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  • Grant Jackson | Investing in the Right Side of Healthcare Change
    POSTED 4.20.21 M&A Masters Podcast

    Our special guest on this week’s episode of the M&A Masters Podcast is Grant Jackson. Grant is the Managing General Partner of Council Capital, a middle market private equity firm based in Nashville, Tennessee. Their mission is to be the best healthcare private equity firm, with their focus on investing in the right side of healthcare change.

    We chat about the underlying goal of improving the healthcare system, as well as:

    • Providing access to vulnerable populations, including those with disabilities
    • Asking the important questions about the future of healthcare
    • How Council Capital identifies businesses that will scale
    • Maintaining the highest quality even when businesses grow and expand
    • The difference between venture capital and private equity
    • And more

    Listen Now…

    MENTIONED IN THIS EPISODE:

    TRANSCRIPT:

    Patrick Stroth: Hello there. I’m Patrick Stroth, President of Rubicon M&A Insurance Services. Welcome to M&A Masters where I speak with the leading experts in mergers and acquisitions. And we’re all about one thing here. That’s a clean exit for owners, founders and their investors. Today I’m joined by Grant Jackson, managing general partner of Council Capital. Council Capital is a middle market private equity firm based in Nashville, Tennessee. Their mission is to be the best healthcare private equity firm, with their focus on investing in the right side of healthcare change. Grant, great to have you. Welcome to the podcast.

    Grant Jackson: Thank you, Patrick. Great to be here.

    Patrick: Now, before we get into Council Capital, on your specialty in focusing on being on the right side of healthcare change, we’ll start with you. How did you get to this point in your career?

    Grant: I grew up in in of all places, Africa, under a dictator came here and really started from scratch from scratch. A lot of people helped me along the way and generally without there being anything in it for them. And really think America’s unique in that regard. Started in M&A consulting and post merger integration. But quickly realized that I wanted to be partnering with great entrepreneurs and supporting them in growing really valuable businesses, which meant getting into private equity, I hadn’t had any kind of draw towards healthcare that came later. And so to get the private equity at the time, that really meant you had to get an MBA, that’s not true anymore. But it was back then. 

    So I went to Northwestern’s Kellogg School, graduated, during of all times the.com bust, and got fortunate that there was at least one company, one firm that was willing to hire me into private equity, but literally one. And so I quickly took that job, and got into private equity. The surprise to me was then how quickly I developed a passion for healthcare. And I knew that I needed to make my career around investing in companies that improve the healthcare system. I’d always felt that advances in science and disease were important. But they always were held up as the most important things. Whereas I felt like we were only capitalizing on 10% of the potential of all of the technological advances we’ve made in healthcare, and that the other 90% really comes from improving the healthcare system. 

    And that’s really what I’m passionate about supporting and doing. So, my career has been about following that dream, which has ultimately led me to, to Nashville and to Council Capital, which at the time was a very small fund. But one that had what I felt was a really strong approach. That I felt I could scale as, as the firm’s leader. And I have been at Council for 12 years now, we’ve just launched our fourth fund, with an investment that we closed just a month ago.

    Patrick: Well, going into Council Capital specifically, and I like to ask this of my guests, because we get a feel for the culture of an organization when you drill down and figure out unlike law firms and insurance firms that essentially name their companies after the founders’ last name. Tell me about Council Capital by beginning with how did you come up with the name, and then give me a quick profile of your organization, and we’ll get into strategies and so forth after.

    Grant: Yes, happy to. So the name I get no credit for the name, the name was, was created by the founders of Council Capital, who had a vision for improving healthcare, by investing in companies and they felt that the best way to do that was to find real experts, get them to invest their own money into our fund have real skin in the game, and where their money goes, then you will have their hearts. And so we put together the original CEO Council, which was a council of people who had been there done that in house in in healthcare. And that formed the CEO Council, hence the name Council Capital.

    Patrick: Then with your focus, because you’re not focusing on upper middle market or middle market, you’re looking at the lower middle market. And I kind of think about with health care, a lot of people that aren’t familiar with health care think they think of it just on these institutions, side. Hospitals and large physician groups have large health plans. That’s not it. There’s a universe of smaller organizations within within the business of healthcare. Talk about your direction because you’re focused on the lower middle market.

    Grant: Yes, what we do is we make buyout investments of healthcare companies. We can grow fast, we don’t use that much leverage. And we’re able to achieve those fast growth rates partially because of our council model. But also, because we’ve used our CEO counsel, that group of 34 people who’ve really built really valuable healthcare companies, to help us figure out where healthcare is going, and thus, where growth will be the highest. And so that has led us to focus focus on important or in today’s world, essential services, that are usually providing access to vulnerable populations or under managed high cost populations, and at the lowest cost point of care. 

    And so these are naturally, companies that move care away from high cost settings, often with people don’t want to be particularly in COVID, in places such as hospitals, inpatient behavioral health units, and toward caring for people where they live. And that’s why we have, for example, investments supporting medically fragile kids, which is one of our ideals, autism, those with intellectual developmental disabilities. And so, you know, think of us as investing in any company that improves the healthcare system, we can do that by investing in a company that actually provides care itself. Or it could be a to a services provider or a technology provider to those care providers, or it could be anywhere else in the support ecosystem around healthcare. So there are just a tremendous amount of different ways you can support the growth of building great healthcare companies.

    Patrick: Well, I think what’s great about what where your focus is, with the lower middle market is, you know, my belief is that there are so many of these lower middle market companies under under 30 million under $50 million in transaction value that they don’t know where to go, when they reach some inflection point, and they’re too, too small to be big, but too big to be small. Where do they go next. And if they don’t know about organizations like Council Capital, then they will default and look to a financial institution. Or even worse, they could just surrender and capitulate to a strategic that doesn’t necessarily have their best interests in mind. 

    And so the more people can understand and learn about Council Capital, and all the resources you bring to bear for that specific class of business, I think is is fantastic. The issue though, when we look into health care, which is different from any other business, because you’re dealing with people’s lives, people’s health, okay, and so there’s a different standard that they have. And you’ve mentioned it a couple times already, but talk about the paradox out there of, you know, making an investment in healthcare that is efficient and profitable, without sacrificing quality of care. How do you balance that?

