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Welcome to our

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weekly livestream recording of the Amazing Podcast series devoted to acquisition

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entrepreneurs, search funds and whole capabilities in the UK and EU.

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Discussing the topics and challenges that impacts SMB succession,

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M&A and exploring the highs and lows of searching, acquiring,

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owning and operating small and medium sized businesses.

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I'm joined, as ever by my illustrious co-host, Gareth Wilkins, serial acquirer,

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CEO, Biz Crunch, and all around fonts of acquisition knowledge.

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You know, I think if I was a font, I'd be a sensory.

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Yes. What a letdown.

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You've got me with a ghost.

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A ghost?

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Our guest is profound Ghost of a Freudian.

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But yes, yes.

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Tune in next week for a thrilling adventure there.

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But we are.

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Yeah.

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We're here to talk about due diligence, do's and don'ts.

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Key topic.

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For most of us doing acquisitions, what do we need to look at?

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Where do we need to spend our time, etc.?

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Well, I guess before we dive into that,

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we should talk about stuff that's happened this week. Yes.

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Well, if you hit it off, Gareth maybe got some interesting news from Italy.

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Yeah.

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Yeah, I like it when we can bring news from the wider European ecosystem.

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And Italy seems to be spawning new traditional search funds

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rate of knots at the moment.

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The fifth to emerge in recent weeks

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is lost of capital, which has just closed its race.

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Surrounded by Francesca Vardy

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and counts illustrious search fund investors

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on its cap table among which is Conti capital and search capital partners.

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Both of Italy Search Capital Partners is in Milan,

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founded by Giacomo Andreoli and Luciano Lanzini.

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Those guys are very well experienced and are becoming

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quite prolific on the scene over Italy.

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But we're wishing Francesco very well now that he is beginning his process

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of finding the acquisition targets

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he wants to bring over the line to build his platform.

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So well done for the close.

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Francesca Exciting stuff. Yeah.

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Like I said, it seems to be quite a lot coming out of Italy at the moment.

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It's really a hotbed for search funds at the minute.

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Yes, I think it's

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a symptom of the emergent

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kind of latent scene of search around that Mediterranean area.

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As we know, Spain has been a big progenitor

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of the search fund movement,

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probably second most only to the US.

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So it's unsurprising that it's spreading through those Latin countries.

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At the same time as it's gaining momentum here in the UK.

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So watch this space for more, I think.

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Interesting stuff.

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What news is from the other side of the pond.

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So Calgary based Rumi Cafe, it's all led by pastel samovar tea and sort of

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launched a cohort of the graduate program, which is super interesting.

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So they're taking on ten ambitious acquisition entrepreneurs

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to help them sort of find an upright and acquire businesses in Canada.

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I'm really it's an incubator for search funds,

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which I think is really cool.

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We've spoken about this a few times about how, you know, search funds

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are so important to this movement because search funds for more acquirers,

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but there's only more search funds.

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Each is absolutely brilliant.

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Yeah, but they're getting these interns, these graduates who have come out of sort

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of, I guess, an MBA program and now hungry to get stuck in to acquiring companies.

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But Rumi, a sort of, I guess what, preparing them,

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arming them, capitalizing them, possibly even to go and do these deals.

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It seems so. Yeah.

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That's really interesting.

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Super interesting. Led by a great team.

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I know that you've been following them

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for a while, Gareth, so I'm really excited to see what comes out of that.

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Yeah. Yeah, me too.

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Are you familiar with Coniston?

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You know, I think I've done a similar thing.

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Maybe we'll talk about those in a different

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in a different episode, but yeah, really interesting.

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Yeah.

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That those guys have been busy doing that.

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Cool.

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Okay, well, yeah, Well, back to Europe

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then for the final of the three news items for this week.

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Let's talk exits.

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It's always nice to hear of a searcher getting the,

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you know, the culmination of their journey in this case is an eight year journey

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for working Pardoe of senior capital

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he acquired was retail back in 2017, 2018.

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I think

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it's a call center solutions company that he's just managed to exit and sell

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to ever airfield who are a buy and build vehicle to basically got a platform

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they've talking because it's Alinta but yeah

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who says a fun cycle is five years I know and effort

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no doubt on behalf of you keen but he's he's got there he's done it

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and hopefully as we often see is the case

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with excited entrepreneurs that capital that wealth event nobody gets

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put to good use in capitalizing the next era, the next vintage of investors.

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So it's not like trying to obligate working,

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but I'm sure he'll be paying forward his experience in one way or another.

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So congrats again for your exit and hope that maybe

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we can even get him on to talk about it at some point.

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That would be fantastic.

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We'll have to reach out to him and get once again, you know,

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Spain's leading the charge in Europe again is amazing.

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I love to see these sort of success stories and exits.

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You touched on something really interesting there,

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actually, that they often do get rolled into new ventures.

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It's something that I really love to see in an ECI.

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Do you think it's a sort of

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we don't often see people taking that cash and running sort of thing.

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Do you think there's something sort of addictive about it?

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I think once you're in it, probably be hard to extricate yourself from it.

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I mean, the parallel there is, you know, excited tech entrepreneurs in the venture,

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seeing that name becoming LPs into VC funds or are prolific angels.

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Yeah, I think, you know, you once you understand the space

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and you've had direct experience in it, you feel you can

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navigate it well to make some good

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investment decisions, but also allocate capital and advice

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where you think you can make the most impact.

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So I mean, Criss Angel SPACs, a great example of that in the UK.

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Angel scene, he had a great exit from his tech startup,

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which then he has, I think he's been prolific, is like 200 times

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investor, 200 portfolio companies in his in his stable and he's so well

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regarded, well-liked, well respected because he gives his time

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and his knowledge and his experience and his guidance as well as making his,

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his investments with capital.

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So yeah, I do think there's some parallels.

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Simon Webster here in the UK obviously was the big of

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such funds outside of the States or, you know, back in the day

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he having gone full circle with an exit, has become a prolific

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search fund investor and backed, you know, new vintage of of entrepreneurs.

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So yeah we do see it there are opportunities there

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there are examples and long may it continue you know we need that

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perpetuation of capital in order for these bases to continue to flourish.

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Absolutely. Well said.

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Okay.

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With the news wraps up,

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it's time to get into this week's topic, which is a bit of a tongue twister.

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Due diligence, do's and don'ts.

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This is something that

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I think a lot of first time acquirers can be a bit nervous about.

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I think if you haven't been through the process before,

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the idea of kind of knowing what to look for, you know,

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what's the red flag, what should scare you off, there is just quite so much

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to dig into and it's something that I know very little about.

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So this week I'm going to be interviewing you, Gareth,

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and I'm going to ask you lots of questions.

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I'm going to pick your brains because you've been through this process.

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I mean, how many due diligence processes of you have you been through?

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I've been through eight on the buy side,

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plus a slightly accelerated one when buying a company out of liquidation

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and then one on the on the sell side.

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So on the buy side, one liquidation pre-pack and then a sell side process.

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So, you know, seeing both sides of the table can hopefully attest to

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what can be a deal killer or what will where to focus your time and effort.

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Because I think fundamentally the clock starts ticking and the meter starts

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running from you know, from a legal cost and advisory cost perspective,

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the moment that they are kind of get shared and you're in

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having two against the clock, if you like, work out whether this is a

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a good as idea as you thought it was going to be or not

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as the case sometimes is. Okay.

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Well, let's start with the very basics

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for any first timers out there, what exactly is due diligence?

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You know, in the context of SMB M&A, what is it and why is it quite so crucial?

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Yeah, really good. Really good point.

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I mean, I think there's three moments

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of big boy pants times when in a deal, right?

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Well, in your M&A journey, we go out there with the

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the lofty idea and the dream of getting a deal done

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and then it gets real when you are agreeing the terms,

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the head to terms, that handshake, that moment where you've got

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the countersigned date back and it's like, right, game on.

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That's big boy pants moment one.

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I would say moment two is when the VTR opens

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and you know, you've got your you're managing the share purchase agreement

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coming at you in red line terms back and forth from the lawyers

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at the same time as you are trying to make sense

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of this sea of documentation that you've requested

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and really get digging

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into, looking for the sort of hidden liabilities in amongst all that.

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So due diligence is is duly being diligent about

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checking through all of the necessary documentation

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and records and financial results and ledgers

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and all of the things you need in order to have a very cogent understanding,

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in order to have comfort that you can then sign the SBA and execute the deal.

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This is your moment to determine

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the reality behind the CIM because you're going to read all the path.

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You're going to hear about all the possibilities and all the potentials, but

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only when you really get into the weeds with this and start, you know,

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lifting the rocks and looking underneath and opening the cupboard to looking for

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the skeletons, are you really going to get to know the real business?

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I mean,

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look, flippantly, I say the real due diligence begins the moment the ink is dry

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and you own the company because that's when you really know what you've got.

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But you want to try and avoid that.

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You want to you want to do as thorough a process as time and money will allow

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before you're committed and there's no going back.

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Absolutely.

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And I think that is what scares people about this process, is, you know,

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what am I going to find out afterwards

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if I do not do a good enough job in the prep and the due diligence stage

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before the SBA is signed, you know, what am I going to leave myself with?

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So hopefully that leads you to the third

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big boy pants moment of I own this company.

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Now the SBA ink is dry.

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I've got to go and stand in front of a roomful of people

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and say, here's what's happened

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and hello, I'm here for your future.

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And, you know, we're wedded together now.

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It's often much easier to do that

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if you are doing it from a position of confidence and knowledge than it is.

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Well, at the same time, you're filled

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with trepidation about taking a leap into the unknown.

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You know,

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I'm not going to quote Rumsfeld,

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but it's it's better to have some, you know, control of the situation.

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So due diligence is good preparation, really, for that moment.

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Okay.

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Well, that leads me on to my next question.

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So anyone who's kind of looked at this subject before

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and had a cursory look will see that there's different types of diligence.

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So, you know,

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we hear about financial, commercial, legal due diligence, sometimes even H.R.

