Wisdom From Wall Street: How To Buy, Then Sell

Transcript

John Warrillow:                … from Matt Slaine, S-L-A-I-N-E, on LinkedIn, if you want to reach out to Matt. Matt is an investor, I think, first and foremost. As you’ll hear, he grew up on Wall Street. And instead of starting a business, decided to buy one. If you’ve ever thought about buying a business, this might be a good episode for you to listen to. He goes into detail on how he identified a potential candidate to buy, how he built up the value of the company over time, making it less dependent on him every year; ultimately selling it for a tidy profit.

John Warrillow:                Here to tell you the entire story is Matt Slaine.

John Warrillow:                Matt Slaine. Welcome to Built To Sell Radio.

Matt Slaine:                       Thank you so much, happy to be here. I’m flattered you asked me to join.

John Warrillow:                Yeah. Well listen, tell me a little bit about Progressive Business Media. You know, I don’t know much about this business, so give me the short strokes. What did you guys do?

Matt Slaine:                       Yeah, absolutely. So Progressive Business Media was kind of the world’s leading B2B media and communications company in the home furnishings and gift space. So what that really means is we allowed home furnishing manufacturers, such as furniture makers, and gift manufacturers to reach their end users, which were mainly retailers; both brick and mortar and online. So we were that communications vehicle that provided news on what’s happening, who’s working where, trends, consumer guides, to the retailers. And then manufacturers were our advertisers that supported the revenues of our business.

John Warrillow:                Got it. So if I have a home store, where I sell sofas and coffee tables and so forth, I might subscribe to one of your magazines, and the advertisers that would advertise in the magazine would be your revenue source.

Matt Slaine:                       Exactly. So when we kind of started the business and built it in the beginning, it was exactly. That. It was a magazine, and we had advertisers and the retailers. So if you owned that furniture store, you would read it so you understood exactly what was going on. And that was called Furniture Today, that publication. And that as kind of your weekly guide to what’s happening in the furniture world and what you should buy, what you should put on your store, what’s selling, what’s not, what’s trending. And because we have those eyeballs, the retailers, all the people that wanted to be on their floor would advertise in one way or another to get in front of them.

Matt Slaine:                       So at the end of the day, I always told people we actually sold eyeballs. Because we had this audience of people that were engaged, and we were able to sell against it.

John Warrillow:                Got it, got it. So how did the business model evolve as digital become more prominent? How did you guys sort of … Because a lot of magazines have been put of business, obviously, through the whole digitization of media.

Matt Slaine:                       Absolutely. So I’ve always kind of discarded the mainstream thought, and going back six or seven years ago, the thought was, then, that print was dead. And obviously, that’s kind of still the mainstream thought today. But you know, when we looked at the opportunities, kind of listened to the consumer, which is always good advice, and found a really niche product that was still printing print magazines and had a really engaged audience, and people really liked it, and had very, very high affinity for it.

Matt Slaine:                       So while print is “dead,” we were able to find a product that was primarily print, and do something with it. So-

John Warrillow:                How did you stumble into this business? How does one become the media guru of the home furnishings space?

Matt Slaine:                       Yeah, that’s a really interesting question. It’s something I never kind of imaged for myself. But I went to Dartmouth College, undergrad. And I was kind of steered, as many Ivy League graduates are, towards the investment banking consulting world, and I went into investment banking for a number of years, and I left. I went to business school, and they steered me back into banking, where I was on the investment management side. And you know, kind of throughout those years, I always wanted to be the client. When I was working with corporations as an investment banker, I wanted to be the guy on the other side of the table that was kind of reading the pitch book and trying to make a decision, whether that M&A deal was good one or not. Or when I was on the investment management side, I wanted to be the client.

Matt Slaine:                       So I kind of took a very different path than a lot of my peers, I think. And I left that world. And it’s a tempting world. I get it. Feeds your ego and your wallet, and you get to live in New York, and all of that. But I went on a search to become an entrepreneur. And I kind of grew up in a household where my father was an entrepreneur and was in business, and was not in a financial world. And I thought that was something I wanted to pursue. So I had an itch to go out and find a business that I thought had a relatively low bar, that someone with not a ton of operating experience could do. And had an investment thesis that I thought was kind of manageable. So yeah.

John Warrillow:                So you bought the business?

Matt Slaine:                       Yeah. So it was a … So we acquired a number of different assets of the years. It started with a platform in late 2012, early 2013, where we bought kind of a revenue division of a much larger media company. So really, what I got was editors and salespeople, and then I had to build the rest of the platform to make it a standalone company.

John Warrillow:                Who’s the we, Matt? You keep referring to we. Did you have partners in this, or …

Matt Slaine:                       Yeah. So I had investors, but mainly it was me going out there and borrowing as much money as I can. So when I say we, I’m really talking about Progressive Business Media and the team I put together.

John Warrillow:                Okay.

Matt Slaine:                       I always believe in the we approach, and the old saying, “There’s no I in them,” so … No, I’m referring to myself, though. I left that world in New York and found a business located in North Carolina, a state I actually had never even been to, where I now live, and decided that there was something I can do with this little division that was proving to the world that print wasn’t dead.

John Warrillow:                So when you say a little division, are you referring to … Like, it was the magazine, at the time, or what exactly did you buy?

Matt Slaine:                       Yeah, so it was a large media company that published lots of various magazine in other media outlets, website, some events. They had a B2B division, which published kind of that … What they called the Furniture Group, at the time.

John Warrillow:                Mm-hmm (affirmative).

Matt Slaine:                       So what I really acquired was the brands and those employees that were directly working on the brands. What it did not come with is a jar, any finance, any kind of accounting or bookkeeping, or PNL management. No IT support. All those things that are kind of part of corporate did not.

