An M&A Q&A in which Paul Giannamore answers common questions from business owners, advisors, and buyers about selling a company. Topics include evaluating preemptive offers, the difference between a buyer's capacity to pay and willingness to pay, running a competitive sale process to reveal market value, treating valuation as a range rather than a single number, how process discipline affects negotiating leverage, advisor credibility, common buyer mistakes with sellers, thinking about synergies and strategic value, and how owners can strengthen their business in the years before a sale (higher cash flow, lower risk, strong management team, reduced owner dependence). Timestamped chapters cover: whether to take a preemptive offer (00:29), selling to one specific buyer (05:31), setting realistic valuation expectations (09:04), biggest M&A advisor mistakes (12:06), pushing buyers without losing credibility (15:39), what buyers get wrong with sellers (19:25), building trust early (23:01), synergies (25:32), and making your business more attractive to buyers (27:58). # Video Identity Observations ## Intended Audience - **Primary audience includes M&A advisers and investment bankers**, but framed as a Q&A serving multiple groups: - Sell-side advisers ("Today's Q&A session is largely focused on questions from other advisers... investment bankers and M&A advisers... than I do from business owners"). - Business owners ("I do think for the business owner, a lot of this Q&A could be extremely valuable"). - Buy-side participants: a "relatively young investment banker," a "search fund operator," and questions "from the buy side." - The content addresses both sides of transactions: negotiating preemptive offers, valuation expectations, process discipline, buyer behavior, and owner exit preparation. ## Claimed Scope and Expertise - **Self-described identity and experience**: "I'm Paul Gammore. I'm an investment banker and I negotiate for a living," and "over 20 plus years as an M&A adviser." - **Scope claimed**: sell-side and buy-side M&A advisory practice — preemptive bids, competitive process design, valuation ranges, credibility building, drift/process control, and value creation for owners. - **Positioned as a practitioner-educator**, repeatedly referencing teaching materials: "the second sell-side master class... I talk about the no-more transaction," and "I've talked about this quite a bit in the master class series." ## Observable Presentation Patterns - **Q&A format sourced from LinkedIn**: "Feel free to reach out to me at the contact form in the description below or as always, you can send me questions to my LinkedIn." - **Recurring case-study framing**: repeatedly cites the "no more" transaction as a worked example (Dutch auction, process changes, credibility). - **Real-world proof of reach**: a viewer quote from "an advisory firm in Northern Europe" — "your videos have been foundational for us and we've organized our small M&A advisory in Scandinavia based upon your lessons." - **Channel generates inbound leads**: a seller "had watched our YouTube videos, reached out to me... I wanted to get in your orbit right now." - **Teaching style**: analogies (web forms, "pen and a napkin"), direct colloquial tone, and explicit frameworks ("range concepts," "capacity to pay vs. willingness to pay," "drift"). ## Claims vs. Demonstrated - **Claims**: 20+ years advising; sells companies via competitive processes; teaches master classes; participated in INSEAD's entrepreneurship-through-acquisition judging panel. - **Demonstrated by the material**: fluency in sell-side process mechanics, valuation frameworks, and buyer psychology; a functioning YouTube + LinkedIn + contact-form distribution funnel attracting both practitioner questions and prospective seller clients. # Delivery Observation: "The M&A Rules Every Business Owner Should Know" ## Overall Format & Structure - **Q&A frame**: The video is explicitly organized around audience-submitted questions, introduced with consistent signposting: *"All right, we are back with some Q&A"* and *"Okay, this next question here from an advisory firm in Northern Europe."* - **Question transitions are formulaic**: Nearly every topic shift follows the pattern of praising the question before answering: *"that to me was a great question. That's why I wanted to start out with it"*, *"This next question is a great one"*, *"I think that's a great question and it's about being structured from the get-go."* - **Persistent references to prior content**: Repeatedly points back to a master class and a named case study: *"in the second sellside master class, um, I think it was the psychology behind selling a business, I talk about the no more transaction"* — and admits the habit: *"I keep going back to the no more transaction."* ## Recurring Vocabulary & Phrases - **"Range concept"** — used twice as a teaching anchor: *"I always talk about range concepts and I use them all the time with my clients"* and *"the value of a business is a range concept, right?"* - **"Hard and fast rules"** — appears three times: *"far less hard and fast rules"*, *"hard and fast rules, but the advisor can change them"*, *"You should establish hard and fast rules that you live with yourself."* - **"Competition / competitive process"** as the central explanatory lever: *"competition amongst other things tends to increase price"*, *"how you do that is through a competitive process"*, *"you ultimately have to give away... that's where the fight is."* - **"Optionality"**: *"I'm going to preserve my optionality"* and *"I'm going to preserve optionality."* - **Standalone/synergy framing** repeated across the valuation answer: *"what's this business worth on a standalone basis."* ## Teaching Habits - **Role-played dialogue**: Frequently stages mini-conversations to illustrate points — *"the seller says, 'Hey, I really like you...'"*, *"I say, 'Hey, Mr. Buyer...'"*, *"they might say, 'Hey, you know, I'm awesome.'"* - **Direct address to the viewer in second person**: *"You can go out hugely broad to hundreds of different potential buyers. Or you can use some brain power and try to narrow it down."* - **Socratic pushback device**: Describes turning questions back on clients: *"I push the question back to them, which is how do you expect me to extract that value from them...?"* - **Analogies from everyday life**: the web form with *"50 fields"* vs. *"my name, my email, my phone number, press enter"*; *"Now I'm much more inclined to use a pen and a napkin."* - **Concrete numbers throughout**: specific dollar figures (*"$50 million... five, maybe 10 days to decide"*, *"$10 million... 10x multiple"*) and career statistics (*"over 20 plus years"*, *"this happens two or three times a year"*, *"I've done this thousands of times"*). ## Self-Referential Framing - **Positioning statements**: closes with *"I'm Paul Gammore. I'm an investment banker and I negotiate for a living."