Transform Retiring Businesses with Proven Success Strategies

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M&A Masters, with Patrick Stroth

Listener Note: Older episodes may reference Rubicon M&A Insurance Services, the previous name of Patrick’s agency prior to joining Liberty. 

How can you transition a business successfully from a retiring entrepreneur to the next generation? This episode dives into the human element of mergers and acquisitions, revealing strategies to make these transitions smooth and profitable.

Brian Shields, co-founder of Handoff Partners, shares his journey of combining financial expertise with operational insights to help retiring entrepreneurs pass their businesses to the next generation.

In this episode, you’ll discover…

  • The significance of understanding industry knowledge for successful business takeovers.
  • How Handoff Partners is revolutionizing the way retiring entrepreneurs transition their businesses.
  • Unique strategies for investing in people with industry-specific experience.
  • New developments in M&A transactions for small to medium-sized deals.
  • The crucial role mental health plays in leadership and preventing burnout.

Mentioned in this episode:

Transcript

Patrick Stroth: Hello there. I’m Patrick Stroth, trusted authority in transactional liability and national practice leader for mergers and acquisitions for Liberty Company Insurance Brokers. 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 Brian Lee Shields. Brian is a business development and acquisition expert specializing in advising entrepreneurs on how to create sustainable, profitable enterprises that thrive across generations. Oh, and while avoiding burnout. Brian, welcome to the show today.

Brian Shields: Patrick, thanks so much for having me on. I’m really excited to be here.

Patrick: Brian, before we get into your organization, Handoff Partners, let’s start with you. What brought you to this point in your career?

Brian: Yeah, a lot of providence and some level of intention in there. So I’m originally from Houston, Texas. You cannot hear it in my accent. I went to college in Atlanta, Georgia, at Morehouse. And while I was there, I had a professor pull me aside and say, hey, Brian, the banks are interviewing on campus today. You should go check them out. And I was like, I didn’t come all this way to go be a bank teller.

Hindsight, then I learned, oh, you mean investment bank, we’re talking about, like, Goldman Sachs, Wall Street, all that good stuff. And so that path took me to Wall Street. I worked at a place called Lehman Brothers, which a lot of you may have heard of for a few years in the private equity finance group.

And then I went to go work at one of our clients called Welsh Carson Anderson and Stowe for a number of years. And that taught me a lot about how to think about assessing value in a business and what levers create value. It really taught me how to be an active shareholder. But what I didn’t know was how EBITDA happens and gets on the page and like becomes money.

So I transitioned into the internal operating group, which was staffed with people from like McKinsey and Bain and BCG and all the best of the best, and worked with those specialists on sales, procurement, operations, pricing, all these different projects at the companies, and really started to learn how revenue happened.

And that set me on a journey which was led by this fundamental belief I have that the best operators can be the best investors, but it’s hard for an investor that doesn’t know how to be an operator to be great at investing. Especially in the climate that 20 years ago I thought we were going to be in, which I feel like we are in now.

Which is where capital is a commodity. All money is green. So if I’m going to take money from this person versus that person, or if you’re going to raise money from LPs, you need to have some differentiator, particularly around operations. And so I wanted to get my operational chops tight. And that sent me down this path where I was then running growth at different venture-backed companies, and ultimately decided to buy my own company that I did a roll-up with and thankfully had a successful exit.

Patrick: And now you’ve transitioned over into Handoff Partners. And you didn’t call it Brian Lee Shields Partners or anything like that. So start with the name Handoff Partners and talk about the services that you guys are providing.

Brian: Yeah. So Handoff Partners is a firm in which myself and my partner, Landon, are actively looking to facilitate the quote, unquote handoff between today’s generation of entrepreneurs and the future generation of entrepreneurs, in which I would include myself. The business that I last bought was from a retiring entrepreneur.

Somebody who had built a business over 30 years. Had all the battle scars to show for it, and they were ready to ride off into the sunset. And they were looking for a partner that they could trust to take the keys, facilitate, and steward the business into the modern age, and do right by the employees, the clients, etc.

