The Wise Exit

Cashing Out Podcast | Episode 16 | Jeff Durso

Todd: [00:00:00] Welcome to the Cashing Out Podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve. Today I have a special guest, fellow podcaster and serial entrepreneur with multiple exits under his belt, Jeff Durso.

Jeff is a Massachusetts native who after attending MIT. Sold his first business at the height of the internet bubble in 2000. We'll hear how a strategic partner can turn into an acquirer without any notice and how a well-timed silence during the subsequent negotiation with that buyer was worth an extra $1 million to Jeff.

On his second exit, Jeff describes the incredible hurdles he and his team overcame to get multiple investors in. With signatures in place to not blow up a deal. Jeff shares his lessons learned on keeping your cap table clean and how time is not your [00:01:00] friend in any m and a engagement. So let's jump into it. I hope you enjoy my conversation with Jeff Durso.

So Jeff, thank you for being here today. I really appreciate you taking the time. I got really excited when Brian told me about your background, having built and launched multiple companies and had multiple exits. I know the stories that we've talked about briefly are gonna be very valuable to our fellow founders who are thinking about potentially selling their businesses, uh, someday.

And you know, when you decided, Hey, I'll take this time slot. I, I really had no qualms about bumping Mark Cuban from this spot, so I really appreciate you taking the time.

Jeff: No, of course. Yeah. Thank, thanks Todd for having me. I'm, I'm excited to join.

Todd: So, because this podcast is always a really about the exit, right?
And the advice that founders give, we tend to skip over the building of the companies. But I think when you and I spoke, there are two situations in particular that probably want to jump into and that you can [00:02:00] certainly, uh, share your guidance and advice around M&A. And so maybe. Take us back on, on the first company, the one that you sold at the height of the NASDAQ.

Jeff: Sure, yeah. And I think there's an interesting framing here too, right? So I did a recent, I recently did a podcast called Begin With the Exit in Mind, which I didn't learn until after my first company, right?
So when we started my first company, we weren't really thinking of exit except maybe, maybe we'll go public someday in this distant future, right? Whereas in the second company, we were very deliberate about our exit strategy from the very beginning. And I think that'll, that'll come out as I talk through it.
But sure, if, if we go back to the first company, so we were right when the web was getting. Um, we had spent every weekend kind of coming up with ideas for how to get rich quick on the web, and came up with some incredible ideas. No one took notes. So we started over every weekend and at some point we were like, why don't we just do picks and shovels and [00:03:00] actually just build a consulting company?

And very quickly we found our niche within the financial services space. So Thompson Financial was looking to do some strategic moves in the web space. When we told them we could build some of these products in a matter of weeks instead of years, they jumped on that opportunity. So that was. Incredible partnership that we worked on and built some, you know, just some incredible web properties very quickly that that ramped up to millions of dollars in revenue like almost overnight.

And again, that created a blind spot for me cuz later I realized it was cuz Thompson had like all of Wall Street on the Rolodex. So anything we created they could sell immediately. Um, but that's kind of how it went. And so we built a lot of momentum, um, up through about 2000. in our strategic planning meetings, we said it's really important that we go all in on the.com space because that's where the future's coming.

So that, that was, that was one thread that we were doing, uh, going into 2000. Um, another thread was we were looking at, uh, venture raising, venture capital, but we were opening some potential acquisition [00:04:00] opportunities. And, um, one Friday afternoon, this was not, I did not know that this was gonna be a big day ahead of time, but this was, uh, March 10th of two.

Um, my, my partner reached out to me from New York. He said he was stuck in New York and he and Sam, my brother, was my third partner. Were gonna go to talk to this company that was thinking of acquiring us. But it was, it was pie in the sky. We didn't, we didn't think it was really serious, but he said, you know, put together a PowerPoint.

We talked it through, you know, give him three bullet points, give him one to cross out, which would be intellectual property cuz we're a consulting company. So I literally put together a presentation, put this big fat, you know, $6 million thing to, for them to put a line through called Intellectual Property.

