May 24, 2023

E122: Practice Leader Of Transaction Strategy And Transformation Group Discussing M&A Opportunities

E122: Practice Leader Of Transaction Strategy And Transformation Group Discussing M&A Opportunities

Kevin Moyer is a Partner & Practice Leader of the Transaction Strategy & Transformation group at Sax LLP, a top 75 public accounting firm. Kevin's team focuses on financial, operational and commercial buy/sell side diligence projects and...

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Kevin Moyer is a Partner & Practice Leader of the Transaction Strategy & Transformation group at Sax LLP, a top 75 public accounting firm. Kevin's team focuses on financial, operational and commercial buy/sell side diligence projects and advising on transformative events within PE backed portfolio companies. Prior to joining Sax, Kevin was a member of the Transaction Strategy and Execution team at Ernst & Young Parthenon and the CFO of two private equity backed portfolio companies in the manufacturing sector.

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[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit Podcast. Today I'm here with Kevin Moyer. He is the practice leader of Transaction Strategy and Transformation Group. Thank you for being on the show, Kevin. 

[00:00:09] Kevin Moyer: No, thank you for having me.

[00:00:10] Ronald Skelton: Man I always like to start off with the origin stories and how you got into this space. Could you kind of give us your background and how you ended up, a practice leader and even tell us what a practice leader is? Tell us what you do. 

[00:00:20] Kevin Moyer: Yeah, no. That sounds good. So I lead the transformation or the Transaction Strategy and transformation practice for Sachs LLP, which is a top 75 public accounting firm. Within our group, we focus heavily on, on kind of two work streams. One of which is buy and sell side diligence. So when you think financial quality of earnings, operational, standalone costing and commercial market sizing, that's one area that we focus on. And the second is much more focused on integration and transformative events within companies, right? A lot of private equity firms will acquire, as well as strategics and need a roadmap or a playbook to properly integrate the company into, a platform or perhaps, another endpoint of the portfolio. 

[00:01:00] So we do a lot of work in that arena as well. By way of background, prior to joining Sachs, I was part of Ernst and Young Parthenon's transaction strategy and execution team. Focused on sell and separate mandates, both public private markets. And proceeding that was a portfolio company CFO for two Aerospace in defense, private equity backed manufacturing companies. Kind of what led down the path. It's a great question I asked myself all the time. Originally growing up I had the, the goal of becoming a weatherman. Which is not in the m and a world, of course. And, quickly found out that, my predictions were as poor as theirs.

[00:01:32] So I'd probably make a great weather man, right? But, worked a lot with my grandfather when I was younger. He was a large, relatively large real estate developer in Pennsylvania, Ohio, and some of the other states. Kind of just there, got used to, indirectly running businesses, looking at financials, dealing with banks. And as, as time progressed, kind of went into banking myself. Started out on, corporate credit analysis and moved to loans syndication type work. And I think just through the evolution, that was my segway into running acquisitions prior to going into private equity for a, an independent sponsor.

[00:02:05] It was a large single family office in New York City. Just like they say hindsight's 2020. I could see the dots connecting now looking backwards. But if you were to ask me, 10 years ago, do you do I think I would've been in the position I'm in today? I'd probably say, you know what? I have no idea what position I'll be in 10 years from now. So, very thankful for how it worked out. Enjoy what I do tremendously and really enjoy providing value to lower middle market. Which is predominantly where we, Sachs, within my team, specialize and focus. 

[00:02:34] Ronald Skelton: That's awesome. So what are some of the, I noticed on your website and stuff. You guys do due diligence and I'm always curious. I've only been in this space for about two and a half years. And I've seen some really creative stuff in, in small business financials. What's the most creative thing you've came across when you're doing due diligence? I know people try to clean it up before they get to you probably. I'm sure you guys come up with stuff in there that's, in the financials that are just not supposed to be there.

[00:02:59] Kevin Moyer: Depending on what side of the transaction we sit. Predominantly we do sit on the sell side. So we're kind of the first cut of the quality of earnings before the buy side comes in and kind of tears into it. We have seen everything under the sun. I have seen business owners pay for their child's wedding through their business. I have seen vacations that no business purpose whatsoever. I mean, at the end of the day, a lot of these are sole proprietor, sole proprietorships, single member LLCs. The reality is at the time of the expense, they're probably not thinking of selling the business. When you think about adjusting out non-recurring or one-time items or just personal expenses. We tend to spend a lot of time in maybe the founder owned community doing that.

[00:03:36] When you get to the point of maybe lower middle market private equity where things are a little bit more sophisticated, typically you won't have as many, if any personal expenses running through the company's pnl. And I think that's probably the biggest delineation is the, to your point, the cleanliness of the financials as it relates to maybe someone who's ran a business for 30 years, no intention really to sell prior. Maybe treated it a little bit as a piggy bank. Which to some degree is okay. And just kind of had their lifestyle right for say, more structured. Supported back office with a private equity fund that is very, hyper-focused on every expense itemization. As well as classification and kind of being what's run through the business. 

[00:04:12] So answer your story. We've seen quite a bit and I always say I've seen it all and then I get on another transaction. I'm like, oh, this is interesting. So. 

[00:04:20] Ronald Skelton: I won't say where it was, but, somebody brought me a pest control company cuz I own a small one. And, they wanted me to look through their due diligence and this guy had exotic animals on his balance sheets and stuff. Like, yeah, zebras and tigers don't have anything to do with pest control. And he is like, well I was gonna use him for advertising. And I was like, But you didn't. Like show me some ads where they're in there like that doesn't belong on there.

[00:04:42] But he was funding his collection of, a little exotic farm he had through his, so. I won't say where, what it was. I've seen some interesting things there. That and he had two Escalades and some other stuff that he thought was part of the business.

[00:04:55] Kevin Moyer: We see that quite a bit. We see maybe the accessories of the lifestyle that try to tangentially become part of the business in the event of a sale. That is something that, that we scrutinize pretty heavily because, there is a fine line, right? Is it in fact a true qualified business expense or is it personal? And I think that, we spend a lot of time on that again. Probably more so in the founder own. Community than maybe the private equity. But still, certainly on both sides of the equation. 

[00:05:17] Ronald Skelton: Yeah. Now that we got the amusing thing out of the way there. Let's talk about, what's one of the cool things you're working on right now? I know we talked a little bit before the show. You got some cool stuff coming up. What are you working on right now? 

[00:05:27] Kevin Moyer: Yeah. We're working on next week. We're actually gonna be launching, in conjunction with KPMG. The first of its kind veterinary m and a conference. We're seeing a tremendous amount of activity just in macro healthcare. But specifically it seems like in the last 12 to 18 months, private equity going a little bit more aggressively into the veterinary space and that's a D clinic level. That's a D pet product level. Any tangential service offerings that affect the clinics. So, we felt that kind of combining those two brands and hosting a, a first of its kind for the investor community was something that, that made some sense and something we're very excited about.

[00:05:59] That really does dovetail into probably an area of growth that I see within just the, in general investment space is, you hear a lot about ambulatory surgical centers. You hear a lot about DSOs, dental service orgs. You hear a lot about hospital consolidation, of course. But, there's such a demand in the vet space and really finite supply of DVMs. If you look at the age trajectory, if you look at the, there's only 32 vet schools in the US, right? Hyper-competitive to get into. And they're only pushing out so many veterinarians per year. Yet, the pet population, which now, as it should be, being treated much more like a family member.