So thankfully, they thought we would be that person. And so I got the chance to acquire that company. And with the success that we had with that business, I was able to put somebody in leadership there from a corporate role, who didn’t have the risk profile to go out and buy her own company or start her own business, but had the experience and could very easily step into an entrepreneurial type role and be successful.

And just given the nature of difficulty in promoting in corporate environments, the lack of relative stability there, a lot of people are starting to see entrepreneurship as an opportunity for themselves and the skills that they’ve acquired in these Fortune 500 or 1000 companies. But for those of you who maybe came from corporate you know very well, being in corporate land is very different than being in charge.

Those are two different worlds. So we like to be the bridge. We want to build an ecosystem in which people who are entrepreneurs, who have for a generation employed people, delivered great service, and built things that are enduring are ready to ride off into the sunset, or at least like move into an elder position.

We want to facilitate the transition from them to the people who are ready to kind of take the reins and build this ecosystem where those people who step into the new seat get support from the people who were in that seat, and just make sure that everybody sees the value in everybody’s experience and energy.

Patrick: Yeah, and you bring up a couple of things here, because a lot of those owner/founders that have been around for 20, 30, years, they came of age where there was the option, join a large institution, big business company, where you put in your time, and then you ring the bell when you’re done, and then you just go off and they plug somebody else in.

You had no responsibility other than your role. That was the thinking. But then those entrepreneurs that stayed away from big companies that opened their own ventures, well, now they’ve got huge responsibilities. They have staff and team members who are relying on their careers for them to keep going.

You’ve got customers, you have suppliers, you have this whole ecosystem that you’ve created that as the owner you’re at the center of. You can’t just check out. And there were a lot of, I’m seeing a lot of manufacturers that you could see the names changing to. It was whatever name, Smith, and then it became Smith and Sons.

And if you didn’t have sons, it’d be Smith and Family. And that kind of transition isn’t available now. And so you’ve got this pent-up demand for talented people who really didn’t know about entrepreneurship, and now are looking at that as the alternative to big business. And you’ve got this supply of companies that need somebody to carry legacy forward. And so you’re moving that together.

Could you just, we didn’t talk about this earlier, but talk about the operational chops you develop, because you came from an environment where you know if you’re going to add value, it would be financial reengineering. And then you move from that into now operations. Talk about that. I mean, were you in manufacturing? Were you in tech? What did you do?

Brian: That’s a great question. And so just to close off the point you were just making that big company job, the way that my parents described it was, that was a good job. You need to go get a good job. And we’re in an environment.

Patrick: It’s all security.

Brian: But those don’t really exist in the same way anymore. And so I think that that creates the talent opportunity where people in our ecosystem in our Rolodex are not only desirous of transitioning but are actively working with us to figure out how to do that. And we have data on that we can dive into.

But to answer your question from an operational perspective, I was a financial engineer. That was the beginning of my career. And as an example, we were just talking about a deal I was looking at before I got on this recording, and I quickly looked at the financials. And I was like, okay, here are the five things that we probably need to think about.

And this is how I think about refinancing this, and this is probably some opportunity for working capital management. I could just see that quickly. I’m not the best at it, but I’m definitely up there. Maybe I might not medal every race, but I’ll be in the top 10, at least for current time reference.

But one thing that I recognized was I don’t know how to make these things happen, and those are really important. So I thought about my post-financial engineering career as such. I wanted to first kind of get a quote, unquote, real-life MBA. And for this in particular, I thought a lot about the GE model where Jack Welch is famous for having all these great managers and general leaders and stuff like that. And I wanted to think about how he developed those.

So they have these rotational programs where they would put people into different departments and different divisions, so they could understand how to think about industries differently, and then how to think about functions across those industries. So that when they become in charge of a thing, they would then have the panacea of things.

Patrick: Marketing, operations, human resources, all those different things.

Brian: Which are critical to a large business and in a small business, that all falls on the operator. So you need to have that reference point in your mind. So that was my first stage. I went rotating through our operational group team and did projects or deep studies with them on all of these functional areas. And so I got some academic and some applied learning.

I then left the firm to go launch a division at one of the portfolio companies. And that was from scratch. I went to this diagnostic lab to launch a pain testing service line, and it was a ton of fun because I didn’t know what I was doing, but I figured it out.

