UPDATED Jeff Giles interview Transcript: This is Jeff Giles here with Core and Main. I want to appreciate you coming in, taking some time here to talk with us. And I'll let you kind of introduce yourself, what Core and Main really does and what your role is there. - Yeah, thanks, happy to be here. So as you said, Jeff Giles, executive vice president of corporate development for Core and Main. Core and Main is a local St. Louis company. We went public in July of '21, so now a public company. We are one of the largest distributors of primarily water infrastructure products, so I think pipes, valves, fittings, hydrants. We also have a business in fire protection where we fabricate sprinkler fittings and distribute products there, as well as some geosynthetics and erosion control products and a few other answerable tools and products, primarily serving municipalities and underground contractors across the United States through our 350 branches and call it 5 ,500 associates. So I was recruited to really join the executive team and build out the corporate development function, so M &A and strategy primarily, join the organization in March of '18 and since then have really executed on our roll -up strategy and been acquiring businesses both in our core and adjacent markets, helping to grow the business through inorganic means. Yeah, it'll be seven years in March and it's been a great run. So you joined, you said in, is it March of '18? March of '18. So not too long after that, that's when Co would kind of hit and what did that do to you? That was an interesting time, certainly for everyone, right? So we were, you know, in essential business, which is great. But so we were able to stay open and operate throughout, but I'll never forget when we had a, you know, sort of an emergency board meeting and talked about, all right, let's model out a zero revenue scenario. Like what does that look like and how long can we keep our people, you know, paid and employed? Which certainly we never got close to anything like that, right? But it was a scary, you know, few moments in time and we had to go through that. I recall though, one of our, at the time, largest and really most strategic acquisitions was based in Northern California. And we closed that acquisition in, I want to say it's like early March of 20, late February, early March of 20, right as COVID was happening. And like right after that happened, you know, the world shut down, and we are trying to integrate 14 is in Northern California, which was one of the most restrictive from a COVID shutdown perspective. That was a real challenge. - So has your career path always been in mergers and acquisitions or is that something that kind of, you know, you took a right turn and kind of fell into it? - Yeah, I mean, a little bit of a turn somewhat intentional. So, you know, think about my post -MBA career. So I got an MBA at WashU here in the full -time program, finished up in 2002, and went to work at Emerson Electric, great local St. Louis company, and was very fortunate to have a couple different jobs there with some great leaders, and was working on primarily business development and a little bit of strategic planning. And at the time, I really enjoyed it, got some great training, worked with some really talented individuals, but ultimately wanted to do something a little bit more entrepreneurial and ultimately got into private equity, worked with a small sort of a startup firm here in St. Louis. - Okay. - And then ultimately joined a firm called Bertram Capital, a Northern California based firm to really build out their business development function. So that was the first foray for me really into M &A. - Gotcha. And since taking over that at Core and Main, like how many, roughly on average, I mean, how many acquisitions are you doing every year or maybe since you started? - Yeah, I know it's a great question. And I'll tell you, when we first got started, it was great to sort of put the team together, put the systems and the process in place. I mean, one of the things I wanted to make sure we did very early on was have a very defined and repeatable process of how we go about originating opportunities, evaluating opportunities and going through through the entire due diligence process and you know, signing and closing the transaction. So still a relatively new role that hadn't been clearly defined in terms of the process and what we wanted to accomplish and how we were going to do that. So I had the freedom to really, you know, put together the team and the processes, which was a great sort of a blank slate to start with. And in the early years, you know, looking at kind of 2018 and 19, you know, did a few smaller acquisitions, built up the team, built up the systems and processes, got some reps under our belt. And then really kind of going into COVID, we're really, we're ramping up, had a little bit of a COVID pause. And then post COVID, we've ramped up significantly. So last year was a record year, acquired 10 businesses and including our first outside of the US while we acquired a business in Canada, which was great. So yeah, two branch operation up there. Great to talk hockey with all those guys. - Yeah, right. - I know we were talking hockey earlier and I love talking hockey with the Canadians. They live and breathe. I'm not talking with them about it right now given the recent four nations classic. Who would have known that that would have become? - I know, it's such a, yeah, right, right. That was fun to watch. - It was indeed. - Yeah, so roughly how many acquisitions have been, have you done? - So 42 since I've been leading the organization. Yeah, and we've deployed almost a billion eight in capital into M &A in that timeframe. So we've been incredibly acquisitive, I think really by any measure, the most acquisitive in our industry and potentially in sort of all of industrial distribution. So it's been gratifying. I mean, the team is really thriving and I've got the best team in the industry and I love working with all of them. And not just my team, I mean, I tell people all the time, the buying businesses is the easy part, right? But it's the actual integration and then execution operation where that's where the heavy lifting comes in. - Yeah, for sure. That's why my eyes are just like, oh, that's a lot. - Yes, it is. And I've got a great partnership with our integration team. And I mean, really every functional area across the organization. And, you know, there were some growing pains over the years and which is natural, right? I mean, any organization, you're gonna have that with the level of growth we've had, particularly through M &A. But wow, I mean, we've got just, we've got the right people in the right seats and everybody is really thriving. We certainly got our hands full, but really happy with what we've accomplished, really happy with the team members we have across, again, all of all of the functional teams. And now it's just about execution