    Grant: I don’t look at it as necessarily a balance, the way we look at it, is that we start by saying, where is healthcare going in 10 years? We then back away from that and say, what does that mean about the best starting place for us today? What kind of company should we be investing in. And then we look for companies with several attributes, it starts with, they have to be if they’re a care provider, they have to be providing great care if they’re a service provider, they need to be providing great support services. And if they’re a technology provider, they have to provide great technology. Once we understand that they are doing what they are meant to be doing great, then we look at the unit economic model and their ability to scale. And it’s an end rather than an or it has to be that they have both. 

    Once we have that, we look at it and we say what the entrepreneur printer has done is the most difficult part we believe, and that is to start something up and create something with great quality, a good unit economic model and limited compliance risk. And then the way we’ve built Council Capital is to be able to support them in scaling it from there, which oftentimes because they’ve built their capabilities around that first part of building a company, what we’ve done is we’ve said, what do we need to do to one identify those kinds of companies and then support them in their growth. And so the way that we’ve built the council model has been to specifically help support those companies, wherever they need it within growing from there up to a company with more scale, and so that includes several elements. One part of that is the CEO Council. 

    Which, just going into that a little bit more deeply, we’ve got 34 of them. These are people who have generally built very large successful valuable healthcare companies, billion dollar healthcare companies, the who’s who of their respective industries. In in healthcare, a lot of people have said, well, you’ve got the LeBron James and the Michael Jordan’s of, and then they named their individual sub specialty. And what we do with them is they have invested more than $140 million of their personal capital into counsel into our funds. So they are directly investing into, you know, the entrepreneurs business. So if you think about that, relative to having an advisory board or something, you know, where somebody doesn’t really have skin in the game, the CEO councilmembers have real skin in the game. And then they’re motivated to help that entrepreneur that company to scale. 

    So there are a variety of ways in which they help us with that, whether it be strategy on the board, helping with connections, relationships, basically helping the company punch above their weight class, so that you can take something with great capabilities, but enable them to behave as if they were a billion dollar business get the credibility of as if they were a much larger business. So we’ve done that with the CEO Council. And then, you know, we are we’re always evolving our business. And so what we said is, what else can we do, as it relates to building capabilities to help support these these businesses in their growth. So we built a value creation function that, in addition to the CEO Council, also builds brings a whole lot of other capabilities. So it, it helps people scale their human resource function, their finance function, their technology function, etc. 

    And we have a lot of very simple case studies to be able to demonstrate to people the kind of value that that has, in terms of helping a company really grow and scale in the right way. So, you know, a lot of times, small companies, as they scale, they lose their quality, quality of care, etc. And what I find when I speak to entrepreneurs, is they’re often worried about partnering with somebody, because they don’t want to see a dilution of the quality. Whereas what I think we can demonstrate to them is that we will help them to solidify that quality, and ensure they don’t lose it as they scale. And that, to me is the beauty of building a great, valuable, scalable company is that you want to hang on to what was special, when the company was small, great clinical quality, great service quality, great technology quality, and figure out how you scale that which is, is different than what you do when the company is small.

    Patrick: I think one of the things that you cannot understate the value of what your bringing with with that counsel model is that and again, we’re dealing in healthcare, as you’re growing, you’re dealing with institutions out there as prospective clients or opportunities or whatever, who better to get access to those institutions, than members of your council who they’ve got credibility, because they put their own money behind these ventures, they’re not just speaking it up. And that eliminates a lot of obstacles. So if anyone out there listening today is considering, you know, making a move, I’ll tell you that a resource that Council Capital brings to the table that is literally unmatched out there. And I think that’s just terrific.

    Grant: Patrick, to that point. Healthcare is an enormous industry, but in some ways, it’s quite small. And so just to help people understand what that CEO council really represents, those 34 CEO council members plus our strategic investors, so all of those are investors in our funds. They directly represent over 60% of the managed care lives in America. And over 60% of the for profit hospital beds in America, similar statistics in behavioral health, a range of other sub sectors within healthcare. 

    But what that really means is that if there’s a relationship that the company needs, we are going to be able to access them directly through our investor network. And our investor network is really leaning on our credibility. They’re looking at us to be the stamp of approval for the company we invest in because their reputations on the line, and because we haven’t violated that trust that we have with them are investors, it means that that credibility goes a long way, when they stick their neck out their own reputations on the line to go to bat for a small company.

    Patrick: Let’s underline one other thing about this. And this is just an undeniable fact. Let’s talk about the importance of Nashville, Tennessee, in the healthcare world.

    Grant: Yes, Nashville really is the biggest healthcare market in the United States. I always thought that it was big when I lived elsewhere. And then I came to Nashville, and I realized that was much bigger than I’ve previously understood. It’s also well organized, which means that you have a path to navigate the system. So what we found is that we can invest in companies around the United States, and then give them access into Nashville and what that gives you access to is not only the biggest market within healthcare in the United States, but Nashville companies often have the benefit of working with each other, which means that you can avoid mistakes, figure out what the right approaches to doing things are often. And so you really get access to a lot of that, you know, that thought capital

    Patrick: Well then, tell us Grant, give me a profile of your ideal target. What are you looking for?

    Grant: Well, we really want a business that is great at what it does. So whether that’s great clinically great service, great technology, that they have a good unit economic model, they have to be going in the direction that we believe healthcare is going. So I often look at people ask me, what’s the difference between venture capital and private equity, for example, and the what what I respond with is, oftentimes venture capital is looking at the right side of change in healthcare, but they are looking for things that might work in 10 years. And not all of those things are going to work now. So the success rates going to be be lower, which is fine, because that’s part of their business model, the way we look at it, in terms of what does right side of change, mean for a private equity fund investing in the lower end of the the middle market in healthcare is that we want to invest in things that represent the future of healthcare, but they have to have business models that actually work today. 

    And therefore, you’ve got a company that has products that they’re selling today, solutions that they’re selling today. And they can be profitable, and they can grow it today. But as the winds of change pick up, then they’re just going to have more and more wind at their back. And so it’s going to accelerate their growth over time. But it’s a very important distinction, in terms of what we look at, relative to what a lot of other great healthcare funds might be looking at, it’s just a different focus. While markets, clinical quality, etc, are important and table stakes. What really enables us to be successful with these businesses, is having great leadership that we trust. So the quality of the management team is really important. 

