Episode 279 Featuring Alex Bond

M&A Strategies with Jason Somerville

M&A Strategies with Jason Somerville

Jason Somerville is a Founding Partner of GW Partners, a firm that combines the best elements of operational consulting, financial management, strategic planning, and M&A advisory services to help consumer brands transform into more valuable acquisition targets.

Jason is a seasoned entrepreneur and investment banking professional with nearly 20 years of experience in capital markets, M&A, strategic planning, business operations, and brand building. Before launching GW Partners, Jason executed over $50 billion of Fortune 500 capital markets transactions for companies like Bank of America and Bayview Asset Management. He also purchased, started, and exited five different companies as a solo entrepreneur. He has successfully executed over $300 million of M&A sell-side transactions in the e-commerce industry.

On this episode, Jason and I discuss the kinds of attributes that make an eCommerce brand an attractive acquisition target, the current M&A market environment for eCommerce brands, what founders should know about the acquisition process, and much more.


What is GW Partners

[00:00:54] Jason Somerville: Sure, yeah. I'll give you the short version. We can double click if needed. You know, with GW Partners, we're a boutique advisory firm, and we kind of do two main things.

One is we advise primarily consumer products, brands on, you know, scaling their businesses improving their businesses with really the goal typically at some point in the future to have a strategic transaction, whether that's a big exit or a big capital partner coming in, you know, et cetera. And then we take our clients through those processes.

You know, again, most of what our work does ultimately ends in an exit or a sale. And so we go through that kind of a middle market investment banking type approach to M&A with I'd say a little bit of our own special flavor added in there for fun. And that's what we do. 

Client Engagement Process Overview: From Inquiry to Closure

[00:01:42] Alex Bond: I'm curious about the process, you know, you outline it pretty well on your website of kind of like a four stage process from when, you know, brands or companies come up to you. I'm curious if you could kind of go through that process of let's say a client hits you up and they want to talk to you to maybe like a sale to where they essentially end talking with you. I know you could spend the entire rest of the show doing that. So at your own pace, my friend. 

[00:02:13] Jason Somerville: Sure. No, yeah, again, I'll try to be a succinct as much as possible. So in the beginning phase one, we call it the kind of the assessment and diagnosis phase. I mean, typically what we're doing in the beginning, when we start working with a company is we're trying to like really review it very thoroughly from top to bottom. 

So every functional area of the business, finance, marketing, supply chain. You know, all the above we're going through very methodically and we're trying to really learn as much about the companies we can and assess where it currently is. And again, a lot of times we're looking through the lens of if I want to ultimately have this strategic outcome, let's say it's a sale.

We're looking at it through the eyes of a potential acquirer, right? What do we see? What are things we like? What are we, what are things that need improvement? What are things that, you know, honestly need to be completely changed about the business and the whole idea of phase one is by the end of it, we will have pretty much scored every functional area in the company, including multiple levels of sub function and decide, hey, for the game plan that we're about to put in place.

What are the key elements and key action points that we all need to take as a strategic team to go out and improve the quality of this business so that one day it is a highly attractive acquisition target. So that's the point of phase 1. Phase 2 is taking all that fun stuff we figured out in phase 1 and actually doing it, right?

So that's where we essentially lock arms with our clients. One of the things I think that makes us pretty different from a lot of any other, I'd say advisors in the market is I almost hate to use the word advisor because advisors often they'll tell you what to do and then they'll just leave.

Right. Hey, if you guys do this, you're cool. I'll be back later when you figured it out. So we're, we're a little different, you know, we're like, you know what, we, we want to be part of that, you know, game plan and that execution. So we start flowing into areas where we have a lot of expertise or resources or whatever.

And try to really help these execution points get, get accomplished. And that's got a very, I'd say variable amount of time to it. As you can imagine. So, I mean, if we have something like, oh, a cleanup of financial reporting, well, that might be a two month thing. Or if we have, hey, we're going to completely revamp your entire marketing approach that might be a six month thing, you know? 

And I mean, these things take on, you know, different time periods and different, I'd say, you know, kind of a different field, depending on the exact situation. So then once we've kind of assessed and then we've kind of gone out and we've done all this work to execute, we call it the, we'll call it the refine and maintain phase.

