Summary

In this conversation, Bill Snow shares his journey into the world of Mergers and Acquisitions (M&A), detailing his transition from various sales roles to becoming an investment banker. He discusses the intricacies of the M&A process, including the importance of negotiation and understanding the market dynamics. Bill also reflects on his experience writing 'Mergers and Acquisitions for Dummies', emphasizing how the book has served as a valuable tool for validation and opening doors in his career. In this conversation, Bill Snow discusses his journey of writing and publishing a book, the opportunities that arose from it, and the importance of networking and differentiation in business. He delves into the complexities of business valuation in mergers and acquisitions, emphasizing the role of quality earnings reports and the necessity of having reliable advisors during transactions. Additionally, he highlights common pitfalls in business acquisitions, including the challenges of managing expectations and understanding financial metrics.

Takeaways

Bill Snow's journey into M&A began after a series of sales jobs.
He emphasizes the importance of negotiation in M&A, likening it to poker.
Understanding the specifics of each deal is crucial for success in M&A.
Bill enjoys the front-end marketing and negotiating aspects of his job.
He believes in the value of a sell-side quality of earnings report.
The pricing structure in M&A often varies based on the size of the transaction.
Bill's book serves as a third-party validation of his expertise in M&A.
He learned that he is a writing preference learner through the process of writing his book.
The book has sold around 40,000 copies, which he considers a success.
Bill's experience writing the book helped him crystallize his understanding of M&A. Writing a book can open unexpected doors.
Networking is crucial for business growth.
Valuation in M&A is complex and multifaceted.
Quality of Earnings reports are essential for sellers.
Advisors play a critical role in successful transactions.
Understanding accruals can impact deal negotiations.
Differentiation in the market is key to success.
Managing expectations is vital in business sales.
The importance of strategic buyers in M&A.
Effective management requires delegation and trust.

 

 Watch the Interview:

Transcript:

Jon Stoddard (00:00.426)
Welcome to the top M&A entrepreneurs. Today, my guest is Bill Snow. If you don't know Bill Snow, you should, because he's the author of Mergers and Acquisitions for Dummies. He's actually got a new one, updated version, Mergers and Acquisitions for Dummies. And he's been involved with over 50 acquisitions as an M&A advisor. Bill, welcome to the show.

Bill Snow (00:23.417)
Thank you for having me, John. Appreciate it.

Jon Stoddard (00:24.93)
Yeah. Bill, let's kind of rewind and go back and how this M&A journey all started. What were you doing before M&A and how that got started?

Bill Snow (00:37.67)
Sure, I had a series of jobs, sales positions. I worked for a publicly traded retailer that has since long gone, helped with a lot of acquisitions there. We were buying up little mom and pop video stores. This was not Blockbuster, one of the competitors. And I worked for an angel-funded company. I worked for a venture-funded startup. So I was trying to figure out what I was good at, what I wanted to do. And I got to my late 30s and a former colleague went to work for a small investment bank.

and they were looking for someone who could speak on the phone and knew how to sell and could read a balance sheet and so forth. They offered me the job to be an investment banker and I turned it down and I turned the job down I think four or five times and then I got a call from the owner of the firm and he caught me in a moment of weakness and so I said, okay, fine, I'll go be an investment banker. So I'm exaggerating a little bit, really not that much. And so that was in 05 when I started doing transactional work for the middle market.

Jon Stoddard (01:36.906)
Yeah. And what kind of companies was that transactional for? Just across the board, agnostic? What was it?

Bill Snow (01:42.711)
It was it was agnostic a lot of manufacturing distribution businesses some business services as well

Jon Stoddard (01:48.298)
Yeah. So tell me, why do you think he kept working on you? What characteristics does Bill Snow have that he goes like, I got to have this guy on my team?

Bill Snow (01:59.518)
Well, a former colleague who knew me well was working for him and they were looking for another person, another execution person, somebody who executes the mandate. So the way I divide M&A is you've got the business development, the front end, the marketing, whatever you want to call it, materials preparation, and then the execution, someone who gets the books out, makes the phone calls, sets up the meetings, negotiates the deal and so forth. And I guess they were, couldn't find the right person. So he called me a few times.

Memorial Day weekend 2005 and he said he wasn't going to take no for an answer. Part of it too is the firm was out in the suburbs. I'm in downtown Chicago and I really wasn't that keen on commuting for 30 miles out to the suburbs and the terrible traffic in the Chicago area. So when he told me he's in the process of moving the firm downtown, that made the decision a lot easier to, okay, fine. You got me. I'll go be an investment banker.

Jon Stoddard (02:49.827)
Yeah, yeah.

So he brings you on board. What was the first deal that you worked on?

Bill Snow (02:57.25)
was a small deal was a spin out of a printing company. They had a bit of technology that they were trying to sell off and monetize this bit of technology. And so we spent a lot of time trying to find a buyer, we got a couple offers. And it was one of the first we did not get a deal done. The client kept turning down transactions, they were never enough money. And that was one of the first lessons I learned that M&A really is supply side.

you bring an asset to market, you're going to get bids. The only question becomes, are the bids acceptable to the seller? And in this case, the bids were not acceptable to the seller, but we got multiple bids. And sadly, that business ended up failing and they probably should have taken at least the little bit of money, it was a couple million dollars we were able to get from.

Jon Stoddard (03:45.098)
Yeah, yeah. So you guys came up with the valuation and you thought that was reasonable. Was the seller being unreasonable about the valuation or just had the wrong number in his head?

Bill Snow (03:47.494)
You guys came up with the evaluation, and you thought that was reasonable. Was the seller being?

Bill Snow (03:56.498)
A little bit of all of that. I think valuation that exercise that investment bankers do is helpful, but it's ultimately an academic exercise because an asset is worth only what somebody else will pay for it. So we did get multiple offers, including those that said no interest. So in other words, they bid zero and that's a bit of Intel. That should tell you what people think of something as well. And the...

Jon Stoddard (04:10.538)
Right, right.

Bill Snow (04:23.118)
The amount of money, again, it was a few million dollars, relatively small. I think they had stars in their eyes. They wanted more money. Who wouldn't want more money? But it wasn't enough to move the needle, and they decided not to move forward.

Jon Stoddard (04:35.698)
Yeah. And what about the next one? What was the first successful deal that you went through in the process?

Bill Snow (04:39.79)
deal that you went through in the process? Sure, we sold a marketing company that had run aground, so to speak, it was about a $20 million business and had expanded, overbuilt, had opened up some offices in some other cities that were losing money. It had a big client that was an every other year type of client. This was a company that helped organize events.

things like that. And so it was kind of a bit of a foolish thing. They did not have this client lined up for the coming year. It was an every other type of year deal. And so they were looking at a situation where they were basically running on vapors. They had a line of credit that was being used to support some other offices they opened, probably shouldn't have opened them. But the company was very creative, had some great people, did some really good work. And we were able to find a strategic buyer in the space.

that was able to buy that company was a company that did a lot of kinda boring stuff setting up curtains and chairs and stanchions and things like that so they were looking to add a creative flair uh... so in addition to handling all the blocking and tackling at an event they could handle some of the creative things that help convey a message in addition to just setting up chairs and doing things like that.

Jon Stoddard (05:59.186)
Yeah. Well, with a company on cash law and papers, how do you price that? What do you say you'd be trying to be transparent with and disclose with the buyers? Like it is what it is. What are you going to, you know, what's your offer?

Bill Snow (06:05.414)
Say you'd be trying to be.

