What Elite Investment Bankers Do Differently in M&A

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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 subscribe to our free weekly newsletter. If you want to keep up with us on the go, head over to LinkedIn and follow M and A Science. I'm your host Kisam Patel, founder and CEO at Dealroom and chief scientist at M&A Science. Joining me today is Nash Patel, Partner at PJT Partners. PJT is a leading independent investment banking and financial advisory firm traded on NYSE under pjt. Today we're going to talk about the role of investment bankers and M and A Nash, how you doing?

I'm good. How are you man?

We are here live PJT World Headquarters Manhattan right off Park Avenue, New York.

City New Wall Street Midtown.

Thanks for taking a break from all the deals you're working on and have a conversation with me.

This is a long time coming. I think we met 10 years ago when you were getting up and running.

I don't even know, back in Chicago. Yeah, maybe I started Deal room back then.

Long time ago.

No podcast back then, no podcasts. I've seen you go from your junior banker to jumping around firms and now look at you.

Exactly. JT partner, long time coming. Glad to be here. Thank you.

I was going to ask for a little bit about your background.

16 years as an investment banker so far. I started at the beginning of the financial crisis. I still remember sitting and training. September of 2008. World was collapsing around us. I had the benefit of being in a financial institutions group. So I had what I call the front seat to the end of the world, but immediately got the benefit of learning what cycles look like. So 16 years in industry, eight plus have now been at PJT which is about the age of the firm in terms of its kind of public profile. Always been focused in some way, shape or form on financial services and fintech. So I'm one of the partners that leads our efforts in that broad industry vertical. I spent time at the bulge bracket prior to pjt. So two different firms that are now one spent time in coverage groups, spent time in product groups, spent time in New York, spent time in Chicago where we met. So I feel like I've seen a good amount of investment banking across a couple different slices here now all around.

Bulge Racket boutique, now Elite boutique.

Yeah and I was a career switcher so I did not do this out of college. I came out of industry after my MBA at Kellogg. I had the fortunate benefit of joining full time investment banking firm. But before I worked at two companies that both played a big role in my decision to become an investment banker. One was AT&T, which for those of us who ever follow the telecom industry at&t was together then it got split up and it slowly came back together. I was part of a firm that was doing a lot of the bringing it back together. So AT AND T was actually a business we acquired, took the name. So I saw a couple big transactions there, saw the impact that an investment banker could drive along with management and a board almost from the outside in relative to the work I was doing internally. That had great impact but not to the size and scale and significance of those types of transactions. And the second one was Discover Financial Services, great company in Chicago. I was part of the team that was setting up finance department to spin it out in Morgan Stanley, a separate publicly traded company. There again I saw the role investment makers play and setting a company up for long term success. And look at that performance of Discover after it came out of Morgan Stanley. It really was one of the great value creation exercises of a carve out separation of a business. Had some interesting opportunities that led me down this path and they've all played out pretty well.

That's really interesting and awesome that you got that exposure that actually inspired you to get into the banking side and you stuck with it because a lot of people don't do that. They do it for a few years, they get burnt the hell out and get the hell out.

Yeah. I have an unlimited amount of advice for junior bankers on surviving the ups and downs of this industry. It's a tough one.

Pjt. I've been on record and I've told people like if I ever went back to banking, that's the only bank I would actually consider working for. It's got quite the reputation. Maybe you can add a little bit to that.

It starts with our backstory. Paul, our founder and CEO and the pjt. And PJT was a best of breed investment banking M and A deal professional and spent 30 years at Morgan Stanley perfecting his craft and rising up the ranks really fast. M and A all the way up to running half the firm was co president of institutional securities. And then when Paul's time at Morgan Stanley came to an end and he found himself looking for what he was going to do next, clients basically decided for him. They called two of his biggest clients called while he was on his own and he reminded them that he was no longer with Morgan Stanley. And they said, yes, we understand we're calling you Paul, not Morgan Stanley. Fast forward a couple months or a year and he found himself on the M and A league tables by himself as an individual. I don't recall another time I've seen that. I remember way back when that happened thinking wow, who is this? But that's the caliber of leader that sets the tone for everything that we are and everything that we do. And so PJT I think is an offshoot of that experience which is you don't need to be at the biggest firms in the world to deliver the best advice in the world. Those of us who joined here who didn't grow up here, from the very beginning we all came from a bulge bracket firm. We developed the skills, capabilities to advise the biggest companies in the world. But we're now doing it from a much more intimate but also independent format, which is a big part of what we are. And so it's a culture of excellence all around. I think that's what attracts people to want to join the firm. I think that's what's slowly allowing us to win more and more clients in the industry and establish a brand. And amongst a universe of companies that have decades, if not 100 years plus.

Of history, there's a lot to that. I think there's even more elements in that story too. How the firm really came, what it is today. That's for those listening to go look up Paul Dobman and if you get a chance to see any videos. He doesn't do a lot of appearances, but phenomenal the way he communicates.

He's been on Bloomberg a couple times this year. The topic of what's the state of the M and A market? What should we expect? Coming around the corner has been a big one and he's been tapped a few times to comment on that.

Why does everybody hate investment makers?

I think it's because any other industry, there's a wide range of practitioners who have different standards that they stand behind. I'll parrot our founder and CEO, Paul. Reputation is everything and how you conduct yourself is the most important. We kind of hold that out front as our bright line. We will not cross the line when it comes to reputation. That has to be the basis on which we conduct our business. The reason they hate investment bankers is because there's going to be people who push deals. Maybe they push bad deals, they push prices, maybe inappropriate prices. Why? Because at the end of the day, they're getting paid. They want to get paid. And they're motivated more by the short term gain of a fee than they are the long term relationship or serving as a trusted advisor. When I got into this business, I had my own cynicism. This was 2006, 2007, when I was ideating around a move into investment banking. It was like a hot industry was moving really fast, a lot of velocity. Balance sheet was driving quite a bit of activity. It was all about who can lend really well. And I had a question that I asked a lot of people. Relationships even matter anymore. Is the trusted advisor still a thing? I'm a bit of a purist. I got into this to find a way to be that person that someone can rely upon, that they call when they can't get their head around a problem or a concept or a question that they would want to lean upon. And I wanted to know if that still exists. Now the good news is, yes, it definitely still exists. I think PJT and firms that look like us are proof positive. We can provide no utility to someone if they're looking for us to lend them money. We don't do that. Can provide very little utility to someone if they want us to lead an ipo, we don't do that. But we don't do that because we want to be completely independent. So that at the end of the day it's like, what's the best advice for this person now and for the foreseeable future as part of a series of things that we're probably going to work on together until you push all that out. If you don't think of it from that big, broad, like lifetime value of a client perspective, and you're just like, I'm going to eat what I kill this year and I got to just print some tickets and I want to get some deals done and I'm going to push. You're going to get a bad reputation. Now there's other, I think, attribution that maybe bankers participate in around M and A. Like M and A can go poorly. Your podcast is a great example of people who figured out how to do it. Well, there's that many more people who do it for the wrong reason. Whether it's empire building or ego or they think it's the right thing to do, but they don't really have a real fundamental basis or they've forgotten about things like integration. It's like fun to do the buying and the diligence and get the deal announced. But then someone's got to own it, someone's got to run it and someone's got to realize all those synergies that we model out. And at the end of the day, we're supposed to be fully aligned. That's the philosophy. It should be that we're fully aligned with the success of our clients. If the deal goes sour at some point, they're going to say, hey, how come the banker didn't warn us about this? It was all rah, rah, boom, boom at the right time. That's part of the reason that they can get caught up. There's a wide variety of actors. Pick your ecosystem, pick your industry. There's going to be that. And that's something that we have to contend with and deal with on a day to day basis. But the way we solve for it, the way I solve for it is hold myself to a very high standard.

