1 00:00:00,000 --> 00:00:08,040 Welcome to the Growing EBITDA Podcast, where we unlock the doors to management and technology 2 00:00:08,040 --> 00:00:10,160 insights in the middle market. 3 00:00:10,160 --> 00:00:15,480 Join us as we explore innovative strategies to drive revenue and EBITDA growth, interviewing 4 00:00:15,480 --> 00:00:18,440 industry leaders and technology experts. 5 00:00:18,440 --> 00:00:23,340 Whether you're looking to streamline operations, understand the latest tech trends, or lead 6 00:00:23,340 --> 00:00:27,760 your company towards exponential growth, you're in the right place. 7 00:00:27,760 --> 00:00:31,880 Stay tuned and let's grow together. 8 00:00:31,880 --> 00:00:34,320 So James, what are we talking about today? 9 00:00:34,320 --> 00:00:37,920 You know, Mike, we're going to talk about IT diligence. 10 00:00:37,920 --> 00:00:41,120 Now everyone expect, hey, we have James on the line. 11 00:00:41,120 --> 00:00:43,200 He's the resident IT expert on the podcast. 12 00:00:43,200 --> 00:00:45,320 We're going to switch it up a bit today. 13 00:00:45,320 --> 00:00:48,160 And I've prepared some questions for you around IT diligence. 14 00:00:48,160 --> 00:00:49,560 Hope you're ready. 15 00:00:49,560 --> 00:00:50,560 Born ready. 16 00:00:50,560 --> 00:00:51,720 Alrighty. 17 00:00:51,720 --> 00:00:55,240 So first question for you, Mr. Redding. 18 00:00:55,240 --> 00:00:59,600 What is an IT due diligence and why is it critical for PE investments? 19 00:00:59,600 --> 00:01:04,200 Well, I think our listeners probably even already at this point realize that I'm not 20 00:01:04,200 --> 00:01:10,040 the IT diligence expert, but I can tell you why we do it from an investor perspective. 21 00:01:10,040 --> 00:01:16,700 And I can tell you why it's important to investors to do a work stream like that during a deal. 22 00:01:16,700 --> 00:01:22,900 So for those of you who may not be as familiar when private equity investors are going to 23 00:01:22,900 --> 00:01:27,360 invest in a business or are thinking about investing in a business, they're going to 24 00:01:27,360 --> 00:01:36,320 hire a number of different outside third parties to come in and help do diligence on that company. 25 00:01:36,320 --> 00:01:41,060 Typical work streams for diligence look like hiring lawyers to do legal work and accountants 26 00:01:41,060 --> 00:01:47,200 to do financial analysis, maybe some operations folks to look at the operations of the business 27 00:01:47,200 --> 00:01:50,900 or supply chain or whatever the case may be. 28 00:01:50,900 --> 00:01:54,880 Maybe they're going to hire some market research folks to do commercial diligence. 29 00:01:54,880 --> 00:01:55,880 What's the size of the market? 30 00:01:55,880 --> 00:01:56,880 Is it growing? 31 00:01:56,880 --> 00:01:57,880 Is it shrinking? 32 00:01:57,880 --> 00:01:58,880 Who are the players? 33 00:01:58,880 --> 00:01:59,880 Who are the competitors? 34 00:01:59,880 --> 00:02:03,040 And last but certainly not least on that list is IT. 35 00:02:03,040 --> 00:02:08,120 And this is something, James, that if you go back 15 years, hardly anybody did IT diligence. 36 00:02:08,120 --> 00:02:13,040 If you go back 20 years, hardly anybody did anything other than legal and accounting diligence 37 00:02:13,040 --> 00:02:15,320 for the most part, maybe a little bit of market research work. 38 00:02:15,320 --> 00:02:19,960 But the diligence landscape has been evolving to include a number of other kind of specialist 39 00:02:19,960 --> 00:02:20,960 work streams. 40 00:02:20,960 --> 00:02:24,440 And I include IT in this kind of in that bucket, a specialist work stream. 41 00:02:24,440 --> 00:02:27,800 And you know, when you're buying a business, thinking about making an acquisition and this 42 00:02:27,800 --> 00:02:32,120 this rings true for add on acquisitions, as well as you know, what are referred to as 43 00:02:32,120 --> 00:02:35,880 platform acquisitions, you kind of want to really understand what it is that you're buying, 44 00:02:35,880 --> 00:02:36,880 right? 45 00:02:36,880 --> 00:02:39,440 So you're going to hire all these experts who are going to go in, they're going to do 46 00:02:39,440 --> 00:02:40,880 a deep dive. 47 00:02:40,880 --> 00:02:47,920 Many of them have very well tuned skill sets, but also tool kits that they bring to be able 48 00:02:47,920 --> 00:02:50,200 to assess a business really quickly. 49 00:02:50,200 --> 00:02:53,140 And if you're talking about a business, maybe that's been owned by an entrepreneur, it's 50 00:02:53,140 --> 00:02:56,720 never been owned by another private equity firm before, it may be quite frankly, the 51 00:02:56,720 --> 00:03:00,520 first time that anybody's going and doing a deep dive into some of the corners of the 52 00:03:00,520 --> 00:03:01,520 business. 53 00:03:01,520 --> 00:03:02,960 So the investors learn a lot. 54 00:03:02,960 --> 00:03:07,360 Oftentimes, the seller of the business can learn a lot about their own business. 55 00:03:07,360 --> 00:03:12,080 And it can be a really, you know, eye opening experience for all parties. 56 00:03:12,080 --> 00:03:15,920 But when it comes specifically to your question about IT diligence, and why it's critical 57 00:03:15,920 --> 00:03:19,640 for private equity investors, you know, in today's day and age, you know, we've talked 58 00:03:19,640 --> 00:03:23,080 in other episodes about things like cybersecurity. 59 00:03:23,080 --> 00:03:28,180 But in today's day and age, where technology is prolific across almost all companies and 60 00:03:28,180 --> 00:03:35,120 all industries, we find that, you know, there's just a lot of exposure, a lot of risk in some 61 00:03:35,120 --> 00:03:37,320 of these operating companies. 62 00:03:37,320 --> 00:03:41,520 So what we try and do during diligence is we try and understand where the risks are, 63 00:03:41,520 --> 00:03:46,800 where the red flags are, where the opportunities for improvement might be from an IT perspective 64 00:03:46,800 --> 00:03:51,560 that could include things like looking at their cybersecurity infrastructure, right? 65 00:03:51,560 --> 00:03:54,960 What's the risk that this company, you know, what kind of exposure do they have from a 66 00:03:54,960 --> 00:03:59,440 cybersecurity breach perspective, the last thing we want to do is pay a lot of money 67 00:03:59,440 --> 00:04:00,520 to acquire a business. 