How to Convince People to Sell their Business

Hello Ma Friends, Anyone that charges you per page for a virtual data room is not your friend. It made sense 20 years ago when people would show up to your office to scan documents, but with today's cost of cloud storage, it's a dirty scam. That's why I'm here to tell you about Firmroom.com's new data plan that includes 50 gigs of data storage for only $800 per month. And that would be over $300,000 in the per page pricing world. Don't take my word for it. Check it out for yourself by starting your own free trial@firmroom.com check it out firmroom.com I'm Kisam Patel and you're listening to M and 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 and A deals. Welcome to M and A Science, where leading M and A practitioners share lessons learned from their experience. If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our free newsletter. Every week we share highlights from our interviews and invitations to events as we build the greatest community of forward thinking M and A practitioners. Again, that's mascience.com I'm your host, Kisam Patel, CEO and founder of M&A Science. Joining me today is Willie Walker, chairman and CEO of Walker and Dunlop. Walker and Dunlop is the largest provider of capital to the multifamily industry in the United States and the fourth largest lender of all commercial real estate, including industrial, office, retail and hospitality. They're on NYSE under wd. Today we're going to talk about how to convince people to sell their business. Willie, how you doing today?

I'm great Kisan. How are you?

I'm doing fantastic. I want to thank you for taking the time and give a special shout out to your comm department. I think it was Susan I worked with over there. Just want to thank them for putting it together. Can we kick things off a little bit about your background?

College lacrosse player, moved to Latin America, worked in the nonprofit world, went to business school during my summers, worked at Morgan Stanley and their Latin American corporate finance group. Got out of business school, decided not to go to Wall street, not to go to big consulting, but went down to Santiago, Chile and worked for a venture capital firm. Was asked to work on a startup airline in Argentina. As I was pulling together the management team and all the infrastructure for the airline, couldn't find a general manager to run the airline. And my boss said, I guess you're the general manager. So I was general manager of an airline startup. I then went from there to working for the tech specific group doing buyouts in Latin America. We tried to buy Idolinas Argentinas from the government of Argentina on behalf of Continental Airlines, which TPG had been a big investor in. We lost that to American Airlines. But then I went on and did a number of buyouts with TPG in Latin America. And then I moved into the call center industry where I was tasked with building out Latin America for a NYSE listed or actually NASDAQ listed company called TeleTech TTEC. They had nothing in Latin America and so we built out Latin America and acquired companies in Mexico, Brazil and Argentina. And then they asked me to go do the same thing in Europe and so I moved to London. Both acquired companies as well as added to the already existing footprint in Europe. And then I left Teletech to come back to my family company, which was a small regional mortgage bank called Walker and Dunlop based in Bethesda, Maryland. We had one office and 46 employees. And through investment in both organic growth as well as acquisitions, we've now done. I think our last acquisition was our 16th acquisition. We've gone from one office and 46 employees to 40 offices, almost 1500 employees. Company was worth my dad and I estimated $25 million when I joined it and our market cap peaked at $5 billion at the end of 2021. And I guess that's about it. I'm chairman and CEO. I'm the largest individual shareholder of Walker Dunlop and it's been a super fun journey of growing the company and seeing it grow and seeing all the things that we've been able to create.

I like that story because you started as the investor perspective, got into becoming an operator with the airline startup, and then you became the deal guy where you're putting together these pretty significant deals. I think that's an interesting combination when you're blending in the operational experience as well as being able to do deals.

When I joined Walker and Dunlop, I didn't know really anything about the mortgage finance business. Even today you would hope. I know a lot about the mortgage finance business today after having been around it for 18 years. Nonetheless, my expertise has never been in underwriting a mortgage, originating a mortgage, selling a property, all the things that we do, or appraising a property, all the things that we do every day. At Walker Dunlop, my real expertise has been both general management and as well as my exposure and Experience in investment banking and private equity and venture capital. And from the finance side of things, I've been really blessed. I joined Walker and Dunlop. My father was still there and then my partner in growing Walker and Dunlop is a gentleman named Howard Smith. And Howard is someone who is a consummate practitioner in the mortgage finance space. And so to have someone like me with the general management and financing background and Howard with the practitioner mortgage banking background, we've made a really good team in being able to think strategically, acquire a lot of companies, integrate those acquisitions and at the same time make sure that we can actually make good loans, have great credit, et cetera, et cetera.

Deadly combination.

It's been pretty good if you look at our growth and our market share. There are a lot of much, much bigger companies that if you'd asked them 15 years ago, who Walker and Nunlock, they didn't even know who we were, much less thought of us as a competitor. And today we're eating their lunch on a daily basis. So yeah, it's been fun to see it from that standpoint.

How did you grow the company through M and A.

When I joined we didn't have a brand, we didn't have capital. So it was really hard. You can't just like all of a sudden say, oh, let's just go buy a couple companies and put them together. For the first couple years we're really growing organically, building a brand, getting the team really focused on growth. We had fantastic growth characteristics at the beginning when I first joined and, and then when the great financial crisis hit, there were a number of big Wall street firms that were exiting the mortgage finance space, not surprisingly. And there were a couple companies that were out there that we thought, wow, we'd love to get those, they're super cheap. But we don't really have any capital to buy them. And so we were fortunate that we approached Credit Suisse. And Credit Suisse had a company called Column Guaranty which was their commercial mortgage finance group, both on the commercial mortgage backed securities side as well as on the agency lending side where they lent with Fannie Freddie and hud. And we were keenly interested in the Fannie Freddie businesses because the government guarantee made it so that Fannie Freddie and HUD could continue to operate throughout the great financial crisis. And so we put a deal together where Credit Suisse took all stock in Walker Nolop. We didn't have to use a dollar of our own money, but they took a 35% interest in Walker Nolop in exchange for Selling us column. And that was the first deal that we did. And I will tell you that on that first deal, I'd been doing deals my whole life. I'd been advising people on doing deals at Morgan Stanley, I'd done big acquisitions at tpg and I'd done a ton of M and A work at Teletech buying companies in Latin America. So I had a pretty good sense of how you diligence companies and how you integrate companies on stuff. Nobody on my team did. I remember the first time I walked in and said, we're going to buy column. Everyone was like, how do we know what we're buying? How do we know whether they're any good at what they do? How do we know what their credit quality is like? We might be buying loans that are really bad loans. And I looked at the very seasoned professionals, but not in this part of the world. And I just said, that's what due diligence is all about. We'll do our homework to make sure that what we're buying is what we're buying and we'll structure a deal that if there's stuff that we're buying that we think is A and it's B, we can do something about it. That was our first foray into M and A and that just started it. We then went public the next year, which was huge because then we got a capital base. So it was buying column in a non cash deal in the depths of the great financial crisis and then going public in 2010 to give us a currency. And then from there it was off to the races as it relates to M and A.