That's Fair. There's a good portion of bad bankers, but there are some good bankers out there. I always thought it was the funds flow. When everyone sees that line, Adam, on how much the bankers are getting, that's what gets. That pisses the lawyers and everybody else off.

You know the lawyers, they might. I'd argue that everyone is charging an appropriate amount for the service they deliver. But look, we could be like real estate. Those spreads are very attractive on a transactional basis. And having bought and sold a primary residence or two, I always kind of wonder how, I wonder what this fee is really going towards.

It's. Yeah, it's a model where you take it on contingency. That tends to be what it is, a little risk versus reward.

But I will say that on like on the fee point and it's important thing that we consider all the time. We strive for alignment in every way that we can. We have a business to run. Of course there's market rates for these things. We compete with others. So if someone really is price sensitive, they might find their way to one of our competitors who will do it for less. One, I'm a big believer of you get what you pay for. But two, when we structure fees, a lot of it's success based. And that's what when you point at criticism like a lot of people will do, work around a transaction, they'll get paid no matter what. The accountants, the consultants, occasionally the lawyers, they will get paid no matter what we get paid in the vast majority of instances when the client gets paid on true success on close.

Let's talk about the primary roles and responsibilities of investment bank because I think they come in different flavors and I feel like a lot of folks are very familiar with sell side shops. That's primarily what they do is run an auction process and probably try to make it as competitive as possible. And that's the sort of staple stereotype. What you started describing goes beyond that. Can we talk through of what that profiles look like?

Yeah, I think it maybe starts with answering the question through my frame versus the one you just said. I write like buy side versus sell side. And what are all the bits and pieces that a banker does? When I think about that prompt, what's the primary role of investment banker? I pull way back and I'd say that's to serve as the trusted advisor to the client, whether that's a management team, whether that's a board of directors, whether that's both and be the person that brings forth a whole depth of experience, whether industry, whether M and A tactical negotiation, strategic, all of the above. And brings forth all that relevant experience to help create frameworks and the ability to help your client fulfill their duty, their obligation and their goals. That's our role. There's stuff that we are more qualified to do and there's stuff that we need to partner with other professionals and advisors. We work very collaboratively, for example with lawyers. I know quite a bit about how law touches transactions. But I also respect and understand that my partners on the legal side are the real practitioners. And so we work together. But at the end of the day, what we're doing is the same thing. We're bringing our collective experience. What's market, what have we seen before, what's worked, what's failed, what issues are going to come up? How do I think about this? How do I take a complex question and simplify it so that any given client can actually figure out how to develop a point of view? Because that's what we are at the end of the day. We are agents, not principals. We are here to facilitate the decision making of clients. It's not our decision to make. I hold that as our role. Our role is like a catalyst to help people really do their job as well as possible. Then you can break it down into sell side versus buy side. And we take a broad perspective. I mean, we help people structure partnerships, we help people raise equity capital, we help people think about primary versus secondary equity raises, we help people figure out the right capital structure. So it's not purely M and a transactional the way we think about it, but it's always advice based and it's always delivered by a team of professionals that have a really deep body of knowledge, body of experience that they can bring to it. That's how I think about our primary role when it comes to responsibilities. Look, there's tons of tools in the toolkit. I've touched on some of this stuff so far already. If a client needs to know what the industry landscape looks like, we should be able to show up and talk about who are the different players, who's up and coming, who's struggling, who's who's valued, how and why, what's the market's reaction, been to recent transactions, good industry landscape type content. Then there's like the analytic portion which goes to. It's not, hey, can I do a dcf? You can find a free DCF template online and anyone can technically do a dcf. It's the question is how do I take analytic tools and generate actual analysis, which is like what I Talk to my junior bankers about all the time. It's like, look, it's not just about, can you calculate what one plus one is equal to? It's what does it mean? Mean, like, why are you adding one and one together? And how is it actually helping our client understand a problem? We take various methodologies, apply them against things that have been tried and true, things that stand up well in court. Like, we package it all together and actually use that to deliver the advice. That's the key part. It's really not the formulaic, check the box stuff. What you described as like the typical sell side process. I would put at the responsibility level of a VP at our firm taking all of that execution, but putting insights, advice, tactics on top of it. That's where you get a real, proper, well trained senior banker advising you.

Let's talk through that. It sounds like we're going. And I'm getting a sense this is becoming advice oriented, very strategic. It's not transactional. It's not like, hey, Nash, I got to sell this business. I want to get the best price possible. There's a lot more into that view, and I'm getting a sense of influencing, shaping strategy. Talk me through that. Teach me how to get in the company, whether it's through the executives or the board. And how do you influence and help shape that strategy?

So, one, what is M and A? Is M and A a separate capability or is it yet another tool that exists to affect strategy? I'm of the view that it's the latter. You hear about organic versus inorganic, and there's organic strategy versus inorganic strategy. Again, I take a step back and I say, like, companies should have a strategy. There's things that they want to do, things they want to do now, things they want to do later, things they want to do way down the line, things they're worried about, that they will have to address again now, medium term, long term. Then the question comes up is where do I need to deploy capital to affect those? And do I need to spend it on opex? Do I need to spend it on my people and like, organically go after these strategic goals, or do I need an accelerant? Is it enough reason that says I can't do it as fast as I want to on my own? I need to make a bigger splash. I need this capability now. I need to do this right now. That's where MNA becomes again, a tool, a tactic that helps affect the company's preexisting strategy. So then the next question is, how do you get in with a client and help shape the strategy the old fashioned way. Knock on doors, referrals, meet people however you can. That's how you start off when you don't have any relationships. The good news about our business is a junior banker, you're working on deals. Guess what? There's gonna be a counterpart at the company that you're probably all in the mud together. While the senior people are talking higher level concepts or architecting the overall transaction, all of those people will go somewhere. So without even thinking too hard about it, if you do a good job and are a good junior deal team member, you've actually slowly started building a network. You started building a relationship base. And then as you get more senior, you can complement that by clients now who are very happy with you, who've seen you in action, who may go to other companies. So your network can port company to company. So it's not company specific, it's person specific. And that's how you crack in. Is like one relationship and one individual at a time. You leave behind a really good impression and slowly they will come to realize that interacting with you brings value to their day. And that should be the goal. When you think about your network, networks are as good as what you put into them. Relationships. Think about any relationship in your life outside of your parents. Like that you had to go out and find and build and develop. Think about a spouse, think about your friends. Relationships are only as good as what you put into it. Like how much value you put into it. Investment banking, relationships, penetrating the C suite, the exact same thing. If I show up and I'm a taker, guess what? That's not that useful to people. Maybe I can get lucky and someone's just like, I'll throw you a bone for this and that. But you're not really building a relationship that becomes transactional. Again. But if I'm a giver, I show up and say, hey, I found this interesting. Hey, you want to brainstorm this idea? Hey, I heard this about what's going on in this space. Hey, I have some insights into this transaction now. Hey, by the way, I've done some analysis. I think you might find it interesting for your day to day. That's a giver. So you contribute value to people and then they just want the interaction, it becomes useful to them. And then they become sources of referrals. They'll say, hey, you should talk to this person. At this point, a good portion of how I meet clients is because someone else said, talk to Nash. You need someone struggling to figure out how to like decipher which banker to listen to. Go talk to Nash. Which is great for me because it took years to get to the point where there was at least a few people out there that were saying things like that. That's the work now. That's the work is to keep investing in the network and the relationships.

