How to Scale Global M&A with Culture, Strategy, and AI with Rob Brown, CEO of Lincoln International

This episode is sponsored by Dealroom, the M& A platform purpose built for buyer led M and A. If you're in corporate development, you know how chaotic things can get. Juggling Excel trackers, email threads, shared drives and four different tools just to get basic updates, dealroom puts you back in control. It's an end to end platform designed specifically for buyers. You get one place to manage pipeline diligence and integration with built in project management, real time commenting and automatic stakeholder notifications. You can templatize your rooms, run bulk permission updates across deals, and even use AI powered contract analysis to spot risks like change of control clauses in minutes instead of hours. With Deal Room, you're not just chasing people or reconciling data across tools. You're actually running a repeatable scalable M and A process the way a buyer should on your terms. Go to dealroom.net or click the link in the description to learn more. Let's get back to the episode 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. Foreign welcome to the M and A Science Podcast. This podcast is part of a mission to rethink how M and A is done. The old school cell led approach at Stead Buyer led M and A is about strategy alignment and efficiency, putting value creation at the center of every deal. We uncover what truly works in M and A by learning directly from the best. I'm your host Kisan Patel, Founder and CEO of Deal Room and Chief Scientist at M and A Science. Joining me today is Rob Brown, CEO of Lincoln International. Lincoln International is a global investment banking firm specializing in M and A advisory and strategic financial services. Under his leadership, Lincoln has expanded his presence in key international markets, leveraging AI for deal efficiency and refined its approach to integrating acquisitions. This episode we discuss Lincoln International strategic growth through acquisitions, how they evaluate cultural versus Commercial fit and their approach to geographic expansion. We'll also get an AI and M and A shifting from a seller led and buyer led dealmaking and best practices for successful integrations. Rob, how you doing?

I'm doing great.

Hey, thanks for hosting me. This is Lincoln's Global Headquarters.

This is our global headquarters. We're proud to be headquartered in Chicago.

I'm excited to have this interview. Gotten to know you over the years like back in the day.

It was many years, well over a.

Decade when I first met you. I think it was a couple hundred I don't know if you had 200 people back in Lincoln.

Might have been. We probably had 200 people. Today we're well over a thousand.

So the firm has grown massively. I had some things top of mind. I was actually working on a deal in Europe and I was thinking, man, there's all these nuances with doing something international. And then actually, red, you've done some international acquisitions. You run a global organization, you have offices all across the globe. Can we kick off just a little introduction about yourself and the firm?

As you noted, I'm chief executive officer of Lincoln. I was their seventh employee 27 years ago. We just celebrated our 29th anniversary on April 1st and I joined soon after that as employee number seven. So while the hat I wear today is CEO, I have worn pretty much every hat here. And prior to that, I spent eight years with Price Waterhouse before they added the C and became PwC in audit transaction services and then in their wholly owned broker dealer doing middle market or private capital M and A. As I said, I've had pretty much every job here. And today my role is really to set our strategy with our global management committee and then help drive it. And a key part of our strategy has been growth. We have been managed to maximize growth, not managed to maximize profitability. And as you note, acquisitions or group hires or things really just beyond organic growth have become an important part of our strategy. And I think as our market is consolidating, we'll play an even larger part of our strategy going forward.

What's like being the CEO? Thousand person investment bank. What's the real day to day life look like?

It changes every day. One of the things that's made Lincoln a success from the very beginning has been an entrepreneurial spirit and an entrepreneurial culture. What I try to do is get up every day and remember that being entrepreneurial, having entrepreneurs within the firm that see opportunities and aren't afraid to take risks to capitalize on them, that's an important part of what we do. I love getting up every day and going to work. It's exciting some days. There's a lot to you point out. I've got a lot of people relying on me to make the right decisions and take the firm in the right place. What really has motivated me, and somebody once asked me recently to say, what's been the most rewarding thing of your career? The most rewarding thing is seeing leaders of this firm today who I helped recruit as analysts or associates. Because one of the unique things of Lincoln is the Longevity of our people. And as I think about the impact they're having on the firm and they're going to have long after I'm gone, that's been the most rewarding thing.

I noticed that the culture is different because early days, that's the backstory. When I first started the company, I spent a good three years just focused on selling to the banks. And then we pivoted more to the buy side model. Your bank had a different culture. It wasn't as pretentious of we only hire from Ivy League schools.

What's been interesting for us is even since we started the firm, when we decided to essentially start the firm and there was seven of us sitting around a table, we wanted to grow something in the very beginning. Even how we named the firm, we didn't name it after any of the founding people. We wanted to name it for something that stood for more than us, that was going to outlive us at that very young age. We said, well, how are we going to grow? We have competitors that have been around for decades and it's a really competitive market. And we said, are we smarter than our competitors? No. Are we going to pay more than our competitors? No. Are we going to work on more interesting deals than our competitors? No. You want to scale something that can get to all of that being equal pretty quickly. What we decided was we could really differentiate ourselves on culture in an industry that's not known for really good cultures and a culture that is really kind of rooted in attracting, retaining and engaging talent for the long term. In the beginning, we could kind of see that culture. But as we started to scale in multiple offices and multiple products, multiple geographies, we realized we had to define it at a granular level. We had to measure against it, we had to manage to it. We very actively manage our culture. We've got a 60 page culture document that we send to every employee. We have an engagement survey we do every year. Because when engagement's high, we're living up to our cultural promise. Where we see it falling off, we're not. We do focus groups when we see it falling off and we manage to it. So for us, it's been something we've identified as an asset very early and really worked hard to institutionalize it. That's a big part of the job of leadership around here, is maintaining our culture while we grow. Because if you grow too fast, you can deteriorate it. But part of the culture is growth and it'll get into how we think about acquisitions.

What's like the summary and culture in like a sentence.

I mean, I think if we had to say the summary of our culture in a sentence, it's a culture of collaboration, it's a culture of respect, it's a culture of growth, and it's a culture of entrepreneurialism.

Nice. I want to go back to this growth expansion. How do you think through organic versus inorganic? Because the firm obviously has been growing.