Was that deal a carve out? Did you have to do work and have TSAs to pull it out from Credit Suisse?

The TSAs weren't that big. A number of other deals have had very significant TSAs. And to anyone listening to this who doesn't know what a TSA is, it's a transition services agreement which allows for certain services to continue to be provided while you're transitioning something into your company. So Kiesen's point is just when Colm was inside of Credit Suisse, wouldn't all the back office of HR and Finance and everything else be done by Credit Suisse and therefore you need a transition services agreement to get it into Walker Nolan and that deal, really all we were buying was the servicing portfolio as well as the bankers who are at the platform and who didn't have a new home. So we basically picked up a lot of origination talent and then we picked up the Servicing portfolio, the acquisition of, for instance, CW Capital from Fortress. Because we were breaking apart cw, where the Special Servicing stayed behind with Fortress. And we picked up the agency lending department that had a bunch of TSA agreements in it.

Got it. And this first deal, was it a big headcount bump? Cause you mentioned you're about 46 when you joined.

It wasn't that big. As I recall. We were a firm at that time of 70 people and we added 35. It got us over a hundred, but it was. And Maybe it was 80 and we added 40, but it wasn't that big.

Yeah, I didn't know. It was like a monumental thing.

The CW deal was a doubling of the company. So when we bought CW, we were 230 people and CW was 200. So we went from 230 to 430. And that was a big step up. We doubled the size of the company overnight. And the thing that really worked about that deal, Kieson, is that when we bought them, I made a discreet decision to make sure that we got the best out of their management team. And I think it was very important to keep the frame of mind that as much as we were the acquirer, there was a seat for all the really good senior management team at CW when they came to Walker Nomad. We had a scaled servicing portfolio at the time. I decided to take the head of servicing at CW and put him in as the head of servicing for the combined companies. We had a really good chief origination officer gentleman who managed the sales force of people who were outselling mortgages for Fannie and Freddie. Really good. And I ended up making the decision to put the head of CW's agency origination in. And the two of them have been great partners ever since. But somebody's gotta be the lead. And I made the CW head the lead. I think that immediately sent a message to everybody at CW that was, we may be getting acquired, but there is a understanding that we know our business. We can add value to Walker. No opinion. On a combined basis, the two of us are stronger. And that deal, one of the great deals we will ever do, it created massive shareholder value.

When we look at the 16 deals you've done, the nature of the strategy, we have a couple examples of carve outs. What did that path look like? Was it. That was part of it. Looking for these companies that may have this business unit that was something that you could manage or run better, more effectively. Did you have other things that came to you through bank process? Was some of the Stuff sourced through your experience of hunting these deals down and making them happen.

Kind of all the above. One of the things to remember is the spinoff of Colin from Credit Suisse only happened because we were in the depths of the great financial crisis. They wouldn't have let go of that business. In normal course, the acquisition of CW from Fortress. Fortress. Private equity firm Wes Edens had decided that they'd gotten everything they could out of that acquisition. They made a lot of money off of it. And he was like, I want to move on and who are we going to sell it to? And he called up a banker, banker called up me, and the two of us did a deal the first day we ever met in his office. Literally a hand. Obviously, there's plenty of documentation after it, but Wes and I got to a price and to terms in our first meeting with a handshake. But I would put forth to you that one of the important things is being in the ecosystem of M and A. So it helped me a lot that I'd worked at Morgan Stanley, because I have friends of mine who've been bankers at Morgan Stanley forever. It helped that when we were looking at businesses in the mid-2000s, before becoming public, that I'd made great relationships with a couple of bankers on Wall Street. Scott Heberton at Wells Fargo, Andy Rosenberg at Credit Suisse, Diana Reed at Credit Suisse and then at pnc. And that having those relationships, they. They meet with clients and they sit there and they say, what are you gonna do? You're gonna spin this business off? You wanna go buy this, what have you, and you're in the mix and you're getting phone calls and you're seeing deal flow. I think that's super important because there are a lot of smaller businesses that have great businesses, but they're just not in that ecosystem. And so people aren't showing them ideas, they're not thinking about them for ideas, and therefore they never show up. To be perfectly honest with you, that was sort of where Walker Nolop was. Before I joined Walker Nolop was incredible business. My dad knew some people in the investment banking world and had looked at a couple things, but you weren't getting shown ideas on a consistent basis. Today, anything that goes on in the mortgage finance space, commercial mortgage finance phase, we at least look at it, we get called in, what have you. Unless it's a competitor who doesn't want us to be able to look under the hood because they may not have conviction that they're going to actually transact and Then they don't want us seeing everything about them in a due diligence process. And we obviously have the other side of that, of do we want to go sign an NDA to take a look at somebody and not be able to go and potentially pull employees away from them or do anything else? There's always that there are the two sides to it. Some people don't want us looking at them, and then we also don't want to be limited by looking at them.

