The playbook for selling your company just changed—again.
What separates those who merely survive from those who exit with maximum value? The answer may surprise even seasoned founders.
In this episode, Anthony Caporrino, U.S. Transaction Advisory Group Co-Leader at Alvarez & Marsal, reveals the behind-the-scenes secrets to smarter M&A, how analytics are rewriting the rules, and what it really takes for owners and investors to achieve a clean exit.
You’ll discover…
- The single biggest mistake even mature companies make when prepping for a sale
- What founders should be doing years before considering an exit (and why most miss it)
- How “operator experience” trumps traditional consulting in maximizing deal value
- The new analytics tools that give buyers (and sellers) the ultimate edge
- Why rep & warranty insurance is changing dealmaking—and what it means for your next negotiation
Mentioned in this episode:
Transcript
Patrick Stroth: Hello there. I’m Patrick Stroth, trusted authority in executive and transactional liability and national practice leader for mergers and acquisitions, for Liberty Company Insurance Brokers, where we provide peace of mind with great care. Welcome to M&A Masters, where I speak with the leading experts in mergers and acquisitions, and we’re all about one thing here. That’s a clean exit for owners, founders, and their investors.
Today, I’m joined by Anthony Caporrino, the U.S. Transaction Advisory Group Co-Leader for Alvarez and Marsal. Founded in 1983, Tony Alvarez and Brian Marsal joined forces with a shared vision to link operations, performance improvement, and value creation, to help companies turn areas of stagnation into growth. Today, Alvarez and Marsal have over 11,000 professionals serving clients in six continents and 39 countries. Anthony, it is a real pleasure to have you here. Welcome to the podcast.
Anthony Caporrino: Patrick, it’s nice to be here. Thank you for having me.
Patrick: Now, before we get into Alvarez Marsal, which is a big leader in the global stage, let’s start with you. What led you to this part in your career?
Anthony: Sure, so I’ve been performing financial due diligence for private equity now for about 25 years. I graduated Boston College, and like many people with accounting degrees, took the usual route. I started in the audit practice of Arthur Andersen. I got my CPA after a couple of years, and then I moved on into the transaction advisory group there at Andersen to really work more specifically in financial due diligence, mergers and acquisitions, which was an area that was interesting to me and that I really found my passion for.
I think if you take a step back, my father happens to be a CPA, so I worked for him when I was in college for three or four summers, and I really got a lay of the land as to what some of accounting did relative to what I learned at school. And I think the most important thing is I learned what I didn’t like about it, and mergers and acquisitions was always interesting to me.
So that’s how I got my start after a couple years in the audit practice, and I’ve been doing this now for about 25 years. My specific industry experience is mostly in consumer and business services, and really that’s been a function of where my clients have invested over the years. But I’ve done a lot in food and beverage, and restaurants, and retail, environmental services, digital media. So it’s been a wide array of different transactions over the years, which has been a lot of fun.
Patrick: Yeah, and I’m a little biased with mergers and acquisitions. There’s nothing wrong with the audit practice. I mean, everybody needs that. At the same time, I consider mergers and acquisitions as the most exciting event in the life cycle of business. It’s not IPOs, because IPOs is like being drafted in the first round the NFL. It’s like, good, you’ve made it, but you could be a bust.
We have no idea what you’re at. M&A, it’s transformational for, you know, both companies and for the owners and founders. I mean, with with big opportunity, there are big risks. So it’s great having, you know, that area to look at just a dynamic siting point. So I agree with you as to going into that route. Now with Alvarez Marsal, which is one of the larger firms that we’ve had on the show, talk to us about what they do and also where they sit with serving the middle market and lower middle market.
Anthony: Sure. So just for perspective, the firm, as you said, was founded in 1983. Brian Marsal and Tony Alvarez founded it, and for the better part of almost 20 years, was primarily a restructuring firm. So bringing that mindset to help troubled companies, in some cases, turn them around and grow. In other cases, help them through a bankruptcy.
And since then, over the last 22, 23 years, the firm has grown to serve, really, a bunch of other things. And the easiest way to think about it is a third of the firm serves private equity, a third of the firm serves corporates, and a third of the firm is restructuring. So when I joined in 2006, the firm didn’t have a transaction advisory group at that point.
I was hired by the three founders of the group, Paul Alversano, Nick Alvarez, and Jack McCarthy. I was the first partner hire after them, and we’ve grown it now in the U.S. to over 500 professionals globally, to 1300 transaction professionals. And the firm was 700 people when I started. So the levels of growth over the last 19 years.