So I've made a point to connect with you at least once a year over like 10 years we've known each other. I would look back and saying there was the consistent theme I would see is getting the market info. Like you'd always give me what's the market doing and especially I'm always more in the financial tech services area. I would tell you, I'll give you an update on where the business is. Here's the growth and you've obviously seen it nothing for a long time now. It's turning into something. But you'd have ideas. You'd say hey, checking out Money20 20 and get into this network and stuff like that. And then you'd plug in intros. You'd plug in who's covering businesses that are closer to the hardcore business. So you connect with some folks over there. That's what I got. You got market ideas and intros now for the bigger companies. Are you doing something different? How does that approach change? I know I got the pre friend advice, but what does that look like when you're.

I like to think everyone I call it in some form is a friend. Look, it's the same thing. It really is the same thing. There's things that are useful to a person. If I came to you and said here's how debt is pricing, you'd be like thanks but that's not that helpful to me right now. But there's other people where that is relevant. If I went to someone who sits in a cap market seat, I had a client whose principal job is to go find ways to finance the business to raise money. I say hey, would you like to meet the corp dev person from a completely unrelated company that might be off the mark? So it's really about what do I know about this person and is there something like that I've banked inside that is useful to them and that's what you try to do. Part of it is a general philosophy. You get back 2x what you put out in the universe. So that's just my point of view. Someone needs help or if I have an ability to help, I try to. And so then it just becomes what's the most useful look, big companies have a abundance of different needs, so it depends on who you're talking to. But I think we touched on a couple of things. Some people are going to be wondering what execution looks like on capital raising. There's going to be some people wondering, hey, I've been trying to get to this person, can you help me? Like we just. Actually it was sitting in this room a few days ago. We met with a growth equity investor and I had pulled together three of my colleagues so that he wasn't stuck talking to me. But mostly because his discipline in terms of what he focuses on covers three or four different industry verticals that collectively my colleagues and I cover. So we showed up, we came up with a couple of ideas. There was a few names where he had some awareness of it, but he didn't have the connectivity. Of course we offered it up. Yeah, you should talk to them here. We can make the intro. We've built a relationship with them. We can call them and say, hey, we think this is a good use of time. So it depends on what each person needs that kind of drives it.

Do you have like an example story time here?

Yeah.

About how you've worked with the company and really influence shaped their direction.

Yeah. I'll give you one or two, smaller to bigger, like on the smaller side. I got a call from someone I covered at Fintech and that person told me this isn't actually about my company, very popular large cap fintech name. It's not about my company. I'm actually an investor in this business and I think that they would benefit from meeting some people in the wealth tech ecosystem. I know you know that space said sure. So he introduced me to that founder CEO that he had invested behind and we got to talking and he explained to me what he was looking for and from that I generated a set of ideas like these are actually people I think would really enjoy meeting you and likewise you would enjoy meeting them. And originally it was around distribution. So find a way to create a distribution relationship. He was creating a specific wealth management product that he needed help getting out to advisors, getting out to retail investors. He was really good at creating the product, not good at distribution. I wish more fintechs thought about how to partner with distribution versus struggling with scale. But again this is a person who kind of knew about this and I made an introduction to another fintech in the wealth tech space. Lo and behold, few weeks pass and they ultimately decide that they should just join forces in the truest sense, which is he should sell his company into that fintech I could probably pick up cross a dozen public companies where it is not even transactional like specific idea, focus on it. The nature of our engagement. It is much more strategic in that it's I know I need to do something. I don't like how I trade today. So help me figure out how I should run my business, Discuss my business, report my business but also what are the ideas and strategic alternatives that exist for me to go out and go and chase and really get smart on so that I can address those things that my board cares about, that my investors care about and the like. That's how we help drive strategy. It's because people identify, maybe it's because we help them identify it but they identify that there's a deficiency in how they're trading or how they're performing. Like they're not optimized and they can feel it. The organization knows when it's not optimized. And so then we help them think through okay, can this be solved with M and A? Can this be solved through other means? Have you thought about this operational exercise? You thought about that operational exercise? So that's again without getting into like specific client lists but across a couple different industry verticals. That is the exact nature of dialogue that I have on a day to day basis.

Very different. I'm like liking you a little more. It's a little more.

That's a low bar I'm getting.

I'm getting a sense of being a real partner strategic advisor as opposed to the cliche transactional banker where it's all about the engagement letter and they're calculating what's the, how big of a house they can buy from that. He talk through challenging and thinking through strategy but then it's also execution. It sounds like you're just hey, let's pick up the phone and get the conversation going.

Clients like to know that someone cares about what they care about. Go back again all the way to some basic concepts, independent conflict free advice. Putting ourselves in our clients shoes. They might as well have this written on the wall. That's what we all subscribe to, at least to this firm. And so you have to play those roles. That's the other reason by the way that it was a very nice transition for me coming from the bulge bracket is we weren't containerized to. You can only cover like these three companies that you've been assigned. Like you cover an ecosystem, you cover an industry. Which means that we can go where our clients need us to go. Like how many large cap clients are tired of a banker showing up and pitching the mega cap deal that's going to earn the most fees because that's really what the banker wants to talk to them about as opposed to, hey, can you show up and talk about what I've told you I'm focused on. Sometimes people are in tactical bolt on mode, sometimes people are in transformational mode, sometimes people are in I'm not going to put my head down mode. But I need to know if there's things changing in the industry that means I need to pick my head up and reconsider how I'm spending my time. Big question for CEOs. How much time should I be spending internally versus how much time should be spending getting to know potential buyers, getting to know potential private equity firms? So there's a balancing act. All of that now fits under our remit of places we can go and help. And that's because we cover companies large and small. If I think about my transactional experience, I've advised on three of the most consequential deals in financial services across three different industries. Huge industry shaping deals. On the flip side of things, I've helped founders who started a company still own almost all of the equity in it get that once in a lifetime exit. And they were selling by the way to a large cap company. So they needed to be as well equipped to deal with that big buyer as that big buyer was equipped to like deal with them. And so you only get that kind of penetration into and these are all in financial services and fintech industry. The only reason you can do that is if you had that flexibility to go up and down the spectrum. As some of our pitch materials that we'd craft in the early days, our original messaging was like we have the big firm capabilities in the small firm field. We are your friends, we are the people you trust and rely upon. But make no mistake, we have all the sophistication and capability to advise on the biggest deals in the world. That's important. To be able to really cover an industry and cover a client, you need to be able to go where they need you to go.

Yeah, you mentioned that companies could be at a different place and whether they're doing the bolt ons or need to think about doing something transformational. You mentioned for the executive thinking about their time spent internally versus externally, what have you seen around that? Is there an answer and does it vary by company?

