When Deals Get Weird: Stories You Don't See in the CIM

23:44And it was our understanding that we would own the IP. It wasn't until nearing the end of the transaction where we learned that they needed to keep the IP and provide a royalty back to us. Learning something like that at the end of a process is not good. It really destroys trust. And trust is something that we value. We always say, if there are challenges, if there are issues with the business, let us know up front and we'll see if we can figure out a way to resolve them. Don't have it come up as a surprise late in the process because that's going to kill a deal. If you had to do that deal again, what would you do differently?

24:23I think what we would have done is probably put some more explicit language into the LOI. That made it very clear at that point because we thought we were clear, but clearly there was some misunderstanding along the way. And that created the challenge. And so that blew up the deal, which was unfortunate. So another one that I thought was interesting is we like to look at bootstrap companies too. So bootstrap companies where they haven't raised any capital from venture firms or private equity firms. And it makes it a lot easier instead of having to deal with multiple constituents. you're dealing with a founder who's owned a company and it's been his or her baby for a long period of time.

25:00And in this one situation, there were two founders. One who was clearly committed to the deal and very excited about the deal. And one who, throughout the entire process, you felt was uneasy about the deal. Wasn't comfortable about necessarily relinquishing the baby. And it was interesting because looking back on it now, We should have paid more attention to the fact that this one person was never fully on board. So what ended up happening is we ended up doing all the diligence. We negotiated the deal. Literally, we're ready to sign on the dotted line. And we learned that this one founder had hired an independent valuation company who, of course, told him that he could get three times what we were offering in our letter of intent that blew up the deal.

25:45It's obviously very painful when something like that happens again. late in the process. Wait, which stage was that? That was near the signing of a definitive agreement. And they said, no, I got this company. They told me this company's way more. You guys are trying to pull one over on me. We're not going to do move forward unless you come up under this price. Right. Something like that. Right. It was something like that. And, you know, we had all kinds of market comps, all kinds of transaction comps. Our value was right in line with where they should be trading. And of course, you know, valuation experts are going to say you're worth a lot more and give you that opportunity to go try to find that, but it never happened.

26:17The message is just being able to try to identify some of those things earlier in the process before you've gone through so much of the work to get to a point where the deal fails. So that's just something that we've learned. What would you do differently? On that one... That's a surprise, essentially. From my perspective, we should have recognized the fact that this person was never really fully committed to the deal. His other co-founder was, and we relied on that. And we sort of relied on his influence with this one other founder, looking back on it, we probably should have just said, this is too much for a red flag.

26:51Unless you're fully committed to doing this deal, let's just move on, go our separate ways earlier in the process. It's always painful to get through that much of the work and hire the external advisors and spend all that time with your cross-functional team, diligently a company to then have the deal not come to fruition. What ended up happening to them? They ended up getting bought by another company for probably significantly less than what we offered. And that's what always happens. It's always those kind of rude awakenings. That's okay. We move on. What else do you offer me? The other thing that is interesting is, and these dynamics are something that we've experienced multiple times, is working on a deal.

27:30And it's a banker-run process. And it is you as a strategic and PE firms looking to buy the same company. One of the things that's an interesting dynamic and some we've discovered over the years is that bankers tend to give preference to the private equity folks because they look at the private equity folks as an annuity. I can do this deal with them. Maybe they'll give me their next sell side. If I do this deal with them, maybe there's an opportunity to sell another one of my companies to them. Whereas we as a strategic, we're not out there selling a lot of portfolio companies and doing that, not creating that same kind of annuity and that same kind of deal flow.

28:08as the private equity folks are. So we've had a couple situations where, again, we're very far down the process negotiating a deal. In one situation, we had higher valuation and didn't have an opportunity to provide that last bid because they made the decision to just sell to the private equity firm. And that was always their intent. I think that's something that you just need to be very cautious of when you're in a process that's competitive. Think about what the banker's the motivation is. And if there's an opportunity to preempt a process and move ahead of the bid date to position yourself more strongly, do it.

28:45If you wait until the actual bid date, it could be too late. We've learned that. So I think, you know what, for me, it's all about all these lessons learned and how to be better going forward. These are all awesome stories. One of the great benefits of having done this for as long as I have. Any parting advice on parting advice? Yeah, I think parting advice is always keep your eyes wide open. Things that are orange flags or red flags, there's usually a reason for that. And really double click there. If your spiny senses are telling you something doesn't feel right, speak up about that and really follow up on that.