    We’re not looking at people through necessarily a traditional resume based approach, we’re really looking at them as what capabilities do they have to take this company from, where they are now, going forward, and we need to be able to trust them with that. And so increasingly, what we found is that we can back people up, they may not have been there, done that on every single element of what we need them to do in the future. But as long as we feel that they are really capable individuals, then we can support them in a lot of the ways that they want support going forward. You know, we never want to run companies, but we can create that a toolbox that we give them access to. So that they can help themselves to the toolbox to really help them scale their own business. So, you know, great leadership and having a great relationship with that leadership is critically important for us in a deal.

    Patrick: When you’re looking at investments and acquisitions in in healthcare, you know, everything can fit everything can look right. But you know, these deals don’t happen in a vacuum. And so there’s always risk involved. And a lot of the, your counterparties are probably first timers in the M&A world. And so they get the experience very new experience of learning about that risk and how it applies to them personally, they can’t hide behind the corporate veil. They are financially at risk to a prospective buyer. In the event something blows up post closing that even the best diligence just didn’t pick up. And you’ll have your seller target, arguing, hey, I can’t tell you something or be held responsible for something I don’t know, I told you all I know. 

    And contrary, buyers gonna look and say yes, but we’re investing 10s of millions of dollars, that you have a perfect memory. And so, you know, there is going to be indemnification agreements, there are going to be these tools out there to transfer risk, and so forth. And that can introduce a bit of stress and tension between the parties where it didn’t exist before. Because of that, and it’s just the the issue of fear of you know, those types of losses. I’m very proud that the insurance industry has come in with a product to transfer that risk away from the parties. And it’s called rep and warranty insurance, where the insurance company essentially looks at the seller reps, compares the seller reps with the buyers diligence of those reps for accuracy, and then makes a decision says, hey, for a couple bucks, I’ll tell you what, we will take that risk that indemnification obligation away from the seller. 

    And we will take it so that if something does explode post closing buyer, you have peace of mind that you will recover, we will pay the pay the loss for you seller, you get a clean exit, it’s been a rapidly moving product that has now come down to the lower middle market transactions, which is very welcome news. I’m curious grant because this only became available for sub hundred million deals in the last 16 to 18 months. Good better and different. What experience have you and Council Capital had with rep and warranty insurance?

    Grant: We’re not as experienced as a lot of our much bigger private equity brethren, with respect to rep and warranty insurance, but that’s really because it was serving a much larger market. We’ve since been paying attention to it because we’ve realized that it is suitable to the small you know, the smaller end of the market, which is where we play. And so we we look at it as as something to consider on whatever deal we are looking at. And it really is just going to depend on the facts and circumstances of the deal. But it does give you the ability to be able to both close on the deal in the manner that we need to and give the seller the ability to take more money off the table up front. And without us really giving up much in the process. So I think it can be can be a great way to navigate a potentially significant issue between a buyer and a seller.

    Patrick: Yeah, I think it’s a case by case it’s maybe not a fit for every single deal out there. The one thing is welcome news is healthcare was one of the sectors that the rep and warranty industry did not like to deal with. It’s heavily regulated. And there were a lot of other exposures that the underwriters just didn’t know what I’d get their hands around. And I think that over time with great experience and a little bit more understanding, particularly getting the right brokering to negotiate with the underwriters and show them that there are exposures that aren’t really relevant to every healthcare company. 

    There are ways that your solutions can be found. And this is, you know, consistent with one of the things that you came up with where you don’t have the dilemma of, you know, profitability versus quality of care, you can have both. And I think that’s one thing that’s encouraging about this sector with with insurances. things continue to develop in favor of the policyholders out there. So we’re very, very, very happy about that. Grant, as we’re getting into, you know, the first half of 2021, now times flying, I think it’s safe to say we’re looking at the beginning of the end of the pandemic. Give us give us perspective, from what you see, what trends do you see in M&A either for Council, Capital, healthcare, the economy at all. What do you see out there for the rest of the year?

    Grant: Well the market, in healthcare for deals that really are in these sectors that we view as right side of change in healthcare is very hot. So there, I think what the pandemic did was it highlighted the vulnerabilities in healthcare, you know, what kinds of companies could have issues and people focused on you the areas that that had strength. A lot of those are markets that we’ve already been invested in, and will continue to be invested in. So it just means there are more funds out there looking for investments in those markets, which leads to more competition. I think the key for us, is making sure that we find ways to adequately communicate what we are like as a partner, you know what we bring to bear and let the entrepreneur then, you know, determine how they would compare us against any other alternatives which we which we welcome.

    Patrick: Grant, how can our audience members find you and Council Capital?

    Grant: Best way is through the website and really through our leader of business development, Jon L’Heureux, who’s also his contact information is is on the web on the website. And we’d love to meet entrepreneurs who are growing great healthcare businesses.

    Patrick: Yeah. And I’d say you’re yours is one of the better websites out there. I just looked at websites from private equity firms from five, six years ago where it was, it was almost password protected, and they had so little information on there. Now your organization is easy to find easy to navigate, easy to reach out. So I think that’s user friendly is good because you do not want to be the best kept secret in private equity, particularly for healthcare. Grant Jackson, been an absolute pleasure. Thanks again for joining me today. You have a great day.

    Grant: Thank you, Patrick. Thoroughly enjoyed it. Have a great day, too.

  • Dena Jalbert | Focusing On the Strategy of the Transaction
    POSTED 4.6.21 M&A Masters Podcast

    Our special guest on this week’s episode of M&A Masters is Dena Jalbert. Dena is the Founder and CEO of Align Business Advisory Services, a team of former business owners, operators, and executives in offices throughout the US who bring Wall Street resources to the lower middle market. She was also recently named on Mergers and Acquisitions Magazine’s list of the Top 25 Most Influential Women in Mid Market M&A.

    Dena says, “When we sit down with clients, we start creating the investment thesis, helping them make that decision. We help them really analyze all their options and what they all mean, then we have it reflect their personal needs, because 99.9% of our clients are owner-operated businesses. Quality of life and success all have to be considered in addition to what opportunities the market can avail. We align those two dynamics, and then the clients will get excited about it.”

