Pros and Cons for a Growth Company to Take PE Capital

This is a conversation with Jason Mirnov, managing director at TA Associates. He has 13 years of experience in private equity and financial services. In this interview, we discussed the pros and cons of taking money from private equity firms. This was a fun conversation with some friendly bantering. We discussed the pros and cons of taking PE capital How founders are deluded when partnering with PE firms Selecting the right PE firm to partner with how to build and preserve wealth Hope you enjoy this conversation. This episode is sponsored by our flagship product, Deal Room. Take a minute to learn about it. It's the best way you can support this podcast. Emerson Block Cardinal Health Broadcom Toast Energizer Jamf Treehouse Food Forame there's too many to listen what do the best corporate development teams in the world have in common? They use Deal Room, not a crappy data Room, and Excel trackers. In 2021, Emerson did an $11 billion acquisition on Deal Room. Then this year, a $14 billion platform divestiture to Blackstone. Even with every big bank name involved in the deal, they all had to use Deal Room. Learn why the best in MA combine diligence and integration into one workflow so they can get both diligence and integration done faster. To execute M and A like the best, you have to know how to use Deal Room. See for yourself@dealroom.net Again, that's dealroom.net let's get to the interview. I'm Kisan 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. Hello M and A Scientists. Welcome to the M and A Science Podcast where we learn from the best in M and A and if you're interested in learning more about the solutions we develop to support world class M and A teams or want to get involved with our community of forward thinking M and a practitioners, visit mascience.com get started by subscribing to our free weekly newsletter for the latest insights and events. Again, that's mascience.com I'm your host Kisan Patel, CEO and Founder of M and A Science. Joining me today is Jason Mirnov, Managing Director at TA. TA Associates is a 55 year old private equity firm that's raised over 65 billion to date, based in Boston, Massachusetts. Today we're going to talk about the pros and cons for a growth company to take private equity capital. Jason, how are we doing today?

Awesome. It's an honor to be here. Kisam, I've been a longtime fan of the podcast you've had a bunch of my friends on, Henry Schoch from ZoomInfo and Nate Lemmerman from Cast and Crew. So it's an honor to follow in those footsteps. I can't promise to live up to them, but I'll certainly do my best.

It's an honor to get you on. It took a lot of chasing you down, a lot of persistence and thankfully my EA gen for all the effort to finally get you here.

Yes, thank you and I'm glad we could match it up to do it.

In person and for you taking the time from doing deals to spend it with me and ask you a few questions about how your business works. Let's talk about the capital game. Can we kick things off a little bit about your background?

I'm Jason Mironov. I'm originally born and raised in the great state of New Jersey. Then I attended the University of Michigan where I was in the undergraduate business school. And when I graduated from Michigan, while many of my friends were getting internships at big New York based investment banks, I actually had an internship at the Toledo Jeep assembly plant where we made the Jeep Wrangler. It was a great learning experience for me and I think has helped me think about entrepreneurship and working in a business very differently over the last 20 years of my career. After I graduated I did take a job with a bank. I worked for JP Morgan in New York and then I actually had the unique opportunity to go overseas. So I spent a year in Johannesburg, South Africa building out an M and A practice and working on transactions in places like Nigeria, Mozambique, all over the subcontinent, which was really interesting experience and a great way for a young to mid-20s kid really to experience the M and A universe in a unique way. I took a job then in Boston with a firm called Spectrum Equity Investors, which was a great experience. I worked closely with a couple of guys who'd actually come from TA and it helped build a unique technology practice in Boston and learned a lot in the experience, was grateful for for that job and then went back to Harvard Business School where I got an mba. Turns out all politics are local and so my roommate, my best friend from business school had actually worked at TA as an associate and so when it came time to do recruiting I was lucky enough to get an offer and joined our business and financial services team here at TA in 2012 and had.

That run since then. So that's a good 11 years.

Yeah, I'm one of the few people left in my business school class who's actually in their original job coming out of business school, it's been an incredible opportunity to be a ta. When I joined, the fund was much smaller, the team was much smaller. We've been really lucky to be in an environment where we've continued to expand our practice, add to the resources that we offer our portfolio companies, and build out our origination all across the world.

The Africa experience. I feel like we can unpack a whole podcast interview around that. But I'm curious. You don't have a lot of operating experience. Does that ever come against you when you identify or you're looking to talk to a CEO, founder of a company? How do you look at that?

One of the parts that makes people successful in an investing role is being self aware about their strengths and weaknesses. I think may not have traditional operating experience. The part of my intro that I probably left out is that I had to help pay for college running a cell phone refurbishing business where I was buying and reselling GSM technology. In the early days of the cell phone boom, I was a telemarketer for the New York Times. I was a waiter at TGI Fridays, I was a summer camp counselor. And so it's true I didn't have the unique opportunity of working in a place that was operationally intensive. But also all of the experiences I had prior to joining an investment banking shop or a private equity firm really contribute to my experiences today. And when we talk about being self aware about our weaknesses, I really try to compliment our teams with people who are operationally intensive. Perhaps they've come from a company that was Six Sigma guru or come from a background that lends themselves to be a really great team member. I'm a strong believer in the portfolio approach to team management and bringing in people who have pricing experience or tech integration experience can be really valuable when I may not have had that direct experience myself.

I like that, like the background of having some grit. Ultimately what it comes down to. Yeah, I mean, it is a thing because just immediately you get outreach or your level, someone's gotta get filtered out enough to get an introduction or you get the referral through somebody and right away it's like, okay, is this person a career investor or do they have some of that operational background? The big question I have for you is like, why would a company take money from a private equity firm?

There's a myriad of reasons why people, at the end of the day, take money from a private equity firm. I think the most important ones are first de risking a person's individual investment. One of the things we have found, which is a little bit counterintuitive, is that entrepreneurs who own a hundred percent of their business may be more hesitant to take on real risk that can expand the growth opportunity that can blow out that business across a market segment because so much of their individual net worth is tied up in that company. So I do think there is some mental capacity and stress that comes from being a preeminent owner of a business that helps diversify. With a private equity firm, depending on who the partner is, there can be tremendous resources and value in having diversity of thought across the boardroom. Whether it's prior experience or mistakes we may have made with other portfolio companies around things like M and A or pricing or acquisitions, there's real value in having people who have had a variety of experiences across the platform. And what we find is the executives and entrepreneurs with whom we are lucky to work really draw on that experience and leverage our network. And it's not just about the individual investor, me or whoever else from TA who may be representing us. It's about bringing our portfolio of 550 plus portfolio companies of 55 plus years of experience and a variety of positive and negative outcomes, and using those learning experiences to help amplify the value of a company over time. And what's been really neat for me to see over the last 12 years is executives really partnering with us emotionally too and drawing off of those resources. So much of what we do is taking the lessons we've learned in other companies and applying that to the pattern recognition we see in the companies that we are lucky enough to partner with. What you find is we're better together and teams that are high functioning really have representation across a variety of backgrounds that help these companies continue to succeed.

So I picked up de risking you can be more risk forward because you got more capital. Second is leveraging the network. You obviously got a group of partners and folks in the company that have the operational experience as well, and other portfolio companies that you can leverage that as a network to help you grow. The metrics part, I think there's a component where you know the numbers really well and you know how to position the value of these companies as that growth progresses. Does that sound right? I just want to make sure I got clarity on that.

I think it's one step deeper than that. When you work with a company, you understand the metrics that drive success and the aspects of a company that are most critical around making an investment decision. I think the other piece is you have a comparable set of companies that you've looked at over time, so you know what great can look like. And so we know what best in class sales enablement metrics look like. We know how to roll out technology as an enabler of further growth and efficiency across an organization. We know what a cost basis should look like. We're often bringing that data together to help companies operate on all cylinders to make sure that they're moving towards a successful outcome. And it's not just about any one individual. That's the beauty of partnering with a firm that's as large and established as TA or others, where you have a breadth of experience across a variety of end markets, where, yes, some of it is making introductions and calling potential customers and extending the reach of that business far more than any one individual can do. But a lot of it is helping craft best in class metrics across a variety of outcomes and helping these entrepreneurs get access to people, resources, independent board members, which we'll talk about in a little bit, that can be really valuable as a company is in growth mode.

Any other benefits of taking money from.

Ta, not just me, on behalf of our limited partners, who we should give a lot of credit to, These are colleges and universities. These are nonprofit institutions. These are folks on a pension. These are really important organizations and we never forget for whom we work. That's an important part of the TA ethos and culture here. There's another piece of this that we haven't unpacked yet, which is doing anything alone is not that fun. So at the end of the day, partnering with someone who really has skin in the game, who's really only motivated by the individual success of that business, is really important. One of the things that we often talk about here is that a lead investor at TA will make a material personal investment alongside TA in that investment, and that helps align our incentives with that of the founder. Because we're often shoulder to shoulder. We're thinking about the next chapter of the business, and it aligns that cultural idea of growth between the two parties. There's something really special about the partnership that creates with entrepreneurs and executives, because at the end of the day, we're all in the boat, rowing in the same direction. And we may have fundamental disagreements on strategy or a specific decision, but it's the health of that partnership that helps drive the emotional success of the team as well. And having someone that you can relate to, that you can talk to honestly about the things that are happening inside the business. Is a really healthy dynamic. I'm really fortunate to have that in my marriage, in my personal life and with my family. And it's something that I think many of our executives and entrepreneurs would tell you is a great part of partnering with ta.

