WEBVTT 00:00:02.350 --> 00:00:05.070 Welcome to the Growing EBITDA Podcast, where 00:00:05.070 --> 00:00:07.669 we unlock the doors to management and technology 00:00:07.669 --> 00:00:10.689 insights in the middle market. Join us as we 00:00:10.689 --> 00:00:13.230 explore innovative strategies to drive revenue 00:00:13.230 --> 00:00:16.129 and EBITDA growth, interviewing industry leaders 00:00:16.129 --> 00:00:18.949 and technology experts. Whether you're looking 00:00:18.949 --> 00:00:21.809 to streamline operations, understand the latest 00:00:21.809 --> 00:00:24.629 tech trends, or lead your company towards exponential 00:00:24.629 --> 00:00:28.030 growth, you're in the right place. Stay tuned 00:00:28.030 --> 00:00:32.600 and let's grow together. Welcome back. to growing 00:00:32.600 --> 00:00:36.740 EBITDA, the podcast. Are we famous yet, James? 00:00:37.439 --> 00:00:39.780 I think we actually crossed a big threshold, 00:00:39.859 --> 00:00:43.899 Mike. 15 listeners? Yeah. If you take that and 00:00:43.899 --> 00:00:47.380 make it like 650, pretty close. Wow. Moving up 00:00:47.380 --> 00:00:51.320 in the world. Really moving. So what's going 00:00:51.320 --> 00:00:54.100 on in your world? Busy week? Man, let me tell 00:00:54.100 --> 00:00:56.759 you. We've had quite a few deals moving quite 00:00:56.759 --> 00:00:59.479 quickly. We just had a team got a call on Thursday. 00:01:00.090 --> 00:01:02.530 Did a diligence on Saturday. Report due this 00:01:02.530 --> 00:01:04.989 Wednesday. So it's moving out there. So exciting 00:01:04.989 --> 00:01:09.390 start to 25. Excellent. Excellent. So today we're 00:01:09.390 --> 00:01:13.689 talking about how private equity creates value 00:01:13.689 --> 00:01:17.290 in the first 100 days. So building on your prior 00:01:17.290 --> 00:01:19.489 comment there about speed. Speed, obviously, 00:01:19.510 --> 00:01:21.049 in the private equity business, very important. 00:01:21.960 --> 00:01:23.760 Today, we're going to spend some time talking 00:01:23.760 --> 00:01:26.459 about just how fast -paced it is, but really 00:01:26.459 --> 00:01:28.459 just focusing on the first 100 days. What's a 00:01:28.459 --> 00:01:30.120 private equity firm trying to do in the first 00:01:30.120 --> 00:01:34.920 100 days of owning or investing in a new business 00:01:34.920 --> 00:01:38.000 for their portfolio? I'm going to try and tailor 00:01:38.000 --> 00:01:41.680 it to our audience. We're going to try and make 00:01:41.680 --> 00:01:44.299 it so that private equity laypeople can understand 00:01:44.299 --> 00:01:46.900 this. We're not going to tell private equity 00:01:46.900 --> 00:01:48.879 investors how to spend their first 100 days. 00:01:49.019 --> 00:01:51.579 We're going to hopefully shed some light for 00:01:51.579 --> 00:01:53.939 maybe some management teams that are newly backed 00:01:53.939 --> 00:01:57.019 or newly owned by a private equity fund or some 00:01:57.019 --> 00:01:59.340 management team members who are looking at the 00:01:59.340 --> 00:02:01.560 private equity industry from afar, trying to 00:02:01.560 --> 00:02:03.219 think about how they get into that business or 00:02:03.219 --> 00:02:05.760 that industry, which is a very exciting space 00:02:05.760 --> 00:02:12.979 these days. Fun fact, 60 % or more of private 00:02:12.979 --> 00:02:14.819 equity -backed businesses are going to undergo 00:02:15.340 --> 00:02:18.020 a transformational change in their first 12 months 00:02:18.020 --> 00:02:20.319 of ownership. We're going to spend a lot of time 00:02:20.319 --> 00:02:23.099 talking about that today. Yeah, I think we see 00:02:23.099 --> 00:02:24.759 it a lot, Mike, whether it's someone who's been 00:02:24.759 --> 00:02:27.680 a cash managed group, moving to accrual base, 00:02:27.960 --> 00:02:30.460 or just some of the folks don't make it through 00:02:30.460 --> 00:02:33.180 the transition. It could be financial shakeups 00:02:33.180 --> 00:02:35.120 or management shakeups, and it seemed to happen 00:02:35.120 --> 00:02:36.500 in that first 100 days. That's an interesting 00:02:36.500 --> 00:02:40.419 statistic. So we're really going to cover three 00:02:40.419 --> 00:02:43.460 things today, assessing the business, and obviously, 00:02:44.629 --> 00:02:46.569 Most private equity firms, all private equity 00:02:46.569 --> 00:02:48.530 firms, I would hope, are going to do extensive 00:02:48.530 --> 00:02:51.050 diligence on a business before they invest in 00:02:51.050 --> 00:02:53.550 it. But there's still a lot to learn after the 00:02:53.550 --> 00:02:55.610 fact, right? So when we say assess the business, 00:02:55.729 --> 00:02:57.629 this is kind of in addition to doing due diligence, 00:02:57.729 --> 00:02:59.409 which would have been before the investment. 00:03:00.169 --> 00:03:03.189 So we're going to talk about assessing the business, 00:03:03.370 --> 00:03:08.189 fixing any challenges, inefficiencies, or problems 00:03:08.189 --> 00:03:11.090 that were identified during diligence. And then 00:03:11.090 --> 00:03:13.629 last but not least, aligning leadership, right? 00:03:13.810 --> 00:03:16.330 Private equity fund who invested in the business 00:03:16.330 --> 00:03:19.050 is likely going to have some improvements or 00:03:19.050 --> 00:03:20.629 opportunities that they've thought about independently 00:03:20.629 --> 00:03:23.550 from management. Management may have some things 00:03:23.550 --> 00:03:24.849 that they want to work on now that they have 00:03:24.849 --> 00:03:27.889 a new owner. And getting everybody aligned on 00:03:27.889 --> 00:03:29.669 the same page is obviously of critical importance 00:03:29.669 --> 00:03:32.849 early in the deal cycle so that everybody can 00:03:32.849 --> 00:03:34.789 be rowing the boat in the same direction as things 00:03:34.789 --> 00:03:39.120 progress. I like the T up there. Let's just get 00:03:39.120 --> 00:03:41.159 right into it. Does that make sense to go through 00:03:41.159 --> 00:03:43.500 some of it? Maybe you can ask some questions 00:03:43.500 --> 00:03:45.379 because I'm coming off of one of these pretty 00:03:45.379 --> 00:03:48.099 recently. Maybe we'll kick it to you to ask me 00:03:48.099 --> 00:03:49.919 some questions and then maybe I can hit it back 00:03:49.919 --> 00:03:51.979 to you for some of the follow -ups, but let's 00:03:51.979 --> 00:03:55.419 just jump in. Yeah, let's do it. We're going 00:03:55.419 --> 00:03:57.039 to talk about assessing the business and setting 00:03:57.039 --> 00:03:59.900 priorities. What does the first step look like 00:03:59.900 --> 00:04:03.319 after the deal closes? What do those first 100 00:04:03.319 --> 00:04:10.060 days look like, James? interesting. And we get 00:04:10.060 --> 00:04:12.800 a chance to see this because Trivista isn't a 00:04:12.800 --> 00:04:14.800 financial group that's doing quality of earnings, 00:04:14.879 --> 00:04:17.360 or we don't have an accounting team that comes 00:04:17.360 --> 00:04:20.160 in. And so really, we get to participate from 00:04:20.160 --> 00:04:22.279 the sidelines. And I'll talk about a little bit 00:04:22.279 --> 00:04:24.540 how it's intertwined. But really, they start 00:04:24.540 --> 00:04:27.120 