In this episode of Cascade Conversations, Cascade Partners Managing Director, Jon Doehr, and McDonald Hopkins Chair Mergers and Acquisitions Group, Christal Contini, talk about the recent trends from both a legal and financial side of M&A transactions resulting from the pandemic, recent changes in the economy and news coming from Washington, D.C.

 

Video Transcript

Welcome to Cascade Conversations. Join the team at Cascade Partners and their network of trusted advisers as they work to demystify details, terminology and strategies in the world of acquisitions, divestitures and financings.

Jon Doehr – Managing Director at Cascade Partners:
Hello, I’m Jon Doehr, managing director with Cascade Partners, and welcome back to Cascade Conversations. Today, I’m here with Christal Contini, chair of the M&A group at McDonald Hopkins in the Cleveland office. And we’re here to talk about some of the trends that we’re seeing both on the legal and financial side of M&A transactions, as a result of the pandemic, and the recent changes in the economy and some of the things that are coming out of Washington. Christal would you like to say any more about your practice?

 

Christal Contini – M&A Group Chair at McDonald Hopkins:
Sure. So, McDonald Hopkins is a middle-market law firm. We represent primarily from an M&A perspective, buyers and sellers of businesses on the sell-side. We represent a lot of family offices, a lot of entrepreneurs, small family businesses, people who have spent their life building up a company and now they’re ready for a liquidity event to either sell to private equity, sell to a public company, maybe sell to one of their competitors down the street.

And then on the buy-side, we represent independent sponsors, private equity funds and people who are trying to make strategic acquisitions. So, definitely the full gamut and I’m excited to be here. So, thank you for inviting me.

 

Jon Doehr: Excellent! Thank you. So, as you can see, McDonald Hopkins is in the same playground that Cascade Partners is in terms of M&A. We work on transactions that are generally around $20 to $250 million in deal value, companies with EBIT between $4 and 25 million—so, playing in the lower middle-market, middle-market—and that’s why we’re excited to talk to Cristal today.

So, with the changes going on from the pandemic and from everything that we’re seeing in the economy, I know that the deal process has changed. The planning has changed. When is the best time to bring in your team when it’s pretty clear there’s going to be a transaction?

 

Christal Contini: As soon as possible. And actually, even when you’re thinking about doing a transaction, but you’re not really sure, that’s actually the best time. We can kind of have a conversation about what are some estate planning things you can think about, what are some things in the company you might want to do with a little bit of a lead time before you sell your business.

Oftentimes, we are not always there at the very beginning when this is just the first thought, the first moment when you start considering a potential sale. So, at the very latest, I would say, before the letter of intent. The reason for that is that is when sellers have the most leverage. That’s when they can really try to set the tone not just for economic terms, but for legal terms that could end up having an economic impact.

Indemnification is one of those key items, which is just a fancy legal word for “reimbursement.” If there’s a pre-closing breach, those are the types of terms that if we can get in favorable indemnity terms and to the letter of intent, lawyers can really help do that on the front end when you have the most leverage. We also have clients who sign the letter of intent and then call us afterwards. That happens too.

 

Jon Doehr: That’s always fun.

 

Christal Contini: Yeah, and it’s not fatal. I mean, it is a thing that you could do and we’ve certainly dealt with it. And one of the things we can do is try to use that as an opportunity to say, “Okay, we weren’t involved in the letter of intent, but maybe there are some reasons we want to do something a little bit different in the purchase agreement.” But if we can set the tone at the letter of intent, that’s surely the best way to do it.

 

Jon Doehr: Yes.

Christal Contini: What about you? What’s kind of your philosophy on that? Because I know, oftentimes, investment bankers are on the front end of this and you actually talk to the client sometimes before we do.

 

Jon Doehr: Yeah well, certainly at Cascade, we like to be brought in as soon as possible. I mean, we always like to meet business owners, whether they’re thinking about a transaction or not. But, whether it’s a year in advance or a month, we want to be introduced to the situation as early as possible.