Okay, I wrote down family. So the big pros are De Risk network Metrics. Slash comps. Family.

Yeah, Metrics. Comps. I think in some ways belittles what's happening.

How would you describe it in one word or two words?

A pursuit of greatness amongst portfolio companies and knowing what that looks like. That's more than one or two words.

Seeing the path forward.

It's seeing the path forward and knowing and aligning on the metrics that really matter within an organization.

We'll use three words. See path forwarding on the other side.

Yeah.

The disadvantages of taking your money, I.

Wouldn'T necessarily qualify them as disadvantages. What I'd say is when you embark on a partnership that can take a lot of different shapes and you got to be open about what that's going to look like. And in many cases, a private equity firm, because we invest on behalf of these limited partners who are meaningfully sized institutions that are trying to return capital to their members in a meaningful way. There is this desire to try to be helpful. And many executives and entrepreneurs who have been going it alone for a while need a transitionary period where they're thinking about what it's like to work with another sponsor who has a vested interest in the business. That cadence takes some time to really iron out. Oftentimes I'd say the first few months, it's a little bit of the early portion of any relationship. We're getting to know each other personally and professionally. We're hashing through problems. They're seeing how we think about the business. Part of why TA does so many proprietary investments alongside founders we've gotten to know for many years is that shortens the period in which we're getting to know each other. You've gotten to know me over five or ten years versus getting to know me over a three month arduous investment banker process. So much of our angle, so much of our edge is about the relationship we've built with these executives and entrepreneurs. And so I would tell you that the disadvantages are if you're used to going it alone and being a solo soldier, it is a transition. And that does take some getting used to. But the benefit of that is you've got a lot of people around the table who've had a myriad of different experiences. And one of the questions that we've talked about is why have independent board members? And so much of that is bringing in the outside views of people who can be additive to the business over time. But most of the growing pains come from just the early relationship building aspect of partnering with a sponsor. One of the things we say often around TA is that we treat our portfolio companies and our partners as if we are invited guests. We don't have a key to the office, we don't let ourselves in, we don't have a login to the QuickBooks account. We really do genuinely treat this as a partnership, same as we view many of the relationships in our life. The command and control model that is instituted successfully by other private equity firms isn't the model that we fashion ourselves after here. I'm really proud to say that in most of our partnerships we have the chance to compel change through logic and the numerical number crunching that you did earlier. The goal is not to force people to do something they're uncomfortable with, but rather show them your perspective. It goes back to the alignment point I made earlier. If you can make a compelling case as to why we want five more or five less salespeople on a given team, we can have a logical debate about that because we're all aligned on the outcome of making a great investment and growing the company over time. Certainly there is a piece of this that if you're a majority shareholder in a business, you have the final say. That's not really a muscle that's productive to flex. Growing businesses have entrepreneurs and teams that have an unlimited amount of choices. I'd be foolish to think that TA is the only private equity firm vying for the hearts and minds of these executives. And as a competitive angle and as good business, we try to work in concert and collaboration with these folks to get to the right decision.

Okay, let's role play a little bit. I'm a founder of a 10 million run rate company with 50 employees bootstrapped, which you don't see a lot of. But hey, we've been at this for a while since 2012 and got four little business lines, some tech products and familiar with SaaS and products to manage M and A. And things are good. Business is profitable. Business has been profitable last three years going on four right away. When you think about the idea of taking capital, it's appealing. Who wouldn't want a better stronger cap table so you can invest off of it, more capital, allocate, make bigger moves. I look at disadvantages. That's control. I'm imagining a board where I got to report into this board, I got to give them some pretty comprehensive updates, I got to sit in meetings and I got to take some direction from this board, especially when they feel really strongly about certain things.

Yeah.

So there's a sort of factor where there's the operational view and how things should be done. And I would say the other big one is a very culture shift from being this customer oriented, how everybody wants to be, take care of your team company to an IRR focused company that bottom line, we're making our decisions focused on irr. I think that changes it. Even a lot of the decision patterns with way a company operates would be impacted based on that driver for the board. Maximize RR and shifts away from being a customer company.

I'm going to push back on that a little bit, I think. Let's start with point two and then we'll move to point one. I don't think that being a customer centric or employee centric company is at odds with being an IRR or return centric company in the nature of developing a really great business. You need to have terrific employees and you need to treat them with respect. And in a company that's growing, that's expanding, that's continuing to dominate their market, we find that those management teams are treating their employees terrifically well. And there's no reason for us as a sponsor to come in and necessarily change that. So I wouldn't necessarily think that those two things are at odds with each other. At the end of the day, the hope is that by doing good we can continue to do well. And that's very much the strategy we apply to many of our businesses. The second notion I'll push back on is that most of what we do isn't bootstrap companies. In fact, a majority of the partnerships I've been lucky enough to initiate in my time here at TA have been bootstrapped founder owned businesses. And I find that those are the companies that offer tremendous upside because by nature this executive has been operating this business for a really long time without the benefit of a team around them who is embracing them with new ideas, new resources, new thought patterns, new pattern recognition. And again, it's not about telling people what to do. It's about offering alternative views of how one might be able to manage that business in companies that we have. What makes me really proud at the end of the day is that we are adding thousands of jobs to the American economy every year in most of the segments where we're spending time. And so these are. Companies are growing and expanding and perhaps doing so even faster than they could have been done on a standalone basis with just the existing management team in place. And then the last piece around this idea of reporting to a board. It's all about how you look at it and treat it. At the end of the day, I learn from our entrepreneur partners every, every single day. There isn't a monopoly on good ideas or a monopoly on how to think about business here at TA or in general. And our best partnerships are the ones where we're learning from each other. And so what I would say to you is at the beginning of our partnership, when we are evaluating the business in diligence, we are totally open about what are the metrics we're looking for and what are the goals that we have for our investment and what are the things that we're going to be monitoring over our five to seven year hold period. What I think is interesting is when executives and entrepreneurs say to us, hey, these are the metrics you should be looking at. This is how I manage the business or this is what I'm solving for on a bottom line perspective. Because then we're learning from each other and we can refine that reporting and content to a position where you're not losing your life pulling together thousand page board decks or perpetually in this pit. I think that's actually a way that TA differentiates themselves is this collaborative view of learning and growth. Because we don't have any ego in this, we're not charging management fees. I'm not going to the board meeting to be hailed as a genius by the people around the table. If I was waiting for that, it'd be a long career for me. Fundamentally, I'm learning every single day. If you look at it with the perspective that we're going to collaborate on the metrics we agree to and we come into these meetings and evaluate based on those metrics, then this can be a really healthy partnership. What I would encourage you as an entrepreneur to think about is what are you solving for? Because at the end of the day, you've been running this business, you have forgotten more about the company you are running than I will ever know.

Fundamentally, this is fun. A lot of this is about having a commitment to institutionalizing your company. Is that fair to say?

I do think that adding infrastructure and systems and reporting is a valuable part of the maturity curve of a business.

Right. If you're, if you're going to be a publicly traded company, you're going to have a lot of institutional investors, you're going to be on public calls with your earnings reporting. So this progresses towards that. So for a founder that's a big consideration. You're making that commitment to institutionalize your business. Going back to those two disadvantages, I think one is around control in general. Here's this control over decision flow and you tell me what to do. I think there's also control around exit path because now you got a board, you got institutional investors. They obviously you want to keep your LPs happy and they want to see a return on that investment. Sure. And get that calculated irr. We got to think through that. And then the other dynamic that we're touching on is basically the cultural piece that my concern is if we're shifted focus on irr, that sort of changes the culture from being that strong. And you have some obviously counterpoints about being transparent and on the same page of what those goals are for the metrics of the business. Yeah, upfront, those are the big thing, the culture thing. I still think that's tough. It's tougher than that. I just, I've seen companies in the way they operate and it's so much about pushing the numbers and then you know, you get this change in the market. You're running a riff and downsizing your. And it was the airtable just did a 30% reduction in workforce. That's a big shift where you know, if you weren't pushing that hard and had a stronger cash balance to operate that little bootstrap flow, you wouldn't be susceptible to making that big of a shift. But I don't know, maybe that's all a bad thing in pursuit of greatness.