That's a tough one to balance. It sounds like you're being very comprehensive when you look for opportunities by having the relationships with the banks being part of the M and A ecosystem. What does that look like in terms of the key approaches? Is there bankers? There's private equity firms out there, there's some of these larger companies where you identify, carve out opportunities. How pragmatic are you in terms of building that for your pipeline, using those different sources and even going direct to companies?

When we first entered the M and A market, I did everything. Bankers called me. I met the senior management team at the company. I worked with our team to underwrite the company. I knew every single deal term I would negotiate almost every single deal term. And I knew everything about the acquisition from start to finish. The last three deals we've done, I knew all the terms and conditions, but I never read the contract. I suppose I say one diligent session. I say that because when we started in this, I was in the weeds on everything. And now that we've gotten the scale and we've got the team and the team talks to bankers all the time and knows all the diligence questions to ask, and we've got external legal advisors and financial advisors who help us. My role is dramatically diminished as it relates to our MA activity. I would also say to you, though, because I've done so much of this. We had a deal over the last two years, it was coming down to the short strokes. And I got a 911 phone call from the deal team on a Sunday morning and they said that the sellers had come back to us with all these kind of modifications to the deal. And they're like, we think the whole thing's blown up. And I could understand the emotion from my team. They'd been in the trenches with this company for months and they'd negotiated every point out, this and this. And they were like, I can't believe they've done this. And it's making a comment about their character and all this great stuff. And I said the Team, take a deep breath, okay? You should have predicted that this was going to happen. This typically happens at the end of deals. Typically people come and ask for that last little thing that they've always thought they could ask for. And if they think the deal is going to get done, they ask for it. If they think it might tip the deal, they don't ask for for it, but they obviously think that they can ask for this. Don't worry about it. You guys take care of these three issues. Here's how you go do this and this. And I'm going to go talk to the owner and talk to the owner about this issue. If I get this done, you all get that done and we'll be good. So eight hours later, we got back on a call. I said, I got my piece done. You guys get your piece done. They all said, yeah, we got it done. I said, are we ready to close tomorrow? They said, yeah, we're ready to close tomorrow. And that was eight hours on a Sunday where they thought the deal was essentially dead at the beginning of the day. I'm not in any way trying to pat myself on the back, but those types of moments come from experience. They come from having seen a lot of different things in deals. A lot of people raise issues that you never thought they'd ask for. Being able to not get too emotionally attached to a deal after you've invested so much time, so much effort, so much money in trying to get it done. And our track record of finishes on starts as it relates to deals that we decide we're going to move on, we do a bunch of upfront diligence to make sure that the team and the company is a company that we want to have join Walker and Dunlop. And once we say go, we've never had anything blow up on us. That's not to say that we haven't gotten down to some short strokes where I thought things might blow up, but we've never had anything blow up on us.

What does that look like today? Do you have a whole dedicated M and A function corp dev integration people?

We do. We have a head of business development and he has a number of analysts who work for him. We've done 16 acquisitions, and I'd have to go count it up, but I'll swag it and say we've used advisors on five on the investment banking advisor side. So we've probably done somewhere around 10 deals without advisors on the investment banking side. We always obviously have to bring in legal counsel. I'll give a plug for Arnold Porter and Kevin Lavin, who's our lead M and A advisor on the legal side. And we've worked with a bunch of different firms. I worked with a bunch of different firms when I was at TeleTech and TPG and I've worked with all the name brand firms as it relates to legal talent. Just like when we find a client who likes sole sourcing with Walker Nolot. From a financing standpoint, I really like working with Kevin and his team at Arnold Porter because they know how we like to structure deals. We don't need to explain to them every time what things we like in deals and things we don't like in deals, the reps and warranties and all the purchase agreements. If you look across all of our deals, they've got very similar terms and conditions. Sure, we might be negotiating with someone who has some lawyer from Clary Gottlieb who says we won't accept that term or whatever the case might be. But generally speaking, there's a consistency to the deal docs and as a result of that, we also don't get surprised after a deal closes that all of a sudden says, oh, there was something in there that wasn't properly thought through or worked. So I like having that consistency of working with Arnold Porter.

What's advice you'd give to another CEO that at that point M and A is going to be core to the strategy and thinking through a building the M and A function or even broadly the M and A muscle. What are some of the things or lessons learned from your experience?

I think one of the first ones is to keep in mind that my former cfo, who is now our coo, Steve Theobald, said to me years ago, and it's exactly right, and I've repeated it a thousand times, companies are sold, they're not bought. And I think it's really important because as you asked the question, how can you advise someone who wants to get going on M and A? The way you get going on M and A is first of all being in the market, looking for things, but finding people who are interested in selling their companies. And you clearly don't want to catch a falling knife. So you got to be interfacing with people who have companies that would be of interest to you but that aren't on their decline. They're actually on their upswing. But if you're out saying, I'm going to go buy companies unless there is a willing seller, you're overpaying, period.

Let's talk about that direct versus auction. It Sounds like you favor your proprietary pipeline development as opposed to, we've made 16 acquisitions.

We've never bought a company at auction. Not one.

What's the benefit of buying direct versus.

Auction price, timeline integration, everything. But it's hard if you're buying through your own M and A efforts, your own networking, your own. Is this person a seller? That's a lot different than Morgan Stanley or JP Morgan calling me up and saying, we got a company for sale. And boy, oh boy, is it a great fit for Walker Nolock. We get those phone calls all the time. We never bought one of them. So the issue with that is that if you're buying at auction, first of all, there are lots of bidders. Pricing is going to be perfect. There are a lot of companies that like that because they don't have to get a fairness opinion to figure out whether they're paying the right amount of money or not. When you do your own deal and you're bidding on a company on your own, you don't have market forces. There's. You can be wildly overpaying for them or underpaying, whatever the case might be. In many of the instances we go, we underwrite the company, we do our own comp analysis, we say, great, this is a good value. This is what it is. We get them to a point where they say, this is great. Many times they've hired bankers who are saying to them, great price. Here's what we're seeing from a comp basis. If we took you to market, it would be here. But many times we have to go and hire banks to do fairness opinions for us, to make sure that what we're buying is fair value and that our board feels secure that what we're buying is what we're buying and why we're buying it and at what price.

