AM&AA Winter Conference 2016 Value Growth Session: 22 Flavors of Growth Advisors

Welcome to the 22 Flavors of Value Growth Advisors. Just a brief overview of, of what we're here and what we're talking about. We're going to present various disciplines and practices and and how they're important in value growth leading up to and through transactions. And the orientation is non-financial disciplines. So this is how these other disciplines, among many, can incorporate into a successful value growth engagement. My name is Mark Holmes. I'm a principal with Charted Course Advisors. We're a value growth firm in Chicago. We work on financial direction, Operating System, Exit Choices, helping private family-owned companies grow their value and work towards whatever that transition may be for them. I'm going to introduce our panelists, let them talk a little bit about their practice area, some of the expertise that they bring to the process. Then we'll go through some different questions, and if at any point there's questions from the audience, please jump in. We want to make this as interactive as possible. Greg, would you like to start?

Sure.

So my name is Greg King. I've got 3 minutes to talk about something that could take hours. I'm not an M&A person, I'm not a banker, I'm not an exit planner, and I'm going to talk to you about something you probably don't know anything about or never heard of. So I spent 14 years with the Massachusetts Manufacturing Extension Partnership. It's a mouthful, commonly referred to as the MEP. So the MEP is a national network that's tied to the U.S. Department of Commerce. It's since under Commerce, under the National Institute of Standards and Technology. It's called NIST MEP. If you wanted to Google it, you would get all the information you could possibly imagine. So it's a national network that's focused primarily on small to medium-sized manufacturers. By definition, those manufacturers that are from 1 to 499 employees. So the specific mission is to enhance the productivity and technological performance of U.S. small to medium-sized manufacturers. There are 440 locations throughout the country. There are 1,200 manufacturing experts associated with that. There is an expert within 2 hours of every manufacturer in the country. It is the largest single consulting organization specifically focused on manufacturers in the country. We work with over 2,800 private and public resources, and we service over 300,000 manufacturers. So the primary initiatives for the network: growth and innovation. And that includes, but is not limited to, things like sustainability, supply chain management, technology acceleration, and workforce. And maybe a little later on I can talk more about workforce because I think it's an underexplored area for everything I've heard here at this conference. All of these things are specifically designed to enable a small-medium-sized manufacturing enterprise to successfully grow with invention, innovation, and commercialization, which better positions them for transition or some kind of an exit event. So the core competency of the National Network Predominantly since its inception back in the mid-'80s has been lean manufacturing and those things that are focused on operational performance. The system is very good at those things, and the mission has morphed into more strategic initiatives in the past few years and has enabled us to, you know, contract with resources like many of you. That are here today. So some statistics about the network. Every center is measured on a quarterly basis. We're funded through the federal government, so we have to be measured. And if we don't meet our required metrics, we don't get our funding. So we're very motivated to be successful. But from 2014, the network holistically Created over 46,000 jobs— I'm sorry, retained over 46,000 jobs, created over 17,000 jobs. New client investments totaled just under $3 billion. Cost savings were just a little over $1 billion. Retained sales over $4.2 billion and new sales over $2.5 billion. So pretty impressive statistics. For an organization that's not all that well-funded. So why should you care about the MEP? I think the MEP represents a great opportunity for the AM&A to collaborate with as you look to grow your clients and add value to what it is they do. Let me give you some examples of how we operated in Massachusetts. On average, 40% of revenue-bearing projects utilize a third-party resource. As we move up the food chain, so to speak, away from more operational-related issues, that statistic grows to about 75% when we get into more strategic-related initiatives. In those cases where we develop strategic roadmaps, 50% of the implementation resources were third-party. I guess if I leave nothing else with you today, it's the opportunity that the MEP could become part of the ecosystem that I've heard talked about here at the conference. And wouldn't it be cool if the MEP, the AM&AA, and perhaps NIST and the U.S. Department of Commerce can collaborate on some funding that might enable some projects in the various regions throughout the country to build this ecosystem, which I think is a great idea and, you know, definitely needed for— certainly for saving our manufacturing industrial base. So thanks. Look forward to some Q&A later on.

Thanks, Greg. Michael?

All right.