So a couple of things. I can't speak to Eric table because we're not an investor in the business and I'm not familiar with the company. But what I would say is one of the things I don't want to pick on your. No, that's okay. One of the things that we do up front is have a what we call 180 day planning session where we sit down with the management team of the company and we say, hey, we here's what we would love to do in an ideal circumstance. We want to hire more salespeople here. We want to think about price there. We want to expand the market opportunity internationally. We want to recruit in these particular positions and before we sign any paperwork, we want to be on the same page about what the strategy of that business is going to be on a go forward basis. And it is not uncommon keyson for our margin profile of that company to go down post investment because we are investing in some of these areas. The beauty of investing behind growth is that it creates a massive opportunity for expansion people, expansion systems, expansion, growth in existing strategies and teams. And that to us is where the excitement lies. I get up every day enthusiastic about my job because these are companies that are fundamentally creating market opportunity for themselves. They are blazing the path in whatever vertical or sub segment that they are spending time in. And that's what gets me jazzed and juiced up thinking about what the future of these companies can look like in our partnership. So that's number one. Number two, what you find is that we have a very tempered approach to this. Growth does not come in all flavors. We experienced for the last 10 years a 0% interest rate run where companies that were wildly unprofitable but growing top line became the soup du jour for many of the investors who sit in these seats. For us that's never been the case. The companies that we are investing in are profitably growing, have great margin profiles and an expansion opportunity in their individual segments. It's our goal to help bring that forward and to show them other comparables that have learning opportunities for us and for management teams and where those expansion opportunities lie. And then the last piece is around control. But this concept of control is a fascinating one. You highlighted early in our discussion that I am not an operator. I don't fancy myself as an operator. I have the grit of having to get through various parts of my career. But I view that as a positive because I'm not going to step in and run these businesses if the opportunity.

That's the nightmare is having a board of you, Jason's that are no operating experience and they're telling you how to run the company. They're asking you a bunch of questions about your numbers and it's difficult to have that conversation.

That's my nightmare too. That's what I'm trying to express is you have to surround yourself with people who have relevant experience and who can bring stuff to the table. There are areas where I have relevant experience where either through prior portfolio companies or experiences I've had in other roles or specific sector, specific knowledge where I can help a company. But I don't want to overstate that. This is the self awareness you got to bring in people who can help with discrete tasks and business problems. And so what we are always trying to do, whether it's our strategic resource group who's thinking about things like data science and marketing and sales and recruiting, or independent board members who have been luminaries and industry visionaries in their specific segments. You gotta bring those people to the table and it's our network that can help people do that. And on the control point, I'm not sitting in the captain's chair. I am an advisor as a board member to an independent business. And I have a view, I have a point of view that hopefully is informed by data and experience. But at the end of the day, we are dependent on that management team to see through the outcome in that business. And it's why we are backing so many existing A + management teams in all of the segments we spend time in is because they can see the opportunity and we have healthy partnerships largely across the board. And so that control point, you make a valid point. When you own a majority of a business, you fundamentally get the final vote. But the practical application of that is very different. And it's about finding a management team that you are aligned with and really marching forward together as a future. It reminds me a lot. I have two kids, two little kids. I have a seven year old and a five year old. And being a parent and being a good partner are very similar. You gotta listen, gotta be there for them when they need you. You gotta be on the ground, nothing substitutes for FaceTime. And you gotta be data driven in your approach and explain everything that you're doing because at the end of the day, those are the partnerships that are the most healthy. It's like any good relationship, marriage, parenting, partnership, you gotta be totally transparent about what you're trying to do as their partner.

Are there any CEOs that have beef with you out there?

I can't say that. I don't know whether they're, let's be.

Hypothetical, say there was a CEO out there that had beef with you. And what I'm trying to do, Jason, is get to some disadvantages because we keep turning them into positive things, which is great. Honestly. That's a reason you're on the podcast.

Listen. Part of doing this job is having a passionate point of view in a variety of different areas. And sometimes when you fight for that point of view, others will disagree. And that could be fundamentally in how we as TA approach the idea of partnership in our entrepreneur backed businesses or a specific decision on pricing or customers. At the end of the day, we are all individuals and must live with the trust and relationships that we've built over time. And I spend an inordinate amount of my own time trying to Build that because it is the most important aspect of. Of my position. I've been really fortunate. The companies with whom I've partnered have chosen to partner with us because we showed up early, kept knocking on the door. We did what we said we were gonna do. And that's a really important part of any good partnership. Are there disagreements? Absolutely. On fundamental concepts, from everything from recruiting to strategy to sales. But if you treat people with respect, I think that those are healthy relationships. And I spend a lot of time, a lot of my personal and professional time forging those relationships, because at the end of the day, that's all there is. But Ta, we're not here forever. We are a firm that is owned by the partners and managing directors that has been transitioned through a variety of generations, which has differentiated us. And it's that differentiation and the legacy that we anticipate building institutionally that has kept us in business for as many years. It's that respect for the people who are actually controlling the business.

You're answering a lot of my questions ahead, which is great. I want to understand how to control the board. If I'm going to commit to taking this path with you, Jason, to institutionalize this company. Ring the bell on the stock exchange, you referenced Henry. I think that's a good example of. Because he talked highly of you. So that's the reason we had a conversation. And that was a big thing where he told a story of he held onto his company up until 75 million revenue somewhere around there. And it took him a bit to get that. And somehow it was. I don't know if you led with him on that deal, but you got him to do it.

Yep.

And. And that was a commitment. But the big thing he attributed was just the bigger thinking, the shaping the strategy to get to that level where you actually went public and covers over 20 billion market cap now in public exchange. That part is interesting. Through that journey, there's two big things I think about. One is control. Hey, I still want this to be my company. I don't want to be kicked out of my own company or have to based on these things. I don't expect through that is a view on that wealth creation of how does this sort of get diluted through. And you see, nowadays, these valuation people really dilute minimal. I just talked to an uncle in India and he's working on these deals where there's only 5% dilution. He's like, you should take some capital, get 5% dilution. I'm like, tell me more. I'm Going to come to your house next weekend.

Yeah, seriously.

And I'll let you know how that goes, the value creation part, and we can unpack that. I want to definitely talk through a little bit more of that. Cause I think that's definitely a big value point. But as a founder, those are the two biggest things. If I now I'm cross the line actually committed because you sold me on the family part.

Yeah.

That we're all going to work together and create something big. We've gotten some reasonable terms in terms of just the overall board control. And then I guess it does fall into the terms. The dilution is. I don't know. Let's talk through those.

Let's talk about this concept of board control, because this is, to me, always an interesting idea. So I've been doing this job for a really long time at this point, and in the entire time I've done this job, I have not had a contentious board vote in the traditional sense. And what I would say to you is the board meeting is about getting together and talking about what's happening in the underlying business and getting updates from sector leaders and a perspective on what the underlying business is is actually encountering. The idea of a contentious decision is less common in businesses where both. We are a minority shareholder, which we are in many cases, and in situations where we have a team that we're really enthusiastic and excited about. But what you find is you can compel people to do things, you can argue for a perspective and a point of view, but at the end of the day, you really have to have people on board for them to put their hearts in it. And the companies that we partner with that do the best are the ones where the management team shares the vision for the future, which is why we spend so much time upfront trying to understand that. And so many of our conversations pre investment are about what the goals are. Over the next five to seven years, we're marching in lockstep towards that really terrific outcome. Even in situations where TA owns a majority of the business, we frequently won't have more than one or two folks from TA on the board. I think you get 80% of the utility from the first board member and the incremental 20% from the second board member. I'm usually the second board member. And so the view is, at the end of the day, you want to find people who can make business development relationships for them. That was certainly what we did with Henry at ZoomInfo, was inviting people to be a part of that board who had history at big, big financial services and data businesses, who could open doors, who could create business opportunities, who could share their growing pains from having been a part of organizations that scaled as quickly as Henry scaled discoverorg. And then the last piece of that is Henry himself. The executives that I've been fortunate enough to work with in this role have been prolific in so many ways, and Henry is the perfect example of that. You have someone who's young, who's driven, who's intelligent. We've certainly had disagreements on strategy, but fundamentally believes in the success of his business. He's also been wildly generous to the community, to the employees, and continue to take care of them. So you talk about being at odds. We were really supportive of all of what he did, both for the greater Vancouver, Washington community. What he's done in Boston, that's a part of their core culture, even if that was a part of what was happening at the business.

He's nuts, man. Henry is just. He's wired so different that I don't.

He is wise beyond his years. If I want to feel inadequate about my career so far, I think about Henry because we are of a similar age. I'd say he's a few months older, but he's accomplished far more in those few months than I'll be able to before I turn four.

Yeah, no, he's just wired different. That guy thinks different. He's got that ability to zoom down and up with zero delay.

