How to Start Executing the Roll Up Strategy in M&A

24:09And we all wanted to make sure that we offer a level of customer service that was unprecedented in the industry. So those are our key strategies and we are executing very tightly against it. How does that take place? That varies and that will vary probably a year or two from now than it is today. But those are the core strategies that I, what I talked about are differentiators that you really want to make sure you have going in that will set you apart from previous sellers or any other better that will come and do another role up strategy in the industry. How much do PE firms like pick at that?

24:45Were you involved when you did the fundraising? Yeah, I was involved from the very beginning of it. What were the tough questions they asked? Did they dig into that a lot? Absolutely. They got into it. That was an interesting process. And in many ways, different than I expected. They were a lot more operational focused. And one of the things when we send them the decks and all the financial modeling, we asked them, hey, what questions do you have on financial modeling? I think the biggest compliment was like, nope, we're good with financial modeling. You guys did a good job. So there was no questions like that.

25:15But the questions were really, can you execute? This all sounds great on paper, but why do you think you can execute versus the next guy? And those are the things that they really were going after. It was really important for us to be able to demonstrate that capability of execution. We had a good story. We had a good strategy. We backed it up with the financial modeling that was solid and sound. And then it was, can you execute? What is our execution risk? And probably we spend more time on the execution risk than on the other two. That's really fascinating. And I think that's going to come back up in our other areas here.

25:52But capital provider, you have the PE firm that you end up partnering with to sponsoring this strategy. Other sources, are you lining up that ahead of time or figuring out who those resources are going to be? Does the PE firm help you with that? Are you doing like a role of equity on these acquisitions? What are the other angles you're thinking about capital providers? We're a little bit more traditional at this point because we were very much a piece-by-piece acquirer. If you had a platform that you start acquiring, you can probably utilize debt a lot sooner than we could. But yeah, you start thinking about it.

26:25We didn't have those lined up. We had a network of professionals that could jump in and have stayed in touch with them throughout the years. So I was not afraid that we were not going to be able to find somebody. But it wasn't that we had anyone particularly lined up. The equity piece of it was really the important part because a lot of the debt providers as well look, how committed are you guys on equity? And do you have enough cash flow to service the debt? So those are the two key questions. So as long as you secure the first one and you make sure you have enough cash to service the debt, then the debt will be easier to find.

27:00We do equity rollout, but not too many. People depend when they decide to get out. Most of them would prefer cash than equity. but we do it both ways and we're all open to it. As you go through larger acquisitions, that becomes a little bit more overplayed and it's something you want to entertain and engage in. Do you do a lot of earnouts in your deals? No, not that many. And I've learned, even the few we've done, I would probably stay away from them. I love them from the concept perspective. I hate them from a practical perspective because there's so many factors on the earnouts, how you do the deals, how you account.

27:34Just the accounting methodologies can just cause a conflict on earnouts. If you go, we go a lot of times from cash accounting to accrual accounting, it's a debate. It's things like that. How do you accrue for manufacturer rebates? Every single thing becomes a debate. Although they sound really great and they're really great in concept, practicality of earnouts is very challenging. I believe that. I'm pushing hot buttons there. That leads to a whole other podcast conversation, which we've done all about earnouts. The capital provider's big focus is going to be on the equity side. You get that dialed in and then the acquisitions, what you're pursuing, the debt's going to be a lot easier to figure out.

28:12There's plenty of options there and interest rates going up. You might be trying to avoid that with other tools as well. Pipeline. Pipeline. You're pitching the P firm. I would assume that you'd want to have to demonstrate pipeline, even in the early stages of raising. How far do you go? Do you show, hey, we've got a pipeline. In fact, we've had some initial conversations and have some hot, ready-to-go targets. Or what does that look like? That was probably one of the most interesting parts of our roll-up strategy. In the beginning, there's a lot of questions about pipeline, managing pipeline, reviewing the pipeline RAs.