68 00:04:00,520 --> 00:04:04,820 In some cases, it could be hundreds of millions of dollars to acquire a business and find 69 00:04:04,820 --> 00:04:10,640 out two days after we own it, or two months or two years or quite frankly, ever after 70 00:04:10,640 --> 00:04:16,320 we own it, that they've been hacked and or breached by a bad actor. 71 00:04:16,320 --> 00:04:21,680 And we find ourselves in a ransom situation where we can't access our data or our data 72 00:04:21,680 --> 00:04:25,880 has been compromised or our systems have been brought to their knees that would represent 73 00:04:25,880 --> 00:04:27,080 a significant risk. 74 00:04:27,080 --> 00:04:30,860 And when you think about private equity investors in particular, because they tend to use debt 75 00:04:30,860 --> 00:04:36,080 to finance the investments that they make, it's even more risky there, right? 76 00:04:36,080 --> 00:04:40,320 Because the banks aren't really going to care that you got hacked, the banks are going to 77 00:04:40,320 --> 00:04:43,480 care whether or not you make your interest payments and your principal payments. 78 00:04:43,480 --> 00:04:47,200 And quite frankly, it's just a big distraction to most private equity firms are not making 79 00:04:47,200 --> 00:04:51,840 investments hoping that they have a big distraction after they invest, they're hoping to very 80 00:04:51,840 --> 00:04:57,480 quickly grow that business and create value for the shareholders. 81 00:04:57,480 --> 00:05:02,460 And conducting an IT diligence exercise really kind of helps identify those risks. 82 00:05:02,460 --> 00:05:03,460 It goes beyond risks. 83 00:05:03,460 --> 00:05:08,320 There's a big part of IT diligence where we look at business enablement. 84 00:05:08,320 --> 00:05:13,480 You know, you want to make sure that the company has adequate systems and processes to that 85 00:05:13,480 --> 00:05:18,160 enables the company to be run efficiently that enables them to hopefully scale. 86 00:05:18,160 --> 00:05:23,860 We think a lot about ideally not having to upgrade ERP systems during our ownership just 87 00:05:23,860 --> 00:05:27,120 because of the cost and the risk that that represents the distraction of the business 88 00:05:27,120 --> 00:05:28,120 it represents. 89 00:05:28,120 --> 00:05:32,860 So kind of pre-closed pre-investment understanding cybersecurity risk, understanding business 90 00:05:32,860 --> 00:05:35,560 enablement, do they have the right enterprise applications? 91 00:05:35,560 --> 00:05:40,400 Are they the kind of scale and quality that that business needs to go to the next level 92 00:05:40,400 --> 00:05:42,440 or even to support the level that they're currently at? 93 00:05:42,440 --> 00:05:47,000 And then last but not least, you know, infrastructure is kind of the third leg that we typically 94 00:05:47,000 --> 00:05:48,000 see in IT diligence. 95 00:05:48,000 --> 00:05:49,000 Do they have the right hardware? 96 00:05:49,000 --> 00:05:50,840 Are they running the right systems? 97 00:05:50,840 --> 00:05:53,400 Are the computers within warranty? 98 00:05:53,400 --> 00:05:56,340 Like are we going to have the risk that, you know, in the first year of our investment, 99 00:05:56,340 --> 00:05:58,480 we have to go by, there could be 500 employees. 100 00:05:58,480 --> 00:06:03,120 Do we have to go by 500 laptops next year because they've been under invested in laptops 101 00:06:03,120 --> 00:06:08,720 or do we have to spend a lot more than we thought on security software because they 102 00:06:08,720 --> 00:06:14,960 don't have security software or do we have to change MSP providers because their current 103 00:06:14,960 --> 00:06:18,440 MSP just is not, they're a mom and pop shop and they don't have the capabilities that 104 00:06:18,440 --> 00:06:23,360 a medium sized company, you know, with a hundred or 200 or $500 million in revenue really needs 105 00:06:23,360 --> 00:06:25,680 to support them on a day to day basis. 106 00:06:25,680 --> 00:06:27,240 So it's really kind of those three things. 107 00:06:27,240 --> 00:06:28,520 I mean, I'm not the diligence expert. 108 00:06:28,520 --> 00:06:32,960 We're going to talk to you more about some of the nuances of this, but cybersecurity 109 00:06:32,960 --> 00:06:37,240 enterprise applications slash business enablement and infrastructure are the things that we 110 00:06:37,240 --> 00:06:42,160 care about and doing an IT diligence exercise, even though it costs money, that helps us 111 00:06:42,160 --> 00:06:44,640 get comfortable with those aspects of the business. 112 00:06:44,640 --> 00:06:48,840 And while we may find things that we don't like, we're comfortable with that. 113 00:06:48,840 --> 00:06:53,840 We just want to understand post-close what is the investment required to bring them up 114 00:06:53,840 --> 00:06:59,360 to speed look like, or to bring them up to best in class look like and doing an IT diligence 115 00:06:59,360 --> 00:07:01,960 project or assessment helps us get comfortable with that. 116 00:07:01,960 --> 00:07:02,960 Yeah, great. 117 00:07:02,960 --> 00:07:03,960 It's nice to hear from the business side. 118 00:07:03,960 --> 00:07:08,440 I always love when business folks understand kind of the components and can speak to it 119 00:07:08,440 --> 00:07:10,040 like you can and understand it. 120 00:07:10,040 --> 00:07:14,040 Obviously we've had years of looking at them together and reviewing, but when you have 121 00:07:14,040 --> 00:07:17,760 business folks who understand those components, I think it allows for a deeper and richer 122 00:07:17,760 --> 00:07:18,760 dialogue. 123 00:07:18,760 --> 00:07:22,240 So it's great to hear you talk to the compliments anywhere I can get them. 124 00:07:22,240 --> 00:07:23,240 So appreciate that. 125 00:07:23,240 --> 00:07:24,240 Yeah, no problem. 126 00:07:24,240 --> 00:07:26,680 The, the other side of that, you touched on something that I thought might be interesting 127 00:07:26,680 --> 00:07:33,440 to go a little deeper on, which is how does a IT, again, just the IT diligence actually 128 00:07:33,440 --> 00:07:35,480 influence the valuation of a deal, right? 