My Daughter Interviews Me About M&A | Holiday Special Episode with Shyla Patel

24:07And you're going to have your financial model and all these things in there. But along that, you'll have this investment, this integration thesis to go along with it. That way you start seeding the early thinking, which includes that go-to-market. What is that joint go-to-market going to look like? And you build an outline for that. And then once you actually sign a letter of intent, you start laying out the terms and you agree. You start agreeing to the purchase price, timeframe to get the deal done, and all the key elements. Then you start moving into conformatory diligence. And that's when you really start putting a lot of effort into the due diligence.

24:45But then you put more effort into integration planning. So you iteratively update your integration plan as you do diligence. A lot of information you get in diligence is really helpful for planning integration. Big mistake we always see is companies don't do that. Integration people come late. They come maybe a couple of weeks before it closed and they end up scrambling, trying to rediligence the deal all over again. And they plan just enough to get through day one, but there's still a lot of questions. And then they still scramble to continue planning after day one. And that ended up taking a lot longer to integrate the company.

25:18The big important part of it is you got to get ahead of it with mindset. I can see how mindset would definitely have a greater impact on doing M &A design. Also, talking about due diligence, during the diligence process, how would you get information about the other company when it's not fully open? One, when you start in the deal, you try to go online and do as much as you can. Sometimes you try to be a little sneaky. You go try to talk to some people. Maybe there's other companies they work with and you start talking to them. That's what you do really early in the process. And then when you start talking to the company and get them interested that, Hey, they were interested in doing a deal, you'll sign a non-disclosure agreement because you at least get to the point where they're interested enough to see an offer.

26:04Then you will have them agree to non-disclosure agreement. And sometimes you negotiate that because if it's like a direct competitor, they're going to be super sensitive about the information and they may have more strict terms than a company that's not a direct competitor. So you'll negotiate that, which is basically your agreement that you're not going to share this information with people that you're not supposed to. And that if the deal doesn't work out, you're going to destroy the information that you get. And sometimes they may want to make sure you're not going to take information and go try to hire people from the company or do stuff like that would be harmful for the business.

26:41And once you agree to it, usually people are pretty comfortable getting some initial key pieces of information. Because usually there's some real staple stuff that you want in the beginning. This is where companies have to play smart. They got to ask for not too much information because then it's like, whoa, it seems overwhelming at first. But you want to ask for just that right information. A lot of times it's this key information that allows you to follow up and ask for more information. So a lot of times I will ask for three years of financials. And if they have any projections for the coming years, I want to understand how well they financially performed the last three years.

27:16I'm mostly software, so other industries are a little different. I will then want to get the customer breakdown. So I want to get a, they call it a customer revenue waterfall. I don't get the name of the customers, but at least I see the different customers, how long they've been a customer, how much they pay, what their terms look like. And that gives me a really good understanding of the quality of the revenue coming in. You might see, wow, there's customers that have been around for so many years and they keep renewing every year, there's a really high renewal rate. Or maybe they're not. Maybe they're really short-term customers and they're constantly churning and they have to spend a lot of time getting new customers.

27:50I want to understand that. And then a lot of times I want to understand what their investment situation looks like. There's a bunch of different investors and they have a cap table that tells you who all the different investors are. I want to be able to understand that. Sometimes it's a little tricky. You're talking to one person, but they might not be the main decision maker like they represent they are. So it's always good. Sometimes there's multiple people. So I like to have that cat table to know who are the actual people that need to influence to make the decision. And then the HR, just at least like a roster.

28:21I don't need the names, but I want to know what people they have, what roles they are, and maybe how much they're getting paid. That gives me an understanding too, trying to think of like org charts of how our companies would come together. We usually start off with getting that basic information. At least it gives me an idea of what we would pay. There's some key things, like it's really important that we integrate the technology, then I might go deeper in there and say, hey, it's so important that the tech gets integrated. We really need to understand what your tech stack looks like. In fact, maybe it might be good to have our VP of engineer talk to your head of engineering, let them exchange some details.