to dig in on those financials. And maybe this 00:04:27.120 --> 00:04:28.879 is something that after I finish my section, 00:04:28.959 --> 00:04:30.500 you could let folks know a little bit more about 00:04:30.500 --> 00:04:32.819 how the deal goes, because I have covenants I 00:04:32.819 --> 00:04:34.740 need to make. I have additional reporting and 00:04:34.740 --> 00:04:36.930 visibility that's required. So I'm really going 00:04:36.930 --> 00:04:38.870 to make sure those components are there. And 00:04:38.870 --> 00:04:40.970 then even more being private equity backed. And 00:04:40.970 --> 00:04:42.810 I think in a previous episode, we talked about 00:04:42.810 --> 00:04:46.029 how deals are structured with a mix of debt versus 00:04:46.029 --> 00:04:48.930 the equity. That cash flow component is pretty 00:04:48.930 --> 00:04:52.000 important. In those first 100 days, the PE firm 00:04:52.000 --> 00:04:54.339 or the sponsor is going to want to come in, work 00:04:54.339 --> 00:04:56.519 with your business and understand what the cash 00:04:56.519 --> 00:04:58.459 flow is, what the information. A lot of that 00:04:58.459 --> 00:05:00.240 should be known through the diligence process. 00:05:00.500 --> 00:05:02.360 We all know there's kind of those unique things 00:05:02.360 --> 00:05:04.120 that are found out afterwards. And if folks don't 00:05:04.120 --> 00:05:05.920 ask the right question, maybe you're not letting 00:05:05.920 --> 00:05:08.800 them know all the information. I think identifying 00:05:08.800 --> 00:05:12.759 those financial risk is important, but really 00:05:12.759 --> 00:05:14.819 you need to start driving value. So yes, you 00:05:14.819 --> 00:05:16.279 need to have a pulse, you need to have visibility, 00:05:16.500 --> 00:05:19.430 but that operational side. really comes into 00:05:19.430 --> 00:05:23.350 play. So a lot of times, if an organization or 00:05:23.350 --> 00:05:25.629 a sponsor has engaged an outside firm, such as 00:05:25.629 --> 00:05:27.930 Trivista, doing operational due diligence, you 00:05:27.930 --> 00:05:30.550 essentially have a cheat sheet to say, hey, there's 00:05:30.550 --> 00:05:32.550 the five things that I need to do after I buy 00:05:32.550 --> 00:05:34.670 this company. I should probably start on these 00:05:34.670 --> 00:05:37.750 components and pieces, but I just need to kind 00:05:37.750 --> 00:05:39.449 of wait till the deal's done to start driving 00:05:39.449 --> 00:05:42.750 that change. So on that first day, even before 00:05:42.750 --> 00:05:44.910 the 100th day, you know, going in that management 00:05:44.910 --> 00:05:46.490 team, some of the conversations you want to have. 00:05:46.889 --> 00:05:49.290 Now, after a transaction, you want to be respectful, 00:05:49.490 --> 00:05:52.089 not step on toes, give some time, build those 00:05:52.089 --> 00:05:54.430 relationships of trust. But you have that in 00:05:54.430 --> 00:05:56.750 your back pocket. So those could be understanding 00:05:56.750 --> 00:05:59.170 inefficiencies in process. It could be supply 00:05:59.170 --> 00:06:01.569 chain issues, or it could be outdated systems 00:06:01.569 --> 00:06:03.779 that need to be worked on. But you have in mind 00:06:03.779 --> 00:06:05.259 what those look like. And you're going to start 00:06:05.259 --> 00:06:08.300 to talk about those gaps in that 100 -day. You 00:06:08.300 --> 00:06:09.740 may not start to remediate, but you start to 00:06:09.740 --> 00:06:11.819 put the plan in place, start having that steady 00:06:11.819 --> 00:06:13.699 drumbeat with your management team, and start 00:06:13.699 --> 00:06:15.360 planning the ideas of here's the things that 00:06:15.360 --> 00:06:18.439 we want to change. And the last one that I think 00:06:18.439 --> 00:06:21.220 is around the leadership and culture side, you 00:06:21.220 --> 00:06:23.040 buy the business because it's a good business. 00:06:23.220 --> 00:06:24.980 You don't want to buy the business and implode 00:06:24.980 --> 00:06:26.980 the business. You like what it is. So you want 00:06:26.980 --> 00:06:28.480 to follow some of the things, whether it's that 00:06:28.480 --> 00:06:30.300 leadership team that's in place that you believe 00:06:30.300 --> 00:06:32.920 in. or that culture that you think really aligns 00:06:32.920 --> 00:06:35.360 for what your use case for that is. So you want 00:06:35.360 --> 00:06:38.060 to start to evaluate those management team strengths 00:06:38.060 --> 00:06:40.279 even more than you did in diligence. And you'll 00:06:40.279 --> 00:06:42.439 see that whether it's in board meetings, in your 00:06:42.439 --> 00:06:44.360 one -on -one calls, or as you start to have operating 00:06:44.360 --> 00:06:46.839 partners, which are folks from the PE firm that 00:06:46.839 --> 00:06:48.560 come in to help you run your business potentially, 00:06:48.860 --> 00:06:51.199 or outside consultants such as us, you'll really 00:06:51.199 --> 00:06:53.500 get to know that management team more through 00:06:53.500 --> 00:06:55.810 their efforts and through their work. I think 00:06:55.810 --> 00:06:58.129 one of the things that is super important, and 00:06:58.129 --> 00:06:59.910 this is a bit to our PE friends, I know this 00:06:59.910 --> 00:07:02.170 episode is targeted at the acquired company, 00:07:02.329 --> 00:07:05.310 but to our PE friends, having a very specific, 00:07:05.430 --> 00:07:07.610 succinct list of goals that you communicate to 00:07:07.610 --> 00:07:09.730 that management team, very important in the first 00:07:09.730 --> 00:07:12.509 100 days. Management team, very important to 00:07:12.509 --> 00:07:15.089 ask or understand those goals and start to align 00:07:15.089 --> 00:07:17.509 yourself to those because not only do you have 00:07:17.509 --> 00:07:19.470 a business to run, now you have that sponsor 00:07:19.470 --> 00:07:20.790 that you need to be able to communicate and have 00:07:20.790 --> 00:07:23.209 that connection with. And then the last part 00:07:23.209 --> 00:07:25.610 is... Maybe you have an influx of cash. Maybe 00:07:25.610 --> 00:07:26.970 you have a little more time on your hands because 00:07:26.970 --> 00:07:29.050 you got some help and some things. But what are 00:07:29.050 --> 00:07:32.060 those gaps in people you need to fill? Quickly 00:07:32.060 --> 00:07:33.360 escalate those because you know you've got the 00:07:33.360 --> 00:07:35.100 financial changes to make. You know you have 00:07:35.100 --> 00:07:37.060 operational changes you need to make. Get those 00:07:37.060 --> 00:07:38.980 people in place. Communicate that early with 00:07:38.980 --> 00:07:41.240 your sponsor to say, hey, I know I need someone 00:07:41.240 --> 00:07:43.660 on FP &A. I don't have an FP &A individual. To 00:07:43.660 --> 00:07:45.459 get a lot of the stuff done, you need, I probably 00:07:45.459 --> 00:07:47.639 need that FP &A and start that recruiting and 00:07:47.639 --> 00:07:49.959 get that rolling that first 100 days. But going 00:07:49.959 --> 00:07:51.620 back to the first one around the financial side, 00:07:51.740 --> 00:07:53.259 Mike, I mean, you sit on a lot of boards and 00:07:53.259 --> 00:07:55.079 see this. What are some of the financial things 00:07:55.079 --> 00:07:56.579 that you see in the first 100 days that would 00:07:56.579 --> 00:07:59.000 make our listeners successful? Yeah, I think. 