Summary

In this conversation, Jon Stoddard interviews Craig Dickens, a seasoned entrepreneur with extensive experience in mergers and acquisitions. Craig shares his journey from starting his first business at 25 to becoming a serial acquirer, discussing the lessons learned from various ventures, the importance of strategic selling, and the challenges faced in the acquisition process. He emphasizes the need for an abundance mindset, the significance of capital partnerships, and the necessity of thorough due diligence in business transactions. In this conversation, Jon Stoddard and Craig Dickens delve into the intricacies of business deals, focusing on the leverage of capital, the importance of risk management, and the dynamics between private equity and family offices. They discuss the significance of personal guarantees, market timing for selling, and the challenges of valuation. Craig shares insights on the journey of helping entrepreneurs, the grit required in M&A, and the importance of transparency in addressing deal risks. The conversation highlights the need for strategic planning and education for first-time buyers and sellers, as well as the various pricing structures in M&A services.

Takeaways

Craig Dickens started his entrepreneurial journey at 25.
He emphasizes the importance of competition when selling a business.
Craig learned to parlay proceeds from one business into larger acquisitions.
He believes in investing heavily in private companies rather than stocks.
The importance of understanding market demand before acquisitions is crucial.
Craig discusses the psychological aspects of money and risk tolerance.
He highlights the need for thorough due diligence in acquisitions.
Partnerships can be beneficial if they bring complementary skills.
Craig advises against overvaluing a business based on personal attachment.
He stresses the importance of having multiple funding options for acquisitions. Leverage in business deals is crucial for success.
Understanding risk management can enhance deal value.
NDA agreements are essential for serious capital providers.
Choosing the right capital partner can impact growth.
Personal guarantees can be avoided with the right partnerships.
Market timing is critical for selling a business.
Entrepreneurs often wait too long to sell their companies.
Building relationships is key to finding clients in M&A.
Transparency in deal risks builds trust with buyers.
Pricing structures in M&A can vary significantly.

 

 Watch the Interview:

Transcript:

Jon Stoddard (00:01.313)
Welcome to the top M&A entrepreneurs. Today my guest is Craig Dickens from the JD Merit Group. Craig has been involved personally over 300 transactions. That's all the way through his career. So welcome to the show, Craig.

Craig Dickens (00:19.842)
Thanks, John, thanks for having me, appreciate it.

Jon Stoddard (00:21.781)
Yeah, so we got to wind back and talk about how you got started doing this. I mean, it's something you're really good at acquiring companies, but you said you did serial acquisitions yourself, 14, you did 22 bolt-ons, and then you sold 13 or 14 of them. Tell me a little bit about that, how you started and where that came from.

Craig Dickens (00:44.81)
You know, I had a mentor that I worked for early in my career. And I think this was his kind way of saying that I'm unemployable, right? In a corporate setting. He's like, you're ambitious. You want to do all these things. You're a born entrepreneur. And I'm like, okay, I let that sink in for a while and decided that, you know, maybe he was right and that I should start my entrepreneurial journey with a passion.

And I started my first company at 25 years old. I was doing triathlons at the time. And there was this seam in that business where all the traditional bike people were being sold, their equipment and all of that, but nobody was really catering to this triathlon market. So it literally started out of a hobby, which a lot of people end up doing that, turning their hobby into their avocation, right? So.

Jon Stoddard (01:26.489)
Yeah.

Jon Stoddard (01:37.828)
Yeah.

Craig Dickens (01:38.746)
That's how it got started and from there it just snowballed. I got bit with entrepreneurial ADD, right? I wanted to focus on several things over my career and that's what I ended up doing.

Jon Stoddard (01:49.113)
So what did you do? Did you build a business and started supplying equipment to the triathletes or what was that? Or did you buy a business that was already doing?

Craig Dickens (01:57.01)
Yeah, in aggregate for my businesses, I've started seven and I acquired seven. So that one I started and really it was taking the latest technology that was offered by other manufacturers. And I started an early mail order business and I'm dating myself. Right. So this was 1987. So this is this is.

Jon Stoddard (02:02.702)
Yeah.

Jon Stoddard (02:14.569)
Oh wow. What are we talking about? What kind of date?

Craig Dickens (02:24.354)
free internet, this is where we had mailing lists and we placed ads and all of that. You got it, you got it. So we built quite the little audience of early adopters. And the key thing was that those people had high discretionary earnings. Triathletes were these kind of freaks of nature and most of them were like doctors, attorneys, et cetera. So they would buy the latest disc wheels and things we see every day now, the aerodynamic handlebars, the wetsuits, all the things for triathlon.

Jon Stoddard (02:29.141)
And the magazines, the Triathlon magazine. Yeah, yeah, yeah.

Craig Dickens (02:54.77)
But yeah, built that business literally out of the closet of my home and ended up selling it and it was an interesting early lesson in how to say no to a preemptive offer and make sure you get competition in the deal because I had a strategic approach.

Jon Stoddard (03:08.513)
Yeah, so you're going to tell me that you sold too early and left money on the table? Is that what you're saying? Oh.

Craig Dickens (03:14.85)
No, I made the bold move when the second largest player in the market, which was a mail order company of bicycle components, said, Hey, we're missing out on this triathlon thing. You've built up this huge mail order business. They approached me made me an offer. And I just I said, you know, something doesn't feel right. So I called the big boy. And I said, Hey, I'm in play. Somebody wants to buy my business. They're a competitor of yours, which those two happen to be

you know, butting heads in the marketplace all the time. And they ended up making me a better offer. So that was lesson one in getting competition if you're a seller.

Jon Stoddard (03:52.021)
Yeah, I'm curious how fast did that happen? You make a call to them, how fast did they turn around and say, oh my God, we gotta have this guy? It's an open play.

Craig Dickens (04:01.986)
three weeks before they got in front of me and did the wine and dine. And then the transaction was closed in four months.

Jon Stoddard (04:09.549)
Yeah. So this was mail order, real mail order. It wasn't email list. It was like, how many people do you have on your mailing list? Yeah.

Craig Dickens (04:14.13)
Old school mail order. Yep. At the time I had 26,000 triathletes, which was a big chunk of that market back in those early days, right? And we did it old school. We did it through calling, through advertising, direct mail, remember that, direct mail? So, yeah, indeed. But the key for me really was, I mean, that cemented, and as I look back now,

Jon Stoddard (04:27.31)
Yeah, it is.

Jon Stoddard (04:33.537)
Yeah, yeah, still in use today. Still people still use it. Yeah, yeah, yeah.

Craig Dickens (04:43.622)
in helping entrepreneurs sell their companies, right? You know, that auction mindset, that get competition going, because when you have one buyer, you have no buyer, right? And you don't know whether you're getting a good deal. Yeah. And on the flip side, you know, as a buyer, I always wanna be preemptive. I don't want competition, right? So it's this battle in the marketplace of trying to walk that carefully, right?

Jon Stoddard (04:55.809)
Right, right. You got a bad offer usually. Yeah.

Jon Stoddard (05:08.225)
Yeah. So what did you do after that? And I got to ask this because in the global context is because people you sometimes you just see the one time entrepreneur, they take the money, and they don't do anything for the rest of their life, right? You just live off of that. Like what what? What did you do?

Craig Dickens (05:22.213)
Mm-hmm.

Craig Dickens (05:26.314)
Yeah, I mean, I had a I had a penchant and a habit. And at that time, I was, you know, in my mid 20s. So I knew it wasn't, you know, hang it up. Right. And this was a good exit, but it wasn't a retire, create multigenerational wealth kind of exit. So I wanted to parlay it into the next deal. So throughout my acquisitive nature, right, I have always kind of parlayed proceeds into the next deal and tried to get larger and larger and control larger assets. So.