The other two bullet points added up to like 9 million. And you know, fast forward to this meeting, I think it was like 3:30 PM in this conference room with this company. And we're actually talking Turkey and going through it and we get to that slide with the pricing and he crosses out the intellectual property, kind of scoffs at it, but not in a bad way.

Kinda like looks at that and he stops and he is like, [00:05:00] yeah, I guess we can do nine. And stunned silence at that point. but this is what's interesting about silence, right? So I think from our perspective, this was supposed to be any other Friday and now suddenly we had this offer for 9 million on the table, right?

AndI think he might have interpreted the silence as disappointment. So at, we didn't break the pause, we just sat there, kind of stunned and he came back and said, or 10 million. And then at that point, that was, that was how we made our deal. Like literally the moment that NASDAQ was hitting. It's relative high.

We were, uh, shuttering the.com plans and, and doing the acquisition path.

Todd: Oh, that's fantastic. I mean, there's a lot in that story, right? So first you've got some inbound interests that you're not, sounds like you're not even really aware of. It's your other partner and your brother and, okay. You're gonna, I guess, pacify this conversation with a pitch deck.

Yeah. And in some form in that pitch deck, you're gonna share how you think about valuation and [00:06:00] knowing that this is gonna be a negotiation. You put in an element. They need to throw something away, so we'll give them this piece of the puzzle to throw away. And like, like clockwork, they do it. Exactly. And then sitting at a negotiating table that you really didn't think was gonna be a negotiation, you now, uh, you're stunned at an offer and they take that as disappointment and up their offer just because of the uncomfortable silence.

Jeff: Yeah. We were stunned that because, you know, if you go back about six months before, our line of credit was tapped. Our client was late paying us at one point, so our line of credit's tapped. We've got all my credit cards up. I mean, we're like on the verge of just getting financially wrecked. So to go from that point to like, okay, there's real money on the table here.

That was a pretty crazy shift. Um, Over the course of a few months. Right. So this meeting, yeah, I had known about them. I had know there was some interest there, but there was normal that my partners and I, I would call him all, I'd call him sometimes and be like, Hey, I can't make [00:07:00] this client meeting. Can you go, here's what we need to talk about.

Or he'd do the same to me. So this was just another one of those meetings until it wasn't .
Todd: That's fantastic. I liked the beginning of your story. You talked about you're gonna build a company, right? You're gonna make money and you don't really have the exit in. , and whereas in one of your next ones, you do have the exit in mind.

You're planning it out. Yeah. What hits me is that you didn't have investors on this first one, right? You guys were just saying, Hey, how do we catch lightning in a bottle? And you figure out how to do that, but you don't have that external pressure of like, Hey, we need liquidity in, in three years, we need you working towards this valuation.

It was right. You guys seizing a moment, right? And yeah, bootstrapping, right, which all of us entrepreneurs have gone through and that is, that is a real struggle for yourselves, your families, right? To make those decisions, to take all of that risk. So that's awesome. That it paid out and it paid out at the height of the Nasdaq.

Right. People are throwing money around. Yeah, but you still have to ink that deal, Jeff. So can you [00:08:00] talk me through that?

Jeff: So I remember on that Friday afternoon, so I took a, I took a trip by the Acura dealership to visit my dream car that was just sitting there roped off.

Todd: That's a little, that's a little different than your brother's dream car though, right?

Jeff: So, yeah. So yeah. So I laugh cuz he had, um, when we had started selling years earlier, when we were doing cold calling, his motivation, he would have like certain levels of how effective was his day. And at the highest level was a, a red Ferrari convertible with tan leather was the, just this stock image that he had taken out.

And he would look at that all the time. And so you fast forward to now we're actually, we've got a real deal going. Right? So for me it was the Acura nsx. I went to the accurate dealership, couldn't, couldn't cross the rope line, right. But I could look at this car that was just sitting there, like, just waiting for me.
But I'm like, all right, but now this deal has to close before I can actually make that happen. Um, which God, that's when the pain began.