    We discuss the ability for companies to grow organically, as well as:

    • What happens when business owners reach their inflection point
    • Helping sellers understand the science of the deal
    • Cultivating relationships with investors to better serve as an intermediary
    • The greatest resource for both buyers and sellers
    • Women in the M&A workforce and the opportunity to offer value and see more diversity 
    • And more

    Listen Now…

    MENTIONED IN THIS EPISODE:

    TRANSCRIPT:

    Patrick Stroth: Hello there. I’m Patrick Stroth, President of Rubicon M&a Insurance. Welcome to M&A Masters where I speak with the leading experts in mergers and acquisitions. And we’re all about one thing here, that’s a clean exit for owners, founders and their investors. Today I’m joined by Dena Jalbert, Founder and CEO of Align Business Advisory Services. Align Business Advisory Services, or Align, is comprised of a team of former business owners, operators and executives in offices throughout the US that bring Wall Street resources to the lower middle market. In addition to wrapping up a very robust M&A season, despite the pandemic, Dena was just named to Mergers and Acquisitions Magazine’s list of the Top 25 women in middle market M&A. So Dena it’s a real pleasure to have you here. Thanks for joining us.

    Dena Jalbert: Hey, it’s my pleasure. Thank you for having me. I appreciate it. Very much.

    Patrick: So Dena, before we get into Align, let’s set the table for our audience. Tell us about yourself. How did you get to this point in your career?

    Dena: Oh gosh. well, you know, I started my career years and years and years ago, with Arthur Andersen. So if that dates me at all, but you know, started in big four public accounting, I’m actually a CPA by trade. You know, I took to heart when Warren Buffett said accounting is the language of business. You know, I thought to myself, okay, if I can speak the language, then then I’ll understand it. So it was just kind of the path I, I followed, but I was fortunate enough to never go the the kind of traditional CPA route, you know, I started my career with big four in internal audit, and then went into transaction advisory. 

    So I’ve been doing m&a for since the beginning. And then over the years, I transitioned to the other side of the desk, where I got to work for corporations who were buyers. So I worked for Tribune Media, who owned a publication in in South Florida. And I worked with the publisher there to help do acquisitions of smaller publications and evaluate those, and that was kind of my first foray into being a private buyer. So buying, you know, small businesses, and then that same experience followed me over the years. So subsequently went to work for some technology companies, e commerce, financial technology, and professional services, and did the same thing would work to do acquisitions. and integrate those businesses, scale it and then exit it. 

    And so then over the years, they all just kind of piled up. And so, as a buyer, throughout those processes, I just saw how these smaller businesses were just really underserved. You know, we’re sitting there with our investment banking team, but they’re sitting there on their own, you know, for the most part, right, and, or they would have some support, but just not the right level of support. And one that just didn’t fit, you know, their exact needs. And so I saw an opportunity in the market to be underserved and, and that’s really where Align came, came to be. And so I leveraged all those years of experience, into how we do things here it Align and so far is borne lots of fruit for us, which has been great.

    Patrick: So let’s talk about Align now. And why don’t we start by sharing with us how you came up with the name, because unlike a lot of law firms and insurance practices out there that have no creativity at all, they just named their companies after the founder’s last name. Tell us about the name, how you came up with it. And let’s then turn the attention to your commitment to the lower middle market.

    Dena: So it was a word that we used all the time, I would find myself in conversations as we were working with businesses, that word came up a lot. And and as I think about what we’re trying to do for clients, you know, we’re trying to align buyers and sellers in transactions, we’re trying to align, you know, internal operations or financials or preparation for sale, you know, everything was about, you know, creating alignment and synergy and so on. So that’s really where it where it came from. And and it’s, it’s, it’s ironic, because it really is the core theme to what it is we do and I’ll find myself in conversations with clients and investors and acquirers and they’ll use the word and chuckle and I’m like, no, no, it’s okay, pun is very much intended.

    Patrick: One of the things to really point out about Align is your commitment to the lower middle market, which I think is excellent because not only is the lower middle market, just a vast marketplace that’s sizable, it’s seriously underserved. And while you and I are involved in an m&a transactions, day in and day out, these owners and founders aren’t. And when they come new to me, they don’t know what to expect, they don’t know where to turn. And what’s unfortunate for them is because they don’t know any better, they’re going to default to either an institution, or they’re going to default to a strategic because they don’t know any better. 

    And if they go to the institution route, unfortunately, they’re going to get overlooked, they’re not going to get their needs met. But they’ll get overcharged. If they go to a strategic without guidance on how to navigate that process, they may end up with a less favorable deal than they thought. And so let’s talk about that, and how you’re helping them. Because the great reason why we want to highlight Align is that companies like yours need to be known by the lower middle market, because of all the great things you do and how you commit to them and bring resources at a fraction of the cost that the bigger shops are offering.

    Dena: That we are no and we stay focus here. For a number of reasons. One, as you mentioned, you know, it’s it’s it’s a huge market. And it’s comprised of industries that are extremely fragmented, you know, and so, which breeds opportunity. So I, as a buyer, knew and understood that there was value to extract there. But you know, when you think about how quickly you want something to grow, it’s the age old, you’ve got the aircraft, carrier boat, or the speedboat, the lower middle market is the speed, but they can go faster, they can be more flexible and nimble, and there’s more ocean for them to cover at a much faster clip, it’s harder to turn, you know, the larger boat. 

    And so when from an investment perspective, when you’re thinking about how much can I grow something and in receive a return on that investment, you know, larger deals, their organic growth potential is much smaller. And there’s not as much that hockey stick that everybody loves to model, you can actually achieve it in the lower middle market. So I knew that there was value there. And it’s just a matter of making sure that those who are in the market understand that those opportunities exist for them. And because it’s underserved, you know, you have some investment banks who work in the space, and they’re great, there just aren’t enough. You know, there are some that that, you know, try to but maybe don’t quite give it their focus or 100% effort. 

    And then there’s a lot of very well intended business brokers who traditionally are more Mainstreet focused, and that’s their expertise, you know, they’re the best resource for there. And there’s, you know, the age old business of they’re too, too big to be small and too small to be enterprise. And it’s really that niche, but they have so much potential. And there’s, and because they’re in fragmented industries, you can grow both organically and in organically. And that’s just such a recipe, you know, for an investment thesis all around. So I looked at that and said, you know, these companies just need to, they need the help, and they need someone to pinpoint the opportunities that are available to them. And that’s what we hear from clients every day is that, gosh, I didn’t even know that an opportunity like this could exist for a company like mine. 

    And I, that’s what we strive to do. And you know, and then on the flip side, you know, our the investors we work with new cars we work with, are so thankful that we’re there to help bring them highly qualified and good opportunities. And so it’s, you know, it’s a win all around, we’re just there to make it, you know, more efficient, I think sometimes we as intermediary, sometimes get a look as to, you know, are you here to hinder or to help and, and I think our brand is now been proven and is known for definitely being helped and generating quality deal flow.