It’s been an amazing ride. But there was a big demand at the time in 2006, which was the height of the M&A market at the time. They go outside of the big four accounting firms which had themselves gone through a bunch of changes coming out of Sarbanes-Oxley over the prior three or four years. So the market was ripe for what I’ll call a disrupter, and that was us.
And the thesis was to bring that combination of world-class financial and tax due diligence expertise for private equity, and combine that with A and M’s operational heritage to bring a value creation mindset across the transaction lifecycle. And that’s what we’ve done over the last 19 years.
Patrick: And so unlike the big four, then probably with six or eight, but while they’re tracking numbers and doing reports and the essential reporting function, you’re taking it the next step, and there’s information. How can you take that information and put it to use?
One of the developments that we talked about, that you had, was how you have embraced analytics. Which a lot of people immediately catches their ear, and they think analytics, moneyball, all those derivations. But talk about that, because you just don’t talk analytics. You’ve actually developed a lot of tools that have made a real value-add difference. Talk about that.
Anthony: Sure. So our focus historically, when we started up until now, it’s been primarily the middle market. And that’s expanded over time. So, the definition of the middle market back in 2006 was quite a lot different than it is today. And many of our clients have grown from $500 million funds, US only, to now five, six, $10 billion funds that span the globe.
So as they’ve grown, we’ve grown, and really the need to bring new things to the table and to really invest in how we do our craft. It’s quite important. When you look at the middle market space, again, you mentioned public companies before, that’s generally not where we’re playing, although we have done many public-to-private transactions.
But generally speaking, the middle market is founder-owned businesses that are ripe for some transformation, whether that’s an outright sale, whether it’s a minority investment. And in many cases, while those businesses have done great things, they don’t always have the most sophisticated systems to track information, financial information, product information, you name it. And so our ability to really digest and analyze large pieces of data, to really understand what drives a business is quite important.
And we realized that a while back that doing diligence at that granular level is probably the most powerful. You gather the most insightful findings, and you can create value opportunities and advise your clients with very relevant information. The issue is, though, that’s very hard to do in a very compressed timeframe.
So you need to be creative in developing certain tools, migrating out of Excel, understanding what else is out there. We have a number of data scientists on our team who supplement our financial diligence skill set. And so they bring that data mindset as to how to get after what you’re looking for and what you need to create those valuable insights. And so we’ve come a long way in that regard. Now it’s almost a requirement.
You need to be able to do that. So we’re certainly not the only firm out there that does it. But in order to bring those valuable insights to your clients in a way that is practical, in a way that’s timely and that they can make decisions on, is quite important, no matter what type of deal you’re looking at, but certainly in the middle market, where you may have some challenges, visibility wise, with some of the information that’s available.
Patrick: You know, it’s interesting, because I would take for granted because the types of clients you have, and we’ll get into your client profile later. But these are larger, successful, advanced companies. And they’re not new to things. They’re not having paper records.
I mean, they’ve embraced digital assets and process and doing things, but probably they’re more focused on their performance and working in their business, not on their business. And first of all, it is a real cumbersome task to just collect the information granularly. But then not only collect it all, I mean, it’s great with all that data.
What do you do with it? And you’re able to bring that perspective in. And I just think that, correct me if I’m wrong, is there a resistance, or is this just a whole new mindset that owners and founders need to have? Forget planning for an acquisition or being acquired, but just operationally.
Anthony: Sure, I think there certainly isn’t, I wouldn’t say there’s a resistance, but many of these firms that our clients are buying or that we’re working with when they go up for sale, whether it’s clients bringing us in, private equity clients bringing us in, or investment bankers, many of them have grown by acquisition.
And so you may have decent systems across the initial platform or original investment, and then two or three, four add-ons down the road, those systems might be working great, and there’s no appetite to really integrate them all beyond the things that it’s time consuming, it’s costly.
Patrick: So it’s not broken. Don’t fix it.
Anthony: It’s not broken, don’t fix it, exactly. But if you think like a private equity investor, you could say, all right, well, what if we had real-time information across now, the four company platform that we can make decisions on. That is a lot more powerful than saying, okay, company one does this. Company three is on this system, looking at it this way.
So many times, we help do that and make sure, particularly when we’re on the sell side, almost our first step is to bring in our data analytics team and have them create that consistency across the company that may have different divisions that were acquired over time.
And then you’re working with one consistent data set, and you can really then understand the trajectory of the business, and that’s what people want to know. So it’s not necessarily that things don’t function, but sometimes there’s no need for change. But then, when it comes time to exit, someone who wants to then go buy it is requiring that change.
