M&A Surprises and Horror Stories

24:32And it sounded like you had a little story around that already. What we've seen is that story I was talking about where we went to the board. It was an M &A subcommittee. It was only three. Unless it's a material transaction. And then once the subcommittee approved, then typically it just went to the full board for ratification. It was already done. The deal was done at that point. Okay. I mean, the deal was done as it relates to getting the board signed off. So ideally, if there's an M &A committee, that could help streamline things. Absolutely. Because if you've got a real focused key people, maybe have some relevant experience, they pre-vet it, then it goes to the broader board, and does this make some common sense?

25:11Okay. Yeah, exactly. The thing I really wanted to talk to both of you about that I was most excited about was these surprises that come up in deals. Yeah, now you know what I'm talking about. Sometimes it's hard to get this out of interviews. And to me, it's like you can go to any top MBA program and you can take all your academic courses you want, but you will not learn this tried and true from experience. there are surprises that come up in M &A. Surprise? No surprise. There are no surprises. There are no surprises. It happens on every transaction. Yeah, it's all predictable. Every deal is like a snowflake.

25:50They're different. Every single one has its own interesting things that come up. That's one of the reasons why we've been doing it for over 20 years. It keeps us interested. Always learn something new. Is there like a framework around surprises? Can you bucket them in certain categories? Is that possible? Yeah, I think I can. I can give you a couple. Jim certainly has a few. When you're actually entering into a formal diligence process, you obviously are going to get access to some data, usually via a data room that has been populated by, if there's a banker involved, they're probably managing the data room for the client.

26:23And it's always insufficient. There never has the right data in there that you need. There's just a lot of stuff in there that you got to go through. And it's typically because the targets are just never ready with all the data or they can't, their advisory is not good enough to tell them, hey, you really need to go pull all this stuff together. And likely, if this is the first time that the target's been through an acquisition, they're not ready for the questions and to be able to pull all that data. And then all the departments that they have to go to trying to pull that data together. So that's what you're battling against.

26:54It's going to be insufficient. And 99 % of the time, that's the situation. So surprise, no surprise. There's already a workflow issue with this deal around the information and access to the information that already creates some inefficiency. Exactly. There's also surprises in the sense that when you're dealing with smaller companies without much experience in an M &A process, they'll share things that they shouldn't be sharing. Data privacy concerns. So it really helps to, when you are approaching that diligence point and you're asking them questions, you should tell them what not to provide because it just presents liability and risk to you, especially if you don't end up completing the transaction or back out.

27:37Yeah, especially when you're dealing with international places, specifically in Europe. If you're getting information regarding employees, that's illegal. That can happen. And people that receive it can be personally liable. Part of that is we've got to educate. If we don't have a sophisticated seller or advisory, be careful. Don't put us into a problem. So I wouldn't characterize that as a surprise, but you could risk mitigation. But it's a surprise if it ends up in the data room. If it ends up in there and you've had access to it and you've looked at it. So then, okay, you've looked at it. You can track back and now you're liable.

28:09Yeah, that's a bad surprise. I've had a transaction where they sent an Excel spreadsheet and there were hidden rows that they didn't password protect or something on it. And it actually had their pricing, which is a big no-no. Yeah, and so when you have to do a HSR filing in the U.S. What's an HSR filing? The Hart-Scott-Rodino Act for antitrust filing. When you do that, there's a lot of information around what information did you get. And when you're in between signing and closing, there's a lot of things you can't violate. You can't start integrating the company. You can talk about integration, but you can't start doing things.

28:44You can't look at customer pricing or material pricing. A lot of things that are deemed to be around specifics of the business, you've got to stay clear of that. Can't get into the pricing. No, no, no, no, no. That's a no-no. If it's public, though, free game. If it's public, the chances are it's not public. Enterprise is not going to be public. It's going to be in the customer contracts. Do you have access to review those customer contracts? Typically we do, but they don't get redacted. They're going to redact the pricing. Yeah. But we have this. There's that information that you know you shouldn't be looking at.

29:14You want to make sure you don't look at it because that would compromise and you have to report that. Okay, there's maybe the lawsuits that are there. You know, any things like that you see where it's like, whoa. Yeah, there's always that. We've got employee issues. Give me some dirt. Tell me some good stories. What are some good lawsuits that pop up and they just shake your head? This gets into a little bit of mitigation as well and how you mitigate those surprises or risks. but one of the companies we acquired had an outstanding lawsuit from one of their customers suing them, a defect in the product.

