220 Deals. One Playbook. How to Scale M&A Without Losing Control

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

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I'm your host, Kison Patel, Chief Scientist here at M&A Science. Today, my guest is Sean Rodrickx. He's an independent consultant in M&A and corporate development, former Vice President of Corporate Development at Amerivet Veterinary Partners, over 15 years in corporate development. Sean's closed more than 220 acquisitions, over a billion dollars in enterprise value. Most of it inside high-velocity roll-up environments where speed and discipline had to coexist. He built and ran lean in-house M&A engines where the playbook was the operating system and integration started before anyone signed anything. Today we're getting into what makes serial acquisition programs actually scale, what breaks when volume spikes.

And how you keep integration quality from slipping when deal pace doesn't let up. You're gonna leave this episode with a concrete framework for scaling an M&A function, how to hire the right team, build a playbook that actually gets used, and structure communication so nothing falls through the crack when you're running multiple deals at once. John, how you doing?

Great, Kison. How are you?

I'm doing good. Thanks for taking a break from doing deals to have a conversation with me.

Anytime, man. Anytime.

Can we, uh, kick off with a little bit about your background?

I'll start with kind of my education. So I have an undergrad in biology, chemistry from the University of Toronto and then made the switch into getting an MBA in finance from the Schulich School of Business. I have 15 years of corp dev experience, close about 220 transactions, basically in two organizations. The first organization was Rexall in the pharmacy space. I learned everything M&A— how to read a legal agreement, how to negotiate a deal, how to build a team, how to put a due diligence process and integrations process into play. And then went closed 37 transactions while at Rexall. We sold Rexall to McKesson and that was a great transaction. Then made the switch to Amerivet where I joined them as a director. I was hired to do M&A, but being one of the very first employees, I was employee number 6, got to do so much more. It was figuring out the model, joint venture model, refining legal agreements, Assisting with sourcing, putting systems into place, building teams, and then going and building the organization from somewhere close to zero to all the way to 220 transactions, and then sold to Maribeth. So great experience out at Maribeth. Currently I'm working two main projects. One is helping the sell side to sell multi-pharmacy chain, and then working with another organization to build a repeatable M&A engine so that they can scale up and do the same thing. That's my career so far in a nutshell. On a fun note, I've lived in 3 different countries. I was born in India, grew up in the Middle East, and now live in Canada where I did my education. And I love to travel, so I've been to over 25 countries. So that's a little bit of fun facts.

Dude, you jumped in, right? Doing the M&A deals, getting experienced, and just kept pushing it and doing them at that high-level scale. So biochem to high-scale M&A. Anything from biochem background that you bring over to M&A?

Oh yeah, for sure. It's a discipline. It's the work ethic. It's the accountability. Keep moving forward in the labs while doing biochemistry. Often you encounter failure, but then you learn how to move forward and keep moving forward and improving, which is a key skill set in M&A. You can do all the work right up till the very end and the transaction just falls apart., but you can't be stuck on that. You gotta move on.

So given the background, over 220 acquisitions, 189 Amerivet, 37 at Rexel, what's the operating model look like that makes that volume possible?

Yeah, Kison Patel. So while there are many, many factors, if I have to kind of summarize it, the first one would be alignment to do those many deals, right from the board of directors to the executive team, all the way through the organization. This is not a side Project. You're not doing one transaction, you're trying to do 50, 60 transactions a year. So it's a lot. There's alignment to do deals, there's alignment on strategy. What do I mean by that? Basically it means, okay, what are the transactions that I'm going to pursue? What are the parameters? What are the multiples I'm going to pay? What is the type of model? Is it going to be 100% or a joint venture model? What are the multiples? What are the returns that I require? So you gotta figure out all these parameters. You gotta figure out where do you wanna do these transactions. And most importantly, in pursuing these many transactions, you need to have the ability to kill deals quickly if they don't meet your criteria and walk away and move on. So that's the second piece. So building out that, the whole strategic piece. The third important piece is hiring the right people, right from hungry business development folk, good competent corp dev integration ops folk. You cannot have any bottleneck. The fourth is having a very clear, simple, but effective playbook right from the start, all the way from pre-LOI due diligence, legal integrations. And this playbook needs to clearly identify the different paths, the different providers of information, the different receivers of information, who's responsible within the organization. And then most importantly, timelines. You have to have correct systems in place for tracking, such as good CRM systems, good tracking tools. You also gotta have a system. It's almost like a database of deals that you walked away. So you find that some of these deals, and especially in our world, cycle back over time and you want to keep a note of that. And most importantly, you gotta have a tracking system for all the deviations from your standard model and your standard templates that you've agreed to in that particular transaction. And this is forward thinking towards an exit. So when you're trying to sell the platform, the more you have identified all the deviations from your standard template, the easier it becomes to let the potential purchaser know these are the deviations from the standard template. And I think the last, and it's also very important, is constant communication and partnering with your stakeholders within and outside the organization to keep the transaction going forward.