I call it the marinate phase a lot of times, like, okay, we need to let this marinate for a minute. Let's all this stuff we've done. Let's let it start to, you know, sprout and bear fruit and develop and take the time it needs to age to where it's now, hopefully if we've all done our jobs well.

Coming to fruition, like all this good stuff that we thought was going to happen because we did one through 50, hopefully that good stuff is now starting to happen. And then that really leads us into the final piece, which is what I would call of the kind of transaction process. So if we're talking about a sale that kind of leads into.

You know, if any of your audience has ever been through or kind of knows anything about an M and a sale process, it takes on a relatively standard, I'd say feel to it, except in our market, which is the lower middle market, that's typically companies under a hundred million in revenue. 

There tends to be nuances there that you won't get in one, two, three, 5 billion type transactions, but we then lead through that sale process essentially creating hopefully a very competitive situation where we have a lot of, you know, buyers that have a really strong fit with the company and then ultimately lead in into a sale. 

[00:06:21] Alex Bond: No, that's great. That's extremely informative. And I'm actually curious, I know that this is a case by case basis. I along with I can imagine some of our audience might be curious of what's like a very general timeline of that whole process.

I mean, I know it's it obviously depends on the size of the company, the revenue, and maybe when they call you in their life cycle. You know, I can imagine you might get some calls at 11 to midnight being like I need to prepare my company to sell, you know, and I can imagine that that might frustrate you. I'm just kind of curious of what that general timeline looks like. 

[00:06:59] Jason Somerville: Yeah. Good question. I would say if we're going to use like a rule of thumb, I'd say it's a one to two year, typically, and most people will want to engage with us again, typically a minimum of a year out from when they want to actually execute on something.

And of course, look, if someone comes to us and says, you know what, I'm kind of in a hurry. I would like to, for whatever reason, I'd like to go to market with my company. Our job is to offer the best advice we can. And if we look at the situation and we say, hey, all right, given what we see here, this is what that would look like.

Do we all believe that this is a worthwhile endeavor to move forward on? If the answer is yes, we'll do it. Right. I mean, I think you have to sort of take it to the mat first, make sure everyone's on the same page. And if so great, I mean, you know, this is going to sound a little salesy, but I'll just say that you know, the client goals really are what starts the conversation and starts to really drive the process.

Strategic Planning for Future Exit Strategies: Maximizing Transparency and Scalability

00:07:56] Alex Bond: So Jason, what is the best way to kind of plan and scale? If a founder does want to exit in the future, you know, I mean, we're kind of talking about, you know, a year or two, that's probably going to put them at a better advantage than I need to sell by the end of the year. I'm curious, what are kind of some of the best ways to plan and scale if a founder wants to exit in the future. 

[00:08:26] Jason Somerville: Well, I mean, I think it starts in the very beginning with understanding, you know, what ultimately do you think you might want to do with this business?

Right? So if I have, if I'm a founder, and I've put in whatever amount of blood, sweat and tears into my company, There's always going to be some hefty amount, no matter who you are, even the people that get lucky and the growth is quick there's still plenty of pain along the way, you know, it's like, well, what do you really want to do?

And is that realistic? So there are a lot of businesses and this doesn't get talked about a lot, I think, especially among people who deal with sale transactions for a living. Like the idea is like the overwhelming majority of businesses, including successful businesses. Will never be sold. That's just not the statistics are very, very small.

I mean, you might have 10 percent of companies. Ultimately ever sell like in in the entire history and and a lot of those companies that aren't that don't sell they're very successful it's just they for whatever reason the founder kind of wanted to just run it into retirement and hand it off. 

Or I mean, it's funny there's a quote that a lot of people pull out all the time about jeff bezos who says listen, there's Amazon will fail one day right and It's because you know on a long enough timeline You Almost every company eventually, you know, sunsets at some point.

But to be specific, like really understand, am I building a sellable business?

Is that really what I want to do with this company? Is that really my goal? Because if it is. You're going to do things a certain way. And if it's not, you might not do them that same way. So I think understanding that if you don't have that knowledge and expertise, which a lot of founders don't, you need to bring somebody in the room who does.