Varies by company, varies by stage, varies by based on how they're doing, based on their goals. That's what's super important. You cannot show up and give a cookie cutter response like, yes, of course you should be out there courting because deep down inside, I secretly want you to hire me to sell your company. And if I get you out there talking to people, maybe someone will come in and lob in a, you know, bid. Okay, that's not that useful because what if the company's not in good shape to be sold? What if the market multiples or the market sentiment around that business is not constructive? What if the company has plenty of Runway? And really the question is, what do I do for six months versus what do I do right now versus what I do a year from now? It lacks like that context and that thoughtfulness. And that's where every specific situation dictates a different piece of advice. And that takes time, it takes effort, it takes thinking. But that's actually what makes this job really interesting to me. Like, it's a constant Rubik's Cube. You get a new one every few minutes to solve.

That's why big differences between working on with public companies versus private companies.

Not much in terms of like, I'll call it like the building blocks of transaction activity. Hyper conceptual level. It's the same thing. What are you trying to do? Why? What are the facts? What are the financials say? What is the market telling us? What's the appetite? That's all kind of the same, I think, with public companies or private companies. A couple obvious differences. Public companies usually can be resourced better. Maybe the quality of their information is higher, maybe the amount of experience they have in M and A activity is greater. So you can tap into some institutional knowledge versus private companies. Big private companies can have all the same characteristics, but small ones can have none of those. Secondly, when you work with a public company, chances are you're working with a board or a management team where they've done this before. This is one of a series of transactions they would have worked on across their career. And they are professional corporate leaders and they're great. They are the right people you want in that seat. But when you're talking to a founder or someone who's going to have one, maybe two exits in their life, it takes on a whole different scale in terms of headspace. Again, that's not to diminish the role that a board member or a CEO of a public company has. But it's different if you own all the equity. And ultimately you're just deciding like, my lifestyle is intertwined in this. What my kids think of as where my parents Go to work is tied up into this takes on a different. So in those instances you can find that you play equal part, shoulder to cry on, therapist friend as well as sophisticated financial advisor. So that's another difference I think exists when you go into like specific types of private companies is that there is that extra element that you need to be able to bring up. Then there's like other differences like valuation methodologies and the like like depending on the profitability of the company or the sector that it's in the fact that public companies have a daily mark as to what the market thinks that they are valued. Whether or not that's compatible with management of the board's view. It tends to drive a lot of transaction activity when you're private. Like there's a opacity to valuation so you're looking at like prior marks or different rounds and things like that. So there's like a little bit of data element differences that exist as well. But I think of advice on this holistic level. Like I said at the beginning, we bring the experience, we bring the knowledge, we bring the data, we bring the analysis and we create frameworks to make good decisions. And that is the same for a public and a private company.

Let's test it out. It's not all talk. Okay, we're going to role play one of our catch up calls.

Let's go.

We'll take all the niceties out to save some time here. The update. It's been a year since we last talked and growth is still doing good. We mentioned last time we had a couple of really good years hitting 60% year over year. We closed out last year 5, 3 million revenue. We're at 10 million run rate. We're going to close this year out probably about 8,9 million revenue. At the end of last year I got a new COO restructured the whole management team, got a new VP sales, VP marketing, cfo. They've all come from backgrounds from venture backed companies. Scaled up the 50, 60 million revenue. I got a lot of confidence that they're going to be able to get this to 25 million ARR over the coming two years.

Exit ARR will be 10, 8 to 9. 8 to 9?

Yeah, we should 8 to 9 run rates sitting around 10 right now.

Okay.

So I really confident they've put a whole new operating framework in there, really restructured the teams and you can tell last quarter was our record quarter and the growth is going in the right direction. They're acquiring great talent. I have high confidence in the direction they're going in terms of organic growth. I'm removed from operations. I get to do podcasts and hang out. But now I'm starting to learn how to wrap my head around thinking more on the business as opposed to in the business. So trying to network with other CEOs, get an understanding of what those conversations are, the ecosystem to better look at the whole picture. To be truthful Nash, I'm like dying to do deals. Like I come from a background like you doing deals and I haven't done a deal in a long time. I talk a lot about doing deals. I but I as sure as hell am dying to do deals. I would like to see this company get to 25 million ARR so we're less looked upon as an acquisition target and more looked upon as a potential platform. And at that point I would given that we have employees with options in the company that we recap this business diluted a minority stake around 30% and let's say some round numbers keep the math simple. Obviously the time may be a little different but if it's 25 million arrangements looking at 250 in terms of potential valuation. But if we could introduce something like 50 million of primary capital, 25 million of secondary capital, 50 million would be a strong position for us to go out and do some deals. I think this is where we would see that organic growth still continue but really want to get more aggressive. And I think there's a couple other things I've been thinking about. One is doing deals. I noticed there's not a lot of stuff in a really core area and they're competitive. We've seen a lot of activity in our areas. So one I'm really interested in carve outs. If we can look at leveraging these relationships that I get through these podcasts with senior executives that's these large strategic companies. If that's an area to build this company into the M and A platform, that's one area in terms of inorganic and on the organic side. Because I did have a conversation I don't know if Nick Schumach, he's VCO at Berkshire Capital now he's got his own firm, Schumach and Co. He's been doing a lot of deals with strategics on these kind of minority recap positions and its valuations have been really good. They obviously want to push for a call but then it's negotiated on hitting some certain milestones that you can remove that. I thought like that's pretty interesting and the reason I'm going back to that is looking at a strategic partner for the distribution side. Because right now we're selling really well into these large strategics. Got a number of Fortune 50 companies but also rollups, doing a ton of rollups. The next phase for us would be sell directly into private equity, which I feel like is a whole new go to market and everything. But is there some kind of partnership that already has those relationships into those firms where they're selling some kind of LP relationship CRM product which may be one of the businesses like S and P has. So that's kind of where we're at with the business. And when I'm looking ahead around the corner, what do you think? Am I missing something?

Let me ask you a couple questions. How much of that 50 of primary do you need to fund growing the business from 8 or 9arr. To 25 to 30?

I don't need anything right now, I guess. Add that context. Still bootstrapped?

Yeah.

Haven't raised any money. Still got good cash reserves on hand. We got about one million and a half cash on hand. So I'm confident that we can continue bootstrapping to reach that 25 million ARR. I think that's a good goal too.

