October 11, 2024 • 18 mins
What if the right M&A advisory team could make or break the success of your business sale? Join hosts Russell Cohen and Jeremy Wolf as we uncover the high-stakes world of mergers and acquisitions, focusing on assembling the ultimate team of experts to guide you through the process. From understanding the pivotal role of a fractional CFO in ensuring financial clarity to navigating complex negotiations with seasoned attorneys, we promise to equip you with insider knowledge that will enhance your M&A experience. Whether you're a small business owner or part of a larger organization, this episode reveals how a specialized advisory team can transform the daunting task of selling into a seamless journey.
As we approach 2025, the M&A landscape is evolving with rising interest rates and increased liquidity from private equity groups. With these changes, having stable financials and a knowledgeable advisory team is more crucial than ever. We discuss current trends and their impact on deal-making, emphasizing the importance of selecting advisors with the right experience and integrity. Our conversation also highlights why every business should engage M&A-specific attorneys to tackle complex transactions. Tune in to gain valuable insights into leveraging these trends and learn how to prepare for the future with confidence.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Welcome to the South Florida M&A Advisors Podcast,
your trusted M&A team.
Here's your host, Russell Cohen.
Speaker 2 (00:13):
Hello, hello everyone , and welcome back to another
episode of the South Florida M&AAdvisors Podcast.
I am your co-host, Jeremy Wolf,joined by, of course, your host
, Russell Cohen.
Russell, good to see you,brother, Nice to see you.
Yeah, likewise, man.
So today we're going to talk alittle bit about the M&A
advisory team and why it'simportant to the deal, right?
(00:37):
So why don't you start off by,I guess, kind of explaining the
primary roles andresponsibilities of an M&A
advisory team in a merger oracquisition?
Speaker 3 (00:48):
Sure, thank you very much.
Obviously, you have the M&Aadvisor, which would be myself.
You will have your CPA involvedin the transaction.
Typically we get a CFOfractional CFO involved to
handle the networking, capitalanalysis and additional
preparation for the quality ofearnings.
(01:10):
And, of course, you have yourattorney, who will be involved
from the LOI stage all the waythrough the entire deal.
And then ancillary consultantscould be an insurance agent
benefits consultant could be ainsurance agent benefits
consultant.
Uh, it could be a tax advisoroutside your cpa or or tax
attorney or just any advisorthat the seller feels necessary
(01:33):
to help him or her through theprocess.
Speaker 2 (01:36):
So basically just a comprehensive team of experts in
each facet of the business tohelp that, that business or
business owner, through theprocess.
So I can see there's there'sprobably two ends of the
spectrum here.
Right, you have a smallerbusiness that maybe doesn't have
so much complexity, that maythink, hey, I'm going to sell my
business, but I don't, I don'tneed any help with this.
(01:57):
I kind of know, you know theins and outs of the business.
And then on the other end ofthe spectrum, you have the more
complicated organizations thathave, where mergers and
acquisitions can be a lot morecomplex.
So start with the smallerbusiness owner out there that
maybe they're going to selltheir business and they think,
like I said, they can go at italone, they don't need help.
What ways do you believe thatan advisory team would add value
(02:18):
to a business like that?
Speaker 3 (02:21):
Well, you're basically negotiating against
yourself no-transcript closing.
(03:14):
In a M&A transaction, keyemployees are interviewed,
determined if they're staying on.
Interviewed, determine ifthey're staying on.
Sometimes clients do you knowthey do a ramble or a random
sampling.
They actually may speak to aclient and ask you know, are
they happy with the seller?
So it's a little more intrusiveon an M&A deal and key
(03:40):
employees who are part of theseller's team are on a right to
know.
Speaker 2 (03:47):
Now on the other end of the spectrum, when we're
talking about some of the largerorganizations, I know, like
some of the deals you've donerecently in the past with that
large roofing company, obviouslymergers and acquisitions can be
quite complex.
How do you typically help tonavigate some of these
complexities and ultimatelyensure a smoother transition
(04:08):
through the deal?
You know the M&A advisor doesnot.
Speaker 3 (04:11):
You know they know how to quarterback the deal and
we have experience in manyfacets of the transaction.
But we're not experts in law,we're not experts in accounting,
we're not experts in benefitsor insurance.
We're not experts in accounting, we're not experts in benefits
or insurance.
