Summary

James Carey shares his journey into the M&A world, starting with his experience in mortgage banking and eventually working with Wayne Huizenga at his family office. He then moved on to HIG and Peterson Partners before joining NextPark, a family office where he is currently a partner. James explains the difference between private equity and family office, highlighting the fact that family offices invest their own capital and have more flexibility in deal structures. He also discusses the importance of relationships in deal sourcing and the value of partnering with founders and entrepreneurs. In this conversation, James Carey discusses the process of deal sourcing and evaluation in a family office. He explains that they lead the initiative by leveraging their network and working with traditional recruiting firms to find potential opportunities. When examining opportunities, they conduct initial screenings and make quick decisions based on their experience and intuition. They also thoroughly analyze the market, industry trends, competitors, and the potential for value creation. Carey emphasizes the importance of building trust and rapport with sellers during the due diligence process. He shares examples of red flags and successful deals, including minority investments that led to rapid growth and quick exits. Carey also mentions the involvement of industry experts and operating executives in their deals.

Takeaways

James Carey's journey into the M&A world started with his experience in mortgage banking and eventually led him to work with Wayne Huizenga at his family office.
Family offices, like NextPark, invest their own capital and have more flexibility in deal structures compared to traditional private equity firms.
Building relationships is a key aspect of deal sourcing for NextPark, and they actively reach out to potential partners and attend industry events.
NextPark focuses on investing in people and partnering with founders and entrepreneurs to help grow and scale their businesses. Family offices lead the initiative in deal sourcing by leveraging their network and working with traditional recruiting firms.
Initial screenings and quick decisions are made based on experience and intuition.
Thorough analysis of the market, industry trends, competitors, and value creation potential is conducted.
Building trust and rapport with sellers is crucial during the due diligence process.
Red flags can include anonymous letters with negative information about the seller or management team.
Successful deals can involve minority investments that lead to rapid growth and quick exits.
Industry experts and operating executives may be involved in deals to provide expertise and add value.

 

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Transcript:

jon (00:00.062)
Well, welcome to the show, James Carey. How are you?

James Carey (00:03.15)
Good, John, how are you? Happy to be here.

jon (00:04.606)
Well, thank you for joining me. So you are working currently at a family office. It's not private equity, it's family office, but you've had years of experience in private equity and buying companies and now you're head of acquisitions at the family office. So let's go rewind a little bit how you got into this &A world and private equity and then family office. How'd that start?

James Carey (00:29.55)
Sure. Yeah, no, that sounds great. That's actually an interesting way I got into this, which was almost 18 years ago. So I'm originally from the Northeast. Like many folks that live in Florida, I moved here from somewhere else. I did that a while ago, though. Obviously, there's been a lot of folks that have moved here over the last couple of years, but I've been down here for 20 years now. So I'm based in South Florida in Miami. And I actually got into &A and private equity.

kind of by happen chance. I was working in mortgage banking right out of undergrad. So I was at a bank that was in the mortgage lending industry. And this was obviously, I don't know if you've seen the movie, The Big Short, but this was right around that time. So the short story is that we were selling all of our paper to Lehman Brothers. They went under and then the next day our firm went under.

even though our CEO wrote us a very nice note saying that that was not gonna happen the night before. So I was like many other professionals in the industry, similar to the movie The Big Short. I did go to a couple job fairs and I actually got a call. I was getting, I was a young kid at the time and I was like, well, maybe it's time to go back home and kind of, I don't know, figure something out. And I actually got a call from a friend saying, hey,

I know of a group that's looking for a guy like yourself with finance experience but has kind of a little bit of a business development edge to him and kind of, he's more of a people person than just a numbers guy. And sure enough, I got an interview and prior to the interview he said, hey, have you heard of a company called Blockbuster? I'm like, of course I have. Have you heard of AutoNation? Of course I have. Well, it turned out to be Wayne Heisinga's family office and then one of his funds called New River Capital.

jon (02:09.47)
Of course you have.

James Carey (02:19.47)
So I was fortunate enough to land there. And that's really where I started my career in &A and investing in private equity. So I was there for four years and then was off to HIG and the rest is history as they say.

jon (02:33.726)
Yeah. So Wayne, I've read his, the auto biography about him, Wayne Huzenga. He's done over 800 acquisitions, you know, including Blockbuster, Waste Management and AutoNation. Just an incredible &A machine. Yeah.

James Carey (02:47.758)
Yeah, no, he had me classic buy and build strategy and I learned a ton working with him. I mean, you know, a lot of folks are like, well, did you end up going to grad school? I said, no, I didn't need to. I worked with Wayne Huizinga for four years. So, you know, he truly did have this model of buy and build. I mean, Blockbuster was a perfect example of that. Waste Management was a perfect example of that. And so was an AutoNation. I mean, I think he was only one of a handful of individuals that has brought in four.

jon (03:00.382)
Yeah.