Todd: Yeah. Yeah. And so how long was that process? [00:09:00]

Jeff: Okay, so it started March 10th. We signed the deal on June 14th, which was when we could announce it. Yeah. Which that was a big pressure release because, you know, we had like 15 employees that we literally couldn't tell that anything was going on and they knew stuff was going on.
Yeah. Yep. So that was a three month period of, of crazy emotional ups and downs that we had to act like nothing was going on. Yeah. Um, and then the deal actually closed on July 5th. And, I had my Acura at July 6th, 9:00 AM .

Todd: That was, I learned . I like how you jumped to the, to the result, the Acura. Oh yeah.
That's awesome. But yeah, you, you achieved something from that, that March 10th did you say, was, was basically an loi, right? You so you know, purchase price. Yes. There's the intention. Yep. We're gonna move forward exclusively with this group. Great. Now you've gotta continue to run a business. And run what is a full-time job and m and a process to get through even when you have the buyer.
Right? All that due diligence, [00:10:00] everything. They're digging in all of the documentation. Did you have any support along the way to get you through that, that three month period?
Jeff: Yeah, so fortunately my, my brother has more of the, uh, psychotherapist mindset, so, and, and well, and the picture of the red Ferrari to help motivate him.

Right. What happened is after we inked the deal, you know, which was a very quick meeting. Yeah. Like this was probably like an hour and 20 minutes meeting, and now we're walking out with this, you know, with this 10 million deal. At that point, that's when the cfo and the lawyers, multiple legal teams get involved and you've got like a hundred page document being redlined on both sides.

Mm-hmm. . And then what also happens is that emotions start flaring up on all sides. And not just among us, but among these professionals who it's their professional ego. It's like their ego's on the line. Yeah. So when their counterparty insults 'em by mistake, they get upset too. Sure. And a lot of the deal was working through the issues.

And this was again, my brother, Sam being the chaperone of a lot of this. [00:11:00] Helping bring people back to the table and saying like, let's step away from all of this ego and all of this emotion to figure out how do we solve these problems. Right? So we had a few details that had to be, you know, that that literally could have been deal breakers to the point where our law firm, called us and said, you guys need to walk away from this deal.

and we called back and we were like, and imagine it's May of 2000. Like you see the writing on the wall that the.com thing is like just ready to go. Yep. And we've got this deal going. It's like we're not walking away from this deal. We're, we're moving forward with this. Not, not to mention the company acquiring us was a perfect fit for us to continue to support our clients.

Sure, sure. There was a million reasons for us to do this. So it's like how do we get back to the table and how do we get past whatever stupidity is trying to kill this?
Todd: I don't know your exact situation, right? All of the personalities involved, but I love the stories where there's a business development relationship, so kind of the product or service is already really well understood by the acquiring side.

So when [00:12:00] that decision to buy you, you're not necessarily stepping on someone's toes, right? Like, oh, I was supposed to build that product, I can't do it. So they're gonna go buy this group, but there's already been kind of the dating period. And then yeah, the corp dev group comes in and says, Hey, it just makes more economic sense.

We can leverage those customers better to our own advantage, their strategic value. So if you were walking in saying, Hey, we've got kind of this new business model that's working really well. I could see how there are certain people, certain divisions going, wait a second, who's making this call? Right. So you gotta get a lot of people on board to get something over the goal line, nevermind the purchase agreement and, and all the legal work, right.

And negotiation that goes into that.

Jeff: So yeah, that's, that's huge. Like, so I think for us that's a good, that's a good way of framing it, because for us it was like a shotgun wedding. Yeah. Right. So we just kinda showed up. It's like, great, let's get married. The company had just, that bought us, had just gone public like three months before.
So they're like, cool, our first acquisition, right? . Oh wow. But obviously when they brought it out to their wider [00:13:00] team, they're like, well, let's think about this. You know? So now of a sudden they, I can imagine from their perspective, like, okay, it's a Friday afternoon now suddenly we've got a, an active deal on our plate.

What do we do with this thing? So to your point like that, that hot potato would've been a lot less hot if it had been a longer cording process or if we'd had a business relationship for a long period before that.
Todd: And for you also. Right. So are you going to work for this acquirer for a while? Oh yeah.
And transition the business. Absolutely. So now you gotta get to know a whole new set of people, right? Is this the right fit for you? I guess that's kind of trial by fire.

