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Ronald Skelton 0:06
Hello and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling
Hi and Welcome to the How to exit podcast. Today I'm here with Jacob George. Jacob is a strategic adviser and investment banker, founder of George and company investment bank that's headquartered in New York City. A with a strong global presence and experience in executing cross border transactions, George and company provides clients access to global platform to acquire companies divest assets or raise capital. George and company has experienced advising companies in the technology, software, aerospace defense, industrials, healthcare technology and food and beverage sectors. Welcome, thank you for being on the show Jacob. I'm really glad to have you here today.
Jacob Geroge 1:11
Thank you so much, sir. Really appreciate the opportunity to be on your show. I'm looking forward to our conversation.
Ronald Skelton 1:16
I think I just said a new milestone. I think I got your name right. And I didn't butcher something in the intro, I actually got through it pretty smooth. I think there was one hiccup there. So I always joke around, you get an omelet. If you're watching this, you're getting a live raw, raw, uncut, I don't believe in editing anything too much. I just want to give organic conversations with people. With that, let's just start with kind of your origin story. I like to joke around and say, hey, you know, you were born and then someday you ended up here with me on a mergers and acquisitions podcast. How did you end up here?
Jacob Geroge 1:45
You know, had an interesting path. You know, my family, especially my dad is very much an engineering person grew up wanting to be an engineer, right? And then went to a magnet school for electrical and computer engineering. And somewhere I would say sometime in high school, I was like, wow, I really don't see myself doing this. For the rest of my life. I love technology. I love creating new ideas. But I don't see myself being an engineer for the rest of my life. Right? And I, on a whim, I said, you know what, I'm gonna do pre med, I'm gonna go to med school. That didn't work out so well. A 2.6 GPA in my first year of med school, and I was like, you know what, it's probably not for me, I don't think people really want me treating them. So I said, Okay, you know, I'll switch to finance. And, you know, the motivation to go into finance was really simple. I liked investing in stocks, right, I would sit next to my dad, my dad would be working on his retirement fund, and I just didn't like investing into stocks. And it was that simple, right. That's why I went into finance. Had zero clue about the different areas of finance, you know, corporate finance, investment banking, equity. REITs, I knew none of that at all right? I just wanted to do stocks. And it's a and then, you know, my brother is who's two years younger than me, he gets the college, goes into finance, watches a movie called Wall Street Money Never Sleeps. And he comes home. He's like, Man, I want to be an investment banker. Right? And I was like, okay, cool. You know, what does that mean? And then I remember, I was doing a lot of research, I was like, this is really, really cool, right. And one of the things at that point that happened was that I realized I was still very passionate about technology. And at the same time, I was very passionate about finance and deal making. And I found that m&a or investment banking was a way for me to bring both those worlds together. And you know, I went into investment banking. I, I'm from New Jersey, I was born in New Jersey. I grew up my entire life here went to Seton Hall University, Biggie school, and so not a not not a target, right for investment banking. Not at all, you know, I was not heavily recruited for the Big Four or anything like that. You know, I had to network and fight my way into Wall Street. And once again, that intersection of technology and investment banking came into play. I remember I found a list of A to Z investment banks boutique investment banks in New York City. Started calling them one by one and I get down to affirm the Bs, and they do process control and test and measurement and technology stuff that I grew up doing. And you know, I picked up and I didn't say I was a finance student. I said, Hey, you know, I am a finance student. But I've done process control. I wrote software I I develop hardware, and he was like, Oh, wow. And invited me in for an interview and ended up working there for a few years, all based on the fact that I understood technology. It was less about investment banking, right. And then as I got a little bit older, I realized that I wanted to be more in charge of my deal process. I wanted to source deals. I wanted to manage the entire m&a process. And I wanted to negotiate and, and I wanted to be a big part of the m&a strategy. And I decided to start George plus company. And here we are, it's been five years, and we're growing. And I'm excited about where we're going as an organization.
Ronald Skelton 5:18
Awesome. Now you say on your description, you guys do a lot of stuff with international. I know, we talked before the show, you're also very into sustainability. And that's a very hot topic right now. How does that come into play in the mergers and acquisitions space?
Jacob Geroge 5:35
So Ron, you know, sustainability is just being thrown around. Right? The essence ESG. Right. And we are seeing now that the financial world, the investment world, has largely trended towards, I would say, putting up premium on companies that are sustainable. Now, I am by no means an expert in sustainability, right. I simply know that from a strategic standpoint. Companies that are sustainable, demand a premium. And, and I think that is irrespective of politics, right? I believe whether there's a Republican in the White House, or whether there's a Democrat in the White House, I think that this is now no longer a trend, I believe it's the way of life for most companies. And, you know, especially in the world that I work in, sustainability is actually probably a very, very big problem. Because one from the financial side, I believe that private equity investors, I believe, family offices, institutional investors, the LPS that are funding, private equity funds and GP's, they are now looking for sustainability metrics as part of their due diligence. Right?
Ronald Skelton 6:52
So before before we go too deep into this, define what sustainability is in the concept of this? Is it just like, if I produce coffee, and I sell coffee pods, I use a reusable or a environmentally friendly container? Or is it just you know, buying carbon offsets or all of it?
Jacob Geroge 7:15
It's a combination, right? So there are obviously the things that happen from a physical nature, right, you know, natural environmental things. That's one and of course, within your company as well, right? So you're, for example, lithium ion batteries, right? You can mine them in a very sustainable way. Right? Or very unsustainable way, right. So as an organization, you have to think, you know, if I am not mining the lithium for my lithium ion batteries in my electric vehicle, how will I be perceived five or 10 years from now, when it is a very important thing? That's that's really what it is about. Okay.