129 00:07:35,480 --> 00:07:40,360 So we hear a lot of times, you know, we hear on the quality of earnings could affect it, 130 00:07:40,360 --> 00:07:43,600 or if there have some other issues that could affect the deal. 131 00:07:43,600 --> 00:07:46,520 What, what do you see from an IT perspective in your mind? 132 00:07:46,520 --> 00:07:50,980 I know you touched a little about hardware exposure, but what kind of exposures or bogies 133 00:07:50,980 --> 00:07:52,440 or whatever you want to call it? 134 00:07:52,440 --> 00:07:55,040 Do you think that could influence that valuation of a deal? 135 00:07:55,040 --> 00:07:56,760 Well, a couple of things come to mind. 136 00:07:56,760 --> 00:08:02,240 First and foremost, the valuation of a deal could go to zero real quick if we identify, 137 00:08:02,240 --> 00:08:07,280 and value is all relative, but if we were to identify, you know, an issue that was impossible 138 00:08:07,280 --> 00:08:10,080 to solve or resolve, could walk away from a deal. 139 00:08:10,080 --> 00:08:13,240 So from, it depends on what side of the fence that your, your perspective is, right? 140 00:08:13,240 --> 00:08:15,760 But the value could go from a lot to a little real quick. 141 00:08:15,760 --> 00:08:22,120 You know, we've had examples where we've had businesses that had cyber breaches weeks before 142 00:08:22,120 --> 00:08:23,120 closing. 143 00:08:23,120 --> 00:08:28,200 And I'm not, I'm not actually thinking about an example of an investment that we were making. 144 00:08:28,200 --> 00:08:32,280 These were in my consulting days and we were working with a business. 145 00:08:32,280 --> 00:08:36,360 We weren't doing the diligence, but we were working with them on a post-merger integration 146 00:08:36,360 --> 00:08:40,960 plan and the business they were looking at acquiring had a cyber breach a couple of weeks 147 00:08:40,960 --> 00:08:45,440 before, you know, they were supposed to close on that investment and it killed the deal. 148 00:08:45,440 --> 00:08:46,440 Right. 149 00:08:46,440 --> 00:08:50,400 Now, two years later, it ended up coming back to life at a discount. 150 00:08:50,400 --> 00:08:53,680 That business suffered tremendously from that breach. 151 00:08:53,680 --> 00:08:56,360 But in that instance, how much can impact on valuation? 152 00:08:56,360 --> 00:08:59,000 It was a couple hundred million dollar deal went to zero real quick, right? 153 00:08:59,000 --> 00:09:03,440 So hundreds of millions of dollars of shareholder value at risk as a result of there being, 154 00:09:03,440 --> 00:09:04,440 there being an issue. 155 00:09:04,440 --> 00:09:08,600 I would say that other ways that it shows up, and this is probably the more common way 156 00:09:08,600 --> 00:09:13,140 because it's, you know, while cyber breaches are increasingly common, it's not increasing. 157 00:09:13,140 --> 00:09:16,280 It's not that common that they're happening a couple of weeks before close. 158 00:09:16,280 --> 00:09:17,800 That was just tremendously bad luck. 159 00:09:17,800 --> 00:09:22,120 The other place that we should see it show up though is just in general valuation of 160 00:09:22,120 --> 00:09:23,120 a company, right? 161 00:09:23,120 --> 00:09:27,680 If we go and we look at making an investment in a business that has, you talk a lot about 162 00:09:27,680 --> 00:09:32,720 technical debt in some of our other episodes, when we look at a business, if they have been 163 00:09:32,720 --> 00:09:38,440 materially under invested in cybersecurity or under invested in enterprise applications 164 00:09:38,440 --> 00:09:43,680 or under invested in infrastructure, and that's been something that's been happening for years, 165 00:09:43,680 --> 00:09:47,720 we're not going to place as much value on that business as we would had that not been 166 00:09:47,720 --> 00:09:48,720 the case. 167 00:09:48,720 --> 00:09:53,820 You know, if we see a business who is appropriately investing in IT infrastructure, we're going 168 00:09:53,820 --> 00:09:59,880 to, well, A, realize that the leadership team is very thoughtful about that corner of the 169 00:09:59,880 --> 00:10:05,440 business, which is a positive because technology is enabling companies increasingly more frequently. 170 00:10:05,440 --> 00:10:08,480 But we're also going to look at the P&L and go, okay, well, they've been investing and 171 00:10:08,480 --> 00:10:09,760 then shows up in the P&L. 172 00:10:09,760 --> 00:10:13,500 So when I'm underwriting the deal and I'm expecting a certain amount of cashflow in 173 00:10:13,500 --> 00:10:18,680 year one or year two or year three, I'm assuming that the required investment in IT is kind 174 00:10:18,680 --> 00:10:20,520 of baked into the historical numbers. 175 00:10:20,520 --> 00:10:24,680 And when we do our modeling, we can look at that in the future and recognize that that's 176 00:10:24,680 --> 00:10:25,800 been considered. 177 00:10:25,800 --> 00:10:29,980 If you haven't been investing in that, we're probably going to have to discount those future 178 00:10:29,980 --> 00:10:34,320 anticipated cash flows, which is going to have a commensurate discount in the valuation 179 00:10:34,320 --> 00:10:35,500 of the business, right? 180 00:10:35,500 --> 00:10:37,860 So I'm sure there's a lot of entrepreneurs out there. 181 00:10:37,860 --> 00:10:41,000 A couple of them may be right, but I'm sure there's a lot of entrepreneurs out there. 182 00:10:41,000 --> 00:10:43,720 I would argue that most of them are wrong, who may think this way. 183 00:10:43,720 --> 00:10:47,980 But I'm sure there's a bunch who think about it like, hey, if I invest in this next type 184 00:10:47,980 --> 00:10:52,600 of enterprise application, which may be more expensive, or if I invest in those more expensive 185 00:10:52,600 --> 00:11:00,340 firewalls or a more appropriately sized MSP that I'm reducing my profitability, that reduces 186 00:11:00,340 --> 00:11:06,760 my take home, but it increases the profitability of the business if I don't, that ultimately 187 00:11:06,760 --> 00:11:11,640 my business is more valuable and I would maybe offer some counter arguments against them. 188 00:11:11,640 --> 00:11:16,800 I think many investors out there are looking at buying really good businesses. 189 00:11:16,800 --> 00:11:20,880 Some are looking at buying maybe businesses that aren't quite as professionally run, but 190 00:11:20,880 --> 00:11:25,280 those guys tend to pay less because they're going to have to go do more if they're going 191 00:11:25,280 --> 00:11:29,560 to ultimately own a business that is even more valuable in the marketplace. 192 00:11:29,560 --> 00:11:34,760 This is just one lever that you can pull, but increasingly it's an important one. 193 00:11:34,760 --> 00:11:36,920 No, it's an important one, I agree. 