29:20Because usually your gut is going to be right. And if your gut's telling you there's something not right on this deal, maybe that means you should walk away from that deal. And walk away earlier in the process. I'm going to give a little progress plug here because I think it's important. One of the things I love about progress is that we as a team cross-functionally are very committed to every deal that we evaluate. We're always looking at ways that we can improve ourselves. And one of the great things about my cross-functional teams is that even when I have to tell them that this deal isn't going to happen, they always look at it from a standpoint of, but we learned something new on this deal.

29:56We learned how to do better diligence here. We learned how to keep our eyes open for this issue there. And that kind of positive attitude allows us to be more effective as a team as we look at opportunities from an M &A standpoint. Jeremy, thanks for sharing your deal blow of stories. You're welcome, Kisan. I have plenty of success stories too, and we can come back and talk about that. But I know you were curious about some that didn't happen. Thought it'd be worthwhile to share that the track record isn't 100%. Even the best deal makers don't get every deal done. By the way, multi-time podcaster on M &A Science.

30:29Look up Jeremy Siegel. He's been on there at least three or four times. And we're slated to do another podcast in the coming months. Looking forward to it. Here's to the deal.

30:40Live at DealMax with Patrick Mumman. Tell me who you are and what your company does. Hey, Kisan. Patrick Mumman, Vice President of Corporate Development at CBiz. Been here for five years with the company. My role basically is origination. So top of the funnel type opportunities, looking for deals that CBiz will go out and acquire and incorporate into our business. Big time accounting firm? Number eight accounting firm in the United States on the heels of a transformative deal when we acquired Markham about a year ago, a little over a year ago, jumped us to number eight accounting firm in the United States.

31:13What's the most memorable deal you've done? So prior to CBiz, I worked at H &R Block doing a roll-up strategy, acquiring small mom and pop accounting firms. Did an accounting firm acquisition in the Bronx. It was owned by a 78-year-old grandmother. Really nice lady. Seemed really nice. Acquired her business. Closed in October of that year prior to tax season coming up. So tax season opens up early January. These acquisitions were all exit strategies. She knows she's on her way out. She's going to work two to three years and then she's done. First week on the job. May have even been the first day, but first week on the job.

31:49So now she's an employee. We bought her business. She stays on board. She had a fist fight with the manager and was fired and was no longer part of the transition. Oh my God. So that was a bad memorable story. Was there like an earn out attached to it? Yes. Yes. There was an earn out attached. So they technically would lose out on their note. Technically, I think because of the situation and to kind of appease everybody, they helped her out a little bit, but she did not get the full earn out. Wow. Yeah. First week on the job, you get fired. It was an argument over a printer, I believe. The longest deal I've ever had was a 12-year sales cycle.

32:29So when I started with H &R Block, it was probably the first couple of months that I started. Metal gentleman down in Virginia, Maryland area, had a regional tax and accounting practice. He had some ties to H &R Block, was interested in us as an acquiree. He was an older gentleman, probably at retirement age already, and said, yeah, you know what? Really thinking about this. I'd like to do this. Great. We had conversations. He kind of stalled. Went on to the next year, et cetera. It kind of went like that for 12 years, where every year I'd approach him. We would go to lunch. We would go to dinner.

33:04We'd had great conversations. He just never pulled the trigger. He's like, yeah, I might sell, but not ready yet. Yeah. I mean, it wasn't, hey, maybe one day. he was interested in talking and learning and wanting to do it. And then he just never pulled the trigger. Finally, I was there for 12 and a half years. And that last year, I finally got that deal done. Now, the interesting thing is his business has shrunk considerably over that time. So unfortunately, he lost out on a good deal of acquisition money that he would have got for selling the business and revenue that he lost over time. I saw this a lot with these older owners where they stopped the business development cycle.

33:39It was just continuing to service the clients that they had. and then over time there's going to be attrition. So they were losing customers, losing revenue. Ultimately, when he sold his business 12 years later and unfortunately for us, we lost out on a lot of tax returns and revenue that had left that he was unable to sell and we were unable to acquire. It worked out well for him in the end because he was making money as he went along but he could have sold it for a lot more at a higher premium had we done the deal earlier in that cycle. If you're going back to that deal, is there anything you would do differently now?

