All right. So we are live on this Friday to talk about sourcing add- on acquisitions for acquisitive platform companies. I’m excited to have Dan and I’ll let him introduce himself.

Awesome. Well, glad to be here, guys. I’m hoping this is a valuable session for everybody. By way of some quick backgrounds, again, my name is Dan Herr. I’m actually in the Lake Tahoe area here today. I actually grew up around here. But the more relevant background is I’ve spent the better part of the last decade doing leading building sourcing teams. I spent four or five years doing that as outsourced buy- side dealer origination.

And then more recently spent four or five years building up an in- house proprietary dealer origination team over the course of four or five years at Serent Capital. I was in San Francisco, then down in… Austin, Texas. And the ask and the charge there from the partners and the team was to get us from a point where we were deploying $ 50 to $ 80 million per year to like, hey, how can we get that to be $ 400 to $ 500 million per year consistently, all proprietary?

And so by the time I left, we had 13 folks on my team, 10 of which were doing direct outreach, and we had marketing. And I also brought on somebody, we kind of called it sourcing operators. And I also brought on somebody, we kind of called it sourcing operators. But got us to the point where we’re deploying $ 400 million per year, 95% plus of which was proprietorially originated. So hopefully I can add some value for you guys. I’ve led platform out on acquisition searches. I’ve done it as outsourced, I’ve done it in- house.

There’s a list of a number of firms that I’ve worked with or supported over the years or done deals with. But yeah, looking forward to a great conversation.

And thank you.

Thanks for having me on.

I’m excited. So we’ve got a bunch of pre- submitted questions, which we’re going to start with. But people who are watching can submit questions and we’ll throw those on screen as the AMA progresses. So starting with the basics, why do add- on acquisitions matter? Why invest in this at all?

It’s one of the biggest drivers of value is really what it boils down to. And I think we’ve seen more and more private equity firms move in that direction over time. So I recall even at Serent early on, I’m like, oh, no, we’re going to do all focus on organic growth. And then started seeing pretty quickly that the inorganic growth just added multiples more value to those businesses. So some of the things we kind of put on the slide here, obviously, are natural ones also to talk about.

I mean, it’s a great way to buy down an entrance multiple, especially if you’ve gone and had to purchase an asset. It’s your platform company that was through an investment banking process. And obviously, if you can then go and pick up a handful of smaller targets for a couple of turns less than that and kind of buy down your entrance multiple as a result of those acquisitions, that can be a great one. We touched on just the pure value that there is in doing add- ons, like this kind of one plus one equals three effect.

I mean, we’ve all heard about what sort of synergies, so whether that’s revenue synergies or whatever it is. So I think it’s a great way to kind of buy down those different types of assets. And then the other big one is, what are your strategic initiatives for the business? So when you think about how we want to grow the business, is it we want to add additional geographies? We want to add additional product lines?

There’s a lot of different ways that instead of us going and building that in- house, how do we think more strategically about having this kind of stepwise growth? As opposed to something that’s more linear by buying versus building those additional strategic offerings.

Awesome. So getting into some of the tactics, what are the underlying pieces that you need to set up to make an M& A effort successful?

Well, I get this question all the time from people about like, do I really need to have a dedicated sourcing team or individuals or head of sourcing, et cetera?

Yeah.

like, can’t I just have analysts or associates that are doing this, whatever? My answer all the time is like, no, that’s wrong, right?

That’s not the right way to do that. And like, there’s a very specific reason why.

When you look at the makeup of a traditional kind of ad hoc sourcing team, if you’re pulling in analysts or associates that are, you know, doing this as kind of their side job, you run into this problem of importance versus urgency, right? If you just kind of look at it on an Eisenhower matrix perspective, anytime you have a deal that’s ready to get across the finish line, right?

Something that you’ve got to execute on and like you got to sign up under LOI, every analyst associate you’re going to have that’s in that theme or that area or that pot or whatever, like they’ve got to drop everything they’re doing and they got to switch over and they’ve got to just start executing.

Because I mean, the reality is you got a ticking time bomb. You got to get this deal done or, you know, move on.

And so like everything else gets dropped. So sourcing just falls into this bucket of important, but never urgent.

And it just the unfortunate thing is it ends up getting trumped all the time, right?

And so there’s a lot of ways to approach this in terms of like, whether you have somebody at the fund level, whether you have somebody at the portfolio company level, whatever.

But the point is like, you’ve got to have somebody that’s the accountable champion for this. You’ve got to have dedicated resources for it to ensure that you actually get to success because the reality is without that, you’re going to find yourself falling on your face more often than not.

Can the CEO of the company ever be an accountable champion or that person has so many other jobs, it’s not going to work?

Not that they can’t be the accountable champion, but that doesn’t fill the bucket of dedicated resources, right? And so like when I talk about the idea of like accountable champion, to me, that’s about having somebody that’s ultimately responsible for this.

And so like when you think about designing it for your CEO of your portfolio company, it’s actually got to be one of their targets, right?

Of like particularly getting either a certain number of add- ons done or a certain total enterprise value or capital deployment of add- ons done or procuring a certain percentage of the market. Like however you want to measure that, it doesn’t matter.

You pick whatever the right way is you want to measure that for your business. But the point is like, it has to be part of your OKRs. It has to be one of the key things that’s going to be delivered by somebody in your business. And they’re ultimately responsible for that success.

And then in addition to that, you know, or together, it depends, like there’s different ways to look at it, but then you’ve also got to have that dedicated champion, the person that’s actually performing those activities.

That makes sense. And the success- based compensation, what does that typically look like for add- ons in particular?

You know, it’s when you design comp for this sort of position, and I’d say this position, I’m talking about people that are doing, you know, sourcing for either platforms or add- ons. And this could be in- house or external, doesn’t necessarily matter.

But like, you’ve got to think about building the comp package in a way like you would for sales, right? Where you have to incentivize actually getting into success.

And there’s a lot of different subcomponents to that. Like, let me start with the high level, which is when you think about what does that overall comp look like? First, yeah, start with your own target earnings number.

That’s fine.

But like, I often believe like the simplest way is just break it up 50- 50 between like the amount that’s success- based and the amount that’s just like, you know, base or whatever, right? And so if you figure, hey, we’ve got to hire the person we’ve got to hire for this, you know, we’ve got to be paying them 300K or whatever, right?

And she put 150 in this bucket, 150 in that bucket. And like, you know, there’s a big portion of it, which is success- based, right?

There’s another piece, which is like, if you have multiple people doing this, I believe in having a team component to it, but in general, like that’s the simplest way to do it. There’s all sorts of numbers I can show you guys when we talk about that.

Actually, Braddock Matthews put together a nice report. I was actually looking through it last night from back in November of, you know, private equity business development compensation.

Oh, we can pull that into the recap notes.

