It takes nerves of steel to start a deal during COVID and exit it during the Silicon Valley Bank collapse, and today’s guests pulled it off. 

On this episode of Deal-By-Deal, host Greg Hawver is joined by Evan Gallinson of Merit Capital Partners and Jonathan Schilowitz of MFG Partners to present a case study of a successful relationship between an independent sponsor and a capital provider.

Evan and Jonathan, who recently partnered on a successful transaction, take listeners on a deep dive into the highs and lows of their transaction. Given that they started the deal during the uncertainty of the pandemic, they found that the relationship they built beforehand was key to maintaining trust and open discussions throughout the process.

This deal will not be their last partnership. Evan and Jonathan share that they have a few more things in the works right now.

Meet Your Guests

Name: Evan Gallinson

Title: Managing Director at Merit Capital Partners

Speciality: Evan joined Merit in 2005. He previously worked in Investment Banking with BMO Capital, William Blair & Company, and PriceWaterhouseCoopers, where he focused on mergers and acquisitions advisor work for middle market companies in a variety of industries.

Connect: LinkedIn 

Name: Jonathan Schilowitz

Title: Partner at MFG Partners

Speciality: Prior to founding MFG Partners, Jonathan was a senior investment professional at Partners Group, where he was focused on investments in the industrial sector.

Connect: LinkedIn

Acquired Knowledge

Top takeaways from this episode 

• How “independent sponsor” came to be. In 2006, Merit Capital found they were doing a lot of great deals with sponsors who didn’t have capital of their own. To bring everyone together, they coordinated a Fundless Sponsor Conference, which was well received, with one important piece of feedback: “don’t call us fundless.”
• Existing relationships help overcome challenges with new deals. There are challenges with any deal. Having past experience and rapport in successfully navigating deals, particularly in the context of remote communication during the pandemic, can be extremely helpful.
• Your metrics can signal your exit. Even when you have a whole playbook to keep growing a business, the market might send you different signals.

Contact

Connect with us on Facebook, Twitter, Instagram, YouTube.

This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

You are listening to Deal-by-Deal, a McGuireWoods independent sponsor podcast. Deal-by-Deal invites you to conversations with experienced independent sponsors and other private equity professionals. Join McGuireWoods Partners, Greg Hawver and Jeff Brooker, as they explore middle market private equity M&A to provide you with timely insights and relevant takeaways.

Welcome to Deal-by-Deal, a podcast for independent sponsors and others in the private equity community. This is your host, Greg Hawver. Excited for this episode. We've got an interesting one here. The last couple of episodes we've kind of done deep dives into some legal topics and things of that nature. For this episode, we thought it would be a fun idea to do sort of a case study or a playbook on sort of a successful relationship between an independent sponsor and a capital provider, kind of from start to finish on a deal. Today, we're happy to have Evan Gallinson of Merit Capital Partners and Jonathan Schilowitz of MFG Partners with us. They successfully partnered on a transaction recently and they're going to chat with us about it.

Just one other note, the idea for this episode actually came up last week when I was sitting in Jonathan's lovely offices and we were chatting and catching up for the first time. It kind of dawned on Jonathan that I had a connection to Merit, and Jonathan and Evan started texting a little bit back and forth and joking about how Evan didn't invite Jonathan to a golf event that we're having here in Chicago and this banter arose and I just thought it was a great example of a positive relationship here. This should be fun. I'm excited. Evan and Jonathan, for those not familiar with you all and your firms, do you want to give a quick overview, maybe starting with Evan?

Starting with me? All right. Merit Capital Partners, we've been around for 30 years investing alongside independent sponsors really since the beginning. I'm not sure we called them independent sponsors at the time. They were just crazy guys who didn't have money and the world has certainly evolved a lot since then. Going back to 1993, probably half of our deals or so have been with independent sponsors. The other half are doing direct with owner operators. We're currently investing our seven fund, a $550 million fund looking for deals, 25 million of enterprise value to a hundred million in enterprise value, and always excited to partner not only with the existing management team, but certainly with smart independent sponsors like Jonathan and Jeff at MFG.