28:52So they're confident that they can integrate the technology together. Usually most of the people will get comfortable to share information once you sign a letter of intent. Once you sign a letter of intent, it's like you're really, you're both sides are committing to working together to do the deal. At that point, you really want to do that. And for the buyer, once they sign a letter of intent, they really want to make sure they're getting what they paid for. Because a lot of times you just don't have a lot of information before you sign a letter of intent. It's even crazier if you're in an auction process, all of a sudden you have pressure from the bank to hurry up and put an offer in.

29:25So a lot of times you'll skip a lot of steps and just take the bare minimum information, put an offer in. But once you sign the letter of intent, you really want to make sure there's no surprises. It could be anything that could pop up. Maybe the financials weren't as good as they should have been. There could have been some adjustments that they could make or should have made that would have changed the whole financial situation. You may find out a key person's leaving, like all those things. So you really want to do your diligence to make sure you don't get those surprises. And if you find a surprise, you got a few things you could do.

29:56You could either create a mediation plan, figure out like a mitigation plan of like, what are you going to do about it? If they owe taxes, okay, we'll just have to budget paying taxes and we'll pay the taxes or we're going to require them to pay the taxes before close. Sometimes you may have to go back and say, hey, there's like a million dollar difference in the revenue than we expected because we had a third party look at the numbers and they showed us that this stuff wasn't reported correctly. You may actually renegotiate the price. That could be another thing. Sometimes you may find something that makes you just want to walk away from the deal.

30:28You may find out somebody that the main VP of engineering that you're with the big prize talent and team that you're after is going to leave and go to another company. It's not worth us doing the deal anymore. So those are things that may come up, but you got to build that level of comfort. That's why trust is so important, M &A. You got to try to build a relationship. Good trust is not only getting the information, but stuff comes up. You find a surprise. There's never a smooth deal. Something comes up and then you got to work together on it. I get that. Having a lot of trust in others and having people trust you is definitely like a big step in working together to integrate one company.

31:04That's amazing. I'd like to ask you another question. So what's the number one mistake buyers make during diligence? I know we kind of already dug into this, but you can elaborate a little bit more. The number one mistake that buyers make during diligence, integration planning. They don't really do the extra work. I feel like anything you do in this world, you have to do the extra work to be really successful at it. Remember we talked about how do you be the best at anything? We used to talk about purpose. What was the purpose? Find what you love to do and be the best in the world at it. How do you do that?

31:39Having a burning desire. Right. Having goals. You got goals and you have this like burning desire to go after it. Give me an example of that. Like why is it important to have burning desire? So when you have burning desire, like the more that you want something, the more you're actually going to want to work for it. If you really want to win this track race, you're racing against other people. This one person just doesn't really care if they win or lose compared to you. If you're actually working hard and actually trying to win the race, the one that has more desire is obviously just going to chase after it.

32:14They're going to want it more. So they're really going to try hard. That desire amplifies the effort that you put in. Most of the time, not always, the person that puts in the most effort usually wins. I think the same goes with M &A. It is very competitive in a way. And maybe you won the opportunity to buy the company, but you still have to be as competitive to make the deal successful, which is putting that extra effort in. This is one thing. It's a lot of work to go through diligence to get the deal closed, but to even do all the integration planning along with it, that's that same level. You have to have a real burning desire to make this deal successful, to put that extra effort in to get that outcome.

32:56specifically what do people like ignore when it comes to doing diligence like what should they be looking out for but what do most people just like ignore i think this still leans into integration there's who actually owns the outcomes in the integration oftentimes where if you don't plan early that same accountability doesn't get assigned so early so really knowing who's going to own the value capture and having them involved early so that they can do all these planning and things like that. That's the big other area that that would be a miss if you don't have that alignment. You end up also having this knowledge chasm.

33:40And if you think about you sign that ownership or identify the ownership later, a lot of times they're playing catch up. They're going back. They don't have all this information that the people that worked on the deal earlier have so that they're going back and trying to catch up all that information. And that's what causes problems. Yeah, I see. So why should integration start with diligence before anything else? I think we talked a lot about getting the mindset in early, but integration, it should because it's like what you're ultimately trying to do with the company. It's really figuring out the how as early as possible.