Jeff: That's an interesting story too, because, you know, so we. Can you imagine? We're like often an island here. We've got 15, you know, rag tag team of people just doing our thing and we had no idea.
are we really good at what we do or are we amateurs? Like you literally have no point in reference, right? And now suddenly we're getting acquired by this much larger company. And very quickly it turned out that they treated us like rock stars. They loved us. And, and the weird thing that happened too is it was like a [00:14:00] reverse acquisition.

From a staffing perspective. We had been getting pressure from our client like, Hey, your bench, you know you're gonna grow your bench. Like, so we're a 15 person company. They wanted 50 people on this team, and. They were pressuring us. And when we called 'em up and said, yeah, we're acquiring and we're gonna be able to increase our, you know, team size to 30 people overnight, they were ecstatic.
Oh, that's awesome. And so it was like a reverse, like we had an office 10,000 square foot office with 15 people that suddenly just filled up with all of the people from the acquiring company. It was like the best people from the acquiring company. It was a, it really was a match made in heaven. I mean, it was, it was phenomenal.

Like there was so much cultural fit there that we kind of knew. originally made the deal, but to watch it come to fruition was pretty exciting.

Todd: When you put that initial slide together around your perception of valuation, were you taking into account, right, how your clients would respond when you've got a bigger bench and more resources or, or taking into account how they would leverage what you were bringing to the table?
Jeff: A little bit, but we [00:15:00] didn't realize how valuable it was till we actually inked that deal. Yeah, right. Because I think for us, the real thing pushing us was that we. We were pretty excited that we had run what we thought was a successful company. We were running like 34% profit margin. You know, doing great work, having great growth.

But whenever we started talking to venture capitalists, They were throwing this very bizarre logic at us. Like we had to, they didn't care that we were pro profit was like not a word in their, in their vocabulary at that time, cuz this was the.com explosion. We needed to prove to them that we could take $8 million of their money and lose 10 of it

And we were kind of scratching our head like, That seems like a recipe for blowing the company up. And in hindsight, that would've killed the company if we had taken venture capital that would've killed it. So to be in a room with a company that's similar culture values to us, but further down the path, and then to your point to realize that, hey, this could help us solve this urgent problem of the team [00:16:00] issue.
it was like everything just lined up for us. It was a no-brainer.

Todd: That's great. Right. My first sale, we really left a lot of money on the table, so that's where this question is coming from. And we left money on the table cuz you just didn't have the insight into the strategic value of this acquisition.

You know, we did it with a business broker at the time, or an m and a advisor. Do you think you guys left any in hindsight, left anything on the table from that?

Jeff: There’s kind of two answers to that. So I think the first answer is there is just two aspects of Blind Luck that made the deal just work out perfectly for us.

So first of all, obviously Nasdaq being at its height, was not a bad time to sell the company, right? Because they looked at us and said, well, Their stock price had just closed at 50 times revenue. So they looked at us, they're like, well, we can pay you five times revenue and just get an immediate pop off of that.

Right? So that obviously helped. The other part of the deal was they priced the shares at like [00:17:00] 20 days trailing of whenever the deal signed. So their stock price went down by about 70% between when we had the verbal and when we signed it, which means we got triple the shares that we would've gotten if we.

So I would say that we, by pure luck, we just, everything fell into place. But in terms of like, we couldn't, we didn't leave any money on the table. Now the flip side, the second answer to that question is fast forward a year later, um, our clients were like a big chunk of the revenue of the company cuz what we brought to the company was absolute quality, right?

And so that, and because of being able to, you know, bring their team members in, we were able to grow those accounts quite a bit. . Yeah, I think it was a great deal on both sides of the table, actually, if I think about it.

Todd: That's great. Thank you for sharing all that. What I, I'd love to jump to, I think the next exit, I don't know if it's number two in line, but the one we spoke about incredibly interesting, where time is not necessarily [00:18:00] your friend.

I'd love to hear about that one. Sure. Yeah.

Jeff: And there’s a few aspects to it. So first I'd bring up the strategic thing, right? So when, when I was designing that second company, when we're, we're at the whiteboarding. , we thought about strategic acquisition from day one.

