337 Nick Wallis

Jeffrey Feldberg: [00:00:00] Nick Wallis is a partner in a leading London based mid tier professional services firm, Gerald Edelman. Nick heads up the M& A deal advisory team and focuses on selling private businesses with a value range of 5 to 100 million across different sectors. 

Nick has been working in finance for over 15 years and has advised on many successful and market leading transactions.

And before we hop into the podcast, a quick word from our sponsor, Deep Wealth and the Deep Wealth Mastery Program. We have William, a graduate of Deep Both Mastery, and he says, I didn't have the time for Deep Both Mastery, but I made the time and I'm glad I did.

What I learned goes far beyond any other executive program or coach I've ever experienced. Or how about Bruce? Bruce says, before Deep Wealth Mastery, the challenge I had with most business programs, coaches, or blogs was that they were one dimensional. Through Deep Wealth Mastery, I'm part of a richer community of other successful business owners.

The idea shared forever changed the trajectory of the business and best of [00:01:00] all, the experience was fun. And we'll round things out with Stacey. 

Stacey said, I wish I had access to the Deep Wealth Mastery before my liquidity event, as it would have been extremely helpful. Deep Wealth Mastery exceeded my expectations in terms of content and quality.

And you know what, my Deep Wealth Nation, why they're saying this is because Deep Wealth Mastery, it's the only system based on a nine figure deal. That was my deal. And as you know, I said no to a seven figure offer, and I created a system that we now call Deep Wealth Mastery that helped myself and my business partners, welcome from a different buyer, a different offer, a nine figure exit.

So if you're interested in growing your profits, preparing for a future liquidity event, if that's two years away or 20 years away, and you want to optimize your post exit life, Deep Wealth Mastery is for you. Please email success at deepwealth. com. Again, that's success, S U C C E S S, at deepwealth. com. We'll send you all the information about Deep Wealth Mastery, otherwise known as Scale for Ultimate Sale. That's where you want to be. You want to be with [00:02:00] other successful business owners, entrepreneurs, and founders just like you who are looking to create market disruptions.

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Welcome to the Deep Health Podcast. Well, you heard it in the official introduction. We have a rockstar with us when it comes to liquidity events, taking your company to the next level, unlocking your financial freedom. You're gonna love his accent, although I suppose I have the accent to him as we're talking across the ponder, but I'm gonna put a plug in it right there.

Nick, welcome to the Deep Wealth Podcast. An absolute pleasure to have you with us. And I'm curious before we get going, there's always a story behind the story. So Nick, what's your story? What got you from where you were to where you are today?

Nick Wallis: Thanks, Geoffrey, and it's an absolute pleasure to join you. I hope my accent is understandable. So the story behind the story so as you say, I am, I work in corporate finance or [00:03:00] investment banking mainly taking or selling private companies in, based in the UK and obviously in the US and overseas.

The journey to get there was interesting one. I've always been interested in finance studied finance and accounting at university. I actually then went to work for Lehman Brothers in the summer of 2008 which wasn't the best time, but it was a very interesting time and I spent about three months at Lehman Brothers and then as soon as I left, the whole world went into a financial crisis.

So, yeah, you can say it's my fault but I picture it as they couldn't cope without me is the way I tell people. But so yeah, I started in investment banking, and obviously in 2008, the global financial crisis wasn't the best time to be in banking. So whilst I kind of had an offer from Nomura who took over Lehman's, I decided to go what I thought at the time was a safer route into accountancy.

So I started my career at one of the big four accountancy firms in London, qualified as an accountant actually really enjoyed it. So I spent four or five years doing audit and then moved across into what I call the deals environment, mainly working with. And I've done a lot [00:04:00] of due diligence a lot of modeling work, a lot of forensic work.

And it led me into kind of being more of an advisor and helping clients. And when I was in big four accountancy, I worked on some really high profile transactions. So billion pound transactions or billion dollar transactions that were on the front page of all the financial newspapers but never really met.

The entrepreneurs, the business owners, and the founders and that was something I really was missing. And so I went to work for a boutique investment bank where I work with entrepreneurs and founders on a daily basis. And that's really where I properly understood business and what makes business tick.

And so we work with companies with sort of a value of somewhere between five and 150 million. And they're the sorts of businesses that are the lifeblood of the economy, both in the UK and the US and worldwide. And that's really how I've got into what I'm doing today. So I've been doing that now for over 10 years.

I've now moved into head up the team at an interior accountancy firm, but doing a very similar thing, working with very similar clients, looking to [00:05:00] sell their business or buy a business. But mainly, most of our clients are looking to sell their business. And that's how how we've ended up today.

I've gone full circle.

Jeffrey Feldberg: Absolutely love your story, Nick. There's so much to unpack. And so before we get going, I just wanted to ask you because -2008, the meltdown that happened, and I'll share a quick story from my side. We were going through our liquidity event and I was at one of these social get togethers or parties that our investment bank had put together.

We're kind of the flavor of the month, if you will, and they're showcasing us around. And Nick, I will never forget this. I was speaking to an investment banker. He comes in and he says, Jeffrey, you're not going to believe what just happened because if I would have told myself this, when I first got going, I would have said, hey, what kind of cheap drugs are you smoking?

I said, well, now you really got my interest, what's going on? And he said, I just did a deal where there was literally no diligence. Papers were signed off. We went, the deal was done, couldn't believe it. And as soon as I finished my conversation, I went to my business partner, Steve Wells, and I said, Steve, let me share the story with you.

Something's not right in the [00:06:00] marketplace. We got to get our deal done as soon as we can, because I think this whole thing is just going to implode. Two weeks after we did our deal, Nick, that's when the Great Recession happened. It happened in the bond market first, which is what our buyer was using to finance the deal.

And I look back, we were lucky. I'd rather be lucky than smart. Had our deal taken two weeks longer, there would not have been a deal. That's what the buyer said at the time. So I want you for the benefit of our listeners who obviously liquidity event. Why speed is so important. Speed always wins. So we both saw the effects of 2008.

