How to Build Trust and Leverage in M&A

0:00Hello, M &A scientists. This podcast is brought to you by Dealroom. Would you like to avoid wasting hundreds of hours managing Excel trackers and building PowerPoint reports?

0:13Kison Patel:Do you want to make your process more efficient? Well, I have green news for you. Dealroom is the buyer-led M &A platform that saves you time, headaches, and improves collaboration so you realize value faster. So go to dealroom.net and try it for yourself. Also, there's lots of AI, so go knock yourself out. Anyways, here's to the deal.

0:41Kison Patel:I'm Kisan Patel, and you're listening to M &A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies, and what actually happened during M &A deals.

1:05Kison Patel:In the last episode, I shared the story of Jerry Sedici, my old boss from 20 years ago. He was an orphan from France who came to America barely speaking any English and built hundreds of millions of dollars in real estate, cafes, hotels, and restaurants. You want the full story? You got to start there. This episode is the playbook that follows. It's all about how Jerry builds trust with someone who has no reason to trust him, why he pushes the other side to name a price first, how he thinks about leverage and risk, and a phrase that's always stuck with me, money's like air. Near the end, something happens that never happens on this show.

1:45Kison Patel:I bring up a competitor I'm looking to buy who won't share their financials. And Jerry starts working through it live, how to break down that barrier, what I could pay, and what the company could become. And the number he'd actually offer, even offers to negotiate it for me. It's a wild ride. Here's the rest of our conversation. When did LA come to the picture? Because even back then, you were doing some development in LA. And then back and forth, now you're full-time in LA. I was involved with my friend Jean-Louis de Maury in the restaurants more than anything else. The construction came when I was here at the restaurant.

2:22I started enjoying the weather. Chicago with the cold and that type of things. I decided I'm going to move to LA. I discovered the Pacific Palisade. I didn't discover. Jean-Louis called me and he said there is a lot with a view on the water. They want$1 ,050 ,000. I said, I'll buy it. If it's a view on the water, I'll buy it. That's how I always did my business. I followed my guts, basically. I arrived here. I saw the lot and I said, wow. So I went partner with John Louis in one restaurant. It was called, remember the restaurant?

2:58Kison Patel:Which type of restaurant was it? It was an Italian restaurant. Then you had that Japanese one you did for a while. Japanese tapas, is that what it was? Yeah. It was like... Japanese tapas. It was called Zuruvata. My brother met this chef. His name was Ricardo Zarate. Very talented. And he sold me this bag of good that I took him partner. I gave him 10 % and I bought this restaurant on Wilshire. And we created this restaurant called Zurabata. It was an extraordinary restaurant. But again, I never put lots of attention into marketing. I learned at a later date that if you spend$500 ,000 to build a restaurant, you should spend $300 ,000 in marketing because the marketing is going to bring you the people to that restaurant.

3:46You're not going to be struggling for paying rent and having difficulties.

3:53Kison Patel:I got a list of some things about you. More of like what are the lessons learned? And we can always pull in examples if you have something. First is the character yourself that it starts with a lot of self-belief. You had a lot of examples of that. There was like zero doubt in yourself. It was always no way to go back, only going forward. Yeah, I know. I never had the issue of the, how I call it, confidence. What? Is that just upbringing, their childhood? My childhood, if I had an idea, the secret was you have to believe in your idea. If you don't believe in yourself, who is going to believe in you?

4:33If you doubt yourself, don't start. We are sitting in a business that I own. I don't know how I started this business. I went to China. And I have these friends. They are Chinese. I said, I'm coming here to find a product. I bought the store. I don't have the product. I bought a warehouse in Inglewood. And I need to put the product. And I want something related to construction. But that's how I did all my life. I have this idea. One of them, he said, tomorrow I'll take you to a friend of mine. He make this product that you're going to love it. I said, you sure? He said, I know you. I went there and I discovered artificial grass.

5:11He took me to this factory. They make basically a carpet of grass. There is this ingenious people. Basically, they took a base of carpet and they put, they stitched this artificial grass in that carpet. you can take a place where there is a drought like California and you go in front yard and turn that front yard green 365 days a year I saw it and I said wow this is incredible how many you can load in a container he said we can put 30 ,000 square feet in a container I said give me 100 ,000 square feet I don't know anything about it I don't even know how to install it. When I told him 100 ,000, I went on the internet, looked for artificial grass and see how people, they do the installation.