* Earlier: *"welcome to my day job."* - **Admits fallibility/evolution**: *"in my old age, I have far less hard and fast rules"*; *"sometimes that comes back to haunt me because... they're pissed."* ## Patterns vs. Isolated Moments - **Stable patterns** (well-rep across the transcript): question-praising transitions, role-played dialogue, numeric specificity, and the competition/leverage framing — these recur in at least three of the seven answers. - **Isolated moments** (single occurrence, not enough to establish a pattern): the France/INSEAD anecdote (*"I was on the judges panel... when I lived in France"*), the emotional seller imagery (*"This buyer knows I used to live in a car"*), and the copywriting analogy (*"it's almost like age-old copywriting advice"*). - **Uncertainty note**: The attribution of a *company* sale case study (*"it grew from 5 million to 50 million"*) appears once; whether this case recurs in other videos is not observable here. Similarly, the "No More" transaction is named repeatedly in this video, but its full details are only referenced, not explained — suggesting it is a known prior topic rather than a new claim. # Observation Record — "The M&A Rules Every Business Owner Should Know" ## Speaker Identification The video is a solo Q&A session. The speaker identifies himself at the end: > "I'm Paul Gammore. I'm an investment banker and I negotiate for a living." He states he has **"over 20 plus years as an M&A adviser."** All positions below are attributed to this speaker as expressed in the transcript. He notes the questions come disproportionately from investment bankers and M&A advisers via LinkedIn, not business owners. --- ## 1. Preemptive Offers ### Definitions and claims offered - A **preemptive offer** is "by definition an offer that preempts or comes before process" — a buyer attempts to place a bona fide offer to shut down competition. - Two common situations he describes: 1. A seller expressing interest but intending to hire a banker; the buyer offers a deal first, offering an escape hatch to run a process anyway. 2. A buyer familiar with the target sends an immediate offer after a sell-side engagement begins, but before bidding or management meetings start. ### Stated reasoning on buyer motives - "Buyers are not stupid and they realize that competition amongst other things tends to increase price." - Preemptives are often short-lived ("explode" documents): e.g., "$50 million... you've got five, maybe 10 days to decide." ### His position (with an explicit evolution over time) > "In my old age, I have far less hard and fast rules... if you would have asked me many years ago, I would have said no. But I don't think that's right. I think that you should take preemptive offers serious, but seriously does not mean obediently." - Career-based claim: he has seen **only one** preemptive offer no one else could beat; "every other time" it was "an opening bid or a middling bid disguised as a final bid." - **Case cited:** the "No More" transaction (covered in his second sell-side master class). ServiceMaster made a preemptive bid, ultimately purchased the company "at a substantially higher price" than that offer. - His practice (2–3 times per year): thank the acquirer and run the process, telling them they "can participate like every other buyer." His counter-rhetoric: if no one can pay more than you, "you've got very, very little chance of actually losing it." --- ## 2. Selling to One Specific Buyer — Capacity vs. Willingness to Pay ### His method - At engagement, he asks sellers for a "mind dump" of every deal/acquirer they know, to avoid missing anything. - Sellers often say a particular acquirer "can create the most value." His response: "Nine times out of 10 I say that's probably right," then pushes back: how do you extract that value with "zero competition whatsoever"? ### Core distinction he draws - **Capacity to pay ≠ willingness to pay.** An acquirer may have the cash, scale, and synergy potential — "the real hard part is how do you extract that value from them." - Buyers "do not want to pay a seller for value that you will be creating" — the buy side wants the low end of the range. - The sell-side banker's job is building a **tight acquisition universe** ("you can boil the ocean... or use some brain power") and running a **competitive process** to extract that value. This argument "typically leads to some sort of a formal process." --- ## 3. Setting Valuation Expectations with Clients ### Position - Advisers should "talk straight" and be realistic: inflating numbers to win mandates ("I think 25 million... somebody else comes in and says 35 million") sets the adviser up "to lose right out of the gate" and damages sellers doing retirement/business planning. ### His stated practice - Uses **range concepts**, which "frustrates the hell out of" clients who want a precise number: "I can't give them without being dishonest quite frankly." - Provides: (1) the most likely number in a competitive process, and (2) a high end "if everything goes swimmingly." - Admits a tension in his own approach: he sets "ridiculous goals" (e.g., likely $60M, best-case $75M, but shooting for $85M) and acknowledges "sometimes that comes back to haunt me... then I come short at 85, they're pissed." --- ## 4. Common Mistakes of Inexperienced Advisers — "Drift" ### Framework offered - The adviser simultaneously negotiates **process and substance**; process underpins leverage by introducing competition, "ferret[ing] out information on the other side while protecting information on your side," and protecting seller resolve. - **Drift** = "very small kind of micro violations of your own process rules." - Spectrum: controlled auction (tight rules) ↔ no rules; most middle-market deals are modified auctions where the adviser may change rules "as the adviser sees fit." ### Examples he gives - A buyer requesting a one-off 5-minute CFO call or special analysis: his practice is to **amalgamate all buyer questions and share identical responses with all** — "No buyer gets a one-off call with the CFO." ### His claim about consequences - Seemingly harmless concessions "seed" process control and leverage to the buy side early, which buyers will leverage later. --- ## 5. Preserving Credibility While Managing Buyers ### Position - Credibility is "simple... do what you say you're going to do," established by defining process rules **upfront** — "it's really hard to do what you say you're going to do if you don't really know what it is that you're going to do." ### Mistake he criticizes - Dining with a buyer for 5–6 weeks, then suddenly introducing competition. Better: "be honest upfront... I'm going to preserve optionality... we will be talking to multiple buyers." ### Reconciling mid-process changes (No More