E:29 Adam Coffey CoolSys CEO - bought & sold 100 companies in 20 years - aggregate value $5 Billion

Yeah, I've got a little bit of background noise, but. Welcome to the top M&A entrepreneurs. I have a really special guest. I got Adam Coffy. He's an Army veteran. He runs a Cooliss, and I gotta tell, I just want to read this. He's purchased 18 smaller companies. This is the last, uh, since he's running Cool Coolis. 3 more letters of intent over the next 4 years, he's gonna purchase a grand total of 50. Over his career, he's bought, sold, financed around 100 companies in 20 years. That's an impressive record. And welcome to the show, Adam. Well, thank you. Thank you for having me. Hello to your listeners. Uh, very glad to be here. Uh, I think a cool sis, today it's 21, are, are now, uh, now complete with, with more on the way. But yeah, you know, buy and build is, is kind of My thing. So, yeah, that's beautiful. After 20 years, he's also the author of these two books, The Exit Strategy Playbook and the Private Equity Playbook. Uh, I just want to start with the book, how simple you made to read. Well, that was kind of the goal and an objective, just to be honest with you. I, I really had something in mind, and that was for a person to be able to go on a cross country flight, as an example, take off from New York, have a bad meal, have a drink. Sit back in your chair and decide, am I gonna do email for the next 3.5 hours, or am I gonna read this book? And you know, for those who chose to read that book, you know, the, the goal and objective was to give you kind of 20 years' worth of CEO cliff notes. Uh, from my own career, having worked with private equity, um, and try to just impart some general knowledge and wisdom, not necessarily going too deep on any subject because it's a rabbit hole, but just kind of giving a good broad overview of the topics that that were being covered. So, first book was all about private equity, second book, partially about private equity, but really just more for entrepreneurs who are exiting a business. What's, what's that all about? What's that like, what are the options, etc. Uh, I think they're, they're great reads. I mean, if you don't have any experience in the industry, I'd start with these two. I keep these two on my desktop. Well, I appreciate that. I, I, I got a few around, oh jeez, I turn and say I was gonna say, I got a few on my desktop, and they're not sitting there. Somebody just cleaned up my office, but they're back here on my mantel. So I, I, do you use these books now to, you know, send out to prospective targets, or do they I, I, you know, uh, not designed for that, but I do have to admit that my, uh, my M&A team, my in-house M&A team does use the books, uh, all the time with prospective entrepreneurs. You know, people who've spent careers building businesses have not necessarily spent a career selling businesses. And so oftentimes for an entrepreneur, it's their first exit. And it's daunting, you know, and trying to, trying to figure out who, who, who's a good partner or, or how to navigate that experience. Um, it can be really daunting for people. So my, my team likes to use our books, or my books as a kind of a primer, you know, on the whole subject. Well, definitely, I, after reading he goes, hey, this guy's got credibility. He wrote a book and he wants to buy my company and based upon what I read in it, he's gonna give me top value, and he's gonna tell me how to make more money by doing the rollovers, and it just adds credibility for your case. Uh, yeah, you know what, it, it, it does, you know, it wasn't why I wrote them, but it's a great side benefit. Don't tell anybody. OK. Yeah, I, so I wanna kind of get into this a little bit detail. So you're backed by, you know, your first private equity group that backed you was OX Group, which is a middle market, right? And then, yeah, yeah, and then, uh, I guess that grew too big for them or they got their 3X or 5X return or whatever it was, and then they Eris Management group bought them, which is a higher, much higher. you know, so, so private equity firms, there's 6000 of them on the planet today, which is amazing. If you go back to the beginning of my career, there were a few 100 you've gone from hundreds of billions in assets under management to now trillions, uh, you know, 4+ trillion dollars in assets under management. $7 trillion if you include debt funds. And you know, it, it, there, there are 6000 firms out there, but they're, they all tend to be specialists. They, they specialize in certain size companies, in certain verticals, you know, in certain industries. And so it's very common. I mean, you know, when, when, when you're building a company as I am, the way that I look at it is, I'm gonna take an asset with revenue at the start, call it, you know, cool sis, 200 million plus, uh, and then at the first flip, You know, it's in the 400s. Then at the next flip, it's gonna be over a billion. And, you know, I'm building a company for the long haul. You know, we have, we have, you know, 3000 employees now. We, we've combined 21 different companies. And the process of doing that, private equity would see the company as a tool for their investors to earn a return, and I, as the CEO of a company, can look at private equity and think of them as a tool to help fund our growth. And so when you're gonna Go, you know, call it from 100, 200 million to over a billion in revenue, you're gonna have multiple hold periods with different sized private equity groups. So you mentioned the AX group, great guys, loved working with them. You know, they typically are a very disciplined investor. All they do is buy and build, and they typically buy companies in the lower middle market, so EIA in the teens, you know, generally, and then they typically sell when the companies get to about, you know, call it the Between 40 and 60, you know, so I call it 50, teens to 50. That's all they do. They do it every day. And when they get that business there, it's time to go. It's time to ring the bell. And so they're very disciplined. Aries, my current sponsor, they're over 260 billion in assets under management. They are, you know, they, they, they don't say it this way I do, and I, I can't cause I don't work there. They're like the world's largest non-bank lender. Uh, you know, private lender, you know, areas management. And so they came in, they, they partnered with me at a company that I ran, you know, a long time ago. And, and they were on the debt side. They were providing the debt, the debt capital for, uh, for Wash, multi-family laundry when I was building that company. So I first met them like 10 years ago, 15 years ago, whenever it was, way back when. And, you know, those relationships that I fostered there, you know, they paid dividends today, you know, uh, much later. And so, was, uh, was, was great to partner up with, uh, Aries and You know, they took a company that was worth hundreds of millions of dollars, and when we're done