Bill Snow (06:10.318)
Sure. It is what it is. What are you going to, you know, what's your offer? Sure. Well, that's what you have to do. Yeah, we do not price something. We do not say here's the manufacturer suggested retail price, give me your best offer. We provide a lot of information and ask a buyer to come back and say, what is this asset worth to you? And what I've learned in this business as well is they will push us. And those of you who have dealt with me in the past trying to buy something from me.

you've probably heard the same line if people ask me I say I'm not going to give you price I'm not going to do it for a couple reasons one if I give you a number and you were willing to go higher than that number I've just done a disservice to my client that makes no sense if I give you a number and you were willing to go higher and then you use the number I give you and some other group did higher I've just given you bad advice so I'm not going to give you any information take a look at the materials read it study it everything you need to make a fully formed offers found in that book

Come back to us with a deal that you can support and close, being mindful that you have competition.

Jon Stoddard (07:12.926)
It's kind of a blind auction. Do you guys do a quality of earnings report for the...

Bill Snow (07:14.762)
Yeah. We a good question. It's something that I used to poo poo, because I thought, oh, we don't need the sell side QV quality of earnings, I can negotiate anything, I get these things done. But increasingly, in the last few years, I strongly recommend anybody who is thinking about selling their business to do a sell side quality of earnings. So we don't do that work or investment banking firm, but we will

work with other accounting firms. Sometimes they'll have that already or we can refer accounting firms to come in to do that quality of earnings.

Jon Stoddard (07:49.886)
Yeah. Do you do any reps and warranties insurance on the recommend or same thing, third party?

Bill Snow (07:55.454)
You know, it's the same thing with the rep and warranty insurance. That's something we don't do. We're not an insurance company. We're seeing that more and more where the pricing for the product, the rep and warranty insurance has come down, where the smaller transaction, it is something that is more feasible for them. So if it's if it's of a size, you know, big enough where it makes sense, that is something that we do recommend where a few years ago that was not something that was that common, probably because they were for really, really large deals.

Jon Stoddard (08:24.906)
Yeah, it's definitely come down. I actually know some people doing SMBs now. Two firms. So how does a firm like yours get paid? He brings you on? Is it you know, you guys get paid for some kind of retainer, and then percentage of the total transaction, and that's a pool split up with everybody working for the company.

Bill Snow (08:26.64)
Yeah, yeah, yeah. Yeah, yeah. Okay, okay, okay. So how does a firm like yours get paid? He brings you on, is it, you know, you guys get paid, do you get paid? Yeah, yeah. So, yeah, yeah.

and then percentage of the total transaction, and that's a pool split up with everybody working with the company? Yes, so we get monthly retainers, if you want to call them that, and those typically offset against a final success fee that is usually somewhere around 3%, might vary, smaller transactions that percentage fee might be larger, but it's usually right around 3%.

Jon Stoddard (09:06.582)
Yeah. And then you get that percentage. Is that around 5, 10% of the sale price? Is that kind of the right range or do you take higher? For Successpe Commission. Yeah.

Bill Snow (09:16.038)
you take higher for the success fee? Well, again, it's the size of the transaction is going to be part of that. So if it's a smaller transaction, we might have a minimum fee. And so ours is typically $300. We should probably adjust that. So if it's a smaller transaction, the amount of work that we do is going to be the same. In fact, if anything, the smaller

Jon Stoddard (09:41.312)
Exactly.

Bill Snow (09:45.654)
handholding and pounding the table and explaining and negotiating and all those sort of things. Not that a big transaction is easy, but there's more work. And just because it's a smaller transaction, it might be one-tenth the size of an earlier transaction, but we're not going to have one-tenth the work. So we want to have that minimum fee. So if it's a smaller transaction, I tell clients or prospective clients, here's what I'm looking for. Here's how we get priced.

our fee that we'd have to get is probably going to be userous. You know, you're looking at a $3 million valuation. We would we would take a guess after, you know, sometimes you kind of stick your finger up in the air and you know, we'll do a lot deeper dive on the valuation. But look, this is the amount of work that my team will have is going to be the same. It's not going to be one tenth the work or one half the work just because it's a smaller deal. So I have to charge this. So it's self-select. So we've had.

transaction smaller transactions that they were comfortable with that and happy to pay it in and if they don't we get it we get it as well if it's if it's too pricey for them

Jon Stoddard (10:48.822)
Yeah. So fast forward, you've done 50, worked on 50 deals. Uh, what kind of area do you, and I got to tell you back to the year, merchants acquisition, you really outline every over 339 pages of every step in the process. Like what, what processes do you like and dislike of this whole M and A game?

Bill Snow (10:56.934)
What kind of area do you, and I gotta tell you back to the year Merchants and Acquisitions, you really outlined every, over 339 pages of every step in the process. Like, what processes do you like and dislike of this whole M&A game? In terms of different types of businesses or in terms of the buy side or sell side? Yeah, the sell side, right? Yeah. You know, reaching out.

Jon Stoddard (11:17.994)
Yeah, do you, I mean, yeah, the sell side, do you like reaching out to 500 private equity firms and sending an anonymized bullet list of their highlights and then going through this process or?

Bill Snow (11:31.426)
and going through this.

Uh, the, the best part of the job, the most fun is the negotiating part of the job at the end. The, I do a lot of the, the front end business development, which this is obviously part of it. And I've got all kinds of thoughts and philosophies on that. It's, it's, I call myself the accidental marketer. How I got the book in the first place was, was kind of a, a funny chain of events. I did not seek out a publisher. They sought me out. Uh, I, I enjoy that. I enjoy doing this. I enjoy speaking.

Jon Stoddard (11:41.207)
Yeah.

Bill Snow (12:04.226)
I enjoy writing, so those are some of my favorite things to do. Putting the book together, years ago I did my strengths and weaknesses myself, what I was good at, what I liked, most importantly what I did not like, what I was not good at. I've written books, I've spread the numbers, I've done the research. I'd prefer not to do that. I'd rather have other people who enjoy doing that and have those sort of skills, especially the design and the layout. I do not have good skills in terms of just making a document.

look good, forget the words of the story that's being told just there's a certain flair that some people have that I don't. So I enjoy the front end marketing. I spent years doing the execution piece, the negotiating part of that, you know, getting the materials out and setting up the meetings. And then the most, the most fun was the, uh, the jousting and all that, that goes on with negotiating the deal. Yeah.

Jon Stoddard (12:54.454)
What's what's Yeah, what is the jousting you're talking about? Are you got a couple big egos into the room, and then you're trying to get them to, you know, hey, if you get the price, we get the terms, if you get the terms, we get the price, right?

Bill Snow (12:58.138)
you got a couple big egos in the room, and then you're trying to get them to, you know, hey, if you get the price, we get the.

Yeah, for me, negotiate. Well, you say negotiating and it's funny, people who don't negotiate, they view it as one thing, bluffing. Because I will say that negotiating, especially in M&A is very much like playing poker. If you haven't played cards with your friends, you don't have to be some big gambler. I'm certainly not, but I've enjoyed playing cards with friends. If you don't know how to do that, how to do that properly, I think you're at a disadvantage in this line of work. And here's why.

People who don't play cards think poker is just bluffing. And yeah, that goes on. But the key skill that you learn when you play a game like poker or other games of skill, the same skill that you need in investment banking and negotiating is understanding your hand, reading your hand in as best as you can determine in comparison to the other hand. You have to learn how to play a weak hand. You have to learn to play a strong hand. If you have a weak hand,

You can't push, you have to get out of the game as quickly as possible with as little damage as possible or the best deal that you can put together. If you have a strong hand, and this is where a lot of people make a mistake, this take it or leave it, and I liken it to, I remember years ago playing with someone who had a great hand and he started betting very high after we anti'd, now it's the first round of betting. Well, he signaled to everybody, he had a great hand. He chased out everybody and he won the ante, you know, a small amount of money. And he had a great hand.