I was in the plastics business. Several of my acquisitions were around the plastics business. And that's a business that tends to be capital expenditure heavy. So a lot of times I'd be plotting those proceeds into growing a large plastics injection molding manufacturing business. But I've been involved in several others as well. Home mirror replacement.

Jon Stoddard (06:07.256)
Yeah.

Jon Stoddard (06:15.781)
Yeah. When you say parlayed, what do you mean by that? If I make a million dollars, 50% goes to me, 50% goes to the next acquisition. What's that number to you?

Craig Dickens (06:30.262)
Yeah, I mean, it grew over time, right? And the largest divestiture that I had was 175 million, right? Now we had 70 million in debt on that company, right? So, you know, it's a big number. But yeah, generally speaking, I'm a terrible stock picker. So I believe in private companies, and I believe investing in private companies just personally. And maybe because I'm a control freak, I get to touch and feel and go to board meetings and things like that. So

Jon Stoddard (06:40.365)
Yeah, yeah.

Craig Dickens (06:59.83)
Generally speaking, while I made some investments in commercial real estate and other things, I would always plow a good bit. And sometimes it was anywhere from 50 to 75% of it back into the next venture.

Jon Stoddard (07:11.665)
Oh, wow, 50%, 75% of it. Hey, I got to go back to that question. When you say there was $75 million in debt, was that a stock purchase or asset purchase?

Craig Dickens (07:23.427)
That particular deal was a stock purchase.

Jon Stoddard (07:25.889)
Yeah, so they assumed all the debt. Yeah. Yeah, gotcha.

Craig Dickens (07:31.714)
Yeah, you know, nowadays, as you're familiar, right, a lot of deals are cash-free, debt-free, right, where you pay off the debt and you get to keep the cash on the balance sheet. You know, this was, I don't know, it's been about 17 years now, right. So you know, it's a little bit different in the stock purchase. They obviously wanted the contracts that went with it. So some of the rationale for stock versus asset purchase.

Jon Stoddard (07:51.825)
Yeah.

Yeah. So you parlayed that to a bigger plastics company and then parlayed into what? Were you trying to just keep going bigger or did you find a niche in a lower mid market you liked or what?

Craig Dickens (08:00.236)
Mm-hmm.

Craig Dickens (08:09.706)
Yeah, no, I think, you know, trying to leverage the expertise and a lot of learnings along the way and a few of those smaller companies, as I built it up, we did a whole meal replacement company. You know, that was an interesting deal. Well, kind of like a dream dinners, if you're familiar with that, right? Where people come in and do a party and cook a bunch of meals and then they freeze them. We were actually an early grab and go kind of concept where you can come in and have a pre.

Jon Stoddard (08:22.125)
Like Swanson's? Is that like Swanson's?

Craig Dickens (08:37.022)
made meal and just bring it home, right? This is before Safeway and all the other folks. So, you know, got into that business at the grocery store. We did an accounting and bookkeeping business, myself and a partner. So really parlayed a couple of those into the larger plastics businesses.

Jon Stoddard (08:48.013)
Yeah.

Jon Stoddard (08:53.741)
Yeah, how did you like that accounting business? I mean, I'll have a lot of students that look at these, and I tell them, hey, look, it's really great gross margins. SDE is usually good. Multiple is usually 1x of sales. But you're not going to be working. You're not going to be available from January until after April to talk to anybody.

Craig Dickens (09:18.322)
Yeah, exactly. That's the tricky part. And it's so reliant on you, right? And your expertise, your knowledge, right? So that's tricky business. We were, this again was an earlier one. So it was more of a technology adoption play than anything else. So we basically went to SMBs right when the real steep adoption curve for QuickBooks was happening in small businesses.

So literally those people that will bring their accountant, their shoe box full of stuff, right? We're like, look, let's get you on the QuickBooks. So we were more of a training and onboarding company than we were per se an accounting company. But that led to additional services. Whereas if they didn't want to, you know, understand QuickBooks and fight through it, so to speak, we would make sure that they'd be onboard, everything would be good. And we would either keep the business from an accounting standpoint, or we would refer it out to other accountants.

the adoption of QuickBooks was so rapid that we could afford to kind of send those to other CPA firms. And ultimately a CPA firm bought that business out just because of the ramp and following the QuickBooks training.

Jon Stoddard (10:27.309)
Yeah, what did you feel about that? Did you, you know, it's hard to increase the multiple on that because they just sell for one X sales. I mean, did you thought like the effort we put into this to fix the business, grow the business and it's still selling at one X sales.

Craig Dickens (10:43.286)
You know, it was interesting. We actually got more than one X sales. And the only reason it's not my genius. The only reason I think that we did get more is just because of the growth rate. Because we were onboarding so many people and they could build their book of business for additional services, for tax, for audit, for what have you. Because some of them we started to get larger and larger businesses. So we sold for about, I think that one was about 1.4. Time is running.

Jon Stoddard (10:55.917)
Yeah.

Jon Stoddard (11:10.017)
Yeah, you weren't just a CPA firm. You were kind of an onboarding and training firm. Look.

Craig Dickens (11:14.558)
Yeah, I mean, we were one half marketing, one half tech enabled with QuickBooks. And then, you know, ultimately, the CPA valued the client relationship, right. And the growth rate more so than they did the overall book, because we weren't generating all of those revenue streams. You know, they were looking at it from a revenue expansion standpoint.

Jon Stoddard (11:34.383)
So you sold that one and then you started looking for another acquisition.

Craig Dickens (11:40.618)
Yeah, I actually had, so I say serial and parallel entrepreneur because I was running one plastic company at the time. And my controller came to me and said, hey, I have this idea. I want to do this. I see what's going on. So I said, all right, let me partner with you on it. So we became 50 partners. And while that business was going on, I obviously brought in a CFO for the growing plastics business. And then, you know, she really ran that business. But.

Jon Stoddard (11:47.276)
Uh huh.

Craig Dickens (12:05.554)
I kind of provided the marketing fuel and the working capital and all the cash flow from start to finish. So we were actually partners in that business. So yeah, it was a fun one.

Jon Stoddard (12:13.109)
Yeah. When you say you provided the working capital and cash law, I mean, you funding it from your previous acquisitions, or you were going out and raising capital?

Craig Dickens (12:23.398)
No, this one was all done out of the personal resources. And again, to attract all those SMB clients that needed bookkeeping, that was a marketing effort, right? So a lot of the spend was really just outbound marketing and attracting new clients.

Jon Stoddard (12:35.598)
Yeah.

Jon Stoddard (12:40.493)
Yeah. How do you make that decision to spend that money? Because a lot of the times you see somebody to sell a company and they start on a new opportunity and they're dipping into their savings and they go, well, what's my ROI on it? Like, I got to be able to know I'm turning the dollar into $3. Can you do that? And most of the time it's no. You're like, I don't know how to trade that.

Craig Dickens (13:01.046)
Yeah, yeah, it's a tough one. I mean, you know, I like it or not. And, you know, I know your audience is a lot of different entrepreneurs and acquirers. I think it starts with a mindset, right? An abundance mindset that, you know, if I do the right things and if I'm convicted about that market, you know, I can grow it. And certainly assessing whether there's room there.

also a big believer in failing fast. If we didn't have the traction and have the adoption of people wanting to move to QuickBooks, not getting the resources, going to their CPA and saying, well, yeah, we can get to you in three weeks, right? If we didn't have the adoption that we did, we would have shut it down and said, okay, great idea, but it didn't work. But it just so happened that we were willing to set aside a certain amount of capital to test the thesis.

you know, it worked out well for us.

