Podcast: Part Two of Selling to Private Equity, an Interview with Seller and Client
Following on the heels of Part One, this interview looks at the success of selling to private equity from a seller's standpoint.
About the Host
Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs called Growth and Exit Planning that helps in exit planning, value building and financial management.
About the Guest
Robert (Bobby) Kingsbury
He joined MCM in February 2008. His responsibilities include the execution of investment transactions and management of portfolio companies. Mr. Kingsbury is also responsible for the sourcing of investment opportunities, leading the partnership’s e-marketing strategy, website design and managing and developing Limited Partner relationships.
Prior to joining MCM, Mr. Kingsbury was drafted by the Pittsburgh Pirates in the 8th round of the 2002 Major League Baseball Draft. He spent six years playing professional baseball as an outfielder in the Pirates organization, participated in the 2004 Summer Olympic Games in Athens, Greece, and was a 2008 inductee into the Fordham University Athletic Hall of Fame. Mr. Kingsbury graduated from Fordham University with a Bachelor of Science degree in Finance.
He began his career in manufacturing. He was soon involved with the Torsion Group and found himself on the distribution side of the business. Action Industries is a leading manufacturer and distributor of a wide range of products for the garage door industry. With the help of MCM Capital Marc has been able to take the Torsion Group to a new level in the garage door manufacturing industry!
If you listen, you will learn:
- Welcome back, Bobby Kingsbury.
- Introducing Marc Calcaterra of the Torsion Group.
- How Bobby and Marc met.
- The importance of establishing a relationship with your client and learning their situation.
- Marc’s situation with Action Industries.
- How Bobby and Marc began building their relationship.
- The options Marc considered before calling Bobby.
- Why private equity was the best solution.
- The role of the Quality of Earnings report.
- Why you should hire an outside financial professional to appraise the company.
- The headache of dealing with 8 partners in one business.
- How Bobby kept Marc motivated through the process.
- The due diligence process and why it was the longest MCM Capital has ever done.
- Lessons Marc learned from his time working with MCM Capital.
- How to align all your key players’ interests.
- The deal Bobby structured for Marc.
- Pulling together the best executive team and strategically planning the future.
- The value a board gives a company.
- Why outside opinions matter in business decisions.
- How to establish a trust and comfort level with your client.
- Bobby’s and Marc’s parting thoughts.
Announcer: Welcome to Life After Business, the podcast where your host, Ryan Tansom, brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: Welcome back to the Life After Business podcast. This is episode 92. If you haven't had a chance to go back and listen to episode 91 with Bobby and what it's like inside of the eyes of a buyer, why someone would buy your company, how it's valued inside the depths of private equity firms and why they're trying to get a rate of return and what it's like to partner with them, go back and give it a listen to because this is part two of this two-part series today. We have on the show Bobby Kingsbury from MCM Capital and one of his CEOs of a company that he bought, Marc Calcaterra, from the Torsion Group. And they're both on the show today to give us an absolute real, raw, live experience of what it's like from Marc's perspective on why he chose the private equity route, why he chose Bobby and MCM, how they rolled four companies into one, what the due diligence process was like, how they came to valuations, what the whole goal was going forward, and how they could capitalize on a growing business and increasing EBITDA and conquering and industry. The reason I really enjoyed having them both on the show and I thought it was a good idea is because they're both extremely open and honest about what the entire process was like sitting across the table from each other, without a bunch of fluff or bs. So I really hope you enjoy the interview with Marc and Bobby.
Announcer: This episode of Life After Business is brought to you by Solidity Financial's growth and exit planning. Their proven process gives you clarity on all of your exit options and how those options impact your financial success, timing and future happiness. Sell your company on your timeframe to the right buyer at the price you want.
Ryan Tansom: Good morning Bobby and Marc. How are you guys doing?
Marc Calcaterra: Good.
Bobby Kingsbury: Doing well, thanks Ryan.
Ryan Tansom: Well, this is series to- part two of this series and we're gonna get some, uh, real, raw perspective from Marc. Um, what it's like to partner up and be bought out by a private equity firm and from MCM Capital Bobby, and so Marc, why don't you, for the listeners, um, give us a little bit of backdrop in how you started your business and come up with some of the major milestones that led you up to the triggering point to start looking and searching out there.
Marc Calcaterra: Yeah. Thanks for having me on. I guess from a, from a process standpoint for over two years before the transaction, I actually met Bobby and, uh, we actually met on the golf course and uh [Bobby interjects: perfect place] and um, you know, we just had a general business discussion. It wasn't about acquiring our business or anything like that. It was just really a, an intro that we met through a mutual colleague and you know, that that kind of kicked it off and we stayed in touch for several years, you know, in different events. And um, I will say just fast forwarding that, um, that definitely helped with the process and when we were... I'll explain a little bit about the situation we were in and how we got to private equity. But I would just say that that was a big help and it was a, it was a comfort level for us and for me personally, uh, when we went through that. As far as our business and we actually had four and my background is in manufacturing and I went to work for a distribution company and it was a family owned business.
Marc Calcaterra: It was actually in the garage door... the garage door business, and we sold different types of parts. Weather seals and hardware and accessory type products. And the idea there is I came from a manufacturing company and went to this, this distribution company. The idea was to vertically integrate and um, we started three other businesses to support the distribution company. So the family that owned the business had a, I guess a person that was in charge and, and he was there, but there was a father that was involved that was, was elderly and, and wanted to transition out. So they really wanted to find somebody to help run the business. So that, that's kinda how I got got into the distribution side. And then over the next six or seven years, we vertically integrated three additional businesses and, um, it was really to support that distribution and it was a host of different types of manufacturing processes and we built those up. So as, as we progressed, the business became very successful. All of them were very successful and there was just a, a, uh, from a family standpoint, there was a, uh, a lot of issues and it really escalated to a point where it got toxic and um, became legal and without getting into that whole drama, um, why, you know, we were looking at different ways to try and each of the entities... So although I had common ownership with my partner who was one of the owners, you know, one of the family members, um, I actually didn't have ownership in the distribution company. So there was really eight people involved. And as we're going through the process, trying to figure out how to, you know, kind of work through that, obviously I thought of Bobby and I didn't have any background in private equity, didn't know a ton about it. You know, heard some things, but you know, and looking at how we were going to finance that, um, we really came to the conclusion that private equity was a good solution to, to really make everybody whole and I don't know if it'd be a great deal for everybody, be a way to really separate it. So that's kind of how we got to the point of, of working with MCM and Bobby and, and, and making that transaction.
Ryan Tansom: No wonder. Out of eight partners, Bobby probably seemed like a gem.
Bobby Kingsbury: Private equity didn't look that bad!
Ryan Tansom: Right?
Marc Calcaterra: Yeah, he was throwing out life preservers. It was good stuff.