Price is pretty straightforward when you look at the contrast between proprietary and auction. You mentioned timeline integration. Can you tell me more about the difference you see when running a proprietary deal over auction in those areas?

Why do very few of the marriages that come out of that television show, the Bachelor or the Bachelorette, survive? Seriously, why do few of those survive? Because everyone's in a beauty contest. They'll be picked. And they're not really thinking about, do I want to spend the rest of my life with this person? So they're like, representing all this stuff to be the one who's, hey, I picked Judy or I picked Joe. And it's not, do I want to spend the rest of my life with Judy or do I Want to spend the rest of my life with Joe. Similarly, when you're in an auction process of selling your company, you want to be coy, you want to hold back data, you want to, like, have the bankers drive the highest price possible. And typically, when you get done with an auction, the company that's buying you is so relieved that they actually won the auction that no one's actually thought about what are these people going to be like to work with? And do these people really want to work with us or are they just trying to get the highest price? The point is that when we've gone to meet with people, I and my team have to convince the CEO or the owner that she or he wants to sell to Walker and Dunlop and almost always become part of Walker Dunlop. So there's a lot in that of saying, does my brand survive? Does my brand get fold it in, Do I survive or do I go to the beach? For successful M and A, you've got to think all that through. It's not just the price you get the day you sell the firm. If you're buying good companies, you want to buy companies that are going concerns. They're not coming to an end, they're not a falling knife. And as a result of that, you want to buy those types of companies. And those are the ones that survive. Those are the ones that the people who come across in the deals actually understand why they're coming across. Look, we've had deals done where really the CEOs held the cards close to their vest and we announced the deal and everyone's like, oh my gosh, we're being acquired by Walker Nolop. What does that mean for me? And where am I going? We've also had a lot of other ones where people have been like, basically with the entire M and A process. And when we announced the deal, everyone inside the company knows that they're being sold to Walker Nop, and they almost know what desk they're going to take in their new offices.

Which one's better.

It's hard as you get to our scale and the size of the companies we're acquiring to have more than just a few people know what we're up to. Back when we were a private company, which we didn't do a lot of M and A when we were a private company, as I told you, we did one deal before we became a public company, but when we were a smaller public company going after smaller acquisitions, you could allow for the word to get out. It wasn't going to change that much now that we're looking at. I mean, our last acquisition, we bought a technology company for $300 million in February and then we bought a affordable housing tax credit Syndicator in December for $700 million. When you're doing a $700 million acquisition, it can't be public knowledge. It's ma to keep it to a tight group. But Sean Horowitz, who is the CEO of that company, who is now at Walker and Dunlop is just an incredible entrepreneur. The first time I met Sean, I said, man, getting his company to be part of Walker Knop would be amazing and having Sean on the Walker Knob senior management team would be amazing. And all that's come true.

That's a really great way to look at it. So let's get right to the how do you convince someone to sell their business?

When we were small and had no brand and had no capital, and I remember distinctly when we bought column from Credit Suisse was so good, I flew down to Dallas to meet with one of the column bankers who was a pretty significant CMBS commercial mortgage backed securities banker and had done a lot of big fancy deals. And I sat down with him at the Rosewood Hotel in the lobby and he sat down and he said, I don't even know who Walker NOP is and to be honest with you, you sound more like a law firm than a financial services firm. And I laughed and I said, you know what? I inherited this brand and Walker and Dunlop does sound like a law firm more than an investment bank. But what was evident to me in that comment was that he needed the card to sell. He couldn't sell himself. He needed to show up with fancy Credit Suisse card and say, I work for Credit Suisse, work with me because I'm part of Credit Suisse, not I'm an individual who can do the business for you. And I immediately discounted his value to our firm because he was like, I need a fancy business card to sell. And I'm like, if you need a fancy business card to sell, Walker and Dunlop is not the place for you to be successful. First of all, we had no brand and we didn't have the track record from a mergers and acquisition standpoint and integration and people coming here and saying much more difficult to convince people to sell. I'd done a lot of it. I'd done a lot of it when I was at Teletech convincing people in foreign countries to sell to us. I bought companies in Brazil and Argentina and Spain where I'm negotiating with people all in Spanish. They don't know who I am, where I come from, what the company looks like, anything. And you have to convince them that they want to go sell their company to some big amorphous American company listed on the nasdaq. You pick up a lot of skills in going and figuring out, how do you talk about price, how do you talk about culture, how do you talk about integration, how do you talk about creating future value? I will tell you one of the easiest sales I've ever had. There was an entrepreneur who was selling his company. I'll disguise who this was just because he may not want me telling the story, but one of the companies I was buying when I was at Teletech, we were down to short strokes on buying his company. And I borrowed the corporate jet and I put this guy on the corporate jet. And his eyes were so big being on the corporate jet that I knew I had him. And I could get him dreaming about being on the corporate jet himself, even though buying his company was nothing close to allowing him to buy his own jet. While we're on the plane, I got him to sign the line to sell me his company because he was so excited about being part of this big corporation and flying around on private aviation. I think he might have flown one more time on the corporate jet. But anyway, it was worked really well to get the deal done. But the reason I raised that is just that as we've gotten bigger, anyone that we approach to potentially sell to Walker and Dunlop, all they have to do is call the other entrepreneurs who sold their company to us. And if we ever mess that up, then our track record is damaged and it's very difficult to continue to go. The reason we bought 16 companies is that we have, generally speaking, some happier and some less happy. But we got 16 really happy entrepreneurs who sold their company to Walker Knollop or were fiduciaries for a company and sold it to Walker Knlop and have seen us create huge value for them, for their shareholders. And as a result of that, if I had someone I was negotiating with today, I'd say, go call Sean Horowitz. Ask Sean what it's like to be part of Walker Knlop. Go call Ivy Zellman. Ask Ivy Zellman what it's like to be part of Walker Nolop and what it was like to sell your company to us. There's kind of person after person. So once you've built up that reputation, it really comes down to personality and fitness. And I said to you that I'm Much more further removed from the M and A process than I used to be. But the one thing that every single deal has is meeting me and me saying, I like this team, I don't like this team. It could be the best M and A. It could be the most accretive deal we could ever do. And if the team and typically the key individual is not a cultural fit to walk or Noah, we're not doing the deal, period. End of statement. That cultural fit is fundamental to us doing anything.

