Most M&A Advisors aim for the billion-dollar deals—so who’s serving the true engine of American business?

Take a behind-the-scenes look at the world of lower middle market M&A, where relationships, turnaround expertise, and strategic partnerships make all the difference.

In this episode, Bob McCormack, Founder of Murphy McCormack Capital Advisors, reveals the unique challenges and overlooked opportunities in family-owned business transactions—and why collaboration (not competition) is the future of deal making.

You’ll discover…

• Why Murphy McCormack says “no” to 9 out of 10 potential engagements—and what happens to the businesses who aren’t ready (yet) to sell
• The inside story on Cornerstone International Alliance’s deal-sharing model and how it transforms client outcomes
• How emotional intelligence and post-closing support can make or break an owner’s life-changing exit
• The reasons rep & warranty insurance is finally making inroads with private business owners—and who’s still pushing back
• The untold macro risks (like tariffs) that are reshaping manufacturing deals in real time

Mentioned in this episode:

• https://murphymccormack.com/

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 Bob McCormack, founder of Murphy McCormack Capital Advisors. Based in Pennsylvania, Murphy McCormack Capital Advisors is an M&A advisory company specializing in sell-side and buy-side advisory services, business valuations, financial advisory, and highly selective business turnaround services. Bob and I, quite frankly, for full disclosure, have worked together in the past. It’s been a fantastic relationship. So Bob, thanks for joining me today. It’s great to have you.

Bob McCormack: Thrilled to be here, especially with the great speakers you’ve had in the past, and the ones I know are coming.

Patrick: Yeah, well, now, before we get into Murphy McCormack Capital Advisors and all the M&A that’s happening out there in Pennsylvania, let’s start with you. Give us some context here. What led you to this point in your career?

Bob: Yeah, so my roots go back to a little nerdy. I wanted to be an accountant all my life. I worked for four years for the Reading Phillies, which is a Double-A minor league baseball team. Skip to assistant business manager, and enjoyed doing it. And when I graduated from college, I took the CPA right away, but I was recruited by what was then Core States Bank. It’s now Wells Fargo. They had a great training program. They paid for my CPA.

And I was a commercial banker for most of my life. We were acquired by First Union, which is now Wells Fargo. And I had corresponded banking for everything north and west of Harrisburg in Pennsylvania. And one of my customers was another bank, Sun Bank, which is now FNB. And it was a turnaround. They recruited me to be Chief Lending Officer, and I eventually, real quickly, became CEO of the bank.

Have a ball during that, and then part of that turnaround was actually doing acquisitions and divesting some interest. So I did nine acquisitions when I was the CEO of the bank. They were bank acquisitions. They were leasing companies, insurance agencies, trust companies, and really fell in love with the M&A side of the business.

I also financed acquisitions, both at Core States and Sun. And when we sold Sun to what is now FNB, I had the opportunity to do investment banking for banks only, with some firms in New York City and DC, and other places. I moved six times for Core States. My family was tired of moving. My wife was a coach of the women’s tennis team here.

I was helping coach the boys and women, and we just said, moves. And I saw this opportunity. There was a niche between the Goldman Sachs of the world and the business broker level of the world. So we started the firm in little Lewisburg, with a town of 4000 people in the middle of Pennsylvania. And it’s been something we’ve enjoyed. We’re in our 20th year.

Patrick: Yeah, congratulations. You opened in 2005, and Murphy McCormack has been going now 20 years. So congratulations, and you’ve seen our big swath of M&A activities in that whole time. So we’re going to get into that. But with regard to Murphy McCormack again, congratulations on the 20 years. Let’s talk about the firm’s commitment to the lower middle market, because being around 20 years, there’s always a tendency to go up market. Talk about what Murphy McCormack does and your position with the lower middle market.

Bob: Yeah, so we, like I mentioned, we saw a niche. Everybody wants to be Goldman Sachs and do the $1 billion, $10 billion type deal. But there are a lot of closely held businesses in the region and throughout Pennsylvania and mid mid-Atlantic that I saw as a commercial banker that were being not served well, and those were companies typically between 10 and 100 million in revenue. I also saw the need below that level, too.