Ronald Skelton 7:55
That's a very good example, if you've ever seen what those mines look, it's, it's just open like Grand Canyon and the ground. And you're, you know, most mining in most countries released here in the United States has high requirements for restoring land back to a usable state. But some of these countries that you know, these guys are going out and buying lithium for the batteries and other precious minerals don't necessarily have those and I can see where sustainability is like, look, even if they don't have them, we're going to do what's right. You know. So,
Jacob Geroge 8:29
You know, you know what, the thing that I think you'll see is that industrials, manufacturing technology hasn't caught up yet, right? So you're going to Costco, right. And don't quote me on this, but I believe Costco when they sell a piece of fish, in Costco, it has to be sustainably produced. Right, whether it's farmed, raised or wild caught, it has to be sustainably produced. They're not going to buy fish from suppliers who go deplete resources in Southeast Asia, right. So it's food and beverage has been there for a while they've focused on sustainability. I think industrials and manufacturing and technology just has not caught up yet.
Ronald Skelton 9:09
Did you think there's going to be like a stay up or something for products and food services and other stuff that shows you it's sustainably produced? Like, you know, kinda like organic is and as your United States if you stamp something organic, there's supposed to be some level of oversight to prove that it's organic. Like, if you think there'll be some type of like national or international seal for this was done, you know, environmentally responsible?
Jacob Geroge 9:36
No, but I'll tell you where we're going. I think was last week, the SEC came out and said that publicly traded companies are going to have to within 60 or 90 days speak about their ESG their sustainability. They don't have to report it on the 10k right, so here we are. We pay millions of dollars as publicly traded companies to get our financial statements audited, right. You now need to put into your report that goes to the SEC, along with your audited financial statements. Report on your ESG. Right.
Ronald Skelton 10:08
Jacob Geroge 10:09
So now what's gonna happen is m&a is going to dictate that stamp of approval. Right? So so now I am the world's largest industrial Corporation. Let's just pick for example, Honeywell, right? I'm Honeywell, I'm in oil and gas technology very heavily, which is a problem in itself, right? And then, but now I'm making a small acquisition, I'm not talking about a big $200 million dollar acquisition, I am buying a small technology company based out of the northeast area, or the Bay Area who is only worth about $5 million, but it's very critical to our growth going forward. But the key component in there is a rare earth mineral that is unstable, unsustainably produced somewhere else. They have to report that on there 10k, right. So I think now bigger corporations are going to start putting pressure on small to medium size, middle market businesses say Hey, guys, I'm doing all this due diligence that we've done before on on finance, accounting, sales, marketing, operations, legal, but you know what sustainability is important.
Ronald Skelton 11:13
So one of the Yeah, one of the things that brings up is for our our typical audience, which is kind of the buying companies, acquisition entrepreneurs buying companies that are about 1 million in revenue all the way up to about $20 million revenue. We call ourselves acquisition entrepreneurs, and we kind of operate right under that PE PE. Like, where they're targeting their private equity and strategic purchasers or are looking because we're wanting to buy these and grow those into selling it to that, that customer base. Now the issue that that brings up for us is, now we have to be concerned with that and have that in our deal room, what our you know, our sustainability, because anybody that's acquiring us, that's larger public, you know, potentially a strategic purchase, where we're gonna get our highest multiple, they're gonna need to know that as part of their due diligence as buying us because they have to report it on their paperwork.
Jacob Geroge 12:05
Let me let me let me paint this picture for you. Right, so it's about two to three years from now. The SEC regulations now are in full effect, right, and you've got a technology company that was built out of a research university, right? So they started making a product, right, they probably don't have audited financial statements, their sales and marketing policies proceed, nothing is in place, right? The first thing in their mind when it comes to a due diligence, or even maybe professionalizing, their business is going to how can we get our policies for sales and marketing, finance and accounting operations, legal and HR, none of them right now are thinking about ESG and sustainability, right? None of them. So it's going to be a shock when two to three years, maybe five years from now, you're ready to exit your business and you go, the due diligence team, or the m&a team from some large multi billion dollar company comes in says, Hey, what have you guys done in terms of ESG? They have no idea what that word means. They've got no scores, no metrics, no records, no nothing. Right. And that's where, you know, we've been trying to build awareness of, you know what, you guys need to start thinking about it now. I'm not saying that it's going to be easy to transform your business, but you should at least have a plan in place to make that transition into a sustainable lead compliant organization.
Ronald Skelton 13:26
You know, I see it starting to pop up here a lot. I know investors who I have worked with, it's that's what they're looking for, they're looking for that ESG component, or companies that, you know, do really well in that some of them refer themselves investors in that space. But you do some stuff internationally and help people do stuff internationally. Is there any countries that are really way ahead of us on this? And they're really readily critical on it?
Jacob Geroge 13:55
You know, I would, right off the bat, right, the European Union. Right? I would say that, when it comes to any aspect of ESG. Right, when it comes to the governance and the social aspects of it, and then mindfulness, the European Union is, is, in my opinion, far ahead of everyone else. But, you know, I think it'd be important for us to discuss in a bit is, what do we do about the additional cost that is incurred by having to transition your supply chain over to sustainably compliant competence or, you know, inputs, you know, what, like, you know, Europe is the leading is the leading place for such things.