28:49Once we started rolling and executing on the pipeline, we don't get any questions from PE firm anymore, whether our pipeline is strong or not. We have probably 5 ,200 targets in the pipeline right now. we've demonstrated that we can close probably about 50 % of those. It's only up to us of how fast we want to go. So once you demonstrate the execution of it, it'll probably die down. But yeah, pipeline is a huge risk for the consolidators. In the beginning, to get that first check, I'm trying to get that first equity check, what I think is the hardest. What level of validation do I need to do on that pipeline to get somebody...

29:25You need to list probably your 20 to 30 potential deals because the expectations of the funnel is probably 10 to 20%. So you got to have 30 candidates for acquisitions in order to be able to close maybe three to five. That's kind of our experience have been how they've looked at it. We were fortunate enough that we had a different story, a much better story on that. So that really is no longer a discussion. But in the beginning, it was a lot about pipeline. And that was the number one thing about that execution. And great. You tell me it's good. you have this strategy. You showed me that math works.

30:01Are you going to make it happen? Can you really bring people to the table? They are going to sell. Once we demonstrated it, it was a lot easier conversation. Very typical, like a sales pipeline. Yeah, absolutely. Our sales team is probably listening to this. But you want to be able to prove that, hey, if I got this much in the early stage of the pipeline, this is where I'm likely to convert and close. That's correct. Yeah. And it was really proving that concept for us that made a difference. Tell me about nailing the pitch. I feel like there's two sides of the pitch. There's pitch, the P firm of why us and why we're going to be great.

30:31Aside from here's our economics and here's our approach for the operating model. Here's a pipeline. I still think there's like a pitch to tie together. And then you got another pitch to the target company of why us. Walk me through those. How'd you finesse those and make them land? Maybe a cliche to say it again, but it's one of those things you got to really think about it. What is in it for them? So whoever you're pitching to, Don't talk about your strategy. Talk about what is it in for them. As I was going through some of the transition between the corporate into P world and a few other deals that I was advising on being part of, a lot of the pitch was around, oh, we're going to build a great company.

31:10We're going to build a great product. We're going to build it. Not enough. What is it in for the investor? How can investors get their money back? What is it that those numbers, those ratios that... Because everybody loves a great company, but I can tell you probably at least five or 10 great companies that never made money and went under. For the investor, that's great company or great brand or great product does not really do everything or anything for them. You really need to speak to, okay, what's in it for them? How error-proof is your model? That's one thing. For the sellers, it's probably slightly different.

31:44Not that much different though. A lot of these people, as I said, build their history, their families on these businesses. You got to ensure them that you're going to take care of it. For the private sellers, you wouldn't believe number one concern for, I would say for majority of them is what's going to happen to my people? What's going to happen to Joe, Sally, or Megan that work in my business? Are they going to be secure? Are they going to be okay? That part of the legacy, because if you think about it, those guys are involved in the communities they live in. They see the people in grocery stores.

32:17They see people in churches. They see people in country clubs or wherever they go on the street. They don't want to say, oh, yeah, you walked away with millions. Well, I now I have no money to feed my kids. Those are things that the sellers are very concerned about. And those are the two things that you need to also pitch what's in it for them. How are you going to take care of their business, of their people, of their legacy? I know it sounds cliche, the for you, what's in it for you. But it's the easiest thing to forget. It is the easiest thing to forget. Yeah, exactly. We always forget about it.

32:46You go into hardcore pitch mode of like, why us? When you said it, it reminds me of just conversations that I have with my kids because I'm always like, the greatest skill learned is to convince anyone anything. I'm like, how do you do that? It's all around empathy. I'm like, if you can get inside another person's head and understand how they think, why they think that way, how they feel, why they feel that way. I feel like it's really similar as you explained that. Here's an investor. You're looking to deliver returns to your shareholders. You want to make sure you get a healthy ROI. you want to make smart investment decisions.