And so we, we started the firm with the premise of focusing on the family-owned, closely held business. Now, we do do some publicly traded companies, we do do some financial services work, but our main focus is on that closely held business owner, family-owned business. And we also, besides M&A, we also help with succession planning, management buyouts, ESOPs, some of the other things that there’s still need out there, and there’s not a lot of great solutions.

And my business partner, Sandy Miller, she was my chief banking officer at Sun Bank. She came out of M&T Bank. M&T had a great training program as well, and always had a client-centered focus, and that’s what we had at the bank. So that’s what we drove to when we started this organization. Anybody who works here has to have that focus.

So there’s still a need out in the marketplace, in the lower middle market, and we have a long-term focus. So many of our clients, we’ve worked with 3, 5, 6, 7 years before we’re ready to go to market. In some cases, we’ve done two or three acquisitions for them. We’ve helped them restructure their debt, and then they’re ready to go to market, or they’re ready for a family member to buy the business, or a key employee, or things along those lines.

So that’s been our primary focus. We still see a nice niche there in the mid-Atlantic region, but across the country, we have some great peers across the country that do this well. Some of them have been or will be on your podcast as well, and I have a lot of respect for what I’ve learned from them as well, too.

Patrick: Yeah, I can imagine the universe of advisory services, both buy and sell side, has expanded dramatically since you started. Talk about that a little bit, and then how you were working with other firms.

Bob: So when we started, there was not a great place to get training for this. So at Core States, we actually had M&A training. So that was great roots for me. But it was back 15 years ago, before I started the business. And I learned a lot from the investment bankers. My investment banker, primary investment banker at Sun Bank, was KBW at Keefe, Bruyette & Woods in New York. My relationship manager there, Scott Anderson, helped model the structure of this firm. I also had a great mentor at FNB who did a lot of acquisitions, Steve Gurgovits.

So combination of those helped me get trained. But we really needed to do something more. So IBBA was around, which is the International Business Brokerage Association. More true business broker. A source piece of that the lower middle market was splitting apart and becoming a separate component of that larger organization, and really focused on training and development, and sharing with peers. And that really helped develop our team. We continue to be, I was past chair of the National Association.

I still teach there, still work, do workshops. Most of my people will go. One of our commitments, which is a little unusual in our industry, is I pay, we pay 100% for them to just take the classes. A lot of firms don’t do that. They make the individuals pay. Our team is employees, not independent contractors. So we feel that’s an obligation to our clients, and I think they’re more likely to stick with us then as well, too.

The teammates and the clients then as well. So one of the groups we’re active in, and we were original founders, was a group called Cornerstone International Alliance. It’s about 20 firms here in the US, three in Canada, a handful in Europe, one in Japan as well, and one in Brazil. And it started as a best practices group. So if you think about like BDO Alliance or the RSM Alliance that CPAs have, it’s really a best practices group, but they often share clients, and that’s what we did with this, too.

So when we formed Cornerstone International Alliance, it was four or five of us with a primary focus of best practices group. We evolved to still doing best practices, but we evolved to where we actually share deals together. We have about 20 firms here in the US, a handful in Canada and Europe, and Asia as well. So what we have done with that, though, is, I’ll use an example of working together. Cornerstone Business Services in Wisconsin had a transaction in the non-wood manufacturing space.

So think of resin-made furniture or like trex decking. And we had something very similar. Our firm was actually a little bit bigger, but in a best practices meeting, we started talking about, hey, does anybody have experience in this industry? And we jump on it right away and say, yeah, we do. Scott in Wisconsin said we do. We’re able to pull those two deals together and sell them to a private equity firm. That has thrived our leadership team, thrived with the private equity firm. There’s one of them retired, but one of them is still leading the combined company, and they’ve done add-on acquisitions since then.

