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

William (Bill) M. Casey is the EY Americas Vice Chair of Transaction Advisory Services (TAS), which helps organizations raise, preserve, invest and optimize their capital. Bill advises clients on capital strategy, mergers and acquisitions, public company spinoffs, IPOs and securities offerings. Bill has led some of the largest client engagements of Ernst & Young LLP, including cross-border transactions for major multinational corporations and leading private equity firms. Over the last decade, he has worked to help double the talent and revenues of TAS practices in EY Americas member firms, which now include more than 3600 professionals based in the United States, Canada, Mexico, Central and South America. Bill is fluent in English, Spanish and Portuguese and a competitive triathlete.

If you listen, you will learn:

  • Bill’s financial industry background.
  • The M&A Report basic overview.
  • How markets are blending their services to better serve the consumer.
  • The benefits of embracing technology in business.
  • How to create good synergy to attract a buyer.
  • The role data analytics is playing in business planning.
  • How to prepare for a seller's exit.
  • The reasons sellers are selling to private equity firms.
  • The 3 factors to consider during a sale, other than the price.
  • Know what you want to accomplish with your sale.
  • Why cash deals are becoming more common.
  • How to build a great team to run your company.
  • The main thing a seller should focus on when selling.
  • How to align your team regarding the future of the company.
  • Strategies a seller and a buyer can use to achieve alignment.
  • Bill’s advice to future sellers.

Full Transcript

Announcer: 00:06 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: 00:17 Welcome back to the Life After Business podcast, this is episode eighty-two. Do you wonder what it's like in the mergers and acquisitions field? What's happening in the market place now that we're going into 2018? Where is the best data that we can get on how the markets are feeling, what is the deal flow and the activity going? Well, that's exactly what we're going to be talking about today because we have Bill Casey who is the head of EY Americas vice chair of the transaction advisory services, so essentially the deal team that's involved in mergers and acquisitions for EY, which was formally Ernst and Young and Bill has decades of experience. He's got almost 4,000 employees underneath his department and they did 2.1 billion dollars' worth of transactions last year and every single year they come out with the capital competence report, which is a survey understanding where's the competence in the marketplace? What deals are happening and why? Bill and I dive into all the different kind of bigger trends and stats that he's seeing, how to future-proof your business and the intricacies of actually doing the deals, so what goes right and what goes wrong when selling a company, what are things that you need to ask yourself and what are things that you need to know about what's important to you and your business and what outcome will actually make you happy. Tons of great gold nuggets in here with Bill because of all the experience and the exposure that he gets. So hope you enjoyed the episode. So without further ado, here's my episode with Bill.

Announcer: 01:39 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 time frame to the right buyer at the price you want.

Ryan Tansom: 02:02 Bill, how are you doing today?

Bill Casey: 02:02 Great, Ryan, how are you?

Ryan Tansom: 02:05 Good. I am super excited to have you on the show. You and I were sitting down in sunny palm springs chatting about your crazy background over the years of doing what you've been doing at EY and you were telling me some amazing stories. I just couldn't literally couldn't wait to have you on the show, but for the listeners that were not able to sit in, which is probably a good thing, on the some of the fun conversations we were having, why don't you just bring everybody back and kind of give us a little bit of a debrief on, you know, how did you get into M&A and you know, your career path at EY.

Bill Casey: 02:38 Well sure Ryan and thank you for letting me be on your program. Really appreciate the opportunity. So I've been with EY since I got out of college and which was an unbelievable 35 years ago. I started my career with the firm back then in audit. And audit is a great background for anyone going into business. I mean, at the end of the day, accounting is the language of business, so I got a really good start in the audit world, but I wanted to do more. I got an MBA at night and I got really, really interested in the deal environment and so I made a career change at that point in time where I started with, uh, at that time I was the junior guy and we had some partners that we're looking at putting together a new business offering for us, which is to really work with companies and helping them execute on deals.

Bill Casey: 03:28 At that point in my career, it was really all about doing financial and tax diligence and we were primarily working for the cfos, financial reporting professionals and the tax team, but we always aspired to do so much more. And so much more is the journey that our practice - which is called transaction advisory services at EY - we always aspired to be the main chief trusted strategic advisor to the c suite. And it's private equity. It's really to the private equity fund professional. And we've always been on that path. So I was really excited about that, inspired to do that. And I had an opportunity, uh, early on in my career to work in Sao Paulo Brazil. So I was sent down to Sao Paulo, you start put together a transactions practice, so I worked in, in Sao Paulo for many, many years, at which point, um, I moved back to the states and now I've had this wonderful journey with a career career with the firm whereby I started really at kind of at the front end, which is doing diligence type work to where now, uh, I've worked on some of the largest transactions in the US.