Ryan Tansom: I appreciate the, the backdrop, Marc. So when you guys where in that journey, was the two years when you had met, so you know, Bobby on, you know, you started talking to Marc, what was some of the original conversations and you know, Marc, where were you like, you know, in your head or the, the experience that you'd had with different options by the time you met Bobby? Was it, didn't liquidity? Were you thinking about an exit? Were you not? Were you planning it? And kind of how did that mental journey go over those two years and then when did the pressure and tension become so much that you guys actually started to search for options?
Marc Calcaterra: Yeah, at the point of when I met Bobby, we weren't looking at exiting at all. Like I said, we met casually through a mutual business colleague and um, you know, that that relationship flourished from there. But at that point we were growing the businesses and really I was, I, like you know, um, small business owners doing a lot of different things, trying to juggle a lot of different things. Didn't have a, a really big team. It was, you know, it was me and a few good soldiers and, and we did hire some people along the way, but it was uh, you know, it was like every, every challenge of a small business owner just trying to, trying to make it work, grow the business and we were successful. But you know, it's, it's tough. You kind of just gravitate to what, what the business need is and, and working towards that. So, but when we initially met, no we weren't even looking at a, uh, exiting at that point. We were still growing the business, like I said, in that two years though, the, uh, business had started becoming very successful and our revenue is growing, our profit was growing and, and the people that weren't very interested from a family perspective before became more interested and, and I, I would just say a little politically, the owner that was there was kind of a passive owner and um, I don't know that they really were in love with the way um, he was, he was doing things. So as you can appreciate, that continued to escalate and then, you know, fast forward about two years after where we're at a point where something had to happen and it was a big distraction to the business and we needed a solution.
Bobby Kingsbury: You know, when Marc and I first met on, on the golf course, I don't think we, I mean, for the first few, we didn't talk anything about private equity. It was more... one, him and I were partners, so we wanted to win, first and foremost, that was number one...
Marc Calcaterra: Yeah, we knew we were both competitive!
Bobby Kingsbury: And then number two, we just talked general business stuff. He, you know, he was telling me about, you know, his business and what he was doing and I just told him, you know, certain things that we see in, in, in businesses and really had no, no discussion about potentially doing a deal later on. Just kind of wanted to have fun that day, get to know him and then, you know, over the course of two years, you know, started to talk more, you know, we went out and played a few more times. Um, and then you know, when, when the timing was right, you know, Marc reached out, you know, really based on the relationship that we had developed over over that two year period.
Ryan Tansom: Formulating this relationship, when did the revenues and the EBITDA get discussed? Where, you know, Bobby, might know it might be a prospect for you or that you know, Marc, did you reach out to Bobby just for some pure advice because of the crazy storm that you were in? I mean, and when did you guys start to think about like, "Hey, this actually might work?"
Bobby Kingsbury: I would say it was probably a little bit of both. It wasn't until after that, that two year period where, you know, Marc called and said, "hey, you know, I think there might be an opportunity for us to do something together moving forward. Let's, let's have lunch." So we had lunch at that time. I didn't know, you know, how big the companies were um in totality, but I, I knew, you know, we, we wanted to, uh, to put all four together, strategically. It made sense for the business. It was a way for the family members, ah, that weren't involved in the business will actually, none of them were two really provide them some liquidity and settle some of there disputes that were outside of the normal course of business that was really distracting too to Marc and his team.
Ryan Tansom: Which makes a ton of sense. Marc, did you because of the relationship with Bobby, just reach out or did you... like explain like what the heck were you thinking? Because I'm assuming with what you're going through, you're probably going to bed every single night going, how in the heck am I going to fix this? What went through your head? What are some options that you were thinking of um along the way?
Marc Calcaterra: Yeah, we, we looked in and actually with my partner we looked at a lot of different things as far as trying to personally finance it, trying to consider another partner, but to be honest, none of those really made sense. So it was really trying to figure out a way to make everybody whole. And it was a stressful time for me. I mean, being a part of some of the legal proceedings and being drug into that, um, and still trying to keep all the businesses focused and, and growing. It was a, it was a difficult, desperate time and, and honestly the private equity at the end of it was really the only option for us, at least in my mind and talking to my partner. That was, that was really, it was a, but it was a difficult time.
Bobby Kingsbury: So you came to me when you were desperate?
Ryan Tansom: [cross-talk] Bobby's benchmark again is not getting set very high! I think it's interesting, because you know, for some scope what were the size revenues of the different companies? I mean, how did it fit into, you know, Bobby's criteria, but was it, did you look at other private equity as well?
Marc Calcaterra: Uh, we did not. And there's the talk about the businesses, the businesses in totality were 25-26 million. Now, there was some inner company sales and that's where we can talk a little bit about the quality of earnings and trying to come to a, trying to come to a number where it made sense. There was a lot of... Because you have to pull out the inercompany and really come to an EBITDA number that you know that makes sense. And there was a lot of add backs with, with the family and what they had. So it was, that was a long process, but you know, I would say we, we did hire an outside person to come in and help with that, which was a huge help because we were using a public accountant, I guess I would say, that didn't really know the business that well and was really just rolling up financials. Now, we did implement a SAPB-1, which was a small... It's a smaller platform on the SAP enterprise system, but. So, I mean, it, it, it did a lot of financial calculations. It's just as far as analyzing that, uh, our public accountant was just, just regurgitating the numbers. There was no strategic piece of that. Um, so other than my review, um, we weren't getting a lot of help. So that process was, took us awhile and it was definitely challenging. But I think through it we learned a lot. Um, we learned a lot about the business, I did personally. It was a process for sure.
Ryan Tansom: So when you kind of had more seriours conversations together, guys, was that kind of the first and only person that you are going down this route with, Marc? Um, and then if so, you know, did you guys, you know, Bobby, did you start due diligence right off the bat? Explain kind of how you guys started formalizing the good relationship that you had already started?
Bobby Kingsbury: Why'd you choose me? Why'd you choose me, buddy, to go down this road with?
Marc Calcaterra: No, I mean I, you know, I think, you know, and like I said, we had a mutual... our business attorneys were they used the same firm one of the same firms as we did and I think a lot of him as well and he always spoke very highly of Bobby and I think, you know, like I said in the interactions that we had, there was trust there. And it was really where there was some component to it where we needed to work through it and, and it was complicated, so we had to find a partner that, that would understand that and work with us through that. So, you know, in my interaction with Bobby, he had some of that backdrop and it made it easier and really from there it just kind of snowballed and working through our legal group and collectively together, it just ended up being the right decision and really one of the only decisions that we could to, to really clean up all the things that were going on and set the business up for success moving forward. That was my biggest concern is with all these distractions, what was gonna happen? I mean, we have all these employees, which, you know, I'm responsible for and it was a very difficult trying time and, and for me, uh, we needed stability. So that's really how, how it went and...