Patrick: Okay, yeah. Well, and again, co-head of the Advisory Transaction Group. People think, okay, well, then I must be only in the market to talk to you when I’m ready for transaction. And I think that it goes a little bit broader than that, because the things that are going to be required of you down the road if you’re going to be looking at that kind of transaction, well, maybe you should prepare for it earlier.
And that’s where I think Alvarez Marsal can really come in. Talk about that, because you wouldn’t recommend that owners and founders wait until they picked an investment banker who’s going to advise them on this. What’s your approach in that respect?
Anthony: Sure. So I think first and foremost, we try and bring what we call relationship-driven, trusted advisor mindset to our clients. So yes, the crux of it, when we’re in the heart of what we do it is involving a transaction, but it’s much broader than that. We talk to our clients about performance improvement, and we bring in our colleagues from our operational group to meet them and talk about ways that they can enhance value.
That might be either right after a transaction, or it might be years in advance of a transaction. 18-24 months. So, the bottom line is, we try to be helpful no matter what. And when then our clients and business owners are looking to divest, by all means, the earlier you start, the better. At least, to have a discussion, so you really can get a perspective of, okay, first, let’s think about when do you want to go to market?
Two, what’s your story? Three, who might be the most obvious buyer? Sometimes it’s private equity, sometimes it’s a strategic buyer. Those needs are different. And what might be important to a private equity buyer may not matter to a strategic, so you want to make sure you better understand that.
And then once you start asking those questions, what does the seller want to achieve? If a founder owner, and we’re brought in by one of our investment banking relationships, many times early on, you ask the questions. What do you want to achieve? And how are we going to go about doing that? And so those are the types of things where the earlier start is much better. You have more time to plan.
You can organize yourselves in situations I discussed earlier, where there might be disparate systems. It gives you time to make everything consistent, more user-friendly. And then, at the same time, we’re also then training the management team to understand what they need to handle, help them with their expectations as to what questions they’re going to face.
Make sure that they’re knowledgeable about explaining the issues at hand. Many times, there are a lot of positive attributes, but we’re objective. We also disclose and articulate things that aren’t so great. So the management team needs to understand how to explain those things and make sure they can get somebody comfortable with those levels of risks.
And those are in every transaction, so the more you can do that with advanced timing, the better. And it just generally makes for a smoother transaction. Not always. We see all different timelines. We see what I just articulated.
And then sometimes we see companies that hired a banker and they want to go to market in a month, and we got to rush to get everything done. Those situations can work. It’s a lot harder and not necessarily more smooth, but if you have the right team and you know what you’re focused on, you can generally get things done under that scenario as well.
Patrick: And for enhancing companies performance evaluation, whatever. Yeah, you’ve got policies, you’ve got procedures, systems, software, hardware, you can plug in. One of the most difficult things to bring about, resources wise, is people and finding a trusted network.
I just personally, I just think the human element is the most difficult element of any change, adding or subtracting. And in that front, because of all the resources you have, let’s talk about Alvarez and Marsal’s huge, deep bench of human capital resources. Talk about that.
Anthony: Sure. So we compete, generally on the accounting and tax side, with the Big Four. On the operational side, with the MBBs of the world and AlixPartners, all great firms all bring different types of talent. The unique aspect about A and M is we combine that operating talent with the financial and tax expertise. So our operators generally have been in the C suite. They have run companies.
They have been COOs, they’ve been the head of procurement, they’ve been Chief Technology Officer. Some of the firms we compete with, they’re generally consultants by trade. Great, great acumen, great education, great experience. But they haven’t been in the seat to actually run companies and execute and that’s the difference we bring.
We are very much action-oriented. Bring practical solutions to the table. But it makes a big difference when you can sit across from someone and say, yes, I did this in my role prior to A and M. I executed on X, Y, and Z of this type of value creation plan. And if you look at it from the side of a financial due diligence professional, and I say this to people all the time, there isn’t a professional out there that on the due diligence side that can bring that level of experience.
I work alongside those people every day. I learned so much. Yes, the accounting is important, and yes, you have to get it right, you bring just a different mindset when you’re working with a true operator as to what’s important in the transaction, what might be prioritized, what’s going to make or break the decision.
And yes, the accounting you need to get right, but very often, you’re dealing with other operational issues that you need to be mindful of that you need to recognize, and you need to be able to articulate. And so that’s the key differentiator for us. It’s the level of talent and their prior experience. And when you bring the financial and tax folks in under that roof, we bring a pretty unique angle to what we do on the financial and tax due diligence side.