Organically in this past year. We've hired over 30 managing directors. And that was very intentional. We got to the end of 2023 and we said, okay, our market's getting closer. Towards the end of this recalibration. Now's the time when there's noise in a market, better people are available. So we changed our strategy and our approach became very targeted, worked with different partners. So organic growth is still the biggest driver of our growth, which is hiring lateral talent. If you look at our managing directors over the last several years, it's about 50% internally promoted and about 50% lateral. And we like that mix because we've got a great pipeline of internal people. You supplement that with expertise and thoughts and experiences from outside the firm. The next piece of that is then supplementing with acquisitions. So organic growth, incredibly important to us. One of the things that organic growth from lateral managing directors and acquisitions have in common for us is there has to be a strong cultural fit. You evaluate these things based on a commercial fit or need and a cultural fit. Given the importance of culture that you and I just discussed, that cultural fit is really, really important. And when we are looking at an acquisition and we sense that's really good and it gets stronger the more we learn, we go after it very aggressively. Conversely, there's been some deals, as we've dug into them, we realize this isn't going to work culturally, we put the brakes on.

That's interesting. Go back to the business case of doing inorganic, like that position.

So that's what's happening when you get to a scale. There's two things going on. Our market is consolidating, there is emerging and there has been for the last several years. It's becoming more acute. Kind of a bulge bracket of the private capital markets. And that's how we define our expertise. We are experts in the private capital markets. There's the public markets, the public to public stuff. There's the private. We are experts in the private. And by the way, we love our space. It's five to six times larger than the public markets. It's growing faster and it's less cyclical. But as our markets have developed, no different than what happened to the bulge bracket firms in the 80s, 90s and 2000s when there was a lot of consolidation, you're starting to see that in our market as well. We are one of the leaders. We want to be the leader. You get to a scale where if you want to keep up the growth rate and you want to. And by the way, one of the things I didn't mention about growth and why it's so important to us is what we found is the best talent wants to be on a growing platform. They want to know they're a firm where there's going to be white space, where there's going to be growth for them personally and professionally. And we think it's a virtuous cycle. The more you're growing, the higher quality talent you attract. The higher quality talent you attract, the more you grow. But if you want to maintain a certain growth rate at our size now, you're going to have to look at acquisitions in a more material way. And the way we've done it is we look at acquisitions in two buckets. And by the way, there's a gray line in our business between an acquisition and like a group hire or a group lift out. Those can look like acquisitions and some of those group lift outs can be as large as an acquisition. But we will look at areas that we say, okay, what are acquisitions that can be tuck ins to what we're doing, but can really add to us materially? And that's the last two acquisitions we've done, which we'll talk about a tech deal in the US and the tech deal in Europe. And then we've looked at certain acquisitions and we're looking at some now where we say, boy, we really would like to be in that sector in a material way. And given our size, if we're going to do something in a material way, it's probably going to have to be an acquisition. We're not in financial institutions in a material way. That would be an area that would make more sense to do through acquisition. We're not in real estate in a material way. And there's some other areas. So we tend to look at what are areas we can accelerate through acquisitions. What are new areas we may want to get into where it's going to be hard to build organically. And as I said, across both of those, there's full on acquisitions and then there's potentially group hires.

So overall big ambitious growth goal and then you have sector focuses and then geography.

Geography is interesting. For us. Because if you look at where we're at today, globally, we're in the top economies in the world. We probably account for. If you look at the countries we're in today, we probably account for 99% of all activity. So there's no big geography we have to be in. I would say the one, if we were to do an acquisition geographically, the next one would likely be Australia and we have a partner. There was a great partner that could become part of Lincoln. But there's no geography that we say, oh my gosh, there's so much activity going on there, we need to be in that geography. But if we find a group of bankers that add to us from an industry or a product standpoint and they're in a new geography, we would do that. One area we are planting a flag in here shortly is in the Middle east, and that's through a lateral hire. That's going to be the first geography we lead with valuations into because the sovereign wealth funds and a lot of the money in Middle east, there's a need for valuation work there. That's one area we're probably saying, gee, that's a geography we should be in. We're going to lead with valuations and we could very well backfill with merger and acquisition or other advisory capabilities.

Let's talk about this deal you did in Germany.

The TCG deal was interesting because our goal and our vision is to have all of our industry groups and all of our product groups to be balanced globally. We have this approach where if anybody works with Lincoln anywhere in the world, they should be getting the global reach of the firm. We have this thing called Glocal. We want to be locally deep and globally integrated. When we looked across our industry groups, one of the areas where we had an imbalance is we had a much larger tech practice in the US Than we did in Europe, and most of our groups were a little more balanced. We really wanted to scale technology in Europe and we were looking for some lateral hires. But we realized we're going to continue to scale in the US it's going to be hard for Europe to catch up unless we could have some chunkier growth there. We actually very proactively were thinking about targets in Europe in the tech world. And we had some detailed discussions with other partners, other potential parties that didn't work out. And one for very squarely cultured commercially, it could have been a very good fit. But TCG was interesting because one of our partners in Germany mentioned TCG about a year before we did the deal and said, hey, it's a startup. But the principles here they were at another investment bank, Mummert, that got sold to Raymond James Sometime in the teens, 20, 15, 16, they left and they had formed this bank and really around it services a little bit of software, but it was really a startup year earlier. What happened is I was in Germany last summer. I met the founder, Harry. Harry and I met in Frankfurt. I walked out of that meeting feeling like this is a company we should acquire, we should merge these two firms. Harry sees the world the way we do, and his firm was only three years old when we acquired it. So we met in July, we flew Harry to Chicago in August. We had a handshake deal in September, and we closed the deal in October. This was a situation the more we learned about his business and their business and there was five managing directors, the more we felt, boy, the commercial case here is great. But as importantly, the cultural case got stronger and stronger. And of their five MDs, three cover IT services, one covers software and one covers consumer. But more in the digital economy and consumer, that was just one of those situations where you meet somebody and you see the world so eye to eye that you say we should really do something. And then the more people we met there and the more we understood about where they were at, it was really going to balance. It almost doubled the number of tech managing directors that we had in Europe.

How's the process different of doing a deal in Europe versus if you would have done it domestically?