Yeah. And so like, it’s a really good, you know, piece of information to know, like, what do you pay for these sort of people, whether they’re junior level or senior level, whether they’re, you know, how many years of experience that they have, what are they focused on? Like, there was some really great data points in there.

Much of it is, is base compensation versus, you know, success- based. So like that, but that generally that’s to me, the structure to think about you’ve got to have, you know, a big chunk of it that’s success- based and, you know, decent chunk of it that’s, that’s kind of base.

There’s another key component I’ll hit on, which is I believe in having scalers here.

Some people do this for sales, but I also really like having it for business development as well.

And what I mean by that is like, you want your rock stars to push even further, right? So like what you don’t want to just set like one success bar and say like, Hey, you get, you know, 20 bips or 50 bips of a transaction.

And then like, that’s it.

And it doesn’t matter how many deals you get.

Like, that’s what you get. What you want to do is you want to incentivize them to go to the moon, right? And so like, you, you might start with something that’s like, they get 20 bips at this point and 30 bips at this point and 40 bips at this point at 50 bips. And so like you max them, like you max, you max them out at a goal. That’s like, Oh man, if we do this, we’re crushing it. Right. And so you incentivize your rock stars to go all the way up that curve.

And, and, and even maybe even take what you originally thought was your baseline and, you know, success- based and, you know, put something below that, you know, or, or push it down, like just to encourage everybody to kind of move up the spectrum in terms of the percentage they get out of every transaction that’s consummated. And you can base that on total enterprise value.

You can base that on a number of transactions. You can base that on capital deployed. There’s a lot of different ways to do it. But that’s broadly what I mean about success- based compensation.

Nice. So let’s, let’s talk about targeting and we have a bunch of specific questions that I’ll throw up. But we, we put up a sample scorecard. Why is good targeting important and how do you think about good targeting when you’re, when you’re doing add- ons?

Well, specifically, yeah, when we’re thinking about this, this is related to add- on acquisitions, right.

And do an M& A for, for a portfolio company.

Um, I don’t know.

To me, one of the most important things we’re doing, you know, platform M& A is like, you’ve got to you’ve got to have alignment in terms of like what you’re trying to accomplish and like, what is a good transaction look like?

Right.

I think it’s it’s it’s pretty easy to have whoever’s working on this get off track really quickly. And and, you know, you also like as an executive team, don’t want to just be seeing shitty deals that are coming to you all the time. And you’re like, that’s not a fit. That’s not a fit. That’s not a fit. It’s like, just stop wasting everybody’s time and just like, let’s lay it out right at the start. Like, this is what a good transaction looks like.

This is what a good add on for us looks like.

And you might not know, you might not be able to fill in all these boxes, but like fill in the ones that you can.

Right.

And this is just an example we put together.

Right.

Like, here’s some of the things you might want to say, like, yes, it has to be U. S. or Canada.

Right.

Like and again, put it.

How important is that?

Like, yes, that’s required.

Right.

It has to be U. S. or Canada. I’m not looking at stuff that’s in, you know, the U. K. or New Zealand, even if it’s English speaking. Like, it’s just it’s got to be in U. S., you know, U. S. or Canada industry like nail that down. Maybe you want to. Expanded other industries.

Right.

So you might have like one industry is a high priority.

Other ones are slightly lower priority, but still interesting. Right.

To kind of give give a direction here. And then I think some of the important ones, whether it’s, you know, product or scale, you just got to hit on like what what means, you know, what is what a success here look like? Spend time as an executive team to do that.

Right.

And what I mean by that is often board members from a private equity firm, as well as like, you know, CEO, maybe CFO, maybe chief revenue officer, whoever, like.

Make sure you guys are all aligned on what this looks like and where to drive.

And it’s going to it’s you’re going to find that it’s actually going to, you know, bring up some interesting conversations for you guys strategically around like, oh, are we going to actually buy or build here?

If we actually did find an interesting business that looked like this, would we buy it?

Right.

Or are we, you know, set on only driving organic growth?

And so when we were prepping for this call, one of the things you mentioned was, hey, I probably wouldn’t go to SourceGrab and export a thousand companies. Why not? And how do you like create your starting list instead?

You know. You know, there’s a lot of ways to do it. Yes, I think that that has become a lot of people’s default today.

Right.

It’s like you go to PitchBook, you go to SourceGrab, you just, you know, say, oh, give me everything that’s in K- 12. And like, whatever, if you’re doing like, you know, I led EdTech investments for us at CERN is one of the things. So, you know, pull out all the K- 12 education businesses like, you know, what I prefer to do. I think the thing that makes the most sense is like I mentioned, like starting with that conversation, the executive team level. The other thing is like.

At the portfolio companies, the executives, they’re often already know a lot of the companies that you should be in touch with. And I think this is something that a lot of private equity firms miss, right? As oftentimes you’re like, hey, I know this industry.

I know who the players are like, we’re going to build a list internally here.

And it’s like, no, spend the time with the port co, spend the time with the executive leadership because they’re going to have ideas. They’ve been talking and they know they know who they’re going head to head with. Like, you’re obviously going to start with your competitor set.

Right.

You put all your competitors on there and they’re going to be part of your list.

But also, you should end up going and talking to, you know, revenue and sales folks and, you know, customer success people like go and talk to them. Talk to your your revenue team and see who else you’re running into in the market.

Right.

And that’s going to get you a really, really good start. Obviously, from there, go and expand it, go and find the other conference related to best alternative, you know, you got to start at the port co, you know, executive team.

So we were already answering this question. So step one, hey, talk to the executive team. Step two, maybe conferences. Step three, maybe data sources. Is that the right way to think about it?

To an extent, right, like market mapping, I’ve kind of built this iterative process.

As it relates to to building out market maps and figuring out how you put together this list.

And I think, again, building the list, the first thing to me is is understanding the market a little bit.

Right.

And again, you bounce back and forth between doing both of them, I believe in kind of having some sort of document of record where you start putting together like, hey, here’s here’s our current thinking about how the market looks like. Now, given if like you haven’t done that, you don’t know where to start.

Like, sure, you can go grab like some CB Insights, you know, whatever market map and plug that in for now. But like you should develop your own understanding for like how you think about the world.

And what the different buckets and types of companies are the easiest way is often to like put them into buckets of like product offerings.

Right. Or, you know, like that, that’s that’s usually the one most people end up starting is like, OK, these are the sort of offerings that are in our market and the ones that are in our core market and the ones are ancillary to us, whatever.

But in terms of that iterative process, it it does take at least today, it does take some manual work to go through that right by by way of going in and say, like, when you’re actually building the list, like if you’re doing it in source code, for instance, right.

like if you’re going and you’re using source code, oftentimes they have, you know, the conference list and the best of lists and all these sort of things you can plug in and find all those lists. The problem becomes, how do you build, you know, not that I want to go back and kind of management consulting speak here, but like, how do you build that MISI list, right? And you say, like, I want something that’s mutually exclusive and collectively exhaustive. How do I make sure I have that entire list?

