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Sept. 9, 2020

How To Avoid Committing The Worst Mergers And Acquisitions Mistakes (#21)

How To Avoid Committing The Worst Mergers And Acquisitions Mistakes (#21)

"In M&A every mistake you make takes your hard-earned money and puts it in your buyers pocket." -  Jeffrey Feldberg and Steve  Wells
Jeffrey Feldberg and Steve Wells are the founders of Deep Wealth. Deep Wealth is an M&A advisory services preparing busin...


"In M&A every mistake you make takes your hard-earned money and puts it in your buyers pocket." -  Jeffrey Feldberg and Steve  Wells

Jeffrey Feldberg and Steve Wells are the founders of Deep Wealth. Deep Wealth is an M&A advisory services preparing business for their exits. 

Deep Wealth has two mandates for business owners. First, showing business owners how to protect themselves on their exits. Second, enabling business owners to maximize enterprise value.

Feldberg and Wells know a thing or two about exits with their eLearning company Embanet. An experienced buyer presented a 7-figure 3-times EBITDA unsolicited offer to buy Embanet. Feldberg and Wells said "no" to the unsolicited offer. 

Instead, the two said "yes" to mastering the art and science of selling a business. Two years later, Feldberg and Wells, welcomed a 9-figure exit based on 13-times EBITDA.

Business owners are dreamers, the make-it-happen people, and the change-makers. It's us business owners who put everything on the line and win against all the odds. So, why is it that as business owners, we’re at the losing end when selling our companies? 

The six-week Deep Wealth Experience is a proprietary system. At the core are the strategies and exit playbook that created the 9-figure exit. Take your experience to the next level with a private mastermind group. Enjoy peace-of-mind from your live success coach who walks you through the system step-by-step. The only "silly" question is the one that isn't asked.  Finally, benefit for the in-the-trenches experience of Feldberg and Wells.

SHOW NOTES

  • Mergers and acquisitions mistake one: your business value is an opinion and not a fact
  • The importance of standing out from the crowd
  • How to show your differentiation and value
  •  Mergers and acquisitions mistake two: mastering due diligence
  • Why every business owner must perform due diligence before starting the exit process
  • The importance of creating your virtual data room before hiring and investment banker
  • How your data room conveys an image of professionalism and readiness 
  • The power of finding the skeletons in your business closet before starting your exit
  •  Mergers and acquisitions mistake three: not using an auction
  • Why a mergers and acquisitions auction saves you time and increases value
  • Understanding the leverage you have when using an auction
  • Why buyers are more likely to behave better when an auction is in place
  •  Mergers and acquisitions mistake four: not assembling the right exit team
  • Understanding who you need for members of your exit team 
  • Two of the most overlooked exit team members that make all the difference
  • The power of a Chief Exit Advisor to protect you and help you increase value
  • Why you shouldn't think about selling your business on your own
  •  Mergers and acquisitions mistake five: believing the letter of intent (LOI) is the deal 
  • Why buyers keep an LOI brief and general
  • What to look for in an LOI
  • Terms smart sellers insist on NOT having in an LOI
  • Why you need the LOI to be as detailed and specific as possible

This podcast is brought to you by Deep Wealth. Are you thinking about selling your business? You have once chance to get it right and you better make it count. Learn how the Deep Wealth experience helps maximize company value before you sell. Master the same exit strategies we used to increase our company value 10X with our 9-figure exit.

Enjoy the interview!

SELECTED LINKS FOR THIS EPISODE

Jeffrey Feldberg on LinkedIn

The eBook Why You Suck At Selling Your Business And What You Can Do About It (Today)

The Deep Wealth Experience

Book Your FREE Deep Wealth Exit Call

Deep Wealth LINKS FOR THIS EPISODE

The Deep Wealth Experience

FREE Deep Wealth eBook on Why You Suck At Selling Your Business And What You Can Do About It (Today)

Book Your FREE Deep Wealth Strategy Call

 

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This podcast is brought to you by Deep Wealth. 

Your liquidity event is the most important financial transaction of your life. You have one chance to get it right, and you better make it count. 