Like we were really thinking about like this company, when it gets to a certain uh, brand, it almost becomes like a toll booth for the industry. And in doing that, that gives it a lot of that, that could give it a lot of power if we're able to achieve that. So that was literally when we started formulating the company.
We were thinking about the strategic exit from day one. , right. So then when we actually, years later, when we got to the point where the strategic acquirer showed up, they fit the exact profile of what we had defined on day one. Yep. Right. Where they're looking at this and saying, this is a company that is already sending us a lot of business, and imagine how much more business they could send us if we were to [00:19:00] pump more resources into it and.

So what was interesting to me is that the hypothesis at the whiteboard that said if we build this sort of strategic acquisition, came to fruition years later in terms of attracting that strategic acquirer. Because we weren't just acquired based on like, oh, here are your numbers and here's a multiple.
Like we were a strategic acquisition at that point.

Todd: And in this business you took on external investors, right? We did. Okay. . And did you share that strategy of how you were gonna create liquidity in a return for those investors?
Jeff: Yeah, that was part of it. I mean, you know, there was, you know, multiple strategies like, hey, this could come big, it could be public.

But that was definitely part of the strategy that, that we, we brought to them. You know, although a lot of those investors came on board because we were, when we raised the money, we didn't need the money. Right. So that , which is like I say, the strategy for raising money is, don't need it.
Literally didn't need it, and they could read that. So there was an excitement to it that they were, they were throwing fuel on a fire.

Todd: And you obviously had a history [00:20:00] of, of success, right? That you could lean on, on what you had built previously? Yeah. Okay, so, but, but this is a different dynamic now. You have investors, you've got this plan to exit in a certain way, and it sounds like it's coming to fruition.
How long did that take to create what is the funnel for an industry? And now you're gonna exit. What was the timeframe?

Jeff: Yeah, so this time, this time's, yeah, it's supposed to be easy, right? Because of the lessons learned. So we originally started like, it was kind of a two, two hot periods, right?
There. It got really exciting one year in like a march, April timeframe, and then it cooled off and then disappeared and then suddenly in December of that year it heated up again. Right. its sort of like there was a lot of interest and then they kind of, the interest died down and then out of nowhere we're suddenly urgently interested again.

Todd: Interesting. Do you know what kind of stimulated?

Jeff: you know, it's not entirely sure on, what might have been on their side may. Maybe they saw [00:21:00] like the hypotheses in terms of like this, like the numbers growing and growing and growing on their side that were supplying and then realized that, yeah, this was a deal they wanted to do.
But then, but then that got to, you know, your, your question, which is, okay, so now at the second point where it's like they really want to go to the altar at this point, right? This isn't fooling around. If the first time was just messing around and like, yeah, let's talk this time. It's like it was clear that, yeah.
both sides wanted to create a deal. Um, that was like, you know, the end of one year. And then, so I call that December, the deal went pretty quick for maybe two months, but it felt like about 10 years because of the, challenges that happened along the way from the kind of verbal, yeah, let's do this to the inked and money wired.

Some of the challenges that happened became pretty interesting and. almost killed the deal multiple times.

Todd: In this particular case, there was a document, so we had about 43 investors, if I remember. and, and our cap table had, you know, 43 lines on it, . know today when deals are done, a lot of times you'll consolidate investors into a line item, right?

So we didn't, we didn't really have that. We didn't have DocuSign, so when we put that, that timeframe, , at one point we had a document that said like late January, it said, okay, we've got 30 days to. , which would put us at February 28th at 5:00 PM That time becomes important, right?

So, but at the time we were like 30 days, like at this point everything's figured out. We need like, you know, 14 days or whatever. Then we started wrangling to get signatures from these 43 investors. Now some of these [00:23:00] guys are like on yachts, somewhere in the Indian Ocean, like with a fax machine trying to go back and forth to get signatures.

So the signatures dragged a little bit, took a little bit longer. There's a little bit more negoti. And suddenly we get to February 24th, right? Which is a Thursday. And so we're like, oh, we'll close February 25th, everything's in order. And then February 25th, the Delaware Secretary of State makes a typo on a form, and that kills it that day.