And that’s typically the way I think about building out a market map is like, you know, try to build all the right buckets and make sure I’ve got all the companies inside of each of those buckets. But one of the other ways is just looking at it in terms of all of the lists that exist. And you kind of have to build like a list of lists, if that makes sense.

And so one of the things I end up doing is like, when you go through and you start finding interesting companies, every time you find an interesting company, you need to identify all the lists that they’re a part of, right? And then it’s kind of like you do this bouncing process. If you go from a list to a company, to another list, to another company, to another list, to another company, and then like you end up building out this massive set of all the lists that you should pull from. And then like, and that’s the first thing, right?

To me is like, just get, I know you said like, first thing, we don’t want to just immediately go pull everything from source code, but that’s probably the second thing, right? You know, go grab like every single company you possibly can that could be in the universe of what you’re looking for, right? And then like, don’t spend the time judging them yet. First thing is like grab them all, right? And then start filtering, right?

And figuring out here’s the ones, because what you don’t want to do is you don’t want to miss, and particularly when you don’t want to miss that one little niche company over here that like you didn’t find because you didn’t go through all these steps, because oftentimes that’s the one that can drive the most value for you, right? And so you have to build that massive list and you have to go through and then filter and figure out which ones you’re actually going to spend time on.

But again, you got to have the scorecard first, you got to build a market map, then you build a massive list. And once you’ve got that massive list, then start filtering.

And so as we start to think about prioritization, how do you think about tranches and how you’re going to treat those tranches there’s various approaches to doing that.

I’ve done this a bunch of different ways in terms of how you prioritize. We did it one time where I had five different executives from the portfolio company, as well as a board member, like go through and like rate each one of the prospects. You and I have talked before about this idea of being precisely inaccurate. That’s one way of being precisely inaccurate, right? It’s like over dialing in and saying like, yes, this is the one successful business or we need one. And I think that’s one way of doing it. And I think that’s we need that one business.

It’s like, yes, to an extent, like you want to be as focused and strategic as you can with M& A, but there’s also an element to it, which is opportunistic and it’s time bound, right? And you have to figure out like when the right time is that somebody is going to be open or interested to transaction. Sure. I want to help you catalyze something as much as I can, but you also don’t want to miss the opportunities that are there. Right.

And so like that’s kind of, I think some of the idea here is like, you want to put them in buckets, but don’t put them in overly precise buckets.

Right.

Because the reality is you’re coming outside into private businesses that don’t have to disclose anything publicly unless you’re looking at companies in the UK, which is a different story. But they don’t have to disclose anything public. So you’re taking best guesses here. Right. And so, again, I think about this, not that marksmanship is the perfect way to think about it. But again, like if if if you look at the idea of like what’s precision and what’s accuracy. Right.

Like if if you’ve got a really tight grouping, but it’s like way off target over like really precise, like you’re constantly shooting right on the mark.

Right.

But the problem is you’re missing the target, which is way over here. Right. And but but then like you could have a, you know, a center of your target that’s like it’s accurate. It’s centered around the target, but like you’re not hitting anything.

Right.

And so you kind of kind of balance those things. And I believe when you start with this, you kind of have to be a little bit more scattershot. Right. Because you’re still learning. You might not have the perfect market map. You’re doing a lot of the outreach. You’re still surveying the landscape. And oftentimes, like the conversations you have with your competitors, you’re still doing the research. And you’re still doing the research. And you’re still doing the research. And you’re still getting the feedback that you need.

And you’re still getting the feedback that you need. And you’re still getting the feedback that you need. It’s actually going to give you information as you like work up the chain toward the ones that are more valuable. Right.

So that’s a fantastic segue into this kind of process question. So we’re kind of in this identify stage. Who’s who’s on the list? Who’s in the market map as you start to get into the engage stage? Do you not want to start with the ones that you’re most interested in? You want to get some reps on?

Yeah.

I mean, well, it depends on who they are. It depends on who’s doing the outreach, right? Like, if the CEO or executive is doing the outreach or somebody that’s like super experienced in doing sourcing and add- ons and whatever, like somebody you trust that’s like not going to, you know, fumble and trip on their way to get this thing across the finish line, put them right on the best heart.

What if it’s a CEO who knows their company, you know, inside and out, but has never sourced and never done sourcing?

Yeah. That’s a common one, honestly. And I’ve worked with a lot of executives that like they’re great at leading businesses. They have stellar businesses, but they have no And honestly, I think a lot of folks end up being nervous about like, you know, how do I approach my competitors, right? And like, how do you do that? I do believe, and you and I have talked about this a little bit before, Kate, is like, how do I approach my competitors, right?

When you’re specific to like direct competitors. For instance, one of the things I do believe in, I think it is helpful to actually have somebody else that’s performing the outreach right. It actually helps bolster the CEO, for instance, where you kind of like, hey, I’m calling on behalf of you, know the office of Kate, right, like it can actually be helpful to not have the CEO direct now, given if CEO already has a direct relationship, they’re like sure, keep you know, keep, keep that going right.

And oftentimes, when you’ve been in a market for a while, like the CEOs do end up having relationships with each other. But it can be helpful to kind of have that kind of firewall, if you will right, between the direct competitors talking with each other and, you know, perhaps having somebody at the private equity firm you know, have those conversations on your behalf. But, to your point, like, if you’ve got high quality prospects, find a way to get in front of them right away.

Right, because, like time kills all deals, time kills all opportunities, like opportunities in M& A and add- ons- they’re perishable, right, and so, like you’ve got to get after them.

So, as you get into the engaged phase, are you, let’s say, you’ve got 100 companies on your list. Are you sending emails to all 100 or how do you think about that?

I mean, the short answer is yes, but I think the slightly longer answer is: like you have to be realistic about what the M& A landscape looks like today. The average CEO or executive is just getting hammered legitimately four or five emails a day at times, right? What you don’t want to do is you don’t want to be noise and you don’t want to end up in this bucket of like you’re just getting ignored because, like you just sent really crappy messages from the beginning and they blocked you. You’ve marked you as spam or whatever, right?

So what? What advantages or disadvantages do you have if you’re, if, if this is an add on target as opposed to a platform target, oh, I don’t.

Like, add ons are way easier to engage, just straight up. You know in doing this for a decade. Like, platforms are way harder, add ons are way easier to engage, right, because any time I would call somebody and I could immediately tell them: we have this and this and this and this other company that are in the edge of the market.

Right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right, right. I have immediate credibility, right, because they not, like I don’t even have to explain what I know about the market or anything else like that. Literally just mentioning the fact that we have this business is usually enough to get in the door.