So that's where that team comesin.
Where you know, the M&A advisorteam may not be just one
(04:33):
individual.
It could be a team of three tofive people who have different
talents.
That is helping the seller fromfrom the accounting side, from
from all different.
We all have different types ofexperience.
So it is a truly team effort,especially on the larger, larger
M&A transactions, and it'sreally not an individual game.
Speaker 2 (04:55):
Yeah, for sure.
So due diligence it's criticalin any deal.
How does an advisory teamenhance the due diligence
process and what are some of thecommon, I guess, like pitfalls
that they help avoid?
Speaker 3 (05:13):
So what I like to do is I like to bring in a
fractional CFO very early when Istart talking to the seller.
The typical CPA will not beinvolved in the quality of
earnings or in the calculationof the networking capital.
They do not really.
They want to be more of aconsultant to the seller and
(05:35):
they would get involved if it'stheir work that's being done,
that's being scrutinized by theaccounting firm.
But what happens is we bring ina fractional CFO.
They make sure the books arereally clean before we enter
into the quality of earnings,make sure all the categories
aligned If there's anythingunusual.
They also start educating theseller for the networking
(05:57):
capital.
How much money are they leavingbehind in the transaction for
the benefit of the buyer?
And that's one of the maindifferences.
When you're selling a verylarge company, you are supplying
working capital to the buyerbecause you are selling a work
machine, a business that is atrain going 150 miles per hour
(06:18):
and it needs that fuel of thatcapital.
So the private equity group isexpecting networking capital and
to a business owner this islike another language.
So as a M&A advisor, I educatethem on what's coming, what is
networking capital and how itwill affect the transaction.
(06:40):
And then I start bringing inprofessionals who will do the
analysis of networking capitaland start educating the seller
and then the quicker they engagehow the CFO works, the better
they're going to do in thetransaction.
Speaker 2 (06:57):
The negotiation process.
I'm curious how does thattypically work for you guys?
What role does the M&A teamplay in the negotiations?
And I'm just trying toobviously, you guys do your
homework on your end for theseller and then the buyer does
their homework.
Do you guys sit is it like amediation process?
You sit down and discuss thisopenly.
Do you guys sit is it like amediation process?
You sit down and discuss thisopenly.
Do you go back and forth?
How does that?
Speaker 3 (07:16):
typically work.
You know.
So, typically when we have ahigh quality business, we're
getting multiple offers.
You know it could be, you know,a couple offers.
It could be 10 offers.
So you know that initial thrustof offers.
You know we are there with theseller going through all the
offers, limiting the offers downto a couple, and then we go
(07:41):
even deeper with the potentialbuyers.
So it's important the attorneywill get involved and negotiate
the LOI.
But what you negotiate in theLOI hopefully will carry through
the entire deal.
So that initial negotiation ofthat LOI is the deal.
Basically it is the structureof the deal, from the price to
(08:04):
the if there's seller financing,rollover equity, if there's an
earn out, and they all havedifferent tax consequences.
So the M&A advisor, you know,and if we don't like the like, I
had an example I had 15 LOIscome in over time on a roofing
company, another roofing company, so I didn't like it.
He was learning what all theseterms meant and he finally got
(08:27):
his grasp on what he reallywanted.
Well, hence, one year later wego under an LOI with 94% cash
out with a 6% rollover equity.
So sometimes it takes sellersto understand the new language
that they're now embarking inthe M&A process and we have to
go through many LOIs to find theright buyer with the right deal
(08:51):
terms for the seller to move tothe next phase.
So it's a negotiation thatprobably never ends throughout
the entire deal because there'sa lot of negotiation points and
other facets of the transaction.
Speaker 2 (09:05):
So, russell, what about when the deal is done?
Obviously, the main focus is ongetting the deal done.
What post-transaction support,if any, does an advisory team
provide to ensure theintegration is successful?
Because I know if it's not justa sale, if it's an acquisition,
sometimes the previous ownerstays on.
There's a lot of complexity andlogistics.
(09:25):
That goes on.
Do you guys play a role after?
Speaker 3 (09:28):
the deal is done.
Definitely On the M&A advisoryside, obviously we're there from
start to finish.
So we're hearing and we haveall the documentation of what
was talked about.
So, if there networking capitaltrue up at the, you know, the
90 days after the closing, sothe CFO a fractional CFO will be
(10:00):
involved in that.