[00:06:33] Maybe versus 20 years ago where, your dog may have stayed outside, most of the time. You go out to feed it, maybe play with it and come back in. Now you see pet owners spending, 500,000 a month on, on pet care, organic foods, kind of, et cetera. So we're seeing a lot of movement in that space. And we feel that sub niche of the healthcare market is relatively defensive. As you think of covid, where the pet population, in theory increased, right. When you think of the number of owners who maybe are working at home a little bit lonely. Maybe had some downtime and said, I feel like something's missing. And that, that led them to get a cat, dog or companion. 

[00:07:05] Ronald Skelton: Yeah. I think it's very logical that the private equity is looking at this right now because when the economy goes sideways or gets, right now, I would classify it as unstable. One day we're in recession. Next day it's gonna be a depression the next day. Like we're gonna have a currency, total currency collapse and be Venezuela. It depends on who you talk to and what minute you talk to 'em, right? So in those moments of uncertainty, you look for things that seem safe and secure. And we are addicted and passionate about our animals. If I was gonna put money into something like that, I even own some domains around pet stuff.

[00:07:35] Like on the online side, I buy websites and, revenue generating. I always tell people b2b, but I would definitely look at something in that pet space if it's already revenue generating. Cuz it's not recession proof, but it's definitely recession resistant. It's very logical that they're looking at this and, like I said, before the show I told you I looked at the veterinarian space and it was the, like for an individual group doing rollups and stuff. The MSO managed, medical service organization you need to set up per state. Right anywhere between, it looked like about 18 to, depending on the state. It could be as much as $45,000 to set up all the legal fees to set up to that. 

[00:08:12] And for those of you guys that don't know, the newer guys listening the show, in most states, you can't own a veterinarian clinic unless you're a veterinarian. One of the ways around that is what's called a medical service organization, and the dental has their own called a dental service organization. So when he said DSO, but you can set up the organization and the, kind of the fine line is you can't tell the veterinarian what he can treat, how he can treat it, what medicine he can use. But you own the facility. He's an employee of you, but there's some fine rules inside of there of what you can and can't do and tell him.

[00:08:43] But it gives you an opportunity to roll it up. We looked at it and it's just the overhead cost. It slowed us down on that and we had funders for it. It was just one of those things covid hit. 

[00:08:52] Kevin Moyer: It's certainly an attractive industry. Historically you would see a lot of corporate aggregators, much more strategic buyers in the space. And in private equity is kind of come, dip gone from dipping their toes into kind of going chips on the table, if you will. Over the last few years, and I think a lot of that is, a lot of them have a healthcare dependent thesis. However many healthcare companies or industries or sectors deal with insurance companies. When you think of the vet industry, in many cases it's private pay. So, the DVMs are taking in private pay.

[00:09:18] Maybe the pet owners are getting reimbursed on the backend from their insurance company. But, the majority of the business is private pay. And you look at the average DVM per clinic that's doing in revenue, probably anywhere from six to 700,000 per year. Depending on the cost of living in the area. If you scale that model, and you take that one DVM clinic to two to three, you're gonna get a media multiple accretion as well. As you kind of go upstream in a market. So, I think it's a very viable play. For PE and for corporate aggregators. There's 30,000 clinics, vet clinics in the US. I would say that there's probably 50 corporate aggregators that own 10 or more clinics.

[00:09:51] So there's still a lot of room left, to consolidate and roll up. And I think that's equally appealing to, to, again, the private equity spaces that think of the vet thesis and why that could make sense. 

[00:10:02] Ronald Skelton: Now, a lot of times these guys are selling or they're moving on the seller side of this. Do you work with the veterinarian? Like in this scenario, are you guys gonna be working with the veterinarians themselves on the seller side? 

[00:10:12] Kevin Moyer: I would say that, we're kind of buy sell side agnostic. We have team members that heavily focus on more buy side, QV type work. C D O D operational commercial diligence. We have team members that are kind of much more 10 toes down in the sell side of the equation. I would say predominantly for us, we're probably more in this particular niche on the buy side. As it relates to dealing with the aggregator or the acquirer. We have frequent interaction, with the DVMs. And I'm kind of finding one of the reasons or linchpins that a DVM would maybe consider, the average DVM today is I believe 46 years of age.

[00:10:44] Probably getting to the point they're looking at a transition plan to an extent, and they're probably tired working, on the back office. Managing employees, handling finances. And when you roll to an aggregator, you kind of forego that and you kind of hand that off. What that allows them to do more importantly is focus on the clinical side of work. Which is really what they're trained in and typically what they're passionate about. So, I think that a lot of people view, private equity as the big bad wolf. And I can understand that to an extent. 

[00:11:09] But at the other side of the equation, the ying and the yang. There's also some value add, I think can be drawn from, from shifting to either a corporate aggregator or private equity consultant. 

[00:11:18] Ronald Skelton: So I've always had a knack for just really get into people about their, like having people just tell me all about their business. It's just something I'm fascinated about it, so I always get it. One of the dentists I went to, in Oklahoma, they were the result of a DSO, national chain of them. And, I asked him, I said, why would you work here as opposed to own your own thing? And he said, I just wanna be a dentist. I don't wanna do all the rest of it. I wanna come in here, help people with their teeth and go home. All right. And, I think the veterinarians are the same way. I think you have two different groups of people who sell you a veterinarian clinic. There's just people who want to treat animals and help animals, and they don't want to do what you said.

[00:11:53] They don't wanna do anything like that. And then you got a group of people that are like, they've done that long enough, it's time for them to retire. The only concern I have with that is you just said that, dentist, I mean, not dentist, veterinarians are hard to come by. Finding the right young veterinarian to take over veterinarian clinic is one of the biggest, concerns we had when we were looking at buying these up and roll, doing rollups is. It's a very often, more often than almost anything else. I think heat and air is almost this way for the small to medium guys. The lead guy is so operator central. Like the operator dependent, I think is the word I should use. That replacing them is an art.

[00:12:27] Kevin Moyer: You look at different niche specialties within vet. So maybe take away primary care and move to equine. Equine is probably the one of the most, needed as it relates to specialty services within vet. And you look at, just overall why some DBMS may be leaving the industry. It's very much similar to what you see in the medical doctor, traditional medical doctor, even our end world where, a lot of burnout, massive caseloads. Very much compassion fatigue, going through the constant kind of ups and downs of becoming attached, maybe tangentially to, to the patient and, having a not a good end result.

[00:12:58] So I think a lot of that plays into it as well. And we're in a very fascinating, when you take the DVM out of the equation, you think of support staff. Again, going back to maybe the nursing side, when you think of vet techs, vet nurses. There's an equal shortage there. Not selling that, that point, but joining an aggregator in a, maybe a close geographic area, may allow you to leverage some of this staffing, model that the aggregator consolidators set up that maybe otherwise you don't have.

[00:13:21] I live in the Midwest where you may see a DVM that covers a 40 to 50 mile radius. Right? Cuz it's a very rural area. Verse the density that you might see on the coast, whether it be California, New York, New Jersey, et cetera. So it's certainly geographic specific to an extent. But I think it rings true a little bit that, there's value add if you wanna stay in the practice and continue to run it. And there's value add if you wanna slowly transition out to your point. And had maybe a new graduate from a DBM school come in and run the clinic, thereafter. 