Bobby Kingsbury: Yeah, I think initially, you know, we had a few discussions of just the overall business with Marc. We wanted to understand his strategy moving forward. You know, when we looked at four different businesses, putting this together at one time is not easy. So we had to, uh, to understand Marc's strategy where he wanted to take it, why it made sense and we had the utmost confidence in him really, you know, at the end of the day we were backing Marc, you know, inherently it's, it's a great business. Um, in, in my mind, you know, you think that the garage door business isn't very sexy. Uh, but at the end of the day, whether you're a commercial enterprise or you're a residential home, if your garage door breaks, you don't care how much it costs. You care about how quickly someone could come out and fix it. So the price elasticity for in their business model is, is huge and the value that they could bring from being the only a company that has a national footprint, uh, in the industry was certainly huge to understand Marc's strategy and then what we had to do with once we understood that was really get our arms around, you know, to, to Marc's point where, where are these numbers? With four different businesses and you know, the manufacturing group selling to the distribution group which were then selling to the customers, you know, when, when they're combined entity, you know, some of that inner-company stuff is going away.
Bobby Kingsbury: And then to really understand, uh, the profit because while, somewhere on the SAP business one, the others weren't they're on a different... well on the SAP business one, but they weren't talking to each other and they were on a different version. So, you know, it was pretty complicated, um, transaction and he had, as he mentioned, hired an outside accounting consultant who, you know, she was an absolute blessing in this, in this process for both our perspective and I think Marc's perspective, you know. When we're trying to get numbers and understand it to put together a value for, you know, Marc and the other shareholders, something that was of substance, something that was real and something that we could actually back, um, and feel comfortable doing. And I thought it was important.
Marc Calcaterra: Yeah. And I thought it was important to, to have somebody from the outside so that it wasn't skewed so that everybody trusted the process. Because, I mean, I think when you have that many different people involved and it's important to have, you know, somebody independent looking at it versus you know so, so they don't feel like they're being screwed. So I, you know, I think we spent a lot of time going through that and, and you know, just as we work through the, not just in the quality of earnings, but I mean I did spend a lot of time with Bobby and the MCM team really talking strategy, right, because it's about where's the business going and what could it be, you know, and consolidating it and creating economies of scale and, and, and doing a lot of different things that we historically weren't able to do because of the different ownership. It was just, it was really four separate businesses. So now consolidating this, you know, like, but like other business owners on there, you're working in the business all the time. It was, it was actually refreshing to be able to step back and, and think about the business strategically. And we spent a lot of time talking about that because that's, that's part of the value, right? As well as where we can go with the business. So we spent a lot of time talking about that and, and you know, it's, it's, for me, I didn't have a lot of opportunity to talk to other business people. I mean, when you're in the business working on it, I didn't, I didn't have an outlet to talk, talk about different things. So it was, it was awesome for me. So, um, I just wanted to add that.
Ryan Tansom: It's interesting because I think, Marc, when you look at a lot of entrepreneurs is all about where can we take whatever business it is. And then there's also the, I gotta take care of myself. And so how did you balance those two things and kind of one layer on top of that is, so if you got this many partners in these businesses with these family members, you know, I'm assuming if you're like most owners and entrepreneurs, you probably sat down on a napkin going, if we mold these things together, I could buy these people out and I can hopefully get a certain dollar amount for you and/or what the business is worth. And did you have expectations coming from the family members of how much they wanted? And then how did you guys all have a price in mind of how this would work before engaging with Bobby? Or what was the benchmarks in your head like that?
Marc Calcaterra: That shit show? I think the, the accountant that we had, um, was probably the resource that I think, from a family perspective, they, he was, he was really the accountant for all of the family members. So, you know, I think in his limited ability to understand the businesses and from a financial perspective, he obviously put together a, a, you know, a pro forma to kind of put together what he thought made sense. Um, and then like we talked about, we hired this outside person to come in and really look at it and, without getting into a ton of detail of the background of all the people there was, one of the family members was in investment banking. So he has obviously some background and understanding on how to, how to look at some information. So I think collectively, um, we were, we were able to come to an agreement or at least an understanding of what, what the businesses were worth. Now not everybody had ownership in the different businesses, so that's where it got a little more complicated and I guess ultimately everybody won because when we molded them together, they were worth more than we're, I mean if they were buying... if MCM was buying and I don't wanna speak for Bobby, but if they were buying them individually there, there's no way they would've been as worth, worth as much as they worked together. So, I mean everybody really wanted... and putting a value on that. I think we had a, a framework for what that was. But um, you know, it was really going through the process and everybody was being educated on, on that as we went along. So...
Ryan Tansom: But it sounds like there wasn't a lot of preconceived notions where you get people saying, "I want this to walk away" or "I'm gonna like, sabotage the deal unless I get this from that part."
Marc Calcaterra: Yeah. I think there was some discussion. I know my partner had his perspective because for them it's um, and where they are in their careers, it's, you know, for him is, is he employable and what can he do? So it is what I'm getting enough to, to you don't allow me to retire and sunset and uh, so he had a number and I think we worked around that framework so, um, but understanding it all and it's more than just the number and then, from a tax implication standpoint and how it's distributed, um, we did work through a lot of that so... but like I said, during that time it was very toxic and there was a lot of things going on. So it just, to have rational discussion, it's difficult at times.
Bobby Kingsbury: There was a lot of stuff going on behind the scenes aside from the transaction that Marc has had to deal with. So ultimately what we decided to do was, um, two separate transactions, um, to, to alleviate a lot of the concern from family shareholders. And then the other shareholders, um, you know, so that the distribution business was bought um was assigned a value separate from the other three entities and the other three entities were, were bought together and then merged immediately after the, the transaction.
Ryan Tansom: So Bobby, how did you as the buyer looking at this... and I know, us as entrepreneurs, future strategy if love your marketplace. I mean it gets a lot of fun to talk about that, but then you gotta deal with the reality that you're, that you're sitting in. As you're, especially this shit show of four different companies and all the different, you know, buying and selling back and forth. How did you, you know, through the due diligence, how did you start going through that, through that and then how did you place the value on the current, you know, cause like Marc said, if you have bought them separately, then you could have had the opportunity to say this is how we're going to do it and then immediately place a different value and you could roll them together and had it been different immediately. So how did you balance, you know, as a buyer looking at what they're currently going through and how did you look at it and how did you get to that and then you know, what the value would be as if they were all together?