194 00:11:36,920 --> 00:11:41,440 I think it's interesting to have this conversation because it's no secret that we're business 195 00:11:41,440 --> 00:11:43,120 folks as well. 196 00:11:43,120 --> 00:11:49,760 As a firm, we decided to focus on standing up a team that focuses on IT diligence and 197 00:11:49,760 --> 00:11:53,600 IT improvement and consulting and those type of things due to seeing some of these market 198 00:11:53,600 --> 00:11:54,600 trends. 199 00:11:54,600 --> 00:11:59,160 I know my last question before maybe we flip the table back and talk about a little more 200 00:11:59,160 --> 00:12:01,240 on the IT diligence side. 201 00:12:01,240 --> 00:12:04,120 For you, what was that driving force that inspired? 202 00:12:04,120 --> 00:12:07,520 I know you're one of the main folks who took the lead on or the charge on trying to get 203 00:12:07,520 --> 00:12:12,440 this stood up and be whether it be via market research or speaking with others, what really 204 00:12:12,440 --> 00:12:16,760 kind of led you to believe that this was an additional service that our clients needed 205 00:12:16,760 --> 00:12:20,840 that you thought was valuable to them and what made you kind of want to push to have 206 00:12:20,840 --> 00:12:22,880 that be part of our offering to our clients? 207 00:12:22,880 --> 00:12:25,720 You're talking about IT diligence, right? 208 00:12:25,720 --> 00:12:29,880 So probably a couple of different factors. 209 00:12:29,880 --> 00:12:36,480 Starting maybe 10 years ago, maybe more, maybe 15 years ago, we started seeing IT diligence 210 00:12:36,480 --> 00:12:38,880 as a emerging workstream. 211 00:12:38,880 --> 00:12:46,040 More and more often, we were seeing some technologists come in and support the deal team, the team 212 00:12:46,040 --> 00:12:50,040 looking at making the investment in the private equity fund and they were increasingly bringing 213 00:12:50,040 --> 00:12:53,920 these technologists in and it was a little bit deal dependent. 214 00:12:53,920 --> 00:12:57,440 If somebody was buying a software company, obviously there's going to be a lot of technologists 215 00:12:57,440 --> 00:13:02,200 involved looking at the business and looking at the software and you know, etc. 216 00:13:02,200 --> 00:13:04,240 The code for a whole host of different reasons. 217 00:13:04,240 --> 00:13:09,480 I would say probably around 12, 15 years ago, we started seeing it show up also though more 218 00:13:09,480 --> 00:13:12,000 frequently in industrial businesses. 219 00:13:12,000 --> 00:13:16,480 I think the reality has been is that if you go back 20 some years in private equity, it 220 00:13:16,480 --> 00:13:20,280 was actually a pretty easy industry to make money and you could buy businesses for a pretty 221 00:13:20,280 --> 00:13:21,520 reasonable price. 222 00:13:21,520 --> 00:13:23,660 It was nowhere near as competitive as it is today. 223 00:13:23,660 --> 00:13:25,640 You could grow earnings, you could pay down debt. 224 00:13:25,640 --> 00:13:28,080 I'm oversimplifying it, but it was pretty easy. 225 00:13:28,080 --> 00:13:33,160 I think as the market for deals became much more competitive over the years and this market 226 00:13:33,160 --> 00:13:37,280 became much more efficient, you had less room for error. 227 00:13:37,280 --> 00:13:41,420 And you know, a lot of people probably think that cybersecurity concerns were the primary 228 00:13:41,420 --> 00:13:44,000 driver of the increase in IT diligence. 229 00:13:44,000 --> 00:13:48,080 I would actually argue that this may be different in different parts of the market, but for 230 00:13:48,080 --> 00:13:52,040 where the vast majority of private equity deals get done kind of sub $500 million of 231 00:13:52,040 --> 00:13:57,080 enterprise value, I think a primary driver of the increase in IT diligence was actually 232 00:13:57,080 --> 00:13:59,840 the risk of unplanned capex. 233 00:13:59,840 --> 00:14:05,040 So think about it from an investor's perspective, I buy a business and if in the first year 234 00:14:05,040 --> 00:14:10,240 or two, I realize I have to replace the ERP system, that could cost several million dollars 235 00:14:10,240 --> 00:14:14,140 and be a distraction that is several years in length. 236 00:14:14,140 --> 00:14:17,040 And when I only wanted to own the business for five years in the first place, I never 237 00:14:17,040 --> 00:14:21,320 even contemplated having to change out this IT system or ERP system and spend millions 238 00:14:21,320 --> 00:14:22,720 of dollars doing so. 239 00:14:22,720 --> 00:14:27,600 I never modeled that in, that's going to have a profound impact on, you know, where I thought 240 00:14:27,600 --> 00:14:32,840 we could get the business and what the financial profile of the investment looks like. 241 00:14:32,840 --> 00:14:38,000 And I think that after a number of instances and horror stories from hearing from others 242 00:14:38,000 --> 00:14:41,600 of finding yourself in that situation, I think investors got smarter and said, hey, how do 243 00:14:41,600 --> 00:14:44,600 we make sure we know what we're buying? 244 00:14:44,600 --> 00:14:47,920 How do we make sure we've got the right applications in the company? 245 00:14:47,920 --> 00:14:51,440 And if not, let's reduce the value that we're going to place on this thing, knowing that 246 00:14:51,440 --> 00:14:54,520 we have to go through all this pain and all this investment while we're going to be the 247 00:14:54,520 --> 00:14:55,520 owners. 248 00:14:55,520 --> 00:14:57,020 Let's know that before we close. 249 00:14:57,020 --> 00:15:00,440 So there's, you know, less surprises, investors hate surprises. 250 00:15:00,440 --> 00:15:02,440 So I think that was a big driver. 251 00:15:02,440 --> 00:15:06,920 And we've been advisors to the private equity industry before I became an investor for years. 252 00:15:06,920 --> 00:15:09,660 We kind of saw that happening. 253 00:15:09,660 --> 00:15:13,320 We saw some firms start to build IT diligence businesses. 254 00:15:13,320 --> 00:15:19,080 And then what happened was we realized that most of the technology advisors in the marketplace 255 00:15:19,080 --> 00:15:25,080 were pure play technologists and being operators and being very operationally focused. 256 00:15:25,080 --> 00:15:28,840 We always had this belief of, you know, IT and ops kind of go hand in hand and we need 257 00:15:28,840 --> 00:15:34,320 to or we saw rather this opportunity to step into the space and say, hey, we can look at 258 00:15:34,320 --> 00:15:35,320 both. 259 00:15:35,320 --> 00:15:36,680 We can look at operations, we can look at IT. 260 00:15:36,680 --> 00:15:40,240 And most importantly, perhaps most importantly, we can look at both of them at the same time. 261 00:15:40,240 --> 00:15:43,000 So I think we saw this this trend towards IT diligence. 