Classic entrepreneur, I was just like, I don’t know. I’m just gonna go in here and ask a bunch of questions and look dumb for as long as I can until I figure this out. And it concluded, not only with some financial success. We got the business to about $3 million of run-rate revenue before I left in a year.

But what I took as the signal that this was working was that the sales team would look to me to answer all the questions technically or operation-wise, for the clients. And so they would be like, well, Brian knows how all this works. And I’d be like, yeah, go from here to there, and then these are the reference ranges we care about, blah, blah, blah.

And all this stuff that, like, I don’t have a healthcare background, Patrick, but I learned it. And so that just taught me how to become a relative overnight expert, and then not just intellectually understand it, but operationally apply it into a sales and service delivery organization that allowed it to be financially successful.

Patrick: From learning to execution. Well done.

Brian: That matters a lot, right? Because I find entrepreneurs generally are really good at that, but not all executives are good at that. And so there’s a healthy balance in understanding where one ends and another begins. But I find that as you’re building or turning around a business, or even just taking over an enterprise from a previous executive, you need to say, hey, look, I understand what best looks like in all of these different areas.

And so if you are not lining up to that measuring stick, then we have to have a conversation. But if you don’t know what that even looks like, and you’re going to take over an enterprise and then be like, I don’t know man. Seems like the CFO knows what they’re doing, and meanwhile, they’re embezzling. Who knows? And these are true stories.

Then from an industry perspective, in my career, I’ve either worked in or invested in about 15 industries. The most I’ve spent time in are generally business services, people-oriented, customer service organizations, and technology businesses.

And so Welsh Carson focused on healthcare, technology, and business services. And so basically, my experience aligns with that. And I think that knowledge matters a lot into taking over organizations because you want to have some point of reference for the industry.

Patrick: Well now let’s talk about the role with you and Handoff Partners, as you’re looking at a prospective owner/founder that wants an exit, or maybe not an exit, a transition, and they don’t have the skill set to get to the next level. You would be coming in, and then you can pull other talent that’s looking to be into these opportunities. Coordinating that for me, please.

Brian: Of course. Yeah. So with Handoff Partners, our vision is to build an ecosystem where Handoff Partners is the best steward of companies from retiring entrepreneurs. What does it take to be a good steward? Number one great values. And this is something that myself and my partner spend a lot of time with each other on. Whether it’s our Christian values or just how to be business people.

So we talk a lot about that and operate from that place. Second is being fair and transparent with the conversations with the sellers. So we’ll tell you if we can’t get there as soon as possible. But if we can get there, we’ll try to bring you along the journey so there are no surprises. It’s still gonna be a partnership.

So we wanna make sure we’re open and honest with each other. And then, from a talent perspective, I have operational chops, but I can’t run 10 companies and if anybody tells you they can, they’re probably lying.

Patrick: Other than Elon.

Brian: He might have found his limit with Twitter. That’s just a fun case study, because it’s like, hey, you bought a company you didn’t really know a lot about and now it’s unclear if you’ve gotten any value out of it. But anyway.

Patrick: He’s got a margin for error that a lot of other people don’t have.

Brian: He has got a margin for error. That is exactly right. But with Handoff Partners, as I mentioned, there are sellers in this quote, unquote Silverwave who are ready to retire or transition and diversify from one asset to maybe cash that they can put into multiple assets so they can age gracefully.

But then there are all these people who are thinking about being entrepreneurial and want to jump in. And so what we’ve done is we run workshops and seminars for people who are thinking about dropping their w2 and potentially coming to be a senior leader or general manager or CEO of a company.

And our position on it is, you could do it with Handoff or yourself, but we really believe in entrepreneurship. So here’s the knowledge, here’s the framework of how to think about this. If it works for us, great. If not, you know. Yeah, go be free somewhere.

Patrick: You’re providing infrastructure. I think that’s fantastic.

