Maximize Your Multiple - Jon Taylor M&A Investment Advisor - Top M&A Entrepreneur

Welcome to the top M&A entrepreneurs. Today I have a guest is John Taylor. I came across John Taylor probably 2 or 3 years ago. He had a book out called, well, he has a book out, go to LinkedIn. It's got a fantastic title, Maximize your Multiple. And this is uh really important because, you know, every investor says, hey, I, I, I, you know, you buy a company at one x multiple, but if I grow the even uh, add some software, add some reoccurring Rinau, I'm gonna maximize my multiple. So welcome, John. Thank you. Good to be here. Yes. So John works for a company called BGSA Holdings right now, and they do a lot of acquisitions or getting a company's investment advisory for supply chain. How did you, let's go all the way back and how you got involved in M&A. Sure. So, um, I, I graduated from the, the Wharton School um in Philadelphia, University of Pennsylvania as an undergrad and yeah, I mean, so started off working merger and acquisition advisory with um You know, mostly tech companies in, in kind of the late 90s is, is when I graduated and, you know, got, you know, kind of got my feet wet doing, doing M&A deals, doing some capital raise type work. So, um, you know, mostly with middle market type businesses, right? So, you know, middle mark, I mean, there's lots of ways to define middle market businesses but typically, um You know, kind of under, say $100 million in sales is, is where, you know, kind of most people look at middle market. Have you ever thought about buying one yourself? You're so involved in the acquisition process. I have, yes, I mean, or even just investing in some of the, the transactions that we work on maybe, you know, just rolling some. Some equity into a deal. Um, yeah, I mean, I have, I mean, you know, I, I have invested in some, some small transactions in the past, but I mean, it's something I'd like to do more in the future for sure. Yeah. Do you, I got a question for you. Do you work on the seller side with a seller mandate or a private equity institutional or strategic target mandate? Say, hey, I, these guys will say, here's my menu, here's what I want, go get it. Or you say, You know, develop a relationship with the seller and Yeah, typically we're working with the seller, so yeah, 90 plus, I mean, you know, we, we have worked on some by side work in the past, but you know, I, you know, we like working on the sell side and So we're always trying to develop relationships with business owners and CEOs and people that might be looking to do a deal in the future. So, yeah, we're, we're mostly working with the, the seller. How do you reach out to them and stay top of mind awareness that John Taylor, BGSA is the company we want to sign with? Yeah, no, it's a great question. It's something that um You know, we're, you know, we're always trying to think of, of better ways to do that, right? So I, I think it's mostly about just staying in front of people over a long period of time because, you know, typically, I mean, if you look at privately held businesses, You know, on average, they might get sold every, say, you know, 20 plus years, right? Because, you know, uh, uh, you know, the typical trajectory is somebody, you know, starts off their career in a, in a corporation, usually a large corporation, they might go off and start a, a company mid-career and they're usually building up that business over, say, 2030 years and then they're looking to sell it around the time they might want to retire. So when they're kind of You know, maybe, uh, late 50s, 60s, you know, it's, it's funny. I run into business owners all the time that are, you know, kind of well into their 60s and 70s in some cases, and they're still not, you know, I'm like, hey, you interested in considering a sale in your future? And they're like, hey, I'm, you know, I'm not even thinking about it, which is kind of, uh, funny just to meet people that, um, You know, kind of at an age where you'd assume they'd wanna retire, but I, you know, I think a lot of these people, you know, it's a typical entrepreneur, they're, they like what they're doing, they're motivated by it. Um, you know, they don't necessarily want to retire, right? I mean, they can kind of set whatever schedule they want cause they're, they're the owner. So, um, But what's the market that they get into. I, I, I gotta figure out this like, is it, you know, you, it's easy to say, hey, I, I wanna work with that one seller goes like, well, look, I'm, uh, I want the, uh, I'm the entrepreneur type, right? serial entrepreneur. I wanna sell that and I get the highest multiple. And then there's a guy like you just mentioned, the 60 year old guy like. Well, I'm not even thinking about it. And then it's uh 6 months later, 3 months later, some life changing