and the tailwinds we have in the industry are very favorable. And I see a bright future ahead for us. No change in terms of how we look about the future from a perspective. - So are these acquisitions, are you mainly focusing on kind of strategic parts of the country? I know you mentioned kind of up in Canada, the one, but there are certain areas of the country that you kind of have your sights set on or is it just really all across the country? - So it's a great question. So we will make acquisitions across the US and now into Canada, but we do certainly have some higher priority geographies we've identified primarily where we don't necessarily have sort of either like the number one or number two position in the market. We feel like with our capabilities, our vendor relationships are phenomenal people that we should be the market leader in every market that we're serving, geographic market, that is. So, we frequently review those areas and look at opportunities to grow through acquisition as well as through Greenfields. We've done a lot of Greenfields where we're just opening up a new facility in a specific geography. That's slower, obviously, to build scale there. But the one I mentioned in California that we closed just as COVID was hitting. When I joined the organization, we were private equity back at the time when I joined. So Clayton Dupre and Rice, CDNR out of New York, which was a great firm, super supportive of our growth efforts. They were a tremendously valuable partner for us. But as we were sort of building our strategy and developing that, we didn't really know exactly how successful it would be. And I remember a conversation I had with someone that said, look, if we only do one acquisition in like sort of this next few years, I mean, this, this one in California is called R and B company. Like that would be the one we need to do. And, um, so we did it, right? Um, and that really filled in a nice white space on the map in Northern California with a great business, with great people that, um, you know, nothing's plug and play, right? But, um, we're able to integrate that despite the COVID challenges, and we've got a great business out there. And so it's just a great example of picking up a very solid regional player, filling in that white space on the map, but essentially the business model's the same, but the products are the same, and in many cases the vendors are the same. So one of the things that we really are able to benefit when we're bringing companies into the fold, just given our relationships with our suppliers, you know, We can, in a sort of a pure waterworks distribution business, drop 100 to 300 basis points to the bottom line just by adding them to our purchasing program. - Nice, yeah, huh. So I have to imagine that's quite an undertaking of, you know, if you're making that number, that large number of acquisitions every year, you're probably looking at a lot more deals than that. I'm guessing that you're you're passing on or you weren't, you know. - That's right. And you know, one of the first things we did early on and we update this frequently has really developed a very comprehensive market map and just to build out the landscape of what's the opportunity in front of us both in our core water, fire, now, you know, geosynthetics and erosion control. We've been doing some work in concrete structures now evaluating the Canadian market further for expansion there. So, you know, the first step is just identifying the opportunity in front of you. And then given the, you know, the number of people we have in the field, out on the streets, working with customers, competing against, you know, other companies, we're able to identify pretty granularly down this really long tail of who the companies are that are operating in every geography that where we operate, you know, who would be a good fit with Core and Main and not just from a, you know, sort of a strategic financial standpoint, but also culturally, that's a huge area of focus for us because we're nothing without our people. And we don't wanna really poison what we've built by bringing in a business that on paper looks great but has either a toxic culture or culture that's just a mesh with what we've built. So really very focused effort on understanding the landscape and then directly developing relationships with all of the business owners and leadership teams at those companies that are sort of the most high priority from either geography or product standpoint. And, you know, over time, the one thing we can't control in M &A is timing, right? So, I'm not gonna say it never happens, but very rarely do we call a business owner and, you know, express interest in the business. They say, well, perfect timing. - I just was about to call you guys, I'm ready to sell, and here you go. But I mean, I am continually, pleasantly, I don't know the surprise is the right word, but I'm pleased with the success we've had in developing relationships and really having meaningful conversations pretty early on in some cases about an actionable opportunity that has led to a deal that we've closed and we've actually had business owners that have called us directly, not frequently, but it's happened where they say, "Hey, look, I saw you buy this company. I know those guys and we should talk. Yeah, that's a good situation. That's the dream scenario. We'd love for more of that. But we've acquired businesses that were sold in a formal investment banking process. We continue to see those. And given our size, scale, our position in the market, our level of M &A activity, if there's a business that's for sale that is being auctioned by an investment banker, if they don't show it to us, and no offense to any bankers out there that may be listening, they're not doing a great job, unless of course they've been told do not show it to us, which occasionally happens. It's pretty rare, but in some cases due to just competitive sensitivity around things, it's been very seldom that's happened, but we know that could happen. For the most part, we're seeing everything that's out there in our space through our proactive outreach efforts and then through the sort of more common investment banking channel. And to your point, last year was a record year with 10 acquisitions. I don't expect that we'll necessarily have many years to require 10 businesses, but you never know, right? Our pipeline is robust. We're evaluating, as always, a number of really interesting opportunities. What our commitment is to the organization that we intend intend to grow two to 4 % annually from a revenue standpoint through M &A. And last year, we were significantly higher than that. And again, it sort of ebbs and flows a bit, but we feel very comfortable with the opportunity set in front of us that two to 4 % plus is very achievable. And it's been a fun ride, but I feel like we're just getting started in many areas. That's great. And are you mainly going after like distribution type