Bill Casey: 04:45 In fact, our practice has worked on 17 of the top 25 deals and we will not necessarily, there aren't league tables with respect to, uh, uh, advisors from professional services perspective. But you know, if there are a, we'd obviously score very, very high. So, you know, over all these years the types of transactions that I've worked on, the spaces that I've touched, whether it's transaction processing, uh, I've worked a lot in the beverage space primarily, uh, in beer and spirits. I've worked on a lot of different sectors, but I've also worked in a lot of different geographies. And I had, I had a, just a lot of fun building our practice in Latin America. I've had the opportunity, uh, to work in pretty much every market in the Americas from Canada all the way down to Argentina. I picked up Portuguese and Spanish, uh, along the way and in addition to working on some very, very large complex cross border deals, I've, I've worked on a lot of fun one-off deals. Uh, I've done some alligator deals. I live in Miami, so that's Kinda fun. So from alligator deals to toilet seat deals, you name it, I've covered it. And so, you know, it's been a great journey. The deal market has evolved over the years to come so much more sophisticated. And now, uh, we have professionals on our team that not only have very deep sector, uh, capabilities and experiences, but we also have folks that have very diverse functional skills, whether it's an IT finance supply chain, uh, et cetera. And now even those functional capabilities are getting very sector specific. So, you know, it's been, you know, a lot of fun for me in this practice has grown to where we're at now. We have 4,000 professionals for about 2.1 billion in revenue and last year was a great year for us. We're having a great year already and all the things that are happening in the deal market right now, tax reform is clearly going to have a positive impact on the deal market. So look, this is a great time, uh, to be an M&A professional. It's a great time to be in the deal space. So we're, we're really, really positive about the outlook for the market. Certainly for calendar 2018.

Ryan Tansom: 07:00 I am so excited, uh, to be able to be to get you on the show because, you know, I had a James Markham on the show, so we were talking about with the tax reform and tax changes are going to be happening. But you know, with your exposure, I mean you've got such an amazing vast variety of deal flow and the things that you're seeing. And I think that's going to... It's an important thing because a lot of entrepreneurs, they get one-off advice or opinions and with just the sheer amount of data and things that you see, I think you're able to pull out trends. So you know, maybe if we could, you know, kind of go through, uh, correct me if I'm wrong, but EY just released their M&A survey report, right? Which is kind of like the state of the market or something? So can you maybe give us some of the main takeaways of, and we can link to that in the show notes if people need to, but what are some of the big takeaways that you guys found as you went through the... All the data that you guys gathered?

Bill Casey: 07:51 So twice a year we release a capital confidence barometer. This is a survey we do globally as well as in the Americas and more specifically the US. And so we survey deal professionals in the corporate and private equity space to get a sense for what are the trends, what, what is, what is the confidence and the expectations around doing deals and overall health of the deal market? And I would say over the years is our survey has been relatively predictive and so, you know, once again, based on the results of our surveys, so the optimism in the market continues to be very high. So let me just give one example of a lot of different statistics that I could throw up, but I think this one is quite telling. If you look at companies that are greater than 5,000,000,000 of revenue, 75 percent of these companies plan on doing deals within the next 12 months.

Bill Casey: 08:46 I mean these are historic levels of competence within this market. And then if you look at more smaller, more middle-market companies, all of the reasons to do deals continue to be the same. And that's what's driving the deal market. And this was pre tax reform when we did the survey. So what are those reasons? Why are the conditions so ripe? I'd say first and foremost, a lot of companies continue to build cash on their balance sheets. For companies that have shareholder activists that are involved, activists are looking for growth beyond organic growth. Now we've come off a pretty decent year in 2017 in GDP growth. GDP growth, I think for the year, ended up two point six percent plus or minus a few basis points. We had a couple of quarters last year. We got around three percent GDP growth. Pretty strong for the US considering where we're at. If you credit markets continued to be very, very healthy and first and foremost you know companies continue to need to innovate and you're always faced with the build versus buy.

Bill Casey: 09:52 And so innovation is a key driver, but we also see this divergence of - convergence of sectors as well. Technology companies being paired with the automotive companies and the consumer products companies. So first and foremost, it's really innovation and companies that are continuing to try and future proof their business models compels them to be active in the deal market. And so the converse of this is also the divestiture market. So, you know, likewise, we, we do a survey on the bus tours and divestments as well and we're seeing a record number of companies that are focused on divestments in 2018. Close to 90 percent of the companies are considering to do a divestment. And again, it's divest to invest. Focus on the core, look at those assets perhaps that are not aligned with your strategy, positioning those companies, excuse me, positioning those particular assets, getting them ready for sale, propping them up, making sure you got the Ip lined up, you have the appropriate transition agreements to sell those businesses, so we're, we're seeing this real uptick in divestiture activity, which bodes well towards continued M&A and then on top of all that you layer tax reform and so you know how much of the tax reform will be reinvested in acquisitions remains to be seen. There's no question that there will be an uptick in activity if not only solely for the fact that you know deal markets are always impacted by uncertainty in the market. So leading up to tax reform. Yeah, there are certainly some level of uncertainty as to where this was going to end. What was the corporate tax rate going to be? What was the impact going to be on the repatriation of offshore profit and now that we have that certainty both on the corporate/strategic side as well as on the financial/private equity side, now the buyers in the market have certainly around it. So just by the mere elimination of the uncertainty around the tax code and tax reform that frees up the deal market. And then on top of that, obviously the corporates are going to have even more cash on their balance sheet. So you put all this together. We're expecting a very positive deal mark for 2018 and then January of 2018, from a deal value perspective, uh, was one of the highest months on record. So you know, right out of the blocks starting out with a real strong deal market. So we continue to see and certainly just the level of deals that, you know, my team is working on, the outlook for 2018 is pretty positive.