262 00:15:43,000 --> 00:15:46,880 We saw an opportunity that was be like a unique and kind of proprietary angle that we could 263 00:15:46,880 --> 00:15:47,880 bring to bear. 264 00:15:47,880 --> 00:15:51,800 And I would say that then what happened was, you know, cybersecurity, people actually started 265 00:15:51,800 --> 00:15:52,800 paying attention to it. 266 00:15:52,800 --> 00:15:57,520 And with the increase in focus and emphasis on cybersecurity, and then the risks that 267 00:15:57,520 --> 00:16:03,720 are now inherent from a cyber breach perspective, that pushed the insurance companies to start 268 00:16:03,720 --> 00:16:08,920 offering insurance, what's the right word plans, tied to reps and warranties and cybersecurity 269 00:16:08,920 --> 00:16:10,240 and things like that. 270 00:16:10,240 --> 00:16:12,000 And that then just kind of snowballed. 271 00:16:12,000 --> 00:16:16,480 So now now we're at a point where, you know, 15 years ago, I would say that there was an 272 00:16:16,480 --> 00:16:20,840 IT diligence workstream on maybe one in 10 to 15 transactions. 273 00:16:20,840 --> 00:16:25,560 Now there's an IT diligence workstream on probably eight out of 10, 13 out of 15 or 274 00:16:25,560 --> 00:16:26,560 so transactions. 275 00:16:26,560 --> 00:16:29,800 So it is it is rapidly become a kind of mandatory workstream. 276 00:16:29,800 --> 00:16:32,880 And every once in a while, we'll still see deals that get done without it. 277 00:16:32,880 --> 00:16:35,800 We try to make sure that's not any deals that we're involved with. 278 00:16:35,800 --> 00:16:40,480 But we know we're IT diligence evangelists at this point, because it's a controllable 279 00:16:40,480 --> 00:16:41,480 risk. 280 00:16:41,480 --> 00:16:42,480 We're around it. 281 00:16:42,480 --> 00:16:43,880 It doesn't cost that much money to do it. 282 00:16:43,880 --> 00:16:48,640 And I would way rather know if I have exposures pre close so I can factor that into my models. 283 00:16:48,640 --> 00:16:51,920 And we understand what we need to work on post close to protect the investments that 284 00:16:51,920 --> 00:16:52,920 we're making. 285 00:16:52,920 --> 00:16:53,920 Awesome. 286 00:16:53,920 --> 00:16:54,920 Yeah, great summary. 287 00:16:54,920 --> 00:16:55,920 And sure, that's great to hear. 288 00:16:55,920 --> 00:16:58,840 I personally grateful for the opportunity because it's how I found the firm and joined. 289 00:16:58,840 --> 00:17:01,400 But I think it's also something that that our clients have needed. 290 00:17:01,400 --> 00:17:04,280 And we've we've seen that in the response to the offering. 291 00:17:04,280 --> 00:17:08,520 So off the hot seat, I'll go ahead and turn over to you what kind of questions I know. 292 00:17:08,520 --> 00:17:11,020 I mean, essentially, you wrapped it up pretty well for me. 293 00:17:11,020 --> 00:17:14,480 Let's dig into maybe a little more deeper questions that you might have around kind 294 00:17:14,480 --> 00:17:16,800 of the IT diligence side that we could talk to our users. 295 00:17:16,800 --> 00:17:20,360 I think what you're I think what you're saying is let's actually put some meat on the bone 296 00:17:20,360 --> 00:17:21,360 for folks. 297 00:17:21,360 --> 00:17:25,480 Yeah, yeah, let's let's turn the tables because you actually know what IT diligence like actually 298 00:17:25,480 --> 00:17:26,480 is. 299 00:17:26,480 --> 00:17:29,440 Yeah, I just read the reports and pretend like I understand them or call you when I 300 00:17:29,440 --> 00:17:30,440 don't. 301 00:17:30,440 --> 00:17:32,200 So yeah, let's let's turn the tides here. 302 00:17:32,200 --> 00:17:37,120 So how does IT diligence differ from again, you're going to put your you're a technologist 303 00:17:37,120 --> 00:17:38,120 I'm not. 304 00:17:38,120 --> 00:17:40,760 How does it diligence differ from the other forms of diligence that I mentioned? 305 00:17:40,760 --> 00:17:42,080 Yeah, you know, it's interesting. 306 00:17:42,080 --> 00:17:47,000 So my background for years, I worked in M&A and participate in a lot of corporate M&A 307 00:17:47,000 --> 00:17:51,080 and and funny thing is during our time in corporate M&A, we did a lot of IT diligence 308 00:17:51,080 --> 00:17:52,280 without realizing it. 309 00:17:52,280 --> 00:17:55,960 The thing about the other diligence is their name quality of earnings. 310 00:17:55,960 --> 00:18:00,720 Everyone knows it's understood use a big four local firm and you do it people talk about 311 00:18:00,720 --> 00:18:01,720 it. 312 00:18:01,720 --> 00:18:02,720 It's understood for years. 313 00:18:02,720 --> 00:18:05,720 We've been doing a lot of other diligence and just haven't had a name for it. 314 00:18:05,720 --> 00:18:09,520 So I think it differs because it's a little less unknown. 315 00:18:09,520 --> 00:18:13,680 It's one of those things that folks find a little bit nebulous and maybe they don't know 316 00:18:13,680 --> 00:18:15,640 who to go to or who's the right answer. 317 00:18:15,640 --> 00:18:21,520 I think it also is important to note in its simplest form, it focuses on business systems 318 00:18:21,520 --> 00:18:22,520 and infrastructure. 319 00:18:22,520 --> 00:18:26,000 And I think a lot of times folks get wrapped up and while the components are part of that 320 00:18:26,000 --> 00:18:28,160 infrastructure is your cyber risk. 321 00:18:28,160 --> 00:18:29,160 You talked about cyber risk. 322 00:18:29,160 --> 00:18:31,000 I think that's a great conversation. 323 00:18:31,000 --> 00:18:35,160 And if you want to listen to another podcast we had about cyber, I think it's a great conversation 324 00:18:35,160 --> 00:18:38,760 to listen to because part of diligence is understanding your what we like to say your 325 00:18:38,760 --> 00:18:40,240 cyber position. 326 00:18:40,240 --> 00:18:42,760 Where are you on the cyber journey? 327 00:18:42,760 --> 00:18:46,640 And then the last part that we really think is different than others is it really shows 328 00:18:46,640 --> 00:18:52,200 the value that technology is providing your business and the ability to enable outcomes. 329 00:18:52,200 --> 00:18:53,840 So a lot of times we look at quality of earnings. 