example) - Questioners asked whether switching from ascending to Dutch auction mid-process impaired credibility. His answer: "emphatically no" — because deadlines were set and enforced (buyers were booted for violations), "every single thing that we said we were going to do, we did." - He admits the Dutch auction decision was made "until the very minute I decided to do it," but claims he "telegraphed it appropriately." --- ## 6. What Buyers Get Wrong with Sellers (Search Fund Question) ### Position, based on his claimed vantage point - He hears seller reactions after buyer meetings ("thousands of times") — buyers leave wondering how they did; he gets the feedback. - **"The worst thing a buyer can do is make it about them"** — leading with credentials, wealth, and track record. - Sellers "don't give a [damn] about what school you went to"; they want to feel **understood**: their 20 years of building, their sacrifices, their differentiation from competitors. - He frames it as copywriting advice: "Don't speak to the seller about you... speak to the seller about the seller." > "Sellers don't want to be flattered... they really want to be understood." - Qualification he offers: track record "at some point it probably does... move the needle" — the issue is leading with it. --- ## 7. Getting a Seller Comfortable Early — Reduce Ambiguity - His prescription: simple NDA, small initial request lists ("five things from you now, not 50"), clear timeline, phased process with diligence explained in advance. - Analogy used: a website contact form with 50 required fields (users give up) vs. name/email/phone (easy). > "Sellers typically are not scared of DD. They're scared of these ambiguous processes where they don't know where anything is going." - He claims otherwise great deals "never even get off the ground" because buyers made themselves hard to deal with, and that being the easiest buyer is "a massive leg up." --- ## 8. Buyer Valuation and Synergies ### Framework presented - Value is a **range concept**: standalone **fair market value** (hypothetical construct, no synergy) vs. **investment/strategic value** (with synergies in a competitive process). - Illustrative math: $1M cash flow at 10x = $10M standalone; a buyer who can double cash flow via synergies implies $20M; a buyer with $500K synergies → ~$15M; another with $2M → $30M. - "The standalone value is really all that the seller had to sell" — the negotiation "fight" is "how much of the value creation do you ultimately have to give away," decided before entering the process. - Self-deprecating note: as a young analyst he built large Excel models; "now I'm much more inclined to use a pen and a napkin." --- ## 9. Preparing a Business for Sale (Owner 5 Years Out) ### Core claim - It's "really hard to structure your business in a way that's appealing to buyers" because buyer preferences shift; instead, **run the business in a way that maximizes value to yourself**. ### His advice to the seller in question - Build a management team so he works less / steps back to chairman — the business then "stands alone without you." - Increase and durate cash flow — "the core of valuation." - Cut the painful 80%-of-time/20%-of-profit customers and reallocate resources. - External factors (interest rates, capital markets, industry consolidation) can't be controlled; internal fundamentals can. - He notes this seller did ~$2.5M bottom line and frames $5–15M EBITDA as a life where "who cares whether somebody buys it or not." --- ## Self-Check Notes - All positions are attributed to the sole identified speaker (Paul Gammore, per his self-introduction) and traceable to transcript statements. - Preserved qualifications: his stated shift away from hard rules on preemptives; his admission that aggressive goal-setting sometimes backfires; his admission the Dutch auction was improvised; his acknowledgment that buyer credentials "probably" matter eventually. - No private beliefs or motivations inferred beyond what was stated. # Speaker & Provenance Record ## Video Overview - **Title:** The M&A Rules Every Business Owner Should Know - **Format:** Q&A session addressing questions from M&A advisers, business owners, and buy-side participants ## Speakers & Roles ### Paul Gammell (per self-introduction) — Creator / M&A Adviser / Sole Speaker - **Identity:** Self-identified at close: *"I'm Paul Gammore. I'm an investment banker and I negotiate for a living."* - **Role:** Sole speaker throughout; no guests, co-hosts, or other voices appear. - **Stated credentials (self-reported):** - Over 20 years as an M&A adviser - Ran sell-side processes including the "no more" (ServiceMaster) transaction discussed in his sell-side master class - Formerly lived in France; participated as a judge on INSEAD's entrepreneurship-through-acquisition program panel - Has sold search-fund-backed companies ### Question Submitters (unvoiced — read/paraphrased by speaker) - **M&A advisers and investment bankers** (main source of questions, per speaker) - **A young investment banker** who founded a three-partner firm (LinkedIn contact) - **A Scandinavian M&A advisory firm** - **A search fund operator** - **Buy-side participants** (two questions) - **A business owner** (~5 years from a sale, spoke with him the day before recording) ## Referenced Sources & Prior Work - **Speaker's own content:** "Second sell-side master class" — *"the psychology behind selling a business"*; the "no more transaction" case study (ascending auction shifting to a Dutch auction at the end) - **External claim:** ServiceMaster made a preemptive bid for "no more" and ultimately purchased it at a substantially higher price than its preemptive offer — speaker's account, no independent source cited ## Provenance Notes - Questions attributed to channels: **LinkedIn**, YouTube contact form (speaker invites questions via both) - Anecdotes (e.g., a client company growing from $5M to $50M and selling to a public acquirer; a $2.5M-bottom-line owner consultation) are the speaker's personal recollections, not documented sources - No third-party data, studies, or statistics are cited ## Promotional Segments - **Self-promotion (ongoing/implicit):** Repeated references to the speaker's **master class series** as the venue where his methods are taught - **Call to action (closing):** Invitations to reach him via the **contact form in the description** or **LinkedIn** — promotional/engagement segment ## Availability Limits - **Comment availability:** Not indicated in the transcript (no mention of comment sections or responses) - **Cited documents/data rooms:** None available; all case specifics are verbal only ## Unverified/Uncertain Items - Spelling of the speaker's surname: transcript reads "Gammore"; no metadata provided to confirm spelling - All deal details and client anecdotes are unverifiable from the source material All