34:20There's always the why is pretty clear. Like if you figure out why you want to do it, and it is effort to get everybody on the same page. You get a lot of employees in the company for them to understand the why, but the how, if you can really focus on the how early, that allows you to have that comprehensive plan that you can ultimately get both sides of the companies aligned on, how they're ultimately going to bring those businesses together, how they're going to achieve that value that they wanted to, whatever that goal was. Was it enter a new market? Was it to get the talent from the company, to bring the technology to their company?

35:00Sometimes it's to get a product out to market faster. Actually, one of my favorite was we use Alexa. We still use Alexa. Alexa was actually created through three acquisitions. So they bought three unique technologies together and they just integrate them well. It's like a prime example, just acquisitions that allow them just accelerate their roadmap and get that product out to market. That's very cool. So integration is like the main point in a deal. It's like what everyone's trying to like. I think it's the most important. The thing is you don't want it to be forgotten is all the how. What are all the things you're going to have to actually do to make this deal successful?

35:39It's like the hard work. That's where the work really starts. Kind of like for a startup. They get all excited about raising a bunch of money, but that's not a thing to celebrate and be excited about. That's like when the work actually starts. Especially if you raise more money, it means you have more work to do. That's a lot more work to manage that kind of money. So the same thing when you do M &A. It's once you close, that's when the work starts. You got to go do all this work to get that value that you planned on. I see. Quick break and a reminder that the M &A Science founding member presale is now live for December only at mascience.com.

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37:00Can you walk us through the five pillars of Biolet M &A? Which one's the hardest? So pillar one is never M &A by impulse. Pillar two, unified process tools and data. Pillar three, synchronized diligence and integration. Pillar four, built for scalability. Pillar five, a win-win approach. Okay. Can you break them all down? Sure. Let's do the first one. Never emanate on impulse. That means you don't want to just do a deal because you're just so excited you're reacting to it. And this could happen where a banker brings you an opportunity, a book and says, hey, here's this company. And it gets you excited about it and you get other people in your company excited about it.

37:47And then you're in the process that way. Or maybe you're in an auction and they're like, hey, all these other people are bidding on it. You should bid on it too. And then you get excited about it and then you're bidding on it just to try to win that deal. And that's, again, you're being more reactive to that process. You want to really spend the time and look at your company and understand your company strategy. Every company has a strategy. It's like, where do you want to be 10 years from now? How are you going to get there? You know, in the deal room, like five years from now, we're going to be a$100 million business.

38:15We have these organic growth levers, but we know along the way, we're probably going to end up buying a business. We're probably going to end up buying adjacent technologies and things to help us really expand and cover the whole buy side of M &A and be the number one platform for buy side M &A. And while we have that strategy defined, we can look at how M &A can help us accelerate it. And maybe, for example, if we find this company doing something similar in another market, like in Europe, that could be part of it. We want to geographically expand faster and be global to reach our goal. Well, we're going to use that as part of our M &A strategy.

38:50So we have a clearly defined M &A strategy. And then you can go as far as defining your M &A criteria. I know exactly which companies. I might get to a point and say, hey, we're specifically looking for companies that are similar, that are in Germany, France, the UK. That's the markets we're really going out. And then we have that criteria and it makes it really easy to know which companies say yes and no to, but it allows us to actually go to those companies. We can start building relationship with these companies before they think about selling. And sometimes you can actually get them warmed up to the idea to sell.

39:24You can say, hey, there's a better together story and you can get them excited about it. And that's what we call making a deal actionable. That's something I want you to work on one day is learn how to make deals actionable because these are companies that may not be actively trying to sell. They may not be in the market to sell, but can you convince them to sell? Can you make that deal actionable? That's what we want to do with pillar one is really be able to take that approach of being reactive to opportunities instead of be proactive where we can go out, build these relationships with people in the companies.