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or tech is becoming increasingly important in the process.

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Which categories do you think matter most for the smaller deals and why?

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Really good question.

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Obviously, I'm going to capture it with it's very dependent

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on the business, both its size and its type and sector.

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So if you're buying a software company,

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of course that tech due diligence is paramount.

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You know, what are you buying beyond hopefully recurring revenue?

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What actual innovation have you if you bought,

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is there proprietary IP

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or is it just a nice looking UI built over a lot of other people stuff?

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You know, hopefully you would know that before you offering.

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But this is a tech audit.

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Tech due diligence is a way of finding that out.

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Also, that would tell you how scalable etc. that is.

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So I'm going to I'm going to not say a lot more on tech, but

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there are some great specialist companies

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who typically they're adjunctive to developer agencies who will do that

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tech audit for you will get into the each of the code repositories and

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tell you if the product looks to have been

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put together, engineered properly, or is held together with duct tape.

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Yeah, you have to tread a little bit carefully there.

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Obviously, you're under NDA at this point.

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Software companies are loathe to share the crown jewels

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during a due diligence phase, so don't be surprised

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if if a number of them are sort of restricting access to really

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delicate stuff

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do press and push as much as you can to get sides of it.

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But remember, you are duty bound to respect it.

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And if the deal falls apart, delete any reference to it.

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But yeah, that is is one of those trust moments

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where you're letting people spider across your code as the seller and hoping

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to you know, the saints that this actually completes a deal.

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Yeah.

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You're really putting a lot of faith in the NDA

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there aren't you, because you don't have any other solid commitment on paper.

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Yeah, I've heard.

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I heard some pretty bad stories about I mean, imagine malpractice there.

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So let's hope that you, you know, you've found a level of trust

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and you're working with somebody that is is decent when doing that.

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So that's what, say, sound tech.

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Tech can be fundamentally a software business.

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It's secondary in a lot of

00:14:37:02 - 00:14:40:28
the more traditional SMB that perhaps is about in this context.

00:14:40:29 - 00:14:44:00
So if it's a small business, which a lot of these will be,

00:14:44:04 - 00:14:49:09
you know, we're talking potentially maybe a couple of million EBITDA at most,

00:14:49:12 - 00:14:51:11
it's going to start with a few,

00:14:51:11 - 00:14:55:11
you know, universal truths, universal fundamentals here, people.

00:14:55:11 - 00:14:57:04
So what does the org structure look like?

00:14:57:04 - 00:15:00:30
What's the length of service, the tenure of these people?

00:15:00:32 - 00:15:04:05
Also, whilst you're looking at length of service, you're going to be

00:15:04:05 - 00:15:08:14
calculating what your liability is in the event of a redundancy process.

00:15:08:16 - 00:15:13:17
So you really want to be able to see anonymized and GDPR compliant

00:15:13:17 - 00:15:19:09
lists of roles and salaries in that roles and tenure in those roles

00:15:19:12 - 00:15:22:25
so that you can calculate your potential liability there.

00:15:22:28 - 00:15:24:13
But also an org chart.

00:15:24:13 - 00:15:28:08
The spreadsheet of roles and costs means nothing without an org chart

00:15:28:08 - 00:15:31:33
showing the fixed lines and dotted lines of communication.

00:15:32:02 - 00:15:34:22
So you can actually assure yourself that it isn't

00:15:34:22 - 00:15:38:12
just a whole bunch of headless chickens running around duplicating effort, it's

00:15:38:14 - 00:15:42:00
people who are, you know, structured in the way they go about their day.

00:15:42:00 - 00:15:46:16
And there's so clear responsibility and lines of communication.

00:15:46:19 - 00:15:49:33
So I probably spend a disproportionate amount of time looking at people.

00:15:49:33 - 00:15:53:28
But, you know, that is a fundamental thing to try to get to know early.

00:15:53:31 - 00:15:55:04
Yeah.

00:15:55:04 - 00:15:58:04
Second to that, obviously, what's the the supply chain

00:15:58:04 - 00:15:59:32
and value chain concentration risk.

00:15:59:32 - 00:16:04:12
So you want to be seeing potentially again, an anonymous list of customers

00:16:04:12 - 00:16:07:12
and suppliers, vendors.

00:16:07:13 - 00:16:11:06
So like how exposed to

00:16:11:07 - 00:16:14:10
a small number of customers, for example, is this company.

00:16:14:17 - 00:16:19:27
So I like to see a table which shows me like their top

00:16:19:30 - 00:16:22:30
X potentially top 50

00:16:23:04 - 00:16:25:28
because that's a nicely diversified risk.

00:16:25:28 - 00:16:31:14
But at the very least, what does your top ten account for of your total revenue?

00:16:31:22 - 00:16:36:05
If if one customer is accounting for 25% of your business, there's a risk that

00:16:36:08 - 00:16:40:29
you know, particularly with like change of ownership clauses in contracts,

00:16:40:32 - 00:16:45:07
you know is there big exposure that that company, that customer could say,

00:16:45:13 - 00:16:49:20
well, we've got this, we're going to exercise our rights at this window

00:16:49:23 - 00:16:53:14
to explore our options and bang goes a quarter of your business, right?

00:16:53:14 - 00:16:58:25
So I think key risk mitigation around customer concentration

00:16:58:25 - 00:17:02:07
and again, on vendor concentration, if someone's holding you by the short

00:17:02:07 - 00:17:07:02
curlies on the supply chain side and can choke you off, that,

00:17:07:05 - 00:17:10:11
you know that that could be a real risk that you can't continue to trade.

00:17:10:14 - 00:17:13:28
So again, have the have

00:17:13:28 - 00:17:17:08
the seller already got like a panel of suppliers

00:17:17:08 - 00:17:20:32
that they can switch you to in the event that one becomes a bit sticky.

00:17:21:01 - 00:17:25:04
And so customers and vendors really worth exploring.

00:17:25:07 - 00:17:26:09
Okay. On that.

00:17:26:09 - 00:17:29:12
Just before you go on again, someone has been through this process before.

00:17:29:12 - 00:17:31:18
Is this something that you know you're quite comfortable

00:17:31:18 - 00:17:33:29
and acquirers should be quite comfortable saying to the seller, Look,

00:17:33:29 - 00:17:36:01
this is what I want, I want it in this format.

00:17:36:01 - 00:17:38:15
You know, I'd like them anonymous, I'd like the top 50.

00:17:38:15 - 00:17:39:22
Is that something you advise?

00:17:39:22 - 00:17:41:26
You know, just going out there to change the seller I want this is

00:17:41:26 - 00:17:43:17
my due diligence.

00:17:43:20 - 00:17:44:25
Yeah, absolutely.

00:17:44:25 - 00:17:45:16
It should be on your list.

00:17:45:16 - 00:17:50:32
I mean, I always kept a sort of spreadsheet checklist, if you like, and

00:17:51:01 - 00:17:55:11
I think it's probably about 200 rows long of the sort of things

00:17:55:11 - 00:17:59:25
I'd like to see and the sort of things I expect to be in a

00:17:59:28 - 00:18:03:17
in a data room, often a buyer will share that list.

00:18:03:17 - 00:18:05:21
You know, these are the things I want.

00:18:05:21 - 00:18:08:11
And yes, definitely be asking for that.

00:18:08:11 - 00:18:11:08
And is it going to be forthcoming without asking?

00:18:11:08 - 00:18:12:24
Probably not.

00:18:12:24 - 00:18:15:11
Not unless this seller has been through the process before and has been

00:18:15:11 - 00:18:18:27
asked these questions already and already prepared.

00:18:18:29 - 00:18:21:00
But yeah, it's definitely worth asking for.

00:18:21:00 - 00:18:23:10
I assume everything that I'm going to touch on is stuff

00:18:23:10 - 00:18:25:17
you should ask for if it's not forthcoming.

00:18:25:17 - 00:18:25:30
Okay.

00:18:25:30 - 00:18:26:08
Sure.

00:18:26:08 - 00:18:30:27
And also, again, you know, customers and vendors, two super important things.

00:18:30:29 - 00:18:32:19
It is something you would expect to have a dialog

00:18:32:19 - 00:18:34:17
with the seller about, you know, maybe for some more context,

00:18:34:17 - 00:18:37:29
how many of those relationships are dependent on the business owner,

00:18:37:30 - 00:18:38:24
you know,

00:18:38:24 - 00:18:42:08
and that increases the risk of perhaps losing that vendor or losing that customer

00:18:42:08 - 00:18:45:14
is another sort of part of the data that you would go through.

00:18:45:17 - 00:18:46:25
Yeah.

00:18:46:28 - 00:18:49:03
What's the relationship like here?

00:18:49:03 - 00:18:52:08
You know, these are this is more of a verbal conversation with the seller.

00:18:52:08 - 00:18:54:19
Sure. How long have you known these people?

00:18:54:19 - 00:18:56:02
Are they the sort of supplier that you know,

00:18:56:02 - 00:18:58:22
when you go over to see them, they invite you into their house and now,

00:18:58:22 - 00:18:59:27
you know, known to the family,

00:18:59:27 - 00:19:03:10
you know, that sort of stuff, because you want there to be

00:19:03:13 - 00:19:06:03
a tie between the businesses.

00:19:06:03 - 00:19:07:10
But you also don't want to be that

00:19:07:10 - 00:19:10:10
the only tie between the business is to be the individuals.

00:19:10:18 - 00:19:14:05
And when that individual is removed from the equation because they felt

00:19:14:07 - 00:19:16:06
that that relationship might break down.

00:19:16:06 - 00:19:18:21
So if it's a strong commercial relationship

00:19:18:21 - 00:19:21:16
between the stakeholders, that's that's always better, you know?

00:19:21:16 - 00:19:22:31
yeah, my people deal with their people

00:19:22:31 - 00:19:26:20
and we go way back and that that's enough for me to be a contract.

00:19:26:26 - 00:19:27:27
Make sure that, you know,

00:19:27:27 - 00:19:30:27
they're not going to pull the rug out from under me and I'm happy.