Jon Stoddard (13:54.047)
Would you stop spinning if you didn't hit that? Yeah, OK.

Craig Dickens (13:56.546)
Yeah. And I even told my controller, I said, look at this idea, if we don't get the traction that we think we're going to get, you always have a job here at the plastics company, right? But I like your entrepreneurial spirit. I think a lot of folks get caught up in, you know, trying to control employees versus letting them flourish. And because your next great idea is probably going to come from one of your employees. In that case, it did.

Jon Stoddard (14:21.805)
Yeah, I'm just curious, what do you think about the psychology of money about that? Because what I heard you say is if you think you see a market there and we're providing value to the market, I'm going to make it work or bend reality to my will, but I do have a limit. Like, you know, if it's $500,000 and that's it, I'm not able to bend that reality, I'm going to stop at $500,000.

Craig Dickens (14:46.678)
Yeah, you know, it's funny, we deal a lot on the investment banking side with sellers and sellers, you know, behavioral finance, they talk about the endowment effect is when I own something, I tend to value it much higher than if I don't own it. And that's where I think people hold stocks too long. And where people hold businesses too long is that, oh, well, you know, I think this business is worth $40 million. Well, the marketplace keeps telling you that it's only worth 20. At some point, you got to face reality. Right. So I think.

Jon Stoddard (15:14.746)
Yeah.

Craig Dickens (15:16.09)
Well, on the one hand, you know, the businesses I've been involved in, you know, I've been convicted about the business, but I think like an investor and I think about my tolerance for pain. You know, what is my tolerance for pain? If we're losing money at a certain rate, right, I'm going to stop it at some point and say, no, move on to the next one, or tweet the business model, turn some knobs and dials to make sure that we're getting that product market fit to borrow a software term.

Jon Stoddard (15:44.589)
Yeah. Let me ask you, do you remember when Elon Musk was negotiating his compensation package? And, you know, EVs were just still in the celebrity mode at that point, but he saw something that, like, I know it's going to catch up. And, you know, $170 billion later, he called that right.

How do you see that that's risk tolerance that nobody else sees and you're trying to convey that message to them?

Craig Dickens (16:15.722)
Yeah, I mean, that's tough, right? Because Elon is such an outlier, right? He's got crystal ball somewhere in there, right? That none of us can see. You know, there's that old adage, right? I mean, I think people, when it comes to thinking about money, you know, if I asked you, if I asked 100 people to bet a dollar, that would be easy for 75 of those people. And if I asked the same 100 to bet...

Jon Stoddard (16:21.241)
He's an alien.

Jon Stoddard (16:25.113)
God.

Craig Dickens (16:42.846)
a hundred million dollars, right? Everybody would get a little, you know, maybe even $10,000, right? The lexicon would change. You'd be like, oh, risk tolerance, right? So I think everybody has to answer that for themselves. I think, you know, Elon looks at risk and his confidence around it different than any of us, right? And I guess when you have that big of a bankroll to play with, you just have to balance that risk. And, you know, we see all the time entrepreneurs, and I've done it, I've been guilty of...

A lot of my net worth was tied up in an illiquid private company and I was making a play and I was parlaying looking for the bigger play. You know, you really as an entrepreneur, you have to be careful not to overdo it and not to put too much at risk. Yeah, I mean, yeah, I mean, you know, that may pay off big and one out of 10 times, but the other nine people are in the bread line, right? So you just have to be careful.

Jon Stoddard (17:28.833)
to bet all your chips, like all in, and you're like, I'm not gonna do it, yeah.

Jon Stoddard (17:39.661)
Yeah. So of those 14 that you bought the 22 or bought and sold, bought and started, and then 22 add-ons, did any of those not work out and you not know the reason why? Or you do know the reason why and just like something you couldn't solve then, you probably could solve it today, but back then you didn't.

Craig Dickens (17:57.922)
Um...

Craig Dickens (18:04.478)
Yeah, I mean, hindsight always 20-20, right? I think, you know, the acquisitions, if I were to kind of categorize it, there were a couple of add-ons that didn't really add a whole lot of value because that whole bending reality, I thought it was gonna add a bunch of value and I could turn an apple into an orange just because of our infrastructure, our relationships or what have you.

But I think if, as we switch into the kind of the acquiring mode, you really have to be, entrepreneurs are optimists by nature, but you really have to put on that speculative hat and say, okay, what happens if this doesn't go the way I think, or what if the marketplace doesn't accept that product? I would buy a couple of acquisitions. I basically bought them for the product line, because I thought it was additive to our product line.

And people said, no, thanks. They valued innovation versus an existing product line. So those were, I would say, a couple of them that didn't quite work out.

Jon Stoddard (19:06.425)
What's that? Was it, do you think it was your winning arrogance that kind of blinded you or created some biases with you possibly?

Craig Dickens (19:17.17)
Yeah, you know, you kind of think it becomes easy, right? We have these hard fought customers and they'll buy something else from us because the relationship is already there. But you really have to be careful and diligent, not to overuse that word, in really testing that. And now, you know, I see so many people trying to acquire that don't talk to the customer. You know, your first thing when you go to buy a company and you own a company is, if I had these seven things, right, how many of them would you buy from us?

And a lot of people are afraid to go to their customers with that kind of question. I think I probably should have gone to more of our customers with that kind of approach to say, would you buy product line XYZ from us because you buy product line ABC, right?

Jon Stoddard (20:02.581)
Yeah, yeah. And you're talking about doing a kind of a face to face or was it kind of a direct mail or internet? Would you buy these other

Craig Dickens (20:11.37)
No, I mean, if I could, right, depending upon whether the customer or client would give us the time, right, I would definitely try to get face to face. And we've also done, you know, in today's day and age, we've done a lot of survey work on behalf of our clients and for ourselves. I think you'd be surprised how many people, well, you know it, even on LinkedIn, right? When you have looking to acquire on LinkedIn, you ask people a question, they'll generally respond.

Jon Stoddard (20:38.422)
Yeah, yeah, yeah.

Craig Dickens (20:38.482)
whether it's would you like to sell your company, right? We're a buyer. People wanna help, people wanna answer those surveys if they think they're gonna benefit from them. So certainly face-to-face is always best, but you can use any omni-channel marketing tool, right, to get market feedback. And I think that's huge when you're considering an acquisition.

Jon Stoddard (20:56.726)
Yeah.

Jon Stoddard (21:00.089)
So you had these own companies that you, serial acquisition entrepreneur, 14 of those, 22 add-ons, and then you sold 13 or 14. Did you sell, did you run some simultaneously or do you just leapfrog and all of a sudden sell the whole portfolio? What was that like?

Craig Dickens (21:19.058)
Yeah, I had, so I would tend to sell one at a time to try and pick that maximum window of opportunity. One, I was actually forced to sell back in 2009, 2010, just because of the banking and access to capital. That was an interesting story. But really it was, I would generally have one or two going and then sell them one at a time.

Jon Stoddard (21:26.894)
Yeah.

Craig Dickens (21:47.406)
And sometimes, you know, I would sell the two within a year and then roll into a new company so that I'd only have one going at a time. So, like I said, entrepreneurial ADD. But and again, you know, some of these were very opportunistic. Most of the add-ons, obviously, were strategic because we thought, you know, we had a company that we wanted to build the enterprise value to get to an exit. But really, all of my approach to business was more of a chess game.

in that I wanted the companies to get higher in value so that I could sell them. There was, there was an end game. Oh, I started with the end in mind.