Somebody who's going to be straightforward with you. And so, so in that case, to be honest, it's better to have almost like an advisor or almost like a board advisor to the company who in many cases doesn't have a vested interest necessarily in what you choose, right? They're just there to offer you their very best, you know experienced advice. 

So that's kind of number one is understand what you're dealing with and understand what that future might look like and how does that play into your own life, you know life plan and then if you think hey You know what? I would love the idea of selling this company, you know in a couple of years five years whatever it is.

It's time to get to work because you know building a company so that you maximize the sale is a very specific thing, right? Along the way, as you're making decisions. Now, the good news is a lot of times decisions that are operationally correct for the business are also good for a sale. So you get a lot of overlap.

However, there's a lot of other things that are not necessarily, if I'm going to sell in a year, I'm going to do it this way, if I'm not, I'm probably not going to do it that way. It might be. It might be how you grow from the standpoint of layering on costs, right? I mean, it's a very typical, you know, when a business goes from early to later stage in those early stages before it wants to ultimately have a transaction, there's a lot of investing going on in, you know, a lot of fixed costs.

You're building, you're kind of planning for the future. So your income statement right now doesn't look that great. Because you have all these investments that you're doing. And so these costs are coming through now and that's fine. I mean, you want it, you want to invest for the future, but if you know, you're selling in a year, you've got to start paying very close attention to your margins and how that's going to look to an acquirer.

And so minding where money is going, for example, is one of the many, many things to consider. So without kind of belaboring the point here, I think that the idea in the beginning is understand where you want to go. If you want to ultimately sell, bring somebody into the conversation. 

If you don't have that background and expertise, and then start going through, it's part of the reason why we do our, you know, our process, the way we do, you got to go through every single part of your business and you've got to look at it and you've got to say, what would this.

How would this be viewed by an acquirer? Would it be a positive or a negative? If it's a positive, how do we magnify it? If it's a negative, how do we get rid of it or reduce it? And then as we grow, how do we grow in a way that's going to be, I'd say, strategically significant to the market that you're in? I think that's important. How do we really differentiate, right? 

I mean, you know, there's a lot of businesses that, you know, they actually make a good cash flow. They're not differentiated in any way whatsoever. They're just kind of part of the crowd. They're a bit commodity in nature. And however, you got, you know, a founder who's figured out a recipe that, you know what, I actually make decent money from this thing.

That's great. Here's the problem. An acquirer is going to look at that and go, I can't get excited. It's just kind of a, it's kind of middle of the road. And there's nothing super special about it. I think it's understanding where those points are and then starting to move each of those chess pieces in the right direction.

[00:13:36] Alex Bond: Are some of these companies acquired from like a competitor in a defensive position where it's simply just a matter of, you know, these, these guys have a little bit more market share than I'd like. So I'm going to eat them alive. Whether I want to, whether they're as attractive as you're kind of mentioning or not, you know, I mean, is that often or does there really need to be a, you know, these guys are a leader in the space kind of aspect to it.

[00:14:03] Jason Somerville: Yeah, it's funny. It doesn't happen as often as a lot of people think the whole idea of a defensive acquisition. And I think a lot of that, it's funny. And I talk about this a lot of times with, we nerd out with other finance friends and talk about how much human nature and psychology makes its way into business.

And there's all sorts of things that happen that, you know, again, if AI were doing it, they would do, it would do it differently, you know, cause it doesn't have the human emotional element and this is one of them. Because I think, you know, smart, ambitious people oftentimes feel like they can just win, right? And so they look at it and go, you know what, I don't need to, even though that might make sense on paper to do that defensive acquisition, I think I can just win. 

So I don't think I'm going to do that. And you see it a little more in, I'd say larger companies, kind of large middle market and kind of those businesses where it's very clear that, you know, let's say you've got a company a has 25 percent market share company B has 20 percent market share, both of you guys have huge pieces and let's say both, you know, billion dollar a year close to a business is that's probably a defensive type of merger that makes a lot of sense more than likely.

But again, in our space, which is kind of smaller companies. You just don't see it as often just because most guys look at even even private equity firms that do roll ups where they'll just buy A bunch of companies in one sector and just trying to roll them all up together even a lot of those guys look at it in in terms of the smaller company space and like you know what? I think we can just I think we can just win, you know, and so we might be doing acquisitions that expand our coverage of the market, but not necessarily to take out a competitor. 