Ronald Skelton 14:37
You know, the interesting thing inside of that is if you're running lean, like say, you're in a commoditized product base, and you've been competing on price for a while, and now this movement comes forward and says, you know, ESG is important, and you have to have sustainable resources. It's kind of like I'm imagining that sustainable resources are and I I apologize for being a little bit ignorant on the subject and I'm well I have to admit that, but I had imagined that they're like organic resources, meaning they're going to be a little bit more pricey. So you price yourself into a commodity, you know, producing a commodity, you know, you're competing on price, because you know, you're big enough to do that. And now you need to change your sourcing around to be something sustainable, that you know, very likely is going to come at a premium
Jacob Geroge 15:22
It is going to come at a premium. But I think it's very important for us to understand that this particular conversation is happening in a vacuum, right? We're talking about sustainability in a vacuum, because the, because people don't understand it, right? It hasn't gained full traction yet. Sustainability impacts a lot of things, it didn't clap, it impacts your suppliers, it impacts your customers, it impacts the transportation and logistics surrounding your product. Right. So you can't simply say, you know, what, I want to be a sustainable company and do all these things, you know, you went price yourself out of the market, right. And you might cause a lot of damage to the total supply chain. Right. And I think it's going to take time for that to build and, and come to a point where I think sustainably compliant products, or services are close to what's traditionally been sold and, and provided.
Ronald Skelton 16:25
I get that. And I just I'm really kind of kind of stuck on this topic of, you know, we're taking a shot. There's part of me that says there's a there's a misaligned here's where I'm going with this, I guess there is a misalignment with consumer sentiment, like this socio social economic component to where society needs, you know, at the consumer level, and I've been talking about that commodity product consumer level, guys buying coffee on a daily basis that would never pay for a premium blend. Or they're not buying single, like there's there's a lot of stuff going on in coffee right now about being single source, being, you know, sustainable, treating the farmers, right, all the different stuff that's in that space. But you still have, I would say the majority of the consumer market buying Folgers or something else off the off the shelf. And they just don't care. They want to drink what they drink, and they want it to the most affordable price. So how to, I'm wondering when that shifts gonna make because I think before some of these commoditized products can really get into this, that consumers just have to understand that, you know, or buy into the story that this is important.
Jacob Geroge 17:43
Yeah, it has you're 100%. Right. Right. It cannot be supply side driven. It has to be demand side driven. Right. I believe that over the next, I think in the industrial market is a little different. I think I think people see the value of it, because a lot of the competence and inputs in manufacturing industrial technology is rare as it is right now. Right. So I think they're a little bit farther ahead. But on the consumer side, you're 100%. Right, sir, it's it, the demand has to drive the shift. And, and I think that as more millennials grew up, and, you know, their tastes are well, much different from my generation who grew up in the 90s. And, you know, older than that, as they grow older as they get purchasing power. And as they prefer these sort of sustainable products. I think you'll see the change happen in the consumer side of things. And I think that's at least, you know, 10 to 15 years off.
Ronald Skelton 18:42
Yeah, it's interesting. I mean, we're all business owners ever listen to this. We thrive on the consumer knows consumer realism, I guess you want to say what's the word I'm looking for, to just our nature, especially here in the United States that every problem has a solution you can buy, you know. To where, there is a shift now where, you know, do it yourself, fix it, fix things, repair things, don't just toss them away. But uh, you know, I'm 50 I just turned 50. And in my lifetime, it went from everything was, you know, single use throw away, like, you know, I remember times growing up where my parents just didn't want to do dishes and bought either just, like anytime we had more than five or 10 people coming over for a barbecue. It was we had the dishes for it. We but it was paper, paper plates and plastic cups in the 90s. Right. And we went from that, you know, that's not so much okay anymore. You know, I have a friend who said he went to a barbecue he was actually posted all over a lot. I went to a barbecue and they were using Solo cups. He was just so frustrated. He knows they like they know I'm an environmentalist. Why did they invite you know invite me. And I was like, Okay, well that's you but there's more of that going on now. So I'm curious on this shift, you know, and really curious on The international impact of it just because, you know, we live in, in a very privileged state, you know, the United States. United States is just, it's just a different beast of its own. We're pro consumer, we're pro business. And, you know, but you go to a lot of other countries, especially anything that I hate the phrase, I don't know, a better phrase for it, like third world, low income countries, and where they're just trying to the businesses there are a lot of them are just trying to get by. And as this as the spreads, anything that happens here, anything that happens in Europe eventually makes itself and kind of pressures the rest of the world to do it. I'm just curious on the impact to economies and environments where they're just doing their best right now to to, to get by.
Jacob Geroge 20:48
You know, it's I wasn't born in India, I was born here, the United States, right. And but I've had the chance to go back to India a number of times, and of course, my travels, my work allows me to travel quite a bit, and see different areas of the globe. It's an interesting point you make, but I think that there is a solution for it, right? I think that the world as a whole, yes, it's gonna make a massive impact, right? Let's agree on that. Right? This sort of sustainability shift is gonna have a massive impact on the world around us. Right. But there is an intersection there, where I think that people really need to think critically about and and put into action. One is that some of these poor third world countries are very natural resource rich, right? We know that about India, we know that about Southeast Asia, we know that about Africa, right? And to be honest with you, even South America has some incredible natural resources, right? In these areas, there is a majority of the people are living very close to the poverty line. Right? So I believe the world has to come together in some form or fashion and figure out how can we uplift the economic status of the people in these countries? By allowing them to be manufacturers or producers of sustainable goods that now the first world countries can use? Right, would solve a lot of issues, I think.