event, cancer diagnosis or kid needs to go to college, or wife just says, hey, I'm, I'd like you home, let's go travel. Right, yeah, yeah, yeah, there's all those things, which is why keeping in touch with people is, is the way to do it, right? So I think that, yeah, if, if there's, I mean, there's certain industries where we've done more transaction work than others, so. Getting to know the industry, going to the trade shows that that industry might host, um, you know, across the country, publishing research on, on particular industries, or, you know, a lot of it is just, you know, sending people emails and, you know, calling them every, say, like, you know, 6 months and you checking in with people, right? Yeah, so, so it's, it's all those things getting referrals, I mean developing referral sources with attorneys and accountants, so, um. Yeah, I mean, I, I think that there's, you know, there there's all different ways to, to find people, but I think it's all about, um, it just, just staying in front of people and, you know, eventually someone's gonna do something. So, is this very similar to like a real estate agent? They, they want to book the listing and say you get them under some kind of contract, and you have them for what, 6 months or a year to, to find a buyer? Yeah, that, that's right. That, that's right. Yes. I mean, typically, um, yeah, you're looking to sign a contract and, and, and, you know, kind of represent the seller in the deal and help them get the best terms overall and, you know, negotiate and find it, you know, negotiate a deal to the end. And so, yeah, I mean, typically, you're looking at 6 to 12 months to get a deal done. I mean, I mean, typically, you're, yeah, you're looking at closer to 9 to 12 months. I mean, really to, to get a deal close from start to finish because there's, you know, there's a couple of months of preliminary work. Um, the marketing takes a couple months and then, you know, and then even once you, you get a deal signed, I mean, you're looking at 90+ days of diligence, um, so, you know, it, yeah, you're talking about, um, Yeah, many months, you know, close to a year really to get a deal done. Yeah, how does like somebody want, it's like it wants to come in your role and say, I love what you're doing there. How do you get paid if it's just based upon kind of, uh, you know, transaction? I gotta find a buyer, I got a seller, or is it like real estate where dude, it's 100% commission? No, I mean, typically we're, we charge uh a a monthly retainer, so we, we, we cover some expenses, right? I mean, most of our compensation comes. a success fee at the end, you know, similar to a realtor, right? But, you know, we do, there is a lot of work. I mean, it's, it's not like in real estate, you could just, you know, a realtor's just gonna stick your house on multiple lists. I mean, obviously, they'll, they'll take some pictures and, you know, I don't want to minimize the, you know, what they do, right? Cause they do spend money to hire a photographer, position your home, but, but I mean, really, it's um there's a lot more investment that goes into selling a, a larger business because it's a very kind of proactive, that there's no like, You know, comparable multiple list service in, in, uh, the MMA world. I mean, there, there are some sites that where you list like smaller businesses, but, but typically it's, it's a very exclusive type process where each buyer's qualified beforehand. Um, you have to develop, you know, very comprehensive marketing materials that have a lot of specific details that have to be included to answer all the questions the buyer is gonna have, so. You know, it's, uh, there's a lot more time and investment that goes into it than, you know, marketing a house, right? So, um, that, that's why we You know, ask for, you know, some type of retainer, you know, you, you, I mean, our retainers aren't big. They might be 5 to $100 a month, uh, for 6 months or something like that, but, um, yeah, most of our compensation comes in the form of a success fee at the end. When, when you say investment advisory, do you, let's say, take an example, a company, 60 year old guy comes up, it's time to sell. I've got a $7 million dollar company, 1 million Ebi uh. Uh, which is pretty good, but he would get better if he did these few things, like just go acquired a couple of companies. Do you also help them maximize their multiple on that? Well, we, we do, yeah. I mean, in some instances, if, if there's some kind of, you know, no-brainer type things that they could do to help better position the company, you know, cause we've had clients where um we were in early conversations with them and they, they lost a very large customer that was a, a big chunk of their sales or um You know, they, they had a, a, a large return from one of their customers or