Doesn’t always work, especially for some of the top prospects and the ones that, like, they’ve been out there a long time and they’ve heard it from everybody, yep. But add ons are, for sure, a lot easier to break in front of and, to the extent, like I have two lists sitting side by side, what you know, one’s a platform list and one’s an add- on list- i’m always going to hit that add- on list, as you know, as fast as i can, because i know i’m going to drum up opportunities a lot quicker and i can get add- ons done a lot quicker. Versus like platforms.

Platforms might make me more money and platforms, you know, bring more value to the firm. They just take longer. Yeah, um, like the average conversation, like for for purely proprietarily originated transactions in the private, you know it. Like platforms, like you’re talking about, at least for lower middle market, like you’re talking about three to five years. Like you know, it’s a long time to be building a relationship, start to finish.

So, speaking of relationships, um, how do you think about building relationships with founders at when, when the goal is an add- on, can it be the firm or should it be the portfolio company that’s building that relationship?

I guess?

How do you think about relationship building differently, if at all, for between platforms and add- ons, yeah, or is it? It’s the same thing, it’s, you know, building relationships with the founders.

Well, you, at the end of the day, like you- you, as if i’m sitting in the, in the chair of, you know, private equity firm- like i generally want to have all of those relationships managed at the at the firm level, right to the extent i can. Um, generally want to have all of those relationships managed at the at the firm level, right to the extent i can, um.

Both platform and add- on. But the reality is, from an add- on acquisition perspective, the people that actually know the portfolio company and know that end market are typically better suited to maintain and build those relationships right.

And especially, like, if, if you’re in a portfolio company that’s going to change hands over time, um, and so to me the most important thing is you kind of have to have a coordinated effort, right, um, and it’s tough, like it’s tough, to do that across multiple portfolio companies, multiple industries you know over time because, like you’ll have, especially if you end up going deep in any vertical or end market, you’ll end up with multiple of your ceos having, you know, relationships with same or similar companies and they could be out on acquisition targets for you know multiple of your portfolio companies, right, interesting, um, and so, like that’s to me like it has to be coordinated and- and it starts at the firm or fund level, what, uh, can you share any examples of outreach cadences that work really well for add- ons, including you know what’s email versus call versus linkedin and which person is doing them?

Sort of? Some an example of a, of a cadence that you might put together for an add- on?

Sure, yeah, um, it’s funny, like, when you talk about cadences and like outreach sequences, right, like, it’s a very well- known term in in the sales space, but like, as, as you think about it inside of, like sourcing, i think it’s, it’s a, it’s a, it’s a, it’s a, it’s a, it’s a, it’s a, it’s a, it’s a, it’s a, it’s a. Think it ends up like the wheels end up falling off a lot of times.

Um, let me tell you what often happens, which is somebody performs one outreach and then, like, forgets about it because they got a bunch of other things going on, and then three weeks later, sends another outreach and then, you know, maybe another one the next week, and then forgets about it for two months. Right, like that.

This is typically what ends up happening in a traditional like outreach for add- ons or platforms, um, and so it’s not strategic and and you’re risking just losing people left and right, right, and so the most important thing to me is like being thoughtful about like, what does that, what does that look like?

And the way i try to do that is i try to you start with a place of empathy, which is like, sit in the shoes of the ceo or executive and like what’s the set of messages that i would want to receive um, that would make me interested in engaging with somebody.

And so, um, the way that i tend to do this- and this isn’t the only way to do it, there’s a lot of different approaches to doing cases- but the way that i tend to think about it is i try to think about a process of escalation over a short period of time and then just completely dropping it thereafter. Right, because beyond a certain point you just risk becoming noise, um, and if you don’t do it in a condensed enough manner, you’re not appearing serious enough.

Um, and so, like the way that i treat it is as if the executive is like fuck, this guy’s gonna come bang on my door tomorrow. Right, like you know, but like in a very polite and genuine way. But, like i, i try to build it up like over three weeks, for instance. Right, and like often to me generally just start with some sort of first hour. You know this isn’t counting conferences or face- to- face meetings or any of that. I get into that in a minute.

But just if i’m doing kind of general outreach, you’re starting with one outreach and i’m usually giving them like a week, right, because i don’t know they could be on vacation. They’re busy, we’re both. Just i try to put myself- i just think of us as both of those executives and like we’re, you know, trying to communicate- like shit, you got stuff going on, i got stuff going on like whatever. If you didn’t have time in a week, that’s fine, right, but like the next week, then i start condensing it and i’m like: hey, did you get my message right?

And then, like it, condense it again so it might start, as it might start, as five business days, and then it might go to four, and then it might go to three, and then it might go to two, and then it might go to: hey, i’m sending him a message on linkedin and i’m sending him an email, right, and then now i’m texting him and now i’m telling him i’m gonna be in their city next week.

And now, like you know, like you just think about the process of like, if i was actually serious, if i legitimately have conviction that you are the business that i want to get in front of and i know we should be doing a deal together, then i need to be actually putting that together in a sequence and make it feel like i’m that fucking serious that i’m literally going to show up at your door and we’re going to do this deal tomorrow, right? Um, now, given, do it genuinely, do it politely. You can’t be- you know- an asshole about this stuff.

I mean, given, i’ve had a lot of deals where people told me to fuck off and then turn it up in an actionable deal later. But we can get into that later. But, um, the point being, like, you actually have to build something to me that like it, you put, thought into, like what that, what that cadence looks like, start with it you know something that’s over three weeks or whatever, and then just drop it, just shut up, go away, like don’t, don’t.

If they haven’t answered for, like, over that three- week period and you’ve done literally everything, you could drop it, go, do something else, right, and then find another opportunity to engage them.

Now.

That brings me to the second piece, which is like, around, you know, meeting people in person. Hands down, this is still the best way to get a deal done, right. I’d like, for every transaction i did at sarin, i met with them in person, right, and i had trips where, legitimately, like, i would jump from city to city and just go for my top prospects if i could fill in a couple meetings here and there, whatever great.

But like the most important thing was if i got one of my a’s or top prospects and i got them to engage, and i got a lunch or a dinner meeting or a coffee meeting and i got them to engage, and i got them to engage and i got them meeting with them, like that’s what ends up building the relationships, that’s what ends up allowing you to catalyze the, the transaction. I mean, we all know this intuitively, like oh yeah, we should spend time in person with people.

But i think a lot of us get comfortable with sitting behind the phone or sitting behind the screen and not actually getting out there and like you’re not going to regret getting on the road and getting in front of your top prospects now, given what i would do oftentimes, i think a lot of us get comfortable with sitting behind the phone or

Is I build, like, here’s the list of you know what my, where, my top prospects are, what cities they’re in, what geographies they’re in, right, and I would tell them. This was this was actually one of my suggestions when I joined Sarah and I said, hey guys, we got to happen to be places more often, right, we have to happen to be in middle of nowhere, Kansas, like I don’t really care, but like you’ve got to happen to be there for some reason. Make up a reason.