29:46It was very difficult. Negotiations were nasty and tough, but we actually got indemnification for that lawsuit. But after a close, and as part of that indemnification, the seller got to defend himself with that customer. The decision was made after a close, even though we had full indemnification in the purchase agreement, we ended up settling and taking on some of that liability in order to not damage that customer relationship too much. Because the seller, he's out of the business. He's actually retired now. He's sitting in Hawaii, enjoying the good life, and he doesn't care. He'll fight like hell to make sure that he doesn't pay out several million dollars on a lawsuit.

30:30So he could really aggravate that customer. And the customer would look at you saying, hey, why are you doing this to me? So in the best interest of the customer relationship, which was substantial outside of this one little piece of business, we ended up absorbing a portion of that loss. Okay, so you got customer lawsuits. What else? We have employee lawsuits. We had an interesting situation. We had an acquisition, and it was a little bit outside of our normal business. We viewed it as very strategic to get us into another business area, another vertical. And it was a startup company, very well funded.

31:01and it was on a growth projection that was just unbelievable. I didn't believe it the whole time. In hindsight now, I probably should have believed it because they exceeded all expectations. So it was a very good successful. But what was really interesting is when we buy these companies, we typically do background checks on the senior management. There was a couple that came back from the senior management. It was just absolutely unbelievable. What's unbelievable? He had some run-ins with the law. He spent time in jail, illicit narcotics possession, firearm possession. Really colorful stuff. But the CEO sure does.

31:34But he's really a good guy. I think he was reformed by that time. But anyway, that was the background check. So it gives you pause for, oh, what are we getting into here? Did it break the deal? No, it didn't. Okay. I think any other deal, something probably would have had to be changed in order to complete that deal. But on that deal, because we wanted it so bad, it was like, we don't care. Let's not focus on that. And then we've had other transactions where the CEO had a colorful past. That really, when we brought it to the board, the transaction made sense from a strategic standpoint. But the board stipulated that the CEO can't continue past close.

32:11Just for clarification, when you say colorful, that's about equivalent to batshit crazy?

32:19We're not saying any names here. So, yeah, yeah. You could say that or you could just say that they've had an exciting past. you ever had somebody that you really felt that was 100 committed to move forward even like CEO or C-suite oh yeah yeah gone yeah I heard that one before like yeah we had a transaction where the owner of the company was actually retired from active management the current president was totally bought in was excited enthusiastic about joining and agreed with the strategy had a lot of input there on the integration plan. And sure enough, we closed the deal. And within two weeks, he resigned, just dropped out.

33:01See, he had worked for a large company before and understood that structure and he wanted more autonomy. So from a career perspective, he didn't want to be back in that same position. It wasn't necessarily anything personal at all about our company at all. It was just really, he just wanted to make sure the transaction went through. So he played along and ensured that the transaction was successful, but he didn't want to be there after close. We've also had the situation where the management of the company we thought were solid and they'd do well going forward. But after six months, you got to really see the true colors.

33:36And it was like, we got to get this guy out of here. So we've had a number of those as well. It's hard. Like, what can you dig into to figure that out so soon? I don't think there's anything we could have done in that situation with that president because all the signals were green all the way through. True. And very supportive. If it happens to you 10 times out of 20 transactions, you got to look inside. You're doing something wrong. If it happens once out of 50 or 100, that's going to happen. I was always curious, especially buying out an auction, you got like a big moment for a management presentation.

34:05And it's like, all right, this guy can ace the first interview. A different angle on that. The very first transaction I worked on, Selectron many moons ago. It started off as an auction, but it was, let's say, a failed auction. We were really the only company in pursuit of the target at that time. the CFO became so difficult to deal with through diligence, told the owner that if he wanted to sell the company, that CFO had to be gone. And so essentially he was put on garden leave to the end of the transaction. We got people surprises. How about accounting surprises? The ones that are, you know, kind of indirect accounting surprises that are always there, especially when you get into European transactions where you've got public and private pension schemes.