3X in 3 years is a great goal. It's a great goal. Here's what I'd say. I get all the desires and I think that's a great plan. The thing I care about and I like the most is I can organically grow from 8 or 9 to 25 plus in three years. And I have the team in place to do it and I have all the capital I need to do it. The reason I say that is when you start talking about raising primary, we start talking about valuation. At what point along that journey you raise that primary. Plus that big secondary component you're talking about is going to be important and you're sitting in between a place where you're a bit small for growth equity to where you start to get into the sweet spot for growth equity. But you don't need the money. So should you be spending time talking to investors today? I'd say no because it's more important that you get from 8 to over 10 and towards 20 so you can tap into a more ambitious, a more deep pocketed group of potential investors who get excited about taking the company from 25 to a hundred if that's ultimately the goal, like if it's to keep growing. Second, I think raising equity capital on spec, if you have no need for it, is really challenging unless you're in A handful of specific industries. If you're a gen AI startup and I know you got some great AI capabilities, you're trolling out, but none of what you articulated to me, the 50 that you want to raise is for investing in product or investing in the company. It's for M and A. So I say first find your M and A targets, talk about that in a second and then if you need capital to get that deal done, you show up with that package. Because then you're selling the pro forma, you're not selling your business as a standalone today and you get no credit for the fact that you're going to go Deploy successfully that 50 million, maybe you can get a little bit of credit for it, but again that's going to require quite a bit of information. Pipeline of deals, certain deal being able to get them, the price you can get them, how well you can run it. And all of that's going to be haircut because again it's all on spec. So if you really want to use external capital to finance an M and A roll up strategy, go really build out the M and A roll up strategy and build it out the same way you build out a sales funnel. People want data, information. Here's my target list. I've identified that there are these private companies, there are these carve outs. I've initiated these conversations. Treat it the way you would treat running your business. If you're going to make M and A leg, like I said before, there's strategy and your strategy can be I'm going to go do M and A or M and A can be an accelerant to a strategy, which is I'm going to try to get bigger and I want to find ways to grow my revenue base through new products or capturing scale within my market that I'm in today. That's all the same stuff. So you got to go use your M and A strategy. You go build that pipeline now. Pipeline building to finish off the thought. Look, you and I can sit there and talk about it. Let's talk about the companies where there's the capability that sits inside and we can determine whether I got access or whether one of my partners has access. We can create the right type of introductions. You should go and farm your network that you have as well and put the word out, hey, I'm looking, I'm open, I'm interested. Here's what I would like to get to know people on the basis of if you're on the buy side, I think having people have an awareness there's so many people that are out there looking for ways to connect dots. Some good actors, some bad actors, but at least there's some awareness you can create. What you're going to have to manage though is separating the good leads from the really bad ones. The fishing expeditions. That's my reaction. Like without spending a good amount of.

Time with you, I think that's it. And I'll click in one level into it real quick to take it one step further. So I started building a pipeline. I pursued one direct competitor and I learned a lot. I learned that hey, it's going to be really hard to predict churn. It's going to be a very complicated integration that would come at expense at our organic growth. I was lowballed. It basically wasn't comfortable to put a competitive value on it. And it's still there. These are more distressed or stagnant or declining growth. So I've learned a lot from that. I build this thesis around consolidating data room products. We own a separate data room or firm room and it is a really clean, simple product that I thought if we can buy some of these been around 10 plus year businesses, move the customer base over much simpler product, you can have much higher confidence in the churn and to definitely be like enhancing customer experience but then be able to.

Cost energies single platform lift and shifts.

Pretty aggressive.

Yeah.

And that's why I thought build a pipeline actually validate the thesis. What I realized is there's a gap one there's a bunch of little crappy one to $3 million companies but then it goes up to 20 plus million and there's a good amount of activity in that consolidation that's already happening with the big two. The big two buying up those size companies. And then at that low level there wasn't as many as I thought there was. There's not as clean of a product that you would be able to do that play they do different things and it would be even some situations you might have to keep that product a lot longer than you need to or have to keep it. So that's where still looking at doing some of those deals to try to get a rep or two in because I think there's a whole learning curve and muscle building of doing the deal itself. But that's when it sparked my interest in carve out because you know I lost one deal to a competitor but I thought why compete when I can run a focus the energy to like leverage these relationships that are hard to establish and try to find those car. And that's looking back, it's the best I've seen from M and A. Our rollups are pretty predictable and sound and tend to make good results. And then carve outs, they're hard and tricky but if you really do them, they unlock a lot of value. And so that's where I thought area would be a shift is the carve outs. And that's where we're starting to build some pipeline there.

Test and verify, develop a thesis, go out and test it, verify whether the thesis is right or adjust it. The scientific method applies to deal frameworks and deal strategy as well. I'd say part of this job is helping people determine when they should transact equally. It's when they shouldn't. And the caution I tell people is don't let the desire to do a deal put you in a situation where you do a bad deal. Like why would you do small deals? You do small deals because one, maybe there's less competition for them, two, maybe the valuation is very attractive. And three, that's what you have capacity for. And I'll put a fourth there. It shows that you can get deals done, integrate and you can be a successful acquirer. So as you get bigger and you go out and you need someone else's money to help you do it, you have the ability to prove and that's.

The goal is I was hoping to do two deals before we get to 25 million ARR then that story of why we want to raise to continue doing acquisitions is a lot stronger.

Right. But if you find that in order to satisfy some of those goals, you do a bad deal, you pay a little for a company that's probably not even worth that much. You can't integrate it because the client base really did not want to port because they were more attached to the original principle of that business as opposed to the service. And you can't shift them to your platform. So now you're running two platforms but you never wanted to do and you can't demonstrate that money wouldn't have been better spent plugging it into your OPEX or like driving sales. So the return on capital was actually a bad decision. And all of that stuff backfires. You got to put that lens when you're thinking about a strategy the way you're thinking about it. But I think you're doing the right thing. Like you opportunity, you're acting on it and you got to put the right decision framework around it and make sure it makes sense.

Don't forget I'm Indian. I always get good deals.

Exactly.

The carve out. What do you think the approach is? I think there's an angle. I was actually talking to a good friend, Antonio Sanchez has been on this podcast the other day about this that you should really spend the time with Corp dev and learn the business lines and identify an actual business to start cultivating a business case around. Then start leveraging that executive be on the same page about sponsoring that deal. What am I missing? What's how can I leverage you to find these covered opportunities?

Well one, you could tell me what you're looking for and then when I'm speaking to the companies that I speak to, if there's a fit then it's top of mind for me to mention to them and to mention to you. That's part of it. That's that awareness point that I made earlier. If you put out to the right folks, these are the things you're interested in and you know, they traffic in the worlds where you want to traffic. It creates enough of a catalyst for someone who is looking to find ways to connect people to go do that basic work. That's a big part of our day to day. We collect information and expectations and needs and wants from a group of universe of people. And then sometimes we find that we know where they match up. Second, corporate development professionals are incredibly busy people. If they're at a good company that's got a good balance sheet and some firepower, they're probably getting a lot of inbounds.

I literally carve out funds that are dialing every corporate person every day.

It all becomes about people want to know that they're not expending calories, they don't need to. And so if you are working with or you got to know a corporate development person, that's great. If you through them can have a good sense or understanding of the business and you can find areas of the business where collaboration makes a lot of sense. But then ask yourself, are they even looking to do something with this? And can what I put on the table be more attractive to them than owning this business anymore? And maybe you'll find that in some instances the answer is yes. And I think you have a nice formula for, you know, me, you know my business, you know there's a benefit here and I know that you're looking for a solution for your business. Why don't we spend some time talking about this and take the time to really explore it properly. If you can't find those characteristics, I just think it's a bit harder and you just have to ask yourself, does this person have the time and appetite or the conditions right for me to do this? Or do I have to keep upping the price in order to induce it? And at some point you're going to bump up against your hard parameters. Is this a good deal?

There's a spectrum of doing what's very strategic, which I mentioned, the distribution of private equity. So if I find those kind of products and large companies that have already got that scale, really focusing on that, and that may be more of a partner approach and then from there expand. What other opportunities other than the spectrum? Is my core Indian self being highly opportunistic, looking for a good deal? Which people is this podcast isn't the best thing to do.

There are companies out there who have done a good job buying companies when it was a good deal and they do not integrate them at all and they're doing fine.

So that's good at cutting costs too well.