I got vision, culture, values, fit and innovation was part of it too.

Yep.

Maybe we role play a little bit. I got a company called M and A Science with five business lines that are essentially education and technology tools we provide to corporations to execute M and A better. I think it fit nice with your portfolio, Willie, because you do a lot of these commercial, large financing, the real estate side. What would be your approach to talk to me to learn? Obviously we're just role playing it out here, but that cultural value and to the point where you see a fit that you start really putting the motion to convince me to sell.

In days of old, when we were a much smaller company and I had a much more sort of active role in all this stuff, I'd start engaging with you and then I'd bring my team in, said, I think this is something we ought to look at and it would have to be not only the relationship with you, but also is it of the scale that we needed it to be. And then do we think that from accretion dilution standpoint it would be an accretive transaction for us? And those would be a couple of things that I'd start talking to you about as it relates to what's your company do, how big is it, et cetera, et cetera.

Is some of this stuff you're picking up before you even reach out to me as a company, that's in the.

Days of old when we were a much smaller company today because we're only going after larger acquisitions, all that kind of spade work has been done. By the time I'm sitting down to see whether you and your company are something from a cultural standpoint that I want to bring in. So by the time I've met with you, I've seen numbers on your company. I've seen the accretion dilution analysis, I've seen an integration plan. There's a lot of spade work that's done before the team brings me something and says, hey, this is what we're proposing for us to do.

We have Maturity that in the early days you're kind of don't have limited information, you're doing a lot of this stuff upfront yourself versus now you got a team to bring forth all this information to you. So you're getting more visibility ahead of time.

That's right. And I just literally got a memo yesterday on a small acquisition we're doing to tuck in. It's not big deal, but they literally spelled out everything on it. It's actually of a size that I'm not even going to go meet the team just because it's teeny, teeny, teeny. But that's the kind of stuff that they've already done all the work, they've already negotiated all the documents and I get a memo that says this is what we're going to do, we need you to sign off on it. I'll go sign on and that won't count. That won't be our 17th acquisition. It's a banking team that we're bringing across, but we're buying the banking team rather than just buying individuals and putting them on new contracts. And because it's a M and A transaction, we're buying a company, I gotta sign off on it. But the point is that a lot of the magic on the M and A side and on the biz dev side is convincing people to want to sell to you. For instance, I used to do our biz dev work in conjunction with a gentleman named Aaron Perlis who's now our Chief Technology Officer. Then I brought Greg Florkowski in to be our head of Business development and Greg Flerkowski is now our cfo. So our CTO and our CFO both were in biz dev before they got those two roles. Two things to keep in mind there. The first thing is being the head of biz dev at Walker Nellops a pretty damn good stepping stone to going on to a much bigger and very important job. A lot of that has to do with the trust and confidence that I gained in both Aaron as well as Greg in their work is running business development. The other piece to it though is that you can be really good with the numbers. You can go to Morgan Stanley and you can do an Excel spreadsheet that makes someone's eyes spin as it relates to all the different toggles you have as far as what happens to value if the 10 year treasury moves from 3% yesterday down to 279, which I can't believe, it's at 279 today and it's great. And the model Streams it all through. That doesn't make you a great biz dev person. That doesn't make you a great corporate development or M and a banker. Sure, you can run the Excel spreadsheet and the numbers are very important, but you've got to be able to convince people that they ought to sell you their business. You got to be a salesperson, man or woman, not salesman. You have to be a good salesperson to be able to sit there and tell someone articulate, why do you want to become part of Walker Nolot? Why do you want to become part of whichever firm is trying to buy? And I think a lot of people miss that. I think a lot of people sit there and say, I want someone who's really analytically, really good. They know how to buy low and sell high. And they've got great analytical skills. And I'm like, the analytical skills a dime a dozen. That sales capability, the strategic ability to say, this is a company that would fit really well, to be able to assess the people and understand what you're buying from a human capital standpoint and then making sure that the deal is structured in a way to get the best out of them going forward. A lot of the deals we do, almost all the deals we do have some component of earn out to them. Why? Because it aligns interests. The last three deals we've done, the last deal we just did, we paid $300 million for it. We paid $100 million upfront and 200 on an earn out. It's an incredibly well structured deal. It aligns interests really well. If we end up paying out everything on that earnout, the $200 million we will have paid six times EBITDA for a technology company. Do I want to pay out that $200 million? Damn right I do. Damn right I do. It's like going to be the most accretive deal ever. The structure has a lot to do with it. The numbers have a lot to do with it. But so much of it has to do with that EQ and the personal relationships and being able to sell as a biz dev person.

Going back to the roleplay thing, how would you do that with me? Because the vision part, you do some initial diligence, say, hey, this company looks good, fair. How do you get that alignment?