Maybe you had another meeting there, nobody freaking cares, right, but like you’ve got to happen to be there, right, and you got to get in front of them and you got to spend time with them. Now, given I again I would. I would tell people I’m going to happen to be in Denver six times a year, right, because I, maybe I had somebody I needed to meet there, right, but like I didn’t, I didn’t travel there six times a year, right, if I didn’t get the meeting I want, I didn’t take the trip.

But if I got the meeting I want, right, then then then you go and book the trip and you fill in around it and put other things like. That to me is one of the best things you can do is you got to get on the road, you got to get in front of people and you got to find out whether that’s at a conference or whether that’s in their city.

You got to do it and so we had a question on that. In that around balancing outreach and meetings, how do you think about making time for both? Because if you’re, if you’re always on the road and you’re not spinning up any new outreach, there won’t be any. You know the the funnel runs dry. How do you think about balancing those, balancing outreach, meetings and follow up, yeah, yeah.

How do you build your schedule, kind of, yeah, yeah, um. So for anybody that’s dedicated towards sourcing and spending a significant amount of time on sourcing- that I always told people I was working with it- you have to hit the different pieces of the funnel, particularly like the most important thing that I. You got to start at the top of the funnel, right, like there’s.

There’s two things I always looked at like this: think about a funnel and think about- I mean, you can think about an analogy of you know, a gold miner or whatever- like throwing stuff on the top of the funnel and kind of massaging the funnel as it goes down, but like you can’t have stuff stop anywhere along the way, right, like that’s the trouble with sourcing is there’s so many different balls you have to juggle at any given time, like there’s not one silver bullet to solve the entire problem.

You’ve got to constantly be adding new opportunities to the top of the funnel and you’ve got to start at the top of the funnel and you’ve got to constantly be moving things through your funnel as it goes right. Um, so that in mind, like, if you have to accomplish each of those things in a given day, to me I just believe in like time bucketing those right and saying, like time outing, like, say, okay, great, I have to get my outreaches done every day.

For, for anybody that’s dedicated to our sourcing, like they’re, whether if that’s their sole responsibility to me, like, set that time in your morning, make it be the first thing you do every day, rain or shine, you’re getting, whatever that number is, 20 outreaches done every single day. Right, I don’t want to, because that’s it’s the easiest thing to make excuses on. I was working on this other stuff, or whatever you have to like.

If you don’t add to the top of the funnel, you’re, you’re, you’re going to miss at the bottom of funnel and so you have to every day hit that number. And so to me, the way I think about- I always think about structuring things is like, first two hours is is cold calls and outreach right then the middle of your day, and again this- this is for me like being on on pacific time. It kind of made sense to do that.

For different people you can schedule things differently because, like, for instance, having um when you meet with people and when are convenient times to actually have those phone calls, follow- ups, you know actual scheduled zoom meetings, whatever. It might vary depending on what time zone you’re in um.

But then, like, after that, I’d typically say: you know, so, do all your calls in the morning, set up all your meetings midday and then the the afternoon and evening, because you know on East coast time, when you’re on Pacific, like, end of the day ends up being just follow- up time, right, follow- up emails, whatever little tasks you have. And then, like, do the research for the next day, what are the other companies I want to work on, and add that to the back of the funnel and you got to go through that every day.

That’s generally the way that I think about it now, given that doesn’t account for actual travel and any of that sort of sort of stuff. Um, but to me, like, first thing is got to have, you know, these, these kind of time buckets to ensure that you hit each thing each day, cool, um.

So, as we get into the nurture phase, what happens if, like you’ve done your your three- week press or you’ve seen them in person, it doesn’t happen immediately? And with the add- on lens in particular, how useful is it to continue to nurture over the course of your whole period? How do you think about that? Nurture for add- ons versus prospects or, sorry, versus platforms?

You know, nurturing is probably the most valuable and the hardest thing, right, like, for for some of the folks I I talked to, like, because right now, like, we’re working on building software to help people with the process of, you know, sourcing transactions, right, like, that’s, that’s what I’m working on today. But, like, when I have conversations, people, what are the pain points were they doing today as it relates to sourcing?

What I often hear is: like middle innings are the hardest, um, and and nurture is, is what you’re doing there, right, like, you even get maybe you engage them for the first time right, and, and the answer could be a lot of things. It could be, you know, nfw. It could be. You know, call me next year, it could be. You know, yeah, let’s freaking do this right.

Like.

There’s a lot of different answers you can get, but most often it’s kind of somewhere in this like amorphous, like not today, maybe sometime, you know, I don’t know, follow up with me in a year, like that’s. That’s often like a lot of the, the initial responses you get to these sort of things like hey, nice to meet you, let’s stay in touch, right, like okay, what do you do with that? Right, um, and, and, and, and.

That’s where you have to be thoughtful about this stuff and that’s where you have to start, from my perspective: figuring out, figuring out, figuring out, figuring out.

and, and, and, and, and being proactive about ways that you could engage people over time.

To me, the best nurturing I did with any prospects, it was the CEOs and executives that I built a personal relationship with. And I was able to like text messages and literally have executives where like, I know they really like the outdoors and hiking or whatever.

And, you know, I’m literally sending them pictures of me backpacking with my daughter. Right. Um, and you know, cause they have kids and whatever, and they like the outdoors. It’s like just finding common connections and building that relationship with them.

You can’t do it in just like, it can be a little bit cheesy, but like, you know, you want to be as genuine as you can with it. Um, but it can’t always just be like, Hey, just wanted to follow up and check in and see how things are going. It’s like fucking boring.

I’m sorry. But like find, find a better way to engage other than like, let’s have a check- in call.

Right.

Like, cause that’s what most people do is like, let’s have a check- in call.

Right.

And it’s like, and what you’re really asking by that is like, tell me your updated revenue and earnings. It’s like, find something more to talk about.

So you can actually build a relationship that’s more than surface level. And that’s the way you’re actually going to nurture transactions.

And to do that, you have to be thoughtful and you have to send them, you know, an article that you found that’s about their industry and things that you’re worried about that are impacts for their business and sharing it with them.

Right.

And like actually being in their industry or caring about it, or like, you know, just something that’s actually relevant for them. That’s, I don’t know. I don’t know if that’s helpful.

Here’s a good question submitted. Um, what if the CEO already has a relationship? So maybe it’s a partner, maybe how does that change things?

Yeah, look, it depends on the depth of the relationship, but again, uh, there, there is a certain element of actually, even if it starts with the CEO, having that relationship take place with the private equity firm. And here’s the primary reason when you start, especially if it’s a competitor, right.