6:08I said, I just found the sheep with five legs. There is an expression in French, the sheep has four legs. A unique thing that doesn't exist is the sheep with five legs.

6:22Kison Patel:Yes. You always did something. We didn't even talk about all the travel to China. You went to China so many times. Yes. The beginning when I first met you, you were bringing products in from Italy, from France, from Brazil. And I switched everything to China. Everything to China. Then you would constantly go back and forth. Yeah. I had this friend of mine. His name was Maurice Amar. Wonderful man. He passed away at a very young age. We used to call him Frereau. Frero. Frero, it's F-R-E-R-O. Frero is brother. But the word, frere, F-E-R-E. Frere, mon frere is my brother. He called everybody that he meet.

7:05He meet you tomorrow. He call you frero. Very gracious and friendly name. I met him because I was here in California. and Jonathan Sebag, who was a young lawyer, the son of a friend of mine, one of my best friends in life, he came here to the United States and he went to stay in the United States. But as a lawyer in France, he never learned to speak English properly. So he was never able to adopt himself to the United States. And he dreamed to come to the United States. And I used to tell him, I said, English is nothing. Don't worry about it. It will come. I said, I come here. I knew no. I knew yes.

7:53That's the only language I know. When I came to the United States, the custom guy, he asked me, how much money you have? Money? He said, money? He said, money. I said, here. I pointed this suitcase. I had a suitcase with me. I don't know if it's legal or illegal to say it was probably a couple hundred thousand dollars. That's when I come to the United States. so Jonathan stayed here good year trying to figure out what he does going to take some classes in school and he had a girlfriend and the girlfriend she come from a family very strong family and her father his name is Simon Simon Amar she said you will love my father I said I look at you and I think you're just like my father So she created that curiosity in me.

8:49I went to France and I went to meet him. When I met him, Jonathan broke up with his girl. The first thing he said broke my heart when Jonathan broke up with my daughter. Because between you and me, he could have been the king. He said, I've been talking to you for an hour. You are going to be my best friend. He was very gracious, very pleasant. He meets you, he calls you frero. Frero is brother. An unbelievable gentleman. Unbelievable. We were very close. And he had a sickness and that sickness took him.

9:33Kison Patel:Yeah. I got some lessons I want to talk about. So we talked about the motivation. this other part is this self-belief right self-belief we talked about right it starts with self-belief and that's something you've built in and having the belief in your idea the other part was motivation we talked about this even from the moment you wake up i remember you used to say this to me was when you wake up it's like you can trigger yourself it's time to play the game and i used to think about that when i wake up in the morning like it's time to play the game? You know, when you come from a nothing, there is that disease that I had, which is called ambition.

10:14It's a disease. And I wanted to accomplish it in the worst way possible. Just have to be the honest way. Because I had a lot of friends. They grew up with me. And they cut corners. they end up jeopardizing their freedom. I was very fortunate. I had a brother. It's really my fortune because he kept me disciplined. Not him. By having him under my responsibility it put that demand on me that I have to go faster, work harder, wake up before everybody because I have somebody that depend on me. And I have to give him the example. And we came from the background from my mother. They believe in the degree.

11:10You have to have a degree. If you don't have a degree, you're nobody. I'm talking about this to the friends of my mother that I met over the years. And when I was 17 and 18, they said, your mother was this. Your mother was this. Your mother was stubborn. Your mother, if she wants something, she will get it. Your mother, her parents, they prohibit her from marrying your father. She took off and she went with him. She said, that's the man I want. And at the end, they accepted her. And they were saddened by their decision. I kind of like forged that character because I had these beautiful pictures of her.

11:57And all the word that I heard about her, how diligent she was, how tough she was, how she finished things. She believes in ethic. She believes in her feeling. When she decided that she fell in love with your father, she said, this is the man I want. And it's not going to be another one. She had certain values that just because I hear them from other people. and I think I admired those values. So I applied them to myself. From her absence, she gave them to me.