Ryan Tansom: 12:37 With all those different things that you were saying. I mean, you touched on a lot of different really interesting facts and you know, one of the things is about, first of all of the optimism, the fact that there's clarity because now we actually have rules of the game so actually people know what game they're playing and what's going to be available to them. But you know, one of the things you had said, Bill, is the kind of the different sectors as people are divesting, or they're trying to innovate, you know, you got the automotive industry in software and a lot of the technology enablement in different industries is very interesting. I think there's a lot of blending, you know? What, what are you seeing? Is it because I think the buyers are no longer the usual suspects anymore because you know, especially with a lot of the corporate profits that are coming over, people are going to be able to you know if they're planning on selling... It's not just the typical buyers anymore because of the technology, the different money that's flowing in. What are you seeing as far as like that whole landscape of the different things that are in different industries and sectors that are moving in on each other?

Bill Casey: 13:35 Yeah. No, I think that's been a trend that we've seen now for the last couple of years, which I think is really, really exciting. And I think, you know, when you first saw it was really, you know, the automotive space where you have automotive companies that are viewing themselves now as technology companies. And so therefore in terms of I go back to the years I did deals for the automotive companies where they were primarily focused on buying out parts companies. Now you're seeing automotive companies making big bets on technology and uh, you know, it's really kind of changed the landscape from a deal perspective. So, uh, and you also see that in consumer products, in terms of consumer product companies trying to better understand their customers and their behaviors. So, you know, you have a convergence now of sectors that, that we didn't see before. I think you're going to see more of that and will continue to see different sectors that are now converging and, and deals that were very, very different than what we've seen in the past. So I think, you know, again, that it goes more towards innovation in terms of connecting with customers that I think crosses all kinds of sectors and will obviously increase the amount of deal activity that we'll see.

Ryan Tansom: 15:01 How does that impact the valuations? Right. So if you got a, you know, a company that is treating on a, you know, on a multiple of EBITDA or profit versus you know, the software companies that are, you know, a lot of them are valuated on, you know, recurring revenue and all these different. There's all these different rules that are kind of, you know, slamming into each other. I mean how, what are you seeing on valuations and sectors and such?

Bill Casey: 15:24 Yeah. I would say fundamentally, you know, every company should be valued obviously based on its, on its future discounted cash flows for sure. And so that that is a far easier task on more traditional companies where you can we nail it down to specific units and you have history and you have a fair amount of of data that one can look at. When we start moving towards more technology-based companies whereby the technology is new, it is not necessarily market-proven, you know, the valuations can be more challenging and then you also bring in a broader sector of buyers. So if you're on the seller side of that and you have a technology that is very, very innovative and the market potential is not as precise, then obviously you know that that bodes quite well. So as a result of that, obviously the more a company can position itself as a technology company and leading edge, it's likely to have a positive impact with respect to its valuation. So, uh, that's a little bit more of an art than it is a science and I think that's where it becomes... It requires a very, very astute buyer because obviously one needs to place their bets very, very carefully in terms of looking at that technology, the scalability of that technology. How, how future proof is that technology? So, you know, it certainly adds another layer of complexity, uh, with respect to doing deals.

Ryan Tansom: 16:54 So let's say let's say the buyers actually very eyes wide open. They might actually understand technology versus just trying to pretend like it's, they're trying to get into the game. I'm- I was actually just getting done with this book and they called the, they called Walmart's acquisition of jet blue as putting hair plugs on a, on someone that's going into a retirement facility. It's just like an interesting way to word it, but you know, when you're, when you're dealing with, aside from the numbers and merging these companies or the acquisitions that they're doing, you know, what are you seeing with the ability to integrate the cultures and the ways of operating companies. I mean like, like this... I guess that kind of goes into the success of actually completing the transaction and having it afterwards. I mean, what are you seeing as far as how they're able to merge cultures and different operation methodologies?