Some of the key issues surrounding transition for a seller include a succession plan. Like if the owner plans on exiting the transaction or exiting the company within six months to a year after a transaction, most buyers are going to want to know that there’s a second command that can step up and take over the business. So, it’s important to identify that person; and then what other management depth is there beyond that individual so that the entire business isn’t hinging on this one person who’s going to be walking away.

And then from a financial standpoint, we want to make sure that the balance sheet is as clean as possible, that there are limited tax issues, contingent liabilities, any receivables issues—just make sure deals are cleaned up before before we enter into a transaction.

And then, what’s become critical with the pandemic and with all the supply chain issues is diversify, diversify, diversify. So, it’s important to—whether it’s your vendors, your customers, your partners—you have to be flexible, you have to be adaptable. And part of that means you have to be investing in technology, automation, artificial intelligence, machine learning and robotics. It’s just the way the world is going. So, we try to put all these issues on the table awhile in advance and make sure business owners are thinking about them before they start marching down the path of a transaction.

So, the process is changing as a result of the pandemic. What are some of the key legal issues or trends or challenges that you’ve seen in transactions and how is McDonald Hopkins helping to try and resolve those?

 

Christal Contini: Sure. So, as you know, it’s been a seller’s market, right? So sellers have been able to command a pretty high purchase price. But with that comes, I would say, more rigorous due diligence. And I think a lot of that had to do not just with the market but also the pandemic impacting certain things about the business and people wanting to be buyers and wanting to be more sure that they are getting what they’re paying for.

And so, you mentioned supply chain, you mentioned customers and suppliers. Buyers want to make sure that those relationships are intact. They want to understand how the pandemic has potentially impacted those relationships and what have you had to do in order to diversify. Are you using the same suppliers? Have you gone out to market and found new suppliers with new contract terms? Are you in a force majeure situation, which is essentially a supplier saying, “Look, for market reasons we can’t actually supply, therefore the contract terms are no longer applying.”

So, that’s one area. I would say another key area has been the impact of the pandemic on your employees. Did you have to cut your workforce and did you do it properly? Or did you enter into new incentive arrangements in order to keep people in place and incentivize them to stay? And did you do that in compliance with law? Because employment incentive plans can get a bit tricky, and if you didn’t work with a lawyer to do that, did you do it properly in compliance with all laws?

And then, actually you mentioned going and using more technology and making sure that you have appropriate ways to work remotely and things like that. So, if you have expanded your technology, that usually comes with more legal risk. You’re doing more things remote, and so what happens if there’s a data breach? Do you have the right policies in place?

So, when I first started my practice, the data security breach, representations and warranties and a purchase agreement were maybe two sentences. Now, it’s like three pages of information and reps and warranties that buyers want about how you think about data security. How do you think about protection of your clients and customer information? That kind of thing. So, buyers are very much focused on that.

 

Jon Doehr: Right. And I know McDonald’s Hopkins has a a reputable national practice in cybersecurity. And we’re hearing more and more stories every day about companies being impacted by ransomware and other issues. So, it can’t be emphasized enough how important it is with your remote workforce to make sure you’re on top of that because you could be put out of business pretty quickly.

 

Christal Contini: Right. I mean, when you mention the sooner the better getting involved, that’s one of those things—even if you’re not thinking about selling—you might just want to reconsider. How are you thinking about your data security?

But you’re right. Having lawyers that know these things about data security, employees and vendor supplier relationships, we can kind of help make sure those things are appropriately documented and that they comply with law before clients go to make representations and warranties and their purchase agreement.

So, legal side is definitely complex, but that’s what we’re here to help with. Just just like you are for on the financial side. So, on the finance side, what are some things to consider—especially now, after the pandemic or during the pandemic, depending on how you look at it. And how do you help your clients prepare?

 

Jon Doehr: Well, it’s been an interesting couple of years for sure. I think in April or May of 2020, everybody expected that the pandemic would have a huge impact on the economy and companies, and there’d be a lot of negative performance. As it turns out, for the most part, companies have been pretty healthy with the amount of liquidity the government injected into the economy in 2020 and 2021. Most M&A providers had banner years in 2021.