34:07I don't know if there's anything I'd do differently. If anything, it really taught me patience. You could tell them that story. Maybe that. Yes. You know, we did have some situations, especially at Block. It was folks that we were going after to acquire were definitely an aging demographic. The average age of those small accountants and tax people at that time was over 60 years old. There were a couple of times when we would talk to somebody. They said, I'm going to sell next year. Great. You call up next year and you're talking to the wife because the husband passed away. Now the business is gone because he didn't have anything to sell.

34:39There's no more business. He's not transitioned. Yeah, nothing to transition. So those were kind of sad stories. It wasn't the case in this 12-year sales cycle, but maybe that's something I would have talked about. Hey, the time is right. Sell now. Yeah, it's kind of coaching the exit. Yeah, go off in the sunset. And that is part of what we had to do is explain the exit, teach people what it means, how it's going to work. And the one thing it taught me was patience. The one thing it taught me was a no today is not a no tomorrow. And sometimes you're just planting seeds. You're just going out and doing the best you can and teaching people the way they need to be taught, but ultimately they have to be able to pull the trigger.

35:14There you have it. Yeah. Patrick, thank you for taking the time and sharing a memorable story. Kisan, appreciate it. Great to be on the podcast. Here's the deal. We're at DealMax Live with Tej Brombat. Tej, can you tell me who you are and what your company does? Absolutely. Investment banker, M &A, buy side, mostly sell side. Watched our capital, privately held companies that don't know what to do next because we came out of the big banks. We can help them run a billion-dollar process, except at the$50 to$100 million level. That's what we do. What's your most memorable deal story? They're all memorable because they're never the same, never cookie cutter.

35:49And there's always some friction. We try to alleviate that. An exit we did recently in the last two years, they came to us for capital raise because most clients who never run a process don't know what they don't know. Why do you need the money? because two other companies in my tech space also got checks for$10 million. So why shouldn't I? Which is a terrible answer. I said, I dug in. We dug in for a couple of months. Turned out they wanted to grow. They wanted to hire and a couple of other things. And in that process, what I loved was the fact that he allowed me to show him how to be on the business versus in the business.

36:29So strategy versus the mechanics of the business. because the CEO, his job is to operational efficiency, do other things, etc. So we basically taught him how to think on the business from a strategy standpoint. While we were doing the process for about six, seven months, I was concurrently running a separate process of looking at buyers, not just people who are going to write a capital check. 13, 14, 15 months later, we sold the company for a double-digit profit. And it was all mostly because of the fact that, unlike a lot of CEOs, the CEO was amenable to listening, learning, absorbing from us, taking the front lead when need be, and then also knowing when to sit in the back seat and allow us to do our job, which is a lot of work to get into their head and kind of be the psychiatrist.

37:13I've seen this a number of times where companies originally contemplating doing a raise and then end up doing a full exit. And it sounded like similar in this situation. Was that already thought through? Hey, we're going to run a parallel process and see what's a better option or did you just bring options to the table? I always say KYC, know your client. First thing I always do is I do a deep dive with the management team. Me, myself, my banker, and our corporate attorney, we do a deep dive. We get into their head and say, what are your plans right now? So you have the express need or the express pain point.

37:44The other one is the latent need, which is they don't know what they don't know. So in his mind,$10 million does the job. I said, what next? Two, three, four, five years out. And he hadn't thought of that. But The typical answer is I hope to exit, but there's no plan for it. So we don't always concurrently run a process, but we do advise the client with as many options as possible. And life, personal life, dating, selling a company, strategy, building a business, the more options you have, the better. So the more outlets you think about, you have to be able to adapt and flex. And that's it. That's everything.

38:18Yeah. So you took your own initiative, brought in the different options. and then how'd the client take it? What was their thought process to actually go in a different direction? Almost always their first thought is like the strong arm of, no, I know what I want. I know what's best for my company. You do. For today, you know what's best for your company. But have you ever run a process before? No. Have you ever raised 10, 20,$30 million for a founder-led company? That's roughly five. This is a small company. Five or six million EBITDA. Have you ever done something like that? No. Have you ever hired three or four external teams, legal counsel, audit, QOV, whatever it might be, and an investment?