33:15Absolutely. Let's talk through that. What are you specifically looking for? And I feel like that's a way to solidify and get on common grounds in terms of the thinking and facilitate the relationship development so that they know that, hey, we're aligned on best interest. And then same goes for the seller of that company. Being able to understand that your people are what's really important beyond the cash. Let's talk through that. Let's figure out what is going to give you that assurance that they're going to the right home, that there is a better together once we close this deal. Is there anything else magic with a pitch?

33:43No, no, that's really it. The simpler the delivery, the better, the more successful you will be. And let me ask you this too, like on investment thesis, did you have to like write out formal investment thesis? No, not really. We had a pitch of a PowerPoint presentation. I was pretty hefty one, I would say. When we went into the details, we had a pretty good financial plan behind it. And that was it. Those are two key things that we went to the investors with. That's what I'm working on now. and I had 15 pages draft fit. So I got it. Thanks to good AI technology condensed down to two pages. But I think you're right.

34:17I need to put it together to the next thing is a nice deck. Once you shrink it down, it's, oh, I can actually get through all this key information. Fair point. Key, brevity is key. That way you get your key points across. Anything else on the pitching that I should know? As every presentation, you're going to get better as you do it. Be prepared. But also don't overly script it either. The best conversation we had was like over dinner or over, I would say, a few drinks. And you talk about it, you talk about the stuff you know, but it doesn't have to be super formal either. Because the more scripted you are, the more skeptical the investors will be of what are you hiding?

34:50Because you're telling them you're not going to be as genuine. If you're too scripted, they're like, you just took pieces that you wanted us to hear, not what the true story is. So know your stuff and know your presentation. Just be yourself, be natural and be honest. Does alcohol help you close deals? No, I'm not believing that. Just curious. I will recommend against it. Not that I've ever done that. No, but you bring up a good point. Networking does. So how you get there, whether you do it over a glass of wine or you do it in a golf club or on a hike or whatever it is, networking does help you close the deals.

35:23We'll leave it at the organic, natural, whatever that is. And then get your reps in. The old get the 100 no's to get to yes. Be persistent to get your reps in. Process, diligence, integration, the science. How do you build? And I'm curious too. on when you're pitching the P firm and they're wanting to understand, they get a sense of your operating strategy, but is there a level of detail that you're elaborating there? Or is it more of when we do our first acquisition, we're going to figure this out? No, I think you have to start with a certain knowledge and a process approaching it. But I think that was one thing that evolved the most for us because there's always the balance of we're trying to please in many ways.

35:59Is it a finance team? Is it the investor? Is it the seller? Is it the operations guys? So you really have to fine tune it. Also, you have to find out what is the appetite of the sellers for process. Because when you're dealing with highly sophisticated sellers, and I don't want people to misunderstand. I think that the people, mom and pops are extremely highly sophisticated operators, but they may not be the highly sophisticated sellers of businesses. It's very different. But when you're dealing with companies, the corporate development world, where that's what people do for a living. When you tell them, oh, I want to go to Termsheet or let's talk about it, everybody will be like, okay, let's do it.

36:36You tell that to a mom and pop shops running a small business, they'll be like, Termsheet, what is that? So you have to really be very careful about it. The other part is that it is very difficult and probably one of the biggest differentiator between corporate development and small rollups is in corp dev, we always signed at one date and closed a month or two months later in order to prepare for transition. In roll-ups, you just do everything at once. The owners are super sensitive about confidentiality or letting people know that they're selling their business. Extremely sensitive. So almost zero time we allow or they would allow you to approach people in their business.

37:16So that's a really big difference. So having that simplified structure helps them through the process. It takes a lot of emotional anxiety out because they know what's coming after another. Create five, 10, eight steps and say, hey, we're going to ask for this and this. After that, we'll create an LOI, we'll do this. Then we're going to do a due diligence or a quality of earnings. And that's what's going to mean this and that. Explain the process. It's going to be a lot easier. And the only way to explain the process is to have a process. Do you use consultants? No, we don't. Nowhere. We use legal team, external team, and we use third party for quality of earnings, but we don't do consultants for...