John Warrillow:                This is fascinating, because I know we’re going to get to the sale of Progressive, but a lot of our listeners are curious about what it takes to buy a business.

Matt Slaine:                       Yeah.

John Warrillow:                It sounds like in your case, you had some investors. You also took on some debt and the bank helped finance some of this. Is that right?

Matt Slaine:                       Yeah. Yeah. The capital stack, or kind of how we financed it changed over the period of time, but buying a business can be an arduous process. It is not easy. Anyone can just go online and go on eBay and buy a product. Buying a business is just a … Especially one that involves human capital and/or machinery, it can be a long process. You know, forget about it being expensive. It’s not like a piece of real estate where the building is the building. It’s, I think, a little more complicated and more difficult.

John Warrillow:                What advice would you have for someone who’s looking to buy a business?

Matt Slaine:                       Yeah, in the age of technology, the way to find a business continues to be person-to-person. It is in-person networking. It’s telling everyone you know, whether they’re an intermediary like a lawyer or an accountant, who often is dealing with business owners, to your neighbors and your friends and your family members, that you’re looking. And it’s a person-to-person business.

Matt Slaine:                       And the second piece Of advice I’ve had is trying to find exactly what you’re looking for, as best as you can, and as easily digestible. Because asking a general question, “I’m looking for a business,” really doesn’t help someone point you in the right direction. So even if you have no clue what you’re looking for, try and narrow down, just size, the number of people, the geography, profitability, the product type; whether it’s a product or a service, if its B2B or B2C, or if it’s online only. Take three, four, five criteria that you think would satisfy the type of business you’re looking for, and just tell everyone you know. And it’s actually pretty amazing how many leads you will get by doing that.

John Warrillow:                Interesting, interesting. Good advice. Okay, so you get this business. I mean, I realize there were many inflection points along the way, but what do you, as you look back between 2012 through 2019, is there one point, one strategic move you made that really helped define your success, or made your success?

Matt Slaine:                       I’m not sure … There were lots of inflection points, which is a nice way of putting the struggle that every entrepreneur, and the sleepless nights that every once of us goes through, at some point or another. I think really what made a difference for me was a little bit of a softer thing than a strategic move, and that was understanding the role of kind of a cultural implication, when you come into a business, that where you come from is not necessarily where you are today, or where you’re going. And let me just share my experience. I’m New York City born and raised, in that area. That’s very much my culture, right? And who I was at the time. And you buy a business in a different part of the country. In my case, in the south, and things work differently. You’re only a few hundred miles away, but there’s different expectations around how you operate and how things get done. You’re not-

John Warrillow:                Like what?

Matt Slaine:                       You’re not better or worse.

John Warrillow:                Give me an example of … Wall Street comes to town, and now things work differently in North Carolina.

Matt Slaine:                       Well, A, there’s certainly suspicion, right? The guards go up. You don’t necessarily get the truth or the whole story, because people are suspicious, they’re fearful, or whatever it is. There’s that fear element that new guy comes to town; a New Yorker comes into town. There’s something that you weren’t part of the community, or our history. Both company history, as well as people are really proud of where they live and what they’re doing for their community. I don’t think I fully recognized how important Progressive Business Media, which was not called that at the time, when we bought it; but how important that business was to the actual geographic community of High Point in Greensboro, North Carolina, which is furniture capital of the world, really.

John Warrillow:                Really? I had no idea.

Matt Slaine:                       Yeah.

John Warrillow:                So how many employees did you … When you acquired the business, how many employees did you guys have?

Matt Slaine:                       There were about 65 employees.

John Warrillow:                Wow. So this is a pretty good sized business.

Matt Slaine:                       Yeah.

John Warrillow:                You must’ve had some significant investors. I mean, unless you … It sounds like a lot of money to buy a company with 65 employees.

Matt Slaine:                       Yeah, yeah. It was a significant purchase, and I was lucky enough to have great support from friends and family there. And yeah, it was a significant business, but I thought it had just so much more room to grow. Fast forward, we’re about 100 employees. And I’ll tell you, to go back to your original question about the transformation of the business a little bit, what I saw was the opportunity to really build out pieces that weren’t the focus on the management team before I got there. The management team that was there was doing a good job at what they were doing. I believed there was a lot of room, or runway, to grow the digital part of the business, the events and conferences part of the business, research part of the business. Social media was kind of in its infancy six or seven years ago. And obviously we know how important that is to digital today.

John Warrillow:                Mm-hmm (affirmative).

Matt Slaine:                       I saw kind of these avenues that I didn’t think it was going to meaningfully triple the size of the business, but if I can grow double digits in some of these smaller categories, I could kind of supplement print, which is flat to single digits percent growth a year. Which is great, by the way. Because with a big number, growing 2% or 3% a year, it’s a nice cashflow to be able to invest back into other pieces of the business.

John Warrillow:                Mm-hmm (affirmative), mm-hmm (affirmative). How did you value the company when you bought it? Were you looking at a multiple of profit or revenue, or how did you go about valuing it?

Matt Slaine:                       So that’s a difficult question to answer, because it really wasn’t a standalone company. It was number of publications that had a revenue and a cost, but it didn’t really represent the full cost of the business, because you really had to account for what does this look like as a standalone business outside of a big corporation? So what costs am I going to have to add in? So I really had to spend a lot of time building a model, if you will, of what I’m going to have to hire or buy in order to kind of make this a sustainable, growing enterprise.

Matt Slaine:                       So typically, print, to be more specific in my answer, typically a print media in the B2B spaces trades somewhere between … An when I say trade, I mean it sells, or you can buy it for somewhere between four and a half to five … Call it five times cashflow, or EBITDA, earnings before interest, tax, depreciation, amortization. At about anywhere between five and six times. And certain variables will make that lower by one or higher by one. And then when you start to add in events and trade shows and some more sticky revenue-type situations, it can go up seven, eight, nine times.

