Mergers and Acquisitions: How to Prepare Your Transportation Business for Sale

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What does it take to sell (or buy) a passenger transportation business? 

In this episode, Ken and James explore why M&A activity is high in the passenger transportation industry. They break down how changes since the pandemic have driven market evolutions, the importance of preparation, and key strategies for both sellers and buyers navigating transactions.

• The state of mergers and acquisitions in the passenger transportation industry
• The different players involved in business transactions of transportation companies
• Signs of good (and bad) sellers of transportation businesses
• Signs of good (and bad) buyers of transportation businesses
• The valuation equation and the different components that impact sale price
• Considerations for business owners serious about exit planning

At Driving Transactions, Ken Lucci and his team offer financial analysis, KPI reviews,  for specific purposes like improving profitability, enhancing the value of the enterprise business planning and buying and selling companies. So if you have any of those needs, please give us a call or check us out at www.drivingtransactions.com.

Pax Training is your  all in one solution designed to elevate your team's skills, boost passenger satisfaction, and keep your business ahead of the curve. Learn more at www.paxtraining.com/gtp

Connect with Kenneth Lucci, Principle Analyst at Driving Transactions:
https://www.drivingtransactions.com/

Connect with James Blain, President at PAX Training:
https://paxtraining.com/

Episode Transcript

James Blain (00:24):
Hello everybody and welcome back to the Ground
Transportation Podcast.
My name is James Blaine at PAXTraining.
I am joined by my co-host, KenLucia, driving transactions.

Ken Lucci (00:33):
Glad to be here.

James Blain (00:34):
Hey, so today we're gonna have an m and a episode,
and m and a is probably one ofthe biggest things going on in
the industry.
I think it's gonna go up right?
For those of you that, I mean,what, uh, essentially mergers
and acquisitions have become amassive part of the industry.
We keep hearing about companiesgetting purchased, companies
getting sold, people gettinginto the industry, people

(00:56):
getting out, and so we reallywanted to take a moment to come
together and talk about whatthat looks like.
Thankfully, my, my co-hosthappens to be an m and a expert.
So Ken, can you kind of set thestage for us, what, what is
going on?
Why is this such a big thingright now?

Ken Lucci (01:13):
Um, interesting.
So we thought that coming outtathe pandemic that we see, we saw
the, the height of m and abecause people were.
Aging out.
They were past the point of, wecall it the silver wave, people
wanting to sell their businessesbecause they were, you know, mid
sixties, late sixties, um, and21.
The pain point at that pointremember, was CDL drivers in

(01:37):
getting chauffeurs back to work.
I think what kind of slowed mand a down between 20 at the end
of 21 and 22 was 22.
Everybody was making atremendous amount of money, and
I mean, record amount of moneyin the industry, right?
A lot more revenue, a lot lesstrips.
Um, so I think it's a fewthings.

(01:58):
Number one, I think it's a, Ithink the people taking their
eye on the off the ball when itcomes to financials, I think
they've loaded up with debt andit's not as easy to raise prices
through the roof.
We, we don't see that happeninganymore.
So I think number one, it's,it's, the heyday of, of, uh,
unabashed profitability andunabashed raising of prices is

(02:19):
over.
Um,

James Blain (02:21):
you think we've hit that ceiling on prices?
You think we're at that pointwhere we're we're really pushing
it

Ken Lucci (02:26):
we, we have hit that point on airport.
We've hit that point on withcorporate.
We see a lot more RFP.
We are, we see it on both ends.
We've got corporate clientsthat, that have us do some
analytics, and they have us todo, do some KPIs and, and RFP
work.
Um, so I, I do think we've hitit on the airport.
Do I think we've hit it on theothers?

(02:46):
No, I don't, I don't think we'vehit, hit the highest prices on
vans, minis and motors.
I think the people are, are,are, are, need to keep their big
focus on how they're, howthey're, um, pricing out
contracts.
We have a lot of clients thatcome to us to help them with
RFPs and contracts andlogistically understanding what

(03:08):
their costs are to do, you know,corporate shuttle work every
single day.
They're enamored with therevenue every day, but.
You know, to the point wherethey're dropping prices and
dropping their pants andthey're, they're not covering
their cost, including their softcost.
Um, so m and a, I think it's, Ithink it's picked up drastically
because it's, it's, uh, the costdrivers including fleet

(03:28):
insurance, uh, has gone throughthe roof and, uh, repair and
maintenance and, uh, is, is alot more expensive, uh, on the
fleet vehicles than it was prepandemic.
So I think it's a combination ofthose things.
Um, I also think there's alittle bit of a scary mentality,
uh, might be a herd mentalitythat so and so sold, uh, uh,

(03:51):
for, you know, what so and sosays is a lot of money.
So, geez, I guess I should bedoing that.
Um, the, you know, the realityis preparing a company for sale
is probably one of the mostimportant exercises that you
should be going through.
And you, you, you don't gothrough it with your CPA because
they don't know the metrics ofthe industry.

(04:12):
You certainly don't go throughit with your lawyer because, you
know, they're, they're focusedon legal protection, but
preparing the business bothfinancially and operationally
and, you know, uh, I I liken itto, uh, if, if you try to sell
your house, you don't open, youdon't have an open house before
you take care of the black moldin the basement or the leak in

(04:35):
the roof, or replace theappliances or, you know, paint,
paint the walls that haven'tbeen painted since the
seventies.
And people do, I see operatorsmaking mistakes that way that
they have not prepared.
My best clients prepare years inadvance.
Um, my worst, my worst clientsare the ones that call me and

(04:56):
say, I need to get out within 90days.
It's really not you, you fallvictim, you know, you fall
victim to not, not, um, havingyour stuff in order.
And when you, when you, they saylifting up the kimono in the m
and a business, when you'relifting up your skirt, um, you

(05:16):
know, there, there are thingsthat you shouldn't see.
And, and at the end of the day,the better prepared you can be
financially, um, at closing, itwill benefit you.
Uh, the, so I, I think that, Ithink it's a combination of
things.
I think age is, is, is a bigpiece of it.
Um, I think there's also a lotof buyer activity and um,

(05:40):
there's a lot of activity, uh,there's a lot of buyer activity
in the space that, um, howshould I say this?
You know, if, if a buyer, if, ifa buyer broker approaches, you
understand the buyer broker'stactic of telling you, I have

(06:01):
someone interested in buyingyour business.
Their tactic is to tie you up ona contract.
They're, they want to tie you upfor 12 months, and if you, if
they have one specific buyer,then, and all you're doing is
working with that buyer, ratherthan doing what we do, which is
preparing a business, valuing abusiness, creating an

(06:21):
information package, and goingthrough a process of showing it
confidentially telling, showingthe business to, to the most
viable buyers in the space.
Um, whether it's inside thebusiness or inside as operators
or in the financial market.
Um, I think you're sellingyourself short, right?

(06:41):
I

James Blain (06:41):
Well, and and how many times do you do that?
And they get a better offersomewhere, right?
I mean, they're, if you just gotone person buying, that's gotta
be, you know, you're basicallyplaying into their hands, aren't
you, Ken?

Ken Lucci (06:52):
yeah.
So the most masterful, the mostma out of the 30 or so that
we've done, the most masterfultransactions have been when
we've had.
Two or three buyers vying forthe same company.
The other, the, the othermasterful is we had was when we
went to the biggest player in,in the same region.

(07:13):
And, and the seller said to me,I wanna show it to them first.
And I said, okay, well, if theythink they have exclusive and
only then we're not gonna getwhat we want out of them.
But masterfully, we said tothis, this buyer, if you make me
go to the open market, you willhave a massive competitor in

(07:34):
your market.
So if you are going step up onany acquisition, this is the one
that you're going to step up on.
And the funny thing is, it wasa, it was a tough transaction,
uh, dealing with the lawyers allon both sides.
But it, it had the most upsidefor the seller.
Um, it had a tremendous amountof upside for the seller.