34:47And I know of a transaction that it was next to impossible to calculate the underfunding of a particular pension scheme in the United Kingdom. Those schemes cover prior employees for many years, and some of these companies were very old companies. And so there was a lot of money associated with it. So you're talking about liability where they underpaid into a pension? Yeah, it was underfunded. Defined benefit plans. Yeah, and a lot of those they're investing in public markets. And during this time frame, the public markets were really in a shock. This was back in the 2008 timeframe. And the pension funds were way underfunded.

35:23You go on and you have an analysis done every so often, but to get the analysis done in the heat of a transaction, you were not going to get it done. It was going to take months to actually get the specific amount. So what was shown as being a$1 to$2 million issue at the time ended up being like a$12 million issue post-close. So those are those off balance sheet liabilities are kind of surprises. And some you can navigate through, try to navigate through. Some you can't because there's no way to define. And if it's a public company transaction, well, guess what? Buyer beware because there's no recourse.

35:57Yeah, no recourse. There's nothing left because you bought the seller. Yeah. Well, any other accounting related? Because obviously you get this high level view of financials, free LOI that gets you to LOI. And then you dig in there. A lot of these deals, if you're doing bank process, they'll have a QOV, things like that. You still run your own Q of E. You know, you're relatively safe with a public company because you've got audits and you can go back. And yeah, there's going to be some little stuff, but nothing really material. We're talking about a small fraction of that are public company deals.

36:25Yeah, okay. Yeah, I mean, you've run into, there's just a ton of stuff you've got to go through. What's some crazy shit you've seen, man? A little bit of a crazy story. We were looking at a small privately held company down in the southern end of our state, great state of California. And as we're going through diligence in the process and the transaction, the CEO of the company called us down for a meeting where he disclosed that his CFO has absconded with a lot of the company's money. He'd been siphoning off money for years. Can't trust their financials. Did related to an IT implementation that they did down there of a new ERP system.

37:03And the CFO led the implementation. They didn't have a lot of the checks and balances in their banking and accounting systems that you should have. And CFO actually had the same codes and authority so he could sign off on bank funds requests where the CEO was required. And he had essentially gotten away with several million dollars. The end of the story, we didn't end up moving forward on the transaction in that instance, but they ended up luring that CFO back to the United States because he had left and bought a nice little villa somewhere. And when he touched down at JFK, the authorities were waiting for him and arrested him.

37:47And I'm not sure what they ended up being able to recover at the end of the day, but there was an interesting surprise that happened. Yeah. Some of the other accounting irregularities that we find, especially in a manufacturing environment where you're going to be taking over materials, raw materials, work in process, or whatever form or level of material. There's certain accounting rules, and not all companies follow the exact same accounting rules. There's got to be some reconciliation there, but we often find that things such as excess and obsolete are not properly accounted for. Kind of gets down to where, let's say, in a purchase agreement, you have the phrase consistent with gap or past practice.

38:27You got to watch that or versus and. It has to always be consistent with gap and consistent with past practice. But even in the instances of gap, there are variations which can come back to haunt you. Yeah, no, exactly. You get an example? Is this revenue is encountered differently or pushed into? Well, no, I mean, it could be as simple as, look, I value this part. This part is$1 and it's on the books for$1. But under the E &O provisions. That's excess. You haven't used that part in 300 days and it's sitting out there. I'm not going to value it. I'm not going to pay you for a dollar for that. It's not worth that.

39:02It should have been written off and it should have either been scrapped or sold as excess. No good. So that's the fundamental. There's a lot of other twists that go into that as well. As you start to get the product into a manufacturing process where there's more value add put on. So there's different levels of where you can end up with ENO and that could be a big financial hit. Somebody has to write that off. Does the seller write it off or does the buyer write it off? And that's what the discussion comes down to. Who takes the hit on that? That could get into, depending on the size of the inventory that's transferring, that could be a significant part of the purchase price.

39:33Revenue recognition policies have changed over the years. Now there's partial completion. Right. What happens if that product isn't shipped? Laws are always changing. Accounting rules are always changing. So you got to keep abreast. But talking about inventory and just not necessarily a surprise and diligence, but at many of, let's say, large multinational companies, they have outsourced certain portions of their business that may be something you have to manage post-close. We had a transaction where warehousing services, third-party logistics, was outsourced to third-party logistics providers.