Bobby Kingsbury: Yeah. Well, you know, it's a, it's an interesting question because of the dynamic that was going on before the transaction, given four different businesses. So really, I mean we put and this goes back to what, when we talked on the first podcast is developing relationship from both the buyer and seller standpoint is so huge because getting to know Marc over that two year timeframe, his character, the type of person he was, the type of business person he was, the strategic mind that he had for, for this business before we really even got gotten involved was something that, that I really valued. So, so at the end of the day, you know, if, if I were to distill it down to something, it's we really backed Marc. Now, couldn't, could we have paid, you know, in aggregate multiple arbitrage by buying the four businesses separately. Absolutely. But I want Marc to... one, I don't think we hit some certain shareholders numbers if we do that and then a deal isn't done.
Bobby Kingsbury: Um, and then one I, I wanted Marc to be able to, um, get something for, for the businesses that he built that was fair and then have him so motivated, um, you know, uh, he invested in real dollars in the combined entity, uh, to have him motivated to continue to grow this business. Now, Marc's a certain person where I say it right from him. Money doesn't motivate him. Um, you know, it's, it's nice to have that there, but if it, if he didn't own as much as he does today of, of, of the business, I think just personally and how competitive was because you remember that first day on the golf course. We wanted to when, um, you know, it's, it's personal satisfaction. It's him caring about his employees is really where the business is. It's going to go to, to create something. Um, you know, he, he had a vision years ago once he started the manufacturing side of the business to really be a vertically integrated garage door solution provider and you know, he's, he's achieved a lot of those goals, but it's ultimately not where he wants it to be. Um, so from, from our standpoint, you know, it was really was really backing Marc and his strategic vision. Now we're buying a company based on future potential but also based off of historical earnings. Um, and you know, trying to figure those out with a four, four different businesses was, was, you know, really the toughest part of this situation to be able to really understand the numbers and provide something that was fair and equitable to all the shareholders.
Ryan Tansom: Can you give me like along the you know the due diligence and how long did that take and what were some challenges that you guys experienced where it really pushed your, your, your, your current relationship? You talk about the relationship you'd, that you'd built where because you had the relationship and allowed you to overcome some adversity that was going on between the two of you in the situation.
Bobby Kingsbury: Well, I don't wanna speak for him. Maybe you should answer it first, you know, to give them a real perspective so that I don't color it.
Marc Calcaterra: Yeah well I guess just from my personal experience and being involved in it... You know, for me, owning a, a large percentage of three of the businesses and really just running the other entity, um, which actually had the highest amount of value. Um, I wasn't really, although it was, it was lucrative, it wasn't to a point where I could [unclear] anything and it really wasn't, you know, I think a lot of business owners, I bet on myself my whole life and it was something that I wanted to do moving forward. And it was, you know, as we went through it, it was part of it, um, in, in, you know, cashing in some chips. But it's really the future. And that's why I think we're so aligned together is it's, you know, with MCM is, you know, what can we do with the business? And there was a lot of limitations, not just from cash but from resources. And as we, as we talked about it, it was really exciting because there was just a huge opportunity. One to consolidate the entities but also just things that I've thought about and they just weren't reality because we didn't have the time and energy to do it. Um, so, you know, um...
Marc Calcaterra: I think the process from, from start to finish, you know, during that whole process, I, our relationship, at least in my mind, wasn't tested at all as, as a matter of fact, I think it got even stronger.
Bobby Kingsbury: Yeah. I mean, I think the, the, you know, I think the trust part of it was, and I think we're both very candid, so there was no, uh, I mean, and I, I've been that way from, from day one and I mean if there's an issue, I bring it on, I put it on the table and I think we're, we're both that way. So, um, you know, we, we did talk about valuation a little bit and it was adjusted slightly and um, I talked about the reasons why and we had that discussion, but, you know, as far as the quality of earnings, um, that was more working with the, with the accounting firm to try to come up with a way to actually effectively do it and come up with a present value. I mean, there was just the intercompany made it. Bobby talked a little bit about it, but we had parts that were being manufactured, sold into the distribution and then resold and trying to come up with a revenue model and a gross profit model that, that was, [Ryan interjects: Accurate?] you know, excluding that, it was very difficult.
Bobby Kingsbury: So, you know, this is... it was the longest diligence period that we had. I think we signed the letter of intent in August, um, and then we closed the day after Thanksgiving. [Marc interjects: Yup, the end of November] You know, now, some of that was one of our best friends, a landlord in Arizona, which if Marc and I ever see them again, it'll be... hopefully he's listening. Yeah. You know, it was just, I've never dealt with a human being. I don't know if I can call him a human being. I've never dealt with a person like that in my entire life [Marc interjects: Crazy.] and I hope to never ever deal with somebody like that again um somebody who wasn't even involved, you know, as a shareholder tried to submarine a transaction... was crazy.
Ryan Tansom: I think that's an interesting note because you got two people on two sides, a buyer and a seller, are obviously working towards the same goal pretty effectively. And how something that was out of your control Marc, which is, uh, you know, where you're renting from or whether you had bought or what, how did you know, what actually happened? Because I think there's stuff like this, a business owners don't even think about that hey your business is all great, but like, you know, there's certain things that trickle down like the real estate. What actually ended up happening and how did that potentially submarine the deal?
Marc Calcaterra: Well, we, we ended up sorting it out after a long, drawn-out process. I mean it was really, it was really just a contractual obligation and was something where we were going to move from that, from that facility anyways into a larger facility. I think lesson's learned. I mean we've done several additional expansions since then and, and we, we address some of the concerns that we had and just... it was mind-boggling on we would do everything to... And you know, it was working with all the old ownership team as well because there were some costs involved and it was really on, on, on making the space acceptable to him for us to exit. And I mean, we just went through, I don't know how many different versions, I mean it took a month - over a month - to, to, to actually... and it was just crazy to think that something that trivial would, would hold up the deal, but it did.
Bobby Kingsbury: It did. And talking to him in person, he was so irrational, I had to pull over on the side of the road. I was gonna probably get into an accident if I didn't. But, you know, it was the assignability of the lease. So now every time we look yet at lease, especially here with, um, you know, as we're looking to move into larger buildings here with GTC and with other companies, it's really looking at that provision in the contract, you know, because at the end of the day a landlord can hold up a deal based on that assignability clause, um, in a, in a lease and really, you know, he was looking for, you know, cock in windows, paint, you know, really minor things as he's gone through there with a fine-tooth comb just to try to stick it to us and hold stuff up. At the end of the day, we got through it.
Ryan Tansom: So it sounds like the landlord was a bigger pain in the butt than Bobby's due diligence.
Marc Calcaterra: Yeah, I think so. I would agree with that.
Ryan Tansom: I would agree with that. Even though you had four entities and all the family members and stuff like that. Was there any other red flags, Marc ,that came up, um, at, you know, as you're looking at partnering with Bobby and then also vice versa? Was there not much that actually ended up coming through this, even though it was the longest due diligence that you've done and probably very complicated?