    Patrick: I like your observation of companies that are too big to be small and too small to the enterprise. And essentially, where they are, they’re at an inflection point where they’ve got to make some kind of move, whether it’s getting more capital, looking for an exit, looking for an acquisition, something like that. And that’s where you guys come on in. And you’re on both sides of the table, actually, because you’re not only bringing resources to sellers, you’re attracting buyers, which is very helpful, because there are a lot of buyers out there that don’t know probably all the places to look, they don’t know where all the opportunities are. So why don’t we talk about just how you’re bringing services, we’ll start from the sell side of the table, and then bring it over to the buy side on how you’re bringing those together.

    Dena: Perfect yeah. So I’m using your example there’s a business owner that’s reached an inflection point. And they need to to make a decision. And sometimes it’s not even so much that they’ve reached an inflection point. It’s just that there are an abundance of opportunities at their feet. In either way, there’s a decision point to be made for a business owner. And first off, they they just need to understand what it all is. Because there’s really you know, complex turn leveraged buyouts and you know, indemnification and all sorts of things that, you know, make the heads swirl, you know, for a business owner if they’ve never gone through the process before. And so we we bring our expertise, and our technical knowledge, I call that the science, right? It’s the science of the deal. 

    You know, there’s the art component, which is the sales, we’ll get to that other side of it, as you mentioned, but then there’s the science of the deal. So, you know, we are team members, who focus on that are CPAs, MBAs, JDs, CFAss, right, you know. We technically adept people that traditionally that level of skill is out of the reach of the smaller businesses. The smaller businesses unfortunately, are, because they sit in that niche of being too big to be small and too small to be big, that they, they get shoved into the Small Business Resource bucket. So that means small business coaches, and it’s not and again, all well intended, you know, people, but it’s, it’s not that level of strategic experience and the science there that, that someone like ourselves is able to bring them. 

    And just because they don’t have access to it doesn’t mean they don’t want it, right. And so what we see when we sit down with clients, and we start creating the investment thesis, or your idea here and helping them make that decision, as they come to that decision point, we help them really analyze here, all the options, here’s what they all mean. And then we have it reflect their personal needs as well, because 99.9% of our clients are owner operated businesses. And so there’s a personal need from, you know, economics, of course, but quality of life, and it’s a succession all sorts of things that have to be considered, in addition to what opportunities the market can avail. And so again, we align those two, those two dynamics, and then then the clients will get excited about it. They’re like, yes, you know, this is great. A lot of the time our clients think m&a only means I sell to a competitor. 

    And it’s like, oh, gosh, you know, m&a is. It’s like Baskin Robbins, there’s 31 flavors, right? There’s so many different ways that you can do these things. And so our Wall Street resources, if you will, that science, you know, we bring the technical knowledge and expertise around capital markets and deal execution to one help them decide what they need and to get it done and not feel overwhelmed by the process.

    Patrick: Yeah, so standing there, you’re providing options to the sellers, where, as you said, they may think of a transaction, they only think of it one way, and there are multiple ways to pathways to get to the ultimate goal where they want to be. So that’s great that you’re able to handle that. And I apologize for being overly simplistic. But I think the other thing that you’re providing is very similar to what professional stagers do in real estate for homes, where they bring in folks that are going to stage up the house make it look ideal and optimal.

    And in a lot of cases, the owners look at the the staged house and kind of wish they were living there now because it looks better, and but you’re setting it in a way and you’re positioning a company to put his best life out there. And it’s amazing how whatever money is spent to do that staging, that process of improving a company and getting its looks right. The return on that investment alone is seven or 8x. And was amazing to me is how many business owners don’t even realize this kind of service exists.

    Dena: Oh, fundamentally, and those that are aware of it, you know, think of it as purely a you’re just going to introduce, introduce us to buyer, right, they only see the relationship piece of it. That’s something that, you know, we’re very proud of us, you know, our scope is very broad. So using your house analogy, it’s a great one, in that, you know, we help them evaluate the house and say, well, listen, you know, do you want to fix up the kitchen, before you go to market, you know, or not? So, as an example, we could be working with a client and their financials might not be as strong or as or as cleaning, or where they’ve got maybe a couple of management issues or some some things internally. 

    And so we all talk about, you know, is it something you want to address before we got to market? Or is it something that we’ll just be transparent about and know that the outcome of a process will actually naturally solve for those things? You know, so it’s so much more than, than just, you know, an introduction to someone who might read a check. And then it’s also, you know, helping them through all the nuances of a deal. A lot of again, small business owners who do have some basic knowledge of it, think of it as so much, I’m just going take the biggest offer. 

    But then when you break down as you know, and what you do, there’s a way more to it and so we help them understand all of that as well. And that’s, that’s a big lightbulb moment. So it’s all of those components that there They’re important and we help package all that up to answer your question. And we do package all that up and, you know, help them get the most value at the right terms. And that’s what we call the right deal. It’s not just getting a deal, it’s getting the right one.

    Patrick: So that’s a real thorough explanation of the sell side of the table where you’re bringing all that valuing coaching them through that. Let’s turn it around. Now let’s go on the buyer side, because for every seller, you’ve got to find a willing and able buyer and make that fit. So tell us about that. Because you don’t just have knowledge of buyers that are out there, you know, what they’re looking for. And so that’s ideal, because you can save them time bringing ideal clients or ideal targets that they’re looking for. Why don’t you talk about the buy side?

    Dena: Absolutely. So that’s the product called the art of the deal. So and we’re structured that way, we actually have, you know, team members who are focused on on the the art side of the house, or the sales side of the house, both with clients and with with investors. And we then we have those who are dedicated to the science. But so now on that side, you’re exactly right. So I spent a tremendous amount of my time and so does our team, constantly interfacing with investment groups, those that we’ve met and known over the years, just through doing deals, that’s the best way, right. But then, you know, through that, there’s just more and more that are added every year, every minute of every day, and all different types, right family offices. 

    In independent sponsors, you know, corporate debt groups, you know, you name it, there’s so many different types of folks on the other side, and it’s our job to know them, and we try to the best of our physical ability to, to have those conversations and create relationships, one of the things that we like to do is, rather than just taking kind of a basic shopping list, if you will, like it has to be this amount of EBITDA, it has to be in this vertical geography, we don’t care, it’s, you know, I know better, they do very much care, and they very much have far more specific needs. And so we try to take the time to sit with acquires and investors, and really dig into that, understand their strategy, and be a part of that. 