But unfortunately, up to 90% of liquidity events fail. Think about all that time, money and effort wasted. Of the "successful" liquidity events, most business owners leave 50% to over 100% of their deal value in the buyer's pocket and don't even know it.

Our founders said "no" to a 7-figure offer and "yes" to a 9-figure offer less than two years later. 

Don't become a statistic and make the fatal mistake of believing that the skills that built your business are the same ones for your liquidity event. 

After all, how can you master something you've never done before? 

Are you leaving millions on the table? 

Learn how the 90-day Deep Wealth Experience and our 9-step roadmap helps you capture the maximum value for your liquidity event.  

Click here to book your free exploratory strategy session.

Enjoy the interview!

Transcript

Steve Wells: [00:00:00] This is Steve Wells. 

Jeffrey Feldberg: [00:00:01] And I'm Jeffrey Feldberg. Welcome to The Sell My Business Podcast. 

Steve Wells: [00:00:06] This podcast is brought to you by Deep Wealth. Are you a business owner who is wondering how to either grow your business, sell it, or both?

Or maybe in today's environment, you're wondering how to make your business pandemic proof. Visit deepwealth.com to find out how you can master the strategies to grow and extract the deep wealth from your business. Visit www.deepwealth.com. 

Jeffrey Feldberg Episode 21: [00:00:26] Welcome to episode 21 of the Sell My Business Podcast. Today, we're going to talk about something that most sellers realize after the fact when it's too late, and that is how to avoid committing the worst mergers and acquisitions mistakes.   Steve. As we look back both at our own experience and with the many, many business owners that we've spoken to we've compiled a list of some of the top mistakes. . And I know for both of us, when we see these mistakes, we just shake our head and have such empathy for the sellers, because you have one chance to get it right when you sell your business and you really do want to get that right.

Many of the strategies that we're talking about today, we've built into the Deep Wealth Experience. You will recall from one of our earlier podcasts, this is our six-week online experience where you really get to know the ins and outs of how you master the art and the science of selling a business.

So, Steve, why don't we start with number one and that's knowing that in mergers and acquisitions, your business value is an opinion and not a fact. 

Steve Wells: [00:01:31] You know, what's interesting. Jeffrey was you mentioned that is mos. Business people that I've spoken to and you've spoken to as well. they jump into this valuation right away. They call up an expert and they say, what is my business worth? And they're looking for a number.

And, as we're going to talk about that number is an elusive number best in the beginning. It's not where you really want to start in looking at assembling your exit team and thinking about an exit. But I think it's just human nature. Don't you think? I mean, it's like, you want to sell your house and you call on the realtor and you go how much is my house worth?

Well, even houses have some subjectivity to them, but a business is hugely different. What are some of the things that could affect the value of a business Jeffery?

Jeffrey Feldberg Episode 21: [00:02:16] Well, here's the issue that most sellers don't understand of why a business value is an opinion. So, you can go to your investment banker, you can go to your accountant to any advisor for that matter and they're going to probably be doing something like this.

Okay. Who are your competitors? And have they sold recently? What did they sell for? Are you going to have a strategic buyer, a family office buyer, a financial buyer? What sector are you in? Are you going to be doing an IPO? And those things are generic.

If you take the averages, one business sold for $100 million and another business sold for $20 million, you have an average of 60 million, but you have a huge disparity in between. What we share with you in the Deep Wealth Experience, and what you need to know is when it comes to your evaluation, you're not like everyone else. You're unique and you're different.

Steve, why don't you talk about the ability of a seller to convey what the business is about and to get hope into the mind and the eye of the buyer to help with the evaluation process.

Steve Wells: [00:03:24] Well, when we were looking at getting our business evaluated in the beginnings of selling our business, the number that are investment banker came up with initially was very different than the number we ended at. And it wasn't that they were dishonest and it wasn't that they weren't experts in their field.

They just didn't have a complete picture of what our business was worth and the unique. Parts of our business that would enhance the value. The way they got to that point was with us, telling us proper story, a story, meaning a dialogue, not anything made up, but giving them the reasons, we were valuable and more valuable than they thought.