We both got out at the time the whole Leemings Brothers bank fell down because you weren't there. And we're going to hold you responsible for that, Nick nudge, wink, wink. But why is it important with that story there and other insights that you have of why speed is so important when you want to get in and out of the market?

So what's going on with that from what you saw?

Nick Wallis: Oh, speed is so important and getting stuff done and keeping momentum is probably the most important thing in any transaction because we don't know what's around the corner. You [00:07:00] just don't know. Whether it's global financial crisis, whether it's a global pandemic, whatever it is, you don't know what's around the corner.

And the longer something takes The more chance there is that something comes up, stop something happening. There's more opportunity for a buyer to find an issue. There's more opportunity for your trading to go wrong, for a customer to lose, or for a big global economic event like the 2008 crisis. So, we are very firm advocates, Geoffrey, and completely aligned with you, that getting, once you're in the market, just get it done as soon as possible.

Making sure you keep momentum is so important with these things. And the other thing is, you could be talking to a buyer who might be talking to two or three other targets, and if yours is taking slow, their priority might move to something else, and then it takes even longer. I mean,, unfortunately, one of the things that's come out of COVID in particular is that deals are just taking a lot longer.

So there's so much more scrutiny from buyers around due diligence and deals are taking, in some cases, months longer than they did before. We completed one [00:08:00] health care deal just before Christmas. That probably took six months longer than we were thinking, it was meant to take three or four months and it ended up taking almost a year.

And it was painful, you know, it was pain, it was a painful process for both sides and there were ups and there were downs and the deal was off and it was on and it was off and it was on. And That's not good for anybody it's a distraction for the business, it's a distraction for the sellers it's a distraction for the buyer as well so yes, I'm a very fair advocate, get the deal done.

Once you've agreed a deal, get it done as soon as possible.

Jeffrey Feldberg: Absolutely. And for our listeners, what's nice about today is Nick's colleague at the firm Carl Lundberg was on earlier, and we'll put a link in the show notes so that, so you can hear that. And Nick really brings a whole other perspective. So he's really going to open things up of what we went into with Carl, but now into other areas as well.

And Nick, what I really like about your background. You've been there on the diligent side. You've been there really on all sides of the deal spectrum. You see a lot of what's going on. A lot of advisors don't have that benefit. And for the benefit of let's call it our North American [00:09:00] listeners, your title that you shared a little bit earlier, corporate advisor, that's like here, that's like a super investment banker, given your skillset, given what you're doing.

So you really bring a lot to the table. So let me ask you this. Given what you've seen, both on the deal side of where you have a prospective buyer who's looking at a company, perhaps that you're representing, perhaps they're walking away from the deal, or they're pulling aside either you or the company, and they're saying, we really like your company.

We were prepared to move forward at X Factor. X, but because of what we've seen, or because of what you're doing, or because of what you're not doing, there's now going to be a penalty. It'll be X minus whatever that is. What would be, and I suspect I'm a little bit all over the map here, but there is a method to my madness.

I'm going to call it Pareto's law, the 80 20 principle. Is that the case where the same 20 percent of the issues in that circumstance are creating 80 percent of the problems or the headaches? And if that is the case, What would be one or two of the top causes that are creating that pain [00:10:00] or the walking away from the deal table or even no deal or a lowered enterprise value?

Nick Wallis: Yes, it's a great question, and I think some kind of price chip or amendment to the deal, the change in the terms is more common now than it's ever been, particularly in a post COVID world where there is so much scrutiny it's getting less, but that two year period post COVID when there was this COVID bounce or this COVID bubble when nobody knew really what the real trading position was meant that there was a lot more contingent on, Money or contingent consideration in the deal and much more risk that there was gonna be a price chip or a change in the deal.

The biggest single reason why deals fall over is trading the trading performance of a business during a process suffers. And again, another reason, what we were just saying. Why the deal needs to happen quickly because it mitigates or minimizes that risk. So that's the biggest thing. The trading position, the business, the shareholders or the owners take that eye off the ball and the month or two months or three months during the process.

The trading isn't quite [00:11:00] hitting the budget numbers that we forecast and then the buyer goes, well, let's just give it another few months and then give it another few months and then you lose momentum and then another few months and then we're going to change the terms of the deal. That's the biggest reason.

But we see. Yeah, and that's probably makes up, that one thing probably makes up 80%, I would say, or 70 to 80 percent of the reasons why deals fall over. I mean, there are lots and lots of reasons shareholder disputes, we see intellectual property issues, we see financial information issues, we see issues with employment contracts or employment law, we see issues with, concentration of customers and suppliers.

We see issue with using subcontractors or litigation. There's various other things that come up during due diligence and another reason why planning is so important to make sure we're mitigating as many of those issues as possible which I'm sure we will talk about. But the trading performance of the business is probably the single the biggest thing.

And that's why Again, and sometimes that's not within our control. It's just the nature of a customer stops trading with you. You can't do anything about that. But again, there's a couple of things you can [00:12:00] control. One is the speed, as we talked about getting it done quickly, that minimizes it.

The second thing is making sure that you've done the proper preparation program and you've got someone in, who is representing you and doing a lot of that pain for you. Because as soon as business owners, particularly smaller businesses, where the business owner is a fundamental part of the business.

As soon as they're spending X percent, 50, 60, 70 percent of their time doing something else, i. e., preparing for an exit, their eye gets off the boil, that's when the trading suffers. So if that person that's involved in the heavy lifting of a deal alongside their advisors can be someone that's not instrumental to the day to day running of the business, That is, definitely a positive thing, and that's why we often suggest to clients they bring in sort of a finance person externally that can take over the day to day finance and that, their current finance person can help with the deal or vice versa.

So there are ways to mitigate those risks but I'd say that's probably the biggest single reason is the trading performance.

Jeffrey Feldberg: And Nick, as you're talking about that, [00:13:00] I am all smiles at this end. Oftentimes, you're never a profit in your hometown. What you're talking about actually is our step number four in our nine step roadmap. We talk about this in our 90 day Deep Wealth Mastery Program. And step four, and I'm sure you'll agree with this is where the business owner goes through an internal audit.