John Warrillow:                Got it, got it. That’s helpful, for sure. So and you had to build a model to figure out what on earth your company would earn if you … Certainly you graphed on a bunch of expense that the mothership was sort of paying for; in particular, finance and technology.

Matt Slaine:                       Yeah, exactly. And that actually makes you a less competitive bidder, in a way.

John Warrillow:                Mm-hmm (affirmative).

Matt Slaine:                       Because you’re basically valuing the business at a lower profit than, say, another company that had already had all those expenses in there, that could kind of bolt it on.

John Warrillow:                Was it a multiple bidder situation? Were there other people at the table?

Matt Slaine:                       Yeah, no. So the best part about it was, it was a privately negotiated transaction. And going back to buying a business, that’s obviously the best case scenario, is when you could build a relationship with someone, where you are the preferred party, and they’re not creating an auction process, and they don’t hire an investment banker to represent them. We did hire an investment banker on the way out, but on the way in, we did not. Neither us nor the selling party had bankers. And that’s the way to do it, if you can.

John Warrillow:                How did you convince them not to … How did it work that they didn’t have representation or create any sort of auction?

Matt Slaine:                       You know, it all goes back … And maybe I sound repetitive, back to relationship. In this world, with all of the digital means, it really goes back to spending the time to build the relationship with someone so that they trust you, and trust is everything. I’m a salesman, kind of by nature, if you look at my strengths. And it’s building that trust that you have their best interests in mind, and you have the best interests of the company in mind. We didn’t come in there and lay anyone off, for example.

John Warrillow:                Yeah.

Matt Slaine:                       In fact, we hired and we added and we demonstrated that as the new owner, we’re actually going to build this and invest in more than the previous owner could have because of other obligations of their capital.

John Warrillow:                Mm-hmm (affirmative), fantastic. So what was it that … The kind of triggering event that made you want to sell? Because you’ve only owned it since 2012, so a lot of people listening would say, “Wow, that’s a really short hold period.” What was it that made you want to sell?

Matt Slaine:                       That’s a really good question. It was kind of the impetus of the sales process was actually because a large buyer, strategic buyer … When I say strategic, an operating company, not a private equity firm or an investor, proactively reached out to us, wanting to buy us. And that happened about a year, or a little more over a year before we actually did sell. So that was the impetus of the process, where I was basically asked to come to a meeting where another company was interested in acquiring us, and it kind of took my by surprise, because I was, call it, five years in, and I thought I had been building a pretty good company, and I’d been doing it very purposefully in order to make it attractive and make it the best business I possibly could. But it definitely came quicker than I had expected. And that’s what kind of led into the whole process of the way out.

John Warrillow:                Yeah, yeah, yeah. Which is what I want to get to. So who was the strategic that … Can you tell us who that was?

Matt Slaine:                       I can’t.

John Warrillow:                Okay.

Matt Slaine:                       I still have the NDA. My NDA with them is still ongoing, in terms of the-

John Warrillow:                No problem.

Matt Slaine:                       Yeah.

John Warrillow:                No problem. So the strategic comes to you. What was your expectation going into that meeting? They’re obviously a strategic, meeting they’re a media company. So we’re …

Matt Slaine:                       Yeah.

John Warrillow:                … get a sense that it might turn to an acquisition conversation, or what was your sense?

Matt Slaine:                       No, I was actually pretty caught off guard in the meeting. I was certainly flattered, but it really was not … I kind of had a sense that maybe that as happening, kind of maybe 10 minutes before walking into the office.

John Warrillow:                Why? What happened in the 10-minute period before walking in that made you think that?

Matt Slaine:                       I was trying to either deduce in my head … I either had done something wrong, or … Because the only other interaction we had with other media companies is when we thought they were plagiarizing our stuff-

John Warrillow:                You were going to get your ass sued.

Matt Slaine:                       That’s … So I’m either walking into, we did something terribly wrong, and this is a conversation before we get sued. Or, they’re about to poach a person from us, and this was a courtesy call, because we’ve had those, too. Or, it was something bigger. And the strategic had recently been acquired by a private equity firm, themselves. And sometimes when you get acquired by a private equity, they want you to go out and buy things. So that’s kind of when I put two and two together, is kind of sitting in the waiting room saying, “Wait a second. This could be actually a very different conversation than I thought.”

John Warrillow:                Okay, so you go into the board room. Pleasantries are exchanged. What happens next? How does it get raised?

Matt Slaine:                       You know, it was very straightforward. It was just the personality of the CEO, who was a very, very pleasant person, who continues to be my friend today, by the way. And it was just, “Hey, we were acquired. We have a mandate. You’ve built an awesome company who we’ve got to know and we’ve been watching for the last five years, and we think it would be highly complementary to the business we’re trying to build. So why don’t you think about it, and let’s talk more formally in a couple weeks?”

John Warrillow:                Did he use words like, “Let’s partner,” or, “Let’s create an alliance,” or did he actually come out and say, “We’d like to buy you, Matt.”

Matt Slaine:                       No, he was very straightforward, yeah.

John Warrillow:                “We’d like to buy your company.”

Matt Slaine:                       Yeah, yeah.

John Warrillow:                Got it. So what was it-

Matt Slaine:                       And he-

John Warrillow:                Go ahead.

Matt Slaine:                       I was going to say, and he gave me a couple reasons around the management team we had put together. We had a pretty good vision, we were executing on that in a meaningful way. And they thought that there were … Synergies is the wrong word, because it was on the cost, but there were really synergies on the revenue side in terms of cross-selling opportunities.

John Warrillow:                Mm-hmm (affirmative), mm-hmm (affirmative). Yeah, that’s great. And so those were the rationale that he provided to you? Got it, got it.