The attorney will be involvedpost-closing because there's
money held back in escrow, moneyheld back in escrow for the
networking capital, and thenthere's money like typically
around 8% of the entiretransaction, held back for reps
and warranty violations.
So, yeah, we all potentiallyhave a role after the fact.
(10:22):
The M&A advisor will go downminimally unless needed, but the
other advisors definitely willcome into play in certain topics
.
Speaker 2 (10:31):
Basically, Can you share with our listeners maybe a
success story where having astrong M&A team made a
significant difference in theoutcome of a deal?
Speaker 3 (10:43):
No doubt about it.
So, yeah, let's go back to thatlarge roofing deal.
It was $100 million.
It started out with 80, I thinkit was $70 million down and we
had a rollover equity.
We had an earn-out structure,two earn-out structures.
So we're going through the dealand it started, let's say, in
(11:06):
January and February, and one ofthe earn-out structures was in
the current year.
If the seller finished thecurrent year at a certain EBITDA
, he would have earned $10million.
Okay, ebitda, he would haveearned $10 million.
Okay.
So, by the time you know andthis was like January of, I
think it was 2022.
(11:29):
No, January of 23.
Yeah, january of 23.
23.
Yeah, 23.
If he hit in that 23, if he hithis EBITDA numbers, he would
get $10 million.
Well, by the time we got toSeptember of 23, he already hit
it.
So he already passed like anEBITDA of $13 million.
(11:52):
So, technically, while we'restill trying to close the deal,
he already hit the mark.
So we were able to negotiate toget him that $10 million.
Okay.
So, instead of $70 million down,he got $80 million down in the
and when we closed on it,november 30th of 2023.
(12:12):
So, and keep in mind, theprivate equity groups already
have structured their deal withtheir investors and have money
earmarked.
So it kind of upset the applecard and and.
But it was justifiable becausethe company was trending towards
20 million dollars that yearand which is very rare that you
(12:33):
know, while you're in thisquality of earnings during the
year you're selling, yournumbers are just going up like a
hockey stick.
So we were able to.
The seller was able to get youknow 100, a hundred million
total purchase price $80 milliondown.
He kept 10% equity and thenanother $10,000 earn out, which
is basically occurring right now.
(12:53):
So, yeah, so here we got aseller of $10 million more just
for because he did a great job.
Speaker 2 (13:02):
Very cool, very cool.
So, as we get closer to 2025,as we're wrapping up the year
here, what current trends areyou seeing in the M&A landscape,
and how should businesses adaptto these changes?
Speaker 3 (13:17):
It's always tough to get quality of inventory.
That's our biggest challenge.
We're seeing seeing interestrate hike cycle, even though we
just had a pullback of 0.5.
So it makes money moreexpensive and that hurts
multiples, of course, whenprivate equity will always put
like 30 percent down of theirown money that's committed and
then they'll put out a leveragedebt and then they'll put out a
(13:40):
leverage you know debt.
So yeah, so as interest ratesare high, the cost of money is
higher and the debt service ishigher and that squeezes the
multiples.
The good news is there are alot of private equity groups
with a lot of liquidity.
That's great.
Now it's just a matter of aseller having numbers that are
(14:02):
stable or trending upward andhaving a desire to go through
that one-year process to get thebusiness sold.
And what we're hoping, if youknow, after we get through this
election, whoever wins, theeconomy will stabilize.
I don't have high hopes,unfortunately.
I think we're going into veryunusual times which will, I
(14:25):
think, affect the overall M&Amarket, unfortunately in 2025.
Speaker 2 (14:32):
Yeah, we'll keep politics out of the discussion
for this episode at least.
Speaker 1 (14:38):
Who knows Every?
Speaker 3 (14:41):
time you wake up you kind kind of turn your head,
you're like.
Speaker 2 (14:45):
Really, we live in an interesting time, for sure.
Any advice you'd like to giveto business owners out there
that are considering a mergeracquisition regarding the
selection of their advisory team?
Obviously you're there to helpyou have any, but I'd imagine,
as a business owner, you'd wantto interview a bunch of
(15:05):
different advisors to find themost competent and the one that
you feel the most comfortableworking with.
Any advice you'd like to offerto folks out there.