So now suddenly we're at February 28th and we're like, how did this happen? So February 28th arrives. , that's, there's literally nothing we could do, but keep our fingers crossed. I think I played, um, angry Birds all day long. Cause I'm like, that's what I can do is get my Angry Birds game better. There's literally nothing I can do to influence at this point.

It's all up to, the gods of Delaware. And, uh, at 3:52 PM a wire transfer showed up in my bank account. Oh my gosh. One hour, eight minutes. And, and [00:24:00] just to be clear, if this hadn't gone through Yeah. This very well could have killed the deal. Emotions were so tense at that point, like they always are in any of these deals.

And we would've had to go through a really challenging procedure to get all sorts of signatures again. And I think at that point, all these emotions would've exploded and potentially killed the deal. So we were an hour and eight minutes from catastrophe.

Todd: Yeah, and uh, I don't know the exact situation, but again, like you've told me some of your stories and when you have a date that everybody's shooting for, sometimes the business with investors or banks, you have certain covenants, and if you don't hit certain dates, it triggers a whole bunch of other things, whether you owe money in or out, and then the documents have to be adjusted and renegotiated and re-read, lined, and you just keep pushing and pushing and pushing these deals.
Was that part of the challenge?

Jeff: That was absolutely part of it. The other part of it too is, you know, when you've got 43 investors and they all have different life [00:25:00] philosophies. Yes. Right. Some of, some of whom are more into the pencil sharpening and looking at nickels than the big picture. Right? Yep. So there was, there was an investor who almost killed the deal at the last minute, um, I think this is on the 25th, when we were already dealing with that other issue, saying like, you know, we should redo all the documents now because since this has taken a few extra.

There was some interest payment. They were, they were gonna get on some piece of it. Yeah. That we now owed them another couple thousand dollars interest . Yeah. And so he wanted to like redo the documents and resubmit to all. I'm like, fortunately, you know, another one of the investors who was also leading the round just looked at 'em and said, no, that's ridiculous.

You're gonna kill the deal. There was just so many opportunities for a deal to get just obliterated from every different angle.

Todd: You know, I think, um, hearing the story, the lesson for me really starts at the beginning with your cap table, kind of keeping that clean. Right? And it's not that you [00:26:00] can't have multiple investors.

You referenced it right. Having an S P V, right, A special purpose vehicle that is one name on the cap table that requires a single signature, and not having investors have blocking rights, or you know, Hey, I need to be part of every part of this m and a process, or You don't get my signature right? I mean, that's the lesson, one of the lessons.

I think that I'm hearing that I'd love listeners to take away. We're always, as entrepreneurs, we need the money, right? And we're willing to sign to get the business to live another day and keep growing the company. But if you're thinking about an exit as you should when you take other people's money, right?
That is the goal, to return capital and provide a return on that capital to investors, you've gotta know that. You gotta control that investor. So any, I mean, you, you had one that almost blows up a deal cuz they want an interest payment. I have a friend that he's about to sign and one investor that had a blocking right.

Required, and I think it was like half a million [00:27:00] dollars in order to sign it was almost a bribe. Right. like, no, I'm not happy. Just like you said, right? They have different interests in life and the the profit that this guy was gonna make from the deal was not game changing enough and he required something special on the side.

So I think that there's a real lesson in that, in in understanding your cap table and the rights that you're giving to your investors.

Jeff: Oh my God. This is just, you know, multiply this by 10 because I think like in that particular deal, so we were talking about this particular investor, we were talking about hundreds of dollars on a 10 million plus deal, right?

That's what was at stake. But that's the kind of thing that ego can get involved and it's reminding me of one of my angel investments that I got involved in where, you know, the company was, it was a great. Didn't quite get traction. Right. Well, it got to the point where he had to come back to the investors and said like, look, I need, I need some other path.