So yes, it’s been niche. Obviously, the hospitality sector, some of the services were impacted dramatically. But other companies that there are plenty companies that benefited from the pandemic and had great years and, for the most part, valuations remain really strong.

I think part of what Cascade is paying attention to now is as that government largesse, the liquidity gets withdrawn from the economy, how is that going to impact businesses? And we’re starting to see the interest rates—obviously there is a 75 percent basis point increase yesterday. So, cost of money is going to start going up. So, we do expect to see an increase in the challenges of some companies’ performance in on distressed assets. So, part of what we want is, while we want to meet with business owners and get out in front of it, is have you plan for both the strategic and financial impact of the both the micro and the macro economy. These are the issues you should be thinking about. And for some companies it’s going to be charged ahead as planned and others are going to have to take a step back and understand how some of these issues are going to impact them.

So, it’s planning, trying to get out in front of it and making sure that they’re aware of the issues. I think two areas where we’ve seen the most dramatic impact is labor. And I just read an article yesterday, how the textile industry is still 20 percent short on labor. They need more people to come into the workforce and they’re actually reaching down into junior high schools in order to start those relationships and train those people.

As it relates to do that, we’re hearing more and more about companies investing in robotics, and that doesn’t necessarily displace the workforce. It just means you need to upscale your workforce. So, investing in robotics, in automate, automate, automate your factories is going to make you more efficient and help you be able to compete in the long term. And then, you need to look at how you’re training your workforce. So, some of the important issues that are facing companies today and that we’re trying to make sure that they’re thinking about as they look to either grow or exit their businesses in the near future.

So, what are some of the other key trends that you’re seeing? I know that we’ve seen there’s still a ton of capital in the marketplace. There’s no shortage. There’s like two and a half trillion dollars of private equity money. I think I saw that there’s $7 trillion of corporate cash on balance sheets. So yes, there’s a lot of negative news out there, but there’s still a ton of liquidity in the marketplace.

What are some of the unique structures that you’re seeing, at McDonald Hopkins, in terms of how businesses have options available to them to seek liquidity?

 

Christal Contini: So, I think there’s the traditional just make an acquisition and a buyer will buy the business. That still happens, and they buy 100 percent and the buyer takes over and runs the business going forward.

There’s kind of the next step, which I would say is a buyer makes a control acquisition. Maybe puts in anywhere from 60 to 80 percent or essentially buys 60 to 80 percent of the business. And the seller rolls over anywhere from 20 to 40 percent of their existing equity in their business and invests with the buyer. So, they continue a stake in the business going forward. That is still another big thing that’s happening right now.

There’s—and I know you and I have talked about this—now there is, “Okay, let’s not take a control position, but in order to put some of our money to work,” buyers are also looking and saying, “Well, we will make a minority investment. We will invest in the management that currently exists. We will try to improve upon it.” But it is more so a smaller or tiny piece of the business. And usually with that, buyers still want some of the, I guess, legal rights that they had when they were buying a majority. Part of it is that they are putting in money and with that money, cash is king and they want to make sure that they get certain legal governance and control and ways to make sure that their investment is safe.

And I know a lot of my clients are saying, “Well, they’re only putting in a minority investment. Why should they get all of these legal terms that might be more akin to a majority investment in things that…” What we’re are seeing are things like they want a board seat, even though they are just a minority. They might want certain what I call veto rights. So, before the company does anything big like take on significant debt, sell the business or change the tax structure of the business, the buyer wants the ability to potentially say, “No, you can’t do that.” And then, on the other side, they might also say, “Oh, and in addition, in exchange for investment, we want a preferred return that might even have priority over the existing family or companies owners.”

So, it’s a different way to think about it. It’s supposed to be viewed as more of a partnership, but because they’re putting in cash, these buyers want more rights. And I don’t know if you’re seeing this too.

 

Jon Doehr: Yeah, yeah. So, I mean, I don’t think that can be emphasized enough that there’s just a plethora of options available to business owners today whereas, say ten years ago, is generally you either  sell 100 percent of your business or maybe 80 percent? Minority recaps are definitely a core focus for many capital providers today.