Jon Stoddard (22:18.838)
Yeah.

Jon Stoddard (22:22.441)
Let me go back to some of those add-ons. And when you say you were a strategic, did you overpay for those, some of those? For instance, if you go to Generational, that firm out of Texas, they don't list any prices because they're looking for strategic buyers, not financial buyers. Yeah. How do you?

Craig Dickens (22:42.186)
Yeah, you know, hindsight, again, 2020, I bought a company here. And I think we paid the right amount, but our seller turned out to not be the most truthful guy. So he overstated his inventory. He played some games. We needed to take him to arbitration, which is never fun. We were eventually made whole. But I think.

Jon Stoddard (22:57.9)
Oh, okay.

Craig Dickens (23:11.662)
I guess if I were to sum that up, when you overpay, it's usually because there's something in diligence that you missed or there's something about the marketplace that you missed, right?

Jon Stoddard (23:23.273)
Yeah, yeah. By the way, I've been into arbitration. Yeah, it's definitely split the difference. That's like the most you're trying to get out of it, right?

Craig Dickens (23:28.398)
Ha ha.

Yeah, it's such a time suck. And it's you know, again, if we had done a better job at diligence, and I had a full diligence partner, a CPA firm out of the Midwest that was doing the diligence, but we missed it, right? Yeah, so you know.

Jon Stoddard (23:41.569)
Missed it. Did you place blame on them or use them again? Or was that a

Craig Dickens (23:48.614)
Never used them again. I was partnered with a private equity firm at the time. So we were both putting our own money in, but they had the relationship with the, what we call today, quality of earnings firm, right? So they had the relationship and they never sued them over it, right? And if you read the fine print, we only can rely on the representations of the seller, blah, blah. So I don't think it was worth the squeeze from the private equities firm to go after them.

Jon Stoddard (24:00.099)
Yeah, yeah.

Jon Stoddard (24:17.59)
Yeah. Yeah, let's just move on. Gotta go to the next one. Yeah. Did you do this with a partner or group of partners or board advisors? I'm just curious about your support network. What did you have?

Craig Dickens (24:18.198)
Right, I kind of left that in there, Bailey.

Craig Dickens (24:30.178)
Mm hmm. Yeah, so literally I've kind of batted the cycle, if you will. I've had partners. I've done it solo. I've had a private equity partner, a family office partner. You know, I've had partners on the cap table as well as a few of them. I just did myself. So really all over the map.

Jon Stoddard (24:54.145)
Yeah. What would you recommend or not recommend? I mean, now you're into M&A, advisement and helping companies grow. And then somebody goes, Hey, I want to bring a partner in like, and you, your theme today is no, you don't need a partner or something. I don't know. Unless you find your Warren Buffett char charley monger. Don't

Craig Dickens (25:11.244)
Yeah.

Craig Dickens (25:16.618)
Yeah, yeah. You know, it's again, everybody's a little bit different. I think, you know, a lot of times if you find a partner that's complimentary or has skills that you don't have, that can really be additive as long as you both grow and scale the business and kind of stay in your lane, so to speak. I do think kind of the exception to the partner rule across the board, though, is when it comes to capital.

because most entrepreneurs or search funders and others, folks that are acquiring, they usually don't have the sophisticated capital relationships or financial network to go out and say, all right, I wanna bring $10 million to this opportunity. Now, obviously the SBA and other tools are available to provide some of that financing, but if you have a pretty good appetite for a larger size business, you're gonna need a capital savvy partner or

an advisor that can arrange those relationships with you on the capital side, whereas they don't necessarily need to become your partner, whether it be structured debt or other tools that you can use.

Jon Stoddard (26:23.241)
Yeah, and they're gonna get some commission for signing the money. Well, what how would you split that up? If you brought the idea, you have the company acquisition, but you need a capital partner. And they're not a, you know, you know, bro, lending broker, they're just somebody goes, Hey, I can find the cow.

Craig Dickens (26:45.51)
Um, you know, it's, uh, yeah, I mean, it's a bizarre, right? It's like everything is subject to negotiation. So sometimes the traditional models would say, Hey, you're going to earn your way into 20% of the business. Uh, other models where you have family office investors and kind of kinder and gentler capital, um, you know, you can get as much as, you know, 40, 50% of the deal for bringing it and being the sponsor, right. Um, and then again, you know, um,

Jon Stoddard (26:46.773)
But that yeah, go ahead. I follow my question if you

Craig Dickens (27:14.518)
You always want to set up a situation where your cash that you're putting in, your equity is just as good as your capital providers equity. You don't want to be in second position to that or, you know, give them a preff if you can, you know, avoid it. So all of it is really kind of subject to negotiation and how many people you're talking to. Cause if you talk to one or two people that are providing capital, you're going to get one or two different answers, but they may not be the best answers. Right. So.

Jon Stoddard (27:39.765)
Yeah, I always recommend with the SBA, even SBAs, you got to bring a lot of rides to the altar. Because they just have their own biases. They may not want to do e commerce, they may not want to do landing scape or they just, they're underwriting values at different like just this SBA lender over here and less SBA lender over here. Yeah.

Craig Dickens (27:47.085)
Yeah.

Craig Dickens (28:01.278)
Yeah, definitely baking folks off and making sure you have positive alternatives, because, you know, the worst case is you get a no and you never know between today and tomorrow what that lender might like. They might just say, hey, we've looked at our portfolio and we have too many landscape companies, so we're going to stay away from that industry. It doesn't mean that your acquisition is a bad one. It just means that they don't favor it. And it's like if you've got one voice at the table, you're in trouble. Right. So.

Jon Stoddard (28:27.511)
Yeah, yeah, SBB will teach you like, should not have too many of this one company in our portfolio.

Craig Dickens (28:33.706)
Right, exactly.

Jon Stoddard (28:35.681)
Yeah. How much money do you bring to those deals? Do you have a minimum, or do you wait till the other banking partner says you need to bring a minimum to the table? Or have you ever done a deal and not bring your own money, just brought the deal?

Craig Dickens (28:52.21)
Yeah, I mean, all of the above. And, you know, part of it goes back to that conviction and that I'll bet you a dollar, I'll bet you $100,000. Right? I mean, how much risk you want to take? And what's the pucker factor? Excuse that, that expression. You know, but that'll flush some things out. But ultimately, you know, and as you know, right, when you're talking to people, there's a disproportionate weight put on originating the deal.

Jon Stoddard (29:01.145)
Yeah, yeah.

Jon Stoddard (29:05.102)
Hahaha!

Craig Dickens (29:20.678)
and not everybody sees the deal flow that they need to see. And that's why kind of your work is so important for those looking to acquire that you need to have multiple avenues and multiple ways to bring those deals. And for those investors that have capital burning a hole in their pocket and they need a return, they need folks that are bringing them deals. So ultimately, you know, there's value there. So you wanna be able to monetize that for sure.

Jon Stoddard (29:40.911)
Yeah.

Jon Stoddard (29:45.897)
Yeah. What's your feeling about the leverage that you bring? Say, hey, man, I got this great deal. It's cash flowing. You know, it's a $20 million company. It's cash flowing 5 million. It's a services based company. It's my deal. It's an off market deal. And I want x percentage of it. You just bring the capital. And here's what your return will look like. And they go, well, yeah, but

You need to bring your own money or no, we're not giving you that much. I mean, what port of is like you haven't, you know, a Elon Musk type confidence. Go, no, I want 51% of the deal or I just walk somebody else.