    One of the things that, and by doing that, one of the things that we’ve been successful at doing is when we sometimes will place a client with an investor, and it will be a new platform for them, and we know them so well now that they’ll then in turn, use us to help them find add on acquisitions, because we just, you know, know, the client innately Well, we know the space, because we’ve been in it, and so, and then we create sector focus in that, in that way. And so, you know, and I spend my time during that, you know, I cultivate relationships with various investment groups and touch base with them to understand and then we track that, you know, when we start to see pockets of demand bubble up in certain sectors, that’s an indicator to us that, you know, there’s there’s money being put to work there by several folks. 

    And that means we should focus our efforts there to be able to help support them in their deal flow. And so it helps us It helps us kind of laser in on on where, where demand lies. But then it’s, it’s, it’s fun, because then we get to help put those puzzle pieces together. Yeah. Well, you just did an acquisition in, you know, in Georgia now, are you looking at Alabama? Are you thinking about the Carolinas, or the Northeast? You know, we are, you know, you just bought this new service line? Well, you know, what have you thought about XYZ, and so we get to really become a part of their strategic plan, and just help them execute it. 

    And that’s a lot of fun for us. So you can do it on on, on both sides. And because we’re constantly talking to businesses, you know, sometimes we’ll be able to bring those proprietary opportunities, folks that might not want to go out in a full in a full process, but it still winds up being the right deal, because we know what the buyers needs and intentions are going to be and we know the fits going to be so yeah, so we worked very hard on both sides.

    Patrick: Well, I think for buyers out there, particularly those that are looking for add ons, this is ideal for them, that’s a great value add that you’re bringing, because if you already know what they’re looking for, you’ve helped them on one deal. And now you’re aware of their appetite. So you’re saving them from one of the dirty little jobs out there. Private equity is doing biz dev, where they are looking for companies in literally cold calling perspective target companies, which nobody wants to do, but it’s out there. And what you’re coming along with is your another set of eyeballs that are out there. And one of the things you mentioned I caught was that you can bring them deals that are not necessarily looking for an entire process. So all of a sudden this becomes part of their proprietary deal flow. And you can’t put a price on that.

    Dena: Yeah, yeah. And, you know, I’m also a big believer in time is a resource that none of us can recreate. It’s the one thing that you know, it puts pressure on all of us. And so my goal is to never waste anyone’s time you know as a seller or a buyer. You know, we don’t like to present opportunities that are a stretch, it’s just a waste of time. Now granted, I know a lot of these groups have great processes to be able to review things quickly. You know, but again, that’s, that’s just a, it’s a, it’s a waste of effort, it’s a square peg, round hole. And, and people pay for things they want, you know, any of us in our day to day lives, you know, pay for things that are of value to us, it’s no different in the investment community. 

    So if it’s not as directly hit by why waste time, and the only way you’re going to know that is to truly get to know your clientele. And so we really, and, and also, we genuinely care where our clients go, which I think, frankly, is a bit of an anomaly. And in our industry, I genuinely want to see our clients succeed, again, back to it’s the right deal, not just a deal. And so that’s where, you know, truly understanding buyer strategy, and, and who they who the people are inherently that are a part of the team, you know, we want to put our clients in the hands of good people who share the same values, who, you know, they all are excited and aligned, see how that works out in the same mission and are excited about this particular opportunity, what they can do together, you know, that’s where you see great things happen. 

    You know, as an example, we had a client, that we that we helped exit them their new platform investment. And it was extremely competitive process, there were a number of folks at the table, they went with the best partner wasn’t necessarily the highest offer. But it was the best terms, it was the best opportunity overall, and just the best rapport and relationship and this company went on to grow, they grew 20%, the first quarter after close, they’re going to double in size, within less than a year, it’s only been 10 months ish. And those are the types of stories that I get really excited about, because that means we, you know, we, the puzzle pieces align came together really well there. And that’s where growth and success happened. So, you know, we pride ourselves on on doing that, and not forcing things for the sake of forcing things.

    Patrick: What’s your ideal client profile for Align? Both on the sell side and on the buy side?

    Dena: Yeah, so for Align, it’s, it is that, you know, growth stage business that has had, you know, strong, a good strong year three to five years of growth, that it’s like well, huh. Okay, where do we go next? Because, you know, those even who aren’t in a pressure situation where you’ve got to worry about like retirement or succession or some trigger. It’s really any business who’s who’s been doing really well. And most entrepreneurs that we meet, are always saying, What’s next? Because in order to grow, you’re always challenging yourself, and you’re always doing new things, right. 

    So, you know, the the ideal client for line is, yeah, you know, that that client that’s got 10 to 15 million in revenue, and we do your transactions bigger and smaller than that. But those kind of second stage growth stage companies who are at as you put it earlier, that inflection point of, man, we could really grow this thing and blow it out. Or maybe, you know, maybe I’ve been doing this for 15 years, and I want to go pursue my love of, you know, competitive barbecue, or something. I mean, we’ve seen so many different types of stories, but, you know, maybe there’s a new passion and so whatever that is, but you know, and I would say we as a firm tend to focus in service based businesses or in or manufacturing. 

    A lot of our team has come from various industries of services, everything from healthcare to industrials to business. But I would say we tend to focus there and you know, someone who’s saying, What’s the next opportunity, and, you know, those are the companies we like to work with.

    Patrick: So now as we’re talking about prepping and transitioning, you know, between buyers and sellers. Now, one of the things that we have to keep in mind on this is these deals have quite a bit of risk attached to them. And you’ve got a human element that we have to not overlook were, particularly with original owners and founders who aren’t dealing with m&a day in and day out. They’re not accustomed to the fact that they become aware of as you go through the negotiations where you get to the talk, the subject of indemnification, where the seller is held personally liable to the buyer financially. 

    In the event the buyer suffers a loss post closing that the seller didn’t warn the buyer about and sellers get very scared and surprised because they don’t realize it is their personal assets that are risk, they can’t hide behind a corporate veil, they are personally liable to the buyer for something that may be completely out of their control. Buyers are accustomed to this as part of the deal for them. And so over a very short period, there’s quite a bit of tension and stress that is created because of of this dynamic because buyer doesn’t want to be left holding the bag if something blows up, and the seller doesn’t want to be on the hook for this. 