That is misplaying a great hand. And the same thing can go on in M&A. If you have a great hand, a great company, but you're too aggressive, we're gonna get all kind of, you tell the buyers we'll get all kinds of great offers and you better hurry up. What happens is they just might all back away. And so you've taken this great hand and you've greatly diminished it. So the biggest skill is understanding that. And each deal is gonna be different. It's almost impossible to come up with a one size fits all approach to negotiating.

Bill Snow (14:59.014)
because you have to understand the specifics of the company, where the company is strong, where it's weak. Each of the buyers might have a different angle, different approach in terms of what they see in terms of the value. And figuring that out to me is the most fun and being creative and listening to the other side because you're not going to get a deal done. It's not force of will and we have to completely win and get everything to the other side or we have to completely capitulate to the other side. You have to figure out.

what the other side, what motivates them, what you have to offer, and how best to structure something. And the best way to do that is have conversations, explain your position, and hold firm. And that is my absolute favorite part of this kind of work.

Jon Stoddard (15:38.806)
Yeah, do you know like cards how to make a call and said, hey, they, I have a prediction mathematically. They probably got X cards in their hands. So this is all I'm going to bet. Uh, versus a, do you just be able to make a call on a hand? I know what they have. They know what they have. I'm going to make a call on this.

Bill Snow (15:45.85)
prediction mathematically they probably got x cards in their hands so this is all

Bill Snow (15:58.188)
I know what they have, they know what they have, but I'm going to make a call on them. Sure. Well, I'll give you an example. We had a client years ago and the client or the buyer made a strategic error and they sent along a spreadsheet and they disclosed all the information or all the fees they had paid to the different accounting firms and law firms and other...

consultants, environmental consultants and IT consultants and consultants to consultants. It was $1.6 million on a $40 million transaction. And that was a huge strategic error. And so they try to renegotiate the deal, lower the price. We had disclosed that we had some slow moving inventory, the company tried to move into a market they were not familiar with. And they were stuck with a couple million dollars of slow moving inventory. We had disclosed this, but in the last hour, they wanted to use that.

excess inventory that they thought was going to be unsellable as a way to lower the earnings of the company and of course lower the valuation what they might pay. And so we had a meeting at a lawyer's office in just outside of Detroit is where our lawyer was a company of someplace else. And it was a contentious meeting, but I told my client, let's hold firm. They cannot go back to their overlords at this big private equity firm and ask for $1.6 million.

because the bosses will say, oh.

Jon Stoddard (17:19.207)
They were looking for a $1.6 million concession somewhere in there. Yeah.

Bill Snow (17:22.658)
Yeah, well, it wasn't that much. Well, actually they wanted more than that. But what I knew is that buyer could not go back to their bosses and say, we need a million six. The bosses would say, oh great, you got the deal done. No, we didn't get the deal done. We just need a million six to pay off all the lawyers and the two accounting firms we hired and the two law firms we hired and so forth and so on. So I knew that they would have a much easier time to get that money if they were also able to bring home the deal. And so we held firm.

I wanted to hold firm. I was chomping at the bit to say, you guys have an airplane to catch. See you later. But my client did blink a little bit and it was probably a good thing. So we conceded or we agreed on everything. There was one small minor concession that we made at the end. And just as well, I'm a big fan of that, too, when you're negotiating these things. If you can give the other side the last victory. So you've won the war, but they won that last little skirmisher battle. They can go back to their side and say, look, look what we extracted. Look what we want here. Yeah.

Jon Stoddard (18:17.474)
That's what they'll remember.

Bill Snow (18:19.574)
So in the funny, Koda is one of the PE guys years later, showed up at my office. And by this time all the dust settles, so we're friendly. And he said, I've got your book, Bill. I want you to sign this. And you better write something funny. Oh, great, now I'm under pressure to write this. So I'm thinking, well, what can I write? And I said, Justin, thanks for the house, Bill. And.

Jon Stoddard (18:42.118)
Ha ha ha!

Bill Snow (18:45.614)
It was a nice feat. He laughed. He he laughed. He thought that was very funny. Yeah.

Jon Stoddard (18:46.674)
And his reaction to that was, he loves it.

Yeah. So how many deals did you get accomplished before and where this idea to write a book mergers and acquisitions for dummies?

Bill Snow (19:03.21)
Oh, I probably worked on and some things were in process, probably 20 transactions at that time. And we had had, you know, I've kind of lost 10, 12 closings. And we were doing buy side work as well and sell side work. So it gets a little, little blurry. One of the buy side clients, we bought a bunch of companies from somebody that was kind of three separate transactions all in one throw. So it gets a little muddled in terms of being able to say exactly how many, but, uh, you know, the 10 to 20 that I had worked on and most of those have closed.

Jon Stoddard (19:09.856)
Yeah, yeah, yeah.

Jon Stoddard (19:30.754)
Yeah. And then you were just going to write an all-encompassing book. You didn't have, you just said that Wiley Brand came to you for the dummies. Did you write the book first? And then.

Bill Snow (19:33.922)
you were just going to write an all-encompassing book. You didn't have, you just said that they came, Wiley Brand came to you for the dummies. That's right. Did you write the book first? Fabulous question. Everybody always asks me that. The other question they always ask is, did you really write it? They think I had a ghostwriter. They hired nobody and hired a ghostwriter to write it. The story about that book came, and it's a great marketing lesson for all of us. This is 20 years ago, when I was still trying to do the venture capital game, I had a meeting with

a venture funded company, they wanted to raise some money, they were going to hire me to go raise some more dough. They had friends and family put money in, they wanted to go to the VC world. Okay, I can do that. So I met with the chairman who had put in millions of dollars for this. We did not have a good meeting. He pointedly asked me, what the blank do you know about venture capital? He did not say blank. And it was not a good meeting. And I was so upset that I had this little article that I had been working on, didn't know what I was going to do with it. And I just started writing this article and then

expanded it, it'll be a two-parter, a ten-parter, I'll make it a book. I'm going to weave a narration through it, have some fun with it. I called it Venture Capital 101, it was just a spur of the moment decision. I wrote it in about a month, I gave it away as a PDF and I was a viral, a very, very small viral hit before viral hit was a term. This is about 20 years ago. And I remember getting all kinds of offers. VC firms in California were thanking me and all kinds of people were offering me good, bad and different things.

And I remember thinking if I knew what I was doing, I'd be able to hit the accelerator. What I realized is it was basically a book for venture capital firms. This is what you don't do if you want to get venture capital. So I was kind of the, the polite conduit. Um, shortly after that, that's when I went to work for the middle market investment firm, investment banking firm. And a few years after that, Wiley contacted me, that little PDF that I wrote, little booklet that I wrote where I claimed that Keith Richards guitar tuning.

was a paradigm for venture capital seriously it's in there I go through that I just figured that out for the guitar I just have some fun but they contacted me to write a book LBOs for dummies I said who would buy that they said the big guys on Wall Street do billion dollar deals I said there's six of those guys yeah yes sorry to keep going on I suggested M&A for dummies they said that's a bad idea who would buy that I said I don't know you know hundreds of

Jon Stoddard (21:33.796)
I wonder if I...

Jon Stoddard (21:43.746)
Yeah, how would they make money on that? If it's a big guys, and we're talking what, 500? I...