00:07:59.470 --> 00:08:02.029 I think the first 100 days can look very different 00:08:02.029 --> 00:08:05.870 depending on the type of business or maturity 00:08:05.870 --> 00:08:08.750 of the business, right? A lot of private equity 00:08:08.750 --> 00:08:12.129 firms buy what have historically been family 00:08:12.129 --> 00:08:14.589 -owned businesses. So maybe you're talking about 00:08:14.589 --> 00:08:17.230 a situation where a founder has owned a business 00:08:17.230 --> 00:08:21.329 for 30, 40, 50 years, some cases longer, and 00:08:21.329 --> 00:08:23.389 got the business to where they could take it, 00:08:23.430 --> 00:08:26.310 and now it's ready for a next generation of ownership, 00:08:26.470 --> 00:08:29.930 so to speak. In those situations, this could 00:08:29.930 --> 00:08:31.930 be the very first time, that diligence process 00:08:31.930 --> 00:08:35.809 that would have taken up the prior two to six 00:08:35.809 --> 00:08:40.830 months before closing the deal, a lot of things 00:08:40.830 --> 00:08:43.070 could have come up in discussion amongst the 00:08:43.070 --> 00:08:45.049 management team members, amongst the investors 00:08:45.049 --> 00:08:47.289 that were looking at the business, the investors 00:08:47.289 --> 00:08:48.950 that ultimately ended up investing in the business. 00:08:49.470 --> 00:08:52.490 And it could be, in some cases, it's the very 00:08:52.490 --> 00:08:54.389 first time in the history of the business that 00:08:54.779 --> 00:08:56.659 the entire business, the entire organization 00:08:56.659 --> 00:08:59.960 went under the microscope. And it may be the 00:08:59.960 --> 00:09:02.940 first time that some outside perspectives are 00:09:02.940 --> 00:09:04.980 coming in, right? Whether those are the investors 00:09:04.980 --> 00:09:06.960 themselves or consultants that they've hired. 00:09:07.539 --> 00:09:09.899 So there just may be some rocks that have been 00:09:09.899 --> 00:09:12.580 looked under, not necessarily that skeletons 00:09:12.580 --> 00:09:14.740 were found in the closet, but they're just going 00:09:14.740 --> 00:09:16.340 to have a lot of really smart people looking 00:09:16.340 --> 00:09:19.259 at a deal pre -closed and coming up with ideas 00:09:19.259 --> 00:09:21.440 and opportunities for improvement. And likewise, 00:09:21.700 --> 00:09:24.139 a management team of a founder -backed business 00:09:24.750 --> 00:09:26.990 for the very first time, is thinking about what 00:09:26.990 --> 00:09:29.809 does the future look like without the constraints 00:09:29.809 --> 00:09:33.429 of the prior owner? Not necessarily a bad thing, 00:09:33.509 --> 00:09:35.590 but many family -owned businesses are managed 00:09:35.590 --> 00:09:38.750 to produce cash flow for the shareholders. Private 00:09:38.750 --> 00:09:40.950 equity businesses are similar, but they have 00:09:40.950 --> 00:09:43.529 a little bit more patience to them. They're okay 00:09:43.529 --> 00:09:47.509 not making as much cash maybe this year and reinvesting 00:09:47.509 --> 00:09:49.389 more back into the business such that the business 00:09:49.389 --> 00:09:52.830 can grow faster in subsequent years. You could 00:09:52.830 --> 00:09:54.809 have that situation. You could have the opposite 00:09:54.809 --> 00:09:56.429 of that, where you could have a very mature business 00:09:56.429 --> 00:09:59.149 with a very strong leadership team, maybe that's 00:09:59.149 --> 00:10:00.710 already been owned by a private equity firm. 00:10:00.809 --> 00:10:02.289 And those two experiences are going to look a 00:10:02.289 --> 00:10:04.429 little bit different. But generally speaking, 00:10:04.730 --> 00:10:08.190 one thing that is constant across all those examples 00:10:08.190 --> 00:10:12.450 is, as it relates to the financials that you 00:10:12.450 --> 00:10:14.990 mentioned, James, is just making sure that all 00:10:14.990 --> 00:10:17.090 the parties understand what the expectations 00:10:17.090 --> 00:10:22.309 are for financial reporting, right? The new owners 00:10:22.309 --> 00:10:25.029 and the new board are expecting to receive updated 00:10:25.029 --> 00:10:26.990 financials, the format that they're expecting 00:10:26.990 --> 00:10:29.330 to receive them in so that they can crunch their 00:10:29.330 --> 00:10:31.610 numbers on their end and do all the fun things 00:10:31.610 --> 00:10:33.549 that they're going to do with that information. 00:10:33.830 --> 00:10:36.269 And obviously, the financial statements are a 00:10:36.269 --> 00:10:38.230 reflection of the heartbeat of the organization, 00:10:38.470 --> 00:10:40.529 right? It tells the investor group whether or 00:10:40.529 --> 00:10:42.230 not the business is healthy, if it's performing 00:10:42.230 --> 00:10:45.190 at or below or above expectations. And that's 00:10:45.190 --> 00:10:46.809 where a lot of the future subsequent conversations 00:10:46.809 --> 00:10:51.100 are going to start from. On the operational side, 00:10:51.200 --> 00:10:53.460 you're right. A lot of folks are going to do 00:10:53.460 --> 00:10:55.360 some type of diligence, operational diligence 00:10:55.360 --> 00:10:57.220 on the business. They're going to have a sense 00:10:57.220 --> 00:10:59.000 as to where they think some opportunities for 00:10:59.000 --> 00:11:02.580 improvement exist, or maybe where some risks 00:11:02.580 --> 00:11:05.580 are that don't necessarily have to mean material 00:11:05.580 --> 00:11:07.279 risks, but just some risks that they would like 00:11:07.279 --> 00:11:09.759 to mitigate. Maybe it's improving cybersecurity. 00:11:09.940 --> 00:11:13.559 Maybe it's filling a leadership team gap that 00:11:13.559 --> 00:11:15.679 exists. It could be any number of different things. 00:11:17.109 --> 00:11:18.769 Beyond the financial reporting, though, one of 00:11:18.769 --> 00:11:20.690 the things that I think is most important is 00:11:20.690 --> 00:11:23.669 the relationships that the investors have established 00:11:23.669 --> 00:11:26.570 with management and vice versa up until that 00:11:26.570 --> 00:11:29.309 point can be a little bit tenuous, right? Hey, 00:11:29.370 --> 00:11:31.649 these are new owners. If I'm the management team, 00:11:31.690 --> 00:11:32.990 these are new owners. I don't really know who 00:11:32.990 --> 00:11:36.049 these folks are. They kind of seem smart. I didn't 00:11:36.049 --> 00:11:37.549 really get that much access to them, so I don't 00:11:37.549 --> 00:11:38.850 really know if I have an opinion of them. It 00:11:38.850 --> 00:11:40.990 could be anything like that. Likewise, the investors 00:11:40.990 --> 00:11:42.450 are looking at the management team like, geez, 00:11:42.509 --> 00:11:45.679 I hope this team's as good as I thought. right, 00:11:45.720 --> 00:11:47.600 during diligence. I hope we're going to be able 00:11:47.600 --> 00:11:49.120 to achieve what we're all setting out to do, 00:11:49.200 --> 00:11:50.539 which is why we bought the business in the first 00:11:50.539 --> 00:11:53.220 place. So I think sitting down and breaking bread 00:11:53.220 --> 00:11:55.159 together is always a really good idea. I think 00:11:55.159 --> 00:11:58.100 some of the best firms, private equity firms 00:11:58.100 --> 00:11:59.620 that I've seen and some of the best management 00:11:59.620 --> 00:12:01.559 teams that I've seen out there, they make it 00:12:01.559 --> 00:12:04.980 a point in the first five to 10 days after closing, 00:12:05.120 --> 00:12:06.740 even though everybody's kind of typically tired 00:12:06.740 --> 00:12:08.299 from doing the deal, they make it a point to 00:12:08.299 --> 00:12:11.049 sit down in person, break bread. get to know 00:12:11.049 --> 00:12:13.450 each other, ask some personal questions beyond 00:12:13.450 --> 00:12:15.610 the business. Because like it or not, you're 00:12:15.610 --> 00:12:17.250 now kind of married to these folks for the next 00:12:17.250 --> 00:12:20.110 five -ish years, maybe longer. So I think a lot 00:12:20.110 --> 00:12:22.710 of the folks that do it well really appreciate 00:12:22.710 --> 00:12:24.789 and understand the power of that relationship. 