right, we are back with some Q&A. It's been a while and I have a ton to catch up on here. Today's Q&A session is largely focused on questions from other adviserss. So, on LinkedIn, for whatever reason, I get far more questions from \[music\] investment bankers and M&A adviserss than I do from business owners. And I do get a lot of questions from business owners, but advisers seem to send a lot over. But I do think for the business owner, a lot of this Q&A could be extremely valuable. So, let's start with the first one. Should I ever take a preemptive offer seriously? And that to me was a great question. That's why I wanted to start out with it. You know, a preemptive offer is really by definition an offer that preempts or comes before process. And so, a buyer might find a target, a selling company, and attempt to preemp process or put a bonafide offer on the table in order to shut down process. And that usually arises in one of two situations. One situation might be an acquirer reaches out to a potential seller, starts to have some conversation, and the seller says, "Hey, I really like you. I would really be interested in doing business with you, but I'm going to preserve my optionality. I'm going to go out. I'm going to hire an investment banker to run a process. I'm a business owner. I'm focused on my industry. I don't know how to run an M&A deal. I want to make sure that I do this the right way from the start." And at that point in time, the buyer might say, "Well, listen, before you do that, before you spend all this money on a banker and go through this huge process that's going to take multiple months, allow us to put an offer down, you could take a look at it, and if we're not serious, or if you don't think we're serious, you of course reserve the right to run process." That's one example of a preemptive. Another preemptive is what I deal with from time to time is that a client engages us. We are going to go out into the market. We establish the acquisition universe. We have conversations with potential buyers, assign NDAs, and we have not really started the process yet, meaning materials haven't gone out or maybe materials have gone out, we haven't started bidding yet, haven't had management meetings. an acquirer that knows the target quite well um will attempt print process which is effectively send over an immediate offer in order to shut it down. Now why would a buyer do that? Well, a buyer would do that because buyers are not stupid and they realize that competition amongst other things tends to increase price. So, their hope is the seller will take a step back and say, "hm, do I really want to spend the next 3 or 4 months dealing with a bunch of different buyers, or do I want to take this bird in the hand?" And often times, a preemptive will explode. Meaning, it's a short-lived document. A buyer might say, "Listen, we're offering $50 million for this business, and you've got five, maybe 10 days to decide. Take it or leave it." And in my experience, a preemptive offer is often an initial or opening bid that kind of masquerades as a final bid. Now, should you ever take a preemptive offer seriously? And you know, I guess in my old age, I have far less hard and fast rules. I mean, I I think if you would have asked me many years ago, I would have said no. But I don't think that's right. I think that you should take preemptive offers serious, but seriously does not mean obediently. And here's what I have seen over the course of my career over 20 plus years as an M&A adviser. I have seen one preemptive offer that there was no way anyone else was going to pay more. Meaning the acquirer saw such extreme value in this target. They put an offer on the table that was so compelling in terms of price, structure, and terms that I couldn't see any way to practically turn that down. Every other time I've seen a preemptive offer, again, it's really more of an opening bid or a middling bid disguised as a final bid. You know, in the second cellside master class, um, I think it was the psychology behind selling a business, I talk about the no more transaction, and that was largely driven by a preemptive offer. Service master came in and made a preemptive bid for no more. Now, they ended up ultimately buying it, but they ended up buying it at a substantially higher price than their quote unquote preemptive offer, which should have effectively shut down process, at least in their minds. And so I always tell sellers and advisers obviously put yourself in the shoes of a buyer for a second. What does a preemptive bid do? Right? A preemptive bid effectively removes risk from the equation and it remove by removing competition. Right? Competition pushes up price in a sellside process. We come in with a preemptive bid. We shut that down. That's not to say that you couldn't be that outlier there where that preemptive bid is phenomenal and you won't be able to do better out in the market. I would say it's extremely rare. And so what do I do when I get a preemptive bid? Um that probably happens two or three times a year. And for the most part, I thank the acquirer for their interest and tell them that we're going to go ahead and run the process and they can participate like every other buyer. When I hear the rhetoric, no one can pay more than us. Our offer is super strong. Well, then you should be very comfortable going through this process because if no one can pay more to you, you've got very, very little chance of actually losing it. But that allows the seller, our client, to get full price discovery in the process. This next question is a great one. How do I advise a client who wants to sell to one specific buyer because they believe that that buyer will create the most value? Now, welcome to my day job. Every time a client engages us, we go through the valuation process. And one of the questions that I ask the seller is I said, "Listen, been in this industry 20 years. You've clearly been approached before. You see all the acquisition activity out there. You've got buddies who have sold. You've heard rumors about purchase prices, so on and so forth. I want a mind dump from you. I want you to take this blank sheet of paper and I want you to write down every deal you can think of. Think about your competitors. Think about the different acquirers in the industry. I want to know what you know. And I do that to make sure that I don't miss anything. Even if I know the industry very well, I want to hear what the potential seller has to say. And inevitably, more times than not, the seller will say, you know, Paul, acquire a over here, they can create the most value. And I say, why is that? well, you know, because of their footprint or their capabilities and what we bring to the table and these synergies and they've got all these ideas about why acquirer A can create the most value doing the