James Carey (03:17.646)
four Fortune 100 companies. So he's, four Fortune 500 companies, excuse me. He's built four Fortune 500 companies. So that's two or three more than most. And he was a hell of a guy. He's obviously no longer with us, unfortunately, but a hell of a guy and also just did a lot of philanthropy and was a big pillar of the community in the Fort Lauderdale.

jon (03:41.246)
Yeah. And then you went off to HIG, which is now a $60 billion fund to buy companies, not small at all. Yeah. What was your role there?

James Carey (03:49.774)
Not at all. No.

Yeah, so I think when I actually started there, believe it or not, we had six billion under management. When I left, it was just under 30. And now the fund, as you mentioned, it's well over 60. So HIG is a global private equity firm. We did all types of transactions. We did everything from large corporate carve -outs. I mean, you name it, we did it. We were very industry agnostic. I think there were hundreds of portfolio companies when I was there. So...

I basically did it all when I was there. We looked at all different types of companies, all different types of businesses, sizes, industries. And so for me at the time in my career, it was a fantastic experience. It was really kind of where I cut my teeth and really grew as an &A professional. Just doing the sheer amount of deals that we did on an annual basis. Yeah, really kind of saw it all and got to learn a lot. I mean, I still have a ton of close personal relationships at that firm.

And then there's been a lot of folks and individuals now that have spun out and done their own thing. So it's really been interesting to see where everyone's kind of landed over the years. But yeah, for being there for seven years, it was a great, great experience.

jon (05:03.71)
And then you jumped over to Peters & Partners.

James Carey (05:06.99)
Yeah, so then I was at Peterson Partners and they were based in Utah. And so, yeah, my fiance, now wife at the time, I told her the story. I'm like, yeah, I'm gonna go out to Utah. I actually started in January. Being from Vermont originally, I'm an avid skier and snowboarder. And I'm like, it's fine. I'll be coming back and forth every other weekend. You'll see a lot of me. Well, she didn't see me until April, because the snow was so good that year that I was.

jon (05:34.078)
Snow is good. I mean, I've skied in Vermont and skied in Utah. Snow is great in Utah. Yeah.

James Carey (05:39.47)
Yeah, right. I think it's some of the best snow on earth. And Snowbird was right very, very close to our office at Peterson Partners in Cottonwood Heights there. So it's actually a funny story. The first day, it was like a really, really bad snowstorm. I'm relatively new to the farm. I get there, 839, and I'm looking around. I'm like, where the heck is everyone? And sure enough, everyone was on the mountain. It was like a snow day.

jon (06:05.47)
You can just like a, yes, I made the right decision.

James Carey (06:08.526)
Yeah, I didn't know that though. I was the only guy at the office and then everyone, you know, skis in the morning and then just comes in after lunch. Right, exactly, exactly. And then, yeah, I was there for a couple years and it was a great firm, great guys just for me being from Florida, a lot of back and forth and did not want to move to Utah full time as much as I love it out there. And had no land paying in the index park, the firm I'm at now.

jon (06:16.158)
he's from Florida. We don't need to tell him. He probably doesn't skate. Yeah.

jon (06:32.222)
Yeah.

James Carey (06:37.582)
I've known him for a while and we have been talking about doing something. So just time he worked out really well. So I partnered with Len after that. And yeah, that was about four years ago. And so that was my transition from private equity officially to a family office.

jon (06:49.054)
So this is a...

jon (06:54.91)
So let's really get into what the difference is to private equity and family office. I mean, everybody knows the 100 foot, 10 ,000 foot view that private equity is somebody else's money. It's the institution of money, et cetera. And then family office is high net worth individuals getting together, representing a family or they're the individual itself. It's their money.

James Carey (07:19.118)
Correct. Yeah, so, yeah, let me, I'll try to give a pretty basic breakdown for the group, because there are a lot of, I don't know, misnomers out there. There is some, still some type of confusion when it comes to what is a family office. Now a family office can take on many different shapes and forms. Our family office, we're professional investors, okay? So for all intents and purposes, we act and feel like a growth equity firm or a traditional private equity firm, but we are different.

jon (07:19.742)
Right?

James Carey (07:46.606)
We are much different because where our capital comes from. So our capital comes, the majority of our capital comes from Nextpark's founder, Len Pagan, my partner. He had a very nice exit in 2009. He sold his business to a private equity firm. Then that business was subsequently sold to a public trading company called Pulgisys. So public transaction, he did very well on that and started Nextpark in 2009.

jon (08:12.83)
So that was his second to buy the Apple. Yeah.