Patrick: I think you’re not only helping deliver at closing. You’re delivering flawless execution, post-closing.
Anthony: Yes.
Patrick: And you can’t put a price tag on that.
Anthony: And it’s very powerful. Again, if you’re a financing source, and you see some pro forma concepts that add value, and you go to analyze and critique those to make sure that they’re real. Well, if somebody who’s done that at a prior situation in the C suite is standing behind that, big difference between that and a consultant who thinks it could be done. And so that’s like the perfect storm for us, where we could combine that level of experience and be able to stand behind essentially what’s a value creation plan in the next year or two post-acquisition.
Patrick: And when I think about it, because there’s always this concern about costs and all this, I would just think investment is the key metric here, just because, and to oversimplify with staging a house, if you wanted to sell your house. You would pay an outside stage firm in California, where it’s 1000s of dollars to get your house looking like you didn’t live there, but you know, the ideal couple did. But for every dollar that’s spent, you get 6x, 7x of that cost in added value. Same thing, you know, for you guys?
Anthony: Yeah, I would say, yes. There’s definitely a value to bring when you’re on the sell side to prepare, spend the money, make the investment, and increase your chances for not only a smoother process, but one where you get a higher multiple and you find the right team to work with. Sometimes those dollars can be very big. But again, it’s dependent on the situation. But in the overall process, my opinion is it’s a small price to pay for the value that’s created that you’re going to walk away with if you’re on the sell side.
Patrick: Now, when we’re talking about perspective and context and scale. Let’s define this a little bit more. Give us a profile of your ideal client. Who is Alvarez Marsal, looking to serve? The transaction advisory group specifically.
Anthony: Sure. Our primary client base is private equity, family office, and sovereign wealth. We have clients of all different sizes and fund sizes. I would say the ideal client for us is one that obviously is active. Two has different industry focus areas. So maybe there’s a slug that’s a generalist, and then there’s another, another slug that’s healthcare or business services or software and technology.
I think we bring a very strong industry expertise to the table. So clients who generally cover more than one area, we match up really well with. Ones that have a global profile, not necessarily global offices, but they will look at deals and companies that have some global footprint.
So maybe they have primarily U.S. operations, but they may have distribution centers around the globe, or some division that is outside the U.S., we stack up very well in those situations. So I would say funds that are active, that have a bit of a global footprint, as well as a broad industry directive, they match up really well for us.
And when you look at our client base, there are generally the clients we serve, they check, they check two, if not three, of those boxes. And then also ones that are not afraid to get their hands dirty, post-acquisition with some operational improvements. It doesn’t always need to be the biggest fund.
Sometimes, many of the smaller firms will lean on us more to bring in that operational expertise to help them execute post-acquisition. So if there’s an operating mindset, those funds match up really well with us, too. Just given everything I articulated about our value proposition.
Patrick: We’ll talk about the future trends you see a little bit later, but it struck me with the view on tariffs and an emphasis on more onshoring coming to the U.S. Are you guys at Alvarez and Marsal seeing opportunities where they’re outside firms wanting to come in and make an acquisition in the U.S., to add a U.S. presence?
Anthony: Yes. So it’s probably not a week that goes by where we don’t get some inbound referrals from the other parts of our global transaction business. Whether it’s Europe, India, Asia, LATAM, Australia, Canada, those are the countries that we’re in outside the U.S. But it’s very common to get inbound referrals. Generally, I feel probably two or three of those situations a week. Now, they may not always pan out, but we’re getting brought to the table. Sometimes it’s a handoff, and we’re doing the work without too many questions asked.
Patrick: There are new conversations.
Anthony: Other times it’s a formal RFP, and those are the common two. But there’s a lot of back-and-forth activity, both inbound to the U.S. and then outbound for us as well.
Patrick: You never know, because there may be, I mean, we’re dating ourselves here, but there could be some major 300% tariff against Scotland, and then all of a sudden, Scotland wants to come and have a big U.S. presence so they know who to call. So fantastic.
Now, one of the major drivers for mergers and acquisitions overall, just the rate, is the fact that the insurance industry came in and started transferring a lot of risk away from the buyers and sellers over to themselves. And by relieving that risk, they did three things. The risk transfer, they simplified negotiations, having an insurance policy.
And if there were losses, they paid claims, so that promises made, were promises kept. And so it kept the sustainability for this product, reps and warranties. But don’t take my word for it. Anthony, from your perspective, good, bad, or indifferent, what’s been your experience with reps and warranties insurance?