Brian: Yeah. That’s how we like to operate. We want to give more than we get. Because A, we just believe that’s one of our core values of how we operate, is we just don’t sit here and always think about what we can get from this specific interaction. We think, hey, I have a lot to give here, and if this is a platform to do it, great. And you know, if you get value out of it, cool, and if it comes back to me, great. But good karma is real, so we like to invest in that.

But these folks we have, we’ve got a few dozen people on our short list now who have industry experience in financial services, in consumer goods, in healthcare, and technology and janitorial services, who have come to us who wanted to be on our shortlist, who said, hey, I’ve got 10 to 15 years of experience in these industries, who have PNL experience, who have hired and fired and who also have capital to co-invest, which we think is really important.

Because you want people to have skin in the game alongside the fund. So, we feel like we’ve been able to attract talent and organize it in a way where we can quickly say, we have this opportunity with let’s say a wealth management firm because my partner is a wealth manager. Cool. So we know this person who ran this wealth management firm really well, or this wealth management division within Bank of America really well.

Let’s place him here, give him his own book, and let him run wild with it and get clients. And that has been successful, both for myself and my last business and my partner with this current business that he bought about a year ago.

Patrick: So what’s great about this and one of my common questions to my guess is, what are you bringing to the table that others aren’t? From my perspective, what I’m seeing here is you’ve got owners and founders that want to go ahead, and they don’t want to just dump their life’s work off and let it disappear.

They wanted to go forward, and maybe not necessarily pure legacy, but they wanted going forward, they want their people and their customers taken care of. There’s an emerging growth, group of buyers out there, search funders, where they’ve got some intellectual capabilities, they’ve got some capital that they can bring to bear, but you’re bringing the skill sets.

I think that’s at a nice higher level, that’s the value add that I see. Is that if you’re an operator of business services and you want this to continue on, if not grow, whether you’re going to stay on board as an investor or not, you know, let’s find somebody who can transition it and up this game. And that’s kind of how you’re coming as I see it.

Brian: I will say that we’re in now in a record number of search funds raised land, and I think that that is a signal that there are a lot of people who want to pursue a risk-adjusted way to become entrepreneurs. And so that just speaks to the talent pool that we can pull from, which is great.

But from having both been an operator who sold a business and having talked to, I talked to a couple dozen people who are thinking about selling businesses every month, that question of trust comes up.

Because when you’re sitting across the table from somebody who’s thinking about buying your business, A, you want to make sure that that thing that you’ve invested, in a lot of cases, more time into than maybe even your kids, is going to someone who will do right by it.

And right can look a bunch of different ways, but you want to make sure that there’s rational, empathetic leadership on the other side of the table. And then second, just from a practical perspective, there’s a creditworthiness question.

Most of these deals require a seller note or some equity roll, and you’re looking at that person across the table saying, are you actually going to make good on this? Can I make a bet on you with some meaningful amount of capital? And speaking for myself and Landon, outside of our track records, we believe that we bring a lot of experience.

We’re a couple of decades in our career and a great track record, but all of that is founded on a strong humanness that has led us to make good decisions, but also take care of the things that really need to be taken care of. And I’ll give you an example.

So we’re looking at a deal right now, and we’ve been having a discussion about how to do right by the seller almost exclusively, up until today. And as we were having this conversation, we’ve been having some waffling about the seller. My partner was like, hey, man, we’ve been talking about the seller and how to do right by them this whole time.

What if we took them out of the equation, and then also asked ourselves, how do we do right by our investors in this scenario? And the good thing about it was that the differences in how we would approach them weren’t that wide apart. There were some valuation tweaks, 10 or 15% one way or the other. There were some timing questions that came into play.

But the things that held us up in dealing with the seller were also the things that would have held us up from the investor’s perspective. And being able to align those things is really critical and takes a lot of experience. It takes cuts at the apple.

And a lot of search funders who are out here for the first time don’t have a lot of practice at doing that. They depend and rely on their investor base to kind of help guide them. But when we come with that built into our DNA.

Patrick: Okay. One of the things you underline there is my core belief about mergers and acquisitions. Because a lot of people out there, they think about mergers and acquisitions when they see an article in the Wall Street Journal. And it is, Amazon buys Whole Foods. Okay, that’s what they think. And it’s not Company A buying Company B.