Bill Casey: 17:45 It reminds me of the old black and white as that culture always been strategy and so getting the culture right is probably one of the most difficult types of either... I don't know if synergy is the right word, but clearly when you integrate two businesses, getting culture right is by far the most challenging aspects of it because generally you have two organizations and the team members of both those organizations obviously have a strong affinity with a culture of, of, of the legacy business. So when you put those two together, it's preserving what's great about let's say the target culture and then bringing that in under the umbrella of what say the acquirer or. Sounds easy to do. In reality it is quite difficult. I would say the complexity increases based on let's say how much of their revenues are, let's say more of employee-dependent as opposed to machines.

Bill Casey: 18:38 So you know as you, as you move more into let's say more of a professional services type business away from straight on manufacturing, that gets more and more difficult. But I would say that clearly doing your homework up front, being very, very sensitive to the cultural side of the equation and getting the right balance because there's always a balance, right? So there's a temptation to, uh, let's say a fully integrate and bring in the other, let's say the acquiree as quickly as possible to capture the synergy so that the other side of it, so you have the synergy capture, the market is pushing hard, they want to see the synergies within the deal, but if one pushes that too fast, too far, then you sacrifice obviously the long-term in terms of having a motivated workforce, high retention rates and it requires a very, very careful balance. So that is something that requires, you know, some homework upon getting, getting folks involved from the acquiree standpoint in terms of how best to inculcate these cultures I think is just absolutely critical.

Ryan Tansom: 19:50 Yeah. It's like the numbers can be, you know, done in half a day. And then there's the people element. It was totally the the variables that are not predictable. You know, when you, if, if someone's straight, you know, you've mentioned it a couple times, future proof their business and I think that's, you know, as we've been alluding to like the technology and then the traditional industries. What are some, you know, other than the automotive industry, what are ways that you are seeing people future-proof their business with a different acquisitions or the innovation? I mean, is there a certain trends that are popping up more than the others?

Bill Casey: 20:23 I'd say first and foremost, one of the things that's really, really helping companies quite a bit and something that we've certainly been, you're working with our clients is data analytics and using data analytics and technology to really mine your customer - we'll start with the customer - to really mine your customer base to understand your customer behaviors or customer trends so that you can spot movements in your own customer base and trends within your business to give you more lead time to respond to it. So I think we're seeing as companies that are able to innovate and are able to adapt to the markets, have that ability to do that. So I think the ability to use data and technology to better understand your customers clearly, uh, gives an advantage. Let's see another side to it, too, is turning that around in your operations. You know, the ability to really challenge your supply chain, challenge or vendors look for those cost opportunities to provide again, that provides the organic capital, what you need to continue to invest in the business. And I said before, companies that are, that are kind of leading in in their segments are companies that are really taking a hard look at their portfolio of businesses and really challenging whether or not those companies or those business units are performing and if they're not, they're moving on those rapidly. So I think, you know, again, it's using technology, using data analytics to your advantage to help you better manage your business. I think it's quite cute.

Ryan Tansom: 21:56 Do you think there's any industries that are overly exposed to the longer ability to actually accomplish what you just discussed?

Bill Casey: 22:07 I say as from a sector perspective, I think the answer to that is no, because I think there's always players within these sectors that are, that are, that are focused on dabbing, are focused on innovation. The companies that are going to be that, that will have a challenge are those that are not the ones that are not challenging, uh, their portfolio, the ones that are not, you know, looking around the corner to see where the next innovation is that will disrupt their business model. So I think, you know, in every sector, so you have companies that are out there, there are being innovative. So you know, the issue therefore is if you are not one of those companies, what are you going to do? You know, what's, what are the next steps in order for you to maintain your business? I think that's, that's, that's what we see.

Ryan Tansom: 22:54 Yeah. I think that it's a very good point and I'm curious what your perspective is though. So when you think about there's all these, there's a wave of baby boomers that are going to be trying to sell their companies and all different sectors, right? And all different sizes of companies as well. And I think, you know, there's this whole, there's a lot a lot of owners that have struggled to actually start with the end in mind and actually plan for next thing you know, it's a little bit different in the IPO world are the people that are actually, you know, it's, you know, living and breathing on deals. But when you look at it. Okay. So how do you tie in, I guess maybe your maybe, I guess what the question is I'm asking is about starting with the end in who you want to sell to, what your exit is, how, how do you see the success of that and how much more important that is based on what you just said, because knowing where your company and your industry plays, who you could potentially sell to, you know, do you see people actually planning that out that much or is it, do you see like an actual issue where there's not, there's not a runway of 10 years to plan this out because your industry is changing and you're not even thinking about who you're going to sell to? I mean what's the spectrum of how what you see from the people that you get exposed to?