Great.

Jeff and I formed MFG Partners about almost eight years ago. Both had similar backgrounds, banking and then private equity, and we had this idea to focus on the lower middle market to focus on founder family management owned businesses in the industrial sector, broadly defined. I think this was back when independent sponsors were called Fundless Sponsors even eight years ago. I'm not sure, maybe McGuireWoods coined the term, independent sponsor. I'm not really sure, but whatever you call us, that's what we are. Done eight deals as MFG partners, have successfully exited three, and have done a couple deals with Merit Capital, who've been a great supporter of ours. That's really us.

Great.

Jonathan, are you going to tell the world what MFG actually stands for? We're putting you on the spot here.

There you go.

You haven't answered it.

It stands for whatever you want it to stand for. It's actually a funny story. When MFG Partners was forced incorporated, it was incorporated as as Schilo Rahi, LLC. My last name, Schilowitz, and Jeff Mizrahi, my partner, but that didn't quite ring. It didn't quite roll off your tongue, so we came up with MFG Partners, convinced a person to release the domain to us as long as we do good things for this country, which hopefully we have. He completely released the name to us as long as we host our website with 216digital in Cleveland, Ohio, which to this day, still hosts our domain and we've been off to the races since, a cool logo and put a shingle out.

Greg, I think he's still coy about what MFG actually stands for. I don't think we got an answer, did we?

It's short for manufacturing.

Okay.

I like it. Was there a light bulb that went off when you were making the initial decision, kind of eight years ago to strike off as an independent sponsor? A fundless sponsor back then, there's probably less of a developed community maybe than there is now.

Yeah, so Jeff was doing it for, I think for a year and a half or so, needed a partner. He had identified a family office to start providing us with some working capital to get us up and running and approached me and I was thinking about maybe doing something more entrepreneurial and kind of just left at it with him. We've been off to the races ever since. We actually did a couple deals with a house within a family office in the early days, but we've developed a stable of investors such as Merit that has allowed us to go out on our own, fund our own working capital, and take that risk to really be truly independent.

That's great.

Greg, I will jump in on one thing Jonathan said about the terminology of fundless and independent, and this may be break use and someone at some point will correct me, but I will tell you in 2006, Merit Capital hosted an independent sponsor conference. Actually, we called it a Fundless sponsor conference. That's just because once again, as I said in my intro, we looked at our deals that we had done up to that point in time and we said, "Hey, we did a lot of great deals with these guys who don't have capital, but they're great partners. They find deals and how do we continue to stay in front of them?"

And we said, "Hey, let's put together this conference," and at that point, everyone we knew who was a funnel sponsor under that nomenclature was invited to this big event in Chicago, which I think maybe we invited 90 people, which Greg will laugh and tell us what's in the McGuireWoods conference. 90 invites out, maybe 45 or 50 people showed up, and we had some panels and some good discussions. And at the end of the day, I gathered everyone in the room and we said, "Hey, how'd you guys like this?" and they said, "Hey, this is great. We don't usually get to get in the room together," and then some guy raised hand was like, "But can you not call us Fundless?"

No way.

Okay, what do you want to be called? And someone in the crowd, and I don't know who gets credit for it, someone said, "How about an independent sponsor?" After 2006, that they held the Merit Conference five more times and we changed the name to the Independent Sponsor Conference.

Breaking News.

Breaking news.

That's fantastic. We're going to have to put that in the show notes to really drive listenership to this one. Find out the origins of the term, independent sponsor. I love it. I love it.

Merit Capital 2006.

Should have copyrighted it.

Yeah,

That's awesome. That's awesome. Yeah, I guess to quickly plug for our Dallas Independent Sponsor Conference coming up here in October, registration is strong and trending above the last couple years so far, and we now have no space limitations at the Fairmont, so we'll see. I think we capped it around 1100 last year at the Ritz and sky's the limit, so could be a fun one. Maybe we'll dive in, and again, we can call this a case study. We can call it whatever we want to do, but maybe we just kick off and give a little description of the company we're even talking about here, and defer to Evan or Jonathan, and then maybe talk about Jonathan, how your team at MFG found the deal in the first place.

