Episode 164: Comfort, M&A, and Negotiation Strategies with Lance Stier / Nassau Candy

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. Skucast is the official podcast of Common Skew.

And so when you have a market like this that's disproportionately affected and you're seeing negative comps, significantly negative comps, in large portions of our promotional business and some other sectors, the real question that always goes through your mind is, is where's the bottom? And the second question that goes through your mind is how long does it take for it to come back. And that thought process kind of underlines the way we think about transactions from a structural perspective.

The voice you heard is that of Lance Steer, and today we're talking about 3 very important trending topics. Number 1 is the rise of comfort food. The Wall Street Journal reported that comfort foods have made a comeback in the coronavirus age, and the demand for small luxuries like food and candy are at an all-time high. Which also includes the confidence and security we have at this time in brands we trust. And there's no one better to address this topic than one of North America's largest confectionery companies. The second critical topic we chat about is this shifting landscape that's happening right beneath us due to heightened merger and acquisition activity. Lance is an expert in M&A. It's his passion, as it will be evident to you as you listen. As we know, mergers and acquisitions are highly active in a depressed economy, and now It's no longer just suppliers who are interested in M&A, but distributors as well, as we've seen mergers and acquisitions increase in recent years on the distributor side too. Nassau is a bellwether for both topics. Even if you're not interested in M&A for your future, you'll value Lance's insight into our third topic, successful negotiation strategies. About our guest. Lance Steer is an owner of Nassau Candy. Now, if you haven't heard of Nassau, they are one of those sleeping giants in our industry, yet with a very strong partner business model. Nassau was founded in 1920 as a supplier in New York City to those old-school ice cream parlors and soda fountain shops, and today they have over 1,100 associates in 4 divisions. Number 1, a specialty candy division. 2, mass market as one of the largest suppliers of private-label confectionery products in North America, working with all the major chains. Number 3, gourmet natural foods business working with thousands of specialty grocers. Number 4, their customization business, which most of you are familiar with through companies like Chocolate In and Lancôme, and some breaking news announced just this week, the addition of Mrs. Fields. The addition of the Mrs. Fields brand is a continuation of their ongoing partner brand strategy with brands like Godiva, M&M's, Jelly Belly, and Lindt. As CEO of NC Custom, Nassau Candies' customization business, Lance has led organic and M&A growth throughout the U.S. and Canada, including the acquisitions of Chocolate Inn, Taylor Grant, À la Carte, Plegg, AmuseMints, Landco, Stitches in View, SPD Shoreline, and Pennsylvania Dutch, forming a vertically integrated top 40 ASI supplier, making them the largest food supplier in the promo industry with a growing hard goods apparel and personal care product line. At Nassau, Lance is Head of Business Development and leads M&A strategy and financing. He was previously a private equity investor with Payne Partners and Wellspring Capital. And completed investments in the consumer food and retail sectors, investing over $1 billion of equity capital. Prior to entering private equity, he was an investment banker at Lehman Brothers, where he completed over $20 billion of M&A LBO transactions in food, retail, and consumer. Now you can see why I'm excited to have Lance on the SkewCast today to talk with us not only about the rise of comfort food and M&A, but also the impact of private equity the negotiation of the deal, and the vital importance of strategic partnerships now more than ever. Real quick, you might've heard that we opened registration for SKUCON 2021, featuring a truly astounding lineup of speakers, including Seth Godin and Anne Handley, and many other emerging voices that I'm so proud to have join us. We have been overwhelmed by the response so far. You can learn more and secure your ticket at skucon.com. Now here's my conversation with Lance where we're in the middle of a chat about how the lines are blurring between retail and promo from a product development perspective. Lance is reflecting on what they see working in retail that crosses over into promotional products.