And a lot of times, we'll get criticism from outsiders saying, Jeffrey, why are you having people go through due diligence? Not once, but twice, before the deal and then during the deal. And Nick, it's exactly your point. As we love to say here at Deep Wealth, let's find those skeletons that are in the closet before we ever speak to someone like yourself, Nick, let's remove them.

And then let's find those areas that we are world class in, that can really bump up or catapult our enterprise value. Know about those ahead of time so we can really Make that aware of, or bring that to all of our stakeholders, our customers. So they renew with us new customers. They'll come on board because of this and ultimately to the future investor or buyer.

Nick, before we move forward though, let me ask you this because out of every episode, we want our [00:14:00] listeners walking away with one actionable item. Hopefully something that's really low effort, high return. I know there's going to be many of those, but you've said some foundational things with us right now.

So coming out of this episode, if a business owner based on your experience, what you've shared, what you've seen, if they were to do one thing that could prevent them, these heartaches of, Oh my goodness, I just lost that deal. The buyer walked away or wow, my value went down.

The LOI said one thing, but they found this other thing and it went down. What would be that one action? What would you think?

Nick Wallis: Well, I would say that the action is doing a diagnostic on your business or an internal audit as you call it. I think that is so important. We call it a diagnostic our world. In an ideal world, a client has been through the 90 day program with you, and then we kind of take them on because they've done all that preparation, but where they haven't, and they come to us and say, I want to sell my business, the first thing we do is we put them through our diagnostic.

Which is just identifies, it's not doing due diligence on the business, but it's making sure that they are prepared for due diligence and there are [00:15:00] no skeletons in the closet. We flagged all the big issues. And even where there are big issues, it's not necessarily resolving them. It's making sure that we've got an answer to it so we can preempt any questions so that we can say, yeah, we know this is an issue.

This is our lawyer's view of it, or this is our finance advisor's view of it. And it's not kind of, oh God, what do we do? So it's making sure that you are properly prepared and there are no skeletons in the closet. Or if there are, we've got a resolution to it. That'll be my number one piece.

Jeffrey Feldberg: Wow. Terrific advice. And I love what you're saying. You're actually talking about our step three or part of our step three, future buyer, future investor. And this is where we're creating narratives, particularly if we have skeletons that we can't remove. Hey, buyer, investor, yeah, here's a skeleton, but let me tell you, it's on our radar, here's what's going on, here's how we're handling it, here's what you need to know, because the currency, and you can tell me, Jeffrey, you're off base or on base, the currency in M& A, it's not money, it's trust, and if you can earn that trust, okay, yeah, Jeffrey dropped the ball here, but he's been spot on with everything else.[00:16:00]

I trust them. I'm not going to penalize them for that. Hey, everyone makes mistakes. No one's perfect. And so Nick, with that said, and again, let's continue forward with what's going on. So tell us about your secret sauce, because I say as business owners, and I'm putting myself in this category as well, as business owners, we can be incredibly smart.

But we're also incredibly stupid. And what I mean by that is, how do you master something you've never done before? The skills to build a business are not the same ones to sell it. And oftentimes, it's a ready, fire, aim approach. Nick will show up to you as a business owner. Okay, I'm ready. Take me to market.

And I haven't done. Anything when it comes to preparation, I haven't even thought about this. So what's your secret sauce? What's the preparation? What's your system that will differentiate you from me going elsewhere, where I'm working with you, Nick, and the team, I'm going to get ultimately a better result.

What does that look like?

Nick Wallis: Well, not just one thing I would say, I think it's making sure that our focus as a business is on successful deals. So we have a fee [00:17:00] structure whereby the vast majority of the fee is based on success. So we don't make money unless the deal completes. So for us, the focus is on making sure we are very selective with the clients we work with and we make sure that even if it's going to take us a little bit longer to get the fee, that we increase the chances of getting the fee.

So to do that, we are doing this diagnostic that I mentioned. So the due diligence preparation, we're finding the key issues and resolving them now, or at least having an answer or pre empting what the questions might be. We're making sure that business is properly presented to buyers. this sounds easier it actually is.

I think no buyer is ever buying a business for what it's done historically. A buyer is buying a business for what it's going to do in the future and being able to articulate that in a credible way is actually not that easy. So we make sure that's one of the first things that we do when we work with a new client is thinking about the growth plan and the growth map and what are those opportunities for growth and how do we [00:18:00] present those in a credible way.

So for example, If you've got a client that operates purely in North America, but their growth plan is to move into Europe. If you said to a buyer, well, we're in North America, but we're going to go into Europe, the buyer will look at you and go, well, you've never done anything outside of North America.

So that hasn't got any credibility. But if you'd started and you opened up an operation in Spain or in the UK or wherever, and you've got a few people there and you've started to sell, albeit at a small scale, It just adds so much more credibility to that story, and that's when you enhance the value because the buyer will be hopefully then paying on a future, a multiple of future profits because they believe in them.

They're credible. And that's what we try and do. And sometimes we work with clients for up to a couple of years before we Sell to enhance that value and ins saleability by doing those things. So it's preparing a sales deck. We call it an information memorandum, a sales deck about a business that shows credible growth.

It's preparing the numbers that sit [00:19:00] alongside that in a credible financial model. And it's thinking strategically about who's gonna buy the business. I think that's really important. In fact, probably one of the most important things that we do is thinking about who's going to buy the business. And of course, we don't know every company in the world.

And we work across lots of different sectors. But we like to think, and it's obviously easy to say, but we like to think that we're very strategic in thinking about who's going to buy the business. And it's thinking outside the box. It's coming up with solutions that, often our clients say, oh that my buyer is going to be this one, or this one.

And we say, well, hold on a second. What about this group or this group? And they say, oh no, no, no, no. And then we say, look, well, let's speak to them and find out. And not every time, of course, but at least probably one in three, if not more of those times. The buyer ends up being someone that we've thought of a little bit outside the box.

And ultimately, because of the strategic synergies there, they end up potentially paying a higher price.

So I was just gonna, I was gonna give an example of that. So, we had a transaction a few years ago that was a business that did food safety standards.