And Henry is an incredible example of that, partially because he's at a public company now and he's certainly in the public eye. But we have countless examples of that across our portfolio. If you look at the names behind you, there's any long list of examples of young, old, medium, aged, all across the spectrum, executives that have been successful in their specific subvertical. They're not always the common background. I guess. If anything, I would encourage the entrepreneurs who are out there to continue to pursue their ideas. And when you think about the life cycle of private equity, where you have early stage venture capital and seed capital on one end and mature late stage buyout on the other, TA sits very much in the center of that. We are investing in growing businesses that still have a meaningful market opportunity ahead of them, many of which have been bootstrapped up until that point, as Henry did. But he's an example of the many executives with whom we work who have off the charts iq, eq, market awareness, connections, smarts, grit, you name it. And so for me, that's what's so enjoyable about this job, is Being in the room of people who've built these businesses from day one, I go in with awe and admiration. And yes, of course, we have a perspective. And of course we're data driven in our approach. And of course we have an idea of where we think we can add value, given our institutional experience and the smart people we have on staff and our partners on independent boards all across the world. But at the end of the day, we are standing together with this management team as they dominate whatever segment that they're in, and that's where our investments are most successful. It is that idea of partnership, not the disadvantages of taking on an outside sponsor.

By the way, if anyone's listening and doesn't believe Henry's crazy, check out the interview I did with him. It's really because he talks through the first 12 acquisitions that ZoomInfo did. We did barely any editing on that interview. He talks like that. This guy can compress so much information in such a short period of time.

Extraordinary perspective.

We ended up Writing a 16 page ebook based on this interview because it had so much information in it. And it's out there as well.

And you know what else is interesting about him? And I can say this as a friend, he's also a great dad and a great husband and a great community member. That's the cool part of this job too, is you get to see people in a holistic sense. And it's been an honor to be his partner and to be a part of his life in that way too. And so I do encourage folks to listen to that interview. But this is true of the folks that you know and the folks that you don't. And so many of our executives are doing stuff.

I want to ask you, first round, you're investing into us hypothetically?

Yep.

What is your expectation for the board structure in terms of what would you want set up and piece of a.

Board in that situation? It's a collaborative discussion. So oftentimes what we'll say one or two folks from ta. Great. That's where we'll sort of.

How about no folks from ta?

That would be tougher for us to slog. We do make a commitment to rlp.

One person. How big of a board are we creating?

Well, it depends. There isn't like a one size fits all approach to this idea of investing. And so I'm on boards that are for people. I'm on boards that are 10 people. I'm on boards that are 15 people. This is about what your individual needs are as an executive. And we can make that board as big or as small as you want. No board, I think no board defeats the purpose of bringing on outside capital. I mean this seriously.

That's part of the model.

It's part of the model and it's not about. I'm wrong with frequency and I am not bashful saying that. The trick is surrounding yourself with people who can be right 75% of the time or 50% of the time. And that the power and the group and the infinite diversity that you invite to these boards can really bring power to the organization. That is like a critical point. It's not about me, Kisana. It's not about the independent board member. It's about all of the individuals you bring together, plus the management team creating magic by drawing off of each other's experience. I'm a believer that infinite diversity breeds infinite opportunities and ideas. Diversity isn't just a good idea. I don't mean this in the traditional sort of pop culture sense. I mean this. You want people who have a variety of different backgrounds because they're going to draw on different experience sets and they're going to embolden each other to be open and honest about what the opportunities outstanding for this company are. And so if you can get to the right answer with a group of people that is a collaborative, high functioning board, and I spend a lot of time, we all do, here at ta, thinking about the creation and development of a high quality board. But it is collaborative. And so the answer to your question is if you say to me, hey, I want to have somebody who's got business development experience and done M and a buy in builds in the past, great, we'll draw on somebody from our network. If you have a financial services desire and you want somebody who's built and sold a bulge bracket investment bank, great, we'll grab that. Somebody who's built a financial services technology company, great, we'll grab that. And we will incentivize many of those folks with equity alongside the management team and us so that they are vested in the positive outcome of what will eventually be sold in the business.

Don't be scared of the board.

Build the best board and do it collaboratively. I sort of joke. When we first invested in ZoomInfo, we lined up a series of probably 50 board candidates for Henry and it was like the usual suspects. Number two, step forward. Tell me about your experience at this company or that company. That is a model that works for us is bringing you the executive or entrepreneur. The smorgasbord approach of team Management, where you have an unlimited supply of potential candidates and you have your pick that's.

The better to pay these board members at the back.

Typically there is some small cash comp, but really the big upside for them is around the equity compensation that we all have being a part of the business. And so the idea is we make money, our partners make money when our executives and entrepreneurs make money. And that is the perfect and beautiful alignment of bringing on a sponsor.

Let's get into the dilution.

Don't forget, most of what we do here at TA is not primary capital. And the traditional venture capital model is adding capital to the balance sheet to go out and invest in sales and marketing or do M and A. We are predominantly providing secondary capital today, which means we are buying secondary shares from shareholders, because by definition, the companies that we are partnering with are growing profitable businesses. And so the idea is that there isn't necessary dilution from our investment. Now. There's friction costs, certainly, because we're creating option pools so that we're equity incentivizing management teams to continue to grow their businesses. But there isn't dilution that you'd get from cash on the balance sheet.

Yeah. So instead, so say founder, own company, we create an option pool.

Yep.

So I had that allocated.

Yeah.

So that means I have 80% of the shares outside of the option pool. Which half is allocated? I would sell you my shares.

Correct.

I would just say, hey, you want 20%? What do you usually be at? Like, what's the range?

We will own, frankly, any percentage of a business, anywhere from 10% of a business to 100% of a business.

5%. I'll sell you guys 5%.

For us, it's more about minimum equity check sizes and making sure we're judicious with our time. Fundamentally, that's our most limited resource here at TA. And what I mean by that is for our 12 and a half billion dollar fund that we're investing out of, currently our minimum equity check size is 125 million. We're agnostic on what we want to own. Now, part of that is making sure we're making sizable enough investments in order for us to return capital to our LPs, that's meaningful enough to justify the time commitment. But part of it is also just when you're investing in growing, profitable businesses who dominate a market niche with awesome entrepreneurs, you really have to be flexible in certain areas. And for us, it's about how much of the business that we actually own. Oftentimes, it is a direct secondary Sale where that liquidity actually goes to the shareholders of the business versus capital going on the balance sheet.

We'll say you took me out for a few drinks, convinced me to sell 20%, and we come to no drinking involved.

No drinking.

No drinking. We sports. We played a pickleball.

There we go. Yeah, yeah.

Play pickleball over this.

And yes, I was a captain of my high school school bowling team, so maybe we went bowling.

Yeah, we agree on that.

Yep.

I would sell. You say the valuation is 100 million. We agree on. I get 20%. Is 20 million you would pay that 20 million goes into the company.

No, that 20 million goes to you. This is an idea of purchasing shares directly from individual shareholders in a business. And because these companies are nicely profitable on their own, the idea is that capital will actually go to the people who are selling their shares. And in many cases, we'll work with third party lenders who will provide some leverage on the business. The best parallel I'd make to that is it's like mortgaging a house. So there'll be some form of debt, there'll be some form of equity. The benefit of the debt, for those of you playing along at home, is that it limits the equity value and thus the dilution that you mentioned earlier of putting in incremental equity into the business. And the idea is that lack of dilution benefits both the original shareholders in the company and the new money, which in this case is probably us.

I keep using Henry as an example. He's like a case study.

Yeah, let's do it.

This podcast has just shifted to be a case study about Zoom Info, Henry Schuck and his wealth creation. Because if you look at it, it's public how much shares he owns. The guy's a billionaire. It's out there. So I'm not tattling on him, but that's a lot of wealth to preserve to go through that. How did that happen? And I see there's a few great artists that doing this. Bill Stone, multibillionaire, has a huge, huge chunk. Joe Mansueto did that. Held majority shared up until he retired. Michael Dell is probably the greatest living legend of all time. To take his money private, do a couple acquisitions, go back public, I think. I don't know how many billions he generated of wealth. Personal. 8, 10 billion. Just biggest play I've ever seen. In front of all of us. I try to give him the podcast. Anybody knows Michael Dell has any link to him and can get him on, I will take care of you. Very handsomely.

I use Adele. That's where my connection lies. No, look, this is.

You'll be my connection. This is going to be great. That will bring him up. But yeah, how do they do that? How did those people do that? Because that. I want to do that. That's fine. If you can give me a playbook to preserve that much wealth and do it. Because there's a lot of founders I've seen and you know, the whole thing, they run so many series of rounds and they come in and yeah, like 3% of that and they're running around trying to do the next startup. I don't want to do that after this is done. And I want to. Not just a nice house and car. I want to live up in the skies and be that comfortable.