[00:13:49] Ronald Skelton: I grew up on a farm out in the middle of nowhere. Our idea, like the small animals we took to the vet and the big animals, the vet came to us. And very often we just called the vet and told him what we were dealing with and he would have us pick up, like for the cattle, we had cattle. He'd just pick up the shots and stuff and we'd go out there and give 'em to our cattle ourselves. Like we took blood samples from our cattle and took 'em to the vet. Like we taught, you just taught us how to do, how to do it one time. And we just went out there and, took samples or did whatever he needed. And, dropped it off and he would give us whatever we needed cuz he didn't have to come out.

[00:14:18] I'm just trying to think. How does it scale on aggregator? You can't do telemedicine, right? I guess you could, you give a farmer a cell phone and said, pointed at the wound. I need to see it. But, I wondered like, how do we bring modern technology? How does some of the stuff that's really done a lot in other realms of private equity. Where they modernize things? They do bring some of the other, cross industry technologies in when they come in. 

[00:14:40] Kevin Moyer: Sure. I certainly think there's to, to an extent, like any business or industry, there's performance improvement, right? So when you acquire a company that's typically step one, probably the easiest step. Anyone with capital can buy a company. It's really understanding if there is an integration or if it's a standalone enterprise, what operational levers do you have to pull? How do you extract working capital?

[00:14:59] How do you optimize patient flow? So when you think of technology and just, from a pet perspective, charting out next day appointments or scheduling your patients more tactically right, in the vet space. I think a lot of that goes into the overarching value add thesis of PE is they may go a little bit more business intelligence focused. A little bit more deep dive in, into proper, cadence of scheduling and different resources. And I do think there's also some technology similar to other medical fields that, that are allowing maybe vets to, increase the pace of each visit. So maybe instead of meeting with a, with a pet owner for 10 minutes, now it's down to seven. If you scale that over a year, that's a big time grab.

[00:15:34] So I think that, there's, again, I think there's a lot of tangental offerings in the industry that maybe you see in, in macro healthcare. Now, telehealth is interesting. Because I do think there's applicability for very, very citable or seeable symptoms. Now, if it's something within the stomach or otherwise gonna be very difficult, the pet can't speak. Unlike maybe a child or something. But I do think there's maybe light to moderate applicability there as well in telehealth. 

[00:15:56] Ronald Skelton: I could also see the thing where you, if you had a, in 10 or 15 clinics, you have one really good, like a master vet. Like somebody's just really good at stuff. And then he, it's something that, these newer vets coming in that you bring, veterinarians, you bring in, have somebody to lean up to. To say, Hey, I haven't seen this one before. Here's the symptoms, here's the photos, here's the blood work. And then that's a telemedicine thing where they got somebody, looking into their files and stuff. There's possibility there.

[00:16:20] I can see it. What other realms do the, I mean, right now, private equity brings something to the table that a, that an individual buyer may or may not be able to do. With the interest rates and everything else going on. Private equity might be able to push a little bit more on getting better offers to these veterinarian owners than you or I could because of the interest rates and the debt coverage services ratios and all this stuff, that SBA would require us to fall under.

[00:16:45] Kevin Moyer: I think what you're seeing in private equity predominantly now. A lot of private equity funds right now are very cash pure. They have so much capital to deploy that it's almost insane to think about. But in maybe the smaller, lower middle market cases, what you'll typically see is a private equity fund go in and put, the minimus capital down. They'll try to share some of the risk. Maybe the interest rate risk and the business risk by way of seller financing and then structuring and earn out on top of that seller financing. Based on revenue hurdles, EBITDA hurdles, what, whatever they may be. And that's kind of hedging a little bit of their operational risk as well as their interest rate sensitivity as well.

[00:17:16] Cause to your point, if they go to a traditional lender, whether it be sba, whether it be otherwise. And they factor in where the interest rates are today on top of their cost of equity, their weighted average cost of capitals through the roof. So then it becomes the thesis of does this even make sense to do if we can't, potentially structure seller financing with an earn out kicker management equity role to where our, our leverage is relatively, minimal. As opposed to the old model of the LBO. The LBO era where it was maximum leverage and interest rates were at the floor, at the time.

[00:17:43] Ronald Skelton: All right. Let's switch gears a little bit. We talked a little bit about the show. You have a lot of experience on the seller side of things. And we were talking about seller side psychology and what a seller goes through on the, on a transaction. What is your experience, with that? And then based off that, I'll probably have some good questions for you there.

[00:17:59] Kevin Moyer: No, I think, it's interesting. We've seen throughout our careers a variety of instances and that maybe are independent of one another. So you may have sellers that, that have contemplated a transaction for many years. And finally just said in Covid it was actually a precipice of a lot of this. Finally said, enough is enough. With this extra headache, it's time. And it's a very smooth, kind of, very seamless process. I mean, diligence wise, you may have some cleanup there. There may be some things to think through, but overall the seller's ready. And you have other instances probably equally as frequent where, the seller may engage a bank. They may engage a diligence provider, they may be ready to run a process. But throughout that process, they're realizing that, Hey, wait a minute.

[00:18:39] I've done this and centered my life around this for 25 or 30 years. This is my identity, right? And am I ready to truly give up my identity? I'm known as the guy that owns A B C L C. That's how I've always been known. Without that, what do I become? And I think that sellers in all reality, I mean, we're human beings. I think that there's certainly a struggle with detachment. A struggle with potentially losing that identity. I have seen deals personally in many cases. Start and stop based on that. And the sellers predominantly are pretty transparent as to why that is. Typically if they're not, you can kind of see that there's some hesitation.

[00:19:13] But you know, we try to, and I say we as just a general advisory community, or at least they should as a general advisory community. Kind of walk step in step. Depending on what side the deal we're on with the seller. Kind of assure them in any way we can. We're not, as a diligence team or a performance improvement team, we're not going to guide them to sell or not to sell. We're kind of, we have to slow the pace down of our work, we'll do that. If they wanna take maybe a break, pencils down for a period of time, happy to acquiesce to that. But, overall it's, I think just understanding that a lot of people get caught up in the transaction itself.

[00:19:44] And forget that there's, a human element right to the deal. A lot of times in private equity, it is very transactional. There's not the emotional attachment. It's, what is the multiple at the market level? What is my offer? And if it's, likable, how quickly can I get out of this asset? So very much more, kind of to the point, stoic, if you will. So definitely a different path. When you're a, an advisor, a banker, a diligence professional to kind of understand your client or the target depending on what side of the deal you're on. And kind of their hot buns in emotions that they may be going through.

[00:20:14] Cuz again, this is a, in many cases a, very big deal. Or transition for somebody who's attached their identity to this for so many years. 

[00:20:22] Ronald Skelton: It's interesting you say that because one of the things that comes up. I've interviewed quite a few people who, some of them just for fun and didn't put on the show cuz they didn't wanna, they didn't wanna be on the show, but they wanted to tell me their story. Mainly cuz they couldn't be on the show yet. You're telling me your story right after a, after a acquisition. We can't publicize that. Because they have certain rules, right? That said, often when I asked somebody like, why didn't you sell to the private equity? They were offering you almost, one and a half times what the other guy offered you. And they said the actual answer, probably. I can count on, it would take both hands to count it.

