Insights from an Engineering Expert: Deal Experience

This episode offers a raw and honest look at the emotional journey of selling a business. Hear from a business owner who navigated the complexities of deal structures, the frustration of endless paperwork, and the surprising realization that the acquiring company's culture was a perfect fit. Discover the importance of having trusted advisors, understanding the financial intricacies, and preparing for the emotional impact of major business decisions. If you're a business owner considering selling, this episode provides invaluable wisdom and practical advice for a smooth transition.

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TRANSCRIPT:

Welcome to Integrated Insights with ICCG. For more than 30 years, our team has partnered with small business owners to prepare for and navigate the business transaction process.

Pull up a chair as we share stories and insights from our experience on all sides of the M &A table. Welcome back, everyone. My name is Michael Hefner. I'm a team member at ICCG and your host for today's episode.

I am joined by one of the co -founders of ICCG, Grant McQuilken. Hey, Grant. Howdy, howdy. For today's episode, I'd also like to welcome back Craig Janssen.

Hey, Craig. Hi, Craig. Great to be here. So on a previous episode, we talked with Craig about Adebri and how he and his partners came to the decision to sell.

On this episode, we will talk about his acquisition and post -acquisition experience. So Craig, just to get started, do you remember, well, Craig and Grant, do you guys remember the moment that you looked at each other and just said,

hey, this is it? You know, I think there were a couple of steps along the way. And by mention that is, I had a,

this is that, Then I backed away, and then I came again. And I'll identify a couple of those as Grant will remember. You know, I was on the call, I've been, I don't know how many calls over the years I've received from people who are interested that didn't go further than the phone call.

I, you know, more than a dozen. And you very quickly get a sense on that call how this is gonna go, it doesn't take long. And when I speak to Darren Anderson.

I don't think we were in less than five minutes and I'm going, okay, this is different. This is connecting with things that are really important to me. I was probably sold in the first 15 minutes.

The reason for that, incidentally, is he never once talked about the company. He told me who he was and he wanted to know who I was and who our team was.

The business was almost secondary. And because we're in a services industry, this belief that the people are absolutely central, and this story is important,

really resonated. So I went away and I spoke to Angie and Vance about that. And we set up a time for Vance to meet with Darren and he came back and go,

yeah, this looks pretty good. So very quickly he got to Robert meets the road. He flew out with the team and we had a couple of, I read a couple of our non -owners into the next two of them and had them meet with him as well.

And it was a very, it was a good meeting. They brought in people from the existing prior people that they had acquired to tell their story and allow us to ask any question we had.

So again, leaving that felt really good. Then we get to the deal, and the first pass on the deal wasn't great. I was disappointed. I was all jazzed and excited to,

so got the first pass on the deal and Grant needed to walk me, talk me down off the tree, which was that, hey, This is just the first step in this negotiation. Don't get, you know,

it's not going to happen once. So that was very valuable to me. And then we went through about what was it that was important to us. And this is where Grant was able to act as an intermediary and go to Salah Subrayan.

And the person Grant handled who was navigating a lot of the deal and say Tim look this is what's important to Craig in the team. Now let's twist this in our case. What was really important to us was the ability to do a deal with as much stock in Seller -Sabrine as we could get and part of that was we really believed in it in what Seller -Sabrine was and part of it was we knew that stock was escalating rapidly

And so the cash wasn't the deal for us as much. So once we got through that, we said, "Okay, we've got a plan here,

"but I'll probably expose a bit more "than I should about Sellus O 'Brien." But I was, we were accidentally, I guess, sent 'cause I asked for an employee handbook. 'Cause handbooks do a wonderful job of telling you who a company is.

And because you get the, you know, what they say they are, and then what they enforce it. And I got a handbook that was, that everyone has acknowledged was a very old handbook. And it said,

amongst other things, you know, your smoking break is at nine o 'clock in the morning for 10 minutes. And I just, my head exploded. And I said to Grant,

we're out. - Not because you smoke. (laughs) - I was just going, "No, we're not gonna do this." And he reached out and we set up a call with Darren and Darren and said,

"What did you read and where was, where did that come from?" And no, that's not who we are. And it was then. It was like, okay, we've got this alignment between what is stated as the values and the character of the company,

and the practice of the company is aligned. And at that point, we said, "We're good to go." Awesome. Grant, give your side of that story. How'd that go when he came to you? Well,

I think what he identified, what Craig identified, is almost like a seesaw. I mean, you go, you're all in, and then you go, "Wait a second. Is this really not going to happen Because this is a big deal.