330 00:18:53,840 --> 00:18:56,760 They'll say the ERP that you have and you'll know the name of the ERP. 331 00:18:56,760 --> 00:19:00,840 But what's different about an IT diligence is it tells you what value is that ERP bringing 332 00:19:00,840 --> 00:19:04,320 to you, whether how you've configured it, why you use it or how you use it. 333 00:19:04,320 --> 00:19:06,440 So it's really talking about tech driven value. 334 00:19:06,440 --> 00:19:08,440 So what do you look at when you go do an IT diligence? 335 00:19:08,440 --> 00:19:10,840 And maybe just to get started, how long does it take? 336 00:19:10,840 --> 00:19:11,840 Yeah. 337 00:19:11,840 --> 00:19:15,520 So an IT diligence ranges, we typically see diligence is from two to six weeks. 338 00:19:15,520 --> 00:19:19,560 Now I'll tell you, I think we all know this as part of a transaction. 339 00:19:19,560 --> 00:19:21,720 Scheduling is one of the most challenging parts. 340 00:19:21,720 --> 00:19:24,600 You get scheduling lined up three weeks to get done. 341 00:19:24,600 --> 00:19:25,880 But we all know how that goes. 342 00:19:25,880 --> 00:19:30,640 We are one of eight teams that are trying to get the deal team's attention or the ownership 343 00:19:30,640 --> 00:19:31,640 group. 344 00:19:31,640 --> 00:19:34,200 So I'd say, you know, that's about the average couple months at max. 345 00:19:34,200 --> 00:19:35,200 Okay. 346 00:19:35,200 --> 00:19:36,200 And what do you look at? 347 00:19:36,200 --> 00:19:37,200 Yeah. 348 00:19:37,200 --> 00:19:40,560 So you hear in the industry a lot, the phrase check the box. 349 00:19:40,560 --> 00:19:43,040 And we try to say that we're not a check the box organization. 350 00:19:43,040 --> 00:19:44,920 But at some point, you got to check the box. 351 00:19:44,920 --> 00:19:48,040 So we're going to look at your full technology stack. 352 00:19:48,040 --> 00:19:50,040 Everything you got, we got to look at, we got to understand. 353 00:19:50,040 --> 00:19:52,480 And we're going to try to do that as quickly as possible. 354 00:19:52,480 --> 00:19:54,180 We do that in two forms. 355 00:19:54,180 --> 00:20:00,000 The first form is sending over a data request where we ask for some information, very prescriptive. 356 00:20:00,000 --> 00:20:04,800 And the second form is a conversation, whether that's in person or remote, where we talk 357 00:20:04,800 --> 00:20:05,800 about your systems. 358 00:20:05,800 --> 00:20:07,440 So it's like a desktop exercise. 359 00:20:07,440 --> 00:20:13,200 The next part that we would look at was what your standards for cybersecurity are. 360 00:20:13,200 --> 00:20:14,560 And that's not the systems you own. 361 00:20:14,560 --> 00:20:18,840 Because you and I both know you can own a system and not use it correctly. 362 00:20:18,840 --> 00:20:22,000 I've got plenty of friends that have high performance cars and you watch them drive 363 00:20:22,000 --> 00:20:24,040 and they shouldn't be in those cars. 364 00:20:24,040 --> 00:20:27,320 Plenty of people own cyber tools and are not using them correctly. 365 00:20:27,320 --> 00:20:28,960 So we need to dig in and understand. 366 00:20:28,960 --> 00:20:33,920 And the last part is whether it's your team or an external team, we need to evaluate those 367 00:20:33,920 --> 00:20:35,040 resources. 368 00:20:35,040 --> 00:20:36,720 Understand the value they're providing. 369 00:20:36,720 --> 00:20:41,120 Understand how rich the data is that they have, their technical aptitude, their ability 370 00:20:41,120 --> 00:20:42,800 to carry the business forward. 371 00:20:42,800 --> 00:20:44,760 You talked about this all the time as part of deals. 372 00:20:44,760 --> 00:20:46,740 Can the business and system scale? 373 00:20:46,740 --> 00:20:48,960 We talk about that all the time. 374 00:20:48,960 --> 00:20:54,600 Sometimes when it comes to IT teams, we need to understand, can that IT team scale with 375 00:20:54,600 --> 00:20:55,700 the business as well? 376 00:20:55,700 --> 00:20:57,720 So we look at humans as well as part of the transaction. 377 00:20:57,720 --> 00:21:00,360 Give me some examples of what you find. 378 00:21:00,360 --> 00:21:02,320 Some examples of red flags. 379 00:21:02,320 --> 00:21:04,600 What would be a red flag that you guys might uncover? 380 00:21:04,600 --> 00:21:08,240 Besides really large font on folks phones because they can't see it without their reading 381 00:21:08,240 --> 00:21:12,360 glasses, that's always the time we come in and we say, hey, we're here to do an IT diligence. 382 00:21:12,360 --> 00:21:14,720 And the joke's always, I can't figure this thing out on my iPhone. 383 00:21:14,720 --> 00:21:19,480 So that's a red flag that everyone thinks that's all we are is technology iPhone helpers. 384 00:21:19,480 --> 00:21:23,600 But I think a lot of times when we look at the smaller businesses and we go and have 385 00:21:23,600 --> 00:21:28,000 those chats with folks, we discover underspend. 386 00:21:28,000 --> 00:21:31,480 And even in the mid-market, we discover some underspend. 387 00:21:31,480 --> 00:21:35,640 I think a lot of times when we go to that red flag, you mentioned at the top here, when 388 00:21:35,640 --> 00:21:40,440 we look at the business, if I haven't bought laptops in 10 years for my business, I know 389 00:21:40,440 --> 00:21:45,120 immediately by simple math, I need to buy X mile laptops by Y amount of dollars. 390 00:21:45,120 --> 00:21:46,200 It's very easy. 391 00:21:46,200 --> 00:21:50,720 And our procedure is we immediately pick up the phone, talk to the acquiring entity, tell 392 00:21:50,720 --> 00:21:51,880 them what we're seeing. 393 00:21:51,880 --> 00:21:55,360 Another common red flag is outdated systems. 394 00:21:55,360 --> 00:21:59,800 So systems that haven't been updated, patched or available for 10 to 15 years. 395 00:21:59,800 --> 00:22:02,240 Those systems you know you have to change or at least secure. 396 00:22:02,240 --> 00:22:04,460 And there's a cost associated with that. 397 00:22:04,460 --> 00:22:06,720 So that's another red flag we would throw up. 398 00:22:06,720 --> 00:22:10,220 And the last one is probably the most famous one, a cyber event. 399 00:22:10,220 --> 00:22:11,580 Have they been compromised? 400 00:22:11,580 --> 00:22:13,240 Has there been a ransomware attack? 401 00:22:13,240 --> 00:22:17,120 Has there been some major issue that we all know those buzz terms of cyber? 402 00:22:17,120 --> 00:22:20,720 We immediately flag those because that could be a large exposure. 