on their watch, it'll be worth billions. And, and so different private equity firms come in at different sizes, different points in time. The constant is the company and the employees and the entrepreneurs who joined CoolSys when they sell us their business. We're the constants going through time until eventually we hit, you know, so big that we We, we ultimately wind up with a public exit somewhere, uh, hard to stay private at a, at a certain size. And there'll be different PE firms that come and go during that time period. It's, it's, it's a lot of fun. Yeah. How, how did you start with Coolits? I mean, I know, I read about the washers and how many washers and dryers you own, sold that. And how did you start with Coolits? Was it just 11 HVAC company and So, you know, boy, that's a complicated story. You know, I saw, I, you know, Adex bought the platform and the platform was known, known as Source Refrigeration. Uh, and Source was a company that was actually 3 companies that were put together by a public utility. So it was called Edison Source. So the Edison. You know, electric company or the, the, the public utility, um, put together three HVAC companies way back when and, uh, you know, had this great concept, you know, the largest user of electricity is grocery stores. And they thought, jeez, if, if we could own a service company that could keep a grocery store. Finely tuned, operating at optimal efficiency, instead of just selling power, we could sell, you know, call it the total solution. We'll maintain, we'll provide the power, we'll maintain the equipment that's using the power, and, you know, wouldn't this be a great, we can capitate your largest line item expense. And somewhere along the way, you know, regulators stepped in and said, oh, that's a great idea, but you can't do that. So, so Source, Edison Source was spun out, you know, part of a management led buyout, and that kind of began its PE adventure. But this was still going back like, like to the year 2000. AdA bought it in December of 2015. They held it for just over 3. Years. Uh, it was about a 4 times multiple of invested capital return. Uh, I ran it for 27 months. We bought 8 companies, the 1st 8 companies, and, uh, and really kind of took the growth trajectory and, uh, and went from something that was kind of sleepy to something that was more in the neighborhood of 30%. And, uh, and, and that's what we're continuing to do today. So you, so the kind of the model of acquisition target was set in where You know, you're looking for HVAC companies with contracts with large uh grocery stores, fries, Alberton's, whatever, Whole Foods. Yeah, yeah, so I mean, I mean, literally you could pick a brand, uh, and in the United States, we service over 45,000 different customer locations. However, today we're, we're not just, you know, call it grocery. We build cold storage warehouses, we do blood banks, we do pharmaceutical research. Laboratories, drug storage facilities. We just recently uh re outfitted the USS Comfort for the Navy, you know, to handle the, all the cold storage needs of, of the current, you know, vaccines. And, and so it, it, the company is many things to many people. We do cell phone towers by the thousands, uh, for carriers, you know, so, uh, data centers, you know, there, there's just a, a, a, a whole myriad of new customer. that we've gone into. And that was a part of the strategy. So we've done 21 acquisitions now, 8 on Ad Ax's watch, the rest of them, you know, now on, uh, on, on the Aries watch. But a lot of strategic pivots to get us into uh new markets, new customer verticals, uh, places where a customer's core, core need, you know, is to do something, uh, but they have a mission critical need to keep it cold. If you think about it in basic terms, a grocery store, you can't turn off the refrigeration and the frozen food section at night when everybody goes home. You know, the, the food's got to be frozen 24 hours a day or kept cold 24 hours a day. Uh, and so there's a mission critical need to maintain that indoor environment at a certain temperature. And, and that's where we like to play. So it's beyond grocery now, um, and, and it's taking us into a lot of different directions. Yeah, I love that. I mean, uh, you could have one place in Tennessee, wherever you have a location and then go, hey, they got, they're doing cell phone towers, they're doing refrigeration for blood banks, and then you just take those ideas to somewhere in Arizona and just say, that's that boy that that that's really the the the kicker, right? So we use acquisitions to fulfill. One of three strategies. Either I'm extending my geographic reach so that I can, can, can, you know, service a broader territory, or I'm making a pivot to service a new customer vertical or a, a new market, or I'm building density in the existing markets that, that we have. You know, going back to what your original question was that I, I hadn't answered yet, you know, how, how I find my way here. There was a, a, a, a search, you know, underway. So it was a recruiter that, that called me and said, hey, we have this company. It's, you know, it's AA backed and they're looking for a, a, a new CEO. Uh, and if you look at my 20-year career, the three companies that I built very different industries, but there was commonality. And, and this, not to sound sexist ladies, but a lot of guys, a lot of trucks, a lot of broken stuff. 1st, 1st 1 was a medical company fixing imaging equipment in hospitals, CAT scanners, MRI's all over the United States. Then the next one was commercial laundry machines all over North America and in 70,000 locations. And now it's guys in trucks going to grocery stores, blood banks, and, you know, all these myriad. of places, 50,000 plus now to keep something cold, you know, and so a lot of guys, a lot of trucks, a lot of broken stuff, you know, it's a service business. I'm a services expert. So if you're a private equity firm and you're looking to do, uh, looking for a new CEO and then maybe even it's a buy and build or it's, uh, you know, it, it's a services-based business, uh, my name is one that would pop up on the shortlist for, uh, a lot of people. So it was, it was just happenstance that brought me to cool sis. I mean, you're doing a great job. How does the, now that you have your deal team in place and they're sourcing these deals, and you're looking for the right size that makes sense that moves the needle, uh, And when you guys make that first call, now that they know about you, is it kind of like, hey, cool this is calling, let's get a higher multiple or what or can they? No, you know, the, the interesting thing when you're, when in any industry, when you're doing a buy and build, the, the, the base requirement is highly fragmented industry. So in our particular case, um, based on our own research and the research of Others, because we don't do it all in-house by, by any stretch of the imagination. We have outsource partners that help us what I call