companies or are they fabrication or is it kind of anything? Yeah, that's a great question. So primarily distribution, I mean, the most straight down the fairway opportunity for us is a pure Waterworks product distribution business. And in some cases, we can acquire those businesses. And, you know, if There's no brand recognition for that company in the market or no legacy sort of concerns from the ownership group or the leadership team there. We can swap the name on the side of the building, take off XYZ company, throw corn main up there and continue operating and not skip a beat. That doesn't happen quite as frequently as we'll acquire business. As they should, I mean, a lot of business owners are very proud of what they've built they're proud of their legacy. In some cases, it's a family name that they want to maintain or just a name that does have real significance and meaning in that local market. So, great example, we acquired a phenomenal business in Hawaii, which was, that was a fun due diligence project. - Yeah, I'm sure. - Yeah, like I had a lot of people sign it up like, "Hey, can I help out?" And you guys need any more folks to travel with you? - Right. - Like just carry your bags maybe. So, Pacific Pipe's name of the company run by just a fantastic individual Ken Oda with a wonderful team there. And we knew very early on that the culture in Hawaii is almost like doing business in a foreign country, right? It's, there's just a unique culture and customs that they have there. So we spent a lot of time upfront really trying to understand that we actually hired an outside firm to help us to understand that culture, because again, the culture piece is so critical. Right. And fortunately, you know, despite the differences, I mean, it's all about taking care of the people and treating them like family. And it really meshed with our culture and our organization. So that part was phenomenal. And as we thought about the branding strategy going forward, I mean, they have a phenomenal business in the islands and the name is very well known. So there was no reason to take that away. If we just slept corn main on the side of the building, it probably would have been, you know, a negative, right? So what we did was Pacific Pipe, a core and main company. So best of both worlds, keep that brand, tie it to our broader sort of national organization and that business has just been thriving. I mean, that's a great test case or I guess example of what we want to accomplish and what we can do when we find the right business with the right culture or the right strategy, the right team. - Yeah, kind of checked all the boxes. - That's exactly right. - And a lot of these companies, is it, are they fall more on the kind of mom and pop type of, of organizations or are they fairly large organizations that you're, that you're going after? It's a mix. So our market is still incredibly fragmented. You've got a, you know, meaningful number of sort of larger regional players, I'll call them. But you've got, you know, hundreds of mom and pop operations still operating out there every day, whether it's one, two, three branches. And, you know, they're doing a great job and they're great players in our industry and some of them will join Korn Main at some point, some will not, but we've acquired a great mix of those. And the good thing about the team we've built, the strategy we have in place, we're really able to accommodate sort of any one of those, right? So if we've got a mom and pop type business where you've got sort of owner operators and they've been doing at their whole lives and they're looking for an exit and they're looking for, you know, really to sort of exit the business completely themselves from an operating standpoint as well as an ownership standpoint. And as long as we know that upfront, then we can accommodate that, right? We've got, you know, a massive team. We've got great talent that we can put people in place there. Now, ideally, there's a transition period. We wouldn't want someone to just run for the hills down. But, you know, and going back to Pacific Pipe, Ken Ode is a great example of, you know, an owner -operator who wanted to stay on board. And it's, is there, he is absolutely thriving. - Still? - And again, oh yeah. - Oh nice. - I mean, the business couldn't be doing any better. His team is wonderful. Just a great family environment there. One of the stories I like to tell about that one, so one of our first visits there, and Ken was giving us a little tour of the facility and showed us a picture on the wall of, it was of it was a house and it was someone who purchased a house recently, went from his team. And he talked about in Hawaii, sort of one of the cultures and customs there, it's just home ownership is really important. It's very meaningful, right? And so his goal was for everyone in the organization to own a home. And so I raised my hand and said, "Well, Candace, I mean, I get to own a home in Hawaii." So I don't, unfortunately, but I mean, I guess I could buy mine if I wanted to, but it wasn't part of the deal. - Right, right, that's funny. So shifting over a little bit, these acquisitions that go through, how many deals have you been a part of that fall apart during due diligence and what are some of those common things that you see happen that may lead to that? - Yeah, that's a great question. I mean, we certainly, as you alluded to earlier, we evaluate far more opportunities than we actually pursue. We do a pretty good job, I would say, of making sure that we've got a efficient process for screening and evaluating so we're not wasting time on opportunities that aren't going to be a good fit. But unfortunately, we certainly have had opportunities where we had signed a letter of intent or moving forward in diligence with every expectation that we would ultimately sign and close the transaction and things come up during diligence that in some cases are insurmountable, which for me personally, I'm incredibly competitive and I don't like when people say no, I don't like when people say this is not a problem that we can solve because I feel like there's always a solution to any problem, right? But in some case, I mean, it's all about risk tolerance and what we're able to absorb versus things again that truly and surmountable. What are some of like the key financial or operational metrics that you're kind of looking at when you're evaluating these businesses that kind of signal to you like, oh, this is, this could be a good opportunity or the opposite of like, this isn't what it looks like on paper kind of thing. Yeah, that's a great question. And, you know, we like to be somewhat flexible in terms of how we look at opportunities because we know that a business that's run by an owner operator in some cases may not be set up to absolutely maximize profitability or therefore taxes owed, right? So a lot of times they're reinvesting in the business maybe in a way that we wouldn't. But I