James Carey (08:15.47)
He did have a second bite of the apple. He did roll some equity. So he obviously had a liquidity event up front when he sold to Lindsay Goldberg. Lindsay Goldberg merged his company called Brulant into one of their companies called Rosetta, not Rosetta Stone, a different Rosetta. And then that entity was acquired by publicists for over $600 million in cash in 2009. And so Nexpark was born after that. Let I'll tell you that he played a year of bad golf and then got pretty bored.

and then really started doing some investing. So the majority of the capital comes from Lend. The other capital comes from myself and my two other partners. There's four partners at the firm. So we don't raise outside capital. We don't really necessarily partner with other family offices too much. We have enough liquidity and capital that we actively put that to work like a private equity firm would. I would say the main difference between us and private equity,

Is that we don't because we have not raised an outside fund from other investors. So we don't have any limited partners We don't have other investors that have that we're managing capital for so traditionally a private equity firm will raise a 250 million or 500 million dollar fund from a handful of institutional investors and a bunch of high net worth individuals Well, those folks expect a return on their capital and they expect it in a certain time frame

Because I don't have any pressure from LPs, because I don't have any, I don't have to do deals if I don't want to. So I don't have that artificial pressure of doing deals just to do a deal. So I think the main difference between us is that we truly invest in people versus just investing in great opportunities. I'm not going to do a deal just to do a deal because it's, you know, I can get it for 10 cents in the dollar or something along those lines. I do not do that.

We really truly partner with individuals. We back founders and entrepreneurs that we have shared vision and we frankly like working with. So.

jon (10:16.158)
So what do the acquisitions look like the, the calf stack? I mean, yeah.

James Carey (10:19.758)
So for us, yeah, and another difference too, John, is that for us, because I don't have LPs, I don't have a fund, I can frankly do whatever I want. So I can structure deals in and around the founder's needs, right? I can do minority investments. I can do majority investments. So we basically work with founders and entrepreneurs and management teams to structure transactions in a way that's favorable for both sides.

We do we don't just write checks and say good luck. That's not our style at all There are some family offices that do that. We're set up differently We have I think almost 12 employees now. We're all investment professionals. We all have an investment background My partners are you know have long history in investing as do I? So we're set up like a traditional private equity firm with all the tools the investment team but

you know, we do act a little bit differently because again, we're not really returning capital to anyone else but ourselves. So we can get a lot more creative from a structure standpoint.

jon (11:30.878)
Yeah. So when you return on capital and you're holding for longer period of times, are you actually selling the companies at some point or are you just taking off the cash?

James Carey (11:41.614)
Yeah, good question. So we actually will underwrite our transactions or our initial investments like a traditional private equity firm would. So we don't hold on to companies for 10 years. There is an exception to that. We do have one company in our portfolio that we've been involved with for 12 years. That's an outlier, though. But we typically want to buy and scale and grow businesses and then sell them. So we typically don't want to make an investment unless we know we can make a difference, unless we know...

we can help. But our goal is to grow and scale the business, support the founder, support the management team, and then ultimately have a nice exit in that traditional three to five or five to seven year window.

jon (12:26.878)
Yeah, I was looking on your site, you got 22 companies you own right now and they all look a little bit different, different niches, different industries. Where do you get the expertise to say, all right, I see this company, it's doing 5 million, we can get it to 25, how?

James Carey (12:45.998)
Yeah, so I would say yes, we have a pretty diverse base of companies. We have, we are, I guess you could call us also industry agnostic where, you know, we are into private aviation and mountain biking. So those are two different, you know, two ends of the spectrum, but we also have a large focus on health and wellness. I would say the majority of what we tend to look at, given our background and experience, are I would say professional services, businesses, business B2B, business to business companies.

and tech enabled services businesses. But again, that being said, we do a very, very diverse portfolio of companies. The reason for that, John, is because we're really all about relationships. That may sound cliche, but a lot of the folks that we invest in, we know we have prior relationships with, or we've known for a long time, or we've gotten over a one or two year period. And so we really, at the end of the day, are getting very comfortable with the business. We're very comfortable with the industry that that business is in.

And more importantly, we're very comfortable with the management team or the founder of that business. And so that will allow us to invest in a industry or in a company that may, you know, we may not have prior experience in. So again, for us, it really comes down to the people element here. And I would say that's the reason why we have such a diverse portfolio of business.

jon (14:06.686)
sounds like a pretty broad criteria buy box. How do you create this deal flow? What does it look like? I mean, you're going to go to your site and go, hey, we're doing 1 million to 15 million EBITDA, but now you're talking about forming relationships that you just understand. And how do you do that?

James Carey (14:26.286)
Yeah, sure. So I would say just, you know, given my experience, you know, I traditionally know a lot of the bankers in this space and players in this space. So we get the traditional deal flow from bankers reaching out to us and we are on a lot of lists, right? So I would say because we are a professional family offices, a lot of bankers look at us like a professional investment firm, i .e. a private equity firm or even a venture capital firm, because we do make minority investments.