From a regulatory standpoint, there was more complications. They were in multiple countries in Europe and the business was headquartered in Germany and we have a very large presence in Germany. So we were already in. That just got published. We're the number one M&A advisor in Germany. So we knew that market. We had people in the market that knew that market. So in this particular case, it wasn't that different because we knew this geography really well.

It's more of an add on than.

Yeah, it was an add on, but it was more than that. Were really large in Frankfurt. TCG was headquartered in Munich. So it was a different city. But there was some compliance elements of it. You have to go through the different M and A approval bodies in Europe, which was more legal at the end. But as about building the commercial case, building the cultural case, thinking about how we're going to integrate this, it really wasn't that different because we're already in all these countries in Europe and we understand the nuances of how you do business in different Countries. That's probably the tricky thing in Europe and why we love this approach. We have called glocal the nuances of doing business. It's different in Germany than it is in France, than it is in the UK Than it is in Italy. The US Is a huge market from how you do deals, how you approach buyers, how you market things, buyer behavior. It's pretty homogeneous. It's very different. In Europe, we'd built up that knowledge over 20 years. So doing a TCG because we had that knowledge was easier for us to do. And in some ways, we viewed it as less risky than if this was our first foray into the German market.

One of the things I was curious on, the cultural difference. I looked at a deal in Germany and I felt like it was so black and white around, show me the numbers, give me a price in front where I feel like in the US you do a lot of courting. You spend some time really getting to know each other, get comfortability, and I feel like we'll talk more detail on the cultural fit. But more of those things that you have confidence in, more comfortability, you are to pay more. I felt like that's something I struggled with, and I'm just curious, how could I handle that?

What gets on the seller, too? Certain cultures can be very direct. Here's my numbers. Tell me what you'll pay me.

That's it. Just give me a price. And I'm like, well, how do I know we're going to get along after this deal and support a transition?

One of the things you have to do as an acquirer of businesses is put yourself in the seller's shoes and say, okay, where do they sit in the evolution? What's important to them? So if somebody's coming to you and saying, hey, I'm going to give you this. I don't really want to spend more time with you till I know the price is right. They may have been burned with somebody else spending a bunch of time. So you have to kind of understand where they're coming from, be responsive to them, say, hey, all right, based on what you've given me, I can give you a range. But why don't I come have dinner with you and we can talk about my offer. Then you can force the getting to know them, put yourself in their shoes and understand why is this what they want when they want it? You're not going to buy a company until you can get comfortable with everything you need to get comfortable with.

They probably want to know if I'm.

Serious or not, yeah, and maybe it's not in the order you would've wanted, but you have to try to be attentive to a seller's needs. And value is always important, but there's always other things that are important to them. Part of your job as an acquirer should be finding out and understanding what's important to them, because that's going to help you get to the finish line as opposed to, well, this is the way we acquire things and you better fit within our process.

Should I have given them a range?

Yeah, I would break them a range. If somebody's giving you financials and you don't have anything else and they're saying, hey, before I engage with you, I kind of want to know where you're at. Give them a range. A seller wants to know, hey, are we in the same zip code? You don't have to be precise. It's also the advice we give to our clients when we're representing on the buy side. Don't take yourself out of a process by pointing out all the things that you have concerns about or all the risk items they've given you information. Put a value down and say, these are all our assumptions and if all of this checks out, we can be at this value knowing that if it doesn't check out, then maybe things can change. Sometimes. Sellers said, well, we're at this value because we have all these risk items. It may end up trading at that value. But you've taken yourselves out by making assumptions before. You have all the facts.

But I don't want to be too ambitious and give them something that's like a high range when I end up on the bottom of it.

No, no, I think you have to be authentic.

I'm trying to figure out how to balance this out, Rob, because I'm cheap. That's why I do the relationship thing, because it's, hey, then we come to some amical terms.

But I think if you put a range and you say, gee, if all this does check out, I could be at the high end of this range, it can't be a, no way am I ever going to get this. I'm putting a pie in the sky. And then if you get a chance to due diligence, you get a chance to know them, they get a chance to know you. And let's assume something material doesn't check out. You now have a relationship to talk about that as opposed to bringing that up in the beginning where you don't really have a relationship to trust each other yet.

What are the software companies going for.

These days less than they were two years ago.

That's a good thing.

Yeah, that I can tell you. Software is interesting because we're seeing a fair amount of activity right now in software. That market has recalibrated down to lower values, still really high values. We're not seeing things go from the multiple of revenues that they were in 21, 22.

That's why everybody's slapping AI and everything, just to get a couple turns higher.

That is interesting. The M and A world always has. What's the buzzword? And let's see if we can lever ourselves into that. We would sell widget makers that happen to serve the healthcare industry and they'd be like, we're a healthcare company. Can we show that our company will benefit from what's going to be an explosion in AI? And some of those are very direct paths, some of those are maybe riskier paths. And the buyer has to be aware on that.

I'm going to work on putting a range and see where that goes from there.

I always think, put yourself in the seller's shoes. Someone's built up this business, this is their baby. They have all their money, they have all their wealth tied up in this business. You're knocking on their door, wanting to acquire them. You've got to be responsive to them to develop that relationship.

Part of it is we're a business that's bootstrapped. We don't have a sponsor yet at some of the things you start looking at where if you sort of put it together with a sponsor, they got a very different way of valuing.

If you put together the sponsor, you know, when you're spending other people's money, you can be more aggressive.

Bottom line.

Yes, that is the bottom line.

How's it with your firm? What's the capital structure like?

We are 100% partner owned.

What's the pros and cons of being partner owned as opposed to. You've seen other firms, banks are public and you got the whole range.

We have had this vision to be the best advisor in the private capital markets. And we've had the vision for a long time. And even when we were much smaller and it was very aspirational, today it's much less aspirational. We are among the best and the most active in the last three years. We're number two in the world in representing private equity groups and sell sides which are the most sophisticated consumers of what we do. And we're much smaller than the firm who's number one. So to date, we have really felt being a private partnership has been the best way to achieve that goal. I think as we look forward, we do have to think a bit more broadly about our capital structure, our governance, our ownership. Because, as I told you, in a market that's consolidating, having access to additional capital, whether it's a public security. You've seen Houlihan and Piper use their public security pretty effectively in doing acquisitions. That's something we've considered over time. I think it's something we constantly evaluate. But the real benefit of being a private partnership is we continue to control the culture. If you value culture and you want the leadership of the firm to continue to drive that culture, selling control becomes something that's difficult. You've got to think about other ways maybe to expand your capital base without selling the firm.