[00:20:52] Of the times I talked to people. Six or seven times I've been told that private equity is so cold. It was just numbers. They didn't care about the people. They said, I didn't feel like they cared about the people. I didn't feel like they cared about anything. They just cared about the numbers and the transaction and the mathematics of it. And I built something here with real people. And these people are my friends. You own a company for 30 years and you spend 45, 45 to 80 hours a week. Depending on whether you have a good week or bad week. Around these people, a lot of times that's all you know.

[00:21:18] Kevin Moyer: Yeah. And I, I think private equity, I think it's like anything else, it's case by case, right? I think there's great firms. Very kind of empathetic to situations. Certainly there's outliers to that, I would say. Yeah, overall, I'd probably say the general private equity landscape is relatively empathetic. Now when you get into the more public market deals and you start talking about maybe the juggernauts of the industry. That could differ slightly. But I think in the lower middle market specifically, you have to be.

[00:21:41] Because, if the relationship between a potential seller and a private equity firm is already off to a cold start, it's not gonna materialize and go anywhere. It's much more mindful or in the minds of private equity professionals in the middle to lower middle market is to, again, that little bit of extra empathy and kind of treating it beyond the numbers. Numbers are key, but numbers aren't everything. If you don't have the human capital, you don't effectively have a business at the end. 

[00:22:04] Ronald Skelton: It's interesting you say that cuz the more I think about it, the people who said that were bigger transactions they would've never qualified for SBA copy line. They were in the, say between 15 million valuation of, one of 'em was closer to 50. They were bigger deals talking to PE and strategic acquisitions. And they had mature, like one of the reasons I liked talking to these guys is they already had teams in place. Two of the guys that already kind of semi-retired out and was just, owning and run it from afar and it was time to sell. One of the guys tried to do an ESOP first, and it just didn't, he didn't feel that it worked. I think he used the wrong, facilitator to set it up for him.

[00:22:35] That said, there were bigger transactions and I can, maybe there's a different expectation. The PE came in seeing everything was buttoned up and running right. And just assumed they didn't need that personal connection. And I think it was a wrong assumption to make when somebody's touched and known something. But they built by hand for 35, and in one case, 40 something years. No matter whether or not it looks buttoned up or remember how logical or, alpha the guy seems, or what's the word I'm looking for on the disc profile there? The d or whatever? Where you're just like, gimme the facts, or I mean. 

[00:23:03] Or gimme the high level facts and just make a decision. Even if they come across that way. I'm very high level on that. Just like, give me the confidence you can do it. Tell me what you're gonna do and let's just go. 

[00:23:12] Kevin Moyer: It's almost like the, it's almost like the dominance theory, right? And I think that plays a little bit into, to your point, when you think of. What I call upstream private equity, like your bulge bracket firms in, in the deals they're working on. I mean, there's thousands of employees in these companies. When you're in the lower middle market, you may acquire a company with a, an owner and two employees. So I think that the touchpoint at the employee level also is very different, right? You may be dealing with a, again, upstream, just a leader of a unit, a business unit, whereas, in the lower middle market you may, you're likely dealing with all the employees of the company to some degree.

[00:23:42] And I think that those relationships get forged a lot earlier. Which is probably why it's a little bit more, we'll say as a more human element than maybe just the numbers element when you go upstream.

[00:23:50] Ronald Skelton: Let's circle back. There was a question about the veterinarian services, what multiples do they play in? What multiples would they sell if they sold to like an SBA loan? If they're small. What of what multiples can they achieve through private equity and roll up? And, is it the standard? I think the standard inside of most industries is the, PE firm buys like 80% of at least 20% on our table, or 70 30.

[00:24:13] And then they have an upside, they have a second chance at, at that earn out or the ability to have a second exit when the PE firm exits. So can you gimme an idea of the deal structures you're seeing or kind of ballpark range? 

[00:24:23] Kevin Moyer: Yeah, I think, it's, if you were to ask me this question a year ago where vet was trading at an all time high, I mean, we, we've seen in mostly, I would say actually all these that I'm gonna reference, just broadly speaking, or public data, if you will. But, we've seen anywhere from 15, 20 times in cases, a lot of that plays in the scale. Right? What is the scale of the, is it going from aggregator to aggregator? If you go to a one DVM clinic or even two DVM clinic, you're not gonna get, obviously, you're probably gonna, ah, maybe then you'd break eight times EBITDA.

[00:24:52] In this market, there's a lot of pause, again, interest rate sensitivity. I think there's DVMs and other business owners just struggling with the economic uncertainty of what to do, right? Is exiting now gonna last me until retirement? Very real concern. So, multiples, I wish you had a more finite answer, but they are truly all over the place. But it's truly dictated based on revenue, size, scale, the clinic, and I would say geography as well, right? Are you in a major metro or secondary? You're in a tertiary market. And what's your competition look like in a media 10 mile radius? Is there opportunity within a pet clinic to scale and add another potential DVM or other staff?

[00:25:28] So I think a lot of that goes into the value add, kind of player value creation, play fuel of what PE and non-PE for that matter kind of look at. 

[00:25:35] Ronald Skelton: So inside of that realm, Like what does this, what do the deal structures kind of look like? Are they like, there's cash up front of course, and then there's an earn out and, what's the play for the private equity? A lot of times these guys, are they building these like holding codes or are they actually building these like typical private equity model where they're gonna roll 'em up and aggregate 'em up and, they're in and out in three to five years? 

[00:25:55] Kevin Moyer: I would say in the past eight to 12 months, it's pivoted a lot more to the private equity model, right. Where I think the thesis is, like many other investments we're gonna acquire, we're gonna add as much value as possible. We're gonna perform, improve, we're gonna continue to bolt on right to the platform that's acquired. And in three to five, seven years, depending on the underlying fund mandate, that's when we're gonna contemplate harvesting and exiting.

[00:26:18] Right. Historically, I do think, again, just given the defensive nature of the vet and just generally in healthcare, And with the exception of pharmaceutical is that, the thought was why not just carry these, right? Because they're for the most part cash flow. Cash pure. And, they're relatively stable investments and maybe not look to exit in three to five years, but maybe more green fund, right. Maybe more long term and kind of ride out the evolution of pure value extraction at the end of the day. But again, when multiples are trading, going back to 12 months ago where they were, everyone and anyone who could, was trying to come to the table and get the highest price they could command.

[00:26:52] So their original thesis on day one may have drastically changed when they were able to get two to 300 more basis points on their multiple ion than they ever anticipated just based on movements in the market. Right. So I think at the end of the day, private equity is always going to be an investor, right?

[00:27:07] That's what they're there to do for their LPs. And I think they're, they're gonna focus on what's gonna generate their maximum, most maximum risk, adverse return possible, kind of even independent of timeframe. If that makes sense. 

[00:27:20] Ronald Skelton: Let's run through a scenario real quick, cuz I'm curious on the answer to this. I'm a veterinarian. I have a decent size clinic in my, my market. I'm not, I'm saying this scenario. In this scenario, you're a veterinarian. We have a decent size, veterinarian clinic in, in a market. And I'm thinking about exiting. What's my process to go through?