I was taking a lot of notes. That's why I keep looking down. This is what I got. One key thing is alignment. When I think of alignment, the strategy, building that into criteria, how you're going to build a model to approach valuation and structuring model to structure your deals. And then from there, it's the playbook. When you think about the playbook, it's covering the whole lifecycle, everything from diligence through integration, the timeline. And then part of that, it's like systems that come in play. What does that look like that you set up? And then the people part, having the crew and the right people, right roles. I put that note as also the communication, having constant communication with the stakeholders throughout. So I think those are the big key elements.

That is absolutely correct.

Can we break these down? I want to start with the team first because I feel like that's always the first thing is you got to figure out the people that you're going to work with.

Yeah, for sure. Look, I'll tell you how I go and hire my team. So I look for 3 main things. The first thing is your finance knowledge, and I'm talking about corp dev. Business development is slightly different. Sometimes business development resides within corp dev and sometimes it's not, but I'll talk about both. Let's start with business development. So you want people who are hungry. You want people who can understand the models that you're trying to sell and then be able to sell the model, are very good with relationships, but also understand the model. Because if you don't have an individual who does not understand the model of the company, they're basically just selling, but they don't really know what the model is. So when there are questions being posed to them, they don't really know, they're gonna revert back to the organization, you lose efficiency. As opposed to an individual who actually understands the model, understands the process, understands the playbook, and then is able to sell, makes them way more efficient. So you wanna be able to source the correct business development folks, and you need really hungry people. When you're starting a platform, you are bleeding cash, you need to get out of the gate. So as soon as you figured out your strategy, You need the business development folks to go in and get you deals. Keep in mind, just like anything else, the first deal is the hardest deal to close. Once you start closing deals, you have precedent. You can refer to the deals that you've closed, the partners that you've brought on. It just becomes easier. You've also built your relationship. It's that very first step. So that's from a business development point of view. From a corp dev, pure corp dev hiring standpoint, I look for 3 things. One is your knowledge in finance. That I do by asking you certain questions in finance or giving you a case study and just seeing how you build the evaluation. The second piece is, which is to me the most important piece, more difficult to gauge, is your work ethic, your accountability, your ability to put in the work, show up prepared every single time. And if the deal dies, your ability to think about it, and then move forward and get over it pretty quickly. This is a little bit hard gauge because you gotta probe and ask questions, but what I kind of do is I also make a note of the questions that I ask, and I ask the same questions to references that they provide to kind of see if the stories are corroborated. And the last piece that I look for is an individual's hunger to move forward and constantly improve and grow themselves. So just like M&A, where you're taking one organization and another organization and you're hoping for all these synergies to come to play where you build the value up, I want to see if that individual also has that kind of mindset of growth to be able to grow. And the way I'll look for this is I look at their resume, I look at the, their progression throughout the years, and obviously you have more progression as you become more senior. And I'm not looking for people who constantly jump organization, but rather have progressed within the organization, being loyal to the organization and are hungry.

So your first hires are really biz dev to get the coverage.

They're out, they're selling the model. You want them hungry and self-improving as they keep learning. I want to get a sense of like, you start building and it makes sense because you need pipeline right away and you want to really have that flush so you can find good deals. And then you obviously got to start the rest of the lifecycle. But what does that progression look like as you staff and build a full-out team? Is it sort of like depending on the market I'm going after, I get like a number, multiple biz dev, get coverage there, and then do I have somebody like financial analyst sort of backing the analysis part?