Yeah, so talk about other conferences for a second. Jeff and I have gone to Deloitte Corporate Finance Conference several times and they actually do a nice job of finding companies, management teams who want to learn about the investment banking process, and I think several years ago, Jeff and I went down there and we met Kevin Rowles who is the CEO of Storage Solutions, and they were not in a process at the time, but they were down there to learn a little bit about the process, so we got to know them. We thought really highly of the business at the time and of Kevin, kept in touch with him, and we in fact, invited him out to Elgin Manufacturing to take a look at another portfolio company of ours, which we're actually in with Merit as well, our first Merit deal, and to take a look at the pallet racks within our warehouse to see if there's a more efficient way to lay them out. Nothing really came of it, but we were able to stay in touch with Kevin through that process.

And I think that gave us an edge in the overall process once the formal process was launched for multiple reasons. One, because Kevin already knew us and felt comfortable with us, but two, this was a very unique process, which was launched in early 2020 and I believe we submitted an IOI in March of 2020, and by the time they had management presentations in April of 2020, the world was completely locked down and nothing could be in person. From what I understand, we were probably the only people who actually met them in person because we had that prior relationship, so I think that played a part in terms of our edge in being able to source this transaction.

That's awesome, and that process kept going through, sounds like the process started before the lockdown and kept going through it. That's interesting.

Yeah, I'm sure they had a lot of conversations on their end, should they or should they not stop the process, but they didn't, company continued to perform and they continued to keep the process going.

Got it, so it was a relatively wide process, but you had the inside angle because you knew them personally and they knew you guys were in the weeds operation-wise because of that visit to talk about pallets or whatever it was. That's interesting. You got the deal under LOI. What were kind of the next steps, and how did you connect with Evan and his team?

We got it under LOI and the world was completely shut down. Had talked to Evan about it, and Evan was going through a process, wasn't sure if Evan was going to get there, so continued to stay in touch with him, spoke to a bunch of other investors and I think the world-

Earmuffs, Evan. Earmuffs. He'd talked to some other investors.

You know other people?

Exactly.

I can't believe that. Come on, Jonathan.

I think there was the Steel Solutions transaction going on and some other things. I'll let Evan talk about from his side, what was going on, but talk to other people. It was a crazy time. People just were completely, a lot of people were just not sure where it was going. I was doing this whole transaction. I live in New York City. After about a few months of being locked down in New York City with little kids, we actually moved up to Vermont, so I was doing this from Vermont. I think Evan was down in Florida, I think drove all the way down to Florida, and it was a really strange time. We continued to push forward, our funding diligence, but continued to give Evan updates on the process as we continued to learn more and more, and I guess maybe I'll let Evan talk about his internal process in COVID.

Yeah, we all know what was going on in the world. We were no longer in our offices. We were going through a sale of a company at that time called Steel Solutions, so they were serving the same end markets. They were building out mezzanine systems in the warehouse space. And Jonathan's telling me about this deal he's buying. I'm like, well, we're selling, so we're not really buyers in this market. We're selling right now, and certainly, as we got through the March period of time, we're like, we don't know what's going to happen here, but one thing we did know is as we're selling, our company is performing really, really well, and part of us was like, we would like to stay in this industry, but this is a good time to get an exit and if buyers really want to buy this company in April of 2020, we're going to go through with it.

We ended up getting that company sold and Jonathan was calling me up on the side and I said, "Hey, I like the business, but I think you're paying a little bit too much for it, given the uncertainty in the market. We just don't know right now," and I think Jonathan, you ended up hiring a Q of E firm, and maybe we ended up even co-sponsoring that. I can't remember exactly what we did, but at that point, the Q of E, I remember that big moment when I was walking on the beaches down in Hilton Head because we were once again not in offices, so I took my family down there, and I'm on the phone with Jonathan and he's like, "We just got the Q of E back." He's like, "The numbers are XYZ," which was a little bit higher than we thought. Once again, the industry was booming.

