Using M&A Best Practices to Get Better Deals

This is a conversation with Brent Baxter, Chief Executive Officer, association for Corporate Growth, AKA acg, and Jeff Giles, VP Corporate Development at Coromain. With both their experience in executing deals.

And the power of networking.

We talked about how to optimize your M and A practices to get better deals. We also discussed the importance of relationships in M and A, how to deal with family owned businesses executing deals during COVID the role of technology and M and A in the future. This podcast episode is brought to you by Deal Room In a world of M and A, speed, efficiency and collaboration are key. The AZEC company faced challenges familiar to many Outdated methods led to time consuming processes which hindered deal potential. That's when they found a lifeline in Deal Room, a modern end to end MNA solution with Deal Room as a centralized collaboration, got real time results and eliminated excess. With Deal Room's help, deals are closed.

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Foreign.

A scientists welcome to the M and A Science Podcast where we learn from the best in M and A to uncover proven techniques for enterprise value creation. If you're interested in learning more about how to optimize your M and A practice or want to get involved with our community of forward thinking M and a practitioners, visit mascience.com and subscribe to our free weekly newsletter for the latest in industry trends, insightful content and community events. And if you want to keep up with us on the go, head to LinkedIn and follow M and A Science. I'm your host, Kisan Patel, CEO and Founder of M and A Science. Joining me today is Brent Baxter, Chief Executive Officer at the association for Corporate Growth, otherwise known as acg. Also joining me, Jeff Giles, vp, Corporate Development at Coromain, the association for Corporate Growth ACG is a global organization focused on middle market growth program, particularly in mergers and acquisitions and corporate development. Established in 1954 and has over 14,000 members from various sectors including private equity, finance and professional services. Based in St. Louis, Kor Main is a leader in advancing reliable infrastructure as a Leading specialized distributor with a focus on water, wastewater, storm drainage and fire protection products and related services. Corn Main provides solutions to municipality, private water companies and contractors. Today we're going to talk about how to find and execute better M and A deals. Gentlemen, how are you doing today?

Doing great. Thanks for having us.

Spectacular. Thank you, Kisan. Good to be here.

Let's kick things off with brief backgrounds.

Jeff Giles. I'm vice president of Corporate development for Corn Maine. I've been with Corn Maine coming on six years now. Was really brought in to lead our corporate development function, which for us means M and A and strategy. We've been quite busy on the M and A front. Actually just today and I checked, it's out there, it hits the wire. We announced our 33rd acquisition. We closed a company called Eastern Supply. So welcome to the Eastern Supply folks of the Corn Maine family. Prior to Korn Maine, I was in a similar role with a great local St. Louis company called Barry Wehmiller. It's a manufacturer of capital equipment. We grew that company, essentially doubled the size of the business in about five years, primarily through acquisition, grew to about 3 billion in revenue. Prior to that I was in private equity with a couple different firms. Most recently a firm on the west coast called Bertram Capital. Happy to be here with you guys talking about M and A and our successes here at Corn Maine and what we've got in front of us.

I'm Brent Baxter, relatively new in the role of Chief Executive Officer of acg. Just started month seven. Prior to that, had been an investment banker and actively engaged in ACG for over 25 years, including a lot of activity in governance and been chair of the board. So a simple way for me to put my role in context is just think of the chair of the board stepping in as the CEO to amplify on the introduction. ACG is the middle market M and A go to place. With over 15,000 members, we have a significant membership in the corporate strategic acquirer category. Huge constituency in middle market private equity, investment banking. And literally all of the M and A partners are extremely active in our association, be they legal, accounting, tax, human resource consulting, you name it, we've got it in our membership.

Awesome. I'm excited for this conversation. We got a nice blend from the strategic deal side to your background, Brent, with banking and then also with ACG as this networking platform to really bring together the community of various participants when it comes to M and A.

Well, and to round it out, I spent 20 years as a corporate guy. I guess I have the trifecta that's.

Why he was the perfect guy for the job.

Not too much of anything, just enough of everything.

I'm looking forward to it. I've been a member for 10 years in the Chicago chapter. This year is the first year to actually participate with dealmax. Brent, I know you gotta be excited about ACG dealmax coming up at the end of April this year. Can you tell me a little bit about what's happening?

We're very excited with ACG. Our premier event, DealMax, is coming up in Las Vegas beginning April 29th. We're expecting something in the neighborhood of 3,500 attendees. We're very excited about our scheduling tool which enables attendees to schedule highly relevant one on one meetings. Last year we scheduled 13,000 one on one meetings while that group was in Las Vegas. So it really has not only the broad brush appeal of being in the room with many of your colleagues, but also gives you the ability to dive into industry sectors to find relevant deal flow, to meet new M and A advisors, to learn what's going on in the whole world of artificial intelligence. And all those people are there. So encourage everybody to come. It's a great event.

I'm looking forward to it. We're partnering up. I'm participating as well. Jeff's going to be there. You're participating as well, Jeff?

I will be moderating a panel discussion as I did last year, and I'm really looking forward to it.