(07:57):
And, and this, and out of the,out of 30 something transactions
we've done, I can tell you, Ican give you, uh, references
from every seller and most ofthe buyers will say, yeah, he
was a little, he was a littledifficult to deal with, but his
stuff, his work, his workproduct was absolutely
unbelievable.

James Blain (08:15):
Stop being so difficult, Ken.

Ken Lucci (08:17):
it's not in my nature.
Um, so, you know, the m and aprocess can't be short
circuited.
So when you do make it a, whenyou fall in love as a seller or
a buyer, when you fall in lovewith a target, whether it's the
buy side or the sell side,you're really limiting yourself.

(08:38):
Um, you know, the, the, the oneof the biggest acquisitions that
took place so far took about a,it, it actually took about three
years to do, and that was theWindy City deal.
And George Jacobs will have himon.
He'll tell you that he wentthrough quite a few suitors.
And he found, he found one thathe felt, you know, was, was
great.

(08:59):
And he did that by a process ofgoing, following the process of
preparing the company, makingsome financial and operational,
um, spit and polishimprovements, if you will.
And then presenting the companyto several buyers.
Now, the funny thing is, a lotof times companies will get

(09:20):
approached by a buyer and thebuyer will say, well, we don't
like intermediaries.
Because what we're doing in theindustry is incredibly, um,
confidential.

James Blain (09:32):
how convenient.
So, so the guy that's supposedto help me if I'm the one
selling my company.
Is the one that you're tellingme we don't need to have
involved is what I think I'mhearing here.
That that's very convenient.
That's very

Ken Lucci (09:43):
listen, it takes a team, okay?
It takes a team.
And we are just one cog in theteam.
But we are the mo I believe froma prep perspective and from a
financial analysis perspectiveand telling the story and the op
financial opportunity andoperational opportunity, we are
critical.
And, and you can't replace that.

(10:05):
You can't short circuit thatbecause the, if you are, if
it's, if it's just all you'regonna do is entertain the one
buyer, and because they havesupposedly secret sauce, I think
you're limiting yourself.
The other piece of the puzzle isyou cannot save.
There's no such thing as savingmoney on consultants, lawyers,

(10:26):
and accountants during theacquisition process.
When you save money in theprocess, you lose at the closing
table.

James Blain (10:33):
Well, and, and you know, a lot of us have been in
business for a long time, right?
But if you've never sold or, orpurchased a, a business, a lot
of this is really new to you.
And you and I have talked in thepast, right?
If you're only pulling 60 granda year out and you want all this
money for your business, youknow, a lot of us are
emotionally invested.
We're physically invested, we'vegot time, we've got energy.

(10:53):
I think what you're sayingreally rings true because you've
got to be able to step back andsay, okay, I'm getting out.
But you are.
I mean, and for most of us, thisis our baby, right?
You know, if, if it ever came tothe point where, you know, uh,
my partner Bruce and I decidedwe were gonna sell packs, man,
that'd be a hell of aconversation because this is

(11:14):
kind of our lives.
These are our friends.
These are, you know, more thanjust customers.
So I think what you're saying isextraordinarily important
because if you don't have thosepeople to help you step back, to
help you get out of it and lookat it.
You know, you're really settingyourself up to get taken
advantage of and to get takenfor a ride, aren't you, Ken?

Ken Lucci (11:34):
Uh, yes.
And the only reason I know thatis because we've had access to,
well, we've done some mid 30 asfar as seller facilitations just
facilitating the deal for theseller.
We've done, um, probably 20buyer due diligence where we do
not negotiate for the buyer.
The buyer, the operator, thebuyer, whoever it is, has
already found their target.

(11:54):
And we do buyer due diligence.
We're doing a bunch of thatright now.
So we, we assemble the package,um, and then we do the lender
side.
And what people don't realizeis, I mean, we've known about
the, the transaction that just,we knew about them a, you know,
in some cases, almost a yearago, nine months ago, because

(12:14):
lenders were certified to dofleet valuations, et cetera.
They'll bring us in, they'llbring us in, the lender will pay
us.
Uh, by the way, we make theleast amount of money when we
work for banks.
Don't, don't ask me why.
Um, so, so you can't shortcircuit the purse, the, the, the
process.
And, and one thing I'll tell youis I, uh.
I've never seen any businessowner that even if you've bought

(12:37):
and sold a few businesses, thenuances of every transaction are
different.
And we've seen the pitfalls ofnot using a transaction
attorney.
We've seen the pitfalls ofletting your CPA tell you what
they think the business is whenthey have never looked at a

(12:59):
transaction in the market, neverlooked at the transac, and they
don't know the market.
Right?
We, we, we have a database thatwe subscribe to that's, you
know, every transaction that'spretty much that's been taken
place with any kind of lending.
We, we, we have access to it.
Um, we, in some cases theybecome public, just overtly

(13:21):
public knowledge because of thefilings that have to be done.
So I think that operator tooperator transactions, um.
Um, I think that it's great ifyou want, you know, I understand
confidentiality.
Everything we do covers, concovers that.
I mean, there are transactionswe've been involved with that

(13:42):
nobody, nobody will ever see ourfingerprints anywhere near them.

James Blain (13:45):
Yeah.

Ken Lucci (13:46):
But it takes a team and it's not, it's not, you
know, the, your bookkeeper, it'snot your CPA, it's, it's an
outside, you need a tax plannerthat's, you need to consider the
tax implications and all of thetax maneuvering well in advance
of the exit plan, right?
It is not, I have an offer.

(14:07):
I'm gonna accept the offer.
Oh boy, what are my taxconsequences?
The tax planning piece can takea co, it can take a few years,
and I don't wanna burst any banybody's bubble.
But 90% of the CPA firms thatare out there are not certified
to do tax planning.
But let me be clear, clear onsomething.
We're not tax planners.
We have people that werecommend.

(14:29):
And we tell, we work with ouroperators who are thinking about
ex exiting, and they will docertain things legally from a,
from a, from a corporateperspective and also from a,
from a prep perspective, thatare way over my head.
And it's, and it's because we,they're dealing with certified
tax planners, certified taxprofessional.

(14:50):
So your CPA is typically, he's,his job is to tell you what you
owe for taxes and, but as far astax mitigation, that he'll take
all the deductions he possiblyknows about, but the specialty
of tax planning is critical.
The other thing that's, that'scritical is a transaction

(15:11):
attorney, someone that knows howto interpret transaction
agreements, stock agreements, etcetera.
And it's not your real estateattorney, it's just, it's not
your general counsel.
It's a, it's, it's a specialtybecause in a lot of cases.
The agreements will have, youknow, what they call a poison

(15:31):
pill or a trap door that favorsone or the other.
Um, and then what we do morethan anything is, first of all,
we do the financial analysisthat says what your healthy
metrics are and what their, whatour unhealthy, what can we
possibly change, what can wehelp you with?
We document your KPIs.

(15:52):
All of, we do a full analysispackage and then we do an
informational, informationalpackage that tells the story.
And we tell the story in such away that there's nothing
proprietary, that we don't giveanything away.
We've recently seen operated tooperated transactions where the
potential buyer has found out somuch that they should not have

(16:12):
known, and then the deal didn'tgo through in interesting
statistic.
For every one deal that getsannounced, there are four deals
that fall apart and that's just,uh, that's just general business
brokering, right.

James Blain (16:25):
and, and that's kind of a takeoff point for us
because, a lot of people don'tnecessarily know what this
process looks like.
I mean, what if, if we wentreally high level and we said,
you know, how does this, is itjust, Hey, I like John's
business.
I'm gonna go up to John.
I'm gonna ask him, it's forsale.
I mean, what does this typicallylook like out there in the
market?
What's, what's kinda the processthat it goes through at a high
level?