Strategic Insights: Psychological Dynamics in Business Decisions and Key Attributes for eCommerce Acquisition Targets

[00:15:56] Alex Bond: No, that's fascinating. I appreciate that well thought out answer because, you know, I pay a lot of attention to the streaming wars of streaming services and how that's essentially like a bubble that's eventually going to pop, you know, where it's gotten to a point where you said it yourself. They'll all sunset eventually. So the fact that everyone decides to bet on themselves, knowing that is kind of like very American dream, you know, and I think there's something that you mentioned psychological about that. That's pretty fascinating. 

[00:16:26] Jason Somerville: Well, even in the biggest, I think people would be fascinated. You know, I started my career at bank of America and all the deals that worked on were all fortune 500 deals, you know, multi billion dollar, the biggest companies in the world. In those boardrooms, you'd be amazed how much human psychology, even in the biggest companies that are supposedly just the smartest run, best people. I've seen it so many times, ego and hubris just wins the day. Man, happens all the time. 

[00:16:52] Alex Bond: I'm curious if there are any sort of specific kinds of attributes that make a specific eCommerce brand strategically attractive as an acquisition target. 

[00:17:05] Jason Somerville: Yes. Well, one, I would say, and I don't know that any of these are going to be earth shattering, but I think I'll point them out. I mean, one in particular, right? 

It's something that gets talked about a lot. I'd say in an acquisition process for an e commerce brand is, you know, we'll call it the level of your customers fanaticism about your product. I would say that, you know, any e commerce brand, one of the goals should be to cultivate incredibly loyal, fanatical customers everywhere they can.

So that should be something they're consistently looking at themselves in the mirror going, how much do our customers care about us and what we do? If the answer is meh, then you got some work to do right? Now, granted not every brand is gonna be like apple for example, where people just completely sold out to apple as I talked to you on my macbook, you know what I mean? 

So we're not talking about binary oh, so, you know, you have to have millions and millions of just insane, you know loyal fans who will never consider another brand, you know, it's more of a spectrum. So if you're looking at it and saying, well, I want there to at least be this core customer base that I've built that really, really identifies with what I do, right? I think that that's one. 

And so when you're going out to market with that type of opportunity and you can show and you can back that up with data, say, Hey, listen, these customers are very, very sticky. And the reason they're sticky is because of whatever, maybe, maybe they're just great at product innovation. Maybe they're great at marketing and people just love their, you know, their campaign again, or maybe, you know, they're in a sector that it's got a lot of, we'll call it, you know, cycle. 

Going back to psychology, people tend to latch onto a brand, like a good example would be the people that boy, people buy like supplements, you know, it's weird because you have a tale of two different behaviors on the one hand people have their core brand of their base supplements that they won't they won't use they'll lock in on a brand. And they'll just only take those right? 

Because it feels they have a they they believe it is the most effective and then around the edges. They'll be trying other stuff right but in that core like, you know, whatever the products are like a lot, you know longevity products for example health span products are really popular now People lock in on a brand and they, they basically stick with it.

So I'd say that's a big one. I would say, of course, when it comes to the quantitative side, you need to be showing that acquiring your next marginal customer is not that more, much more expensive than it was to acquire your last customer, right? So if an acquirer sees a trend where, you know what, again, let's just use some round figures.

Let's say I've got 5 million of revenue and my customer acquisition costs kind of across that 5 million is 20. Okay. Well, and I want to grow to 10 million of revenue. Is it going to cost me 20 per customer to acquire that next set? Or is it going to cost me 30 or 40 or 50? You know, and every time I'm scaling here is am I seeing real inflation in that customer acquisition costs?

Because, you know, tthat'snot the trend you want. So you need to be asking yourself, hey, I can go out and I can ramp up my paid ads here and I can probably go get some more revenue. However, I'm going to get that revenue at a marginal cost. That isn't attractive. So let's not do that. Like, let's find a better way to reach our audience. So that our customer acquisition costs are staying within a certain range. And that's the kind of trend.