I'm going to say I'm a moderate panel and there's rumors that I'm going to be doing some podcast interviews on site. If you're listening and you're going to be a dealmax, hit me up, let me know, reach out so we can connect to dealmax. Kick off this interview. It feels like this market's only getting more and more competitive. There's deals to get, proprietary deals, but then anything out in the market gets more and more competition to it. What are you doing to get deals faster?

What we've really built here at Cornmain is, I would tell you, a proprietary, process driven approach to originating deals outside of a process. It comes down to a number of different areas. First and foremost, we built out very comprehensive market maps so we have a clear lay of the land in both our core markets as well as adjacent markets we've identified for expansion. You can find targets and develop relationships if you don't know the companies that are relevant there. So we spend a lot of time making sure that we've got a very comprehensive view of that, working in collaboration With a lot of our field leadership teams who are feet on the ground and competing with these companies, friends with these individuals and they know who they are. So that's first and foremost. And then it comes down to building relationships over time. It's very rare that you'll call a business owner or management team. They pick up the phone and say, it's a great thing you called, I'm just about to sell my business and now I'll sell it to you. So it's about being right place at the right time, but then again building that relationship over time. One of the things I think that's made Corn, Maine so successful is a bit of a network effect too. Right. Success kind of breeds success. So we started off after I joined and got our feet wet with some smaller acquisitions and started kind of ramping up with some larger ones and then really hitting on all cylinders. Have been very busy the last few years. We've actually had business owners that have called us and said, hey, I saw you bought XYZ company. I know those individuals and they're good people. You must be good people. We should talk. Obviously that's an ideal scenario, but it's about getting out there, building the relationships and ultimately doing what you say you're going to do when you're going through a process.

Jeff uses the word relationship and that's exactly the right word. Although M and A is always a ends in a transaction, the transaction never happens without relationship. The ACG has been able to take a pretty meaningful role. If you look at over 25 years with private equity emerging as an asset class, you now have roughly one third of all middle market transactions being a private equity purchase. And they've taken a pretty significant market share. Think about that. 25 years ago private equity would have been less than 10%. It is a very competitive market and one of the roles that ACG plays is to facilitate meaningful relationships or valued relationships. So how do we connect what is essentially a very inefficient market? How do we make it more efficient? There was a study, it's a bit dated, but consulting firm looked at like 850 middle market transactions over a period of time and there were 550 different investment banks representing those sellers. So ACG's role is to try to get relevant buyers with relevant sellers, relevant advisors with relevant potential clients. So being able to connect industrial related investment banks with private equity and strategics who are in those spaces is a really vital service of acg.

This is fun. We're talking about two different approaches. We have this proprietary approach to sourcing deals and executing on them. And then there's the network to tap into where you accelerate networking with the bankers and different facilitators of deals. I don't think there's a debate about which is better. It's all about best of both worlds. Can we talk a little bit more in terms of what's that approach to the outreach look like when it comes to deal sourcing? When we talk about relationships, how do you get to that point when you can ensure you're that first call when that time comes to think about selling?

It's a great question too. And there is a balance. The vast majority of the transactions we've completed have been the result of proprietary outreach. So no investment banker involved. That said, we have and will acquire more businesses that have gone through a process where there was a banker involved. And there are pros and cons to both. I'll tell you, having an investment banker involved that knows the process, knows what their seller's hot buttons are, and just knows how to work through it is extremely helpful. It makes it a much more efficient process. However, when we're dealing directly with a business owner, in some cases maybe the valuation is better, but it's also a challenge for them to manage the process while they're trying to run the business simultaneously. And these are generally great entrepreneurs and operators who have started, run and built these great businesses, but they're new to the idea of selling their business. It's sort of that toss up. You're dealing with an individual who's trying to run their business while they're managing the process themselves to sell it to you. So getting the information can be extremely challenging, but again, generally worth it at the end of the day, as long as you can stay patient and help them navigate all that in terms of being the first call just goes back to the reputation. When I joined Corn Maine, the goal was we want to establish the business as the acquirer of choice in the industry. You do that by obviously being active and successful. Our story's been pretty good. The performance has been good, both organically, what we've done through M and A, both in our core markets and adjacent markets. And then we went public in July of 21st, which was a fun experience. Got some more sort of recognition for the company and just that sort of momentum. And as I've said before, where success kind of breeds success, it's timing, it's relationships and it's doing what you say you're going to do, it's being forthright in everything you do and communicate. That's one of the things that I'd really take pride in. To make sure that all of our team, across an entire process, start to finish, we do not make commitments that we cannot stand behind. Otherwise, your word means nothing to you and you're not going to have an opportunity to continue doing the great things you're doing.

And I think really the role of ACG here, ACG I view as a toolkit that folks like Jeff can use to make their either their jobs more efficient or to deepen relationships. So back to that fragmentation, Jeff, for a while now, and they're looking to buy companies in all 50 states and they're looking to really be the consolidator of choice. You know, in perfect world, they'd like every investment bank or business broker to know who they are and what they're looking to buy. And they'd like every accounting firm that has clients in their space to know who they are and what they're looking for. And, and we're investing a lot in data and data connectivity in ACG so that we can deepen that knowledge base within our own membership so that we can connect firms like Core and Main and folks like Jeff with that pipeline. That's going to be a deal six months or two years from now.