So again, if you're going to put them together, that's different. I want to opportunistically own a bunch of different businesses and I'm going to buy them at the right time. There is such a thing as buying a company really well. Like you buy in at a really specific point in time where they need an exit and the market conditions aren't particularly conducive to like paying a big multiple for it. And so you can swoop in and you can show up with capital when they need it the absolute most and do a good deal. That's different than a good deal being defined as something I can buy, integrate and maybe even drive the revenue up on. It's two different types of transactions. Maybe there is an intersection of that Venn diagram where it's opportunistic and it has that do that deal all day if you can find it. Yeah, but otherwise those are two different underwrites.

If you ask me for your reference, I would say B2B SaaS. I'd like to stay in that circle. Finance related. Got to be some kind of finance theme or it could potentially be collaboration. If you look at our business ecosystem today, it is very oriented around nature of high security, whether it's IPO M&A deal and there's data security, there's collaboration as an element. And now with this AI that we've recently released, it's legal diligence all day. So that's like another area we potentially look at is finance legal and transactional and then it's kind of collaboration document workflow.

Got it.

Just as you talk to some folks.

I'll keep it in mind in terms.

Of what I'm doing now, which is building, trying to get, I think looking and be more strategic, building the relationship with these companies. I've got a list right now about 30 strategics that I'm trying to learn and start courting. Is there anything else that you think I'm missing or should be thinking about? Because I haven't put the private equity themselves as much of a focus. But then I'm thinking at their level, they're not looking or thinking about little carve out deals or anything like that.

There's a whole universe of, I'll call it private equity firms that exist for companies of all sizes. So there's private equity firms that focus on companies with 1 to 5 of revenue. There's private equity firms that exist for companies from 10 to 30 and so on and so forth. So if you're saying should I go to Blackstone to help finance a 20 million acquisition? No, you should not. I think responsibly. If you are targeting deals that's going to require outside capital, you should have a couple relationships you've started to develop so that at least a few people you can call that already know your business and understand that you're going to call them back not when you need money, because you don't, but you're going to call them back when a accretive high return on capital transaction that you've identified requires a partner to come in and help you. You have an actual reason to spend some time with a select group. And you'll have to figure out whether someone's really understanding the story reputationally. You can even ask for referrals like who's good in this space but at this size threshold. And you can also try to think about do they have the right type of capital for where I want to partner today versus tomorrow versus down the line.

Right now I get about five to seven inbound inquiries every month from all different types, really small firms to some pretty high profile ones. I even wonder why they're reaching out.

They heard about the service, they just want to sign up.

That's what I always tell them. Because a lot of times they're like junior associate level. I'm like, listen, be a customer first. I only take these calls from customers.

There's a lot of software and services companies, CEOs who have that exact same position of large cap public companies.

How do I weed this out to find those PE firms I should be spending the relationship with? It's A blur. I mean, there's firms I love out there like TA Associates, which I know they don't cut checks less than $100 million. I'm like, we're far from that. But then the other ones, they all blur. They all seem the same. And I'll start asking them, what's your fund size? Check. Average check and stuff. But then you really want the one that has that incredible good reputation, Tier one. But like I said, at that check size, how do you go through figuring that out?

I don't have a depth of experience on that slice of the market. I know it exists.

I know, man. I took you from. We just talked about the biggest deals that you worked on to.

And the smaller deals I work on tend to evolve. At least one party is a large party.

We're going to do this interview five years from now, and it's. It'll be a different story.

It will be a different story. It's on them to convince you that they are a worthwhile partner because you're inviting someone into your house. If you're ever going to take capital from a private equity firm, from a growth equity firm, whether small or large, they are assessing whether you are worthy steward of capital for them to give money to. And in reverse, you are assessing whether they are the right partner. That not when times are good, but when times are bad, will they stand by you and help you figure things out and get the company to a successful place? Some of that comes from them being able to articulate why they're an investor in the first place, what their special sauce is. Is it just money? Is it something else? Do they have operational know how even more specific, who are some of the entrepreneurs and founders you've worked with? I'd like to talk to a few of them, current or former portfolio companies, and you can look up where they've invested in the past. If they're not willing to engage in this, like, mutual dialogue, and you could probably just move on because there's some firms out there, just like you said, some bankers have a bad reputation. There's investors who have mixed reputation.

These are like inbound. What about going outbound? If they say, hey, I know this p firm's got a really good reputation or something, you can try.

That's why there's generally available information on a lot of their websites. Again, for the universe of private equity firms that you're looking for, like discovery is one of the hardest parts, because the distribution of companies in the United States that have this revenue profile versus, say, one that's got $10 billion revenue. It's a totally different sample size.

Yeah.

When you compete in this lower end of the private equity market, like half of the challenge I have to imagine is how do I even find the companies. And that's where you find this weird space between like business broker land and true investment banker land where like if you're that investor, what's the best way to figure out what's even around? Like how do I screen for this? Not like there's a directory of great information that has perfect fidelity of what's this company, how well is it doing, what are their prior raises? That's what exists at the higher end of the spectrum. And so they're all about discovery. So again, a good firm with a good reputation, you should have no problem finding a way to call them and start a dialogue. And again, if they have time for you, then that's great. Off the bat, you already know that this is someone who's going to take a moment and give an honest assessment if they don't move on. Cause there's more.

I agree. I found just talking to other founder CEOs seems to be good.

That's always a great way. Warm intros, warm leads, warm referrals. It works both ways. Ask people who can I talk to? That'll validate everything you said to me.

I want to switch things up. I got this thought leadership point of view I've been working on and it's fire led M and A. A lot of this I took some time off and I was putting myself in what are they like an asylum in Italy, A little town wandering around, drinking a lot of wine, eating good food. Reflecting back on all these podcasts I did came to this conclusion because a lot of it there's buyer oriented like we don't One of the few bankers I've had on the sell side and I see this maturity curve that the first deal you do ever, it'd be like very seller anchor led process. But as you do more deals, you mature, you'll start learning all those integration lessons and why you should put that up front. Have some idea of how you're going to integrate the company sooner than later. The way they manage their data and having the data really central single source of truth. So start integrating it. You don't have to go back and ask for the same thing again. Building your process around scale, synchronizing your integration planning with your diligence. All these little things I've put together and I'm wondering as a company matures and their process becomes more buyer led from the banking perspective, because it's basically calling out the problem in the industry is this traditional seller led banking process. But I do believe that there's a nice balance you can create that once an LOI is signed, the buyer with more people involved in the deal typically should be able to control the flow of information so that they can manage information in a way that allows them to do their integration planning at the same time and put much more comprehensive effort into integration planning. That's like the biggest gap I've seen. If you purely run a seller process, you don't really do it, you miss it. It's a whole different area, It's a whole different group. When you look at rollups that are doing M and A at scale, it has to be buyer led. They end up driving the whole process regardless. I was just curious, you're on the investment banking side and before I call out like big problem is the bankers in the world, what's their perspective on that? I understand early stage. If you're running competitive process, you got to control it, keep the information separate. But once you sign the loi, you go exclusive. There's flexibility there to work with the buyers so that they can drive process that gets the deal done faster and integrates the company better.