I mean, of course it's the have your cake and eat it too thing, right? Everyone just wants everything all the time, but those are two, two good examples of areas where, you know, if you're seeing these things, if you don't have a really, again, fanatical customer base.How do you develop one? And if you're seeing your marginal cost of acquisition going up and up and up and up as you scale, that's something you kind of have to try to correct. 

Consumer Appeal and Brand Influence: The Role of Brands in eCommerce Company M&A Strategies

[00:21:19] Alex Bond: Yeah, because you want those valuable customers at the same time too. I mean, just because you're doubling the amount required financially to acquire a customer. Even if they are like a lifetime customer, it might not even even out in the wash, you know. 

I mean, there's certain brands when I'm sitting here thinking when you were talking Jason about certain brands that, like, I get excited about and I don't have a bunch of them, but I know immediately that, like I really like converse and raybans. 

Those are kind of like the two things that like, I remember the first time I bought a pair of rayban sunglasses and a pair of converse shoes, and I never really stopped, you know, I mean, thankfully they're things that you only buy like every one or two years or something like that. 

But I'm kind of trying to launch into, for example, like what specific role, if you could help broaden your previous answer, what specific role does brand play in consumer products, eCommerce company M&A. 

[00:22:20] Jason Somerville: Yeah, that's a good question. So the first thing which you probably know is if you ask, if you poll people and ask for a definition of brand, you'll probably get just as many different definitions as you have people.

That's totally true. Yeah. So I think we start with that sort of phenomenon. I mean, I think the way we tend to define brand in a very, very simple way is are you creating an opportunity to have a second and a third and a fourth and a fifth conversation with a customer, right? That, that, that really defines a brand to me.

It's like you have sort of established yourself as, you know, a, a, we'll call it a beacon in a given market. You have interacted with customers, you know, let's say any customer the first time and if the majority or Most of those customers are wanting to have a second conversation or a third or a fourth That means you probably have a brand or at least a lot of the elements to make a brand right?

and I think in and it's funny you bring it up because the answer in an m& a sort of context is it changes with market conditions because it is You know, what we saw a couple of years ago in e commerce was a big bull market of A lot of money in post pandemic, you know, it's financial markets tend to always over correct one way And then they'll go back the other way and it's always Too far to the extreme, right?

So we have the pandemic everyone is pretty sure that no one's going to step into a brick and mortar store ever again in their life Right, okay So everyone reacts that way like okay Now it's like, okay, well, you know, e commerce has not only reverted to the mean, but you know, it's kind of gone back through and it's on its way back to, I'd say the trend line.

So, but during that two years ago period, people weren't asking those kinds of questions, I think as much as they probably wish they were. And they were just looking at macro, I'd say themes, which is e commerce is growing like crazy because of the pandemic. Let's make sure we don't, Miss the boat on this big, we'll call it acceleration and growth.

So buying companies that were just showing good financial results, you know, in the short run became very very common, you know, and a lot of those results were driven off of, you know, that pandemic sort of tailwind. So now all of a sudden brand is a big, big part of the conversation where it wasn't so much a part of them because.

What has been proven yet again, is that from a longevity standpoint, consumer products, you know, markets, you have to, in order for a company to develop and drive long term value, you have to establish your brand presence. And that means having you get the privilege of having those next conversations with the customer, does that answer the question or did I just totally dance around it?

Navigating the Intangible: Quantifying Brand Value in M&A and the Current Landscape of eCommerce M&A Markets

[00:25:21] Alex Bond: No, I think so a little bit. And just to kind of provide my answer, because I think that you actually summarize it pretty succinctly by describing the more intangible aspects of a brand, you know, in an M and A, they want to see like, you know, quantitative version of it. But to take something that in my head is so intangible of like, what a brand is, is how it makes me feel actually it's kind of how it like, I don't know what's important to it. 

You know, it's a little bit more, you know, again, esoteric but to try to take something that is qualitative in my head and put it into like a quantitative version, I think you described pretty well. And I think a lot of people struggle with brand when it comes to a quantitative definition of it. So I think it's fascinating. You know, I could, I could talk about that sort of stuff for hours. I'm curious, you know, just to kind of piggyback off of that, what the current M & A market environment is for eCommerce brands. 