So I think it was a complicated time for the investment bankers, for the company management team, everyone just kind of figured out where their actual EBITDA was, but once he told me those numbers and knowing what was going on at our company that we just sold, that this industry was booming, we're like, "Hey, they're really tracking much higher than we initially thought." Therefore, the price that Jonathan and Jeff were paying sounded a lot more reasonable, so once he told me the number in the Q of E that they were calculating, I said, "Jonathan, we're doing this deal." Jonathan hadn't showered in a couple days because he was up in Vermont out of New York at a place with no water. What was the story there, Jonathan?

Yeah, so by the time we rented a house, houses were like, few and far between, so we ended up renting a house, and my wife is actually from New York City. We rented a house that had a well and the well had caved in, and so to find somebody to drill a new well in the middle of COVID was not an easy task.

You guys fought through adversity.

Exactly.

To get the deal done.

Yeah, I'm on the beaches of Hilton Head. He's dealing in Vermont with no water and we're like, but we're doing, this deal's happening.

You guys decide to do the deal. Green light, let's go. How did you all work with one another as far as negotiating the deal with the seller? And then, were there any bumps in the road on that front?

As all deals, there's certainly bumps in the road. This was a complicated deal. It was an ESOP transaction, so we were buying an ESOP, and that's not an easy feat to begin with, so there were certainly bumps in the road. Figuring out how to get our senior lender do a site visit was certainly a challenge. Some of the data that we had to work through was certainly a challenge, so I would say that it was very complex deal. I think we have worked with Merit in the past was certainly helpful.

I don't think that, since people were not meeting people face-to-face, certainly going to an investment committee with your independent sponsors a lot of time's a part of that process, and the fact that we had already done a deal and had been through that process was certainly helpful in this weird period of time. The fact that we had done deals in the past was certainly helpful, and I think MFG and Merit have a rapport and were able to work through the issues that came up, and there were several along the way, mostly around how do you wind down an ESOP and the complexities there.

We're fortunate that Merit, we had been involved with a couple ESOPs before, so we brought that knowledge to the table. I think a couple things. One is, we had done something in the industry. Our team at Steele that we just sold had known this management team and said positive things about them. We knew MFG. I had worked with Jonathan and Jeff for a couple years in our other investment and we knew they were great people, so it was just, everything's lining up. We got great people around the table. We've got experience with the ESOP and we're just going to fight through this strange COVID diligent period of time.

Jonathan, I think the biggest issue probably ended up being how the earnout was originally proposed. Merit does not love earnouts, especially earnouts that are earned in the first year and paid out shortly thereafter, so I'm not sure Jonathan and Jeff loved the fact that we went in and said, "Hey, we got to renegotiate this." We ended up restructuring the earnout where some of it was earned initially, but a lot of it was pushed to, actually to our exit, is how we ended up structuring it. Jonathan, if I remember the range that we put on our exit where it actually would be earned.

Yes. We never thought we'd get close to hitting those numbers. We're like, oh yeah, we'll just put it on the back end. Yeah, if we paid this out, we'll be more than happy. Well, we knock on wood as we tell the story a little more, we certainly paid it all out and were more than glad to do so.

We can cut this out if it's too controversial, but how did you, Jonathan, navigate the idea? You had already baked in that earnout with the seller and you had to walk it back a little bit?

Yeah, that was certainly a complex situation. I think the bankers, there was definitely some off-color comments being made, I'm sure.

We see that a lot in that there's always the tension of trying to lock up the deal with the seller, but then making sure that, that term sheet works for the capital of riders and the more detail you've got to put in that M&A term sheet, the more risk you run of having a term that doesn't work for the capital of riders, so that's why I have.