Ronald Skelton 22:14
I think I'm the rare business guy who just doesn't understand how can you know, how can a diamond my mind in South Africa, be in a community where the people are barely making it, and that diamond mind is producing billions of dollars and that's okay. Right, I just don't understand that in my realm, I get it, I understand. It's the corporate greed, or whatever you want to call it, you know, greedy capitalist pig mentality. And I joke around and call myself a greedy capitalist, capitalist pig, the I don't think I could do it, I don't think I could actually buy a diamond mine. And, uh, you know, South African, or wherever they happen to be community, and have essentially slave labor barely, you know, barely doing the work, I just, it just does not make sense to me. And so I like the sustainability movement, I see it making a difference, I see that, you know, all of us as acquisition entrepreneurs, need to at least be aware of what it is. And if you have intentions to ever sell one of your entities to a publicly traded, you're almost going to have to deal with it, right. And if you're gonna ever want to get the highest value out of yours, you got to remember these strategic acquisitions and the publicly traded companies that are buying you, even some of these family offices, they're looking for this now. So the guys that would pay you the most just, you know, pretty much everything other than a sole operator, you know, is gonna take a look and see how you how you handle is your the ESG side of your, the sustainability side of your business. And the the environmental and so I get I'm gonna display my ignorance is environmental, this sustainability, what's the G stands for?
Jacob Geroge 23:54
Ronald Skelton 23:55
Jacob Geroge 23:56
It's actually I believe its environmental, social and governance. And I believe sustainability is a piece of environment.
Ronald Skelton 24:01
Environmental. Okay. So I'll just admit that I don't know what the acronym was. I know what the concept is. I like I said, it's interesting. You said it's bigger in Europe, because the two or three investors I was telling you about that, like they tell everybody there is they buy companies with ESG components, and that's what they're focused on. They're all in the UK. Right? They are in that area, they travel that area, and they're big on that. So I can see why because they're ahead of us probably four or five years. It sounds like.
Yeah, that's that's accurate. That's accurate. Yeah. They actually, you know, the European Union actually funds companies that are progressing on developing technology for this area.
So let's just go back to the international side of things just because I haven't had any to be on the show that does a bunch, I've had Sebastian on here, which mentors do an international deals and stuff. But what are the differences between, like cross border m&a, and when you're going through the process from an investor's bankers point of view, what do you look at differently if I was going to buy a Is this to come to you and say, hey, I want to buy, I don't know, just throw something out there, I want to buy 25 to 100 of this business in history history, roll them up. And I'd like to work with you guys didn't back me as a thing. What's the difference between doing that here in the United States, and then me telling you, hey, I'm going to do 10 of the United States, 10 of them in Brazil, 10 of them in, you know, Europe. Like, other huge requirement differences, as far as the due diligence and all the stuff that goes along that,
Jacob Geroge 25:31
I would say that it's it's less about the due diligence, but more about the perception of the company in three key areas, right. Culture, culture, culture. Listen, I can't stress this enough that each individual country has its own cultures. And sometimes that could be within very within the region itself, right. And I'll go back to Brazil, because Brazil has been a place that I worked in for a long time. And we have investors in Brazil, who won't touch the rest of South America. And then I have investors who sit who have spoken to a long side, the coast of the border of Brazil, who won't touch Brazil, why? Because of the massive cultural differences, right? I've dealt with potential Asian acquirers before, and they are very slowly it's very methodical, it's very calculated, right? It's not just hey, here, we're interested, here's an offer, let's buy the business. It takes six months sometimes to bring them around. In India, they're going to negotiate hard, right? In Europe, the culture is a bit more punctual on time. Americans and Americans in North America, I believe, are a little more flexible when it comes to these sort of cultural things. Because of kind of the the diversity, we have diversity of thought we have in this country. But every country is different culturally. And when you go to do m&a in there, you must understand that culture first and get a plan to work through it.
Ronald Skelton 27:01
It's interesting, I, many years ago, before I even got into m&a, we were looking at buying a business in a tropical I won't say where just because the laws have changed since then, it was a very corrupt area. And I'm gonna say something about about the area and it may not be even true anymore. But this was a kind of resort, we were looking at buying, we'd raise money for some investors, they said yes, we were starting to do the kind of due diligence on the it was a very large kind of bread and Baptists type of resort. Matter of fact, when the cruise ship stopped nearby, the the city would say, Hey, if you want to stay in town, stay over here. And when I was reviewing their books, it was like, there was a lot of stuff on the end, there was a considerable figure that was gifts and other expenses. And so I got the owner on a private call, and I said what is gifts and other expenses? He goes, Hey, we're in so and so. So it's a South American island. And, and I was like, okay, yeah, he's like, if you want to continue having the cruise ship, bring their tours by and have, you know, the cruise offer you're like the resort actually had fishing guides, they had dead gifts that could take people fishing on like, you know, the reefs and stuff catch Barracuda and stuff. Anyway, it was a pretty good little business. And he said, You got to pay this the local the equivalent of a sheriff they call him a constable or something like that. Or Hispanic work Spanish word that means that but basically the local sheriff, and the local mayor basically got a monthly stipend of gifts from this, this resort. And that's because whenever there were city town councilors or something and they were like, working deals out with the Carnival Cruise Lines, or the other cruise lines that stopped at the one giant pier that's there. For the cruises to stop. They would say what's on island for the people to do. They would pitch your stuff. So they if you wanted them to stateless, so I was like, Okay, you're bribing officials? Oh, no, no, we don't call it bribes here. Yes, that's just not you know, it's not a bribe, that's a negative thing. This is just how we do business here. And there's a lot of cultures where gifting as they call it, is culturally acceptable and normal. And to where us here we would consider that, you know, shady, you know, you know, matter of fact, that wasn't the only shady thing that was going on. So I backed out of the deal. But I didn't necessarily want to own a business to where I constantly, you know, they elect a new sheriff, I have to worry about how he's going to handle and how much he wanted. And, you know, all that was just that it was just a game I wasn't ready to play. Or those are the cultural differences you're looking at, as you're just I mean, that's just one of them, right?