And we’ve had success in the last two years doing minority transactions where business owners are able to take some chips off the table in an amount that provides them some financial security, partners them with a group that can provide capital going forward, and in many cases it really re-energizes the company, re-energizes the business owners. They’ve been running the company for for 20 years and they feel like they’ve kind of reached the end of the road, and then this partner can bring capital, it can bring relationships. And we’ve seen where it just changes the whole dynamic of the business and they’re poised to now grow and increase the value and take a second bite of the apple down the road in 3 to 5 years. And it can both increase the financial value for sure, and the amount of money that they’re going to take off the table at the end of the day. But also it just creates a great improvement in culture and in their outlook on the business.

So, we’ve seen that. And—whether it’s minority recap or majority recap—it’s a very different dynamic and that capital is definitely available. And then, even beyond that, if you’re just looking to grow, leverage recaps are also a great option now. So, there are a lot of debt funds that have raised a significant amount of money and they’re looking to put that capital to work in companies, both healthy and distressed.

And so, that’s an opportunity for a business owner to take chips off the table, get some financial security—yes, you’re putting some leverage on the business, but generally they’re not going to over-leverage. This isn’t a situation where they’re lending to own. They want to just partner with the business owner to create that opportunity to grow the business. So, it’s a win-win for everybody.

So, a lot of options out there to create liquidity today and it’s a lot different than it used to be five or ten years ago when it was either sell your business or just keep it and do the best you can.

 

Christal Contini: I would agree with that. I think the thing that has struck me about that kind of recent change is, before, sellers would just sell their business—kind of ride off into the sunset. Maybe they stay on for 2 to 3 years because that’s part of the deal. They’re going to remain employed.

What is really unique about what you’re talking about is that this starts to look more like a partnership. And there really is an alignment of interests. The issue is, now everyone has to think about, “Okay, what does the legal landscape look like going forward and how do decisions get made?” And so I think having great advisors and a great legal counsel to talk about what is normal for that process, because it’s not easy. Because instead of you being the captain of your own ship and you make all the decisions, now you have a partner, right? And working through that from a documentation standpoint or from a culture standpoint, I would say that just takes a little bit more time than your traditional M&A transaction where you sell your business. You maybe work for a couple of years and walk away.

So, I think it’s a very unique opportunity. I think it comes with just more time to consider what the post-closing world looks like because we have to have documentation and a culture that everyone can agree to and get aligned on the front end.

 

Jon Doehr: Right. And I’m actually looking at a situation now, working through our term sheet, and the business owner is of course, “I want to make sure I’m not I’m not going to end up in a bad situation in here,” even though it’s a minority investment. And it’s important, I think, to bring McDonald Hopkins and or the legal team in to look at that. Right? Don’t just assume it’s just a financial document. That there are—especially with with the pandemic and all the issues surrounding that—some of the legalese has just changed in the last couple of years. Has it not? In terms of what you need to be looking out for and some of the risks—like you said, “force majeure”—some of the risks that could impact the business owner negatively, even though it’s only a minority deal?

 

Christal Contini: Yep. And It might be in the form of debt or equity. So, even the debt companies that you mentioned are coming in and they are putting covenants that look a little bit more like equity type control. Which again, if you understand what they are, you can kind of walk into things eyes wide open.

And I think the thing sellers need to remember is, yes, there are legal implications, but the goal is to try to align interests, and the lender or the buyer—they are just trying to protect their investment. So, there’s a little bit of tension, but I think there’s a way to work through it if everyone understands what the terms are.

 

Jon Doehr: Right. And it’s interesting, one of the best quotes I’ve heard recently on this subject from a business owner is, “Look, Jon, I’m looking at this document and I’ve dealt with investors in the past and their attitude was, ‘What’s mine is mine and what’s yours is mine.'”

And so, to toot our horn a little bit and yours as well, is that part of what we bring to the table is we’ve been doing this a long time, and we know the groups that we’ve partnered with over the years and we’ve done a follow-through and do what they say they’re going to do. And others who, as I mentioned earlier, are lending to own. And there’s, without a doubt, good partners out there and there’s bad partners out there. And yes, the money is green, but we really pride ourselves at Cascade in finding you the right partner.