Adding on to that, as I mentioned, we have acquired several businesses that were in a formal auction process with an investment banker. And in fact, there's one who sold us two businesses, which has been great. He's active in the space and built a good reputation there and ran a good process that was fair and ultimately we prevailed twice. Certainly there is value there. And to Brent's point, I'd love for every investment banker to just call us when they have a deal. We know that's not going to happen, but it's important that they know who we are. I would tell you, if you're a banker marketing business in our space and you don't call us, it's likely because we're on the do not call list and they don't want to sell it to a strategic buyer, which occasionally does happen. But for the most part, just given our size scale, what we've accomplished, we're usually on the list, but at that point we've got to prove ourselves. And again, it goes back to that relationship. Having a connection with the banker in advance certainly can be helpful. Not that they're going to give you any inside baseball, but just that they know how you operate, they can trust you and you trust them. It's very helpful. So there's great value in what ACG brings to the table. And those relationships that I've developed over, gosh, Brent and I probably met 15 plus years ago or something like that.

Yeah, that's absolutely right.

How do you get in the do not call list on for a bank?

So I'll take that one. As a former investment banker, it's usually because the client has an incorrect perception of the strategic buyer. They have something in their head and often good investment banker can educate them that the best buyer is often the best buyer. I don't know, Jeff, if that's your experience also.

Yeah, in my experience it's generally concern about confidentiality. I don't know about other strategic buyers, but I don't know that. I've heard of many cases of buyers getting a book on a business and then trying to poach all their people or taking competitively sensitive information that they agreed not to disclose when they signed a nondisclosure agreement and then acting upon that. There's concern about that in some cases, probably unwarranted. Our industry is large and fragmented, but it's also very tight knit. So there is some concern from that standpoint. There's only been a couple of cases where we were on the do not call list and if it's ultimately acquired by private equity, we know it'll come back around at some point.

So when we look at relationships, I'm thinking of a few different buckets here. We have a relationship with potential target company. We have a relationship with the network of investment banks to amplify our deal flow. We got relationships with the private equity firms because they could have stuff for sale and trade notes with. And then we have a whole bunch of different providers out there which cover all different things, diligence, integration, et cetera. Can we talk about some of the best practices, maybe how even the approach differs when it comes to building relationship with these different Personas?

For us, when we're talking about acquisition candidates, we've already done the legwork building out the market maps. We know who the good companies are that we think would be a good both strategic and cultural fit. So that's easy. You identify them and then you figure out the best way to make contact in a genuine manner. And usually they know who we are. Usually the worst message we get when someone, either myself or someone on my team makes a call or an introduction to a company is hey, thanks for the call. We're flattered, but we're not interested this time. If and when we do decide we'd like to sell. You'll be our first call. We love to hear that, obviously, and we've seen that play out in some of our historical relationships. And then it's just about keeping that contact, telling them, hey, do you mind if I continue to reach out every six months or so? And usually they're going to say yes. It goes back to doing what you say you're going to do. The fact that we built this great reputation in the industry, we've proven our ability to execute transactions, integrate the companies into our business, and create opportunity for all the people that have joined us through acquisition. So when other business owners see that happening, in some cases we've seen, like, hey, what about me? Don't leave us out of this. You want to join the team, too? That looks like a lot of fun. And when you're talking about investment bankers or other service providers, obviously that's got to be more of a shotgun blast for us because, you know, we don't have the time to. I don't know, Brent, how many investment bankers are there in the country right now? Yes. A few thousand. Yeah. And they're obviously not all trafficking in businesses that are going to be relevant for us. Back in my private equity days, as Brent knows, I went to, gosh, 1520 ACG events a year and met as many investment bankers as I could because we were investing more of a generalist, or at least multiple industry sectors as a opposed to core in Maine, where we're very focused, so there's just not as much bang for the buck. But triangulating around the investment bankers, either that I know or that have emerged, that are really focusing on our space, making sure that we've got a good dialogue and relationship and not just when there's an active deal, but talking about industry dynamics, talking about other businesses, other ideas they may have, that's always a good use of time as well.

You're basically coming in, sharing a bit about the criteria in terms of what you're looking for the market, and getting a sense of how knowledgeable they are or how they actively think about your space.

Exactly. And it's about being top of mind for those individuals as well. Again, even though they're not going to necessarily have a bunch of opportunities for us in one year or even in five years or 10 years, whatever. But when they have that one great opportunity, we want to be that first call. And if we've got a relationship built on trust and they've seen the way that we operate, we'll get that call, hopefully when it's a limited process.

About the E firms, there's definitely been.

Some activity in our space. I would say not probably as much as some of the other sectors where I've operated historically. We'll continue to interact with them again, we know if there's a PE owner in our space, at some point they're going to sell that business. It's good for us to obviously have a relationship there. Usually they'll hire a banker and run a process, but if we can have a relationship there that gets us either that early look, which is sometimes possible, that's always going to be beneficial as well.

When you look at the providers too, is that just more of the relationships for when you need those, or do you actually look at those deal flow too?