And I think without the proper dialogue, the proper setup, giving them the benefits and letting our experts around us see why that value was there. If we had not done that, we would have been down in the lower numbers they initially brought to us. And remember this again, it's just human nature.

The incremental difference didn't benefit them substantially, but it sure benefited us. And so, it's your job to tell the right story of why your business is valuable.

 Jeffrey Feldberg Episode 21: [00:04:34] One of the classic mistakes that many sellers make, and in fact, Steve, I was just speaking to a business owner two days ago. And unfortunately, his exit failed and he was glad that his exit failed. I was curious and I asked, well, why are you glad that your exit failed?

And he said, well, looking back now, one of the big mistakes that I made going in, I assumed, he said, that I just didn't know how to sell a company. So I checked out mentally and I let my advisors lead the process. And because I did that, I assumed that they would just know what's best for the business.

They would know the best value for my business, and it really didn't happen. By the time I realized what was going on. It was almost too late, because the letters of intent, which we're going to talk about a little bit later in this episode, came in the buyer's expectations were already set and it was too difficult and challenging for me to go back and change that. What he told me was that when he restarts the exit process, he's going to put himself in the driver's seat and he may not have the investment banker experience or some of the other experience from the advisors he does have that no one else has. He knows his business the best. And as you're listening to this, it's important that you realize, you know, your business better than anyone else.

And because of that, you need to take control of the narrative that you're sharing with your entire exit team of what your business is about. Why you're not like the industry averages or the other businesses that are out there, and why you need to and can set your business apart from what you have there.

Steve Wells: [00:06:16] To tell the proper narrative requires practice. It's like any presentation. And that's really one of the things we found in the Deep Wealth Experience that when you're with other business owners who are going through the same process, it gives you the opportunity to practice the dialogue to practice the narrative because you're not going to get it right away. And so that preparation is something very important. You wouldn't go in and try to sell your product that you have let's say for the first time, without having some practice, a role playing something before you went into your customer and you only have one customer and your customer in this case is not only the buyer, it's also your team. So, you need to practice that. And so that's another benefit that we found in the Deep Wealth Experience. 

Jeffrey Feldberg Episode 21: [00:06:58] Here's a tip for you and we talk a lot about this in the Deep Wealth Experience. Even when your investment banker comes back and assigns a particular valuation for your business.

One of the things that we did in our exit is now that we had the top number of what the investment banker thought was the best of the best. It couldn't go anymore. We changed the commission structure, and we said to the investment banker for every dollar that you go above and beyond what your top value is, you're going to earn more commission.  People looked at us and thought that we were nuts saying that we were trying to buy off the investment bankers and it was just going to fall flat in our faces. But see what happened when we shared that with the investment bankers, both at the time and then a number of years later when we spoke with the investment bankers, after the fact?

 Steve Wells: [00:07:45] Again, human nature. They're incentivized to get us a better deal. Again, these aren't bad people. What we're doing is creating an incentive for them to push like we want to push. So of course, the value in the final sale price was higher.

And, interestingly, we went back years later and we talked to them about that and some of them had change organizations. And we said, we wanted to dissect what our experience was like. And they said, had we not created that incentive for them they didn't think they would have achieved what they did.

And again, not that they didn't want to, it just gave them that extra push to be aligned with us to try to get that higher price.

Jeffrey Feldberg Episode 21: [00:08:25] So there you have it. Mergers and acquisitions mistake number one is knowing that your business value is only an opinion and definitely not a fact. So, let's go to mergers and acquisitions mistake number two, Steve what is that?

Steve Wells: [00:08:41] The second one is a master due diligence today so you can thrive and prosper tomorrow. The due diligence process is very, very important and you can prepare for it right now before you're actually going to get there in the future. And so what do we mean by that Jeffrey?

 

Jeffrey Feldberg Episode 21: [00:09:00] If you want to see a grown person, cry mentioned two words, due diligence. I think for many people in mergers and acquisitions, they view this as more painful than going to the dentist because it does take time and it does cost money. But here's the thing, and this is something that we didn't do on our exit and Steve, I know you would agree with me. We likely could have had an even higher valuation had done what we're about to share. And listen, we had a nine-figure exit.  I know that we could have done better on that. And so with due diligence, why would you want to take the time and spend the money to do this on your own? 