Ken Lucci (16:45):
Ideally, the ideal process is you start an exit
strategy.
You, you start discussing anexit strategy several years
before, and you align that bymaking the changes in your
business necessary to improvethe value.
And it's simple.
You have to improveprofitability and, and both
standard EBITDA and adjustedebitda.

(17:05):
Those are the lending, those arethe, the, the, the, the, the
lending data that, that bankswill look at to finance these
kind of deals.
So it's not impr, it's not, it'snot, you know, just going crazy,
growing revenue because if therevenue's not profitable
revenue, it's actually gonnahurt you.
Right?
So it's improving theprofitability of the business,

(17:26):
improving EBITDA and gettingyour financial books in order.
It, meaning they have to, Idon't mean that they have to
pass an IRS audit, but theyabsolutely have to pass a due
diligence process.
So you can't have anythinghidden, and you have to have
them clean and they have to begap.
Um, we've walked away fromclients that have not ref,

(17:48):
they've not, they've playedgames on their financials and
their financials have not beengap.
We've made suggestions that

James Blain (17:55):
What, what does that mean by the way?
Gap for those of us that, thataren't familiar with that.

Ken Lucci (17:59):
generally accepted accounting principles.
Right?
So there's basically rules that,that every, that the, uh,
American Academy, excuse me,American Accountants, CPA, firms
follow, and it, the generallyaccepted accounting principles
are what, what are taught toCPAs and accountants.
Um, and we've had situationswhere operators have done their

(18:21):
own books and they think they'rehiding.
They think that they're, thatthey think they're, they're
hiding something.
What.
Well, it's gonna come out right?
It's, it is absolutely gonnacome out.
And if it comes out at the wrongtime, it's a problem.
So getting your financials inorder is critical.
And in most cases, the business,every case, the business.
I've never met a business thatwas ready to sell.

(18:42):
I've seen some that haveabsolutely perfection on
financial, their financials andtheir KPIs.
But it's maybe one out of 10,maybe even, maybe one out of 20.

James Blain (18:55):
It, it's different than running your business
regularly to get ready to sell,is what I'm hearing is this.
This is something you don't say,I run an awesome business, I'm
gonna sell it.
You have to actively make adecision.

Ken Lucci (19:06):
and you have to actively prepare and you have to
put your team together and, andyou have to, you, you have to
invest in an exit plan.
You have to it ideally, you wantto.
Have plenty of time to do it.
I mean, the minimum should be 18months, 12 to 18 months if
everything looks good.
If you have to make somechanges.

(19:27):
I mean, we just looked at acompany, we, we were hired to
value a company and there'sactually two divisions of a
company and we value them.
But the sad part is they have,they're, they're, their EBITDA
is not where it should be.
Their net, net ordinary income,their profitability is not where
it needs to be.
So even though the owners aretaking out really, really good
money, their EBITDA is probablyhalf of what it should be from

(19:51):
an industry average perspective.
And we identified things thatthey should be changing.
And we've said, here's what yourbusiness is worth today, but if
you make the following changes,this is what it will be worth
in.
And we really want to see twoyears of performance

James Blain (20:09):
So does this provide an opportunity then for
companies that are looking forgrowth through making a
purchase, knowing that a lot ofcompanies are not planning to
sell, they're not putting thatone to two to three years in.
Does that mean that there's agreat opportunity to purchase
those companies that aren'ttaking that step?
Or how does that, how does thatplay out from the buyer side
with today's market?

Ken Lucci (20:29):
Um, uh, let me just say, say flat out the, the, this
is, when it comes to sellingbusinesses, uh, it is always a
buyer's market.
Let me tell you why.
Less than 25% of privatebusinesses ever sell, ever sell.
Um, and it's for all the reasonswe've talked about.
They either don't prepare,right, or they enter, uh,
discussions with a, with, andthey don't realize, they don't

(20:54):
realize what the process lookslike and it fails.
So 25, less than 25% ofbusinesses ever sell, especially
when you're talking about the,the under 5 million mark, right?
It's a little bit bigger, alittle bit better on as the
businesses grow, but that's astatistics that that's known
throughout the businessbrokerage.
Industry.

James Blain (21:12):
Across the board.

Ken Lucci (21:13):
Across the board.
Part of the reason why is, isnumber one not prepared.
The second reason number two isit you, you don't have the right
team in place.
You think your lawyer's gonna dothis for you, right?
He has no idea what to look for.
And I, I say this to people andit's not an insult to their
lawyer, okay?
But we know the market, we knowwhat buyers look for.
We look, we know the duediligence process.

(21:35):
And a lot of times a lawyerwho's running a process, who's
trying to run a process, whetherit's on the buy side or the sell
side, a lawyer is built, hismind is built, okay?
On for the, for the buyer, he istrying to eliminate all risk,
okay?
But for the sell and, but forthe seller, okay?

(21:56):
He's trying to be an adversary,okay?
He thinks that the buyer is theadversary, and that's not the
case.
You can't go into it as.
As this is the adversarial,we're adversaries because the
seller has to live with thebuyer the day after the
transaction.
So what we do is we kind ofcorral the troops, if you will.
We're a, after we've prepared abusiness, we are the buffer and

(22:19):
we save money because, you know,we, we, we stop the$600 an hour
beasts, right?
From, from, from, from, from,from wasting valuable time and
money.
And, and I'll be on the phonewith, with the seller's attorney
and I'll say, I can already tellyou that's not gonna fly.

(22:41):
I'll, I'll then get on the phonewith a buyer's attorney and say,
uh, no, that's not gonna fly.
And what did I just do there?

James Blain (22:47):
You save five hours of arguing on each side.

Ken Lucci (22:49):
Right, right, right, right.
Exactly.
So, um, is it an opportunity,uh, uh, is a tremendous
opportunity.
When an operator has, is when anoperator, if a, if an operator
wants to buy, they have to be inthe condition to buy.
I've seen too many operatorsthat want to get, I met a bunch
of at, at the, at a con, theconference in DC in the fall

(23:12):
that want to buy companies.
And the first question I askedthem is, how's your liquidity?
Okay.
And they went, what?
How's your cash liquidity?
How's your debt structure?
How's your operation doing?
Okay.
If you don't have cashliquidity, if, if, if your debt
is too high right?

(23:33):
And you are not profitable, anacquisition will weaken an
already weak host,

James Blain (23:40):
Yeah, it's not gonna make it better.

Ken Lucci (23:42):
Right?
And that's the sad part.
You know, the, the sad truth is,is the only thing that grows for
the sake of growth is the cancercell.
Okay.
Uh, okay.
And so strategic acquisitionsare exceptional.
And, and they, you, when you gointo looking for an acquisition,

(24:04):
I always ask a buyer, what'syour strategy?
And when they say, well, he'sfor sale, okay, that's not a
strategy.
My strategy is I want to go fromPhiladelphia.
I want to go up to, uh, Newark.
Great.
I want to go from Northern NewJersey down.
I want, I've got right?

(24:25):
I've got$500,000 worth ofbusiness in Philadelphia and my
affiliates giving me a hardtime, okay?
Which is another subject, but ithas to be strategic on the sell
side.
You know, you brought up thenumber one problem that I deal
with every, that I, that I haveto deal with, with, with small
businesses.
And to me, a small business is,is under 20 million.