I think the reality is the world at that time was such a weird place. The lenders, and we did develop a good working relationship with Deloitte who was representing the sellers as well as the management team, and I think everybody recognized it was a weird time, and I think everyone by that point was committed to get a deal done, and the fact that Merit has a unique capital structure where they can do a little bit more mezz debt and a little less senior, was probably helpful in being able to renegotiate the term sheet because we didn't necessarily need to rely on a senior lender as much, which at that time, probably was harder, just that unique period was a little bit of a weird period, so I think everybody recognized there was certainty of a deal getting done, and I think once people realized that and that we were genuinely not playing games, we were genuinely trying to be creative to find a constructive win-win situation, I think we were all rubbing in the same direction.

I think management wanted to get the deal done, the bankers wanted to get the deal done, both MFG and Merit wanted to get a deal done, and it was really just trying to find a creative solution to get that deal done, and ultimately, we did create a earnout structure where I ultimately, because of the returns that at the end of the deal, they actually made more in this than the original earnout only because what we did was we gave half of a cash upfront in the form of first year performance and gave them a chance to earn more than the other half that we cut them back, but gave them a chance to outearn upon an exit based on an MOIC return, and the returns blew through every single one of those hurdles. The management team ultimately made more in this construct, the initial construct, but it was certainly a stressful period because we had to explain to them why we were renegotiating the deal.

I agree. It wasn't controversial. Fortunately, we had really good people on both sides, and I guess in summary, just everyone wanted to get a deal done. Outside of COVID, this ESOP, they had plans to grow and they were limited in what they could do with the ESOP, so I think Jonathan and Jeff built a great relationship with them, having the advantage of meeting them before COVID hit was good, and they talked about culture a hundred times every time we got on the phone with them, how important that was to them, and then I think our experience in the industry, and they were able to check on Merit based on our investment in Steel, and I think they knew they were around people they wanted to work with and we were too, and we were going to work through this in this strange times, and I think we're all glad it happened because I think everyone came out winners in this one.

Got it. You closed the deal. Tell me a little bit about how MFG and Merit and management kind of all interacted on the board and otherwise during the hold period. Who was on the board and what were those interactions like?

Yeah, so it was a combination of both Jeff and myself from MFG, Evan and Lauren from Merit. Evan and Lauren had brought in an advisor from Steel Solutions, Mike Thelen, who was the founder I believe, of Steel Solutions. He served as an independent director, so that was the board, and I believe Kevin, the CEO, may have been on the board, and Craig, the founder of the company, was the vice chairman of the board, his heirness, and I'm not sure if he technically was on the board or not, but he was certainly at all the board meetings.

Jonathan's passed by that, but there was a lot of time spent on determining his title, and they came up with his heirness is what they... He was the classic old school salesman and he built obviously, a great business. He was the guy out there who could close any deal, and I think they called him his heirness and I think he said as a joke, but we may have even documented that Jonathan, as his official title. If not, we should have.

I love it. Love it. How long did you hold the company before you decided to sell? Was it two years, three years?

Well, we didn't decide to sell. We closed the deal in November of '20. We launched the process in September of '22. We launched the process less than two years into it, so I'm trying to remember when we actually decided that we were going to actually formally launch a process. Was it down in Florida?

Yeah, we were probably interviewing bankers in June of '22, so probably setting it up right before then. The company was just hitting numbers left and right. Every month was better than next. It was just an amazing run. The company did a great job. We pushed them hard to grow their headcount, build up internal automation experience, grow their sales team, so those are the things we were pushing at every board meeting. And then, Jonathan and Jeff at MFG, and then your team really pushed acquisitions, which we got a couple acquisitions teed up, so the timing all kind of came together where basically, once we got those acquisitions close to closing is when we really decided to hire the investment bankers and go to market. I think that whole happened in the middle of '22. Bought in the end of '20, middle of '22, we closed those deals. We're in the market by the end of '22.

We had closed two pretty important transactions in '22. We bought a business on the West Coast in the Inland Empire, which is the densest area, I believe, in the country for warehouse and distribution centers, so that was strategic in the sense, giving us a foothold on the west coast, and we bought a company down in Nashville called Emmitt. The company was already selling some automation projects. They were growing in organically hiring people, were pushing to hire people, but we acquired a business down there that allowed us to accelerate the adoption of, or internal sales for automation, which is obviously a very hot area these days, and I believe a lot of private equity firms thematically are trying to play that space right now.