Matt Slaine:                       Yeah. And again, I was flattered. And kind of smiled, and we shook hands, and that conversation continued pretty seriously over the next few months.

John Warrillow:                And did he ask you what you wanted for the company?

Matt Slaine:                       Yes. He did, and I don’t think it was a question of value, to him. I think more of it was a timing issue; was either how quickly can we get this done, or can we slow down and can we wait a few months? Because they had some other things going on in their own corporate life.

Matt Slaine:                       So in that process, that’s when we kind of had to hire some representation to kind of … Because they also had representation. We had to hire someone, as well, just to kind of have that conversation with … You know? And that’s when the other party who ultimately ended up being our acquirer, was found.

John Warrillow:                And when you … So the initial conversation you had with the strategic was not the company that you ended up selling to?

Matt Slaine:                       Exactly.

John Warrillow:                Oh, wow!

Matt Slaine:                       Yes. Exactly. So that, we ended up for lots of different reasons; from timing to value, and otherwise, selling to a different strategic, who was very hungry for an acquisition, and obviously that’s happened now. It’s GateHouse Media. They have a B2B division called BridgeTower, and that kind of ended up being the group that bought us, at the very end of 2018.

John Warrillow:                Okay. So often times, entrepreneurs and listeners to this show will get the question, “Okay, well what do you want for your company?” And often times they get caught off guard by that question, and it happens very early on. And sometimes we make the mistake of just spitting out a number which is on the top of our head. How did you go about answer the question when they asked you, “Okay, Matt. What do you want for your company?”

Matt Slaine:                       Yeah, it didn’t happen as simply as that, unfortunately. It was kind of more through a process of LOI and bids and things like that. But what I can tell you is what I told them. And that’s the reason of kind of why I was going into that process in the first place. And it wasn’t only because we were approached. That’s what got my head kind of spinning in that direction. But really, what was going through my head was the next level … We had really put together six years of professionalizing of the organization, bringing in a great management team that was effective and not only knew their roles, but actually their responsibilities, and they were enabled to make those decisions and to do that.

Matt Slaine:                       So what we really needed, after putting that together was scale. And you see that in so many businesses, that consolidation where the next stage … For us, it was scale. We needed scale from everything from healthcare costs were rising rapidly, and we needed to spread that over a larger group of employees. And our digital business had grown really nicely. And the next step for us was to kind of … How do we put together a really significant digital agency to represent our clients? How do we go into the podcasting business? How do we set up a professional video studio? We went from doing a couple dozen videos a year, five years ago; to I think we did 400 or 500 in 2018. But how do we go from 400 or 500 to 2,000? And we couldn’t do that on our own. So that scale question was really important to me. And every time I came back to it, the only way I thought we could find the scale necessary was to find a strategic buyer that we can kind of morph into, and use their resources and spread it across.

Matt Slaine:                       And by the way, retention’s tough. And I think we did a really good job. We had great loyalty and great employees. But the truth is, we were a small business, and the best ones want to continue to rise up in their career, and this provided a lot more options for employees to go into new geographies, different types of jobs, things like that.

John Warrillow:                Yeah, I want to get to the way you communicated it to your people. So at this stage, you’re roughly 100 employees. You’d grown from 2012, when you acquired it, around 60; you’re up to 100. So you’ve almost doubled the business in that six-year window, at least in terms of employee count.

Matt Slaine:                       Correct, yeah.

John Warrillow:                Got it. Okay so you have this strategic conversation, and you’re like … A light bulb goes off and is like, “Hey, maybe this is actually a decent time to go to market.”

Matt Slaine:                       Yeah.

John Warrillow:                And you hired an M&A professional? When you talk about representation, people may now know what you mean, but I’m assuming you hired a sell-side M&A firm to sort of represent you in the process.

Matt Slaine:                       Exactly, yes we did.

John Warrillow:                Okay, great. And so what was that process like? I mean, did … So I’m assuming they went out to try to talk to other media companies, and-

Matt Slaine:                       Yeah, yeah. It’s really kind of all-consuming for a little while, as I think most people who have sold their business can attest to. It is not an easy process, just like buying is time consuming; selling is also time consuming. What I found, and was most unexpected … I knew it was going to be time consuming. What I didn’t really think about is how psychologically draining it was.

John Warrillow:                Mm-hmm (affirmative).

Matt Slaine:                       Not only from a time management, right? So you’re running a business, and doing that as a full-time job, and you’re also, as a full-time job, trying to sell the company. So psychologically, it’s just … Splitting your time is just … There’s only 24 hours in a day. And you’re decision making, right? Your decision making changes a little bit, because instead of always looking out two or three years, you’re sometimes not looking out as far, so your decision making can change a little bit. Not that you’re not acting in the best interests of the business, but you may defer buying a new machine, for example, or something like that. You may not invest that same level.

Matt Slaine:                       Psychologically, the third piece is kind of the emotional piece. And I think a lot of business owners can relate to this. You, for better or for worse, fall in love with your business. I loved what I did. I woke up every day thinking we were doing an amazing job. I thought we had excellent people. Our employees were absolutely everything to the business and to me. And our clients. At the end of the day, we all have clients, and we had really special ones, and they were people that had become friends over the years, too.

John Warrillow:                So you’re starting to feel maybe guilty, a little bit, that you-

Matt Slaine:                       Yeah!

John Warrillow:                Yeah.

Matt Slaine:                       I did, I did. I felt guilty, because I felt like I was, in some way, going to let them down if it didn’t go well. And I think they all generally, almost probably liked me and liked what we were doing with the business. Again, they didn’t all like me from day one, and that goes back to the lessons I learned about culture we talked about earlier. But I think I’d done a good job over the years of kind of ingraining myself into the business, and the culture and the geography and our clients and what we do. And I think the employees felt like I understood what they did, and the time it took to actually do things. Right? Decisions on the spreadsheet, and then the implementation of them are very, very different things.