So we do get a lot of traditional deal flow from the normal sources in our industry, which are investment bankers and investment brokers. So I would say we do get a lot of deal flow that way. The chances, John, of us actually doing a deal in a broad, broad auction process from a large bank are slim to none, just because, again, we're so hyper -focused on relationships and getting to know people. And in a traditional auction process, you really don't get to do that as well as you.

as you could otherwise.

jon (15:23.422)
Yeah, that's the overpaying. Yeah.

James Carey (15:26.094)
Yeah, yeah, yeah. So then I would say, so a limited process or like a non -traditional where it comes in from an intermediary, like an attorney or an accountant or, you know, a friend of a friend or a board advisor, things of that nature. We get a lot of deal flow like that. That'll come directly to myself or to maybe to my partner, Len or to my partner, Miles or my partner, Nate. And so we do get a lot of opportunities that way. And then finally,

What I think we're also really good at, and we're also, this is a big differentiating factor for us, is that if we have an investment thesis, and we do have one right now in and around health and wellness, we'll proactively start reaching out to folks, we'll proactively attend industry events, we'll proactively market ourselves and say, hey, here's who we are, let's get to know one another, we don't have to do anything right now, but we'd love to learn more about your business, let's build a relationship.

If we can be helpful now, great. And if it's 12 months down the road, that's okay as well too. So we do do a lot of proactive outreach, John, where we'll do a lot of research on companies in a specific space that we're interested in. And then we'll proactively reach out to them. I don't blindly cold call people. I don't blindly email them. I'm actually pretty old school. And I do send stuff through the mail, but it's thoughtful and it's not generic.

jon (16:47.774)
Just a regular mail campaign or what?

James Carey (16:50.19)
Yeah, yeah, you know, sometimes it's whether it's done through UPS or FedEx or, you know, write in a letter, things of that nature. But it's not generic. It's it is tailored to that company that I will follow up, you know, with email or, or a phone call. And the whole firm does this. I spearhead most of it, but we all do it. And it's a great way just to really develop relationships. And in my experience, again, getting to know a team, getting to know a potential

seller, or just an entrepreneur and a founder, and even working together in some type of capacity before they're ready to sell, or before they're ready to raise capital, I think it just adds a ton of value. And you really get to know one another, and you can form a personal relationship too, as well. And you can say to each other, well, I really like working with you. I really like, this is the type of individual that I'd want to go have a beer with, or I'd want to go have lunch with.

jon (17:40.862)
Yeah.

James Carey (17:46.158)
or you know go on a ski trip with or whatever the case may be and in my opinion those make for the best investments.

jon (17:52.542)
Yeah. When you go find somebody that's actually interested in possibly selling and having a conversation, I mean, what are you looking for in their motives? I mean, are they, you know, divorced, death, disinterested, whatever it is, what do you, or do they stay on for a couple of years? Like kind of private equity does.

James Carey (18:13.422)
Yeah, no, I partnered with folks, right? So I want folks to stay on board. I don't think for us, it's how can we add value? How can I add value? Typically an entrepreneur, he or she has gotten to a point in their journey where, you know, all right, I've grown my business to 10 million in revenue, but I don't know how to get it to 20. I don't know how to get it to 30. And I need some professional help here. You know, I don't know how to implement it.

jon (18:16.638)
Yeah.

James Carey (18:43.086)
ERP system. I don't know. I don't have a professional head of sales and marketing because I've been doing it all myself or I am the CFO, COO and CEO, which happens a lot. And

jon (18:55.454)
And you're looking for, specifically looking for those arbitrage opportunities. Yeah.

James Carey (18:59.982)
Yeah, you know, I would say that so because we can add a lot of value there and then they can go and do what their best, you know, whatever their best superpower is, whether it be running the business, running operations, running sales and marketing. So they can focus on help, you know, growing and scaling the business. We add value. But ideally, yeah, John, we want to partner with individuals. We want them to stay on. We want them to be part of the growth journey.

And then, but we sit down in the beginning before we make an investment and say, here's what we want to do for the next two to three years. Does this work for you? And if it does, great. And if it doesn't, then it's not a fit for either of us. So we were very clear on that from the beginning. And I think that's one of the things that we'll address. That's one of the first things we'll address going into an investment is, all right, what are the roles, responsibilities? What are the next three to five years look like? What's the ideal outcome? And if we're all aligned, we'll make an investment.

jon (19:53.118)
What's the stickiest part? Usually it's around control. We're making an investment. We control it or you're still in control, right? You don't want to come in and buy a company, put by 60 % of it or 50 % of it and not have any control over the next two to three years.

James Carey (20:11.694)
Well, it depends on what type of investment that we're making. So again, because we do both minority and majority investments, control, I guess it depends on the type of investment. I'll start with the minority investment. So when we do make minority investments, again, unlike some other investors, unlike some other family offices, we don't just cut a check and say good luck. We want to be involved with the businesses that we invest in. So I will.

jon (20:36.03)
Sure, sure, actively roll and saying, hey, we're going to go add products or services, or we're going to add more marketing, or just going to spend more marketing, whatever it is. Yeah. Yeah.