40:08And we had only received the companies, the target company's inventory records. And as it turned out, the third-party logistics provider was on a totally separate system that didn't balance with the target company. So there was a discrepancy there of several million dollars. And somebody's going to take the hit on that. And somebody's going to take the hit on that. Correct. Any other surprises? IT surprises? Oh, that's a code word. IT is a code word for surprise. When you're trying to combine companies, more often than not, you probably don't have similar IT systems, depending on what kind of processes, whether it's manufacturing, whether it's financial reporting, whether it's HR.

40:53And there's some level of integration that needs to be planned for and then completed by the time you close to get to close. Because typically you can't, unless you have a way to plug in the two IT systems, probably can't close on day one simply because you probably can't pay the people. The acquired company, you probably won't be able to pay them. That's probably one of the principal items. But there's a lot of other things. You may not be able to run certain other elements of the business. Or you may have to run two sets of IT systems. So it gets very cumbersome. And that's always been one of my pet peeves.

41:26the IT diligence, no matter how well it's done and how well it's performed, and the planning in order to get to day one close is always insufficient. It's always wrong. And so whenever I go to the final review of the IT diligence and time to day one, my automatic response is, I don't believe it. I don't believe the timeline. And I'd say 99 % of the time I've been right. It's just the nature of the beast. That usually happens when you're talking about a divestiture of a large multinational corporation. It's on a different system. They can't necessarily. The entity that you're acquiring is not its own standalone system.

42:04So it has to actually be separated. It has to be separated from the customer's larger enterprise. So there's a lot more that needs to be done to be ready for day one. And then it's the software providers that aren't always cooperative. Because it's a money grab for them as well. and you need their support to go forward from a licensing arrangement. A lot of this stuff would happen between sign and close. Yes. Are there other general surprises that you see between sign and close? That's an interesting time. Here's a crazy one. I was working on a deal. It was a time when he's manufacturing operation.

42:37It did batteries for laptops. And it was an acquisition that we had done years prior. But it ran its logical life. And it was like, we don't need to be in this business. We ended up selling it to a private equity company. and as soon as we signed the deal, two days later, we find out the general manager had a brain tumor that he, I think he had known about it because he said he wasn't going to be able to continue on with the business. Private equity said, no GM, no deal. Anyway, make a long story short, ended out he was scared of whatever his issue was. The deal finally did close about six months later.

43:11That's a surprise. Quite a long period between signing and closing. I had a transaction that had majority and minority shareholders. It was in a jurisdiction where we certainly had the ability to close the transaction and buy the company with only acquiring majority shareholders' shares. And we had signed a transaction. And when word got out and the minority shareholders found out about the sale, it turned out that those minority shareholders were much more problematic than the majority shareholders realized. This was originally a business that was owned by a few different families, by three families, and then two families.

43:54And the one family that had the majority of shares, they were successfully able to increase their shareholdings over years and at the expense of the minority shareholders, which left them very disgruntled. And the minority shareholders weren't involved in the management of the business. It turned out to be a long history of disputes, not necessarily legal that we would have been able to identify in our diligence, but a newspaper article, investigations, and things of that nature, where it could cause a lot of unwanted publicity for us to proceed on that transaction, even though we had signed a deal.

44:30You didn't do it? Well, no, we ended up closing, but we had flown out to meet with the minority shareholder. He presented us several binders. what he said was malfeasance on the behalf of the majority shareholders and how they've done things illegally to their detriment. And we looked at the data, reviewed it with our counsel, didn't see anything that at least on the face of it was legally wrong. But what we did do is go back to the majority shareholders and said, you told us not to talk to the minority shareholders. and we respected that through the process, but you really didn't let us know how big of an issue this is with them.

45:10So now you're going to help us fix it. And so we ended up buying those minority shares and paying them a little bit more than the majority got per share. But a good chunk of that came from the majority shareholders themselves. So if they wanted to see the deal closed, they had to, let's say, pay a price. That would be a fun one to negotiate. How would you go about mitigating risk and surprises? You know, they're going to happen on each deal. What can you do about it? It depends on what it is, right? You don't know. You've got to find a way. Look, Jim and I, our role is if it's the deal, make sure we get it done.