39:55So even if you're not thinking about selling, I don't get the deal actionable in a week or a month, maybe a year goes by and all of a sudden there's a reason you need to sell. It could be any number of reasons, but you think of me right away and you call me and I'm your first phone call. And again, that's where we want to be very proactive and deliberate, not an impulse, never. The second is unified process tools and data. And we've talked about this with like Deal Room as an example is having a home for your deal. Because the old model, you'd always have information all over the place. You'd have some in Excel, email, and then you'd have a data room.

40:35And it was always like disconnected. And then when the deal's done, it just gets archived somewhere and forgotten about. And now the way that things are evolving, you want to really connect everything. If you connect everything, you get a single source of truth. You have a place that enables you to collaborate with your team internally, collaborate with external team. You may hire a lawyer or a consulting company to help you with the deal. You can collaborate with them easily. Then you can collaborate with the counterparty, the one you're going to work with to buy the companies. Because when you're done with the deal, you're going to be working together.

41:12Collaboration is really important. Along with that collaboration's priorities. You always want everybody working on the highest priority items throughout the whole process. So having that unified tools helps you with it. And then also the reporting is really important because you can have reporting for your whole pipeline that you want to know what deals you're looking at and tracking that your due diligence. You want to know, you want to make sure the different people are different teams are doing what they're supposed to do and contributing. And you're managing the details, making sure things are getting acted on.

41:43And same thing that goes with integration. You want to make sure you're making progress towards capturing synergies. I would say the emerging thing is AI. You know, when you have all this stuff unified, you can better leverage AI. That's becoming really important because you're seeing it now. Look at our company. We really try to connect all our tools together so we can run AI across all the information in the whole organization. Pillar three, synchronizing diligence and integration. This is when you have two separate teams, one for diligence, one for integration. A lot of times that's not a good thing.

42:16You really want to try to have them working together as one team or as a true partnership. And this is where we use the example of if you have a work stream to go do diligence and you have people internally, your external team, counterparty, all working on that. Having a parallel work stream that works in tangent with diligence so that team members can plan integration alongside diligence. That way you keep everything synchronized. All the information can be synced together. You can repurpose a lot of information from diligence into your integration plan. That's where the synchronization of diligence integration comes in.

42:52The built for scalability, it is one thing to do one deal a year. It's another thing to do multiple deals in a year. But if you're trying to do multiple deals at the same time concurrently, then it's a whole different game. You do need to design your process for scalability because you're using the same resources. You're using the same people, same departments. you got to have a real setup that scales and drives that efficiency so that you can keep doing that so it's really important is like building your system for scalability there's a lot of nuances so you can achieve that the other pillar is a win-win approach you think about the people we talked a lot about the culture but if you break it down to the individual person it's like setting them up for success you're setting up your current team to welcome all these new people and work and collaborate with them.

43:42But if you think about all the people joining your company, how do you set them up for success? How do you make sure that they're really set up, they're motivated, and you're ultimately creating a real good experience for these people coming in? Ultimately, you want to make it a win-win. That's what's really important in M &A to make it successful. It's not just one side. So having all of these pillars are important for all the processes of M &A. You said the hardest one. I think it might be the first one. Sometimes I found myself even in a situation where you start investing time into a deal and you get really excited about it.

44:17And it's hard to say no. It's like you fall in love with the deal because you want to do it. Then along the way, you start finding red flags. You're like, oh, this doesn't look good. Wow, there's one main customer that makes up 30, 40 % of the revenue. That's not a good thing. That one customer is gone. That's it. We're going to lose a lot of value there. Start looking at that, But then it's so hard to walk away to get to a point where you're like, all right, we shouldn't do this deal. That first one is when you got it. Because the better you intentionally are about that criteria and disciplined on it, you're going to make sure you buy the right company to begin with.

44:50Wow. So when you know your true intentions, it's like you already know what you want with yourself and the values of your company. Yeah. I use this analogy a lot. When you think about M &A, it's a lot like getting married. Like you go date around. if you want a long-term relationship you want to make sure those things that you're looking for you have in common which is like the values and then you want to make sure there's likability the more things in common you have you along like those are really important so that's why and if you saw some red flags in that you're like this personal change or something like that that's not good you go to that point then when you sign a letter of intent it's like getting engaged then when you engage you're like really you're planning the marriage and getting there you still got a chance to run away, which you usually don't.