[00:26:28] Jason Somerville: Well, I would say if we're going to compare it to, you know, 2021, which was kind of the peak, I would say it's slowed pretty dramatically, right? I mean, if you're talking about, if you just kind of measure it by deal volume, I mean, deal volume is probably down 60, 70%, right, from that peak. And it's for a lot of reasons, which we can certainly go into, but could take another hour there too. 

But I would say right now, and kind of, that's why back to the point about brand, part of the reason why buyers are cautious about e commerce brands now is because we've gone through, you know, we've gone through the up, we've gone through the down.

And now trying to ascertain whether or not a company has real longevity and has a real brand. I'd say the acquirer universe is feeling just shakier about their ability to do it. You know, I would say a lot of it has to do with their own insecurity that they're kind of, they've been sort of shaken a little bit by all of the events of the last two, three years.

And there were a lot of, again, there were a lot of mistakes made where, where companies were purchased. You know, on the back of very strong pandemic results, and then they promptly returned to Earth, right? So there's a level of caution. There's a lot of macro factors to interest rates, of course, being a big one.

But I think that what we're seeing is more of what I would call almost like a, just a return to normal in many ways, you know, we had this kind of abnormal period and the way I sort of described for people, how an acquirer thinks about something, you know, thinks about an acquisition, right?

In a very, very simple way is you, Mr. Seller, Mr. Owner of the brand, and you, Mr. Jason, banker guy. You know, you want me to pay a multiple of the earnings for this company, right? Let's just pick an hour. You want me to pay eight times EBITDA for this, but when I look at it, you know, I see all kinds of potential volatility, right?

So if I see, yeah, look, there's absolutely a world where I pay you eight times and I come out, you know, looking like a champ, but there's also almost an equal probability. And in my hypothetical scenario here of I look like a complete moron and this thing, you know, just, you know, it bottoms out on me and the more and if you look at that probability curve or a standard distribution or standard deviation of outcomes.

That's where buyers are struggling. So what they're trying to do is they're trying to be defensive. So what we've seen is multiples have come in and like, they don't want to, they don't want to make a mistake and they just feel like the ability to predict the future is, is just, it's just harder right now.

So, but. All the way back to the, again, to the brand concept where acquirers get really excited is with, with companies that feel like, and are behaving like, and the data says, wait, this is a real brand. Like, even if it's an earlier stage business, like we're seeing all of those signs, you know, we get a lot of, even if let's say it's not a high consumable product, but we're, eeing consistent return, you know, return customers coming back to the brand, right.

We're seeing that engagement with the audience is at a high level. Maybe it's on social, you know, maybe it's on other channels. We're seeing that, you know, the products. Are very well regarded, right? I mean, the reviews of the products are good. And then when we look at it, we go, you know what? These people seem to have a little bit of a bead on what these customers really are looking for and they're being rewarded for it.

So those kinds of opportunities that come to market are getting a lot of attention and a lot of I'd say interest. Also, because to be frank, the supply of deals is so much lower now that the people who are hungry for acquisitions, they don't have a lot to look at. So if something good comes out, it's like, okay, a lot of people jump on it. And it actually is a little bit of that binary sort of world where if it's good, it gets a lot of attention. If it's not good, it gets kind of ignored. 

[00:30:39] Alex Bond: There's maybe like a room to make a deal in between there though you know? 

[00:30:43] Jason Somerville: There is, for sure. I mean, You know, founders, we often talk to founders about timing the market. So I think there's a school of thought and I see people make blanket statements, like you can't time the market. We don't necessarily agree with that. 

What you can't always do though, is time it to pinpoint accuracy. You can time it. Like, if you think about it in terms of a bullseye, right? We've got the, we've got the red, you know, the red sort of middle, but in the right, in the middle of the red is that little green, you know, dot, which is the very, very center of the bullseye.

You're not going to, you're not going to hit that, but you might be able to hit the red part, right. And at the very least, you can be very smart and strategic about timing. And that's just making sure that whoever you're working with kind of has, has a beat on the macroeconomic environment. And as seeing as clearly as you can.What maybe the next 6 or 12 months holds for M & A cycle. 

Rebranding Dynamics: The Evolution from Global Wired Advisors to GW Partners

[00:31:39] Alex Bond: I'm curious while we're on the topic of brands, Jason, why GW Partners? This is just out of my simple curiosity, why GW Partners rebranded from Global Wired Advisors, which I'm pretty sure was the name for about six years or something like that?