Matt Slaine:                       So yeah, there was a lot of emotion around guilt, sadness, fear. What was I going to do next? Would the business be okay without me? Despite having spent the last few years building a business that could be okay without me, we all tend to think we have some sort of importance.

John Warrillow:                Through this process, you’ve hired the M&A firm. They’re out there sort of “shopping” the company, if you will. I don’t mean that in a pejorative way, just they’re out there doing their thing.

Matt Slaine:                       Yeah.

John Warrillow:                Did you share the news with any of your employees? How did you handle that?

Matt Slaine:                       Yeah, so I very purposely did not share the fact that we were in a sales process with anyone until the very, very end, where I shared it just with my senior management team, because they were going to be the ones that have to do the … What we called kind of a face-to-face meetings in that last round, when you actually get to talk with prospective buyers, and they get to ask questions, and you get to talk about the business and the growth opportunities. So-

John Warrillow:                How’d you handle that conversation with your senior managers? How did you sort of frame it for them, and what was sort of in it for them?

Matt Slaine:                       Yeah, so I’m a very candid, open-book type of person. So what I said to them is exactly what I said a few minutes earlier to you, is, “We have done an excellent job. I feel like I have put in everything I can. I’ve put my heart and soul into this business for the last six years. I’m proud of what we built, and I want it to go to the next level, and I’m not going to be able to be the one to take it there.” I wanted a new challenge. I felt like the results were there, and I wanted a new challenge in my life, and I wanted the business to have an opportunity to be challenged in a new way.

John Warrillow:                So what was their reaction?

Matt Slaine:                       Really surprised. Really surprised. I moved down to North Carolina to be in the business every day. I knew most of the clients, at least the significant ones very personally. I was highly involved in being the cheerleader by that point. I did a lot of management by walking around and sitting on committees with employees on wellness and then things like that. So I think everyone thought I was kind of all-in. And I was all-in. And I was all-in to the very last day, because I think it’s important, but which also makes it psychologically draining when you’re all in on something, and trying to sell it.

John Warrillow:                Yeah, for sure. So your first reaction from your senior managers was sort of surprised.

Matt Slaine:                       Oh, total surprise.

John Warrillow:                And then did you incentivize them at all, in terms of … What was in it for them to help you sort of close the deal, if you will?

Matt Slaine:                       Yeah, absolutely. I’ve always believed in treating people really fairly and sharing kind of the benefits. So I did incentivize them, that if we were able to close the sale, and they were to stay on with the new buyer for a number of months, they would be rewarded financially, and-

John Warrillow:                You know, a lot of people think that the only way to do that is through giving people stock options.

Matt Slaine:                       Yeah.

John Warrillow:                It sounds like in your case, it was more a stay bonus, or some sort of financial … Like, “You stay, and you get X.” Again, I don’t know if you can talk about it in detail, but that is a-

Matt Slaine:                       Yeah, I don’t think they would love for me to talk about it.

John Warrillow:                Yeah.

Matt Slaine:                       I think everyone’s pretty private people. But yeah, I incentivized them financially, to stay and to help integrate the company into the new company, and to assure the employees were … Just have them stay as much as they could, and things like that.

John Warrillow:                And how did you ensure that your senior managers, now that they were let in on the “sale,” how did you ensure they did not tell the rank-in-file people, the rest of the team?

Matt Slaine:                       It goes back to building a competent and effective management team around you, who you trust. And that’s … I trusted them to do what was in the best interest of the business for years before that, so by not telling people, that was in the best interest of the business. Because you wanted people to remain focused on the job, A. B, much more importantly, why would you introduce an element of fear, or unknown into people, when you really couldn’t give them an answer?

John Warrillow:                Mm-hmm (affirmative).

Matt Slaine:                       I’ve always believed, and my management philosophy is to kind of create a safety with your employees. Make them feel as safe as possible, psychologically safe. And they’ll give you their best. And I just couldn’t fathom introducing the ideas of saying, “We’re for sale, and I don’t know what’s going to happen,” because I don’t.

Matt Slaine:                       So I was never … I think we did a good job, I should say, of not letting it leak. Because I really was never asked. So I applaud my management team that they … My trust for them was real, and they did a good job.

John Warrillow:                And so to your knowledge, it was not made public? People didn’t find out until the end?

Matt Slaine:                       It was not. I mean, there’s always rumors in every business, all the time, about everything.

John Warrillow:                Sure.

Matt Slaine:                       And to be honest, the rumor of us being for sale probably started the day after I bought it.

John Warrillow:                Right.

Matt Slaine:                       You know? But it obviously wasn’t true, and there’s always lots of other rumors. So I was never confronted or directly asked; or, there was never a prevalent sense that something doom and gloom was about to happen.

John Warrillow:                Right. And how are you communicating with your investors? Because you’ve raised some money, it sounds like both debt and equity to buy the business.

Matt Slaine:                       Yeah.

John Warrillow:                What’s that conversation like, as you’re going through?

Matt Slaine:                       As an investor, and coming form the world of investors in New York, all an investor cares about is return.

John Warrillow:                Right.

Matt Slaine:                       Bottom line, right? So I provided great cash flow and a good return on their equity. And that’s all. Nothing else matters.

John Warrillow:                Okay. So they’ve invested in you. Were you able to give them some dividends or some yield along the way, as investors?

Matt Slaine:                       Sure, yeah. We paid out distributions quarterly.

John Warrillow:                Based on profit? A percentage of profit?

Matt Slaine:                       Exactly, exactly, yeah.

John Warrillow:                And that’s sort of their shareholding.