    Fortunately, the insurance industry came out with a product. It’s called reps and warranties insurance. And what it does is it transfers the indemnity obligation away from the seller to the insurance company. buyers are protected because they have a guarantee of recovery. In the event they suffer financial loss seller gets a clean exit. In many cases, the rep warranty policy replaces 90% of any escrow that’s out there. So the buyer gets to exit with more cash at closing. And they have a peace of mind knowing they get to keep all of that cash and not worry about a clawback sellers like this because it reduces the tension. 

    It eases negotiations, because if there are particular terms out there that the two sides are are discussing and negotiating. If an insurance company is going to cover that rep or warranty, guess what no need to go on anymore. And so we’ve found this to be a real elegant solution that was reserved years ago just for deals in the 100 million dollar plus transaction value level. Because of competition, because of the great outcomes that the insurance industry has been receiving, there aren’t as many claims getting paid on this, the costs have come down, the underwriting criteria have been simplified. 

    So now more deals and more lower middle market companies, owners and founders can benefit from this. And it’s purpose of why we want to share this news because this is the only way we can get it out that what years ago was ineligible, you could have a deal as down around 12 or $13 million transaction value can now be an eligible risk. And so Dena, with your experience at Align, why don’t you share with us good, bad or indifferent? How have your clients fared with rep and warranty insurance?

    Dena: I love rep and warranty insurance and not just saying that because we’re having a conversation. But genuinely, because of the type of client we work with. They are the ones that no matter how much you explain it to him, it’s it’s inherently difficult to wrap your head around that liability. And we’ve worked with exceptional attorneys. I mean, don’t get me wrong, they’ve got great legal advice, but even still, it’s just it’s a complex thing to talk about. And then it’s what you know, how long does it How long do I have these sleepless nights. 

    And, you know, and because a lot of our clients don’t have the most sophisticated infrastructure, I love the point you made about you know, I’m betting millions that you remember everything. And it literally is that it’s that have they remembered everything, because there’s not as much infrastructure, you know, institutionalized process and administrative things there to, to give them comfort that it has, in fact, been done. And so and, you know, from a deal perspective, it makes the deal frequently move faster. And it also gives buyers and sellers, you know, we’re so focused on the success post close as well, that when you put insurance in place, the deal really is in the rearview mirror, it removes that measurement point and the the the need for attorneys to come in, in the future and kind of argue around measurement and potential claims or whether it is whether it isn’t what the basket was, etc, etc, you know. 

    It’s a it’s a challenge, and it just strips all that away, I’ve seen a number of deals where it should have been used and wasn’t and so, you know, big escrows that they’re asking to be held in, you know, in off to the side and you know, even 10% you know, to investors, that’s not that big of a deal. And it’s not much but to a selling person, what do you mean, you want to keep 10% of my money and why? And it’s hard for them. I mean, they get it conceptually that they they don’t like it and you know, there’s no there’s no more positive moment than the moment the wire hits the bank account for any seller. And to know that any of that might get clawed back and or it’s not as much as it should be because you’ve got all these different, you know, things sitting around, you know it and what I’ve seen is the cost I when I first started, you know, years ago, no money the cost was prohibitive. 

    It’s so much less expensive now that it’s, it’s less than it’s, you know, it’s significantly less than what you’d have to post up in escrow. So it really gives folks a tremendous peace of mind allows the deal to be far more focused on the strategy of how we’re going to make this thing work and win, then it is about making sure you told me about every single contract and every relationship you’ve ever had since the inception of time. So our experience has been really positive with it. And we’re seeing more and more of it to be used. And I hope that trend continues.

    Patrick: Definitely don’t want to overlook the fact that I’m speaking with somebody who was named to Mergers and Acquisition magazine’s list of the Top 25 women in m&a. And as a father of two young teenage daughters, I am more aware now that I have in the past about the importance of diversity out in the workplace and opportunities for women, particularly, you know, selfishly for my daughters. And I’m just curious, from your perspective, I have seen women underrepresented in the world of finance in general, and m&a in particular, and it’s beginning to change. But I’d really like your perspective, why don’t you share your thoughts on on women and m&a? And and that whole subject?

    Dena: Yeah, absolutely. So, you know, I spent a number of years as being the only woman in a room and still are a lot of the time. And for me, it was one of the catalysts for me and founding aligned was, you know, there is room for more women and in broad diversity to you know, I’m not just gender, but ethnicity and professional personal background, I actually pride myself on the fact that our team members, you know, those on the front end of what we do client facing, and they’re not all informer, investment makers, you know, we’re up business operators. And so your diversity can bring a number of different connotations to it. But particularly women are definitely underserved. Finance has been an industry where hasn’t been super welcoming to, to that. 

    And I actually gave a speech at University of Central Florida here in Orlando, where we’re headquartered to the MBA students, and there’s many statistics around women who graduate with finance degrees or graduate with MBAs who don’t stay in finance long term for their careers, for a myriad of reasons, you know, the fact that they, you know, aren’t welcomed, given as many opportunities, it’s starting to change, I definitely see more and more women, you know, the fact that a list like this exists is great. You know, and I’m certainly honored to be named as one this year. 

    It’s, it’s humbling when you see the other women on the list, but I think we’re all there in, in pursuit, and in proof that there is a place for it, and many of us went and carved it for ourselves, I think it will become more and more, you know, institutionalized, you know, with time, and less the exception, then, perhaps it may have been or even slightly, still is, and so, but I think, you know, what women bring to m&a is a level of empathy, that doesn’t exist, or not as much with others, you know, and that’s, it’s not a bad thing. It’s just, I think, something that is a bit gender specific. It’s that I guess, maternal, if you will, quality that people often refer to women about but we have an ability to listen, and we have an ability to empathize. 

    And so everything that we do, is based around, you know, aligning people in something, and so you have to listen, and you have to understand, do you have to agree sometimes, well, no, you know, naturally, but and that helps, you know, in negotiations with prospective acquirers, you know, I can understand them. And I can understand our clients. And that’s where we talk about how we translate that language, the speak on either side of the table, I think we as women have a unique ability to truly empathize and, and apply that practice, which has led to a lot of value creation, and a lot of success. And so I think it’s peaking, you know, peaking the ears of groups who maybe have been a bit more homogeneous until now to say, well, gosh, there are approaches creating value and bringing return on investment. We need more of that. And I hope that to continue.