That's a good point. And it's just looking at those capital sources and how they align with the growth that you're and how you can allocate that capital.

You asked me, what's it like being CEO? I think one of the things you have to do as CEO is constantly think about the future. What got you to where you're at today. It's going to be different going forward. You constantly have to be evaluating not only your strategy, but you have to be evaluating your capital structure and your governance. If this is your strategy and this is your goal, you have the right capital base to get there.

The deal you did in the US.

Spur your capital partners. Although we had done a small acquisition in Germany years and years ago, we basically merged our German partner into US with all equity. I really view Spurrier as the first real acquisition we did. They had hired an advisor. It was within a process, I think Spurrier was commercially. It doubled the number of software bankers that we had in the US the one thing that was really interesting about Spurrier, even as a small firm, they were doing work mostly with private equity, and that was rare. It's rare to see small firms doing a lot of work with private equity because private equity values the deal flow. They value broader institutional relationships. SPUR was really interesting from the standpoint of it was all software, which was really additive to what we were doing. It was mostly private equity. It was in New York, where we already had an office. So the commercial case pretty quickly was attractive to us. And then the question was, what about the cultural case? And again, that was another situation where the more people we met there, more we understood how they looked at the future. It was a great cultural case. And that's how it's played out. Our timing on that wasn't great because we did that deal in May of 2022, just before the bottom fell out of the M and A market. But in terms of what that's done for our tech practice, it's become a material part of our US Tech practice.

Identifying commercial fit seems pretty straightforward because it's just lining with your goals. Are we confident we're going to get these outcomes? Cultural fit is like a tricky thing. I'll use another deal as an example where I felt management team, I had like great cultural fit, this and that and then it's a tech deal. So my VP of engineering, this isn't going to work. They're completely different way of working. This is not going to work. I still want to do the deal because obviously got my agenda, but just curious about that. Like, hey, if culture fit is that big of a factor, should I say since we're riding on tech integration and we probably shouldn't do this deal if our VP of engineering doesn't want to do it? I'm just curious how you look at it with the firms. Is it just a feel good thing, we go have a beer and this seems like good fit, or is there something more?

You bring up a great point. Cultural fit has to be more than just the two leaders feeling like they see the world the same way. But you have to have that. You have to start with that. So if I think about our process to assess cultural fit, it's multifold, but it starts with the leadership seeing eye to eye that, hey, you seem to have the same values that we do. You're looking at growth the same way we are just in conversations. How do they think about management? How do they think about aligning incentives? How do they think about values? You can start sensing that leader to leader. That's a good place to start. Because a lot of organizations, the culture is a direct reflection of leadership. But you bring up a great point. It can't just be that. You have to start with that. Then you have to then say, all right, does this culture permeate their organization? How does our overall leadership feel about their leadership? So you have to expand the amount of people interacting. You also then have to try to find are there third party ways to validate a culture. One of the things we look at is Wall Street, Oasis and Glassdoor. Those are unvarnished views of what do current and former employees think of the culture of that firm. So we tend to look at those. If you go to those and you Say, wow, the way people, current or former employees talk about this firm is really different than the way their CEO talks about the firm. That's a red flag. And you got to drill down on that. You do trend to look for third party validation. The other thing we'll do is sometimes if we get further down the line in a confidential way, bring up a firm's name in front of some of your clients and see what they say. Clients think about their reputation, factor their reputation. So I think it's multifaceted. Got to be leader to leader and then it's got to be kind of team to team. You point out something that's interesting is that if there's words that say this is our culture, but then you see actions or the way they manage, that's very different than that. That's a red flag. And by the way, I don't think you're really ever done assessing culture till the day you close. Cause you keep learning more about them, they keep learning more about you. So it's not a gee, we've checked the box on this. One of the things we do for senior hires and we do it as part of our acquisitions as well, is we have personality profile assessment that we give to senior people, which it's not perfect, but it's one input in saying, hey, will they fit into our culture? Will they fit into the things we value? Some of those third party tools can be effective as well.

You do that post dollar line before close.

Yes.

Okay. So my playbook here around the culture is this conversation really digs into leadership styles, values, really understanding what that actually means in practice and seeing how wide that is across our organization and then having a broader spectrum where it's not just the two leaders at the top, but the overall management team's perspective on the management team. And then you also mentioned look for ways around using third parties, whether those sources, Glassdoor, Wall Street, Oasis, if you don't know, it's a form from investment banking community. Really funny memes on there. And then also personality test you mentioned is another tool you could use.

We like to say assessment as opposed.

To test assessment reputation. Just ask around what's the reputation of the firm.

But again, it's not something that you're, oh, we've confirmed the culture. You're going to be taking risk, but you can try to mitigate as much of that risk. Interestingly, we had another deal that we were in the tech space in Europe and we were close to having probably a deal on the table that was a situation where the more time we spent together, the more the cultural case deteriorated in the professional services world. In investment banking, one of the things you want to ensure is that there's a real institution here, that a bunch of the revenues aren't tied up in one person. One key dominant figure. So that is one was also observe how they treat each other when you're around them. A key element of assessing culture is how do their people treat each other when they're together, having a dinner with them, being in meetings with them, and you start picking up clues that say, hey, this is in line with our culture or it's not. And that was a deal we just walked away from saying commercially would have been a good fit. It was culturally never going to work. And for us, also part of our strategy is this concept of one firm. We don't want to do acquisitions and leave them alone and have them be like, hey, this is a Lincoln business. Typically, it would have to be something that's a totally separate business. We want to be really one firm. We want everybody to feel as one firm. And if you start realizing in the course of doing diligence that they really don't want to integrate. And the beauty of an acquisition, I think, is you always learn something. Every deal you do, they do something better than you do, and you're like, oh my gosh, that's great, we should do that for the whole firm. And then there's things you're doing to be more effective than them, and they want to be part of that. If you start getting down the line where someone's like, no, no, no, what we're doing is working great, why don't you kind of leave us alone? That's not going to work for us. Generally, others that have an acquisition strategy that says, hey, listen, we want to be a collection of businesses that can work for them, that's antithetical to how we look at the world.