Matt Slaine:                       Yeah, exactly. And frankly, a five or six year time horizon, very non-liquid investment; meaning you buy an IBM stock today, you could sell it in five minutes.

John Warrillow:                Sure, yeah.

Matt Slaine:                       You buy a business, it could be difficult and a long time before you get money out. So I think everyone’s happy when they get their money back plus more.

John Warrillow:                Yeah, and so you were … They obviously did well at the deal. Was there any pressure … Sometimes we talk to entrepreneurs who say their original investors … I’m thinking of Rand Fishkin, for example … Especially professional investors, or venture capitalists, they have such a high failure rate that they’re looking for … The winner has to be a huge win, a 10X win for anybody to kind of agree to sell. But it doesn’t sound like that was the case in your investors.

Matt Slaine:                       No. You know what? I didn’t have an institutional round behind me. I was lucky enough that I was able to cobble it together from people that believed in me. And I’m thankful for that opportunity.

John Warrillow:                That’s great. And so they weren’t like, “Hold on for more! You got to … Don’t sell yet.” You weren’t receiving that sort of pressure from them?

Matt Slaine:                       No.

John Warrillow:                That’s great.

Matt Slaine:                       Mm-hmm (affirmative), it’s very different being in a venture-backed business or a professional private equity firm behind you, where you’re one unit in a larger fund. And if the other fund units aren’t performing and you are, you’re going to be pressured to probably sell earlier in order to compensate for other people.

John Warrillow:                Yeah, that’s … Yeah.

Matt Slaine:                       Yeah, I’d urge people that if they’re going out to raise money, you want to raise money with that really believe in what you’re building, and you as a person and your decision making abilities. Otherwise, there’s too many factors in your decisions that have nothing to do with the best interests of the business.

John Warrillow:                Yeah.

Matt Slaine:                       They’re investing in you because of your decision making abilities.

John Warrillow:                Such good advice. But you know what? To be honest, Matt, I think most of our listeners would identify more with your situation. They either self-funded or they did sort of a friends and family round of investment. Round is probably too formal a way of saying it, but had some investment from … But not sort of a VC round, or whatever. So I think you’re right.

Matt Slaine:                       Absolutely, yeah.

John Warrillow:                So how was the actual process of … So for those who may never have gone through the process, it sounds like you hired an M&A firm who went out and had some conversations with different firms. The ones who were interested wanted to meet with your managers and understand the business in greater detail. And then obviously, some of those were … The hope is that one or two or more of those companies that you meet with ends up making an offer.

Matt Slaine:                       Right.

John Warrillow:                Did you have that sort of auction where you said, “Offers are due on a certain day.” Did you do it that way, or was it-

Matt Slaine:                       Yeah. You know, we ran a pretty formal process, and that’s really because we’re under really … happened to be, in the last year, a really good market.

John Warrillow:                Mm-hmm (affirmative).

Matt Slaine:                       Economically, despite what may be going on right now with some of the slow downs if you think back six, eight months. But really, right before that December of 2018, stock market meltdown for about six weeks. But right before that, we were in a really hot market. There’s a lot of capital out there that needs to be deployed. There are more private equity firms globally, than there have ever been. There’s global investors that have a lot of capital that want to put it in businesses in the United States. If you look at yields on bonds in Europe, they’re negative. So all this money is flowing into the US, and the only way they can earn a return or a fee on it is to actually put it to work.

John Warrillow:                Mm-hmm (affirmative).

Matt Slaine:                       And that’s just a fancy way of saying buy something.

John Warrillow:                Right, right.

Matt Slaine:                       So yeah, there’s … We’re really luck that we went to the market into a really strong economy, where there was and still is a lot of capital. And that’s really what makes buying a business today so tough, is it’s incredibly competitive. I’m not sure a privately negotiated transaction would be as easy today, although it certainly happens.

John Warrillow:                How many offers did you guys get?

Matt Slaine:                       You know, I’m under an NDA to talk about … I can’t talk about the actual process, especially because the buyer was a publicly traded company.

John Warrillow:                Okay.

Matt Slaine:                       I want to be careful about talking specifically around the process and who they bid against and things like that. But the process overall was really an introspective one for me. And I think that’s what would be really helpful to the readers, is really-

John Warrillow:                Yeah.

Matt Slaine:                       Yeah. It forces you to think about what the future for you looks like, as an individual, a professional, and what the future of the business looks like. So you spend a lot of time understanding and looking at your strengths, and your weaknesses, as well. And when you’re sitting across the table from someone looking at your business, you believe this business is as good as it can be, and they’re looking at you like, “Why didn’t you do this? Why didn’t you do that? You didn’t see that opportunity. Why did that fail?” And you know, you have to stay strong. Because their whole reason for sitting across the table is to poke holes. Right? They want to poke holes in what you did and your business, what it can be. So a lot of it is they need to see how strong you are, and how much you really understand your business, or how much your management team, more importantly, if you’re not going along with the business, really can defend the path you’ve taken.

John Warrillow:                Did you know, going in, that you didn’t want to have a role after an acquisition? It sounds like you wanted your managers to take over, but not go personally.

Matt Slaine:                       Like I said earlier, I think I was mentally ready for a little bit of a rest, and mentally ready for a new challenge. There were a number of bidders that essentially wanted me to stay on, and some, it was a condition of their offer that I would do so, for a significant period of time. And for the right situation, I’m sure I would have. But I just felt that it was time. I had a two-year-old daughter, or she was about a year and a half, at the time. I felt like I hadn’t spent a lot of time with her since she was born because of the travel demands and the schedule. I also knew that I wanted to do other things with my family, and I felt that I just needed some time. And we’re going to have twin boys in a few weeks, so-

John Warrillow:                Ah-ha! Congratulations! That’s awesome.