45:50If it's a risk or something that comes along as a surprise and it's the wrong deal, find a way to make sure either it gets resolved so it's still a good deal or make sure that everybody understands that maybe this is one you need to walk away from. Can't fix it. You know, I'm looking at my notes here and I had a thing about trapped currency. What the hell is that, trapped currency? So when you're doing offshore, especially if you're doing deals with China, one of the transactions, one of the last transactions that I worked at was with a China business and being able to get the money paid in either RMB or US dollars.

46:24And to get RMB, And I think the situation might not change that much. There's real restriction on China. Companies getting, moving, transferring RMB out of China and converting it into other currencies. We have a heavy restriction on that. And there is only so much allowed per year for a company. And so we had a transaction where there had to be some creativity around how we got paid a portion of the purchase price in RMB that would stay in China for our China operations. and then how we had to get some of that converted into U.S. dollars out of China, either into, I think we ended up getting it into Singapore.

47:02I don't remember the specifics of the details of how that was done, but it was a bunch of smart guys figured out how to do that. As you can imagine, with that kind of limitation and the need to move currencies around, there's a lot of smart guys working on figuring out how to do that. Structuring the transaction, looking at the different legal entities involved and taxes and things of that nature all determined. I don't think y 'all got a little main degree in money laundry doing all that. I wasn't involved. I wasn't there.

47:33You weren't in the room. I wasn't in the room. I wasn't in the room. Integration, the fun part of M &A. Yes. I'm curious about surprises that pop up during integration. We never wanted this deal. Why did we get it? Yeah. That's a surprise. It usually comes from one of the business guys when it's like a little difficult. Hey, they don't think the way we do. They don't work the way we do. Yeah. Have you ever had that? Like a B-unit sponsor deal and change his mind is, I don't want this. You've had to have seen that before. More than once. Oh, no. He and I participated in a transaction. He was at the front end.

48:08I was at the back end. Or you were at the front end and I was at the back end. Yeah. But one we gave away, we paid$340 million for it. We ran it, proceeded to run it into the ground over a period of three years, and we sold it to private equity for, I paid them$12 million to top up their working capital and gave them the keys to the business. Wow. There's more to the story there. That was something that where the acquisition, the strategic underpinnings was based on integrating the IT systems and taking that information from call centers and sharing it with our depots. And after the transaction closed, the management of that call center business talked the business unit executive leadership into not following through on that IT integration.

48:52Without that integration, there's no way to reach those synergies that you had in your business plan. Well, see, Jim was part of that business. And so that's the explanation from the business. From my perspective, it was a failed strategy from the get-go. So you say I'm part of that business. As part of the business unit, the acquiring business unit, yes. And the business unit, I always point on that. And I wasn't happy that we weren't able to carry through with our integration plan. But it is what it is, Steve. And then there's the transaction that you did down south. We won't say where exactly.

49:27That really, the integration plan wasn't really followed through with. And it turned out that from just a business mix perspective, it really didn't match the larger organization. Maybe you could tell us a little bit about that. It was the entry into Mill Arrow, which the company had no experience whatsoever, but had some really great ideas. Everything from building airframes to getting into microelectronics. Microelectronics, yeah. It had great capability. But it became an orphan the first month. Yeah. Nobody paid attention and thought about, okay, how do we really integrate and how do we go drive this thing?

50:05And then that was part of the problem. The leadership that came along was less than what we thought. We tried to force business in there that really didn't fit their business model. So we started selling stuff into them that wasn't microelectronics, which wasn't mill arrow. They struggled with that in terms of profitability. We ended up selling it three years later. Steve did a great job negotiating the purchase price. We didn't know who paid for that. And I was fairly adequate on negotiating the selling price. Going back to the same thing and mitigating these surprises, is there a different thinking or approach when it comes to integration, mitigating surprises from integration.

50:39A lot of that is really dependent on how well of a job you do on the front end as you're going through the diligence process. What we got smart on after a lot of scar tissue was we got an integration leader plugged in to the process early to the diligence so that the integration lead would know, oh, okay, here's what's coming, as opposed to, oh, the deal closes. Hello, are you the integration lead? Oh, here's the deal. Maybe we should meet for lunch. Yeah. That's a bad strategy. Yeah. They're involved early. Get the integration in early. It's making sure you do a thorough or at least an adequate amount of due diligence.