00:19:30:29 - 00:19:33:04
Okay, excellent.

00:19:33:07 - 00:19:35:18
Then we should get into IP.

00:19:35:18 - 00:19:39:02
So we want to know what kind of patents or trademarks

00:19:39:02 - 00:19:42:02
or design rights they have,

00:19:42:07 - 00:19:45:06
you know, written or unwritten.

00:19:45:06 - 00:19:48:20
What is what are the barriers to entry to competitors

00:19:48:20 - 00:19:52:31
that might want to spin up and or colleagues that might want to go away?

00:19:52:31 - 00:19:56:15
In Phenix, a company is your competitor, which is often is the case.

00:19:56:18 - 00:19:59:13
What's going to stop them from an IP perspective?

00:19:59:13 - 00:20:01:04
So that's useful

00:20:01:04 - 00:20:05:18
and also make sure that the business owns the IP, that all the trademarks etc.

00:20:05:18 - 00:20:09:17
are owned by the seller individually and walking out the door with the seller,

00:20:09:17 - 00:20:11:19
you know, you really want to do a bit of an IP audit

00:20:11:19 - 00:20:15:08
and make sure that domain names are registered against the seller's

00:20:15:08 - 00:20:16:15
personal credit cards.

00:20:16:15 - 00:20:20:05
And, you know, yeah, I've seen that stuff happen before.

00:20:20:07 - 00:20:24:09
It's a lot to unbundle post deal when the seller is in the wind or in Barbados.

00:20:24:12 - 00:20:28:29
So you're like, could you just get into a GoDaddy account for me?

00:20:28:32 - 00:20:29:29
You know, it's dirty.

00:20:29:29 - 00:20:31:08
You want to get that stuff all done.

00:20:31:08 - 00:20:34:09
Pre deal really goes with the company right

00:20:34:12 - 00:20:37:12
Don't want to be held to ransom at a later date.

00:20:37:14 - 00:20:42:28
So all those aspects of IP brand and brand assets,

00:20:42:30 - 00:20:44:25
products and services,

00:20:44:25 - 00:20:46:33
you'd like to know a bit more about them obviously.

00:20:46:33 - 00:20:50:12
So if there's certification around a product or there's accreditation

00:20:50:12 - 00:20:53:12
around the the engineers or the staff in a service company,

00:20:53:13 - 00:20:54:13
you want to make sure that

00:20:54:13 - 00:20:59:05
that all of that stuff is compliant is all that is done by the seller.

00:20:59:05 - 00:21:03:13
But you know, they're not they're not just lapsed on a particular approval

00:21:03:16 - 00:21:05:06
and you're going to have to pay ten grand to go

00:21:05:06 - 00:21:08:29
and get this re-approved on day one because they swung the lead.

00:21:08:32 - 00:21:10:09
You know, those things attract a risk.

00:21:10:09 - 00:21:14:08
So you want to make sure that from a compliance and

00:21:14:10 - 00:21:15:14
certification perspective

00:21:15:14 - 00:21:20:00
that what you're buying is safe

00:21:20:03 - 00:21:23:30
can't go on without having mentioning financial stability.

00:21:23:30 - 00:21:25:25
Obviously, financial due

00:21:25:25 - 00:21:29:21
diligence takes up a lot of time alongside legal due diligence.

00:21:29:24 - 00:21:32:00
We'll get into those, too, I think, specifically in a moment,

00:21:32:00 - 00:21:34:26
because that's where you want to have some some support.

00:21:34:26 - 00:21:39:18
But yeah, that quality of earnings, financial stability study is key,

00:21:39:20 - 00:21:42:26
as is the legal due diligence of going through all of the documentation

00:21:42:26 - 00:21:44:00
that you're going to get populated.

00:21:44:00 - 00:21:47:09
So employee contracts, customer contracts, supplier

00:21:47:09 - 00:21:50:09
contracts, leases,

00:21:50:09 - 00:21:52:12
hire, purchase, you know, all this stuff.

00:21:52:12 - 00:21:56:17
We're looking for the gremlins to see if there's a liability there.

00:21:56:20 - 00:21:58:16
So I think

00:21:58:16 - 00:22:03:18
probably the final two are on my checklist normally are governance.

00:22:03:20 - 00:22:07:27
So can I see some previous board minutes, for example,

00:22:07:30 - 00:22:08:09
you know

00:22:08:09 - 00:22:11:32
who's responsible for compliance in a regulated industry?

00:22:12:01 - 00:22:14:27
You know, can I see as regards their track record

00:22:14:27 - 00:22:17:27
and, you know, there

00:22:17:30 - 00:22:20:07
certification, etc., their education,

00:22:20:07 - 00:22:23:07
their background, who am I putting my faith in there?

00:22:23:09 - 00:22:26:28
So, yes, if there's records that show good governance, governance,

00:22:26:31 - 00:22:29:16
then then that should be in the data as well.

00:22:29:16 - 00:22:32:16
And slightly less easy for the

00:22:32:23 - 00:22:35:21
seller to come up with, but something that you should try and commission

00:22:35:21 - 00:22:37:00
if you can,

00:22:37:00 - 00:22:38:19
or that potentially if you working for a broker

00:22:38:19 - 00:22:41:18
they might have already done for you is a market study.

00:22:41:18 - 00:22:45:03
So what kind of information if you got about competitors

00:22:45:03 - 00:22:50:21
like in context with the seller and what, what how can you verify market share?

00:22:50:24 - 00:22:51:23
For example,

00:22:51:23 - 00:22:55:24
can you see data that tells you whether the market is growing or shrinking?

00:22:55:27 - 00:22:58:22
Sometimes that is a pipette that as part of that process.

00:22:58:22 - 00:23:01:22
Other times it's probably incumbent on you to just reassure yourself

00:23:01:25 - 00:23:05:12
for probably even before you've actually made an offer on the company that this is

00:23:05:12 - 00:23:09:03
a market that you want to pursue, that you want to be in,

00:23:09:11 - 00:23:14:11
and that it's a market that this particular company has upside in.

00:23:14:13 - 00:23:17:20
Yeah, some of that work should have been done, you know, in advance.

00:23:17:20 - 00:23:18:14
I mean, potentially

00:23:18:14 - 00:23:21:21
even when you're choosing what type of companies to go looking for,

00:23:21:24 - 00:23:22:06
you know,

00:23:22:06 - 00:23:24:21
it's one thing that we've advised users to do is, you know,

00:23:24:21 - 00:23:27:06
look at markets where they can see opportunities for growth, etc..

00:23:27:06 - 00:23:28:25
But yeah, obviously when it comes down

00:23:28:25 - 00:23:31:31
to the actual company themselves and the data that they would have, I mean,

00:23:31:31 - 00:23:35:19
is that something that you would bring someone in from the outside to do?

00:23:35:22 - 00:23:38:11
Yeah, there are companies that specialize in doing specifically that.

00:23:38:11 - 00:23:40:20
I mean, you know, be cautious.

00:23:40:20 - 00:23:42:21
A market research company is going to want to charge you

00:23:42:21 - 00:23:45:13
a lot of money to do a very thorough exercise.

00:23:45:13 - 00:23:48:03
There are probably some low hanging fruit things you could do,

00:23:48:03 - 00:23:50:05
which maybe we can get onto in a little while.

00:23:50:05 - 00:23:51:31
Well, yes, that does lead me to my next question.

00:23:51:31 - 00:23:56:03
So the next point is assembling your due diligence team.

00:23:56:03 - 00:23:57:00
So, you know,

00:23:57:00 - 00:24:01:02
from accountants to legal counsel, who do you need on your diligence squad

00:24:01:02 - 00:24:05:08
and how do you decide what you can DIY and where you need that professional help?

00:24:05:08 - 00:24:07:25
Yeah, definitely. Both of those.

00:24:07:28 - 00:24:10:00
I would say ideal team

00:24:10:00 - 00:24:13:00
minimum squad should involve

00:24:13:00 - 00:24:16:00
a financial competence

00:24:16:01 - 00:24:18:25
experience, qualified strategic accountant, right?

00:24:18:25 - 00:24:22:10
You need somebody that can dive into the Zero or the QuickBooks

00:24:22:10 - 00:24:27:05
or whatever and until you where things have been awry

00:24:27:08 - 00:24:30:30
or where things be done really well for that matter, it's always good to hit.

00:24:30:33 - 00:24:35:19
So definitely a strategic accountant or someone that knows how to navigate

00:24:35:19 - 00:24:39:26
Ledge as well and piece together the true story

00:24:39:28 - 00:24:42:14
and you're going to have a lawyer on your team.

00:24:42:14 - 00:24:45:14
Lawyers aren't just there to produce the documents for you.

00:24:45:14 - 00:24:48:09
Yes, they're going to be going back and forth doing the terms of the share

00:24:48:09 - 00:24:49:11
purchase agreement.

00:24:49:11 - 00:24:52:16
But you depending on the size of the transaction, you may have

00:24:52:16 - 00:24:56:18
a sort of junior associate or something there that is going through the data room

00:24:56:18 - 00:25:00:25
and actually reading these documents for you with

00:25:00:27 - 00:25:05:32
with a critical eye for detail that is looking for liabilities like, hang

00:25:05:32 - 00:25:07:06
on, this contract will cease

00:25:07:06 - 00:25:12:13
to be relevant when the incumbent no longer owns the company.

00:25:12:16 - 00:25:14:02
For example,

00:25:14:02 - 00:25:18:31
or hey, look, there's a huge bullet here on this lease that

00:25:19:00 - 00:25:21:20
you know, or this

00:25:21:20 - 00:25:24:13
building leases is actually overdue on its break

00:25:24:13 - 00:25:27:13
clause and the landlord could kick you out at any moment.

00:25:27:18 - 00:25:30:18
You know, these are things that you want to turn up

00:25:30:19 - 00:25:33:09
in due diligence because they all have a bearing on.