Bill Snow (21:57.486)
Tens of thousands of business owners and executives, that's a bad idea. They called back two years later with a new idea, M&A for Dummies, Mergers and Acquisitions for Dummies. We thought of it, Bill, not you. Would you like to write? I'm exaggerating a little bit, really not that much, but I'm very thankful to Wiley for reaching out to me and it was a long gestation, but it's been very rewarding to be able to put that book together.

Jon Stoddard (22:16.01)
Yeah. And did they put you on their contract or you just say, I'll write it and I'll deliver it. And they come back and forth and makes the corrections edits and stuff.

Bill Snow (22:22.69)
You we spent a month or not a month a whole summer of 10 about three months working on the contract. And we finalize that actually, I part of it is when you do this as you're working on the contract, you're also working on an outline that has to get approved. I think it's the grand pooba is what they have at Wiley grand pooba sits there and everybody comes they pay field to you and they say would you bless this book idea.

and they kept rejecting the outlines that I had, the chapter by chapter outlines.

Jon Stoddard (22:56.638)
And they would know the outline of an M&A process. Why? How? Yeah.

Bill Snow (23:00.01)
Yeah, yeah. Well, I mean, part of it is and I see it now. These books are supposed to be a reference book. So I was thinking more serial starting point, ending point. I was going to build out from there. They wanted this to be a reference book. So you what's the letter of intent? So you can look that up in the at the back of the book and see that's on page whatever. And then read the paragraph or the page about that. So these outlines kept getting rejected. The acquisitions guy was working with it wildly.

said, let me take a stab at it. I think I understand the subject matter after reading all these outlines. So he wrote this thing that was a disaster and I thought this thing was gonna die. And much to my disappointment, it got approved. And so now I've been approved by a major publisher to write a book with an outline that makes no sense. And then I signed the contract. And so this is what you do people, while he's watching this probably upset at me. When you sign the contract, you've been approved to write a book. You have no idea how you're gonna write it.

you read the contract and it says very clearly upon signing the contract, they're supposed to give me a little bit of money. It took a month for me to get that money. And that was just enough time for me to re figure the outline. I began writing the book. And then the next thing when I was turning a chapters that didn't line up with what Wiley agreed to. This is what you do when you're writing a book for major publisher and you're doing something you're kind of going off the off the ranch, so to speak. Don't answer your phone and don't look at email. So I did that for a couple of weeks and I kept.

But the most important thing, they are terrified of hiring an author and not getting the book done. So I kept turning the work in. I think it was good work. We had a Come to Jesus meeting at some point and said, we're going to do it my way. And that's what ended up in the book. And I'm quite pleased with the book. And they came back years later. We've now done a second edition.

Jon Stoddard (24:27.495)
Yeah, yeah.

Jon Stoddard (24:38.39)
Yeah, curious, did your firm require, I mean, did you have to give anything revenues from your firm, from your knowledge, learning about transactions in M&A? No.

Bill Snow (24:51.318)
No, no, don't give him any ideas. No, I would not do that. I would not do that because I write this soup to nuts and absolutely not. And I appreciate the question. It's an interesting thought. It hasn't come up but absolutely would not share anything. That's that's my little baby. Don't make a lot of money on it, but I make money on it. But more than that, it is mine. I own it. You know, the ideas, all the layout, everything in there.

Jon Stoddard (24:55.618)
Thanks man.

Jon Stoddard (25:13.835)
Yeah.

Bill Snow (25:19.882)
is mine. And also what was very important to me is writing that book taught me that I'm not a writing or reading preference learner. I'm a writing preference learner. So I experience I do things that when I wrote that book up and forced me to think through a lot of things, the process and the steps and how to explain things. Yes, yes, yes. So that yes.

Jon Stoddard (25:36.726)
you like crystallize in the process is interesting, isn't it? Like doing it, and I do it every day, but then you crystallize it so somebody else can do it. Yeah.

Bill Snow (25:47.102)
Yes. Yeah, invaluable, invaluable. So that's, that's part of where I started thinking about, well, how do how do I learn? What am I good at? Good at putting words together? Good explaining? I'm good at taking complicated subject and explaining it in a simple, easy to understand manner. That's why I've written a Ford Dummies book, right? What am I not good at? I remember when I got the first copy of the book, my housekeeper was there was a Friday, it was home and I held up the book and she didn't care. And I'm looking at the book, I'm really proud of myself. And I'm

And I realized, yeah, I'm pretty good at this word stuff, art, the visual design, you can see all the incredible artwork behind me in my office, right? There's a window. I don't have an eye for that. But that to me was very valuable. Instead of trying to do everything and think you're an expert at everything, because none of us are, I have a very good idea of what I'm good at, you better get out of my way, and what I'm not good at. And then I look for partners, I look for colleagues who have those skills that can.

bolster up where I'm weak and it's been absolutely freeing for me to focus on and understand what I'm weak at, what I'm bad at.

Jon Stoddard (26:51.178)
Yeah, well, I'm just curious, what grade level is mergers or acquisitions for dummies written at? You know how they say write for eighth graders?

Bill Snow (27:01.884)
Yeah, good question. I didn't think about it. I would say high schoolers would be able to probably be junior high. I mean, I don't use a lot of big words. I have some fun with words because I like that. But I think the concepts of it's a little bit complicated, you know, when you're getting into accounting, I think you'd have to have a little bit of growth and development. So I would think high schoolers but probably

an eighth grader would be able to comprehend the book as well. I don't know how much they would be able to understand because I think being in business to some extent is helpful to give you kind of a foothold on it. But certainly the basic terms and so forth in the book is written. So the way I put it is even I can understand it. That's how I write the book.

Jon Stoddard (27:29.378)
Yeah.

Jon Stoddard (27:46.239)
Yeah, yeah. Well, so what did it what did the publishing powerhouse Wiley brand and going under the brand of four dummies do for you? I mean, how many original copies did they print say hey, we're gonna print 100,000 or 10,000.

Bill Snow (28:02.766)
I wish, wish was 100,000. I think they printed about 2000. We've, we've sold, yeah, my I have no idea. This, this was a leap into the great unknown when I did this. So this was back in 10. When I wrote the book, the book came out spring of 11. I've sold I think roughly 40,000 copies over those years, which is pretty good. I mean, you know, I'm not, not gonna get rich, but I get you know,

Jon Stoddard (28:04.586)
Hahaha

Jon Stoddard (28:09.954)
2000.

Bill Snow (28:31.586)
Twice a year I get a couple grand, which is better than nothing. But my only goal when I wrote the book is I just wanted to sell enough where it stayed in print. And what that was couldn't tell you. I think I have a sense of it now because obviously it stayed in print all these years. And I'm very fortunate Wiley came back and we were able to put together a second edition in the last couple months. Yeah. Well, Nick, man, you got three and a half years.

Jon Stoddard (28:52.862)
Resign you. Well, heck man, you got 384 and a half stars on Amazon. So you've definitely sold quite a few copies, but in reality, that's not why you write a book, right? Most books don't make money, but it opens the doors. How did that change your M&A career having this book?

Bill Snow (29:08.93)
Yeah.

Bill Snow (29:14.73)
Well, it opens up doors. It becomes a form of third party validation. Some people like it. Some people don't. When I signed the contract and I was writing the book in fall of 10, I had a meeting with the business owner and he looked at me and he said, Well, what do you know about M&A? Almost a repeat of that question. You know, what the blank do you know about venture capital? And I had to bite my hand because I thought, oh, this was just teed up perfectly. Well, I wrote the book, but I couldn't say that. Yeah, I wrote it. I wrote the book.