So, it was [00:20:00] a UK based business that every time someone supplied into one of the big supermarkets in the UK, they had to have a certificate, a certification, and this business provided that certification. The business was looking to grow in the U. S. and in China and in India. And they'd actually started to do some of that in those territories.

They were telling us the buyer was going to be someone that was in food certification, right? That was the natural buyer. And we did some research and we said, well, actually, what about a business in different parts of certification, not in food, but already has infrastructure in the U. S., India, and China?

Okay, find out, but we don't think it's going to happen. Anyway, very long story short. All the businesses that were in food certification offered a price of around seven to eight times profit, which was about, 15 million, 15 million. We ended up selling the business to a a supplements standards business, so not in food, for about 45 million.

So three times more than they were expecting, because they had the strategic synergies in those key territories. Although they weren't necessarily in food [00:21:00] certification, they had their strategic synergies. And I think that's my example of thinking outside the box, and that's how you really enhance the value.

And that's, going back to the question around secret sauce, it's making sure everything is properly prepared, making sure there's no issues, making sure the business has strategic opportunities that you can present in a credible way to buyers, and then thinking outside the box in terms of who those buyers might be to really enhance the value and saleability.

Jeffrey Feldberg: and Nick, for the benefit of our listeners, for our listeners, if you're ever wondering, well, do I really need an investment banker, I could probably do this on my own. And you know what? I am a great negotiator. I'm pretty sure I know who it will be by my business. Well, let me ask our listeners this from a 15 million enterprise value to a 45 million enterprise value.

It's a three X. Don't you think that's worth paying a success fee to a talented individual like Nick and team to do that? And so Nick, I want to circle back to something that you're saying, because it's absolutely not gold. But Platinum, and again, this falls squarely in our [00:22:00] step three, future buyer or future investor.

And you were talking about why not create a narrative of a future opportunity that the business hasn't done today, but you can paint the picture of, Hey, we haven't done this. We lack the experience. We lack the capital, but guess what? As a buyer, you actually have the capital. You have the experience.

Here's what you can do. And Nick, it absolutely works. I'll share a quick story and we'd love your thoughts on that. Just to really support what you're saying. For my e learning company, we wanted to expand internationally. And we had only been really selling in the U S and the vision was, why don't we find international students outside the U S and it was all done through e learning who wouldn't have to come to the U S they could say in the comfort of their home, in their country or wherever that may be, and we can actually charge a premium for that.

Because there's a marketplace for that where the families don't want their kids to go to the U. S., never come back, they lose their kid. And because the kid stays there, marries, all that other things, and here was a terrific brand name university. So we didn't have a deal signed. We never had a [00:23:00] dollar of revenue from that.

The buyers didn't show up to the liquidity event. Because of that, but the fact that was there, and that was a narrative, they got really excited about that, of what they could do, and it elevated, actually catapulted the enterprise value. And so it goes back to what you're saying about the narrative.

So let me throw something I've had on the podcast. We've had evaluators come on and they said, Jeffrey, for us, 80 percent of a company's value. Starts with a narrative. If it's an exciting narrative, that's where I start. I'll look at the data, the facts afterwards, and yes, the data, the numbers have to support that, but it all starts with a narrative and you're talking exactly about that.

What kind of narrative can you create for the buyer or the investor? So where are you on that? Do you buy into that? You're not buying into that. What are your thoughts?

Nick Wallis: Yeah, I think I buy into it to a degree. I think nobody's going to be buying a business if the narrative isn't right. So that's the first thing. I think the fundamental business model and the management team are very important to the business as well. So, and that is kind of the [00:24:00] underlying narrative around it.

But as I said, look, I think it's about buying, it's about presenting to a buyer a business that's going to grow. And whether that's going to grow with synergies from the buyer or whether that's going to grow because of growth opportunities you've already got in place, I think that's the narrative and that's how you need to present it.

And we always think about those growth opportunities in sort of two avenues. One is kind of the actionable things that we would do. As a standalone business, if we weren't selling and that might be stuff that we've started or might be stuff that's in progress, a bit like you were just saying in, in your example on the e learning side.

And then you've got kind of the bit more sort of, not extreme's the wrong word, but sort of more long term opportunities. So saying, look, if we had the capital and if we had the infrastructure and if we had the the bandwidth, we could do this as well. And this just, and what it does is it just presents.

So, I think it's really important to give the buyer the vision that they could then do. Because most of the time the buyer is bigger than the seller, and the buyer will have deeper pockets, and the buyer may have that [00:25:00] infrastructure. And that just gives the buyer the idea that actually they're not just buying the business as it is today.

They're buying a business with credible opportunities that the team are actively working on. But also all of these other opportunities that could come in the future. And that's really the narrative that I think helps to sell. That is pretty stable and pretty flat in some industries, in some sectors, that's attractive because you look, people like the recurring nature of clients or whatever else.

But for most businesses, the buyer wants to see growth and wants to see a bigger return on their investment. And going back to my example on the food standards business, the business was doing, 3 million of profit. When we started the process, 'cause of those synergies that the buyer had within 18 months, the business was doing 9 million, 9 million pounds actually.

So probably closer to 11 or $12 million of profit because of those synergies. So actually whilst they, the multiple they paid was much bigger than we were expecting in their world, they weren't paying a big multiple because it was the synergies that allowed that. And that's when you come back to that narrative, it's [00:26:00] making sure that you can sell the story to a buyer in the right way.

Jeffrey Feldberg: Absolutely. The narrative is so important. And for the people who are more on the logical side of things, Jeffrey, nothing happens unless it's in a complicated formula in a spreadsheet. We at Deep Wealth say actually it's the opposite because we buy on emotion first, justify it with logic later, whether it's a hundred dollar sweater or a hundred million dollar or a hundred million pound deal, humans are humans.

From our side of things, we go into the science, we go into the arts, into all the studies of why that narrative is so important to get people excited. And you also shared something really interesting, Nick, that a lot of business owners don't necessarily get right up front, and that is you can't have your best days behind you.