(24:47):
It's just the way it is.
Any, any business that wasstarted by a founder and the
founder's still running theday-to-day as a small business,
you know, is the, it's a veryemotional process of selling a
company.
So

James Blain (24:59):
It becomes part of who you are,

Ken Lucci (25:00):
right?
But it's even more emotional.
Even more emotional threesituations, number one, if
you're not ready to let it go,okay, I've sold four businesses.
I couldn't wait to get out thedoor.
Okay?
And I'll tell you why.
I mean, I grew them to the pointwhere I was my PI reached my
Peter principle, right?
Or I reached the point where Isaid, this is the success and I

(25:22):
owe it to my life's experienceto do something else.
I've never looked back.
And that's just maybe,unfortunately that's the, you
know, but that's, that's notwhat happened.
So they're not emotionally readyto, to, to sell.
Number two, they're delusionalabout what they think their
business is worth.
Okay.
That's the the second

James Blain (25:40):
That's gotta be pretty common, right?

Ken Lucci (25:41):
It it's, it is, it is a comment and it's so much
misinformation in this industry,and part of it is because that
everybody wants to look good on,uh, after they sell their
business and they embellish,they embellish what, what
happened?
And they're also buyers that areembellishing.
There's flat out buyers thatembellish.

(26:02):
And, and our job is, to bring areality check.

James Blain (26:06):
How does it look like to the buyer?
What?
What does the embellishing dofor the buyer?
Are they just poisoningthemselves for future
acquisitions?

Ken Lucci (26:13):
so the part, the, the buyers that, the buyers that are
in my mind exaggerating are theones that come in and say, you
know, we're gonna pay you Xmultiple for your business and
then we're gonna help you makeit more profitable because.
That X multiple, they pay.

(26:34):
They're actually, you know, youget that a few years down the
road.
Okay?
So I'm gonna break it, I'm gonnabreak that down.
And it, it's, it goes like this,you know, let's just use a
multiple of three for theenterprise, okay?
Alone, or five for theenterprise with a serious fleet.
Somebody comes in and says, I'mgonna pay you 50% or 60%, or 70%

(26:59):
at closing, and then you'regoing to get the rest in an
earnout, or you're gonna get therest in another instrument that
might be minority stock, andwe're gonna help you grow this
business.
So that's actually a contingencysale because the definition of a
contingency is something has tohappen.

(27:23):
In order for a result to occur,as it, it as, as opposed to a
buyer who comes in, you know,one recently in new, uh,
Pennsylvania, New Jersey linecame in and said, look, I'm
gonna buy this business.
I'm gonna pay you this much.
And by the way, there's apromissory note for the rest.
You're gonna get that money.
It's gonna be interest.
I'm gonna do a corporateguarantee.

(27:44):
I'm gonna do all kinds of thingsto make sure that you're gonna
get that money.
And by the way, your attorney'sgonna also make sure as well,
the other, the other type of atransaction is, is a
contingency, right?
It's, it has a level ofcontingency in it, whether it's,
say, in order for you to get theearnout, these things have to
happen, right?
So I always tell people goinginto the process, it, it, it,

(28:10):
whether they use us or not,always assume that the buyer is
a liar.
That's a hard thing for me tosay.
Okay, but when you hire me, whenyou

James Blain (28:22):
but, but they've gotta make money, right?
The goal, the goal of thepurchase is for them to, to make
money.
And just like when you go buy acar or anything else, the more
the, the less they pay, the lessyou pay, the more they make.
So,

Ken Lucci (28:34):
I'll tell you something, I'm gonna tell you
something right now.
I'm gonna dispel that the bestbuyers, the best buyers, the
best buyers, the best buyers ofany businesses wanna make it a
win-win.
And they have the intention ofmaking it a win-win.
And they, and there's a guy likeme in the middle with two
attorneys saying, you know what,this is gonna be a win-win.

(28:56):
Everybody's doing their job,it's gonna be a win-win.
Right?
And there are certain thingsalong the way that have to
happen to make it, make it awin-win.
And part of it is the history ofwho you're selling to.
Okay?
Uh, I can tell you the operatorsthat, and I'm in the middle of a
couple right now, where the, itis an operator to operator
transaction.
Where they didn't have goodrepresentation.

(29:17):
And I'm unwinding badsituations.
I'm unwinding really serious badsituations.
Um, but the, the, the best dealsin, in the, in any industry are,
are a win-win where going in youaddress as much as you possibly
can and the, the seller goesaway with a little less than

(29:40):
they expected and the buyer goesaway giving a little bit too.
Okay?

James Blain (29:45):
Yeah, to push pull.

Ken Lucci (29:47):
Right.
But, but when you have predatorybuyers, and there's a lot of'em
on the PE side, private equityside, um, the private equity,
I'm dealing with a privateequity company that has a couple
billion dollars in assets.
Let me ask you a question.
Who's got a better return?
A$10 million seller or privateequity firm that's based That,

(30:10):
that, that right?
That,

James Blain (30:12):
Yeah, I don't care how many times, I don't care how
much you have lunch with yourlawyer, he ain't got the
firepower of the big

Ken Lucci (30:17):
right.
So, so when you go into theprocess, okay, you go into the
process with the best team thatyou can.
If you go in alone, you go inand naked and, and I, look, I
don't care who you use, we do aphenomenal job.
I think the fact that we've doneeverything by referral has been
fantastic.
And by the way, two NLApresidents have sold their

(30:41):
businesses through me.
Two, two of the largesttransactions that have taken
place in the industry since Istarted this two NLA presidents
were not, can't be, they werenot wrong.
And, and we've done, you know,five of the biggest deals at,
at, in the industry.
You know, there were, there area lot of bigger deals that I, I,

(31:03):
I got a customer call me thatdoes that.
They're a customer of mine andthey're a$60 million company.
And they're thinking, you knowwhat, Ken?
I think we want to, we want tosell.
I'm like, okay, well, I'm notfor you.
I'm too small, but I'm gonnaprep you now.
I didn't, I didn't mean thatfrom stature.
Uh, only kidding.
Um, I'm gonna prep you, right.
I'm gonna prep

James Blain (31:22):
but, but you did the right thing.
You did the right thing.
You didn't try to go into waterthat you shouldn't be in.

Ken Lucci (31:28):
you know what they did?
They hired that company and me,and me, and because we do a
phenomenal job on financialanalysis, KPI analysis,
preparing the company because weknow the industry, right?
So we'll look at things like,uh, revenue concentration here,
the margin of the shuttleservice, you know, and then the

(31:49):
big company will do the massivemarketing of the enterprise to
buyers that, you know, fromaround the, from around the
country and around the world.
And the funny thing is, we helpthe seller pick who that was.
We helped the seller pick theinvestment bank that they went
to.
And during the process, theysent us the information package,

(32:13):
they sent us their work product,and, and I, we made some really
solid suggestions as to who toshow the business to, who not to
show the business to, becausewe, we were a little bit more
intimate with who the buyercategories were.
So, but you know, I can't stressenough that you'll never go
through this process enough as abusiness owner to master it.

(32:36):
The only reason why we've done,we have a massive access to
financial data and criticalmetrics.
We know who the buyers are, weknow what the healthy metrics
should be, and we know how thelenders are going to react as
well.
Um, and there are, there aretransactions that take place in
the industry that we've beenbehind the curtain on.
And that's something wherebehind the curtain is, is a, is

(33:00):
an axiom where we are notnegotiating with the buyer.
We're not negotiating on behalfof the seller with a buyer.
We're not trying to find thebuyer, right?
The seller has, the seller hascome across this buyer and they
want our help because we knowwho the buyer scenario.
And I will share something withyou if you ever come across, if

(33:24):
you're selling pacs and thepeople that come to you and say,
we want to buy your business,but we don't want you to have an
intermediary.
What they're saying to you is,we wanna buy your business and
we want your pants around yourankles when you do it.

James Blain (33:35):
Makes sense.