Less today than I did historically back in my private equity days where we're looking at business services, industrial consumer health care, and we can talk to lawyers, accountants, other service providers that have clients across those different sectors. And I'm not coming in with a I need a waterworks distributor. You have a relationship there, but they're going to have clients in those industries. For me now, it's probably less relevant, but you never know where a referral could come from. So I'm not turning away meetings or introductions to new people, but that's less of my sort of proactive outreach.

All right, Brett, I'm turning this back to you because I heard Jeff is spending a ton of time with the target companies and then obviously there's a lot of value in the network and the bankers, private equity and the various providers platform like acg. How do you best optimize that? Because I feel like there's a lot of different folks working in different type of deals, but to really get the best time for money and hone in on the right people, you know, the.

Best is of course doing your homework and being prepared. Jeff's acquisition or Core and Main's acquisition criteria are pretty laser focused and absolutely lends itself to a very proactive outreach where they can literally know who 99% of the relevant targets are in an industry. That's not always the case. And in fact, more often acquisition criteria, even for strategic Acquirers, are broader. ACG's role is to make that inefficient market more efficient. I'll use an example. Largest one of the larger pet care companies in America attends our DealMax event. And they attend that because in advance they're able to identify the private equity firms who have pet care investments, the investment banking firms who have pet care expertise, the law firms who have done regulatory work around pet care, and the accounting firms who have done Q of E on pet care. And in three days, you can have 25, 30 meetings, all extremely relevant to your charter as a strategic acquirer. And there's no place on earth you can be that efficient around an industry vertical. And at ACG side, we're trying to provide better data to the attendees so that we can help them curate those meetings. But the other side of that, and Jeff alluded to it too, you just don't know what you don't know. I can't tell you how many ACG events where I've been in a random conversation and all of a sudden I found someone that an attorney or an accountant that hasn't a client. That's spot on for an area that we, as an investment bank had a particular expert. I've had the phone ring back in my investment banking days from someone I talked to at a cocktail party like six years ago, and they say, hey, Brent, do you remember me? And I go, yeah, sure, I remember you told me, you know, you did a lot in plastic closure systems. And I have a client that has a now willing to come to market network is just invaluable. And you just never know where that investment comes from.

So my tip from you, Brett, is to make sure you do your homework ahead of time so that we can strategically book as many meetings as possible. Then don't discount the bar conversations.

Random conversations often we had investment bank was sitting next to him at DealMax dinner a few years ago, and he met a strategic. And they were looking for a certain company. It's a company he had known of for five or 10 years. He went home, called the owner. The owner said, sure, I'd be happy to talk to him. The investment banker got a nice referral fee, a very nice referral fee. And that wouldn't have happened but for that dinner at DealMax.

You actually remind me of one of the early podcasts I did where the funny story was he sourced one of his deals from the hot tub at a ski resort.

I think we all have a few of those stories. Yes.

Can we talk about some of the more interesting stories regarding difficulties you came across in M and A or just crazy stuff like that.

Just a crazy business. They don't close till they close. And we've all had that experience of the seller changing his mind the night before a transaction, or the buyer trying to change. Change the price during the closing. It's just a weird business.

Having been doing this for, gosh, I don't know, almost 20 years, whatever it is. There's always something that pops up in every transaction. Brent said earlier, you don't know, we don't know, and you can't predict. Every deal has some unique nuance and like, haven't encountered this one before, but it's a series of problems that you have to solve. That's really how I look at the entire diligence process. In addition to the relationship building and nurturing them along, you're just solving little problems along the way. And inevitably, in all the transactions, something pops up that haven't experienced before and you just got to work through it. This is more of a common one, and this may seem counterintuitive, but again, we're trying to be very forthright and above board in everything we do. And we're generally dealing with business owners who do not know how to sell a business. We make sure we tell them up front, you need to hire a good M and A attorney. I know you've got a relationship with your cousin or your nephew or your someone who helped you with your real estate leases. Maybe a great attorney probably is a great attorney. But if they're not an M and A attorney, it's going to be a tough process for all of us. Again, we're not trying to pull one over on you. We want to do a fair deal where everybody's happy or maybe everyone's just a little bit unhappy. I think they say that's the best deal. But we don't want to work through a transaction with opposing counsel that doesn't know what they're doing. It's just not good for anyone and it lengthens the process significantly. And there's the old adage, time is the enemy of the deal. And Brent mentioned that as well. We try to do everything we can to be as quick and efficient as possible. And if that means helping council get better advice and guidance on the other side, it's good for everybody.

It is absolutely good for everybody. We did buy side work in my investment banking days, and we were in a transaction, we proposed a working capital adjustment in the letter of intent, and the seller took that idea to his sole practitioner, CPA tax preparer, who said he had never heard of a working capital adjustment. They're trying to screw you and don't agree to it.

Oh, my God.

Four months later in the highly seasonal business, we were sitting at the closing table, he had $2 million more in his working capital, and he said, I should get that back. It's real money, isn't it? And our client said, asked and answered. You turned it down and we're not going to change now. That's a huge mistake for an advisor and 2 million out of pocket for the seller.