James Carey (20:46.478)
Correct, exactly. So if I make a minority investment, I do want to board seat, because I do want to have a voice, right? We want to go and add value. I can't add value if I'm just sitting there in the background twiddling my thumbs, right? We want to be involved. We want to help. I mean, we truly want to help. We want to help grow and scale the business. That's the whole point. If not, then it's just not an investment for us. There's plenty of firms out there that are happy of just saying, all right, here's a check, check in quarterly, and hopefully in three years, things work out. There's...

plenty of firms that do that and that's great. That's just not, that's not who we are. That's just not our style and not our, yeah, not our preferred form of investing. So.

jon (21:25.246)
Yeah. And it's, I think it's hard to place a bet on individuals that I would consider goats that goes like, I'm just going to give you money. Cause I know you're Elon Musk and can take me from, you know, 10 billion to a hundred billion. Thank you. That doesn't happen very often. Yeah.

James Carey (21:36.51)
Right, right, right. Yeah, I couldn't agree with you more. Yes, so on the minority front, yeah, we'll have a board seat, but we actively work with founders and entrepreneurs. We're not as involved as if we were to make a majority investment. If you make a majority investment, we'll set up a cadence with our entrepreneurs, our founders, where it's, hey, let's maybe check in just weekly. Here's a weekly report. Here's some of the KPIs. Here's some of the things that we like to look at.

whether it be what are your sales for the week, what are your goals for the quarter, things of that nature. So we'll set up a normal cadence, a healthy cadence of communication. We truly believe communication is very critical. And we'll also, again, set up roles and responsibilities. What are we gonna do over the next 90 days? What are we gonna do over the next 180 days? And so we'll set up clear communication, clear action plans of, okay, here's what we're doing.

Here's what you and your staff are doing. Here's what you and your team are doing. All right, do we need to hire a new CFO? Or what kind of, how can we upgrade your talent? Well, I've been trying to look for a COO or CFO for a while. I haven't been able to do that for whatever reason. Well, we can come in and do that for you. And it's a very collaborative process. So again, we don't really do anything without, you know, working together. Again, we treat everyone that we invest in as partners. It's not like we're coming in.

jon (22:59.582)
What do you mean you could do that for them CEO? Do you mean you're going to go put out the, go find a COO or somebody from inside? yeah.

James Carey (23:03.726)
Yeah.

Yeah, so we'll lead that initiative. So we have our whole network of Rolodex of individuals in our network. And then we also work with traditional recruiting firms, right? So we can help them with that, where maybe a founder or an entrepreneur may or may not have access to that. That's something that we bring to the table.

jon (23:11.454)
Okay, okay.

jon (23:19.87)
Yeah.

jon (23:29.118)
How do you examine the opportunities? Like say, you know, there's a, Brad Jacobs just released his book, how to make a few billion dollars. He didn't look for anything unless like at five accent. How do you look for say, a business opportunity? And he goes, well, you know, we can come in at this $5 million business. We could see that it's a, a 25 or, you know, it should be up to 25. How do you measure that and, and, and say, all right.

This is a great deal. Every, you know, clean books, clean financials, clean ethical individual. Now the TAM is a pretty big opportunity. Let's green vote, you know, up or down vote it and go for it.

James Carey (24:12.75)
Yeah, yeah, I mean, so I think there's obviously an initial screening that happens. And I think there are certain opportunities just I've been doing this for a while that like I'll look at and just kind of instantly have an attraction to or instantly pass on just given I know.

jon (24:27.614)
Yeah. I address that a little bit later too, because like sometimes you fall in love with deals because it's cool. And then there's deals that looks like make sense, but they're just boring, right? But they're great businesses. Yeah.

James Carey (24:33.998)
Yeah.

James Carey (24:41.038)
Boring's okay, by the way. Boring's totally okay. Boring is good sometimes, actually. I actually think that's like a, I've seen that trending recently, but, because there hasn't been a lot of great businesses for sale over the last 12 months, but, yeah, so anyway, I digress. So I think just initially, to your question, John, you know, there's an initial kind of just passes the smell test. This is something that's interesting or not. I'll know that in 30 seconds to a minute.

jon (25:09.182)
Right.

James Carey (25:10.19)
And then, and then so it's kind of a quickly just the amount of deals that we see or we come across, I have to make quick decisions. I can't just, otherwise we just, you know, I'd have a, we'd have a pile of deals that we'd never get through them all. So, but then after we take a look at an opportunity, something catches our eye. We'll certainly dig in, you know, whether it be the materials, have various conversations with founders and entrepreneurs, really get to know the people there.