[00:27:36] What should I do to maximize that? Let's say it's a year to three years out. I'm willing to work on, work on things, change things for the next two to three years to maximize my retirement fund. Sure. What are some of the things these private equity firms are looking for, and how can I create something that would be very attractive to one?

[00:27:56] Kevin Moyer: It's an interesting question. A lot of times private equity for the most part, depending on where they sit at, whether their growth capital otherwise is going to look for a company in general with some meat on the bones. Meaning is it fully value added or has value been created to its maximum extent? Or is there still, avenues to, to drive more value? So it's much more case by case. But when you think of a dvm, or really a business owner in general, right? When you think of cost reduction kind of plays that may exist, you think of, systems and softwares, right? Are they using optimal systems of softwares?

[00:28:26] Is there order to cash or procure to pay methodology kind of fully up to speed, right? Is their working capital management fully up to speed? Is their financial reporting seamless to where it uck into a private equity fund if required? So I think it's very similar to what you would see maybe otherwise, I would say probably in the vet space specifically, it's increasing. And this just comes down to revenue generation, right? It's increasing the number of cases that you could see per day, right? So does that mean you extend hours or does that mean you shorten case visits? Does that mean you expand staff or does that mean you rely on technology. More heavily.

[00:28:58] And I think those are the questions probably D V M centric that go through their minds as you think of maybe a year to 18 months out of a potential exit. And then once they're at that point, it's a decision of, okay, I'm at the point where I feel I'm ready. Do I want to, go in, enlist a banker to, to market me to the widest pool possible? Do I wanna potentially reach out to an aggregator, maybe I have a relationship with them through my banker otherwise, and go direct there. And that's typically one and two paths. There are dbms who list their own companies for sale, right? We see it all the time where, they may utilize LoopNet or something similar buy biz sell and say, you know what, I don't want, I don't want any of the noise.

[00:29:32] I want to control everything end to end, so I'm just gonna run this process myself. And we've seen successful exits that way. 

[00:29:38] Ronald Skelton: Interesting. Now, Are the private equity interested in only the veterinarian clinics or some of the ancillary stuff like medi, like I think about small medical clinics, and then you got ambulatory services, you got medical supply companies, you got, there's all these supporting companies that if you were a holding company or a company that was acquiring that particular in that industry, it would be beneficial to actually kind of fill in the gaps around are they these PE firms, looking at the, pet medical supplies and pet medical devices and all the other stuff too.

[00:30:08] Kevin Moyer: Hundred, hundred percent. I think the overarching thesis is how can we all become vertically integrated right. Within our own infrastructure? And I think when you think of, to your point, pet supplies, pet products, pet foods, it maybe something is a pet lifestyle, right? There's now pet lifestyle brands that exist.

[00:30:22] They maybe didn't exist three to four years ago. There's also an emergence of a lot of DVMs are turning patients away, or, pet owners away because they just don't have the capacity. So what you're seeing now is more of a flooding to, vet emergency rooms, right? So there's an emergence now of what's almost known as vet urgent care, which may differ from your traditional day by day dvm, similar in, primary medical that we would go to.

[00:30:44] So absolutely think in, in field and private equity funds and otherwise acquiring. Tangential or ancillary service offerings that, that further support and augment their platform, right? Whether that be, again, medicine related, whether it be product related, whether it be, food related or otherwise, but definitely trying to control the vertical integration as much as possible. I think that in and of itself can drive multiple accretion, pretty quickly and efficiently. 

[00:31:06] Ronald Skelton: So now we're gonna end up with, pet Ambul ambulatory services pet, outpatient service, like surgeries and centers. The whole nine yards. The whole nine, yeah. Take your dog to an outpatient, surgery center, yeah, for, anyway. 

[00:31:20] Kevin Moyer: On a funny side note. I just, I saw this, just a week ago. Didn't even know this exists, but in, I believe the, company's based in, I dunno if it was New York City or Boston, but it's a pet maso therapy clinic. So they will actually, like, you don't, for yourself, you have, 30, 60 minute sessions where they'll come and they'll work on your pet, maso therapy on your pet.

[00:31:39] And that's something, again, growing up, having animals my whole life, I cannot recall one time that. My parents said, Hey, Kev, jump in a car. We're gonna go take our, we're gonna take the dog to the mass therapist. It just didn't exist then. 

[00:31:50] Ronald Skelton: So, massive therapist, I'm thinking of the massage.

[00:31:52] Kevin Moyer: Yeah. Massage. And it's for circulation and blood flow and I don't like golden retrievers, have hip issues, all those things. But again, three to four years ago, never would've thought, never would've thought or heard of it. 

[00:32:03] Ronald Skelton: What, right on the way through here to move to California, we drove through one of the towns I seen a mobile vet clinic was an RV converted into a veterinarian thing. So, basically you just, they just pull into your, pull into your work and you can ring your dog to work that day and go get its vaccinations and have it checked up and have its teeth looked at. Now I've seen mobile dental clinics and other stuff, but I have never seen a mobile veterinarian clinic.

[00:32:25] But I, until about a year ago, I was driving and drove fast. One actually stopped and looked at, I think I have a photo of it somewhere cuz it was a big nice luxury motor coach style. Our rv, they actually made something, it was a really nice high-end, RV that they converted to a mobile veterinary clinic.

[00:32:41] Kevin Moyer: I think the biggest thing that it overall, that needs to be thought through the vet space looking forward right, is much more when we talk about supply and demand, right? There's such a great demand. Finite supply finite veterinary schools. I know in New Jersey they just, there was a large grant. They're gonna be launching one I believe at Rowan University, which is very exciting to see. First Vet school in New Jersey. I think more of that's gonna only help, right? It's figuring out how do we, if we're anticipating by 2030, that we need 41,000 more DVMs. We're, if we continue to the pace and trajectory we were on fully graduate, everyone, we still have a 15,000 DVM gap.

[00:33:13] How do we plug that? Right. And I think that's gonna be the overarching question that if private equity can plug or figure out, they're gonna do very well. How do they match that supply or finite supply with what seems to be, infinite demand at the moment. 

[00:33:27] Ronald Skelton: Yep. It's topic near and dear to my heart. I have a seven year old little red haired, blue-eyed fireball of a girl who has never seen an animal she doesn't love. That girl would run up and hug a grizzly bear if I wouldn't stop her. Two days ago we walked up on a pit bull that was growling, had his ears back at me and she wanted to hug it cuz it was mad.

[00:33:43] And I was like, no, you back up. And the owner's like, it doesn't bite. I was like, yeah, I've been bitten by people, I've bitten before by pit bulls. And right before, right after the owner said, dog doesn't bite, they grabbed me by the leg. But yeah, it, nothing happened in that situation. I could really see her being a veterinarian or marine biologist or something. If she never loses her love for animals. She pretty much only eats chicken cuz she's figured out that, every, where everything comes from. And she's like, yeah, I don't eat that. Yeah. I like cows. I'm not gonna eat that. That's great. So, let's go into the other sides of what you guys do.

[00:34:13] Sure. We talked about, a little bit about the due diligence side, just the quirks of it and stuff like that. We talked about the seller side. Let's talk about integration and stuff like post sale. It looks like you guys do some, integration planning and execution. 