Jon Stoddard (29:40.13)
For dummies!

Bill Snow (29:43.038)
And so I, because it wasn't done yet, it wasn't out. I had no idea if it would be good or well received. And actually I'm still in contact with that guy actually. And then shortly after it came out, I had a meeting out in California and I went out there with a colleague and I brought the book and I was just chopping at the big, at the latest, at the right moment, just the earliest moment to be able to say, here's the book, I'm an expert. And it came up and I kind of forced the hand.

And I gave him the book and he looks at it kind of scoffs and tosses aside and says, Well, I'm not a dummy. And I said, Well, look at the author. So that one backfired, but it has opened up other doors. It, you know, it, it is something that some people find cool. It's interesting. They always ask the same questions, who wrote it for you? Did you write the book and sell it to Wiley? Or did you pitch the idea they came to me, I had to come up with the idea, you know, all those steps that I explained earlier.

Jon Stoddard (30:20.758)
What's up?

Bill Snow (30:36.042)
Um, it has opened up other doors. A group overseas reached out to me. So before the pandemic, I was going over to Dubai and Malaysia and doing M and A presentations, um, I'd done that two years in a row and I was looking forward to doing that for the rest of my life. And hopefully that comes back, who knows? But I was in talks with other groups and I thought, boy, this would be great to be able to do a lot more, get on airplanes, fly halfway around the world and talk for a day or two days.

I really enjoyed that. So those sort of opportunities never would have happened. And again, I have to go back for people thinking about writing or how do you differentiate yourself? Think about that. I was upset about a business meeting that did not go well. I wrote something, I had some fun with it. Had a bee in my bonnet, so to speak. That led to a major publisher contacting me. That led to an overseas group contacting me to do speeches. Of course you get paid for this as well. So.

All these things opened up. And the key thing is people know me, firm you say this, things in life happen when you have something to offer, when you're asking all the time, give me a job, give me this, will you do this for me? It's a lot more difficult than saying, I have this, here's what I'm an expert at, here's what I can offer you. And that's been a big approach for the way that I try to market myself, services for my firm.

trying to figure out some way to differentiate ourselves by offering, not just asking. Think about everybody watching this. Think about all the yahoos that contact you on LinkedIn. Everybody's trying to sell you what, a bespoke suit and fractional jet and insurance and on and on and on. And how often do you say yes to that? The whole world is asking. If you can figure out how to offer something, that's when the doors start opening.

Jon Stoddard (32:18.462)
Yeah, yeah. But they you've pre framed them because they if somebody types in Bill Snow, they're going to see your Amazon listing, then you're going to see your book listing, you're going to see all kinds of stuff. And they're going to make a form of opinion of you before they even meet you. Which is a pre sale. Yeah.

Bill Snow (32:20.282)
You pre-framed them because if somebody types in Bill Snow, they're going to see your Amazon listing, then you're going to see your book listing, you're going to see all kinds of stuff. You're going to make a form of opinion of you before they even meet you. It's a pre-sale. It absolutely helps. It helps when you talk to other firms. Like I said, having that book is a form. I view it as a form of third-party validation. I wrote it initially just for myself.

Can I do this? And it's funny, I'm a good writer. I still remember cringing when I was in school and high school and in college and being assigned the 10 page term paper. Oh my God, that was torture. How can you write 10 pages? I can write 10 pages, you know. Yeah. That one, that one.

Jon Stoddard (33:05.57)
Any college kid can write 10 pages today. They just go to chat, GPT.

Jon Stoddard (33:13.034)
And write it in Frank Kern style, please. There you go. Oops, oops.

Bill Snow (33:17.746)
It's, yeah, that's, you know, technology. Yeah, it's sad because I did work very hard at writing. I didn't think I was a writer. I didn't think I was a writer till long in my life. You know, I always enjoyed doing that to being able to express things. And I do it for myself because I have to work out how to explain something. So whether it's a business thing or something else, I have to work it out in my mind and I could play around with the words. And so the technology we have today, not necessarily all that.

AI stuff, but the computer. I would not be able to write and do what I do without word processing programs and being able to move sentences around and words around and try different things. Having to write longhand and then type it up, that was laborious. The technology to some extent is a huge boost to my writing.

Jon Stoddard (34:05.634)
Yeah, I have to ask you about, so what's the difference between the mergers and acquisitions for dummies that you released in 2018, your first edition, and the second edition? What's the difference? Aside from you've got 30 acquisitions under your belt now, plus the two.

Bill Snow (34:08.419)
difference between...

Bill Snow (34:13.894)
your first edition and the second edition. What's the difference? Yeah, we go into... Aside from you've got 30 acquisitions under your belt. Yeah, we... Sorry, sorry. Yeah, we go into... Well, some of the changes that have gone on in the industry. So we've talked about it before. The Quality of Earnings report. So I go into a lot of detail of what that is and why business owners should do a sell-side Q of E Quality of Earnings report. We talk a little bit about...

the rapid warranty insurance, which was barely on the radar 12 years ago. I go into a lot more detail in terms of valuation. And this is something that's come out from my thinking and working on deals, both buying and selling companies, that the different ways of looking at valuation, the different components, what really drives valuation and what business owners can do to help their valuation. You know, little things like if the business owner's not needed.

The company's going to be worth a lot more. And so we have a lot of deep. Yeah, sure, sure. If the owner's not needed, only shows up 10 hours a week to just hang around and you got a general manager, what does that add?

Jon Stoddard (35:13.786)
How much, let me ask you that. If the owner's not needed, only shows up 10 hours a week to just hang around, you got a general manager, what does that add to the valuation? And I guess it's always gonna have, well, it depends, if you're a $5 million company versus a $20 million.

Bill Snow (35:32.965)
I guess it's always gonna have, well it depends, your $5 million company versus a 20 million firm. Yeah, yeah. Yeah, you gave the succinct answer. It depends. That's what someone told me years ago, these people that go to get these fancy MBAs, the first thing that they teach them is, well it depends, that's what you're supposed to say anytime you get a question. But it really does, it's a difficult thing to say at one size fits all because it depends on

the industry, other factors in the business. Do you have recurring revenue? Do you have a lot of capital expenditures? You know, a lot of other expenses. Do you have a long sales cycle? You know, on and on and on. So there could be a lot of factors that go into a business that have an impact, a positive impact or a negative impact on the valuation. A manager or an owner rather, who is not needed certainly is a very helpful thing. The business runs itself. We've got a great team.

and now Mr. Private Equity firm, you can come in there and everybody in the management team knows what's going on. Those are good situations. When an owner needs to be replaced, that's trickier, but again, depending on the deal, maybe a little bit smaller transaction. Sometimes you have some of these smaller, I call them smaller PE firms. They don't have necessarily limited partners, but maybe a guy or a couple guys or a couple gals own a firm or a couple companies and they're also looking to buy some more. Maybe someone, or they have somebody in there.

in their circle who wants to operate a business, that becomes a good fit too. So if somebody has the capital access to its backing and is looking and has the experience and is looking to run a business, well, that becomes a good situation when you have an owner who wants to segue out, maybe that owner who is integral to the business and pretty much in the middle of everything, assuming that owner is open to doing some sort of transition, you know, six months, a year, two years, whatever the case is.

Jon Stoddard (37:21.286)
So what is the biggest area what you see that's difficult to tackle? I mean, I'm going to focus on valuations because you'll see this guy, 72 years old, he equates his retirement with the day to sell his company. And then you got to figure out a valuation, but you don't tell anybody else, you know, you know, buyers, you don't tell what your valuation is, but you've got to figure out some kind of valuation, what you think it's worth. Right. Yeah.