Or, or there’s some sort of potential competitive dynamic. Usually, um, those targets end up being reticent towards like sharing information directly with their competitor.

And so there’s a number of things you can, you can do here and actually that’s the next slide.

Yeah.

Um, so you can actually do, do things like, like this as like creating artificial barriers.

Right.

So like one of the things that I believe in is like just by having it be, um, a conversation, not between direct competitors, between a private equity firm and this other company allows you to just start with the idea that like, Hey, look, instead of us having a conversation with direct competitors, why don’t we just, you know, chat with them?

Like they have these sort of conversations all day, every day. Like when I’m sitting at the private equity firm level, I can, I can say like, look guys, like I, I appreciate that. Like there’s a competitive dynamic here. Like we deal with competitive dynamics all day, every day.

Like if, if we were in the habit of, you know, sharing everybody’s confidential information, we wouldn’t be in business.

Right.

And so like, that’s a conversation as somebody at the private equity firm, I can, I can have very easily right now, not everybody might believe that for sure. But so that, that’s where I kind of call this peel back the layers of the onion sort of you kind of say, okay, great. Look, I, I understand everybody’s sensitive about this, but like, what if we did this, right? What if we start by just like, let’s just talk about high level numbers, right. And stuff that’s nothing that’s going to give anybody any competitive information.

I’m not asking for your list of customers. I’m not asking for anything that, you know, about your proprietary tech, whatever, like just give me enough details for me to get you a high level indication of interest or LOI that allows us to then take the next step. Because if I put an offer in front of you and you say, you know, no effing way, like we’re ever doing anything in that range.

Like, great.

Like let’s, let’s not keep talking about it.

Right.

But if I’ve hit a number that you’re like, okay, I could see, I could see something happening for that number. Then we’ve got something to talk about.

And then we can start peeling back more layers of the onion and go toward, you know, the stuff that’s more and more sensitive.

Now given to the extent we get all the way close to the finish line.

Yeah.

There’s a lot of other stuff that we’re going to need, but like, let’s keep that conversation directly between the private equity firm and that target.

And we’ll sign the NDA. Like we’ll have the, one of the things I would do if it was like people were really sensitive about is explicitly say in there that we’re not going to share any of this information with the portfolio company and tell a certain, right. And that, that a lot, you know, given whatever for the NDA, like what an NDA actually does or doesn’t do, but just psychologically the ability to kind of say, like, this is where it is. You can usually get there.

Awesome.

So I think let’s move into a broader, broader Q and a conversation, uh, starting with, um, this question. Did you ever have, do you ever have conversations with add on targets before acquiring the platform or maybe while you’re, you know, under LOI with the platform?

Oh, a hundred percent. Yeah. I mean, like if, if you’re not doing this, you’re not doing your diligence to say like, you know, and, and there’s a lot of ways to do it. Like you can tease the idea that like, Hey, we’ve got, you know, a transaction in this space. That’s, you know, like you guys, it feels like you guys would be a good fit, whatever.

Or you can just not, you know, like, you know, like, you know, even mention anything about like what’s going on there and just, you know, come out why you’re explicitly interested in them, various trade- offs to, to, to, to those approaches.

But if you’re, if you’re, if you’re, if you’re, if you’re, if you’re, if you’re.

If you’re in the process of acquiring a new platform, my sense is most people today are already reaching out to their add- on targets because what you want to be able to do is build that relationship before you complete the transaction with the new platform such that as soon as you get the deal done with the platform, you’re ready to go back and share that you guys just did that deal and be like, let’s work together, right? And you’ve already started that conversation beforehand.

Again, if you don’t mention anything about the fact that you might be having another conversation going on and then you come back and then they might feel like you’re a little disingenuous about the conversations you had, so that’s the risk you run if you don’t say anything about the fact that you’re working on something else, but you should be having those conversations.

A couple questions about what you should do in terms of staffing at the portfolio company. So first one, when do you want to head a biz dev or corporate development or something at the portfolio company? Is it if you’re doing a lot of add- ons?

When do you staff at the port co? Yeah, I mean, look, if you’re going to investment committee and one of your points of thesis is around actually doing a roll- up or doing add- ons at the portfolio company or they’re a decent size port co and you can see doing a decent amount of volume there, to me, it’s a no- brainer to have somebody in the seat there. And again, you don’t have to do it right away, right?

You can start with having folks that are at the fund level dedicated toward working with you on that add- on, but they’re often going to have a bunch of other things going on, whatever.

But to me, it purely comes down to the amount of volume.

And again, like we talked about toward the top of the hour, like the number of, like whatever you set as those measurable objectives, like number of transactions you’re trying to complete in a given year, whatever. If you’re trying to do, you know, two or more add- ons per year at one of your platforms, that’s probably when I’d start thinking about it, right? Like if you’re like, hey, there’s going to be, I mean, especially if you’re like, dude, we’re going to do, you know, five or six in a year, like let’s start with that.

Have somebody there, right?

It’s no brainer to me.

But yeah, to me, it comes down to kind of a volume question. And also it’s got to be large enough, right?

Like if it’s a, just talking like software terms, if it’s a 5 million ARR, you know, business that you’re investing in or 5 or 10 million ARR business, it’s probably not ready for having like a head of corp dev or somebody there, right? Potentially you could borrow part of somebody else’s time to do it. But again, I still believe in having a dedicated sourcing function.

If it is a smaller portfolio company, you think about doing M& A and you don’t have the resources to do it in- house, you don’t know how to do sourcing in- house.

Think about hiring a buy- side firm. And, you know, if you need help on figuring out what that looks like or how to hire a buy- side firm or, you know, just reach out to me. I’m happy to, you know, talk about all that stuff. But like, if you’ve got a smaller company, you want to do add- ons, that can be a good place to start where you don’t take on all the headaches, especially if you don’t know how to do sourcing in- house. You can hire a firm that’s going to, you know, staff them against that.

And then maybe they’re going to charge you some sort of retainer on a 5 or 10K a month or something like that. But then you’ve got somebody that’s actually done add- ons before.

But you got to make sure you measure them.

Anyway, that’s a whole.

No, I think that’s I think that’s interesting. And we’ll share contact information for you in the in the recap materials.

Sure.

Another team one. What if you’re replacing key people at the portfolio company, like the CEO or the CFO? Bad idea to try to do add- ons at the same time or you have to. It’s a long lead time.

So you got to start.

It depends who’s managing it. Right. If. If you have if you’re managing add- ons at the fund or firm level and you’re replacing CEOs and executives, like here’s again, the point you just make a like sourcing often takes a long time, right?

Like it’s you don’t just call. Well, you can call somebody tomorrow and get a deal signed up.