So, the day after closing, you feel good about the transaction and six months down the road it’s even better. So, that’s where it works out for the best for for everybody. And that’s important to consider when you’re going through the process.

 

Christal Contini: No, I definitely agree. And you mentioned kind of the changing landscape. So, what would you say are other private M&A market evolutions that have occurred over the past couple of years? And do you expect them to continue?

 

Jon Doehr: I mean, I think without a doubt they’re going to continue. There’s just so much money floating around out there. I mean, we get hit up every week from some new fund or search fund that’s looking for an acquisition. So, the capital is going to be out there going forward. It’s just the dynamics are going to change and they’re going to be looking for companies that are investing in technology, first and foremost. I can’t emphasize that enough, especially on the manufacturing side. The digital factory is here to stay and if you’re not versed in that technology, you’re going to fall behind.

So, yes, I mean, it’s the old saying, right: “Invest or die.” And in this case, it’s keeping up with all the changes going on around the supply chain, keeping up with the changes around remote workforce.

And so, that’s going to be first and foremost. Some of the important issues that we’re seeing going forward in terms of the private money market—yeah, the public markets are down, but the private M&A markets are still strong. For companies that are performing, it’s still a great time to sell and it’s still a great time to be seeking partners to grow in 2023 and 2024 and beyond.

So, it’s going to be niche for sure. I mean, as we’ve seen, some service businesses got hit really hard, but now they’re bouncing back. I mean, we all know what the cost of an airfare is today, what the cost of hotels are; so, those markets are bouncing back. It’s going to be niche, it’s going to ebb and flow, but for the most part, I think the private equity markets are going to remain strong. And we’ve got several new proposals that we’re considering here that have just come out in the last couple of weeks. So, it’s still a good time. We expect—as I mentioned earlier—there will be some distressed asset activity as interest rates climb and the banks start to pull back a little bit, but, for the most part, we’re cautiously optimistic.

 

Christal Contini: I mean, I would say the same thing. On the legal side, we are still seeing M&A transactions. Our clients are still selling, our clients are still buying. And so, people are still interested in being inquisitive, finding opportunities. I think what has also been interesting is that they’re being creative with how they structure their purchase price too. So, it’s not just the straight, “We’ll pay you cash at closing if there is a little bit of uncertainty.” I think buyers and sellers are finding ways to bridge the gap earn-outs, which essentially is a post-closing payment for performance of the business that was sold after closing.

So, essentially we will pay you X if certain hurdles are met. That is a big thing that we saw post-pandemic just because people wanted to make sure the revenue was actually there. I think, as the market gets a little bit soft and people are trying to think, “Is the value actually there?”, we’ll see more and more of those earn-outs are trying to figure out, “How do we incentivize people to perform, but still give them the value that we think this business is actually worth?”

So, I think we’ll see a little bit more of that, too.

 

Jon Doehr: One thing we’ve seen, and I’d be interested in is your thoughts as to what have you seen in the last couple of years and what you think would be going forward is the timing of a process? So, in 2021, it was a very busy time. So, accounting firms, law firms, investment banks, commercial banks—everybody was really busy, and transactions just took longer, and everyone was trying to get through to close by the end of the year because of potential changes that were coming in the tax world.

What have you seen in that arena in terms of how long it takes to get a transaction done and some of the challenges around the legal aspects of documenting a deal? And what’s the near-term forecast for how long a business owner should expect a transaction to take?

 

Christal Contini: I think generally the process is it just takes longer than it used to. And I think, for business owners, it takes longer than they would have thought anyways. But now, because of the market—because it is so busy—there’s still a little bit of backup from service providers that are ancillary to what we do. Like rep and warranty insurance would be one of those areas.

So, maybe to give a little background, one of the products that is now present in most M&A deals passed a certain threshold, is that buyers are purchasing representation and warranty insurance to effectively use the insurance policy to collect if there are post-closing breaches based on pre-closing activity, which helps sellers because now the money’s not coming out of their pocket, the buyers are just hitting the insurance.