Ken Lucci (33:36):
I'm, I'm serious.
And, and you know what?
I, every buyer in the industrysands one.
Every buyer in the industry thatwe've come, that we.
That we've come across out inthe, out in the market
absolutely solicits our opinionon deals we've never, we're not
even involved in.
What do you think of this?
What do you think of that?
But I really have to question,like, and we've had a couple of

(33:59):
PE firms that we've had to workreally, really hard at proving
our value.
You know, I question how, whyyou, you would say to someone,
uh, we don't want anintermediary because, you know,
what we're doing is super, supersecret.
Because I'll tell you something.
The first time they do a deal,nothing secret anymore.

James Blain (34:17):
Right.
Well, and, and let me ask yousomething.
You know, I, I think there'sthis myth.
That you sell a business, likeyou sell a car, you sell it, you
get your paycheck, you leave,you ride off into the sunset.
That's not how it works.

Ken Lucci (34:31):
No, it's not 60% of all transactions that take place
in selling private businesses.
60% have some element of sellerfinancing.
That's not because Ken says it,that's a statistic across the
board because there's riskinvolved.
Okay.
If, if you, as a seller want allcash at closing, I can do that

(34:53):
for you, but it's not gonna be atop multiple.
Okay.
Let, and let's clarify Fleet.
I can get anybody financed on afleet as long as their
financials are in order.
I can get any buyer fin uh,financing on fleet.
I mean, we had a situation rerecently, it was a$10 million
seller Okay.
And a$5 million buyer.
And we were doing buyer duediligence.

(35:15):
And their finance, theirfinancials were not such that
they could afford this fleet.
We tried everything and iteventually went to another
seller.
Right.
It was, it was more of an openprocess.
And we tried, we triedeverything.
But, you know, to, to your, toyour point, this is not this,
you are selling a lot ofintangibles here, right?
The tangible piece that you'reselling is the fleet.

(35:37):
I mean, I could teach somebodyhow to value a fleet in an
afternoon.
You just look at three comps, orI can teach you a depreciation
calculation from what a newvehicle would cost.
Right.
I, I could take you throughthat.
Literally, I could teach Bentleythat, Jack Russell, how to do
it.
But as far as se, as far asselling an intangible, it is, it
is a, it is a lot, it isdocumentation of financial data

(36:01):
and KPI data that you as anoperator, even though the best
companies I've dealt with justdon't have this kind of data in
a package.
Right.
And then it's tell, it's, it'screating the, the information
package and, and exemplifyingthe opportunity

James Blain (36:18):
Well, and, we're seeing a lot of owners stay on
board through the Right.
You know, I sold my businessand, and this, this ties right
into that.
I sold my business.
Why the hell are you still here?
Right.
You know?
So you see so many people thathave sold it, but they're still
materially involved in thebusiness.
They're still there.
They're still working on thatbusiness.

Ken Lucci (36:35):
I I, and that's, and that's, and that's the best way
to limit disruption.
some sellers don't want to,they're where they're packed
before we sell the company, andthey'll stay on for 30 days, or
60 days, or 90 days becausethey're aging out.
In other cases where it's abigger organization and it's
been part of the transactionnegotiations where the buyer

(36:56):
says, part of this is you willstay on and you will receive
great employment contract,which, you know, we've helped
negotiate as well as, you know,the earnout, the earnout that
you're going to get or theportion of the deal that you
didn't get paid at closing.
The best way to make sure you'regonna get it is if you stay at

(37:17):
the helm,

James Blain (37:18):
Okay.

Ken Lucci (37:18):
okay?
Now, at the same time, thecompany's not your piggy bank
anymore, and the company's notyours anymore.

James Blain (37:26):
That's gotta be tough.
I,

Ken Lucci (37:28):
Oh, some owners never make the transition now,
happily.
I mean, I've got, I've got guysthat are now, that I never
thought would do it, that arenow the mo, that they're the
best employee that this buyerhas.
Now, I've

James Blain (37:41):
Well, there's probably a lot of pressure that
comes off at that point too,right

Ken Lucci (37:44):
Oh, absolutely.
I've got a guy in New Yorkthat's, that's absolutely was
one of the best high touchoperators in the entire country,
and he's senior vice presidentof the buyer.
And I never thought he wouldstick around for six months
because, you know, he, he wantedto go off and play golf and ride
horses, but he stayed on.
I got another guy that, that,that took a sales, that this VP
of sales and this guy for thebuyer, he stayed with the buyer.

(38:07):
This guy is a better buyer rep.
This guy makes the buyer'scompany look so much better.
He's the most professionalsalesperson because he was a
company owner.
He's a man of stature and he,and he got it.
He made the transition, but alot of people can't make the
transition.
First of all, it's not yourcompany, it's not your piggy
bank anymore.

(38:27):
And second of all, you, you haveto take on the role of a C-level
executive for a company that'sbigger than you.
And they will make thedecisions.
Now, when we negotiated thosedeals, you know, we negotiate
the finance, the, we negotiate,help negotiate the employment
agreement, or, or we'reconfident in the imp in the, in
the attorney.
And when I leave the process,when I leave the process after

(38:50):
an LOI, uh, on the, on, on, whenI'm repping the seller, it's
because the attorney is topshelf, right?
If you seem, if I'm in themiddle of the process till the
day of closing, it's becausethe, the attorney needs help or
the attorney is fluffing uptheir bill.
And I want to keep it down formy client, but I think that's
the toughest p for some people.

(39:10):
For some people that'sdifficult.
For others, they shined.
Right?
They're like, I don't have toworry about the burden of
personally guaranteeing anymore.
I, I'm free.
I've got people that are here.
My team is fantastic.
And the funny thing is the bestcompanies I've ever sold already
have a team in place, and theowner is a less important cog in

(39:32):
the wheel.

James Blain (39:33):
well, it's gotta bring the value up too, because
I'm not dependent on that.
You, you, it, it's that point oftranscending to where in a lot
of businesses, they never get tothe point where the owner isn't
the business anymore.

Ken Lucci (39:47):
Well, those are the toughest to sell.
Okay.
I can tell you right now, Imean, if, if, if the toughest
business is to sell.
Or when the, uh, when the owneris emotionally involved and he
has really bad information fromwhoever about what his company
is worth.
because they don't know themarket.
The second is when the owner isliterally seven days a week knee

(40:08):
deep in the business.
Those are very difficult to sellbecause there's a such a blurred
line, right?
There's a blurred line.
And even the best buyer has tocome in and say, holy crap, I
need to fix things.
Those are the worst sales tomake.
By the way.
When, when, you know, and, andI, I have one promise, I one

(40:29):
promise I made myself when I getinto this,'cause I'm a contrary
to popular belief.
I'm a shitty salesperson.
Okay, wait a minute, wait aminute.
I have to believe in what I'mselling that, and that's my
fatal flaw.
You can read it on my face.
So I don't lie for sellers and Iwon't lie for buyers, and I
won't lie to sellers and I won'tlie to buyers.

(40:49):
And that's why, you know, when,when a buyer says, I don't want
'em in the process, that's.
That might be part of theproblem.
Okay?
Because I won't, I won't sit byand watch a lie, okay?
I won't sit by and watch a lie.
I won't let it go because Idon't give a, I don't care what
the commission is.
It's never enough money to easemy conscience.
Or when I'm walking down in aconference, you know, there's

(41:12):
been people that have comebefore me in this industry that
have done this, that have beenan M&A person.
They don't show that, they don'tshow their face at conferences,
okay?
There are people that do thispart-time, okay?
This is not something you coulddo part-time.
First of all, the certificationsto do this are, are, are
serious.
And second of all, this isprobably the most intense thing

(41:33):
I've ever done in my life.
Okay?
I mean, intense.
And when there, when we get tospecific points in the process,
it gets even more intense.
The only way it works is whenyou have sellers and buyers who
have the right intentions, okay?
They line up.
if you have a predatory buyer,okay.