37:58We've got a few. We've got external counsel and QAV providers. That's good. That's great. Yeah. There's the level of, I would say, expertise that comes with it and credibility that comes with it. That's very important. If you think about executing, and even early, because to me, it's a big learning curve. Most of us, you learn the hard way, which you probably know. But if I wanted to start thinking through You're staffing my dream, my M &A dream team. And it sounds like a good thing. You're not overly reliant on external folks. This is like me building a tech company. A lot of people want to outsource it right off the bat.

38:27We didn't do that. We built an in-house team and it was probably the best early decision because it paid off and we've got nice quality control and it's an advantage. I sense the same thing. Earlier, build out the in-house capability with your M &A team. You can really execute better. Who are those key people? Who are there going to be those people and what order do you want to bring them in? You want to start with people who are in each department, each function. So start with a badass CFO. Yeah, exactly. Then what's next? Of course, you want to start with, we have a really good operator that can really drive the business.

38:59Like a GM. Yeah, exactly. I would say then at that point, you need a really good finance person and somebody that's going to help you grow the pipeline and do the deals. I will tell you one of the lessons learned that if going back, I would bring a really good IT head of CIO a lot earlier than we did. Because in the consolidation play, integration, especially data and system integration is the key. And if you don't have that person guiding and directing it, you're going to be paying for it for years to come. That's something that I would definitely advise. That's the number three. Okay. What else after that?

39:36You start building the teams. And also you need somebody who can direct you in strategy as well. Now, that doesn't have to be a full-time person in the strategy, but if somebody really takes care of, are we on track? Are we measuring to what we said we were going to measure and go through it? It can be probably a role of either a CFO or CEO. And I think then you build a team around it, just little by little. You don't need to hire a head of corporate development per se or some of the financial analysts right off the bat. Sounds like you can start getting the momentum going. And then as you scale, you start going.

40:07Yeah, I mean, we started with more of a 1099 structure in the beginning, But we did have a head of corporate development to build that pipeline. We did have that. I think that is important. Now, the CEO or GM can do that a lot. But if you have somebody who is dedicated to it, it's probably a really good thing. I would say the GM, the head of finance, head of operations, IT, and M &A. Those are the core things that you want to have in a role of strategy as a key team. Tell me more about it. Because I think of, obviously, you got to keep track of costs and know where things are. But what are the intricacies of it?

40:40This becomes truly a challenge in a roll-up, especially when you're doing a very aggressive roll-up. You never have a really good base. It's very difficult to compare it to, okay, how did I do it last year? Because last year, you weren't managing the business. Somebody else was managing the business, most of it. So you really got to stick to your KPIs. What do you feel that you need to do in order to be successful and do the true good business in your industry? within the, I would say, framework of KPIs and monitoring that way. As you get into it, you got to understand where are you going to extract the value?

41:17Is your value going to be in a cost or is your value going to be in price or volume, whatever that is? So wherever you create the value is, or you think you need to create the value, you have to really monitor it. Are you really getting it out of there? Purchasing, make sure you get the synergies that you were expecting. If you're not getting, ask yourself why. Did I make wrong assumptions coming into it? Did the market change? Or am I just not executing? So those are things that I would truly pay attention to. A couple other things that you probably need to do with due diligence. So there's no hidden cause that creep up.

41:50How does this roll up into a macro view in your financials as you do these acquisitions? Because I can just see that whole picture changing. Yeah. What are your key metrics? You know, you're doing a healthy deal. you're getting to the cash flow out of these companies fast enough to keep doing more deals. That's such a different approach in a corporate dev or even corporate finance approach of what you do with roll-ups. You always look at what you call what it's referred to as LTM last 12 months. We have this pro forma going backwards, which is had I owned these companies for last 12 months, this is what would have been my earnings and this is what would have been my cash flow.