[00:32:00] Jason Somerville: Yeah, I think it really represented a pivot in our history. So, you know, our firm started with what I would call a more traditional M & A sort of sale focused practice, right? We weren't getting involved with companies very early. We were much more transactional in our relationship with our clients, which is very much a traditional M & A kind of only type of a company.

[00:32:29] Alex Bond: So more kind of like brokerage? 

[00:32:32] Jason Somerville: Yeah, very much, right? And so because I mean in part like that's where you know, the the world of capital markets and investment banking That's what's sort of typical, right? That's kind of what a typical m& a firm would look like and then I think a couple I'd say there were three sort of things that drove our sort of adjustment, you know one is I mean even along the way as we were doing that.

I mean we were constantly saying to ourselves If we could only get involved with these businesses earlier, if we could only, you know, be able to get in and help these founders. Actually an impact the company so that when we did go to market, we were, we were just an even better potential opportunity, right?

So we were always telling ourselves that and saying that. And then, you know, we had the big bull run and then we had the environment where M & A slowed. We also had, we actually had a change at the partner level. So we had one partner who left the firm and we kind of sat down and said, You know what?

I think what we need to do here. We've been saying this for years. We want to get involved with people earlier. We feel like we have the knowledge. We have the expertise. We have the network. We have the answers to the test here. We think we can drive real value in these businesses. So let's change what we do a little bit and let's do the thing we've been saying we wish we could do for a while.

Let's do, let's work with less clients, let's work with them longer, let's spend more time with them. And, you know, the word partners was not an accidental word, right? In terms of our firm name, you know, we used to be called advisors and now we're called partners. And that's on purpose, right?

Because the way that I think we used to engage, not that we didn't have really close, good relationships with our clients, but it was much more an advisor type of role, right? And so we said, you know, I feel like this is going to be one. I think we can do a lot of good work here.

And if we do it in this way too, I think we can have a lot of fun. That's always important. And three, I think we can not only help founders, but to be honest, help ourselves by creating much, much better acquisition targets. So when we're taking these opportunities to market, they have been really refined.

You know, they've been put through that bootcamp, they're in a really good place. And so. You know, our founders, our clients are just going to get, you know, that much more for those businesses, right? They're going to execute it at that much higher level. And so, yeah, that's why we did it. And we actually are really enjoying, you know, how we're working with our clients now, I'd say even much more so than we were before.

Strategic Outreach: Engaging Interested Parties for Brand Acquisition and the Role of Specialized Resources

[00:35:33] Alex Bond: I'm curious, you mentioned the resources that you have, right.. This may seem like an obvious question. I'm curious how you find interested parties for a specific brand, is there, you know, is that something any brand can do, or does it require your specific resources? I mean, what about that, you know, kind of more tactile selling process?

[00:36:00] Jason Somerville: Well, look, I think it's a combination of, you know, relationships to an extent. I think, you know, look, there are a lot of companies, you know, in the market that have different structures, some are private equity.

Some are what I would call more house of brands, you know, for a while there were, there were certainly things called aggregators which, which have which have slowed down quite a bit. You know, so we have a bunch of those relationships in markets that we're really active in, and that's part of the process, right?

And that's not something, you know, I'd say a brand owner can really duplicate. Right now, in addition to that, any, any good M & A investment banker who's worth their soul is going to, is going to take two pieces. One is their relationships. And two is just, I'd say very thorough research. That will ultimately drive, you know, we'll pay.

I may not have a relationship with these 75 other parties, but through my research on this opportunity, I've determined that these are very good fits. And there's a lot of ways to go about doing that research. One, there's a lot of, I'd say, unfortunately, very expensive software that that we use to do some of that research.

And then some of it is just, you know, good old fashioned, you know, desktop, you know, Kind of internet research. So you kind of put all those together to help identify, well, what's the right universe for this. That being said, you know, what we tell founders all the time, and a lot of times it's well, before they're working with us or, or whatever is look, it is part of your job as a founder.