Craig Dickens (30:27.57)
Yeah, I think it's so now we're kind of getting into the realm of kind of what we do for a living, right? So, you know, we believe in the law of large numbers. And so if I can have 50 conversations with 50 capital providers on your behalf, I'm going to get 50 different cuts at that great deal. And part of our work together is to make sure that it's truly a great deal. Now, what makes a great deal one that's de-risked?

one that's bought an appropriate multiple, one that has a future runway of growth potential, right? So the degree to which you can do your homework as an acquirer will accrete value and will allow you to get more than 20%, 25%, 30% of the deal. And truly bringing a great deal is one that checks all those boxes for the capital provider. The more risk they have, right? The more they're gonna discount you as the person bringing the deal.

Jon Stoddard (31:27.266)
Yeah.

Craig Dickens (31:27.422)
So, you know, doing that homework is vital and making sure that you're looking at it objectively.

Jon Stoddard (31:33.069)
Yeah. And when you send a deal out to, let's say there's a 50 list of 50, and you just send these bullet points where you're basically de-risking it and it's animized. And what does that look like that conversation? Hey, we want part of it. Tell us more. Do you get an NDA with them or do they have a standing NDA?

Craig Dickens (31:52.626)
Yeah, no, definitely an NDA in place. A lot of the VC community, if you're bringing a VC deal, they won't sign NDAs because they say, hey, we see a million of them, right? So we tend to stay away from them. But serious capital providers that rely on deal flow coming from entrepreneurs or independent sponsors or others, they're happy to sign an NDA. And they're, generally speaking, they're happy to say, hey, this is a good one for us or a bad one, because you want to get through that list of 50 pretty quickly.

Jon Stoddard (31:58.477)
Oh, they're not gonna sign in it.

Jon Stoddard (32:22.371)
Yeah.

Craig Dickens (32:22.506)
And they have their own thesis and predilection, right? They might say, well, we don't like landscape businesses, but we like tech, right? So knowing where to go and who to talk to is definitely helpful. But certainly getting to a, you know, nobody likes a slow maybe, I want a yes or no quickly if they're interested in the deal.

Jon Stoddard (32:40.737)
It's just a waste of time. You just got to just tell me. Look, you're not interested. Just say yes or no. You're not going to hurt my feelings. Yeah. Well, what do you like working better with, private equity firms or friendlier, kindlier family offices? Where do you see the deals most coming from, private equity or?

Craig Dickens (32:47.69)
Right? Exactly.

Craig Dickens (33:01.726)
Yeah, I mean, we've as far as helping people sell their businesses, you know, our distribution on the capital side, you know, it's the right hammer and right nail, right? If you need growth equity, right, you know, private equity is probably going to move faster than a family office. If you need patient capital, if you don't want to have to

Jon Stoddard (33:08.329)
or capital, I meant to say capital partner, sorry.

Craig Dickens (33:27.41)
exit the business in five years, you want to exit in 10 years, 20 years, whatever, then a family office might be more appropriate. So I think it's, it's fine in the right, right hammer, right nail scenario. You know, there's even pension funds and sovereign wealth funds and others, if you get up into some bigger, bigger checks. Yeah, but, you know, and I think there's still a place, right? There's a lot of

Jon Stoddard (33:43.041)
Yeah, those are bigger checks. Yeah.

Craig Dickens (33:51.842)
Former entrepreneurs, ultra high net worth folks that for smaller deals can really be a great source of capital, patient capital. And so it's got to be the right fit. Even though we kind of bake these things off to get the numbers game working in people's, you know, on your behalf.

Jon Stoddard (34:07.573)
You have no emotional attachment to any of the 50 until they say, yes, we want to take a look at.

Craig Dickens (34:13.63)
Yeah, and then we can focus on, you know, once we get the quantitative, what are the terms, what do you know, what does it look like, then we can really start drilling in on the qualitative, how good a partner, how supportive, you know, what happens, get their references, what happens when things go bad, how do you behave, right, those are important things, you know, and start to focus on that fit issue, if you will.

Jon Stoddard (34:30.915)
Yeah.

Jon Stoddard (34:35.937)
Yeah. So how did you get involved in helping others build their company and sell their company and grow their company? The whole JD Merit 300 transactions.

Craig Dickens (34:48.242)
Yeah, I think, you know, part of it was if you think of that progression and parlaying and rolling and, you know, putting capital to work over and over again, and especially in the plastics business, I mean, this is a pretty capital intensive business, you know, injection molding machines can be, you know, the size of a small locomotive, the molds, oftentimes, we would get into product lines where, you know, we would have two, three million dollars tied up in molds. And as an entrepreneur,

I'm the guy signing the personal guarantee with the bank, right? Until I partnered with private equity and realized you could get out of those. But really, my passion for helping entrepreneurs having done growth through acquisition as well as organic growth was just that, just to help. So that was issue one. And issue two, you know, I got together with my wife and I said, look, you know, how can we de-risk our life? How can we diversify our life?

financially and otherwise and monetize the gray matter, right? What I've done over 25, 30 years. And that was really professional services that was helping others. So, you know, I started the bank in, in 2013, Merit Harbor Capital. And then in 2019, we merged with another bank called JD Ford, and we brought those two brands together to, to bring it to JD Merit. So.

Jon Stoddard (35:55.682)
Yeah, yeah.

Craig Dickens (36:15.37)
JD Ford was more of a classic investment bank, you know, founded in 1996, and we were more this kind of entrepreneurial engine. So I think we've brought kind of the best of both worlds together to serve buyers and sellers of businesses.

Jon Stoddard (36:32.125)
Yeah, I want to go back to that personal guarantee. I had some experience with that. I was trying to buy a business. It was really profitable, but the SBA wanted a personal guarantee. So it was this long conversation with the white. Oh, yeah, all of our assets are exposed up until the moment of the valuation of the business. There was some ways you can put it into a trust and keep removing it, or you can do insurance. What point did you just say no more personal guarantees? And could you have said that?

Craig Dickens (36:41.006)
You know what I think?

Jon Stoddard (37:01.921)
years early.

Craig Dickens (37:04.554)
Yeah, and that's the benefit of partnership, right? You know, if you have a private equity partner, there's no personal guarantees, right? So that was definitely a key learning. I think, you know, we tend to learn the most out of our, what I'll call our failures. So I alluded to it earlier, you know, I was forced to sell a business back in, I think we finally got the last piece of it closed in 2010. But if you recall, right, 2008, 2009, market went, you know, to nothing.

Jon Stoddard (37:04.917)
I'm signing it, yeah.

Jon Stoddard (37:19.501)
Yeah.

Craig Dickens (37:33.858)
There was no capital available. I had a company that had grown 40% a year for the two years prior. So I was using a lot of working capital. I needed a bank loan to grow that fast, right? So I had some debt on the books. Well, the business was kind of a second half business. We did a lot of our sales in the second half of the year. And so we had built up all these inventories and then all of a sudden the market went.

just collapsed, right? So the value of our inventory went down, the bank called our line of credit. We found out that bank became a zombie bank over one quarter because they had so many different commercial loans out that were underperforming. So it was kind of a us or them, right? They were like, look, we're gonna get our money back. They swept one of my accounts illegally. So I was forced to either go out and find some capital, which there was none available, or sell the business. And I ended up

very quickly selling the business. I broke it into three divisions and sold the business, right? So that to me was that's and personal guarantees, right? We were in the middle of building a big house and for my wife, it was like, this is like catastrophic or could be, right? Now I still made money on the transaction, all the debtors got paid and all of that, but I probably left 10 or $15 million on the table. And so, we were doing everything right.

Jon Stoddard (38:47.375)
Yeah.