Bill Casey: 23:59 Yeah, I would say a lot of this kind of depends on where the life cycle of the company is. Also let's say the dynamics of the investor team, but a lot of times companies let's say hit the wall in terms of just their ability to expand. So when we think of a, let's say a smaller mid market company and they, they realized that there is a tremendous market opportunity for their, for their company, their service offering, their product, but their ability to seize that opportunity is limited. It's limited because they don't have the capital and or if they don't have the distribution channel and that's when either let's say the first step could be an alliance. An alliance whereby all right know these are my products, let's push them through your distribution channel. Let's take a look at the synergies. And oftentimes alliances are the first step to an actual acquisition.

Bill Casey: 24:57 So from one perspective it could be, do we have the ability to raise enough capital to fully exploit this, this opportunity? And the answer to that might be no. So the right course of action is you know let's sell to a strategic or a let's tell to a private equity firm and we maintain part of the business. And we leverage the private equity's ability to raise capital, private equity firm's ability to bring in some seasoned management that's already gone through this. So that often is the trade off between do we go with a financial buyer, i.e. financial/private equity firms, or do we go with a, a, you know, a strategic. And so I would say there's choices there and oftentimes it's just generational. Uh, you'll have an owner entrepreneur that has had a great run with the company and you know, now it's time for the next generation and the next generation, maybe a financial buyer or a strategic, so there are a lot of dynamics that go into this. But I know oftentimes we see it's, it's either for the ability not to have the capital that's required to get to the next level, or I'd say, even more so now, it's companies realize that by aligning with a strategic, they can see the incredible synergies that their technology, their service offering, their product can bring to this company to future-proof the business. And that's why we see a lot of these technology plays that are being aligning with the consumer products industry, the automotive industry, the life sciences. I mean, I could keep going.

Ryan Tansom: 26:43 Right so I think you've brought up a huge point which is strategic versus financial buyer and there's been a lot of PE firms that are trying to deploy their dry powder and the extra capital that's been sitting on the sidelines, you know, but then I believe, you know, from what I've been seeing, you know, with the, the smaller Beta or the smaller test group of the people compared to what you're seeing is there's going to be a lot more strategic sales probably going to be coming down the pipe because of the corporations with the extra money now that's coming back over and, or the technology that people are the different sectors that are intermingling. You know, as far as all the deals, are you seeing that? Is it more leaning towards strategic and then if so, you know, there's so much more thought that has to go into where you might find that person, so, you know what I guess the ratio, I mean, is there one, you know, weighted versus the other?

Bill Casey: 27:35 Yep. So let me... We kind of roll the tape back. Private equity has been on an uptick from a deal perspective, and then an uptick for probably about almost two years now. And as a result of that, the fundraising and the amount of dry powder and private equity, it's almost a trillion dollars. And in the US, it's probably, I should say North America, it's probably north of $600,000,000 er $600,000,000,000. There's so much dry powder right now in private equity, you know, looking for deals. So we've seen a big uptick in private equity in 2017. We're seeing that now in 2018. So, you know, I, we continue to expect to see an uptick in the amount of deal activity, you know, for private equity in terms of just, if you just look at the deal share of private equity and just in the number of deals in the US., that number is trending up.

Bill Casey: 28:27 So yeah, I think overall the deal market, the number of w we expect to see an uptick in the deal activity. So I think both the strategic deals and the financial slash private equity deals, I think we're gonna see an uptick in 2018. Now, in terms of, again from a seller perspective, is it always about price? Am I going to give it to the highest bidder? Yes, no, maybe, but you know, there are, there are many, many, many reasons why a seller will go down the path of a private equity firm. I'll use a private equity firm again because a private equity firm's going to provide them with their ability to continue to run and manage the business but also will provide them with some operating expertise, management expertise, some uh representation, different board members as well as other options with respect to an exit. So you know, I think for both, for both the private equity firms as well as the on the corporate side, you know, again, I, I think the market's going to be pretty strong on both sides.

Ryan Tansom: 29:28 I want to expand on that a little bit because I think you actually hit on something that's super important, which is it all about the price? And so when you look at the decades that you've been doing this and all the different, you know, exposure to different industries and size of the companies and stuff, when you eliminate the price, Bill, what are some of the things that a seller should be thinking about with a potential acquirer that you know, that is different than the price? What are things that they should even just start asking themselves that are important to them?

Bill Casey: 29:56 Yeah, I think so we'll go down the path of, you know, let's say the seller wants to remain in the business, so you're going to go down the path, you know, private equity. What is your percentage of control going to be into that business? What role will you have in the business and the decision making and what are the next steps? Post private investment, private equity. Typically the typical life, the typical span of a fund is going to be between five and seven years. And you know, if your aspiration is once you sell the business to stay involved in that business, you're obviously going to have looking for a path beyond the horizon of having the private equity firm involved in the business. And so you know that's I would say in terms of going down the path of private equity firm is in addition to the capital, what else are they going to bring in terms of helping you grow that business, expand that business within let's say their portfolio of companies going forward.