Most investment bankers are going to tell you well don't both doing that, we will do the due diligence for you once you sign up as a client. . Well, here's why you don't want to do that. And I want you to picture for a moment, the following scenario. Imagine that you have been awarded something in your industry.

You're the top of the top, the best of the best. And you're now invited to an awards dinner. The pandemic has gone. Everything's good. People are getting back together again and you show up in the awards dinner. Are you going to want to show up in your sneakers and your shorts looking scruffy, or are you going to want to show up in your best formal ware playing the part and looking your best?

So, Steve, how is due diligence the same way in terms of showing up with your best foot forward for your investment banker? Why is that important?  

Steve Wells: [00:10:27] Well, you want to prepare, yourself, for the due diligence process. And what I mean by that is like we were talking to an owner a few weeks ago. And, he was in the due diligence process and he got hit because he didn't realize that his contracts were very inconsistent and they'd been in business for a while.

And over the period of time, what he thought his contracts were saying to his early clients was very different then what they actually said. And it was unfavorable. Had he gone through the due diligence process, himself, he would have determined that difference. He could have seen it. He could have gone back and yeah.

Renewed and upgraded the contract so they wouldn't have had to do that. Now, the future buyers can do that, of course. But they're going to discount you for that process. It gives you a chance to see what issues you may have that you can correct. What, skeletons per se are in the closet that you want to get out of there and, and, and, and if you don't do it, they're going to do it, and they're going to charge you for that.

Jeffrey Feldberg Episode 21: [00:11:27] And here's another reason why doing your own due diligence to find the skeletons in your closet is important. In the mergers and acquisitions industry, the currency, isn't what you think it is. The currency isn't money. The currency is trust and you need to establish an unbreakable trust with both your investment banker and later on with your buyer.

You know, your investment banker is human like everyone else and the first perception is really the reality. So if you show up, you're not prepared. Your investment banker starts to find the skeletons in the closet, as minor as they may be, or as big as they may be. And even though you're going to correct them, in the back of your investment bankers mind there now becomes a trust issue. Most investment bankers wouldn't tell you this to your face, but in the back of their mind, they're saying, okay, I found these skeletons here. Are there other skeletons? Should I be concerned about this? What most sellers don't realize is that your investment banker will do many, many transactions with your future buyer. .

You're a onetime transaction. You're a one hit wonder with your investment banker. Maybe you'll defy the odds. Perhaps you'll have a second exit, maybe a third exit, if you're really lucky, but for your investment banker over the lifetime of his or her career doing business agreements and exits with your future buyer will be many, many tens of millions, hundreds of millions of dollars and beyond. So, your investment banker needs to know that you can be trusted. So now imagine a scenario where you've done the due diligence. You’ve picked up as many of the skeletons in the closet, as you can.

You're not only show up with your due diligence done, but you've now taking your due diligence and you've put that into your own virtual data room. You're sending a strong message, loud and clear to the investment banker, hey, I am prepared. I'm serious about this exit. I'm ready to go. I'm educated, let's make this happen.

And it creates a night and day experience with your investment banker.   Truth be told the virtual data room itself and the preparation in terms of time and money will be a rounding error compared to the extra valuation that you're going to receive when you're prepared and when you're going to be doing the due diligence. Steve, when it comes to due diligence, I know you mentioned one item a little earlier, what would be some other kinds of items that most sellers tend to overlook on their due diligence?

 Steve Wells: [00:13:58] Well, every business is different. And one of the benefits of the Deep Wealth Experience is we're going to help you think through the whole due diligence process and give you guidelines on how to set up your own virtual data room.  There may be some employee, issues that they haven't signed a confidentiality agreement, or, there might be some stock, one thing that's hanging out there that needs to be resolved.

And the new buyer doesn't need to see that there's the boring things that people just overlook. Are your minutes up to date? Did you get everything signed by old board of directors or whoever, you want those nuances, taken care of, so the new buyer doesn't, look at that.