deal. And that's obviously very very helpful. There's a big difference however with regard to capacity to pay and ultimately willingness to pay. And what I mean by that is there might be a choir A might have the capacity to pay, right? They got tons of cash. they have scale. Um, they might realistically be able to create a tremendous amount of value doing the deal. The real hard part is how do you extract that value from them? Because look, when you're doing an acquisition, think about the buy side and the sell side. If you're a buyer, it's like you want to pay on the lower end of the range, right? You do not as a buyer want to pay a seller for value that you will be creating, right? You're the buyer. You're taking the risk. You're writing the check, you buy the business. Now, you might get revenue enhancements. You might get a variety of cost savings. There's a lot of things that you might as the buyer get from this acquisition. You certainly don't want to pay the seller for that, right? And so identifying, you know, that's the whole point of the competitive sellside process is upfront identifying a very tight acquisition universe. Who are the most likely acquirers for this business? And you know, you can certainly boil the ocean on that one, right? You can go out hugely broad to hundreds of different potential buyers. Or you can use some brain power and try to narrow it down to who you believe would be the most likely acquire based upon recent activity, based upon what you know about the industry, based upon what your client knows about the industry. Put together that acquisition universe and you might have two or three acquirers that clearly can create a ton of value by doing the deal. The hard part actually your job as the investment banker as the adviser is actually being able to extract that from the buyer and how you do that is through a competitive process. So whenever a seller says to me and this happens quite a bit acquirer A can likely create the most value with this deal. And nine times out of 10 I say that's probably right. And then I push the question back to them, which is how do you expect me to extract that value from them if we're having a one-on-one conversation and there's zero competition whatsoever? And that typically leads to some sort of a formal process. This is an interesting question from a relatively young investment banker who just set up his own firm. There's three partners and I've had a little bit of a LinkedIn chat with them. One of the questions he asks is, "How should I think about valuation when setting expectations with a client preparing to go to market?" I've talked about this quite a bit in the master class series. You know, for me, it's important to be realistic with a potential seller. You know, often investment banks, and you hear about this all the time, it's like if a a seller is considering going into a sellside process, they want to sell their business, they might call up three or four investment banks, like they got referred to us by one of their buddies, they know another firm here or there, their accountant is plays golf with another investment banker. investment bankers come in and we know that one of the things that the seller will be looking at is who is likely to say they will get him or her the most for the business, right? So, it's like if we take a a business that I think could reasonably fetch $25 million in a competitive process on the open market and I tell the seller that 25 million bucks, but somebody else comes in and says 35 million. Now, the seller, not having gone through this before and not really being particularly versed in valuation, might be swayed uh by that potential adviser. Unfortunately, that sets up really bad expectations because that M&A adviser is now set up to lose right out of the gate, right? He set very high expectations and he's not going to hit those. Furthermore, that creates a lot of damage, I think, for a seller who relies on that, who's actually trying to do business planning, trying to say, "Hey, here's what my portfolio looks like. Here's when I want to retire. Here's how much money I want to have. What's realistic?" So, I think it's important for advisors to talk straight with their clients and say, "Here is the meaty part of the bell curve, right? Here's likely what you will get for this business." And I always talk about range concepts and I use them all the time with my clients and it frustrates the hell out of them because they want a precise number from me which I cannot give them. I can't give them without being dishonest quite frankly. And so I provide our clients with the most likely number in a competitive process and then I provide them with a number which is the high end of the range if everything goes swimmingly, right? If the numbers are super clean, we want a great process, there's a lot of bidding, if all things go well, you end up here, right? So, here's the range. And then, of course, when we go out to market, I always think it's really important to have ridiculous goals. And I am frank with my clients as to what my goals are. And sometimes that comes back to haunt me because if I say, "Hey, you're likely to get 60 million for this business, but if everything goes, if this is the best process I've ever run, maybe you can get 75 million, but I'm going to shoot for 85." And then I come short at 85, they're pissed. But at least upfront, I've been very realistic as to where um I think we're going to end up. Okay, this next question here from an advisory firm in Northern Europe. Paul, your videos have been foundational for us and we've organized our small M&A advisory in Scandinavia based upon your lessons. What common mistakes do inexperienced adviserss make in running a sale process? I, you know, there's a lot. I mean, that's an endless um an endless list, but I think I'm going to go with one that I've been thinking about quite a bit is the concept of drift, right? You as an adviser are doing two things simultaneously. You're negotiating process and substance. Process underpins your leverage, right? Process is what actually provides a lot of leverage. It introduces competition. It ferrets out information on the other side while protecting information on your side. It pro protects the resolve of the seller. It does a lot of different things. So process rules are really important. In drift is those very small kind of micro violations of your own process rules. When I think about an M&A process, at the far end of the spectrum, you have a controlled auction process which has very defined process rules that are held tight and fast throughout the entire process. The other end of the spectrum, you have a process with almost no rules whatsoever. The majority of middle market deals are done kind of in a modified auction format, which means there are hard and fast rules, but the