45:36Usually you really figure it out, make it work out. And then once you get married, but then the work starts, then you have you're married and then you got to really work together. That's like integration, like the hard work to make that successful. I don't know if that analogy helps at all or it might scare you away. I don't know. That actually helps me understand MNA a lot more now when you compared it to dating. Now it makes a lot of sense. I'm sure it would help other people too. Anyways, that's a great example you pulled out. Now I want to ask you another question. So could you explain the three codes of conviction?

46:13Why are they so dangerous? So if you look at the three codes of conviction, there is the base code, which is reactive positioning. That is like you're entering a process and it's already in flight. There's an auction going on. You get in, you get really excited, and you're jumping in trying to catch up as quick as you can. You are totally reacting instead of leading. This is not good for anything. This is like when we're watching a movie here with your brothers and you come in and you're trying to catch up on what's happening. And you join the movie like halfway through. That's not good. The middle coat, it's like integration negligence.

46:51This is where integration is really important, like we talked about. But you can easily get caught up into this. This is a later problem. We'll figure it out later. We'll get to it later. We'll have other people deal with it. Let's focus on getting the deal closed. That's not good. It's like if we are going to design our kitchen over here, right? We're going to remodel the kitchen. And I'm not going to talk to the person that's actually going to do the cooking. That's not good. That's the same thing with integration. Like a person that's actually going to execute and do all the work, you're not really including them.

47:20The top coat mirage is the model mirage. So you always have to make a model for all your deals that really lays out your assumptions. It's really easy to make a model look good. And you do. You do need to make a model look good to get it approved, but it can be a mirage. It looks good. And you fall in love with the way it looks. You have these assumptions on your cost synergies. Oh, we're going to combine these companies. is we're going to be able to eliminate all these costs, which will help the business become a combined company and be more profitable. And then you have revenue synergies. We're going to cross sell our products and make more money that way.

47:51Get excited about that. That's going to help increase revenue. But you really got to pressure test it. What did you actually do to validate those assumptions? Those are like the three coats that you always see pretty common on these deals and why things go sideways. So what can people do to avoid making these errors when it comes to the three coats? like what advice would you give these people so they don't make this mistake? This goes back to values, discipline. You got to have some real discipline. You can't, it gets easy to do this. It gets easy because you can hear about an auction, you get excited, you want to, if you have your process designed so that you have clear criteria set up, you're not going to fall into reactive positioning in an auction.

48:34If you have that real discipline on how you plan integration and you follow through, like you're not going to run into integration negligence. And same thing with your model, like having those integration leaders involved early, they're going to pressure test that model. They're going to help validate those assumptions because they're ultimately the ones they have to go execute and deliver on those assumptions. So having a lot of discipline and having a good mindset when it comes to this seems very important to avoid a lot of issues. Okay, moving on. What similarities do elite buyers have in common?

49:13We talked about early alignment and there's alignment between both buyers and sellers on what needs to be done to make the deal successful post-close. Because a lot of times you can get the person that's selling the company, he's gonna get a lot of money and he's gonna get the money and just buy a boat and go away. But you wanna get him involved early in terms of what's gonna happen post-close, what his role is going to be. And then your internal team, what's the plan, how we're going to integrate this company. That's going to be like really important is to be able to have that model laid out so that you have early alignment.

49:45And then you're also clear on the ownership too, because you have a clear plan on how you're going to integrate the company, but you also know who owns what. There's usually going to be some main owner of the overall integration. And then you have the different departments that are going to own their parts as well. Do you really want to get early alignment with all the key stakeholders and also the accountability. And then the operating model is the other thing you want to define really well. That's a big part of integration plan is like, what is the operating model going to look like when the companies combine together?

50:19And then overall, like you're ultimately building M &A as a muscle. Like the more you're trying to do this, you're trying to really improve and build a muscle for doing M &A so you can keep doing deals better and better. Could you elaborate more on like what needs to be done when it comes to early alignment? What can be done to get early alignment is just having the tough conversations early. I've even been in a situation where it feels a little awkward. It feels a little awkward the first time I was in a deal and wanted to start asking questions about culture. I wasn't used to it. I never did that before.