How do you ultimately integrate these companies to make them work post close, you.

Have to have a plan. You got to start working on a plan the minute you start talking to them. And we've become really sophisticated in how we integrate lateral managing directors. And we hear it when we onboard a lateral managing director. And even if someone's worked at a couple of other firms, they've never seen anything as detailed, as organized. We have check ins every six months. You have to find a way to say, how do we get them integrated into our processes and systems? How do we get them integrated into our culture? So when we've done acquisitions, we've taken that playbook from our lateral MDs to make sure you get them integrated. I also think particularly for tuck ins like TCG and Spurrier, kind of day one, integrate them, get them on your CRM system, get them under your brand and there's some pain to that. But really saying, hey, get integrated into our systems, get integrated into our CRM system, our performance review management system. The revenue in these businesses are driven by managing directors. So if you can get them very integrated, get their people on your systems and processes sooner rather than later. And again, there's some disruption to that. But I actually think it's better than saying, well, over time we'll move you on to what we're doing. You do the acquisition, you get them onto your systems and you move forward.

Pretty aggressive on the tech integration part.

Yeah, we have been, we've been very aggressive on that.

This is helpful. Like I like the examples to walking away from a deal. I feel like that's the hardest thing to do.

It is hard to do because you spend a lot of time. My own view on that is trust your gut. Like when my gut starts telling me, hey, this isn't going to work out because you can become enamored with the commercial case, but in any acquisition you can't discount the cultural case. In professional services, where your people are your product, it's the most important thing that's so important.

That's like the hardest thing to do sometimes.

Yep, it is.

Especially if you sign loi, then you're.

Really invested in the commercial and cultural assessment. It keeps going on. You got to respond to what you're hearing back.

Let's talk about the dynamics. Buyer, seller. I put a whole framework called buyer led M&A rob and this was my observation of doing hundreds of these interviews and working with a bunch of corporate buyers. And I've noticed the evolution. First deal, they don't really know what they're doing. It's a lot of times very seller driven. But then you do 10 deals and the process becomes more and more buyer driven. Whether it's starting from how you source deals and just having that clear North Star, then being proactive. Even if that deal goes in a bank process, you at least have a relationship already there to leverage to the integration. Just putting that front and center and just having a process where you can iteratively update your integration plan as you do the deal. The question always comes up too is like, what do you do in a bank process? Because the bankers control the whole process. I'm just curious of like how do you look at it? Because now you've been on the buy side, you've been through it on a proprietary deal and a bank deal.

Yeah, we did one of each. We had a proprietary deal and a bank deal. They weren't that different even on the bank deal. You know what Spurrier told us? Clark Spurrer, who was the founder, said you guys weren't the highest value. I just felt you were going to be the best home for our business. Now you have to be at an acceptable value. My sense is the other acquirers whose businesses were commercial banks and maybe even foreign commercial banks. And that's a whole other ball of wax. And I think he was worried about his people staying through that. I laugh when you say buyer driven M and A because coming out of the global financial crisis really through kind of mid-2022, it was a seller driven market. Sellers could dictate. We had zero cost of capital, tons of money to put to work. Every process had multiple parties. You had these highly competitive processes so the sellers can dictate the process.

I mean, it was insane. There was like non exclusive processes where you essentially had to show up with a purchase agreement.

Yeah, yeah. And there's still some of those going on. But now when inflation spiked and the rapid increase in cost of capital and then the fear of the recession in 2023 and really from mid-2022 to mid-2024, I think the M and A market was going through a recalibration. You had to recalibrate. Cost of capital's higher and economic uncertainty. And it really wasn't until probably mid 2024 you started seeing us start to get back to a little bit more normalized M and A market. You saw that through January and February. And then given what's happened with the tariffs, that's put a little bit of a wrench. I think there was. And we saw it too. We had a lot more confidence that this M and A market was going to continue to improve in 2025 as it did in 2024. A little more unclear now. My point is the market started recalibrating. For the last couple of years it's been more of a buyer driven market. The buyers could dictate the process more and they could dictate what they wanted more because you didn't have as deep of a hand. Now for the really high performing businesses, the A quality businesses, you still had really seller driven processes because there were so few deals in the market and people wanted to put money to work that they're really High quality deals. The processes looked a lot like 21 kind of deals, just the values were slightly lower. Even right now, there's still more leverage that buyers have in this market than they did at the peak of the market.

I was curious. It comes up because we sell a really badass tool to manage them and the buy side.

Yep.

And the thing you gotta do is take control of the process. When LOI signed, you can do all your integration, planning and diligence, work stream and tie them together. That's the magic of it. It works really well in a proprietary deal. It's not hard to get that arrangement when it's a bank process. Competitive, sure, you just gotta replicate it and build your own environment. But once you sign loi, is there leverage to say, hey, we're gonna get through diligence faster and better plan post close?

It's funny because most of our deals we're not signing an loi. We're going right to a purchase agreement. And there's generally not exclusivity given. Sometimes there is. A lot of times it's kind of a handshake saying, hey, we're not going to give you written exclusivity. This deal's yours if you sign the purchase agreement by this date as opposed to signing an loi. Sometimes we are signing an LOI and it's a little different geography to geography. The best seller leverage is a competitive process. That's the best seller leverage. What sellers are always worried about is that the buyer is going to change the price and terms if we give them too much time to sign this. And what the buyer's always worried about is am I going to have time to complete all my diligence and really think through integration before I have to sign this. And that's the tension that you have to manage. And one of the things you brought up that I think is really important is spending time with companies. Even if they end up hiring an advisor. Like spending time with companies in advance of that's going to put you at an advantage. The more they know you, the more they feel like, hey, you could be the right partner and the private groups that invest in that and get on the road and meet management teams well in advance of a sale process. They tend to do better in those sale process. And it could also be because they're willing to pay more because they've gotten to know the team over a longer period of time. But it also could be that the team says, hey, I'm willing to take some discount to the highest price to do A deal with this acquirer because I think they're the best home for me and my people.