Yep. So this is why part of the reason why private equity firms like TA exist. I'm going to differentiate between the life cycle of capital. So when you have a great idea and you raise venture capital, there's pretty massive dilution that goes in line with that. Now there's reasons for it. I think venture capital firms would tell you their ideas, their network, their ability to scale businesses will help those companies. But there is a massive overhang that happens after you take on capital when you need money. I am investing and TA is investing in companies that don't require outside capital. They are fundamentally profitable. Many cases the executives that we're working with are taking dividends out of the business every year, especially for founders who've been around a long time. And they bootstrapped it, much like Henry did in the early days of Discoveror and Zoom Info. The real key to this is growing a business to a point where it is profitable because the valuation gains you get from doing a secondary transaction with a firm like TA is meaningful enough that you're going to retain a significant chunk of that business. In a situation where I'm buying secondary shares or TA is buying secondary shares from the founders themselves, that's much more capital efficient than continuing to put tens or hundreds of millions of dollars on the balance sheet. And Michael Delick is a pretty good example of somebody who bootstrapped to a certain point in the company's evolution. There are thousands of examples, ones you know of because they're high profile executives and ones you don't know about of people who dominate individual industries. I can think of at least 4 or 5 of our portfolio companies where I sit on the board where the executive waited till the company was 10 million of EBITDA generating cash, taking distributions every year and that creates an opportunity for significant individual wealth because your ability to command a premium valuation as a profitable growing business is simply higher than it would be when you need capital to continue to feed growth. The answer to your question is embedded in the intro you gave yourself. If you can get a company to a point where it is nicely growing and profitable and you choose to bring on a partner to continue to scale it, the upside is dramatic. And what I mean by that is in many cases the second bite at the apple, as we call it at ta, which is not just the first liquidity event where you're generating opportunities from the sponsor, but the second liquidity event when you're either going public or selling the company to a strategic or raising additional private equity money that can be as lucrative as the first in the order of magnitude. In situations where we are rowing in partnership, that is really your chance. That institutional wealth and in my opinion, multigenerational wealth, comes from waiting to take on that outside capital until you're at a point where you're at scale.

All right, we're back in the VCs pretty hard on this one.

No, no, no, listen. Venture capital plays an important role in the American economy.

I guess from the bootstrap founders perspective, when we talking about wealth preservation specifically. Yeah, this is part of it is a lot of these founders were describing and used example, probably Bill Stone's another one there. They held on to so much of that equity and there's a lot of that bootstrap. Maybe they had a little capital in the beginning, but it was more of that that allowed him get to a certain point where then all of a sudden they're talking more of the PE with a different operating model than the VCs, which I think that's a fundamental thing. They went to PE and they held out enough to go be able to work with PE or firms like yours. Tell me about timing. Like, even at a company now where I'm like 10 million run rate, 50 people, how do I start thinking about when's the right time for us to really say, hey, we should be having that conversation. Remember that guy Jason I talked to a while back? I should probably hit him up. Or do you just not check on me every year? There's folks that we can talk more about that, but we should talk about.

TA's outbound approach and relationship building approach.

Yeah. First question I got is why do you always send the junior associate folks? You know this to the point where I'm getting two to three a week.

Yep.

I create a quarterly BC pe, office hours. And I put them all on the same call because they all ask the same questions. Yeah, but just what we talk through. You sold me on the company. Like I'm already. Maybe not all the way sold, but I'm like 70% sold. Yeah, on CA, just through the way you're answering and understanding. Like, hey, this is about alignment. This journey that we're going to take together to institutionalize a company and generate a lot of value. And I don't get that. And then no knock on it. The team's good, but it's just they're there to fill up a CRM with some fields. That's all the questions are, because they'll ask like a series of questions and it's not a real conversation. Understanding what that founder's goals, dreams and passions really are. So you end up putting them on a call. But then it never turns into anything. It's a lot of, hey, you're worthy to go be my partner and intro. But then it doesn't feel special.

You ask a really interesting question and you highlight an increasingly problematic dynamic that's happening in the private equity industry. And one of the reasons that I really love working for a place like TA and being a part of this organization is the individual bespoke approach we take with potential portfolio companies. TA has been doing the very same thing since 1968 when we opened our doors. Investing in growing profitable businesses in a variety of end markets, whether that's consumer or healthcare, tech enabled services, where I spend time, technology, and all across the world we're doing the same thing, which is building relationships with executives and management teams and founders. And what that means is everybody here is actually doing the same job. Our associates, our principals, our vice presidents, our directors, and our managing directors, which is leaning intelligence, building relationships and getting to know people over a long period of time. We have legacy investments where we got to know the management team over 20 plus years. And that is a really valuable not only opportunity for us to get to know each other and build that partnership at a relatively early stage, but it's also a chance for us to show you exactly what we can do to be helpful. I always joke the best way for us to prove that we can be a helpful partner is to actually be a helpful partner. You want an intro to one of our portfolio companies. You want to have a business development opportunity with something that's in our portfolio. That is the case. And we have an arsenal of people here who are getting to know companies, who are reaching out to founders like you every single day. And those relationships are happening at a variety of levels within ta. But at the end of the day, it's incumbent upon our partnership group to get out and actually spend time with people to understand their underlying businesses. And what I would say to you is that is what differentiates us. We really revere founders, we respect what they've built. We have a really healthy partnership dynamic with them. And the longer we get to know people, the better partner we can eventually be. So much of what we've done here at TA and in general has been proprietary in nature because we need to win over these founders. At the end of the day, there are unlimited capital sources in this market. This is a very efficient market. This isn't 30 or 40 years ago when there's a handful of private equity firms who are king and queen makers in their respective markets. And the best way to do that is to prove what it is that we can do. As your potential partner, I'm proud to say that we've been helpful to hundreds if not thousands of companies this year alone in terms of creating revenue optimization opportunities, opening business development doors, getting them in front of existing portfolio, introducing people in our network. That's how you win people over. Because people need to choose us.

What do I do with your junior associates?

You should talk to them about what it is they want to do.

You don't get the partners too much. It's got to be a referral from another founder where they're like hey, you should talk to somebody about advice. Right. Thinking through capital strategy like we're talking about. I get a lot of inbound. This is a lot. This is going to be well over 50 a year coming in.

Yep.

And you want to nurture some of those relationships, but I don't have time to do as much one on one calls. And then there's going back to the timing part of it. How would you handle that situation? What would you do in my shoes? And really again, like start thinking about this in terms of how do I think about the relationships with like you. And then part of me wants to make it competitive. Do I make this a beauty contest to really explore some different options and present it with my leadership team and know that. Yep. And then how far of a plan? Because I a lot of them come and it's introduced my firm. It's impress me, become a customer. Like your first investment should be coming. A customer, you're in private equity. You acquire companies, acquire a product first. Or give me at least an investment thesis like a rough like you can't even bullet point. Three points of why we're interesting to invest in. Do something that shows you actually really care or you're not going to waste my time. Want to at least get to that point and then it's like, oh, I can invest and do that and do I look at those options? Bring it or how would you do it?

You got to ask yourself the question first of when is it that you want to actually start thinking about liquidity?

We're talking about fractional liquidity.

No, no, understood. But there are a bunch of decision points that happen within a business. I think venture capital plays a really important role in the American economy. If you look at an Uber or a Lyft or capital intensive businesses that need that expansionary opportunity to grow venture capital is a great fit because they'll never be at the profitability profile that would make sense for a traditional private equity. But the first decision you make is do you want to raise primary or secondary capital? Do you want to put cash on the balance sheet to invest in sales and marketing? Or do you want to wait for the business to get nicely profitable and sell independent shares of your business to a secondary investor like us? So that's decision one. Decision two is how much do you want to sell and what are you solving for? Are you solving for a specific valuation? Are you solving for a magic number that's in your head? Are you solving for just maximizing it? At what point do you think you've scaled the business we're bringing in? A partner will actually be productive for you at the board level, where there's enough to talk about in terms of goals and metrics and M and A opportunities and expansion. And we haven't even talked about just the fact that our portfolio has done over 900 acquisitions, of which you highlighted ZoomInfo being one of those cases. But there are hundreds of opportunities very similar to ZoomInfo, where we have not only originated the M and A opportunity, but helped execute it with a founder who may not have done acquisitions in the past, and that it can be a critical growth strategy for companies that are dominating their market. What I would say is it's a little bit about personal preference. And I think my general rule of thumb is you really want to start having individual conversations with people several years before you decide to sort of raise outside capital. Be it venture or private equity money, deciding what it is that you're solving for is critical. Do you want to have a great partner? Do you want to have somebody who's got geographic expansion Opportunities. You want to deal with somebody who's an expert in product. You want to think about people who've done pure M and A growth over time. It comes in different flavors. Like any business decision you make, you got to decide what it is you want from your partner. And so what I would say is getting to know those folks that you have identified over a five year period is a great way to get good ideas for the business, to ask them questions, to have repeat conversations with people over time to see if they become a customer, to see where they helped you along the way, to prove their worth. Because fundamentally, if you're operating or growing profitable business again, you'll have the chance to test those waters. You can make it competitive at some point.