Marc Calcaterra: From my standpoint, it was really... not looking at the business and not that we weren't focused on profitability, we were. But um, you know, when you're running a small business, um, and actually several of them, um, you don't always think about maximizing EBITDA or um, you know, you're really trying to minimize tax. So, I mean I just wanted, through that process and that's the other reason why we brought in an outside person, I just wanted to make sure that it was right. And I think that was from my standpoint and working with the team is making sure the information's right so we get a fair evaluation and um, it was, it was definitely a process.
Bobby Kingsbury: Yeah. I mean, you know, I, I, I can echo that. That was probably... there weren't really any red flags, you know, I think maybe, you know, the number that we agreed upon and then after going through due diligence was maybe $50,000 less than what we agreed upon, but we know at the end of the day we just, it is what it is. And we kept our price where it was at, you know, the last thing I want to do after going through that process, um, and putting my trust in Marc is to start off on the wrong wrong foot. You know, at the end of the day it's $50,000, you know, if you're assigning a multiple to it, is a quarter of a million or $300,000 going to do, you know, much difference, you know, when you're talking about growing the company, you know, in terms of a, you know, multi-million dollars. So what we want to do is take a holistic approach, you know, start off on the right foot and we knew through Marc's strategy, you know, what he was going to do when the companies were vertically integrated, some of the costs that he could drive out of the business, were going to more than make up for, you know, a $50,000 of, of EBITDA. So in my mind, you know, no, there, there, there, there weren't very many red flags at all once we got passed and once we understood all the numbers from, from the different entities.
Marc Calcaterra: Yeah, from my standpoint it wasn't as much private equity driven as it was trying to keep all the people that were involved, you know, and make sure that the process was done correctly so everybody would buy in and believe what we're actually doing because I mean, you know, there was just a lot of different viewpoints, different things in. And it was um, it was a challenge.
Ryan Tansom: How did you guys go through it? A couple of questions about the people. So there's probably the people that are the owners and the shareholders, but then there's the staff. Did, you know, maybe the second part and we can revisit that is I wanted to understand like how you guys ended up telling the staff and everything. But Bobby, you said you were backing Marc a lot of this way and then you know, Marc, I'm assuming you're sitting there going, OK, this is my way out of this mess, you know, how did you, did you have an idea what you were going to get and kind of what, what is it that you know financially and then know roles and responsibilities. At what point did that start to come come to fruition and how did you guys land on the structure for Marc in the, how did you buy out the rest of the family members?
Bobby Kingsbury: Again, we're, we're betting on Marc. We wanted Marc to own a significant percentage of the business moving forward. So you know, he had ownership interest in the other three businesses.
Ryan Tansom: How much ownership? So you were a controlling member, Marc?
Bobby Kingsbury: Basically. Yeah. He was 51 or 50 to 51 percent of the other three entities.
Ryan Tansom: You made the ultimate decision of whether you wanted to go with Bobby or not.
Bobby Kingsbury: Yeah, well, yeah, and the other transaction he did too because he was the one running the ship for the other none of family members who are involved. So he was... without Marc, um, to, to be fair, you know, that that business is worth half as much as it is, um, which, you know, goes back again to what we talked about in the podcast and the people is how important people are to a specific business. So really Marc drove the ship for all four of the businesses even though he didn't have ownership in the, uh, the, the largest one. So from, from our standpoint and the people in it and backing Marc, we wanted him to have a significant ownership percentage going forward. So he rolled over money, um, to, to have a significant, uh, equity. And then we also provided him with what we, what you can call is carried interest, um, stock for a nominal amount of money, um, to really, you know, further align our interests.
Bobby Kingsbury: And then secondly, you know, may maybe what we skipped over is, you know, Marc had a, a very important person in the manufacturing part of the business. He was the COO, you know, Marc would, would, would talk to me about how important, um, Joe is to the business and it w what he brings to the business. So I went out to a Evansville, Indiana, with Marc to meet Joe and person, you know, to, to let Joe put a face behind private equity to, um, really address, you know, well, Marc and I talked about the vision of the business together as an entity, what it would mean for Joe, uh, moving forward and um, you know, kinda what, what his concerns might be, you know, partnering with, with private equity. So we did that. Then ultimately what, what we've told him is, since he's so important to the business, we promoted him to COO. We gave him a, Marc gave him a raise, and then we provided him equity into the combined business as a whole. Um, and, you know, it was a way to align everybody's interests. Um, you, you know, we have equity set aside for other key members of the management team, um, and you know we look to, so really eight to 10 percent of the business is set aside for key executive team members, aside from Marc.
Ryan Tansom: So Marc, when you went into this and as Bobby is kind of structuring this, did you, did you have any idea how or what or when you were going to get your money or your control or anything like that? Or what, what kind of preconceived notions did you have going in there and then how did you and him coming to grips and being comfortable with what you ended up getting?
Marc Calcaterra: Yeah, I would say, you know, and just to talk a little bit about the, the process, you know, internally, you know, as we were going through it, you know, Joe was a key person so we included him and there was a couple other people that were involved as well. So, but beyond that, nobody in the organization knew and, and you know, they, they, you know, from an outside standpoint, there was a lot of noise and I think people were trying to figure out what was going on. So, you know, one of the most difficult things was trying to keep everybody calm and, and, you know, make sure that, um, and really how I positioned it with everybody is this is what the business needs to move forward versus, you know, if something were to happen and it got dismantled on the family fractured, I mean, who, who knows what would happen to the business. Um, you know, as far as coming up with a value, it took some time and I, and I had a couple of people that I reached out to as far as, you know, really, um, how it was going to work for me and, and not owning, you know, owning a, a large portion of the three of the businesses and not of the one... coming to grips with what that is and what that looked like, it took me a while and um, but I knew it was the right decision for the business, so it was really as much of a business decision as it was just personally because I knew moving forward, like I said, I bet on myself so, um, with, with more upside, and that's really how we ended up structuring it, I knew if, if we all won together and, and I, I was competent what the business could do and the opportunities that we talked about and, and really a fresh start where we can, we can talk post-transaction and in what we've done since then. But I mean, um, yeah, it definitely took awhile to come up with um, what was right. And I, I, I talked to my wife a lot and I think a lot of people as they're going through this, you know, one of the things was the flexibility part of it when you're, when you're a privately held company and you know, there's a lot of things that you can do and, and, um, you know, just, just different things as far as how the business is run and your time and moving around.
Marc Calcaterra: And doing different things with the money versus once it's restructured... not, not, not from my standpoint, actually, it was a ton of different. But I think a lot of, a lot of business owners think about that as a, as they work through the process. So, you know, for me, um, you know, I had a, like I said, I had a big portion in several of them, but now it was an opportunity to, to own a portion - good portion of all of the entities and as one business, you know, there was a lot of upsides. So, I mean, that's really my mindset and kind of as I was working through it all, we came to a final deal.