Anthony: Sure, Patrick. I think by far, it’s been a great concept, and has done a lot of good for private equity in general. I think everything you’ve said, the product facilitates transactions. It eases negotiations many times. I think it helps both sides understand more of the risk that each one is taking.
And by doing so, I think there brings a more of a meeting of the minds, and you can get around some of the things that maybe in the past were obstacles. I think almost every deal has rep and warranty insurance. It’s not that common for us to have a deal where we don’t see that. Most of the time, we will deal with the rep and warranty providers.
They’ll look at our product, we’ll walk them through it, we’ll field questions. Sometimes we don’t. It just depends on how involved and how inquisitive the insurance companies are. But I think overall, it’s been a positive development. It’s almost become a mandate, if you will, and certainly as much of a requirement as possible. But overall, I think it’s helped, and I think it benefits both buyers and sellers.
Patrick: I think just get it down to the essence of it. I mean, buyers don’t want to get stuck holding a lemon. Sellers don’t want to be on the hook for the buyers post-closing for any length of time. And so how can we, you know, find a bridge between those two priorities without any contentiousness? And it’s been a very, very elegant product. The nice thing is that, as you mentioned, 10 years ago, rep and warranty was used in about 5% of M&A transactions.
Today it’s over 95% of transactions with enterprise values over $100 million have it. I mean, even billion-dollar deals that used to be self-insured, six, seven years ago. Now they’re getting some element of it. The nice thing is, the news out there is, there is now a Lloyd’s of London facility that can insure add-on transactions that are priced as low as a million dollars in enterprise value to $50 million.
It’s a re-engineered product, it’s built for that smaller thing. But as a market matures, you’re going to see more options, more efficiencies. Claims are getting paid. So it has been a very effective product moving forward. And moving these other transactions that make the economy move forward.
So it’s fantastic. Now, Anthony, from your perspective, what trends do you see going forward, either with Alvarez and Marsal or we just had the big, beautiful bill pass. So, there’s some more certainty in the market. What do you see out there?
Anthony: Sure, I think over the last couple of years, there certainly has been less activity, for obvious reasons. U.S. elections last year, tariff policies as of late, different financing environments than, say, five, six years ago, higher interest rates, etc. So that’s created a lot of uncertainty. And with uncertainty, there’s hesitancy.
So the deal market has been a lot slower in the last couple of years. But there’s still a ton of pent-up demand, and there’s still a lot of dry powder, and that hasn’t changed. So with now a little bit of uncertainty on the administration’s tariff policies, yes, there’ll be more expense, but at least it’s it seems to be more predictable than, say, April when the news first came out. But now there’s a little bit more predictability.
It looks like the Fed will at least do one rate cut for the remainder of 2025. That will help. And I think once those two things happen, you’ll see the deal market and activity pick up dramatically to make up for some of the lost time that’s happened over the last couple years. So I expect it to be very busy for the rest of 2025. I expect ’26, barring any big geopolitical or global type event, I think ’26 will be a pretty good year for M&A.
All signs at least point to that, which is encouraging. And I think that will help not only put money to work, but it also help with some of the distribution challenges that have been out there that create a whole host of other issues. Whether it’s fundraising or what have you. But I think with a few events and things relative to policy, I expect the activity to pick up quite dramatically.
Patrick: Yeah, I would think in addition to a little bit more known and predictability on the tax front, I think the regulatory environment is a lot more business-friendly now, particularly with regard to mergers and acquisitions. And there’s going to be a little bit more openness to that. Particularly for clients of your client size.
Anthony: I would agree. I think that’s a positive trend. It’s sometimes hard to realize it’s really only been eight months of the new administration. It sometimes feels like it’s been a lot longer.
Patrick: It feels a lot longer than that.
Anthony: There’s a lot of runway to go. And I think some of those M&A friendly policies, we still have a number of years for them to pan out. So again, I think as long as the world is stable and there’s a little bit more flexibility when it comes to interest rates, I expect the next couple of years to be pretty, pretty active.
Patrick: I think there will always be drama in M&A. A little less would be nice. And I think we welcome that. So Anthony Caporinno, the U.S. Transaction Advisory Group, co-leader for Alvarez and Marsal. How can our audience members find you?
Anthony: Sure. You can always find me on LinkedIn, where I’m pretty active. The A and M website, you can always find me, and I’m generally 24/7 responsive.
Patrick: You are that, you are that!
Anthony: And you know, I look forward to any reach outs to further elaborate on what we discussed today.
Patrick: Well, thanks very much. Anthony Caporinno it was great having you. I look forward to talking to you again very soon. Thanks again.
Anthony: All right, Patrick, thanks.