they, you know, they ran into some type of financial or customer issue, which, which would make it very difficult to market the business, right? And we'll often say, hey, look, what we need to do is really focus on the business, focus on turning it around, focus on continuing to grow it, um, and then, then you'll be, you'll be in a much better position to get a deal done, cause it, it, it, you know, you know, we try to be upfront with people and say, hey, look, given, given Your current circumstances, this is where we think that, that the market would pay for it. So if you're not happy with that, you, you're better off just waiting and, and turning things around and work, you know, working on the business before taking it to market. Yeah, I gotta ask you about the top of your funnel. Yeah, I mean, is this still kind of correct what you're talking about on page 43. I took all these notes on here. 514 buyers contacted 98 NDAs, 14 uh uh indications of interest, 6 presentations, 2 letters of intent. Yeah, I, I'd say that's kind of an ideal type process. I mean, typically, um, you know, a lot of those are gonna be financial buyers, right? I mean, you know, oftentimes it, it's hard to find more than say like, you know, 50 to 100 qualified strategic buyers in, in most industries. So, um, you know, the majority of your buyers list is gonna be financial guys, private equity firms, um, You know, because there's lots of those folks out there. I mean, there's been a real proliferation in, in private equity groups in the last 1010 years 1 trillion dollars ready to go to work, yeah, or something like that. Yeah, yeah, it's, it's, it's, it's a ton of money, right? I mean, there's, there's a lot of money out there and people looking to invest in the, you know, privately held businesses that have good growth potential and profitability and so forth, so, um. Yeah, it's, yeah, but I, I'd say that's very typical. I mean, we like to go to a large group of buyers, get as many bids as we can, and, and present the, the owner or seller of the business with, with as many options as possible. I, I used to work for Intuit, so, you know, that's a lot of small businesses, but it was larger. Now, a lot of these guys just don't have their financials in order. What do you guys do for that? Do you bring an accountant in or a CPA in and kind of clean them up too also? No, good question. So oftentimes we recommend having a quality of earnings report done for the business. So quality, the quality of earnings reports, you can get them from, you know, major regional type accounting firms offer quality of earnings reports. I mean, typically you're looking at You know, 30, 40, 50 grand, to have that done and, and that they'll basically take the financial statements and it's, it's almost like a mini audit, right, where they'll go in and say, hey, these are the potential adbacks to the business, um, they, they'll look at the accruals on the balance sheet and just make sure that the uh financials really reflect the, the true profitability of the company. So yeah, I mean, we do recommend that we, we, you know, we look at financials ourselves, we ask a lot of questions about The the P&L, the balance sheet to make sure that, um, you know, all the questions that a potential buyer's gonna ask so that we know up front what, what any potential issues might be. Do these guys sign, you know, when they sign a document and they pay you to help them sell or is it, right? You said the 5 to 10K. I'm just curious about, yeah, yes. Yeah, and are these companies that they are looking for mostly private or some of them publicly traded? Like, you know, the kind of crap that was going on with the uh OTC markets with the PCOAB, the 21115C. Yeah, I would say, I mean, most buyers we talked to. are, you know, private equity firms are, they're looking to own, I mean, there are some private equity firms that, that take public companies private. I mean, you know, I mean, we, we've done a little bit of that work in the past, or at least I have with, you know, with other, you know, and other careers I've worked, worked in the past but um I mean right now we're mostly focused on You know, yeah, working with privately held businesses that are looking to have a, a buyer that's, that's gonna hold that company privately as well, whether it's private equity or strategic buy. I, I guess there could be some publicly traded um strategic buyers, right? So, so yeah, I mean, you could sell, you could sell a private company to a public company. Yeah, I, I, I used to do some capital raises in the OTC market and it's just with the 15C211 that came on, uh, yeah, it, it, it just There's so many, so much crap in the OTC market. That's I was curious about that. Most of them just go, hey, you know what, say $20,000 a year, you're paying the OTC markets, just go