We have a saying in our retail businesses that collections sell, and it's the way we think, and especially in our travel and resort businesses. Yeah, I love that. Is you're going to sell a— and it's true, by the way, in our travel and resort business called Amusements. And that business, what you'll see is that if you're selling, you know, a New York City collection or a Las Vegas collection, and you have a Las Vegas— well, a well-designed Las Vegas mug with a well-designed Las Vegas hat with a well-designed Las Vegas shirt with a confectionery item reading Las Vegas, etc., what you'll see is that it's well-curated and well-designed the end-user customer is going to— and we're not the retailer— the end-user customer, you'll notice from your shopping trends, will pick up, you know, multiple items because they'll buy the shirt that matches the hat and it's just fun. And so the idea is that collections sell and we're starting to bring that same concept in promotional categories. As we think about building out concepts, particularly as we see kits start to emerge, you know, we're using our design skills to kind of build those thematic stories. And I think that that's going to be a big idea here as we kind of see distributors think more and more about kitting and more and more about effectively building mini collections inside.

Yeah, I love that.

That's great.

Where have you seen the most significant growth with all of these respective brands? You're seeing trends in the market and obviously hopping on a lot of those, but where are you seeing growth?

Yeah, sure. So let's take a step back. In the current market condition, we're seeing a very similar experience in the specialty confectionery and food businesses that you saw after the most recent recession that I remember, 2008, what you're seeing is very similar things. So in the gourmet food business, rather than folks going out to restaurants, they're dining at home. So for example, people are grabbing a— I've given the example of how I think about it, which is in the casual dining space, heretofore you may have gone to a food service restaurant, a casual dining restaurant, And for, I don't know, $80, you know, you feed your family. And so you buy pasta, you buy a sauce, you get an appetizer, et cetera. And that's kind of the cost of being a family. What we're seeing in our gourmet food business is people are going to a local grocer, which is great. They're buying a better sauce, like a Rao's pasta sauce, a better pasta, right? You know, and maybe a cheese item and maybe a sausage item. And together, They come home and then for $20, they have an unbelievable restaurant-quality meal. Great point, right. And that's what we're seeing. So our gourmet food business has been trending exceptionally strong, thank God, during this period for reasons like that. And so that's what we're seeing in our specialty food business. And then in our confectionery business, what you're seeing is candy's a comfort food, right? So we call it an affordable indulgence. So for a couple bucks, you know, you can buy a chocolate bar or you can buy, you know, some gummies or something like that. And it's an affordable indulgence. So we're actually seeing our confectionery business also quite strong in this period. Again, similar to what we saw in sort of the '08 time period. So our mass business is doing great. I would say to you, the confectionery retail store, the specialty store, you know, in a lot of states, the market was closed. So you had a business that was running below where it should have been. We're seeing those businesses come back as the market reopens. And I think the specialty candy trends at a high level in the specialty markets really are about experience and entertainment. So you saw this with Dylan's Candy Bar as Dylan's Candy Bar became an iconic destination in New York City. You saw this with It's Sugar as they just opened up their American Dream store. You've seen this at Disney, you've seen this at Universal. Places that create confectionaries and experience and where people are and are enjoying the products. You've seen this with Candytopia, which was a big, you know, candy traveling show, etc. People love engaging with candy. As I said, it's a fun, affordable indulgence. Fun, just fun. We've seen that trend where people are— where retailers are focused on experience. That's been a sort of growth trend for us over the last X years, and, and I expect to see that, you know, as the world continues, continues to open. And the other thing that, you know, we're seeing growth on, um, in sort of today's world It has been, as you touched on it, Bobby, our PPE category. Fortunately, through our Lancôme business, we are a manufacturer of sanitizer and other health items, lip balm, et cetera. And so we've seen, and apparel, Gators particularly, but we've seen in our business has been some nice growth in those PPE categories as well. So all of that good stuff combined has luckily put us on stable footing. In, in the, you know, challenging period.

Yeah, your business and you in particular are at this apex of some exciting things that are happening in, in, in the market, in the business in general. And one is all the comfort food, as you mentioned, the affordable indulgences and PPE. And you've got this incredible repertoire or this, this, this group of brands that are ideal for the time in which we live. But then So shifting gears a little bit over to something that you've invested your career in is the mergers and acquisitions opportunities. Before we move into that though, is there anything else you wanted to comment on about where the market is now and what other opportunities? Because I love your comment about all of this so far.