Yeah, it really comes down to the number of deals that you're going to do. Most firms test the waters. The year one is— this is a perfect analogy. Think about you're in a very fast car, you're in a Ferrari, you're moving really fast., but there are things to fix. You can't really stop that car. You gotta lean out, you gotta fix while keep moving forward. So in an ideal world, you'd want each event to happen in succession after you've completed the event. That's not the world that we live in. Things happen simultaneously, so you need to figure it out. So depending on the number of transactions you can close, which generally is slower in year 1 because you wanna build all the stuff out. You kind of want to build out your business development for— depending on how many transactions you're doing. And if you're doing less number of transactions in year 1, maybe it's you yourself doing the sourcing, selling the model. You probably need an analyst, again, depending on the number of transactions. And then you slowly start building your team as you get transactions into your portfolio that can fund the compensation for the team, though. And it's important to get your first few transactions correct, more so because of credibility. So you want credibility if you're a PE-backed firm, you want credibility from your PE-backed sponsor so that you want to build credibility with them so that they have belief that you can grow the organization after year one. You want to build credibility with your lenders and they know that the transactions that you're doing are good. So year one becomes really, really important. So I would tell organizations Even though you have an aggressive target, leave some buffer in year 1 to be able to not only do transactions, but build a foundation to be able to scale.

Absolutely. That's a good starting place. I guess the playbook is the other key part. I really want to hit into like, how do you actually scale this? So what does that playbook look like in practice? What do you have in it? How do you get the whole organization standardized on it?

Yeah. So to me, A playbook is a collaborative effort whereby key departments have to determine success is not negotiable, success of a transaction. So they need to keep that as a standard. The transaction has to be successful. But what do I need to do and what do I need to receive in order to make that transaction successful? So it's a collaborative effort between the departments to build this playbook together. The playbook in itself needs to be simple. It needs to be clear, easy to understand, and highly effective. It needs to have your different sections, i.e., the different stages of the lifecycle of a transaction. Within each stage, there needs to be a task. It needs to clearly identify who within the organization is accountable, who the receiver of the information is, and who the provider of the information is. And then it needs to have clear timelines. Once you build this playbook up, then comes the education piece because the rest of the organization needs to be educated, which sometimes organizations don't do. They build a playbook, it's in a PDF, but it is what it is. Education becomes really important because this becomes the holy grail that everyone needs to follow. It literally needs to live and breathe with every transaction. So in practice, think of a transaction as a project. You have a project manager who's probably the head of M&A, and you have the key stakeholders within the organization and external stakeholders as well. The project manager, it is his or her role to ensure that this playbook is used in every single transaction. I'm not talking about literally pulling up the PDF or whatever, but it needs to live through every single transaction and to ensure that the transaction's moving along. If you need to educate and reeducate until it becomes second nature within a transaction, then that's what you need to do. But ultimately, it does need to become second nature. That is the practicality of a playbook. It's not only just developing the playbook, it's the education piece and making it second nature within the transaction so that I know, hey, We're getting this transaction. I know exactly what I need to do. I know exactly who I need to pursue. And if there's a fire, I know exactly who I need to go to. So it becomes second nature. The final piece, I'd say it needs to be flexible. So think about starting an organization. So for example, at Amerivet, when we were doing our first few transactions, that playbook looked very different from a playbook at 50, 100, because we learned so much more. So you need to be able to go and update that playbook along the way with a perspective of how do I make things better? And it becomes really important. Just to summarize, it's the development of the playbook, which is a collaborative effort, and then it's the use of the playbook every single time till it becomes second nature. And then finally, the flexibility of the playbook to constantly adapt is very key to scaling at this level. Cool.

The team's the one that's got to collaborate. They create the playbook, they really identify all the tasks and steps. Huge part, you emphasize the key is the education. Keep teaching it. So everybody's on the same page about it and then have this flexibility so you can keep updating it and continuously improve the playbook.

That's right.

Awesome. So one of the things when it comes to like deal flow, it's not consistent. I feel like there's always ebbs and flows, you know, whether it's a spring break that comes up, summer, people take off, end of year holiday, you end up, everybody's trying to rush to get their deals done. How do you manage it when you have like that part? And then you just, sometimes you have like 5 deals closing in the same month. How do you manage the ebbs and flows in your deal process?