    Patrick: And just to double back on something that we discussed earlier on about, you’re not able to remove the human element from m&a. And what better way to capitalize on that factor, then bring in these alternative perspectives where you’ve got empathy. You’ve got These other skill sets, other viewpoints out there. And what’s beginning to be seen is, I think traditional firms out there that may have been resistant to some form of diversity, whatever it is, they’re figuring out that by having these other perspectives in this diverse team work, that framework is a competitive advantage. 

    And once that becomes translated to them as a competitive advantage, I think we’re gonna have a lot more buy in, we’re already seeing that happening. The other issue is that bringing in other perspectives doesn’t limit opportunities, it actually expands opportunities, expands avenues for growth, and ways to get, you know, a deal completed. And so I think that’s a great value add right there just in and of itself.

    Dena: Correct. And it’s also about reflecting the the clients that we serve to, you know, I mentioned before, how unique our team is, is, you were comprised of so many different types of people, all ages, and backgrounds. Because it’s really important to me that we were, that we look like and represent the clients that we are working with, you know, and that’s where, again, the empathy and understanding comes from too, because, you know, you can really, when it when a client’s telling you about their personal needs and wants, it resonates so much more, because you truly innately understand it. And because you’ve got connectivity there. So, you know, being able to reflect who our clients are, is equally important to us, where sometimes that turns around is a challenge is maybe a bit on our acquiring side and the investor side. But from their perspective, it’s all about value creation. 

    So if you’re bringing them something of value, you know, it’s it’s so in those moments, I actually had this a couple weeks ago, I brought together two groups of people who’ve been voraciously, hungry to meet with one another. But, you know, I was the one that was able to bring them them together to consider a really, really important potential merger between these two organizations. And, you know, I was the only woman in the room and at one point, there was someone in the space was like, Well, how did this happen? And who, and I can raise my hand at the end at the table. And it was, you know, just really interesting to see the expressions, but again, they’re just like, oh, that’s awesome. 

    Because you’re creating value. And, you know, and so there’s far more when you’ve got that, those success stories to point to those in something good for those guys to look at. It. They’re far more accepting of that, I think then when it years ago, and what it used to be. So there, there’s definitely some shifts happening. And and I am I hope firms like ours. There’s, there’s more stories like that to be told. And that’s where change happens.

    Patrick: Now, Dena has a great perspective. Now, as we look back on 2020, I guess you couldn’t be blamed to be sad that 2020 ended because you had all the success with deals and then making that top 25 list. But as we go forward, now, we’re looking into 2021. Tell us what you see out there. What trends either with Align specifically or m&a in general?

    Dena: Yeah. So 2020 was an exceptional year. And I remember though, in March thinking, oh, my gosh, are we going to do any deals, the rest of this year is like, just the world’s gonna stop. You know, I mean, it was just, there’s so much uncertainty, nobody knew. But like any of us in any moment have, of course, challenge. Yeah, they, you pick yourself up, and you figure it out. And so it just became different. And then, you know, once that initial shock, because it was it was a bit of a light switch moment, it was just like, you know, you can pinpoint the day, almost, you know, in each local place where, where that’ll happen. And that’s so unique. And so once once, what’s that shock? Or often it was, okay, well, how do we make this work? 

    Because clearly, it’s not going away anytime soon. And then, you know, so we saw March in April get pretty quiet, but then come May, 2nd half of the year was just gangbusters. And, you know, at the root of it, I think there’s still a ton of cash out there. And so 2020 was strong. 2021 is going to continue to be I think even more so, because there’s still bottled up demand and there’s still a lot of cash coupled with consumer. You know, you mentioned the beginning of the end of the pandemic, and we’ve been caged animals for over a year. Everybody wants out you know, once the gates are open, as I call it and make that I guess joke, but everybody’s gonna be running every which way. 

    You know, I’ve, I’ve never I just had lunch this morning or this afternoon with someone and said, I can’t wait to travel for business again, meaningfully. You know, I’ve done a couple things here and there, but you know, I’m usually on the road regularly and so, those norms will come back and with that will come the volume of life and of work in various industries. You know, I, we at Align of always focused on need to have industries and need to have businesses, you know, we are not the firm for your venture tech, high tech, you know, organization, you know, we are, as I mentioned, we work in healthcare, you know, industrials, and, and manufacturing, and business services. And so those are all things there need to have. And so I think that’s, yeah, there’s no perfect word. Exactly right. And, and so by virtue of that 2020 continued to be strong, because all those businesses, you know, still carried on because you needed them. 

    And for us, 2021 will continue to be the case, because that’s where people are putting their money in and seeing this infrastructure is needed. These are businesses that are recession resistant, nothing’s ever fully recession proof. But they were recession resistant. So money’s pouring in there, we can’t keep up with the demand, we’ve actually had more requests for buyside help in that regard than we’ve had, historically. And so I see that trend continuing. But then I also see money flowing back into the hardest industries, you know, fitness, hospitality, you know, restaurants, leisure, all of that, because again, once the gates open, people are going to go take those vacations are going to have the weddings, they’re going to go out to eat, they’re going to, you know, do all the things that they haven’t been able to do. 

    And so we’re seeing good consolidation happening, maybe some weaker players merging with some stronger ones, and so they’re going to be primed and ready to go for that rebound. So I think we’re gonna see a lot of growth. And the administration is one who is known for being more of a spending infrastructure, per se. And you know, that’s going to benefit infrastructure, and it’s going to benefit again, some of the sectors that we do a lot of work in. So we are bullish, we’re hiring or growing, hoping to double in size again this year, so exciting 21 ahead.

    Patrick: Dena, how can our audience members find you?

    Dena: Well, you know, you can come to our website, you can find us at alignba.com. You can look me up, I’m on social media, LinkedIn, Instagram, we’re in all those social channels. And or just drop, you know, drop me an email. Our company email is just info@alignba.com and ironically, those still find their way to me directly. So if anyone wants to reach out, reach out that way, our website also has our company phone number on it. So just you know, give us a call, shoot us a note. Send us a message to social whatever is your preferred channel. We love just to meet folks and have to just have a good conversation and, and help them be able to get more information and learn more about this crazy word world of m&a, whether it’s something they want to do now or 15 years from now.

    Patrick: Dena Jalbert of Align Business Advisory services. This has just been an outstanding conversation. Just a real pleasure meeting you and speaking with you. Thanks so much for joining us today.

    Dena: Thank you.