But like generally it takes, you know, a handful of months, right? Like especially when you’re doing add- ons, I think about this being a, you know, if you budget for it being an 18 month process before you get your first one done, that’s decent kind of budgeting. Like, can you get it done in six months? Yes. But it takes a little bit longer. And so like, yeah. If you’re changing out a CEO or CFO, whatever, it doesn’t matter. Like if you’re managing it at the fund or portfolio company level in terms of add- ons, just keep doing it.

Keep pushing it.

Like I think about sourcing is kind of like going to the gym.

It’s like you’re not going to bench 400 pounds tomorrow.

Right. But like if you put in the consistent workout every day, you’ll eventually get to that reason.

I think about sourcing is kind of like going to the gym.

And we touched a little bit on the next one already, which is, well, we talked about what’s big enough to do add- ons or to staff a biz dev person. What about the relative difference between the size of the add- on versus the size of the portfolio company? Any rules of thumb?

It comes down to the ability of the executive team. This is what it really comes down to, is post- merger integration. And I hate to say most firms suck at this. No, I mean, purely, like, post- merger integration is a shit show across the board. To the extent, like, there are firms you can hire and M& A pros, people you can hire to actually help you make this a little bit smoother. If your executive team does not have the ability to effectively take that on, you’re going to fail, right?

Like, that’s really what it comes down to, is, like, what happens after acquisition. Now, that said, I know. I know companies that have actually gone and acquired businesses bigger than them, right? I mean, I’m not even talking about full reverse mergers. I’m talking about straight up, you know, 5 or 10 million ARR business acquired a, you know, 25 million ARR business, right?

Like, it’s possible.

But there’s got to be the appetite at the fund or firm level, right? You’ve got to have a thesis around it. You’ve got to have an executive team that can drive it. And oftentimes what happens is if you’re thinking about or talking about something like this, it might not even be the leaders at either one of those firms that ends up being the leader of the combined company.

Yeah.

Right. And so if that’s something you’re actually thinking about, of, like, do a really, really big ARR acquisition, you better sure as shit have, you know, at least a board chair, if not a future executive, kind of teed up of, like, hey, this is who we’re going to have lead this.

And that’s kind of an interesting side question around egos of the acquiring company CEO and the add- on company CEO. How do you think about managing those dynamics? How do you think about pitching? How do you think about pitching being acquired to somebody who’s been a standalone CEO? When does that work? When does that not work?

Can you speak to kind of, yeah.

Yeah. There’s no faster way to kill a deal than having a shitty CEO that has poor bedside manners, right?

Yeah.

I’m sorry. Like, I’ve had, you know, platforms where, like, I’d teed up 15 add- on acquisitions that were just all slam dunks. And everybody just was rubbed the wrong way by the CEO. Like, that’s the fastest way to kill anything. And so you got to think about that, especially, like, if you’re going into an investment committee and you have, like, some sort of thesis around doing M& A. Like, does this founder have the capacity to actually interact with other executives in a way that’s appealing?

Like, the best CEOs that I’ve worked with, I helped one guy build a, you know, $ 2 billion revenue business doing a bunch of add- ons.

He’s a freaking best.

He’s a freaking best, man.

Like, he was, he just, like, every person we got on the phone with, he was so genuine.

He cared about them. Like, he didn’t come off as, you know, brash or big ego or anything.

Like, you know, he was genuinely came in with this curiosity and, like, an equal footing sort of thing. Like, that’s what, I mean, this is a little bit of a sidebar. But, like, even when you approach add- ons, you should not approach them with the idea of, hey, I want to come in and fucking acquire you guys.

It’s like, no.

What you need to come in with is an attitude that says we’re better off if we work together.

Right?

The combination of our businesses. Like, can you imagine, like, Kate, if we put our two businesses together and you and me went and we tackled the world, like, the things that we could accomplish for our customers, that’s the message that people want to hear. Now, ultimately, sure, like, what the transaction is going to be is, like, I’m going to acquire your business.

Right?

That’s fine. But, like, the pitch needs to be coming in on an equal footing. Like, give them respect. Like, don’t come in and be like, oh, you’re a small, shitty little business and we’re so fucking important.

It’s like, no.

You need to come in with, like, a genuine, like, mutual respect, like, you know, CEO to CEO and, like, what if we did this together? Like, talk about it like it’s a partnership. It will become an acquisition, but talk about it like a partnership.

Do you ever come across acquisition targets where that CEO just doesn’t want to work for anybody and so being a tuck- in is just a non- starter or that’s usually overcomable?

Sorry. Where you’re an add- on target that the CEO just doesn’t want to work for anybody? Yeah.

Like, they want to be a platform.

They don’t want to be an add- on.

Oh, it happens all the time.

For sure.

Like, there’s a lot of people that think they’re, you know, tough shit and they want to be their own boss and whatever. And, like, some of those you’re never going to find a way to do it. Like, there’s still guys that, like, I’ve been building relationships with for 15 years and they’re still like, you know, yeah, I’m only ever going to be my own dog.

Right?

And it’s like.

That, you know, that can be a thing. Now, that said, this is something I think people forget. No does not mean never.

Ha, ha, ha.

Right. No means not right now.

Yeah.

And the thing that I think I’ve been bitten by more times than I want to admit, where somebody tells me no, tells me to pound sand, tells me whatever, like a firm like, yeah, we’re going to be our own freaking thing. And then something happens in their life over the course of a period of time that I didn’t know or appreciate. And like they had a passing in their family. Right. Or their health changed or like whatever. There’s something that you can’t see from the outside.

And all of a sudden, the dynamic entirely changes and the stance entirely changes. And it goes from a never to like, let’s do this tomorrow.

Here’s another personality one. So particularly if you’ve invested in like a formerly bootstrap founder or one that has never had the capital or inclination to acquire before, they’ve always built stuff themselves. Do you ever have to persuade the platform company CEO that buying versus building? Is a really good idea.

Yeah.

And how do you how do you do that?

Oh, for sure. Yeah. Especially like if you have a just again, coming from most recent, I’ve spent a lot of time industrials, but like recently spent a lot of time in tech. If you have like technical founders in particular that have like a really they think they’re, you know, their code is the shit and they built the best infrastructure and nobody could ever replace that. And like anything anybody else would have is going to be complete shit compared to what we put together. Like that’s a conversation you have a lot of times.

And the tech world, because there’s like big egos about that stuff, it can take time to to to, you know, convince.

Right.

And like one of the if you like one of the ways you can say is like, here, set your targets, right? Like, what’s your growth target that you have for the for the for the firm or for the excuse me, for the for the company? Like, here’s what you need to hit right in the way of revenue growth or whatever. Right. And like maybe it’s an aggressive target. And if they’re not hitting it, like it just gives you an opportunity to come back and like, OK, well, we got to hit this right here. And here’s another way to do this. Um.