shake the trees, you know, and then I have a deal team that, that, that can also field inbound inquiries, make outbound inquiries, you know, etc. But you know, we, we've identified over 4500 companies in the United States that does what we do. Most of them are really small. Mom and pop, you know, call it. So it's a, it's a person who started with a truck and over an extended period of time, they built an empire. They're wealthy guys, you know, they're, they, they, they built an empire, but there's 4500 of them, you know, in, in the US. And, and so it's so fragmented that really deals either are found by what I call our outsourced front end. They make calls and they, you know, if you go to our website, you'll see I have a section for people to reach out directly to us. And people do reach out to us. And now that we've bought 21 companies kind of all over the US and a lot of entrepreneurs know some of the entrepreneurs that have sold businesses to us. And so there's kind of a networking thing that goes on, hey, I respect. that company, they sold the cool sis. I respected that company. They sold the cool siss. Maybe I know the founder, maybe I don't. Um, but, you know, that's someone I want to talk to. So we, we, we feel a lot of inbound calls now and, and we have so many testimonials from our former owners. I call it my former owner's alumni club. So they, they sell the company, they get their jacket with their patch, and it's the former owner's alumni club. And, you know, they become a, a rollover investor in cool sis. They're, they're a shareholder in the, in the mother ship. And then they, you know, they, they run, go back to running their businesses as, as they have, but now they got friends. You know, I, I tell people it's kind of like you go into a bar fight, uh, and now you got 3000 brothers with baseball bats behind you. You got the muscle of this giant organization. But you're still that small company, you know, in your own region, in your own territory. You're just now a part of the, the cool sis family. And then we cross pollinate all these different customer opportunities. You know, they may have a relationship with someone locally, but because they're a local company, they can't grow out of state or grow in multiple states with that customer. Now, They can, you know, introduce that relationship to the rest of the coolsis empire, and we can grow with their customers, or, you know, when we go into a new geography, part of what we do is analyze the markets that we're entering to see where our existing customers have, have infrastructure, you know, and have, you know, have locations and then we'll do outreach to them. Hey, We're now in new geography, and we can bring different products and services to bear in this market. And, and so there's a lot of cross-pollination that takes place, which means on average, right now, uh, when we acquire a company, they grow by about 20% uh organically after we buy them. Um, and so it's a, it's a great story. Yeah, I, I would just noticed the deal size you go after in the high 100, 20 to 30 high, 125. And then most of the companies you see you run into kind of average 2 to 8% growth, and what you can do with those uh 3 to 4 levers is get it to 24 to 27. What, what, what, what typically happens in an entrepreneur founded company, organic growth is the primary driver of growth. So in early years, almost blinders, yeah, yeah, uh, in early years, you know, it's very high growth rates because one location. becomes too is a 100% growth. But, you know, over time, they build the empire to a certain size and then it's like, OK, I'm comfortable managing this size empire. I'm good with the amount of trucks on the road, the income I'm generating, and so they never really go beyond, you know, a certain plateau. And, you know, I've done a lot of research, um, uh, you know, uh, and I, I'm, I'm a guest speaker in a lot of colleges and universities. And, and so, you know, I really try to understand the entrepreneurial mind. And, and I would tell you, a lot of the same DNA that makes an entrepreneur successful going from 0 to 2030 million is the same thing that prevents them from going from 30 to 100. And it's almost like there has to be a reprogram or a shift internally. And, and so to, to expound on that, you know, a, a founder-owned company typically is a micromanager, and that's one of the things that makes successful. I call it the Happy Meal effect. They, they want to make sure that every anywhere you go in the United States, you know what a happy meal looks like. It's a red box, yellow handles, cardboard hamburger, and little apple slices, and, you know, a little thing of fries. You know, it's, it's a very predictable. Entrepreneurs, in order to build the business, you know, go down to the unit level economics, and they make sure it's repetitive, the same thing, and they have to be able to keep their arms around it, which limits, you know, they're successful growing, but at some point, It has to become about we and not about me. And I, you know, my best analogy, I'm, I'm not even a huge classical music fan, but I, I like to use the, the concept of an orchestra. Instead of being the first chair player in every section of that orchestra, the entrepreneur has to truly learn how to be a conductor, and it has to learn how to trust others to be first chair players in all these different sections. And that's the DNA shift that would Allow people who are successful to a certain level to kind of amp it up and, and, and really blow out growth. And so, it's been a lot of fun working with, you know, call it 21 very successful multimillionaires who have sold businesses to us and You know, keeping that DNA, keeping that that entrepreneurial spirit alive, while at the same time trying to harness it collectively, uh, as a group and drive it to new heights and new levels. Yeah, I had somebody explain that to me. It's like, uh, you know, every level of coaching, let's say if you're going to swimming coaching, you know, you start out with your high school, and if you've got any, uh, talent, then then you'll go to college. College, you've got any talent, you go to the Olympics, but those are not gonna be the same coach in each one because every level is gonna expand your, your training and your, you know, and, and that's a great analogy because people have different specialties. You know, it's like I can take the raw talent, shape it, get it this far. Someone else takes it from there, gets it to here. And that's similar to that analogy we're Using on the private equity, you know, the size of firms, size of fund being a tool for us as we're growing through evolution, and for us being a tool for their investors to get, get, get outsized returns along the way. But that's also why you typically don't see like a, a private equity firm go from startup, you know, to billion-dollar company. I mean, these are very different. You know, growth periods and the evolution of a of a company. Yeah, it's way too