Craig Dickens (39:00.182)
The marketplace was loving what we were doing, but capital evaporated, right? So, you know, I think that was really the turning point to say, okay, how can I de-risk personally? How can we keep this in perspective? How can I partner to kind of share the risk, et cetera? So that was probably the seminal moment.

Jon Stoddard (39:16.033)
Yeah, let me ask you about that too, because there's always a economic cycle every 10, 8 to 12 years. How much do you factor that now with the clients you advise?

Craig Dickens (39:30.322)
Yeah, you know, one of the one of the biggest questions we get asked is, you know, should I sell now? Right. And entrepreneurs, I would say, when things are bad, and when things are good, the single biggest flaw of entrepreneurs, because they're optimists by nature, typically, is that they wait too long. They wait too long. Right. When things are bad, they wait too long to cut to trim to do whatever. And when things are good, they wait too long. So

Jon Stoddard (39:48.941)
How are sales? Great. Yeah.

Craig Dickens (39:59.742)
you know, knowing where you are in the cycle. And I think we've got a blog post on our website relative to the boomerpreneurs. I think that's in the title of it, but it talks about the transfer cycle. So not only are there economic cycles, but there are transfer cycles in M&A that are well-documented. A guy by the name of Rob Slee kind of studied this and he wrote a book about capital markets, but the transfer cycle shows when it's a good time to be a seller and when it's a good time to be a buyer.

Now, companies are bought and sold in every market, but that transfer cycle is pretty true and every day. Yeah. Yep. And the key is, you know, who is it? Kenny Rogers? No one to hold them, no one to fold them, right? If we all knew that we had a pocket full of timing, right? Yeah. But but, you know, now we're more students of the game, right? And we advise clients based on where they are in their corporate lifecycle.

Jon Stoddard (40:31.809)
Yeah, and every day. So how do you, in every industry, yeah.

Jon Stoddard (40:42.821)
We all knew that and we'd all be rich, right? Yeah.

Craig Dickens (40:54.442)
You've got the growth and then you get up into the maturity and decline. Every corporation, a lot of times it will correlate with the owner's age. You become less risk, you're more risk averse. You don't put as much capex out there. You start to decline and ride what worked 10 years ago. So there's a lot of things about the individual company we look at and say, all right, where are you in your cycle? But ultimately, why is it?

that nine out of 10 private equity acquisitions have a new life cycle, right? Yeah.

Jon Stoddard (41:20.537)
Well, let me let me stop you there. When? Yeah, let me stop you right there and ask about it. When when you ask somebody when you're in your cycle, and the guy says, Well, I'm 65, right? And then it's like, Hey, it's a 15 year old company. But that really doesn't answer it, though. I mean, how deep do you go to say, Where are you in that cycle? What questions do you ask?

Craig Dickens (41:43.018)
Yeah, I think and I'm going to borrow something from John Warillo, Built to Sell, right? And other books, you know, he did a study early on that said that 75 found out that 75% of owners equate the sale of their business with retirement. I mean, think about that. It's like all of a sudden the moon, the stars have to align just because you turn 65. The marketplace is going to reward you with the sale of your company because you're ready.

Jon Stoddard (42:11.311)
Yeah.

Craig Dickens (42:11.978)
Right. And that's not always the case. Right. We could be in a different cycle. The cost of capital can be really high or you haven't done the necessary prep work to get a deal done when you're 65. Right. So it's really a complex question. But to get to the root of your question, we spend a lot of time understanding people's companies. And it's not so, you know, so many times we'll have somebody say to us, well, I'm growing 8 percent a year. And let's say it's a managed service provider, an IT service provider.

say, well, that's impressive. That's great. But your industry is growing 30% a year, so you're actually a laggard, right? Nobody likes to hear that, but it's all relative. And since we get to see hundreds of businesses a year, we can pretty much size up how they're performing against their peers. Because at the end of the day, that's the set, the data set that buyers are gonna look at. No one likes to make an acquisition of one and say, okay, I've looked at one of these companies, and now I'm really convicted that this is a great company.

You got to look at five, six, seven, eight, nine. And of the nine, is this the one that has the most potential or has performed the best? So we go pretty deep in figuring out where they are in terms of over-perform or under-perform or neutral on all areas of the business.

Jon Stoddard (43:24.129)
Yeah. Well, how did you decide to bring on a client about what stage they're in? I mean, let me go back. How do you find clients now of the 300 transactions you've done? How do you find them? They just...

Craig Dickens (43:41.486)
I mean, a lot of them, you know, when you've got, you know, that many transactions and, you know, kind of a little bit of brand equity in the market, right, we get a lot of referrals from M&A attorneys, from CPAs, from, you know, Vistage coaches and other people that are in that ecosystem of dealing with middle market entrepreneurs. And I'll tell you, and this is why we're probably brothers in another life, you know, we use LinkedIn pretty heavily to also find clients.

Jon Stoddard (43:47.956)
Yeah.

Craig Dickens (44:10.942)
not just acquisitions, but also to find clients. Hey, have you ever thought about taking some chips off the table? We're here to help, we do deals in your sector, right? And here's a case study of somebody just like you. And you're not surprised by it, but I think some of your listeners would be surprised that deal flow coming from LinkedIn, I mean, that's where people are hanging out. I have CEOs that won't listen to my email, won't respond to my email, but I'll ping them on LinkedIn and they'll be right back to me in 10 minutes. It's phenomenal, phenomenal.

Jon Stoddard (44:30.542)
Yeah.

Jon Stoddard (44:39.797)
I tell people, I have a course for LinkedIn. Let me show you how to generate money and leads from LinkedIn. It's funny, you and I would go to a party and I would be able to talk to you about Intuit. I worked at Intuit's old QuickBooks, Enterprise Solutions. I'm not a triathlete, but I'm working out all the time. From Gig Harbor area, which my wife is.

Craig Dickens (45:03.694)
Small world, right?

Jon Stoddard (45:07.233)
So they find you and then what, why do they pick you over somebody else? When you sit down and they have this, they're out there talking to 10 M&A firms, just like everybody else would do. Why would I do this? You don't have five stars from 3,000 people viewing it, but hey, we're gonna get you the best price or we're gonna get you the most offers or we're gonna get, what is it triggers them and then you could prove it.

Craig Dickens (45:35.914)
Yeah, that's a great question. I think it probably boils down to two or three different things. The first of which is what I call tactical empathy. I've been there. We've been there. All of our bankers have had their own exits. They've had the good, the bad and the ugly, right? In terms of experience. So we're not just financial engineers. We have been there and done that. So that also translates into entrepreneurial grit. As you know,

Buying and selling companies is a full contact sport. It's not for the weak of heart. And you want to know that you've got a team that's committed to getting your deal done. And not just say, ah, we tried and throw it in what we call the bone pile, right? There's no such thing as a bone pile if you've got 30 years invested in this business and you want to create liquidity. And as we know, most entrepreneurs have 70 or 80% of their net worth tied up in their business.

This is mission critical as to how their life is going to be and their retirement is going to be. So that entrepreneurial grit, we take our role seriously in getting them to a close. And then I would say lastly, we particularly focus on first time sellers and first time buyers because that introduction to the education of M&A and the introduction to institutional capital and capital partners. You know, entrepreneurs are pretty self-directed.

control-oriented people. And you're not just gonna say, oh, sit back and trust me, right? There's an element of education and handholding and psychology involved. We actually spend the time to make sure that our clients are educated, knowledgeable and happy with the transaction, you know, at the end versus feeling like the transaction just ran away with them, right? So I think those three things are probably the biggest differentiator. And I would say the macro is,

You know, we have something called outlier outcomes where we're always searching for that outlier outcome for a seller of a business in particular. And that means that we need to tell you the truth. Your baby is worth X in the marketplace. Now here's five or six different things that you can do to improve that number. But at the end of the day, we're not gonna promise you a hundred million dollar exit when we think you're only worth 75 million. So ultimately,

Craig Dickens (47:57.422)
telling the truth through your lens, I think resonates with people. And in this business, sometimes, you know, the deal goes to the guy who promised the highest number, but I don't wanna be that guy when you're saying to that client, well, do you wanna do the deal or not? I know we told you it was worth 25 million more than you're currently seeing in your offers. So I think that's probably the last kind of cultural thing that we make sure that we do what we say and say what we do.