Right? And one of the investors, so this company was struggling with sales. One of the investors was a solid sales guy and said he had a whole, created a whole deal to restructure the [00:28:00] company move forward. And one of the other investors just killed the deal. And all I can say is, I don't know if it was outta spite ego, there was something the other investor didn't like.

and he just killed it. So this, this could have given this company's second, a second breath of life, and it didn't get it. So that company ended up imploding. You know,
Todd: I'm always hesitant to kind of plug exit wise in what we do, but I think that this is pretty important where we think of ourselves as almost like your most informed board member around M&A or we're the, the founder's Sherpa, right?

The seller's Sherpa throughout the M&A process. And a lot of what we do is handling these personalities from co-founders to employees to investors and the dream team m and a team that we. In front of you from investment banker to lawyer to accountant, Q of E insurance, all of that. And what we find we're really good at is dealing with all those personalities and bringing people to some semblance [00:29:00] of being rational.

And keeping that out of your hair and out of the investment banker's hair and allowing you to run your business and get the requirements of an m and a deal to the investment banker and the attorneys to ink that deal. And we're so proud of what we do because we know that personal element that the psychologist in, in your pocket is of huge value to get these deals done and they don't crash like what you just described.

Jeff: Yeah. I mean we were, we were very fortunate. So, you know, in the first case we had, and my brother. , you know, the picture of the Ferrari and his psychologist mindset. That kept things going to the point cuz we had very expensive advisors on all sides. Very competent advisors who would get to a point where they said, oh, you need to walk away from this deal.

Yeah. And Sam would just bring them back to the table and be like, let's think about this and, and the solution that would come up for any of these problems turned out to be. Absurdly simple, right? But it was just that things get heated and then people can't see these opportunities. So, [00:30:00] so having someone like, like you at the table in that case is absolutely invaluable there.

So we, we were lucky that. One of our team members could do it, but that's not, that shouldn't be someone on the team doing it because now they have to manage their own emotions too, if you can have an outsider doing it, you know, and, and in the second case, fortunately we had the lead investor played that role of slapping down one of the other investors.

It was like, you're not killing this deal over a couple hundred bucks.

Todd: Yeah, those are great examples that we're in the middle of a deal right now where the attorney said, guys, we need to step away this, these, they're not negotiating in good faith. And so there is a time when that is appropriate, but having somebody that can. Look at a 50,000 foot level and have seen deal after deal after deal give you the confidence to make that decision. [00:31:00]
So I appreciate you sharing that.

Jeff: Yeah, and I think to your point too, Things get so heated and so past the point of no return that sometimes all you have to do is. Pretend they're not past the point of return. like, act, act as if it's still rational. Act as if the players are still rational and sometimes people will come back to life and things will move forward.

Todd: Yeah, you're absolutely right

Jeff: There's one other thing too that happens, this can be all out battle, right? Yep. During these processes. Yeah. And when you actually consummate, it's, like water under the bridge. I. We absolutely loved the company that we, you know, we got acquired with. Yep. Both times. Like it was, it was, it's so, it's, it's just, it's just the process and you have to not take it personally.
Right. And you have to realize that once you get through it, there was a reason why you came up with this, this acquisition in the first place. Now you get to actually realize that and just move a, go a hundred [00:33:00] percent after it. It's just, it's easy to get distracted from that when you're dealing with all the, the hassles of the deal.

Todd: We like to tell people, having that layer of the intermediary, that great investment banker, that great attorney shields you from a lot of that kind of caustic conversation or debate or negotiation, you're gonna have to go work there, right? So we always want to elevate our founders or business owners to the person that you cannot wait to be on the other side working alongside the product team or the technology team or wherever.

Kind of gonna deliver value and be really welcomed when they get there, as opposed to somebody that, you know, you just, you went 12 rounds with and, and beat the crap out of each other and now we've gotta work together. So having that team on your side can shield you from a lot of that, and that it's not a small point.

You have figured out how to have that battle and then be buddies on the other side. So, you know, kudos to you for figuring that out.

Jeff: Yeah. And by the way, it's, it's a different set of skills that, you [00:34:00] know, we had some of the top lawyers involved. They would look at us and be like, this point here is ridiculous.
Right. And like at, at one point I think we had to indemnify, this was in the first acquisition. Yeah. We had to indemnify our acquirer against, like toxic waste buried in our office. . Yeah. Yep, yep. They're like, you could buy Exxon Mobil with this agreement. And so our, our legal team was looking at that and rightfully saying this is absolutely ridiculous.