Jacob Geroge 29:40
That's just one of them. And it's really about how people are right. It's about what makes them go how they think about life. You know, it, you know, m&a, I would say is 90% psychological and 10% technical, right.
Ronald Skelton 29:58
I 100% agree And so many people miss the human side of this, right? They go in and like, show me the numbers. I've had people they Hey, will you help me get on the first call? I'm just wanting to I want to buy a business, will you? Will you get on the first couple calls with me? Like, okay, I've done a few 100 of these calls by now I'm comfortable. And I said, first thing I always tell them on the first call is just report. All we're trying to learn from the seller unless there's a broker involved. And that changes the dynamics before talking directly to a business owner who's thinking about selling. All we're wanting to do is figure out what their motivations are, build rapport with them, and figure out where they want to get this the first call 35 to 45 minutes, let's just figure out where they want to be. I've been scheduled for an hour, but I've shifted my mindset, it's just too much. What happens is when you build when you're done out of building report, and you figure out where do they want to go and schedule for an hour, you start almost going into your pitch there, you're not ready to do that. But I would say most acquisition entrepreneurs operating especially the new guys, like myself, that's only been doing this for two and a half years, we're operating off of being trained by mentors, reading everything we get our hands on, maybe we got some college education behind acquisitions and mergers, you know, running a search fund and stuff and, but it's about like, make sure the numbers are good, make sure the legal stuffs good. That's all needed. But if you don't have the human aspect of this done, you're not getting to the other side of it. And I'm a firm believer that I did real estate for years all the time. And somebody says like, Well, how do you buy so many houses, I was like, I get to know the owners and work with them. I've had people sell me houses for 567 $1,000 cheaper than the highest offer because they liked me and I was little you know, I sit down and listen to him and figured out what's going wrong and no help remove the fear and help them get to the next level of where they want to go. And my offer was cheaper than the others, but they chose me anyway. And that happens constantly, right? In the mergers and acquisitions space, I would say that most businesses under that's not publicly traded, that are say under the $15 million $20 million revenue Mark, I would say there's a majority of them that don't sell to the highest and best offer, they sell to the offer that meets the most needs of this the sellers, right. And, you know, that includes like legacy. Cultural, like we you take care of my people, we take care of my brand, my name, like there's some, there's an ego attached to the to the business, there's an identity attached a lot of entrepreneurs to tie their identity to it. So, but I think a lot of us miss that a lot of mergers and acquisitions, they jump right into you show me the numbers, I want to see if this is a profitable business.
Jacob Geroge 32:31
You know, I for for us, we because of the size of deals that we're working with, and, and some of the engagements we have, I need to approach it as not, not just a it's an asset, right? It's human capital, right. And I have to have a personal connection with the person. And, and I try to make it a point in the way that I conduct myself. And my organization conducts itself that that there is empathy, right? There's compassion, there's an understanding of their issues. And there's two ways I address it. If it's an older owner, right, who's looking to exit, it's pretty clear cut, right? He wants to exit the business fully. A lot of times, he's made emotional attachment with his employees, and the location. So we asked him, What are your concerns around these things? Right? What do you want me to prioritize in the m&a process with the prospective acquirer when it comes to these things, right. And secondly, when it comes to a key employees in the organization, almost immediately, right off the start, we're asking them, hey, what do we need to do for you in this deal? Right? You're critical to this deal getting completed, the new owners, or the new acquires are going to want to know that you're engaged, what do you want? What's going to make it worthwhile for you? What's gonna make you happy? And also, what do you how do you want your career to look? So we go through a couple of these things to build that relationship and build that connection. And I'd see that it really does help to do quite a bit.
Ronald Skelton 34:07
I get it. And if you miss that component, I'm a big believer, like, nobody cares what you know, until they know you care. And no, that's, don't quote me on that. I've read so many books, I stole it from something I've read or heard. But I really believe that I really believe that until you build that rapport, that bond people trust you. And trust is made through communication most of the time, right? It can be made over years, and it can be destroyed in minutes. But you can start build rapport on call one just by you know, listening. I know if you had a chance to catch it, but I actually have one of the coaches from the Black Swan group never split the difference. And they talked about tactical empathy and report building. And if you look at like how they defuse, you think about you know, most of the guys in the black swan group that coaches were actually FBI hostage negotiators to start with. So the guy I had on the call, Derek was an FBI, hostage negotiator. And if you think about it, what he's selling, is, you want to get out and be free, and I'm selling you 20 years in jail, and they have a 90 something percent success rate. And I asked him about that, like, how does that true, and he says, rapport. We get in, we listen more than we speak, we figured out what they're trying to get to, and then we, you know, we, we show them a path that, you know, keeps them alive. And usually that ends up in 10 or 20 years in prison. You know, I don't know that I could sell 20 years in prison to somebody who's desperately trying to do something else. So, you know, I really, I really think we ought to lean into, like, how do they do that? How do they pull off? You know, work on that? And how can we apply that inside of other aspects of business? And it really comes down to the human aspect of it. The understanding where that person is trying to get having them felt heard and understood, and then then coming up with a solution that makes sense for both parties.
Jacob Geroge 36:02
Is absolutely, absolutely.