Let's get a quick show of hands from the audience. How many people here work primarily with the owner or the sell side? And how many of you work— whoa, they turned on the microphone. How many of you work primarily with the buy side? Okay, we'll have one comment for you later on. So it gives us an idea how to really customize some of our comments that we're making here. I just want to tell you that the biggest lie in business is not the check is in the mail. The biggest lie in business is it makes a contribution to overhead, and that is a lie that many, many business owners tell themselves all along the way to not being able to sell their business, not being able to get the money out of their business that they need to live on because they focus so much on revenue. In the more than 200 companies I've worked with over my checkered past, One of the biggest issues that I've found in terms of creating enterprise value and sustainable profitability in a business is that most companies have a core set of maybe 3, 5, 10% of their clients that are truly strategic, truly important for their growth, and they're important to the client. And then the rest of their sales mix is made up of also-rans, people who are burning up a lot of management time and bandwidth without adding really anything to either today's profitability or tomorrow's exit value. So we use the Quadrant Five methodology to help business owners to focus on, first, sometimes first to identify who their really strategic critical clients are. How did they get them? Where did they come from? What makes them strategic? What are they willing to buy? What are they willing to pay extra for, and so on? And by identifying those people, build their strategic plans, their operating plans, their marketing plans around serving those core clients and finding more of them. The result of that type of serious, disciplined alignment around the real value creation in a company is that earnings grow faster, earnings are more sustainable, the customer base is a richer customer base that any buyer would pay extra to have, risk is reduced, inefficiency is eliminated, not eliminated, you never eliminate it, but inefficiency is reduced because a company isn't spending a lot of time marketing to people who don't make a profit and don't provide any value in a transaction. So it's a very common sense approach that we use, but it's an important part of a toolkit for anyone who's looking to prepare a company for a transition event. And that could include making the company more sustainable for the next generation, bringing in new investors, or an exit. Thank you.

Thank you, Michael. Christine?

I'm Christine Hollington, and I actually A little bit about me. I actually started my career in technology transfer for both the Texas Agricultural Experiment Station and the Texas Engineering Experiment Station, which are both located as part of Texas A&M University System. I joined Grant Thornton as a senior consultant doing debt and equity financing, business plans, financial projections, marketing plans very similar to what some of you do in this room. Before, and in a nod to Star Wars, I went to the dark side of, as a marketing coordinator for Grant Thornton, starting their marketing effort. Then recruited from there to be at PwC in regional marketing covering 5 states, 15 offices, and then became director of marketing for KPMG before I started my own firm firm in 1993. So we've, since that time, we've worked with more than 300 companies to develop and implement growth strategies and really focus around 3 things, and that is positioning, process, and people, which it takes that combination of things to be successful in any kind of business. So first, positioning is about market positioning. Where are they, where are they aligned in the market? Do they have a niche they can dominate? Or gain significant market share? Do they understand and know their target audience? And do they have core message points that can resonate then with those audiences? And out of that develops marketing strategies and plans. The people part of it is, do you have the right people in place to promote and grow that business? And do they understand what makes that firm unique? The process part of it is, do you have the processes in place to both promote, capture leads, and then measure ROI, which a lot of firms don't. Some of our deliverables, we start with branding, the strategic planning that I just discussed, the marketing plans. We also move into the tactical aspect of things such as websites, eMarketing, social media marketing, search engine optimization, SEM, search engine marketing, public relations, content development, and marketing automation. So we can do a turnkey for our clients or plug into a specific element. And what we call, as Michael alluded to about the making sure they identify their right kind of customers, who they know their customers are. In, in our firm, we call that if they're not talking to the right people, they're talking to themselves.

Thanks, Christine. Curtis?

Good afternoon, everyone. Dr. Curtis Odom. I'm the principal and managing partner of a firm in Boston known as Prescient Strategists, and very specifically, we play in the integration advisory space. There are 4 areas that we really focus on that both bring value to the buy side of the equation as well as the sell side. And specifically, early-stage synergy assessment, pre-stage acquisition planning, post-acquisition optimization, and finally, which everyone's been talking about here at the conference, is really how do you do value growth as a value growth advisor. So the firm is 4.5 years old as of right this moment. About 2.5 years ago, we got into the space of really playing in mergers and acquisitions when a very salient thought and fact was thrown at me in the standpoint— the numbers vary, of course— but the high percentage of deals that fail due to the fact that cultural integration, change management, adoption are thought about either not too late or not thought about at all. So we looked at that standpoint from our firm and said, how can we take what we bring to the table, which is a real solid understanding from a research perspective, practice perspective, and understanding organizational behavior, applying the things that make up the doctorate that I have in that space, and said, where should we really focus? And we looked at it from the standpoint, when you think about the sell side of the equation and you think about, you know, the seller, as we've been talking about, as I've heard many of you say, many sellers are not ready to sell their business. They want to, They feel like they're ready to, but when you go through and you do the looking under the covers, if you will, you find out that many are not ready. So what my firm does in that space is we work through partnered efforts to get businesses ready for sale around the human capital aspect. Do you have the right leadership? Do you have the right workforce? In other words, you have the right people in the right place at the right time for the right cost to get that business saleable. So we work on that aspect. But then on the buy side, we look to try to figure out, you know, when you are thinking about the organization that you've just acquired, how are you going to maximize your evaluation? How are you going to maximize that asset? How do you make sure that 90, 100 days after the close that your top talent doesn't run out the door? How do you make sure you don't lose your intellectual property, intangible assets? All the things that made the acquisition or the merger seem that much more palpable and the reason why you went through the transaction. So we stride both halves of that and have been very fortunate to do a lot of that work right now with 27 of the Fortune 100 companies in the world and continue to grow and move downmarket to really be an asset because we believe what we bring to the table is agnostic to the size of the deal or specifically the industry in which an acquisition is being focused on.