00:25:33:09 - 00:25:35:03
I mean, I acquired a business

00:25:35:03 - 00:25:38:12
some years ago which we could never see coming,

00:25:38:15 - 00:25:40:16
but pretty much as soon as the ink was dry on the spa,

00:25:40:16 - 00:25:43:19
they got a compulsory purchase order from the local authority.

00:25:43:19 - 00:25:45:21
No, the amount of their building.

00:25:45:21 - 00:25:47:29
And it was only because they wanted to build a retail park

00:25:47:29 - 00:25:51:05
on the building that they had occupied for almost 100 years.

00:25:51:08 - 00:25:54:08
You know, my luck that they won, that we acquire them.

00:25:54:08 - 00:25:57:20
They get this notice through the post from the council.

00:25:57:21 - 00:25:59:11
Yeah, we're developing the site.

00:25:59:11 - 00:26:02:10
Your own home. No,

00:26:02:12 - 00:26:05:12
I mean, they all end well with that.

00:26:05:18 - 00:26:07:01
Yeah, fine.

00:26:07:01 - 00:26:10:06
It expedited the relocation, let's put it that way.

00:26:10:14 - 00:26:12:24
I can imagine. Yeah, Yeah.

00:26:12:24 - 00:26:15:06
So yeah, you'd love to see that coming. Right.

00:26:15:06 - 00:26:19:24
So you could even have some folks poring over like local plans

00:26:19:27 - 00:26:23:11
like that on the, on the local authority's website to say look at all

00:26:23:11 - 00:26:28:21
the earmarked sites in and around where your business is operating from.

00:26:28:24 - 00:26:31:04
Is there a risk of that?

00:26:31:04 - 00:26:35:06
Yeah, it's not insurmountable, but, you know, if you're buying a shop

00:26:35:11 - 00:26:36:29
with a high street location

00:26:36:29 - 00:26:40:07
and it's entirely about that, like the people go there for,

00:26:40:15 - 00:26:44:08
are they going to follow the shop when it moves to a out of town location,

00:26:44:08 - 00:26:44:30
for example?

00:26:44:30 - 00:26:47:07
Yeah, I think that there can be a temptation there.

00:26:47:07 - 00:26:50:00
A lot of sort of scrappy acquirers want to do it themselves

00:26:50:00 - 00:26:51:32
and they want to DIY stuff to keep costs down.

00:26:51:32 - 00:26:53:16
But the cost of a lawyer to go through

00:26:53:16 - 00:26:57:05
that for you is a lot less than the cost when to relocate in your first week.

00:26:57:08 - 00:27:02:28
Yeah, So yeah, that's a balance like and a lawyer will obviously tell you

00:27:02:31 - 00:27:04:32
that you should do the most thorough process you possibly

00:27:04:32 - 00:27:08:05
could that, you know, it takes months and months and months and goes

00:27:08:05 - 00:27:12:29
into every conceivable preemptive all permutation.

00:27:12:32 - 00:27:13:16
Yeah.

00:27:13:16 - 00:27:18:25
You got to temper that, mitigate that with cost and reality and make your own.

00:27:18:28 - 00:27:19:20
I mean, we'll get into it

00:27:19:20 - 00:27:22:23
in a little while but you should have your own rules, rules

00:27:22:23 - 00:27:25:08
for how you want to run this and how far you want to let it grow.

00:27:25:08 - 00:27:26:13
Arms and legs.

00:27:26:13 - 00:27:26:22
Yeah.

00:27:26:22 - 00:27:29:13
We don't want to get into the of deal fatigue, which we will talk about

00:27:29:13 - 00:27:30:19
in a little while.

00:27:30:19 - 00:27:30:25
Okay.

00:27:30:25 - 00:27:33:01
So would say go ahead.

00:27:33:01 - 00:27:35:01
No, no, please finish up.

00:27:35:01 - 00:27:38:01
I have finished It's just I would say your deal team is you

00:27:38:04 - 00:27:39:16
and the people that are in your close

00:27:39:16 - 00:27:42:16
knit community that you are that are part of this process,

00:27:42:18 - 00:27:44:33
you'll need some additional pairs of eyes to go through it,

00:27:44:33 - 00:27:46:32
Check things that you've got to come from, lawyers

00:27:46:32 - 00:27:50:27
you pay for, or people that are in your camp and you know,

00:27:50:28 - 00:27:56:00
good numbers people and possibly a market study and you could have an h.r.

00:27:56:00 - 00:27:59:13
Person look over the org chart and, you know,

00:27:59:18 - 00:28:03:02
cultural indicators about the company if you are particularly concerned.

00:28:03:08 - 00:28:07:01
But i can't name more than about two acquirers

00:28:07:01 - 00:28:08:03
i know that have gone to that.

00:28:08:03 - 00:28:11:13
That's quite interesting.

00:28:11:16 - 00:28:13:12
Okay, so something i wanted to ask about,

00:28:13:12 - 00:28:15:06
which i've kind of heard about a few times,

00:28:15:06 - 00:28:16:22
and we kind of touched on this a little bit earlier

00:28:16:22 - 00:28:20:04
when we're talking about having a good strategic accountant.

00:28:20:06 - 00:28:22:07
But what's the quality of earnings reports?

00:28:22:07 - 00:28:26:02
How does it differ from, you know, the basic financial review

00:28:26:04 - 00:28:27:06
and why?

00:28:27:06 - 00:28:29:19
I mean, I can understand how they could be a deal breaker.

00:28:29:19 - 00:28:32:19
But yeah, what is the kind of the difference there?

00:28:32:20 - 00:28:34:33
Where do they go with that extra debt?

00:28:34:33 - 00:28:35:20
Great question.

00:28:35:20 - 00:28:41:16
The Q of A is all about sustainability and durability of revenues.

00:28:41:16 - 00:28:41:27
Right.

00:28:41:27 - 00:28:46:00
And ultimately, and

00:28:46:03 - 00:28:47:24
are the costs

00:28:47:24 - 00:28:50:24
in servicing those revenues realistic?

00:28:50:31 - 00:28:52:14
Have they been massaged?

00:28:52:14 - 00:28:52:23
You know,

00:28:52:23 - 00:28:54:30
someone might be citing a huge gross profit,

00:28:54:30 - 00:28:57:13
but actually they're mis accounting for where the overheads

00:28:57:13 - 00:29:00:13
go, for example, and stuff should be put in as a cost of sale

00:29:00:18 - 00:29:05:21
that if they if they did it properly, actually the gross profit is far less than

00:29:05:24 - 00:29:09:11
it's being advertised, but it's really the sustainability and durability

00:29:09:11 - 00:29:13:11
of of the earnings of the company driven by the revenue and the costs.

00:29:13:14 - 00:29:17:06
Am I going to continue to get this revenue or has it been cooked up

00:29:17:08 - 00:29:20:26
in anticipation of selling like somebody really expedited

00:29:20:26 - 00:29:24:17
a pulled forward lots of stuff into a year

00:29:24:19 - 00:29:27:07
and then it's going to be fallow for the next few years when it's

00:29:27:07 - 00:29:29:06
when I'm cash flowing, it.

00:29:29:08 - 00:29:30:11
So, you know,

00:29:30:11 - 00:29:33:27
you want to make sure that this is a sustainable, ongoing business.

00:29:33:27 - 00:29:37:23
And it's not just, you know, getting out of the top of the curve

00:29:37:31 - 00:29:40:00
before the ass falls out of it.

00:29:40:00 - 00:29:43:00
So there's that.

00:29:43:01 - 00:29:48:02
But there's also looking at other calls on cash flow as well.

00:29:48:02 - 00:29:53:25
So, you know, getting into a proper exercise within the Zero

00:29:53:25 - 00:29:57:29
or QuickBooks or Sage will tell you what goes on beyond the PNL.

00:29:57:32 - 00:30:01:04
Like, are there some serious sort of ongoing

00:30:01:04 - 00:30:03:03
calls for cash that are happening at the balance sheet

00:30:03:03 - 00:30:06:28
level that can undermine your ability to serve the working capital?

00:30:06:28 - 00:30:10:00
You need to get your PNL going or keep your PNL going.

00:30:10:00 - 00:30:14:16
So yeah, that is fundamental to equality.

00:30:14:16 - 00:30:17:05
Quality of earnings. Is it sustainable?

00:30:17:07 - 00:30:18:32
You're looking at

00:30:18:32 - 00:30:21:32
customers, you're looking at repeatability, you're looking at

00:30:22:05 - 00:30:22:29
recurrence.

00:30:22:29 - 00:30:26:04
If you're a software firm, like if we break these down,

00:30:26:06 - 00:30:29:03
are these coming from a small number of customers

00:30:29:03 - 00:30:30:31
and we don't have a great deal of recurrence

00:30:30:31 - 00:30:34:32
from the majority of our customers because that creates a vulnerability.

00:30:34:32 - 00:30:37:32
If you do so, you're really trying to get an understanding

00:30:38:02 - 00:30:42:16
of of the beating heart of what is driving the earnings in the business.

00:30:42:18 - 00:30:46:23
And that's forensic, really, because you could be taking it as read

00:30:46:23 - 00:30:51:02
just by looking at the sort of high level retrospective ledgers.

00:30:51:05 - 00:30:55:02
Or you could be looking at how the company plans

00:30:55:02 - 00:30:59:10
and how they and the contracts they've got and, you know,

00:30:59:12 - 00:31:03:23
the sort of heuristic indicators, if you will, in the PNL that tell you

00:31:03:31 - 00:31:09:08
how it really played out, because you can spot like a massaged,

00:31:09:11 - 00:31:10:07
you know,

00:31:10:07 - 00:31:15:01
you can spot like an artificial surge in demand if you unpick it and go back

00:31:15:01 - 00:31:19:04
and look at customer behaviors and start asking questions about that customer.

00:31:19:04 - 00:31:24:00
In the four years prior spent 20% of what

00:31:24:03 - 00:31:27:19
they spent in that year before you advertised it for sale. Why?

00:31:27:21 - 00:31:30:08
turns out they sold them

00:31:30:08 - 00:31:34:04
for the next four years worth of service upfront.