much risk. It's a million ways to die in the west and a startup, yeah, yeah. I got the chapter on rollovers, we always, everybody says, uh, you know, like, hey, you get a second bite of the apple, but the way you explained that and Definitely the extra little features you can give to uh a seller. I mean, do you give that pitch to the uh the seller of the organization? You, you know, I, I, I certainly do, but my, my team is very well versed on, you know, on rollover investing, and we have, you know, kind of a fifty-page entrepreneur's guide, you know, that we also use, which kind of spells out some of those real life examples and You know, I, I think a lot of times entrepreneurs put their blood, sweat, and tears into building their organization, but they think of exits as a singular event. And I've learned through 20 years of, of working in, in the private equity backed world of companies and building companies that really It shouldn't be thought of as as a singular event. If you play your cards right, you can get multiple paydays, and each payday can be subsequently larger than the one before it. And I, I love to use that, the, the one example of the first company that sold the Coolis for $16 million where they took $12 million home, rolled $4 million forward, you know, that entrepreneur, if he had been given the chance to kind of cash out his chips, he would have. You know, he, he was, sure, I'm selling for $16 million. It's a good number. I'm happy. I'm gone. You know, but he took 12, rolled 4, and then 27 months later, I sold for a 4. Times multiple of invested capital. So guess what? The 4 million rollover became another $16 million. You got paid twice, you know, for the same company. a million now. Yeah. And, and now, and now is, you know, an investor in the third flip, you know, that, that, that we're doing. So the first one being when they sold the company to us, second one being when I sold the entire company from Adex to Aries, 3rd 1 whenever Aries does, does. An exit. So, you know, it, it rollover investing can be a really powerful tool. You know, uh, many times when an entrepreneur sells, it, it's not always what you think. It's not always someone who's in their late 60s, early 70s, who's just wanting to retire. Sometimes it's guys in their 40s and 50s, and they're just starting to get a little nervous. And, and they're, God, I want to diversify my assets. The world's going to hell in a handbasket. You know, I, I, I gotta make sure I don't get stuck. You know, with, with nothing when it is time to retire, but I'm not ready to hang up my cleats. I, I, I wanna keep on working and roll over investing and partnering with either a strategic company like Aosis that happens to be backed by private equity or becoming a platform company direct with private equity, and you get into that realm of additional bites of the apple and, and, and Ability to, you know, what, I tell people, why sell your company once when you can sell it twice or 3 times. My personal record is selling the same company 5 times in 13 years and 4 months. And, uh, it's a very powerful way for entrepreneurs to stay involved, constantly, you know, think of a squirrel putting nuts in the tree for winter. You know, it's constantly you're storing up and diversifying, but you still have enough. Skin in the game to make life interesting to where the next exit is bigger than the last. And that exit was bigger than the last. And it can you find out he be involved in the business after some point, you know, like the 2 or 3rd year, is that, would that be true? I'm sorry, say that again. If the seller sold out and he only worked for 2 more years, but you sold at 3 and he still gets another check for 12 million bucks. Yeah, you know, so what I encourage with my entrepreneurs is I want to have a relationship with them forever. There is no time limit. So they can choose how active they want to be in the business. If they start out being a full-time employee, God bless them, you know, need them, need to keep the relationships that they've built over 2030 years with their customers. Um, but then when it is time to slow down, love to see entrepreneurs then turn to part-time employees, consult. consultants, whatever the case may be. I always want to have a relationship with them. These are people who built a business, they developed relationships. Uh, they're thought highly of by their employees, and it's like I'd never want them to go away. They can always be a rollover investor, they can always stay, you know, in, in some type of a relationship with cool sis, which allows them then to continue to leverage all that experience and knowledge that they've built over a career and to continue to monetize. it in some way, shape, or form. I mean, eventually, you know, I have had a few entrepreneurs actually retire. They were in their 70s and they were like, that's what I wanted to do. I'm like, God bless you, go fishing. You know, and I'm gonna keep you on some kind of a little retainer, cause if I need you, I'm gonna call you or send a boat out to find you. I'm gonna drag you back for 15 minutes to, to help us with uh, a relationship issue or, or, or problem. So, love having ongoing relationships with, with the people that we partner with. Yeah, and when you talk about monetizing, there's 3 other features that you offer, the residual income stream, seller financing, can make extra money on the uh interest rate, uh, being a landlord and being a consultant. I mean, you've got this mapped out where you know, you know what, uh, if it's worth doing, it's worth being paid for. And so when, uh, an entrepreneur partners with me, uh, I, I wanna make sure that they're treated fairly and, and that they have multiple avenues, you know, of, uh, uh, of, or, or ways or abilities to generate an income stream. So, you know, as I, I've talked about in the books, you know, it, it's, you know, most entrepreneurs own real estate. The universe of buyers doesn't want to buy, you know, real estate. It's a different asset class. The diligence requirements are, are very intense. And so I always encourage entrepreneurs, take all your real estate, you know, 23 years before the sale, spin it out, separate, separate entity, put in place a fair market lease with the company. When the company is sold, as long as you have a reasonable fair market rent and duration, you can continue to generate income from the business you sold by being the landlord to the business. And, you know, that's very, very common in today's world. Uh, and so that's one income stream, you know, maintaining either an employee, employer relationship or a consulting relationship, also another great way to do it. And then you, you touched on owner financing. I, I don't often talk about that much, but my brother and I bought an insurance agency from a founder who was in his 70s. He was retiring, and uh he held Back 25% of the capital that we needed, so 25% was equity that we put in. 25% was a seller note, and then 20 or 50% was