42:26It really becomes an interesting and tricky situation of monitoring where you are at. But that's really the only way to measure yourself, whether you're doing better than what you have acquired or you're doing worse than acquired. So you always look at that LTM acquisition or LTM number that tells you whether you're doing better. And sometimes you have to pay for the sins of others. They had a good month, now you have to live with it. or if there's, for example, a gap between the LTMs that you acquired or when you did valuation versus the acquisition, the business sinks in those two or three months.

43:00You're paying for it because now you all of a sudden have to make up the difference. Now you can't walk back and it's part of your numbers. And then you're taking the LTM and rolling it forward into your numbers to get that view of how we're performing. But does it also give you a broader view of... And it goes back to the private equity thing. Like, what are they looking at? Are they looking into more of these individual acquisitions or they just want to see the performance of their overall? There's two things they want to see. They want to see performance of an overall consolidated company. That's number one.

43:27That's what they're worried about. How are you doing now that we've consolidated everybody? Are you covering your extra overhead that we brought in and all that stuff? But what they're really also worried about is how are you doing versus what we purchased, what we paid for? If you pay for a business, let's say 10 times the EBITDA and your EBITDA, you erode the EBITDA, all of a sudden the valuation is no longer 10 times and maybe 12 times. If your exit was at 13, estimated 13, you just eroded 66 % of the differentiation of that arbitrage. I don't want anybody checking my math, but that's where you really have to be careful of whatever you buy, not to go backwards.

44:09Because as soon as you go backwards, your deals become a lot more expensive. Because you're measured against the effective multiple today. So if you buy a business with a million dollars of EBITDA and you pay 10 times, that means$10 million. So if you rode the EBITDA from a million to 500, all of a sudden you paid 20 times for it. You got to pay attention to that. You got to pay attention to that. As long as you're moving up, you're doing really good. As soon as you step back, it's really hurting you. How long are you going to track it for that individual asset performance against your overall?

44:43You track it for the 12 months, but you do also track aggregate basis, on aggregate basis, whether what you bought at acquisition versus where you are today. And then you track that, I think, for the period until you sell. So that 12 months after, you're really validating that even though you originally purchased on. Yeah. And then it really becomes part of the overall... Operations, yeah. But at the same time, you're always measuring yourself. What was my invested capital? What did I pay in the beginning? And how does that compare to my expected capital at the exit? Rolling it into an IRR figure.

45:16Yeah, pretty much. That's what everybody wants to know. But there's a nuance, which I find interesting, if not funny, in the PE world. And that was probably a nuance to me going from a corporate development into the PE world. PE's don't necessarily deal with IRRs. You only deal with, okay, four times earnings, five times earnings, whatever you invest on your invested cash. it makes a big difference whether you earn four times in one year or you earn four times in five years. That reference point is not ever really talked about. It's only like, well, it was a four times exit. That's great. But if you wait 10 years, it's really not that great.

45:52I agree. It's like the net RR is the true telling figure. I like looking at the fund data. I don't know if you ever get, you don't have time. I don't really have time for it. But you know, like CalPERS, they always publish all of their fund performance data. But that's like the key thing. They had the multiplier, but if you look at NetRR, then you would build your own leadership board around it. Yeah, it's a little different story. The assumption is that usually P's go in to hold a company between three to five years and that whatever two to three times exit is, it's always within that timeframe.

46:24But if you hold a company, there's a difference if you hold a company for two and a half years or for five and a half years. And if you have the same exit multiple, it's definitely a difference. Hey, this is more like a treasury question, but how does it work if you've raised like$50 million, you're doing a roll-up, are you managing the cash itself or is it more of a draw? It's a draw. It'll be a draw. My experience has been, and that might be different from others, P's, they like buying assets. They don't like buying expenses, what I say. So they will not give you money in the bank account for you to pay salaries or do whatever you want with it.