What Jeffrey was saying is so important is they're just little things, but some of them could be monetarily very important. But even if they weren't monetarily huge, they they're sending a message that you have your act together. You're taking this seriously, there is this built up respect and trust in what you're doing. And so you're going to need that further downstream, when you're negotiating.

Jeffrey Feldberg Episode 21: [00:15:01] And the one thing that most sellers need to understand right up front, even before you begin the of process, is that every mistake you make your buyer is not only looking for those mistakes, but is hoping you're going to make mistakes. Steve, why is it that a buyer is hoping a seller is going to make a mistake during the exit process?

Steve Wells: [00:15:22] Well, it's like, if I'm coming up to buy this used car, I'm going to point to you every scratch and dent and tear and worn out piece on it so I can negotiate a better price. So they want to find those flaws so they can get your price lower so it creates more value for them. So, you going to do everything you can to polish that car up, so that it looks flawless.

Jeffrey Feldberg Episode 21: [00:15:43] You know, I've yet to meet a business owner who hasn't gone through due diligence and has come out with a better and stronger business. Even something as obvious as having a contract with a customer that hasn't been renewed. You have a great relationship with the customer. No one bothered to look at it, but what happens if there's a change of ownership with your customer or a new president comes in, or who knows what is going to be there?

So due diligence, you're not just doing it for your business valuation. You're not just doing it for your investment banker or for your future buyer. You're really doing it for yourself to make sure that you dot the I's you cross the T's, you're going to find some blind spots that you never knew you had, which will allow you to take your business to a whole other level.

So, let's wrap up mergers and acquisitions mistake number two. And now let's go into mergers and acquisitions, mistake number three, which is why you must leverage the mergers and acquisitions process with an auction.  For sellers who are delving into this new and fascinating world called mergers and acquisitions, what's an auction, Steve?

 Steve Wells: [00:16:50] An auction is where you're going to pit your potential buyers against each other.  It seems somewhat obvious that you would want to do that. But we found many, many, many people do not believe in an auction.  They don't either think it'll get their value or they don't like the competition, but it is without a doubt, one of the most important things you can do to, to set your business up for the maximum value. 

 You know, many people just say, they're waiting for that person to walk in their door or some competitor comes in and buys them. That alone is one reason why you would never want to take that strategy. You, you were going to get more value if you have more people looking at your business. So, don't wish and hope that one buyer is going to walk in your door and maximum, value. 

  Jeffrey Feldberg Episode 21: [00:17:40] We had an unsolicited offer. It was a seven-figure offer. And thankfully we said no, and we refer to the first buyer as a Wolf in sheep's clothing. And here's why you want to have an auction. When that Wolf in sheep's clothing, otherwise known as the buyer with the unsolicited seven-figure offer approached us, here's what we were told. And he says, listen, guys, I want to look at buying your company. 

But if you go and deal with other businesses, other companies, you know what, it's going to slow things down. It's going to increase my costs. And as a result, I'm going to have to lower what I'm going to pay you. And for most business owners who are hoping that the competition is going to come in and swoop them up most sellers believe that and it's to their detriment. So, the beautiful thing about an auction is this, and it ties nicely into due diligence.  When the buyers are doing due diligence on you at the same time, you need to do due diligence on the buyers.

Now, when we had our exit process, we had over 100 to 130 different letters of intent. We took the top of five or seven letters of intent that we thought had some possibility with us.

And for each letter of intent, we did our own and due diligence with the buyer on our side. And we got to know the ins and outs of the buyer. When we knew that, we went back to our investment banker and we said, listen, here are the top three buyers that we believe have a terrific potential to purchase our company.

But here's what we've noticed for some of these buyers. And we would share with the investment bankers, what our preferences were and what our preferences weren't. As an example, one of the buyers that was in the running was known in the industry for having a bait and switch approach. And so, in the letter of intent, the buyer would give a very high valuation and after due diligence would later come by and significantly lower the valuation.