Bobby Kingsbury: Marc and I also came together in my office and I walked them through the model. And showed him the different growth in, uh, in the business Marc, what do you believe in? Um, you know, let's go worst case, you know, business case and best case and I'll show you what that means to you um in terms of where we hit certain numbers and you know, after walking through that, um, you know, he, he certainly was, was a lot more comfortable and understood, um, you know, what at least how it would benefit that not only him, which is what I love, but his entire team.
Ryan Tansom: I think that that's important. And I believe based on the fact there's some history now, since the partnership was formed, but a lot of people do that, right? But it's all the blue sky, all this other bs and, you know, obviously you guys had a relationship that you've built to trust each other on that. But you know, Marc, did you want a certain dollar amount down? :oke how did you guys actually structure it? Because you've got to mitigate some risk unless you- unless you rolled all of your money right back into the end of the whole new entity, but you know, was it a certain money down? And then there's all that upside with the equity and the bigger picture. But then also how did you guys get to what kind of control that you have to be able to get those numbers? So I don't know if you want to just share how you structured your comp plan and then also the roles and responsibility to make sure that what Bobby was pitching was actually going to actually going to happen? You could see it.
Bobby Kingsbury: Yeah. Well I can at least start on the, the, the, the structure and then Marc can hit on the control part for, for him. Um, you know, we structured it as a preferred and common stock. The preferred carrying, you know, I think it's a five or six percent dividend. I have to look back at documents. Basically, you know, Marc rolled over real dollars in, in the preferred which also bought him common. So in our structure, if you look at our preferred and common structures, it's a six percent preferred or deferred dividends. So basically it's almost like another layer of, of debt. It's just, you know, protecting a little bit of, on the downside, you know, from a, from an equity standpoint. But at the end of the day, you know, we talked on the first podcast is, you know, what private equity's underwriting to, generally speaking, currently right now it's 17 to 20 percent, but historically it's been 25 to 30 percent.
Bobby Kingsbury: So if we're only earning six percent, that's senior lending numbers and we're not making any money. So you look at the six percent as a, as a hurdle, everything after that is all upside. So if you believe in the business and you believe it can certainly earn more than six percent, um, you know, and then, uh, we're, we're offering common stock for nominal amounts. So generally speaking, the majority of the money goes in his preferred. So just for easy math, say it's a $10,000,000 equity deal, 9.9 million goes in as a preferred and 100,000 dollars goes in as common. So what we can do is provide upside, you know, so you know from, from Marc's standpoint, provide upside 20 percent of the business for $20,000. That's it. What's great about that structure secondarily is that management team. So when we set aside eight to 10 percent of the common stock for management, they could write a check for a thousand or $2,000 to get two percent of the business. They could not, at least most small businesses unless you're really overpaying, uh, the VP of sales and marketing, you know, doesn't have $200,000 to spend, you know, for two percent of the business. That's how we structured it or for Marc. So Marc rolled over real dollars into the preferred and then we provided him, you know, a lot of the upside in the common. We were happy to give that up because at the end of the day, he's the one running the damn business. Um, you know, it's Marc is operationally in control of the business.
Ryan Tansom: So Marc, Marc, did you take chips off the table or did you roll the entire payment right into the business?
Marc Calcaterra: No, I, I did. Um, I, I would say I reinvested 30 percent. Um, and then obviously the common side of it was the upside, which I was most interested in. So, I mean, I think it worked for me, so, you know, I was, and again, it wasn't, it wasn't the only one involved in the transaction. So I mean I think, you know, my analysis was a little different than if I was, I owned everything myself. So, I mean, I think for me with, with all the complications and everything that was involved, it was a great deal for me
Ryan Tansom: It probably seemed like freedom compared to what you were doing.
Marc Calcaterra: Like William Wallace at the end of Braveheart.
Bobby Kingsbury: Why don't you talk about, because I think Ryan has a lot of business owners on there. You know, the second part of the question was, and I, I'd be interested to hear your answer is the concern over, you know, once you want to do with the business, strategic direction, that sort of thing operationally, what would, what would it look like? What were you nervous about as you looked at the transaction?
Marc Calcaterra: Yeah, I mean I think, you know, we spent a lot of time talking Bobby and I and, and, and really the MCM team about it and um, you know, I think a lot of people and you know, being, uh, when we were a small business, I think a lot of people, including myself are, you know, you're always apprehensive to bring on a lot of um, cost. So regardless of what it is, you know, in hiring high level people, it's just, I think we're more conservative about that and it probably restricts growth to some level and really in thinking about the business moving forward, um, you know, I think I was just able to process it and think about the future more and I think from an executive team standpoint, it really brought a lot of light around I needed some help. And um, you know, we can talk about that. But I mean we, we brought on an executive team and, and um, you know, we implemented some strategic planning and you know, bringing all that together. I mean, we really created a, a, you know, a foundation for the business that's been transformational. And um...
Bobby Kingsbury: Did you have any apprehension about now I won't be able to run the business like I want to, or?
Marc Calcaterra: I mean not really. I mean I think with the discussions that we had and, and you know, I guess... I guess maybe a little, but I mean we had talked a lot prior to that so I mean there wasn't really what, what MCM says is you know, what's going to change and they say nothing and to be honest you can say that. And I guess now, a year, you know, about a year and a half after, that is the truth. And, and you know, they are hands off. But yeah, I mean I guess I guess there was some anxiety on, you know, on making every decision and you know, really going from an owner to... I guess I don't look at it as an employee, but I mean you're, you're reporting to other people. It's, you know, it weighed on me a little. But I mean, like I said in the, in the circumstance that I was under, um, and you know, in prior lives, you know, I've worked in big companies, small companies, worked for people, so I mean, it wasn't, it wasn't a way one off where it would've been a difficult thing. So I mean, um, yeah, I guess it was a concern, but it was just one of many things that was being processed at the time.
Ryan Tansom: It's an interesting thing because I think there's so much, as you guys have... I think there's a lot to be said about how long it took you guys to build the relationships and getting aligned with the strategic vision because I think the biggest apprehension that a lot of people have is OK, I'm now going to be a shareholder and not necessarily in control of the vision of where I want to take my baby, right? And the fact that if there's ever an on, uh, you know, not an alignment with you and Bobby, I mean, you could technically be fired even though you'd still own the shares. I mean, it's something that kind of freaks a lot of people out. And it's an interesting hurdle and probably sabotage a lot of deals out there.
Marc Calcaterra: Yeah, I agree and I, I mean I think probably the confidence I had in the vision of the business and, and where I wanted to take it and really the discussion I had with Bobby and MCM, I think, you know, we were really aligned and I think they believed it. I obviously believed it and that mitigated a lot of, a lot of those concerns.