Speaker 3 (15:14):
Listen, this is your biggest, one of your biggest
assets in your portfolio.
So you got to trust the personthat you're.
You know you don't want to usecar salesman.
You don't want someone lookingout for their interests.
Bottom line if we look out forthe seller's interest, then
seller wins.
Seller has to win.
It has to be a win-winsituation with the buyer and the
seller.
But if the seller, you know,wins and hits their goals and
(15:40):
that's also talking abouttaxation and everything Taxes
are a lot of money.
So the advice, you know,picking an advisor, experience
they have to have the ability tohave the investments and the
subscriptions to find the buyers.
They got to make, you know,capital investments to have the
(16:00):
network of buyers that will paythe highest price.
So these subscriptions to thesedatabases that we have could
run 30 to 50 grand a year and alot of brokers don't spend the
money on it.
And then you got someone who'srepresenting you who can't bring
any buyers.
What good is it?
Experience, integrity that'simportant.
(16:22):
You know I have a.
I do recommend certain CFOs andattorneys that are familiar
with the M&A space.
That's very important.
We need you know.
I have another thing for you,jeremy, you know, if you have a
heart problem, you don't go to apodiatrist.
Jeremy, you know, if you have aheart problem, you don't go to
(16:44):
a podiatrist.
So when you hire an attorney,get an M&A attorney, don't get a
divorce attorney.
Don't get a state attorney.
Don't get another attorneywho's never danced around an M&A
deal, because guess what?
The buyer's attorney are verylarge M&A firms that specialize
in this space.
(17:04):
They're M&A attorneys andthat's all they do and they know
their stuff.
So you better have an advisor,an attorney that can stand
toe-to-toe to them, becausethey're a very demanding process
and most attorneys can't handleit.
Speaker 2 (17:22):
I'm witnessing it right now so important to have a
team of experts surrounding youin these important transactions
.
So anyone out there, you hearthat any business owners
thinking about possibly sellingthat business or merging your
business or getting involvedwith us, reach out out to
Russell anytime.
He is a wealth of knowledge,really doing some great work
(17:43):
here in our South Floridacommunity and beyond.
So, russell, always a pleasure,brother.
Hey, thank you, appreciate it,of course, and to our listeners,
thanks for tuning in and if youlike this content, don't forget
to drop a comment.
Let us know if there's anytopic that you'd like to hear
about.
Don't forget to like andsubscribe and we will catch
everyone next time on the nextepisode of the South Florida M&A
(18:04):
Advisors Podcast.
Everyone, take care.
Speaker 1 (18:14):
Have a wonderful day.
Thanks for listening to theSouth Florida M&A Advisors
Podcast.
For more information, visitSouthFloridaMAcom or contact
954-646-7651.
Welcome to the South Florida M&A Advisors Podcast,
your trusted M&A team.
Here's your host, Russell Cohen.
Speaker 2 (00:13):
Hello, hello everyone , and welcome back to another
episode of the South Florida M&AAdvisors Podcast.
I am your co-host, Jeremy Wolf,joined by, of course, your host
, Russell Cohen.
Russell, good to see you,brother, Nice to see you.
Yeah, likewise, man.
So today we're going to talk alittle bit about the M&A
advisory team and why it'simportant to the deal, right?
(00:37):
So why don't you start off by,I guess, kind of explaining the
primary roles andresponsibilities of an M&A
advisory team in a merger oracquisition?
Speaker 3 (00:48):
Sure, thank you very much.
Obviously, you have the M&Aadvisor, which would be myself.
You will have your CPA involvedin the transaction.
Typically we get a CFOfractional CFO involved to
handle the networking, capitalanalysis and additional
preparation for the quality ofearnings.
(01:10):
And, of course, you have yourattorney, who will be involved
from the LOI stage all the waythrough the entire deal.
And then ancillary consultantscould be an insurance agent
benefits consultant could be ainsurance agent benefits
consultant.
Uh, it could be a tax advisoroutside your cpa or or tax
attorney or just any advisorthat the seller feels necessary
(01:33):
to help him or her through theprocess.
Speaker 2 (01:36):
So basically just a comprehensive team of experts in
each facet of the business tohelp that, that business or
business owner, through theprocess.
So I can see there's there'sprobably two ends of the
spectrum here.