And then, you know, quickly make a decision where this is something we really want to pursue. And when we do want to pursue something, we certainly spend a lot of time doing that. Before we make an investment, just to wrap up your question, yeah, certainly we will model everything out. We have our own internal models. We'll look at the TAM. We'll look at the total addressable market. We'll look at all the industry trends. We'll look at some of the competitors in the industry. We'll look at the whole opportunity as a whole from a macro level.

So those are all the normal things that, again, a traditional private equity or venture capital firm would do. We'll do all that. And then again, I think for us, is it, can we come in and help professionalize the business? Can we come in? Can we add value? And can we envision ourselves working with these individuals for the next three to five years?

jon (26:24.926)
Yeah, when you come in to these off -market deals, they're usually not prepared with a data room. How's that process go and how long does it normally take? It's like, well, that's just one more task I've got to put on my list because I've got to deliver all these financials. I've got to deliver this report. When you go to an auction or an investment bank, they have all that ready for you in a data room. Yeah. Yeah.

James Carey (26:45.038)
Right.

James Carey (26:49.07)
Yeah, they do. So I have to, you know, I sometimes play therapist too as well in my role, right? So, and it's a lot of prep. So I try to one, like hold their hands and walk them through what the next, you know, 30 days are going to look like. So I try to upfront and I actually have a presentation that I use with a lot of first time sellers, John, of, Hey, here's what a data request is going to look like. And I try to provide them, John, with

you know, a minimal data request in the beginning. I don't want to overwhelm folks because you're right, they're not prepared. It's going to take them time to put this data together. And the last thing I want to do is create another homework assignment or a homework assignment for them because they've got a business to run. So I try to make our initial data requests pretty light and just, you know, provide me with enough information that I need in order to say, this is something I really want to spend a lot of time on or, you know, thanks, but no thanks. We're not ready now.

I think maybe in 12 months we could be ready or we're not ready for this reason, or we'd like to see you do this, or we'd like to see the business hit this milestone. So I try to be as transparent as I can with folks. I try to be as honest as I can with folks and provide as much feedback. But typically if I am asking for a data request, it's because we are interested. We've probably had two or three phone calls. We've executed a mutual NDA. So we've had a very transparent back and forth.

And so the data that I do request, I try to make it light, I try to make it minimal. It's just enough that I need in order to say, here's what a potential offer could look like. Are you interested? And then if they are, then we move forward with full diligence.

jon (28:33.598)
Yeah, and do they come back with all counter offer and move play in the game?

James Carey (28:40.462)
I mean, yeah, absolutely. I think, you know, I've had a lot of folks. So listen, these proprietary or off market deals, in my opinion, are by far the best deals, right?

jon (28:50.206)
Right, well, let me put some context to this because they've probably never gone to market before. They don't really know what their business is worth yet. And there's this process of going, hey, we think it's worth this much. And they'll go, hmm, let me see if I can get another offer somewhere else, right? Maybe somebody wants to give me more money and I'll just go through the whole process and hire an investment banker. Yeah.

James Carey (28:53.038)
Sure.

James Carey (29:11.758)
Yeah, no, absolutely. So this happens a lot. What will happen is, yeah, once we're having conversations, because again, it's a off -market or proprietary deal, you're talking six months, probably, it's a much longer process than a traditional auction process, where there's an investment banker that's speeding things along, you know, they're pressing potential buyers for indications of interest or letters of intent. It's a much more structured process when there's a third -party intermediary involved.

a banker. With us, you know, I don't rush folks ever, because I'm not in a rush. And I, yeah, I'm patient. If it takes three months or six months, so be it. I mean, that's, that's just, again, these folks have businesses to run. So but within that timeframe, John, there's a good chance that they've reached out to a buddy that's in private equity or a buddy that's an investment banker or a buddy that's in an attorney. Those are the worst. I'm just joking. I'm just joking. To all the attorneys out there.

jon (29:42.302)
Yeah, yeah.

jon (30:03.422)
you're worth so much more!

James Carey (30:10.67)
Or a CPA or things of that nature. I mean, listen, the first most folks when they're approached, if they're serious, they're going to reach out to their accountant. They're going to reach out to their personal attorneys, folks that they have relationships with. Maybe it's their buddy at their country club or their golfing buddy or tennis buddy, things of that nature. So they're going to reach out. They're going to start having conversations. There's a ton of information like this podcast, for example, that's out there on the web that you can do research on and a lot of.

entrepreneurs will do a lot of research and come back to me with numbers that they found on the internet of how much they think their business is worth. So yes, to answer your question, there is certainly back and forth. I've had a lot of counters and a lot of back and forth with founders. Again, we try to be fair from the beginning. I'm not a value investor. So I try to kind of put my best foot forward from the beginning and if it works out great and if it doesn't, no big deal. We're still friends.

jon (31:05.022)
Yeah. How does that conversation go with your, now you, with your partners and because you've been in this role before, you got to, you take deals, you're the deal guy and you take them to everybody. So you're probably pretty good at justifying a price and why we should buy it or why we shouldn't.