Bill Casey: 30:53 So the flip side of that would be from a corporate perspective. If you're, you're just, you're just doing a straight sale and are you going to get cash or you're going to get stuck. If you're going to get stock, then to what extent are you going to be part of the management of the acquirer where you could have some influence on that stock price going forward? So a lot of aspects to consider if you are a seller. I think one is, a lot of it has to do with first decision. What is going to be your involvement in the business going forward? And the answer is I want to continue to be involved in that business going forward, then the next question becomes, what is your aspirations with that? What do you want to continue to lead and grow that business? Or do you want to be part of a broader company where you're running a business unit. All of those aspects come into play and you know, depending on, on where you fall within that continuum, private equity might be the right path for you or perhaps you know, corporate would be more aligned to uh, would you would like to do in your management team.

Ryan Tansom: 31:54 I think it's highlighted some amazing points there. If we were to take that a step further to actually the way that the deals are being structured, you know, is there a trend that you're seeing as far as how all these are being financed or structured or um, whether it is stock or cash or whatever it is, is there certain things that you see more frequently than others?

Bill Casey: 32:12 Yeah. I think one thing, one thing about the capital markets as it relates to I'm doing deals is that, you know, if there's one area that there's been constant innovation, it's on how deals are structured. And so, you know, as one would say, well you know, was private equity disadvantaged because of tax reform, you know? Yes, no, maybe and I would say, you know, the private equity firms are quick to innovate, quick to come up with structures will continue to be attractive both for the both, not only for the PE firm but also for the investee company, but I would say you know, clearly look, there's been a run up on the stock market and recognize there's been some jitters over the last few weeks here, but you know, is it when you have these valuations of the way the stock market is performing right now, clearly you know that from a corporate side you have no stock valuations that are, that are very, very high combined with tax reform, putting more cash in the coffers of the corporates. You're likely to see on the smaller range likely to see some fairly rich cash deals. For sure. We haven't even talked about the implications of repatriating cash held off shore. I'm also likely with credit markets, you know, being, you know, a very, very favorable here you're likely to see on the lower end, probably a fair amount of cash deals where you're using stock is probably not necessary probably at the lower end of the deal spectrum.

Ryan Tansom: 33:46 So maybe I've got a cause. I think what is another variable that even compounds on top of that is you can expense an asset purchase then in one year. Right? So if you've got cash, you just want to buy that asset. I mean you can just literally write it out, write it down the first year. Correct?

Bill Casey: 34:01 Yeah. So at a very, very high level. So tax reform obviously we pushed the corporates, the uh, the tax rates dropping 35 to 21. Uh, we've changed, we've changed the deductibility of interest which will make, let's say financing a deal less attractive than it was previously. However, the offset to that of course is when one buys the asset, one can depreciate the asset up front, assuming that one has the income to offset that asset. So, you know, that sounds pretty straightforward, but like everything else, one needs to be careful because the last thing you'd want to do is turn a deductible expense into a loss carry forward subject to certain limitations. So hence the reason why, you know, like everything else to say, you know, reflexively that tax reform would disadvantage the private equity firms that are using leverage to do the deals versus corporate, you know, the analysis as you can see this is a little more involved.

Ryan Tansom: 35:02 Yeah. And like you said, people get creative when they're trying to get deals done. So Bill, you want to kind of maybe change a little bit of gears because I think, um, you know, when we talked about the team and like what should someone that's selling expect from who's involved, who are the different people and I know EY does an amazing job for certain types of clients that they have, you know, what, what are the people, what are the roles that people should be bringing on because I know that's kind of what you're, the Taz team that you've kind of put together, you know, can you kind of explain different types of functions and you even mentioned at the beginning of that it's gotten even more specialized. But you know, if someone's looking to start building their team, what would that actually look like?

Bill Casey: 35:48 A great question. I would say, you know, first and foremost, for an entrepreneur or a management team that's looking at selling the business. Uh, I would say, you know, first and foremost, preparation is so important. The last thing you want to have happen is for a perspective buyer to find problems. Some challenges, some inconsistencies in your financial data, your tax data, some perhaps legal matters that you not aware of. Yeah, that's the last thing you want to have happen. You know, you want to do your, your own internal diligence first before you know, buyer, so that way you can anticipate questions, you can, you can anticipate how that might impact your evaluation. Uh, you can present it to a buyer in a way whereby, you know, you can help them understand how they might be able to manage that risk. And that's just absolutely critical.

Bill Casey: 36:49 I think you know also as a management team, understanding what the value drivers are in your business and your ability to articulate how your business adds value to the market. How are you positioned against your competitors? How, where are the opportunities to grow the business? If you had more capital, how would you grow this business? And helping the buyer understand that and how your company is positioned to compete first and foremost. And I think and having the various members of your management team, because what's going to happen is when a company comes in, whether they were there, they choose to do this in house or whether they more than likely use advisors and advisors are going to be as part of their job, they're going to be looking for that. Do you mean not only are they looking for areas where their values, but also where those vulnerabilities are.