One of our great successes at W and D has been these five year business plans. So every five years we have a new business plan. We put very ambitious goals into the five year business plan. A little bit of this was stolen from Jim Collins and his Bhags. A little bit of this was stolen from my old friend Jack Daly, who's a sales coach, who said once at a session I was at, if you don't tell your team where you're going, you're failing as a CEO. And I took that literally and have from that moment forward, always been telling my team where we're going. You have to have a true north. You have to know where you're going. If you don't articulate what a five year plan is, nobody knows where you're going. One of the things we've found very often is that when we go to meet with an entrepreneur of a really successful company, they don't have a five year plan. They got a year plan. They might have a two year plan, but almost none of them think five years out. So when you go to meet with them and I say, Kiesen, I love the five businesses you have and here's how they fit into Walker and Dunlop's growth over the next four years. On our drive to 25, on our goal to be $2 billion of revenues and $13 of EPS and getting us to $65 billion of debt financing and $25 billion of investment sales. And as you can tell, I can kick these things off everyone in Walker. No off can kick them off everyone. Because we say them all the time and everyone knows exactly what we're driving towards. And the cool part about it is that over three previous ones, we've done every single goal almost. There's been like two that we haven't hit. Out of many, each one of these drive to 25 has 10 component parts, $65 billion of debt financing, $25 billion of investment sales, $2 billion of revenues, $13 per share of EPS, $165 billion servicing. The reason I say this is because when we sit down and say, okay, Keesen, you ought to sell to us. If I've got my vision of where we're going and I can explain to you immediately how you fit into that, how all the different component parts of your company will help accelerate that growth immediately. Like, wow, now I know where we go. Now I know how we'd help. And so by having that articulated, it's exceedingly easy to tell people how they would be part of us. Let's just say hypothetically though, that your businesses aren't part of that plan today. So now there are two sides to that. One of them is either, you know what, you don't fit and we shouldn't be talking, or the Other is, you know what, you don't fit. But I think we can build up this vertical here. You'll take responsibility for it. You'll interface with this group. There's some synergies across these other things and I'm going to pay you a lot of money. And for whatever reason you're sitting there going, okay, if he has a vision to add on to his existing vision with my businesses, he's going to give me autonomy to run them. He's going to write me a big check and I'm going to work with that technology group that can help accelerate my growth. Sounds good or not?

It sounds good. Now I'll give you the founder reservation of. I still got another 10, 20 years in the career path. Want to keep running at this? If I keep running at it, I'm going to preserve a lot of value in my ownership and just continue that growth. Be the king on the hill, if you will. Versus when I sell to you, I'm losing. I'm giving up a lot of freedom. What's my long term incentive that you know and I get it, hey, our business could potentially grow faster as a business line since there are synergies to integrate with your distribution, your team that's talking to a lot of people every day. But that's the thing. Where is my real upkick from this? Or I, I don't know. It's a part. I'm wondering, you find that as a gap.

I don't find it as a gap. And look, there have been entrepreneurs who've sold their businesses to us who have, who are still here and they're entrepreneurs who sold their businesses to us and three years later said, thanks, that was great, I'm heading out on my own. Some people want to be their own boss forever. They don't want to work inside of a company where at the end of the day, I'm chairman and CEO. There are other people who are like, you know what? This is awesome. I get to let him deal with all that other stuff and all the stuff I didn't really like doing. And I want to go out and do deals and I want to make a lot of money and I want to not worry about all the minutiae of managing people and budgets and making payroll and all that great stuff.

How do you find out about that?

A lot of it depends on where are you in your own development. How ambitious are you as it relates to future earnings? Is it important that you have your name on the door? We had a number of companies that we Bought where it's like, your name's on the door today, but understand you're being bought by Walker no op. And at some point we're going to take down your name and we're going to. You're going to become part of Walker no op. If we got sold, hypothetically, I don't plan on selling Walker no Up, but if someone came along and said, we're going to buy Walker Nolot, one of the big things is, I've spent 18 years and the brand's been around for 80 years. Do I want to see the Walker Nolot brand go away? I got a lot of emotions around the Walker Nolot brand, but I've also got a fiduciary responsibility as shareholders that if someone walks along and says, hi, we're XYZ and we're going to buy you for some huge amount of money, I'm going to buy board with it and to heck with the emotions around Walker and Dunlop. But if we were to combine with somebody else. There was another firm that came to me three or four years ago and wanted to merge the two firms together. Now that's a fun conversation about whose brand survives, what's the more powerful brand, and do you take the Walker from us and the X from them and put the two together and create something else? You know, there's all that fun stuff.

But is it almost like the matrix of leadership come up in play because you know, who's got the stronger leadership team? Who's going to take over those C3 roles?

Nobody yet has approached me about selling Walker and Dunlop and allowing me to go to the beach. So the day that they. The day that they come to me and say, we don't need you anymore, I ought to take the message. But so far, if we're going to put two things together, they've always wanted me to run it, but they don't.

Come with other parts of the team. Here's other C Suite members. Cfo, coo, cmo. Figuring that matrix out of who that piece.

We've done that, and we did that with cw. We've done that kind of time and again, we're pretty darn good about that stuff. One of the biggest issues on all that stuff is just being transparent and being honest. And it goes a long way. Obviously, they're messages you have to send people that they're not happy hearing. But you just. You got to do it.

Vision part. I'm getting a good understanding of how do you get that? And that becomes a big driver. We mentioned culture Values and fit. How do you understand that? What's your especially early leadership to leadership.