We're not going to discount the quality advisors you can need at platforms like acg. So I think that's also valuable. And this is like the reoccurring theme if anybody follows M Science podcast. You got to have a good attorney when you do these deals. That's one thing you really want to spend the time and have good relationships with. Without a doubt, the mom and pop deals versus bank deals.

Welcome to Jeff's world. Indeed, all family of businesses.

I'll tell you what though, there's something very rewarding about working with these individuals. Again, if they haven't built what we view as a great business that we think is going to be a strong strategic and cultural fit, we're not going to have a lengthy discussion with them. So when we get to the point where there's common interest in a deal and we've agreed to move forward, so. And we do a very formal process, even when it's a proprietary one on one. So we'll do a very formal written indication of interest. If we're in the right ballpark. We provide them as a secondary request list and we hone that into a LOI very formal written document, contains 20 terms that will flow into the purchase agreement. And we try to be very transparent about what that process is going to look like from start to finish. Otherwise it's going to be a big mess. Again, the challenge is they're running their business simultaneously. On the positive side, you really are able to develop these great relationships with these people and you're helping them achieve their dream. They built a business. Now it's come time for them to monetize it. And unlike private equity dealmakers that are doing it day in and day out, this is likely their one time to do it again. It's incredibly important that you're honest, forthright, not trying to pull one over on them and make sure they understand exactly what the process looks like. You're talking about working capital. Brent, in the previous role, we had an opportunity where we're trying to explain the working capital true up process to a seller and what that entailed. And we had a great little written example with some numbers and it showed how it's going to flow. And we probably had five at least separate phone calls where that was the only topic of the phone call. And every time we finished the call, they said, okay, now we get it, now we get it. Ultimately, at the end of the day, we closed the transaction and when we went to do the true up later, they were like, wait a minute, I thought we had a chance to earn that back between the closing and the true up period. That's not exactly how it works. I thought in the five plus times we explained it that you guys got.

It after the change of control. They get.

Yeah, that's good.

That makes sense.

That'd be a good one.

That's interesting. Yeah, yeah, they're interesting stories. These are fun to learn from when.

You'Re dealing with family businesses. They're so remarkably naive and unprepared. As an investment banker. Most of the firms you meet start their conversation with something like this. You probably never met a firm quite as unique as ours. We're really different than anybody else in our industry. There's some really special things you and the buyer are going to need to understand and they often believe it. I have 70% of my revenues with one customer and that shouldn't matter in the multiple or the deal structure. We don't have any control over our contracts and oh shit, they're going to ask me about that in due diligence. My goodness, why do they need to know stuff like that? So it's a big role for the advisors to prepare and for strategics to have the patience and the understanding to work through those kind of issues, because that is the nature of acquiring family businesses.

Adding on to that, another benefit of having a banker involved is controlling and level setting those valuation expectations. We've had many, and I'm sure we'll have more conversations with business owners that say, sure, we're interested in having a conversation. We sign an NDA, we provide our initial request list, we give them a formal written indication of interest. We've been fortunate that we've been paying generally in the five to seven times range. Historically. We communicate that. And so we put something forward and they come back and say, yeah, our 2. $5 million EBITDA business, whatever it is, is worth 10 times. That's our valuation expectation. Okay, let's talk about that. Why do you think it's worth that and what are the characteristics of the business that you think would necessitate a premium multiple like that? And there's rarely an answer, obviously that justifies that. It's usually, well, my friend sold his business that went for 10 times. Or look at what Tesla is trading for. And we've heard Apple or Instagram, you're like, okay, how is that relev what we're talking about today? And so you have to talk them back down to earth. And a lot of times they just walk away and say, okay, you guys aren't going to pay what what we want, so see you later. Now sometimes they come back to us, sometimes they go to a banker and they trade for a market multiple. What I tell everybody a business is worth, really anything that's for sale is worth what someone else will pay for it. While we can talk about average multiples and things like that, every situation is unique. It's rare where a business that we're looking at is going to be worth anywhere near the 10 times range.

Fair enough. Let's talk about executing deals. What about diligence? How do you stay agile, efficient?

That's something that we've really continued to refine as we've worked together as a team, as the company's grown and developed. Obviously started with a company that has a long history, but the Corn Main name and sort of company as exists today was really established in August of 2017. And then I joined in March of 18. And what I really did at the outset was, as I said, a very formalized process for how we're going to go about start to finish from sourcing through integration. We have over the last several years continued to streamline every single aspect of the process from our request list of, you know, sort of data requests, discussion topics, how we handle that. We've continued to focus on what are the key risks that we truly need to tease out in the acquisition or in the due diligence process. Sometimes you can get caught up in checklists and do we receive that? And you can get lost in the weeds on some of those things. And you have to step back and really look at why are we buying this business? What's the thesis here? And we always come at every acquisition, even though we're very nearly focused in our core here. Why is this business going to be a fit with Corn, Maine? So we develop a very specific thesis and then try and remember that as we go through the diligence process, testing the thesis and then making sure that we're focusing on the key risk areas and not getting lost in the weeds. We've shifted a number of our sort of discussion topics or even some of the info requests to the interim period between sign and close. Virtually every deal that we do. We will sign the transaction, announce it publicly, get on site with the team so we can start making them feel comfortable with the future acquisition becoming part of the Corn Maine family, explaining how that's going to work, providing them offer letters, letting them know that they're going to still have benefits and just trying to ease the anxiety. And then we'll generally close two to four weeks after that. Not everybody does acquisitions that way. Some do a simultaneous sign and close. We think that because of the impact on the people and the way the messaging resonates, the options are a business owner calls the team in or all hands meeting. Okay, here's the deal. We've signed the agreement. We sold to Core in Maine. You work for them now. Have fun. Versus we've signed a purchase agreement with Corn Maine. They'll be on site tomorrow. The transaction will close in the next two to four weeks. They're going to be here to answer all your questions, provide information. And there's always anxiety in any transaction, any acquisition like this. But we found that helps to ease that and it makes a smoother transaction for the people. And ultimately, at the end of the day, while we're buying companies that are distributors of critical infrastructure products, we're buying the people and their relationships and their culture. So we want to make sure that they feel good about becoming part of our family. And handling it this way has really helped.