It is a person or group of people choosing to partner with another person or a group of people, with the intent that one plus one will equal a multiple of like three or four or five. You cannot bypass that human element, and if you try, it’ll catch up to you later.

And so, you underline that perfectly, which is great for this, because we want people in the lower middle market, particularly owners and founders, they need to be aware of organizations like Handoff Partners. Otherwise, they’re going to default to some strategic down the street that they know, or an institution that may not have their best interests in mind.

And so they’ll default on these things because they just don’t know about this. That’s what’s great about having Handoff Partners out here. Now, Brian, tell me, what’s your ideal client investment profile? Who are you looking to serve?

Brian: From an LP perspective?

Patrick: Yes.

Brian: Yeah. So yeah, that’s a great question, actually, Patrick, because when we talk about this ecosystem concept, I did not include the investors in that discussion. So very obviously the ecosystem is, there are sellers who we would move into advisor roles and elder roles. And there are new operators that we’re going to bring in to take over these businesses, and run them and modernize them.

But our investor base has primarily been entrepreneurs, for the most part. And to a certain extent, entrepreneurial family offices. People in organizations who have similar scars from running businesses, the ups and downs of being responsible, being on the hook, and understanding the eat-what-you-kill mentality and the long game that is required to be successful at that.

So we have, as an example, we have one LP who has committed to us, who has had a successful real estate career, has built successful fitness businesses, and is looking to invest because he is both of the generation that would want to sell to someone like me, and sees the vision and the opportunity to use his skill set and experiences to better the next generation of entrepreneurs.

He does it on his nights and weekends already. Another investor who is coming to the table with us is a venture capitalist up in the Bay area who, for all of the opportunity that he gets to capitalize businesses in his day-to-day work, to go be entrepreneurial.

This is just a different brand of entrepreneurship, and there are a lot of best practices that they try to implement in some of those startups. But, they don’t always have the longevity to see them play out, but that they can bring to these businesses. And frankly, like that’s a part of what made my last business successful was having spent a bunch of time in the venture capital community.

And having seen customer service best practices, how to use technology very smartly, and all these other things, and then bringing that to a business that was just built with duct tape and bubble gum, because that’s how you had to build it to get it going. There’s just a lot of opportunity to enhance the value. So those are the kinds of folks, generally, we’re looking for.

Folks who have run manufacturing businesses, consulting businesses, insurance businesses, and who we can say, hey, Patrick, we’re calling you and we’re asking you about this specific personnel issue we’re dealing with that I know you’ve dealt with before.

Or how would you think about the reps and warranties for this acquisition that we’re about to do as an add-on to the business we already bought? And just being able to leverage that expertise, where there’s a network effect that’s becoming part of what we’re doing that becomes really, really valuable, both to the sellers and the operators that participate.

Patrick: One of the things that you talked about when we first met, and I mentioned in the intro, is that you are contributing or trying to as your services include avoiding burnout. Talk about that. Because everybody keeps thinking, we gotta get out, we gotta get going. Grind, grind, grind. There are some people that only know grond. But then other people, they’re like, there’s got to be a way out of this. So talk to that area.

Brian: Yeah, man. Going back to your good job reference earlier, my parents were both healthcare professionals. My mom was a nurse, my dad was an orderly. So they would go to work, do their thing, clock out, come home, deal with me.

Patrick: Tune out.

Brian: That’s it. And they didn’t have smartphones. They didn’t have the responsibility of staff. They didn’t have the pressures of a multi-million dollar PNL that they needed to hit, and so they could just kind of check out. And so they were stressed out. But it’s different than, in particular, operator burnout.

Speaking for myself, and you mentioned this earlier, you have all these things that are now dependent upon you. You are the steward of these people’s livelihoods, the service that you’re providing to a lot of clients, and that can feel very heavy. Now, the best of us will rise to that occasion and do the right thing for people, and make sure that people’s payroll is paid on time, that insurance is there for people when they need help, that the clients are getting the service that they paid for, the product that they paid for.

But I suspect most of the best of us who do that also self-sacrifice in pursuit of that. I will include myself in that. I started my career out on Wall Street. I was like, yo, I work 100-hour work weeks. I have no problem with workload or intensity. It’s all good.