Ryan Tansom: What were some of the things that you saw, like when you look at the strategic plan in the future where you're going Marc and all this stuff as you started to get excited about what would be possible, what were the- What are the benefits of private equity that people probably don't have in their current situation? You'd mentioned some staff stuff, but I think maybe I'll just take a little note where it's coming from because I had a bunch of appointments with clients recently where the traditional banking model doesn't usually adhere and help people with growth versus having different kinds of resources. So is it resources for money from strategy to what are the different things that were. You say nothing has changed over the last 18 months, but I guess there's certain things are with what you've been doing and the growth that you've had. So what are, what are the different resources that you've got available to you?
Marc Calcaterra: Yeah, and what I meant about nothing changed, it was really, that was the communication we provide it to the employees that it was really invisible to them. I mean from, from, from my, from my standpoint when we develop the, and I, and I relate it to creating because you know, there is more requirements from just running the day-to-day, now we have a quarterly board meeting. We provide monthly write up. Um, that's different, right? And it was something where, when it was just me, it was kind of overwhelming to try to think about that where I'm going to have to do all this additional stuff. Um, that's why, you know, it's not, you know, it's part of it. But as we built the executive team and we got more talent around, um, around me, it made that easier. I kind of relate it to a lesson plan, like, like being a teacher. Once, once you put it together from a, from a board standpoint and a monthly right up then you're kind of, you're updating it and working through it.
Marc Calcaterra: So it was really putting uh and getting into a cadence with the, with the team and the board. Um, and the executive team. I mean, uh, it's just, um, it was, it was something that took a while. Um, and I, and I definitely had some anxiety about it when we, when we first made the decision and, and we, we got into the new relationship and that's why I think, you know, creating the roadmap and putting the executive team together and go through strategic planning because it wasn't just, you know, becoming part of private equity. It was also rolling for businesses in one and they weren't the same culturally. Um, we had different people involved in merging all that together. It was a... the last year, year and a half has been a very challenging time. But it's been also been very rewarding. And, you know, just to talk about the, the board for instance, um, you know, Bobby spent a lot of time creating a lot of value around that.
Marc Calcaterra: It's not, I don't look at it as a requirement, you know, I think that's, that's probably a perception out there. And, and for, for me, um, he's put together a high-powered board where we really bring in a really it's not just me, it's our executive team. We bring the state of the business and what's going on and the challenges of the business and opportunities and we collectively talk about that. I don't look at that as a requirement or some additional work that we have to do at the time to talk about the business. And, and again, I think that's why we can talk a little bit about the strategic planning and we implemented the traction process. Um, and that's a, that's a common language, a common terminology for the, uh, for the business. Um, it, it's been, and I think really all of that together, it has allowed us to, you know, we've moved three facilities. We, we implemented and consolidated our ERP into one. Um, I don't think we could've done that without the whole team that we had in place. So kind of talking all over...
Ryan Tansom: No, no, it's helping. And Bobby, how do you figure out... so Marc just a lot of things, which is great because there's obviously a lot of voids and/or layers that you provided. How did you determine together or whether it's you, Bobby, as you're going through due diligence and looking at the opportunity as well from an investment perspective, how did you determine how- who you are you're going to put on the board and what, what holes they were missing to make sure that all that was possible?
Bobby Kingsbury: Yeah, so it's a, it's a good question. First I always like to put one of our senior operating partners or another person from MCM on the board and specifically because you know, I'm a people person love to develop relationships and Marc and I have become very, very um, close, now over almost four years and you know, sometimes I may lose the forest through the trees because of our relationship or I could now, you know, TGC has performed extremely well, you know, that, the, there hasn't been any instances but you know, in the case where a business wasn't performing, I, I might be more biased then I should be and it would be more on Marc's side. So I always try to have, you know, a very experienced person from MCM, whether another managing director or a senior operating partner who has business experience on there to be more of the deferential partner. And then we will... What we like to do is, is try to provide value for businesses from entrepreneurs that have experience. You know, I, I mentioned, I think in the first podcast, our investor base, the majority of our investor base, our high net worth individuals that have been successful at running their specific companies and likely have exited, uh, to really achieve their, their net worth.
Bobby Kingsbury: And one of them in particular was a very pragmatic thinker, probably one of the smartest people that I've encountered in, in that he is very measured and calculated in his thoughts and in his guidance and he comes actually from a standards that he owned, a manufacturer of standards and reagents serving the bio-pharma industry. So why the hell would I put him on the board of a garage door business? You know, Marc's like, what, what the hell is Bobby thinking right now? Um, we had very, um, I mean I introduced them to see will we have some very good contacts that were in the garage door market, actually, you know, guys that used to run companies like Wayne Dalton. But the garage door market is, it's a mature market, uh, in, in what I wanted to do. And you know, and I've talked with Marc because, you know, he knows the business.
Bobby Kingsbury: I didn't want to be myopic in my thought process was to find somebody outside, have the garage door market because businesses business at the end of the day, um, and to find somebody with a fresh perspective that ran both of manufacturing and the distribution business was, which is what Torsion Group is right now in manufacturing and distribution business. So the challenges that you've faced in a distribution business and the challenges that you've faced in the manufacturing business aren't usually the same. Then when you have them as one business to find somebody that can understand that and help with the challenges. I think, you know, one of the things that Marc and I talked about before is it was always, it was always him. He had nobody really to bounce ideas off of, you know, strategically to think about the business in a different way or to challenge him, you know, to really say, hey, is this, is this best for the organization? Or have you thought about doing X, Y, and Z? Um, so we brought David on and, at least in my opinion on maybe you can... Board meetings are terrific. Um, I, I love, uh, the, the, the banter, I love, um, the accountability, ah, that's, that, that's being created and the challenges that they pose to the management team. There was one particular board meeting when you know that the guys, both the CEO and Marc, we're looking at another opportunity, but it was going to take them in a strategic direction different from the garage door market and we brought everybody back to, to, to really focus, you know, and it goes back to traction is your mission and vision statement of what you want to be and you know, it was hard. It was a hard pill for them to swallow I think at first because they were really excited about the opportunity and it could have added significant revenue right away. Uh, but I, I think in the long run, you know, we're better off for it and now, you know, 18 months in, because this was rather soon wasn't it? Like five, six months in? You know, that it's a... we made made the best decision as, as a board together.
Marc Calcaterra: Yeah. I would just add that the, you know, it's definitely made me a better leader and we talk about a lot of, you know, I, I talked to Bobby weekly, but I mean, you know, just from a, from a quarterly standpoint, you know, that cross-functional team... when we're in the business and it is myopic and you're, it's good to get a fresh perspective and um, you know, each meeting that we have, it gets better and better. So, I mean, um, like I said, it's been, it's been transformational for us and I mean, I think what we've put together now collectively, um, we're really set up for success. Andit's an exciting time for the business. And um, and you know, it's, it's a, it's a really good deal.