51:21Making sure that the team members are experienced or not experienced. They're mentored through that process. And I think Steve and I both have spent a tremendous amount of time mentoring functional team members in their respective areas. Yeah, and the training, process training. More often than not, we didn't always get the same diligence, functional leads. So I would say during diligence, that's 80 % of what we do is just keeping everybody in line and making sure that they know what they need to do from a functional perspective and what the expectations are. This may seem like a shameless plug, but it's something I truly believe in.

52:00you got to have the tools to support that process and communication as well. Steve and I are fortunate enough to have done M &A back in the days where it was conducted in a closed conference room with no windows and no files and paper. Yeah, just reams and reams of paper that you're allowed to take notes on and no copies. But the M &A process today is completely different. And it's so much easier based on tools like Data Room and like M &A Science that makes... Deal Room. I'll take the shameless plug. Okay. No, no. But I truly believe that. Having virtual Data Rooms, especially with smaller companies that may not be as well-versed in how a process goes, We've had transactions where, and using Dealer Room, we've set up that small company, a data room in due diligence.

53:01We've organized it for them. We gave them control, removed our control over the data and gave them control. We gave the CEO of the other company control of the data so we could only do what he set in terms of limits for access and download and printing. And we conducted our diligence through the process, you know, using that virtual tool. And you've got a complete historical record of the diligence, the comments, the questions that you're able to share with all the team members or management that want to see what happened and what transpired. And it facilitates the integration process so much having that.

53:41And in fact, you could use the same tools for integration that you used on the diligence side. You're all working off the same book and same play. That's the deal room difference. It's actually funny because I'll talk to their CS team and they'll get some funny requests where it is because people want to sense about the data. We'll actually get HR that says, hey, I need to set up my own sandbox. I can't have corp dev in there. I'm like, okay, we'll set that up for you. But it's, yeah, that's absolutely fun. It's evolving. We're excited to see the next generation of M &A here. When we talked about mitigating the risk integration, it sounds like doing thorough diligence is such clutch, getting the integration leader involved early, using a good tech product like Deal Room would be a good avenue as well.

54:24Anything else? Communication is always key. Communication and frequent communication with not just the key leadership, but the employees of the acquired company. Let me add to the communication, especially when you're in the process of negotiating and trying to get to close. The communication with the senior leadership team of the company, it's important that there's just one voice. Yes. You can't be having communication from here's the legal readout. Here's the HR readout in terms of what's going on. And so to try to contain that, it's very important because things can get sideways really quick.

55:01Misinformation moves at rapid speed. And so it's important to control that. It's really important that communication, something goes wrong. You got to be able to speak clearly on it. I'm going to take a break, but I got my co-host here since we're live and I'm on tour here. and I'm going to have her step in, maybe wrap up this interview. Nothing too tough here. Okay, it's me, Shiloh Patel. What was the hardest step to do an M &A? The hardest step? Get paid. Get the money for the transaction. If you're selling or if you're buying, you got to get the finance guys to pay the money. There's difficult elements of every phase of a transaction, But I would say getting them to the point of actually sharing the information you need, that's a process.

55:51It's often like peeling an onion. You have to fight through to get them to give you the information you need to make that decision of a go, no go. What's the worst deal you've ever done? We both have worse deals, don't we, Jim? I've never done a bad deal, Steve. I don't know what you're referring to. I had a horror story of a deal that I still wake up in night sweats over that occurred over 20 years ago. It was early on in my M &A career. It was a deal with an OEM divestiture of a very large datacom telecom business. And it was a transaction that was probably years in making in terms of eventually this is what was going on in that industry at that time.

56:37all of the major providers were outsourcing and getting out because they had this company called Cisco that was going to eat them alive if they didn't get out. And they realized they needed to get out of manufacturing. And our company was kind of king in that area. And we were relied that we could actually take over a billion dollar business and integrate it and continue to run it. There was so many issues from an industry perspective, as well as from that company's perspective that were a constant erosion to that business. So what looked like to be a$1 billion business that we were going to take on, which was essentially taking on a workforce that was unionized, which was problematic in itself, taking on an eroding business that was dropping, and we couldn't even gauge how fast that was dropping.