advisor can change them over time as the adviser sees fit. And again I I talk about that in the no more uh transaction where you know we ran a standard kind of competitive auction process and at the very end we introduced a Dutch auction that was a process rule change and I deemed it appropriate at that point in time to do drift happens when you know you're running a process let's say materials go out into the market you've got 25 buyers out there they're reading the sim and now somebody says hey Paul you know got some questions about u customer retention I didn't in the data room, can you provide me, you know, a quick analysis or, hey Paul, I want to have a just a 5minute call with the CFO just to seek some clarifications. If I've established rules correctly, you know, buyers can certainly send in questions. And when they do, we amalgamate all the questions from all the different buyers and every player gets the same responses, so all buyers are are equal. No buyer gets a one-off call with a CFO. And in general, like these things are so small, I think people think they're harmless, right? Just a quick call with the CFO, 5 minutes, I'll control this. But what's ultimately happening here is now you are seeding process control a very small amount, but you're seeding that to the buy side, right? So they're now negotiating process with you. And when you start to violate your own process rules, particularly at the front end, right? Yeah, that ad hoc call here or the email there. When buyers start to realize that they can be effective in negotiating process, not just substance, but also process, that begins to seed leverage to them. And they're going to remember that as they get later in the process. Because if you're willing to do that for small things on the front end, when we get to the back end, they might entirely change process on you or try to negotiate that, which ultimately seeds leverage to the buy side. Investment bankers should not ever put themselves in a position to be order takers for the buy side. You should establish hard and fast rules that you live with yourself and that you enforce on the buy side. And if you do that, the buy side will respect you. They'll follow your process rules. You'll maintain leverage. So drift is an important one. The follow- on question from that from the same individual says, "How do you preserve credibility while squeezing buyers?" I think that's a great question and it's about being structured from the get-go, right? like so how is credibility built? It's simple. It's like do what you say you're going to do. And I think for an M&A adviser and that's why on the master classes I talk a lot about you know on the front end of a process you're learning about your client's business. You're doing evaluation. You're figuring out the acquisition universe but you're also trying to determine the process because you know it it's really hard to do what you say you're going to do if you don't really know what it is that you're going to do. So understanding what sort of process you're going to run and what those rules look like from the onset are extremely important to building credibility. I think here's where guys get themselves into problems and this is the one that I see quite a bit and it frustrates me. It's like if you are an an investment banker or an M&A adviser and you're representing a client or even if you're just a seller out there and you don't have an adviser and you start talking to a buyer and let's say you've had a couple of dinners and conversations are going great and you're passing materials back and forth and then after five or six weeks of dinners and phone calls, all of a sudden you introduce competition into the process. You say, "Hey, Mr. Buyer, I I like what you've put on the paper here. Um, but you know what? we're going to go out and start talking to some other buyers. I think it's far better to be honest upfront, to be very direct, and say, "Hey, I'll have these dinners with you. I'm going to preserve optionality. Here's how this process will run. We will be talking to multiple buyers. Here's when bids are due." Because credibility really can get shot quickly if the buyer thinks, "Okay, I'm developing a relationship here. I am not in a competitive situation." And that's not to say that you should be concerned about managing the emotions of the buyer. No, what I'm actually saying is think about what sort of process you're going to run up front and like telegraph that appropriately so people know that. You know, when I think about credibility, I think about a lot of the comments that are on the I keep going back to the no more transaction, but the second sellside master class where I did the no more example, I changed that process mid-stream, right? We did a ascending price auction. At the very end, I switched to a descending price Dutch auction. And people said, "Well, wouldn't that process change, destroy, or impair your credibility?" And and my answer to that is emphatically no. And here's why. Because throughout the entire process, my colleagues and I were extremely consistent. We established deadlines. We lived by them. If the buy side didn't live by them, they got booted from the process. Every single thing that we said we were going to do, we did. We built substantial credibility. Now, at the very end, I needed to extract additional resources out of the buy side, and the way I deemed appropriate at that point in time was a Dutch auction. I didn't know I was going to do that at the beginning of the process. In fact, I didn't know I was going to do that until the very minute I decided to do it, but I telegraphed it appropriately. I called up the buy side and I said, "We are in the final stages. There's a small handful of buyers left and this is the appropriate way for us to do this." And because I had maintained credibility throughout the entire process, now with that process change and the way that I came out honestly and straightforward and said, "Here's how we're going to run the process from here on out." That does nothing to impair credibility. In fact, those buyers believed me that this is what I was going to do. They believed me that the transaction for them was at risk. And ultimately that Dutch auction extracted quite a bit of cash out of their pocket and got the deal done at the end of the day. So credibility is important. It's built on small things. It's built on you sending the email when you said you're going to send the email. You having the meetings when you say you're going to have the meetings. You removing buyers from process when you say you're going to remove them if they don't do X, Y, and Z. And you live up through that throughout the entire process. This next question is from a search fund operator. Now, a search fund operator is somebody who has probably recently graduated from business