Ronald Skelton 36:04
So if somebody was wanting tonight, and I operate in a in a space where we do a lot of you know, situations where we're trying to do, like, get the owners owner finance, where I've got investors and stuff like that, that'll, you know, tie up money with mine, and help me put in and things. I've also got a, you know, other ways to do this, but I've never actually went to the investment bank route. And a lot of the guys, you know, listen to here, probably the same thing. What is the route to approach an investment bank and say, here's a project I've got, here's what we're trying to do. What what type of deals do you want to fund? What are you looking for?
Jacob Geroge 36:41
So let me let me go to step back, let me go to the first part of that. Right, and how do you approach an investment bank? Right. And I would say that the, I think you should interview investment banks, right? I think that the investment bank, and the potential client should be on equal footing. And I really believe that you should one, explore whether or not the investment bank is a subject matter expert on the area that you work in. Okay. And I, that's number one right. Two is, do you do they have sort of consider it? Does the investment bank have consideration for the not the intangible things like, you know, key employees, keeping the employees location, personal wishes and desires and dreams and, and legacy? Right? If so, if you've got a good industry fit, and then if you've got a good sort of intangibles, they they handle all the intangibles well. Then I would say you should proceed with, you know, with working with that organization. Do not prioritize some sort of evaluation that they gave you. Okay? Because I'll be very honest with you, there's, I can pick a number that is higher than any other valuation out there. And I can defend that number to death. Right. And I think that secondly, they can also tell you that we'll do it in X amount of time, right? And it doesn't matter, right? An m&a deal is going to take the quickest it will take is probably 45 to 60 days, right? Nothing shorter. And the longest it takes nine months now. And I don't know pick an investment bank on what they tell you about valuation and pipeline.
Ronald Skelton 38:28
Yeah, I know, a lot of people are like, I need this, you know, the seller thinks he needs to sell within 90 days, he's got a medical issue or retirement. I can't go down the investment bank that takes 12 to 12 to 24 weeks. And I was like, yeah, that's not necessarily true. You probably call more investment banks. There's somebody out there. I'm a big believer, I don't know if I'll ever have you on the show just because of his his mouth. But I like Dan, I think, Pena or whatever, he's on YouTube, a lot of classes crazy. But one of the things he said is there's always somebody out there with the money that will believe in your project. He's much, I'm very, very much paraphrase of this, dropping all the four letter words out, and a lot of the vulgarness out of it. But basically, you know, he says, if you've got a concept, and it's valid, somebody out there will fund it, you know. So I believe that and I'd like I said, I've never ventured into the investment banks, the realm. So if what would we bring to you? What would be the you know, if I came to you today and said, Here's a project I want to work on. Does this excite you at all? You know,
Jacob Geroge 39:32
Jimmy for us is George plus company are you mean generally the investment banking was start
Ronald Skelton 39:36
with you, we'll go with for like, what do you you know the industry a little bit. So what would you require? How do you find your deals, you source them yourself? You go out and find somebody and say, Hey, I'd like to work with you, or do you have people coming to you?
Jacob Geroge 39:46
So we have a bit of both, because we're still a young organization. A lot of it is external business development. We are targeting companies that have some that are mainly industrials manufacturing technology, right, but have something unique to it. For example, I don't necessarily want to represent a company that makes copper fittings, right, that gets sold for the millions at Home Depot, right? That's, yes, it's technology, but it's commodity based technology, right? The line I draw, do you have something unique, a unique value proposition, whether that be your knowledge base or your your end applications? It doesn't have to be patents and trade secrets and intellectual property. It can just be that I know how to do something better than someone else, right? That's where we draw the line. We want to work with technology companies, whether that be soft or hard to Tozzi. Where there's some unique value proposition when it comes to the core product, right? So that's number one. Secondly, I don't care about region, I, you can come to me from any region, and I'll take it on. I don't care about revenue so much. I would say, you know, 1 million, like you said 1 million and up, I'll start looking at it a sub 1 million is really difficult for me. Honestly, sub two is probably difficult for me. Two and up we can start working on it. Third, profitability is important. But it depends on what type of company you are, right? So if you are a company that's generating 2 million in revenue, and you have negative profitability, because you're plowing all your cash into new development, I'm good, right? But if your company is three to five years old, and you've been doing 2 million every year, and you have negative profitability, because your gross margins are below 50% or 40%, then I'm probably not gonna touch it. Right. So those are kind of the metrics that I look out. And then I would say the, the third piece of all this, Ron is that I, I want to be comfortable in doing this transaction, right? Not that I want to have to know every potential acquirer were able to do our research, but I want to be able to speak about it intelligently. Right. I want to be the best advocate for the owner for the executive or the entrepreneur and, and so I tried to take on deals where I can offer some value for them in that in that aspect.
Ronald Skelton 42:11
I got him so and you think that's parallel with most of the investment banks that are out there? They're gonna want the similar things?
Jacob Geroge 42:18
Yes, I believe so. But obviously, you're gonna look at different ranges. For example, you know, an elite boutique like Houlihan, Lokey or Morales may not necessarily come down to our level. But at the same time, I think they we all operate a tiny bit differently. But generally, everyone's looking for things like that.
Ronald Skelton 42:38
And what would be the upper range? What's the biggest deal that you would be willing to go out and raise capital for and help fund?
Jacob Geroge 42:45
There is no upper range. I will not turn my back on larger deals. Larger dealsa are obviously, there's a smaller set of people that can afford it. But easier to defend, right? And I think I wouldn't, I mean, listen, we're working on an acquisition mandate now for a company that's got about 1.7 billion of revenue. And, you know, it doesn't matter. And at the same time, we're working with companies that have 10 million in revenue, so it doesn't bother us, we can go larger school.
Ronald Skelton 43:14
Okay. One of my favorite questions always to ask is what is one myth inside of your industry or profession that you believe that it just shouldn't be out there, and you need to debunk it right now?