(41:55):
Or someone that I've, I've hadbuyers approach me in the middle
of repping a seller, repping aseller who have said to me, uh,
we've got three or fourtransactions coming up.
You know, we want to put youunder agreement.
And I've said, you don't haveenough money to put us under
agreement because that means I,I won't work for any, I can't
work for anybody else.
I've had buyers want to, uh,bring us on exclusively.

(42:18):
I, so, so it's, we, we are theneutral arbiter.
And the way it works is we arevery well known.
We don't live and die by a, acommission, uh, buyers, a, a
business brokers charge 15%.
We charge three.
Okay?
We, we, we get paid a retainerto prep you.

(42:40):
And then we take a smallcommission and, and, and the
reasoning is this, you know,these businesses don't sell for
what people think they are.
And we don't take a commissionon the fleet.
But a but a business broker, thereason why they take 15% is they
only sell 20% of what theyrepresent.
We sell, we take 3%'cause wesell about 80% of what we
represent.
You know why we don't put, wedon't put companies on, we don't

(43:03):
take companies and put'em on themarket unless they're, unless
they're ready to rock and roll,unless they're ready to roll.

James Blain (43:09):
So, so let me, and, and I apologize if I'm putting
you on the spot, right?
But if you have a$5 millioncompany, what would a typical$5
million company look like?
What could a typical ownerexpect if they got out?
Right?
Do, do you have any kind of, isthere, and, and maybe the answer
is, well, it depends on everycompany, but if, if somebody is

(43:30):
listening to this and they'resaying to themselves, I'm at
that$5 million mark.
I want to be out in two or threeyears, I now know what I've
gotta do.
Right?
Obviously call Ken top of thelist.
But what if, if I'm at thatpoint and that revenue stays the
same and I can get my financialsin order, I.
What might I expect that to beworth?
If it was a

Ken Lucci (43:49):
Uh, I, I, I can tell you that I've seen$2 million
companies that are worth morethan a$5 million company.
I've seen$5 million companiesthat are worth more than 7
million to 8 million.
You know, the answer to thequestion is, first and foremost,
there's only one way that banks,view the value of a business.
And it's a multiple of what'sknown as ebitda, earnings before

(44:11):
interest, taxes, depreciation,and amortization.
And it's not rocket science,okay?
Every transaction that comes,that has come before.
You know, the, there's adatabase with banks have access
to it.
So the multiples on businessesalone, just enterprise alone, no
fleet is somewhere between a twoand a three or a two and a three

(44:34):
and a 3.5.
And we have an internal metricthat we use, a scale we use that
pushes it, determines what it'sgonna be.
And there could be a risk factorapplied as well.
But it's, that's the multiple.
And then as far as with fleet,okay.
And, and, and we always startthe process by valuing the fleet

(44:55):
separately.
And I'll tell you why.
If somebody is extremely fleetheavy and the value of the fleet
is high, right, they're actuallygonna short themselves on the
enterprise multiple.
So, so there are some buyersthat like to do a wrap and, and
they will only give you an offerbased on.
A wrap of an entire package, andthose go between 4.5 and 5.5

(45:19):
times ebitda.
And I can say those flat outbecause the art of what we do is
what goes into that EBITDAnumber.
Okay?
We, we literally look at thefinancials of the past five
years.
We pull out expense anomalies,we pull out excess owner
consideration, we pull out a lotof things, and we create an

(45:39):
adjusted ebitda.
And w this is, this is thenegotiating page in the
financial analysis where we willput down every adjustment that
we believe and we will put ahundred percent on it.
And then the buyer comes in andthey will disavow or ev vow what
we're talking about.
And that's my job.
That's where we make the mostmoney, is to say, wait a minute,

(46:00):
this is an expense.
You will not ever, ever, you'renot gonna pay this guy's
daughter.
You're not gonna pay this guy'swife.
You're not gonna pay for hisfive cars.
Right?
Right, right, right.
So my job is part art, partscience.
The science is the calculation,the art is what goes into the
calculation, right?

(46:21):
So, um, you know, a$5 millioncompany should have mid to high
teens for ebitda.
So it should a$5 millioncompany.
If it's run right and it'sprofitable, it should have 15 to
17% ebitda, the best we've everseen, a 22 to 24% ebitda, right?
So you have a multiple of that.
The key is when you have someonethat wants to buy the whole

(46:44):
package, you have to start withthe foundational, the fleet
foundation, because look, weknow from a concrete perspective
what that fleet is worth.
We know what it's

James Blain (46:54):
That's a, it's a fixed number.
That's, that's not the rock,that's not the hard part.

Ken Lucci (46:58):
Right.
So the, the, the rest of it is,the rest of it is, you know, the
cash flow of the business.
And then the most important iswhat we call the net equity
calculation.
It's, you know, you owe money onyour fleet or you, you owe an
EIDL loan.
So this is what your sellerproceeds look like.
And ideally we wanna have thatequation done 18 months before

(47:22):
you hit the market.
Because we want to say from atax perspective, if you do
nothing, this is what you'regonna pay in taxes.
But if we, if we work with a taxplanner and we've referred, uh,
people to tax planners and, andwe are, you know, I'm very
skeptical on referring people,but we will help identify and

(47:42):
interview tax planners so that,that people can take appropriate
measures.
Um, to do it.
So, but make no mistake, I'veseen$5 million companies that
aren't worth anything becausethey have practically no profit,
right?
That's the e in ebitda.
E is earnings, right?
Um, and you know, part of whatwe do is educating people on the

(48:05):
entire process and financials.
Um, and I've seen people with,you know, very single digit
ebitda.
I've seen people with a$5million company where, you know,
2 million of it will be revenueconcentrated with two or three
accounts that scares the crapout of buyers, right?
So there's a lot of things thatgo into this, and which is why

(48:26):
if your process is you areoperating your business and
you're really, really good atgetting cars from point
vehicles, from point A to pointB, and you're really good at
operating your business, I don'tknow what makes you think that
you want to take time away fromthat?
And I'm gonna sell my businesson my own.
Why?
Why?
I mean, I can tell you in everycase that we've been, we've

(48:48):
brought companies to the table,we've gotten more money than if
the person did it alone and, andon their own.
And we've also, I I will tellyou right now, we've absolutely
alerted our client to potholes.
And this on the seller, on theseller side, massive potholes.
And what I love the most is whena process comes together and

(49:09):
I've got multiple buyers andI've got multiple buyers, um,
uh, vying for the business, andit's a good business.
Right?
That's the key.
You've got a good product.
And, and that's the best, that'sthe best time that we're able to
say to a seller, you have a, youhave B and you have C.

(49:29):
Now you pick, who do you wannasell this business to?
there's a famous deal I didwhere I drove the owner of the
company in New Jersey to threeto three, to the locations of
three buyers.
Okay.
we had the deals, we had thelois and we, we went to
interview and talk to thebuyers, interview the buyers.
Okay.
And, and we did, we did, youknow, uh, extensive meetings

(49:54):
with them, you know, and theones that just wanted to go out
to lunch, the one that justwanted to go out to lunch and
really didn't want to go and,you know, look in his business.
I said, well, what do you think?
He said, uh, I don't know aboutthat one.
And then the last one, which Iknow was really a very, you
know, a great, a, a greatoperation.
The two of them, the actuallythree, they were all great

(50:15):
operations.
But anyway, the bot, the bot,the seller says to me after the,
the last one, he says, listen,I'm gonna call you.
And I said, um, I have a, I havea conference call.
And I didn't take his call.
I said, I would rather talk toyou tomorrow morning.
And that was strategic because Idid not, I wanted him to think

(50:35):
overnight and say, who's thebest fit?
But that was, that was a processwhere you never have seller's
remorse.
You know, the seller that, theseller that entertains one buyer
and the entire process islistening to the bot.
That one buyer with no soundingboard, even if you have a good

(50:57):
attorney, they're not in theindustry.
Right?
I mean, I don't mind, I don'tmind, I would love another great
m and a person to, in theindustry to, to talk to about
this stuff.
But I believe the seller remorsepart of not going through the
process and not entertainingmultiple buyers, whether you get

(51:19):
'em to the point of an offer ornot, you have to exhaust all
possibilities because it's yourbiggest financial decision in
your life.