Bill Casey: 37:41 And I think the ability for a company to get ahead of that curve, to be proactive in presenting that information to a potential buyer is so critical because it, it, I mean, first and foremost, you know, keeps the confidence high in the deal. You know, it gives the buyer confidence in terms of the price that they're willing to pay. I'd say most importantly, it just speeds the process to close deals. I mean, time is never on your side and the ability to close the deal rapidly is always the advantage. It just, it just eliminates all the uncertainties that can appear while time drags on. So I mean that would be my probably my most important advice I could give to prospective sellers.

Ryan Tansom: 38:27 What did you say at the beginning of the show, too? You said finance is the language of business, right? That's what tells the whole story.

Bill Casey: 38:33 Absolutely. Absolutely.

Ryan Tansom: 38:35 So you know, you know, maybe expanding on that a little bit too, you know, what do you see Bill, because there's all these stats that float out and where people get them in whether they're valid or not, to be determined, but eighty percent of deals fall apart in due diligence or whatever it is. But can you explain that because I agree. I think that is huge advice. Everything that you just said and it's a painful process to even to do that because you don't want to and people get forced to do all that stuff in the middle of a deal and they see the price decrease or the deal fall apart. But what are some main things as people are going through that process that they should really be focused on. You mentioned the legal matters, but is there like maybe expand on the value drivers or the finance/due diligence stuff? What are the things that you see people do well or, or really, really miss on when they actually should be focusing on it?

Bill Casey: 39:20 I, I'd say first and foremost, certainly, you know, obvious things are going to drop, the numbers don't prove out to where, where they should be. There is a tax claim that no one understood or you know, there was a, uh, either a deduction that didn't quite fall through those sorts of things, but I would say, uh, and sometimes those can be overcome, but you know, what can't be overcome is that particularly, you know, if a prospective buyer is buying a management team and when that management team presents the business and there is not a, a shared vision where the company, where the opportunities are for the company, where the business is headed, and a full awareness from a strategic perspective of how this company, where it adds value, how it's going to future-proof itself, how it's being innovative, what distinguishes it from its competition. If that, if that isn't clearly articulated by the entrepreneur and the management team, you know, if, if deals go sour for, for one reason, aside from let's say the obvious, let's say put fault, it's going to be on that. It's going to be on the quality of the management team, their ability to articulate the value of the business.

Ryan Tansom: 40:38 That's huge. I think that's a very good point. What, what are ways that people... What are you, what are some cool ways that you've seen companies actually align their management team? I mean, is it something where like they staffed up and got just a killer management team because they worked so hard on her. Like how. I mean, how do you develop that shared vision and the quality of people that uh, you know, that you need?

Bill Casey: 40:58 Yeah. Know in a lot of that really is leadership from the CEO Perspective, the entrepreneur perspective. It's also culture and the leadership style which will then be brought through the organization inculcated in the organization based on culture and you know, buyers can feel that. They can sense that and they can see that every person that they talk to you, that they can see the alignment with the CEO's vision of the business and in terms of getting prep for a sale, this is where it gets, this is where it can get complicated because a lot. Because this is where we get the circle of trust, sometimes the, the owner entrepreneur may not want to bring in the management team. I mean obviously at some point they're going to have to, but uh, you know, even in advance of that they're just having a very well-articulated strategy and vision for the practice, for the business. I think that's absolutely key in getting those higher valuations for the business.

Ryan Tansom: 42:00 So is there cool ways that you've seen people because I think that, you know, you touched on a tricky part where like do you bring your management team and when and how, like, I mean, do you tell your management team that you may or may not want to sell at some point? I mean, is there a way, you know, some interesting ways you've seen people align your management team financially with them, whether it's like phantom stock stock bonuses or like, you know, upon deal closure. I mean, is there a typical kind of couple of structures that you see people do to give them the confidence to bring everybody on board?

Bill Casey: 42:29 Yeah, and I would say all the ones that you mentioned are certainly, um, are certainly ways to incent the management team to continue with the business. But I would say were really first and foremost, it really kind of works on both sides. Certainly if you are selling the business, you can certainly incent your team to what your control is to let's say, um, whether it's a bonus, whether I'm going to give them some additional shares towards the end of the business. You know, that that's certainly one way to do it. But I'd say first and foremost, it really behooves the buyer, uh, in terms of them reaching out to the management team in terms of how they're going to an incent the management team that's coming over and what does that look like? Because I think that's, that's obviously very, very important as much as the seller wants, you know, the management team to stay in place through the sale process, it really is also the bio, what does the buyer going to do to, to incent the management team that they choose to retain coming over. And that can be through a variety of- You can either be you, it can either be stock, it can obviously be through cash and bonus. And I'd say most importantly for retention agreements and non compete. So, you know, I'd say a combination really of all those, but I'd say first and foremost it's having that management team. If I'm a buyer, I want to make sure and this management team is coming over, I want to make sure that I am, I am aligned and the management team that's coming over is aligned with the strategic direction that I want to take this business and you know, that has to happen first. Assuming we get that alignment and we both agree that this is where the opportunity is with this business, this is the direction we want to drive it. That's step one. Step two, that is how then do we share in that success whether that's going to be through a let's say a stock program or it's just going to be straight up bonus. We can, we can deal with that.