00:12:25.409 --> 00:12:28.429 They get that financial reporting in place. And 00:12:28.429 --> 00:12:30.990 quite frankly, CEOs, if they're not really focused 00:12:30.990 --> 00:12:32.950 on this, or maybe they haven't had a board historically, 00:12:33.490 --> 00:12:35.769 that first board meeting can be critical. How 00:12:35.769 --> 00:12:39.620 you show up, how prepared you are. how thoughtful 00:12:39.620 --> 00:12:42.059 you are, the team members maybe that you're bringing 00:12:42.059 --> 00:12:44.600 alongside you to showcase them to your new board 00:12:44.600 --> 00:12:46.620 of directors and kind of share with them some 00:12:46.620 --> 00:12:49.440 highlights that the business has to share at 00:12:49.440 --> 00:12:51.460 that particular point in time. That can go a 00:12:51.460 --> 00:12:53.899 long way too. So I think just generally kind 00:12:53.899 --> 00:12:55.919 of getting everybody aligned in terms of what 00:12:55.919 --> 00:12:58.159 are the priorities for the business, aligning 00:12:58.159 --> 00:13:00.240 the relationship so that there's the foundation 00:13:00.240 --> 00:13:03.240 for kind of success in the future, right? This 00:13:03.240 --> 00:13:05.620 whole thing is going to hinge on Different humans 00:13:05.620 --> 00:13:07.980 with different personalities in different geographies, 00:13:07.980 --> 00:13:10.039 maybe even in different languages, all kind of 00:13:10.039 --> 00:13:12.460 cohesively working together and drumming to the 00:13:12.460 --> 00:13:15.779 same beat to take the business forward. That's 00:13:15.779 --> 00:13:18.600 super important. So I think assessing that, getting 00:13:18.600 --> 00:13:20.799 those building blocks in place, and then starting 00:13:20.799 --> 00:13:23.279 to tackle some of the opportunities that lay 00:13:23.279 --> 00:13:26.279 before the business in a collaborative way. I 00:13:26.279 --> 00:13:28.100 actually got to attend one of those meetings 00:13:28.100 --> 00:13:29.860 that you talk about, kind of meeting and hanging 00:13:29.860 --> 00:13:32.990 out and going to dinner after the sponsor. And 00:13:32.990 --> 00:13:35.250 we went and met with the management team post 00:13:35.250 --> 00:13:37.389 -close. We had talked about some of the different 00:13:37.389 --> 00:13:39.309 elements of the business, but really hadn't dug 00:13:39.309 --> 00:13:41.730 into all the elements. And we're on this year 00:13:41.730 --> 00:13:44.289 P selection. And in our conversation, it's like, 00:13:44.409 --> 00:13:46.789 hey, you know, we really want to kind of drive 00:13:46.789 --> 00:13:49.370 down those closing times because we think we 00:13:49.370 --> 00:13:50.750 need them faster than the covenant. This is the 00:13:50.750 --> 00:13:53.149 PE firm telling the management team. And so afterwards, 00:13:53.250 --> 00:13:55.509 I pull aside our people and I say like, hey, 00:13:55.570 --> 00:13:58.549 what is the average closing time for getting 00:13:58.549 --> 00:14:00.690 the books closed for this business? And his answer 00:14:00.690 --> 00:14:04.399 was 75 days. I thought to myself, good gravy. 00:14:04.620 --> 00:14:06.740 No wonder they have us in here doing an ERP selection 00:14:06.740 --> 00:14:08.340 for that visibility. You're right. So that was 00:14:08.340 --> 00:14:10.879 not only a breaking bread, but starting to preempt 00:14:10.879 --> 00:14:12.740 some of these major rocks that they wanted to 00:14:12.740 --> 00:14:15.299 move. Okay, let's move on to the next topic. 00:14:15.379 --> 00:14:17.759 What you got for me? Topic number two, operational 00:14:17.759 --> 00:14:20.860 efficiencies. You've got the team starting to 00:14:20.860 --> 00:14:23.019 break bread together. As I alluded to a second 00:14:23.019 --> 00:14:25.399 ago, now it's time to get down to brass tacks, 00:14:25.519 --> 00:14:27.639 right? What are we going to do to grow the business, 00:14:27.840 --> 00:14:31.460 make it more profitable, de -risk it? a whole 00:14:31.460 --> 00:14:33.759 host of operational efficiencies and improvement 00:14:33.759 --> 00:14:36.580 opportunities. So once we've assessed the business, 00:14:36.720 --> 00:14:40.500 right, how do we prioritize what we're going 00:14:40.500 --> 00:14:42.399 to work on next that's going to drive immediate 00:14:42.399 --> 00:14:44.919 impact, midterm impact, long -term impact? How 00:14:44.919 --> 00:14:47.860 do you think about prioritization? Yeah, I think 00:14:47.860 --> 00:14:49.720 one of the things that visually comes to mind, 00:14:49.879 --> 00:14:52.340 and we do this a lot in our diligence decks and 00:14:52.340 --> 00:14:54.220 we're helping companies out on their journeys, 00:14:54.279 --> 00:14:56.779 I think of the X and Y axis. And one of those 00:14:56.779 --> 00:14:59.210 being... The value and the other one being the 00:14:59.210 --> 00:15:01.230 effort. And so when you start to think about 00:15:01.230 --> 00:15:03.470 how do you kind of prioritize and put these things 00:15:03.470 --> 00:15:05.769 together, I would tell you just simply grab a 00:15:05.769 --> 00:15:08.190 whiteboard or a sheet of paper, draw a plus sign 00:15:08.190 --> 00:15:11.129 on an X, Y axis and put value on the bottom and 00:15:11.129 --> 00:15:13.750 effort on the top and start to plot in and just 00:15:13.750 --> 00:15:15.070 a conversation to understand where they are. 00:15:15.309 --> 00:15:17.889 Because the things that are the easiest are high 00:15:17.889 --> 00:15:21.750 value things that are low effort. So those could 00:15:21.750 --> 00:15:24.250 be very simple things like, for example, process 00:15:24.250 --> 00:15:28.009 automation. Today, we have our AP group, our 00:15:28.009 --> 00:15:31.029 accounts payable team, manually creating these 00:15:31.029 --> 00:15:34.250 envelopes, putting them in one by one and shipping 00:15:34.250 --> 00:15:37.669 them out. Let's outsource that as a very simple 00:15:37.669 --> 00:15:39.850 win. It's a couple bucks to do it and we get 00:15:39.850 --> 00:15:42.710 back employee number five's time because they're 00:15:42.710 --> 00:15:44.190 not stuffing envelopes and sending them out. 00:15:44.250 --> 00:15:46.909 That process optimization is an easy one when 00:15:46.909 --> 00:15:49.429 you think about that. Also, there's a lot of 00:15:49.429 --> 00:15:51.169 repetitive tasks in a business, especially in 00:15:51.169 --> 00:15:53.809 the mid -market with a lot of our... family owned 00:15:53.809 --> 00:15:55.870 and family run businesses. You might have folks 00:15:55.870 --> 00:15:57.269 that are in legacy roles that have been doing 00:15:57.269 --> 00:15:59.190 that for a while. That's just kind of working. 