James Blain (51:30):
Yeah,

Ken Lucci (51:30):
And that, that's kind of what weighs on me.
And when I, you know, when Ihear that so and so bought so
and so.
they, they didn't use anybodyand they used a local attorney,
right?
'cause we hear about it on thebank side.
I kind of, I kinda shake myhead.

James Blain (51:49):
I, I think as we kind of draw this to a close, I
think the big thing that hasbeen the real theme here is to
be intentional.
Right?
You've done a really great jobof showing us the difference
between just going out andsaying, all right, I'm done.
I'm gonna walk away.
It's that time, but truly beingproactive and being intentional

Ken Lucci (52:08):
deliberative

James Blain (52:09):
that e Exactly.

Ken Lucci (52:10):
having an exit, having an exit plan and exit
process.
E you know, the worst thing is,is you really weren't planning
to sell.
I talked to one guy who, whoflat out said to me, no, no, I'm
two years away.
And, and he wasn't.
I mean, he, he sold a businessand I'm like, dude, I don't give
a shit who you use, just usesomebody.
But at the, but, but at the endof the day, be deliberate

(52:32):
because, because.
You know, buyers have their owntactics, and if one of the
tactics is to isolate you, andif one of the tactics is you
don't know whether what they'reasking you for is, is, uh, is
good to, is is appropriate togive at that time.
Or I have in many cases whereI've said to the buyer, you do

(52:56):
not need that information tocreate a letter of intent or
make an offer.
We would be happy to share thatduring due diligence.
Okay.
Including, you know, names ofstaff, uh, including customer
lists.
Customer names.
No one needs to know that youneed to know concentrations and

(53:17):
maybe what categories, butthat's really when, when it's a
shame because I probably shouldhave written down every one of
the things where I've said, youknow, that's really not.
That's really not, you don'tneed to see that.
And if you wanna see that, weneed a refundable deposit and we
need a contingency, we need a,we need an offer letter.

(53:38):
Right?
And we're happy to show it toyou, but we think you're on a
fishing expedition.
You know, I'm gonna tell you onefinal story, and I know we're
going over the line.
We had a situation where theseller insisted, insisted on
telling his upper managementteam that the business was for
sale.
And I said to him, flat out,that is the worst possible thing

(54:00):
that you could ab you could do.
Uh, that is absolutely the worstthing that you can do.
Well, the person that's workedfor me for 20 years, I said, my
advice is not gonna change.
That is absolutely the worstthing you could do.
Well, he didn't listen.
He told his, his ops manager andhis dispatch manager, they

(54:21):
proceeded to download thecustomer list.
And, and, and, and walk.

James Blain (54:26):
Oh,

Ken Lucci (54:26):
and walk to, and walk to a competitor.
And they stole 800.
They, um, what amounted to$800,000.
Okay.
In a variety of c clients.
And this owner was, he was ahands-on owner.
But, but it's that easy.
Okay?
And, and part of the exitprocess will be if you start it

(54:49):
a couple years in advance.
Okay?
Tell me about so and so.
what do you have for anagreement with them?
Do you have a non-solicitation?
Do you have a confidentiality?
Non-solicitation,non-acceptance, a agreements?
And they'll say, well, con,non-competes are not legal.
I said, that's not what I said.
Okay.
Now, A confidentialityagreement.
Non-solicitation, non-disclosureand non-acceptance is, is, is

(55:13):
it?
You can compete in the sameindustry.
You just can't steal my stuff.
Right.
So, and, and that's why I gowith the statistic that for
every one of these deals youhear about, there are four that
That fall apart.
Yeah.
It's an inter, it's an integralprocess.
I'm not saying I'm the best atit.
I'll tell you, we are phenomenalat the work product piece.

(55:36):
We're phenomenal at theinformation package and we're
phenomenal when we're teamedwith a great attorney and a
great CPA and we all come to thetable respecting what each one
of us does, and that's when itworks best.
When we understand that our jobis to get it over the finish
line and just think about what Ijust said there, what are the

(55:57):
odds that the buyer's ever gonnause their, at the seller's
attorney?
Zero.
What are the odds that they'regonna use their CPA?
Well, we've actually built thatinto deals, right?
But.
You have to look at themotivation of the people on your
team.
And the only motivation theyshould have is to get this deal
over the finish line period.

(56:18):
And, and you as the seller, needto understand that when you're
listening to the advice from avariety of places.
And the only way to do that isif you're fully prepared.
'cause a lot of things come outduring the process.

James Blain (56:33):
Well, I appreciate you going through it with us.
I know, you know, for me, whenwe do these episodes where we
get to really kind of dive intothe areas that we live are
actually some of my favoritesbecause, you know, we spend so
much time working with others,doing interviews, talking,
sharing.
You know, a lot of times wedon't really get that time to
really kinda dive in and reallyfocus on what we do.
And, and I will say, you know, Ilove co-hosting with you.

(56:56):
I love doing the podcast withyou.
But I can tell you personally,well, personally, I, I've, I've
actually taken a couple notesover here, not that I'm planning
on selling anytime soon, but I,I see a lot of companies that
they're not intentional, theydon't have that plan.
They think they might sell atsome point and they haven't done
it.
And I feel like we could do awhole nother episode on here's

(57:18):
the steps that, that you can doto get all those things lined up
and here's how you short things

Ken Lucci (57:21):
You should be prepared.
Your business should be preparedto sell any day because if
you're prepared to sell, you arealso prepared to to borrow,
right?
So that if you are prepared withall of your financials, your
KPIs, et cetera, and, and youare prepared not only for the

(57:42):
sale process, but you'reprepared for the next
opportunity.
Whether that is your competitorscoming up for sale and you need
to go to a bank, boom, you'reready to do it.
Okay.
And a lot of times they're,it's, uh, there's the, it's such
a lifestyle business whereyou're immersed in it every day.

(58:02):
The reality is, if someonewalked up to you tomorrow
morning and said, and it was abig LMS system, a learning
management system, and theysaid, James, we love Pax.
We love you.
We want you to come work for us.
Will you be ready?
Now, I will tell one storyquick, very, very quick.

(58:23):
I had a guy who started abusiness and it was a great, and
you, and I know who he is.
He, it was a recruitingbusiness.
He started a business and, and,and, and a seller knocked on,
uh, excuse me, a buyer knockedon his door seven, eight months
after we did his, maybe a yearafter we did his business plan
with him.
You know, what sold him to the,to the, to the, the pe to the

(58:45):
buyer, our business plan and ourfive year projections, because
he was actually in his firstyear, we got him profitable,
right?
And the opportunity looked sogood to this buyer who was semi
in the space, right?
But what did they want?
They wanted the process that hehas.

(59:07):
They wanted his, they wantedhis, uh, brand name, and they
wanted the two owners.
They wanted the two owners.
So that deal, you know, was apiece at closing and then a
piece over their three yearemployment agreements.
But the secret was, and weprepared him very, very well, we

(59:28):
prepared him to grow and becausewe prepared him to grow and we
did his initial lending package,uh, to, for, uh, get financing.
He was in the shape and ne henever thought he was gonna get
an an offer.
So, you know, it's an, theprocess is an investment.
And, you know, one thing I willtell you is no, you don't, you

(59:48):
don't have to sell your companyat the end of the process.
If we, we've identified with,with, with potential sellers the
opportunities and we've said,what don't you like about your
business?
Because you're making goodmoney, Ken, I don't like the
seventies.
A week.
It's killing me.
Okay, then let's try to do this.