I'm trying to get a sense of that. 50 people reaching out, all different BCPE little no name crazy firms.

I would ask them, how would you.

Vet that out and get to.

I think vetting out the initial list is really important. One is you want to understand the institutional history. Who have you invested in? Do you understand the space? Have you had experiences here? And that's a very simple question to ask. The second is what are your ideas? What would you want to do? What do you think of the sector? What do you think of the segment? What's your general thesis around what you're doing? The third is who is in your network? That can be helpful to me. Are there introductions you can make to people who would want to buy our product or take on our services, asking specifically nuanced questions? Because my understanding is your business today is a mix of product and services. There's four categories. Where are their experiences? Lying, where do those go? And then the fifth is doing your own diligence. Most private equity firms, TA included, have their companies listed on the website. You will have, in most cases, countless contacts with the people who may be a part of that portfolio. Who do you like? Who's the person? What sectors do they spend time in? Just like diligence happens on companies when sponsors are thinking about investing, diligence should happen from sponsors on companies, from companies. And so the best thing you can do is talk to people who lived through that experience. Did they do what they said they were gonna do? Were they good partners when the time comes? You can't do this on everybody. You gotta have a smaller list of folks. But if they've passed gate one of understanding the sector and gate two of being good repetitive callers and decent human beings. And three, do you feel cultural fit with someone? Cultural fit could not be More important, in my opinion. And spending time with people is the best way to make that determiner. Like any dating process, you got to get to know people before you sit down at the table. And the best way to do that is ask them tough questions.

So the key things to. By the way, first thing, inquiry. I do. I go to the website and I look up the porko.

Yep.

And if I see a bunch of no name crappy companies, it's getting deleted. And then there is. There's a lot of search fund models and just random things that fundless sponsors.

I always like that.

That clears out a good half of them. Then the other half, your left is some boutique, maybe some folks that were alums of your company and they're starting their own shop and they've gotten like a good, you know, 50 or whatever, 100 million on their first fund or something like that. But you're pretty interesting because you know, the background's solid and they're getting something going. Blackstone, every company had an early start and then they got firms like yours or ones that are even larger on the VC side, they're moving downstream and they create their little merging funds or things like that. The way you talked about was having the conversation with them. I put them on a group call and it's hard to do that. You're giving a bunch of information is.

All the question reporting out.

But now I'm hearing you out because what you're describing is difference. Have the qualitative conversation. Learn about the firm. Let them tell you what deals they've done in the space and give you the narrative.

Yeah.

Ask them about the thesis. What have you done? Have you done homework? Can you bullet point the three thesis on why we're an interesting company? Again, that's probably a big red flag.

Yeah.

And that's, hey, be polite here. This isn't going to make sense. Then how can you be helpful to a company like us? What kind of introductions can you make? How can you help our business grow?

Give you an example of stuff you've done historically in this vein. Give me some examples of how you've helped companies like us.

You ever had an example of, before you even invest in the company, something you've done to create value or give that kind of gesture? Because I do believe in this, in partnerships. Put the contracts aside, let me try to help throw some money in your pocket and if that happens, we'll talk about how we're going to partner together.

But we've done it and continue to do it within the portfolio of companies that we have not yet partnered with. Four ways to do it first is helping generate revenue. Whether that's an introduction to potential customers or becoming a customer yourself or having someone in the portfolio become a customer. It's also a great way to do diligence on the product and the category as well. The second is M and A. When there is an industry consolidation opportunity, none of these will necessarily be a surprise, but perhaps there's a way to broker some acquisitions in a specific space or some mergers in a specific space as a way to generate a need for third party liquidity. The third is just really trying to be helpful around strategy and growth opportunities, whether that's potential new sectors or use cases or partnerships or business development or geographic expansion. One of the muscles that we flex here at TA quite a bit is that a significant portion of our investments are outside of the United States. So for companies with great product, that can be as applicable for folks in our Hong Kong office or in our London office or in our Austin, Texas office, as we think about expansion, we think that can be really valuable. And then the fourth is we've lived through a desktop to SaaS conversion or an on prem to SaaS conversion or we've lived through a QuickBooks integration and the move to a more robust financial system. Here's a bunch of prior art around that. And then one of the things that we will frequently do is actually do some customer calls and hey, here's what your customers are saying about you and here's your NPS score and here's how big the market segment is. Again, demonstrating that you have an interest in a business is more than just putting your hand up, it's being relevant. And look, that's a little bit of my secret sauce here at TA is staying in front of folks and trying to be at it.

You try to think about how you can help them get some customers or become a customer yourself. Yeah, which one of our sales reps probably going to reach out to you, no problem.

That's great. You know where to find me.

How many ideas is always great. Sometimes you're not even thinking about it and there's interesting opportunities. Then there's this sort of expansion and the insights around that and then the pricing and maybe some of that wraps around the customer conversations, which I think is really interesting. Give me an example. Like again, pre investing cutting a check of something just to kind of set expectations. Because now I'm already shifting my view. I shouldn't be doing these roundtable things. I should spend the time at Least.

With the ones that I appreciate the time.

I almost feel like the associate, you were probably associate at that time, so I should give you that time. And then five years later, you're likely to be up for, you know, summer senior level in the company.

If only the trajectory was that fast. Look, I think the reality is, I'll give you a good example. So there's a company that I cover that I've covered forever. There's hundreds of companies that you may cover at any given time. And it's a business that I really love. I had the opportunity to follow the founder around at their customer event. I was just doing a story on them and learning more about the business and asked them to be very transparent with me about the nature of the product and the use case. And I fell even more in love with the business model after hearing what customers had to say. In some cases, we're taking that initiative on our own and we're talking to people and saying, hey, what do you think of this product? Or what do you think? And so most recently, we reached out to a company that we've been covering for many years and we said, okay, how do you think about the pricing strategy and what do you think about the price increases over the last few years? And what people were telling us was that they were massively underpaying for the value they were generating, the roi, the return on investment in this product was massively high and many times. And this is a bit of a stereotype, so forgive me for this is executives and founders are going to be more nervous when they own 100% of the business about increasing price over time because they've become quite fond of the customer base and they don't want to disrupt what's existing in their partnership and they don't want to limit their amount of distributions every year. And part of what we're trying to do is take a scientific approach to, hey, if your customers are generating this much value off the backs of your product, be thoughtful about where you're headed on pricing. That's a perfect example. Or a piece of product feedback. Hey, we love the way this portal or conduit works for our existing product and we wish there was more integration into Salesforce or our CRM system. We're getting really candid feedback from people and to be a good partner, it's both learning and our diligence process, but it's sharing this with those management before.

You cut a check. You're doing that.

Yeah. For companies that we think are really interesting, like I said, what's really tough about working in growth focused private equity like TA today is that there's a lot of competitors. And so my job is not to show up and be a part of an undifferentiated auction where I'm simply raising my hand to pay the highest price. My job, if I'm doing it right, is spending five or 10 years getting really deep into our sub verticals, really getting to know these companies and their executives and proving that we can be an additive partner. Now. Yes, we are also paying in many cases top dollar for terrific assets. We really only invest in high quality business models. But at the end of the day, it's about providing a good partnership and showing people that you have the wherewithal to be a good board member and to be a good partner. That's where I spend most of my life. And by the way, that's about building personal relationships too. It's about asking about their kids and going to dinner and being a confidant when they're going through something. You know this. You're an executive, you're an entrepreneur. So much of this job is emotional and we don't have to be afraid, we don't have to shy away from that. We need to be good partners and we need to listen when people are experiencing things. And I really try hard, many of us do here at ta, to try to be that confidant and to be that thought partner and to be that emotional colleague when the time is needed. And I think that's what differentiates us from many of our competitors. That's way better than getting our heads bashed up against the wall in a big undifferentiated auction where somebody's looking to sell 100% of the business.

You should talk to some of our customers.

I'm happy to.

People love deal room. I think it's intros. We got the folks at Emerson. We're down here in the Bay area. We got broadcom out here. Toast build.com, flex some terrific businesses. You can go meet them, have some coffee. They're great. All the corporate leaders are hanging out with.

I love it. You know, everything you need to know about business, you learn from Mr. Rogers. And in this case, a stranger is a friend you haven't met yet. So glad to meet him.

I didn't learn that from Mr. Rogers. I now it's starting to come back to me. You're right.

Yeah. It's important stuff. Not much changes.

Yeah, I like that. Is there any strategies or anything? I like to go back to the Henry thing of how he mentioned shaping the strategy to go public and give me be real with me, because I know he has his view and acquisitions. But how much were you involved in shaping that strategy of where that company's positioning itself in the public market to the whole the queue of acquisitions to get there, that thinking to really go big versus he's going to do that anyways.

