is a people organization. It's built on our people. Without it, we have nothing. And what could be more important than our CEO getting to know these people to helping them realize that they're important. We see them. We want to see them grow. We want to see them succeed. We're committed to helping them achieve that success. I've been a part of a lot of those meetings now, and I love them. It's one of my favorite parts of my job. They kind of run the gamut and there's a lot of laughing in those. People will share vulnerable things. There's some crying, I would say sometimes, but the mutual thing is there's a growing respect amongst peers for the people that they work with every single day.

56:39Nathan Rust:We always get feedback from the leaders of those organizations of how grateful they are that we do those because they learn things about their team members that they didn't know. They're like, Ysan has worked me for 15 years and I had no idea. He's never told me this. And it comes out in those meetings and it just helps people realize how human everyone is. And we're all in the struggle and in the race and we're just trying to be successful. And we all have things at home that's not always ideal, but we're all in this together and we want to see each other succeed. And we just see those teams getting closer after those calls.

57:16Nathan Rust:I don't know what it'll look like in the future. you're right. I don't know if there's some breaking point of, can we continue to do it the way that we're doing it? We will always have those meetings. I don't know how they will always look. It might evolve over time, but it's been one of the most important things that we've done as part of our kind of onboarding and integration. So they're awesome. I'm impressed. You got me sold. Now I'm going to stalk Darren to get him into our CEO series over here. You should. Yeah, he's great. I got to ask you, Nathan, what's the craziest thing you've seen in M &A?

57:48Nathan Rust:Oh, man. We see a lot of crazy things. It's not that crazy, but going back to those intro calls, I love them. And one of the icebreakers that we ask is, hey, what's your favorite band? What do you like to listen to outside of work? And the ranges are just crazy. And that's what is crazy is just you hear these people. One time we were in Canada and there were seven or eight people in the room and there was a lot of accounting personnel. And they're all like, oh, my favorite band is some boy band 98 degrees or NSYNC or Backstreet Boys and it's like what's going on here like Canadians love NSYNC and then we were in Idaho and there was another group of team members who like mumble rap I don't even know what mumble rap is but apparently it's a genre and you should look it up but they were extremely passionate about that and of course they all think it's weird when I say my favorite is Taylor Swift but I have no shame in it I've got a 10 year old daughter.

58:42Nathan Rust:So I do what I'm told, but she's definitely caught on for me. Oh, that's too funny. That's too funny. I guess my 15 year old daughter listens a lot of mumble rap. So I get it. I like it. That's a great one. Hey, Nathan, I really appreciate you taking time from doing deals, having a conversation, helping me become a better M &A scientist. You bet. I want to thank you, my fellow M &A scientists out there. Send me feedback. I dropped my privacy stuff on LinkedIn. So if we're not connected, send me some feedback. I also want to know the audio quality too. You're listening to on zoom but if you listen to a car or something when we finally publish this let me know i want to know the difference between these live ones we do versus when we do them in person this is great i like the feedback here in the chat appreciate it i mean like i said we're kind of doing live streams we're beefing up the content since now i'm a science a separate company and encourage you we're building a membership model i'm really making it really cheap right now it's only a thousand bucks a year but check out on the website we have a whole ai platform we license that makes all this content dynamic and it's more on it we haven't officially launched it we're already reselling it, but later this month, we'll have all these announcement demos and stuff.

59:44This has been great. Reach out to me. Let me know if there's topics we haven't covered yet that you would like to see and criticism. I'll take it. Got some tips on how I can do these interviews better. I welcome it as well. Until next time, here's to the deal.

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