mean, it's not rocket science. I mean, we're looking for businesses. I mean, once we sort of look at the size and make sure that it's at least got some scale you know, consider, we look at, you know, we look at Grossmarge as we look at SG &A and we look at EBITDA and ultimately the biggest thing is not how they're operating or performing today and necessarily all those areas, but what it can look like under Corin main. Again, I mentioned some of our purchasing programs, some of the other operational synergies that we can bring to bear that they just wouldn't have access to and nothing against them doesn't mean they're not good at what they do, but the size and scale of a seven plus billion dollar revenue, national business, and the benefits we can bring, it's going to be different than some of these smaller organizations. We obviously look for businesses that are growing, right? We look at businesses that are able to command healthy, competitive margins. We certainly bump into businesses that, and I get it, sometimes they have to sort of undercut and pricing in order to stay competitive. And then you're talking about a really low margin business. And it's tough to go back, right? It's tough to go back up. So those can be challenging. But really, for us, it's about building a very clear case with the assumptions that we can develop internally on, all right, here's what they've been doing in the last five, 10, 20 years, whatever it is. But here's what we really think we can do. Here's what we really think we can bring to bear. We are, I would say, fairly diligent buyers. we are disciplined, we do not overpay, and we generally don't pay for synergy. So things that we bring to the table, we pay a business owner, what their business is worth as a standalone business. So we look for leadership teams that, again, are able to continue on if that's the strategy. So if we've got a business owner where we know they're gonna be retiring, that next level of leadership, we'd like to see someone that's either able to step up or just align with our organizational culture and vision. That's another key one. So yeah, there's a handful for you. What when you talked about not overpaying is what do you see mainly in the market do business owners kind of have an inflated idea of their value or is it realistic, you know, kind of compared to the real estate market, everyone thinks their house is worth, you know, acts and, you know, these days are right. But generally speaking, it's like, eh, you know, everybody thinks they've got the prettiest baby. There you go. So look, we've, we found common ground 42 times, right? On valuation. But very rarely do we present sort of an initial indication of interest, which is really just a valuation range, and have the response be, that's perfect. That's exactly what I was looking for. Let's do this, right? So there's generally some back and forth. And for the most part, I would say, we've dealt with very rational and reasonable sellers who, whether they've had some sort of bad information or misinformation on valuation, ultimately we've been able to get them comfortable. But yeah, I mean, we certainly, we bump into business owners from time to time where they think, you know, let's call it a, you know, $50 million revenue distribution business that they think it's worth 10 times. And okay, that's great. So why can you show me why? Tell me why. And, you know, this goes back quite a ways, but I did have a business owner that sent us we report that someone had given him and it was valuations of publicly traded software businesses. And okay, and I just threw that one out the window. I said, how about you take a look at this one? This one is lower middle market industrial distribution. He says they're privately held prior to the transaction. Why don't you take a look at that? Let's see if we can maybe meet in the middle somewhere. And yeah, so I mean, look, we've, Again, we've been the most inquisitive in our space. We have a very good understanding of where these businesses should trade and where they have traded, right? So we're disciplined, we're not gonna overpay. That said, I mean, if we've got a business that is very strategic to us, it generally lines up where a fair price for the business owner is a fair price for us, particularly given what we can do with it going forward. - Right, right. And you mentioned culture being a really big factor. How, I know you said you kind of, you're building these relationships with these potential targets, we'll call them. But how are you really able to kind of have a good idea of which companies, you know, have a positive culture, which ones don't? I mean, you're able to kind of get that granular level of information with, I mean, there's probably hundreds, if not thousands of these companies out there. - Yeah, I mean, honestly, that's probably the key question and one of the tougher things to evaluate in any transaction. I mean, you really hit the nail on the head there. It's something that we constantly try and think about and iterate on in terms of how we can better understand the culture because even in a fairly open scenario where we've got a direct relationship with a business owner, no investment banker involved, they're not usually looping in a lot of their team members, right? So even in an organization where there's a couple of hundred people, we're usually directly interacting with three to four. In some cases, it's less than that early on, right? So it's important for us to understand really obviously from the top down. So that the overall leader of the organization, whether it's an or an operator or more both, what are their mannerisms like? When we're walking through a facility, and in some cases, we're only doing it after hours, so this is tougher, but when we're walking through a facility and we see how they interact with people, are they engaging, are they smiling, are they calling you by their first names? I mean, some of these very little things, right? - Yeah, that's the, yeah. - You can tell through those interactions if they're genuine, right? I mean, I've definitely, and this goes back to prior life with other organizations where you're walking through a facility and you can see the owner trying to be very outgoing and engaging with the people. And their kind of response is like, this is odd. (laughing) - That has docked to me in two years. - That's exactly right. It's like, okay, a little bit of a red flag there. - Sure. - But for the most part, I mean, our industry is, I don't know, maybe I'm just bias, but we've got a lot of really great people in our industry and we've got a lot of business owners that really care about their people. So we have not encountered that many organizations where I would say the culture is vastly different from what we have. That's good. Yeah. No, it's great. But I mean, again, we have, and we have passed on opportunities based solely on culture, but those are the ones where it's usually pretty