Thanks, Curtis. So as you can see, the panel's coming from different technical areas, different perspectives, and contributing to value growth in a company. So I just want to kind of flesh out what this means and help other advisors understand. Let's talk about some situations. Some warning signs, examples of when somebody should call you, who should call you, when should they call you, what can you do. Michael, you want to start that?

Sure. There are a number of warning signals that a company is going to need to improve performance or improve its customer mix in order to become more saleable. So revenues have been rising, but the margins aren't going with them. You may have a situation where there's some competitor who is getting what the owner thinks is more than their fair share of the shootouts that they're competing in. So we think we should be getting 50% of this when we compete with Joe's company, and we're only getting 30%, and something's wrong here. We don't know why. It could be that you start losing some employees because servicing some client that is high revenue and low margin is burning out the staff, and the company realizes, you know, we're losing people, we're spending money on hiring and training people, and we're getting no value meanwhile from this client relationship. Another one is is that you end up, you have a lot of customer concentration. By the way, we call the strategic clients A-list clients, and as a brief hint for anyone who wants to know who they aren't, they're almost never the largest client, and they're almost never the longest-standing client of a company, and so what happens frequently is that the management team is spending too much of its time on a high-revenue, low-margin client, and, hey, these great clients over here, we don't have to worry about them, but those are the ones you can build on, and those are the ones that they're not focused on. So any one of those situations where they're seeing something, they're not making enough money, there's too much client concentration, they're losing people because of toxic accounts— by the way, in the next session, Phil Holman is going to be talking about some of the things he's done to clean up his business. So think of this as an introduction to the next session, and— but those are some of the entry points. I'm sure Christine has some others that she would note.

So we kind of come in on two areas. We work a lot with our firm works— we have a specialization in service-based businesses and specifically professional services, so we've worked with a number of M&A firms, investment bankers, valuation firms, CPA firms, and other professional service firms to help them grow their practice. How do they position their practice? How do they develop those core competencies and communicate those core competencies to their target audience? And then we also work with their clients, and we're usually brought in on the client side in a couple of different scenarios. One is when that particular company isn't quite ready for prime time. They're thinking of selling, something is happening, something is changing in that organization, but they need to accelerate the revenues. The owners or founders are the nucleus of that company, and too much revolves around them, and they're not the company really can't survive at that level or continue at that level if those founders or partners back off or leave the company. The value drops. Or where they need their positioning, their market positioning shored up. You know, they need to have their presence, their web presence, their whole marketing effort a little more sophisticated than what got them by in prior years, and we're brought in to do those types of things. Or after the deal is papered up, where there's a communication and a brand rollout strategy from the external communications like press releases, communications to clients, as well as internal communications to communicating to employees, particularly in a merger acquisition situation where you're gaining those— a significant number of team members, and how are you going to communicate the new brand to them and the expectation and calm their fears. So that's kind of the two scenarios when we're brought in on the deal side.

Thanks, Christine. And Greg, I know you're really not often— your expertise is not close to the transaction, but in terms of adding value, preserving value, what are some of the warning signs that you can help address?