47:02They will buy hard assets that produce money. So they'll only give you the money when you're buying a hard asset. And then that money then can produce or make money to pay for your expenses. When you go to the IR figure, I feel like the inefficiency is just the capital sitting there. But if that's not necessarily in your books, you're not pulling all this cash at once, it's sitting in the key firm. I guess it's more of their problem. One thing that we can go on, this is a completely different podcast as well. But when you think about it is when you're measuring against exit against invested capital, it's always looked at it at one point in time.

47:33But that's not really a reality. And the roll-up strategy is usually over a two - or three-year period. So then you've got it. If I put in$50 million on day one, it's very different. And then I put 10, 10, 10, 10 over three years. Your IRR is very different. Exactly. So those are things that usually don't come into calculations. It doesn't come into calculations. No, it does not usually. and that works against you. Then you're taking the baggage. Yeah. Any other like key KPIs that I should really be paying attention to? There's the math that ultimately comes into an IRR figure, but any other KPIs particularly that I want my PE friends to be happy with?

48:10That exit multiple for them or the invested capital is always a key. The EBITDA valuation, EBITDA multiple of what the business is valued. That's truly a KPI that's measured. Third piece to that is cash generation to service debt, available cash generation to service debt. The way that you multiply your returns is by leveraging up the companies and using the borrowed capital to make money to purchase new companies. And you don't spend your own equity. Well, you have to have enough cash flow to service that debt. So that's something that's going to become very important is are you able to generate enough cash to service debt?

48:51Key things to keep in mind and communicate with higher ups. I'll tell you, if you keep those three things in check, everybody will be very happy, Camper. Easier said than done. Much easier said than done, yeah. Technology. Okay, disclaimer, you are a Dealroom customer. I'm obviously founder investor in Dealroom, wanted to make the world's greatest platform and execute M &A, but this podcast is not a commercial for Dealroom. But I got you here, so I'm just going to ask you. I know you could have picked any technology-managed M &A in the whole world. Why did you end up choosing Dealroom? Going back to the comment, I've been the longest non-paying customer probably.

49:27And we've known each other probably for like eight years or maybe six years before we actually went with a product of Dealroom. We weren't using it just for everybody to know. There was nothing, there was no usage of Dealroom for free. But where it is, whether it's a Dealroom or a similar platform, we went with Dealroom for one reason. It was the only platform that was tailored to M &A processes that combined multiple features of the data room, the process management, the pipeline management, and all that stuff. We didn't really find that anywhere else. There was a lot of data rooms. There was a lot of products that were managing only the kind of the more tailored project management.

50:07But there were some that were very specific M &A project management. But there was no tool that really combined it all. And that was the attractive portion for us, for the deal room and why the team actually liked it. But my perspective is when we talked about the tools, I suggested, hey, why don't you guys take a look at the deal room and completely left it to our M &A team. And they went and evaluated several products and then they picked the deal room without even letting me know that you guys were picked. So I was very happy about it. Okay, cool. Then let's step back out and just talk more holistically because anybody can do the research and figure out what's the best tech stack for them.

50:39What else were other, I guess, key things in terms of having tech to keep everything all in one place? What it does really from, I would say, maybe three different points of view from a seller point of view, it sets expectations. Kind of what we talked about building trust and setting expectations. This is the first and maybe only time for most of them that are selling the business. So understanding, oh, these are the components of the deal that I'm going to have to follow through and have to provide in order for this to happen. That's fine. It's a lot easier than when somebody tells them, hey, Monday morning, give me blah, blah, blah.

51:14And then tomorrow on Wednesday, yeah, but you didn't give me X, Y, and Z. And I need A, B, and C on Thursday in the morning. It frustrates people. So when they see that, okay, this is the structure we have to follow, it really does ease their emotional ups and downs in this process. The second thing is it's data depository. You always have one place to go to. That's really great. But the third thing is it really keeps internal team on track of monitoring whether things are submitted or not, whether people are following up on items they are not. That's where that project management comes into place.