The thing that people don’t realize about this insurance product—not because the insurance providers are slow—but the process takes longer to get underwriting because it’s another step. We, as the lawyers, have to participate. If we are representing the seller, we have to help get all the legal due diligence together and the buyer needs to write this really long due diligence memo to get the underwriting for the policy.

So that’s one thing. Even without the market pressures, taxes and things like that, rep and warranty insurance adds time to the deal. I guess the other thing is that everyone is just nervous about taxes, generally. And so, if we can close a deal by a certain year end with all of the uncertainty, I think that’s what clients are pushing for.

So it’s now June, and if you’re a seller, now would be the time that would be a time to get out.

 

Jon Doehr: (laughs) Right. It’s now or no.

 

Christal Contini: It’s now or it’s next fiscal year.

So, the process, I mean with investment bankers, you guys are very efficient. You move very quickly. But sellers also need to provide a lot of information. And so, you guys are the experts in compiling this information, putting together a book to go out and market the business. But that takes time, and then you want to run a fair process to make sure that you get more bidders. That takes time. And then the legal process, I usually say from the signing of the letter of intent, it takes anywhere from 30 to 120 days, and there are a couple of reasons why one might be faster than the other.

So it just takes time.

 

Jon Doehr: Yeah, and we’ve seen the same thing. Service providers, buyers—I think it was last year, towards the end of the year, when it got to a point where the buyers were really having to focus on, “Okay, what normally we would consider these ten transactions, we’re just really focused on these three.” And so to make sure you have as large a buyer pool as possible from an investment banker perspective, it’s important to start as early as possible if you want to try and close by the end of the year.

So, don’t expect any read reason to really push for a 2022 clause based on taxes as we sit here today, and we did have some deals kind of pushing it this year, last year. But again, be thinking about those issues, planning ahead, just understanding that whereas you could kind of rely on getting a deal done in six months maybe five or ten years ago, it’s just not the way of the world today. And as you mentioned with rep and warranty insurance, hopefully that makes the post-deal closing, the post-deal situation much better, easier and smoother. But it does take time pre-closing to make sure that’s all lined up.

One other issue that we haven’t discussed that I think kind of speaks to our process, at least on the banking side has been streamlined, is technology. So, how has technology impacted the legal side of the transaction world and what are some of the important issues around that?

 

Christal Contini: I would say I think it’s helped improve the process. I mean, the purchase agreement for these bids for a sale transaction can be anywhere from 30 pages to 120 pages. I mean, they are dense, they’re long, and while I’m sure everyone is tired of being on Zoom and all of these programs where you have to look at people and yourself while you’re talking, it has been really helpful for the deal process because one of the things we do is we screen share and we can use that to help our clients understand what is happening from a legal perspective—what the risks might be, what the changes in the language might actually mean. Not from the perspective of trying to teach our clients how to be lawyers, but so that they can kind of think through what is happening from a legal perspective. And we can put charts up on the screen, we can put the purchase agreement itself with the red line showing the changes up on the screen. And so, it’s been helpful because we can kind of help drive the process more efficiently.

So, Zoom would be one, or whatever program you use. Another, honestly, it’s as simple as DocuSign. Before we had to have—we kind of moved away from in-person closings—but before we had multiple PDF documents everywhere and clients would have to go print things off to sign. Or—it is inevitable—there is always someone on vacation on the day of closing. Always. They’re on a cruise or someone’s in some remote location in the middle of nowhere and they’re selling their business. So, there’s not like an easy place to print these documents and, so, DocuSign ends up being a great way to do it; being able to remotely sign or just sign with the click of a button. So those, I mean, they’re small, but they have really improved the process.

And then there are just other things. Like Carta is another thing that I think many of our clients use to keep track of their stock or membership, interest rates or things like that to make sure that they track who’s getting what equity and what business.

So, those have been great tools. I mean, anything on your end?

 

Jon Doehr: Oh yeah. DocuSign for starters. I mean, one of the most time-consuming practices for us is non-disclosure agreements early on in the process. We try to get an NDA sign with all prospective buyers, which in some cases can be 100 or 150 buyers. And so, DocuSign has helped immensely there, versus fax machines or even emails. That’s helped a lot.