If you want to eventually sell your company one day to at least have some idea of who the like top 20 counterparties are that might want to buy your business. You should know, and you should have them on a list and you should be watching what they're doing. And oh, by the way, and here's the thing, a lot of founders just oftentimes aren't that comfortable.

You should be reaching out to them and you should be having coffee. And if you, if they're going to be at a conference, you meet you should be developing relationships over time. And look, yeah, listen, you're not ready to talk about selling your company, but you're building these relationships, which are going to be very important.

And then what we do in our role is if you haven't already done that, we start doing that along with you when you start working with us, right. And then of course even though you might be developing these direct relationships, having someone like us eventually in the middle is very important. 

Like it's good to make sure you have, you know, representation who's experienced, who can watch your back, who knows how to negotiate these deals, et cetera, but I would never, I would never advise someone to only a founder, especially to only work through a banker, to develop a relationship with a company that might one day buy your business. It's just, you should be doing that. 

Unveiling the Unspoken: Insights for Founders on Sale Processes Often Overlooked by Intermediaries

[00:39:01] Alex Bond: I wanted to ask kind of before we wrap up, I got to just just a couple more speaking of other things that founders and people should know. Are there certain things that intermediaries don't necessarily tell founders about a sale process that you think they should know.

[00:39:19] Jason Somerville: Yeah, I mean, it happens quite frequently. I think that, and this is not, this is a saying a lot of people use, so I can't claim it. When all you have is a hammer, everything looks like a nail. So when working with a broker or a banker, et cetera, and really all they do all day, every day is just sell companies and that's what their job is, is to try to get sales done.

They're all almost always going to be biased towards, you know, I'd say making the picture to sell be just rosier than it is. You know, I think that what a lot of bankers, and by the way, I've always said, bankers and brokers who do this are not doing themselves any favors, but you need to let your, your client know that the average deal tries to die, probably 10 times on it.

It doesn't matter. You could have the best company in the world. You could have the highly best skilled banker. You could have an awesome attorney. It does not matter. Your deal will try to die multiple times. So, yeah, just get ready for the rollercoaster, go ahead, take your Tums, your Pepcid, whatever you gotta take, because there's gonna be some ups and downs.

I think that's important for people to know and embrace, embrace the the potential journey here, right? I think that's something that probably isn't talked about enough. I think also, it's hard to tell someone, I think for some people, that, hey, you know what? Honestly, your company just isn't going to be very attractive.

Like, people just aren't going to be that interested, and here's why, right? And I believe that's a missed opportunity because when, when someone goes to market with a business, cause going, going through that process is it, there's a lot of time, energy, and emotion involved. 

If let's say a bank or a broker is just eager because they just want to put another deal in the pipeline and they just want to, you know, put it, you know, put another at bat on the board, hoping, you know, to earn some fees, but they're taking a company to market that quite honestly has very little chance of transacting or certainly transacting where the, where the owner wants to do a deal, which I think is even more common.

And you go through that and it results in a kind of a failed overall outcome. That is a lot of energy and emotional capital and real time wasted. So the opportunity is if you're just incredibly honest and say, hey, here's why your company right now probably won't get a great reception in the market. Here are the reasons that gives that founder an opportunity to go work on those things. All right. 

And come back with a much better business For their sake and for the sake of the The process so, you know, and I think that that that often isn't done nearly enough either Right is is is some of that we'll call it, you know, just very direct Honesty about about the the potential process.

So there's a lot of hey, let's go. Let's hurry Let's go and then another last one is just timing right? I mean Again, when, when, when you're, when all you do is sell companies and you're just trying to get as many as you can, like on your list, There's never a bad time to go to market to you, right? You know, and so the there's like, you know what?

It's not always a great time, right? And there's a lot of times you should be you should be waiting You should be waiting six months or nine months or whatever. And I think that that oftentimes that there's a little bit of of what we call hide the football with that stuff too. 

Alex Bond
Alex Bond

Meet Alex Bond—a seasoned multimedia producer with experience in television, music, podcasts, music videos, and advertising. Alex is a creative problem solver with a track record of overseeing high-quality media productions. He's a co-founder of the music production company Too Indecent, and he also hosted the podcast "Get in the Herd," which was voted "Best Local Podcast of 2020" by the Richmond Times-Dispatch in Virginia, USA.

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