I think that's a sign of a really healthy partnership. And my partner Todd Crockett, who led that investment, was critical in the consummating of those transactions both on the M and A side and the go public plan, and was super engaged with Henry every step of the way. It's not something that either person I think could do alone. So it was the beauty of that partnership that I keep hearkening back to. Value creation takes a lot of different shapes and again, there's no one size fits all approach to value creation across the portfolio. At TA specifically, we have invested heavily behind our Strategic Resource group. We have ex consultants, we have technology specialists, we have accountants, we have folks who are focused on internal systems and engineering and Six Sigma. We have data scientists, we have recruiting folks. And we do not charge our portfolio companies a single cent for the usage. And I tell you, and I think Henry would tell you that ZoomInfo was a prolific consumer of those resources and was a really great partner. And I think our best companies are the ones that utilize those resources that are available. And so we were so glad that Henry and team took advantage of those after we did those acquisitions. It wasn't about necessarily getting the transaction done, so to speak. It was about figuring out the right place to peg pricing or to think about where the expansion opportunities were in the product category or how to onboard customers or how to get people on the same payroll system. Most of this is not glamorous. This is not standing up in front of a big room and necessarily compelling people to make changes. It's about the little things. Making sure people are on good health care programs, making sure there's a logical pricing card. Making sure everybody's batting and looking at leads the same way. Making sure there isn't unfairness structured into the system, making sure we compensate people appropriately, making sure the benefits line up. There's a thousand different things. And what I would say is our Strategic Resource group, not just at ZoomInfo, within TA, has touched thousands of companies over the years in just their ability to be able to roll out strategic outcomes for all of these businesses. Because at the end of the day, pattern recognition there's experience, there's connections, and there's just grunt work that needs to get done. And I'm so grateful that I work for an organization that has this strategic resource group because it has created a tremendous amount of value across our portfolio.

How do you push M and A to your portfolio, Pork Coast? Because obviously it's part of your business model to buy and build. Sure, but how do you do that? Because I think again back to Henry, he was sold on it. He's like, they walked you through that. You do acquisitions, they make a higher return. And he saw that perspective maybe on the investor side or how you present it, but how do you do that?

Look, Henry is an exceptional human being, an exceptional leader. And M and A isn't always as obvious to the people with whom we work. And so part of the pushing is about making a logical, coherent case for value creation. And the beauty of this partnership is that we are a shareholder in your business. Fundamentally, we own 20, 40, 60, 80% of the business. But you still have a meaningful stake. Whether that's equity, rolled equity, or RSUs or stock options in a business, you are, at the end of the day, incentivized by the same upside we are. We are strong believers in aligning incentives. If there's one thing I've learned over my time in this industry is making sure to align incentives wherever possible because it keeps people looking out for the broader organization and for the team. And so what I have found over the years, and I think if you ask many of my partners, they would say something similar, is that if you can make the case for accretive acquisitions that allow us to give more products, better opportunities to the customer base, we are oftentimes very compelled to go out and do those acquisitions. And so you may have four products today. Why not have eight where you're cross selling them to people like Flexera and Bill.com and others who are using the deal room product today. And it's incumbent upon us as sponsors to not just explain that to people in really uncomfortable business ease where we're using big words and we're putting together consulting slides and two by twos, and that's garbage. We gotta talk like people. We gotta speak plainly to each other about where that value creation is gonna lie. And I think we've been able to do that with some success. And again, all of our partners, all of our portfolio companies are off the charts. They may not speak the same language we do, or they may not have the same educational views that we have. They may not speak the same business language that we do. But I think they can see value wherever it lies. And it's incumbent upon us to create that value and to make a compelling case for it. Because you know what? Nobody in this business, nobody who's been strong enough to be a great entrepreneur has been pushed into anything. The trick is make a good case and people will see the light.

Really good points, Jason. Can we talk about getting divorced?

I don't have any sector expertise in that, but we could talk about it.

Yeah, I was gonna say it's just that time where, okay, Zoom Info had a success, they went ipo and then you go public. Which maybe it's not a different divorce, it's just this is a new elevated arena. But if you're a private company, for example, I took the 20 million and got 20%. And maybe things like I'm, I'm running along and running the business and growing it, but I have a long term plan. I think that's part of something. Maybe we haven't talked earlier. I got enough fire to run this business for another 15 years. I mean, this is my life. This is. Everything is here.

I get it.

I just see the continued growth, which I think we're aligned on. But I don't want to leave my post. Like I want to stick to this. And you got to return at some point. And maybe we have a view on that timeline. IPO wasn't in the horizons. We just didn't grow that much. Maybe we're at like a 200 million now when we already hit that term, which may not be the thing you're bragging about to your other peers about the big wins of the year. Is it, do we hire a banker and we sell this whole thing and that's your only option? Is there a way I can just buy you out? What does that look like in those instances?

I mean, again, there is no one strategy for this. I think the idea of liquidity is an important one. We are not infinite capital in terms of timeline. We guide our investors to five to seven year hold periods, sometimes shorter, sometimes times longer. What I have found over the last 12 years is that it doesn't have to be all or nothing. Just like everything else, you want to have an understanding upfront of what are our financial goals and thresholds. What do we think is a reasonable return over what timeframe and how do we think about getting that return? An IPO is certainly less common today than it was 25 years ago. And in many cases there may be another sponsor or a Strategic at the other side, who's going to purchase part of or the whole company. And in most cases what's happening is there is some form of partial liquidity over time in many cases. And so maybe another sponsor will say, gosh, this seems like a really compelling opportunity and you've grown it at two to three times the size. So we're going to buy a portion of your stake. Or sometimes a strategic will say, gosh, we really need this part of our product category and we want to own the whole business and so we'll purchase it that way. What I find is just total transparency because again, I may have a view of what liquidity should look like, but I can't force a management team to go out and have meetings with people that they don't want to spend time with. I can think of at least one circumstance where a competitor came in and was very disrespectful for our team. And at the end of the day that wasn't going to be a successful outcome for the sale of the business. And so for me it's about sitting down, talking about what the strategy is, oftentimes hiring some sort of advisor m and a advisor who can help us come in and look at the universe and stand in between. I'm a strong believer that having a third party manage that process can be really healthy for both the company and for the sponsor. And you spend 18 months really trying to unravel that and say, hey, we got to pull materials together and we got to identify a buyer universe and we want to talk to a bunch of people. We treat it with the same respect that we treat the investment process. But so much of that is discussed and iterated on. It's not like we're going to show up one day and say, hey, it's time to sell the company. It really is a collaborative long term conversation.

Can we agree that if it's below a certain threshold that we just get a fairness opinion? I get an option to buy you out.

I haven't experienced that in this role. In most cases these companies have grown meaningfully and there has been a positive outcome. But there is depending on the specific type of mechanism, there's oftentimes, you know, to a mediated outcome. It's just not as common as you might think for TA or for anyone. I think, I think oftentimes it's about trying to find a good home for the business.

I get the good like if we hit that value and we generate at least 5x 10x plus, that's good like we'll figure that out. We already predetermined that. But if the outcome wasn't in that, we sort of had not as a kind of.

I probably don't have a lot of experience talking on that.

I know you got to refer me to somebody, but they probably don't want to come on and talk live on the podcast about those deals.

No, they exist.

They get.

Actually can be a healthy dynamic too. I just.

Fair point. Getting some clarity on what that's going to look like. And I guess a bonus kind of goes back to the founder of thinking of the situation on the side that isn't so positive and getting that clarity and answering those questions.

Most founders who've taken liquidity, and this is a generalization again, may not necessarily want to take money back out of their pocket to buy back a business unless there's a unique circumstance of where they believe they can continue to grow it. It's just less common as a potential outcome. Everybody's different. I'm always really amazed at the community. Charitable contributions, special initiatives, investment behind causes, everything from health to veterans to school districts. That's part of the reason why I'm so proud to do this job is so much of the liquidity that we provide for to these really amazing causes that we have bolted ourselves onto. And we here at TA also participate in that. We recently threw a Best Buddies luncheon here for developmentally challenged folks here in the Bay Area. I just think the community impact is meaningful and what it's done in a lot of these areas. And again, Henry is a perfect example. What he's done for the Evergreen School District up in Washington, I think is a really meaningful contribution. And we here at TA have participated in that and are amazingly supportive of the work that he's done. And so some people have a passion for toys, which is great. It helps move the American economy along. Some people invest in other businesses that they may be interested in in different segments. And many people are trying to create opportunities for their family. At the end of the day, that's what we're so many of us are fighting for, is to create more opportunities for our children than we have. If that's not the American dream, I don't know what is. And it's certainly been my focus alongside many of the charitable things I've been lucky enough to be involved in.

My dream is to just fly private.

Yeah.

And it's not so much the big toy thing, it is when I look at the most miserable pain I face in life is flying commercial. That whole prolonged Duration to get from this place to another. Going through the terminal security and all the key delay flights, poor communication, all the little variables that impact and just it's miserable. So that's all I'm trying to alleviate a pain is my aspiration. Just to know it's not peer greed or anything like that.