other, you know, bank financing. The, the business itself financed all the debt, but here's this former owner, and he was able to charge us, you know, a 10% interest rate on a note. He, we paid more. It was like mezzanine financing. It's not secured, you know, the, the bank debts in front of him. Um, and so he's second fiddle from a debt perspective, but it was above market interest rate, but he made it easy for us. And so he was able to collect, you know, 10% interest on his money that he rolled over as an, as a, as a, a debt provider, you know, for a 5-year period. So it gets the payday when he leaves. Hold some of the debt, keeps getting paydays every month as we're making interest payments, rents us the building, you know, it's getting money that way, and we let him keep an office, until, until literally, uh, the day he died, uh, and, and, you know, a lot of different ways for entrepreneurs to continue to make money. And because, let's face it, you know, when someone works their whole life and they build a company, and then they finally do that exit. What do they do with a pile of money? The first thing they have to do is figure out how to invest it, you know, or what to do with it. And, you know, through doing some of the things I talk about, you can diversify those assets and make some outside investments or get a money manager or someone to help you. But you can also still stay invested and generate income in that thing that you know where you're an expert, where you spent 20-30 years building the business, why walk away? Why not continue to monetize a gob full of money for 2 hours' worth of work. They, yeah, pretty. Much yeah, you, hey, you speak glowingly of your brother in both books. Did, does he involved with Cool sis, or? Uh, he's not. And, and so, and, and, uh, but he was the perfect example. You know, my first book, I had the two avatars, Josh and Rose. I'm the original Rose. I'm the, I'm the Fortune 500 executive who transitioned to become, you know, a private equity-backed CEO. And, uh, Rose is my daughter. She's my 8 year old daughter, but, you know, so I used her name. She thought that was cool to see it in the book. But the, the Avatar was really my experience going from GE to Becoming a, a, a CEO of a business. And then Josh is my son, uh, who, by the way, just got his first payday when his business was sold for a few billion dollars in a, in a private equity-backed adventure of his own. Uh, he, you know, he represented the entrepreneurial spirit. So my brother Mike is both characters. He was, you know, originally Rose. He worked in the insurance industry for a large company, worked his way up through the ranks. He left to buy an agency and became Josh, became an entrepreneur. Uh, I, I helped him with the financing, helped him, you know, from a, I was a, a board member of the business. And then he ran that company for a long time. You know, I think we owned it for 15 years. And then as he's approaching retirement age, it's like, well, you know, I'm not quite ready to hang up my cleats, but the world has gone crazy. You know, let's, uh, let, let, you know, need to monetize, need to diversify the, the asset base, but want to keep working. And so he just was the perfect character to use. as an example in the new book, The Exit Strategy Playbook, because he lived this, you know, spent 30 years or more working in the insurance industry, not only for the Fortune 500 world, but then, you know, as his own entrepreneur, as his own, own business owner. Uh, but then when it's time to exit, hey, this is the first time he's gonna exit. So it's daunting. You know, and it, it requires some guidance and uh and so it, it just so happened, happenstance that that he's the perfect, he was the perfect character to keep referencing in the book because the parallels were there. Yeah, you, you come from an entrepreneurial family, your son, you, your brother, I mean, was this taught by the parents, or did you just, you know, born made? You know, my, my, my, my dad was a uh a Notre Dame grad, Navy ROTC officer, served during kind of late in the Korean War era, uh, and he, um, he was a corporate guy. So I would say that that he was more conservative and a little less entrepreneurial, but his kids I have some type of a creative flair. And, you know, I have a brother who's a cartoonist in San Francisco who does movies and cartoons, and I have a sister who built businesses and has, has run multiple businesses, kind of a smaller entrepreneurial type spirit. She was quite successful. My brother and I were the corporate. Guys, uh, and then, you know, it's, it seems like everybody in my family fit in one camp or the other. Either you're either you're creative, or love. Yeah, right brain, left brain kind of thing. Yeah. So, you know, my brother and I were probably the two who were guilty of following in dad's footsteps to corporate America. We just then had a second incarnation as entrepreneurs. Yeah, I, I have to ask you, when you talked about Ibida in both books, and you know, the way Warren Buffett, Charlie Munger talked about it, even though they hate Ibida, uh, just because it doesn't account for, uh, you know, manufacturing or inventory and. What, when you guys go into an LOI and this is uh another veteran asked me to ask that, what kind of landlines do you see in the due diligence with the IEA that once you start uncovering this? You, you know, I, I can't understand why, why some, especially public companies, you know, they, they talk about cash profit, but, you know, when you're buying a private company, um, Cash profit is very misleading. It's misleading because you could be a business that's not investing for your future, that's not investing in growth. Growth is expensive. And so you could have high cash profit, but be a business that doesn't grow and has no intrinsic value, you know, to, to get a, uh, uh, an increased multiple or, or purchase price. Another entrepreneur may be building a business and they're investing heavily. They're buying companies, you know, like somebody I know, you know, or they're, they're investing in technology and they're driving, you know, they're opening up new offices and new cities and new markets. All of this stuff costs a tremendous amount of money. And so they would show no cash profit. Well, which business would you rather own? Would you rather own the company that's making cash but not growing, or the business that's growing and investing in its future and not generating as much free cash. And so there, there's a, there can be a disconnect when you're trying to value companies. And so, how do you level that playing field? And, and the way that private equity levels that playing field. is to focus on the IIA line. That doesn't mean it's solely about IIA, but it is a place where you can level out, call it those who are investing versus those who are not, and get to some kind of a level playing field to then dig deeper into a business, uh, and, and to try to determine