00:31:34:07 - 00:31:35:20
But rather than put that for the balance

00:31:35:20 - 00:31:39:16
sheet, is unrealized revenue as a liability.

00:31:39:19 - 00:31:42:14
They've just put it through the PNL as revenue

00:31:42:14 - 00:31:43:33
but haven't yet delivered the service.

00:31:43:33 - 00:31:48:04
So, you know, you know, that's a that's a common trick of let's pre-sell

00:31:48:04 - 00:31:52:26
a whole bunch of future years worth of revenue, get it in this year,

00:31:52:29 - 00:31:55:02
but then you should have an equal and opposite liability

00:31:55:02 - 00:31:56:25
on the basis that you might have to give it back.

00:31:56:25 - 00:32:00:13
But you know, some folks selectively forget to do that so

00:32:00:16 - 00:32:00:26
they can

00:32:00:26 - 00:32:03:26
help you dodge those kind of bullets.

00:32:03:32 - 00:32:04:17
So interesting.

00:32:04:17 - 00:32:06:05
I didn't know that was such a such a common issue.

00:32:06:05 - 00:32:08:08
I can totally imagine that happening.

00:32:08:08 - 00:32:09:25
Okay. So that leads me to our next point.

00:32:09:25 - 00:32:14:23
We're talking about dodging bullets, red flags and deal killers.

00:32:14:26 - 00:32:16:25
So you know, you said that that that can be quite

00:32:16:25 - 00:32:19:01
common issue, you know, bringing those those orders forward.

00:32:19:01 - 00:32:21:33
But what are some other common warning signs that emerge in due diligence?

00:32:21:33 - 00:32:26:11
You know, how do you distinguish fixable issues from dealbreakers?

00:32:26:14 - 00:32:27:25
Yeah.

00:32:27:25 - 00:32:31:07
You would hope that by the time you've got this far,

00:32:31:10 - 00:32:33:24
you have a reasonable

00:32:33:24 - 00:32:37:17
appetite for risk and a reasonable understanding of what

00:32:37:17 - 00:32:41:20
the fires are likely to be burning under the business.

00:32:41:23 - 00:32:45:04
And most of those fires

00:32:45:07 - 00:32:47:31
could be easily extinguished.

00:32:47:31 - 00:32:51:22
There's you know, it takes takes quite a lot to bring a business down.

00:32:51:24 - 00:32:54:12
But, you know, incompetence is a key.

00:32:54:12 - 00:32:57:10
The key key reason often.

00:32:57:13 - 00:33:01:07
But so you really looking for the hospital policies, Right.

00:33:01:08 - 00:33:05:22
I'm a rugby player so you're looking for that Someone's passing you

00:33:05:22 - 00:33:10:23
the ball just about to the point you're about to be pummeled.

00:33:10:26 - 00:33:12:29
So I don't know that I like that.

00:33:12:29 - 00:33:13:27
Yeah, yeah, yeah, yeah.

00:33:13:27 - 00:33:14:19
So that one,

00:33:14:19 - 00:33:16:06
there's the past that you don't want to receive

00:33:16:06 - 00:33:19:01
because you're about to get, you know, your head knocked off.

00:33:19:01 - 00:33:20:31
But, but ultimately yeah.

00:33:20:31 - 00:33:23:33
This, this is the what you're looking for

00:33:23:33 - 00:33:28:06
is does the seller know something I don't about

00:33:28:09 - 00:33:31:01
why this is a good time to step out

00:33:31:01 - 00:33:34:22
or are its best days behind the business?

00:33:34:25 - 00:33:36:10
Is there a looming cliff?

00:33:36:10 - 00:33:39:09
It's about a fall off of.

00:33:39:09 - 00:33:41:13
That's what you're trying to work out is

00:33:41:13 - 00:33:45:10
am I going to hold the back here and find that the bank's got a gaping hole in it?

00:33:45:10 - 00:33:47:24
And by the time I've taken two or three steps,

00:33:47:24 - 00:33:51:06
it spilled out on the floor and it's bugger all left

00:33:51:09 - 00:33:52:09
because I suppose, you know,

00:33:52:09 - 00:33:53:04
we talked

00:33:53:04 - 00:33:56:19
on one of the previous episodes about, you know, looking for motivated sellers,

00:33:56:19 - 00:33:59:30
but sometimes there's a, there's a shadow over that motivation.

00:33:59:32 - 00:34:03:03
Yeah. Right, yeah, yeah, yeah.

00:34:03:03 - 00:34:06:16
So I mean most things you solvable but those

00:34:06:18 - 00:34:10:13
irrecoverable things that irrecoverable decline

00:34:10:16 - 00:34:15:08
being masked by a moment of like we've we've created this veil of success

00:34:15:08 - 00:34:18:26
but actually underneath is a house of cards That's what you're

00:34:18:28 - 00:34:19:27
okay.

00:34:19:27 - 00:34:23:01
And in this process how co-operative

00:34:23:03 - 00:34:25:19
should you expect to sell it to be during this due diligence?

00:34:25:19 - 00:34:26:06
I mean, look,

00:34:26:06 - 00:34:27:13
as an outsider, looking in,

00:34:27:13 - 00:34:29:32
you would imagine that they would be as upfront as possible.

00:34:29:32 - 00:34:31:21
But, you know, the more that we talk about this, more

00:34:31:21 - 00:34:35:18
that there are a few sort of dark eyes patches to slip up on.

00:34:35:18 - 00:34:38:23
So yeah, how much could you expect them to share with you?

00:34:38:26 - 00:34:40:12
I mean, you could

00:34:40:12 - 00:34:43:28
distill all of this down to a test

00:34:43:28 - 00:34:47:01
of the seller's integrity.

00:34:47:03 - 00:34:47:25
Right. Yeah.

00:34:47:25 - 00:34:51:21
That's ultimately what this is all trying to determine, is

00:34:51:24 - 00:34:55:20
can I trust these folks?

00:34:55:23 - 00:34:58:13
You would hope that it hasn't

00:34:58:13 - 00:35:03:23
just been a big artificial kind of con.

00:35:03:25 - 00:35:05:09
You would hope

00:35:05:09 - 00:35:08:09
that they've been truthful throughout and candid throughout.

00:35:08:09 - 00:35:10:28
And, you know, you can get a good feeling, you know,

00:35:10:28 - 00:35:14:20
if you're into neuro linguistic programing and, you know, you're looking at the

00:35:14:20 - 00:35:18:17
where the eyes go, the furtive glances and the and the pauses,

00:35:18:19 - 00:35:21:00
then, you know, you get a good feeling for

00:35:21:00 - 00:35:24:27
whether this person is being honest in the moment.

00:35:24:30 - 00:35:29:07
But it's when you start asking for things and asking

00:35:29:07 - 00:35:33:02
for things that haven't been provided that transparency, as you rightly,

00:35:33:05 - 00:35:35:33
it is probably the thing you're really looking for.

00:35:35:33 - 00:35:37:22
For me, that's the biggest red flag.

00:35:37:22 - 00:35:42:00
Like if there is a reluctance or an unwillingness

00:35:42:03 - 00:35:45:33
or a, you know, or the bullshit machine kicks in and there's, you know,

00:35:45:33 - 00:35:51:16
lots of verbiage coming to try and cover up what you've just discovered.

00:35:51:24 - 00:35:55:11
And they don't really want to confess to what you've just discovered.

00:35:55:14 - 00:35:58:24
Then actually, you might be dealing with a liar or a hoodwink

00:35:58:27 - 00:36:01:20
and it might well be that hospital pass that you don't want.

00:36:01:20 - 00:36:03:22
And that's probably the time to walk away.

00:36:03:22 - 00:36:03:32
Yeah.

00:36:03:32 - 00:36:05:13
So I'm guessing that's quite a big red flag

00:36:05:13 - 00:36:06:33
if you're asking for some, you know,

00:36:06:33 - 00:36:10:24
crucial documents, you're asking for some information and they are,

00:36:10:27 - 00:36:14:20
you know, avoidant and giving you a, you know, a whole heap of excuses

00:36:14:20 - 00:36:16:10
as to why they don't want to pass that over to you.

00:36:16:10 - 00:36:20:13
That's going to be a big, glaring red siren, more than a flag.

00:36:20:16 - 00:36:22:04
And it signs walk away.

00:36:22:04 - 00:36:25:03
That's the moment when or at least it's time for the adults in the room

00:36:25:03 - 00:36:25:24
discussion.

00:36:25:24 - 00:36:29:13
It's the time when you sort of, you know, sit down level with me.

00:36:29:14 - 00:36:30:01
Come on.

00:36:30:01 - 00:36:33:28
You know, our due diligence is discovered this.

00:36:33:31 - 00:36:36:10
Could you tell me a bit more about why that might be?

00:36:36:10 - 00:36:37:23
What's been your experience here?

00:36:37:23 - 00:36:40:05
Have you seen this before? Did you know it was coming?

00:36:40:05 - 00:36:45:27
Like have that, you know, mature peer conversation?

00:36:45:30 - 00:36:48:28
I don't think it's a moment to castigate anybody

00:36:48:28 - 00:36:53:14
unless you you hold the ultimate cards here, because if you don't have comfort,

00:36:53:14 - 00:36:56:33
you are not contractually obliged to go through that with this deal.

00:36:56:33 - 00:36:58:25
Right. Hence the terms of non-binding.

00:36:58:25 - 00:37:01:10
So the due diligence is really at the seller's risk.

00:37:01:10 - 00:37:06:26
And if they're not forthcoming, you know, you can just pick up your stuff and go,

00:37:06:28 - 00:37:07:16
Yeah.

00:37:07:16 - 00:37:11:08
So I think you have that adult conversation.

00:37:11:08 - 00:37:15:02
If you're not satisfied with the response, dig deeper.

00:37:15:05 - 00:37:18:00
It will even lead to that relationship breaking down

00:37:18:00 - 00:37:19:31
or it will lead to transparency.