Obviously, you know, because we're so focused on operational process, there's some indicators where, you know, there's just a lot of waste in the organization. There's a lot of things that are being done that the client isn't paying for. So wasted motion, wasted operations, we can go in and clean those things up. And then there's, you know, the other side of it is technology. You know, one of the stories I can tell you about back in the early 2000s, a small injection molding company that were making miniature parts, they were making molds to make miniature parts. And their dad had started the business and the competition all went, you know, the competition went offshore. So they were competing with offshore folks. They had good technology. They were at the forefront of what they were doing. They didn't know how to leverage it to take advantage of what they had and to grow their business. So when we went in and did the assessment, we brought in some domain experts and discovered that they had great technology, but they weren't leveraging the technology to utilize for themselves. So our suggestion to them which they took and ran with was stop making molds for everybody else. Start making molds for people who are going to ask you to mold the parts, which are— these are micro-molded parts. Imagine a grain of rice, if you will, which is a grain of injection-molded plastic, and making 500 parts out of something like that. Very, very small parts, very intricate, a lot of technology deployed to do that. So we, you know, we suggested to them start getting in the business of making parts. And they've grown that business fourfold over the years and increased their employees, expanded their facilities. So, you know, technology is another area where it can be an indicator of opportunities.

Great.

Thanks, Greg. Curtis, situations, warning signs, red flags?

Sure. When I think about where my firm gets brought in, it's really 3 areas we're brought in. It's from the reactive aspect where the deal is closed, you're about a year into post-transaction, you run into your first human capital issue, whatever that might be, and you realize that a culprit might be that the integration didn't go as well as it could have been or the attention wasn't paid. So that's the reactive bring-in. The real time is right at deal close, where they realize now we're going to have to go into integration. We need to stand up an integration office, have an integration manager, what have you. They might not have those resources, so they might look to my firm to provide that in some instance. And then what we're really trying to make aware to people is the proactive bring-in will quite frankly be during due diligence, when you start to think about what's going to happen after the close. And I think that from a value growth from a value growth perspective, being brought in in due diligence really allows to really get at all the things we've been talking about. The earlier you bring us in and the more you think about integration at the front end, rather than just something you have to do by default or you might just fumble into, the greater the opportunities for your success.

Okay. So for bringing— we see those warning signs, we need to pull someone in. Talked about about some of the signals, what's the benefit? Either what's the upside, what's the downside that's been avoided? You know, Greg's example of they kind of shifted who their customers were, they redeployed their technology. Michael, can you talk a little bit about kind of what your involvement, how it can change, examples of what it does in a company?

Yeah, well, let's even look at what the example that Greg was giving. Here you have an organization that has a core value in being able to produce these these, the tooling, and yet most of its business, as I'm getting the sense, is in what would be considered the lower margin or less strategic area of providing the product but not the follow-on service to somebody else. So the best part of the value of this focus on the core profitable business is that you The company's already doing it, right? This is where your value is today. This is what you're already doing right. We don't have to go in somewhere and say, you know, you're making water pitchers today, but you know, you should have a restaurant somewhere down the street. That doesn't work for people. But if they're making water pitchers and that's the core of their value, then you figure out who's buying them, who wants to pay extra for them, what is it that makes theirs special. You know, we use 3 questions. What do you do better than your competition? Do your A-list customers believe you do it better? And if they believe it, will they pay for it? And like Sherlock Holmes said about eliminating the impossible, once you get through that set of questions and you find out what the customers believe you're doing better, and they'll pay for it, and they're the strategic customers, that's the foundation for the business. So that's the value. Business owner and the team a chance to align, to focus, to concentrate on one thing. And the more you're focused on one thing, the more everyone's telling the same story. You know, the meetings are more focused that they have, the sales calls are more focused, everyone knows what to put in the sales deck and the brochures and so on. And when Christine is working with a company like that, her job— I don't want to say it's easy because it's never easy— but certain headaches that you get in trying to do to do marketing are reduced a lot because you can focus on the core that you know is going to work.

Right, so we've identified a competency, we've decided to focus on it, so Christine, how do you get the message out? How do you make the world know that's what you're good at?

So, yes, it's not easy, but it is a lot easier when in a lot more valuable to any organization when you really know who you're talking to in terms of any target audience, any kind of focus. When you know that's who you're talking to, and then you can develop those messages and delivery mechanisms. What type of tactic are you going to use to reach that specific target audience? Because in today's time with as much competition as just about any firm out there has, because of our advancement in technology, because of the internet, and the ability that those kinds of things took down a lot of barriers, reduced, or in some instances eliminated a lot of barriers to entry in very specific, or across industry lines, that it's very easy for people to just mass market and get things out there. But more so than ever before, you have to really target and focus your communications and your marketing effort. You have to know who you're talking to, talk specifically to them, and if other people outside that target audience don't know who you are, that's fine, because you're not talking to them. It's when you have that focus and you're really honing in on that specific target audience and you're willing to do that. It takes a lot of guts to do that. It takes a lot of guts, like Michael was talking about, to focus on that target audience, to identify who that is, and then go down that path and stay the course. And that's how companies get off all the time on either side of the equation that they start to go for, let me just do this, let me do a little of this, oh, here's an opportunity, and then they get so deluded that they're not making any money and all their energies are focused on things. And like Greg's story talked about, their energies and their efforts and their money is focused on things that that aren't making them money.