And then until you talk about it, and you go back and you think about it, and then you go back and you talk about it again, and then you reconcile it,

either it becomes less important to you, or you get them to capitulate on a particular point. But every You know,

we joke sometimes we say every deals got to die, you know before it lives again kind of thing But I think it's a very real thing and it's emotional, you know,

because you're dealing with something that is very dear to you and not just your people, but this is your what you've built over time and so It's not just fighting for every dollar you can get.

It is, is this gonna happen? And you get sold inside on that idea that, oh, this is gonna happen. And then all of a sudden something comes up and you go, oh,

no, this is not gonna happen. And it's a yo -yo sometimes and it toys with you. And just sitting down with a trusted person who can say,

Hey, is that a 10 or is that a three from an important standpoint? How important is this to you? Some people use the word,

"Is this a deal breaker or is this something that we just need to figure out a way to mitigate what you wanted to accomplish?" So I think Craig is,

as you can tell, he's a great communicator, and that really helped because we could go back to them and clearly articulate what was important to Craig. And not with a,

hey, either this or we're out, but saying, hey, this is really important. Your offer doesn't necessarily deal with us in that particular way. how can we do better?

Or how can we change things? And the other thing is, I think Craig and I sat down and tried to anticipate what they were going to say.

And then you already knew what was coming in some aspects. Every business has a revenue model where you know ahead of time what the questions are going to be and how they're going to prioritize things and,

you know, as wonderful as Darren Anderson is as the CEO of Salis O 'Brien. He had some really good people around him, Grant Randell,

the guy that Craig was talking about. He's a really sharp guy and was able to understand the point of view that Craig was coming from and was super reasonable,

you know, if you've got two people that are just treating it as every dollar I win is a dollar you lose and that's all they care about, then again,

it might not be a good match because you're trying to form a partnership, not just buy something. It doesn't always, It's not always the case, but even if the seller is not staying with the company,

there's still the idea that your company or your business is going to partner with the other business. So let's make it a win -win -win for everybody. I would say that I was taken aback at the degree of the emotional You know,

you build a business over many years because you're deeply committed to it. You sacrifice sometimes things beyond then what you probably should have sacrificed, but you do,

and so you get emotionally intertwined with that. But one of the great benefits of business ownership is you steer the ship. I want to go left, I want to go right, and you make those decisions.

Now, suddenly you come into these settings, and each suitor that you're looking at has got a different path they're going to go. And so all of a sudden, it's a binary.

If I select this group, we're going there. If I select this group, we're going there. There's no dialogue. And so once you sell yourself emotionally into, you're going off in this direction,

and the deal stops, it takes some energy to regroup and be ready. So I think, you know, I think Grant was as much a counselor as he was a business steel facilitator,

just going, this is normal, this is how it goes, it's okay. And, you know, let's work together. I think both parties need to want to make a deal and you need to have a conviction that's the case.

And once you have that fiction, then you can navigate the waters to making the deal happen. So you've already mentioned what you saw in Salas.

There were obviously lots of things that made you go that route. But looking back at it, the transaction process,

obviously there was parts that you, you know, to say that you didn't enjoy the fact that you got a big check at closing is disingenuous.

But there's parts that you, that obviously were good, and there were parts that frustrated you. What would you identify in those two extremes?

Well, I think the, in the lead up to the close, there is so much paperwork that is foreign, and was foreign to me.

Just the deals that needed to be done, the legal agreements that needed to be set up, the employment agreements, the, and there's a measure of you just feeling this is not gonna end.

And I'm a, you know, I tend to be a let's move quick guy. And there was nothing there that was moving quickly. It was just tough. And I remember,

you know, waiting up late to do the deal then. I mean, I think the deal was, you know, we thought it was going to be consummated and then it happened the next day. And so that was no fun.

The immediately getting the the docusign and saying okay this deal is done is a very strange experience and we have very nice offices with really nice equipment and things and I walked around that night and I'm pointing at everything saying not mine not mine not mine because I needed to get over that threshold this wasn't mine anymore I'm a guardian of it But it's not mine anymore and and I needed to move past that

and be okay with that of course Which I was we we you know, otherwise you wouldn't have done the deal But but it's not to be downplayed.

How hard it is to walk past all of the stuff you've sweated over to develop so any part of that process that I mean that that you would say was,

obviously it was new, but you know, that you enjoyed or that you, you know, what part would you say, okay, that was surprisingly a good part of that whole process?