Investment, that relationship ahead of time is right what the buyer thinks is a good home. Is there anything else that separates an average buyer from an elite buyer in a competitive process?

There's several things and we see all flavors of it because we're one of the most active sell side advisors on the planet. One is really trying to find a way to authentically connect with management. That starts at the dinner. It's little things. You're in a management presentation and if you got a buyer that's checking their phones, you're not going to win. Put your phones away, put your computers away, come into that room to beat management 100% focused on them. The other thing that we'll get buyers that will ask, they'll say, hey, we love meeting management. The manager presentation, we'd love to fly out and spend a little more time with them. And the worst that's going to happen is the seller is going to say, I don't want to do that. No. But a lot of times it's like actually, yeah, management would like you don't get if you don't ask. If I think about things that have really distinguished buyers in a process, one is investing on meeting management before process happens. If it's a private equity owned business, you know at some point it's going to be sold. And if you think that's a business you want to own or a sector you want to be in, find a way to get in front of that management team. And then even when the process comes, push to spend more time with them. You want to authentically develop relationships. I also think that doing what you say you're going to do as well. We've seen some buyers that everything's great and then as they get in the process, like we need this and this. And you're like, you didn't bring that up a while ago. And a lot of those things may not even be unreasonable things that they want, but they've upset the management team. By the management team feeling like, well, wait a minute, why didn't we talk about this stuff earlier? So get out up front. The things that are going to be important to you to get to the finish line. So there's no surprises at the end or no surprises during the process. Because deals are built on trust. And the more you can continue to build trust with the seller and the management team, the more successful you're going to be at the end of that process.

If you're flipping it around. What are the things that the sellers do to run the table? What are the best sellers do in terms of the operators? To manage the sale process?

You got to be ready before you go to the market. And there's plenty of companies that we've advised where we said, hey, listen, we're not ready. You're not ready from a data standpoint, you're not ready. You got too many holes in your management team. You do need to spend time thinking about, am I ready? Do I have confidence in the visibility of my business? Do I have my data lined up to withstand a diligence process? Do I have the right people on my team? It's never going to be perfect, but I think you need to spend time upfront. What's interesting, we've run a few processes recently, and in certain groups, they're doing this more and more where we have meetings with buyers in person before we even get indications of interest from them. So it's now it's a little incumbent upon us knowing the market, say, who are the right people to get in front of you? But we have management teams that have said, listen, I want to meet everybody and be able to tell my story. Then we can find out where they're at on value. Sometimes management teams feel it's almost too transactional. Like they really haven't met anybody. These bids have come in and they're like, okay, well, yeah, so I think that's better for the sellers. I also think it's better for the buyers, too. But we are seeing more and more and more of that. And then you give them access to information, then you say, hey, come to us with a value. Well, at this point, it's more than an indication of interest. You know, I mean, they've met management, they've gotten some information, they're now giving you their initial value. That's one, it should be a value that's more substantiated. But two, they've been able to hear the story in management's words and get comfortable. This is a team I want to back. And management's gotten more comfort with them. And so sellers that are able to approach it that way end up with better outcomes. What you may miss is we didn't scour the market. We didn't go to the market and get indications of interest from a hundred different parties. You may have to get over the, well, gee, did we miss somebody? If you have the right advisor that really knows that sector and knows who the right strategic acquirers are going to be and the right financial sponsors and curates a process around those. What we've seen, particularly in this market, is those have been pretty effective.

So from the time we first met, like a decade ago, have you changed the way you would take a company to market, working with your customers?

Yeah, I think so. The process is today 1. We've become much more organized along sectors and subsectors of expertise. So if you go back 20 years ago, it was a little bit more of a generalist market. Maybe you'd have a consumer banker, an industrial banker. Well, now you've got a food banker, you've got a consumer services banker. The deep and relevant knowledge in each sector allows sellers to curate a process more around the right buyers, as opposed to going as broad and trying to narrow it down. That has been a major, major change. Two other major changes in the industry over the last 20 years that I think have accrued to both the benefit of the buyer and the seller. One is the electronic data room, the ability to share information, to customize information, to track. That's accelerated. The other thing I think that's changed the M and A market in a really material way is the advent of rep and warranty insurance. Because when you're negotiating a purchase agreement, the buyer and the seller, who are going to be married at some point, they go through this contentious process to negotiate this agreement. Rep and warranty insurance has taken out a lot of that, because if you can get an agreement that the underwriters view as market, it's the underwriters, it's the insurance company's problem. And even if there's claims afterwards, you don't have a private equity group filing a claim against its management team. The insurance company stands behind it. Those two things, they've added a lot of efficiency into the M and A process over the last couple of decades.

Where do you see killing deals? More bad diligence, bad timing, bad chemistry.

It's a really poignant question right now because we have all these deals in the market, and then the global trade paradigm gets turned on its head, and now there's much more concern of a recession than there was a month ago. The deals we have in the market are largely moving towards completion, but everyone's waiting to launch things till there's a little more clarity. And to me, the thing that kills deals the most is uncertainty about the future. If you have certainty about the future, even if there's certainty that it's going to get bad or there's certainty that it's going to improve, that sort of certainty Gives buyers and sellers more conviction to get a deal done, particularly buyers. When you have uncertainty, that's when CEOs and investors start saying, I'm just uncertain about the future and that uncertainty needs to be priced into my deal. That's the thing that kills deals.

That's what makes us tough in this market.

It's rare, I think, in today's day and age that a diligence item kills a deal. Normally, if it does, there's some off balance sheet risk that didn't get disclosed. There's an environmental liability, but it is rare that that kills a deal. The two things that kill a deal, our uncertainty about the future and the company missing its forecast during the sale process. Making your forecast during the sale process is incredibly important. It's not just a math issue. It's not just, well, you missed your forecast by 10%, so our bid's going to come down 10%. It gets to a management credibility issue, saying, well, wait a minute, you gave us this forecast two, three months ago and now you're missing it. You really have a handle on your business. I would say those two things, just general uncertainty and then missing the forecast during the process, those kill deals, you.

Gotta be on point in both those areas. And then uncertainty, that's a whole other.

That's hard to control. And again, we're in a period of uncertainty right now. Is that period of uncertainty going to last weeks or months? And it's hard to answer that.