what, what the, what the value to you is in making it an investment, whether it's a platform or an add-on to a uh a company you already own. So, you know, I guess it depends on the, the angle in which you're looking at it, you know, and it was funny. I, I had a large strategic looking at my company, um, last time I was in the market. And, you know, I, I remember a senior executive making, you know, you don't make very much cash profit. I'm like, yeah, I don't make any. Did you read my book? It's all About EI in the private equity-backed world, I'm investing for my future. I've bought 8 companies. You know, when you bought 8 companies and buy the kind of, you know, and spend and invest the kind of capital that we're talking about, you are guaranteed not to be generating cash profit, you know, uh, uh, because I'm building a multi-billion dollar company. You just don't know it yet, cause I'm not done, you know, but it's, it's a journey, and you have to invest heavily in order to grow. Growth is expensive. So, um, yeah, I understand how some people look at it and say, no, that's not a, a fair representation. Exactly. You know, neither is cash, you know, so you have to use some kind of a combination of factors. And I talk a lot about ebi strictly because. Entrepreneurs, most of them don't know what it is, or, or what it, what its value is to them in an exit. So, I'll leave Warren Buffett to argue with the senior PE guys, you know, at a cocktail mixer at a, at a, at a university endowment or something, you know, or, or at, at some, you know, charity function. They can argue about whether or not it should be used. The reality is, it is used. And so I'm educating the entrepreneurs, what is it? Why is it important? Why you should understand it, and how you should manage and manipulate it because at the end of the day, it's all about generating for that entrepreneur who's monetizing their asset. How do you get maximum value? And so you need to understand how someone's evaluating that business and, and IBEA is the way it's done today. Would you say when you go look at a territory like Tucson, Arizona, there's a $25 million business that they're, you know, they, you could tell that they're growing, uh, you know, putting, uh, you know, investments into the growth versus, hey man, these guys are tapped out. He's, you know, he's fine with the $255 million family owned business and the income, and you, you can give them a multiple base. On that. Or, you know, so, so, uh, most industries have some kind of a trading range. And so there is kind of an envelope of price value from left to right, you know, maybe it's 4 times Ebi data to 6 times EIT. That's a pretty typical range. Where a company falls in that range can then be dictated by what's the market they serve, the size of that market, are they tapped out? What's Their organic growth story? Is there a way to continue the growth of the business? And then, you know, what's the strategic value to me, uh, uh, you know, as the buyer. So from, from my perspective, we put a lot of work. I'll tell you that it's not as simple as someone's for sale and I'm a buyer. We put a whole lot of work into what I call filters. So upfront, I, I, I, I lay out what is my perfect acquisition. And we're very Active. So my deal team um has some proprietary tools that they've developed where we take our universe of customers, we lay out all their locations in the United States. We also look at population factors, and we break them down into MSAs, you know, and so it's, it's kind of city markets. And let's find MSAs that are growing. So people are moving to them, you know, their growth areas just In general, and then they happen to have a large footprint of our existing customers in a new market that we're not currently servicing, which means not only do I inherit the customers we're, we're buying, but I also then get to cross-pollinate customers that I have. Then let's look at the actual business. What percent of it is service, what percent of it is construction, uh, what is the EEA margin of the business, you know, is it union, non-union? You know, etc. so on and so forth. So I have all these filters that help us identify a good acquisition, because buying someone for the sake of buying someone can lead to a lot of problems and a lot of headaches. You know, buying a bad company for cheap can zap so much energy out of a leadership team trying to turn it around or trying to fix it. I'd rather buy world-class assets, best in, in class assets, and add those to the. The team cause they're very easy to integrate, don't require as much management effort um to continue to operate. And then it's the conversations are all about growth. How do we grow faster? What are the limitations that you have today to grow, and how can I, as the parent, you know, and, and the, the larger entity, how can I help you solve those problems? And so instead of focusing on how do I fix what's broken, I focus on how do I grow. It's already good and make it much larger and a, and a more important piece of the empire. And, you know, that's more higher value added work. So we put a lot of effort into screening upfront. And when we find that asset, you know, that fits the profiles that we're looking for, then that's an asset I want to own and it's an asset I'm willing to pay a premium price to get and it's gonna be uh, uh, uh, an important valuable piece of, of our. Future. So some companies in smaller markets help us strategically build density in a market that's not very dense. So I can stop, you know, you use Tucson, so I can stop driving guys from Phoenix over to Tucson if I buy that small company in Tucson that now gives me a hub, you know, in Tucson, it could be much more, um, uh, cost-effective to service, call it the Greater Tucson area from a Tucson. Based hub than it is to drive people over from Phoenix and they spend half the day driving back and forth. No, nobody likes that 100 mile drive. I've talked to a lot of service companies. Nobody. So, you know, so there are different strategic reasons and, and, you know, to, to make acquisitions. I think what's important is if you're gonna be an acquirer, you know, if you, if you're gonna have an acquisitive nature, you need to understand good versus bad and what good means to you could be different than what it means to someone else. Yeah. Yeah, I just uh finished uh Steve Schwartzman's book, uh, from Blackstone, and he talks about that one deal where he basically was a loser, was a $300 million deal, and, you know, don't lose money, but then he created this new process where, you know, it had inputs from everybody in the team, the yes or no veto up or down. Do you guys have that in the role? In in our particular case, we do, but it's informal. So he's putting to work, you know, billions and billions of dollars, and so they're, they're making very big decisions, um, for, you know, and, and their life's blood comes from the limited partners that You know, invest large sums of money. So