Bill Snow (37:29.006)
Because you see this guy, 72 years old, he equates his retirement with the day to sell his...

then you got to figure out a valuation. But you don't tell anybody else, you know, buyers, you don't tell what your valuation is, but you got to figure out some kind of valuation. Sure, sure. What we'll do is, and a lot of other firms do this, is we'll run, we look at four ways of looking at valuation. So we'll look at comparable transactions, as much as you can find them, it's difficult, privately held companies, when they transact, a lot of times that information's not public. So sometimes you have to look at

Jon Stoddard (38:05.282)
Yeah, yeah.

Bill Snow (38:08.174)
public transactions and maybe these are much bigger companies but it's the same kind of business just much bigger so maybe you can make some assumptions for size to bring those multiples down. We'll look at companies, publicly traded companies in this sector and again publicly traded companies are going to be much larger but that becomes a very good metric too when you see the stock price because you can figure out the PE and that's going to tell us in most cases a business

is going to want to acquire a business that is accretive to the earnings, right? They're not going to buy something and have the earnings per share decrease because of the acquisition. And so that. Yeah, exactly. And so that gives us a ceiling. OK, well, this is a check in terms of what a business might be worth. We'll run a LBO leverage buyout, which is the typical valuation form for private equity forms. And we'll do the discounted cash flow, which is the.

Jon Stoddard (38:42.178)
Yeah, none of that distressed stuff, yeah.

Bill Snow (39:00.738)
fantasy of all college students everywhere who picked up their first finance book. So we'll look at all four of those and we'll take a weighted average of those four. What I tell people is that tends to be a pretty good academic exercise in terms of what valuation is. But ultimately something is worth what somebody else will pay for it. And what we want to find, and you can't guarantee it, I can't say it's going to be there with every case, but quite often you'll have an acquirer who has a strategic imperative.

to make the acquisition. Yes, they understand all those numbers, but this particular company offers products that fill a hole in our product offering, or we're taking out a competitor that's just been a big pain point to us, or any other varied factors that might go into making an acquisition. So if a buyer has that strategic imperative, they really want it, aren't they gonna pay more? Probably, especially if they're in a competitive process, which is why I always ask buyers when they ask for a price, read the materials, everything you need to.

to make a fully formed offer is in that book. Please come back to us with an offer you can support. Close being mindful that you have competition. And that's, I think the best way to elicit and draw out that best valuation.

Jon Stoddard (40:12.01)
Yeah, did they have you ever gotten an offer that's 10x what you guys did on your weighted average and go holy cow these guys are strategic they need to.

Bill Snow (40:19.582)
did on your weighted average. Holy cow. Yeah, every Yeah, sure. Oh, yeah. Yeah. Every single deal we work on is at least no, no. Yeah, we've Yeah, no, every deal. Yeah, you hire us all 10 times piece of cake. Yeah, yeah, it's I can't say I can't say 10 times. Usually the offers come in. I mean, sometimes they're a little bit low and

Jon Stoddard (40:27.472)
Well, you had some of you like, hey man, thanks for buying my house.

Jon Stoddard (40:35.25)
Yeah, yeah, yeah. This is something we don't tell, but yes, yeah.

Bill Snow (40:46.966)
lower than you want, but that's why you get multiple offers. Well, that guy was kind of low, but here's some others that are more in the range. So usually they're in the range. Sometimes you do get a wow factor. And even if you get a wow factor, you have to be very careful. What is the form of that transaction? Is all cash a close or are they giving you a big note? Are they asking you to take stock in another company? Is it an earn out? Those earn outs have become kind of a Frankenstein's monster in my view.

So what is the form of the transaction? How much cash are you getting at close? How much risk do you continue to take? So you might have a big transaction that they say is worth, I'm just throwing numbers out here, $30 million. But if they're only putting $10 million cash at close and $20 million in a note and some stock and an earn out and some other things, well, maybe that is a good deal. But maybe...

maybe a 20 million dollar substantially all cash and clothes deal maybe that's better than a 30 million dollar deal with a lot of structuring. No right or wrong it depends on the seller, it depends on the situation.

Jon Stoddard (41:51.862)
Yeah, I got a question for you. I saw this deal on generational and I ask about it because it was in the IRS accounting kind of field software. I got the NDA. I got the SIEM. And then 80% of their business was from one customer. Yeah. And it was on generational. They don't price those either because they're expecting a strategic to buy it. But as a financial buyer, I couldn't accept that. I'd price it at the 20%.

Bill Snow (42:03.962)
I got this dam and then 80% of the...

Bill Snow (42:10.349)
Yeah.

They don't price those either because they're expecting a strategic client, but as a financial buyer, I couldn't accept that. Sure. That's a 20% one, right? Yeah. That's how I would look at it. Yeah. I mean, do you take those clients, say, no, we're not going to take you, or do you fix them? And you go, hey, look, we need to mitigate this risk here for clients to get to a better valuation. It is a big risk. And again, you'll know it when you see it if you can work with it. You know, 80%.

Jon Stoddard (42:21.482)
Right? That's how I would look at it. I mean, do you take those clients, say, no, we're not gonna take you, or do you fix them? They go say, hey, look, we need to mitigate this risk here for clients to get you a better valuation.

Bill Snow (42:43.17)
you know, what is the nature of that? How strong is that relationship? We've sold companies that had maybe not 80%, but we've had them at 40, 50% with one customer. The challenges a lot of times these business owners have these big concentrations because why? They're doing a good job. They're doing a good job and that client keeps coming back or other departments or other units in that company. Hey, I hear great things. Could you do the same or similar for us?

What are you supposed to say? No, I'm going to turn down some profit here from doing what we do. So a lot of times that growth in that terms of that concentration happens organically because of that. So it's tough to turn it down in those situations. What is the nature of the relationship? Are there contracts tied to this? Is it just, we hope every month the phone rings and we make a bunch of sales. And then also, can you find a buyer who has a concentration elsewhere?

that maybe isn't using that big 80% customer. And maybe that 80% customer is a fantastic company, well run, big company, well regarded, and it looks like they're gonna continue to do that business. It's a type of client that anybody would want, but the buyer doesn't have that client. So maybe that makes sense to acquire that. So now you don't have an 80% concentration, maybe that concentration.

Jon Stoddard (44:03.27)
It drops down to, you know, it's a small minority. Yeah.

Bill Snow (44:05.382)
40 percent, 30, 20, right exactly. So it really depends, really depends on the situation.

Jon Stoddard (44:10.698)
Yeah, I've had encountered that before, especially somebody had a concentration in Texas and I go, well, I only got two customers. You know, it's like Shell and mobile. Like, okay, yeah, I get it.

Bill Snow (44:22.195)
Yeah, yeah, I mean, what just, you know, automotive show, you know, we saw the, uh, the OEMs. Well, how many of those, you know, there's, you know, Detroit, you know, there's, there's just a limited number, but they're big companies. And so, you know, it, it really, it really depends. So it's kind of hard to give a one size fits all answer, but it really depends on the situation.

Jon Stoddard (44:40.166)
Yeah, I see that's one of the reasons why you bring in that quality of earnings a little bit more into these.