Right, you have a smallerbusiness that maybe doesn't have
so much complexity, that maythink, hey, I'm going to sell my
business, but I don't, I don'tneed any help with this.
(01:57):
I kind of know, you know theins and outs of the business.
And then on the other end ofthe spectrum, you have the more
complicated organizations thathave, where mergers and
acquisitions can be a lot morecomplex.
So start with the smallerbusiness owner out there that
maybe they're going to selltheir business and they think,
like I said, they can go at italone, they don't need help.
What ways do you believe thatan advisory team would add value
(02:18):
to a business like that?
Speaker 3 (02:21):
Well, you're basically negotiating against
yourself no-transcript closing.
(03:14):
In a M&A transaction, keyemployees are interviewed,
determined if they're staying on.
Interviewed, determine ifthey're staying on.
Sometimes clients do you knowthey do a ramble or a random
sampling.
They actually may speak to aclient and ask you know, are
they happy with the seller?
So it's a little more intrusiveon an M&A deal and key
(03:40):
employees who are part of theseller's team are on a right to
know.
Speaker 2 (03:47):
Now on the other end of the spectrum, when we're
talking about some of the largerorganizations, I know, like
some of the deals you've donerecently in the past with that
large roofing company, obviouslymergers and acquisitions can be
quite complex.
How do you typically help tonavigate some of these
complexities and ultimatelyensure a smoother transition
(04:08):
through the deal?
You know the M&A advisor doesnot.
Speaker 3 (04:11):
You know they know how to quarterback the deal and
we have experience in manyfacets of the transaction.
But we're not experts in law,we're not experts in accounting,
we're not experts in benefitsor insurance.
We're not experts in accounting, we're not experts in benefits
or insurance.
So that's where that team comesin.
Where you know, the M&A advisorteam may not be just one
(04:33):
individual.
It could be a team of three tofive people who have different
talents.
That is helping the seller fromfrom the accounting side, from
from all different.
We all have different types ofexperience.
So it is a truly team effort,especially on the larger, larger
M&A transactions, and it'sreally not an individual game.
Speaker 2 (04:55):
Yeah, for sure.
So due diligence it's criticalin any deal.
How does an advisory teamenhance the due diligence
process and what are some of thecommon, I guess, like pitfalls
that they help avoid?
Speaker 3 (05:13):
So what I like to do is I like to bring in a
fractional CFO very early when Istart talking to the seller.
The typical CPA will not beinvolved in the quality of
earnings or in the calculationof the networking capital.
They do not really.
They want to be more of aconsultant to the seller and
(05:35):
they would get involved if it'stheir work that's being done,
that's being scrutinized by theaccounting firm.
But what happens is we bring ina fractional CFO.
They make sure the books arereally clean before we enter
into the quality of earnings,make sure all the categories
aligned If there's anythingunusual.
They also start educating theseller for the networking
(05:57):
capital.
How much money are they leavingbehind in the transaction for
the benefit of the buyer?
And that's one of the maindifferences.
When you're selling a verylarge company, you are supplying
working capital to the buyerbecause you are selling a work
machine, a business that is atrain going 150 miles per hour
(06:18):
and it needs that fuel of thatcapital.
So the private equity group isexpecting networking capital and
to a business owner this islike another language.
So as a M&A advisor, I educatethem on what's coming, what is
networking capital and how itwill affect the transaction.
(06:40):
And then I start bringing inprofessionals who will do the
analysis of networking capitaland start educating the seller
and then the quicker they engagehow the CFO works, the better
they're going to do in thetransaction.
Speaker 2 (06:57):
The negotiation process.
I'm curious how does thattypically work for you guys?
What role does the M&A teamplay in the negotiations?
And I'm just trying toobviously, you guys do your
homework on your end for theseller and then the buyer does
their homework.
Do you guys sit is it like amediation process?
You sit down and discuss thisopenly.
Do you guys sit is it like amediation process?
You sit down and discuss thisopenly.
Do you go back and forth?
How does that?
Speaker 3 (07:16):
typically work.
You know.
So, typically when we have ahigh quality business, we're
getting multiple offers.
You know it could be, you know,a couple offers.
It could be 10 offers.
So you know that initial thrustof offers.
You know we are there with theseller going through all the
offers, limiting the offers downto a couple, and then we go
(07:41):
even deeper with the potentialbuyers.
So it's important the attorneywill get involved and negotiate
the LOI.