But that sharing of knowledge and sharing of clients has really worked well. We have a team chat that literally right before I got on here, there must have been six messages going back and forth about a certain industry. Does anybody have expertise in that? So it’s been a good learning from each other while still competing to some degree, it’s been a good, a good framework for us to continue to grow, too.

Patrick: Well it’s kind of encouraging. You don’t have this hyper-competitive zero-sum gain attitude. It’s more of an abundance attitude. And I think, quite frankly, it’s helpful for the you know, buyers and sellers out there, if the professional advisors are working together, because the better practices you have on your side of the table, if the other side of the table has equally good practices and has the discipline to do the right things, deals move faster.

And if deals are a fit, you identify that, you’re not trying to, you know, push round pegs into square holes, and you move forward. So the client’s benefit. I was about to ask that. Within Cornerstone, you’re working well beyond the scope of Cornerstone, but within Cornerstone, so you could have you representing a seller, and another office is representing a buyer, and then you’re arranging those types of meetings.

Bob: We are. I’ll take it further than that. So I believe you’re going to have Craig on from Chicago coming up. Great expert on the healthcare industry. We do some healthcare, but not to the expertise that Craig does. So if I have a healthcare specialty type transaction, Craig knows the buyers in that market, one, but he knows the language, he knows the key financial performance metrics to look at.

I could pick up the phone and call Craig or drop him a note, and Craig will be right there to help me in a heartbeat. And you can’t, you can’t pay for that kind of relationships. I think taking a step further, Patrick, just using what you do as an example. When we have somebody on the other side of the table who understands what you do, it goes a long way in helping us to find the best solution for a client.

When we have a, whether it’s an attorney or CPA or an M&A firm or a business broker that doesn’t understand your business, their first answer is no, even if it’s the best answer for the client. And so having professionals on both sides, you touched on it, whether it’s two deal attorneys that know the industry and know what you do, or it’s 2 M&A firms that know what they’re doing, it goes a long way to find the best solution for the client.

Patrick: Yeah, and I think we can’t gloss over this. Is that M&A is not one company buying another company. It is a person or group of people choosing to work with another group of people. And the objective is that the whole is greater than the sum of its parts. And where you come in, your clients will have a deep personal relationship with you. You mentioned that you were working with people for years before they get to a transaction.

And you not being focused on your own needs, saying, well, I’ve been helping you. I understand your business. But when we get into an M&A transaction for an industry outside that I, I may know an industry, but not industry for M&A in a particular area, such as healthcare, you have the resources to bring that in.

And that’s very helpful, because the healthcare specialist who knows M&A for the healthcare doesn’t have the trust and legacy relationship that you have with the owner or founder. And so I think that works out. And that’s what we’re trying to do here is, rather than having competing interests, find some way where we can all be pointing in the same direction. Which is, which is excellent.

I usually ask my guests, what are you bringing to the table that the 1000s of other sell-side advisors are? In addition to the relationship with Cornerstone Alliance, let’s talk about your 20 years experience. What are some of the other things that you’ve learned over the years that has enhanced your delivery of services to you know, buyers and sellers, usually with the owner founders?

Bob: Yes, so I think a big piece of our value proposition to the business community, buy sell side, corporate turnarounds, is the depth of our team, the amount of training we give to our teammates. We have strength in not just the M&A piece of it, but certainly the tax piece. Every business owner has a 20, 30, or 40% or sometimes larger partner, and that’s the IRS. State department of taxes.

So really understanding how to deal with those issues and stay within the framework of the guidelines. Understanding business valuation. I think the other big strength is having the corporate banking backgrounds. So we understand how to get deals financed. We understand the challenges that are out there on the finance front, and that goes a long way. Because if you can’t, you know, again, most of our deals are leveraged to some degree, whether it’s 40, 50% and that includes private equity.

If we don’t understand the financing environment and the cost of capital in those, we can’t serve our clients well. We’re just going to overstate valuations or understate valuations, whatever the case is. And I joke with my clients, but it’s a serious statement. I tell them right up front, when we get involved, you’re gonna have an MBA in M&A, like it or not, by the time we’re done. And the reason we take that approach is we like to be transparent from the time before we get engaged to the time that they get the wire in their account.