So if you're saying, I want to take every single penny out of my business before I take it to market. Not going to fly for the future of business buyer or the investor. They want to say, okay, what's ahead? I know what you did yesterday. I know what you did today. I want to know what you're going to do tomorrow onwards, particularly when I'm owning the company.

[00:27:00] So Nick, with all that in mind, we've talked about some things of what not to do. When you look at whether it's been on the audit side, on the accounting side, the M& A side, as you're looking at companies, taking them to market, buying companies, selling companies, what would be some things that we absolutely must do right.

That makes a difference to get the deal done, increase that enterprise value. I suppose we could reverse what you said of what not to do. Are there things though of what we should be doing that we haven't spoken about?

Nick Wallis: Well, it sounds very salesy, but the first thing I would do, if you're thinking of selling a business, is appoint an advisor. Because as we've said, the advisor can first of all take a lot of the pain away, but also help strategically add, not necessarily just value, but saleability as well. There are so many businesses in the market.

That are taken to market by, I don't like calling them advisors, more brokers that end up not selling. It's astonishing the number of businesses that don't sell because they haven't done that proper preparation. So reversing what we were saying before, it's appointing an [00:28:00] advisor, making sure that you are properly prepared to increase salability and enhance the enterprise value of, we said, that's the first thing we do.

The second thing is making sure that you're ready individually as a human. So forget the business for a second, making sure that you as the seller are ready. And there are various things that you can do as a seller to make sure that you're ready.

And that's making sure that you are not integral to the business anymore. Because nobody's going to buy your business and let you walk away if you are still integral to that business. So creating a succession plan is very important. Making sure that when you're selling a business, you have a story.

So, coming back to what we were saying about narrative, if you are in your 30s or 40s and you talk to buyers and say, I want to sell this business and I want to walk away, there has to be a story as to why that's the case. You're going to be presenting a business that's going to be growing, right? The business is going to grow.

We're going to double, we're going to treble in the next five years. So, what you don't want is a buyer to look at that and say, well, hold on a second. If you're going to [00:29:00] grow, double, treble, why are you selling? Why are you selling today? So it's about creating a story. And the story we like to give people in that scenario is, I don't want to sell the whole thing. I want to sell the majority because I want to de risk my family. I've put a lot of blood, sweat, and tears into this business, and I want to de risk. But absolutely, I want to keep a good chunk of the equity, 10, 20, 30 percent of the equity, because I want to benefit from that upside going forwards. In reality, most buyers We'll want to buy a hundred percent because that's the nature of it, but by giving that message and making sure that messaging is correct, you offer an enhanced value.

So you probably get more value for the 80, 90 percent than you perhaps would do for the hundred percent if you said, I want to sell and walk away. So, it's creating that story and having an advisor help you do that I think is really important to do that. Obviously if you're a bit later in your career, 60s, 70s, it's a bit of an easier answer because you can say I'm looking to retire, I'm looking to take a step back, and that's a bit of an easier sell to a buyer, but especially if you're a bit younger.

It can be a bit of a conflict, saying my business is [00:30:00] going to grow, look how fantastic it is, but by the way, I don't, I want to sell it and I don't want it to get benefit from that upside. It's a bit of a conflict, so there are ways to do that as well. So, appoint an advisor, think about your personal situation, and think about the story, I think are probably the three key things I would advise.

Jeffrey Feldberg: And Nick, once again, as you're talking about this, it's all the more reason to ensure that you have professional representation around you. Again, how do you master something you've never done before? How do you win at a game where you don't know the rules? And absolutely, I can imagine some business owners without that preparation.

Yeah, I think the industry is going to tank and I want to get out of it now. Well, not what a buyer or investor wants to hear. They want to minimize their risk. And maximize the return. Nick, one of the things that business owners often don't understand, and we're going to start dispelling some myths based on your experience and what you're seeing, and again, you can say Jeffrey on base or off base, a lot of business owners saying, well, if I'm going to Nick, of course, he's going to want to work with me, I'm going to be providing him new business, I'm going to be writing a success fee, I'm going to be signing a check, and all that is good, and Nick is going to take me no matter what.

And what they don't understand [00:31:00] is Nick, you and your team, you can only take on a certain number of deals. There's only so much time in the day of what you can do. And if you say yes to one opportunity, ultimately you're saying no to other opportunities. And so just like that business owner, who's maybe checking Nick out, the team out, are we going to work with them, not work with them?

You're doing the same thing on your side. So when it comes to taking on a new client, what are you looking for that's going to have you say yes? Or what are you looking for that's going to have you say, you know what, thank you, but no thank you. Wish you the best of luck.

Nick Wallis: It's interesting because we have a committee that for every new potential client we discuss and the key things we discuss are number one, value expectations. If we are working with a client where we think the value is 20 million dollars and the client thinks it's 80 million dollars, There's an inherent conflict there.

The chance of success is very low. Now we might say, we'll be honest about that, and we'll say we think the value is lower, but we can perhaps work with you for a period of time to increase the value. It may not get to 80, but, and we need to understand that, but if [00:32:00] people are adamant in that scenario that the value is 80, it's not a point for us, because the chances of success are low, because even though We like to think we can outperform we can get to 25 or 30, or even three times that, as in my food standards example from earlier, then, but that's still not 80, in that sort of example.

So there are times then where we think we can enhance the value, but in reality, if someone's value expectations are unrealistic, we won't work with them. The other thing is making sure that they've got credible numbers and numbers that stack up. I worked with a client previously where he kept telling me that the business was Making two million pounds of profit, two million pounds of profit, two million pounds of profits, two million pounds of profit, kept going on and on about it.

And then we sort of took his word for it. We started working with him. And then when the numbers came through, we realized that actually the business wasn't making two million pounds of profit. It was making no profit at all. And that makes it much, much harder to sell. So. We need to make sure they've got credible numbers that stack up and that's a learning that we've taken from that.

Make sure we see proper accounts before we start working with clients. Making sure that the business is [00:33:00] in a market that is attractive. There are some markets that are on the decline and we know that the chance of success therefore lower. And making sure that the management team and the business owner's story stacks up, I think is the other thing.