No, no. I don't view it that way at all.

Ideally I'd like to have it as a company jet so it's branded and I can actually put a podcast studio on this jet. And then hey Jason, you need a ride to Dallas like I got you? I can take you in the jet. We can have a conversation. I can do an interview with you.

Yeah.

And we video it and it's got its little glamour and charm to it. Again, commercial purpose. Do I address that with you pretty early? Because it's not about the exit as much as that's what I'm looking to achieve.

Yeah.

The 20 million outcome of it. I don't really care about the house and the cars. I'm fine with all that. We'll just pay off a mortgage and call it a day. So I don't even need that much with anything.

Figuring out that at the beginning of a partnership is really important. As you might imagine with founder owned companies, there can be a lot of assets in the organization that are varying degrees of related to the founder's endeavors or the company itself. And so I think the best thing to do in all these things is that transparency. And look, if that's a business development opportunity for you and you think it's a chance to get to know more people and make your life more efficient, certainly that's the case.

It's going to cost about 15 million to buy the jet and about 3 million a year to operate the thing.

My United flights are looking more and more attractive.

I know these numbers. It is. It doesn't make a lot of financial sense. That's why I'm curious. Again, I'm battling control at the board. Institutionalize the company and go that path with you. But at the same time there's a.

Personal train down to value. So if that's important to you, I think you got to be upfront with your potential sponsor.

Part my shortest path might be just bootstrapping there.

Yeah. And using your own individual liquidity to insure it. I'm not an expert in this area. I recently hit a million miles on United and so I travel quite a bit as you might imagine as part of this job. But what I'd say is owning infrastructure is not always as nice as owning a part of or renting infrastructure and so not having much institutional experience with it. I tell you that I want to.

Live in this thing, Jason. I'm going to put a bed and shower in there and I'm just going to live in this thing.

I'd find it hard to coach my kids to t ball game from the skies. So unless they let me zoom in. So I'm probably the wrong person to ask about this.

We'll figure that out.

Yeah, we have to run the somebody's got to keep Bombardier in business.

So I'd have to model that. Look, we're still going to be profitable, we're still going to have the margins, we're still going to hit good ir. We'll make it happen.

Good.

The question was can we walk through an investment you made understand the process. The only thing we covered a lot of that already. I was just thinking of just the timeline or understanding what that journey or that sequence was like.

The thing about timeline and investments is there is really no rule because so much of what I've worked on has been direct engagement with a specific owner or sponsor. These have ranged from a year, five years to two months. It really depends on the specific outcome of how you've gotten to know a business and they usually take shape in a certain form. So the conversation starts, you get to know the company in most cases, I've gotten to know that company for years. We, we understand their growth trajectory, we've proven we can be helpful. And finally we get the phone call that kicks everything off that says, hey, we're really thinking about selling a portion of the business, selling the whole business or taking the company to the next level. That's great. We're really excited. How are you thinking about a transaction? What can we do to be most helpful? And then once we get to an understanding of what that looks like, the diligence phase begins and that looks at everything from a company's financials to the management team to the sales pipeline. Gets to know the business over time, gets a perspective on where we can be helpful and where we think we can add potential value as a sponsor partner. And that can last anywhere from weeks to months depending on the nature of the business. I would tell you we're not usually the bottleneck in that many founder owned businesses are still using legacy systems or may not have the reporting. And so we work closely with them to try to get the answers to those questions over a matter of time. But we can work really quickly and we donate all of our resources to the company to help them figure it out. So it's not like we're coming in from upon high requesting stuff that we're not going to help pull together. And then really there is the transaction negotiation piece. Getting through the legal documents, agreeing governance terms, locking down the price, thinking about the exact liquidity, trying to figure out what the strategy is going to be. And again, I think the shortest this happens in is 30 days and the most I've had transactions that have gone on for many years. It's not uncommon by the way, for founders to have second thoughts as you go through that process. There's an old adage that every good transaction dies at least once in that process. And what I'd say is that's totally natural if someone is willing to say, hey, I want to be done with this lock, stock and barrel. That's a bit of a difficult pitch for the person who's investing in the business. Second thoughts, honest questions, a heart to heart. These are all really important. Some of our best transactions and partnerships come from people who rethought them over time. And I can think of one in particular where we got to the altar three or four times before the transaction was finally constant. That's okay, that's the job. And again, you can go in and buy a company from another sponsor which can also be equally lucrative. But at the end of the day, if you want to work in the sort of founder owned company space, you got to be prepared for emotions. Within those emotions there's returns. And I think you got to be patient and you got to be loving and you got to be understanding because this is the reputation you build for yourself within this segment.

Yeah, that's no, that's a good view that once you get through that stars aligned, it moves pretty quick basically. But it could take long if you got the reconsiderations.

And it's not always up into the right. These things take a cadence to themselves and that's okay too. I would encourage to the extent that I can, all the entrepreneurs out there to spend real time vetting their sponsor partner, pick up the phone and call their portfolio companies and ask them what it's like to work with them. That is the best advice I can possibly give because our partners in these businesses get to know us very intimately over the five to seven year time horizon and they can tell you where we've been great or where we need to improve. And I think we spend a lot of time trying to focus on those improvement areas too.

I want to use this interview, when the junior associates reach out, I'm going to ask they listen to it.

I will reach out directly.

I know that. But not yours. Just out there. Anybody listening or they come in and I'm going to have to listen to it and say, you got to outpitch Jason. That's your benchmark here. You got to outpitch him.

There's a lot of smart people in this world, and there's a lot of people with successful experience in their segments. And there is not one pot. There is not one cover. For every pot, there are various opportunities that yield great outcomes. At the end of the day, it's about creating opportunity, about improving our situation, about building great businesses, about improving the American economy, and about developing companies that we're really proud to partner with. And I can tell you I have partnered with the best executives I could imagine. I have become a better person. I've become a better husband, I've become a better father. I've become a better investor. And that's what this thing's all about. That's why we show up for work every day. And it's why I love what I do here at ta And I'm really honored that you gave me a few minutes to talk about my experience.

You got me fired up. You got me fired up. Wanted to hit harder. Now get the business going better. Before we wrap things up, you got to tell me, what's the craziest thing you've seen in M and A?

I've seen no shortage of crazy behavior over the years. Not from our partners, but just generally in the sector. What I would say is success can sometimes change people, and that will change their behavior in many ways. And I'd encourage people to prepare for success, create a happy environment wherever you are. Create a healthy environment wherever you are. Have people you trust, have friends who've been around from you from the beginning. And where that falls off the rails is sometimes where the craziness begins.

That include, like, running off of buying a private jet on the company card?

I certainly wouldn't suggest it as a financial opportunity. I think Bayance jets has been proven historically not to be a great investment case.

Give me an example. What's like the craziest thing you've seen?

Crazy takes a lot of different shapes. What I'd say is PE Hub and many of the other PE specific trade rags that also have a lot of VC stuff in it, have unlimited stories about people who have behaved in a fashion unbecoming of their company or industry.

What does that mean? Like Burning that place down.

Truth is stranger than fiction.

You go do negative PR in your own company or all these things you.

Can see threaten your investors, creating opportunities, threatening investors, physical altercations, you name it, it's been there.

Your own company and then people have.

Done crazy stuff again. I feel very blessed that I haven't experienced that and TA largely has not experienced any of that stuff. All of these are well documented and any story that you read is going to be more, much more compelling than the stories I can tell you. What I would say is think long and hard about your own individual goals and happiness and that's where the opportunities will lie.

I understand Jason want to get a good kosher answer, but I think that's a whole follow on I got to find the PE folks under the circumstance maybe evening and whiskey that we share.

The yeah and what I'd say last commercial for me. I also lead our North American associate recruiting program here at TA and we have some incredible people in this organization. We have 50 plus associates all over the world who come from a variety of backgrounds. So if you're interested in a career in private equity, I'd encourage you to reach out to our folks here too, because this is a special place to work. When I needed a doctor for my kids, these were the people that referenced it. They're coaching their kids teams or involved in their family's lives. This is a job that is meant to be both hardworking and intellectual, but gritty and scrappy and also gives us the opportunity to be great parents, great spouses, great partners, and great members of the community. So if anybody's interested, please feel free to reach out.

Keep an eye out for some solid talent for that role, please. If anybody listening this don't blow up my inbox, go to Jason directly. Go on his LinkedIn.

Check us out www.ta.com can they just.

Harass you on LinkedIn? Send you a mail?

My wife is an alum of LinkedIn and so I'm a religious LinkedIn user.

Awesome. I am too.

It's been a pleasure. Thanks for having me on and it's an honor to be with you.

Thanks for taking the time to have this conversation. I learned a lot. You've helped me become a better M and A scientist today. Those of you still with us, thank you for sticking through. We went on pretty long. 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 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 Reflection 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.