That's like the whole crux of making this successful is that transition, putting people at ease. It sounds like you learned from time.

Sidebar, but important to that. So I've started an education series for all ACG chapter executives and directors so they can better understand the industry we serve. And I was to talk about just the evolution of due diligence. And I'll date myself here, but. And Jeff, you probably remember this as well, the war room where you printed off all these documents and you put them in a conference room and you filled these conference room with boxes and in came the accounting team from the buyer and the lawyers. And they spent days. And then there's been things like virtual data rooms, folks that have deal room technology where you can close deals virtually and you can control access and you can upload documents and literally hundreds and hundreds of people can coordinate a process, software for coordinating deals. The whole, I'll call it science that is developed around quality of earnings. It's really radically different now today than it was even 15 or 20 years ago. And that's the impact of technology of firms like yours, frankly, just the sophistication of what we call our M and A partners. The rest of the world calls them service providers, but they have really qualitatively changed the ability to get deals done.

I should speak more highly of service providers since I fall in the category, but I think that's one of the biggest things I personally found value from being an ACG member. It's like you really connect with the ecosystem. I thought it was cool to find. I'm curious your take on this, Jeff, but you find somebody that just provides a service you never thought existed. For me, it was customer diligence. And now I'm reining those people in when I work on deals because it's an odd thing for you to do as a buyer, but you can bring a third party in to help you get way more intel in a less intrusive of a way. Have you found anything like that? Any like niche providers that you've been able to lean on?

I'm probably not the best example for that. Just given most of what we do is in house. Even on our quality of earnings, we do the majority of those in house. We certainly do in some cases and will again use third parties for that. But given the size, scale, the team and the resources we have internally, we're able to work through the vast majority of our diligence without engaging third parties other than M and A Council. Now we do have internal counsel that we work very closely with as well. We've got great external M and A legal counsel that we work with on every transaction.

All right, for the rest of us, that may not be multi billion publicly traded balance sheet. This is a great platform. Providers that could help fill in your gifts.

Indeed there are.

Going back to the execution, I was curious about COVID So everybody's got an interesting story of how that may have impacted or made significant changes, particularly around how you had to execute deals.

We've got a pretty interesting story where I guess it was early March of 20, the word Covid had just started becoming a household name and events started to be canceled. And we were working on at the time, one of our largest acquisitions. Really just a spectacular company based in Northern California. Fourteen branches, an exciting opportunity, a really great fit. Probably filled in the largest geographic white space on the map that we had. And the cultural fit was incredibly strong financially. Obviously made perfect sense and we're super excited about it. And then Covid hits. We closed the transaction and I believe it was within like a matter of days. That's when they canceled the Masters and then the NCAA March Madness. And I guess this Covid thing is real, huh? Now you've got a company that's based in Northern California, and California was Highly restrictive in terms of COVID regulations and shutdowns, and obviously no one was traveling anywhere. We're all sitting in our newly constructed home offices, mingling with our friends at our garage. We're trying to integrate a business halfway across the country with no ability to be on site and meet and welcome our new team members. So that was an incredible challenge. I will tell you. We figured out ways to work through it. Were we perfect? No. But I think people understood it was an interesting time in the world and we did the best we could. The business sort of remains out there and the branches and the people we brought in are thriving. It's been incredibly successful by any measure, but there was a period of time where there was a lot of anxiety that was really tough to resolve. And we put together videos at the same time. We brought all of our in house training that we do in our St. Louis headquarters here, put that all online. Our training team did a remarkable job of making that all virtual training so we're able to provide that. Ultimately, when we were able to travel again, we really made it a point to make sure we had senior leaders going to visit all those branches, making people feel welcome and doing what we would normally do during integration months, if not further down the road, just to let them know, hey, we're still here, we care about you and how else can we help solve some of these problems that arose over time, but not looking forward to any other experience like Covid? So hopefully we can say that's in the rearview mirror and just move forward.

That's interesting how some are pretty dramatic changes, but then they really go back. We can do a whole podcast interview about all of that.