Jon Stoddard (48:24.653)
Let me ask you something. You said first time sellers, first time buyers. What do you mean by first time buyers? Usually somebody buying somebody's, you know, lifelong journey to build is selling to somebody that's probably already bought companies. Is that what you meant or what do you mean?

Craig Dickens (48:42.002)
Well, yes and no. I mean, so if you think about the continuum, right, some people are buying a job. You get some guys up here, right, you know, out of Microsoft, they've cashed in their Microsoft stock and they have, you know, they want to own a pizza parlor, right. But ultimately, they're buying a job, right. And then there are other people who are more ambitious.

Jon Stoddard (48:58.726)
Yeah, yeah. You want to flip dough for 12 hours a day and then clean up another couple hours and close at two o'clock at night, yes or no? Yeah.

Craig Dickens (49:09.522)
Exactly. Or they romanticize and they think, OK, I want to buy this business. And it can be a much bigger business where they're just a quote unquote passive investor. I mean, there's no such thing as a passive investor. Right. S. Warren Buffett, right. He's involved in his companies, right. At a different level. So but ultimately, it's how much capital do you bring to play or do you have to bring to play to meet your goals? If you want to be a pizza flipper, you can write the check. Right.

But ultimately, as you get into larger transactions, if that's your appetite, you're gonna need to have kind of capital at the ready, right? And it may not be all your.

Jon Stoddard (49:42.345)
Yeah. And it who's them to go with you because you've got a nice, like a LinkedIn database versus a Rolex. I was going to say a Rolodex. Yeah.

Craig Dickens (49:55.795)
Yeah, yeah, that's, you know, doing that many deals, we've done deals with practically, you know, I mean, I don't want to say the lower middle market focused private equity groups, you know, we've done a lot of business with them, several family offices, and even strategic acquirers, right, our business mix is about 50 in terms of selling to private equity versus strategic. So you can't, you know, those relationships are valuable. So

while we take a broad approach and we'll bake off, you know, several capital providers, we do have relationships as well where it's like, okay, I know this one's a good fit for this group. You know, let's make sure we keep them honest in that equation and bring some competition to it. But, you know, that's helpful as well.

Jon Stoddard (50:34.787)
Yeah.

So how do you operate if somebody says, gives you a scenario that they're 65, they wanna retire. Again, that's an artificial number. If you look at Warren Buffett, Charlie Munger, they're all 90 plus. But they do wanna retire. Let's say it's health reasons or something, but they want a number that their valuation of the company doesn't match. What do you, you say there's seven things they can do,

Craig Dickens (50:51.054)
Mm-hmm, right.

Jon Stoddard (51:07.277)
you know, cut costs, grow organically, spend more money, you know, and the list goes down or acquire companies. Like, what would happen, how do you judge how much gas they have left in the tank to be able to do that?

Craig Dickens (51:13.996)
Mm-hmm.

Craig Dickens (51:23.882)
Yeah, great question. And it's interesting, right? Because it's a journey, just like the buyer journey is a journey, you know, the seller journey is a journey as well. And first is going through those stages, I want 60 million, but you're telling me it's only worth 40, right? So there's some time that needs to go by to kind of really just internalize that, right? And go to their wealth manager and say, you know, it's only worth 40.

Jon Stoddard (51:46.082)
Yeah.

Craig Dickens (51:52.17)
I know I told you it was worth 60. Can you rerun my Monte Carlo and see what my retirement's gonna look like, right? So there's some adjustment there. And then we do test that in terms of value building and value acceleration. And we say, okay, you know, we can work with you for the next six to 18 months, depending upon what needs to be done. And we outline all the different value drivers of their firm, whether they're, you know, compared to their peers, where they sit. And that too is a clarifying conversation. And I think...

If they know their number and they figure out what they want versus letting the ego get in the way, I would say eight out of 10 say, you know what, that's enough. I can live off of 40 million, right? Pay my taxes, take 10 off the top, pay you, blah, blah. And a lot of them will make that decision themselves not to roll up their sleeves again at age 65 and say, all right, now I'm really going to increase the value. I know I've owned this for, for.

30 years, but now the epiphany and, you know, I'm going to start digital marketing or whatever the flavor of the week is, they'll make that decision and they'll either reinvest in that value acceleration, or they'll say, you know what, I think this is good enough. Can you put a shine on the Apple and make sure we look great in the marketplace? But I don't want to systemically, you know, double down if you will, and, you know, put all new machines on the floor or invest in 15 other developers or what have you.

Jon Stoddard (53:15.661)
Or buy another company for $20 million. Yeah.

Craig Dickens (53:18.142)
Yeah, yeah. You know, and when we tell them and say, you know, that that's a great way to do it. If you have customer concentration issues, and that's going to prevent you from getting a deal, buying a company might, you know, bring those down. But really, you're not going to see the benefit of buying a company to 12 to 18 months until you fully integrate, get the sales synergies, get the operational synergy. So it's not a quick fix. This is why and you know, entrepreneurs are tired of hearing it, but you need to start thinking about selling.

several years before you're ready to go. You can't just wake up one day and say, all right, 65's in the, you know, right out in front of me. Let's get this thing ready. It takes a little time.

Jon Stoddard (53:56.961)
Yeah, you're like planting Bavoa seeds, waiting for years and years and years to nurture. What's your shortest client that you ever had that was happy? And what is your like an average client? Because if somebody goes, I want to sell my company, it's just selling their company. It's great. Here's your valuation. They accept it. Or then there's something that goes like, I'm not happy with that valuation. I've got gas in the tank. Let's get it to this.

Craig Dickens (54:27.37)
Yeah. And we'd love to have that conversation. We love to be a part of that. Right. So if an owner has ambition to do that, you know, we're, we're pretty patient. We're not, not every company needs to sell today. Right. It's, it's when you as the owner are ready and when the business is ready, and then hopefully we get with that timing, we get to look at the market, is the marketplace going to reward you when those three things come together? Right. That's the trifecta of M and A.

But ultimately, so the fastest deal we've ever done was a capital raise, 39 days from start to finish. But the average for a sell side engagement is anywhere from the 155 to 190 days. And then we have some that, you know, the company had an issue, so we had to put it on pause and it takes longer. But you can figure six to nine months is a good window to get a good middle market company sold.

And on the buy side, you know, as you counsel your folks, right, that say, all right, it's going to take you some time to kind of get enough leads and have enough conversations and make enough offers to drive that. When we're running a buy side engagement, you know, we tell people don't expect to put out an LOI until five or six months into us kind of boiling the ocean, if you will. And.

Jon Stoddard (55:46.669)
Yeah, the larger you get, the fewer those there are. Yeah.

Craig Dickens (55:50.698)
Yeah, yeah. So, you know, you need to you need to be committed to it. It's not something to be done lightly, right? Either way, whether you're buying or selling.