And getting worked up about it. And, but you know, someone like what you bring to the table could have been. That's ridiculous. So what? It doesn't matter, right? Practically does not apply. Yeah. So it doesn't matter that they're asking that there's a million ridiculous things that both sides are gonna do during the, during the agreement.

The question is, does this deal still make sense?

Todd: Look, this has been phenomenal. is there any other advice that you think you would give? I know you've had just tons of experience. Right? But more specifically around m and a ray, we know the silence, right? Uh, during negotiation was worth an extra million bucks [00:35:00] to you cleaning up your cap table or, or keeping it as clean as possible really helps with m and.
Is there anything else that really jumps out at you?

Jeff: Yeah, I mean, I think from us, and, and this would be a lesson learned because this worked out great in both cases, is really think through, this is not the end of the process. This is the beginning of a process together. And so don't, don't just plot the line of like, oh, okay, we have the exit, now we can buy our cars.

Yeah. Which is fun, don't get me wrong. Yeah. But that's literally just, just the beginning of the process. And so picking the right partner. Really is gonna make the next few years of your life better as opposed to just exiting for the sake of, you know, getting the money out. So I think in both cases we picked great partners and it was, in both cases, it was great for the vision of the business.
So things moved forward really well, but I'd make sure don't. don't not do that, I guess is my point.
Todd: Yeah, and sometimes I think it's probably easier for a founder or business owner to do if you've had a business development relationship or a strategic [00:36:00] relationship with that acquirer for years ahead of time.

Right? You get to know the parties, you know who's staying or who's who may be leaving that company, what value you bring. What other things that you could do, and if you have kind of a like-minded person on the other side, you can understand fit in a lot of cases where you're running an m and a process and you're bringing multiple potential acquirers to the table, right?

As an, as the investment banker on a deal. It's really that investment banker's job to really understand what fit could look like on the other end, and present that as part of criteria for you to make the decision of who you want to sell your business to. Right.

Because you're interviewing that acquirer as much as they are interviewing you, like you said. That getting the acquisition done, that's the starting point of working together. I love that. I love that line. It's so true.

Jeff: No, because it wasn't just by the way, it wasn't just for the founders in my first company, there were three of us as founders, but I was most excited about the fact that, you know, so the first few team members we [00:37:00] brought on had a great financial result as well, and all of the team members had an incredible career result as an outcome of this process.

So that, You know that that was, that felt really good. I think, you know, 20 some odd years later to look back and say that this acquisition was a great thing for everyone in the company.

Todd: Right. Move their career forward. It's fantastic. Well, to end, I've been staring o over your left shoulder there, and I, I see a vehicle in the window.

It's not a photograph, right? I'm looking out the window. But there's too much light. It's not real shine. It's not real. Oh, it's not? Look at that. It's a model. Oh, right. So is that an old NSX? What is that? A ‘91?
Jeff: So that is, that is a, that is. The first model NSX. That was my car that I had for years, but that's just a model of it.

And unfortunately after five years and 11 speeding tickets, , I decided it was time to, uh, to get rid of that car and, uh, learn how to drive slow.

Todd: It literally looks like it's parked outside your window with light shining on it. And I didn't wanna be [00:38:00] wrong. I'm like 1991 NSX. That's what I, yeah.

Yeah, yeah. Yeah. That's great. That's great. Yep. Well, Jeff, thank you. This has been really helpful. I think people are gonna get a lot out of this. Your story's amazing, right? You're the serial entrepreneur that just keeps it going, which I love. So thank you for the time. I really appreci. Awesome. Thanks Todd.
I appreciate it. Thanks again for listening to the Cashing Out podcast. For more Founder Exit stories, please subscribe to the Cashing Out podcast on Apple, iTunes, Spotify, or wherever you listen to your favorite podcasts. And please remember, exit wise.com and the cashing Out podcast are for entertainment purposes only. This should not be relied upon as the basis for investment decisions.