[00:34:27] Kevin Moyer: Yeah, we do both. Integration and separation. We call it I M O S M O. In integration management office, separation management office. And in the separation side, just briefly is kinda much more focused on if a company's gonna spin or carve out a business unit. Right. What does that look like when you think of standalone costing current and future state operating model. Synergy assessment. Dis synergy analysis for that matter as well, but more, much more frequently on the integration side, where you have a, a company that's acquired a bolt-on or acquired maybe a secondary platform and a year's gone by. Typically we see this. Maybe it's a year or two, has gone by and it's okay.

[00:34:59] We haven't had time or we've been very busy acquiring. Now it's time to do an integration. And that's typically where we kind of come in and focus on a, building out a playbook, kind of thinking through what a cadence looks like over the first, 90 to 180 days, what functional areas, make sense to, to become shared service centers. What processes and procedures can be shared. Unfortunately you'll come into cases where human capitalize could be duplicative efforts, right? So then it becomes a little bit of a cost reduction play as well. But it, but the end goal of it is truly to fully optimize the enterprise, right? In totality and to make sure that.

[00:35:30] When we leave or any integrator leaves that, all levers have been pulled that can be pulled to truly, again, create an optimal outcome so the company can focus on thereafter just general performance improvement up and through their own independent exit.

[00:35:42] Ronald Skelton: I'm fascinated with divestures. I've had a lot of people on the show talk about 'em. Sure. I've only had one guy on the show that's actually acquiring them, and he was pretty good sized. He was buying, computer security companies at 50 million and above. so, he's done quite a few. Sure. that said, like, I don't wanna say, I don't remember if it was 25 or 50.

[00:35:58] It was, he'd done quite a few over the years and, had, but the, I'm fascinated with, because I keep hearing over and over again, you got great deals, but my concern is I don't know anything about the space. And secondly is I have to imagine it doesn't come with the leadership. Right. You're not gonna get your cfo, F the vp, all this stuff you would normally get if you acquire a company, you know where the main leader might be leaving, but, or you can have them retained for a little bit, but, On these divest you, you're basically getting the customer, what do we get?

[00:36:27] Right? Like you get the customer base, the technology. Sure. some of the team what comes with a company that's gonna divest themselves of some entity within the organization? So, 

[00:36:38] so, good example. So when you think of a,let's think of a holding company with three business units, right?

[00:36:43] And we'll say that business unit A is gonna be carved out, of the HoldCo business unit. A likely has, for the, now I'm not saying back office, but front office likely has dedicated individuals through a current state operating model. You could say, yes, this person's gonna lift and shift, with the entity.

[00:36:57] Or no, this person's maybe an f and a finance and accounting that's, serviced by the back office. So we have to fill that role. Right? So when you think of filling that role, does that mean we go to market? Do we outsource, kind of, what do we do there? you hit the nail on the head.

[00:37:08] You're traditionally, in almost every case, not gonna get hold code leadership in a carve out scenario. I mean, a lot of times you're gonna have to backfill that. So maybe you have a, you have an operator or operators in-house that you pull in. Maybe it's go-to-market type search. But a lot of times that's a big consideration.

[00:37:22] and many times you'll see a, you'll see what's called a transition services agreement, right? So maybe I carve out, once again, business Unit A from HoldCo, but HoldCo is gonna support me for the next 18 months on the f and a and it functions, right? It's just a, very finite period of time.

[00:37:37] Transition service agreement allow me to get my feet under me. You'll also see in more limited cases what's called a mass master service agreement, which goes into perpetuity, right? When you think of an msa, maybe the support's gonna be ongoing and there's no intent to cut it off at a definitive period of time.

[00:37:51] So, all of those kind of things go into planning for, whether it be a spin carve out, whether, someone's gonna cut to ipo. different vehicles can be used to the vest, but overall, the methodology of current and future state op model and really understanding dis synergy and synergy, and this is both on the buy and sell side.

[00:38:05] Cause if I'm carving out a unit, I wanna know what synergies I'm losing, right. By doing that, not maybe just the immediate hit to,to inflows based on purchase price as 

[00:38:13] well. Maybe I missed it, but what I heard inside it, there was all within the private equity, holding, co speeding something off.

[00:38:20] Yeah. Do you guys work much with like the bigger companies that I like? They have, I'm gonna use it. Huge example here. Google buys companies all the time. Sure. and a lot of times those companies have very lucrative side projects. Aren't the reason Google bought it. Right. So Google might buy a company that's, just a great idea, but they have a little side project that, has a piece of software doing, say less than 10 million a year.

[00:38:43] A team of five or six people has nothing to do with Google and nothing to do with the reason they bought it. So they, a lot of times they'll just shut it down or they'll spend it off and sell it off. So do you mess with those type of dives at all? Do you guys work inside of that realm too?

[00:38:53] Or mainly in the PE firm? 

[00:38:56] Kevin Moyer: So I would say that predominantly it's within private equity. if I look back through my career, probably more so Ernst and Young was probably quasi-private equity in large publics that are doing that. To your point, you know what I've seen though, in your scenarios that, when they have this kind of, tangential company or this Bolton that really isn't applicable to their day-to-day business, it's almost always fully staffed with independent employees, right?

[00:39:16] So the day one cutover of trying to backfill spaces or spots or roles is typically minimal, right? Because you're gonna have most of those employees lift and shift, with the entity itself. There are instances, of course, where, that's not the case, right? That not everybody likes being divested, right?

[00:39:30] So you're gonna have employees in some cases saying, you know what? I don't want to be divested to x, y, Z entity. I'm gonna put myself on the market, and see where I can go. And that's something that in theory can be lightly predicted, but overall, it's gonna be relatively unknown un until the transaction's complete.

[00:39:46] Who's gonna stay and who's gonna go. So I've seen the vestiges fail to that regard where they had an exodus of staff in. couldn't find people to backfill the roles. And all of a sudden you may have the customer list, but if no one can service that customer or sell to that customer, what can you really do?

[00:40:01] Right. Right. I think that leans a little bit more towards, both private equity and corporates kind of acquiring an industries they know well. Right. It's kind of the devil that, because if in fact there's an exodus of staff, they in theory should be able to backfill with other, other either portfolio companies or other, pieces of a business unit within a corporation.

[00:40:18] It's like 

[00:40:18] Ronald Skelton: the guy I was talking about, he built something that people wanted to work for. I mean, he, people really wanted, if somebody was in a divest to him, those engineers wanted to go over there cuz they got to work with some really cool softwares, some really cool engineers. Sure. And even if they did leave, he had expertise on how, and on staff that could take over and do.

[00:40:36] He had pretty much all the technology, all the roles. so. We talked, you hit a, you hit some, a nerve on, in this last conversation about people leaving, part of your,PO proper integration planning and stuff is, employee retention. So what is your process inside of employee retention?

[00:40:54] Where does that start? Like, in what part of the acquisition process does making sure you retain employees start in you guys' books? 

[00:41:04] Kevin Moyer: Yeah. I think it's number one, I'd say it's hyper isolated to the level of employee, right? So, when you think of, and this is just being pragmatic.

[00:41:12] when you think of a manufacturing company, right? And you have, maybe you have a ceo, a coo, you have a director of manufacturing, director of quality control, all very high profile positions that, that likely need to remain as. So, so, you, you'll typically, and this would be outside of our scope, but you'll typically see the acquirer set up stock incentive packages and stuff like that.