00:15:59.330 --> 00:16:02.009 And this new ownership group is a chance to take 00:16:02.009 --> 00:16:04.250 a step back and say, how can I drive out repetitive 00:16:04.250 --> 00:16:06.610 tasks and really get the most value out of my 00:16:06.610 --> 00:16:09.230 team? And then another one I also see in that 00:16:09.230 --> 00:16:11.429 kind of process size is streamlining those workflows. 00:16:11.590 --> 00:16:14.009 So we see kind of this ping pong effect where 00:16:14.009 --> 00:16:15.870 I have to go to one person, they come back to 00:16:15.870 --> 00:16:18.090 me, then I go over to this person. And it's just 00:16:18.090 --> 00:16:20.370 this kind of spaghetti chart of like confusion. 00:16:21.149 --> 00:16:22.690 It's a chance to look at those processes and 00:16:22.690 --> 00:16:26.289 say, hey, let's just get things moving. Let's 00:16:26.289 --> 00:16:28.750 just move along. Let's not have a bunch of red 00:16:28.750 --> 00:16:30.909 tape. What are those processes that we can clean 00:16:30.909 --> 00:16:32.789 up? Sometimes you need an outside group to come 00:16:32.789 --> 00:16:34.909 in and help you on that because folks are really 00:16:34.909 --> 00:16:37.049 happy with what they're doing today, and other 00:16:37.049 --> 00:16:40.049 times you don't. A big one, and we've talked 00:16:40.049 --> 00:16:42.470 about this a couple times, is that cost control 00:16:42.470 --> 00:16:45.629 and savings. How do I start to find ways to reduce 00:16:45.629 --> 00:16:48.659 waste? and drive out some of that waste today. 00:16:48.960 --> 00:16:51.279 Now, we'll find some of that naturally as you 00:16:51.279 --> 00:16:53.340 go through and look at those processes. But as 00:16:53.340 --> 00:16:55.100 you start that financial review that you mentioned 00:16:55.100 --> 00:16:56.580 earlier, you're talking about kind of having 00:16:56.580 --> 00:16:58.799 that visibility to the team and talking about 00:16:58.799 --> 00:17:00.720 how you're going to manage, you'll see some of 00:17:00.720 --> 00:17:03.159 those things that could be wasteful. So a big 00:17:03.159 --> 00:17:05.740 one that we see often is I've got three groups 00:17:05.740 --> 00:17:08.640 that have kind of come together under a sponsor. 00:17:09.259 --> 00:17:11.500 And they're all buying their raw materials separately 00:17:11.500 --> 00:17:13.339 instead of coming together and buying it through 00:17:13.339 --> 00:17:16.279 one kind of group purchasing power. And so we 00:17:16.279 --> 00:17:18.740 see those a lot of times as you start to go through 00:17:18.740 --> 00:17:21.259 that plan, those 100 days to say, are anybody 00:17:21.259 --> 00:17:25.759 else in the group of portfolios from X PE firm 00:17:25.759 --> 00:17:28.000 buying these same materials? And how do we partner 00:17:28.000 --> 00:17:29.880 them to get the best price and drive that down? 00:17:30.619 --> 00:17:32.839 That goes back to the renegotiating of contracts 00:17:32.839 --> 00:17:34.339 as well as part of that process. Because you 00:17:34.339 --> 00:17:37.160 may think, I know for my world, I'm buying this 00:17:37.160 --> 00:17:40.839 software for Microsoft at $35. This other company 00:17:40.839 --> 00:17:42.559 is buying at $32. Let's go have a conversation 00:17:42.559 --> 00:17:44.380 with Microsoft and we'll buy it together and 00:17:44.380 --> 00:17:46.940 save some money there. And then I think this 00:17:46.940 --> 00:17:49.039 is an interesting follow -up conversation we 00:17:49.039 --> 00:17:50.880 should have, Mike, and bring a guest to, which 00:17:50.880 --> 00:17:53.670 is around the procurement side. So how do I put 00:17:53.670 --> 00:17:56.329 in programs in place to allow procurement? So 00:17:56.329 --> 00:17:59.349 no longer do I just go buy from this group because 00:17:59.349 --> 00:18:00.670 I've always bought from Grainger. I'm going to 00:18:00.670 --> 00:18:02.750 continue to buy from Grainger. How do I put together 00:18:02.750 --> 00:18:05.150 an RFP pack, go out and really kind of bid this 00:18:05.150 --> 00:18:07.470 out and put those processes in place in the 100 00:18:07.470 --> 00:18:09.490 days? You may not need to use it because you're 00:18:09.490 --> 00:18:10.950 not going to go change a vendor in the first 00:18:10.950 --> 00:18:12.930 100 days potentially, but you at least have that 00:18:12.930 --> 00:18:15.009 conversation teed up and built. And I think to 00:18:15.009 --> 00:18:17.009 build on something you said earlier, pulling 00:18:17.009 --> 00:18:19.529 some of those conversations forward to set expectations 00:18:19.529 --> 00:18:22.420 and putting together those building blocks. for 00:18:22.420 --> 00:18:25.579 that time is pretty important. And then the last 00:18:25.579 --> 00:18:28.000 one, near and dear to heart, technology and systems. 00:18:28.619 --> 00:18:30.799 If you've done a diligence with us, we'll have 00:18:30.799 --> 00:18:32.940 pointed out a lot of these, and I'm sure most 00:18:32.940 --> 00:18:35.180 folks who do diligences look at the same things. 00:18:35.519 --> 00:18:37.880 What are those ERPs they have in place? Are they 00:18:37.880 --> 00:18:40.430 outdated? Are they not compliant? One of the 00:18:40.430 --> 00:18:42.710 things I think that the Trivista team, we really 00:18:42.710 --> 00:18:44.650 take a lot of pride on because we are tied back 00:18:44.650 --> 00:18:47.529 to operations, is that business enablement. So 00:18:47.529 --> 00:18:50.289 coming out of that diligence, am I enabling or 00:18:50.289 --> 00:18:52.329 disabling my business based on that system? So 00:18:52.329 --> 00:18:54.970 is it not only bits and bytes outdated? It may 00:18:54.970 --> 00:18:56.630 have been the business outgrown the functionality 00:18:56.630 --> 00:18:58.769 of the system. It's still a valid system that 00:18:58.769 --> 00:19:00.490 would run, but not really helping me with what 00:19:00.490 --> 00:19:02.500 I need. Again, going back to another thing you 00:19:02.500 --> 00:19:04.099 said, data visibility. What are those reports 00:19:04.099 --> 00:19:06.079 I'm looking for? What do I need? If I don't have 00:19:06.079 --> 00:19:08.460 a common data repository, how do I get that stood 00:19:08.460 --> 00:19:11.279 up and talk about it in 100 days? And then how 00:19:11.279 --> 00:19:13.299 do I start to integrate and pull my tools together? 