I'd like to take a moment. I want to pivot back to your earlier question about innovation, and this will be another kind of ACG plug. But that's my job. St. Louis has had a corporate peer group for a long time where folks like Jeff can get together on a regular basis and meet their peers. And one of the things I'd observe, Core and Maine really has an excellent human resource and culture integration process, which is something many acquirers struggle with. But as a company, Core and Main buys these relatively small family businesses and then many cases wants that entrepreneur to stay on and learn how to survive as a corporate person running a branch inside a larger organization. It's a very intentional process what Cormain does. And Jeff was able to share that with his colleagues in this peer group setting. And I can tell you they all learned something from that. So that's how you learn innovation too. It's really about engaging with your peers. Sorry for that, Jeff, but I had to throw that in because I remember that presentation today.

Any plug for Corn Maine and what we built is appreciated. It's interesting. I am now the chairman of the corporate peer group, probably the worst chairman that the organization has ever had because I think I've maybe been able to attend, I don't know, 10% of the events that we've had in the last couple of years because I've been traveling. Like, does nobody else travel anymore? Is it just me? Like, I'm always out of town during those meetings. We've had some great speakers that have come in and it is a really valuable group. And another aspect of ACG that I think is pretty special and somewhat even unique to the St. Louis market. We've always had a very strong corporate membership in St. Louis and that corporate peer group definitely adds value to the members here in St. Louis. Whether it's relationships that we talked a lot about or just specific sort of examples or case studies about something they encountered in a transaction and how it can be relevant to someone else who's working on something similar. I've seen a lot of those sort of offshoots like, hey, but you just said we need to talk about that. And there's a lot of great, just natural, organic learning that comes as a result of that.

I couldn't agree more. The most valuable asset is your peer group, I think especially in this industry because it's just there's no standardization. I've heard me echo that so many times. But it's just the industry operates in silos and you really have tough time getting access to it. The best you can do is get a good peer group and trade notes and learn from each other's experience.

Yeah, corporate development is really quite similar. No matter whether you're in a tech company or an industrials or a waste management company. It's about building the pipeline and getting deals done and managing process. There's a lot of generic similarity that I don't think has been as well socialized inside the corporate community as it has been inside the private equity.

I want to ask you about tech. Since we brought up tech, how's technology played a role in your M and A processes particular diligence, integration.

So Kisan, you're probably familiar with Deal Room.

Oh, never heard of it. What is this Deal Room?

Maybe if I get a referral fee I can share some more information about that with you. Look, we've used a number of different CRM systems and I'm going to just call it a CRM system for now and you can correct me and use the correct terminology. But when I was in private equity many years ago, started using salesforce.com and spent a lot of time highly customizing that for our needs. And that was really mostly kind of CRM. Going out and meeting bankers, logging meetings, logging all the deals, logging all the NDAs and really focusing on those metrics like how many NDAs did we sign with this banker and how many deals did we take to ioi loi these things. And you can look at it and help to prioritize which relationships spend time with. Given what we're doing now, that wasn't the right tool for us. We had another tool that sort of failed on us. So we've been working with Deal Room over a year now and it's a great user interface for our pipeline management. We're using it on a daily basis. Great for reporting out both internally to our board and then inside each sort of deal card within the tool. Manage our entire diligence process as well. So tracking all of our requests, all of our document management, it's been a great tool that's made us very efficient. You've got all the information in one place. Again, it's very user friendly. The learning curve for it is not steep. We've got team members that join the company. They're up and running on it in a matter of days, whether they're helping with diligence integration. We've got a lot of functional team members, as you can imagine, different than the way private equity does their due diligence and works through a process. We have 30 to 40 people from the company involved in each individual transaction. So everyone from our HR team, finance team, IT legal, all of those things, environmental, health and safety, they need to be able to understand how to use the platform, how to find all the information. That's been a great tool for us. It's helped us become more efficient, especially with the pace that we've had recently. It's just been a great tool to help us in that regard. I'm trying to figure out how I can use chat GPT to my advantage and I haven't found any great use cases there yet. So I'd love to hear if you guys have any ideas. I have been trying to loosely, as we're identifying adjacent markets, get me thinking about different things that I can look into sort of outside the box. AI is obviously a buzzword that everyone's talking about. And I think we're just scratching the surface in terms of what that's going to mean for virtually every industry. There's not a whole lot we're doing with it currently, but it's absolutely top of mind and going to be a focus going forward here in the near term. And what are the applications, what are the use cases there? How can we use that to be more efficient, provide more value? It's just changing so rapidly that you can't ignore it. We don't want to become Blockbuster Video. We're going to need to understand what that opportunity might look like. I know there's a use case out there for me. I just haven't found it yet.

I'm flattered, appreciate all the compliments. I didn't pay you to say any of that stuff. If those of you do get interested, use reference Jeff Giles give you a discount or something. But you know the AI stuff with chat, I got some stuff. I was just talking to the marketing team, a few different things. One, I wanted to just take public company data profile company and just start sharing examples because I've noticed a lot of people have different competency in how they use an LLM like ChatGPT. I noticed that internally, I noticed externally when I've been serving our customers just to figure out what are their ideas around AI. So I think there's one, there's sort of like how can you use the publicly available stuff? And then two, like in the product. Definitely. We've tested a bunch of learning language model. OpenAI stands to be the best right now, but we are looking at ways of incorporating it and it falls in two folds of how easy to analyze the data that you store in the product, which is a complicated thing of its own because most of them aren't designed to ingest a bunch of data at once. So you gotta blend a few technologies together to get the right information in there. And the second is more of the application data. All the things that are moving around people's activity. There's a lot of cool stuff. So I'm looking forward to following up with you. And I think we're going to be sharing a lot of examples just to help the general community get more confidence around utilizing AI in their daily scope of work. But I know it's like a big hype cycle right now, but I do think in the aftermath there's some pretty tangible things you can do with it.