(01:00:08):
Let's get, let's get this inplace.
Let's try this because you arenot sure whether you want to
sell.
So, uh, there's no way I wantyou to get to a closing table.
And, and the work we have donehas shown them and facilitated
that avenue.
So, um, but I think that 2025, Ithink the m and a side of the

(01:00:31):
world is gonna be three,probably even two to three times
more than it is today.
I think it's gonna be driven bythe insurance crisis.
I think it's gonna be driven bythe, the, the pro shrinking
profits for a variety ofreasons.
Um, and I think that the, youknow, we are, we're all aging.
I, we can do many, many things,but we can't stop the clock.

James Blain (01:00:52):
No.
And you can't buy back the time.
And you can't buy more time.
You have what you have.

Ken Lucci (01:00:57):
the best companies to sell are the ones that have 1500
reviews.
Their service levels arefantastic, and they have all the
systems and processes in place.
And, you know, you know, I'vesold companies that have had
PACS in place.
And, uh, the, one of the thingswe've said it, we've said along
the way to the buyer is thereason why this company is

(01:01:17):
successful is the internal teamand the systems they have in
place, including pacs, includingthe right marketing company.
And, and, and, and, you know,don't come in and disrupt the
apple cart and the smartestbuyers don't disrupt the apple
cart.

James Blain (01:01:34):
No, and and I will tell you, it's, it's funny that
you say that'cause I've alsoseen companies that have been
purchased that one of the firstthings they did, right?
They brought us in, they broughttheir telematics in, they bring,
we, uh, it just like any greatperson that understands
repeatability, these companieshave figured out their
repeatability and they've said,okay, you're part of our, our

(01:01:55):
family of companies now.
These are the systems we use.
We're putting them in place.
We're putting them in now.
And they're immediately able totake those companies.
Sure.
Those areas up and they're offto the races.

Ken Lucci (01:02:06):
we can spend another hour on, in, on integration.
You know, I, I love to do a dayafter closing, right?
On

James Blain (01:02:13):
Oh, I, we, we will definitely be doing that.

Ken Lucci (01:02:15):
And, because, you know, if you, if you do it
right, one plus one equals morethan two, if you do it wrong,
one plus one now equals lessthan two.
Right.
So you bought something, you,you took, you, you didn't take
the best practices from both.
You became wedded to the factthat because you bought it, you

(01:02:36):
are smarter than everybody else.
And I saw this in the securityspace, that's not the case.
The the best acquisitions arethe ones where you take both
best practices from bothoperations.
No one is the victor, no one isthe vanquished.
And you, you, you move forwardas a combined team.

(01:02:57):
Um, so there's definitely an artand a science to this.
I've seen terrible sellerremorse.
Uh, not on deals we've done, butI've seen seller remorse and
I've had to unwind deals whereyou know that the deals didn't
go well because they didn't havethe right team in place.
I don't care if you hire us ornot hire someone who knows m and

(01:03:18):
a knows the process.
Um, we were just blessed.
We had one of the biggestinvestment banks in Boston just
referred me to someone.
I'm like, how did you find me?
He said.
You're all over the place.
I'm like, okay.
Well, I said, I'm all over theplace in a small industry.
He said, yeah, and we're smartenough to say we don't know
everything.
You're coming in and he's on theseller side with me, and this

(01:03:40):
guy probably has five degrees,you know, five degrees more than
I do.
And, but, but he, he valued thefact that we, we know the
metrics.

James Blain (01:03:50):
But there's an insanely important lesson there,
and I don't want that lesson tobe missed.
Right.
I want to, I want to explicitlypoint it out because with what
you just said, there's a lessonthere for every single person
listening to this, right?
We're talking about somebodythat is representing a massive
financial institution.
We're talking about somebodyand, and they know enough to

(01:04:10):
know that in that industry, theyneed to identify someone that's
gonna be the expert in thatindustry, that it's gonna
provide them the knowledgethat's gonna guide them through
how many times as businessowners do we think we're the
expert will get through it,right?
Even, even at that massivelevel, they understand the need
for that and, and I, I thinkthat goes back to being

(01:04:32):
intentional as well.
If you are going into an areawhere you are honest with
yourself and you say, Hey, I'mnot the expert.
Know enough to know you needhelp and

Ken Lucci (01:04:41):
Uh, the pre-close phone call is, is my favorite.
And, and I say to, I always sayto every seller, are you sure?
'cause you don't have to dothis.
The easiest answer for you is tonot do this because you're a
profitable business.
And in fact, on the one of thelargest transactions I did, I
had to point something out tothe seller that was not

(01:05:03):
favorable on the buyer.
I found out something on thebuyer that I, I had sleepless
nights over it.
And I, I said to my businesspartner, this is gonna cost us
six figures.
If I, if I, if I.
It could, it could tank thedeal.
And he said, Ken, we can't livewith this.
You have to tell the seller thatyou've uncovered this.
And the funny thing is, theirlawyer didn't uncover it.

(01:05:24):
It was something in the buyer'sbackground that happened on
another trans, a pasttransaction that we, we weren't
involved in.
And I became aware in it, and Ithink, you know, the buyer held
it against me because I said itto the seller, but I'm sorry, I
became very close to the seller.
I get very close to all of mysellers because you're taking
them through a very intimateprocess.

(01:05:46):
But the seller said to me, whatshould I do?
I said, you need to sleep on it,and you need to ask your
attorney, and you need to cometo the decision, and I think you
need to talk to the buyerone-on-one.
And I said, it's, I, I've donewhat I can do.
I've done what I feel isappropriate.
And, and she said, this personsaid to me, what would you do?

(01:06:09):
I said, I, I'm not gonna tellyou that.
That's, that's not up for me.
You, you, you, you get the bestadvice possible.
So anyway,

James Blain (01:06:17):
Well, this, this is the highlight of my week.
I, I, I don't know about you,but we, we, I feel like we say
that at the end of every episodeand I,

Ken Lucci (01:06:23):
Well, my blood pressure's a little high on this
one because, because it is, youknow, it is what it is.

James Blain (01:06:29):
Well, I, I don't think we couldn't, uh, uh, have
covered this better.
I think that the way that wewere able to kind of walk
everyone through it was great.
And I know that there's a lot oftopics.
We'll come back here.
So I think as always, we want tothank everybody for, for tuning
in, sharing their time with us

Ken Lucci (01:06:44):
Downloads have been great.
We get a lot of peopledownloading.
We're, I'm really, I'm, I mean,this was your idea, so I'm so
happy for you that this isworking well and our producer is
happy, keeps telling me thatwe're doing great things.
John.
does.
John Tieman does a great job.
Um, and I, I think that havingBrett Ol was on, we'll have more

(01:07:06):
industry people on that.
I think one of the best thingsthat we do is have people come
on and tell their story.
Right.
And Brett's story is very uniqueand I, I do, I do think, you
know, we, we want to have, we'regonna have some other people on
and their stories are importantand, and we'll try to keep
everybody up to date on what'sgoing on in the industry.

James Blain (01:07:28):
I agree.
Thank you everybody forlistening.
Thank you for listening to theground transportation podcast.
If you enjoyed this episode,please remember to subscribe to
the show on apple, Spotify,YouTube, or wherever you get
your podcasts.
For more information about PAXtraining and to contact James,
go to PAX training.com.
And for more information aboutdriving transactions and to

(01:07:51):
contact Ken, Go to drivingtransactions.com.
We'll see you next time on theground transportation podcast.