easy to identify and it's pretty early on. I mean, you've got, there's there's red flags that'll pop up and just interacts with the business owner. And how they're requesting information from someone on their team, how they're having a dialogue with them in a meeting, and how they even talk about sort of the next level of leadership or sort of the broader team that's out there, whether it's sales or someone in the warehouse, someone driving a truck, you can get a good sense of that. But that is in some ways kind of the secret sauce that we're always gonna be trying to evolve and really grow in terms of how we evaluate and how we can judge that because at the end of the day, numbers are numbers. We can figure that out pretty easily. Go for it operating plan. I mean, we're again, not rocket science and this is a business that we've been a leader in for quite some time, but if the cultural piece does go wrong, it can derail things. Do you get a lot of business owners that during the process are asking about? I want to make sure my employees, what's going to happen to them? Do you bring them in and immediately slash x percent? Are they all taken care of? Does that happen pretty often? No. That's a great question. That's another way that we really identify what the culture is like, is if the owner brings that up early on. Like, okay. - You can tell, yeah. - And it's funny because everybody cares about money, right? So no one's gonna give their business away. Everyone wants a fair price. Some people want more than a fair price. But the ones who also say and mean, I truly care about my people. I wanna find the right home for them. And I feel like that is core and main. I mean, obviously we love to hear that, right? But then we need to see them follow through with that. 'Cause we have absolutely heard that, whether it's in an auction process or even a direct relationship we've developed, but they have maybe another bidder or someone else coming in. And at the end of the day, they say, well, I do care about my people, but there's other companies willing to pay a lot more. So I care more about that, which is fine. That's their prerogative, right? And maybe that's not the right fit for us and that's sort of the internal culture and MO of the owner there. But I mean, we bought a business not too long ago and I can't share any details on what, but fantastic business, wonderful human being who owns and operated this business. And we knew very early on, he absolutely wanted to make sure that we were gonna take care of his people. And to the question you question you asked, we don't guarantee things, right? I mean, we're in America, employment at will, but our goal is to hire every single person at every company that we acquire and find an opportunity for them long -term. Again, we can't guarantee that, but we do not come in with plans to lay people off. I can't think of any scenario where we've actually come in like early on to say, well, this was the plan to get rid of these few people. - Yeah, it's not the first move in the Not at all. I mean, how do you destroy culture, you know, by getting rid of people? - Yeah, and work gets around if that's the, if a company's doing that as well, so. - That's exactly right. So back to this case, I know definitively that he had higher offers for the business, sold the business to us for less than he could have gotten from somebody else because he truly believed that this was the right fit and the right culture. And we were to take care of his people over the long run. So we love that. And I have a ton of respect for him, for the team, and I hope we do right by all of them. Yeah. Do most, you kind of touched on this earlier about kind of owners staying on after that acquisition is closed. Is that pretty common? That there's some period of a year, two years where the owner sticks around just to kind of help ensure that, you know, there's a smooth transition. Absolutely. And that's something we identify very early on. What is their motivation? What's their desire? And you don't want to make assumptions necessarily based on age, because sometimes, you know, yeah, that may be at or above sort of quote, retirement age, they still may have a lot of gas in the tank. And that's all they've ever known. They get their passion and energy from it, they love being around their people, they love helping their people, they love the customer relationships or the vendor relationships, whatever it may be that they've cultivated over years. So we love when they say, I wanna stay sort of indefinitely. That's the ideal scenario. If an owner tells us, look, I wanna transition out over time. If that's six months, if that's 12 months, that's fine. Again, we just need to know. So we have a firm plan in where we're going to bring in someone else to either backfill or they've got another leader identified that's going to step up. And then we make it very clear what that transition period is and what the responsibilities are. So we don't want to sign someone up to just say, okay, yeah, you're sort of a consultant for six months, but you're not really doing anything. That's not good for anyone. So we want to make sure, all right, here's a clearly defined set of actions that you're going to take. You're going to be out there with our top 10 customers, continue to develop a relationship, making sure that we're bidding on every job, winning every job, or you're going to be working with our vendors and making sure that we're, you know, getting the best deal on everything that we're acquiring. We've got the right amounts of each product in each location and making that very clear. And I mean, certainly we've had a mix of how that's played out. And we've had a number where we really thought someone was going to be around for six months and then transition out. And they've said, I'm having a great time. Let's kind of re -up on this. - The stress is kind of relieving, and I actually enjoy doing these again. - That's another great point to bring up in that if we've got a business owner that's been doing it for 30 years, inevitably they've been wearing 50 different hats and doing everything. In a lot of cases, don't want to generalize, but some of the HR activities are not their least favorite, right? Or dealing with No offense to attorneys or tax accounts or anything like that, but attorneys and account. Yeah It's just all the stuff. That's outside of what they're good at exactly Like they wanted to sell pipe right right and now they're dealing with that So if we can take all of that off their plate and like waiting I can just deal with customers or just deal with vendors or just I mean like this is really fun All right, so yeah, we love when that happens. Yeah, nice One of the things I wanted to touch on was, you know, thinking about, um, you know, if you're averaging roughly five to seven acquisitions a year last year, you said it was 10 more than normal. Um, it just, it boggles my mind. I mean, what are you