school. He has raised some capital, seated a fund, and he's going out to find one business to buy and operate with the backing of those investors. I've actually sold some companies over the years that were search fund backed. And there was one, I was just talking about it yesterday, it grew from 5 million to 50 million and we ultimately sold it to a publicly traded acquirer. And I used to participate in INSEAD's program when I lived in France. INSEAD has a acquisition or entrepreneurship through acquisition program and I was the judge I was on the judges panel um for many semesters there uh when I lived in France which to me was a great experience and I actually miss doing it but this search funer says what do most buyers get wrong when approaching an owner now from my experience buyers tend to make things about themselves and so I always have an interesting seat because folks that are on the buy side they get to go out and they get to have conversations with sellers and then they leave and they question. I wonder what happened and did the seller like me? What did the seller talk about? I, on the other hand, get to talk to the sellers. And so, I've done this thousands of times now over the course of my career. So, I get to hear what all the sellers say about all the different buyers. And when I'm running processes like, you know, sometimes these guys are meeting with 5, 10, 15 different buyers. So, it gives me a great opportunity to watch the buy side pitch, how the seller interprets that, and then we go back and have a drink or a meal and we talk about what the sellers thought about all these different buyers they met. In my experience, the worst thing a buyer can do is make it about them. Because here's the deal, in the world that we live in, there's, I don't know, hundreds of search funds, thousands of private equity firms, strategic buyers. There is a lot of competition for most every asset out there. And I find that a lot of buyers like to go to meetings and say, "Hey, you know, I'm awesome. I I went to this graduate school. I have this degree from Harvard. I have a ton of cash. I've done all these great things in my career. If you, Mr. Seller, join forces. To me, we're going to blow this thing up and it's going to be great." And quite frankly, the sellers don't give a about what school you went to. They don't care about your personal track record. Not to say that that doesn't matter. And at some point it probably does and it probably can move the needle, but the guys that lead with that, like sometimes, and I get it, like sometimes buyers want to go in there and impress the seller, and you're talking to a lot of buyers, but you're not talking to a buyer like me. Here's all the cool that I've done. And I get that. But what sellers really want to understand is they want to understand that you understand them. They want to understand that you understand their business, right? That's what they want to feel. and they want to say, "Okay, this buyer didn't come in here to impress me. This buyer knows that I've spent 20 years building this thing. This buyer knows I used to live in a car. This buyer knows how many Christmas presents I wasn't able to buy for my kids. The buyer knows what I do and how I go above and beyond for my customers and how I'm different from my competitors. This is what this buyer understands. The buyer understands me. I mean, it's it's almost like age-old copywriting advice, right? Don't speak to the seller about you. Like, speak to the seller about the seller. Like, what is the benefits in here for the seller? What does the seller get out of this? What do you understand about the seller? I would say for me, that's probably one of the biggest things. I think at its core, sellers don't want to be flattered. I mean, they really want to be understood. This next question here comes from the buy side as well, and I think it's a great one. What is the smartest way to get the seller comfortable early in the process? And I think the core of that for me is just reduce ambiguity. So many buyers step into a process with a seller. And not only do they put this convoluted NDA that's like, you know, it's almost like a massive legal document on parchment paper, but they have these massive request lists, right? Like, and so when I talk about reducing ambiguity, it's like, okay, Mr. seller. I'm going to make this super easy for you to deal with me. You don't want to be like the you ever go on like a a company's website. You want to you got a question or you want to do business with them and there's a web form and the web form like has like 50 fields. Your date of birth and you know where you live and your email address and it just you know have you ever done this before and who else are you talking to and all these sorts of questions and you can't even push the submit button unless all those fields are filled out. Like you just give up. But if there's a web field, it's like, hey, my name, my email, my phone number, press enter. Yeah, I can do that. That's pretty pretty easy for me to do. It's the same thing on a buy side M&A process. It's like you sit down with a seller, you want to explain to the seller, particularly, I mean, most of these folks have never gone through this before. So, it's like, hey, here's a very simple NDA, right? Even a 12-year-old can read it. Here's a request list. Now, the process is I'm going to ask you some very for some very basic information right now and I'm going to come up with evaluation and we're going to talk about it and if it feels right to you and it feels right to me then we're ultimately going to move to the next step and I'm going to have to do diligence and so I'm going to have to request a variety of different things and it might be a little bit painful for you but we're going to get through it. Sellers typically are not scared of DD. They're scared of these ambiguous processes where they don't know where anything is going. Right? So, if you as a buyer can make it very simple, here's the timeline. We're going to move into this slowly. Here's an NDA. I want like five things from you now, not 50. I know you want to understand customer concentration and retention rates and all those things. And that's great and you have that opportunity to do it, but you do that in the due diligence phase. So I see a lot of buyers kind of the bed right out of the gate where you know an otherwise great transaction never even gets off the ground just because they have made it difficult to deal with them. I mean as a buyer make it very easy be the easiest buyer for that particular seller to deal with and that gives you a massive leg up on everyone else. Here's another question from the buy side. How should a buyer think about valuation and synergies? As I've discussed before, the value of a business is a range concept, right? And you've got, you