Bill Snow (44:46.466)
Yes. If that report is done right by reputable firm, yeah, they will look at that, they'll be able to talk about the nature of those ongoing revenues in addition to normalizing owners compensation and the, you know, all the one time only expenses, are they really one time only timing issues as well? Is a company lining up its revenue and the corresponding expense? Are there any issues there? So

Yeah, the Q of E is hugely important and to keep waving that flag, I always tell business owners, you're asking us to go into battle and our flank is exposed if we don't have this report. It's much better for us to be able to go into a process and say, here's the adjustments to EBITDA. Here's how we're seeing the earnings of the business after you, Mr. Beier, after you take over the business.

and we have another firm, a reputable accounting firm has come up with this, that allows us to grab that high ground. And then the buyer has to come back, and they're gonna ask questions, and that's fine, and we're happy to interface with them or turn them over to the accountants. But we've grabbed that ground in terms of how we see valuation. Instead of waiting for a buyer to come back and say, here's where we see the earnings, we're making the other side come back to us and fight up the hill, so to speak.

Jon Stoddard (46:04.295)
Yeah. I want to ask you about your in your new book, Selling a Transaction, Selecting Advisors. Now, you just recommend these advisors or why are you pointing this out? Like, I'm the tax man on page 185.

Bill Snow (46:10.682)
You just recommend these.

Bill Snow (46:16.774)
page 186.

Bill Snow (46:21.079)
why we recommend advisors. Yeah.

Jon Stoddard (46:22.342)
Yeah. Well, I mean, what's like, hey, by the way, you're going to be selling $30 million, and you're probably not going to get $30 million all at one time. It's going to be $10. It's $30 million you brag about to your friends and stuff, but you're going to get $10 million, then you're going to get $20 million. And then if the private equity firm sells your portfolio in five years, you're going to get a bigger pie, et cetera. This is what your tax bill is going to look like. Yeah.

Bill Snow (46:26.606)
Hey, by the way, you're gonna be selling $30 million dollars

Bill Snow (46:32.986)
$10. It's $30 million you brag about to your friends and stuff, but you're gonna get $10 million, then you're gonna get $20 million.

you're going to get a bigger buy, etc. This is what you're taxing both of them. Well, yeah, I'm not a tax accountant or attorney, much to my father. My late father had a master's in taxation. He was a CPA, so he'd be disappointed. He went back to grad school in his 40s just to get that skill set. We strongly encourage business owners before they retain us.

to talk to their tax people, to understand what transaction makes the most sense. Selling assets, selling stock, does it make any difference? What's the basis in all of that? Is accounts receivable gonna be taxed at a different rate than the rest of the businesses that consider cash? There's just myriad factors that go into it. And I know enough to ask the questions, but I want an independent voice to be able to come back and say, here's what, here's the type of structure that is gonna be tax advantaged.

for my client. And then once we get that, we can communicate that in the book, in the SIEM, when we go back or when we go out to the market and say, here's what we're looking for in terms of, we're not going to put down the price, of course, but we're going to talk about the type of structure that we're looking for and explain that it's tax advantage. And if we can do that ahead of time, instead of waiting until negotiating the purchase agreement, that's where you want to be able to explain that to give the buyer, to be fair to them, to give them as much information as possible so they can put together again, a fully formed

offer.

Jon Stoddard (48:12.658)
Yeah. Let me jump to chapter 19 of your new book, 10 Reasons Acquisitions Fail. And you talk about business. Yeah. Well, yeah, it's just like the reporting and bureaucracy, 334. You don't spend a lot of, you only have one page for like three different sections, but the zombie and responsibility with no authority. What do those three mean?

Bill Snow (48:23.58)
10 reasons acquisitions fail. And... You're not gonna ask me to recite them, I'm not gonna have to recite them by memory, am I? Oh my goodness. Reporting and bureaucracy, 334. You don't put a lot of, you only have one page for like three sessions. Like a zombie.

Yeah.

Jon Stoddard (48:39.978)
Reporting and bureaucracy, the zombie and responsibility and with no authority.

Bill Snow (48:41.93)
Yeah. Well, the responsibility with no authority is, and they're all kind of tied together, that's where you tell somebody you're responsible for getting this done, but you can't make the decisions to get it done. That is just a recipe in any sort of a business. How can you expect somebody to be responsible for something if they can't make the decision? Ultimately, the decision maker should be responsible. That's a tough thing too for... How do you uncover that? Yeah.

Jon Stoddard (49:06.882)
How do you uncover that?

Bill Snow (49:10.166)
Well, that's a great question. And when you're a seller looking at buyers, you do your homework as much as you can. Sometimes it's a gut feel when you meet the executives or the PE people, the principals at the PE firm. You ask a lot of questions and you wanna make sure that you have a good sense that the new owners are going to be continuing to run the business correctly and be able to trust their people.

Ultimately, it's out of our hands and it's up to the buyers to be able to do a good job. So we can ask all the questions we want and do as much homework as we can, but ultimately once the deal gets done, the new owner coming in is going to be able to make those decisions. So hopefully they're able to trust their people. If it's a PE firm, I'd ask to speak to other firms in their portfolio and ask the managers talk about the relationship. Are you...

still have autonomy, do you have to approve every single thing you do or can you talk about that? I would get that sort of information for sellers before they make a decision like that.

Jon Stoddard (50:18.666)
Yeah, I think the one example that I remember was Michael Dell's book when he was first running his company, but it was growing so fast that he had somebody walk into his office and he goes, hey, I just lost 50 cents in the Coke machine. I'd like to get a refund. And he's like, why are you asking me this? And they goes, well, because you're the only one with the keys. Like I got to learn how to delegate.

Bill Snow (50:31.566)
Hey, I just lost 50 cents in the uh...

Bill Snow (50:45.042)
Yeah, yeah, it's a tough thing and some people are good at it. Other people are, you know, control freaks. They don't trust others or it's difficult to let go. I've managed people and I call it the lazy manager approach where I don't want to have to do everything. I'm too lazy. You know, you do it. You figure it out and that actually it's a bit flipping to you're kind of joking around a little bit but when you tell people that you figure it out, you know, you're gonna be responsible.

Okay, I'll back you as much as I can, but ultimately you are gonna be responsible for your decisions. You don't have to come to me if you got a question or wanna bounce ideas off me, that's fine. But you encourage people, that's what I've always done, encourage people to make their own decisions. Other than that, then you end up being a micromanager and nobody wants, well, some people like being a micromanager. I am not a micromanager and would not want to be one.

Jon Stoddard (51:35.242)
Yeah, let me clarify that zombie. Now, what's a zombie again? Page 35. Yeah.

Bill Snow (51:40.018)
Yeah, well, yeah, a zombie is a is a business that is sustainable. It's not going under. It's not going to go out of business, but it's maybe not growing. And so it's it's. Is the trends? Yeah, they still need the product or maybe a owner, private equity firm. You see this sometimes in venture capital. You see sometimes a private equity.

Jon Stoddard (51:53.322)
It's not going to grow because the trends are moving in the other way. But people still need the product. Yeah.

Bill Snow (52:08.05)
go to a private equity firm and look at when they've done their transactions. And if you see something that is more than seven years old, that's a question. If you see something they've had for 10 years or 15 years, now maybe it's a great company and they're just continuing to get incredible dividends from it. But probably that's a zombie. So what is that? They have put in so much money into the business and it's profitable now. But the amount of earnings they make do not support the amount of capital they put into it.

They do not want to sell it and take that loss because they have to report that to their limited partners. So that's a real problem. I've known numerous PE firms where that happens. It's not to denigrate them. I mean, it's business. I mean, this thing happens, but a company where it's not going to go out of business, okay, it's a nice business, but the amount of capital that's been put into this, you just can't sell it unless you're willing to take a massive loss.