But when you have, when you when you look across the table with employees who are just thinking about making their rent payment, and you are the person signing the check so that they can make their rent payment, there’s just a different level of stress that comes with that.

And if you’re not prioritizing your own self-recovery, then the decisions you end up making the energy you bring to leadership, it can have negative effects on you, and that will have downstream negative effects on the team, and they will feel it. And so, just as an example, I’ve talked to a couple of businesses that have had to make payroll timing shenanigans work to make sure that the business could have working capital.

But every kind of couple of weeks or months were in payroll tweaks a little bit That just gives employees a little bit of a nudge to say, I don’t know, man, am I really stable here? And then you risk losing good talent. And if that comes from you being stressed out, then that is a big challenge, right?

And if that’s because of the way working capital has been managed, then that is an operator’s responsibility to figure out. But, I would say, just as a closing anecdote on that. For myself, we bought the business that we last bought right before Covid. Perfect timing. And Covid started, we had to turn the business around, and implement a bunch of new systems.

We got through it, and we got and we were thriving, but I self-sacrificed. I put everything out there for the team so that they could have time off so that they had all the resources they needed, that they felt clear on the plan and the vision, and that everybody felt stable. But energetically, I took no days off. Even though we gave our employees extra days off, I took no days off.

If clients needed support, I would try to whittle it down to something focused. So I would step in and involve myself to make sure that the team had efficient opportunities to work. And then so that was cool. And we got to the point where we ended up exiting the business successfully, and it was great, but then I had nothing left in the tank, Patrick, from when real life happened.

And if we closed that business in January of that year, or we exited that business January that year, very successively, my father passed away, and my wife had a really hard pregnancy where she was basically bedridden. We moved, and a bunch of other things happened where I just didn’t have the emotional capacity to withstand all that. And I was just not functional.

My brain was not working, and I started making really weird decisions. I would miss my workouts, I would forget obligations that I made to other people. I would miss meetings, not because I didn’t want to go, I just forgot about them. And so I say all that to say that that is a microcosm of what’s at risk for people who are in charge if they don’t take care of their mental health.

Patrick: It’s good that you’ve got that global perspective that you’re gonna guide this up. Which is what we all need nowadays is not just success, but sustainability, and so that works in that positive direction. One of the things you mentioned with securing an exit are, with mergers and acquisitions, the insurance industry has stepped in with a way that enables the parties to facilitate these transactions by removing a tremendous amount of risk.

So it’s an insurance policy called reps and warranties insurance and what it does and it takes away that, what we call the indemnity obligation between seller and buyer. It’s like the money-back guarantee that’s in the contract.

We take that pressure away, we send it to an insurance company which has really fast-tracked a lot of deals and enabled deals that otherwise would be stuck to go forward. But don’t take my word for it. Brian Lee Shields, good, bad, or different, what’s been your experience with rep and warranty insurance?

Brian: With the last company, we did two acquisitions in that roll-up, and I had to pull, I had to use an indemnity in both of them. It wasn’t for any malicious issues. But with the first one, we ended up identifying that there was, there were some accounting shortfalls that had been happening for like, years that we had to true up and actually put cash out of pocket due to an audit. And so we had the lean on the indemnity for that. And the seller was independently wealthy, so they were able to come up with some of that cash.

Patrick: Less of a problem, yes.

Brian: Yeah, but, A, it didn’t taste good to him. And B, we were ready to have to write the check ourselves. Because, man, I don’t know if this guy’s got it. And so if there was something, a tool like this, that existed for that, maybe it added a couple of basis points on the transaction cost, but the peace of mind, so worth it.

When you first told me about this, when we first talked, I told my partner about it. Immediately the next day. I was like, listen, man. Especially at the size of business that we look at, which we typically look at one to $3 million EBITDA businesses, you hope that the seller has the wherewithal to honor the indemnity.

But they might not by the time it comes up. And so having a tool in place that just eases the burden on both parties and lessens the drama, and reduces the chance of litigation, is just totally worth it.