The biggest change technology-wise that I’ve seen in my career is just how it’s helped streamline the process. And so, there are databases that we all use and really the sell-side process is pretty similar for most of us bankers these days, and the buyers are all encapsulated in these databases. Yes, we all meet with them and have relationships with them, but it’s less about, “Hey, do you know who the buyers are and where to find them?” and more about, “What creative ideas are you bringing to the process?”

And at Cascade, we pride ourselves on being former business owners, former CEOs—we’ve been in corporate development roles. And so, it’s not just so much about, “Hey, let’s ram our client through the process and get to the other side.” It’s really thinking creatively and outside of the box about what are your strategic objectives, what are your financial objectives and how can we help you get there? And technology has allowed us to spend more time on that and less time on who are the buyers, where the buyers?

Research is another great area that’s leveled the playing field. Whereas, 25-30 years ago, Wall Street had access to research that other M&A advisors throughout the country didn’t have. For the most part, that’s just not the case. I mean, there’s so much information out there on the Internet and through these databases that you can get the research you need to support your company’s sell-side process or acquisition process if you’re on the buy-side.

So, it’s really technology that streamlined the process really made it a commodity. And it’s allowed—at least Cascade—to spend more time thinking outside of the box and creatively about how can we help our clients get where they want to go. And maybe that’s selling today and maybe that’s making an acquisition or two, and selling two years down the road when your valuation has increased dramatically.

 

Christal Contini: And are you also able to track? Because I know you do a lot of deals—not just yourself, but across your entire group.You don’t just have information about the buyers that are publicly available. You’re also able to track your experiences too, right? To help pair them?

 

Jon Doehr: Yeah, that’s a great, great question. So, one of the advantages of having our own proprietary database is we’ve got the history going back 20-25 years of our experience working with buyers and how they’ve behaved in processes, how they behaved post-closing and have they done what they said they’re going to do? And so, that helps immensely when you’re getting down to the end and you’ve got four or five buyers, and the client wants to understand, “Okay, can I trust this buyer? Can I trust that buyer? What is your experience with this investor?” So that’s important.

Again, like I said earlier, the money is green. So, what what are the some of the key differences when it comes to selecting a partner? And our experience helps provide the answer to that.

 

Christal Contini: I can see that being very powerful because I think sometimes people think, “Oh, you know, it’s hard to differentiate.” You meet these prospective buyers as part of management meetings, maybe you go out to dinner. But sometimes it’s hard to say, “Okay, what’s going to happen potentially post-housing?” And if you have experience with the buyer, not only do you have the experience, but you’ve actually spent the time to remember it so that all of your colleagues can have the same information, I can see that being very powerful and a differentiator.

 

Jon Doehr: Even in a process where we’re reaching out to 100+ buyers, we’re documenting the reaction we get from each prospective buyer. So, what you don’t want to have happening—it’s a big part of our job as the investment banker—is have a buyer lobbying in a bid that is at the top of the range and come back and just start back-trading and back-trading once they’ve signed a letter of intent. And we have experienced and we generally can tell who is real, who can back that offer up and who can’t, and even in in our database, tracking our notes going back many years, we can say, “Hey, wait a minute, they put that bid in on that business and really didn’t follow up on what they said they were going to do.”

And so, you’re right. That that history that we are recording of information is critical. And unfortunately, you know, we’ve got the history to to bear that out.

 

Christal Contini: I can see that mattering, definitely.

 

Jon Doehr: Right. Right. So well, thank you very much, Christal. This has been a great conversation. I think we both agree that it’s been an interesting time over the last couple of years, but it’s been busy and we expect to continue. Are there any other concluding thoughts that you have?

 

Christal Contini: No, I agree. I think it’s going to be a busy next couple of months and hopefully it continues right.

 

Jon Doehr: So, thank you very much for joining us. If you have any questions on today’s Cascade Conversation, please feel free to reach out to either myself or Christal at McDonald Hopkins, and we’d be happy to answer those questions.

 

Christal Contini: Thank you.

 

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