Great. Curtis, thoughts on how in your area you can help institutionalize this or turn it into a benefit?

Sure. We— right now we're working on a new opportunity that just came to us toward the end of last year where we have, through some networking and through conversations, there's a telecom industry in São Paulo, Brazil, and there's one particular entity that's a $30 million EBITDA company and they would love to be acquired by a US company. So you think about telecom here in the US, there are many big players in the space. They are looking to be acquired. So through the power of networking and just making good collaborative relationships, they've reached out to my firm to say, hey, we need two things. One, we need to understand US-based corporate culture, number one. And number two, we need to make sure that when we go out for sale that we have a good degree of success with that. And the owners and the CEO of the company said, we want to start with our culture first. And it's exciting to us because when you think about doing business with a Latin American company, you know, culture is paramount. It's more paramount than the dollars and the cents that we deal with here in the U.S. So it's a great opportunity as now a new licensee partnering with Ken and with Michael as a new licensee of the VOP. We're going to put that to use here in the next 6 months, which is to go and work with this client in São Paulo to get them ready for sale through the advisory and through value growth, to get them to petition to be acquired by the US market.

Great, thanks. So we're taking these steps into sort of kind of summarize how your particular discipline builds value in a company, both for the current owners, maybe they turn into sellers, potentially a buyer on the other side. Greg, I know you have some passion around workforce and kind of its impact on a company's sustainability and continuity. Could you talk about how that builds value?

Yeah, I think one of the— one of the understated things I've noticed here at the conference, there's a lot of focus obviously on You know, baby boomers in the next 8 to 10 years are going to be exiting from their business. Well, you need to look behind those baby boomers who own those businesses and look at their workforce. There's equally or greater amount of people that are going to be exiting that workforce that are going to have a horrendous impact on that business. So we just recently completed 6 regional studies in Massachusetts to understand what were the greatest inhibitors of growth for these SMEs, and workforce is the number one in every region, and not only in Massachusetts, but we're seeing that throughout the whole country. SMEs find that acquiring skilled help is becoming nearly impossible. Things just aren't aligned properly, and the attrition rate that's going to be upon us pretty soon is going to have severe impact on folks. So I think that a lot of attention needs to be given to that. I know in Massachusetts we have probably one of the best workforce programs in the country. We are focused on it. We've been focused on it for over 10 years, and it is a passion. It's a passion of mine. Of the leadership at MEP in Massachusetts, and it's paid great dividends for us, and I think it positions a company well when they get ready for that transaction activity to have a solid workforce with leadership that's investing in their workforce and keeping their workforce current with the skill sets required. Thanks.

Michael, some thoughts on— building, preserving value?

Well, as everyone in this room knows, and one of the things we always have to try to explain to business owners, the thing that makes a company saleable, that builds enterprise value, is not really the same as what builds revenue in the marketplace. I mean, we used to run into this all the time when I was doing work with a lot of public companies, that what made something a good stock was not the same as what made it a good company. And helping people learn that mindset is really critical. They learn that mindset as you begin to talk to them, well, in my area of focus, which is we start with the customer and work our way back. And a lot of prepping people to go for a transition event People work inside the company and then don't really get out of the company enough to figure out, this is the customer base, this is what the competitive edge is, therefore these are the type of people who are most likely to be buyers. How do you adjust your marketing program so that the messages that you're sending out are going to be appealing to those people you've already identified as the most likely buyers? So that focus on the customer in the marketplace helps build value, not just by, you know, increasing returns now, not just by allowing the business owner and the management team to focus more of their time and bandwidth where it really pays off, but also in terms of enabling them to position and, let me say, condition the market a bit by making sure that, you know, we talk about your permanent record when you're in grade school. Well, now the internet is your permanent record, and so when someone's looking at making an acquisition or someone's looking at whether you're a good candidate to be acquired, the first thing they're doing is Googling you, and you can determine what's going to come up first, second, and third on that search by virtue of how you adjust your messaging in response to where the value is in the business. You know, it's a— it's not quite a straight line, but it's a very clear path from creating, you know, identifying the value you already have, expanding that value, building on that value, and sending the message about that value so that you're able to get more interest, more bidders, people recognize there's lower risk, etc. Does that cover?