James Carey (31:14.574)
Sorry.

James Carey (31:23.31)
Yeah, well, I think if we've gotten, well, I know, if we've gotten to the point where we were providing them with either an indication of interest or a letter of intent, here's our number. We've already done a lot of research. We've already had a very, I would say, detailed conversation internally, and we've hashed all that out. We've had those internal debates or healthy conversations where, hey, guys, this is the reason why I really like this opportunity, or this is the reason why I think we should invest in this business.

And so there's a lot of healthy back and forth, a lot of healthy dialogue, a lot of questions. We talk about merits, risks, and opportunities internally. We talk about the management team. We talk about the founder. We talk about the whole opportunity. So a lot of that's been already accounted for in our proposal. We think that our proposals are pretty thoughtful and meaningful. They probably take a little bit longer to get to these folks than maybe a traditional private equity firm would, is because we do take...

It's not significant, but we do take a lot of time internally and really put a lot of thought and analysis into our offers. Our offers are pretty comprehensive and we hope they're in the best interest of everyone that's involved. That's our goal. But there is always that back and forth internally and externally. So yeah, I play matchmaker at times for sure, but if we end up signing a letter of intent,

Hopefully all parties are obviously happy with the outcome and especially if we close an opportunity, all parties are very happy.

jon (32:57.95)
Yeah, let's talk about some red flags that you see some of the deals come across and you just, and this could go back to HIG and Peterson and everything. You've seen some deals like, no, this is a huge red flag. Let's just avoid it. But everything else looked kosher.

James Carey (33:14.67)
Yeah, well, one that comes to mind is, well, this is an interesting story. So this has actually happened to me twice, ironically, twice. And once we did it, well, I'll tell the story. So I've gotten letters from individuals that are anonymous individuals prior to us closing a transaction.

jon (33:24.862)
Twice! Yeah.

James Carey (33:39.502)
There weren't necessarily nice letters and they were referring to the seller or one of the folks on the management team. And so I've actually received, I think one was from an ex -girlfriend and the other one was from an ex -business partner. So those are certainly extreme. Well, yeah, you know, again, it was obviously someone that was very close to these sellers.

jon (33:52.926)
Hahaha

jon (33:57.982)
How did they find you? I mean, it looks like...

James Carey (34:07.534)
because they knew that they were talking to me and my firm at the time. So yeah, they reached it. They were able to reach out. My information is pretty visible on LinkedIn and things of that nature. So somehow they got a hold of me and they wrote me a letter. It was certainly when you open that letter and you start reading it, your eyebrows go up and the hairs on the back of your neck go up. And then there's a lot of discussion internally on what to do next. So.

jon (34:35.774)
Yeah, and what did you do with that information?

James Carey (34:38.094)
Well, in one instance, we ran away. It was a pretty bad letter. And then we...

jon (34:43.314)
It was that that was that correct changing that

James Carey (34:48.622)
Well, there was a little bit more to it where there was some merit behind that letter. And so we were able to kind of do a little bit additional digging. And we found out that there were some skeletons in the closet, as they say, with one of the individuals involved in that particular transaction. So it was a hey, thanks, but no thanks. And to be honest with you, looking back on it, it was the right decision, I think, for both of us, both parties involved. So that's it.

jon (34:53.534)
Yeah.

James Carey (35:17.454)
group and individual ended up having a great outcome with someone else. And it just wanted to, I don't think it would have been the right deal for us. And then the other one, we had enough, we had built up a longer term relationship with that individual where we had known him for over a year and we felt comfortable moving forward, just given our trust that we had built and personal rapport and again, really trust that we had built. And so,

we were able to talk about it and have a very direct and open conversation and it actually worked out really well. I think we got to know each other even more than we thought we needed to. So it actually ended up working out well.

jon (35:57.758)
Yeah. Was that a, was that a case of he's not trying to be nefarious and hide stuff that was just naively didn't bring it up to attention because he wasn't thinking about.

James Carey (36:09.422)
Yeah, no, I don't think there was certainly nothing malicious there. So again, we addressed it. And so if there was something malicious or misleading or if there was any like, you know, someone lied to us, then or was like purposely trying to hide something from us, then that's just I mean, we would that's just that's something that, you know, I don't think would would be a good cultural fit for us at next park. So yeah, I just don't.

jon (36:32.83)
Yeah, yeah.

James Carey (36:36.846)
That wasn't the case, John. And so we were able again to have a very healthy conversation. It was certainly, it was a little uncomfortable at first, but then it actually turned out to be not an issue at all.

jon (36:49.118)
Yeah. So what about best deals, fastest deals? What, and kind of, kind of summation of like, how long does it, with a family office, does deal flow look taken to, from first reach out to acquisition?