50:49I always just was a very much the numbers person and wanted to make sense of the numbers. And then we'd go do a deal. But then I was like, tell me about your culture and you want to understand how they actually work. And And those are the things that you want to do for early alignment is just ask these tough questions early. You want to also get a sense because you may find out that the person wants to sell a company and just get out as soon as possible. And you might have expected that person to stick around for a number of years. And they sometimes may tell you they're going to stick around for a number of years, but you're really not.

51:16So that's why that alignment piece is so important. You really want to dig into it. That's why it's important to spend time with people face to face, get that level of trust established. Those things are really important to build alignment. So you're saying like knowing true intentions. Yeah. That goes back to what we were talking about earlier. Got it. Okay. How is relying on inbound slash bank deal flow dangerous? Relying on inbound deal flow, they're not the best deals. I can tell you wholeheartedly from experience, the best deals are the ones that you work harder for and go out and find yourself.

51:51And then the ones that you find that you're not competing with a bunch of other people. When the deal comes to you, usually they send it to a bunch of people at the same time. And then all of a sudden you're competing with a bunch of other people and you're probably not going to get the best deal. If you're going to win, you're going to have to outbid. And a lot of times you spend a lot of effort on those deals and you don't even win. So you don't even have certainty to win the deal. And then it's not your narrative. It's not your story. Like you get pitched on why it makes sense for your company, but you're not the one that came up with the narrative.

52:21And then you're ultimately very reactive in the process. You're not leading the deal. The deal is leading you. Okay. So like putting in more effort shows that the deal would be better compared to one where you don't really do as much. If you put in the effort to find your own deals, ultimately you're going to find, do you know this house we're sitting in? You know how we found this house and bought the house? Sending a million envelopes to many people in this community. Yes. So we went, we looked at houses. We toured. You came on some of the tours. We looked at houses that were on the market and they were terrible.

52:56This housing market about two, three years ago wasn't very good at all. People weren't moving because they were really low interest mortgage. They're paying low payments in the house. They don't want to move. And the houses that are coming to the market were in really bad shape. And they were super overpriced. I was like, none of them were nice homes to live in. So instead of looking at the homes of the market, the brokers were showing us that all these other buyers are also looking at. Even when there's a good home, it's like there's 50 people lined up to look at the house in there. People are actually bidding more than the asking price.

53:27Instead, we started sending letters out. I sent a letter out with a picture of you and your brothers. And I put a little note that said, looking for a home to raise my children. If you think of selling, please think of me. That was all I put is a couple of sentences. And we send that letter out to about 300 homes. And we had about six replies. So about one out of 50. Three were asking for too much money. One was actually asking for below market price, but you and your mom thought the house was too small. And then one I liked, one on the golf course I wanted, but you didn't want people walking around the house.

53:58But then we ended up buying the house that we're sitting in, which is a beautiful home that sits on the forest reserve here. And then when we met the sellers, they told us like, hey, we're just thinking about selling the home. And we ended up giving a verbal offer that same day and they accepted it. And it turned out to be such a smooth process because they wanted to wait about three, four months before they moved out of the house. And again, there was no pressure. There was no auction. We're not competing with all these people, cash off or this and that. We're like, hey, we're very flexible. Absolutely, we can get the deal and we can give you extra three months to move out.

54:31No problem. We're in no rush to move out. We still had a lease on the last place we lived in the city. And the sellers were so nice to work with. We ended up getting a lot of other benefits from them. Got a lot of furniture. You got the And I saw a piano behind us and all these things. That was the best deal. Was the one that we went out and found ourselves. We did the hard work. Not a lot of people that go out to buy a house send 300 letters out for the picture of their kids. That's why it's important to do the hard work. The discipline is what allows you to find the better deals. That makes a lot more sense.

55:02finding deals that you actually work for and the ones that you find yourself are more likely to come out better than the ones that you're stuck in competitions with. Yeah, proprietary deal sourcing. Well, that just shows that M &A can be compared to everyday life situations. That's cool. What should functional leaders know about their role in buyer-led M &A? Functional leaders, they're partners in the process. They're the ones that ultimately are going to own the end results. So you think of them as co-creators or co-architects. And what's important is that they're helping to shape the assumptions and also validate them early in the process.

