Jeff Vogel, Partner at Court Square Capital Partners; Jared Ruger, Partner at Bertram Capital; and Iveshu Bhatia, Managing Director of Private Equity at Audax Group, can all agree on one important piece of advice: your partner matters more than the cost of capital, so be honest with them.
“Things that allow you to communicate well will fundamentally come from having command of your business and being honest about where you're good, where you're bad and what you need help with,” Iveshu says. “There's a partner for everyone that's out there. … As long as you communicate clearly and honestly, you will be able to find the right partner for you.”
When making a deal in the M&A space, you have to remember you'll be working very closely with this team for several years, so make sure you get along with them both socially and professionally. Jared suggests speaking with several of their references, particularly executives who have partnered with them in the past, to see how they dealt with issues such as dips in the market in the past. If they have a similar approach to problem solving and share a similar business outlook, you’re more likely to find success.
“Small differences in the cost of capital or valuation, I think, are meaningfully outweighed by finding the right partner that shares your vision and strategy,” Jared says.
In this episode of Deal Talk with 7MA, Jeff, Jared and Iveshu discuss tactics for finding the right partner, the importance of having command of your business and the changes — and some things that have stayed consistent — in the M&A space during the pandemic.
“The greater command you have and the greater visibility and transparency you have in your business, the better position you're going to be in to not only run that business, but if you go to market and you want to find the right partner for you, you can answer all the questions that they're likely going to have,” Jeff says.
💡 Featured Guest 💡
Name: Jeff Vogel
What he does: As a Partner at middle market private equity firm Court Square Capital Partners, Jeff focuses on technology investing, particularly in software and tech services.
Words of wisdom: “What's very important for any investor that's coming into a business is that they’re backing a management team that has commanded their business. They don't have the perfect ability to predict what is going to happen, but they can demonstrate that in previous disruptions … this is how they were able to weather the storm.”
Words of wisdom: “We're all trying to find the components of a business that are yet to be fully harnessed, that we feel like we have a history and track record of successfully executing on, and by nature of that, can underwrite and see growth and opportunity there.”
★ Accept the changes — or lack thereof — that the pandemic has brought. While there are fewer new names coming into the market, existing names continue to fundraise at nearly the same pace as pre-pandemic, and even though the market did dip in the spring, deal making and investing has gone relatively unscathed.
★ Your partner matters more than the cost of capital. If you don’t share a vision and strategy with your partner, it’s not going to work out, so when determining if a new partnership is going to work, ask them the hard questions and talk to past executives they've partnered with to understand how they react to various potential scenarios (such as the market dropping).
★ Maintain command of your business. If you have command of your financials, your business drivers and your operating metrics — and you can demonstrate to people that you manage based on operational data — you will be successful.
★ Be honest. There's a partner for everyone, and as long as you communicate clearly and honestly, you will be able to find the right partner for you.
⚡ Episode Insights ⚡
[04:55] Be careful who you partner with: The men discuss small differences in the cost of capital or valuation, which Jared argues are meaningfully outweighed by finding the right partner that shares your vision and business strategy.
[08:26] Everyone’s reality is unique to their environment: Every company is being affected differently by the COVID-19 pandemic, and more specifically, now some are being viewed as pandemic-proof while others are not.
[16:09] A roller coaster reaction: There was a very dramatic reduction in deal flow in the first couple months of the pandemic reaching the U.S., but by now, Jared sees a meaningful increase in exciting, high-quality deal flow. And Iveshu thinks overall, deal making and investing has been relatively unscathed.
[23:34] PPP’s effect is minimal: Jeff’s portfolio companies weren't available to apply for PPP loans, and Jared said he’s yet to see a buyer willing to assume a PPP loan.
[28:44] Some things never change: Deals are still relationship-oriented in a pandemic environment, so while there are fewer new names coming into the market, existing names continue to fundraise at nearly the same pace because they’ve already developed successful relationships.
[31:02] Looking ahead is important, but hard to do: No company was able to predict this pandemic, but what’s important to investors is that they were able to weather the storm.
[36:13] Everyone’s seeking something different: Every deal is going to be different because no two companies are the same, but one thing that won’t change is the importance of finding a team that you can get along with for years to come.
[45:09] How great transactions happen: Great management teams have insight, visibility and transparency as to what's happening in their business and why it's positive or negative.
☑️ Let us know what topics you would like to hear about on Deal Talk with 7MA by emailing us at email@example.com.
Deal Talk with 7MA, a bi-weekly podcast by 7 Mile Advisors that aims to give listeners a look behind the curtain of the middle-market Mergers & Acquisitions world. 7 Mile Advisors is a middle-market M&A firm based out of Charlotte, NC, that provides investment Banking services and advise on mergers, acquisitions, and private capital transactions around the globe.