Going back to the process side, you kind of gave the overview about how the sell side's changed. How about the buy side? Do you see buyers taking different approaches when it comes to diligence? Integration is a big one. That's the one that you sort of see that push, which is tough to get all the information you want to do that, especially before you sign.

I would say in the last couple of years, since the market slowed down in mid 2022, it's a lot harder to push buyers on diligence. They're going to do their diligence at the timeframe they need to do it. We're at a hotter market. They may be willing to accelerate it or even maybe forego some of it in order to win the deal. We're still in a market where it's harder and harder to push buyers on timing until they feel like, okay, I've got everything done that makes sense.

If just market dictates a lot of this, if you got leverage, more competitive.

Less leverage, you have 100%. One of the things that's interesting in kind of the peak of the market. Not even in the peak really. If you go back to kind of 15, 16, 17, 18, 19, 19 may be the last normal year we've had, if whatever normal is, right? Cause 20 was Covid. 2021 was this crazy kind of catch up year. 2022, the bottom fell out of the market. And we've been in this recalibration but for a long period of time, maybe too long a period of time, sellers would go to market, they'd see if they could get that strategic outlier that would value a bunch of synergies. And if they couldn't, they could get a really good price from a private equity group because debt was nearly free and there was all this capital floating around and business performance was up and to the right for eight or nine years. We're in a market now where you get that strategic outlier or you get that strategic. That can value synergies. But then if you don't, there can be a big falloff and maybe there's one private equity group there that's at an acceptable value, maybe 2. Whereas in the heyday of this market, if you couldn't get that great price, it was really easy to get a really good price or really good value. And that's I think been harder to do. And particularly for businesses that maybe have been a little more performance challenged going.

Back to good old days. Not quite, I don't know, I think we'll go Back to like 20 years ago.

You know what's interesting, if you look at 2024 and I'll just look at the US for right now, a bellwether for is the M and A market improving or not is private equity. Because they buy and sell companies for a living, they monitor the markets really well, they stay on top of their companies really well. And in 2022 and 2023 you saw big fall offs in private equity sell sides. I mean, you could argue there's some studies that say that market was down like 50%. It was down more than the overall M and A market. You saw that improve in 2024. That was the first kind of up year. And in the US private equity sell sides were up 11 or 12%. We came into the year feeling like, okay, that should improve this year, maybe it'll be 15%, maybe as high as 20. It's estimated roughly 60% of companies sitting in private equity today in the US were acquired in 21 or 2022. That's a massive number. Those are the deals done at the peak of the market that are taking a little bit longer to create equity value or maybe aren't creating equity value. That's the wall of deals that will need to come to the market at some point. Our expectation was that was not going to happen in 2025. That probably happens in 26 or beyond. But that we were going to see an improving M and A mark. And we saw that in Q1. Like Q1, our performance was up materially. But now you're seeing a bit of an air pocket in taking new deals to market. So just this uncertainty around the trade and will that force us into a recession? It's causing a bit of a slowdown. And the question is, is this just a speed bump or does this cause some prolonging of getting to a return to a normal M and A market?

We keep creating more and more private capital products.

Yep.

I don't know how big we made private credit. Now we got these perpetual funds that are pulling more private capital in.

The institutional investors haven't had the returns of capital that they needed. So now private equity is saying the institutional guys are tapped out. Where else can I go? I'm going to go to retail. So you're seeing these retail funds and these interval funds. There is a lot of money. There's an incredible amount of credit funds. There's an incredible amount of dry private equity. Potter. There's an incredible amount of companies sitting in private equities. And those are getting more age. So all the ingredients are there to have a real rebound in M and A activity, particularly in the private capital markets. And it's going to come at some point. It has to. It looked like we were going to be on that trajectory to continue that this year, and maybe we still will. But right now, when you just think about the uncertainty economically that's been caused by the announcement of these tariffs, people are in a bit of a wait and see attitude. Put yourself in a CEO's position. All right, should I reshore something? Is this all just negotiating tactics? They're trying to figure out where do I invest? And if they don't have certainty about that, M and A is something that suffers.

Wait, explain that last part again.

Part of a CEO's job is to invest for the future and to allocate capital. And again, it gets to my point. When you have confidence about the future, you're willing to do that. If you put yourself right now in.

A CEO shoes where more uncertainty, we're.

Going to have these incredible tariffs in their hair to stay. And then it's well, no, they're not. We're just using these to negotiate better trade deals. And we haven't announced any better trade deals yet. There's just a. Well, what should I do? I'm not going to reshore factory if this is negotiating, but maybe I will, maybe I won't. But I just think that as you think about, one of the ingredients you have to have for a really healthy M and A market is optimism about the future. That's cloudier today than it was 30 days ago.

Yes. I was curious about just the firm and how you organically grew it. But then the partnerships, and the partnerships could evolve into acquisitions. That's just something I was just generally curious about. And then the AI stuff, which I know you've been big on that, and I want to talk about that. I don't know. In 10 minutes. We have time to cover both, but it's up to you.

Why don't we cover AI? Because I think that's been.

Let's see that. The other one I can always come back to.