00:19:14.079 --> 00:19:16.140 Most of the time, and I think this will be interesting 00:19:16.140 --> 00:19:18.440 to hear from you, most of the time our clients 00:19:18.440 --> 00:19:21.480 are buying a company to scale it. They're not 00:19:21.480 --> 00:19:23.680 buying it to keep it where it is and sit on it. 00:19:23.720 --> 00:19:24.859 They're buying it for something they want to 00:19:24.859 --> 00:19:27.500 scale. So when we go in and do a diligence, we 00:19:27.500 --> 00:19:29.279 always have this question every time we talk 00:19:29.279 --> 00:19:32.819 about a system. Does it break at 2x, 5x, or 10x? 00:19:32.940 --> 00:19:35.420 And that's a question of scale. How far can this 00:19:35.420 --> 00:19:38.160 system take me in my process? Can it handle more 00:19:38.160 --> 00:19:39.940 transactions? Can it handle more manufacturing? 00:19:40.279 --> 00:19:42.579 Can it handle a larger organization? And so a 00:19:42.579 --> 00:19:44.279 lot of times we have those conversations around 00:19:44.279 --> 00:19:46.859 scale. I know, again, those are kind of my points 00:19:46.859 --> 00:19:50.180 around process, cost, and technology. What do 00:19:50.180 --> 00:19:51.960 you kind of think in that space of operational 00:19:51.960 --> 00:19:53.920 cryptocurrencies? Like you mentioned, the systems 00:19:53.920 --> 00:19:57.160 are oftentimes a big deal. If the business doesn't 00:19:57.160 --> 00:19:59.839 have the right system in place to take it to 00:19:59.839 --> 00:20:01.519 the next level of maturity or the next level 00:20:01.519 --> 00:20:06.920 of growth, changing out a system could take 18 00:20:06.920 --> 00:20:10.819 months at the short end, 36 months at the long 00:20:10.819 --> 00:20:13.829 end. private equity firm who wants to own that 00:20:13.829 --> 00:20:15.529 business for five years, if that is something 00:20:15.529 --> 00:20:18.589 that they want to tackle or that management needs 00:20:18.589 --> 00:20:21.329 to tackle, wants to tackle, that's got to be, 00:20:21.369 --> 00:20:24.150 you got to kick that off very early in the ownership 00:20:24.150 --> 00:20:26.170 cycle. So, you know, first 100 days, that's a 00:20:26.170 --> 00:20:28.690 great fit there. You know, I love the classic 00:20:28.690 --> 00:20:31.789 benefit effort analysis. You can't be a consultant 00:20:31.789 --> 00:20:33.430 if you don't have a conversation where you introduce 00:20:33.430 --> 00:20:37.670 that tool set. But as simple as it is, it's a 00:20:37.670 --> 00:20:39.650 really effective tool, right? So I think what 00:20:39.650 --> 00:20:41.960 you're going to find is that Most private equity 00:20:41.960 --> 00:20:46.099 investors pre -closed are developing their investment 00:20:46.099 --> 00:20:49.400 thesis and hypothesis about how that thesis is 00:20:49.400 --> 00:20:51.480 going to come together. It's going to hinge on 00:20:51.480 --> 00:20:54.160 things like process optimization, cost control, 00:20:54.400 --> 00:20:57.200 cost savings opportunities, what ERP system is 00:20:57.200 --> 00:20:59.240 going to get us where we want to get to, and 00:20:59.240 --> 00:21:00.980 very quickly post -close, like we talked about 00:21:00.980 --> 00:21:02.599 earlier, aligning with that management team, 00:21:02.700 --> 00:21:05.000 sitting down with the right folks, getting the 00:21:05.000 --> 00:21:08.539 right plan together. talking about benefit effort 00:21:08.539 --> 00:21:10.960 and sequencing and prioritizing what's going 00:21:10.960 --> 00:21:13.279 to move the needle. Also recognizing that not 00:21:13.279 --> 00:21:15.500 every business is going to be perfect when a 00:21:15.500 --> 00:21:17.720 private equity fund invests in it, and certainly 00:21:17.720 --> 00:21:19.539 no business is ever going to be perfect when 00:21:19.539 --> 00:21:21.920 they exit it on the back end, but trying to optimize 00:21:21.920 --> 00:21:25.160 it as best they can is really the goal. Hey, 00:21:25.200 --> 00:21:28.079 so Mike, maybe that leads us to our third topic 00:21:28.079 --> 00:21:30.720 that you mentioned earlier, the alignment of 00:21:30.720 --> 00:21:33.150 the... kind of that leadership team in the strategy 00:21:33.150 --> 00:21:36.109 side. And maybe this is one that you could answer. 00:21:36.549 --> 00:21:39.509 So obviously having your leadership buy -in because 00:21:39.509 --> 00:21:41.089 you said you bought that organization to grow 00:21:41.089 --> 00:21:42.950 it because you believe in it. You probably believe 00:21:42.950 --> 00:21:45.890 in at least some or most of the leadership. How 00:21:45.890 --> 00:21:47.690 do you ensure that management team is aligned 00:21:47.690 --> 00:21:50.250 to everything we just said and ready to kick 00:21:50.250 --> 00:21:52.210 butt, take names and execute? Like how do you 00:21:52.210 --> 00:21:54.390 tie all this and pull it together and get it 00:21:54.390 --> 00:21:56.089 to that management team in a thoughtful way? 00:21:56.869 --> 00:22:00.450 Well, I think you'd be surprised that it's very... 00:22:00.640 --> 00:22:04.119 And seldomly the private equity fund has a strategy 00:22:04.119 --> 00:22:06.839 that they're giving to the management team and 00:22:06.839 --> 00:22:08.779 getting the management team aligned around that 00:22:08.779 --> 00:22:10.839 strategy, right? That's really not how it works. 00:22:10.859 --> 00:22:13.140 Kind of a common misconception though. Most private 00:22:13.140 --> 00:22:15.059 equity funds are buying businesses with management 00:22:15.059 --> 00:22:18.900 teams that are in place with no intent of changing 00:22:18.900 --> 00:22:22.440 those management teams that much. Maybe a little 00:22:22.440 --> 00:22:23.920 bit on the margin, right? Maybe the business 00:22:23.920 --> 00:22:26.339 has never had a proper CFO before, so they're 00:22:26.339 --> 00:22:27.519 going to bring in a new CFO, but that's going 00:22:27.519 --> 00:22:29.690 to be to compliment. the management team, not 00:22:29.690 --> 00:22:32.970 to supplement the management team. Again, go 00:22:32.970 --> 00:22:34.569 back to what I've said a couple of times on this 00:22:34.569 --> 00:22:37.089 episode and others. Most private equity funds 00:22:37.089 --> 00:22:38.910 are trying to invest in businesses and own them 00:22:38.910 --> 00:22:42.109 for about four, five, six years. If you're only 00:22:42.109 --> 00:22:44.470 going to own it for a relatively short period 00:22:44.470 --> 00:22:46.549 of time, you can't change out the whole management 00:22:46.549 --> 00:22:50.410 team. That'd be a lot of disruption. It would 00:22:50.410 --> 00:22:52.430 take a long time to recruit the right people, 00:22:52.509 --> 00:22:54.710 then to get them to work together cohesively. 00:22:54.750 --> 00:22:56.509 That takes a little while. It's a big cultural 00:22:56.509 --> 00:22:58.740 shift there. So most private equity funds are 00:22:58.740 --> 00:23:01.259 backing management teams that know how to grow 00:23:01.259 --> 00:23:02.980 these businesses and maybe just giving them more 00:23:02.980 --> 00:23:05.839 resources or giving them more permission or giving 00:23:05.839 --> 00:23:09.559 them more capacity to go and grow them. And I 00:23:09.559 --> 00:23:11.160 think, you know, back to what I said earlier, 00:23:11.319 --> 00:23:13.660 sitting down, the investors sitting down with 00:23:13.660 --> 00:23:16.400 the management team and vice versa, very early 00:23:16.400 --> 00:23:18.519 in the ownership cycle. And oftentimes this actually 00:23:18.519 --> 00:23:20.000 starts happening in diligence, right? As they're 00:23:20.000 --> 00:23:21.920 getting to know each other, the PE firms are 00:23:21.920 --> 00:23:23.900 asking a thousand questions about them. the business. 