12:34Kison Patel:There's the other thing I noticed is you transferred this motivation. That was the one thing working for you that any conversation I had, I got off the phone. Maybe there's some work to do, but you had a way of just the motivation was there. I was excited about it. It was something like I would work late. I didn't want to disappoint. I don't know how to explain it, But there was something that you were so motivated that you transferred this motivation. Because I remember it. I had to work on a model to get some bank loan approved. And I'd stayed up late just working on it. But it was just, we're going to get it done by tomorrow because it needs to get done.

13:07Kison Patel:Because we don't want to slow down anything. I don't want to be the reason this project. Motivation in part, it comes where you have nobody behind you. There's no choice. But the thing is that you transfer it. It even gave me that when I told you about some of the things I'm working on the business. where I see some challenge in selling our product and you're like, you got to build, what were you saying? Create the fire with the people. I'm somebody basically, I learned it by listening to other people. I learned it because of watching other people. If I see the things one time, I don't need anybody to explain it to me.

13:42If I see somebody working with their hands, I see a mason or a carpenter or anybody, or I read about something. If I read about it, I can duplicate it. Visual memory, and I have no fear. I don't have any fear of failing. I believe if you fail, that's a lesson. You learn how to fail. If you learn how to fail, you learn how to fix it. Because failing is not negative, it's positive. because you exposed yourself into something. You were not good at it. And now you know how to do it. You fail.

14:23Kison Patel:How do you do that? Like I gave you the example where I'm like, hey, I'm struggling with this person's performance. I want to swap them out and get somebody else. Then you turn around and say, you need to learn how to wake up the killer in people. And you can use some language around that. That's about as a leader, you got to be able to get those people, like really pull them and get them motivated. If I work for you, And I make a mistake. You consider it's a mistake. If you consider I made a mistake, you're the one who's supposed to give me the solution. I cannot judge myself. Me, I gave you the best I can.

14:57I really gave you the best. At least I'm talking about myself. I give you the best I can. But if my best is not good enough, I really expect you to show me your best. And when somebody tells me I made a mistake, I truly, I look at it as a positive thing. I didn't know about something. Obviously, that's why I made a mistake. And now I am fortunate. Somebody is taking that mistake and he's going to show me the right way of doing it.

15:23Kison Patel:That was the thing you always did. No matter what, you'd always go back and chase the person down and figure out what you did wrong. I used to go to a bank. The first banker who turned me down for a loan. Please explain me why you turned me down. And the guys, they explain you why they turn you down. Your financial statement is weak. Your credit is not good. or this or they give you 20 different issues. Just go and fix the 20 different issues and go to another banker. There is a dime a dozen. And that's how I did all my life. Whenever I went to a banker, I had zero expectation. I never expected somebody to tell me yes.

16:01Some of them, they told me yes, and they really shocked me. We talk about the building on Fulton Market. When I had that land contract, I called them a land contract because that land contract, I buy from you this building today on land contract, but the date, I change it to another date. Like I bought it a year ago. That it's seasoned because I understand you have to be seasoned in a lawn. Some bankers, they became very slick and they said, give me a copy of all the checks that you paid on that type of thing. So there's many ways of skinning a cat. But that was creativity. When you understand how the system works, you become creative for to get the deal done.

16:47And when you are creative, you create certain fear in that transaction. You're not allowed to fail. You're not allowed to fail. Because if you fail, somebody can go and take that creation apart, take that deal apart, and he found you misrepresented certain things. and you expose yourself to perjury. So you have to think, how I'm going to make this deal happen? Now I'm sure that it's not going to fail. It's very challenging. Sometimes it takes the sleep away from you.

17:22Kison Patel:My conviction. It takes sleep away from you because we all have fear.

17:32Kison Patel:All right, let's go over the options for learning M &A. You could go to an industry conference. The networking is fine, but the learning is going to be an afterthought. You could go take one of those M &A certifications, but the curriculum was built 10 years ago off of one or two practitioners. You could go to a big name business school, 20 grand for an exec ed program that they cram into four days. Great networking, but are you learning the best or are you getting professor theory? Those are the options. Here's ours. Nine years of M &A science, learning hot off the press from the best practitioners alive.

18:13Kison Patel:We extracted the deal stories, the frameworks, the patterns, and organized them into two certifications. More contributors than anyone. The best in the industry. All of it AI searchable with real receipts. I'll just say it. It's the best M &A training out there. Not going to dance around it. And the value isn't even close. Conferences cost thousands. The university package is 20 grand. Other certifications run 4 to 5 ,000. Ours is 2 ,000 a year or$200 a month. Cancel any time. Take the$200 bet. Feel the difference. Mascience.com.