38:57No. So allow me to show you what happens when you run a process. Do what you do best. Stay at the helm. Wear your captain's hat. Run the business. Keep going because it's a 12-month process. Still got to keep the profits up and the top line up. While you're doing that, I'm going to have to teach you how to speak like an investor. When we do that, that is the best transformation with a client. the C-suite can do their job and then be humble enough to know what they don't know. And that's where the magic is. I always advise it, but it's always about listening and learning. I ask so many questions.

39:28And if you learn enough, they hear their own answer, which is, I don't know that. I don't know that. And then they start building their own foundation of, I'm hearing myself think, oh, I said no to three things I don't know. Maybe I should let this team run the lead and show me another way other than what I already know. It's all psychology. I'm a banker. I'm a salesperson. I'm a psychologist is what I really am. He is like building trust. And then when you build that trust, it sounded like they really started opening up and embracing the idea of these alternative options. Yes. What you just said is, and as I hear you say it, it's not about offering a solution.

40:06You don't know exactly what all the problems are. It's a very multi-layered process, but it's learning about them, not influencing anything other than getting them to open up and say, here's what I love. Here's what I hate. Here's what I want to do. Then you come back. So it's similar to like a specialist doctor. I want to do 30 or 40 different exams. If there's something that ails you, but you don't know exactly what it is, a good doctor will say, let me learn. Let me listen to a bunch of exams, then come back, right? Where the real diagnosis is not, Hey, good to meet you. Here's what I think you need.

40:35Exactly. How'd the deal go? We ended up closing it 15 months in. We sold to a strategic actually. So most companies get It's sold to a private equity or financial sponsor. This one happened to be to a strategic. Why? He ended up staying on. We got him a position as a CTO and he stayed on for a four-year contract. So he was happy with the number and closed successfully. And it was a very large company that I had done business with at Bank of America 11 years ago, stayed in touch. And a sub that they invested in ended up being the purchaser of this company. So relationship building, 501, man, 11 years later, who knew?

41:09Anything you'd do differently on that deal if you had to do it again? A bunch of things. I mean, tighten up our contract. There's a couple of things in there that got a little gray area and that always happens. Good people, when it comes to money, start becoming a little bit more aggressive and things start happening where that's a lot of money you're charging. That's a big fee you're taking. That's too hefty of a charge, that kind of thing. There's that component of it. That always happens. That's always a... Legal contracts, no matter how in-depth money you spend, there's always a way to put a wedge in there and manipulate room for negotiation.

41:40And good people do this. bad people will annihilate on a contract, but good people, there were good people. There's some friction towards, oh, I'm paying this, I'm paying this much in legal fees, et cetera. So always better, more formalized agreements. But on top of that, maybe even verbalizing it early on and saying, hey, so we changed our contract after that. Now we had seven or eight signatures needed on a 12 page contract. Now there's about 30 places where you have to, we use site and example of what it would be and you use signature along each little line by line item, acknowledging we've had this conversation.

42:15So it does two things. It shows them. I don't want to do anything in the last hour, or I don't want you to feel a certain way. Let's have this conversation up front. Cause if there's a problem, let's hash this out today, pre-engagement, not once we're already in five months. Yep. Anything else besides contract approach? Other than that, you always have to be like AI and adapt to every scenario because, I learned from some of the best bankers on the street and people have been practicing for 50 years. There's people that still say, I came across something and I didn't see it coming. So I don't care how good you are.

42:46We've closed over a billion. My team all in, the four of us, we closed over 10 billion. And there's things that pop up and I'm like, oh, I didn't see this one coming. I saw most of it, but not all of it. So you never know. You're never prepared enough. Just like clients aren't prepared enough. Investment banker is never prepared enough. so no matter what you do, it's not enough, always. Thank you for taking the time to share a memorable deal story. Absolutely, man. Always a good conversation with you. Here's to the deal. Live at DealMax with George Helok. George, can you tell me who you are and what your company does?

43:19Yeah, thanks, Kisan, for having me. My name is George Helok. I'm a managing director of the Western Region for LCG Advisors. We're a consulting, investment banking, and due diligence firm, supporting buyers, sellers, and lenders across the transaction lifecycle. What's your most memorable deal? I served as VP of finance for an aviation business. We were going IPO and we ended up pulling the plug late 2022. The capital markets were starting to dry up. That wasn't fun. Put in months and months of work and hours and financing and all that sort of stuff. Were you like, where are you? How far are you?