Ryan Tansom: There's a lot to be said in the relationship and the communication that you guys have had and I know we're getting short on here on time for you, Marc, but I got one interesting question. Do you think that any of this would have been possible had you not spent two years getting to know each other before you ran into the situation?
Marc Calcaterra: No.
Ryan Tansom: I think it's a big deal because a lot of people, they wait until they're burnt out and they're in a shit storm and they've got to pull a trigger and they don't have anything sitting there as an option, which is a huge... And then the, you know, like Bobby will, you and I are talking in the last episode where then you end up forced into a relationship with someone that's got money and you have no idea what the other side's going to look like.
Marc Calcaterra: Yeah, I agree with that. And I mean, I think, like I said, it was really a comfort level in and it became very, it was a difficult situation and everybody, everybody has their own circumstance. But I mean for us, um, it was just a great opportunity and I don't think it would have even been an option if we didn't have and build that relationship prior to that.
Bobby Kingsbury: Yeah. You know, I think from my perspective, I think the answer would be the same, too, Ryan, because yeah, if Marc were to come to me, you know, without having known him and say, "Hey, we have these four disparate businesses, we've got a lawsuit going on with the family. Are you in?"
Bobby Kingsbury: Yeah. But you know, getting to know him and his, uh, you know, personally, you know, I think is as important as it was, um, professionally uh, was very important to me. Uh, this was the largest equity check that we had written, um, as a firm, um, in our history originally and you know, I was going to be the one being held responsible for it and you know, to have, um, Marc behind it provided me with the utmost confidence, um, you know, to, to really make that bet on, on him, on TGC. Uh, and as people in the business,
Ryan Tansom: it's pretty cool guys because it's a good story that you guys have that debunks a lot of the stuff that's out there and it just takes work that you've proven that that has to be done. And it's a, it's a nice story that to know that there's, there's hope out there for the people with all the money and all the it for, for both sides, right? That there's options out there that people do because private equity is a good scenario for a lot of different situations. But then to be able to get the power to do the due diligence on the private equity firm as well. So it kind of just making sure that it's a, it's a mutually beneficial relationship, I think is important for the listeners to know. As we're wrapping up here guys, you know Bobby and Marc, I will do. I'll leave you guys each with one question. You know, if there's one thing, Bobby, when you're, that we want to highlight or if you to leave the listeners with, when you're looking at a potential buy, what, what are the things that they should be thinking of? And then Marc, you know, what are the, what are the things that a listener that is, uh, you know, business owners should be, what did you leave them with when you're in looking at the private equity world that you would leave with? So maybe you know, Bobby, after you first?
Bobby Kingsbury: If there's something I can leave the listeners with is to really understand, uh, the group that you're looking to, to partner with now. You might not have that, that two to five years to develop a relationship, you know, circumstances happen. But if you can, you know, afford yourself the opportunity to really get to know who your partner is going to be. Because at the end of the day, it is going to be a marriage. At the very least, if it's more, if it's not according as more of a shotgun marriage, it at least spend the time getting references from the private equity firm. And not just the, the references from CEOs or um, portfolio companies that they're currently partnering with because odds are those are gonna kind of be skewed because at the end of the day, they're, you know, they're the, they're employees and they have to answer to the private equity firm, um, but businesses that have exited, where the private equity firm has exited, um, portfolio companies where you get an unbiased view from an owner- entrepreneur of who they were as people, what value they add it to, uh, to, to the business and how they acted. I think that's very important.
Marc Calcaterra: Yeah. And I would say that, um, definitely having an understanding of who you're working with, what you're doing with what their strategy is, because it really is, as Bobby said, it's a marriage and you will spend a lot of time working with them and if you're not comfortable with that, it'll be a very difficult thing. So, um, you know, I, I just, just personally, um, this has worked out great for us, but you know, everybody's different and um, there, there are a lot of different options out there. Um, but I would say definitely understand who you're working with, build a relationship with them, understand it. I mean, you know, as far as the numbers go, you know, you could come up with a quality earnings and you can, I mean, what, what was great about MCM is their strategic and they were more than just numbers people, I mean because it really is about people. And at the end of the day, if you're not comfortable with that, um, and you're not working together and aligned, um, it becomes very difficult and then you could take something that's really good and turn it into a bad, a bad situation. So I guess that's what I would say.
Ryan Tansom: I appreciate it, guys. I know it's a unique situation coming out the other end and being partners and um, Bobby with letting Marc actually, uh, actually tell the truth on everything that he wanted and it's a unique relationship that is a, I think it's highly valuable for everybody. So I appreciate you both coming on the show.
Marc Calcaterra: Yeah, no problem. And if you choose the right partner, that relationship isn't that unique. That relationship is more common-place.
Ryan Tansom: Again, I almost forgot again, Bobby-- Bobby and Marc, what is the best way to get in touch with you guys?
Bobby Kingsbury: So my direct dial is 216-514-1843. My email is Bobby - b o b b y at MCM Capital dot com.
Marc Calcaterra: And my number is 330-612-7947. My email is M C A L C A T E R R A at Action-IND.com.
Ryan Tansom: Thanks guys. Appreciate it.
Marc Calcaterra: [both] Yeah, thanks for having us on!
Ryan Tansom: Thanks for sticking in there. I hope you had as much fun listening to the bantering with Marc and Bobby and I as I did doing the interview and if I were to take a couple of major things away from that is the importance of building a relationship ahead of time before you end up partnering up with anybody is nothing short of one of the most important things you can do. Spending the time, right now, way ahead of time, before actually want to sell to get to know the players, the people who might actually provide you of the exit, whether it's suppliers or vendors or private equity firms or whoever it might be, you got gotta do it now before the decision to sell comes to fruition because Bobby and Marc, there's no way they could have done this had they not had two years of knowing each other and how they were going to react and how they were going to strategize going forward. Because in the middle of due diligence, when you're negotiating with someone, it really has to come down to logic and you have to separate the emotion from the logic. And in order to do that, it takes a solid foundation of a relationship.
And I think another thing that I wanted to highlight for everybody is that Marc got crazy lucky because of that relationship and having Bobby as a friend in order to pull the trigger like he did. Had he not had that relationship or done anything, he would have been totally SOL and I also believe that had he had more options in the hopper, he would've been able to do anything that he wanted. He still might have chosen Bobby and MCM, but he would've known that there was other options out on the table to buy out the family to work things in and he might have had different negotiating terms. So I think options and spending the time to meet the different players in the marketplace is nothing short of the most important thing that you can be spending your time on if you're not working in the business. So work on the business, not in it, and build the relationships with the people that matter. If you really enjoyed the episode, go on to Itunes, give me a rating. Otherwise I will see you next week.