Exitwise Productions

Wise Up Episode 4_2.txt
English (US)

00:00:10.400 — 00:00:50.000 · Speaker 1
Last time on wise up on M&A, we filled seat number two with the dealmaker aka the broker or the M&A advisor or the investment banker, depending on the size of the deal, if you missed it. Seat number one went to the M&A attorney. Today we're heading into the third and final seat on your M&A boat. Let's hope for smooth sailing here.

If you're on the exit journey or you're starting to think about one. Talk to us to learn more about how our team of experienced entrepreneurs who built and sold their own companies. In case you didn't realize that hello can support you as you navigate the biggest transaction of your life. Am I being dramatic enough?

I'm just being honest.

00:00:50.000 — 00:01:01.720 · Speaker 2
So we have the M&A attorney, the deal maker, which is either the broker, the M&A advisor or the investment banker. And then there's one more spot that is reserved for sure. Who is it?

00:01:01.760 — 00:01:30.480 · Speaker 3
You know, I think there's probably some debate on this. I tend to push for a high quality wealth advisor. A wealth manager that knows tax and can help the founder or founding team plan for that. Liquidity event the cash event that is about to happen. I have a lot of conversations with founders that are going into process and they say, nope, I've got my finance guy.

We were fraternity brothers back in the day. Like he manages my brokerage account, right? Which is great.

00:01:30.680 — 00:01:33.040 · Speaker 2
Wait. Sidebar, Dukes, were you in a frat?

00:01:33.080 — 00:01:39.640 · Speaker 3
I was not. I played basketball. I was like, guess it was kind of like that. But no, I was not officially in a fraternity.

00:01:39.680 — 00:01:41.320 · Speaker 2
All right. I just had to ask.

00:01:41.480 — 00:01:43.080 · Speaker 3
I was tall enough, but not cool enough.

00:01:43.880 — 00:01:44.960 · Speaker 2
Maybe next time.

00:01:44.960 — 00:01:46.840 · Speaker 3
Thanks for making me feel great about myself.

00:01:48.960 — 00:03:17.990 · Speaker 3
This is where you hear things that people say. Two things can both be accurate at the same time. That that could be very well true. Right. You have a brokerage account. You have some wealth that you've compiled. Having built a business. Great. They have that under control. But for for a transaction that is going to generate, you know, 7 or 8 figures in cash.

At the end of the transaction, you need someone who is not only prepared to manage that influx of cash with again broken record, deep experience, not the like. Hey, I did it, you know, once for a, you know, for a $500,000 transaction. So I'm sure I can do it for a $25 million transaction. This is deep experience and a knowledge base of what you're going to do with that money, how you're going to think about being tax efficient.

And oftentimes that happens months, if not quarters, if not years before our transaction happens. Getting a high quality wealth advisor that understands tax your personal situation, your goals, your dreams, everything you're trying to accomplish is super important. One of my favorite conversations to have early in a process is, what do you want to do after a transaction?

Like, what are your goals? That goal is not. Hang out with my family. Play golf. Those are all very simple things. I love my family, I love golf. That is not probably a long term solution for us builders out there. I'm speaking from personal experience, so it's challenging to like, what do you actually want to do?

You want to travel, you want to buy a winery. You want to build your next business. You want to build an apartment, build like whatever that is.

00:03:18.030 — 00:03:20.630 · Speaker 2
I want to donate to philanthropic causes.

00:03:20.670 — 00:04:15.550 · Speaker 3
Yes, that's exactly right. Thank you. Whatever that goal is. Having a wealth advisor to tell you how you efficiently accomplish that goal or tell you that, hey, that that's an idea you have is an incredible one. But this transaction at this valuation, assuming tax, what you're going to get at close comes nowhere near accomplishing that dream.

You want to go buy ten apartment buildings. Great news. You can buy a half of one with the money that's going to be generated from this transaction. And that helps with the conversation of, should we even be going into this process, or how we do it in the right way? How do we organize? How do we think about preparing properly, setting up the individuals and the business to be as successful as possible?

So seat number three, high quality wealth advisor got it before. Understands pre-planning tax and understanding of of managing a real influx of cash at the end of the transaction.

00:04:15.550 — 00:04:17.070 · Speaker 4
So you kind of use.

00:04:17.070 — 00:04:24.380 · Speaker 2
The wealth advisor and tax specialist interchangeably. If one is a tax specialist, they're automatically a wealth advisor.

00:04:24.380 — 00:04:27.820 · Speaker 3
But not all necessarily are not necessarily.

00:04:27.980 — 00:04:28.580 · Speaker 2
Okay.

00:04:28.620 — 00:05:02.260 · Speaker 3
So it can be two different people. You may need an extra extra deck chair. It really depends. You know, if you have an individual that you just feel really good about, that is a wealth wealth manager. They may not have the breadth of services that you need completely. If you're working with a big, well-known wealth, you know, wealth advisory bank, they probably have every service you need.

So it just it depends a little bit on how you pick and choose. My point is always have a high quality wealth and tax advisor. Oftentimes it is the same person. But it doesn't always have to be.

00:05:02.300 — 00:05:09.460 · Speaker 2
All right. That's what I was asking. Wow, this can be so confusing. I hope everyone listening is not confused because we are

00:05:10.820 — 00:05:29.740 · Speaker 2
trying to clarify, but it's important we're trying to break this down. So those are the top three seats. The boat is quite full I would say. Like what size company in your mind would make room for those three seats on their boat, or should make room for those three seats on their boat.

00:05:29.940 — 00:06:18.620 · Speaker 3
I would say any transaction that is above a couple million dollars in total enterprise value, you're going to need all three of those. There are variants at different sizes that you can kind of. You can trim down that team or, you know, sometimes a high quality M&A attorney can actually play the role of the dealmaker.

If you're, you know, it's a smaller transaction. You know, the buyer personally. Sometimes you have like an entire family transaction or even a to get way off target, an Esop in which you're actually selling the business to your employees. Certain times, you know, the, the, the attorney can actually play more than one role, uh, which is, which is helpful.

But I would say any anything above 2 or $3 million in enterprise value, I would suggest to run a great process to have all three, three of those seats filled.

00:06:18.660 — 00:07:16.810 · Speaker 2
I think it helps to understand really what these roles are and can be, and it also does help the kind of loosey goosey ness of some can do both, and some can do others, because if someone needs to jump ship or whatever the situation might be or whatnot. The fact that perhaps one individual or firm or whatnot could be doing a few of the roles is good and helpful to know.

Obviously, it depends on who you're talking about and what the situation is. So let's say we're moving from this little rowboat to a yacht. We got a yacht. Deals bigger. It's a pretty it's a nice deal. Drinks. Better drinks. Sunset. Better music. Okay. Whoo! We have more room. We got more room on the yacht.

We got more room on the M&A team. So who's joining those three buddies? Who else could come aboard, if you will.

00:07:16.810 — 00:07:29.210 · Speaker 1
When you got more room on the yacht? Who gets to join the party? Find out who should be on your M&A team when your deal gets bigger in next week's episode. And remember, subscribe if you're enjoying and learn more about us at exit,

00:07:30.450 — 00:07:31.650 · Speaker 1
exit wisely.