19:02Kison Patel:I want to talk about influencing people in negotiations. Influencing people first because you're the best at it. I've seen you in the room with people. You just had a way of getting people convinced in a direction. You've seen you do it with deals. If the property is not for sale, you would find a way to get the price out of it. How do you influence people? I don't know how you can influence people. if they are next to you and they are willing to learn. You don't need to teach them. Sitting down and teaching somebody, we teach somebody how to do math, how to vocabulary and certain things. In our field, it's by example.

19:42You see somebody doing a deal and you understood what he did. You go and you think about it. How would I have done it differently? I don't have any money. How should I have done it? How should I approach it? You're like this scenario you created in your head. How am I going to go to Kisan and make Kisan sell me his business with no down payment?

20:07Kison Patel:That's one thing you're good at doing. Yeah. I go to Kisan. I said, listen, I have two options. I work for you, but I never worked for anybody, Kisan. Sell me your business. Consider me as an employee. wherever coming to this business at the end of the day I'll give it to you minus that misery salary that you are going to give me trust have to be there if there is no trust there is no deal you build it by showing you I'm asking you to let me run your business that I'm buying from you I'm really buying your business but I'm asking you to let me run it I saw you running it for the past week I need just a week for you to show me how you're running your business.

20:51And I am going to do as good as you and see how I can improve your way of doing business. When I sign all the paper with you, I said, you can put me in the street anytime you want. I'm not asking you to commit into something for me to taking your business and I become a nuisance where you have to sue me to get me out. But when I give you all the cards in your hand, you can't lose. You go home, you talk to your wife or your girlfriend, brother or your mother, I said, this guy, he's paying me 5x and I have no risk. I can put him tomorrow if he can't deliver. What they will tell you. They see how hard you are working.

21:30They said, this is a gift from God. Take it. Because I'm making you an offer that you really cannot refuse. Not the mafia. By you, when you analyze that offer, he said, how can I lose with this guy. I bought this a hundred. He's offering me 500. Yes, he's not giving me the money right away, but I explained you how I am planning to do it. You're giving me an article of agreement, which is this word, the paper that's written on it. It's not recorded. It has no value in a court of law. And I am telling you post-dated. And you're telling me, you're a smart guy. I said, no, I'm not going to post date.

22:14I'm going to put January 18th and I'm not going to put the year. If you're going to commit any perjury, you do it on your own. And I will tell you, I said, I don't want you to post date it, but I'm going to post date you. I'm explaining you how I'm going to structure my deal. I know how to go to a banker, talk to a banker. My credit, I have always a good, I never defaulted my life on a credit card or late a day because we doubt that you'd have nobody. I understood this as very early time that I was here in the United States. Without credit, have nobody. Nobody. My credit have to be 700. I don't care who I have to rob, but I will rob for to have my credit to be at 700.

22:59Kison Patel:You get like the owner financing, getting the, here's a business, getting the owner, giving him comfortable that there's no risk for him, that there's all upside. Is there anything else to like build trust? You come in, you pursue, Two, you see an opportunity. I think that's part of it. There's motivation. The early example of architecture, there's blank slate. So you're always constantly looking at this opportunity. You brought that lens everywhere. All these people are so different. I feel like some of these deals, when we talk about corporate M &A, it's like you're spending a whole year getting a relationship with that person before they really trust you and willing to do business with you.

23:31Kison Patel:But you're not waiting a year. You have patience, but you also have motivation. So you're sort of... Sometimes it's your vision. How do you explain that vision to somebody? Okay. Because you don't have my vision. I'm coming to you with a vision for your property. I have to explain it to you. You have to feel comfortable. And that vision is coming from the inside of me. I'm not making that vision. A lot of people, they go and they try to find a scenario how I can sell this to Kisan. I'm not selling you. I'm coming to tell you how I envision taking your property, what I'm going to do with it, how I'm going to do it.

24:15And I hope that you believe me. And I am sincere. Everything that I tell the person that I'm doing to deal with them, and I am asking them to facilitate that, I'm doing it in reality. Yes, I want to show them that I am worth to be helped.