00:23:24.059 --> 00:23:25.559 The management team's got a thousand questions 00:23:25.559 --> 00:23:27.299 about the private equity investors. So it's not 00:23:27.299 --> 00:23:28.720 like this is the first time they've ever met. 00:23:29.000 --> 00:23:30.920 But sitting down early in the ownership cycle 00:23:30.920 --> 00:23:33.240 and validating that everybody's on the same page 00:23:33.240 --> 00:23:35.859 when it comes to the growth strategy for the 00:23:35.859 --> 00:23:38.019 company and the underlying investment thesis 00:23:38.019 --> 00:23:40.420 that the investors bought the business or invested 00:23:40.420 --> 00:23:44.069 in the business using. And then driving accountability 00:23:44.069 --> 00:23:46.390 post -close, or I'm sorry, driving accountability 00:23:46.390 --> 00:23:48.890 on a go -forward basis, right? Which typically 00:23:48.890 --> 00:23:50.890 is the responsibility, quite frankly, of the 00:23:50.890 --> 00:23:53.349 CEO, right? And that kind of goes both ways. 00:23:53.430 --> 00:23:56.309 The CEO is in every board discussion. The CEO 00:23:56.309 --> 00:23:59.990 is kind of tasked with understanding the thesis 00:23:59.990 --> 00:24:02.789 of the investors and mapping that to the growth 00:24:02.789 --> 00:24:05.049 strategy of the business, and then turning around 00:24:05.049 --> 00:24:06.849 to his leadership team and getting them motivated 00:24:06.849 --> 00:24:09.529 and incented and aligned around achieving those 00:24:09.529 --> 00:24:13.430 goals. So there's just a lot of work around alignment 00:24:13.430 --> 00:24:17.069 of stakeholders and shareholders. And then it's 00:24:17.069 --> 00:24:18.849 about just driving accountability, which quite 00:24:18.849 --> 00:24:20.630 frankly, you know, I've seen it done a thousand 00:24:20.630 --> 00:24:22.890 different ways. For those folks who are familiar 00:24:22.890 --> 00:24:25.309 with things like the Danaher business system 00:24:25.309 --> 00:24:28.309 or the ITT leadership system, GE had one of theirs. 00:24:28.450 --> 00:24:30.609 There are very tried and true tool sets, whether 00:24:30.609 --> 00:24:33.529 it's X -Matrix, strategy deployment, goal deployment, 00:24:33.750 --> 00:24:36.869 Hoshin -Conry, plan, do, check, act, OGSM. Like 00:24:36.869 --> 00:24:39.130 there's 5 ,000 management consultant tools out 00:24:39.130 --> 00:24:41.109 there. At the end of the day, it comes down to, 00:24:41.170 --> 00:24:43.470 do we have the right people on the boat in the 00:24:43.470 --> 00:24:45.730 right seats? Do they know which direction that 00:24:45.730 --> 00:24:47.450 they're trying to point the boat? And then how 00:24:47.450 --> 00:24:49.289 do we get them all rowing? And it can be very 00:24:49.289 --> 00:24:51.990 simple. A simple Gantt chart with due dates and 00:24:51.990 --> 00:24:56.109 milestones and who owns which action, that goes 00:24:56.109 --> 00:24:58.589 a long way. So I think clearly communicating 00:24:58.589 --> 00:25:00.490 the vision in the first 100 days is critically 00:25:00.490 --> 00:25:02.910 important. If you are going to do some leadership 00:25:02.910 --> 00:25:05.230 adjustments, like add a new CFO or something 00:25:05.230 --> 00:25:07.450 like that. let's get that kicked off soon, right? 00:25:07.509 --> 00:25:10.250 Don't wait three years to go and do that when 00:25:10.250 --> 00:25:11.390 you're going to get ready to sell the business. 00:25:11.450 --> 00:25:13.609 Let's do that pretty quickly so that we can have 00:25:13.609 --> 00:25:15.650 the, yes, you're going to get the cost early, 00:25:15.710 --> 00:25:16.990 but you're also likely going to get the benefit 00:25:16.990 --> 00:25:19.329 and the impact early in the cycle. You're going 00:25:19.329 --> 00:25:21.769 to gain more visibility. If it's a proper CFO 00:25:21.769 --> 00:25:23.829 into the financials, they're going to help you 00:25:23.829 --> 00:25:25.250 make smarter decisions faster. They're going 00:25:25.250 --> 00:25:26.769 to close the books more quickly. Your financial 00:25:26.769 --> 00:25:27.990 reporting is going to improve. And that's just 00:25:27.990 --> 00:25:30.509 the example of the CFO. And then last and certainly 00:25:30.509 --> 00:25:32.650 not least, like I said, tracking it, measuring 00:25:32.650 --> 00:25:35.009 it. and holding people accountable to doing what 00:25:35.009 --> 00:25:37.069 they said they were going to do. Yeah, Mike, 00:25:37.170 --> 00:25:38.849 I think those are some great points. A couple 00:25:38.849 --> 00:25:41.170 highlights on that. And a lot of times we hear 00:25:41.170 --> 00:25:44.190 from consultants, about consultants, you come 00:25:44.190 --> 00:25:45.809 in and just tell us what we already knew and 00:25:45.809 --> 00:25:48.569 you put it in a document. And it's true. And 00:25:48.569 --> 00:25:50.450 I love the point you made is writing it down, 00:25:50.509 --> 00:25:52.410 documenting it, having that information there 00:25:52.410 --> 00:25:55.789 is so critical for folks to understand what it 00:25:55.789 --> 00:25:58.529 is and be able to be on the same page. But my 00:25:58.529 --> 00:26:00.890 favorite point of everything that you said was... 00:26:00.970 --> 00:26:02.529 Really, it's that management team is the one 00:26:02.529 --> 00:26:03.990 that's accountable. Just because you have a new 00:26:03.990 --> 00:26:06.609 sponsor, some additional cash or some folks that 00:26:06.609 --> 00:26:08.410 are working with you and maybe additional help. 00:26:08.690 --> 00:26:10.809 At the end of the day, ultimately, the accountability 00:26:10.809 --> 00:26:12.970 sits with that team to continue to drive value, 00:26:13.170 --> 00:26:15.150 drive the business, grow the business and make 00:26:15.150 --> 00:26:17.289 those changes. So it's not a hands up, put it 00:26:17.289 --> 00:26:19.849 in autopilot, enjoy. It's maybe a little bit 00:26:19.849 --> 00:26:21.289 of guidance and help. So I think that's a great 00:26:21.289 --> 00:26:22.809 point for our listeners as they listen to this. 00:26:22.950 --> 00:26:24.990 We're not saying this is a disempowering thing. 00:26:25.359 --> 00:26:27.200 We're saying you're empowered more and you have 00:26:27.200 --> 00:26:29.500 more responsibility, but the ability to grow 00:26:29.500 --> 00:26:32.539 it even faster and stronger is there because 00:26:32.539 --> 00:26:34.279 you have that financial backing. So that's an 00:26:34.279 --> 00:26:36.500 excellent point. Well, James, because this is 00:26:36.500 --> 00:26:38.660 an episode about the first hundred days, right? 