So making sure that, for example, you don't have one shareholder. Who wants one thing and another shareholder who wants a different thing? Because that, ultimately, that shareholder alignment is so important. And if there isn't a shareholder alignment, the chance of success is ultimately lower. So it's making sure all of those things kind of stack up.

Fundamentally, we get a gut feel as to whether we think it's something that we can do. If valuation expectations are sensible, the numbers stack up and it's a good business with a good management team. It's probably going to be a client for us, but you're absolutely right.

We have to be selective. About who we work with and we need to make sure that we're getting paid on success and the only way we get paid on success is if we can be selective about who we're working with and make sure that we're going to deliver that success.

Jeffrey Feldberg: Absolutely, Nick. And what's interesting as you're talking about that, again, taking a page right out of our playbook with everyone who goes through our Deep Wealth Mastery [00:34:00] Program, otherwise known as the Scale for Ultimate Sale Program, one of the things that we have them do is to create a narrative for every one of the advisors before they speak to the advisor.

So imagine myself as a business owner, Nick, I'm coming to you and saying, Nick, here's our opportunity. Here's why we think it's a great one for you and the team and walk you through that to get you on board, to get you excited because you do have choices. You don't have to say yes. You could be saying no.

You could have other things. Well, yeah, Jeffrey has this opportunity, but we have these three other opportunities. Let's pick the best one that's for us. And so always putting our best foot forward. And I'm curious about this in terms of putting your best foot forward, there's that saying that birds of a feather flock together, which is a nice way of saying who you surround yourself with really speaks a lot about you.

So as a business owner, if I'm just going out there on my own, if I don't have representation, I'm speaking to a buyer or investor, to me, it screams amateur night. But if I have you, Nick, and I've never met the buyer doesn't know us. We don't know the buyer, but the buyer sees, okay, we have Nick's company behind this.

Okay. Jeffrey [00:35:00] must mean business. He's serious about this. It really helps set the stage of, okay, I better put my best foot forward. I'm going to have my best numbers out there. The best kind of deal out there. Would love your thoughts about that, of how the team, the advisors that you represent can make all the difference before a word is even said.

Nick Wallis: A hundred percent agree with that. And I think interestingly, I often come across business owners who have been approached by a buyer and look, by the way, there's a lot of value that an advisor can add even from that point onwards, which I can touch on. But even in that stage, I always say to them, tell them you've got an advisor.

Yeah, name drop if you can, because even if we don't get the work out of it or it's not us, it adds so much more credibility to your argument and your story that it shows you're serious. Sometimes buyers don't like it when a seller has an advisor because they know they're going to have to pay more fundamentally, so that's when they say, oh no, you don't need an advisor, we'll do this between us, we know each other.

Even more reason to have an advisor. And because even in that example I just gave where seller has already been approached by a buyer [00:36:00] most of the time the buyer, the having an advisor can get the deal in a better place. And that's not just price prices is one thing. Absolutely. But there are so many other aspects of an m and a deal that are really important, whether it's the warranties, whether it's the restrictive covenants, the restrictions going forward.

Whether it's the treatment of the balance sheet and how you treat the cash in the business whether it's your ongoing role, there's so many other factors that come into play into an M& A deal and having someone who does this day in, day out, knows all the key things to say, it's so important.

Obviously, price tends to be the most important for most clients. And sometimes when you are talking to a buyer without an advisor, you're going to be working with them going forwards. It might not be for a long term, but it might be for the short term. And therefore, there's always going to be that personal challenge, that personal conflict.

Am I going to really push this as far as I can? An advisor doesn't have that personal connection. The advisor can push it. The advisor can play bad cop while you play good cop. You can always blame the advisor, oh, I told the advisor not to say that. There's always an [00:37:00] excuse, and having that advisor adds so much value.

I agree with you, Jeffrey, even before a word is spoken, by even saying to the buyer, oh, we've got an advisor, a corporate finance or an investment banking advisor, I think it, it adds so much value.

Jeffrey Feldberg: And Nick, to your point, I've had buyers on the podcast and it's also the same thing, Jeffrey, I prefer to find a business owner who doesn't have representation because I know I'm going to get a better deal. It's going to be quicker for me. It's going to cost less money and it's good for me. What they're leaving out of that is it's not so good for the business owner.

And Nick, you answered this, but let me be more specific with this. I don't want to put words in your mouth. So that unsolicited offer, you have that narrative going on from the business owner, well, I know who's going to buy me anyways, my competition, they've given me an unsolicited offer. They would be the buyer anyways, whether I had representation or didn't have representation.

So I'm just going to take that unsolicited offer because it's quick, it's easy, and I can just get it done. What are your thoughts about unsolicited offers?

Nick Wallis: Interestingly, I'd say most of the time when someone does have an unsolicited offer, they end up doing a deal with that buyer, most [00:38:00] of the time. However, they may end up doing a deal at a much higher price, because what I would always say to people is if that party's interested, there'll be other people that are interested.

So what I'm not suggesting is running a whole process and spending six, nine months talking to people or whatever else, because you lose momentum. And as we said right at the start, momentum is so important. By having one or two off the record conversations with others, that little bit of competitive tension, having an advisor to negotiate anyway, can get the price up.

We completed a transaction actually, a US target and a US buyer just a few weeks ago whereby there was an unsolicited offer. We did exactly that. We ended up getting the price. Up by almost 50 percent value and just from that, literally from having that negotiation and advising the client through the process.

So nothing wrong with an unsolicited offer. And if the value works, oh, all for it, it saves running a full process. It saves all that extra faff. So absolutely, I'd much rather. big fan of off market transaction where there's an unsolicited offer, but what I would say to clients is make [00:39:00] sure you've got an advisor to first of all increase the value, but also can run a little bit of competitive tension behind the scenes because most of the time You will do a deal with that buyer, probably, but probably much better deal altogether.

Jeffrey Feldberg: And again, it goes back to having that representation around you and you brought up an interesting point. You as the advisor, you can fall on the sword, so to speak, you can really push the other side and perhaps create a little bit of tension there, but it's you, it's not the business owner to your point who may have to work with the new buyer and the new investor for a period of time.