00:37:19:31 - 00:37:21:04
It may lead through drive

00:37:21:04 - 00:37:24:33
through that transparency and that sort of moment of resignation,

00:37:24:33 - 00:37:28:06
if you like, on the okay, look, the gig is up, so there's got to come

00:37:28:10 - 00:37:31:32
clean and here's here's the real deal.

00:37:32:00 - 00:37:36:06
There actually is a moment potentially to renegotiate.

00:37:36:09 - 00:37:37:22
So yes, fell onto that.

00:37:37:22 - 00:37:43:03
But like that could be it could be an opportunity if it's not a deal breaker.

00:37:43:06 - 00:37:44:09
Yeah. Yeah, absolutely.

00:37:44:09 - 00:37:46:08
If it's not something that absolutely has to kill the deal,

00:37:46:08 - 00:37:49:32
then maybe it's just time for for renegotiation.

00:37:50:00 - 00:37:51:15
Okay, so this does kind of

00:37:51:15 - 00:37:56:06
neatly lead us onto my next point throughout this process,

00:37:56:08 - 00:37:57:28
time management and deal fatigue.

00:37:57:28 - 00:38:00:06
So due diligence can obviously drag on.

00:38:00:06 - 00:38:02:21
And as we're talking about here, you know, if there are so downs from the seller

00:38:02:21 - 00:38:05:02
and any kind of reluctance, even if there isn't this

00:38:05:02 - 00:38:07:17
a ton of paperwork to go through, there's a lot of back and forth

00:38:07:17 - 00:38:10:11
maybe we want to talk about renegotiating prices.

00:38:10:11 - 00:38:12:06
And as we talked about in a previous episode,

00:38:12:06 - 00:38:15:07
you know, the kind of build up of all of this can to deal fatigue.

00:38:15:13 - 00:38:19:07
And as the man himself walk a table says, time kills deals.

00:38:19:07 - 00:38:22:25
So how do how do we

00:38:22:28 - 00:38:24:32
you know what the practical tips for keeping the momentum going?

00:38:24:32 - 00:38:28:09
How do we ensure that we're still reaching those key details,

00:38:28:12 - 00:38:32:07
but without dragging this on to the point that we're jeopardizing everyone's

00:38:32:07 - 00:38:34:00
sanity and the deal itself?

00:38:34:00 - 00:38:37:19
Yeah, I think have the contracting agreement

00:38:37:19 - 00:38:41:11
upfront, have that discussion about we'd like to get this done in

00:38:41:14 - 00:38:44:26
more things being equal and set the target date.

00:38:44:31 - 00:38:47:31
It can move, but you set a target date, everybody gets around

00:38:48:01 - 00:38:52:20
the good guys behind the eight ball on that one.

00:38:52:23 - 00:38:54:21
So I would set

00:38:54:21 - 00:38:57:22
granular kind of milestones along that journey

00:38:57:22 - 00:39:01:18
and say, I'd like to have this vehicle populated by

00:39:01:21 - 00:39:04:21
and first part of the spa by

00:39:04:21 - 00:39:07:21
and we'd like to have, you know,

00:39:07:27 - 00:39:10:30
answers to our first round of questions from the media by, you.

00:39:10:30 - 00:39:15:26
You can, you can break this down into a logical kind of cadence.

00:39:15:29 - 00:39:18:11
I think it also helps, particularly with your home team, in fact,

00:39:18:11 - 00:39:22:01
perhaps only with your home team to agree on the materiality threshold.

00:39:22:01 - 00:39:24:04
So, like, you know, your lawyers will look for everything,

00:39:24:04 - 00:39:25:22
your countless will look for everything.

00:39:25:22 - 00:39:27:05
By all means find things.

00:39:27:05 - 00:39:29:25
But let's agree there's going to be a materiality threshold.

00:39:29:25 - 00:39:32:10
Two things we're going to want to fix in aggregate, right?

00:39:32:10 - 00:39:36:10
And if we took over this threshold and suddenly there's like, you know,

00:39:36:13 - 00:39:38:33
there's a jeopardy to the deal, to the tune

00:39:38:33 - 00:39:42:07
of like a third of the deal value of stuff you've uncovered.

00:39:42:10 - 00:39:44:01
Right. Probably time to call it.

00:39:44:01 - 00:39:45:16
But if you found me, stuff

00:39:45:16 - 00:39:49:01
that's cumulative would be only like point 3% of an impact on the deal value.

00:39:49:08 - 00:39:54:01
Maybe we could just deal with that later because just not it's not disrupt

00:39:54:04 - 00:39:55:19
the deal,

00:39:55:22 - 00:39:57:02
keep the momentum going.

00:39:57:02 - 00:40:00:14
So I think it's important that your team know your risk appetite,

00:40:00:15 - 00:40:04:21
know where your redlines are, and know that the focus is on trying

00:40:04:21 - 00:40:09:23
to get this deal done by certain date calls help so called both.

00:40:09:25 - 00:40:10:23
Well, certainly

00:40:10:23 - 00:40:13:30
I think it's always good to put the home in the way of any team together

00:40:13:32 - 00:40:17:02
on a call to account for their progress, an issue

00:40:17:02 - 00:40:20:16
that could be fortnightly as things get nearer to a deadline that becomes

00:40:20:16 - 00:40:25:13
weekly, possibly than twice weekly, you know, about an hour at a time.

00:40:25:16 - 00:40:28:18
Just going through these my obstacles, this is all suppose

00:40:28:19 - 00:40:31:27
I guess, you know, software development, standup, right?

00:40:31:27 - 00:40:33:11
These are the things that I need to knock over.

00:40:33:11 - 00:40:34:17
This is what I've achieved.

00:40:34:17 - 00:40:36:15
These are the things I need to help with.

00:40:36:15 - 00:40:38:13
So those calls can be really useful.

00:40:38:13 - 00:40:39:33
But it's no more complicated than that.

00:40:39:33 - 00:40:45:13
So expectations understand your risk appetite and communicate

00:40:45:15 - 00:40:47:27
on the point of of materiality and risk appetite.

00:40:47:27 - 00:40:49:12
I think that's really, really interesting point.

00:40:49:12 - 00:40:52:24
And one thing I find really interesting is, you know, if we compare startups

00:40:52:24 - 00:40:55:24
to two acquisitions, as we do obviously in the CTA movement,

00:40:55:32 - 00:40:59:04
when you found a startup, you go into it knowing that only one in ten succeed

00:40:59:05 - 00:41:01:33
and people take that risk on and they say, you know, it's not going to be me.

00:41:01:33 - 00:41:03:26
You have to be confident yourself

00:41:03:26 - 00:41:07:00
in that sense, but you go into it knowing that there is that big risk.

00:41:07:03 - 00:41:09:23
So you wouldn't expect that to be zero risk when acquiring a company

00:41:09:23 - 00:41:11:07
or you shouldn't. I think.

00:41:11:07 - 00:41:13:07
I mean, obviously, you know, you have to set a threshold for that.

00:41:13:07 - 00:41:16:09
But to go into this and expect it to be, you know, 100%,

00:41:16:09 - 00:41:19:15
it's I think is probably a little bit naive.

00:41:19:18 - 00:41:21:04
Yeah,

00:41:21:07 - 00:41:23:29
you need to have a bit of a war chest

00:41:23:29 - 00:41:26:08
or at least some headroom in the working capital of the business

00:41:26:08 - 00:41:27:32
you're acquiring to weather a storm.

00:41:27:32 - 00:41:30:09
And storms are inevitable. Right?

00:41:30:09 - 00:41:35:11
So yeah, I think you have to be realistic about it

00:41:35:14 - 00:41:38:28
and just deal with the punches as they come.

00:41:38:31 - 00:41:41:16
Yeah. Okay. Well, such.

00:41:41:16 - 00:41:43:08
Okay.

00:41:43:08 - 00:41:47:08
Next topic is one that I've been into quite a lot recently

00:41:47:10 - 00:41:51:33
I'm trying to learn more about is data rooms organization.

00:41:52:02 - 00:41:56:20
So perhaps not the sexiest topic, but a really important one nonetheless.

00:41:56:23 - 00:41:59:23
I mean, it's not sexy.

00:41:59:31 - 00:42:01:08
I mean, to some people they aren't.

00:42:01:08 - 00:42:03:16
To me they are, but that's what I do.

00:42:03:16 - 00:42:07:22
Well, I'd rather read one of those.

00:42:07:25 - 00:42:08:02
Okay.

00:42:08:02 - 00:42:10:18
Well, let's let's get you a rundown on that then.

00:42:10:18 - 00:42:13:07
What does an ideal data room look like for an SMB acquisition?

00:42:13:07 - 00:42:13:15
You know,

00:42:13:15 - 00:42:16:04
how do you again, we go back to that same point,

00:42:16:04 - 00:42:16:32
how do you make sure that you're

00:42:16:32 - 00:42:20:06
hitting all of the right details without drowning in unorganized paperwork,

00:42:20:06 - 00:42:23:10
asking for more than you need, slowing down your team who are having

00:42:23:11 - 00:42:24:12
to read through all of this stuff?

00:42:24:12 - 00:42:26:10
Where do you find that balance?

00:42:26:10 - 00:42:29:01
Probably asking somebody here who is ers

00:42:29:01 - 00:42:32:01
more on the side of I'd rather have it and know it.

00:42:32:08 - 00:42:34:11
Yeah. Than than not to have been told it.

00:42:34:11 - 00:42:34:22
Right.

00:42:34:22 - 00:42:38:09
So less is not is definitely not more for me

00:42:38:12 - 00:42:41:08
I think I think more more is more.

00:42:41:08 - 00:42:44:30
And just having the proper resources to devour it and summarize.

00:42:45:01 - 00:42:49:20
Of course we live in an age now with catch up in other realms

00:42:49:20 - 00:42:53:30
and you know, stuff that can do analysis and surfaced key salient points

00:42:53:33 - 00:42:55:02
at a rate of not.

00:42:55:02 - 00:42:59:13
I personally think M&A due diligence is going to be transformed

00:42:59:13 - 00:43:00:05
over the next few years.