That's been an important part of our strategy. We formed an AI committee probably two years ago now. And we formed about 30 people across the firm, all levels, various geographies, various product groups, various industry groups. And we wanted younger people. We wanted some older people on that. And we tasked that committee to come up with, what do you think the most impactful use cases for AI in our business might be? And we said, think big, think broadly, think kind of white space. That committee came up with nine use cases to use AI in our business. We then plotted these use cases on two axises. The ones that would be level of impact and ease of implementation. Some of these really would be fantastic. They'd be really hard to implement. We decided, let's do one or two of these really well. Let's roll these out. Let's use AI. And the two that kind of fell out of the analysis was what we call the Lincoln Library and the Lincoln Deal Sheets. The Lincoln Library was, gee, if we could aggregate all of our data, all of our pitches, all of our information memorandums, all of the industry studies that get done on our deals, all of the notes we have in Salesforce. If we could organize that data in a way where you could search that data and analyze that data with generative AI, we would be able to share insights with our clients so much more effectively. That's called the Lincoln Library. And then we did the Lincoln Deal Sheet, where basically every deal has an AI page, where all the data we get from the client we can then analyze with our AI tool. So those were the two we decided to do. And our AI platform is called lincol. L, A, N, C. We then determined, all right, where are we going to get this technology from? Is there off the shelf technology? Is it something we're going to build on our own? Is there something in between? We ended up working with McKinsey. We developed a proprietary tool, as I said, called Link. So today we've got five years of all of our data that every banker has the Link platform on their computer. And you can now go in and say, what are the latest trends in animal health? M and A. It'll paragraphs on it. We'll drill down on this paragraph. You could go in and say, hey, I'm looking for the last five pitches on enterprise software globally. Drill down front. I'm looking for a specific slide on customer concentration or I've got this company in this sector, gimme a list of the private equity firms that have expressed interest in this sector. It'll scrape all of our CRM notes. So the quality of information and knowledge sharing that we have now is fantastic. We really did this from an effectiveness standpoint. But what it's also resulted in is a lot of efficiencies. So things that might have taken an analyst or an associate if they were tasked to do it hours or even days, they're getting in minutes. This is a tool that just keeps building on itself. We keep training people how to prompt. We've also loaded SafeGPT so we can upload data into GPT that won't go outside of our firewalls but still analyze it against it. So we're a knowledge based business. AI is going to affect almost every business. It's clearly going to affect knowledge based businesses. And we have a roadmap for not only more enhancements of the two we have, but ultimately rolling out some of these other use cases over time. We think we're a little bit ahead. To our knowledge, none of our competitors have a functioning AI product.

I like that a lot. Because you focused on the intelligence piece. It wasn't just some tactical automation of little things to click. Pretty cool.

Took a lot of work. We had to get our data organized in the right way to create like this data lake. And we're learning every day, like teaching people how to prompt better. You can have the tool but if you're not really teaching people how to use it, we're hitting our adoption goals on it. Everything we do is through the lens of what's best for our clients and if we can knowledge share and be able to share, if something's going on in a Milan office and they've got some information that's really relevant to a deal we're doing in the US we can get it. We're going to be less likely to miss that. The old days of sending out an email saying, hey, does anybody have anything on this? Yeah, it's incredibly inefficient.

That's pretty impressive. What's next? You look forward in the next three, five years.

I'll tell you one of the things that's interesting. I think AI is going to help us really analyze buyer behavior. You have a deal if you really think about having all the data saying who are the five private groups that are most likely to stretch for this deal? And we have this data, we analyze it on our own. But having an AI tool that can look at what they've invested in the past and where they've had returns and what have they paid for getting to kind of a predictive behavior of investors. It's going to go there. I don't think it's going there tomorrow, but it's going to go there.

You think you like almost advise them to strengthen their business case on just some of that.

I'll tell you. I'll tell you what's interesting is I won't say the private equity group, but they now have an AI bot on their investment committee. So when they are voting, should we do this deal or not? The AI bot votes as well and they're going to track how did the AI bottom vote versus others. And over time was it more or less correct as they see how some of these investments.

Interesting. I've been doing that with some of my calls. I have like a prompt to extract the takeaways. I want very specific, but then I'll have a score. The productivity of the call.

Yeah, I hope this interview gets a high productivity.

We'll find out.

Yeah, we'll find out. We'll find out when you run it through AI.

You know, I did this similar exercise how you had all these different use cases on the buy side and I went through to validate what's the number one use case, you know what that was. But reducing legal fees. So we ended up building contract analysis just to like, you know, you got the hundred customer contracts, which one other change of control provisions.

So one of the nine use cases that our committee came up with revolved around legal efficiency.

That's interesting. So the buy side, that's what I ended up with and I would say probably there's a bias there because we work with quite a few rollups that was like the top thing that came up was that they wanted to reduce the legal expense. So the biggest thing I had to ask, I was so excited about was what's the craziest thing you've seen in M and A? Being that you operate this global firm that does like hundreds, thousands of deals a year.

So the craziest story that I've seen in M and A is and this goes back a few years, but we were selling a business that was an aerospace and defense components business. And this is going back a ways because it goes back to 911 and we got bids on the business, really strong bids. We were having management presentations. 911 hit. If you were an aerospace and defense company and this was a lot of commercial aerospace, everything got put on hold, gets put on hold. Business actually performed well. The dust settles eight, nine months a year after 911 that okay, there'll be some changes to the airports and commercial aerospace but we're going to move forward. We go to move forward. And the owner of this business passed away in the interim. He had cancer. And one of the reasons he was selling is he wanted to have his estate in order to and he had passed away and he had been married earlier in his life. He never had children, but he had cancer in his life and he was going to go through treatment. He ended up actually freezing some of his sperm. He ends up divorcing that woman. He has a live in girlfriend after that when he passed, she got all of his possessions including the sperm he had saved from an earlier marriage. She impregnated herself with that and then claimed that her unborn son was going to be the heir to the sale proceeds of this business, which you can't make this up. And so we go back, we say hey, let's get going again. And the estate attorneys, we got to work through a little bit of an issue here. We don't think she has a legal claim because he wanted a lot of the money to go to charity and some foundations and that ended up delaying the process eight or nine months. And then their biggest customer came in, recut their contract and that business ended up trading for at half of what it would have from the bids originally. But it was probably the craziest thing we've seen. I don't know if we can air that story or not but in my professional life that's probably one of the craziest things I've seen in the deal world.

Well if you're listening to it, that might be a hall of fame. You know I'm an a craziest story.

And I think she ended up losing. So she had the child but did not get the all the proceeds from the oh boy.

Wow.

That's a crazy story.

That was crazy. The lengths we go to get a piece of the pie, I guess.

Yeah, that was a high risk strategy for her.

Rob, this has been a great conversation. I appreciate taking the time, teaching me a lot of things, negotiating and helping me become a better M and A scientist.

It is always great to catch up with you and we've known each other a long time and it's been great to see the success you've had.

I'm more impressed. I still think I should have got.

That job but then you'd have to work for me.

Maybe you probably would have fired me. Fellow M and A scientist, you tuned in this far. I appreciate you. Love to hear your feedback. What you thought of this interview, ideas for other folks I should be talking to or topics to cover. Reach out to me on LinkedIn. Till next time. 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. 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-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 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.