You learn a lot about that when you're actually doing the deal. So as much as we try and diligence that ahead of time and talk to people in the market to see what they're like as a person, I was just talking about this last week where one of the bankers at Walker Nolop was sitting next to me at a concert we held here in Sun Valley, Idaho for our summer conference. And we're sitting there listening to a great music. And he said, who do you turn to help you as it relates to leading Walker Dunlop? Who are your peers, who you talk to about leadership and all this kind of stuff? And I said to him, back when we were a much smaller company, I was in YPO and I had a bunch of other CEOs and presidents of companies that I would sit around and talk to about stuff. But I said, as we've gotten bigger and bigger, if I want input on a discrete business issue, I've got an exceptional senior management team that I've worked with for, in many instances, decades, in the shortest term, five years. So everybody on that team knows me really well and I know them really well. Complete confidence in their input to me of making a decision. And if it's a really big issue, I can take it to my board. My board has very insightful people. The place where real decisions are made are in those spaces where you're trying to understand the way people act when the chips are down, when everything is going bad. And that's what character is. And I said to this guy, I said, you can walk around this conference, there's 600 people here. There's not a person you're going to meet who you don't think is a perfectly nice man or woman. They're going to sit there and shake your hand and say, hi, nice to meet you. And my business is this and that. You don't know who they are. You will learn a lot about them, who they are. When the company is failing, you want them to do a new job, you want to move their cheese, you want to take resources away from them and they need to go somewhere else. And the only way to get to understanding that can component of character is to work with people for a long period of time. And I said to him, I just had a very difficult decision I had to make on something inside of Walker no law and what made my decision as good as it was. And it's not me, it's that I'VE worked with my team that was giving me very different input. And I had to read through the lines of input where I had a number of people saying X and a number of people saying Y. And I had to sit there and think about all the personalities and all the input and know exactly who they were and be able to find a solution that was right in the middle of those two things. Nobody else on the face of the planet could have advised me on that. No great board member, no great executive, no great YPO member. You have to know the details of the input to be able to make that refined decision. And that's, I think, where real value is made.

Yeah, I was trying to wrap my head on how do you, like, figure that out early when you're looking to buy a company so you don't have.

A bigger mismatch, you make mistakes. We've made mistakes. We bought a company a number of years ago. I went to dinner with the CEO and couldn't read through that. The culture that was in that company wasn't the type of culture that would work at Walker. Noah bottom problems, swap out management team problems, bring in new people. It's fine now, but it's been a long slog to get that stabilized and get it where it needs to go. We actually had an HR issue in that part of W and D last year. And I said to the team, the only reason we have an HR issue here is because we bought the wrong company X number of years ago. In other words, that chain of lack of leadership and culture created this HR issue. And if you'd had you bought the right company, you wouldn't have this happen. And when you get to scale like we are today, if you don't have that consistent culture across it, you can have lots of HR issues. We're fortunate. This HR issue last year was a very singular event with a singular person acting in a really bad way. Very inconsistent with the way that the 1400 other people at Walker no op. And I was just saying to the team, that's why we can scale is because we bought great companies. We've treated the people extremely well when they've come into WMD and they've adapted and adopted to the culture that allows it to promulgate itself. But if you were trying to manage that or fight it or do anything to force it, it fails.

Is there a thing you learned over time to identify that culture faster? Talking through values, leadership styles, or anything like that helps you hone in on it earlier than later?

No. I mean, I do A webcast every week. And I talk to some great leader, CEO, politician, past couple weeks. Peter Linneman from Wharton. The week before that was my summer conference with Mark Few, the basketball coach at Gonzaga, Jamie Lee Curtis, the actress. James Savridis, the four star admiral who was allied supreme commander, et cetera, et cetera. In all of those interviews, I do a lot of background on who those people are and I learn their formula of experiences, where they came from. James Savritis, growing up in Palm Beach Gardens, Florida, five foot five, being generous, goes to the Naval Academy, is on the tennis team, and then goes over and is on the squash team and graduates the top of his class and has just had this stellar career. James Savridis has character, he has rock bottom morals, but you can tell that by studying him, by reading him, by understanding what he does. And so when we're going to go buy a company, we do the same thing. I sit down with the CEO, where are you from? Who you been with? And the other thing about it is that mostly these people aren't all new to us. This industry isn't that big. I can call somebody up and say, hey, tell me about Ivy Zelman. I already knew Ivy very well before we acquired her company, so I didn't need to do that. But I could call anyone and say, what's Ivy like? And I would have gotten Clyde Holland saying to me, she's the most insightful analyst in the housing market there is and she's a wonderful person. I knew Sean Horowitz before this whole deal, but slightly. But we have some very good friends in common. I think I spoke to our good friends in common about Sean and how he runs his company and all that stuff, of course. So you can diligence people to find out what they're like as people. And really the biggest issue is ask them questions about how they were in 2008 and 2009. Not that they had to have made money in 2008 and 2009, but what did they do? Did they try and hold on to their company too long? Did they do anything funny during it, et cetera, et cetera? You can learn a lot about people when they're in stress. How did they act during the pandemic? What was April and May in their company like in 2020? Was it, we're all in this together, I'm in the boat with you, let's all paddle together, or was it, you know what, times are tough and we'll see you when this whole thing passes over. So going to those moments when people have been pushed and stressed. Tells you a ton about what they're like as a leader and what they're like as a businessman or a businesswoman.

That's great advice. I like it. What's the sum it up? Any big takeaways? The best thing I can learn from you about doing MA and convincing someone to sell.