But a lot of times it does come down to like we’re not getting where we want to get as fast as we want to get there is is is is one of the first things. I think the second thing is you definitely sometimes, especially again in tech related businesses, have to go through this conversation of like, what’s again, it comes down to what our objectives are like, what are we trying to accomplish? Are we trying to, you know, build as much revenue and as much, you know, total enterprise value here as possible?

Or is there something else that we’re trying to hit? Right. And like, it’s it’s not aligned on that stuff like that’s it’s going to be tough to kind of have that conversation about doing M& A like you should have a good justification for it versus like, hey, we’re just going to do M& A because like, if there’s another way to accomplish it, that can be better because a lot of M& A does blow up in your face if you don’t do it the right way.

But like it takes time and it’s a board level conversation and like you have to get people involved and engaged on it. And like it might take a couple of quarters to kind of get them there. Right. And if they’re not the right leader to do that, like that’s a decision sometimes you have to make. You know, at the bottom. A fund level to kind of say, like, hey, this isn’t like this is not a leader for us that is going to actually do M& A because like they just they can’t get bought in on it.

Any this is kind of an open ended one. What are some of the biggest mistakes you’ve seen? Just like what can people learn at your expense?

God, don’t try to do a deal in the UK right before Brexit. Yeah, that one that one sucked. Let’s see. Biggest mistakes. I think honestly, again, it took me a long time to get to this was like, get on the frickin road and get in front of your top prospects and, you know, find a way to catalyze a transaction sooner than later.

Because I think one of the things earlier in my career is oftentimes I took those no’s or like the no’s from sitting at a desk or the no’s from a cold call as like a permanent no and didn’t circle back and didn’t find a way to catalyze a transaction sooner than later.

Right.

And I think one of the things that I learned over the course of about a decade was that I need to stop focusing on the noise and I need to focus on the ones that are actually going to move the needle and I need to put 90% of my effort into those those few prospects that I know are going to be good ones. Now, given when you’re starting out, you might not have that nose for it, right? Like you might not know which are the ones that are the good needle movers, because early on when you’re doing M& A. It’s easy to chase a lot of the noise, right?

It’s easy to get caught up in like, oh, we’ve got this shitty little two million revenue business that’s growing 10% year on year that like founder wants to sell. It’s like, I don’t fucking care. Right. If it’s a small, shitty business and it’s not a good transaction for us, like you got to get good at saying no. And that’s what’s part of what’s tough is like when you’re out there, your job, like the job I’ve done for a decade is you’re reaching out to people all day, every day, and you’re getting turned down left and right.

Right.

Right, um, but you have to, and and, and you’ve got to be. You’ve got to have conviction about what a good business looks like and what a shitty business looks like, and if it’s not an absolutely like this, this could be a really interesting opportunity for us. Move on, right. You have to move on, uh, because, like you’re, you’re gonna waste so much time chasing those small shitty businesses that are actionable. Right, stop going after the opportunistic stuff because, like it’s available, we could buy it and it’s you.

Try to convince yourself that there’s an angle, that it makes sense to go buy this shitty little business and it’s like no, figure out what the top dog is. Figure out the ones that’s actually going to move the needle. Spend all of your time and energy toward getting those to convert.

And in an add- on situation, who should be that keeper of the focus? Is it the like the deal partner? Who did the platform? Is it the ceo? Like who’s who’s good at making sure, because you’re incentivizing people to go find stuff and deploy capital, who who’s the keeper of the focus, the keeper of the the, the add- on focus, ultimately, like it does fall to the board right and particularly like it’s going to fall often to you know the folks that are coming from the firm or the fund, right, like you’ve got to be the ones that put the kibosh on stuff.

Right, and because- I especially because we’ve been talking about this a couple times- people that haven’t done a lot of M& A- you get shiny object syndrome right and again like it glitzy, it glitters, it’s cool, it’s like we could, I could see us doing something with it, whatever.

And then you, you know it’s like no, you got to shut it down and you got to focus and again, that comes from the board and the board’s got to drive that direction and like, if we’re spending time having board meeting conversations about shitty little businesses, we got to reset the direction here and we got to enforce for our executives that like that’s not worth us spending time on.

And whoever else, all right, maybe, maybe the last question here: so there’s potential for there to be a lot of cooks in the kitchen and I can imagine this. You know there’s the CEO and the CFO and the biz dev guy at the portfolio company, but then there’s also the partner and the VP and the associate who’s doing the sourcing- like there could be a lot of people. How do you avoid this becoming overly complicated in terms of communications, in terms of decision- making, in terms of everything.

It just comes down to like who should be involved at what level? Right, when it’s direct outreach, you don’t need everybody involved. When it’s initial qualification, you don’t need everybody involved.

But like to the point where, like, you’ve got something that becomes potentially actionable, like and there’s there’s two different ways to kind of think about it, like one is: it’s it’s actionable or interesting, and so like I need another set of eyes on it, right and and or there’s the other which is like Hey, we haven’t been able to engage these guys and so I need somebody else’s support to help engage these.

Right.

But I think it comes down to like you don’t need everybody in the room early on. Like set a clear path of, like here’s the set of things that are going to happen and here’s who’s going to make what decisions, to get to what point. And oftentimes what I’ve seen work really well, again like is you’ve got whoever’s responsible for day to day right, like they’re managing, you know, the outreach, the initial communication, all that sort of stuff. You’ve got somebody that’s managing the day to day. You’ve got somebody that’s that’s set on top of that.

So, again, this is often like at the funder, for you know private equity firm level, and then you’ve got- so think of that, it could be an associate, it could be an analyst, it could be a VP, doesn’t matter- and then you’ve got somebody that’s you know board level at the portfolio company and probably at the firm or fund as well. That’s going to like for the stuff that’s elevated to them going to quickly, like you know, should we explore this further? Should I get on a call with them or not?

Right, and typically the way I do it is like to the ex: like, let your CEO and executive team at the port co run with they. Got enough other shit they’re trying to tackle. Only bring stuff to them that’s interesting and like a little bit pre- qualified right now, given you might need, like you’ll need- to loop them in at some point. But like, don’t put everybody in the kitchen at once, don’t have everybody involved in every MNA. Call.

Like, have a subcommittee, have a certain set of people that are responsible for it, and then, when something bubbles up enough to the point where you’re like, Hey guys, this is interesting, I think we’re going to issue an LOI, right? Yeah, bring people into the kitchen, right, but other than that, like you, should keep it to a small group. Especially when you’re doing add- ons, like to me, you need two or three people that are involved and that’s it cool.

All right, this has been an awesome conversation. We’ll share recap information to everybody who registered- yeah, including Dan’s contact information. Thank you for joining.

Awesome thanks, Kate. Thanks everybody. Hope it’s valuable. If it can be helpful otherwise, just give me a shout. Appreciate it. Awesome, awesome, awesome, awesome, awesome, awesome, awesome, awesome, awesome.