Jon Stoddard (53:04.554)
Yeah, and sometimes the return on equity keeps, it's neutral or it's declining. But if you get rid of that, somebody new coming in and would see it and goes, let's get rid of it, but it's like a Jenga block that could hurt other parts of the revenue for some reason.

Bill Snow (53:09.811)
neutral or it's declining but if you get rid of that, you know, somebody new coming in would see it and go, let's get rid of it. But it's like a Jenga block. Could hurt others.

Yeah, it could, but you're right. The longer you hold a company, the more erosion that you might see in terms of the internal rate of return. And so that's why PE firms, they wanna buy a company, fix it up, maybe make some acquisitions, put the new management team in there, do what they're good at or what they think they're good at, create more value and then sell the business. The longer they hold onto those businesses, the greater the hurdle is.

in terms of getting a good return on their money. So that's why the PE firms, you'll see them, they want to hold for what, three, four, five, six years, something like that, then sell. Exceptions, of course, of course, but that's why they usually want to get out after a few years.

Jon Stoddard (53:57.634)
Yeah, yeah.

Jon Stoddard (54:03.682)
So let me jump to chapter 20 of the new book, 10 Lurking Problems for Sellers. And I'm just going to ask you a couple of questions about page 337, the Cruels, and 338, Peril Activities. And the end-runner approach. What are you talking about there? Yeah.

Bill Snow (54:05.03)
Let me jump to chapter 20 of the new book, 10 Lurking Problems for Sellers. And I'm just gonna ask you a couple questions about that. Sure.

Bill Snow (54:23.174)
Page 337 is accruals, and 338, parallel activity. And the end-run reproach. What are you talking about there? Okay, okay. I'm making notes so we get them all. So you want accruals? Accruals, parallel activities, end-run reproach. Okay, end-run. Okay, why don't we take them in reverse order. So the end around.

Jon Stoddard (54:29.126)
Accruals, parallel activities, the end run approach.

Bill Snow (54:39.598)
That's when you're negotiating a transaction. I am big on having a chain of command. I think that works best. So the seller has their point person, which is usually the investment banker. And then somebody on the buyer's team is going to be that point person. Maybe the buyer is working with an investment banker, somebody like me, or maybe they've designated one of their executives, maybe the CFO, maybe somebody who reports to their CFO. Somebody is gonna be the point person. And it...

To some people, it might seem like a lot of extra steps, but when you have that chain of command, I think it keeps the odds of having miscommunication lower, reduces the odds of miscommunication. Why? Because instead of that chain of command being followed, you have somebody else making an end around and breaking that chain of command, trying to get a bit of information, and you don't know all the requests that have come in. The end around as well.

If you're negotiating, it really shows up in the negotiation as well. So if I'm doing my job as a sell-side investment banker and that buyer, instead of dealing with me, calls up my client and tries to negotiate directly with my client, that's a big no-no, that's an end around. They're breaking the chain of command, that's something that we've agreed to. Certainly TASC, in fact, the NDAs that we'll sign will state that all the communication has to go through my office.

So that's a bad sign. You know, people trying to jazz it or they think they can, they can get the deal done faster by, by knocking out the middleman. Well, that's why they hire us to be the buffer, uh, to make sure that we can convey, uh, information, uh, unemotionally and, uh, act as that act as that buffer. So if they're trying to knock me out, it's happened. That's usually a sign that, uh, they're, they're in a weakened position. So going back to the, the poker game. Okay. Parallel. Yeah.

Jon Stoddard (56:28.682)
Yeah. And I got to say, hey, I got to remind you, we have a contract here. So if you take me out of the deal, I'm paid twice. All right.

Bill Snow (56:33.75)
Yeah. It's it's well, yeah, you get paid anyway, but it's bad, bad pool, so to speak, when you see somebody do that, you know, you're talking to somebody and they're going over your head, so to speak, that is, that is a absolute bad decision. I mean, think about if you were negotiating something and someone just ignores you, this is your job, you're supposed to do something, and they will fully ignore you and try to go

above you, talk to your boss or talk to your client who hired you. It's it's unprofessional and it's it makes getting a deal done because you're not negotiating a good faith at that point. I'm a big believer in negotiating a good faith parallel. That gets into the notion of business owners. A lot of times when they're looking at all the things that go on with a business sale, not just all the steps that we have in a business sale process.

Jon Stoddard (57:10.155)
Yeah.

Bill Snow (57:30.638)
but all the planning they have in terms of hiring us, running the business, and then what do you do with the money after you make a transaction? And a lot of times they will do things in a parallel, or I'm sorry, in a serial fashion. So I'm gonna run the company, I'm gonna run the company, they put their head up, oh, I'm gonna sell the company, I'm focused on sell, sell the company, sell the company, I've got a bunch of dough, what do I do with it, invest the money. That's not so bad, most wealth managers, I'm sure would be happy to get that call, but what we tell them is you can do things

parallel. They don't have to do them serially one after another. So if you are running the business, you want to sell the business, I strongly recommend if they're not working with an advisor, a wealth manager, to hire one to help. So because that might help structure our transaction, again, that might get into a tax advantage situation. So business owners don't have to wait till the deal is done to work with a wealth advisor if they're not already working with.

I recommend, in fact, they talk to a wealth advisor even before they talk to somebody like us. And then the accruals, I'm going in reverse order here. The accruals are a smaller thing, but that will come up in the working capital calculation as you're trying to figure out how much working capital is going to be coming along with the business. And the accrual, especially in the vacation. So if somebody gets two weeks vacation and they've taken...

Jon Stoddard (58:31.522)
Yeah, yeah.

Bill Snow (58:56.93)
uh... they haven't taken any vacation and it's June thirtieth and you're closing a transaction a buyer's gonna say wait a minute uh... that person gets two weeks vacation they haven't taken any uh... i can make a case that they would take a week in the first six months and a week in the second six months so uh... we should make an adjustment that i shouldn't have to pay two weeks worth of vacation i should only pay one week because there there's these accruals of a company is tracking vacation accrual or other accruals

you want to understand the nature of that and there might be an adjustment. It's usually not huge dollars, but it is something that almost all, especially all sophisticated buyers will look at. So business owners should make sure that they understand that. And if they've been accruing vacation for years that people haven't taken it, sometimes we'll see that on the balance sheet. That is something where there are, there are, yeah. And so it's use it or lose it. But if you've got, you know, hundreds of thousand dollars on a crude vacation.

Jon Stoddard (59:45.747)
There are employees that do that.

Bill Snow (59:54.294)
a buyer's going to say, wait a minute, I do not want to take that liability. And so now you've got to have a conversation with that client or write a check or, or something else. So paying attention to the accruals vacation and other accruals, very important for sellers as they try and button up the deal and get ready to do a transaction. Yeah. Thank you so much for sending time.

Jon Stoddard (01:00:13.347)
Yeah. Bill, thank you so much for spending time on my show, Top M&A Entrepreneurs. By the way, so if you guys want a book, get the Mergers and Acquisitions for Dummies, the second edition. It's now available on Amazon.

Bill Snow (01:00:19.558)
By the way, so if you guys want to book, get the mergers and acquisitions for Dummies, the second edition is now available on Amazon. Purple cover, get the purple cover. Purple cover, you gotta do a search for Bill Snow.

Jon Stoddard (01:00:29.498)
the convertible cover. You got to do a search for Bill Snow Mergers and Acquisitions and then scroll down just a little bit. It's right below the blue and yellow one. So Bill, thanks for being on the show.

Bill Snow (01:00:35.714)
Yeah, that's right. My pleasure. Thank you.