doing to ensure that those transitions happen smoothly? Right? I mean, we all hear about nightmare scenarios, you know, um, where a company's acquired and it's just, it's total chaos. Like the employees that are coming in, they're not happy with the transition. The acquiring company is like, ah, these employees are terrible. It's just, there's no alignment there. What things are you doing that allow you to kind of this rinse and repeat? - So, fantastic question. And I mentioned early on, we developed really kind of a playbook for how we're going to execute transactions, starting from how we originate. And one of the key things that I wanted to make part of that process was that our integration leader or someone from her team would be involved in the process as soon as we sign a letter of intent. And certainly they're in the loop on our pipeline and what's developing and what's looking like it's going to progress to that point. But once we sign a letter of intent, they're involved in all those discussions, all the meetings. So when we do on -site diligence trips, someone or multiple people from the integration team are involved. We're beginning our sort of discovery process in addition to our sort of confirmatory due diligence. We're also looking at preparing for integration. And the playbook that we have for sort of the execution side, we have a similar playbook for integration that's been developed and iterated over the last seven years or so. And we've got an incredible dedicated team. This is not their first rodeo. Again, a lot of them have been involved since the very beginning. So they've learned and developed and we've got a very robust playbook and we have dozens of different things, almost like sort of an option list or like a menu of, here's sort of the things that we can do when we integrate your business. Some of them we have to do, right? Like at some point, you know, we obviously need a way to extract financials that we can rely on, right? We're a public company, we have to report on these. So whether that means we're gonna transition their ERP system into ours or make sure that we've got a way to maintain theirs indefinitely so that we've got good accurate financial data. So like that's a just price of admission. There's no negotiation there. But there's other things that we can talk about that are maybe either nice to have or we're gonna have them down the road. We have a philosophy of sort of do no harm, right? So we wanna be as least disruptive as possible when we're bringing these businesses into the core and main family. And in order to do that, it takes, again, the planning that we've got very early on in the process, very open dialogue with the business owners, the leadership team there, and making sure that we are fully aligned. So one of the things that we decided early on was a lot of companies will buy a business, they will sign and close simultaneously. So if we're buying your business, you know, we spend a couple months, whatever it is, performing our due diligence, we've got everything finalized, we've got the legal documents, you know, the purchase agreement finalized, and we sign and we close and we now own the business and then we go on site and we tell your team, we just acquired the business. You probably tell them first and then we come on site and say, okay, you work for us now, let's get going. We don't love that approach. What we prefer is we will perform our due diligence, we will sign the purchase agreements, we have a binding agreement, we will then announce it to the market and then immediately following that we'll be you know, the owner of the leadership team has announced, here's what's happening. I've signed a purchase agreement. I'll be selling the business corn main. That transaction will happen in the next two to four weeks. They will be on site here, today, tomorrow, whatever it is, and talking to you about the future. And you all have jobs, they're gonna be the same or very similar to what you're doing today, and you're gonna have benefits, and they're gonna come and talk to you about what that looks like, 'cause that will change, right? And change Change is scary. The first thing that any employee at a business that's being acquired thinks about when they hear their company is acquired is, do I have a job? Do I have benefits? Not just like the whole suite of benefits, right? And so we make sure that we are on site immediately after that announcement, answering those questions and developing those relationships. So then two to four weeks later, when we actually close the transaction, yeah, and then they've had that, they already feel like they're sort of not necessarily part of the family yet, right? But they're on the inside, they've got the information they need, they feel comfortable and secure in their job and directionally are hopefully excited about the opportunity. It goes back to the alignment. We need the business owner and the leadership team to be fully aligned with the messaging, really especially between that sign and close period when it gets out there If, you know, if one of your top sales, you know, individuals says to your, you know, the owner operator, like, hey, look, I'm pretty nervous about this. I got some offers elsewhere. I can do elsewhere. And they say, no, look, you're going to be doing the same thing. You're going to have more accounts. You're going to have more product. You're going to have better pricing. So, I mean, there's a lot of positives here. And as long as that messaging and that alignment is very clear, then it's generally a win -win scenario where they see aside for them and their people. And not to mention that the training opportunities that we can offer that, you know, I would say it's unmatched in the industry. I mean, we probably bring in a thousand people to St. Louis annually and we're in the thick of training season now. It's all peer led training, developed in -house, product knowledge, leadership, communication skills, you name it. And it is something that we invest a significant amount of time and resources into so that we do have the best trained people in the business. And it's great for us in the St. Louis office. I tell people all the time, all of us in the St. Louis headquarters, we're not sitting in some ivory tower, telling people what to do. We're a support resource for all of our 5 ,000 plus people that are in the field, in our branches, solving customers problems every day. That is our mission in the corporate headquarters, right? And when we bring the people into the field and we interact with them, we have meals with them, we have dinners and happy hours and games and whatever else, it's a great way to connect. And it really builds that culture, right? When our CEO, Steve Leclerc, who's a fantastic individual, is sitting there in his sneakers, having a conversation with some folks that are maybe new to the organization of just going or elsewhere and you know what's product knowledge and