When MFG and Merit were thinking about who had what roles as you're growing the company, were acquisitions, was that MFG's purview? You guys were out there doing that or was everything kind of side by side? Side by side on the board, side by side on M&A, et cetera?

Jeff and I came from more traditional private equity firms. So, think of ourselves as running everything as a real private equity firm should be run. Evan's a great partner in the sense that he allows us to day-to-day operations, and then Merit certainly stays involved and is always involved in joining the weekly calls. It's certainly on the monthly financial review, but from a day-to-day operation, Evan and Merit kind of allow us to do our thing and really be that point to operate because sometimes it can get confusing if there's multiple people, but that's kind of how we viewed it. I don't know, Evan, if you had a different view.

We work so well together on both this, Steel, and Elgin. I think you guys definitely take that lead role and then you say, you'll give me a call like, "Hey, we get maybe have this issue. Why don't you haven't you and Lauren, why don't you go down, see if you can help us in this area to push this along, maybe have some talks with one of the executive, one of the managing team members, and let's get this all on the table, whatever we need to get done." I think we worked really well together on who was the right person to jump on something. I think we, Jonathan and Jeff, like I said, I think were more involved with the CFO and getting the financials prepared and certainly on the acquisition side, and we spent a lot more time, kind of higher level really on the working with the investment bankers and getting our story straight, but all in all, I think we really view ourselves as one team, and we all get on the phone. We talk all the time and it's like, okay, who's going to do this? And usually, it's Grogan who would get to do it though, Jonathan.

That's right. We've started to build our team and John Grogan is a member of MFG, who's been with MFG almost since day one, and this was his deal and he worked on it as well.

Awesome. Moving back to the decision to sell and I guess, June of 2022, you mentioned some of the drivers as far as when to sell, it was just hitting so many metrics and your M&A strategy had kind of fallen into place. Any other pros and cons that you guys were thinking about when you were thinking about making that exit?

It was interesting because there was another similar company in the market at the time, and it was unique because we thought that, hey, we'd follow them in the market and they'd set a precedent setting comp, and we kind of thought we'd follow their lead. For whatever reason, that process got pulled, so we were the only game in town. I would say that was unique. I don't know, Evan, if you disagree. That was certainly a wrinkle

When you hit your 5-year EBITDA in 18 months and then they're going well past that, they certainly make the decision that this is, we've overachieved of what we thought initially. I think we're eyes wide open when we got into the process. We were hoping that other deal would get done, but we also were pretty still bullish on the market and we said, "Hey, if someone gives us a crazy price, we'll do it," or a reasonable price or price we like, however we want to define that, but we're willing to hold onto this, and we were serious about that. I think we looked at a lot of different things of other acquisitions. We actually had another deal under LOI that would've been a really nice add-on as well that we said, "Hey, if this deal doesn't close, we'll go get that deal done, and we'll just continue to grow this business." I think as private equity investors with institutional investors, it made sense to go check the market out, and then we were going to make the best decision, and in the end, we obviously hit the price that we wanted and closed the deal.

I think that's a great point. It was a truly credible threat. We did not need to sell. We had a whole playbook of how to continue to grow this business, and so there was no weakness from our side of having to sell whatsoever, but the other thing that happened again was of the debt marks completely changed in the middle of the process as well, which was interesting.

Yeah, so if you would've kicked it off in June of 2022, yeah, it would've looked different by October, November, December. What was your mix of strategic versus PE buyers? Or potential buyers?

I think that was what was the benefit to us is we had a good mix of both, and ultimately, there was good strategic interest in it, which ultimately led to the process being very competitive, and I think that had it only been private equity, maybe things would've been different, but the fact that there were a bunch of strategic interests who are much less dependent on the overall debt market, enabled us to run a pretty good process.

Great.

Yeah, everything in life can't be perfectly easy. This company hitting numbers every single month and getting the acquisitions closed and everything was going smoothly, and then hitting that debt market debacle, that was pretty stressful. It happened at the worst time, but we were fortunate to have a couple serious bidders stay in there and help us march towards the close.