57:22And there was probably bad management on both sides in terms of they were both committed to getting the deal done. But what ended up happening is by the time we actually closed the deal, we had worked on it for some 18 months with delay after delay and trying to keep on top of what the actual forecasted business that we were going to take on. It was a moving target. And clearly something really bad happened by the time we closed because the day we closed the morning after we wired transferred the purchase price, I got an email, a copy of an email from very high in the target company's management chain to the COO stating, do not give the latest forecast.

58:04We're going to close the transaction this week. Now, if we had received that, and by the way, the forecast was attached to that email. And if we had seen that forecast, we wouldn't have done the deal. We would have backed away. Anyway, it got very ugly to the point where the CEOs of both companies, the CFOs, the COOs, all of the C-level, we all met back in New York in a meeting, very contentious. meeting ended very badly. We ended up unwinding the deal in order to avoid lawsuits. We closed the deal. We owned and operated the business for another about six months and then actually gave the business back and got our proceeds back.

58:42And it was very contentious and it was a bad outcome for everybody. There was actually some, as I recall, some personal venom issued in your direction from the CEO. Yes. Yes. I was not involved in the unwind.

58:58That was a really, really rough deal. Yes, it was. Yes, it was. That's why he's got all that gray hair. That's right. Earned every one of them. What's your best advice when acquiring companies? Make sure you have a very strong strategic underpinning on making the transaction with clearly defined synergies and a strong team to execute that plan. I don't think I have anything to add. Yeah. What kind of advice would you give to the next generation of young leaders? Work in a business. Yeah. Be in a business and be responsible for running a business or involved in running a business and understanding the P &L associated with that business.

59:49and get experience as a business person, and then go play an M &A. That's very good advice. Understanding if your focus is on manufacturing, understanding the manufacturing process, all the elements involved in supply chain. It really helps you as you go through to understand what the pitfalls are and how to avoid them. What's the craziest thing you've seen in M &A? Well, the story about the CFO in the middle of a process just fleeing the country with the millions that he siphoned off was pretty crazy. But we didn't complete that transaction, right? I know I've seen crazy things, and I just can't think of one now.

1:00:33I know there's been crazy moments, and there's been things that happened during the course of negotiations where essentially I've halted negotiations and told my team to get off the call and we're done. You reach that point sometimes in transactions where you can't be afraid if things are going in the wrong direction or if the other side is retrading points that you've already negotiated. Well, one comes to mind, that transaction, and this is never, it only happened one time, the transaction that we talked about earlier, the ugliest one that I was involved in, There was one late night negotiation with attorneys.

1:01:12It was 2 a.m. and the attorneys almost had a fistfight that I had a breakup from either side. So that's kind of a crazy one. That's crazy. Yeah. One thing that you realize is that M &A isn't a nine to five job. It's a 24-7, 365. We're frequently on negotiations, regardless of the geography, early hours of the morning. And oftentimes it's somewhat a strategy to compress negotiations into late hours just to ensure that you get to close. But I've been on negotiations at 1.30 in the morning, 2 in the morning with lawyers. And all of a sudden they bring on someone to substantiate their argument for language in the agreement.

1:02:00And in this one instance, it was litigation accountants. And I called a stop at that point and said, here we are trying to resolve this issue at two in the morning. Got to get things done by tomorrow morning. And you're bringing, you're already bringing in litigation personnel. I don't see how we get there from here. We've proposed something reasonable. and there was the litigation accountants yelling back at me and justifying why they're on the call. They were to demonstrate their value. And essentially, in that instance, we had both lawyers speak up saying, hey, I'm out. Let's bring an end to this issue here.

1:02:47Let's not discuss it further. We think the lawyers have got a solution to it. And the solution was our proposed language. so we ended up just defaulting to our original language but you know uh you reach those points almost every transaction you reach a point in negotiations where it's close to a breaking point and you have to let's say stand firm sometimes at uh or at least most of the times from uh i've been fortunate enough that it's worked out in my favor but like yeah i think i was in the right in terms of my arguments but but you can't be afraid to stand your ground when you need to Yeah, a lot of good crazy stories about that one.

1:03:26Hey, thanks, Shiloh, for filling in. Gentlemen, I want to thank you so much for taking the time. This has been a great conversation. I learned a lot. You've helped me become a much better M &A scientist. Cheers. Thank you. Those of you still tuned in, thank you for listening. Until next time, here's to the deal.

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