private. Makes sense, right? Yeah, right, yeah. You don't have any trading volume and your share price is crappy. So just go private, yeah, right, yeah. Why did you guys focus on supply chain? You've got the supply chain and that is that a Huge train trending uh industry that it's got a lot of different niches. It it is. I mean, it's obviously it's been in the news a lot lately, right? I mean, there's been a lot of issues around supply chain breakdowns. I mean, it's not necessarily the, the, the company's fault. I mean, some of the issues lie at the different manufacturing or raw material sources, but um Yes, supply chain, you know, trucking businesses that are trying to get products to market, you know, either to retail or manufacturers, you know, moving around raw materials and goods. So, um, yeah, I mean, it's, it's an important aspect of the economy. It's, it's a big part of the economy, but yeah, something that maybe doesn't get a whole lot of attention. Yeah, Amazon's charging 5% and Walmart's, uh, paying their drivers $105,000. That, that's right. Yeah, yeah, no, the, the, the, what a, what a trucker can earn these days, has gone up significantly, you know, get just because of some of the constraints, it's, it's hard to find qualified drivers, right? People that want to do, you know, there's all this news about how, you know, all these uh Trucking's gonna get automated, right? You're gonna have robots driving trucks and so it, it's not an industry that, you know, necessarily is, you know, seems like a good career prospect. But, but look, I mean, obviously, truckers are very important part of the economy. I mean, it's, it's how, you know, most products get, get to market and get, get to retail shops these days. So, um, you know, they're a critical part of, of the infrastruc Structure and, and they, you know, a lot of them are making very good money these days. What kind of niches in that industry are you looking for to, to, hey, I'm kind of looking for, you know, software technology that manages drivers and independent drivers or something like that. Yeah, all, all of the above. I mean, it's, yeah, it, it's an industry that, um, you know, we, we've done a bunch of deals in the past, um. You know, so, so yeah, I mean, technology, certainly, um, even, and then even more traditional uh trucking, truck brokerage, you know, uh, you know, asset-like type people that, that, uh, don't own the vehicles themselves, you know, maybe they're, they're brokering those types of services or people that own the equipment that's actually moving it around, uh, you know, so, so yeah, as well as the technology. And, you know, there's lots Lots of segments. There's, there's the, the trucking aspect. You've got, uh, that, that move ocean freight, you've got air freight, right? Um, so there, there's lots of different segments. Yeah. Do you, what kind of license do you have to have to be an investment banker sitting where you're sitting? Sure. So, so we have securities licenses. So Series 63, series 79. I mean, those are, those are the main, you know, state, um, you know, used to be the Series 7, but I guess the 79 has been. Become kind of replace the, the 7 for investment bankers and M&A advisors. You know, I'm really curious. I do a lot of work on LinkedIn and a lot of companies come to me saying, hey, I got this company doing this and Uh, great. Uh, it had, you know, I need to find a home for it. Do you guys pay bird dogs or commission or set that up or what? Yeah, I mean, we, we've worked with people that, that are looking to, you know, if they have potential buyers, I mean, we've worked with them in the past and, and, you know, show, give them, show them kind of different deals that we know are in the market or, you know, clients that we're working with. So are you allowed to like the SEC or Fen saying no you can't pay for dogs or or uh. Yeah. Yeah, I mean, typically if someone's out hunting for deals for a buyer, typically the buyer pays them a fee to do that, right? Typically they, they're on a contingent basis with the with the buyer so they'll get some, some small percentage of of the deal, um, but yeah, I mean we'll, you know, we'll sometimes share deal flow with those folks if if they know some good qualified buyers that perhaps we haven't connected with, um, so yeah, I mean those those those people can be very valuable. Yeah, this is, I mean, great conversation. We're already uh uh 30 minutes into it, and I just want to appreciate your time. And if you guys happen to get get on Amazon and get this book, uh Max finds your multiple. This is everything you're talking about is just acquiring companies that help you increase your multiple to get a bigger payday. Yeah. John Taylor, I really appreciate the time here on Top M&A Entrepreneurs. Sure, thank you. Thanks so much. All right, take care.