And so you keep that relationship intact. Nick, let me ask you this, as we're starting to bump up again, some time here. When it comes to what we call a liquidity event or an exit or selling a business, are there some common myths that you can dispel right away that when we buy into these myths as the founder, the entrepreneur, the business owner, it actually hurts us.

It doesn't help us. Does anything come to mind? 

Nick Wallis: , 

First of all, there's a common myth that it's quite a quick process. Unfortunately, it's not, especially if you want to maximize saleability and value. That's the [00:40:00] first myth. I think we often see people saying, Oh, but you know, someone's told me I can do it in three or four weeks. It doesn't happen. Now, obviously, as we said at the start, we want to get it done as soon as possible.

But three or four weeks just very rare. And actually these things just take time, unfortunately. That would be my first myth.

 Myth I think of is that you get all your money on day rarely in deals, you get your money on day one. We're seeing, especially in an uncertain economic environment that we've been in the last few years on the back of COVID, we've seen more deals have some kind of contingent element, whether it's an earn out based on hitting certain targets, whether it's just deferred, payable in the future.

More and more deals have those. Interesting in the deal, the US deal we just did, which has been publicly announced, so I can tell you who it is. It was a Shutterstock bought a business called Backgrid. that one actually, the vast majority of the cash was paid up front. It is publicly disclosed, so you can see it.

The vast majority of the cash was paid up front. So that was again, quite a rare actually situation in this environment. So, that would be my other myth.

Jeffrey Feldberg: and these myths are [00:41:00] dangerous. As we say here, Deep Wealth, we've got to stop believing, Oh, I believe this is how it is, or I believe this is the best way. And we have to start knowing, no, it may change tomorrow. New information comes out. We learn something new, but for today, Hey, I absolutely know. I don't believe I absolutely know, of how it is or where things are going with that.

Nick Wallis: And on that second point, , again, the more competitive tension you have, the more chance that that myth actually doesn't become a myth because you might get paid more because you can structure and you can negotiate and get parties off against it and say, look, it's yours if you pay a bit more and, all the cash is on day one, et cetera, et cetera.

But again, going back to that myth, we've seen situations before where someone's offered 20 million, all payable on day one, and someone's offered 30 million. Fifteen on day one, five based on hitting this target, five based on this, and five in shares of the buyer, or something like that. As a business owner, I know which one I'd rather take, and that's the first one.

Because you just don't know what's going to happen. And whilst, yes, you can have protections and legal documentation around what you can and can't [00:42:00] do, I know which one I'd rather have.

Jeffrey Feldberg: Exactly. And as terrific as an agreement might be, it's only as good as the amount of time and money that's being prepared to really defend against that if things go the other way that they shouldn't. So no guarantees. And I suppose, Nick, there's no right or wrong. It's really someone's risk tolerance of what works for them, what doesn't work for them.

But let me ask you this before we go into wrap up mode. And again, there's so many different rabbit holes that we can go down. And I've been holding myself back here as we're bumping up against time. Is there a message or a topic or a theme that you'd like to get out to the community that we haven't yet discussed?

Nick Wallis: I think the key message, we've touched on it, but not really discussed, is that a deal is not just about the price.

There are so many other factors in an M& A deal that need to be considered. So when you're negotiating a transaction with a buyer, people often get sold by the day, the headline number, but there are so many other factors there.

For example, warranties. Warranties are so important. You can have one deal where you get [00:43:00] paid a lot less. But you have a very limited warranty cap and a very limited amount potentially liable and you can have another deal where you get paid more but you've got unlimited warranties for the next 10 years resting over your head.

Again, I know which deal I'd rather have. Again, restrictions going forward. It depends on people's personal plans. If you plan to start a business again, you want those restrictions to be as limited as possible. There are some transactions where people are limited for three, four, five years from doing something going forwards.

And actually, so that needs to be factored into the equation. How you treat the balance sheet is so important. What, how you, most transactions are in the UK and the US are cash free, debt free. So making sure you can really extract the value from your balance sheet, that can really move the dial in a negotiation.

Again, it's a numbers thing, but it's a negotiation. And if you don't have that, you can actually, the headline enterprise value could be more, but you actually end up getting paid less. there's various things and I think people often get excited by a headline valuation number. But I think the one thing I would say is.

There are various things to [00:44:00] factor in when you're doing an m and a transaction and it's not simple. There are lots of things, and that's just a few things. There are many more from there.

Jeffrey Feldberg: Well said, and once again, all the more reason, make sure you surround yourself with the absolute best advisors who know what you don't know, who can master this game because they're playing it day in, day out, and it's really a nice compliment to what you're doing after all when it comes to your liquidity event, your exit, or your raising capital.

It's your financial future. Your financial freedom is on the line. You have one chance to make it count. We really want to make it count and minimize and eliminate as many errors or mistakes as we possibly can. 

Nick Wallis: The other thing, Jeffrey, just to add very quickly is timing is very important here. And we've touched on it a little bit, but the way the business is, again, if your business is on an upwards trajectory and it's gonna continue on that trajectory, that's a great time to sell.

If your business has reached the peak. And it's on that downwards trajectory, that is a terrible time to sell. Because not only do you have to then work even harder to persuade the [00:45:00] buyer that it's going to go back to the upwards trajectory, the multiple you're going to get is likely to be lower because people start doubting the future viability of the company.

So timing with these things is really important. So even if you are thinking about an exit in 5, 10, 15 years, there is no harm in speaking to an advisor today and working a plan and backwards working that timing to make sure you're selling at the right time to maximize. Your value.

Jeffrey Feldberg: Nick, it's an excellent point. And as you're talking about that, it actually has me going back to my deal and what's coming to mind. I ran the company under the radar very deliberately. I didn't want people knowing what we're doing. We're so successful. We were so profitable. Having said that, had I reached out to some of the investment bankers earlier, had I had a business relationship with them much earlier, they would have known the company.