Yeah, no, thanks, Bobby. You know, I would say to you where I see the market going is a couple of things, and I'll relate specifically to the promotional products market. I know we've talked about a lot in our business. I think the big stuff going on right now is gonna be a couple of things. Number one is the consumer is at home. So the customer's at home. So I think a big idea in the next, we're working on this hard, and I think you'll see more and more of it, is just using food as part of, you know, an entertainment. So for example, baking kits or cheese and sausage sets, or stuff like that. I think you're gonna see more and more of that. People are looking at food as a way to kind of have a nice little release from everything else going on. And I think, and we're seeing that, by the way, in our fourth quarter gifting business, which is doing well so far. We're seeing a lot of kitting going on. Second big thing I would point to, which we'll touch on the M&A topic, is we spend a lot of time consolidating various businesses within the category. One of the visions being that distributors really want partners that are, able to service them across multiple disciplines. But, you know, we've tried to do it in a thoughtful way where I really, you know, I spent a lot of time saying we don't want to be everything to everybody, but we want to be experts in the things that we do because we want to be really good partners. So I think the other big idea going on right now is, is obviously consolidation, which we'll get to in a second, and then being able to offer up those, you know, we'll call them kitting solutions, where, you know, we're able to combine an apparel item with a drinker item with you know, confectioner item, and do that all in-house so that a distributor's not needing to place multiple POs and do that. They can focus on what they really enjoy focusing on, which is creating and developing and selling. So I'd say that's the second big idea. And the third big idea, which we're seeing across, you know, our business, and you'll see this in retail as well, has been just the strength of brands. I think, you know, when the market— when the world is crazy, people go back to things that they're comfortable with, whether it's nostalgia brands or brands they've historically are comfortable with, right? And so we've seen that. And so one of the things that we've leaned on, leaned in on as a company, is just our brand partnership. So we were, you know, we, we've, we've been in the partner brand business for a while. We've been, you know, brand partners in the promotional products category with Godiva, Lint, and Jelly Belly. And then most recently, in the past year or so, we announced a major brand partnership with M&M Mars where we are their exclusive promotional products arm. And, and, and we're we're seeing nice growth there. And like I said, I think the reason for that is that when the world is crazy, people are looking for sort of, you know, calm seas. And I think, you know, strong brands provide that. And I think you'll see that from us going forward, category dependent, I think you'll see more and more of those sort of partnerships.

Yeah, that's a great reflection. And I'm stitching together multiple thoughts that you've shared because I love what you said before we hit record about distributors and you recognizing the strength of distributors and what they do and that they're your marketing partners and that they're marketing experts. But you've mentioned multiple things here, stitching them together. Number 1, collections sell. Number 2, affordable indulgences. Number 3, experiences sell. 4 is the strength and comfort of brands, which I've not thought about it in that context of the strength, but also the comfort of brands. And then just simplifying the complexity. There's so much for us to do with that as distributors. There's so much opportunity now. In fact, there's been so many challenges. And so many problems, and we've, we've all been through this incredible season, but there are also these amazing opportunities out there. Shifting gears now to M&A, and, and this is speaking again of market opportunities. Mergers and acquisitions, as I mentioned in my intro, are affecting distributors and suppliers today in a big way. And it's sort of a topic that flies under the radar, but it's so vital because there are shifts, I think, in the foundation of our industry that are happening due to M&A, due to private equity and things like that. But part of my job as the interviewer is to ask the dumb questions, which is not hard. So I'm going to act as a bridge to you and our audience on this critical subject because you have spent your entire career largely in mergers and acquisitions. It's a large part of what you do as a daily part of your work there at Nassau. And so you focused on this and made it a part of your growth strategy. So it's obvious why why it's a buyer's market with M&A right now, but what makes this season different than recessions in the past?