51:49If you see an empty folder for two weeks and it's past due, you're going to follow up on somebody who is supposed to populate and say, hey, why is this still empty? Versus if that folder is sitting on their computer, you're not going to know whether it's there or not. You expect it to be done, but it's not. Here you can really monitor the process of the deal and the project. And I think that's really helpful and able to cut down the time of the deal cycle. You sure about that? Cut down the deal cycle? Yeah, absolutely. We went from about 9 to 12 weeks to 6 to 8 weeks timeframe. That's pretty good.

52:20Yeah. Marketing TV, if you're listening to this, that's a nice stat to put right there on the website. That's like roughly 30 plus percent savings. Okay, three big points. It's a better experience for the seller. sort of guides them visually through the process. And it gives impression that you have your shit together, basically. So that's one. Two, single source of truth. Everybody knows where to find stuff related to the deal. It's all right there. It's in one place. Third, managing the details and making sure things are acted on. The real core of project management. So, cool. That's the importance of having a good tech to run your deals.

52:53What were the biggest or most important lessons learned from doing the roll-up? Any startup there, you hear that, but roll-ups are very unique as well in a way that their approach, especially if you're doing a roll-up from ground zero, is make sure you're well-funded. Make sure you're not asking or begging for money each time you need to do an acquisition. That frustrates people who are doing the work, and especially the sellers, and you're going to ruin your reputation if you're waiting for funding. Also, make sure you are able to build a platform early enough and have a strong platform to hold on things going forward.

53:28That brings me to the second point is invest in IT. That's probably the biggest lesson learned that I've experienced through our journey is invest in IT. Your system integration, system synchronization is going to be critical for everything you do later on. Everything from operational, from the data to be able to run the operations to just pure synergies and efficiencies. You got to have that IT buttoned up and you have to do it from the beginning. And in Rollup especially, it's a heck of a lot easier to have the right solution from the get-go and then just incorporate other acquisitions into it versus build until you have 100 different locations or divisions and then try to synchronize.

54:13You're never going to get there. So build it early and then just bolt onto it and integrate a new acquisition as quickly as possible. Third thing is, as I touched upon a little bit on the cost, hidden costs. Those are really funny ones because especially the less sophisticated sellers are, the more hidden costs you're going to have. Every single acquisition that we've done, I heard that two days ago. And I don't know if it's true every single one of them, but probably majority. When they meet the new HR person, it's like, hey, how about the raise I was promised? When can I get that? And everybody is a calm, I would say, practice or expectation or a question that when the new people, a new team comes in, there is opportunity to get that raise you were promised.

54:57Now, whether they were promised a raise or not, it's almost impossible to check or verify. But they set the expectations and now you're all of a sudden failing this. Or you have to meet them and then you have a higher labor cost than you actually paid for. So those are things that can really hurt you going forward, especially if you are in a labor-intensive business. Make sure you're well-funded, so we don't have to scramble for cash. Invest in IT. If you don't have bigger technical issues down the road and you're prepared for it as you scale and need that kind of technical infrastructure, then you can probably integrate better.

55:29Watch out for those hidden costs. Learn to identify them and get over them before they get over you. And the last thing that I found out, specifically in our case, is data integrity. The less sophisticated the sellers are, the bigger data integrations you're going to have. And I want to differentiate. It's not that you're going to buy businesses with false data. You'll just buy businesses with bad data. It was good enough for mom and pops. At the same time, it's not good enough if you're trying to build a multi-million or hundred plus million dollar company that's going to be audited next week or next year.

56:06So those are two very different things that you're going to be dealing with. Well, even you mentioned earlier, just going from like cash basis to cruel is a whole different picture to look at. You're going to need your audits or audit ready financials for debt, to raise debt and things like that. So it's just one of those things you'll have to pay really good attention to and put controls in place very early knowing that the data they had before is very different. For us, year over year comparison is, I wouldn't say meaningless, but challenging at best. And looking forward, what are the trends and opportunities you foresee in the roll-up space?