Jacob Geroge 43:25
Interesting. A lot of people say that, you should, that you shouldn't hire an investment banker, right? Because it makes you look bad. It makes you look incapable as an owner. And a lot of that comes from the venture capital world, right? And so not as much in private equity, play, brokers, fees and things. So venture capital world, they say, Hey, you shouldn't come to us with the deal from an investment banker. I think that's, that's just BS, okay. I think that they want you in the room, and they want to work you over, they know that an investment banker is going to represent an advocate for the client and defend them and make sure that the valuation and the terms are adequate, and what typically is in the market. And, and I think that startup companies, high growth, startup companies needs to start thinking very wisely, and need to start pushing back against venture capital and saying, Hey, we're going to hire investment bankers.
Ronald Skelton 44:28
You know, it's interesting, and I'm going to tick off some of my friends. I have at least a half a dozen friends that own venture capital, friends, companies, and I'm going to, I'm going to say something derogatory. I think that totally comes out of laziness. And as humans, we're just curious, strictly lazy. It's a lot more work to negotiate and work on something when there's somebody on the other side that's as intelligent as you. It's the same thing is inside of our space, the acquisition entrepreneurs space. We often say, brokers and CPAs kill deals, so we want to, we want to source off market deals. And it's because we like to own or finance, the deals and the brokers are risk adverse. And there are a lot of people that won't pay those payments. So they just like to kind of just categorize everybody is no business should ever own or finance their business. And there's a lot of strategic advantages to it both tax wise, and, like, if you got a business owner who's trying to retire, and he's more worried about having $10,000 a month to live on, than he is getting a check and pay in taxes on a $2 million, you know, transaction, right, which is, you know, capital gains, and, you know, like, what did you do with the money? Where do you stick it, so now you've got a, you know, investment fees, and all the other stuff on top of it. Whereas, you know, if you want it if you if you're just trying to get that, because your financial planner suggests what you need to, you need a $2 million to, to retire. You're 65, and you want to, you know, make sure you got money until you're 95, you know. You need $10,000 A month to live on that. It's a lot more economically sound for a guy like me to go fine, I'll give you $10,000 a month until we hit your $2 million valuation. And, you know, which I think is a premium to pay for your business, because most businesses are overpriced, but I'm willing to do that. Because if we calculate interest into it, so I've come around that anyway. And now they're paying income tax or, you know, non capital gains on a yearly thing and their yearly basis, all their normal yearly deductions come out of that, you know. So,
Jacob Geroge 46:26
Yeah I agree. I agree.
Ronald Skelton 46:27
A lot of people say, you know, brokers will kill those type of deals, just because they're number one, they're concerned about who's gonna pay their their commission check. And number two, they're risk adverse, wondering, like, what happens if he doesn't pay and wasn't you know.
Jacob Geroge 46:40
There are bad investment bankers, and they're bad brokers, like, like any other industry is bad CPAs and bad lawyers, right? You got to find the right people to work with. Let's, like, not to brag, right? I'm not gloating. Right. When I go to bed at night, it's less about my commission's or my success fees. And more about if did I do right by that person, right. And that's the way I live my life. That's the way I run my organization. And everybody in my organization will align with that, or they'll be out. Right. And that's about it. Right? And so that's why I said, you know, you ask the question, how do you approach investment bank, interview them, find out who they're about, try to meet them and see what goes on, you know,
Ronald Skelton 47:20
What would you, if you were in my shoes, and you were thinking about, like, starting some big project, we wanted investment banker backing? What would be the selection criteria? What would you, I already know, you want to interview them. You want to make sure there's a personal match. And are there any other indications or any things you would look forward to say? Yeah, this is probably a good one to look for. Maybe not?
Jacob Geroge 47:41
It's a good question. Usually good people, run good processes. But if there was one more to think about, I would say, ask them to define their process. Right? We do we have a we have a process. Okay. Now, you You understand m&a? Right, Ron, it's never, it's never a straight line, right? Discipline is still needed, right? There's a certain type of documentation that's needed. There's a certain type of way to do due diligence, there's a certain type of way to be organized, right? There's there needs to be certain goals and objectives and timelines as part of the m&a process. So don't, don't pressure the organization or the the investment bank to give you a very hard, strict discipline process, but see if something is in place to guide their thinking, and that's how we operate. Listen, I have so many situations where I have to modify or be flexible with a particular part of my process or, you know, supply some additional documentation that typically we wouldn't have. But there is 75% of its covered by a process.
Ronald Skelton 48:47
So somebody on one of my Slack channels is watching this, and he popped up a question he really wants sent to me, I gotta ask this. So I'll ask you. John over here wants to know, personal guarantees when he when he fills out the paperwork to do all the stuff on any business with the SBA, that with the SBA back loans, which only go up to 5 million, I think in deals size. He has to personally guarantee everything and basically everything he exists everything he's ever touched and, and his firstborn child. He's wondering, is our investment banks as strict on that? Or are they more on the finances and structure of the actual company?
Jacob Geroge 49:23
So I would assume he's referring to private equity firms, right. The one investing in these deals? They are not, I would I very rarely have I heard about somebody looking for a personal guarantee from a private equity firm. What they are going to ask for, to see whether you committed is rolling over equity. Right. So, so say you're going to buy an acquisition, say you put in a million dollars or whatever it is. So you put in 10 to 20%, right? You know, when the transaction does happen, they're going to ask you to keep that equity in there and roll it over. Right? And not cash out fully, you know. But it's it's, it's important. So private equity is a typically infusing cash. SBA is primarily lending money, right? So there are distinct differences, but I would say the private equity rarely does parent personal guarantees.