43:48Were you road showing? Road showing. Yep. We pulled the plug at about 30 ,000 feet on a private jet. Wow. So you do the road show. Pop the bottle of champagne. You're doing it like, hey, this isn't feeling right. The investment group that we were using, we started to run into the walls. capital markets were really starting to dry up there at the end of 2022. And it was a smaller cap deal, about 80 million was going to be the market cap. And one thing led to another. And we kind of all looked around on the plane and we're like, what are we doing? This isn't going to work. Now, you know, you play Monday morning quarterback a couple of years later, you see how 2023 went and 2024.

44:19And thank God they didn't do it. Probably better for everyone. Anything we're done differently? Can you keep capital markets open? Maybe that's the answer. It's hard to control the macro environment. Yeah, macro environments are tough. But no, I mean, I was serving as the VP of finance, like I mentioned, and you're setting a client up for success longer term. We were integrating three different businesses to take that public and we wouldn't have done anything differently. Headwinds just hit you when they hit us. And yeah, it's just not a fun experience. You learn a lot. You're integrating companies.

44:46You're trying to figure out the best way to get through an audit, get your FP &A function set up. The one company, they had two accountants that had been with the company for 30 years and trying to explain to them why they need to be audit ready was mind-blowing to them. And, you know, oh, that needs to be in the system. We had an associate basically scanning in invoices for two months because they didn't have anything in their QuickBooks. Wow. It's incredible. Some of the stuff, especially in the lower middle market where us at LCG, that's where we're really playing. QuickBooks with no backup support.

45:19And they're not going through an audit. They're not doing anything like that. So it's... Yeah. And then you have to take this thing public and you're like, This is one of the large public accounting firms who are going to be the auditors. They're not going to let a lot of stuff fly. You guys must see a lot of crazy stuff beyond that. Oh, yeah. Another good one we had in the last year or two at LCG. We've got an investigative services group that they do background checks. I want them on the podcast. Yeah, they've got some good ones. What we had done for one of our private equity clients, had done the QV, had done an IT and cyber due diligence process.

45:51They had us do background checks. and they had gotten to basically the 11th hour. I want to say it was within a week or two of closing. And one of the partners of the company that was selling, husband gets on the phone and the private equity firm is like, Oh, who's this? And they're like, Oh, husband, blah, blah, blah. They're like, All right, well, we're going to run a background check. The background check came out pretty bad, killed the whole entire deal. There was some things that had happened in the past that wasn't able to be in certain countries at certain times, killed the whole deal. They're like, who are we actually going to do this deal with?

46:21and that they were rolling equity and everything. Wow. It was something that bad. That bad. Like beyond fraud? It wasn't fraud. It was going to get into the US because of certain trafficking of things. Wow. Wow. Paraphernalia. Let's not go too crazy here. Okay. But yeah. They broke some big crimes. Broke some federal crimes. Yeah. So the private equity firm backed out. You never know what could happen in the future. It could have been a good deal. I think our client just looked at each other and said, are we really going to do this? That's so crazy that breaks the deal after everything you put through.

46:54All your due diligence costs, your attorney fees, everything. And all of a sudden, it's dead a week before close. What would you do differently on that deal? Start with making sure you do the background checks on everybody off the bat. Whoever's got money tied into the business. If I went through that, I would make that part of NDA. By the way, fill this form so we can do your background check. A lot of times, we don't find much in the background checks. But every once in a while, it's like, is that going to kill the deal or not? It's not our call. We're just reporting. We're saying, here's what we found doing a background check.

47:22And that could be as easy as social media checks all the way to deep, deep internet, dark internet, whatever that gets called anymore, kind of digging into there. So that comes up every once in a while in due diligence. And it's interesting to see how people take that and what it shows. That's so wild. It's fun. It's fun. Got anything else for me? I'm sure everyone that sat in this seat that I'm sitting in has probably talked something AI related. One of the neat things that we're starting to see in due diligence is as we're doing some QV type work for our buy side clients and digging into revenue numbers and the data there and kind of giving them insights that they didn't even know that they could get access to.

47:58So I think we've been seeing a lot more of that from just really looking under the hood and saying, hey, what are you really buying from a revenue perspective? How much of revenue is tied to something or a certain location? Or is something cannibalizing something on the other side of the business? starting to have some of those insights with some of the data that AI can dig into, whereby from human eye, you might not see it. So we've been seeing a lot of that too, which has been good. And a lot of times we're helping clients get prepared for sale. And we had one, we did a sell-side QV for another investment bank.

48:31They went through a buyer due diligence process and just got absolutely smoked, killed the deal. We got brought in to do a sell-side QV about six months later as they were kind of taking it back to market and getting in there and having an understanding of what a buyer is going to go into and dig into due diligence made the process the second time around a lot easier. That's the standard. Yeah. And we've seen it on our QV side. The last couple of years, we've seen a lot more sell-side phone calls to us on the sell-side QVs. The buy side is going to come in and beat the crap out of it. So you might as well be prepared and show the skeletons where they are before the buyer finds it.

49:06Yeah. Almost 10 years ago when I started the podcast, it's like a new concept and now it's like the go-to. Yeah. I mean, our firm did 330 or so last year, QVs, and that's across the buy side and sell side. What percentage do you think you do buy for a sell? Last year, I want to say it was probably about 80, 85 % buy side. If you would ask me three years ago what we were doing, it was probably 95 % buy side. So that just shows how much more sell side is getting done. It's significant given that there's so many more proprietary deals done over banked ones. Oh yeah, for sure. You got a lot of buy side chops out there that are doing buy side work for private equity and other corporate buyers.

49:41And yeah, they're not getting the handholding and helping through a process. They're business owners kind of out on their own. Hey, George, thanks for taking the time to share some memorable deal stories. Hey, Kisan, thanks for having me, man. Let's get a ski day in. Come on, man. Let's ski back in Denver. That's right. That's right. Here's to the deal.

50:01We are live at DealMax. I'm here with Angie Astle. Angie, can you tell me who you are and what Chugach is? Yeah, I'd be happy to. And thank you for having me. I am the EVP of Finance and CFO for Chugach Alaska Corporation. I also serve as their president of their investment division. I'm an accountant by education and training. I worked at Deloitte & Touche for five years and then was hired on to work at Chugach Alaska Corporation. During my period at Deloitte & Touche, I got exposure to Alaska Native Corporations. I wasn't from Alaska. I moved from Montana up to Alaska and started auditing Alaska Native Corporations and just fell in love with their business model, which combines this profit purpose, but with also a social mission.

50:49So I went to work at Chigetch Alaska Corporation back in 1998 and have never looked back. So Chigetch Alaska Corporation is one of the 13 regional Native Corporations that was formed under the Alaska Native Claims Settlement Act, or ANCSA, that was signed into law by President Nixon in 1971. And what it was was a grand bargain between the federal government and the Alaska Native people to give up their claim to Alaska Native lands in exchange for land and money through a corporate structure. So it's very different from the tribal system that you see in the lower 48. Chuget, Alaska Corporation is owned by Alaska natives from the Alutic, Supiac, and Eac descent, and their shares cannot be bought or sold.

51:38They're born into their shares and the shares then are passed down from generations. So we view ourselves in generations and not quarter by quarter or year by year. And the purpose is to have a forever corporation that provides benefits to these Alaska Native shareholders into perpetuity. So I love it because we call it profits for a purpose. So we are making profits, but those profits go to an Alaska indigenous population through dividends, shareholder programs, scholarships, education. We have elder dividends and elder benefits. And then we have tribal camps, cultural camps. It's an amazing program.

52:20The most unique corporate structure I've ever heard of. And what kind of businesses do you own? Chick-Ach Alaska Corporation, because it was mandated as a for-profit organization, not with a business in mind, they started out in canneries and logging and areas where the shareholders had knowledge and where they had their communities. And then the Exxon Valdez oil spill occurred right in their backyard. In 1989, the Exxon Valdez oil spill occurred, And it was unfortunately concurrent with the logging marking falling down. Actually, Chagach Alaska Corporation filed for bankruptcy, Chapter 11, in 1991.

52:55And then they emerged as a federal government contractor, pivoting to providing services to the federal government. And it was a low-cost way to provide services. And they found a niche in federal government contracting. Now we're over a billion dollars in revenue and we have two main divisions where we do government contracting and we now do commercial services, industrial services that are like what we do for the federal customer, but we do them for commercial customers. So HVAC, air conditioning, elevator maintenance. We do oil spill response in and out of the Valdez terminal up in Alaska. We do wireline and E-line services up at the oil field.

53:38We do a variety of different services, both commercial and government. How many employees? 5 ,000, a little over 5 ,000 employees. Angie, what's your most memorable deal you worked on? Well, the most memorable deal I ever worked on was actually our first acquisition when we decided we were going to diversify the corporation out of just government contracting into commercial services. We started looking at a company that was an HVAC company in 2011 in Hawaii. We had a lot of logistics contracts in Hawaii for the federal government at that point in time. And the Hawaiian culture and the Alaska Native culture are very similar.

54:16So we were really excited. And we started due diligence on this particular HVAC company down in Hawaii in 2011. Can you walk me through the deal? What were you originally trying to buy? We were trying to buy this company. It was formed in 1946. We liked the longevity of the company. We liked the customer reputation that it had. And we really liked the service aspect of it. The heating, ventilation, and air conditioning is something that we already do for the federal government. So we understood that market space. And then we started doing due diligence. Shortly after we started doing due diligence, we discovered that they had deployed capital in a couple different areas that actually left them cash constrained and unable to pay debt.

54:59But in essence, they were bankrupt or on their way to going bankrupt. It changed the whole deal due diligence and our thoughts around that deal. When did you realize the company was headed for bankruptcy? And what did that moment look like? We were already emotionally attached to the company. As it was our first deal, we had really chosen it carefully. And so we were pretty emotionally attached to the transaction. It was unfortunate when we had to really take a step back and think about it. Fortunately, though, one of our board members at that point in time was really experienced financially. He started thinking about and suggesting, could we take it through bankruptcy and still complete the transaction?

55:41So we met with the bank and the rest is history. You ended up working with the bank. You changed the whole deal structure. This is a point where most people just walk away. Sounded like you ultimately became the creditor. How'd you land on that? Yeah. So we met with the bank and we came to the conclusion that we could become the secured creditor. So we bought all of the debt from the bank, made a negotiation and bought that debt and became the secured creditor. And then the company did go through Chapter 11 Reorg. And through that reorganization, we actually became the owner of the corporation.

56:17And that was 14 years ago. And now it's a very successful company inside of the Chigach, Alaska Corporation family of companies. We've added refrigeration and elevator services to that company since. And it's a very successful HVAC company in Hawaii. Bought the debt, took ownership. Was there a part you had to rebuild the company's ownership? What did it actually take to get the business to where it is now? I mentioned a little bit earlier that what you liked about it was it was a long-term company that's been in Hawaii since 1946. So it did damage the reputation of the company to take get through bankruptcy.

56:54It took patience to rebuild customer relationships. We did have to hire some new leaders, but they did have great staff. And we just had to convince the community that we are there to stay and rebuild the reputation. It took a lot of time and patience to turn the company's reputation back around. Is there anything you would do differently if you had to approach that deal again? I'm sure there's a lot of things that we should do differently. We could have moved a little bit faster on some staffing decisions. But all in all, it actually ended up fairly well because we have such a long-term hold for our companies.

57:30It wouldn't be for everybody. If you are a short-term holder of companies, this one took a lot of patience to get it to be successful. Let's talk more about that. Running M &A at a forever organization is really different. Does the mission change how you actually approach deals? Yeah, it changes it dramatically. We're very deliberate in our process. It's a very thoughtful process. Our board is extremely involved. We're never going to be the fastest to close. And we've just accepted that we're never going to be the fastest to close. Culture really, really matters to us. We've walked away from transactions just because we're not culturally aligned, because we are a long-term holder of a company.

58:09Those are the key aspects on really how it changes the deal. It's like adopting a child. You're kind of like really thinking this in the long term versus, oh, we're going to fix this, put a new hood in the car and just sell it. No, we do not do that. We keep them for a long time. Actually, we've never sold a company that we've purchased. We hold them. They become part of our family. Is there anything you'd tell somebody in a similar situation, mid-diligence for the first time that gets a big surprise like you did? I think every deal has had surprises. That one was a bigger surprise, but every deal has surprises.

58:40You need to be flexible and creative. and then you need to know your own company culture and not force it. Angie, thank you so much for sharing a memorable deal story as well as a memorable company story. The main thing I like about these DealMax conversations is that they're real quick, they're raw, and they're useful. Somebody else already had to learn the hard way. Shouldn't have to start from zero every time. That's what we're building at M &A Science with DealPilot. Real deal lessons organized so the next one gets better. mascience.com here's to the deal

59:25thank 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.

1:00:10Again, that's mascience.com. Here's to the deal.

1:00:24Views and opinions expressed on M &A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.