Jon Stoddard (55:58.73)
Yeah. How much of your triathlete skills and mindset help you through this process? Because it's always like, you know, going one more mile, you got to go one more mile and it's mind over matter, just push yourself just a little bit harder. Right?

Craig Dickens (56:10.819)
Ha ha!

Craig Dickens (56:22.238)
Yeah, I mean, it can be a grind, right? M&A is not, it's not a guaranteed paycheck, right? When it works, it works. And, but there's a lot of failed deals out there, right? You don't buy every company that you set out to buy or you don't sell every company you set out to sell. So the persistence, the entrepreneurial grit, right? And again, you know, I was fortunate that I learned to suffer as a triathlete, because I'm not.

Jon Stoddard (56:29.487)
Yeah.

Craig Dickens (56:48.218)
I'm not a typical triathlete body right? I'm you know, 215 pounds when I was doing triathlons I was about 175 but you know guys that win those things are you know, 145 soaking wet, right? so I knew what it was to trudge right and trudge along so you know, you got to be able to really persevere and Get into the weeds get into the details, right? Because there are a hundred things that can make a deal go wrong and you have to anticipate all of those and get ahead of them

So there's a lot of grinding in it. Everybody thinks it's all sexy and wonderful and deals happen and Microsoft eventually prevails and buys the gaming company. But down in the trenches, it's a lot of work. So you gotta be prepared.

Jon Stoddard (57:29.805)
Yeah. Let me ask you just a few more seconds here about when you see a deal and it's got hair on it. Like, you know, 80% of their business is one customer, right? Well, that's a risk. For some people, it's a risk. strategic buyer might go, that's fine. Because as soon as we integrated, it's only you know, 10%. We're already doing that stuff.

How do you have this conversation with these buyers and being very transparent? This is awkward, right? We gotta fix this.

Craig Dickens (57:57.687)
Yeah.

Craig Dickens (58:03.614)
Yeah, I mean, you know, the rule, the M&A axiom, if you will, is disclose, right, because it builds trust. It shows self-awareness that, you know, there's a problem as a seller. Um, and, you know, early in my career, I learned that, you know, any deal can be done. You're just going to price the risk. So a company with 80% concentration to your point, right? Um, first blush, you'd say, Hey, this is unsellable, right? If, if the one customer goes away, what am I buying? 20%.

Jon Stoddard (58:10.402)
Yeah.

Craig Dickens (58:33.558)
Well, maybe I price it at 20%, but have retention bonuses or something else that if it doesn't go away or task management with reducing the customer concentration over the next three to five years, right? To accommodate and take the risk out of the deal. So, you know, it's not my favorite kind of deal to work on because the probabilities are still very low of finding a buyer, but.

Jon Stoddard (58:55.02)
Uh huh.

Craig Dickens (58:57.61)
You just have to work with that seller to say, because of these risk factors, here's where your valuation is likely gonna sit if we can get you a deal.

Jon Stoddard (59:05.185)
Yeah, let me ask you about the pricing, how you charge people. You've done 300 deals, so it sounds like it's pretty standard. Did you have challenges early on? And some people say, hey, if we find a company, we charge 10%. SMBs, it's like 10%. But you get larger, it's 5%. And it's very custom.

Craig Dickens (59:26.622)
Yeah, it's, you know, there's a hundred different ways to skin that cat. I think there's, you know, typically two components to a lower middle market M&A deal. It's a retainer, you know, that's work product, put together the buyer list and the SIM and the teaser and get the company prepared and get everything in a virtual data room, right. Ready to roll. And then there's a success fee. Some people don't charge a retainer.

We look at it as mutual skin in the game because we're tying up boutique resources, folks that could be doing deals on behalf of clients. And if it takes you six months to get us the information, we've just tied up that resource for six months when you're not ready to go to the ball, right? So we do charge a retainer. That's typically 50 to 100 grand, depending upon the size of the client. And we can stagger it over a couple months or what have you, a couple of milestones. And then on the success, lower middle market.

Jon Stoddard (01:00:07.907)
Right, right.

Craig Dickens (01:00:22.21)
typically runs in the really large deals, one and a half percent of the enterprise value up to that 10%, right?

Jon Stoddard (01:00:29.313)
Is that still a Lehman standard? Yeah. Are they still using Lehman standard for that? 100 million dollars.

Craig Dickens (01:00:35.778)
You know, we use what we call an aligned method so that we have a certain deal minimum and then we have what we think the marketplace will bear on a normal transaction. And then we have tiers if we're able to go above that and get you a higher price. We participate in that incremental change. So, you know, double Lehman and Lehman, it would actually go down the larger the deal or we actually go up because if we get you an outlier outcome, if we said, hey, your business has worked.

Jon Stoddard (01:00:54.879)
Yeah.

Craig Dickens (01:01:05.314)
27 to 30 million, and all of a sudden somebody shows up from France and wants to pay 47 million, right? We share in some of that, right? Everybody's happy. Everybody's happy in that case.

Jon Stoddard (01:01:13.505)
I've got some good news for you. Yeah, yeah. How many deals do you work on at a time, like any given month?

Craig Dickens (01:01:23.522)
You know, our guys and we've got a full crew of managing directors and VPs and associates and analysts kind of in the investment banking world. That's kind of the pecking order. But at any time, we're probably working 10 to 20 mandates on the sell side with probably two or three on the buy side and then maybe one or two on the capital raise. That's just our business mix.

Jon Stoddard (01:01:45.313)
Yeah, that's fantastic. You are a busy guy. And now you don't have a lot of tips in the game, right? Yeah, yeah, yeah. But how do you feel? I just want last question. How do you feel now versus where you were? You know, when you were doing on your own and you were driving it versus today you're working, you were working for yourself. Now you're working for somebody else, your clients.

Craig Dickens (01:01:50.454)
Well, hey, look, it's a team sport, man. I don't do it all. It's definitely a team sport.

Craig Dickens (01:02:12.212)
Mm-hmm.

Jon Stoddard (01:02:12.601)
Is it a matter of I wish I was doing this sooner or I wouldn't be here if I didn't go through this?

Craig Dickens (01:02:20.598)
You know, I think personally, I wouldn't be here if I didn't catch the bug. And, you know, I paid a lot of dumb tax along the way as an entrepreneur. Right. And I hired some great investment bankers and I hired some not so great investment bankers. So I really just feel privileged at this point in my career to be able, like I said, to take all that gray matter and the scars on my back and the plaques on the wall, right, and bundle it up and say, all right, Mr. Client.

Jon Stoddard (01:02:29.42)
Oh my god.

Craig Dickens (01:02:50.102)
You know, we're bringing you practical advice. We're bringing you know-how. We're bringing you expertise. We're bringing you a track record of performance and results. And let's put that to work for you, right? You don't have to pay the dumb tax. And to me, that's rewarding, right? I mean, I still have plans. We've all paid it, right? One way or another, right? You know, entrepreneurs are always working at the top of their game, right?

Jon Stoddard (01:03:07.265)
Yeah, I like what you said that you don't have to pay the dumb tax.

Jon Stoddard (01:03:14.341)
Oh my god.

Craig Dickens (01:03:18.622)
If you've run a $20 million company, that's probably the biggest company you've ever run. Then you grow it to 30. You're like, OK, that's the biggest one. Or if you have 100 employees and now you have 130, you're always at the top of the game. Right. So to be able to have external advisors to say, hey, been there, done that, take a breath. Let's work on it together. Right. That's that's key to, you know, we can do more together than we can. So.

Jon Stoddard (01:03:41.173)
Yeah. Craig, thank you so much for doing this show. Appreciate it.

Craig Dickens (01:03:46.914)
John, my pleasure. Talk soon.