Ryan Tansom: 44:39 I think it's huge and I mean it takes work to develop your, your rock star team. So I mean I think, and I don't know if you see people make decisions quick, you know, in being able to flush out and find that team because it's a pain in the butt to find people that share the same vision of you and are also rock stars.

Bill Casey: 44:56 Yeah. Look, I mean, it's the old adage, you go with a, uh, A management team and a B business plan, or do you go with an A business plan and B management team, the answer is you need the A-team, uh, if you want to be successful, and I think what's so critical if you're on the buy side of this is making sure you've got the right management team that can help you execute. Maybe that team, if this is a business that you're in, you may have the A-team already, in which case you're not as reliant on the legacy team of a target. You're a private equity team, you're betting on, you're betting on the management team that you're buying, which you can augment through your network of operators that are within the business.

Ryan Tansom: 45:42 Huge, huge advice. It's so important because a lot of people, you know, as they're trying to scale their businesses, I think that's where a lot of businesses get stuck because it's coming out of their profits. You know, the, the people that are A-team cost money and they're smart people that more on the part of the upside. So people tend to not do that for the short-term gain when realistically they're, they're impacting the value of their company. As we're kind of wrapping it up here. You know, we talked about a lot of different topics. Is there one thing that you want to maybe highlight out of the things we talked about or maybe we didn't touch on something that you want to leave the listeners with?

Bill Casey: 46:13 Yeah, no, I would say for the listeners, that are listening to the... So obviously they're focused on the M&A market. I think this is, in my career, this has been the most exciting market you know, that I've ever seen. So we have all types of things that are, are coming together. When we talked about disruption because of innovation and the digital world and now we see convergence of sectors and on top of that we have, you know, the additional juice from an economy that's growing up, perhaps more than a three percent clip with the additional incentive of tax reform on top of that. So I think 2018 is going to be a blockbuster year for M&A and a for all of you that are considering M&A, I wish I wish you the best of luck.

Ryan Tansom: 47:00 I love it. Bill, what is the best way to get in touch with you?

Bill Casey: 47:04 I'm on LinkedIn. It's Bill, Casey, e, y, and I'd love to hear from you. I'd love to see your questions.

Ryan Tansom: 47:10 Love it. Thank you so much for coming on the show.

Bill Casey: 47:12 All Right Ryan. Thank you. Enjoyed it.

Takeaways

Ryan Tansom: 47:15 Thanks for sticking in there. I hope you enjoyed the episode with bill and man did I absolutely have a ton of different pieces of information that I really enjoyed taking away from that. You know, if I were to boil it down to my three, I think the first one that I really, really enjoyed him validating and reiterating is how important the preparation and due diligence and being ready is. The financials speak the language of business and everything will come out. So the more you can prep, the more you can be ready. You can be ready for anything and you can hold true to your dollar amount that you want and keep the trust of the buyer, which is just crucial because you want to get rewarded for all your hard work to doing the prep work is definitely worth the time, energy and money.

And then the second big takeaway that I had is he reiterated over and over again that culture is so important, so your management team understanding how to take your vision and your execution and strategy, layer that into your management and getting everybody on the same page and understanding that culture will provide you with a return on investment of that buyer, knowing how you're going to eventually move on and that your culture and your employees will be taking and passing it on or integrating with a potential buyer. So spending the time to hire the right people in the right spots for the right price.

And the last big, huge, monumental takeaway I had was how much Bill reiterated that you need to know what's important to you. Do you want to stay around? Do you want to have a role and responsibilities after the sale or do you want to walk away? And being able to balance those and understanding how to back into what you want. Then you'll be able to ask the right questions and find the right buyer because you can't necessarily always get everything you want because if you want to sell walkaway, get all cash up front, but you want to keep your legacy and your employees... There's certain things that may or may not be possible, and there's so really starting with a list and prioritizing what's important to you and then backing into it, we'll be able to provide a gap, a guided navigation for the decisions in the conversations that you will eventually be having with your potential buyer. So I really hope you enjoyed the episode. If you like it and are willing to take the time, go on to itunes and give me a rating because it always helps until next week or we have a good one.