I look forward to that. I do use it fairly frequently, but it's more like a serial replacement for me. Just Asking random questions about things or helping my daughter with her homework.

I was surprised I got my 10 year old kid using it and he was doing it with his homework. He's like, dad, I seen you do it.

I was like what? I will tell you maybe this is slightly off topic. Kids should certainly not be using it to say write me a five page essay on the Great Gatsby. But where I may or may not have used it in a use case like that is tell me six themes that someone could write about in the novel the Great Gatsby and then you have six kind of prompts that then you can share with your hypothetical daughter. If you haven't read the Great Gatsby in 30 years, that's a fair point.

That's why I think the practices are so important. I think that's going to be an important thing. Just to get grounds with the other.

Thing that I was going to touch on. Just going back the last, I don't know, 12, 18 months and we've been so busy and I've just been head down working on acquisitions, bringing great new companies into the Corn Maine family. I keep reading about the slowdown in M and A and I keep looking around, I don't see it but now I get it. I know just economic environment, where rates were and how that impacted valuations and then ultimately people, buyers and sellers finding common ground fortunately had not been a real issue for us. I do think we're seeing now with some stability in interest rates and certainly you've got record levels of dry powder on the sidelines. I do think that for those that haven't been as active the last 12 to 18 months, there will be an uptick in activity, hopefully not infringing on our space. I do think it's going to get busier here.

The data we see confirms that we own a data company called GF Data that gets transaction volume quarterly from the private equity community. No question transaction volume dropped pretty seriously. But the indicators are the folks we talk to the number of pitches are up by the investment banking firm. Private equity is beginning to say they're seeing more activity inbound and there's no question having the opportunity to go to a number of ACG events. Often there's an economist and the economists are talking about what Jeff alluded to stability or downward trajectory in interest rates and a massive amount of capital that is sitting there that that needs to get a return somewhere.

I've got a plug for GF data to a real life scenario. So one of the situations where we're talking with a business owner who had pretty lofty valuation expectations and he was kind enough to share a study that he had which was valuations of publicly traded software companies. It was fascinating. It was very interesting multiples there, off the charts as you can imagine, but zero correlation to a Waterworks distributor. I didn't share the report because I, I didn't want to do that, but I did share some snippets. So here's more what a distributor in this, this sort of size range over the last 20 years would trade for. You might find it's a more relevant data set. The numbers will be a little different than your publicly traded software companies, but I think we should probably talk here versus there. Very good source of data for us.

Glad it helped.

Very nice. I gotta ask you guys, what's the craziest thing you've seen in M and A?

I probably have a lot. I don't know how many I can share on this podcast here, but I will tell you one of the most unique things that we encountered in the deal, and it's totally unrelated to the deal itself, but they had a pet alligator in the pond on their property. We acquired the business and showed up and we had been there, but I guess maybe they hate it or something and. But you can't keep an alligator. We can't have an alligator on the property here. So that's the only time I've encountered that divested alligator.

We have an alligator.

Yeah. We had to find a special banker to help us divest the alligator. I don't know. Brent, is there an alligator banker at ACG we could meet?

I'm sure there is. I'm sure there's somebody that has an alligator story.

No doubt.

These M and A war stories at acg, I think Jeff and I have to host an after nightcap happy hour.

Or something would be happy to do it. Yeah.

And most of them really aren't for prime time publication. They have to do with alcoholic ex wives and all sorts of or alcoholic sellers or who knows what. It's a whole variety of things we've seen.

Yeah, we've been fortunate too. And because culture is such an important part of the integration process and ultimately success in any acquisition, we make sure that we're vetting all of the people involved early on in the process and if we've got major red flags, we're going to walk away. And we've certainly passed on opportunities where on paper financially it looks like it's going to make great sense. But culturally, just some of the interpersonal relationships or things we've seen, we know it's not going to be a fit. We'll move along. We have not seen, fortunately, a whole lot of crazy stories or situations involving people. The toughest thing is just the timing of it. As we talked about before is helping them along the way, understanding the process and really holding their hand and guiding them as they're going through what's a very emotional time for them and sometimes their family as well. Again, probably not for public consumption. Maybe the non recorded at the bar conversation at some point.

All right, so we're going to be getting together. Jeff, Brett and I find us at ACG Deal Max. We're going to be back, but make sure it's the after after party and that's where we're going to let loose on the unplugged M and A war stories Deal. Gentlemen, thank you so much for taking the time you've helped contribute to helping me become a better M and A scientist. Those of you still with us, thank you for sticking through. Until 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 at M and A function or or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.