Yes is a short answer. There's a constant battle for controlling the process that exists, whether pre or post loi. And certainly the dynamics around exclusivity add a whole other layer to that. But like it exists perpetually, I'd say. Look, you mentioned a couple things. A buyer has a set of criteria that they need to satisfy in order to get comfortable with the deal. They have to balance that with being able to move fast enough with enough conviction to keep up with the seller's process. If the seller in fact has a process, whether it's a banker led process or whether it's a process been created by management or the seller's board that says this is how much time we're going to allot for this. There's lots of different ways a seller can run their process. But what you want to do is make sure you're satisfying as many of your important items as you can while balancing staying competitive, if their process even exists. Sometimes you know, it's bilateral and maybe you have the perfect ability to take your own sweet time. It's fine, that's great. And then you can play that into. Look, once they've come to the point that they are committed more to the seller's committed to the Buyer, you're an exclusivity. Part of that is establishing that relationship and then making it clear that in order to get to signing or beyond, these are things I need to focus on. Everyone's going to have their list of things that I need to get through to be able to get my side to approve a transaction. More apropos of your question is M and A is a muscle. Some companies don't have it yet and they're building it. Some companies have it well defined, but it's not one muscle. It's like the human body, like it's a series of muscles. Some are primary, some are secondary. So integration and being able to diligence integration, develop a point of view to inform the transactional elements of the deal process, helping make sure that what integration is going to look like, what it's going to cost, how long it's going to take, how that informs the outlook for the business and therefore what you're going to pay for it is a muscle. So if it's really important to your organization, you recognize this now, make sure you develop that muscle so that it can go as smoothly and efficiently as quickly as possible. So you're not really worried so much about not being as competitive from a timeline perspective with what the seller's trying to do. Now, sellers may say, I'm not going to get into some of that stuff until you're at a certain point, but I think that's a bit shortsighted. That's probably not as sophisticated of seller because the reality is the more comfort you get with integration, they should be able to understand that means that you have a more realistic point of view on synergies. And so selfishly for them, that means there's value that's going to emerge that may have been unknown or less likely to be realized that they have a chance to elevate. And that point, it becomes part of negotiation. What's the jump ball? Who's going to capture this value? But both sides should be motivated to find where the synergy exists. So I think it's always about framing. It is that like, I need to understand where the benefits exist. And part of that is really understanding how am I going to put these two businesses together. There's lots of reasons where you can like slowly dip into it and get the information you need because it's extremely important in order to get the deal done. Again, it depends on dynamics across time. I've dealt with this a lot, particularly in the wealth ecosystem, where moving companies on different tech providers over or through different clearing providers over or like the custody relationships over. Like there's big synergy opportunity that exists. But if you don't do that, work upfront, very hard to ascribe value to that synergy. Cause what if you can't move stuff over? It's a major ding on the P and L. Same thing for like tech companies. So if you're buying another tech company, like you don't have the chance to diligence that tech stack and how it's run and how many custom integrations are out there or customized deployments versus like bread and butter, vanilla deployments that are out there. You have an inability to really know how quickly you can lift and shift all those customers to your platform. And so it makes it that much harder to pay a price that might be compelling to seller who is expecting to get paid some share of the benefit that exists by putting the two companies together. And I'm dealing with that right now. There is a huge conversion aspect to it that is tied up into contingent consideration. And the reason it has to be like that is because you cannot find enough harmony of understanding as to how that conversion is going to go. But that's where all the value in the transaction sits is getting that conversion done right. So I think again, both sides have a lot of incentive to do this. It's just about framing it the right way.

So the key to buyer led M and A in a bank process is to communicate early the emphasis around the value that's unlocked during integration and those.

Synergies that's key to the buyer. The key to creating a buyer led process in a transaction is to show up with the right amount of conviction, the ability to move fast and the right amount of value that you can put to work so that you can push away competition. If you want to truly create a buyer led process outside of being the only buyer they could work with, like forgetting, like when structural elements create a buyer led process. If you're in a competitive process and you want to take more control, it tends to be on one of three verticals or axes. Speed, value and certainty. And there tends to be one or two of those that rise above the other ones to a seller. If you want to control a process, show up with whichever of those elements is most important to the seller. Part of your upfront work is understanding why are you selling? What are your goals? What are your objectives? Sometimes your banker will do this for you, sometimes you do it on your own. But it's always good to ask why are you doing this? What matters what are you going to do if someone can close tomorrow versus someone can pay you 2x as much, but they got to close three years from now. It's a way of asking what do you value? Speed or certainty or value.

So yeah, speed and value, which you may need that business case of synergies through integration and then their certainty understanding.

Can you get to a close? I have the money. I know how to diligence to steal. I've addressed my bright line issue. So it's really about finishing diligence. But like the fundamental go no gos I've already addressed, that's a speed and a certainty thing. The certainty is really about are there going to be a bunch of conditions and risks that come with you transacting with me above and beyond getting in.

Line to that, waiting the deal to get to an exclusive, then you can frame things up for the mechanicals of how to get those things done.

When you're in exclusivity, the buyer has more ability to really lean in on the most important things because they've already convinced the seller to a certain extent that this is the party that I'm gonna forego other opportunities to work with. So of course you generate a lot more leverage in that situation. Sellers still have healthy amount of leverage. Everyone should always remember sellers ultimate leverage is the ability to walk away and say no. Like maybe it's competition that allows them to feel that comfortable, maybe it's anger, but at the end of the day, they can say no. Now if they can't say no, then you have a ton of leverage. But usually sellers at least have that one out. But when you're in exclusivity, they've given up a little bit of it because the other buyers who are around the table are left wondering, is this still a good use of my time and should I move on to the other stuff that I'm looking at? Because I may not even get another bite at this. Am I really going to be around? And if I am, am I going to be around the same level when I was trying to win this versus knowing that someone else couldn't get there? This is intense, kind of like psychology of what am I buying and I want to win it anymore. And then now some price is back on the table. Once you're in that exclusivity as a buyer is huge. And at that point it's like definitionally buyer led because seller just wants you to get through your work as fast as possible. And you're going to say, I can get through my Work as fast as possible. As long as I have sufficient access to you and the information I want. Part and parcel of every communication around exclusivity and transaction timing from a buyer's perspective is I can move fast, but only as fast as you can.

Yeah, that's my sales pitch. Both faster, integrate better.

That's a good sales pitch for what you did for sure.

That's the thing. I just, I, the industry is like very, very used to the bankers driving it all the way to close now like I said, you're starting to see it with this high scale roll ups that hey loi, there's sort of alignment mechanically change it.

There's great rollup strategy companies out there and they are very systematic about it. They show up, they've established a deal structure, deal documents parameters around valuation and it's hey, here it is, it's vanilla, that's all I got. But I can move fast. I give you great terms and I can get this done quick. And by the way on the back end I have an integration team. This is all gonna be smooth and seamless. In a lot of those cases maybe that person is still participating to pro forma, like they're cashing out but they're rolling a little bit. So it gives them a lot of confidence that this deal's gonna go over really well. If you're roll up, I don't know that roll up strategy is actually is like the domain like the bankers, it depends.

Some are more banked and not but.

Like the actual strategy itself. If you're a company and you want to do roll ups really well and it tends to be like I'm going to do a, like I'm talking real volume, right? I'm going to do a dozen of these deals a year and they're all about the same type then that's really the case. If they're not all the same type then at least get the valuation integration and targeting on point. Know that it's a good target, it's worth your time, know exactly how you think about value and be disciplined around. I'm going to walk away from this if it's, it falls outside these parameters because I, I model to an ROIC or a return on capital or specific internal hurdle rate or irr. Do those deals and then be ready to go. Have your financing lined up, have your advisors lined up, your accountants, your lawyers, your bankers, whatever you need to like do that extra work to finalize that decision and then have your backend integration set up. Do you have all that place like some of the best acquirers in the world, that's what they build internally. You've interviewed a bunch of corporate development people who've created this exact function or set of functions of their company. And my observation, when companies say I want to do rollups and they don't have any of this stuff, you're not going to see them do the rollups. They're not ready yet.

Good point. That's kind of where I see the market going. Buyer led M and A. It's more realizing it they ultimately integrate better.

At least in my world in financial services and fintech there's a lot of pent up demand on the buyer side. We came out of a market environment where valuations were very seller friendly, like the cap equity capital that was flowing into different fintechs and the overall sector was frothy. And as that froth comes out and valuation expectations normalized to like more standard market environment, I think there's an abundance of buyers that are ready. And so there will be an interesting kind of shift between what happened in 2021 where it was a lot of seller power, too much seller power. I think the pendulum will shift a good amount in terms of the overall market dynamic around what's happening again in my world. But every industry is going to have its own flavor of that.

I think my biggest takeaway is go out there and network with the best. I got you, I got pjt. This is the world's best investment bank. My humble opinion.

I agree.

And this is I got a conversation with you. So that's the thing I really love about the podcast is creating some great content but getting this voice or access, otherwise you don't hear these conversations at all.

I'll plug pjt. We are a true partnership. When you work with us, not only do you get one person, depending on the situation, we'll bring all the right people, a very senior heavy deal team that has the right disciplines, the right background so that no one's faking it. It's not because you're assigned to this seg, this vertical, this segment, you have to deal with this one banker whether they know what you're dealing with or not. And particularly again in financial services and fintech, there's so much crossover now between different business models. You got insurance companies and asset management. You got payments companies getting into lending. Like you got consumer fintechs trying to figure out how they're going to work with tradfi players. Like you need multiple disciplines sometimes that cannot exist with one person. So you need to find an advisor that can mold their offering to what you need versus you trying to mold what you need to some specific brand or some specific company that you think will be able to help you the right way. It's all part of this same perspective. Go where our clients need us to go. We're set up to do that. That's going to be part of the way that you address some of these reputational issues. Again, to go back to where you started this that the industry can have. Sometimes people are just talking about stuff they have no idea about because the incentives around them force them to do it. That's another thing that we've ripped out and don't have because we're a traditional, pure partnership. We all work together. I think what you're doing with your podcast is great. Bringing awareness and best practice to this ecosystem. Grow to be a small part of that community that you're building. As a specie, you know, the banker, we do have an opportunity to demonstrate our value and it comes from one interaction at a time and people holding themselves collectively to a standard and picking and choosing who you work with. And make sure you're working with good clients who also hold themselves to standards. And Rising Tide will lift all boats and hopefully we'll find more and more ways to make a truly a successful way to affect a company strategy.

I got to ask you, what's the craziest thing you've seen in M and A?

The craziest thing I've seen at M and A, honestly, is when you see a public company or you see an executive who you would hope operates fully above board, so tempted by personal incentives over obligation to the shareholders, whether it's public or private. It's crazy how much pressure shows up in the course of a transaction where it almost becomes hard for a person to. To delineate, like, what's really motivating them. And I think therein lies an opportunity for a banker who has the right ethics, who has the right understanding of who is the client and who is ultimately we all responsible to go in and help guide, redirect. It's not about calling people out, it's not about publicly shaming or exposing, but just making sure that all that cloudiness clears up and it becomes really clear, why am I doing this? Is it for the right reasons? Does it hold up? Is it the right process? Has it been done with discipline? And the answer to all that should be yes. So that's the boring version, the craziest thing. But to me, that's crazy. Because again, I'm a purist. I believe in the inherent goodness of people and like that all these great theoretical things are possible. My personal crazy is actually around the time we met I worked on a transaction. It's been announced and it's public and it's closed a long time ago, but it was when I was in a dedicated M and A role. But I worked on a combination of Caterpillar and Bucyrus, which again today I'm a financial services and fintech focused investment banker. But for a brief period of time I did M and A across a bunch of different sectors. And so this was one and it was one of those experiences where sometimes public company deals come together very fast. And I was a junior member of the team. I was working with the head of M and A at the firm I was at the time. And we sat down with our co advisors who flew in from New York to Chicago for one meeting and ended up staying there for a week. But they had flown only expecting to stay for one meeting. And we were all stuck in a conference room together for almost seven days straight with maybe three hours at the most a night to go home, take a quick nap and come back. And it was crazy only because one like the pure adrenaline and the scope of what we were working on, it was like 10 plus billion dollar transaction. It was major consolidation of like mining equipment manufacturers carried us through it. But at the end I finally like as the adrenaline came out of my system, I'd been working as well as someone could with the total of, I don't know, 15 hours of sleep, 12 hours of sleep over a six day span of time. All of a sudden once the final deliverable was done, once we got through the major meeting we were preparing for, once the presentation was set, all the adrenaline came out of my system. And I remember my wife, our kids were really young at the time, so we were like, let's just go out for dinner, we haven't seen you in a week, let's go out for dinner. I was like, yeah, let's go out to dinner. I opted to drive to dinner and I apparently was driving 15 miles per hour down the street because to me that felt fast. And then I fell asleep at dinner a few times before I finally went home and slept for 14 hours straight. I've done plenty of all nighters, plenty of late nights, all kinds of stuff. But that continues to be like my craziest personal experience in this job in getting a deal done. I was so excited at the time to do it. I was thinking associated. That was an associate. It was really early on in my career, so it took on a whole scale of its own that I was going to do my part and deliver for this team. But I don't think I've ever had a week like that again. Even though the deal sizes have actually gotten bigger, despite that one being so big, I've never had that situation happen. That was one of my crazy ones.

That's the reason I can't go back to banking. I can't work that hard.

Hey, someone's got to do it.

Hey, Nash. This has been an awesome conversation. Thank you so much for taking the time. I learned a lot. You've helped me become a better M and a scientist.

Thank you, thank you. Thank you for inviting me. And if any one of your listeners is the type that needs some investment banking help, feel free to reach out to me.

Don't you like a client size? Don't you want them at least be publicly traded, have some symbols behind them?

I have a different philosophy. There's the target client size for PJT as a firm. So, yes, we have a business to run. We're not huge. So business selection is really important for us. But I tell everyone, I don't care what size you are. If you need some help, you need some advice, call me. I work with a lot of entrepreneurs. I work with a lot of founders. I work with a lot of earlier stage companies, private companies who are not yet of the size and scale, where us formally helping them on a transaction or mandate makes sense, mostly because the fees will feel untenable. But I always give people time, and I'll spend time to give an honest assessment, my honest guidance, my honest feedback. And again, it's part of that philosophy. Like you put it out there, you never know where people go. I've even helped. I won't name the name, but there's a fintech that's out there that's hired a banker. I helped them create the criteria for how to hire a banker. I said, this is probably one of the weirdest conversations I've ever had as an investment banker. But here is this type of stuff you should ask these firms that you're interviewing. Some of those are competitors of ours, like on the lower end of things. But that's what they needed and that's how I could add value. So I did it.

Fellow M and A scientists, hope you enjoyed this. You stuck this far. I'm proud of you. Reach out to me. LinkedIn's usually the best way. Love to hear feedback, funny ideas, things like that. Till next time. Here's to the deal. Thank you for taking the time to explore the world of MA 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 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.