Patrick: Which is fantastic, because that’s what happens with rep on warranty insurance. It’s been around now for a lot of years. And through that experience, you’re going to get innovation. We have more competition too, which enhances innovation to another step.

So when we originally talked about rep and warranty with your background with the big institutions, rep and warranty applied because these were for transactions priced at $100 million and up.

But they’ve come down market over the years from 100 million down to 50, down to maybe 20, 25 million purchase price transactions. But to deal with a sub ten million deal where that protection is really necessary. There hasn’t been a product available until now.

So there is a program called TLPE, transaction liability, private enterprise, and it is designed for transactions that are priced between a million dollars purchase price and $30 million. And it’s set because the underwriters saw the opportunity too. We have a market that we can go after at scale.

And if you want to do anything at scale, you have to be able to solve a problem, it’s got to be a simple solution that you can execute, and it’s got to be affordable. And with this product, TLPE, we can now go in on again, these million to $30 million deals. We have an application process which takes less than a day to complete.

The pricing averages $15,000 per million dollars in limits, so you can get just a million, or you can get all 10 million if you want a ten million acquisition, or anywhere in between. And that’s been a great benefit, which we want to bring out to organizations like yours, and to owners and founders out there.

Because 90% of the mergers and acquisitions community, they know about rep and warranty, they don’t know about TLPE. And so we want to get the word out for that. And now with Brian, what do you see going forward now, as we get second half of the year?

Brian: My sense of the market is that there’s a lot of hesitancy, given people aren’t feeling very clear on what 2025 is going to look like, from a political environment, from a tax environment, etc. So, I found that the conversations we’ve had with sellers have been, hey, we’re interested.

But how can we make this the most tax-efficient deal as possible? Or their valuation and expectations are just like wildly out of line with reality. Partially because they’re expecting a meaningful tax impact, and also to try to account for the potential of rates declining, and they’re expecting, maybe a buyer to have some adjustable rate flexibility to pay up now, but then appreciate some decrease in cost of capital in the coming months.

So that being said, I think that the people who are going to get deals done will have some strategic advantage. I mean, we think of ourselves as like people that you like to work with, so that’s our strategic advantage. But, I think a lot of people are looking at strategics.

Whether it’s like their bookkeeping company and there’s a bookkeeping company that can buy them, or there’s a bottling and processing company that can be acquired by another bottling and processing company, or some kind of analogous acquisition.

Those tend to get priority, because, again, going back to the valuation expectations, the strategics have some level of synergies that they can price into the deal. And so, yeah, I mean, I’m even seeing this with some of the private equity firms that I’m friendly with that are upmarket, because A, there’s a lot of dry powder sitting around, and B, the funds are looking to deliver growth and see that the sellers are just, they’re just like, hey, man, this is my price.

If you want it, you have to pay the price. But I think that’ll dislodge itself both after the elections and kind of end the q1 because people will start to realize, regardless, life isn’t going to be that bad. I think tax policy will still continue to be largely driven state by state. And, you know, we’ll get back to business as usual. But people’s attention is just a little distracted right now.

Patrick: I think what happens is we got to get past the election, and whichever way it works out, either side means another month or two to realize that the world isn’t ending. And so I think once we get to that realization, you’re going to have this collective faith moving forward, then just life’s going to go on.

Brian: Yep, I 100% agree. The world will not end.

Patrick: We’ll see it in little more than 90 days. So we’ve got that going. Well, fantastic. Well, Brian Lee Shields from Handoff Partners, how can our audience members find you?

Brian: Yeah, so the easiest way to contact me is on LinkedIn. You can find me at Brian Lee Shields. It’s Brian with an I, and I’m pretty responsive on there within 24 hours.

Patrick: Yes you are.

Brian: You can speak from experience. I’m happy to chat, so just hit me up.

Patrick: Fantastic. Well, again, Brian Lee Shields from Handoff Partners. Great having you as a guest, and we’ll talk again.

Brian: Thanks a ton, Patrick.

M&A Masters, with Patrick Stroth

Listener Note: Older episodes may reference Rubicon M&A Insurance Services, the previous name of Patrick’s agency prior to joining Liberty. 

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