But what you negotiate in theLOI hopefully will carry through
the entire deal.
So that initial negotiation ofthat LOI is the deal.
Basically it is the structureof the deal, from the price to
(08:04):
the if there's seller financing,rollover equity, if there's an
earn out, and they all havedifferent tax consequences.
So the M&A advisor, you know,and if we don't like the like, I
had an example I had 15 LOIscome in over time on a roofing
company, another roofing company, so I didn't like it.
He was learning what all theseterms meant and he finally got
(08:27):
his grasp on what he reallywanted.
Well, hence, one year later wego under an LOI with 94% cash
out with a 6% rollover equity.
So sometimes it takes sellersto understand the new language
that they're now embarking inthe M&A process and we have to
go through many LOIs to find theright buyer with the right deal
(08:51):
terms for the seller to move tothe next phase.
So it's a negotiation thatprobably never ends throughout
the entire deal because there'sa lot of negotiation points and
other facets of the transaction.
Speaker 2 (09:05):
So, russell, what about when the deal is done?
Obviously, the main focus is ongetting the deal done.
What post-transaction support,if any, does an advisory team
provide to ensure theintegration is successful?
Because I know if it's not justa sale, if it's an acquisition,
sometimes the previous ownerstays on.
There's a lot of complexity andlogistics.
(09:25):
That goes on.
Do you guys play a role after?
Speaker 3 (09:28):
the deal is done.
Definitely On the M&A advisoryside, obviously we're there from
start to finish.
So we're hearing and we haveall the documentation of what
was talked about.
So, if there networking capitaltrue up at the, you know, the
90 days after the closing, sothe CFO a fractional CFO will be
(10:00):
involved in that.
The attorney will be involvedpost-closing because there's
money held back in escrow, moneyheld back in escrow for the
networking capital, and thenthere's money like typically
around 8% of the entiretransaction, held back for reps
and warranty violations.
So, yeah, we all potentiallyhave a role after the fact.
(10:22):
The M&A advisor will go downminimally unless needed, but the
other advisors definitely willcome into play in certain topics
.
Speaker 2 (10:31):
Basically, Can you share with our listeners maybe a
success story where having astrong M&A team made a
significant difference in theoutcome of a deal?
Speaker 3 (10:43):
No doubt about it.
So, yeah, let's go back to thatlarge roofing deal.
It was $100 million.
It started out with 80, I thinkit was $70 million down and we
had a rollover equity.
We had an earn-out structure,two earn-out structures.
So we're going through the dealand it started, let's say, in
(11:06):
January and February, and one ofthe earn-out structures was in
the current year.
If the seller finished thecurrent year at a certain EBITDA
, he would have earned $10million.
Okay, ebitda, he would haveearned $10 million.
Okay.
So, by the time you know andthis was like January of, I
think it was 2022.
(11:29):
No, January of 23.
Yeah, january of 23.
23.
Yeah, 23.
If he hit in that 23, if he hithis EBITDA numbers, he would
get $10 million.
Well, by the time we got toSeptember of 23, he already hit
it.
So he already passed like anEBITDA of $13 million.
(11:52):
So, technically, while we'restill trying to close the deal,
he already hit the mark.
So we were able to negotiate toget him that $10 million.
Okay.
So, instead of $70 million down,he got $80 million down in the
and when we closed on it,november 30th of 2023.
(12:12):
So, and keep in mind, theprivate equity groups already
have structured their deal withtheir investors and have money
earmarked.
So it kind of upset the applecard and and.
But it was justifiable becausethe company was trending towards
20 million dollars that yearand which is very rare that you
(12:33):
know, while you're in thisquality of earnings during the
year you're selling, yournumbers are just going up like a
hockey stick.
So we were able to.
The seller was able to get youknow 100, a hundred million
total purchase price $80 milliondown.
He kept 10% equity and thenanother $10,000 earn out, which
is basically occurring right now.
(12:53):
So, yeah, so here we got aseller of $10 million more just
for because he did a great job.
Speaker 2 (13:02):
Very cool, very cool.
So, as we get closer to 2025,as we're wrapping up the year
here, what current trends areyou seeing in the M&A landscape,
and how should businesses adaptto these changes?
Speaker 3 (13:17):
It's always tough to get quality of inventory.
That's our biggest challenge.