[00:41:30] When you look at the individuals who are actually doing the core,fundamental on the floor work, I would say those are much harder to really get underneath of, to the extent where, normally I say you set up a center of excellence. you set up a steering committee, you drive a common message, you drive a common theme.

[00:41:46] you try to maybe offer some low hanging fruit that, that is very incentivizing but maybe isn't a huge overhead cost or otherwise. But when you're dealing with, I think much more of the, maybe the nine to five or multi shift, employees who are really doing the output, right?

[00:42:00] they are running the day-to-day of the company. it's just very hard to isolate 

[00:42:05] Ronald Skelton: maybe 

[00:42:05] Kevin Moyer: a tool or a service that works in every case. we, we've seen instances where, even something as de minimus as advising to, to management,you should consider offering.

[00:42:15] This has been a very stressful time. Maybe offer everyone an extra couple days over the weekend just to give 'em some time to, to cool off and. And think about it. and we had very good retention from that, right? These are people who typically work six to seven days a week. these were paid days off.

[00:42:27] I mean, it, this means a lot, right? So you can pull that off maybe a little more in the lower middle market again, when it's a much more kind of family oriented business When you start moving upstream and you start getting a large Publix in upstream private equity, it's probably less about retention and more.

[00:42:41] So, all right, they're going to leave. What do we do? Who do we fill them with? Right? So it's not so much we need to retain them, it's immediately how do we find that next person to take the seat? Right. So I think that the methodology and the mentality differs a little bit when you think of large scale.

[00:42:55] maybe Fortune 500 versus, a company that does 10 to 15 million in revenue and has, I dunno, 10 to 20 employees. I think it's just managed completely different cuz it has to be to an extent. 

[00:43:04] Ronald Skelton: That's interesting. So I often. The phrase employee retention. and the percentage of retention after a transaction really bugs me.

[00:43:14] It's a, like, it's like people use it as a kpi. Like we retain 65% of the employees, 75% of the employees. And the reason it bugs me is it's a trailing indicator. Meaning that, to know how many people left is too late to deal with, people are looking to leave. Agreed. So I actually had, I've had some talks with,I'm a startup nerd by previous trade, and I'm trying not to be that guy.

[00:43:36] I'm trying not to start other software companies and stuff. But, there's been a drive and I pitched it to somebody who's been on the show recently. he might be able to do something with it, but I'll give you the idea and we'll chat about it. I think there's a fairly. Logical and easy way to do a leading indicator, for employee retention.

[00:43:53] And that's to baseline, before you even make the announcement of the acquisition of mergers Is to baseline all employees on all their social media. like you, you have your listing of your employees, you look at their LinkedIn accounts, and anywhere there's job resumes, anywhere, there's re like, I don't even know that the world, if indeed and if months are still around or wherever the job boards are these days, whatever the job boards are, if you.

[00:44:16] Put a baseline and do change detection, through the communication process, you could see a leading indicator. How many people are updating resumes, how many people are updating their profiles, way sooner. And know, okay, well we're not communicating very well. I've got 200 employees and 65% of my employees have updated their LinkedIn profile.

[00:44:36] sure. since our announcement. Right? Sure. That just says, that says there's un secure insecurity in the conversation. I think it's, I 

[00:44:43] Kevin Moyer: think it's both ways too. we typically, like many consultancies, will issue a series of surveys, right? And those surveys aren't directly stating, are you leaving or are you going?

[00:44:52] But we can then kind of benchmark them against historical past and what, to your point, what attrition's been, what retention's been. but what I found in those surveys, which is kind of fascinating to me when you think of this human psychology, is that. I find people to be more honest in their responses when emotions are high.

[00:45:06] Ver versus when it's a little bit more methodical and maybe they're clearheaded, so they, the survey thesis, to your point of getting ahead of things, right? So, so maybe getting before they've already put a foot out the door has allowed us in instances to maybe get arms around.

[00:45:19] Maybe it's a whole function that's looking to just lift and shift, and maybe it's a small three to four people and they're all gonna go to a competitor, but it has allowed us to kind of get underneath, having one-on-one interviews, kind of understanding what the needs are. A lot of it comes down to, to fear, right?

[00:45:32] A lot of these employees, God bless them and I don't blame them, probably have a certain level of fear. Am I gonna get cut, right? am I gonna be needed as I was historically, with Oldco and NewCo and,many times that's what's driving them going to market. It's not that. the sale or divestitures upsetting them.

[00:45:47] it's, they're fearful and I can't say that in many cases if I were in that position that I wouldn't have the same, same reaction to be honest with you. 

[00:45:54] Ronald Skelton: I think it'd be cool to do. I think, I do too. Absolutely. Yeah. I think it'd be fairly simple. If you looked at some of the software that's already out there for consumer sentiment, like what the consumers were saying about you, and you track, you can even use stuff like that.

[00:46:04] There's sites like Glassdoor and stuff like that where people, they're making comments and stuff. You could almost do an AI tool that would basically give you a decent k p on, how many people of your, how, what's the likelihood, or I dunno what you would call it.

[00:46:17] There's probably another, a new phrase you could coin. Sure. what's the likelihood that your, employee retention rate or your turnover as we call it here for all our UK guys, we're not talking about revenue. I talked to people all over the world. In uk in overseas. Turnover is a revenue.

[00:46:31] here it's people leaving. So the, right. So. You could track, you could almost forecast it. I honestly think you could with the right AI tools and the right,and with con being careful of privacy, not like saying, Hey, that Joe's about to leave. I think there's some concerns around privacy.

[00:46:47] You'd have to acknowledge and play within, just for the fair use of data. Even though people are public publicly posting this stuff, there's still some fair use of data, I think. so I think 

[00:46:57] Kevin Moyer: you certainly can get directionally accurate as to what that looks like. I mean, if I look at a company of 50 employees versus a company of 5,000 employees,I'm gonna be able to pinpoint probably almost to the T and the 50 employees subset who's gonna stay and who's gonna go, yeah.

[00:47:10] When I get to that 5,000 dataset or subset, that's where it gets a little bit more, I think tricky is to, maybe better understanding e each and every individual's underlying psychology as it relates to the feelings on the existing company, feelings on NewCo. Job satisfaction, pay rate, satisfaction, benefit status, you know what I mean?

[00:47:26] So many. So many variables, but to your point, glass door, actually interestingly enough, does capture quite a few of those when you think of reviews and kind of posts of,

[00:47:33] Ronald Skelton: of happiness with the employer. And then the other side of it is, you could forecast some other stuff too. Like I noticed in the tech industry, when I would go from one place to the other, a group of my employees followed me.

[00:47:44] Like, Oh, sure. and it happens a lot in the tech industry. I'm sure it happens in other industries too. Sure. When I manager or a director or a leader goes from one company another, within two years, there's a core people, there's a core group that will eventually work for them again. sure. So it'd be a good tool to have inside your company go, Hey, if John leaves, there's a good chance that you know, Joe, Sally, and Nancy over here are gonna go with in the next year, right?

[00:48:07] Yes. So, might wanna keep John around. so that said, I just think there's some ability to, and some tools that don't exist in this time, that wouldn't be that hard to do. And,I had a guy on the show who builds HR software and after the show, I was like, you know what? I'll probably never act on this.