I guess the first thing is just understanding what your strength is. I remember so distinctly when I was working for Texas Pacific Group. We were trying to buy Aidolines Argentinas. So we're bidding, and the bids going through the finance ministry. I was a lowly associate, and I said to the managing director of the Buenos Aires office, I think I could get us a meeting with President Menem. Looks at me, he says, you can? I said, yeah, I know somebody who knows somebody who can get us a meeting with President Menem. So we got the meeting set up with President Menem, and everybody at TPG up and down the ranks and at Continental Airlines wants to go to the meeting with President Menemen. And so David Bonderman, who started tpg, he's, I'm coming to Buenos Aires. David Grizzle, who runs business development for Continental Airlines, is, I'm coming to the meeting. Rogelio Pagano, who runs the Buenos aires office for TPG's, I'm coming to the meeting. And then about 15 other people. So as you can imagine, for the meeting, everyone's sitting there saying, who's going? Who's going? And my name got cut off the list about 15 times. And my name got put back on the list 15 times because I was the person who got the meeting with Menno. So we go back into the president's residence. We actually went to his residence, not to the Casa Rosado. We went out to Olivos, which was his residence. And we walk in and we sit down at the table, table. And President Menem's at the end of the table and his translators next to us. And then David Bonderman and David Grizzolan. I'm all the way down at the end of the table. The conversation starts going, and it's all going through the translator and this and that. And then all of a sudden, somehow or another, it comes up to me asking President Menem a question. I ask it to him in fluent Spanish, and President Menem's like, oh, there's actually someone on the TPG side who actually speaks Spanish. And so all of a sudden, President Menem's speaking across the table at me at the very end. The lowly associate. And I could tell David Bonderman sitting there with this huge smile on his face saying, damn, that's awesome. Will he speak fluent Spanish? And he's having a great conversation with the president and that might help our bid. Pretty much every single other person between David Bonderman and me is sitting there going, who the, you know, what is that guy at the end of the table? And I want to shut him up right now because he's taking my air. He's shining, and I don't want him to shine. And I need to look good to David Bonderman and all this kind of stuff. And what I understood at that moment was I was like, I shouldn't be sitting in the office running spreadsheets. I can do an Excel spreadsheet. But there are a lot of people who can do an Excel spreadsheet a hell of a lot of better than I can. I shouldn't be on the banking side. I should be on the operations side. I should be engaging with people and leading people and doing that. That wasn't a seminal moment. I didn't walk out of that meeting and say, that's what I'm going to do. But that meeting was an example of what I'm good at and me understanding that I shouldn't be in the office running spreadsheets. I should be out there leading and doing something else. And so I think everyone has to be realistic with themselves of what's the skill set you have. And oh, by the way, if you're really good at Excel spreadsheets and you excel at that, go to an investment bank, go to a quant hedge fund, go do that and crush it. And awesome. But don't fool yourself that, like, you're going to be the next great M and A banker, because you really aren't going to have that engagement with the client and convince them to sell their business or to hire your bank to go do something. Be the support to the front person. Awesome. Great job. Real value add. You can make a lot of money and you can help your bank or your team or whatever the case might be. But I think that honesty, as you get into those sort of late 20s, early 30s of being in a job that allows you to really stress test what you're good at and then identifying what you're good at and then getting yourself into a career track that allows you to use those skill sets is super, super important.

Oh, that story. Great aspiration for all the junior bankers out there. Willie, I know we're right at time. I got to ask you, before we wrap things up, what's the craziest thing you've seen in M and A?

I'll just tell you this one quick anecdote which was just that when we bought CW from Fortress, I did the deal with Wes Edens, who was the head of Fortress, and the management team at CW had nothing to do with the deal because Fortress owned the company. I negotiated with Fortress, I bought the deal. And so we told the management team after we'd gotten the deal done. And so I hadn't had the opportunity to meet with the management team and all the things that I've talked to you about, integration, all that kind of stuff, this was the antithesis of all that. The management team couldn't know that we were doing it. Fortress and I cut a deal and then we stepped in and told the management team they were coming across. And one of the ways I made up for that lack of knowledge of them leading up to it was exactly what I said to you. I gave a number of them really senior jobs at Walker Dunlop. But one thing in that deal which kept me up for hours and hours, was that I wanted a force majeure contract clause in the deal that said that if the three top bankers at CW didn't come to Walker and Dunlop when we announced the deal, that I could back out of the deal because they had three huge bankers who were a huge amount of their deal flow. And as you can imagine, CW or sorry, Fortress is sitting there going, no way, that's on you, not on us. Like those three walk out the door and that's on you. And you got to deal with the pieces. But we can't give you the ability to back out of the deal if you don't get the three bankers to come across. And of course I'm like, I've never even met these people. I don't know whether they're going to say awesome or whether they're going to say, I hate Walker Nello, but I'm going out the door. So the day we announced the deal and we had a three month diligence period after that to get the deal closed, the day that we announced the deal, one of our direct competitors offered all three of them massive signing bonuses to just walk out the door and come across to them massive numbers. I couldn't even think about paying for a couple of weeks. I was scrambling, thinking I might have, without the force majeure contract, made the worst deal we've ever done. And fortunately, in that period of time, we convinced those three bankers to Stay. And they are all still at Walker and Dunlop. They are three of our biggest bankers today and they all have loved the last 10 years being at Walker Dunlop. But I will say that as I signed that contract with no force majeure contract saying if the three of them walked out the door and then also having the competition put a massive signing bonus on the table the day we announced the deal, I was in a pretty bad place for a while, but thankfully it all worked out. So that's probably one of the stupidest things I've ever done that actually worked out. But I would say just one thing on that, just one final point. You have to be able to take calculated risks like that. I had confidence we could keep them and guess what? They might not have stayed, but if I backed away by not getting that force majeure clause, we would have never bought cw. So you're never going to be able to be given, oh, here's CW at a great price and it's all packaged up and there's no risk to you or what you're going to have to take calculated risks. And quite honestly, that's where we've been able to create a lot of alpha, is being able to take calculated risks that we were able to work through. Deal with no deal is perfect, I guess, is all I'm trying to say, and that's what makes great deal makers, is great. Dealmakers can sit there and say, I'd like to have X, but I'm going to take Y. And I know that if Z happens, I'm going to be okay.

You got to take the bet and back it up with alignment on vision and culture. Hey, should we plug in your podcast?

That's nice of you to say that. Walker webcast. Do it every week. Just put in Walker webcast. They're all over YouTube. And you can also go to our website, which is walkerdunlop.com and there's a whole link to the Walker webcast and you can sign up for them this coming week. It's Jamie Lee Curtis and she and I had a wonderful conversation about her acting career and all the leading men that she's been with. It's a great conversation. It's a lot of fun.

This has been great. Thank you so much for taking the time teaching me how to convince people to sell their business.

Kiesen, it's been a joy. Have a great weekend. Appreciate you asking all these questions and being interested in what we've been up to.

Cheers. And here's to the deal. Thank you for taking the time to explore the world of M and 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. You if you need help standing up an M and 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 a science.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 and 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.