Sitting here in May of 2023, it's not that things have jumped completely back to normal with the debt markets, obviously. Turns out, looks like making the move might have been the right thing, and then without going into details, Jonathan, it sounds like your various hurdles on the promote were hit, so you were fully aligned with making the exit, or was there any tension as far as were there additional hurdles or things you wanted to hit before you exited?

He hit them after three months.

That helps with the alignment, I would say.

Thankfully, every hurdle was met. There was not one hurdle we did not achieve.

Got it. Got it.

Greg, there was nothing controversial there. This one was as easy as you could imagine.

I know.

Exactly.

That's why you guys are such good buddies and texting each other and everything. I know how to find a success story for this podcast. Awesome, so you make the decision to sell any major bumps in the road on the sale process?

There weren't really many bumps in the road other than the debt markets changed, but fortunately, we had a bunch of strategic interest, so that really did not impact evaluation. The one thing that happened, I remember, so we got through... One weird thing was that they won the 2022 audit done before we closed and we signed the deal, I forget, we signed the deal in middle of January, and they wanted it... We signed the deal in the middle of January of '23, and they wanted a 2022 audit done. We're like, "Are you serious?" And they said, "Not only do we want an audit at the operating company done, we want an operating at the holding company." We're like, "There's nothing interesting at the holding company." They're like, "We want it done."

Greg, I'm usually a pretty even keeled guy, but if you wanted to see me lose my stuff, when the banker told me that, I was like, "Do these guys not know how to do a deal? They want an audit done? It's January 15th, that means we're not closing until April. This is ridiculous. The deal's dead." I obviously completely lost my mind. I'm just like, this doesn't make any sense. Thinking, of course, as a pessimistic private equity guy, time kills all deals and something's going to screw, this is going to get dragged out. Something bad's going to happen. In the end, we found the, giving them a plug here, Jonathan, the best auditors ever at CBIZ, to crank through an audit in the fastest time ever.

They moved their entire schedule around with a bunch of different things and they threw a full team on it. They really moved mountains. We hit the deadline. We actually, at the end, it was HSR. I believe HSR expired a day after we finished the audit, so it was actually HSR.

It all came together at the same timing. It was amazing having the audit. We thought we were going to get through HSR and have to sit around for another month, but these guys came through.

One last wrinkle was, we get through everything. They have four days to close, so I'm just looking at my calendar here. We got everything to them on March 10th. They had everything, so they had four days to fund. My birthday's March 11th. Super excited about that. What happens that weekend? Silicon Valley Bank and First Republic, Credit Suisse, and we're like, holy cow. Now this.

We got to give kudos to the buyer. They never really wavered. They had some weird requests, but they really kind of worked through all these, the debt markets fallen, the strange thing at the very end with the banks. Who knows what those internal boardroom conversations were like, but they were always, I think, pretty respectful with us in the process, but behind closed doors, Jonathan, Jeff, Lauren, and I were losing our mind like, oh my God. How is this happening to us?

What bank should we have the money wire wired to?

That's the other thing. Exactly. We were so concerned that our bank may not be able to, it may not exist when they send the money over.

Yeah, you started the deal in COVID and you exited during SVB, so you've got nerves of steel, that's for sure.

We got it all in this deal, huh?

This was fun. It was fun to kind of go through this deal, and I know that a lot of us deal lawyers and independent sponsors and PE firms, we're all kind of deal junkies, so it is fun to hear the war stories. What's next for Merit and MFG together or separately? How are you guys looking at the next couple months ahead?

We're actually looking at a couple things right now together.

We've got a buy-side search going on. We've worked so well together up to this point. Let's keep the good times going, so we've got a deal we're in management presentations with that we like a lot and hopefully, we can get another deal closed and continue this wonderful relationship.

There we go. All right, guys, really appreciate you taking time out of the busy schedule. This was fun, and I think, again, our listeners are going to enjoy it. Thanks again.

Thanks.

Thanks Craig.

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