We're seeing seeing interestrate hike cycle, even though we
just had a pullback of 0.5.
So it makes money moreexpensive and that hurts
multiples, of course, whenprivate equity will always put
like 30 percent down of theirown money that's committed and
then they'll put out a leveragedebt and then they'll put out a
(13:40):
leverage you know debt.
So yeah, so as interest ratesare high, the cost of money is
higher and the debt service ishigher and that squeezes the
multiples.
The good news is there are alot of private equity groups
with a lot of liquidity.
That's great.
Now it's just a matter of aseller having numbers that are
(14:02):
stable or trending upward andhaving a desire to go through
that one-year process to get thebusiness sold.
And what we're hoping, if youknow, after we get through this
election, whoever wins, theeconomy will stabilize.
I don't have high hopes,unfortunately.
I think we're going into veryunusual times which will, I
(14:25):
think, affect the overall M&Amarket, unfortunately in 2025.
Speaker 2 (14:32):
Yeah, we'll keep politics out of the discussion
for this episode at least.
Speaker 1 (14:38):
Who knows Every?
Speaker 3 (14:41):
time you wake up you kind kind of turn your head,
you're like.
Speaker 2 (14:45):
Really, we live in an interesting time, for sure.
Any advice you'd like to giveto business owners out there
that are considering a mergeracquisition regarding the
selection of their advisory team?
Obviously you're there to helpyou have any, but I'd imagine,
as a business owner, you'd wantto interview a bunch of
(15:05):
different advisors to find themost competent and the one that
you feel the most comfortableworking with.
Any advice you'd like to offerto folks out there.
Speaker 3 (15:14):
Listen, this is your biggest, one of your biggest
assets in your portfolio.
So you got to trust the personthat you're.
You know you don't want to usecar salesman.
You don't want someone lookingout for their interests.
Bottom line if we look out forthe seller's interest, then
seller wins.
Seller has to win.
It has to be a win-winsituation with the buyer and the
seller.
But if the seller, you know,wins and hits their goals and
(15:40):
that's also talking abouttaxation and everything Taxes
are a lot of money.
So the advice, you know,picking an advisor, experience
they have to have the ability tohave the investments and the
subscriptions to find the buyers.
They got to make, you know,capital investments to have the
(16:00):
network of buyers that will paythe highest price.
So these subscriptions to thesedatabases that we have could
run 30 to 50 grand a year and alot of brokers don't spend the
money on it.
And then you got someone who'srepresenting you who can't bring
any buyers.
What good is it?
Experience, integrity that'simportant.
(16:22):
You know I have a.
I do recommend certain CFOs andattorneys that are familiar
with the M&A space.
That's very important.
We need you know.
I have another thing for you,jeremy, you know, if you have a
heart problem, you don't go to apodiatrist.
Jeremy, you know, if you have aheart problem, you don't go to
(16:44):
a podiatrist.
So when you hire an attorney,get an M&A attorney, don't get a
divorce attorney.
Don't get a state attorney.
Don't get another attorneywho's never danced around an M&A
deal, because guess what?
The buyer's attorney are verylarge M&A firms that specialize
in this space.
(17:04):
They're M&A attorneys andthat's all they do and they know
their stuff.
So you better have an advisor,an attorney that can stand
toe-to-toe to them, becausethey're a very demanding process
and most attorneys can't handleit.
Speaker 2 (17:22):
I'm witnessing it right now so important to have a
team of experts surrounding youin these important transactions
.
So anyone out there, you hearthat any business owners
thinking about possibly sellingthat business or merging your
business or getting involvedwith us, reach out out to
Russell anytime.
He is a wealth of knowledge,really doing some great work
(17:43):
here in our South Floridacommunity and beyond.
So, russell, always a pleasure,brother.
Hey, thank you, appreciate it,of course, and to our listeners,
thanks for tuning in and if youlike this content, don't forget
to drop a comment.
Let us know if there's anytopic that you'd like to hear
about.
Don't forget to like andsubscribe and we will catch
everyone next time on the nextepisode of the South Florida M&A
(18:04):
Advisors Podcast.
Everyone, take care.
Speaker 1 (18:14):
Have a wonderful day.
Thanks for listening to theSouth Florida M&A Advisors
Podcast.
For more information, visitSouthFloridaMAcom or contact
954-646-7651.
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