So I would make a lot of my thoughts on M&A and how we're approaching as a company analogous to 2008. And so when you have a market like this, that's disproportionately affected and you're seeing negative comps, significantly negative comps in large portions of our promotional business and some other sectors, the real question that always goes through your mind is, where's the bottom? And the second question that goes through your mind is, how long does it take for it to come back? And that thought process underlines the way we think about transactions from a structural perspective. So I think the way to think about this is Structurally, that's how we think about deals. In terms of the other, the softer spot here, what I would say to you is that while you might call it a buyer's market, quote unquote, you're also looking for partners who you know that the sledding is not going to be easy over the next couple months or years, etc. You need partners who have the intestinal fortitude to go through that process with you. 'Cause whether it's the promotional market or some other businesses that we're in, like food service business, I don't know when the corporate cafeterias are opening up. I don't know when you're gonna see marketing spend like you did back in '19. But I do know that at some point you will. And I know that this is a team game. And I know that one of the requirements there is finding partners who have a similar approach. So for example, while we want to use this time period to retool and focus on our businesses in an M&A context, if we're acquiring a company or partnering with a company, I also want to sit down with the principal and say, you know, how do we kind of figure this thing out together? What are the opportunities that you see within your subcategory? And then how do we utilize the resources we have to be efficient, to be lean? Because we're trying to all operate as efficiently and leanly as we can right now. But also, how do we position ourselves for as this market comes back to be a well-positioned company to take advantage of that market coming back? And frankly, how do we lean into our customer relationships right now we can show them how important we are to them. So we have, you know, a real reason to be part of that mix. Because what I think is going to happen, Bobby, and this is something that we think a lot about in M&A, and I think, you know, you're going to see it in the promotional market, is I think you're going to see just an increasing— and I think you've seen this— but increasing bifurcation between, you know, scaled suppliers, scaled distributors, and smaller smaller outfits. And I think the key for us is going to be saying, you know, which businesses, you know, which companies have, you know, a real reason to exist. And I would say to you that one of my goals as a company, you know, for our company, is to be able to say that statement very clearly to our distributor partners because we want to be, you know, on the side of the fence where we're partners for their growth. And as this category grows and evolves, And we would look for M&A partners who are exactly the same, who want to be part of that evolving story. Yeah.

There's a lot of heart in that reply. And I appreciate that because in my oversimplified mind, I often think of mergers and acquisitions as if big company comes in and just picks up the weak company. But what you're really looking for is strength. You're looking for the fortitude of these companies and their vision. It's not as if you're just picking off weak organizations. And I can really appreciate the wisdom in that.

Yeah. It's also about partnership, Bobby. I want to comment on that because when I started my career, I remember it very vividly. I started my career in investment banking and private equity. And I remember very vividly, I was probably 24 and I was very proud of myself that when I was going for a private equity job, the partner who I was meeting with asked me to build an LBO model, leveraged buyout model. On a piece of paper and I did it for him. And I said to him more or less, "Am I done?" And he said, "No." And I said, "Why not?" He goes, "Well, tell me about the business. What are the reasons you want to acquire this company?" He was challenging me on my investment thesis. And I gave him a bunch of stuff about the business and the competition, blah, blah, blah. And he goes to me, "What about the people?" I was 24 at the time. I go, "What do you mean what about the people?" And I gave some sort of not deep answer. And he says to me, Lance, the bottom of the page, which was the leveraged buyout model, means nothing without the top portion of the page, which was this sort of the people in this stuff. And that lesson kind of stuck with me. So, you know, we spend so much time looking at companies and meeting with companies, but if we can't build the right partnership and that DNA and that chemistry is not right, we're not doing the deal. I mean, I'll give you a great situation. During the last recession, I went out to Wisconsin actually, and we're looking at a business not in this category, but in a different category. And my dad and I sat down with the principals of the company. On paper, it was a great deal for us. It was an interesting business. It would diversify one of our businesses in a different sort of way. And we were pumped about it. I was pumped about it. Within 10 minutes of the meeting, my dad goes to me, looks at me, he goes, "Lance." The same lesson I got from my boss when I was in the investment business. Lance, we're not doing this deal. What do you mean? He goes, well, I promise you that you're not going to want to work with these people for the long haul. This might be a good deal on paper, but this is not a good partner. We're not doing the deal. And that lesson really stuck with me. And so every deal that we look at, it is so much— the first thing is the deal has to make financial sense for us and obviously for our partner. But once we get past that piece, It is so much about how are we actually going to do this? How are we going to make this happen? And can we do this together? And I can't begin to tell you how much time we spend on culture and thinking through that, because if the— if that part is not right, I don't really care what the numbers say on a piece of paper.

We're not going to proceed with it. That's so good.

Can you speak a little to value-add when it comes to what a buying company offers the seller and maybe giving us an example with Nassau?

Yeah, sure. You know, the first thing we offer is partnership. Look, I'm one of 4 boys. I'm the oldest of 4 boys, and I have a cousin by the name of Jordan. So the 5 of us are kind of the second-generation management team in the company. And then we have, you know, our dad and our uncle who are kind of the chairman and CEO. And then obviously we have a partner in the promotional products business for a very long time, David Miller, who's an unbelievable guy. Exemplifies what I'm saying about a partner. I mean, David's been— and I have sort of worked hand in hand for the last 10 years every day, and he's a partner through and through, a friend and a partner, and someone's got just the right ethics, and he's an amazing guy. But, um, amazing. But, but I guess what I would say from a partnership perspective is, what do we offer to a company? So I think the first thing we offer is, is we're all in, right? So we say, you know, we're going to move our company in XYZ direction. You've got at the family management level, I mentioned to you, my dad, my uncle, and the boys working together to execute whatever that might be. And then depending upon the specific sub-vertical, maybe it's promotional products in this case, we've got partners like David Miller, who's just a rock star, and his team, and we're all gonna work hand in hand to make stuff happen. So, so I would say the first thing we offer, and obviously that, that's true for the rest of our team, whether it's, you know, David or, or, or, you know, Debbie Gasper runs our marketing department, or, you know, or, you know, we can go through all, all the different subdisciplines. But, but the point is, you know, that's who we are. We're, we're a team that's gonna work together to be your partner and we'll understand your business. We'll get into it, we'll learn about it, and then we'll be there for you. You know, when you call it, 5:00 AM or when you call at 10:00 PM or when you call with an issue or an opportunity, we're there, we're in your corner. So the first thing we offer is partnership. The second thing we offer is resources, whether it's capital, infrastructure, you know, we've been there, we've done this before, we have capital to invest and helping you unlock your ideas. You know, we say to entrepreneurs that one of our goals, and I've said this for a long time, my dad taught me this lesson as well, said, you know, one of our goals in M&A is to free entrepreneurs or businesses to focus on, on their passion. But I'm really talking about entrepreneurs right now. So, so when I sit down with an entrepreneur, you know, one of the questions I ask him or her, um, is what's your passion? What do you love doing? What do you hate doing? Because my goal is to be the yin to your yang. So, you know, some entrepreneurs would sit down and say, I love sales, I just love growing the company, but I really don't want to be involved in other stuff, you know, AP, AR, finance, whatever it is. I say, fine, we got you. Our goal is to be the yin to your yang. And so we have the resources we can plug in to do that, but our goal is to sort of free you up to focus on passion. We've had other folks say, I absolutely love being a product developer, I want to create and develop products, but I don't really want to sell them. And so we've had all sorts of flavors in the partnership game. And but the key is understanding what his or her passion is and then being the, you know, the yin to the yang. So being the, the other piece that can then support that. And the third thing we offer in partnership is experience. You know, my dad and uncle have worked together to grow, you know, Nassau Candy from, I mentioned, from 5 team members to north of 1,000 team members. And so we've seen the movies, you know, we've seen the movies, what it means to be a company of 5 people, 10 people, 50 people, 100 people. And each one of those movies takes different management skills, it takes different infrastructure, it takes different disciplines, etc. And I'm not saying we're the best in every one of them because we're not, but I would tell you that we've seen the movie and we've navigated, you know, the different things that takes— that are involved in building a business. So I would say experience is a big thing. And I think the last thing that we really help on is strategy. Um, you know, one of my passions is M&A, you mentioned, but it also is strategy. You know, when David and I worked together to craft out the ChocolatInn strategy. We sat down, and this is, like I said, 10-plus years ago, and on a piece of paper, we said, "Right now, ChocolatInn is a chocolate company." This was in 2008 or '09. "75% of our business is fourth-quarter driven and gifting and products like that. 25% of our products is coins and bars, but what we're missing a broader range of printing capabilities, a broader range of things that matter to our distributor partners. What David and I did was we sat down with a piece of paper and we studied our distributors and our customers, and we said, what are the heuristics that matter? What are the things that matter to our customers? And the answer to that question was they wanted faster lead times, they wanted more imprint options, They wanted stuff that didn't melt, you know, stuff like that. So, so the vision that Dave and I came up with first was to say, okay, in order to be a leader in the food category, the promotional industry, we need to do a handful of things. We need to make investments, diversify our company. Um, so that's why we did, you know, for example, the Taylor Grant deal, which got us into the everyday business, mints, wrap, candy, you know, et cetera.

By the way, sorry to interrupt Lance, but this is a vital lesson for us as distributors too, because we saw in the previous decade or two, the mergers and acquisitions happening largely in the supplier world, a little bit in the distributor world, but now distributors are facing more and more mergers and acquisition opportunities as well. So that's why I think this is such a timely topic. Keep, keep going on. I, I've just, I do know we have a lot of distributor owners that are listening to this and who are probably in the middle of considering deals or working toward partnerships too, but.

And the strategy, you know, for us and the way we act as a partner, as I mentioned, is we sat down with a piece of paper. And we said, who do we wanna be? So, so we sort of studied the distributor websites and we learned a lot from some great distributor websites and we sort of the things that matter. And so the first thing is we had to build out the range of products. So we went from being an edible company to, you know, a chocolate company to being a, a candy and then a mints and a snacks company. Once we had done that, um, we sort of said, okay, we need to continue to build out our production manufacturing capabilities. We got involved in die cutting, we got involved in flexographic printing. You know, etc., with the goal of basically being a one-stop shop in the edible space to our distributor partners. Obviously started bringing in brands, and then trick-or-diva, Lindt, Jelly Belly, etc. Once the company had grown to a certain size as a, you know, food in the food gifts category, you know, we were still only talking at 2% of the category. And the objective then, David and I and sort of the management team sat around and said, okay, so how do we expand beyond, you know, 2%? How do we How do we become more important to our distributor customers? And that's where the Lanco acquisition came from, the goal being to be more important.

So this is, this is really about diversifying your own portfolio, and this goes for distributors too.

Yes, but first having an area of expertise, right? So a distributor needs, is known for X, whatever X might be. For us, it was food, gifts, and confectionery. And for our distributor partners, it may be X channel, X market, X specialty, you know, whatever it might be. So for us, it was food gifts. So we first became known for that. Then we saw an opportunity to diversify the business because frankly, Bobby, you know, we, I kind of, David and I kind of got sick of hearing from our distributors that, you know, when there was opportunity, they went in a different direction. And I hated hearing that. When I got that email, we went a different direction. I said, David, I can't. That's a terrible phrase, right? Yeah. A different direction. I said, have it our direction. So we, we sort of decided, um, to make ourselves more important to our distributor partners. We had to grow that through acquisition, and that's where the Lanco investment came in. And then most recently, we've expanded our business in the apparel businesses through a handful of acquisitions in the screen print embroidery business. The goal, all following the same trajectory, which is to be more and more important to our, our distributor partners. But kind of the core of that whole thing and the value that we play as a partner is sitting down with the entrepreneur, in this case David, and saying, how do we continue to be more important to our distributor partners? You know, who are the great distributor partners we can build around it and build our business together? What are their goals? What, you know, what are they trying to accomplish? And how do we help them, you know, get better, you know, in their own business? So whether it's technology, whether it's product development, whether it's, you know, kitting, whether it's, you know, ways we can act as real resources, um, in the categories we're in, and how do we help them, you know, our distributors, you know, get what they need.

And then ultimately that'll make us, you know, a valuable, valuable partner in the ecosystem. I love your macro viewpoint of the industry, but also how you keep bringing it back down to the customer, which I think is a beautiful visual that we can all learn from. But one of the interesting things about your experience and what you've done with all of the mergers and acquisitions and what you work on day in, day out is you're also seeing in the industry these other macro trends like private equity boom that we've seen over the past decade. I'm curious what your financial mind thinks of when you, when you see this going on, what pros and cons have emerged from these investments that you can see that are impacting our industry?

So I've sat on the side of the table where I was the private equity investor making the pitch, and I've sat now in the seat of being the entrepreneur, entrepreneurial business owner competing with the private equity guys making the pitch. And so, you know, I would say to you, look, The value proposition of private equity is obviously number one, injecting capital into the category, which I think is a good thing because capital coming into the category will make the category a better category. So whether it's investments in technology, investments in combining fragmented markets, investments in building better and more professional overall structures and teams, et cetera, that's a good thing. The detriment to the private equity model in the category and the way that I think about it is a lot of times private equity works by the clock. So day 1, you make an investment and your IRR, your rate of return clock starts ticking, and your goal is to realize the highest IRR and the highest cash-on-cash return as you can. That and business building may be coherent and maybe incoherent. Those are opposing forces, possibly. Yes. And so I heard recently, heard a great interview with a guy named Martin Franklin who built Jarden Corp. And I'm sort of a student of the game, so I love listening to business leaders. And so he had this construct of the difference between, you know, entrepreneurial businesses, building businesses, and private equity, he explained the difference between renters and owners. And I thought that's a great paradigm. So the way he explained it is an owner is somebody who's there for a long period of time, who's going to be in your corner, who's going to go through thick and thin and build the thing for long-term value. And that's our perspective. Look, we're in this for the long haul. So when we look at acquisitions right now. I don't know when, like I said, the market's going to come back. I don't know what the time of that is, but I can promise you we'll be there in your corner, you know, working through it. In the private equity space, once you make that investment, you're worried about your IRR clock. So it's a slightly different time period. And the second thing, um, that— and the second paradigm is, is— so he, you know, Martin called the private equity paradigm a renter, which is basically saying, you know, you own an asset for X period, and then at a certain point I know some funds are structured differently, but at a certain point, by and large, the industry needs to transact and move those assets in order to recycle the capital. And so I think that's an interesting thing. And I think private equity can work well in making businesses better and more efficient, et cetera. And it can work poorly when people are in too much of a rush to smash a bunch of stuff together in fragmented industries and don't think through how to make those businesses long-term sustainable platforms. And I've seen it go well both ways. I've seen great businesses built in private equity where you're really thoughtful and you take a long-term approach and you're building teams and you're building a great company. And I've seen things go less well when people are more focused on just throwing a bunch of stuff together, assuming that 1 1 will always equal more than 1. It doesn't. One of the best lessons I got early on in my private equity career was I worked for a guy named Dexter Payne who runs a fund called Payne and Partners, now called Payne Schwartz. And one of the things he taught me was, Lance, you can't run a business in Excel, meaning just because you take $100 and it's earning X amount of money and you put together another $100 and it's earning X amount of money, 1 plus 1 does not always equal more than that. You have to work it. You got to bring the pieces together. You got to build a team. You got to build a culture. And sometimes, I would say, sometimes in private equity, people lose sight of that, but some private equity firms do it very well.

And I'd say it's a mixed bag.

How do you see private equity affecting the industry at large?

How is this really impacting our business and our industry and margins and profitability and things like that?

Yeah. Well, I think the market— Look, the classic private equity playbook is people look for fragmented markets, where things can be combined to realize synergies and efficiencies. And the other thing underpinning the entire private equity playbook, things like technology, areas where you can see step functions for change. So for example, if you consolidate the market and then you invest in technology and you invest in certain resources, you can differentiate yourself from other platforms that don't have the capital to invest in those things. So I think that's where I see private equity driving things. I see private equity driving things to greater efficiencies, greater technology investments, building scaled platforms. That's how I see it. I think that for an industry is a good thing. It creates more and more sustainable businesses if it's done right. As I mentioned, if it's done rushed, where you're combining a bunch of stuff and the integrations are not thought through properly, it's not a good movie.

So that's kind of how I see it. Yeah. I'm fascinated by your journey and your experience and what you're doing day to day. Can you share with us what you've learned in your career about successful negotiations that you wish someone would have shared with you when you began?

Sure. The first thing that I think about anytime we go into negotiation is the lesson that I learned through a class I took at the Wharton School. Every negotiation is about what's the other person's BATNA, what's the other person's best alternative to negotiate, you know, negotiated agreement, or basically what's the other card the other individual has. And once you understand what somebody else's alternatives are, you kind of have your head around what you're negotiating about.

So that's step one.

Can you give us an example of that? Yeah, sure. So company that I'm looking at acquiring right now, can either do a deal with us or they can do a deal with somebody else. And you have to understand, you know, what that alternative is. It's like, it's— you probably have the same thing in sales when you're looking at, uh, you're presenting your company and you have to articulate why you were the partner of choice. It's the same concept here. So, so what, what's their alternative to going with you, right? What's their alternative? And so the— that's the first thing I look to identify. Once I understand that Then my approach is sort of any sales pitch is obviously, you know, positioning ourselves to be the partner of choice, right? So, so we want to say, you know, what are the attributes of our company, some of the things that we've talked about here. And once you kind of have set the tone for that and you kind of framed it as to we bring, you know, resources, experience, passion, great partnership, etc., once you have kind of the tone set, then, then you get into the issues and sort of What I like to do in negotiation is be— I don't like spending a ton of time, you know, in legal land. I'd rather just have the issues be talked about principal to principal and say, all right, these are the 5 or 7 or 10 issues we have, let's talk them out. And, and what do you think? What do I think? And then ultimately you'll be happy on some things, I'll be happy on some things, and some things we'll just agree to disagree on. But, but at the end of the day, if you form the partnership the right way You find the right people, you're never going to have to look at that document again, ever, ever. So my goal is always to find folks that I know that once we get into business with them, like I mentioned Dave before, he's been an unbelievable partner to us, but we cut our original deal so long ago that I don't think either of us has ever looked back at a document. But I think the point is that the ethos was right and the culture was right. And because that was right and the vision was right and the strategy was right and the way that we set it up was right, then the back and forth, you know, that we had, or we would have with any, you know, prospective partner, sort of was okay. And I think that's the goal. You have to realize that this is, at least for us, you know, we're looking for partners. So my goal is that this is, you know, this is not— I'm not looking to win a point over you or somebody else in the short term. I'm looking for a business partner. So there are certain things that are going to be important to you, certain things that are important to me, But ultimately, the most successful— you called it negotiation, but also the most successful deal structure is one that accomplishes the goals of both sides. So a partner may have certain objectives, we may have certain objectives, and together, you know, we'll hopefully work together to achieve those objectives, you know, first in sort of this sort of negotiated or legal context, and then ultimately to go out and execute it. But that's kind of how we think about it.

I love that, Lance. This has been such a rich conversation, really has. We could actually record for another hour. As you know, I think I had even a third more questions I was going to throw at you as well, but really appreciate you spending time with us today. I know you're in the middle of some really big opportunities that are happening, and thanks for carving time out of your schedule to do this. I hope we can visit again because I've got more questions, and I want to return to a few of these topics because you've hit on at least half a dozen, I think, that are at the, the exciting apex of what's happening in our industry.

So thanks for spending time with us today. Yeah, absolutely, Bobby. I enjoyed it. I admire what you guys do as a company. I look at your organization as a thought leader and somebody who's helping really elevate the game in the category. I admire it and I love it. So, thank you. Thanks. I'm honored that you chose to spend some time with me as well.

And thank you. Thanks, Lance.

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