403 00:22:20,720 --> 00:22:24,680 And we'll have to bring in other folks to be able to work through how bad or how deep 404 00:22:24,680 --> 00:22:26,320 that exposure was. 405 00:22:26,320 --> 00:22:31,600 So I want to go back to one of the comments that you made a second ago about underspend. 406 00:22:31,600 --> 00:22:33,840 You gave the example of do they have to upgrade laptops? 407 00:22:33,840 --> 00:22:39,720 And I think one of the counter arguments to doing IT diligence in the past for some folks 408 00:22:39,720 --> 00:22:43,080 has been that it felt like a check the box exercise. 409 00:22:43,080 --> 00:22:46,600 I remember having a conversation with somebody one time that said, I don't need somebody 410 00:22:46,600 --> 00:22:48,960 to tell me how many laptops I need to buy. 411 00:22:48,960 --> 00:22:50,720 I'm doing a $200 million transaction. 412 00:22:50,720 --> 00:22:52,760 I don't really care about how many laptops I need to buy. 413 00:22:52,760 --> 00:22:58,080 And I think at that size of a deal, that was a relevant comment. 414 00:22:58,080 --> 00:23:03,600 Now you may find smaller deals where buying 20 or 30 laptops for every person in the organization 415 00:23:03,600 --> 00:23:07,720 has a you know, not insignificant impact on the bottom line, right? 416 00:23:07,720 --> 00:23:10,080 But I have heard that feedback in the past. 417 00:23:10,080 --> 00:23:15,400 Give me some examples of underspend that might be more substantial in a business. 418 00:23:15,400 --> 00:23:17,960 The largest, frankly, is the ERP. 419 00:23:17,960 --> 00:23:23,760 If I've underspend on my ERP, whether that's staying on top of the most recent version, 420 00:23:23,760 --> 00:23:28,840 having staff that understands how to use it, or actually paying for my licensing, which 421 00:23:28,840 --> 00:23:31,120 is a sad event we often discover. 422 00:23:31,120 --> 00:23:33,200 Those are major areas of underspend. 423 00:23:33,200 --> 00:23:36,360 Because that area of underspend is so ingrained in the business. 424 00:23:36,360 --> 00:23:39,520 To your point around the laptops, tomorrow you and I can pop down to Best Buy. 425 00:23:39,520 --> 00:23:42,560 They're not the best, but we can buy 40 laptops, spin them up. 426 00:23:42,560 --> 00:23:43,560 We're off and running. 427 00:23:43,560 --> 00:23:45,280 With an ERP, we know it's not a short journey. 428 00:23:45,280 --> 00:23:50,640 We know our clients take 90 days, six months, a year even, to get these ERPs in place. 429 00:23:50,640 --> 00:23:53,360 So to turn that ship, it's tough. 430 00:23:53,360 --> 00:23:58,040 So I think the largest place that we see the highest amount of risk and underspend is on 431 00:23:58,040 --> 00:24:00,400 ERP and the systems around the ERP. 432 00:24:00,400 --> 00:24:02,640 So one more question before we move on. 433 00:24:02,640 --> 00:24:04,400 You talked about outdated systems. 434 00:24:04,400 --> 00:24:06,640 How do you know if a system is outdated? 435 00:24:06,640 --> 00:24:07,640 So there's a couple ways. 436 00:24:07,640 --> 00:24:09,260 There's a very binary, easy way, right? 437 00:24:09,260 --> 00:24:13,320 So one of the things that we have is we have relationships with all the major tier two 438 00:24:13,320 --> 00:24:15,120 and tier one ERPs. 439 00:24:15,120 --> 00:24:19,280 So when we go through to a diligence, we know the most recent versions and what's been no 440 00:24:19,280 --> 00:24:22,120 longer supported and we understand the support date. 441 00:24:22,120 --> 00:24:25,080 If we have a question, we pick up the phone, they answer our call. 442 00:24:25,080 --> 00:24:26,640 We work with the ERPs all the time. 443 00:24:26,640 --> 00:24:31,020 The other way you know is if it's outdated is there's also when you look at a system, 444 00:24:31,020 --> 00:24:34,880 it's not only the application, it's the server it runs on as well. 445 00:24:34,880 --> 00:24:35,920 Sometimes that hasn't been updated. 446 00:24:35,920 --> 00:24:40,880 So we really just kind of tease out where that outdated piece of the component is, I 447 00:24:40,880 --> 00:24:43,520 guess, since it's software or hardware. 448 00:24:43,520 --> 00:24:46,140 Knowing that, then we can talk about how to get there. 449 00:24:46,140 --> 00:24:47,920 But it is an important question. 450 00:24:47,920 --> 00:24:49,680 There's a bit of nuance here. 451 00:24:49,680 --> 00:24:53,760 Just because my system's outdated doesn't mean it can't be updated. 452 00:24:53,760 --> 00:24:58,720 What our biggest concern is an unsupported system that cannot be updated, that there 453 00:24:58,720 --> 00:25:00,200 is no path forward. 454 00:25:00,200 --> 00:25:04,120 It's not a simple install the patch, do a couple of checks and deploy. 455 00:25:04,120 --> 00:25:06,840 It's I have to rip the whole thing out and change. 456 00:25:06,840 --> 00:25:08,120 That's the part that we worry about. 457 00:25:08,120 --> 00:25:12,520 So when we communicate with our teams and when our decks that we produce that talk about 458 00:25:12,520 --> 00:25:16,960 this, we clearly indicate there's a path forward that simple and easy upgrade just like anybody 459 00:25:16,960 --> 00:25:21,800 updates their phone or their laptops, or this is a full system replacement due to this no 460 00:25:21,800 --> 00:25:24,400 longer being supported or even able to be upgraded. 461 00:25:24,400 --> 00:25:26,320 So let's let's move to a different topic. 462 00:25:26,320 --> 00:25:27,320 Long term benefits. 463 00:25:27,320 --> 00:25:29,200 What do you get out of this? 464 00:25:29,200 --> 00:25:30,200 And it could be short term too. 465 00:25:30,200 --> 00:25:34,600 But what are the benefits of doing it diligence beyond identifying the the red flags? 466 00:25:34,600 --> 00:25:38,840 I think you said a few at the top that were important deal valuation, understand the deal 467 00:25:38,840 --> 00:25:40,960 de risking folks don't like risk and deals. 468 00:25:40,960 --> 00:25:43,520 I think those are all very valid points for the business perspective. 469 00:25:43,520 --> 00:25:47,880 So to tack a few more onto that, I like to say that in a different way is it reduces 470 00:25:47,880 --> 00:25:49,880 the risk of the unknown. 471 00:25:49,880 --> 00:25:53,600 Because a lot of times the folks that are looking at these deals, sometimes we don't 472 00:25:53,600 --> 00:25:58,040 understand all the systems and it and what it means and why it matters. 