And we stay involved post-closing too, which a lot of firms, once they get the LOI, they dump it on the attorney and disappear. Our team stays right through the process. We typically are doing the schedules. We’re helping the purchase agreement negotiation and the other side agreements, too. So it’s been a, it takes extra work.

There are a lot of emotions involved in M&A. I used to joke even when I was a commercial banker. It’s 97% emotions and 3% finance. I can value bank in 10 seconds. It’s whose name is going to be on the door, who’s going to be on the board of directors, and who’s going to be CEO, and the finance piece could take care of itself. And that’s that’s true in the closely held business too,

Patrick: Yeah. And let’s understate the importance of this, just the people factor. And we talk about it when we’re providing peace of mind with great care. But let’s talk about the scope of how big an M&A deal is for the owners and founders involved. I mean, there is no other business venture that has, you know, the potential for not only life-changing rewards, but generational affecting prosperity. And there’s a lot of risk on the line that you go from either we are going to be penthouse to, I think we may have to move in with the kids.

I mean, there’s a lot of fear there. And just passing, you know, being a professional, and passing your client off before the process is complete and going into, probably the scariest part is, as you get into the nuts and bolts of negotiating these deals and talking about risk and all the other things. We’ll get into insurance in a minute. But you know, all those things that you just, sending them off, we’re going to pass you on. You can’t do that. And that’s really, really encouraging that that’s not a small deal for Murphy McCormack.

Bob: No, it isn’t. And my managing directors, we figure we put about 300 to 400 hours worth of time in post LOI. In many cases, the client knows our managing directors. The people are doing that heavy lifting better than they know me or one of the other relationship managers by the time the deal closes. And a lot of that is hand-holding.

And nobody wants to hear their child, which these are their children in many cases, and 95% of their wealth is often tied up in this, has some ugliness to it. And everybody has some ugly. I mean, I was on the phone with somebody this morning. There was an inventory count challenged during a field audit.

As a banker, I saw it all the time. It was not at the end of the world. They felt they were perfect, and they’re really upset about it. And I’m just trying to really say, you’re going to make mistakes. You take a widget from the raw materials and put it on the manufacturing floor. That widget inventory is gonna be a little different. That’s normal.

Patrick: One of the areas in mergers and acquisitions that’s come up in the last several years has been the concept of transferring risk away from the parties to an insurance company. And the tool that’s being used is reps and warranties insurance. Some people love it. Other people are still a little skeptical. Give us your view. Good, bad, or indifferent, what’s been your experience with rep and warranty insurance?

Bob: I would I would say it needs to be utilized a lot more. It’s underutilized. Much of it is education-related. So if you think what we’re doing, we’re selling on our end, we’re selling time, freeing them up from the business, and we’re selling them liquidity. And also, when you run a business, you have your contractor. One bad job from having a reputation risk and financial performance risk, and go through the gamut of risk when you run a business or own a business.

So what we’re trying to do is have a liquidity event. Give them peace of mind. Give us some time to enjoy life, post-closing. The reps and warranty insurance and transferring some of risk. So when you close a deal, your risk doesn’t go away. There are reps and warranties, there are other components. Escrow accounts. So in some cases, it’s 12 months, six months, a lot of cases, it’s 18 or two years or longer.

And so what the transferring the risk to the risk to the insurance side is removing, or not completely removing, but mitigating some of that risk. And most of our clients run a pretty good business. So, from a risk perspective on the insurance side, I don’t want to discount the risk that you would take as an insurer, but it is moving some of that risk off the table and gives a little bit more peace of mind.

I think the biggest challenge is I talk about it upfront, before we even get the engagement on the part of the valuation process or the underwriting process. We do. I mean, I was out Friday with a business that was with a different firm that had a failed transaction last year. And they asked the question, did they talk to you about reps and warranty insurance?