56:39I do think the roll-ups are in many ways getting a little bit stale and a lot of industries have been attacked. But also when you look at how many opportunities there are, there's really tons of opportunities still left in many industries. I would say we're kind of at a second half of the roll-up craze with plenty of time left until the game is over. That's how I would view it. And because you're in that place, you really need to identify why you're doing it. I think in the beginning phases, you could probably pick any industry and not add a lot of value. Just get the synergies from back office.

57:14And it was something new and great and everybody loved it and get the value. Now you have to be a little bit more strategic about it. What technology are you going to bring? How are you going to change your processes to improve? What value are you going to add for the customer? This does not exist in a single operator. I think that's going to be the big one is whoever can integrate the best. is really going to stand out. What's the craziest thing you've seen in M &A? You always ask that question and I love it and I hate it at the same time because I've seen some crazy stuff. It's like five o 'clock in the morning, you have to close the deal by noon and the deal changes.

57:44It's like, okay, what do you do now? But I thought about it. You know what's the craziest thing I've done is how many times people do the deal just because they want to do the deal, not because it's the right deal to do. I think they call that deal fever. Is that what they call it? That's what it is. And it's one of those things is, I'll give you an example and won't go into names because I tried to stay away from it. But we looked at one deal for six years and it was like, yep, no, not strategically the right thing to do. And then it's like within three months, the board of directors decides to do exactly the same deal, acts on it without due diligence and executes on it.

58:18Three years later, you ask anybody and everybody who is close enough to this and everybody tells us like, I have no idea why we did that deal. One thing that I really always emphasize on the deal making, before you do any deal, ask yourself, why am I doing this deal? What is the why in it? And if you can't clearly answer the why, walk away. I think that's really what it boils down to. Yeah. All right. We got some crazy, you got like different levels of deal fever and you can be like the extreme. I don't even know what you call it. It's like when you're super sick, if you've got like an extreme disease that's incurable.

58:57Yeah. That's like the high level of this kind of deal fever where you just... Just want to do it. Yeah, no matter what. No matter what. You just want to check that mark. You see a red flag, you're like, next red flag, another red flag. We're too far in. We're too invested in. We can't back out. It's tough. It's tough. Maybe one of the toughest thing for me was in my corporate development career was I worked on a deal for about a year and a half and we came to the impasse and we had to walk away. And it was my call. I was the director at a corporate at Goodyear at a time. And the VP came and asked me, it's your deal.

59:30What are you going to do? This is my line. And if we can't get to that line, we got to walk away. And we couldn't get to that line. And the next morning is like, okay, we got to walk away. It was tough. I think I was like depressed for three days. And he came to talk to me and he's like, don't worry about it. It's better to do no deal than the wrong deal. And I I had to live with that. Is it because you put a year and a half or two into something that you really are excited about and you want to make it happen? And at the end of the day, you couldn't make it happen. It feels a little bit like a failure, but it goes back down to it.

1:00:00If it doesn't answer that why, it's better to walk away. I think it's like a post-departure depression. Yeah, exactly. And I've been there. I walked away from a deal this last year, and I think same thing. I'm depressed for probably about three days. But after you get over it, you felt really good. I felt good about it. But I looked at it and realized this was really going to be a bad deal that would have hurt the company more than help the company. Then ultimately, I actually felt bad and got more clarity in the deals that we should be doing. Yvonne, this has been awesome. Thanks for taking the time, helping me become a better M &A scientist.

1:00:33Hey, thank you. It's always a pleasure to be here. And I learn a lot talking. So whenever you have anything that you want to talk about or anything that you want to questions about, feel free to reach out. listeners really appreciate their attention and feel free to reach out to me personally as well. Always happy to connect. My fellow M &A scientists listening. And you are an M &A scientist if you reach this far in the podcast. You have learned a lot. Till next time, here's to the deal.

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