They would have had that trust because the ultimately the investment banker that we selected took a lot of time to verify everything that we were doing. We were an enigma. They kind of heard about us, but we're this company off in the shadows and they had to make sure [00:46:00] that what we said was true was actually true.

And to your point, when you have those business relationships earlier, one, I suspect we would have had better deal flow for new clients because they know people they would have introduced us and it just makes the process so much easier. And to your other point, I love what you're saying. The business may be at the top of its game right now.

And you're saying to yourself, well, you know what, I have another seven years to go. It's the what if, but what if there's a downturn? What if new competition or new technology comes in that takes me off the profits? And so it's always best to exit at the top of your game. Just like if you're an athlete, it's always best to retire at the top of your game.

Not when your career is burnt out.

Nick Wallis: 100 percent agree. And if COVID hasn't taught us anything or the 2008 crash hasn't taught us anything is we don't know what's around the corner as well. So the number of business owners I speak to who say, I'm just going to sell it in six months or in 12 months or in 18 months, once I've just done this and this, just to increase the value a little bit.

I always say to them, that's fine. And if you really are confident in hitting that, you should do [00:47:00] that. That is the right thing for you. But what if you don't? And if you don't hit those growth plans and actually your business stays flat, your value actually comes down because you're no longer on that upwards growth trajectory, you're on a flat trajectory and therefore your valuation comes down.

So it's making sure you have confidence in that. And as I say, if COVID hasn't taught us anything, it's we don't know what's around the corner. The other thing is we're in an election year here, both in the UK and the US. Who knows what's going to happen to potential fiscal tax regimes in both countries around selling businesses, around other taxes and it's the uncertainty of who knows what's around the corner.

So I always say to people, timing is critical. Yes, you want to sell when you're on an up, but you definitely don't want to sell when you've been on an up, and now you're either flat or going on a down because that's the worst thing you can do.

Jeffrey Feldberg: Nick, you're absolutely right. As usual, we can't time what happens in the market. Nobody knows that. We can time when we do go to market. And as we wrap things up and go into our wrap up mode, to your point, Nick, how did we wait it? So how did we say, yeah, you know what, our company is at an all time high, but let's wait another few years.

Let's [00:48:00] see what we can do and just go along that way. 2008 came along, the Great Recession came along. It would have been at least another seven years before we could have got back to where we were. And even then, could we have gotten back to where we were? The market changed, technology changed, people changed, and you just never know that.

So well said with what you've been sharing with us. So Nick, with that in mind, it's a tradition here on the Deep Wealth Podcast. I have the privilege. I have the honor to ask the same question to every guest. It's a fun question. Let me set this up for you. When you think of the movie Back to the Future, you have that magical DeLorean car that will take you to any point in time.

So imagine now, Nick, it's tomorrow morning. You look outside your window, not only is the DeLorean car there, it's curbside, but the door is open, it's waiting for you to hop on in, which you do. So you're now going to go back to any point in your life. Nick, as a young child, a teenager, whatever point in time that would be, what are you telling your younger self in terms of lessons learned or life wisdom or, hey, Nick, do this, but don't do that?

What would that sound like?

Nick Wallis: I think if I could go back in time I would've invested in [00:49:00] Apple and Google back in 2005 2010, and then I've made a lot of money. I'd also become a, an influencer rather than gone into corporate finance. I think that's probably where I would've. the world has moved on a lot in the last 15 years.

So that's probably what I would do.

Jeffrey Feldberg: love that. Okay. And that said though, so yes, Hey, who wouldn't want to buy those stocks at that point in time and just all of us could have retired in addition to that from a financial side of things, any other things that come to mind, any, anything you'd be telling your younger self?

Nick Wallis: I think I probably would have started working with owner managed businesses and entrepreneurs earlier, because that is really where the part of the, my job that I absolutely love is meeting all sorts of business owners and all sorts of founders. Coming up with all sorts of ideas, we're selling all sorts of different businesses.

The business we just sold Shutterstock is a media business. We just sold a healthcare clinic business. We just sold a medical device distribution business. We sold a cocktail bar businesses, we sold all sorts and actually I love meeting different business owners. So I think the one thing is probably would have done that a little bit earlier in my [00:50:00] career.

But as I say, look, me working with lots of large businesses has helped me understand that sort of, side of bureaucracy and business as well. So, so definitely not a bad thing, but probably would have started working with entrepreneurs a bit earlier.

Jeffrey Feldberg: Love that. It almost sounds as though what you're saying, I don't want to put words in your mouth, it sounds as though you're saying, Hey, don't wait to start today for what you're putting off for tomorrow, or just do it, believe in

Nick Wallis: Absolutely, 

Jeffrey Feldberg: Wonderful. And Nick, before we officially wrap this up, a listener, they have a question for you, where they want to learn more about what you're doing.

They want to work with you. Where would be the best place online that they can find you and ask them questions?

Nick Wallis: So yeah, as I said before, I'm a partner at an accountancy firm called Gerald Edelman in the UK. G E R A L D E D E L M A N. Gerald Edelman. We're a mid tier accountancy firm. I head up the M& A team. The best place would be to contact me through the Gerald Edelman website.

Jeffrey Feldberg: Terrific. And for listeners, it doesn't get any easier. It'll be in the show notes as a point and click. Well, Nick, it's official. Congratulations. This is a wrap. And as we [00:51:00] love to say here on the Deep Wealth Podcast, may you continue to thrive and prosper while you remain healthy and safe. Thank you so much.

Nick Wallis: Jeffrey, it's been a pleasure.

Jeffrey Feldberg: So there you have it, Deep Wealth Nation. What did you think? So with all that said and as we wrap it up, I have another question for you.

Actually, it's more of a personal favor. Did you find this episode helpful? Have you found other episodes of the Deep Wealth Podcast empowering and a game changer for your journey? And if you said yes, and I really hope you did, I have a small but really meaningful way that you can actually help us out and keep these episodes coming to you.

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So all that said. Thank you so much for listening. And remember your wealth isn't just about the money in the bank. It's about the depth of your journey and the impact [00:53:00] that you're creating. So let's continue this journey together. And from the bottom of my heart, thank you so much for listening to this episode.

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