I never heard of that before. So, you know, we spend more time educating the business owner, but we got to educate the attorneys and the CPAs, and that’s where the pushback usually is. Is more on the attorney side of things. Now we’re dealing with M&A attorneys, but a lot of times we’re dealing with small-town attorneys, too.

Patrick: And I mean, I understand this. I used to for the longest time be an advocate for the sell side on this, but you know, if you’re a buyer, you’ve got an expectation, you want to buy another company, you want to get what you paid for. And the risk they have is this could not only set back a company, but it could terminate a company making a bad decision. So they’re trying to get the straight story on this, and nobody wants to get stuck holding a lemon.

On the sell side, they don’t want to be on the hook indefinitely. And there are things that, whether they know or don’t know about, they don’t want to be responsible for that years after closing. So you’ve got that natural resistance on the two sides. What’s been great is the insurance industry came in and said, look, parties, show us the reps, show us the diligence that was done for a couple bucks, rather than pointing at each other if there’s a breach, come to us.

And taking that risk off of the table really has helped. I mean, rep and warranty insurance has three purposes. Number one, they want to remove the financial risk from the parties. If you remove the financial risks from the parties, objective number two is it simplifies the negotiations for the transactions. You don’t have the two sides, you know, tug of war, trying to make terms broader or more narrow in either side’s favor.

And so that speeds things along. And speeding the process time-wise, saves on legal costs. And then the third part is, if there is something that goes wrong, they pay claims. And so you’ve got a source other than remedy coming from the seller’s pocket. So the seller is protected, but also the buyer is protected, because now they can collect and be assured that they’re going to get the remedy from their loss. And so it’s worked out.

The biggest development in the rep and warranty marketplace is a new rep and warranty facility called TLPE, transaction liability private enterprise. It is a rep and warranty facility that is designed for transactions priced between a million and 50 million in enterprise value. Your traditional buy-side rep and warranty policies that have been out for the last 10 years are used in 90% plus of M&A transactions.

Can’t accommodate deals that are under $50 million in enterprise value. They’re great on $100 million deal. But if you’ve got a manufacturer that’s an add-on for $20 million, they could be out scout. This has been a wonderful development that’s come in. It comes in at a fraction of the cost of buy-side. It’s built with the understanding that there may be a lot more deals in the lower middle market, but they’re simpler.

There’s less risk. The cost should mirror the limited risk. So that’s why we’re very proud with that. Again, it’s called TLPE. Transaction liability private enterprise. Now, Bob, we had spoken about a number of things about Murphy McCormack. I’m remiss by not asking, could you give us a profile? What’s the type of client that Murphy McCormack Capital Advisors is looking to serve?

Bob: Yeah, so our general client mix, and let me just go back to something you just said there, Patrick. The other thing that your programs, pray is a fourth item. It’s peace of mind. When you’re sitting on the deck at the lake after you sold the business, or at the shore or wherever you’re at, you don’t want to be sitting there thinking about what’s going to blow up. Especially with a new owner. And many of the new owners are younger people who are buying an old business. And having some peace of mind as well goes a long way. So I would add a fourth piece to your component there.

Patrick: Thank you very much.

Bob: To answer your question, our target market tends to be companies between two and 10 million in EBITDA. Now, most people don’t walk around and talk about EBITDA, so that’s why we say 10 to 100 million in revenue. Ideally, family owned, or it could be multi-generation, family owned. We love manufacturing.

You know, we’re in Central PA, so we’re in the hardwood lumber, steel manufacturing component parts of Pennsylvania, and we have offices in Pittsburgh and Eastern PA, and where all those take place. Surprisingly, we a fair amount in the Amish community. There are a lot of great Amish manufacturing companies out there.

Now, you know, Amish don’t like insurance, but their buyers might, so those are the target markets that we look to. We really put a lot of value in the character of the individual. Sometimes you can’t always capture that in evaluation, but we’re privately held, so we can choose who we want to work with, and we want to work with people we trust. We actually turn down nine out of 10 engagements.

Patrick: Wow.