he, what he does is a different universe, different world from, from what Adam Coffey does. But, you know, we essentially are following, call it a similar profile. It's just less formal, you know, so in our world, we have to like the business, you know, as a company, and then I involve my private equity partner and, and present to them. I call it a white paper, but it's kind of a diagnostic deck. Here's, here's why we like This company. Here's the strategic, you know, gaps that it fills for us. And here's what we think the growth pro profile is for that business, you know, over the coming years. And then we certainly get buy in. I have to have board approval to, to, to do an acquisition. So we, we do have a process and, uh, and there are plenty of people who could veto, you know, veto that, that acquisition. Have you seen anything peculiar or just says, hey, this guy's got, I can't think of the exact, like, too, well, too much dad. Or he's got a code problem or whatever. It's, have you seen anything like that just to make the most of the times what kills a deal from my perspective, you know, there's really two things. One is they tell us that they're making X and they're really making X minus about 90%, you know, so their, their, their numbers just aren't accurate that, that we're we're. How does that happen? Why would I know that everybody's embarrassed like by their numbers. I mean, but. You're only gonna get paid on actually value. How, how does somebody get in a position you wanted to say, we're doing this? Well, you know, it's, I would say it's rarely malicious. Oftentimes it's just poor accounting practices or simplified accounting practices and a lack of understanding of, of call it corporate finance and not truly understanding even that, you know, you know, going back to that. That, that term again. So I, I, I think, yeah, but the, the, the second reason and the real reason why we walk away from most of the companies that we walk away from is personality fit of the entrepreneur. In this particular case, I'm building, you know, a, a, a, an empire will ultimately acquire, you know, as I said, 50 companies or more. Uh, and the reality is, I, I would like to have a relationship with 50 entrepreneurs. If I have 50 cowboys that you can't put a sale on, and they're not gonna play well with others, and they're gonna be, you know, head cases, then I guess what? I, I've got an empire that I can't manage. So, for me, it's all about cultural fit. Do they think like we think? Do they value people as we do? Are there core beliefs and values similar to ours? And, and I gotta tell you. I look at companies all the time where, you know, the, the arrogance or egotisticalness of, of the entrepreneurs is so off the charts that it's just like, you know, I, I, I, I'm better served going somewhere else, because I want people to stay associated with our company. And, and I want to have a relationship with these people. And I've got a great crew of entrepreneurs. And, you know, if you don't fit into that mix, Then you're gonna be odd man out. And, and so we, we, we just don't want to go there. So I, I'd say most of the times for us, we pass, probably first because of personality and the entrepreneur, too strong, not, not a good fit for what we're building. And then, you know, 2, just a total lack of understanding of what their numbers really are. So they report to us something, and then in diligence, it's like, you know, we find that it's not. It's not accurate. And so if there's inaccuracies, I mean, we, we've had some big swings where, you know, potentially you have, you know, 50% reduction in earnings because they're just doing accounting wrong. And so, you know, I, I've had deals fall apart for, for those reasons too. But generally speaking, we focus on buying good companies with good people. They kind of go hand in hand and, you know, great market re you know, reputation and they fill, you know, some of our strategic needs. They check all my filters, and so when we find that company, it's, it's easy to really put your arms around it, dive in and and make it work. Yeah, you're on a different level of motivated reasons to sell, you know, a lot of people buy these companies, 10 reasons like divorce or death or something else. You're on the other level, it's like, hey, do you wanna be uh turn off the lights or be join the team. I like the way you uh explain that, yeah. Yeah, you, you know, and I mean, that's important. So you go back to my brother again, you know, great example. He, he, uh, he was, uh, uh, an entrepreneur who was approaching retirement. He wanted to keep working for at least another 3 or 4 years. And so in his world, in understanding the universe of buyers, it either needed to be a financial buyer who would Make him a platform and keep him around, or it had to be a strategic buyer who wasn't gonna just suck the integrate the entire company and then lay everybody off and get rid of everybody cause that wouldn't accomplish my brother's goal and objective. Needed to either be a strategic buyer where he could join the team and still keep going forward, only now no longer, you know, the sole share. Owner of his company, now he's an employee of the bigger firm with some rollover stock. And, and ultimately, that's what we wound up doing. And we were, we were too small with not enough growth trajectory to be a platform for uh, a private equity firm. So his best exit path was either going to be an owner operator, someone who would come in stage left, buy the business, and then Keep running it while my brother eventually rides out stage right. Or that large strategic who would make him part of a bigger company and afford him an opportunity to diversify his assets, but yet still be a, a rollover investor. Kinda like how coolsis does it. In this case, it was a, a large insurance corporation called Acresure. Uh, and so my brother got to cash out his chips. Make a rollover, and that company's growing like a weed. It'll have an IPO down the road, multi-billion dollar exit in its future. And, you know, my brother probably makes a 3 to 5 times return on, on his rollover investment in about a 3, 4-year period. And so he's happy and, uh, you know, it was the right fit. So I think a lot of times for entrepreneurs, They're focused on price. I want to get max value, yeah. But they don't know necessarily if max value is also the best outcome for their situation. So, part of the exit strategy playbook is really to get someone to look in the mirror and kind of start thinking about these, here's the different. Buyers, here's, here's what's gonna happen to you if these people are your buyers, and then you can start to think about, well, what do you really want for the future? What do you want for your employees? You know, do you want to see them all lose their jobs because you sold to a strategic who's just literally taking your contracts and your, your customers and then they're gonna turn off the Lights on all the offices, and all