This is a fun question because while everybody strives to have a linear flow of closings throughout the year, it does not happen. That's the reality of it. So the most important piece is what I alluded to when you asked me what is the operating model that makes scaling at this level. It's the communication piece. It's the respect that you have for your partners, stakeholders within and outside the organization that really drive growing at the scale. The constant communication with your partner stakeholders. So in my world, closing 5 deals a month was simple. Think about closing 3, 4, 5 deals a week. Now that requires a lot of communication, a lot of planning in advance. Let's say, for example, if you think you're closing 2 deals in January, 2 deals in February, 2 deals in March, and so on and so forth, but you don't close any deals because of these holidays and all, and suddenly you have 4 deals closing in a particular week. Over time, you come to know that these deals are going to be pushed, so you start planning for that. One of the pieces that I really institute is having a closing week dedicated SWAT team. So you have these teams that are dedicated towards your closing week because you have so many transactions closing in the week to put out last-minute fires. So you have specific teams, you're in constant Communication with them, you're constantly asking them for updates to ensure that the transactions close in that last week when that everything else has progressed to a point where it's going to close. Having said that, I will never burden my organization if my partner stakeholders tell me that despite their best efforts, we can't do the closing. So in that particular case, the closing would push. But generally speaking, you, through constant communication, you get the team ready. And by doing it for a year or two, you kind of know what the pattern of closings are going to be because they repeat year over year.

You're making closing essentially scalable. You definitely don't want to delay it. You want to really push it to get it done. Not delay if you have to. And that's why you kind of have this dedicated closing team, the SWAT team that come in.

Yeah. And the other thing is you want to have the right people. So you want to have people who love doing it, who love their job, who are motivated.

Who's on the SWAT team? They're not a dedicated team for closing. Is it? Volunteer?

No, it is literally, you know, at AmeriVet, we had integrations. Within the integrations team, there are a couple of people.

And they're part of the closing SWAT team.

Exactly. So you have those people, you have different operators for the different states in the US. You get those operators. Now, hopefully not every deal is in the same state. So if they're in the same state, then you need to pull another operator to assist with the closing. But remember, The education piece becomes really important out here because if you're having 3 to 4 closings, you have to have people who know the playbook as well. It's not just very limited. So the education piece becomes very important.

Do you have a view in like the finance part in terms of funding these deals? And how do you manage that too, if timing and things like that keep shifting around?

It's a real, real struggle. And to make it easy, what I've done is a constant cash flow requirement communication tracker. So think of like a 13-week rolling cash flow forecast that constantly updates the finance department on your closings. And the other thing that we used to do is weight the transactions with a probability in terms of how realistic is closing going to happen at a particular time. So if it's 90% probability, okay, the finance department can prepare the funds, keep it ready. Whereas as opposed to a 10% probability, then they know they can move the cash flow around. But having that constant communication with them and respecting them as well really helped with these closings from their standpoint.

Partner with the finance department, have visibility into what the cash model looks like.

We actually had a pipeline tracker with all of these details, and we used to weight them in terms of closing and how— in terms of how realistic the closings are. Depending on where the transaction is in the lifecycle.

Yep. And then give that probability, likeliness to close. I want to just chat about diligence. In diligence, I know you split up like quantitative and qualitative. You emphasize like a lot of teams underestimate the qualitative side. What does that actually look like? Especially if you're trying to scale and do a high volume of deals? Cause I feel like you're right. It just tends to like get overprocessed.

So the quantitative piece is, I look at the financials, You look for normalizations, you restate the financials and so on and so forth. But in our world, for example, in the pharmacy and the vet space, the qualitative piece becomes equally important. And by qualitative, I mean the location of the pharmacy or the clinic, the asset quality, like the physical box, the people, the roster of the team, and then trying to understand the culture and then your recruiting ability. In terms of the location, you probably would have already done, and I'm hoping that an organization's already done the work in terms of where they want to pursue transactions based on, let's say, population growth or income potential and so on and so forth. With respect to asset quality, you get that through your pictures, your videos that you can request from the clinic or the pharmacy, or what I try and institute is an onsite due diligence visit. Where you actually do a walkthrough, you meet with the sellers and have conversations with them on the asset and also the team. When I talk about people, you look at the roster, the quality of the people on the team. You have conversations with the seller in terms of the quality of the individuals. You try and gauge the culture. You know, in the web space and pharmacy space, you have a lot of support staff. You need to understand, hey, What are the benefits that they get apart from the actual benefits? So do they have weekly lunches? Do they have Christmas parties? What kind of days they get off? Do they get a holiday on their birthday? Because these are things that if a clinic was successful in the past, these are the small things that are really helpful to ensuring the success continuity post-close. You can't have an organization just come in and say, you know what, 'And you used to get weekly lunches. We're taking it away.' That's not the most— you got to be mindful about all these things while doing these serial acquisitions. And in terms of the recruiting ability, while location plays a key role, understanding the team, understanding the seniority, understanding whether the senior team members are open to mentorship, understanding the support functions play a really important role. While assessing a clinic, for example, I'll try to gauge the age of, let's say, a doctor of veterinary medicine or a key pharmacist. Is that individual going to be there for 5 years? Is that individual going to be there for a year because he or she's up in age? And then be able to affect the forecasting model. If somebody is close to 70 or over 70, you cannot assume that they're going to continue, especially if they're a high producer. So you need to be able to adjust your forecast. It's not a cookie-cutter approach. You need to take each transaction and based on not only the quantitative piece but also the qualitative piece, be able to forecast correctly, which then informs your return and your purchase price.

So a lot of this is really about taking those qualitative information and using it to shape your approach and how you're going to approach the deal. It's not so much of I'm looking for red flags and not to do the deal. That's not your primary goal. It's more of how do we actually lock in, approach this deal in a more of a tailored way so we can make sure it's successful. And some of those nuanced things, whoa, we got to now sense that there's a key person that's not going to be around after we close. We need to plan accordingly.

Correct. Exactly. You need to do your due diligence at every stage. And there are things that you can do without visiting these assets. And there are things that you need to do After visiting these assets. But the most important thing is bringing all this feedback together and seeing how it's going to shape your deal overall.

You had an example on this part of a deal you worked on. You had a high billing clinician who looked great but could potentially leave after close. And part of it is building a recruiting strategy into the diligence even before you sign. Can you talk me through this stuff like that? Because that's always a curious thing that comes up when you really got to look at the people strategy of doing a deal.

Yeah.

Look, you come across— there are a few deals that we've come across where— and I'll take the bet space, for example— where you come across these DBMs who are very high producers. And that to me is a little bit of a flag because then I know that I need to look further into it. So age becomes really important there, especially if it's the seller or the associate DBM. Who's a high producer. I need to understand what their plans are for sale, especially for the stellar DVM who's the face of the business. If they're associate DVMs, I need to understand whether they have employment agreements in place, whether they have non-competes and non-solicits, and then will they be assignable. And then I need to figure out, okay, based on all this information that I have now, how can I institute something to incentivize these key players from continuing to practice at the particular clinic. So what do I institute? Can I offer them some equity? Are there retention bonuses with probably clawbacks to incentivize these key stakeholders for you to stay on? And once I figure these out, I'll probably include them as a condition of closing, and it becomes really, really important to ensure continuity. So You need to identify first if there are key players that you need for the continued success of the clinic, for example, and then you need to figure out how do I incentivize them to stay on. But at the same time, you need to check, which is close to my previous answer about your recruiting ability, because if these individuals leave, how does it look for you to be able to replace them? And sometimes you might have I'll give you an example. A 2-exam room clinic where one of the DVMs produces over $2.5 million in revenue, and there are 2 DVMs at the clinic currently. And you know that if this DVM who produces $2.5 million leaves, an average DVM produces anywhere between $500,000 to $700,000. So if you take $500,000 and that guy's producing $2.5 million, That's 5 average DBMs. We don't have place for 5 average DBMs. So what is your recruiting ability to be able to replace that high-producing DBM with, again, a single DBM in that particular area? If the answer is low, that's a huge red flag to me, especially if the DBM is up there in age. So you really need to take all of this qualitative stuff along with quantitative stuff to inform your decision whether or not you're gonna proceed the deal and then have these incentives into play.

Real quick, what Sean just described is a buy-side function most organizations are still trying to build. Integration wired in before close, a playbook that gets updated after every deal, a team built for volume rather than the next deal. Most are still getting there one deal at a time, but the gap isn't effort. It's that nobody handed them a framework for how how to actually build it. The Buyer-Led M&A Certification is that framework. Diligence and integration running in parallel from day one, 100-day planning that starts before signing, structured across 6 courses taught by practitioners who've actually run it. Go to mascience.com and look for the Buyer-Led M&A Certification. We'll put a link in the show notes. Let's get back to the episode.

I got more questions like dig into like how do you sort of make sure you get the right incentive? But we're going to save that for an HR deep dive because we do that as well. I wanted to get more thinking about scalability is tracking performance on these deals after close. What does that look like in terms of KPIs and the metrics on how a deal is performing? I feel like a lot of this always comes after close when you have full ownership and visibility and everything. And then are there signs that the deal is going sideways and what do you do about it?

You always want to try and meet with the team, at least the key stakeholders, prior to the deal closing. Okay, the more you can have key stakeholders sign employment agreements, it gives you a chance to negotiate a touch point to converse directly with them prior to the deal closing. So you get a chance to see if there are any red flags prior to the deal closing. So I would always try and put in conditions of closing that we need to meet with key stakeholders or get into employment agreements with key stakeholders because people are the most important thing. You don't have the correct people in place, you've kind of lost the transactions. Having said that, after closing, you can give surveys out. You kind of see whether what you're doing is good, whether they're taking it positively, or they have a negative reaction to that, and you can course correct. Customer surveys to see whether the levels of service meet their standards, if there's something that you can improve on, and kind of work together. From a vendor standpoint, ensure that there are no lagging APs, whether the vendors are unhappy with you or not. A weekly P&L review becomes very important. Again, educating. So If you think that the individuals don't know how to read a P&L, you go and you educate them, but you're constantly reviewing it with them. Onsite visits. You got to treat these acquisitions like your own baby for at least the first 90 to 180 days, in my opinion, which means that you're constantly in the clinic or in the pharmacy trying to assess if everything's working out, what's not working, let's try and fix it. You got to build and foster a culture of, hey, you know what, mistakes happen, but let's work collaboratively to fix them. And it's not a, you did a mistake, I'm going to penalize you. It can never be that. It's making sure that they know that we are working as a team to ensure the success of the transaction post-close. And that become— that fostering that culture becomes very important to be able to extract all the synergies that you built into your forecast. Because I tell everybody, I say, I can be the best core dev individual in the world. Okay. I get my integrations wrong, I've lost the transaction. So you need to really pay a lot of attention. You need to handle, you need to treat these assets and these acquisitions like your baby and move along, at least till they're on their two feet.

It's like being a good parent. You got to really—

Oh, for sure. Yeah. The mistake that we do is We take the transaction to close and then we move on from that transaction. And sometimes you lose the transaction because you've not given it your attention.

There's definitely some soft metrics on that, some indicators of the people. Are there hard metrics? Obviously there's finances looking at real numbers and bottom line, EBITDA and all those margins and so forth. And then it sounds like the churn of people, I don't know, is that sort of a trackable metric or are there any other trackable metrics in defining success of a deal?

Remember I told you that we always try to meet with the staff prior to close? What we also try and do is understand if there was a lot of turnover, because you need to be able to correct that. You need to enforce a culture of building something together. So you need to really figure that piece out, which is what I was talking about, the qualitative piece in terms of understanding the culture and the team. It's really important.

You're absolutely right. To build these pre and post-close success factor lists with named accountabilities when you're working with these team members, can you talk through that in terms of what does that look like, the execution and just making sure there's no gaps?

This is going to be art and it comes from experience.

Turn it into a science, man, so other people can do it.

This is what a mentor actually told me. He said when I first started, he said, "John, you probably know the science behind modeling and valuations and all." He's like, M&A is not only that. Most of the M&A is art. It's finesse and ensuring that everything comes together so well that you're going to get all the synergies that you baked into your forecast. And that is the art. The modeling is the science. You understand finance, but there is a big art to doing deals, really understanding what are the absolute tasks that need to be done prior to close. Versus those that are done post-close. So an example is changing bank info, payroll benefits prior to close, because if you've closed the transaction, you don't want the revenue and all going to the previous sellers. You want to be able to control that. So banking, it becomes very important, right? Close payroll benefits. You want the staff to be happy, especially if you're offering better benefits. Do you want to give it to them right off the bat. You don't want it through the seller's payroll system and so on and so forth. So you want to kind of do those things prior to close. Let's say if you, if during your due diligence you identified mold at the clinic, so you want to kind of fix that, that, because that becomes really important, want to fix it prior to close. Whereas opposed to, hey, there are certain vendors that the clinic or the pharmacy deal with Is it really important to integrate before closing or change the vendors? No, not really. I can go assess them and take my time and then accordingly change them if I need to. So you really need to understand what needs to be or is a must to integrate prior to close versus those that can be done post-close. Not everything needs to be integrated right off the bat, and sometimes there are organizations that rush to do everything you're going to kill your flow of doing deals because you need so much more time to do everything, to integrate it perfectly versus identifying, hey, these are the absolute musts and then I can do the rest.

It's having a tailored approach in terms of how you're going to make sure you execute and prioritize what are those key things are, which becomes part of the system here. So I got a handful more questions and we'll wrap up here. The most common way a roll-up thinks it's scaled, but actually isn't.

Yeah. So a lot of rollups think acquisition is the strategy without a well-defined actual strategy. So think about, well, you have the funds to go and acquire or do transactions, but you haven't really figured out integrations. You haven't figured out your teams and you haven't put in proper systems into place becomes a pain point. If you try and centralize everything too quickly, it can become a pain point. You really need to have game plan, especially for year 1, to be able to, to, to be able to start scaling. And I find organizations that just say, hey, I'm going to acquire because I have the funds and I'm going to build this platform, and then because I have a larger platform, I'm going to get a higher multiple and get my returns of arbitrage. Sometimes can fail. The environment that we're in right now is a perfect example where a lot of consolidators who've just gone and acquired without having the discipline, building the foundations of purchasing multiple disciplines, are finding themselves in hot water right now.

That's interesting. So other things in terms of, I guess, the integration part, I always think is like the big bottleneck I hear about. I don't know if you've experienced it, but one, in the last 5 years, I've definitely seen a bigger emphasis on it where buyers are getting smarter. And when they do diligence, they're really looking at how well a roll-up is integrated. And if it's not, there's like some penalization on their valuation to like make up for it, kind of look at like, this is going to be a bottleneck. What's your experience in terms of just thinking about that, of integration being the bottleneck to really scale things up and how it impacts valuation and Yeah, look, like I said, integrations is very key.

Integrations is that one piece that converts everything you put in your model, in your forecast, into reality. And if you don't have proper and good integrations, all those synergies that you thought you're gonna get, or the returns that you're gonna get, are gonna evaporate away. So integrations is that one piece that becomes really key to translating everything on paper into reality. If you have all the funds to do acquisitions and you just go and do all these acquisitions without having a solid foundation or understanding of what needs to be integrated, when it needs to be integrated, and how it needs to be integrated—

There's like a percentage of purchase price you should allocate towards integrating a business. I feel like that's what happens early on. People don't budget for it, and then later on they start budgeting for integration.

It's less of a budgeting. I mean, you got to have a budget, for integration.

It's more about having the right person knows what they're doing to go execute.

There you go.

Okay. Let me ask you again, like scalability is the, what I'm trying to get all my lessons around. What's your trade-off when you start scaling and you really start doing volume of deals? What do you end up sacrificing that you wish you didn't have to?

The luxury of time to do everything in sequential order. You don't get that. What I kind of do is I try and figure out what are the 5 to 10 deals that 5 to 10 things that could kill a deal. And then I go looking to see if the deal passes the test. It's identifying from an integration standpoint what is a must to do prior to close versus what can be done post-close. Because in an ideal world, if you had the luxury of time, you do everything prior close to get a perfect transaction. But it doesn't work like that because you have 3, 4 transactions sometimes a week, especially in our world. It's really figuring out what are the 5 things you're looking for that could kill the deal from a due diligence standpoint, and what are the must-dos from an integration standpoint prior to close versus post-close.

Pretty cool.