he talks to his experience and talks about the great things that our company's done and is doing and how they can play a key part in that. I mean they go back to their branches inspired. Yeah, yeah. Makes them relatable and right, sure. Absolutely, absolutely. Yeah, that's got to be a big piece then. So I mean sounds like for whatever that period of time is, two, three weeks, it's you have a team that's on site, almost there kind of answering any and all questions to try and ease any concerns there may be, like you said, so that's. Yeah, and I cannot overstate the importance of it and it's the relationship development, it's that trust piece, right? Because there's anxiety and it's perfectly natural and normal and I would be shocked if people weren't anxious about hearing that kind of news. But when they see, and you know, I'm In fact, some people think, okay, Core and Main, big national public company, these are probably some pretty stiff and rigid individuals. We sit down and have lunch or dinner or whatever, and we're the same. We just work for a different company. Ours may be a little bit bigger right now, but we're the same kind of people. We're focused on the same things. We care about our families. We care about the people we work with. We care about our customers. We care about our vendors. We just wanna do the right thing. And come hop on board with us, you're gonna have a lot of fun, you're gonna have a lot more opportunity. And I mean, that's generally what happens in almost all of these cases. And we have people that after the fact will say, we were really surprised when we met, you know, Steve Leclerc as an example, our CEO, like, he's just such a great guy. And obviously, tremendously successful as, you know, the CEO of a seven plus billion dollar business. But, you know, he's not too important to sit down and chat with anyone about whether it's their family, their kids, anything, work, and so the culture we have built and again starting from the top down is great and having that flow through into the acquisitions and welcoming people to the organization is something that we are very intentional about. - Right, right. What are you seeing as far as current market trends versus the past few years? Obviously there's a new administration Um, you know, generally speaking, I think MNA has been fairly depressed along with valuations over the past few years and a lot of talk that that's going to start to loosen up. I'm not sure if it actually has yet. I mean, we're still pretty early here, but, um, do you, or is corn main really impacted by those things or you kind of just kind of running your own own show here and, and just want to get your thoughts on on that. So it's funny you ask because you've heard a lot in the press or you know folks talking about sort of the decline in M &A and the level of activity has been depressed and I look around and say I don't know what you're talking about. That's what maybe say like maybe you're over here in your own like get your blinders on like these are great. We're just like you guys can do what you want over here but we're blocking and tackling and getting things done right here. No I mean look we're not immune to you to what's going on in the economy. And I would tell you, because of our very focused, dedicated efforts being proactive, developing relationships with business owners, that's given us the benefit of a great, healthy pipeline, really throughout the time that I've been with the organization. And I don't see that changing. I do see eventually, it hasn't really happened yet. I think there's still, there's a ton of private equity dry powder on the sidelines. And they're still kind of waiting for a little more certainty around the economy and interest rates. And now you got a lot of tariff noise and things. So there's some things that maybe are going to slow down a little bit of that, but at the end of the day, that dry powder has to be deployed. So I do anticipate private equity activity will certainly ramp up. Again, we're going to keep doing our thing. And, you know, business owners, there's, there's the silver tsunami coming, right? Of, you know, business owners that need to retire or, you know, need to have an exit strategy or succession plan or whatever. And again, we're very well suited to, you know, absorb those businesses, take those people, bring them into the fold and give them a really bright future. So I'm bullish on the opportunity set in front of us, I do think the market will likely pick up at some point. In terms of our industry in general, I mean, the tailwinds are incredible. Fortunately, it's a fairly bipartisan issue as well, right? I mean, no one's arguing against improving our water infrastructure in the U .S., which is still, I don't know, the exact number at last guess. Maybe it's, you know, 1 .2, 1 .3 trillion in needed replacement, repair or replacement. So let alone anything new, but just absolutely needed repair and replacement. We've got some great examples of some wooden pipe in our office in St. Louis that was taken out of the ground up in the Northeast. I don't know the exact timing, but I'm told some of that wooden pipe is still in the ground today with fresh water supply running through it. So we just have to show you some time what this looks like, but not what you would want your drinking water to come from. - No, no, no. And you hear things all the time, maybe there's water main breaks all the time. And so the industry trends are very favorable for us. The political, I guess, spectrum, again, bipartisan support for improving water infrastructure. I wouldn't hope that maybe with some of this money that's gonna get freed up through Doge, maybe that'll get redirected into some further for repairs, which is needed, right? And no one is arguing against our industry, which is great. - Yeah, yeah. And you've been on obviously both sides of the fence, meaning, you've been on the PE side, now you're on the, what's called a strategic acquirer. What do business owners, in your opinion, kind of have a preference with a lot of things being equal of which way they'd rather go? Or, I mean, does it give you an advantage being on the strategic side versus PE side? - You've really prepared with great questions. Yes, I think it does. I'm likely biased, but as you said, in my opinion, I think, and nothing against private equity, I would not bash them again. We were private equity owned. CDNR was a great partner for us and very supportive of our growth initiatives, but at the end of the day, if I'm a business owner and I'm looking for the best home for my people over the long haul, I'm looking for a company like CornMain with a great culture, stability, that does what we do, right? Investment in their people as opposed to the private equity model, again, nothing wrong with it. But as soon as they acquire the business, actually before they acquire the business, they're already thinking about how they're going to sell it, why