Matt Slaine:                       Yeah, absolutely.

John Warrillow:                You’re about to lose any time you thought you had.

Matt Slaine:                       It’s been a wonderful break.

John Warrillow:                I’m sure. I know we can’t speak directly about your deal, so let’s just take things into the third person. Let’s say you had an entrepreneur who you were having lunch with, and he said, “Matt, I’m thinking of selling my company. I’ve got three or four different offers. I’m trying to figure out how to evaluate the pros and cons to each.”

Matt Slaine:                       Yeah.

John Warrillow:                What advice would you give that entrepreneur who would be presumably looking at lots of different deal structures? Ones that would have an earn out, others that would be all cash. What sort of advice would you give?

Matt Slaine:                       Yeah, absolutely. So since I have sold, I have been reached out to by people I know and don’t know for advice, just like that.

John Warrillow:                Interesting.

Matt Slaine:                       Whether it’s through the YPO network or just through friends and-

John Warrillow:                Young Presidents Organization, yeah.

Matt Slaine:                       Yeah, or LinkedIn. It’s funny how there’s almost a lack … For whatever reason, a lack of resources out there about evaluating that decision, because there’s millions of iterations of how it can happen and how it can be structured. Which, frankly, makes it really interesting to put together, because there’s no kind of clear way to do it. A lot of it’s very, very personal; despite business not being personal at all.

John Warrillow:                Yeah.

Matt Slaine:                       So a lot of it is what makes them feel right. What feels right for them? Do they want to retain a piece of the business? Do they want to kind of go along for a ride because they believe the buyer is going to do something they can’t? Do they want to break? Do they want stock? Do they want cash? What’s the timeline of the payment? Is it all upfront? Is it over a certain period of time with performance or other type of goals?

Matt Slaine:                       So it would take … I can sit here and talk to you for hours about all the different iterations of what a sale agreement or a purchase agreement could look like, but I think it really comes down to who you are as an individual, and what your individual situation-

John Warrillow:                So let’s make a leap of logic here and assume that listeners to this podcast are saying, “I want the most money upfront as I can possibly get, and I don’t want an earn out. I don’t want to stay on. I don’t want to work for some guy. I want my money upfront, and I want to leave.”

Matt Slaine:                       Yep.

John Warrillow:                What advice would you have for that entrepreneur?

Matt Slaine:                       I think the logic is definitely right. People generally want as much as they can as quickly as they can.

John Warrillow:                Yeah.

Matt Slaine:                       My advice is get it. My advice is get it. You have to understand … You know, if you look at Dale Carnegie, and kind of his rules; one of his rules, actually rule 17, is put yourself in someone else’s shoes. Always look at every situation in someone else’s shoes. And if you can do that, you can pretty much negotiate and/or sell them effectively.

Matt Slaine:                       So a buyer wants the exact opposite. Right? If you look at black and white, you want everything as much as you can up front. The buyer, on their side, wants as little as possible, as far down the road as possible.

John Warrillow:                As little as possible up front, and as most as possible far down the road.

Matt Slaine:                       Far down. Exactly.

John Warrillow:                Based on performance and …

Matt Slaine:                       And they want to pay the lowest they possibly can, right? I mean, you don’t walk into a store seeing how high you can pay. You want to know what’s the lowest you can pay.

John Warrillow:                Sure.

Matt Slaine:                       And so if you start there, you usually meet somewhere in the middle. We were really lucky in our transaction, that it was a cash transaction that was done, because they were able to take the business that was ongoing and plug it right in without skipping a beat. So we had set it up very purposefully, in a way that it was totally self-sufficient and standalone, that it could … The parts that they liked about our business could be plugged into their business pretty quickly with little to no investment at all. Some time investment, but no capital.

Matt Slaine:                       So I had built it over those six years, in order that a strategic or a private equity firm would be able to kind of run it, day one.

John Warrillow:                And specifically, the two or three things that made it not dependent on you, personally, would be what? If you had two or three things that you did that made it attractive to both the strategic and a private equity group.

Matt Slaine:                       Yeah. And I mean, it goes back to putting competent people in charge with real decision making power that you trusted. So someone, a CFO or VP of Finance or whatever the role is called, who understood the numbers and could make decisions and do the budgets and do the reporting and flag problems as they’ve come up, and someone to run sales, and someone to run operations, or whatever it is. So you want the decision making to be done outside of you. You can always have approval, as I did. I can approve or not approve, but most … If a decision got to me for approval, it was probably because it was a difficult and/or highly consequential decision. But generally, they were able to do it on their own. So that’s kind of one, is have people around you that you trust and really give them the power to do it. That’s hard. It’s easier said than done. But you have to give up your ego a little bit. Right? You have to trust and give up the ego that maybe you know best. And realize that, “No, no, no. They actually know best,” because they’re actually much deeper in it than you are.

John Warrillow:                Let me go back to my scenario for a second. So let’s imagine another entrepreneur, another YPO buddy is saying, “Matt, the best deal I can get is 70% of my cash up front, 30% in a three-year earn out, and I just don’t have the stomach for it. I don’t want to work for somebody. I don’t really like the guy that I’d be working for. It’s the best offer I’ve got. What do you think?”

Matt Slaine:                       Yeah, that’s an interesting scenario, and it actually happens all the time, because entrepreneurs generally don’t want to go work for somebody. Especially if they don’t like them. You know, I think I’m a little different, that I love working with people and teams. I’m not a one-man show. I’m very much dependent. I know what my weaknesses are, and I’m very much dependent on having a good team around me. But going back to your scenario, sometimes you can’t have your cake and eat it too, right? It depends and what your personal situation is. If that 70% is enough money to make it worth it for you, you’ll kind of suck it up a little bit and do the best you can. You could always … A good entrepreneur is also a good negotiator. You’re essentially always negotiating, whether it’s your employees or your clients or product timelines. So you’ll try and do something that’s a little bit more palatable.