00:43:00:05 - 00:43:03:20
There's already like a number of tools that are emerging to do this.

00:43:03:22 - 00:43:04:08
The challenge

00:43:04:08 - 00:43:08:32
there is obviously making sure you're not giving open AI all of the video

00:43:09:01 - 00:43:13:02
and, you know, contravening your NDA.

00:43:13:05 - 00:43:16:22
But my point is get the get the information,

00:43:16:25 - 00:43:20:14
have the resources to summarize it,

00:43:20:17 - 00:43:23:21
you know, a prepared stellar with a comprehensive data

00:43:23:22 - 00:43:26:17
and maybe someone that's been well coached, well advised with a

00:43:26:17 - 00:43:30:12
with a good advisor or have gone through this process before,

00:43:30:14 - 00:43:33:10
it can expedite a deal pipeline if they've got stuff

00:43:33:10 - 00:43:36:10
where it should be in a sort of logical order,

00:43:36:14 - 00:43:39:04
then that's a dream because you can get stuff done early.

00:43:39:04 - 00:43:43:13
What slows you down is having to ask, having to wait, rinse and repeat.

00:43:43:16 - 00:43:46:04
That's so super time consuming and often multi.

00:43:46:04 - 00:43:50:00
That's costly because you got lawyers on retainer during that process.

00:43:50:00 - 00:43:52:25
So I think

00:43:52:25 - 00:43:53:27
you can,

00:43:53:27 - 00:43:56:16
you can preempt the problem by sending your checklist and saying

00:43:56:16 - 00:43:58:01
these are the things I want in the day

00:43:58:01 - 00:44:00:21
before, by early like heads of terms agreement.

00:44:00:21 - 00:44:01:03
Right. Okay.

00:44:01:03 - 00:44:03:32
Before we even get the lawyers to meet each other, these are things I want.

00:44:03:32 - 00:44:05:07
Here's a diagram. A link?

00:44:05:07 - 00:44:09:28
Yeah. Go, Mr. Seller. Populate that.

00:44:09:31 - 00:44:12:04
Not just a Google drive.

00:44:12:04 - 00:44:15:05
Make sure it's a robust one that's properly organized

00:44:15:05 - 00:44:16:24
with an audit trail and all that sort of stuff.

00:44:16:24 - 00:44:20:08
Because post the deal that's going to matter to both of us, but

00:44:20:11 - 00:44:23:26
populate this with these things, please,

00:44:23:29 - 00:44:28:11
and then get into the work of having to unpick them

00:44:28:11 - 00:44:31:26
and read them and summarize them and look for the gremlins.

00:44:31:29 - 00:44:33:19
So it's an it's an important part.

00:44:33:19 - 00:44:36:19
You can't shortcut it

00:44:36:26 - 00:44:39:23
and it will be proportionate, the complexity of the business,

00:44:39:23 - 00:44:44:28
but you can certainly get the other side to prepare early for it.

00:44:44:31 - 00:44:47:16
I feel like with all this talk of gremlins, we've got a kind of biz

00:44:47:16 - 00:44:50:03
crunch mascot sort of cooking up in the background here,

00:44:50:03 - 00:44:53:28
sort of just don't feed enough middlemen.

00:44:53:31 - 00:44:56:31
Going back to your point about, you know,

00:44:57:00 - 00:45:01:12
lambs and due diligence, I can totally see a kind of marriage of human in the loop.

00:45:01:12 - 00:45:05:06
Obviously wouldn't cut out your advisors and legal team, but that going

00:45:05:06 - 00:45:08:06
through the mounds of paperwork and looking for,

00:45:08:08 - 00:45:09:25
you know, certain points, I think obviously you don't

00:45:09:25 - 00:45:13:04
want to feed everything to chat CBT but and then align with a well-trained

00:45:13:04 - 00:45:15:01
vet to database that knows about due diligence.

00:45:15:01 - 00:45:17:24
I can totally see that absolute chance for in the coming.

00:45:17:24 - 00:45:22:10
It's coming, but there are already tools that are emerging for this.

00:45:22:10 - 00:45:25:30
It's it's a wonderful time to be alive, frankly.

00:45:25:32 - 00:45:26:21
It really is.

00:45:26:21 - 00:45:29:12
But I see AI as an enabling technology.

00:45:29:12 - 00:45:35:00
It will augment the humans, it will supercharge their productivity.

00:45:35:03 - 00:45:36:21
That can only be a good thing.

00:45:36:21 - 00:45:41:07
Yeah, that's always my my case with AI is, you know, don't look,

00:45:41:07 - 00:45:45:18
it is replacing people just helping this people get more work done quicker.

00:45:45:20 - 00:45:47:11
You know, we want the same amount of humans in the loop.

00:45:47:11 - 00:45:49:16
We just want them to get more done in that time.

00:45:49:16 - 00:45:52:16
Yeah, well said that, man.

00:45:52:21 - 00:45:56:17
Okay, next up is the commercial buzz is financial view.

00:45:56:17 - 00:46:00:11
So beyond the numbers, how do you assess the target markets positioning on that?

00:46:00:11 - 00:46:04:21
We touched on the earlier competitive landscape, customer relationships.

00:46:04:24 - 00:46:07:07
You know how much should this be part of your due diligence?

00:46:07:07 - 00:46:08:16
SCOPE?

00:46:08:16 - 00:46:10:29
Yeah, like I said, it's not done as frequently

00:46:10:29 - 00:46:14:07
and as diligently as it could be done.

00:46:14:09 - 00:46:18:05
I think that's largely because, you know, lots of acquirers,

00:46:18:05 - 00:46:23:06
the institutional acquirers don't necessarily have the resources to do it.

00:46:23:08 - 00:46:23:33
You know, I'm

00:46:23:33 - 00:46:28:22
seeing a increasing number of like post-merger integration companies

00:46:28:22 - 00:46:32:13
that are there to help post the deal

00:46:32:16 - 00:46:34:27
who are also offering pre deal

00:46:34:27 - 00:46:37:27
kind of market diligence thing,

00:46:37:28 - 00:46:39:08
which is interesting. Yeah.

00:46:39:08 - 00:46:42:33
So like it's difficult to do that certainly market sizing

00:46:43:02 - 00:46:47:09
for more esoteric kind of niche markets can be quite difficult to do.

00:46:47:12 - 00:46:48:28
You're going to go to your Gartner's

00:46:48:28 - 00:46:51:28
and your data Gardners and people like that for,

00:46:52:02 - 00:46:54:24
you know, your bigger industries and get ideas about Pega

00:46:54:24 - 00:46:57:24
and who the big players are and you know, direction of travel.

00:46:57:27 - 00:47:02:20
But you know, for a smaller SMB space that's a bit more tricky.

00:47:02:23 - 00:47:05:11
So I think

00:47:05:11 - 00:47:07:18
a competitor analysis is a good place to start.

00:47:07:18 - 00:47:12:13
So, you know, get the seller to tell you who their biggest competitors are, get

00:47:12:15 - 00:47:17:03
someone in your home team to go in, pull out the accounts on those competitors.

00:47:17:12 - 00:47:19:33
Have a look at, you know, whether those competitors

00:47:19:33 - 00:47:23:29
are substantially bigger or smaller than the company that you're buying.

00:47:24:03 - 00:47:27:30
Try and almost come up with a just purely on revenues alone, come up

00:47:27:30 - 00:47:32:10
with who the players are and where your target company is sitting

00:47:32:10 - 00:47:33:16
in the pecking order

00:47:33:16 - 00:47:36:29
that that will tell you hopefully some kind of proxy for market

00:47:36:29 - 00:47:40:23
share market share as an approximation because you've got these different layers

00:47:40:23 - 00:47:42:23
of the value chain like what's a wholesale price

00:47:42:23 - 00:47:45:13
versus a retail price versus a manufacturing price.

00:47:45:13 - 00:47:48:07
Who you know, how far is that that brand permeated.

00:47:48:07 - 00:47:52:13
But anyway, if you look purely at revenues amongst your competitors

00:47:52:13 - 00:47:57:15
and you'll get an idea hopefully of where you sit,

00:47:57:17 - 00:47:58:31
if budget allows

00:47:58:31 - 00:48:03:16
a small NPS exercise, a Net promoter score exercise could be really useful

00:48:03:18 - 00:48:08:26
If you pick off, let's say 1020 of the noteworthy existing

00:48:08:26 - 00:48:13:15
and potential customers in the space, even if your seller isn't serving them

00:48:13:15 - 00:48:18:16
currently, you'd love to know how those stakeholders, how those potential

00:48:18:16 - 00:48:22:11
existing customers rank on an empty space is purely

00:48:22:19 - 00:48:26:29
the players in, in the space.

00:48:26:32 - 00:48:27:05
Yeah.

00:48:27:05 - 00:48:30:24
It's a great idea to canvas for that sentiment

00:48:30:27 - 00:48:34:06
and get the sentiment indicator for both the business

00:48:34:06 - 00:48:37:06
you're going to buy as well as the competitors.

00:48:37:14 - 00:48:40:02
I think also if you've got one eye on the future,

00:48:40:02 - 00:48:43:22
I think having a solid understanding of the competitive landscape

00:48:43:22 - 00:48:47:07
is super useful because you may be looking to do a kind of lateral integration and,

00:48:47:10 - 00:48:50:03
you know, acquire one of the competitors to get greater market share.

00:48:50:03 - 00:48:53:23
And I think having an eye on that from the start might be useful to

00:48:53:26 - 00:48:56:08
completely agree if you're planning a roll up or you know

00:48:56:08 - 00:48:59:29
you're doing a buying build, this can only be useful down the road.

00:48:59:32 - 00:49:00:25
Absolutely.

00:49:00:25 - 00:49:03:19
Okay. So we

00:49:03:19 - 00:49:06:03
have gone through, you know, the main bulk of this.

00:49:06:03 - 00:49:10:01
Let's talk about post diligence next steps.

