In The Trenches

Today’s episode is for anybody who ever plans to sell a company.

Most entrepreneurs will sell a business once in their entire careers (if they’re lucky), and as a result many understandably don’t have a lot of context or experience in the finer points of exiting, specifically when it comes to how to select an M&A advisor. Most advice that I’ve come across in this domain is frankly too high level to be useful, so today I wanted to get really detailed on how to select an M&A advisor, how much you should expect to pay them, what’s included & excluded from the fees that they charge, and other critical contractual terms you should be aware of before hiring one of them.

To help us answer some of these questions, I’m joined today by John Carvalho. John is the President of Stone Oak Capital, an M&A advisory firm that focuses exclusively on middle market businesses, with a specific focus on transactions between $10 and $100 million.

John is also the Founder of Divestopedia. Since its inception in 2012, Divestopedia has become THE place to go for anybody contemplating selling their company: It contains a dictionary of more than 500 M&A related terms, thousands of articles on the exit process, and is now one of the world's leading online resources for selling a mid-sized business.

In addition to his experience advising CEOs, John is also an entrepreneur himself, having co-founded Wolverine Energy Services Inc. in 2012 with an initial acquisition of a $5 million revenue oilfield services company. From the first acquisition to 2020, John and his business partner acquired 16 more businesses, grew revenue to $240 million and took the company public.

For many business owners, few things are as exciting as receiving a Letter of Intent (“LOI”) from a prospective purchaser. Beyond the sense of validation stemming from the fact that a sophisticated counterparty sees an asset worth paying for, many business owners likely view an LOI as a just reward for decades of hard work, sacrifice, and illiquidity. 

Understandable as these reactions may be, I would argue that they are premature at best, and misleading (or even incorrect) at worst. 

This audio blog attempts to speak to prospective sellers of small or medium-sized businesses about what LOIs are (and more importantly, what they are not), and to review how experienced buyers may strategically utilize them as tools to further their own objectives, sometimes at the expense of those of the seller.

In this episode, I attempt to debunk a common misconception among prospective acquirors, particularly those looking to purchase a business for the first time. This myth states that the smaller the business in question, the easier it is to purchase and operate.

In the material that follows, I will attempt to explain why the exact opposite statement is likely true: That smaller companies are actually much harder to both purchase and operate when compared to their larger peers. 

In his book, The Five Temptations of a CEO, author Patrick Lencioni discusses five areas in which CEOs tend to inadvertently prioritize the wrong things. These “temptations”, as he calls them, can lead to poor decision making at best, and can risk the very survival of the company at worst. My experience leading a software company taught me that there is a sixth temptation, unique to software, that seemed to present itself on a near-daily basis. More specifically:

The biggest temptation of a software CEO is to throw bodies (specifically engineers) at problems.

It is this sixth temptation that I struggled with most frequently. With the benefit of hindsight, I’ve come to a few realizations that I’d like to share with fellow software CEOs in hopes that they’ll do a better job of managing this temptation than I did. Among other lessons, I share how the following realities should shape the decision of whether or not (and by how much) to increase the size of the company's engineering team:

Please enjoy!

My guest today is Carin-Isabel Knoop, Executive Director of the Harvard Business School Case Research & Writing Group. Carin has spent decades writing cases on managers and leaders all over the world, across a wide array of functions and industries. In 2019, alongside co-author John Quelch, she published Compassionate Management of Mental Health in the Modern Workplace, a book that dove deeply into the relationship between work life and mental well-being, and suggested in which managers can and should act as the "chief mental health officers" of their respective teams.  

In today's episode, we dive deeply into the following questions and issues: 

Please enjoy!

In this week's episode, we discuss the importance of having difficult conversations, something that CEOs find themselves doing on a near-daily basis. We discuss three primary types of difficult conversations, including a) Hard conversations around internal company dynamics (eg: terminations); b) Hard conversations about dynamics external to the company (eg: politics); & c) Difficult conversations that CEOs must sometimes have with themselves (eg: how and when to ask for help).

This is a particularly special episode of In The Trenches for a number of reasons, including:

Please enjoy!