I think that bringing our core team on board to this was, I'm not sure it's an enjoyable process, enjoyable process, but it was an extremely valuable process to sit down with people who were not shareholders,

but leaders in the team, who had brought us as far as we had, to say to them, "This is what's happening," and marshalling their buy -in to this idea,

which we were able to do, and be patient with them, to A grant came and spent a couple of hours with the group at one point said, you know, ask any question. And so for me,

it was very satisfying for them to come to the conclusion that this was a good deal, A, and B, that they were going to trust me to lead this as an exercise,

because you know, I wasn't gambling with the future, but I was certainly setting a different trajectory for the future careers, at least as it related to them staying with us,

which by the way, everyone but one person stayed with us. And now we've got people to just buy in.

I think Darren is such a strong leader. I think when he came and did the, oh, I'd say That was an enjoyable process, watching Darren win the group over.

By the end of that session, I mean, we were probably 20 minutes in, and I thought, "Who's Craig? Craig, who is he?" That was very satisfying,

and of course, post -acquisition, that's been enormously satisfying to people's opportunities expand. We're in the setting where Salah Subran is over 80 officers.

And things that I didn't expect is that all of those officers wanted us to succeed. So when I call them, I'm used to, I've got decades of knocking on the door from someone to ask them something and coming a little bit hat in hand.

And now I knock on the door and they say, "Come on in. How can we help you? What can we do to you? Who can we connect you with? What resources can we provide you?" Because all of a sudden,

we're part of a larger team. That's been a huge jump for us. Yeah. I love the fact that you trusted me to go have a cup of coffee with one of the employees that was having a hard time with the transition,

right? And just sitting down and validating or making sure that he understood what you were saying was actually legit. That was such a fun part of getting your team on board.

So good. Yeah, well, you know, we're an AV acoustic kind of group, so production is I think, so on the day that we did the announcement,

we did everything up to indoor flying, skydiving. So you know, we made it a fun thing and people came out of that really energized,

not because of the indoor skydiving, but just together we're gonna do something great. And I was asked to one point in the first interview where we brought in two teammates to interview with Darren.

He flew in and brought some people. And he asked me, he said, "So what do you want to do?" And I thought about it. I said, "I want to change the world with the work that we do." And that was one of those moments.

I wanted one of those moments. I wasn't testing him because it was a genuine response, but I also wanted to know, is that what he wants to do? And the answer is yes. And so those are the kinds of things you show these core value alignments.

I had no interest in being retired in place, just working out my earn -out so I could leave. Yeah, well, And that being said,

though, we did put ways that if you weren't happy, that you could exit, right? I mean, we definitely took care of that.

It's not like you bought in and just believed everything without putting things in writing that allowed you to run away if you weren't happy,

right? And you and And we priced it in a way that allowed you to do that without having a ton of regret.

Yeah, I have no regrets on any form of how the transaction was written or handled. There's nothing I'm going back to say, I wish we would do it differently. I think I'd wish these things I would have done differently to be sure,

but no major steps. - So one of the things that you did do, and you've mentioned it in a previous episode, is one of the things you wanted,

if you were going to go all in with another company, is to be part of the equity. A lot of our clients now, because PE groups are now really fond of rolled equity is what we call it,

where you're taking some cash off the table, certainly sometimes a vast majority of the proceeds, but then you're basically getting equity in the surviving entity or the parent entity.

Help me understand. Obviously, I do know because your, I'm your friend, it's gone really well from a performance standpoint.

But how, you know, how was that at the moment when you, when you did roll that equity and, you know, what was going through your head and how did you over time,

you know, become satisfied with your decision? Great question, and I think one of the things,

in fact, both of us remember it happening. We were both a little but surprised at how quickly Salah Sobrian was able, was willing to show us audited financials, and so we got the inside scoop.

They also had a private company, so the valuations were based on a private independent firm that was doing valuations.

So we got that report as well and we're able to look at how they were valuing the group. Tie that to having seen the historical stock performance based on these annual valuations.

I mean, it was meteoric, frankly. And even though I wasn't sure I believed that we were going to continue having that it did. So no question the best financial decision I've been made in my life was getting as much stock as I could.

But it was predictable in the sense that we looked at history, we understood how the arbitrage works of coming in at one valuation and immediately in a larger group you're at a higher valuation.

And I also knew because I spoke to friends in the game to get their advice what the market valuations were. And the market valuations were double. And so it went in very much with eyes open.

And I'm sure these settings were harder to know that. But in our case, it went in with eyes open. We knew what was likely to happen. And in fact, it did happen. So along with going to be a part of a larger organization,

you were working for somebody else for the first time in, in, you know, since you turned gray. Well, no, even before that. How,

you know, obviously, you're, you know, I mean, you're a leader that can lead up and lead down and lead sideways.

I'm really confident that that's of it, but were there any moments where you swallowed hard and said, "Hmm, this is difficult or this is different than what it was?" You know,

I think the first year there are so many unknowns and you come from a basis of security of understanding what we control and what we don't in going into the operation,

just being unclear What that looks like? What are the unspoken rules that exist in every? organization just this one is somewhat larger and and trying to decide You know where I fit in that packing order You know,

how what's my relationship with others? And there's no way around that I think I think it just takes time so I would say the first year is is tricky.

At least with Salis Abrahman, one of the unique characteristics that took me several months to buy into, honestly, actually not to buy into, but to acknowledge, was that it's a collection of highly entrepreneurial driven people who get up every morning,

because these are people who founded the company and they got up and they said, "If I don't go get something to eat, we're going to staff today. I better go do that. And I was concerned for me personally that that would shift because that's how I was wired.

And I thought, well, is that going to change? And no, because now, as I said, you know, the first episode is playing with house money. So all of a sudden I was grabbing more.

And that was true for all of the other teams that had been acquired. In that case, the vast majority, and that was a key factor in making the decision. The vast majority of the people who were acquired,

all of the leadership stayed on across over 30 companies and were still employed. And other than some retirements, that's continued to be the case. - Wow, that's phenomenal.

- And that was important to me. You know, I could see some settings where, in certain industries where that wouldn't be as important, But it was to me So Craig previously we've recorded a couple episodes on working capital and I know that your wife handled that a little bit more Just being the financial person with the debris and but was that what you expected and was the appropriate result achieved?

Yeah, you know I If I had understood how these deals worked 15 years ago, I would have gone and acquired some companies.

I just didn't understand how it worked. When I'm sitting on the other side of it, I go, "Oh, well, that makes sense." Everything that I thought was this great mystery granted a spectacular job of going,

"No, no, no, this is not complicated. This is why it works like this. This is a standard approach, and that helped me start understanding how the work and capital worked. So no,

I don't think there was any angst at any part of that. You know, once I understood the formula, once I understood that, that, you know, the receivables,

the AR was something I needed to, you know, that's my money. So I better go get it. Things like that, that, you know,

Again, Grant made that very easy to understand. - That's great. Anything that you would add there, Grant, on the working capital piece? - Yeah, look, we deal with a lot of clients who don't have financial expertise in the ownership mix.

And so, obviously Angie was huge in making sure that all of that was taken care of. But it always takes time to walk through with clients so that they understand the process and you know it's at the end of the day you got to go into it somewhat with you know with a trust in obviously us as the advisor but also you know,

that the forecast of how it's going to land is going to be achieved. And that's where, once we painted that picture of what it was going to look like,

I think Craig was comfortable and then just, you know, obviously Angie was needed to be comfortable with the forecast as well.

But I think I think the decisions were once he understood the process that he made decisions to make sure that the forecast was achieved. Yeah,

and you know, these it's the classic the person selling once and believes more in the value than the person buying. So, you know, I wonder how often in your career grant,

you've had someone come back and men, we got one over that buyer. We just got more money than we were worth. I would suspect that's not ever happened, and it certainly wasn't for me.

But we were able to very quick, you know, once you make these decisions, you've got to move on. And looking back is not helpful emotionally or in any practical sense.

At a certain point, you go, this is the market. This is what the market pays and it doesn't matter how much I think my baby is pretty if the market saying your baby's okay That's what it is move on Yeah,

so not to be self -serving at all because I think you know our goal is to help business owners understand that they need advisors in the process but you know What what What would you say were some of the values of having us involved in your transaction,

in your experience from the first times you were given some sort of interest, indication of interest, till past the date of closing?

What would you say the value of having somebody like us at the table is? Well, what I should say is, I mean, we started talking about what ended up being a deal four years earlier.

And the advice that you gave allowed me to rethink how we structured a team, how we, to some degree,

compensated them, and how we started moving towards what this in -game would look like, so that we were prepared by that. And so that council is irreplaceable.

You know, I suppose theoretically someone could have come along in the first year and made a great offer and we would have just pulled the trigger even without initially understanding how it all went. But that council was incredible.

And we also started to learn what was important to buyers and reframing what we did. I give you, for example, we had spent a considerable amount of money developing some software that would have been very difficult.

It improved our productivity but very difficult to validate. I mean, talking a couple hundred thousand dollars and so it took me a while to learn that no one cared that we had spent that money.

What they cared about is did that money allow us to be more profitable and they weren't going to say well you've got 400 grand in software let's do a EBITDA multiple of five on that.

So those things were important and then of course finally the process once with granted the table there's a language that M &A people use,

that you all speak the same language. And that was actually very satisfying to go, okay, I got my guy speaks that language, because I'm goodness sakes, I'm not going to be able to learn it.

That was the funniest thing because Darren, the CEO of the Solace, the guy that led the M &A department for them,

his first name was grant. And so Craig and Darren would say, I tell you what, let's, my grant, talk to your grant.

Incidentally, our grant now is CFO. So he's, and you know, we moved into a company that was growing rapidly.

I mean, we have two years and four months, five months now, I guess, in two years, we're in May. When we joined including us, the company size is 1 ,250. By the time this podcast goes out,

we'll be at around 3 ,200. Wow. So for me, that's been exciting. We got on a ride of a train that's just going flat out.

And, you know, that fits my temperament very well. I like that. I agree, energized me, you know, because when you're running a small business,

a fair amount of that is maintenance. You're just keeping the wheels going. So the excitement is fun. Yeah. And you, I mean, you had a pretty complex structure based on just history and,

you And you had a lot of, I guess, different ways of structuring your business. And so that was not easy to get around.

And so your accountant was amazing to help deal with that. I think It was a challenge,

but we worked through it, and I think we came out with a really good result. You know, Craig, one last question that I would love for you to answer, and if you've got guys that we're talking with,

for example, that are in the process of considering selling their business, you know, preparing their business for a for a sale,

what advice would you give them, not that you're on the back end of everything in your career because you're started a whole new thing,

but what would you tell them? I'd say the process of you mentioned our complexity of our structure. That was honestly because I think we didn't get good advice earlier in the work that we were doing and by early I mean when we first started the company we started off on the wrong foot with respect to the way we framed the company up and things just got more complex after that and so that led I would say to anyone

if your systems or your organization is complex in terms of structure make it less complex because it makes that so much easier to navigate the process.

Secondly, I'd say, get your tax advisor on to have the conversations about what happens and how much tax, because it's pretty emotional when you're...

We all used to paying tax, but when it all comes in a big chunk, that's a whole different game. And what seemed as a percentage reasonable,

looks like a really high number. So get used to that well before the session because your emotions will take a dive. You're going to go, "I'm giving all of that money away and taxes and death are coming for you.

So get over it." Then I would say that the emotional part of it is you've got to want a brighter future. And you've got to believe in that.

And so for me, I did. But I also had the parachute packed that would allow me to jump out if the plane was going to crash.

And too many illusions there. But the fact that I knew I could get out in this new deal if we needed to and we may take a beating on some of our own out,

but it was doable. You've got a plan for that. That's the reality. Yeah, and get through the first year because the first year is everything's changed.

We went from cash to accrual. We went to audited financials. We went to blending with another company that had been acquired, navigating in our division now with a much larger group,

navigating two sets of books. There's a lot of heavy lifting. Suddenly, we're dealing with HR of a much larger company, which before you,

I just make a decision. Let's do it. Now, you've got to validate that a bit more. You can't go through the McDonald's drive -through and hire the guy behind the counter anymore,

right? Now, we were given tremendous freedom, which is really, really good. I have a great deal of freedom, so that has been spectacular,

but I didn't know for sure that was going to happen. Yeah, I think a lot of our clients are retiring, so They're not going moving on but I think you're what you said is super important You know don't run from something run to something right?

So even if you are retiring, you know have a plan of of where you're what you're running to Even if it is, you know the Bahamas I have a I have a friend who I've had several friends ask me for advice you know having known we've gone through it And a couple of them have left it too late and I don't want to tell them that's going to make them feel good,

but the answer is your value is increased when you continue at the helm in many cases. And so one of the things I did was very cognitively,

starting maybe even as 10 years ago, is to reduce my dominance in the company in terms of face to the clients. Because I wanted to be very sure that the value wasn't me or just two or three of us,

but was spread across a broader group. And that certainly made the company more valuable. But people are waiting until they're 65 to try to figure it out. That's pushing the envelope.

- Well, hey y 'all, that's all the time that we have for today. I know it feels like we're just hitting the tip of the iceberg still. I'd love to have you back for another one, Craig. But make sure that you all see our show notes for more on Craig and Grant Craig.

Thanks again for joining me today. Thank you. Thank you. And that wraps up another episode of Integrated Insights with ICCG. Be sure to subscribe and stay tuned for more stories from our team.

We love hearing from our listeners. If you have any questions or topics you'd like us to cover, please send us an email in the show notes. For more information about ICCG,

please check us out on our website or follow us on LinkedIn and YouTube. Until next time, there's always a seat at our table.