00:49:10:04 - 00:49:14:12
So once you you know, identify these issues or opportunities,

00:49:14:15 - 00:49:17:25
how do you sort of fold those insights away into a final deal terms,

00:49:17:25 - 00:49:19:25
you know, price adjustments, earn outs?

00:49:19:25 - 00:49:23:08
Or at what point do you decide to just walk away?

00:49:23:11 - 00:49:25:04
Yeah,

00:49:25:04 - 00:49:28:12
I think Dgd's largely getting comfortable with

00:49:28:12 - 00:49:32:17
with the company that you're buying and the risks that they attracts.

00:49:32:20 - 00:49:35:12
Some risks are dealbreakers, as I mentioned, particularly

00:49:35:12 - 00:49:39:04
where there's been duplicity or evasion in the process.

00:49:39:04 - 00:49:43:16
I think those are things that are fairly difficult to come back from.

00:49:43:19 - 00:49:47:17
But actually if you just identified that maybe there's, you know,

00:49:47:20 - 00:49:52:21
there's more working capital required to weather a potential curve,

00:49:52:24 - 00:49:53:15
you know,

00:49:53:15 - 00:49:57:07
you need to make sure that there's more money being left in the business

00:49:57:10 - 00:49:59:26
or that there's a greater risk that what you think

00:49:59:26 - 00:50:03:33
you're buying is dependent on future growth.

00:50:03:33 - 00:50:05:26
And that might not be forthcoming.

00:50:05:26 - 00:50:08:18
You know, you need to have those conversations, as I mentioned,

00:50:08:18 - 00:50:14:05
about how that affects the deal

00:50:14:07 - 00:50:15:00
structure.

00:50:15:00 - 00:50:17:11
For want of a better phrase,

00:50:17:11 - 00:50:21:01
you know, your road to Alpha is going to be

00:50:21:04 - 00:50:22:23
impaired potentially

00:50:22:23 - 00:50:27:14
and so some of that risk should be shared by the seller.

00:50:27:21 - 00:50:32:00
You know, we are where we are largely because of their efforts.

00:50:32:02 - 00:50:36:02
This is a good litmus test, again, like with the seller, to determine

00:50:36:02 - 00:50:37:21
just how strongly

00:50:37:21 - 00:50:40:21
they believe in the robustness and the sustainability of their business.

00:50:40:29 - 00:50:44:15
Because if if there's a contingent aspect to the deal

00:50:44:18 - 00:50:47:10
that is dependent on

00:50:47:10 - 00:50:50:03
the company's continued performance,

00:50:50:03 - 00:50:53:30
and this is a way to reveal whether the seller

00:50:53:30 - 00:50:56:14
really believes that there is going to be a continued performance.

00:50:56:14 - 00:51:00:21
Right, because they're going to bet X amount of their exit on it

00:51:00:23 - 00:51:02:24
if you attach it to an earnout.

00:51:02:24 - 00:51:04:05
Yeah, a fairer.

00:51:04:05 - 00:51:09:02
Now, I don't think it's I mean, look, gone are the days of Martin Sorrell and

00:51:09:05 - 00:51:10:20
WPP making

00:51:10:20 - 00:51:14:21
everything contingent on continued growth of the agencies that he wrote up.

00:51:14:21 - 00:51:16:26
I mean, that was just chef's kiss.

00:51:16:26 - 00:51:22:17
But today people are a bit more savvy and, you know, they're well advised.

00:51:22:20 - 00:51:23:30
And so,

00:51:23:30 - 00:51:27:04
yeah, I think a contingent earnout that is like, look,

00:51:27:04 - 00:51:29:07
it needs to do the same as last year or more.

00:51:29:07 - 00:51:33:30
We might even be generous to say that 95% of last year or more.

00:51:33:33 - 00:51:34:29
But, you know, you don't

00:51:34:29 - 00:51:36:26
want to be more generous than that and you don't want to say

00:51:36:26 - 00:51:38:23
this needs to double in order for you to get your own out.

00:51:38:23 - 00:51:41:00
That's a bit unfair to get to that.

00:51:41:00 - 00:51:44:00
But something that is somewhere between those poles.

00:51:44:05 - 00:51:48:11
I think if the seller truly believes all of what

00:51:48:11 - 00:51:52:10
they've peddled to you in this process, that the company is robust

00:51:52:10 - 00:51:58:02
and is going to continue to flourish, then they'll take some of that risk on.

00:51:58:05 - 00:52:01:03
Yeah, I think that's a good way of sidestepping the hospital pass.

00:52:01:03 - 00:52:02:15
As you put it.

00:52:02:15 - 00:52:05:10
You know, if they know that that that crunching cycle is coming,

00:52:05:10 - 00:52:09:06
then they would be so happy on the on the earnout.

00:52:09:06 - 00:52:11:01
So, yeah, that's a really smart move.

00:52:11:01 - 00:52:12:06
Yeah, fingers crossed.

00:52:12:06 - 00:52:16:19
And that's a good way of being able to to test.

00:52:16:22 - 00:52:19:22
So yeah, I think that's all I probably have to say on

00:52:19:22 - 00:52:23:29
that matter is just use what is revealed in the process,

00:52:23:32 - 00:52:28:32
in discussion with the seller and come up with a deal structure revision

00:52:28:32 - 00:52:34:00
if necessary that both sides carry some risk.

00:52:34:03 - 00:52:34:18
Excellent.

00:52:34:18 - 00:52:35:30
Well, thank you so much for that guy.

00:52:35:30 - 00:52:38:30
I think that was really illuminating stuff.

00:52:38:32 - 00:52:42:17
I think I feel more confidence going and carry out due diligence now.

00:52:42:17 - 00:52:44:15
So hopefully our listeners do too.

00:52:44:15 - 00:52:44:25
Great.

00:52:44:25 - 00:52:47:26
Well, I mean, look, we're trying to give back to the community.

00:52:47:26 - 00:52:51:18
We're trying to, you know, help empower more SMB succession M&A.

00:52:51:18 - 00:52:54:29
Like it's important that you deals get done.

00:52:54:31 - 00:52:57:17
You know, there's too much deal failure during due diligence.

00:52:57:17 - 00:53:01:18
So I think often there's a lack of preparation by either side.

00:53:01:21 - 00:53:02:24
On the on that note.

00:53:02:24 - 00:53:03:22
So while we're talking,

00:53:03:22 - 00:53:06:10
you mentioned that you have a kind of due diligence checklist.

00:53:06:10 - 00:53:09:18
If listeners if you're interested, then drop us a comment or send us a message

00:53:09:18 - 00:53:11:26
and see whether you'd like to make that something shareable.

00:53:11:26 - 00:53:13:20
Obviously,

00:53:13:20 - 00:53:16:23
a kind of abridged version of that they can use for themselves,

00:53:16:23 - 00:53:18:18
but that's something that people would find useful.

00:53:18:18 - 00:53:19:29
Do you happen to share that?

00:53:19:29 - 00:53:20:19
Yeah, of course.

00:53:20:19 - 00:53:26:14
But it's also part of the curriculum sort of assets and resources that you get

00:53:26:17 - 00:53:30:16
by participating in the acquisition incubated with this kind of course.

00:53:30:23 - 00:53:33:33
Good opportunity to mention that I guess that we, we have this recently

00:53:33:33 - 00:53:37:07
launched eight week intensive program.

00:53:37:10 - 00:53:41:19
It's designed to fully prepare you with all of the tools and capital

00:53:41:19 - 00:53:46:16
and knowledge that you need to go from sort of spreadsheet to deal complete

00:53:46:19 - 00:53:50:17
to really complete your first acquisition, get it over the line.

00:53:50:20 - 00:53:53:19
We we are using the acquisition incubator

00:53:53:19 - 00:53:58:08
as a real kind of catalyst to get deals done.

00:53:58:11 - 00:54:00:22
Yeah, and we're of the mind that it shouldn't take two years

00:54:00:22 - 00:54:03:22
to find a good company in this day and age with tools like this crunch.

00:54:03:24 - 00:54:09:00
So yeah, we're seeking applicants at the moment for our cohort of six

00:54:09:03 - 00:54:13:26
handpicked, ambitious entrepreneurs, probably, you know,

00:54:13:28 - 00:54:18:03
business school graduates or career changers out of corporate people

00:54:18:03 - 00:54:21:31
that have got a hunger for operating a business

00:54:22:00 - 00:54:24:23
and a hunger for equity and owning a business.

00:54:24:23 - 00:54:29:00
We we want to help you and we want you to participate.

00:54:29:00 - 00:54:31:12
So come apply.

00:54:31:12 - 00:54:35:08
It's at acquisition dash incubator dot com.

00:54:35:11 - 00:54:36:33
I'll make sure the link is in the description,

00:54:36:33 - 00:54:38:30
the video share on all of our social as well.

00:54:38:30 - 00:54:42:02
I'm incredibly excited about this and I really love

00:54:42:05 - 00:54:44:16
it feels like kind of putting our money where our mouth is because we want this

00:54:44:16 - 00:54:46:07
to be more acquisition entrepreneurs out this.

00:54:46:07 - 00:54:49:17
Why not help shape a new cohort of them and hopefully they can go out

00:54:49:17 - 00:54:51:27
and spread the word, spread it further and further and further.

00:54:51:27 - 00:54:54:10
And that's what this is all about. Yeah, let's get more deals done.

00:54:54:10 - 00:54:58:09
Let's get more exits for these baby boomer owners that need to pass the baton

00:54:58:09 - 00:55:00:18
on to a new generation.

00:55:00:21 - 00:55:02:04
Absolutely.

00:55:02:04 - 00:55:03:20
I'm okay with that.

00:55:03:20 - 00:55:04:21
We're going to wrap up the episode.

00:55:04:21 - 00:55:09:09
We'll move to questions for the live audience in the community.

00:55:09:11 - 00:55:10:22
Thanks, everybody, for listening.

00:55:10:22 - 00:55:15:00
And this, Garthwaite says, Keep crunching, keep on crunching, folks.

00:55:15:03 - 00:55:16:27
So you say, I.