know, effectively the hypothetical construct of fair market value, which is what is this business worth to the selling shareholders, the current shareholders in a financial transaction, right? Where there's no synergy. It's just like a standalone fair market value. And again, it's a hypothetical construct. And then you have, you know, the investment value or the strategic value range, which is, you know, in a competitive process, you have all these acquirers coming in, creating synergies. What's the height of that range look like? The buy side, I mean, you you really need to start with like what's this business worth on a standalone basis before any cost savings or revenue enhancements or any other synergy you might get. So, you might be looking at a business that's on a fair market value basis is worth roughly $10 million. If that business is kicking off a million dollars in cash flow and you think that 10x is the multiple, great. That's 10 million bucks with synergy. So combining that business with yours, let's say that you're able to double reasonably double cash flow to 2 million bucks. That 10 same 10x multiple implies a $20 million enterprise value. Now the standalone value is really all that the seller had. That's all they own. That's really all they have to sell. Why it's worth $20 million is because you're going to be able to create value from synergies. Another buyer might only be able to create 500,000 in synergies. So that's roughly a $15 million enterprise deal. And maybe another buyer can create 2 million. So that's a $30 million enterprise value. The reality is as a buyer, you start with the standalone enterprise value of the firm. And then the trick is how much of the value creation do you ultimately have to give away? And that's a determination that you're going to have to make prior to stepping into the process. So, as a buyer, you always say, "Okay, $10 million on a standalone basis. I'm ultimately going to be able to create 20 million or create 10 million in value, meaning it becomes a $20 million enterprise postclosing. How much am I willing to give away?" And that's where the fight is, right? The fight between the buy side and the sell side is how much who keeps that value, who extracts that value from whom. That's in a nutshell how I tend to think about these things. You know, back in the day when I was an analyst and super impressed with my own modeling skills, I used to build these big, you know, Excel spreadsheets. Now I'm much more inclined to use a pen and a napkin. Um, and that's what you should probably do today. Next question. I think the final question for today stems from a conversation I had yesterday and it's a recurring theme in my life. a seller reached out to me, had watched our YouTube videos, reached out to me, uh we got to chat and and he said, "Hey, I' I've got a business um I may be five years out from selling, but I wanted to get in your orbit right now. I wanted to think about crafting things for an ultimate sale, which which is great." And I and I love those sort of discussions. And one of the questions he asked me is, you know, what do acquirers want to see in acquisition targets or, you know, how can I make this most appealing to a buyer? And again, that's a very common question. And it's a good question and I will say the same thing to you that I said to him yesterday is that it's really hard to structure your business in a way that's appealing to buyers because what might be appealing to a particular acquirer today is not going to be appealing to a particular acquirer tomorrow. The core of this is like what ultimately makes the business most valuable to you is the way that you should run that business. And what I mean by that is what would make you as the owner, what would make your life better? And I asked him that and he said, "Well, you know, if I if I had to work less, spend a lot less time managing this business, if I made more money, you know, and the kind of the list went on." And I said, "Well, those are exactly the things that you should do. You should cultivate that management team so you work less. You maybe step away from the role as CEO and just be chairman of the board. Now you've got a management team and that business stands alone without you. Everyone wants to make more money." And of course, that's the core of valuation here, right? Cash flow. It's the durability of that stream of cash flow. So, you focus on increasing the cash flow of the business. The other question he talked about is like he's like, you know, I've got a lot of different contracts. Um, some are really easy to deal with and some are painful and I feel like on certain sort of end users, we spend like 80% of our time but make 20% of our profit. And I said, get rid of those. Right? So, if you get rid of those, you're going to all there's always opportunity cost, right? and you're going to be able to allocate time and resources away from those sorts of customers and focus on the customers that are far more profitable and less painful to deal with. So the effectively the core of the message is instead of thinking about externally there's a lot of things you don't control. You don't control interest rates. You don't control the capital markets. You don't control consolidation within an industry. Industries consolidate over time. You don't control those. Now you can pay attention to those and you absolutely should but you don't control those. you do have a lot of control over how you manage your own business. So those things fundamental to the company, those are things that you can focus on and the things that actually derisk your business, increase your cash flow and make your life easier are ultimately what's going to increase the value for the business at the end of the day for an acquirer. So my message to him was spend less time thinking about what acquirers want more time thinking about how you are going to increase the value for the business how you're going to increase the value of the business for yourself because ultimately that puts you in a position and I say this all the time you know this guy was I think doing about $2.5 million on the bottom line and you know there comes a point where you get it to 5 or 10 $15 million in ebida 5 years from now like who cares whether somebody buys it or not like I I don't think it's a shabby life to be able to effectively retire from a company, be a chairman of the board, and have the business continue to kick out $15 million a year in cash flow in perpetuity. I would imagine that probably supports the lifestyle of most of us. I'm Paul Gammore. I'm an investment banker and I negotiate for a living. Again, thank you for joining me today. Feel free to reach out to me at the contact form in the description below or as always, you can send me questions to my LinkedIn. I'll see you on the next one.