55:48If it's only the CEO and executives doing it, you're going to get less accuracy on those assumptions. But if you involve those functional leads, you can get more accuracy because they're helping to validate it and give you their perspective on it. They're trying to keep all these expectations realistic. That's good. It's good to know about the role. Give me a quick summary. Sure. Functional leaders, their role in the process is to be co-architects. They got to help validate assumptions. They help create some of these assumptions and really be there to support the plan to create value early in the process so that they have more accountability and ownership and to make sure all the expectations are realistic.

56:32So more of them are better than just one leader. Exactly. You get more people involved that are going to be actually doing the work than just the people from the top that ultimately make the decision to go or no go. That makes a lot of sense. Okay. Okay. Now, could you tell a story from the book that illustrates FireLud M &A in action? There's some good ones. So there's two I'll give you. One was Unilever. I'm thinking of Brigitte because I'm actually going to do another interview with her. But she worked at Unilever and she built out the health and wellness division there, the big healthcare company, a lot of different divisions and products.

57:08But they didn't have anything in this wellness area with all the different vitamins and things like that for personal health. But she actually built this whole division out completely through acquisitions where they did about 10, 11 acquisitions and they built a whole entire division out of the company. They truly took a buyer-led approach. These weren't things that came to them. They were proactively, she built a team all in-house and they defined a strategy, defined their M &A criteria. They proactively went out to these companies and they found a number of companies to buy and they kept acquiring them.

57:43They literally built out an entire billion-dollar division all through acquisitions. That's a great example of buyer-led. The other one I really like is LCI Industries, Jason Lippert. Jason, CEO of Lippert Industries, probably a$3 billion company. Actually, if you remember, you did a podcast with them for Boss Move. So the thing I really admire is the approach on culture. Because when we talked about how culture is important, they are so proactive about culture, they look at it as their competitive of advantage. In fact, they take that as an approach when they approach companies to how they're going to help them change their culture to adopt their culture.

58:21And then when they buy a company, they have all these leadership coaches and they're really involved. They're really proactively trying to change this company's culture. And they use that as basically a strategic advantage. And that was like a pretty new perspective for me. And then later, I end up interviewing Bob Chapman and Kyle Chapman from Barry Waymiller, which are one of the originators of that model. So that's another great example of taking buyer-led and using that to get the best outcomes in the deal process. I see these strategies used from buyer-led help them with their deals. What specifically made them more successful using buyer-led?

59:00Like breaking it down, what made their deal more successful? I would say the way they look at integration owning value. When they look at the culture alignment as a big value in the LCI example, they really brought some big ownership around that on owning how the cultures assimilate. They just did such a good job of it. That's what really made that successful was that ownership of the outcome, ownership of the value. It's not just this handoff is the thing you always hear about. When you hear of the traditional model, you don't think about all these things in integration and there's just a handoff.

59:34There's a deal team and integration team. Deal team closes the deal and they hand it off to integration team and say, hey, it's your turn. You guys go integrate it. And that's an old model. Now things really should come together. Should even be the executives thinking about how the company is going to integrate. Everybody should be ultimately thinking about how the company is going to integrate. And you can design your teams too, where deal team will actually have ownership and accountability of how well the company integrates. Because that's what ultimately determines if a deal is going to be successful or not.

1:00:03What's the single most important idea listeners should take from Buy Lead M &A? I think the most important thing to take away is how you approach the deal is really owning the assumptions. That you own them. You don't just make them up, but you actually do the work to validate them, to understand how you're going to approach executing to achieve those assumptions. Taking that real ownership, doing that extra work. There's some serious work involved to doing that, whether it's focused on cutting costs or increasing revenue, like defining the how and validating it, making sure that's achievable.