It goes back to the prioritization, saying, okay, there are going to be trade-offs. We're not going to get every single thing done, but let's make sure we got the key things done.

Exactly.

If somebody's standing up a high-volume program from scratch, What's the one thing they got to get right in year one?

Goes to alignment, to do deals, to have a proper strategy, well-defined strategy, game plan in terms of hiring, getting the right people into place, really hungry business development folk. That's kind of the starting point, especially in year one, because chances are you're not going to have all the systems in place. What you probably will start doing is you will have a strategy, you'll have alignment, and you need to hire core competent people who can and are willing to roll up their sleeves and do whatever is required to get the organization going.

What was your biggest year one screw up?

My biggest year one screw up, it was a deal where we rushed integrations in the last month.

You just rushed integration?

Yeah, we rushed integrations. And luckily for us, we were fortunate because it was kind of in year 1. It was towards the end of the deals in year 1. And there was one deal that we rushed immigration and it came to bite us later on. Without naming the deal, what we did was because we wanted to get it closed, we left the banking, which is why I raised that example. We left the banking with the seller. It was very hard to track the funds. Yeah, that was problematic. We didn't level set proper expectations post-close with respect to hiring, raises, all the key stuff that's important. The revenue was coming in. We were correct in the due diligence. It's just that we didn't integrate it properly into the system.

So, but this is like classic, this is classic, like doing early deals, the biggest thing. And this literally is the definition of why we have a buyer-led M&A framework just to like get ahead of this stuff because Essentially, that's what you're doing is having an integration-led approach when you're taking a buy-led approach.

So especially in year one, because you're trying to get out of the red zone, you're bleeding so much of cash. So you really want to do deals. And sometimes what happens in hindsight, and as I progress to doing scaling more organizations, it's something that I won't do.

So what's the craziest thing you've seen in M&A?

Oh, I've seen a lot of crazy things, but I can give you 2 examples. We had progressed through a transaction when it was time for some legal due diligence. When our counsel, they ran a lien searches, they realized that the seller did not have the authority to sell the assets that he was selling to us.

Oh wow.

That was one. The other was we went through the transaction and at the last moment a key employee said they had an employment offer with somebody else. They were gonna go with the other company.

Did you still close or you had to make some big changes?

We did close. We actually convinced the employee to stay on.

Okay.

So that was a good, uh, yeah, these are real live things, right?

That happened.

So this has been a fun conversation. I appreciate taking the time. I hear you might be getting buyer-led certified cause we got a new certification coming out.

So I'm looking forward to it. I believe it starts on May 29th.

Yeah. I want to get the pros to endorse it, kind of go through the program, give some real feedback that, hey, this is no BS. We took a collection of all these best practices from over 400 podcast interviews and built a framework you can actually get through. Or you could go listen to all 400 podcast interviews, which I would be totally flattered. I would love to meet that person. If you are one of those people that listen to every M&A Science podcast, I will like make a gold trophy or something and honor you.

Again, the luxury of time, man. Which is something we don't have.

I agree. It gets harder and harder, man. Those of you that stuck through the end of this podcast, thank you so much. My fellow M&A scientists out there, I love to hear from you. I got my privacy gate down on LinkedIn now so folks can reach out, but mention the podcast. I get so much spam on there. Mention you actually listen to the podcast and I'll accept it. Love to get your feedback. Any topics that we haven't covered you'd like to hear about, or just criticism you want to rip on me because you're having a bad day. I get some of that once in a while. Or some praise. I get that too. But, um, yeah, love, love to hear from folks on LinkedIn. Till next time, here's to the deal.

15 years, 2 organizations, 220 deals, and year 1 mistake Sean shared in detail because that's how this work actually gets better. That combination of scale and honesty is rare, and it's exactly the kind of practitioner experience the Buyer-Led M&A Certification is built from. Frameworks from people who've made the expensive mistakes and rebuilt from them. Post-close integration planning, diligence and integration running in parallel, a playbook that gets better after every deal across 6 courses taught by the people who ran it. Go to mascience.com and look for the Buyer-Led M&A Certification. Link is also in the show notes.

Thank 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, Kison, K-I-S-O-N, @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. Again, that's mascience.com.

Here's to the deal.

Views 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.