James Carey (37:06.478)
Sure, yeah, I think so. Some wins that I can think of over the last three, four years for us are we've actually had a couple instances where we've made minority investments in companies, high growth, high growth businesses, high margin businesses, and they've needed that extra capital, whether it's from us, and we don't really necessarily invest alongside like 50 or 20 or 100 other folk, people.

It's maybe us on a minority investment in maybe one or two other firms or individuals, but they've needed that growth capital to kind of get to that next level. They've been able to make a couple key hires and then we've just watched the sales skyrocket. And so growth is certainly accelerated because they were able to use the capital that we provided for growth. And then in both instances that I'm talking about, they were approached by competitors and offered, you know, unsolicited LOIs.

unsolicited bids that far exceeded their expectations. So we had relatively quick exits, which was fantastic. And so I think, you know, just by us getting involved, helping them again, both cases, we helped them hire talent. We helped them with key hires that they needed to make. We helped them vet those individuals out. And once those individuals were inserted into the company, they hit the ground running. And I mean, it was it was just the growth.

the growth was tremendous with both companies. So great outcomes. So that's a direct quick win. And I think a longer win for us is one of the companies that we've been involved with for a long time. It's a company called Flexjet. Flexjet is a very large private aviation business. And private aviation, I think COVID did a good job of accelerating that trend along with a lot of other trends. But that business has grown and we've been involved with that business for...

over 12 years. And so that is a product of the demand for private aviation went through the roof during COVID. And then it really hasn't stopped, at least for our business. So we've been able to be a part of that business for a very long time and watch that business grow from, you know, hundreds of millions to billions in revenue over a 12 year period.

jon (39:25.278)
Wow. Is that a competitor to NetJets like Jesse Itzler or is that a different? Okay. Yeah.

James Carey (39:30.286)
It is, yep, FlexJet is a competitor for sure, yep.

jon (39:34.046)
Interesting. Do you own the jets or are they leased?

James Carey (39:38.606)
So it's a combination of both. Some jets are corporately owned and some are owned by individuals and there is fractional ownership as well.

jon (39:47.326)
Yeah. And let me go back to your minority investments. Is that just a minority investment by itself or is that another buyer needs a little help closing the business and you bring cap, it's a capital call to you.

James Carey (40:02.734)
No, it's typically, you know, it's typically us. It's either us leading, you know, a minority round. We don't, I don't say we participate in like a traditional venture rounds. Like I'm not going to lead a B or C or D round. We will back first, we will back, you know, startups if we know those individuals. But typically it's more growth capital. So it's not necessarily a traditional, traditional venture round. It's, hey, you know, my company's doing 5 million or 7 million in revenue.

I need a couple million bucks to make some key hires, to implement some technology, to maybe develop some more software, and those things cost money. We know if we do X, Y, and Z, those three things, then it should lead to significant growth because right now we just don't have the capital to do it. We're growing as fast as we can, but if we had two or three million dollars, we could certainly accelerate the growth. So those are the types of it.

jon (40:57.918)
Yeah.

James Carey (40:59.79)
you know, it's not maybe necessarily a traditional venture round, but yeah, maybe it's us and another family office, or it's us and another venture or private equity firm, or it's us and maybe some existing shareholders, some folks that participated in the first round of funding. And we heard about it through our network. We heard about it through one of the board members. We heard about it through whomever. So we will participate, John, with other individuals and other firms.

But what I'm not gonna do is be one of 50 individuals, chipping in a couple hundred thousand. That's not what we do. And there are companies that do that, but that's not our preferred style of investing.

jon (41:36.766)
Yeah, yeah.

jon (41:41.982)
Yeah. Let me ask you about the people, the experts. Do you have a group of experts that you just call on hand? Like the free agents that, hey, come in, you know, put this in place, do this and, and, and, and take off, or do you have to go hire and interview and all of that?

James Carey (42:00.334)
Yeah, no, so we will typically if we get into an industry that we don't have as much expertise or familiarity with, we'll absolutely reach out to our network or we'll absolutely reach out to folks that we think can help and we'll tap into our network and say, hey, do you know anyone that has experience in this space? And so we absolutely will work with outside individuals on a deal, especially for making a large investment.

We will do, we will talk to consultants and we'll do all the expert network calls that a traditional private equity firm would do. But I think what we will do is we will reach out to our network and if there's an individual or individuals that we think can add a lot of value, we'll absolutely be open to putting them on the board or giving them a piece of the upside where, hey, help us out with diligence, we'll give you some equity in the business or help us out, you know, we'll give you some upside and exit, things of that nature.

So we love partnering with industry experts or operating executives. I think we've done that in the past and we certainly will continue to do that in the future.

jon (43:07.71)
Beautiful. James, I really appreciate your talking about the family office and the process. Thank you so much.

James Carey (43:14.478)
Yeah, John, pleasure being on the podcast and hopefully we can do it again soon. All right, take care. Bye bye.

jon (43:19.39)
Sounds great.

All right, hold on.