Ronald Skelton 50:17
And then when you guys fund deals for acquisitions and stuff, are you raising money from private equity or private investors or using some of your own money? Or what is that?
Jacob Geroge 50:25
So we don't use any of our own money, right. So it's all we are standing in the middle, and we're trying to facilitate the transaction, right? We approach private equity. Depending on the deal, I always insist that the client also approach strategic acquires, right? You never know, right? Because it might be better to hold 10 or 20% of an organization that's worth 100 million, then then just go out there and sell it to a private equity firm and not get much growth. Right. So it's private equity, and its strategic acquirers. And occasionally, depending on the situation, we will work with private debt funds.
Ronald Skelton 51:04
Okay. Well, we're at the top of our madness, like, flew by I love this conversation. I love we talked about some really new stuff, like, you know, how do we start the process with, you know, investment banks, you know, where do they we talked about just now, like we're investment banks get their money from, you know, and helpful, you know, when they're helping line up deals and stuff. The other thing, the sustainability side of it, I think that's something that is a conversation we've never had on this show. And it's something that's overlooked right now. And I know for myself, I've got some interesting projects, I'm kind of thinking about sticking my toes, and that's why I brought up coffee, I'm thinking about buying some coffee roasteries, roasters, and from the subscription side, ones that are established and actually have people who order on a monthly basis from them. But that sustainability comes in their big time, right? There's a guy here in town, it's his run from his family owns the farm, raising the beans, his wife's family does, he brings them here to the US, he roast them and he distributes them. And so I'm gonna go sat well with him just to learn the industry. And the funny thing is, I don't even drink coffee. I love the smell. I hate the taste, but it's just an intriguing business because people are so loyal to it. But I'd never thought about the SD side of it. I knew that he had a component, but I didn't realize how critical it was because the whole point of me acquiring you know, kind of micro roast, roasting things is to have a brand that has a bunch of and then eventually exit it for something and I know for a fact in that space, if I exit it, I better have a whole like section of my deal room covering the ESG side of it or I'm not going to get the multiples I would you expect to get out of it.
Jacob Geroge 52:43
Listen, fairtrade coffee logo on a coffee bag in your place is just not good enough anymore.
Ronald Skelton 52:48
Jacob Geroge 52:50
It needs a lot more.
Ronald Skelton 52:51
It does. I appreciate your time. It's, it's like I said, we're at the top of the hour. Now how do people contact you and get a hold of you what's the best way?
Jacob Geroge 53:01
You can, best way to reach out to me on LinkedIn. It's obviously right below here. But they can also reach out to me via email. It's my personal email, my personal company email. It's Jacob, J, A, C, O, B at J, r, g, e, o, r, g,e.com. And we can start a conversation there and then zoom, Google meet whatever else we need to do.
Ronald Skelton 53:27
Awesome. I appreciate it. So for you guys that are on the podcast when this comes live on that his linked on LinkedIn is his full name. So we're going to search for him on LinkedIn, it's under Jacob, Ronnie, R, o, n, n, i, e. George, spelt normally J, A, C, O, B, R, O, N, N, I, E, J, O, E, R, G, sorry. G, E, O, R, G, E. I realize I did that. But make sure you put his full name in there, you'll find them. It'll be in the show notes. It'll be in the description of all the anywhere you watch this. But if you're driving down the road, and you get to your location, you want to connect with them. It is Jacob, Ronnie George. I appreciate you being on the show. We're cut out of time. I appreciate this. The last question we always end with this. What can myself or the audience do that to help you out man to help your business grow and help you succeed?
Jacob Geroge 54:16
Two things. Can I, can I say two things?
Ronald Skelton 54:18
Jacob Geroge 54:19
All right. So first one. Listen, we've got this new push in sustainability, right? And we're taking the m&a angle and I want owners and executives to think about where they are as an organization when it comes to sustainability and any future investment or m&a event that they want to pursue and and I'd love for you to reach out to me and we'd love to work with you on a consulting basis to figure out what needs to get done. And that's the first thing. And secondly, I would love any of your listeners if they are considering exiting their business and they feel they have some unique technology or product or whatever it is, and they're thinking about exiting the business, I would appreciate a call and see how we can work together and, and figure out how your future looks a lot brighter, whether that'd be retired or part of another organization.
Ronald Skelton 55:12
Awesome. Thank you, George, almost called you, George. Jacob. We just talked about this other just show that people call you by your last name. And I glanced up and did it. Thank you, Jacob. And I really appreciate you being here. It's been a fun conversation.
Jacob Geroge 55:26
Thank you so much, Ron. I really appreciate it. And I appreciate you allowing me to talk about some things that I'm passionate about.
Ronald Skelton 55:31
Awesome. I had a blast. Hang out for a second or two after the show. We'll chat and we'll end the show. Thank you, everybody, for listening. And that is the show today.
Jacob Geroge 55:38
Ronald Skelton 55:39
Hey, it's your host, Ronald Skelton. I want to thank you personally for watching the show today and invite you to call our new hotline 918-641-4150. That's 918-641-4150. Call us and tell us about our show, ask questions, suggested guests or even tell me about a business you have for sale and we'll reach back out to you. Again that number is 918-641-4150. Call our hotline leave us some information. Thank you. The investors and entrepreneurs professional mastermind. The investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind introduce first in Napoleon Hills famous book Thinking Grow Rich. With accountability partnering, where your peers help you ensure that you set goals take action and get results. If you want to scale blow past roadblocks and achieve success faster than you might think is possible, I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind.