When Deals Get Weird: Stories You Don't See in the CIM

Real talk. How many of you have walked into a leadership meeting and given a pipeline update you knew wasn't accurate? Deals moved, emails went unanswered, nobody logged anything, but you're standing there presenting last week's reality, hoping nobody asks too many questions. We've all been there, and it's not a people problem, it's a process problem. That's exactly why we just shipped automated pipeline management at Dealroom. Your Outlook is already connected. Email sync, docs sync. AI keeps every deal current without anyone touching it manually. Create a deal straight from your inbox. Follow-ups get tracked automatically. Your pipeline actually reflects what's happening in real time. No more stale data. No more pre-meeting scramble. Just confidence when you walk into that room. Check it out at— dealroom.net/pipelineai. That's dealroom.net/pipelineai. All right, back to the episode. I'm Kison Patel and you're listening to M&A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies, and what actually happened during M&A deals. All right. This one's a little different. I was at DealMax and instead of doing one long sit-down, I started grabbing people and asking them for the deal story that they still think about. And they delivered. We got birthday cake in the middle of a management presentation, a buyer who passed away before close, missing data sitting on an old computer. Founders changed their mind late in the process. Deals that looked dead that somehow got done. Here's what I like about these stories. They sound random until you've done enough deals, then you realize they're not random. This is the stuff that actually tests you, not the perfect process map, not the clean sim, the weird stuff. And that's why we built DealPilot powered by M&A Science. We've had hundreds of these conversations with practitioners. The goal is simple. Take what people had to learn the hard way and organize it. So the next deal gets a little cleaner. This is DealMax Field Notes. When deals get weird, here's to the deal. Live at DealMax. I'm here with Nathan Rust. Nathan, tell me who you are and what your company does.

Hey, thanks, Kison Patel. My name is Nathan Rust. I lead corporate development for a company named Salas O'Brien. We are a 5,000-person Engineering firm, primarily across North America, doing engineering for clients across the country and key markets like data centers, education, healthcare, things like that.

So I appreciate the time. What's your most memorable deal?

We do a lot of, we call them mergers, just from a philosophy of partnership. I've been there 3.5 years and we've done 30 deals during that timeframe. But the one that stuck out most to me was one we did about a year ago. So like I said, we're across North America, um, but we were a little under-indexed in the Northeast. So we had been looking for firms in the Northeast for a while. We actually closed a deal through an advisor earlier in the year in Idaho, but they had a mandate for a firm in the Northeast and they were primarily reaching out to private equity firms. But because the transaction went so well, they decided to include us in this Northeast firm opportunity. The minute we saw it, we liked it. We saw a lot of good fit there. Thought it was a good opportunity. We were very interested in pursuing it. So went through all the preliminary due diligence, put together an indication of interest, and we were happy that we made it through the next round. So we were the only strategic buyer who made it through to the next round. They had probably 10 or 12 private equity firms that they kept in. It felt good to be there. We were excited. We were invited to their location for a management presentation. So just with the logistics, I live in Phoenix, so we had travel most of the day, and then we had a dinner in the afternoon, followed by the following morning, a management presentation. It just so happened that the day of the management presentation also happened to be my birthday. You'll figure out the context of that later. Anyways, we had the dinner that night and it was probably 4 or 5 from Solace O'Brien and probably 7 or 8 from their organization. I was lucky to be seated right beside their CEO. Had good conversations with him that night. When you're spending a couple hours with people, conversations go a little bit of everywhere. And we ended up Talking about family, sharing our experiences and things like that. And one thing he talked about was just his close relationship with his nephews because his brother had passed away at a somewhat young age. And we just kept talking. I was just like, how old was your brother when he passed away? And he told me his age. And before I even thought about it, I was like, oh wow, I'm turning that age tomorrow. And it really threw me back. And it was just one of those moments where you're just humbled and remember that you're mortal. Anyways, all good. The conversation went well. We broke up that night and went back to the hotel and got ready for the meeting in the morning. So it was 8:00 AM. The meeting started. I'm from Phoenix, so it's 5:00 AM my time.

Tired.

I'm early, but it's all good. The meeting's going well. We're probably half an hour in and then a waiter comes in and they brought chocolate cake. We had a birthday celebration for me in the middle of a management presentation because he remembered from the conversation the night before that it was my birthday. So he got that planned and Obviously it's 8:00 AM their time. It's 5:00 AM my time. You don't eat a lot of chocolate cake at that time in the morning, but you know, you're polite and you eat the cake and it was great. Meeting went well. At that moment, my thought was like, this guy is a great fit for our culture. He cares about his people. He cares about the details. He hears things and he remembers them. And I was thinking to myself, like, if we get an opportunity to move forward, we're going to pursue it. Long story short, we did. The advisors let us know that My KR offer was a little bit low. It wasn't drastic, but it was probably a few percentage points. But when you're talking at scale, that's a lot of money. But I thought back to that piece of cake that this guy provided me. And I thought like, this is a no-brainer. We've got to move forward. So my joke now is that that was the most expensive piece of cake in the history of Silas O'Brien, because it was just a no-brainer when it came up and it was back to that moment. I don't know if it was strategic on his part, but it definitely worked and it fit from a strategic perspective. That is the one that sticks out the most to me.

That was a great story. Was there anything in the deal that got tough?

No, I don't think so. They had great advisors. Actually, one of the advisors works for me now. She had a great experience and she called me after the deal was done and said, "Hey, I like the way you guys do deals. Is there an opportunity for me to join?" You recruited the banker.

I did.

Now here's the story in the story.

That's the second time that happened, by the way.

Second time?

Yeah.

Yeah.

You build your team with just picking up the bankers. So these are bankers that are running sell side in your industry. They're running the company. They see you as a buyer. And we've talked about this. We have a full podcast if anybody's interested, talked about the big emphasis on culture, and they just spoke up and said, hey, I like the way you guys do deals.

They see it. Yeah. The only reason we were included in the deal was from their first experience in the last transaction. It pays off just being a good person and managing a transaction right. And Being fair and reasonable with advisors and the other party. People see that. Those are not the only two people who have reached out to me about joining our team. There's been a lot, and obviously I can't hire every single person, but we get the best opportunities, not only from an M&A perspective, but from a team member perspective as well, just because of our cultural approach. And we take care of our people and we're fair and reasonable and we do the right thing.

I like that. Is there anything that you would do different if you reapproach that deal? Were any surprises that came out of it?

Absolutely not. This was a great deal, been successful. It's still early, but it's been a good experience for all of their team members, all of their shareholders. One unique thing that they did was they carved out a portion of their consideration, made sure that every employee of their organization received basically a benefit from their transaction.

Every employee.

Again, it just reiterated that we had a cultural match, that they're not selfish, that they care about others and they wanted to do the right thing. So everything alone along that transaction just confirmed that this is a good fit for us. This belongs within our organization. And we saw that throughout the deal and we've seen it post-closing as well.

Give me one piece of advice to take away. How do you develop this culture, this reputation? There's obviously, don't be an a-hole baseline, but beyond that, is there anything—

You took my piece of advice I was going to give you.

I stole it because I want something a little more.

It goes back to the golden rule. You want to treat people the way that you want to be treated. And we're very transparent.

There's a lot of people that must want to be treated bad because it doesn't always exist.

And people forget about it.

We're at a big finance conference. You can tell there's some fun people at this conference, but there's the ones that seem to have something stuck up their butt.

I don't know.

You sort of recognize that and say, all right, this is not the culture fit. And you really are aggressive about finding that match.

Yeah.

I mean, don't forget you're human. Don't forget you're mortal. Like I did at that dinner when he reminded me his brother died at the same age as me.

Yeah, you acknowledged it and said, hey, I'm the same age.

You probably showed some appreciation of him sharing that story.

Yeah, it meant a lot. It made me think a lot that night of like, whoa, just remember you're human. And at the end of the deal, like it's important to win. I like to win. We all like to win, but not at the expense of your own integrity and things like that. So you treat people right. You're not going to win every single deal, but there's been a lot of deals where they've moved forward with another party and then they came back to us later because they realized that firm or that group wasn't going to do what they said they would. In the long run, it pays off. Not always in the short run, but we're a long-term play.

Not always business. It can be personal.

Yeah, 100%.

Hey, Nate, thanks for taking the time to share a story.

You bet.

Here's to the deal. At DealMax Live, I'm here with Lutz Lehmann. Lutz, can you tell me who you are and what your company does?

Yeah, my name is Lutz Lehmann. I'm German actually, and my company is Magnus Business Group, and we represent sellers most of the time, people that want to retire, the baby boomers to sell their business.

What's your most memorable deal?

One of them that comes to mind right now is when we almost had closing a deal, the buyer actually flew from one city to another and crashed his airplane and passed away, unfortunately. So we had to start over again. That was the most memorable.

Okay. Okay.

So how far were you in the deal process? Were you between LOI, close, getting close to close?

Getting close to close. We actually wanna meet on the weekend and discuss the transition. And we were lucky that based on my experience, I always told the seller, just wait, not telling all the employees that you are closing the deal so that nobody is leaving or get excited or afraid. Fortunately, in that unfortunate event that we had not done, and we actually want to meet and plan all that.

And this person regularly flies an airplane?

He regularly flies an airplane, yeah.

Like a single prop?

A single prop. And he was actually on with his son and the dog on the airplane, and the son supposed to work in the company too that he actually acquired or want to acquire. And so he passed away too.

But this was the seller of the business?

No, the buyer passed away. The seller was still around.

I mean—

Oh, so you were running the sell— sorry, you were So you were running the sale process, you had a buyer close to close, dies, and that basically kills the whole deal.

Exactly.

So we had to start over again from scratch. Took us about 9 months later or afterward to find a new buyer, went through the whole process, and then actually a couple months ago we closed it successfully.

It's painful when you have to redo the deal process.

Oh yeah. Oh yeah. I had surprises before. Normally you prepare for surprises to make sure that you can overcome those kind of obstacles. But sometimes you have landlords, third party from outside.

Yeah. In this situation, it's very unique. Then you still have to navigate it. You got to redo the deal process again.

Yes.

And you sound like you did it.

Over time, because I'm doing it for more than 10 years representing sellers, and over time, you learn how to prepare for surprises. As I mentioned before, landlords are sometimes an issue. I had an event where the seller actually crashed a big water pipe within his manufacturing facility, and the landlord was very upset about that. And they had a big argument, the seller and the landlord, and almost killed the deal. It actually prolonged the whole process for over a month. So really highly involved in calming down both parties, the seller and the landlord, and find at the end a solution that worked for both.

Every deal has its surprises.

Yes. Yes, it does indeed.

Is there like a philosophy you have for handling surprises? Because I feel like every deal has them.

Yeah. Over time, what I do is that I go through the deal again, that's what I just closed, and see what surprises occurred. Small ones, big ones. What did I learn? Really writing it down, discussing it with the team so that everybody actually also gets an impression what can happen. Yeah, preparation is the big thing here, I would say. Dealing with landlords is one of my first questions when I talk to a seller. What is your relationship with the landlord? Is it a good one or are there any other issues? We started a transition or a negotiation with the buyer and we had a stock sale negotiated and an LOI and everything. And in the middle of the process, the buyer said, oh, I just want to change to an asset sale. So it is actually a different tax picture all of a sudden. So you have to prepare for that too, if something like that might happen. So you have to have also a right network in place to talk to and bring up that question What is the monetary effect on changing the deal structure from a stock sale to an asset sale? And then be prepared for the negotiation with the buyer.

You're absolutely right. You have to expect the unexpected.

Yeah.

But I like that you actually documented it so you could teach it to others.

Yeah. Yeah. And what was also key is to have a good network. There is always something they call, oh, I cannot do, you know, my IT system is down. So I have IT specialists that I can call and say, hey, can you take care of it? Or workers' comp insurance companies. I know insurance companies at work or other attorneys, real estate attorneys, or there's always something that comes up. If you have a good network in place who you can talk to, that also helps a lot.

That's a good point. Keep growing your network.

Yep.

Lutz, thanks for taking the time to share a memorable story.

Yeah, thanks for having me.

Here's to the deal. Live here at Dealmax with Troy Paspisil. Troy, can you tell me about yourself and what your company does?

Yes, I'm Troy Paspisil. I'm the founder and CEO of Ontra. Ontra provides AI-driven solutions to streamline and automate various processes for private equity firms and investment banks. One of the big things we do is we automate the NDA process. For most of the large private equity firms and investment banks in the M&A ecosystem.

You're not a new startup. You didn't just pop up in the last year or two. What's the story?

No, I founded the business 12 years ago. We now serve about 1,500 private equity firms and investment banks, including 9 of the top 10 private funds asset managers and most of the large middle market investment banks.

I got you here because you got a background working on deals. Can you tell me about what's your most memorable funny deal you worked on?

Yeah, I've got a million funny stories from my time in the trenches in middle market private equity. So before I founded ENTRE, I was a deal professional at a large middle market platform, and I spent a full summer doing diligence on a company that did oilfield services, and they were headquartered in Corpus Christi, Texas. And if you've ever been to Corpus Christi in the summer, it's not where you want to be. The humidity is about as high as it gets, and it's over 100 degrees most days. So if you step outside, you are soaking wet within 20 or 30 seconds from the heat and the humidity. So I had the pleasure of spending a summer there doing diligence on this oil field services business that, as you might guess, was not super organized or sophisticated when it came to accounting and records. I'll tell you two funny stories from that deal. So one, we asked the management team for revenue and gross profit by customer, and they came back to us and said, "We don't have any of that data. All we have is headline revenue for any given period. We can't give you any detail behind that." And I figured that wasn't possible. There's got to be a way to slice their data in some fashion. So I asked them, "How do you invoice your customers?" And they said, "Well, we send them an invoice." And I said, "Can you show me one of those invoices? I'd just like to take a look at it." So they sent me an invoice and I asked, "This has revenue by customer for some service. Do you have a historical record of these invoices?" And they said, "Yeah, we have a file room at our headquarters that has about 8 years of invoices printed out, physical invoices. Give us a couple days. We're going to go take a look and see what data we have." So they came back and they said, we're going to hire about a dozen temps and we've timed them. So we think a dozen temps, it'll take them 3 weeks. We're going to go through all the file cabinets and we're going to key in all the data that was on these invoices. So what was the service provided? What date? What was the revenue associated with that service and that customer? And from that data, we'll be able to get you revenue by customer for the last 8 years. Before we do that, let me ask you a question. How do you make these invoices? Susie makes the invoices. I said, all right, well, where's Susie? They said, Susie sits at a computer in the file room where all the printed invoices are. I said, all right. I was talking to them, I was in my office in San Francisco, and I said, all right, I'm going to be there tomorrow. I just want to meet Susie. So I get to their office the next day and they bring me to Susie. She's sitting in the corner with an old school IBM that looks like it was from the late '80s. and they print the invoices from that computer. And I said, Susie, can you log into this system and show me how you make these invoices? So she logs in. I stick a jump drive into the computer. I download all, and I had everything I need. I said, thank you, Susie. Thank you, gentlemen. I have all the data I need. Went home, you know, sliced and diced it for about a day or two, and I had all the data I needed. So we prevented the management team from hiring an army of temps to go physically go through their file cabinets and key in all the data. So I'll tell you one more funny story from that deal. We were there for a big day of diligence. We spent the whole day with the management team. I'm sure anyone in private equity or banking is familiar with this. We had taken all their data. We'd built a big deck with 100-something slides showing all sorts of trends and things that were happening in their business that we wanted to walk through with the leadership team. And we had a great day talking through the business trends, gross margin stuff. And the whole day, the leadership team and the CEO in particular is telling us, "I am going to take you to the best Chinese restaurant you've ever been to in your life tonight." And we all, we're all based in San Francisco. So anyone who's been to San Francisco, lives there, knows there's Chinatown in San Francisco. We've got really good Chinese food. Yeah. In San Francisco. And we're in Corpus Christi, and this guy all day, he's swearing up and down, "I'm gonna take you to the best Chinese restaurant you've ever been to in your life tonight." He must have said this 20 times throughout the day. He was so excited to take us to the finest Chinese food that Corpus Christi had to offer. We finished the day, we get in a couple Ubers, and we drive to the restaurant. And the name of the restaurant was Vietnam. It was not Chinese food, but to him it was all Chinese food.

Oh my God.

Yeah. Those are two good stories from my days in middle market private equity.

These are great stories. I wanted to pull some lessons learned from doing these deals. Maybe some of these lessons learned that kind of help you with how you run your business today, but what were some of those takeaways from the deal experience that you had?

You just, you gotta always pull the thread and roll up your sleeves and get to ground truth. Management team tells you that they don't have the data, you gotta investigate further. And that, that's life in the middle market. You gotta dig in deep and find the data to do your diligence, to answer your questions. Gotta be willing to get on planes and dig deep in the organization to find the answers.

Digging deep because we always talk about surprises and deals that pop up. In this case, It wasn't quite a surprise.

That deal had other surprises that are not PG, so I won't share those on this podcast. It was an interesting 3 months in Corpus Christi, to say the least.

Hey, thanks for taking the time to share a memorable story, Troy. Here's to the deal. Let me pause here because this is the part people miss. Management told Troy they didn't have the data. Most people would've accepted that and moved on. Troy asked how they invoiced the customer. The data was there the whole time, just nobody thought to look for it that way. That's the thing about patterns. The deals look different, the industries look different, but the traps are the same. We've cataloged hundreds of them at M&A Science, and that's exactly what DealPilot is built from. Not theory, real situations from practitioners who already hit the wall so you don't have to. Check it out. Mascience.com. Again, that's mascience.com. Live at Dealmax here with Jeremy Siegel. Tell me who you are and what M&A looks like at Progress right now.

Well, Kison, great to see you today. Jeremy Siegel, EVP of Corporate Development at Progress Software. We're a billion-dollar infrastructure software company based outside of Boston, Massachusetts. And we are executing on a total growth M&A strategy in which we are really accelerating the company's growth, utilizing M&A as the primary driver. We have done multiple scale transactions since I joined 6 years ago. The company has gone from a little less than $400 million to $1 billion in that time. So it's been very exciting to watch the evolution of the company, watch the progression, and utilize M&A as a key lever in that strategy.

So I know today we're interviewing about your most memorable deal, but you've seen a lot of deals and you've seen a lot of deals blow up. Maybe we can talk about deals that blow up.

Having done probably close to 50 M&A transactions in my career, there are a lot that I'm proud of. Certainly plenty that have not made it to that final finishing line. Thought it'd be interesting to share a little bit of perspective on some of those. And I'm going to start with one that was a divestiture. Interesting on divestitures. You really want to make sure that you're buying and owning the IP. And in these conversations, we were very, very explicit about that throughout the process. And it was our understanding that we would own the IP. It wasn't until nearing the end of the transaction where we learned that they needed to keep the IP and provide a royalty back to us. Learning something like that at the end of a process is not good. It really destroys trust.— and trust is something that we value. We always say, if there are challenges, if there are issues with the business, let us know upfront and we'll see if we can figure out a way to resolve them. Don't have it come up as a surprise late in the process, because that's going to kill a deal.

If you had to do that deal again, what would you do differently?

I think what we would have done is probably put some more explicit language into the LOI that made it very clear at that point. Because we thought we were clear, but clearly there was some misunderstanding along the way and that created the challenge. And so that blew up the deal, which was unfortunate. So another one that I thought was interesting is we like to look at bootstrap companies too. So bootstrap companies where they haven't raised any capital from venture firms or private equity firms, and it makes it a lot easier instead of having to deal with multiple constituents, you're dealing with a founder who's owned a company and it's been his or her baby for a long period of time. And in this one situation, there were two founders, one who was clearly committed to the deal and very excited about the deal, and one who throughout the entire process you felt was uneasy about the deal, wasn't comfortable about necessarily relinquishing the baby. And it was interesting because looking back on it now, we should have paid more attention to the fact that this one person was never fully on board. So what ended up happening is we ended up doing all the diligence. We negotiated the deal, literally were ready to sign on the dotted line. And we learned that this one founder had hired an independent valuation company who of course told him that he could get 3 times what we were offering in our letter of intent. That blew up the deal. It's obviously very painful when something like that happens again.

Wait, which stage was that?

That was near the signing of a definitive agreement.

And they said, "No, I got this company. They told me this company's way more. You guys are trying to pull one over on me. We're not going to move forward unless you come up under this price." Right.

Something like that. Right. It was something like that. And, you know, we had all kinds of market comps, all kinds of transaction comps. Our value was right in line with where they should be trading. And of course, you know, valuation experts are going to say you're worth a lot more and give you that opportunity to go try to find that. But It never happened. The message is just being able to try to identify some of those things earlier in the process before you've gone through so much of the work to get to a point where the deal fails. So that's just something that, you know, we—

What would you do differently?

On that one—

Because that's a surprise.

From my perspective, we should have recognized the fact that this person was never really fully committed to the deal. His other co-founder was, and we relied on that and we sort of relied on his influence with this one other founder. Looking back on it, we probably should have just said, this is too much of a red flag. Unless you're fully committed to doing this deal, let's just move on, go our separate ways earlier in the process. It's always painful to get through that much of the work and hire the external advisors and spend all that time with your cross-functional team, diligencing a company to then have the deal not come to fruition.

What ended up happening to them?

They ended up getting bought by another company for probably significantly less than what we offered. That's what always happens.

Yeah.

It's always those kind of rude awakenings.

Yep.

That's okay. We move on.

What else you got for me?

The other thing that is interesting is, and these dynamics are something that we've experienced multiple times, is working on a deal and it's a banker-run process and it is you as a strategic and PE firms looking to buy the same company. One of the things that's an interesting dynamic and something we've discovered over the years is that bankers tend to give preference to the private equity folks because they look at the private equity folks as an annuity. If I can do this deal with them, maybe they'll give me their next sell side. If I do this deal with them, maybe there's an opportunity to sell another one of my companies to them. Whereas we as a strategic, we're not out there selling a lot of portfolio companies and doing that. We're not creating that same kind of annuity and that same kind of deal flow.— as the private equity folks are. So we've had a couple situations where, again, we're very far down the process negotiating a deal. In one situation, we had a higher valuation and didn't have an opportunity to provide that last bid because they made the decision to just sell to the private equity firm. And that was always their intent. I think that's something that, you know, just need to be very cautious of when you're in a process that's competitive. Think about what the banker's motivation is. And if there's an opportunity to preempt a process and move ahead of the bid date to position yourself more strongly, do it. If you wait until the actual bid date, it could be too late. We've learned that. So I think, you know what, for me, it's all about all these lessons learned and how to be better going forward.

These are all awesome stories.

One of the great benefits of having done this for as long as I have.

Any parting advice on Parting advice.

Are you worried the deal's blowing up? Parting advice is always keep your eyes wide open. Things that are orange flags or red flags, there's usually a reason for that. And really double-click there. If your spiny senses are telling you something doesn't feel right, speak up about that and really follow up on that because usually your gut is going to be right. And if your gut's telling you there's something not right on this deal, maybe that means you should walk away from that deal. And walk away earlier in the process. I'm going to give a little Progress plug here because I think it's important. One of the things I love about Progress is that we as a team cross-functionally are very committed to every deal that we evaluate. We're always looking at ways that we can improve ourselves. And one of the great things about my cross-functional teams is that even when I have to tell them that this deal isn't going to happen, they always look at it from a standpoint of, "But we learned something new on this deal. We learned how to do better diligence here." We learned how to keep our eyes open for this issue there. And that kind of positive attitude allows us to be more effective as a team, as we look at opportunities from an M&A standpoint.

Jeremy, thanks for sharing your deal blowup stories.

You're welcome, Kison Patel. I have plenty of success stories too, and we can come back and talk about that, but I know you were curious about some that didn't happen. Thought it'd be worthwhile to share that the track record isn't 100%. Even the best dealmakers Don't get every deal done.

By the way, multi-time podcaster on M&A Science. Look up Jeremy Siegel. He's been on there at least 3 or 4 times, and we're slated to do another podcast in the coming months.

Looking forward to it.

Here's to the deal. Live at DealMax with Patrick Mammen. Tell me who you are and what your company does.

Hey, Kison. Patrick Mammen, Vice President of Corporate Development at CBIZ. Been here for 5 years with the company. My role basically is origination. So top of the funnel type opportunities, looking for deals that CBIZ will go out and acquire and incorporate into our business.

Big-time accounting firm.

Number 8 accounting firm in the United States on the heels of a transformative deal when we acquired Marcum about a year ago, a little over a year ago, jumped us to number 8 accounting firm in the United States.

What's the most memorable deal you've done?

So prior to CBIZ, I worked at H&R Block. Doing a roll-up strategy, acquiring small mom-and-pop accounting firms. Did an accounting firm acquisition in the Bronx. It was owned by a 78-year-old grandmother, really nice lady, seemed really nice. Acquired her business, closed in October of that year prior to tax season coming up. So tax season opens up early January. These acquisitions were all exit strategies. She knows she's on her way out, that she's going to work 2 to 3 years and then she's done. First week on the job, maybe even been the first day, but first week on the job. So now she's an employee. We bought her business, she stays on board. She had a fistfight with the manager and was fired and was no longer part of the transition.

Oh my God.

So that was a bad memorable story.

Was there like an earnout attached to this?

Yes. Yes. There was an earnout attached.

But so they technically would lose out on their note.

Technically, I think because of the situation and to kind of appease everybody, They helped her out a little bit, but she did not get the full earnout.

Wow.

Yeah.

First week on the job, you get fired.

It was an argument over a printer, I believe. The longest deal I've ever had was a 12-year sales cycle. So when I started with H&R Block, it was probably the first couple of months that I started. Met a gentleman down in Virginia, Maryland area, had a regional tax and accounting practice. He had some ties to H&R Block, was interested in us as an acquiree. He was an older gentleman, probably at retirement age already, and said, yeah, you know what, really thinking about this. I'd like to do this.

Great.

We had conversations, kind of stalled, went on to the next year and et cetera. It kind of went like that for 12 years where every year I'd approach him, we would go to lunch, we would go to dinner. We'd have great conversations. He just never pulled the trigger.

Is he like, yeah, I might sell, but not ready yet.

Like, yeah.

I mean, it wasn't, hey, maybe one day it was, he was interested in talking and learning and wanting to do it. And then he just never pulled the trigger. Finally, I was there for 12 and a half years. And that last year I finally got that deal done. Now, the interesting thing is his business has shrunk considerably over that time. So unfortunately he lost out on a good deal of acquisition money that he would've got for selling the business and revenue that he lost over time. I saw this a lot with these older owners where they stopped the business development cycle. It was just continuing to service the clients that they had. And then over time there's going to be attrition. So they were losing customers, losing revenue. Ultimately, when he sold his business 12 years later, and unfortunately for us, we lost out on a lot of tax returns and revenue that had left that he wasn't able to sell. We were unable to acquire. It worked out well for him in the end because he was making money as he went along, but he could have sold it for a lot more at a higher premium had we done the deal earlier in that cycle.

If you're going back to that deal, is there anything you would do differently now?

I don't know if there's anything I'd do differently. If anything, it really taught me patience.

You could tell them that story. Well, maybe that.

Yes. You know, we did have some situations, especially at Block. It was folks that we were going after to acquire were definitely an aging demographic. The average age of those small accountants and tax people at that time was over 60 years old. There were a couple times when we would talk to somebody that said, I'm going to sell next year. Great. You call up next year and you're talking to the wife because the husband passed away. Now the business is gone because he didn't have anything to sell. There's no more business.

He's not transitioned.

Yeah. Nothing to transition. So those are kind of sad stories. It wasn't the case in this 12-year sales cycle, but maybe that's something I would've talked about. Hey, the time is right.

Sell now.

Yeah. Yeah. It's kind of coaching the exit.

Yeah. Go off in the sunset. And that is part of what we had to do. Is explain the exit. Teach people what it means, how it's going to work. And the one thing it taught me was patience. The one thing it taught me was a no today is not a no tomorrow. And sometimes you're just planting seeds. You're just going out and doing the best you can and teaching people the way they need to be taught.

But ultimately, they have to be able to pull the trigger. There you have it. Yeah, Patrick, thank you for taking the time to share a memorable story.

Kison, appreciate it. Great to be on the podcast.

Here's the deal. We're at DealMax Live with Tej Brambhatt. Tej, can you tell me who you are and what your company does?

Absolutely. Investment banker, M&A, buy side, mostly sell side. Watchtower Capital, privately held companies that don't know what to do next. 'Cause we came out of the big banks, we can help them run a billion-dollar process, except at the $50 to $100 million level. That's what we do.

What's your most memorable deal story?

They're all memorable because they're never the same, never cookie cutter. And there's always some friction. We try to alleviate that. An exit we did recently in the last 2 years, they came to us for capital raise because most clients who never run a process don't know what they don't know. Why do you need the money? Because 2 other companies in my tech space also got checks for $10 million. So why shouldn't I? Which is a terrible answer. I said, I dug in. We dug in for a couple of months. Turned out they wanted to grow, they want to hire, and a couple of other things. And in that process, what I loved was the fact that he allowed me to show him how to be on the business versus in the business. So strategy versus the mechanics of the business, because the CEO, his job is to operational efficiency, do other things, et cetera. So we basically taught him how to think on the business from a strategy standpoint while we were doing the process for about 6, 7 months. I was concurrently running a separate process of looking at buyers, not just people who are going to write a check, capital check. 13, 14, 15 months later, we sold the company for a double-digit profit. And it was all mostly because of the fact that unlike a lot of CEOs, the CEO was amenable to listening, learning, absorbing from us, taking the front lead when need be, and then also knowing when to sit in the back seat and allow us to do our job, which is a lot of work to get into their head and kind of be the psychiatrist.

I've seen this a number of times where companies originally contemplating doing a raise and then end up doing a full exit. And it sounded like similar in this situation. Was that already thought through? Hey, we're going to run a parallel process and see what's a better option, or did you just bring options to the table?

I always say KYC, know your client. First thing I always do is I do a deep dive with the management team, me, myself, my banker, and our corporate attorney. We do a deep dive. We get into their head and say, what are your plans right now? So you have the express need or the express pain point. The other one is the latent need, which is they don't know what they don't know. So in his mind, $10 million does the job. I said, what next? 2, 3, 4, 5 years out. And he hadn't thought of that. But the typical answer is, I hope to exit, but there's no plan for it. So we don't always concurrently run a process, but We do advise the client with as many options as possible. And life, personal life, dating, selling a company, strategy, business, building a business. The more options you have, the better. So the more outlets you think about, you have to be able to adapt and flex. And that's it. That's everything.

Yeah. So you took your own initiative, brought in the different options, and then how'd the client take it? What was their thought process to actually go in a different direction?

Almost always their first thought is like the strong arm of no, I know what I want. I know what's best for my company.

Exactly.

You do for today. You know what's best for your company, but have you ever run a process before? No. Have you ever raised $10, $20, $30 million for a founder-led company? That's roughly 5— this is a small company, $5 or $6 million EBITDA. Have you ever done something like that?

No.

Have you ever hired 3 or 4 external teams, legal counsel, audit, Q of E, whatever it might be, and an investment? No. So allow me to show you what happens when you run a process. Do what you do best. Stay at the helm, wear your captain's hat, run the business, keep going because it's a 12-month process. Still gotta keep the profits up and the top line up. While you're doing that, I'm gonna have to teach you how to speak like an investor. When we do that, that is the best transformation with a client. The C-suite can do their job and then be humble enough to know what they don't know. And that's where the magic is. I always advise it, but it's always about listening and learning. I ask so many questions, and if you learn enough, they hear their own answer, which is, I don't know that, I don't know that. And then they start building their own foundation of, I'm hearing myself think, oh, I said no to 3 things I don't know. Maybe I should let this team run the lead and show me another way other than what I already know. It's all psychology. I, I'm a banker, I'm a salesperson, I'm a psychologist is what I really am.

He is like building trust. And then when you build that trust, it sounds like they really start opening up and embracing the idea of these alternative options.

Yes. That what you just said is, and as I hear you say it, it's not about offering a solution. You don't know exactly what all the problems are. It's a very multi-layered process, but it's learning about them, not influencing anything other than getting them to open up and say, here's what I love. Here's what I hate. Here's what I want to do. Then you come back. So it's similar, like A specialist doctor. I want to do 30 or 40 different exams. If there's something that ails you, but you don't know exactly what it is, a good doctor will say, let me learn, let me listen to a bunch of exams, then come back, right? Where the real diagnosis is not, hey, good to meet you. Here's what I think you need.

Exactly. How'd the deal go?

We ended up closing it 15 months in. We sold to a strategic, actually. So most companies get sold to a private equity or financial sponsor. This one happened to be to a strategic. Why? He ended up staying on. We got him a position as a CTO and he stayed on for a 4-year contract. So he was happy with the number and closed successfully. And it was a very large company that I had done business with at Bank of America 11 years ago, stayed in touch, and a sub that they invested in ended up being the purchaser of this company. So relationship building 501, man, 11 years later, who knew?

Anything you would do differently on that deal if you had to do it again?

A bunch of things. I mean, tighten up our contract. There's a couple of things in there that got a little gray area, and that always happens. Good people, when it comes to money, start becoming a little bit more aggressive, and things start happening where, that's a lot of money you're charging, that's a big fee you're taking, that's some too hefty of a charge, that kind of thing. There's that component of it that always happens.

That's always a— yeah.

Legal contracts, no matter how in-depth money you spend, there's always a way to put a wedge in there and manipulate room for negotiation. And good people do this. Bad people will annihilate on a contract, but good people— they were good people. There's some friction towards paying this, I'm paying this much in legal fees, etc. So always better, more formalized agreements. But on top of that, maybe even verbalizing it early on and saying, hey, so we changed our contract after that. Now we had 7 or 8 signatures needed on a 12-page contract. Now there's about 30 places where you have to— we use— cite an example. Of what it would be, and you signature along each little line-by-line item acknowledging we've had this conversation. So it does two things. It shows them I don't want to do anything in the last hour, or I don't want you to feel a certain way. Let's have this conversation up front, because if there's a problem, let's hash this out today, pre-engagement, not once we're already in 5 months.

Yep.

Anything else besides contract approach?

Other than that, you always have to be like AI. And adapt to every scenario because I learned from some of the best bankers on the street and people who've been practicing for 50 years. There's people that still say, I came across something and I didn't see it coming. So I don't care how good you are. We've closed over a billion. My team, all in the 4 of us, we've closed over $10 billion. And there's things that pop up and I'm like, oh, I didn't see this one coming. I saw most of it, but not all of it. So you never know. You're never prepared enough. just like clients aren't prepared enough, an investment banker is never prepared enough. So no matter what you do, it's not enough.

Always. Thank you for taking the time to share a memorable deal story.

Absolutely, man. Always good conversation with you.

Here's to the deal. Live at DealMax with George Heloc. George, can you tell me who you are and what your company does?

Yeah. Thanks, Kison, for having me. My name is George Heloc. I'm a managing director of the Western region for LCG Advisors. We're a consulting, investment banking, and due diligence firm supporting buyers, sellers, and lenders across the transaction lifecycle.

What's your most memorable deal?

I served as VP of finance for aviation business. We were going IPO and we ended up pulling the plug late 2022. The capital markets were starting to dry up. That wasn't fun. Put in months and months of work and hours and financing and all that sort of stuff.

Were you like, where are you? How far are you? Roadshowing and—

Roadshowing.

Yep.

We pulled the plug at about 30,000 feet on a private jet.

Wow. So you're doing the roadshow, you're D'ing it like, hey, this isn't feeling right.

The investment banking group that we were using. We were starting to run into the walls. The capital markets really started to dry up there at the end of 2022. And it was a smaller cap deal, about $80 million was going to be the market cap. And one thing led to another and we kind of all looked around on the plane and we're like, what are we doing? This isn't going to work. Now, you know, you play Monday morning quarterback a couple years later, you see how 2023 went and 2024, and thank God they didn't do it. Probably better for everyone.

Anything would've done differently?

Can you keep capital markets open? Maybe that's the answer.

Yeah. It's hard to control the macro environment.

Yeah. Macro environments are tough, but no, I mean, I was serving as the VP of Finance, like I mentioned, and you're setting a client up for success longer term. We were integrating 3 different businesses to take that public, and we wouldn't have done anything differently. Headwinds just hit you when they hit us, and it's just not a fun experience. You learn a lot. You're integrating companies. You're trying to figure out the best way to get through an audit, get your FP&A function set up. The one company, they had 2 accountants that had been with the company for 30 years, and trying to explain to them why they need to be audit ready was mind-blowing to them. And, you know, oh, that needs to be in the system. We had an associate basically scanning in invoices for 2 months because they didn't have anything in their QuickBooks.

Wow.

It's incredible. Some of the stuff, especially in the lower middle market where us at LCG, that's where we're really playing, QuickBooks with no backup support and they're not going through an audit, they're not doing anything like that.

So it's—

Yeah. And then you have to take this thing public and you're like, yes, this is one of the large public accounting firms were going to be the auditors. They're not going to let a lot of stuff fly.

You guys must see a lot of crazy stuff beyond that.

Oh yeah. Another good one we had in the last year or two at LCG, we've got an investigative services group that they do background checks.

I want them on the podcast.

Yeah, they've got some good ones. What we had done for one of our private equity clients, had done the QV, had done an IT and cyber due diligence process. They had us do background checks. And they had gotten to basically the 11th hour. I want to say it was within a week or two of closing. And one of the partners of the company that was selling, husband gets on the phone and the private equity firm's like, oh, who's this? And they're like, oh, husband, blah, blah, blah. They're like, all right, well, we're going to run a background check. The background check came out pretty bad, killed the whole entire deal. There was some things that had happened in the past that wasn't able to be in certain countries at certain times, killed the whole deal. They're like, who are we actually going to do this deal with? And that they were rolling equity and everything.

Wow. There was something that bad?

That bad.

Like beyond fraud?

It wasn't fraud. It was, couldn't get into the US because of certain trafficking of things.

Wow.

Wow. Paraphernalia. Let's not go too crazy here.

Okay.

Okay.

So they broke some big crimes.

Broke some federal crimes. Yeah. So the private equity firm backed out. You never know what could have happened in the future. It could have been a good deal. I think our client just looked at each other and said, Are we really going to do this?

So crazy. That breaks the deal after everything you put through.

All your due diligence costs, your attorney fees, everything. And all of a sudden it's dead a week before close.

What would you do differently on that deal?

Uh, it was—

start with the—

start with making sure you do the background checks on everybody off the bat. Whoever's got money tied into the business.

If I went through that, I would make that part of NDA. It's like, by the way, fill this form so we can do your background check.

A lot of times we don't find much in the background checks, but every once in a while it's like Is that going to kill the deal or not? It's not our call. We're just reporting. We're saying, here's what we found doing a background check. And that could be as easy as social media checks all the way to deep, deep internet, dark internet, whatever that gets called anymore, kind of digging into there. So that comes up every once in a while in due diligence. And it's interesting to see how people take that and what it shows.

That's so wild.

It's fun. It's fun.

Got anything else for me?

I'm sure everyone that sat in this seat that I'm sitting in has probably talked something AI-related. One of the neat things that we're starting to see in due diligence is as we're doing some QV type work for our buy-side clients and digging into revenue numbers and the data there and giving them insights that they didn't even know that they could get access to. So I think we've been seeing a lot more of that from just really looking under the hood and saying, "Hey, what are you really buying from a revenue perspective? How much of revenue is tied to something or a certain location, or is something cannibalizing something on the other side of the business?" Starting to have some of those insights with some of the data that AI can dig into, whereby from human eye, you might not see it.

Yeah.

So we've been seeing a lot of that too, which has been good. And a lot of times we're helping clients get prepared for sale. And we had one, we did a sell-side QV for another investment bank. They went through a buyer due diligence process and just got absolutely smoked, killed the deal. We got brought in to do a sell-side QV about 6 months later as they were kind of taking it back to market and Getting in there and having an understanding of what a buyer is going to go into and dig into in due diligence made the process the second time around a lot easier.

That's the standard.

Yeah.

And we've seen it on our QV side the last couple of years. We've seen a lot more sell-side phone calls to us on the sell-side QVs. The buy-side's going to come in and beat the crap out of it. So you might as well be prepared and show the skeletons where they are before the buyer finds it.

Yeah. Almost 10 years ago when I started the podcast, it was like a new concept and now it's like the go-to.

Yeah. I mean, Our firm did 330 or so last year, QVs, and that's across the buy side and sell side.

What percentage do you think you do buy versus sell?

Last year, I want to say it was probably about 80, 85% buy side. If you would've asked me 3 years ago what we were doing, it was probably 95% buy side. So that just shows how much more—

It's significant given that there's so many more proprietary deals done over bank loans.

Oh yeah, for sure. You got a lot of buy side shops out there that are doing buy-side work for private equity and other corporate buyers. And yeah, they're not getting the handholding and helping through a process. They're business owners kind of out on their own.

Hey George, thanks for taking the time to share some memorable deal stories.

Hey Kison Patel, thanks for having me, man. Let's get a ski day in. Come on, man.

Let's— yeah, ski back at Denver.

That's right.

That's right. Here's to the deal. We are live at DealMax. I'm here with Angie Astle. Angie, can you tell me who you are and what Chugach is?

Yeah, I'd be happy to, and thank you for having me. I am the EVP of Finance and CFO for Chugach Alaska Corporation. I also serve as their president of their investment division. I'm an accountant by education and training. I worked at Deloitte and Touche for 5 years and then was hired on to work at Chugach Alaska Corporation. During my period at Deloitte and Touche, I got exposure to Alaska Native corporations. I wasn't from Alaska. I moved from Montana up to Alaska and started auditing Alaska Native corporations and just fell in love with their business model, which combines this profit purpose, but with also a social mission. So I went to work at Chugach Alaska Corporation back in 1998 and have never looked back. So Chugach Alaska Corporation is one of the 13 regional Native corporations that was formed under the Alaska Native Claims Settlement Act, or ANCSA, that was signed into law by President Nixon in 1971. And what it was was a grand bargain between the federal government and the Alaska Native people to give up their claim to Alaska Native lands in exchange for land and money through a corporate structure. So it's very different from the tribal system that you see in the lower 48. Chugach Alaska Corporation is owned by Alaska Natives from the Aleutic, Supiak, and Eyak descent, and their shares cannot be bought or sold. They're born into their shares, and the shares then are passed down from generations. So we view ourselves in generations and not quarter by quarter or year by year. And the purpose is to have a forever corporation that provides benefits to these Alaska Native shareholders into perpetuity. So I love it because we call it profits for a purpose. So we are making profits, but those profits go to an Alaska Indigenous population through dividends, shareholder programs, scholarships, education. We have elder dividends and elder benefits, and then we have tribal camps, cultural camps. It's an amazing program.

The most unique corporate structure I've ever heard of. And what kind of businesses do you own?

Chugach Alaska Corporation, because it was mandated as a for-profit organization, not with a business in mind, they started out in canneries and logging and areas where the shareholders had knowledge and where they had their communities. And then the Exxon Valdez oil spill occurred right in their backyard. In 1989, the Exxon Valdez oil spill occurred, and it was unfortunately concurrent with the logging marking falling down. Actually, Chugach Alaska Corporation filed for bankruptcy, Chapter 11, in 1991. And then they emerged as a federal government contractor, pivoting to providing services to the federal government. And it was a low-cost way to provide services, and they found a niche in federal government contracting. Now we're over $1 billion in revenue, and we have two main divisions where we do government contracting And we now do commercial services, industrial services that are like what we do for the federal customer, but we do them for commercial customers. So HVAC, air conditioning, elevator maintenance. We do oil spill response in and out of the Valdez Terminal up in Alaska. We do wireline and e-line services up at the oil field. We do a variety of different services, both commercial and government.

Okay.

How many employees?

5,000, a little over 5,000 employees.

Edgy, what's your most memorable deal you worked on?

Well, the most memorable deal I ever worked on was actually our first acquisition when we decided we were gonna diversify the corporation out of just government contracting into commercial services. We started looking at a company that was an HVAC company in 2011 in Hawaii. We had a lot of logistics contracts in Hawaii for the federal government at that point in time. And the Hawaiian culture and the Alaska Native culture are very similar. So we were really excited and we started due diligence on this particular HVAC company down in Hawaii in 2011.

Can you walk me through the deal? What were you originally trying to buy?

We were trying to buy this company. It was formed in 1946. We liked the longevity of the company. We liked the customer reputation that it had, and we really liked the service aspect of it. The heating, ventilation, and air conditioning is something that we already do for the federal government. So we understood that market space and then we started doing due diligence. Shortly after we started doing due diligence, we discovered that they had deployed capital in a couple different areas that actually left them cash constrained and unable to pay debt. In essence, they were bankrupt or on their way to going bankrupt. It changed the whole deal due diligence and our thoughts around that deal.

When did you realize the company was headed for bankruptcy and what did that moment look like?

We were already emotionally attached to the company as it was our first deal. We had really chosen it carefully. And so, we were pretty emotionally attached to the transaction. It was unfortunate when we had to really take a step back and think about it. Fortunately though, one of our board members at that point in time was really experienced financially. He started thinking about and suggesting, could we take it through bankruptcy and still complete the transaction? So, we met with the bank. And the rest is history.

You ended up working with the bank. You changed the whole deal structure. This is the point where most people just walk away. Sounded like you ultimately became the creditor. How'd you land on that?

Yeah. So we met with the bank and we came to the conclusion that we could become the secured creditor. So we bought all of the debt from the bank, made a negotiation and bought that debt and became the secured creditor. And then the company did go through a Chapter 11 reorg. And through that reorganization, we actually became the owner of the corporation. And that was 14 years ago. And now it's a very successful company inside of the Chugach Alaska Corporation family of companies. We've added refrigeration and elevator services to that company since, and it's a very successful HVAC company in Hawaii.

Bought the debt, took ownership. Was there a part you had to rebuild the company's ownership, what did it actually take to get the business to where it is now?

I mentioned a little bit earlier that what you liked about it was it was a long-term company that's been in Hawaii since 1946. So it did damage the reputation of the company to take it through bankruptcy. It took patience to rebuild customer relationships. We did have to hire some new leaders, but they did have great staff and we just had to convince the community that we are there to stay. And rebuild the reputation. It took a lot of time and patience to turn the company's reputation back around.

Is there anything you would do differently if you had to approach that deal again?

I'm sure there's a lot of things that we should do differently. We could have moved a little bit faster on some staffing decisions, but all in all, it actually ended up fairly well because we have such a long-term hold for our companies. It wouldn't be for everybody. If you are a short-term holder of companies, this one took a lot of patience to get it to be successful.

Let's talk more about that. Running M&A at a forever organization is really different. Does the mission change how you actually approach deals?

Yeah, it changes it dramatically. We're very deliberate in our process. It's a very thoughtful process. Our board is extremely involved. We're never gonna be the fastest to close, and we've just accepted that we're never going to be the fastest to close. Culture really, really matters to us. We've walked away from transactions just because we're not culturally aligned, because we are a long-term holder of a company. Those are the key aspects on really how it changes the deal.

It's like adopting a child. You're kind of like really thinking this in the long term versus, oh, we're going to fix this, uh, put a new hood in the car and just sell it.

No, we do not do that. We keep them for a long time. Actually, we've never sold a company that we've purchased. We hold them. They become part of our family.

Is there anything you tell somebody in a similar situation, mid-diligence for the first time, that gets a big surprise like you did?

I think every deal has had surprises. That one was a bigger surprise, but every deal has surprises. You need to be flexible and creative, and then you need to know your own company culture and not force it.

Angie, thank you so much for sharing a memorable deal story as well as a memorable company story. The main thing I like about these DealMax conversations is that they're real quick. They're raw and they're useful. Somebody else already had to learn the hard way. Shouldn't have to start from zero every time. That's what we're building at M&A Science with DealPilot. Real deal lessons organized so the next one gets better. mascience.com. Here's to the deal. Thank you for taking the time to explore the world of M&A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M&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, Kison, K-I-S-O-N, at M-A-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&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.