00:26:38.720 --> 00:26:40.980 Not the first hundred years. Yeah. This one's 00:26:40.980 --> 00:26:43.119 going to be a shorter episode for us because 00:26:43.119 --> 00:26:44.519 I don't think we need to belabor it. I think 00:26:44.519 --> 00:26:46.859 we've given people the highlights, get the people, 00:26:46.980 --> 00:26:49.200 get the right people on the team, get them aligned 00:26:49.200 --> 00:26:51.759 and get things moving to the extent that they're. 00:26:52.119 --> 00:26:53.359 opportunities that you want to take advantage 00:26:53.359 --> 00:26:56.420 of. So to wrap things up here, a little trivia, 00:26:56.579 --> 00:27:00.559 right? Your favorite. I love it. What percent 00:27:00.559 --> 00:27:03.559 of private equity deals involve operational improvements 00:27:03.559 --> 00:27:07.720 as part of their value creation plan? So I love 00:27:07.720 --> 00:27:10.380 these because we, as you've heard in other episodes, 00:27:10.460 --> 00:27:11.940 folks, we're not the best at guessing these. 00:27:12.019 --> 00:27:14.339 So I think we're like 0 and 20. But I'm going 00:27:14.339 --> 00:27:16.900 to say based on my win rates. Didn't we get one 00:27:16.900 --> 00:27:19.279 wrong twice? I think we're like. Negative one 00:27:19.279 --> 00:27:21.539 out of 20. Yeah, that's fair. That's fair. That's 00:27:21.539 --> 00:27:24.019 a good stat. We'll have to go to producer Matt 00:27:24.019 --> 00:27:26.480 to have that checked out. One of the things I 00:27:26.480 --> 00:27:28.519 think is, because we do the post -close work 00:27:28.519 --> 00:27:29.720 and we do the diligence work. So I'm going to 00:27:29.720 --> 00:27:32.920 go on my win rate. I'm going to go 75 % because 00:27:32.920 --> 00:27:34.900 75 % of the time we get called back to do some 00:27:34.900 --> 00:27:37.859 sort of work. So 75 % of the time. So I'm going 00:27:37.859 --> 00:27:41.339 to give you the answer by telling a story. I 00:27:41.339 --> 00:27:43.039 think people in the private equity industry are 00:27:43.039 --> 00:27:44.640 going to be very familiar with. Those less familiar, 00:27:44.759 --> 00:27:48.500 less familiar with, right? The private equity 00:27:48.500 --> 00:27:51.759 kind of buyout world dates back to the 80s, right? 00:27:51.819 --> 00:27:54.039 One of the most famous ones, the RJR Nabisco 00:27:54.039 --> 00:27:57.740 deal with KKR. A few deals in the 80s, a lot 00:27:57.740 --> 00:28:00.019 of deals in the 90s, thousands of deals in the 00:28:00.019 --> 00:28:02.680 2000s. 2010s, it became tens of thousands of 00:28:02.680 --> 00:28:06.180 deals as the industry has grown. In the 80s and 00:28:06.180 --> 00:28:08.339 90s, the answer to that question probably would 00:28:08.339 --> 00:28:11.940 have been less than 5%, right? Private equity 00:28:11.940 --> 00:28:13.619 investors were buying businesses with strong 00:28:13.619 --> 00:28:16.650 cash flows. with durable business models, hoping 00:28:16.650 --> 00:28:18.130 they could just pay down some debt and they'd 00:28:18.130 --> 00:28:20.410 make a bunch of money when they sold it on a 00:28:20.410 --> 00:28:23.289 few years later. We call that the financial engineering 00:28:23.289 --> 00:28:26.650 era. As we got more into the 2000s, we started 00:28:26.650 --> 00:28:29.009 to enter the operational improvement era. This 00:28:29.009 --> 00:28:33.190 really kicked off 2010 to 2020 and still to this 00:28:33.190 --> 00:28:36.289 day. These days, the vast majority of private 00:28:36.289 --> 00:28:38.349 equity deals are going to have a very thorough 00:28:38.349 --> 00:28:41.680 operational value creation plan. In fact, The 00:28:41.680 --> 00:28:44.160 stats that I was able to find suggest that 85 00:28:44.160 --> 00:28:46.299 plus percent of the time, there's going to be 00:28:46.299 --> 00:28:49.839 a plan in place. But I would stress, James, for 00:28:49.839 --> 00:28:52.099 the listeners who are a little bit newer to kind 00:28:52.099 --> 00:28:55.359 of how this works, very rare do we see a private 00:28:55.359 --> 00:28:57.519 equity fund present their plan to the management 00:28:57.519 --> 00:28:59.819 team and just expect them to go and execute it. 00:28:59.839 --> 00:29:02.400 That's just really not how it works. And in fact, 00:29:02.420 --> 00:29:05.500 I've seen a lot of managers kind of disappointed 00:29:05.500 --> 00:29:07.819 or let down is the wrong word, but maybe surprised 00:29:07.819 --> 00:29:10.569 that... Somebody wasn't handing them a, hey, 00:29:10.589 --> 00:29:12.950 you should go and do these 10 things. It really 00:29:12.950 --> 00:29:16.269 is a collaborative conversation where the investors 00:29:16.269 --> 00:29:18.289 have probably made some interesting observations, 00:29:18.630 --> 00:29:20.390 third party, outside perspective observations 00:29:20.390 --> 00:29:22.750 about the business. They want to conjoin that 00:29:22.750 --> 00:29:25.690 with management's in -place strategy, maybe tweak 00:29:25.690 --> 00:29:27.109 it on the margin and let the management team 00:29:27.109 --> 00:29:29.009 get back to running the business and keep growing 00:29:29.009 --> 00:29:31.529 it, which is what they're hopefully best in the 00:29:31.529 --> 00:29:33.970 world at doing. So vast, vast majority of the 00:29:33.970 --> 00:29:36.490 time these days, you're going to see one of these 00:29:36.490 --> 00:29:38.539 plants. Sounds like I need to get out there and 00:29:38.539 --> 00:29:40.519 hustle a bit more. I'm missing 10 % of the addressable 00:29:40.519 --> 00:29:42.980 market, but that's a good tip. And I think that 00:29:42.980 --> 00:29:46.839 taking the plan, just a final story before we 00:29:46.839 --> 00:29:49.299 close, is I had this mentor and I was asking 00:29:49.299 --> 00:29:50.920 for some advice on something and we were talking 00:29:50.920 --> 00:29:53.920 about a subject. And I was like, hey, what's 00:29:53.920 --> 00:29:55.220 something that I should do in this situation? 00:29:55.619 --> 00:29:58.460 And the comment back was, just so you know, at 00:29:58.460 --> 00:30:00.789 some point... The people that you're going to 00:30:00.789 --> 00:30:02.930 get the advice from is no longer there. It's 00:30:02.930 --> 00:30:04.609 you that's going to be giving the advice to others. 00:30:04.750 --> 00:30:07.730 And so I think that growth opportunity and having 00:30:07.730 --> 00:30:09.410 that plan and to that point of you can't just 00:30:09.410 --> 00:30:10.789 always knock on that door. Sometimes you're the 00:30:10.789 --> 00:30:12.650 one that's going to have to have the answer was 00:30:12.650 --> 00:30:14.750 a great conversation from a mentor. Great comment 00:30:14.750 --> 00:30:16.529 by you. And I think that's the note I'd leave 00:30:16.529 --> 00:30:18.529 out for the management team is take these things 00:30:18.529 --> 00:30:19.990 and look as a way to empower yourself and be 00:30:19.990 --> 00:30:22.609 prepared for those conversations. Yep, absolutely. 00:30:23.470 --> 00:30:25.690 All right. Well, thanks, everybody, for listening. 00:30:25.849 --> 00:30:28.049 We'll catch you next time. Don't forget, like 00:30:28.049 --> 00:30:30.720 and subscribe. to the most popular podcast in 00:30:30.720 --> 00:30:33.180 town. Until then, we'll see you next time. See 00:30:33.180 --> 00:30:36.759 y 'all. Thanks for tuning into this episode of 00:30:36.759 --> 00:30:39.880 Growing EBITDA. If you liked this episode, hit 00:30:39.880 --> 00:30:42.359 subscribe or follow us on LinkedIn for updates. 00:30:42.960 --> 00:30:45.799 Got a topic you'd like us to cover? Drop us a 00:30:45.799 --> 00:30:47.259 message. We'd love to hear from you.