No, no, that's great. Christine, thoughts kind of wrapping on building, preserving?

So I think it's really two things, is that to remember that people in general don't like change. You know, they just— even the ones that are telling you they love change and they love to do things differently, they still have a lot of habits, a lot of things that they do the same day in and day out. People react and respond in whatever way they choose, if they don't know, if they're surprised, if they're unaware, and that can be internally or externally. And externally, that can be your clients, that can be your prospects. Internally, your employees, could be your vendors, other people that you depend upon. And if they don't know, they're unaware, they will fill in the blanks. In whatever way they see fit. So there may be things that they gather from other sources that aren't reliable or as reliable. It may not be the full story. And we can see that day in and day out. An example of that is how certain stories are reported. You can look at any media source and there's always some sort of bias, and that bias might be simply time. You know, they have 10 or 20 seconds to tell us a story. They can't possibly give us all the details. So it's really imperative to think about the communications and the marketing strategy in all aspects. How is this going to be received? What are they going to think about this? How is this going to encourage them to have confidence and stay the course with us? Will they have this? Will they believe what we're telling them? Because it's about building trust in whatever kind of business that you're in, whether you're— the company is making something, they're going to trust. Can they make it to those specifications within the timeframe, within the cost? Do they have the technology? Do they have the people to do that? The experience, whether it's an international project where it's, do you trust them? Do the people that are involved actually trust you? And that trust comes from what they see, what they hear, what they believe to be true from whatever source they gather it.

Thanks, Christine. Curtis?

I would echo what Christine said. Dean just mentioned, and the fact of how important the trust is. I mean, for the work that my firm does, we don't do marketing and advertising. The business comes to us all by word of mouth because of the fact of the clients that we have, their success, and that old commercial back in the day, and tell 2 friends and they tell 2 friends and so on. That's exactly what I think is one of the biggest things that's missing, is we talk about, you know, over the past day and a half here, talking about the ecosystem that is here that's part of AM&AA. But I think as we can be solid and trustworthy representatives from the different aspects of the ecosystem, when you show up and do what you say you're going to do and return the value for the client, I think as those things happen, people will start to trust those of us who make up the ecosystem and gives all of us an opportunity. That adage about high tide rises all boats, I mean, that's true. And I think that as we continue to really work in the spaces that we're in, and I always think about it from how I lead my firm, is it's basically based on know, like, trust, and refer. You're never going to refer somebody that you don't know, like, and trust, and I think as we can continue as intermediaries, advisors, what have you, to be solid in the way that we work with our clients and the value, I think that that's going to really turn the tide where all of us will have the opportunity to combat the two things that we see, which is owners who want to sell but are not ready, and then also looking at how within 24 months of most deals they fail because the human capital piece isn't there.

Thank you, Curtis. Any questions from the audience?

Yes. Curtis, could you just expand on your last point?

[INAUDIBLE] And thank you for your question first. I think that many times, just from my own observation, is that we're moving so fast to get the deal done, we expect that everything is just going to fall into place the minute that the signatures hit the page. And we go out for the big steak dinner. The way I think about it, the real work of the merger, the acquisition, or the integration starts right after that, because now we need to go out and do what we say we're gonna do. And I think to further elaborate from the human capital piece, whether it's IT, sales, operations, what have you, there are people who are charged with executing the work that's done in that business. And when you take Company A and Company B and pull them together and create NewCo or Company C, that organizational strategy should change. It should not be the same organizational strategy that was left to exist before the merging of the two entities. Most times, to finally answer that, those that are charged with doing the deal don't look at how the organizational strategy should change, number one, and in a nod to my colleagues here from the workforce, they don't take the time to understand or look and see, do I have the workforce now that can execute against that new organizational strategy? You can't just take the people you have and work them harder and expect that that good result's going to happen.

So one of the things you see in family enterprise is there are owners of a call center.

Yep.

And that's family enterprise.