[00:48:22] So I pitched it to him and he liked it. We'll see what he goes with it. What 

[00:48:25] Kevin Moyer: one, one quick point you had that I thought was intriguing on in the John scenario you just gave, John leaves, Sally and Joe leave. One thing that we, we try to pay a lot of attention to that, I can't say many firms do, is that you're gonna have leaders with titles and you're gonna have leaders who don't have the title, right?

[00:48:40] So, if John is the manager, but Jesse's an associate who everybody likes and everybody kind of looks up to. John May leave and people may be, jubilant, but if Jesse leaves the whole staff's going. So I think we try to spend a lot of time understanding that type of makeup as well.

[00:48:54] Absolutely. Is. Sometimes titles aren't indicative of true leadership wi within a business unit within a company. And, that to me is always the fascinating piece of an integration, right? Because. I'm inclined. We're always inclined to drive towards, well, if the CFO leaves, the finance team's gonna leave.

[00:49:08] But the reality is, if the director of fp and a leaves. the f and a team's going, right. So that's, that to me is part of the science and art of getting underneath the functional area, is to understand who really is the leader, right. At the end of the day kind of 

[00:49:19] Ronald Skelton: titles the side. Yeah. Titles don't actually always mean anything, especially in these small companies, 50 or less.

[00:49:25] usually you have a visionary and an operator, so the visionaries of the guy comes with the ideas, the stuff, and the operators that get stuff done. I know of a case where, a guy bought a company, he let go of the administrative assistant, in his own words, she's just too powerful and the company just fell apart.

[00:49:40] His operator, the guy, the CEO that retired out Sure, pretty much basically came up with ideas and his, office administrator, what they, I don't know what title they'd given her, but it was something, like, office manager Sure ran everything. 

[00:49:55] Kevin Moyer: I've seen that. I've seen that. Like, 

[00:49:58] Ronald Skelton: and the company required to do a lot of travel and stuff.

[00:50:00] when she left, nobody there knew how to do their own travel arrangements. She did 'em all. Nobody knew how to do their own expense reports. She wouldn't let 'em cause they would mess 'em up. So, yep. She did everybody's expense report to 'em. They would come here and dump off some receipts to her.

[00:50:10] They'd talk to her for five minutes. She would draw 'em up and put 'em in the system. Right? Yep. She did. It was a 50 person company and she did all the stuff that was like, she was the glue of the company. She was what I would refer to as an operator. Somebody that Oh, yeah. just made the thing work.

[00:50:23] Right. So whatever needed to be done, she made the thing work. Right? Like, she's the person that called maintenance, like if something broke. Right. She knew all the numbers of maintenance and everything. So when the guy let her go, she just like smiled and walked out the door. She didn't say anything about like, Hey, I hold this place together.

[00:50:39] yes. 

[00:50:39] Kevin Moyer: we try to focus a lot too on, on cross-functional training for that exact reason. Right. If you have a key man, key woman that, that just decides to up an exit, maybe they win the lottery. Who knows, who's gonna backstop that role and who's gonna take on those responsibilities.

[00:50:52] So cross-training within a function and beyond even functional lines, I think is a pretty critical part of an integration to make sure, again, that you're kind of backstopping any unforeseeable exit, whether it be by choice or 

[00:51:02] Ronald Skelton: otherwise. That's, so that's one of my favorite questions now to ask every person I talk to with a company, whether it's online companies I'm dealing with now, or even brick and mortar companies, what I was looking at for the last couple years is, sure.

[00:51:12] I ask every single one of 'em. I ask the CEO of the owner who's key, who's critical, what do they do? Yeah. And then I might, he's like, you gotta talk to our VP here. And I asked him, who's key, who's critical, what do they do? And then I go talk. If they let me talk to the next guy, I asked that guy who's key.

[00:51:27] He's critical, right? And and it's important because, I've seen Caser where the ce, the CEO didn't realize how critical somebody was. I would agree. 

[00:51:35] Kevin Moyer: I would agree hundred percent with that. Hundred percent especially when you're in larger organization. Right. I mean, the CEO e o probably below his direct reports probably doesn't have a really good purview on everybody else.

[00:51:44] even comment to honest. 

[00:51:45] Ronald Skelton: Yeah. I actually, I work for a. One of those tech companies. I'll tell you one of the VPs I worked for, he could, he, he could have left it any second in the world and nobody would've missed it. Hi. His tech guy that set beside him and worked with him and went to every meeting with him was absolutely critical to having that place run.

[00:52:01] Yeah. Like that guy knew his stuff. Like even my team and myself, we would call him when something on our side, Hey, we got this here, X, y and Z's going on. we've spent the next 10 minutes on it. Could you come log in and have us take, help us take a look at it, right? Sure, sure. But, the VP could have disappeared off the place of the, I won't say where it was cause everybody knew who I'm talking about.

[00:52:20] But, and I don't know if he's even employed at the moment. I looked at his res or his online thing the other day and it looked like he was looking for something. but. That said, a lot of people just don't realize that. You just don't realize, even this guy, that particular guy didn't wanna be anything but a lead assistant engineer.

[00:52:33] So that was his title. He didn't wanna be a director. He didn't wanna be a manager. He liked fixing broken stuff, right? sure. And he could fix broken teams or broken, software or code. So, but he was absolutely critical to the glue, to that place. hundred 

[00:52:45] Kevin Moyer: percent. we see that quite a bit.

[00:52:46] you'll see the, again, you'll see like you said, the VP or the hierarchy in titles. but the reality is two steps below is who's really running the show and who really, if they left, would 

[00:52:54] Ronald Skelton: be detrimental. Yeah. Cool. Well, I think we're running tight on time here. Let's talk a little bit about more what you're, what you've got going on, what's coming up in the future.

[00:53:02] how do you want people to reach out to you? this is your chance. I really encourage you to make a pitch here. So, you got something you want people to come to, you got a particular customer you're looking for. This is your shot to tell us who, the world, who you are, what you're looking for, and how we can be a service 

[00:53:15] Kevin Moyer: to you.

[00:53:16] No, that sounds great. So, I would say for us, we are heavily focused on the lower middle market, that could be either private equity backed or, family backed, founder own, et cetera. That is kind of the niche we've carved within our practice. again, we try to be a Swiss Army knife to the extent we can, right.

[00:53:30] We, we are a diligence focused group. So when you think of quality of earnings, you think of, again, operational or commercial due diligence. I would say that's absolutely kind of our expertise, kind of dovetailing that into integration, divestiture, SMO planning. but again, we've, we have a great team of professionals.

[00:53:45] The majority of the team, like myself, are former big four, former private equity. We've been in the trenches on a larger deals and we kind of understand also the nuances and have the empathy, to, to work in the founder own community. I personally really enjoy working with startups. I know a lot of, a lot of firms shy away from that, but, To me, there's nothing more exciting than working with an entrepreneur who has a great idea and wants to see that idea come to fruition.

[00:54:07] so I would say re for me, reach out certainly via email, via phone. I believe Ron, you'll probably post that information somewhere, but always a phone call away. I try to tell my team consistently that, our clients are why we're in business and we have to do everything we can to try to provide that kind of white glove service, irrespective again, whether it be a private equity fund or otherwise.

[00:54:25] Ronald Skelton: Awesome. Well, I appreciate you being on the show today, and we'll thank you for having our show. Awesome. Hang out for a second afterwards and we'll call that 

[00:54:31] Kevin Moyer: the show. That sounds good.