those people are out of work, you know, I mean, well, you know, there is no right or wrong, but what do you want as an entrepreneur? And so, I get them to think about all this stuff in advance so that when they head into a sale process, they know what kind of buyer universe they're really interested in finding. And yes, they want maximum value. You always want maximum value, but you also want the best exit for your situation that accomplishes your goals and objectives. And so often, I think people put very little thought into either preparing the company for sale or in who the right buyer is. They just wake up one day and say, by God, I'm gone, let's sell this. Puppy, top dollar, whoever the hell pays it, that's who I'm riding, you know, out of town, and they're leaving money on the table by not preparing, and they're potentially setting themselves up for some trouble if they haven't thought about who that buyer is and what's gonna happen after the deals closed to them and their employees and their empire. Yeah, so you, uh, you're an army veteran, and uh why did you join the army and uh are you still in contact with people from that cause that's been, yeah. Uh, yes, like the Stone Ages, right? It's a, it's a No, I've got like uh 79 to 83. I was in the Air Force, so that's so long ago. Yeah. Yeah, I'm an 82 to 86er, you know, and, you know, so for me, you know, I grew up in an affluent area of Detroit, Michigan called Birmingham, and, and, you know, uh, upper middle class. And, uh, everybody on my block, you know, raised the American flag, you know, every day. Most of them fought in World War 2, fought in Korea. I probably watched too many, um, war movies as a kid growing up, playing army, you know, in the fields, you know, around the neighborhood with my friends and You know, it, it was, uh, so there was a little bit of, uh, I played with GI Joe's as a kid, you know, I can show you a picture of me when I'm 12 years old wearing an army uniform and carrying a, you know, a little, little Croftsman, you know, BB gun. And I'm running around playing soldier, and it's like, I just always knew that the path for me coming out of high school was not gonna be a traditional high school to college. And of course, back then, that wasn't necessarily just the traditional path. There was trade school, there were other things. And so for me, it was, I always knew as a 12 year old kid that I'd get out of high school and I'd go in the service. And so, for me, the, the military really gave me discipline. You know, it, it taught me about leadership and teamwork, how to work in a diverse, you know, world with a diverse set of people. And, uh, and how to, how to accomplish something bigger than just what one person could, could do on their own. So I, I give the military, I tell people all the time, if not for my service there way back then, I'm, I'm never a CEO. I'm never, I'm not here today at this level. And, and so the military gave me a great foundation to build upon, but I also knew I wasn't gonna do a career. In the military. I, I, I knew that I would get out, but I, I wanted to go really to learn a trade. I was into electronics. I wanted schooling, you know, goal and objective eventually was, was, you know, engineering and, and technical, you know, uh, avenue. Military afforded me that education, gave me those opportunities, gave me discipline and, and leadership and teamwork, you know, kind of a foundation. And then, you know, that was the start of the adventure. So for me, it was just like the commercial used to say back in our era, the military, you know, the army was a great place to start. And, and so for me, you know, it, it really was. And, you know, I looked at the Air Force too. I think the reason I chose the Army was the army at the time would guarantee you your specific school or, or military occupation specialty, MOS and your first duty assignment. And, and so the Air Force, when I went in, Um, would guarantee me a field, but not necessarily the job or the school or the duty station. And so I took the longest technical training that the military had, and it wound up being, you know, uh, air defense radar, uh. Radar systems, you know, repair, uh, and, and missile systems repair. So, it, you know, I, it, it gave me kind of my technical school, kicked me off on the road towards engineering, and, uh, and straightened me out. You know, I was a, I was a young kid that needed to be slapped around and, and And, uh, and put into shape. Yeah, and I bet that a lot of the people, guys you hire now are ex-military too for. They're they're one of our, our 3, we really have 3 feeders for employees. There's a huge shortage of technicians in uh in our industry. There's a huge shortage of tradespeople in every trade in the United States, you know. 35 years ago, I, I blamed Nancy Reagan, and I also blame Hillary Clinton. That, that way I, I pick one of each, and you can't, can't put me in a corner. But, you know, uh, uh, very laudable goal and objective. Everybody needs to go to college. And they kind of turned off trade school somewhere back just after I got out of high school. And everyone started going to college and we hadn't been creating enough plumbers and electricians and HVAC, the dirty jobs guy, he talks about that. Like some people are just not right for college and then they'll make more money in a trade. You know what? I've bought 21 companies in this industry, and those 21 gentlemen all started out as guys in trucks fixing stuff. And they are all multi-millionaires today. So you can't tell me, and then the first thing people say is, well, trades, well, how much are they earning in 10 years? Well, if you talk to 21 guys I bought companies from, they're, they're, they're worth a hell of a lot more than, uh, than, than most of those folks who did go to, you know, did go to college. So, you know, the, the trades were always a good way for someone to earn a living. And for those who are entrepreneurs and also started businesses, they created generational wealth, you know, by being plumbers and electricians and, and builders and, you know, all those different, different trades that we've got. So, Um, you know, I have 250 job openings today for refrigeration techs. There's not enough women in the trades. There's not enough people in the trades in general, let alone, you know, there's a, a very low representation by women in the, in the trades. It's like, boy, you know, for everybody out there wondering what could I do? And in a matter of 8 months to a year, be, be earning a lucrative living, you know, come, come to the trades, tons of opportunities. Adam, it's already an hour up, but I want to thank you for the time and being on the podcast. Uh, for everybody out there doesn't know him, get these two books, he's on LinkedIn. Adam, thank you so much. I appreciate it. Very glad to be here. Thank you for having me. Good luck to all your listeners out there. I, I hope they enjoyed it. Yeah, great show. Thanks, Adam. Thank you.