I'm starting to. I'll speak to one client that we have, and, you know, it's the Campbell Soup Company. We've had them as a client for now 4 years, just as an example. They went through 2 recent acquisitions probably within the last 24 months where they knew that they needed to change their organizational strategy. And, you know, the death of the quote-unquote nuclear family where people go home and open up a can of soup and sit around and eat that That's changed. So they realized that if they were going to stay relevant and stay viable, they needed to buy Bolthouse, which is a smoothie company, and they also went out and acquired Plum, which is an organic baby food company. They are very deliberate with our help to bring about the assessment of the best parts of those other two entities, those other two cultures, and figure out— we have a strong iconic brand and iconic culture for Campbell's. What are the best parts of that? Where are we lacking? And can we take those best parts from those other two cultures and use a $50 word, inculcate that, but really shuffle the deck and bring that together? They call it out. They don't leave it like, well, what's our culture? They're very deliberate in defining what the cultures are of those other two entities and in trying to bring the best of the best. So I am starting to see that, and I'm really interested to see what's going to happen from a culture standpoint with this company we're going to work with here in São Paulo.

And if I can add to that, it's really about having culture champions within the organization and identify who those are and making sure that they're going— they know what's expected and what should be communicated throughout the organization. And I'll give you an example of an— it's a public UK company that we've worked with that's doing major acquisitions here in the US involved in the engineering and software space. Space and did an acquisition out of a company in Colorado, came back, one of the executives happened to visit that organization about, or that location, about 6 months after the deal was done, only to find out that the only thing that had changed was they had replaced the sign on the door. The people, all the people there were still using their old business card, Answering the telephone with the old name, all these processes were the same that they had used before the acquisition. They had not integrated into the culture at all, and they had not even integrated into the firm, although monetarily they thought they had, that the leadership had thought they had. But no one had this strategy, no one had a strategy developed, or processes developed to ensure that they were integrated within their organization. So for a period of a little over 6 months, they were losing a tremendous amount of momentum that they thought they had gained because nothing was happening. It was all the same, and they weren't, you know, the power behind this huge company that that they thought they were bringing forward in this new marketplace didn't even exist.

Other questions? Yes.

Say, move on, and then kind of pick up the pieces. How do you convince the people who are in charge to be proactive and not just react to a problem that comes up? Because a lot of times being proactive is the hardest part. Then someone spends their money proactively when the problem doesn't necessarily exist, whether it's in any of the areas that you were working with.

Leadership.

Enlightened leadership.

I think to add to that is one of the things that we've been, you know, working to do is to get, you know, potential clients to understand and hear those metrics around how many deals actually fail. We're trying to, by that narrative, create a sense of urgency where, to your point, Peter, one doesn't exist. No one's going to do anything unless they feel there's a sense of urgency to it. So part of what we do is a lot of the network and a lot of the conversation, a lot of the articles that myself and members of the team that we write and try to put out is to get people to see, you know, what happens if I don't pay attention to this? It's almost like, you know, the Nationwide or insurance companies that are on TV. If you don't have insurance and a tree falls on your car, you're kind of SOL. Well, we're trying to get people to think that same thing by saying, hey, do you want Do you want to have the story that Christine just talked about, which take the name off of your story? That happens so often. So I think to your point, Peter, to answer your question, that's what we're trying to do. It's a slog to do that, but that's the thing that we're trying to do is get the word out and be transparent.

Other thoughts?

Okay.

I just think the— I don't think there's any magic bullet to how do you get people to understand and take a proactive stance other than hearing those things like Curtis was saying about hearing the stories about failure or about slips and falls during the process and monetary loss. But what I see is that more deals are being done that are contingent upon future revenues or retention of clients, retention of key talent, that the deals are being written with those kind of elements in place. And I think that's what's creating, if you will, a sense of being proactive, in that because it's part of those— the deal itself, now they're focused on it. Now they know, I was just talking to someone just the other day that about the deal that they did, they merged two professional service firms, and part of what was written in the deal is the deal is contingent, the payout is contingent upon retaining 85% of their client base that they acquired. Now, when that's in the paperwork, When that's in the deal structure itself, let me tell you, the people who sold that firm are hyper-focused on how do we do that, how do we maintain that. They're focused on their people who have the relationship with those clients. They're focused on those clients' needs. They're hyper-focused now because their pocketbooks depend upon it.