they're going to sell it, who they're going to sell it to and how much, right? So that's not part of our approach. Our approach is how do we bring these people into the organization and make everybody better? - Yeah, yeah, it makes sense. Last thing I kind of wanted to touch on, you know, like you said, this silver tsunami that's already happening and will continue to happen for the foreseeable future, what are some things that business owners that maybe aren't ready to sell today can be doing to prepare for that time when they are looking to exit and whether that's things they can do to obviously maximize their value. What are some of those top things that they can be looking to do today to prepare for that? Yeah, another phenomenal question. Look, - What some businesses end up getting sort of dinged for is the old saying, putting lipstick on a pig, which you don't wanna do, right? So I would say two years before you're really thinking about selling the business, make sure you've got the right people in place. Make sure you have some sort of idea of succession, right? Because when it comes time to sell, you may be looking at acquirers that don't have a deep bench of leadership that they can bring into backfill and they want to understand, all right, who's going to lead this if you're going to be riding off from the sunset? Get ideally audited financials. If not, if you don't want to pay for the full audit or take the time reviewed at a minimum, it makes the process go so much smoother. And when you have, especially some of these smaller businesses, mom and pops, and they're trying to sell the business on their own while also running it, getting the information to us, it can be like pulling teeth. It makes the process take a lot longer. It's incredibly frustrating for them. They wonder why we are asking for so much information. And we have gone through and really refined our sort of diligence request list into the absolute must -haves. Like this is what we need to know. This is just absolutely not negotiable. We need to know these things in order to evaluate our risk and in order to sign and close the transaction. And There'll be other things that we'll ask along the way. And as we prepare for closing that, you know, we need for integration or we need to know in terms of cultural pieces. So I would say the financial piece is critical, right? I mean, that is top level where everyone is gonna be evaluating the business. It's gotta be clean, it's gotta be clear. If you can have three to five years of reviewed or audited financials, you're gonna be in a great position. I always like a business owner that is willing to have a direct conversation as opposed to having an investment banker involved. That's just me. But no, I mean, investment bankers certainly bring value and we've prevailed in auction processes. We've actually had several businesses we've acquired. This is really a great scenario where they started a direct dialogue with us. We sort of began our diligence, our early evaluation of the business hadn't quite gotten to the valuation stage yet and said, all right, time out. I'm not a run a business. I don't know how to sell a business. I'm going to bring in an investment banker, but I'm going to bring him in to facilitate a transaction. Okay. So that's actually a pretty good scenario for us because now you've got a, well, you know, you've got a willing seller. You've got a banker that's incentive to get the deal done. You've got a banker that knows exactly what the process looks like, why we're asking for the things they're asking for. So when the owner says, well, why do they need that, the banker can explain it as opposed to us. Sure. Usually a banker Usually a banker will want to show the business to at least a few other parties, just to kind of reality check, make sure that we're paying market, which is fine. Again, we're not trying to steal anybody's business. We are very value -oriented and disciplined. And again, we found common ground 42 times and we will with significantly more. But yeah, I would say just do the right things. I mean, build a good is don't try and make it look like something that it's not because we will find that out in due diligence, right? And, you know, if you've got an owner operator who's doing 40 different things and six months before, you know, we start looking at the business, they bring in someone else who's like, "Oh, well, no, this person runs the business. I don't really do anything." And we find out, well, up until six months ago, you did absolutely everything. So these massive customers you have, these that you've had for 30 years, those are all your relationships. - Right. - And what are those gonna look like going forward? - That's tough. That's tough. I mean, even the things you're saying are probably tough for a lot of these businesses because, and there's just not enough time of the day already with what they're doing. - Right. - And if they start thinking of these things of like, well, how am I gonna start trying to figure these things out and I'm trying to keep this business going and maintain or grow our business in the in the future, it's tough. - It is for sure, and that's why the financial piece is the most critical, because that's doable, right? Now they're gonna have to spend a little money to get an audit or reviewed financials, but that's the baseline where everybody's gonna be focused on. If we can get the numbers right and create the story here and figure out what we can do with it going forward, then some of the other things maybe fall down the list in terms of importance, but yeah, at the end of the day, if those that are going to be selling their business, you gotta start two years ahead of time and really start prepping for that and making sure that you get, again, the right people in the right seats and you're building the business for the future. Don't build it for a sale. Build it for ongoing operations. - Sure, right. And kind of the rush will take care of itself. - Exactly. - Yeah, yeah, it makes sense. Well, Jeff, I really appreciate it. It's been a great conversation. The Core and Main story is great. I honestly was not aware of the level of acquisition activity that you guys do and especially being here in St. Louis, that's a great story and kind of excited to see if that continues with the number of acquisitions in the future. - Yeah, I know, I appreciate it, Lee. It's been great to be here. I love telling the Core and Main story. It's funny, I still encounter people all the time like, Core and I mean, who the heck is that? We're, check out the stock symbol, C -N -M, one of those stocks, just a little St. Louis based company no one's ever heard of. We're getting the name out there and certainly very well known in our industry. And I expect a lot more of what we've had in the past, going into the future, so I'm very optimistic about the road ahead. - Yeah, sounds good. All right, appreciate it. - Likewise, thanks. (logo whooshes)