473 00:25:58,040 --> 00:26:03,560 And when I'm not doing fishing campaigns or fishing reviews, what does that really mean 474 00:26:03,560 --> 00:26:08,000 to you as the investor so that redo that reduction of risk and putting in business terms so you 475 00:26:08,000 --> 00:26:09,000 can understand. 476 00:26:09,000 --> 00:26:13,880 The second is usually in a transaction in this space, there's gonna be additional acquisitions, 477 00:26:13,880 --> 00:26:18,800 whether that's a bolt on, whether that's a transaction where you sell, you are going 478 00:26:18,800 --> 00:26:22,400 to transact, acquire or do something with this business. 479 00:26:22,400 --> 00:26:27,640 So that future integration success is greatly hindered by having some of these outdated 480 00:26:27,640 --> 00:26:28,640 systems. 481 00:26:28,640 --> 00:26:34,200 How many of us know companies that are three, four acquisitions later and three, four ERP 482 00:26:34,200 --> 00:26:38,560 is later, we all know them, the challenges reporting how to get that visibility, how 483 00:26:38,560 --> 00:26:42,680 to have a common thread of my customer number across all my systems challenges folks deal 484 00:26:42,680 --> 00:26:43,680 with every day. 485 00:26:43,680 --> 00:26:47,360 So that's a long term that can affect the business because I'm carrying four counting 486 00:26:47,360 --> 00:26:50,800 teams to be able to do the work that I could consolidate to one. 487 00:26:50,800 --> 00:26:52,520 So that's a big one. 488 00:26:52,520 --> 00:26:55,760 And the last one, it sets you for success to build exit. 489 00:26:55,760 --> 00:27:01,080 We do a lot of sell side diligence work for folks to help them tell that story, articulate 490 00:27:01,080 --> 00:27:03,080 that journey to help sell that entity. 491 00:27:03,080 --> 00:27:07,560 If you haven't done that work, or had that discovery done up front, it can be challenging 492 00:27:07,560 --> 00:27:10,960 you buy an organization, you own it for five years. 493 00:27:10,960 --> 00:27:14,880 And at the time you go to sell it, you realize all the issues you have. 494 00:27:14,880 --> 00:27:18,360 By taking that pain up front and understand what you own, it gives you that five years 495 00:27:18,360 --> 00:27:23,320 to remediate that in preparation for exit to have a successful exit. 496 00:27:23,320 --> 00:27:24,600 I have no trivia for you. 497 00:27:24,600 --> 00:27:27,620 Oh, I have two bits of trivia for you, Mike, in our typical week. 498 00:27:27,620 --> 00:27:28,620 So thanks for those questions. 499 00:27:28,620 --> 00:27:30,440 It's always an opportunity to talk about diligence. 500 00:27:30,440 --> 00:27:31,440 We love it. 501 00:27:31,440 --> 00:27:32,800 We love going on site with folks. 502 00:27:32,800 --> 00:27:34,280 We love having the conversation. 503 00:27:34,280 --> 00:27:38,800 I will say we love tying to those other work streams and helping folks understand. 504 00:27:38,800 --> 00:27:42,960 And I think one of the things that was most interesting is we began in diligence. 505 00:27:42,960 --> 00:27:46,040 And I did the first five delegences to the group myself. 506 00:27:46,040 --> 00:27:49,420 And it's great to see how we have grown in our understanding. 507 00:27:49,420 --> 00:27:52,120 But the market continues to change and things continue to change. 508 00:27:52,120 --> 00:27:54,040 So it's always great to kind of learn. 509 00:27:54,040 --> 00:27:58,080 So speaking of a bit of a history lesson, I thought it'd be interesting to talk about 510 00:27:58,080 --> 00:28:00,080 the term due diligence. 511 00:28:00,080 --> 00:28:05,360 By chance, do you know the origin of the phrase due diligence? 512 00:28:05,360 --> 00:28:06,680 We talk about all the time. 513 00:28:06,680 --> 00:28:08,000 Never looked it up until now. 514 00:28:08,000 --> 00:28:09,000 Twenty years doing due diligence. 515 00:28:09,000 --> 00:28:11,280 And I'm ashamed to say I have no idea. 516 00:28:11,280 --> 00:28:13,480 Well, if I have to guess England, England. 517 00:28:13,480 --> 00:28:14,480 Okay. 518 00:28:14,480 --> 00:28:16,760 Well, you were a young laddie when this came out. 519 00:28:16,760 --> 00:28:19,520 It was the U.S. Securities Act of 1933. 520 00:28:19,520 --> 00:28:22,000 So if you just think back to that, that's what it was. 521 00:28:22,000 --> 00:28:24,920 U.S. Security Act 1933. 522 00:28:24,920 --> 00:28:25,920 Next one. 523 00:28:25,920 --> 00:28:29,040 Now, this one really got me and there's no way I would understand this. 524 00:28:29,040 --> 00:28:33,520 What's kind of fun to think about afterwards, we use this phrase so much, which is due diligence. 525 00:28:33,520 --> 00:28:36,560 What's the literal meaning of due diligence? 526 00:28:36,560 --> 00:28:37,880 It's two words, literal meaning. 527 00:28:37,880 --> 00:28:38,880 I already guessed England. 528 00:28:38,880 --> 00:28:41,200 I think that'd be a bad guess for this one. 529 00:28:41,200 --> 00:28:43,480 I think I got to go with I don't know. 530 00:28:43,480 --> 00:28:44,480 Okay. 531 00:28:44,480 --> 00:28:45,480 Required carefulness. 532 00:28:45,480 --> 00:28:47,480 I think that's a very interesting fact. 533 00:28:47,480 --> 00:28:48,480 Required carefulness. 534 00:28:48,480 --> 00:28:49,640 And I think that's a lot of what we do. 535 00:28:49,640 --> 00:28:52,560 We're careful in how we help our clients manage their day to day. 536 00:28:52,560 --> 00:28:54,200 We're careful in what we talk about. 537 00:28:54,200 --> 00:28:56,480 But required carefulness, due diligence. 538 00:28:56,480 --> 00:28:58,760 What would we do without your trivia questions? 539 00:28:58,760 --> 00:28:59,760 Dude, two bit trivia. 540 00:28:59,760 --> 00:29:00,760 Two bit trivia. 541 00:29:00,760 --> 00:29:01,760 It's worth what you pay for. 542 00:29:01,760 --> 00:29:06,720 Well, James, yet again, thank you for shedding some light on this very important topic. 543 00:29:06,720 --> 00:29:11,920 And hopefully I didn't sound too unintelligent when I was talking about why we do IT diligence 544 00:29:11,920 --> 00:29:13,560 from a business perspective. 545 00:29:13,560 --> 00:29:19,160 Thanks everybody for joining and looking forward to chatting with you guys soon. 546 00:29:19,160 --> 00:29:22,060 Thanks for tuning into this episode of Growing EBITDA. 547 00:29:22,060 --> 00:29:27,140 If you like this episode, hit subscribe or follow us on LinkedIn for updates. 548 00:29:27,140 --> 00:29:29,160 Got a topic you'd like us to cover? 549 00:29:29,160 --> 00:29:30,160 Drop us a message. 550 00:29:30,160 --> 00:29:57,400 We'd love to hear from you.