Let me add to that. It's a matter of managing expectations and perspectives. Often when something happens in a process, it's a surprise, and when it's a surprise, fear sets in and barriers start to rise up. So the more you can talk about things without creating fear or a threat— well, you know, if we don't do this, the whole deal is going to fall fall apart, because you can only throw that kind of warning out once, and it better be right. If you can manage people's expectations along the way, you know, a few months from now we're going to be talking about this, and we're going to make a decision on this. Don't worry about it now. I'll help you figure it out, but just so you know, it's coming. Then you mention it a couple times. Then when it gets there, it's not a surprise, so it doesn't it doesn't create the fear and the resistance that happens otherwise. You know, in a lot of what we call consulting, consulting is not actually what's being done. What's being done is what we'll call pulling rabbits out of hats, where someone waits until the last minute and says, well, ta-da, I know the answer to this. And it may be good for the ego of the consultant, but it's not great for the process because surprises are almost invariably not received well. So when you're talking about the being proactive, the first part about being proactive is letting someone know what to expect, and then when it comes, you can say, well, yeah, here it is. It's not a big deal anymore. Do I have time to tell a story?

Sure.

So, and this isn't a transactional story, but it's, I think it's appropriate because it comes down to communication. I had a client back in 2008, 2009, wanted to grow his business, wanted to double the size of his business over a 4-year period. Period, and he just couldn't seem to get things jump-started and came to us, and, you know, he thought he had an organizational problem. And after listening to him and kind of understanding things a little bit better, we had an intervention. The problem was him. He might as well have been speaking Mandarin to a management team that only understood English. He just couldn't convey where he wanted to go to his staff. And once we gave him and his staff some, I'll call it language lessons, did they start to move things forward. And, you know, they developed a plan. They actually had a mantra. This was 2009, so what does it mean for 2013? And they lived by that for, you know, for the next 4 years, and they met their goals and went beyond those goals. So it was an issue of communication, which I think is kind of relevant to some extent here.

Thanks, Greg.

To kind of wrap up, you know, what we want to do is give examples of some of the different flavors of value growth advisors that can contribute to a holistic project to grow the value of a company. So I'd ask each of the panelists, starting with Greg, just kind of the, you know, one takeaway nugget of what their discipline brings to the process. And why it's important and why other advisors would want their involvement.

So we're, again, because of the type of organization we are, we're focused and we're measured on growth, and I guess if there's one takeaway, it would be to, in the work that you folks do, especially where operational performance is critical to growing your clients to the point where they become attractive for a transaction. Look to the MEP for some help. There are an unbelievable amount of resources, both from technology, technology labs, folks like yourselves that can really bring something to bear on getting a company well positioned.

Christine?

I think the message from our perspective is that marketing is really not the soft side of the business. Marketing is the business. It should drive revenues, and it's more measurable than ever before. If people are still talking to you from a marketing perspective about making— what we call making pretty— turn the other way and run. If they're making promises about let's put you on the first page of Google or what have you, they cannot make those guarantees. If they're not talking metrics, metrics that are tied to the goals of the company, they should be. If your organizations aren't talking about metrics from your marketing business development efforts, you need to change that today. If the clients that you're talking to aren't talking in that terms, if they don't know their ROI, change that conversation. Your prospects, change the conversation. Talk in terms of metrics. It's just— it's no longer about making pretty.

Thanks, Christine.

Michael?

Your machine doesn't care who buys the widget or what kind of widget it's making, and your accounting system doesn't care where the numbers come from, it just crunches it. A lot of what people focus on in preparing a company for sale is what I'll call table stakes. Yes, it's cleaning things up, and yes, it's reducing certain risk, but it doesn't really increase the value or the opportunity for the buyer in the same way that having a company that has a clear focus on its best customers can do. You know, your A-list customers are probably your relationship with them, how you got them, how you keep them, how you service them, how you make sure that they stay with you and they share their plans with you. That can be 75, 80, 90% of the value of your company. When it comes to selling it. And I know that sounds like a large number, but think about it. If you're really building around those customers, you're building a machine that is bulletproof, that drives how you hire, how you compensate, how you invest your money, it involves how you market and so on. That's the core source of all the value in your business, is the customer. It's not inside, it's outside the business. and the more you can build around them, the more value you're going to get both in the near term and when it comes time to sell.

Thanks, Michael.

Curtis? I'm just taking in what you just mentioned because I love the way that you put that when you think about, you know, looking at the deal, and I think ultimately we're talking about people. You know, every one of my colleagues has talked about how does the human capital, the human aspect shape the value of the deal from the buy side and the seller side. And I think to close, the thing that I would say is that every deal does have a buy side and a seller side. If we're trying to get a company ready for sale, it's more than just the financials. How is the buyer going to look at that company? Are they going to see a company of people and relationships and customers and the availability to have that value and the growth component we're talking about? Or are they buying a widget? You're going to— if you're buying something that has the opportunity to grow because of the value that's centered around the people both inside and outside the organization, then you're making a real acquisition.

Well said. Thank you, everyone.