1:00:44That's the real work. And then I think just leading the process. It's so easy to get reactive and the seller is driving the process. But the buyer-led approach ultimately allows you to better plan integration and create better outcomes for both sides of the table. Okay, so you're saying that taking extra work and ownership, but also leading the process are the most important? Yes, exactly. Everyone, you heard my dad. You should definitely take that, especially because it's one of the main points in buyer-led M &A, so the most important and helpful, like you said. Okay, I have one more question for you.

1:01:25What's the craziest thing you've seen in M &A? I could ask this question. The craziest deals I worked on was actually, I was pretty early in the career. I worked with a real estate developer and we would buy properties and usually they're, we're planning to convert them into boutique hotels. And the financing before the last recession, right before we had this 2007, 2008 recession happen, it was a crazy time because it was so easy to get a loan. Even for a house, it was so easy to get a loan. And that's a problem. They gave these loans. They had these adjustable rates. If the interest rate goes up, the payments go up quite a bit.

1:02:08And it was just setting up a big balloon. The commercial loans were just as crazy. I would do some of these deals that were 110, 115 % financed. We didn't put any money down payment. We would walk away from the closing table with a property and cash. Those were some of the craziest deals that I got to work on part of a number of them. That to me was probably the craziest era that I don't think you'll ever see. There was a time when you'd have a bank, just you could have them and you architected it a little bit. You either do like a construction cash back or you could do a double closing. You could do a creative financing back then and pull a lot more capital out on things that you were buying than what you needed to.

1:02:56And that allowed you to basically finance more than what the property is actually worth. Wow. That's crazy. That seems like crazy time. I'll never get to experience. No, there might be a different crazy time for you. I don't know. We'll have to see. And I have one more question. I could have asked this in the beginning, but what's the difference between traditional M &A and buyer led? Just to summarize everything. How to summarize everything between... So traditional M &A, usually there's an investment banker, they have a company, they want to sell it. They'll create like a teaser sheet that gives you high level information about the company and they'll send it out to as many people to get a group of people excited about it.

1:03:39And for them, the only thing they care about is certainty to close and the highest price. That's it. After the close, it's up to the buyer to figure it out. Buyer-led approach is very different. It's like having this clearly defined strategy and criteria is exactly what you're buying and why you're buying it. And that allows you to actually go after them before they even go to market or to the banker before they're even actively thinking about selling. And that way you get an opportunity to work exclusively with them. And then when you work exclusively with them, you get to control the timelines.

1:04:09It's not a big pressure to close a deal. It's like, hey, why don't we work together to make this the best deal for both of us? We can make this the best outcome because we want to achieve the specific outcome of why we think the companies and our teams will work together. And then likewise, we'll make it a good experience for you. That's why that buyer-led approach, in my opinion, is the best way to do M &A. I see how buyer-led can make a greater impact on all deals. Okay, dad, that's all my questions I have for you today. Are you proud that I didn't roast you too hard. Honestly, I think this is probably the most collaborative you've been in months.

1:04:44Well, I'm just a teenager. It's in the job description. I'm just happy you're still making time. You gave me some time to do stuff like this. I still got your boyfriend. I'm doing my own official due diligence on. Please stop treating my boyfriend like he's a Target company. No promises. Anyway, everyone listening, check out Buy or Let M &A because apparently writing a 200 page book is what dads do now. Hey, thanks for hosting kid. You're still my favorite collaborator, even though I only get you on special occasions. You only get me twice a year, maybe three if you bribe me with sushi. Deal. Thanks for listening, everyone.

1:05:27If you've listened this far to this podcast, I like more than got to thank you for a little special edition here with fellow M &A scientists. Let me know what you think. I'm really curious. We're having fun with this. I wanted to talk through some of the points of this book I published and what better way to do it than have my free labor around the house to help me with it. But send me a note. Connect with me on LinkedIn. Love to hear folks that listen. Give me feedback. Let me know what you thought about this interview. If you have other topic ideas, criticism, I'll take it. It's how we get better.

1:06:00Till next time. Here's to the deal.

1:06:14Thank you for taking the time to explore the world of M &A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M &A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan, K-I-S-O-N, at mascience.com. Or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter.

1:06:58Again, that's mascience.com. Here's to the deal.