Matt Slaine:                       And you always have the option to say no. And say, “You know what? It’s not what I want. I can do this another year. I believe in the business, and I’ll come back to the market in a year and see if there’s someone else out there,” and that’s the magic of this country and capitalism, is there’s … A year will look completely different, and there’ll be new people out there with new, fresh capital, waiting to be deployed, and you’ll potentially get a much bigger offer.

John Warrillow:                Speaking of new opportunities, tell us where you are, if you don’t mind sharing. And kind of what are you up to now?

Matt Slaine:                       Yeah.

John Warrillow:                Other than being a father of twins.

Matt Slaine:                       Yeah, so part of my deal was I stayed on as a consultant for three months after we closed, and that was really through February of 2019, where I worked with the new owner and the employees, as they wanted me to, to help transition clients and make sure everything went smoothly. So I was really … I wanted this company to be successful. I want it to be successful. I want the new owners to feel like they bought something special, and I want it to continue to prosper. I’ve absolutely … I think a lot of people leave a business, even if you had your best intentions, they’re kind of angry, or that guilt, or whatever the feeling is; where no one can do it better than them. I think I very purposely tried to avoid that.

Matt Slaine:                       So at the end of February, I decided I was going to take time off. And that’s really hard for an entrepreneur, for someone that’s been running a business for a long time, or working for a long time, to … You know, it probably takes two or three months to actually stop. So I found myself, over the course of the winter, staying busy doing things. And it really wasn’t until spring, late spring, early summer that I was able to take a breath and relax and start to play golf and really kind of explore myself. And time is good and bad. I totally understand that, and sometimes you need a timeline to make a decision. So I have put an artificial timeline on myself. Obviously, it may or may not happen. But I put a timeline on myself to figure out what my next challenge is going to be, so I’m pretty focused on that deadline. You know, a pretty goals-driven person, so I have a goal, now. But what I’m focused on today is twin boys showing up in a few weeks and making sure that everything’s ready for that. And I’m certainly not going to do anything before that happens. Once they’re here and settled, I am ready for my next adventure.

Matt Slaine:                       And during the down time, I’ve done a lot of exploring of my own strengths. It’s really understanding how do I play to my strengths? What did I learn? What were my lessons over the six years, and before that? What am I good at, and how can I apply that in a future role? And it’s amazing how many opportunities come to you, that you just have never thought of or expected. I mean … Yeah, it’s pretty … I mean, every charity comes looking for money, for sure, which is great. I’ve actually set a goal. I had never been involved in any kind of local philanthropy while I was working hard. I set a goal of getting involved with two philanthropic organizations during my downtime. So I’ve gone on the board of an animal rescue foster network that I absolutely am passionate about. And I’m starting to get really involved with the Make A Wish Foundation, as well. And those are kind of the two things I’m spending a lot of time, from a charitable perspective.

Matt Slaine:                       And then on the self perspective is, again, going back to what are the lessons I learned? How do I be a great leader, and what’s the type of situation where I’m going to do best?

John Warrillow:                That’s awesome. Tell me … Last question. Actually, second to last question, if I may. Describe, Matt, if you could, in as much detail as you can, how you presented your investors with their money back. Did you write a personal check and hand it to them? Did you wire the money? Or, what was that experience like?

Matt Slaine:                       It’s just a wire at closing. It’s pretty simple. It’s money … As an investor, you’re not … You know, it’s so funny. You spend so much time as an entrepreneur or CEO of a company, worrying about every last detail of which client’s upset, how do you make it right, which employee left, who are you hiring, should you spend the money on a recruiter? There’s all these moving pieces. And you get rewarded for that. But as an investor, your mindset is very, very different. It’s purely numerical. And balancing the spreadsheet world that … I call it the spreadsheet world, and the actino world, where you actually make products and services is a really, really unique skillset. And not that I ever went out to build this skillset, but what I’ve kind of been labeled, in the professional world, if you will, is this kind of private equity operator. Right? Where I’m able to … Because of my investment banking background, I understand the financial investor’s desires and who they are and what they want. But what I really love to do is take that and make it into action. Right? Hire John to build this team, in order to accomplish X, because that will create a 70% margin that will bring up total margins on the company by 3%, which means the value of the company is X instead of Y.

John Warrillow:                Right.

Matt Slaine:                       There’s a real disconnect, I believe, in the world today between the investor land and the corporation company land. And more managers, throughout the whole organization, can understand that connectin, I think the better we will all be. And that’s really what I’m focused on right now, in looking at my future roles of what I want to do; is most of my conversations are focused around taking companies that are not performing at what the investor believes to be the highest, and going in there and making them better. So translating spreadsheets into tactics. And that’s not a … It turns out, that’s not a very common skillset, so that’s something obviously that I’m building on.

John Warrillow:                Sounds like you have it in spades. Matt, last question. Where can people reach out if they want to say hi? And is LinkedIn the best way to do that, or …

Matt Slaine:                       Absolutely. Matt Slaine or Matthew Slaine on LinkedIn would be great. Would love to talk to any entrepreneur out there who is building, running, or selling a business. I benefited so much during the process, from people out there who sat down with me, had coffee, had sold their companies, gave me words of advice or wisdom, or just shared an experience. My YPO forum was integral in that whole process. And I am happy to do that. I love talking to people and meeting people.

John Warrillow:                Matt Slaine, S-L-A-I-N-E, if I’m getting that correct.

Matt Slaine:                       Correct.

John Warrillow:                Matt, thanks very much for doing this. It was great to meet you.

Matt Slaine:                       Thanks, John. Appreciate it. Appreciate the time.