Bob: About half of those, say four and a half of those, are sellable businesses, but not right now. So we give them a lot of tools to go back and work with a business coach or whoever, and help make the company more valuable, and we stay in touch with them. We don’t charge them during that time to take it to the next level. The other half are lifestyle businesses, and they’re probably not sellable in many ways. And we still try, we still do the valuation work for them. We give them our thoughts and concerns, but yeah, our primary focus is in that two to 10 million EBITDA and manufacturing, wholesale distribution.

Patrick: And you’re not limited geographically. I mean, you’ve got the Cornerstone relationship, you’ve got the network there, but you can do everything.

Bob: We’ve done three international deals. So our UK affiliate has helped us on two of those. So yeah, we’ve done a number of cross-border type transactions, and we’ve been all over the United States. We wear securities licenses, which allows us to do security transactions, but it also allows us to deal with some of the state laws to some of the states have real estate license requirements and stock sale and some of those real estate states, there’s some rules around that too.

Patrick: So you’ve got all the capabilities out there, and again, I’m not going to understate you’ve got the great personal connection and the commitment to the client to go through from not only to get the LOI but to go from LOI all the way through closing, and probably post post closing, making sure that the closing conditions are taken care of and all that. So that’s outstanding, that you’ve got that whole continuum as you go. Bob, what do you see as trends coming? We’re in mid-2025 as we’re speaking today. What trends do you see for the rest of the year, either macro or for Murphy McCormack?

Bob: I’ll start at macro first. The tariff issue is still hanging out there, although it has calmed down some. But I think if we can get stability. It could be just be a 10 or 20% tariff, but if we have stability, it makes it easier for our business owners to price that into their services or products. And likewise, makes it easier for their buyer to figure out what’s going on in their bank. So every deal we’re doing right now, we’re putting language in the SIM to reflect what the tariff risk is, because the banks have asked us to do that. And we’re having record conversations around that issue. In some cases, we don’t know the answer, though. That’s the challenge.

Patrick: So that’s not some attention-grabbing headline, that is a real factor.

Bob: Like I mentioned, we’re in the hardwood capital of Pennsylvania, and we’re actually in the kind of the capital of manufactured housing. You know, Indiana is the other state, so they’re dependent upon lumber to build them, in many cases. But other cases are dependent upon imported metal things along those lines. So those, we’ve put a couple deals on hold because of that. That stability will help those.

It’s not like we’ve said no, the buyer said no, the seller said no. We just said we need to figure out what’s going on. So from a micro perspective, we’re seeing a good year. I think this might be our best year, potentially knock on wood, since COVID. As you probably remember, COVID was the best year for M&A, as strange as that sounds, and the year after that, because of the potential tax code change.

Still seeing the Baby Boomers, they still have to retire. Many are creeping up in the 80s or 90s, and at some point, they’re gonna have to do something. And we stay in touch with them, of course, but private equity still has a ton of money out there. I think last when we’re at the M&A source conference. I think I heard three and a half trillion dollars in dry powder on the PE side. The banks are now back lending money. Their loan deposit ratios are back below the regulatory guidance. So they can’t find enough good deals. So good deals are being priced up. Moderate deals are being done, and bad deals are still not going to get done.

Patrick: Fantastic. Well, Bob McCormack, from Murphy McCormack Capital Advisors, how can our audience members find you?

Bob: Best way is through our website. It’s www.murphymccormack. Spell that M A C K, at the end, not I C K.com, and the contact info is there. And again, happy to work with people, just if they’re asking questions. It doesn’t need to be something that we’re going to do ourselves. You could be in another part of the country, and I can help you or get you in touch with the right, I mean, a source member or Cornerstone member to help as well.

Patrick: I would imagine just a 15-20 minute conversation with you saves hours of Google searching or trying to do chatbot research on your own. So I think that that’s a great place to start is reach out to Bob McCormack at Murphy McCormack. Bob, great to have you here. Thank you so much, and we’re going to talk again.

Bob: Thank you, Patrick. Talk to you later.