So, what we shared with the investment banker is to speak to that buyer. And let the buyer know that if they lower their price from the letter of intent, for the value of the business, don't even bother showing up because we will not deal with them. Now, if this buyer was the only buyer on the scene, we would not have that leverage.

But this buyer who was known in the industry for doing this, actually complied with our request, because the buyer knew that there are other buyers on the scene. So, when you have an auction, it keeps the buyers in line. And the other thing it does is it will shorten the length of time for the exit process itself.

Now, we don't want you to believe for a moment and some investment bankers are going to tell you this, other sellers may tell you this, buyers are certainly going to tell you this, that an auction increases, the length of time that it takes to sell your business. In the scheme of things, it really doesn't.

It may increase upfront the preparation process in terms of getting out the marketing packages to different buyers, but for the actual process itself, from the letter of intent to due diligence, to closing the deal, it speeds it up because in the back of the buyer's mind, they know that if not them, you have a short list of other buyers that you can go and speak with, who will happily get into negotiations and talks with you to purchase your company.

So, an auction is where you want to be all day and every day, no matter what you do. Steve, as we begin to wrap up mergers and acquisitions mistake, number three of not having an auction, any other thoughts on the auction process?

Steve Wells: [00:21:20] It's so important that you do the auction and when our business owners are in the Deep Wealth Experience, we go through this in much more detail, and we, again, rehearse the different ways an auction can be executed and the different strategies that can be used in the auction.

I don't think we have time here to get into much more than that. But to stress the importance of it and to make sure your advisors are all on board with you, the idea of having an auction.

Jeffrey Feldberg Episode 21: [00:21:49] You know Steve, we have talked about the Deep Wealth Experience throughout this episode and for people that are new to our community for business owners, that don't know what the Deep Wealth Experience is, why don't we take a quick few minutes and share with them what it's all about? And maybe I can start things off with that and talk about our experience because for those that don't know us, we started our eLearning company and the honest truth is we had no money, experience, or team.

We were literally failing forward. We had no business being in business and it was thanks to our grit and our passion that kept us in the game long enough to begin to experience success. Now with success something interesting happened. We got on the radar screen. of a very experienced, sophisticated, and savvy buyer.

This is the buyer who was from a fortune 10 company and who we refer to a little bit earlier as the Wolf in sheep's clothing. That buyer came to us and ultimately gave us a seven-figure offer based on 3-times EBITDA to purchase our company. Now, Steve if I don't know you, maybe you knew what the word EBITDA meant.

I had no idea what the word EBITDA meant. I now know that the skills that you need to build and succeed in business are not the same skills to sell a business, but I didn't know that time.  I didn't know how to sell a business. And that buyer knew that we didn't know what we didn't know.

 Thankfully we said no to that seven-figure offer based on three times, EBITDA people around us thought that we were crazy for saying "no". 

And when we said, "no", we said "yes” to mastering the. Art and the science of selling a business. It took us two years. We spent millions of dollars. We spoke to anyone and everyone in mergers and acquisitions of buyers who won big and loss big, sellers who won big and loss, big investment bankers, advisors, M&A lawyers, strategists. Any advisor that was involved because success leaves clues and failure leaves clues. Well, we found all of the strategies that worked. We found the strategies that didn't work and reverse engineered them. And we put all of those into our exit playbook. And two years later we said yes to a different buyer with a nine-figure offer based on 13 times EBITDA and what's interesting is we were the same company, but our business valuation increased 10 times. Now, why did it increase 10 times? It's because we were prepared. Quite openly. That's where our story should have ended. But what happened over the years, business owners would come to us and ask for tips.

And more recently we were asked for our exit playbook, and while we would have happily given her exit playbook, we realized that it wouldn't have made sense for anyone looking at it. If we're speaking English, it might as well have been written in Latin because we wrote our exit playbook, not for publication, but to have it use just for ourselves. And so, we told our friends who asked us for the exit playbook, that we would find something better for them. Now this was over two years ago and the truth is we're still looking. Yes, there's books and their services and their so-called experts who will charge a lot of money that claim that they'll help business owners sell their business.

But here's the question for you. Why would you trust one of the most important life events that you have, selling your business to someone who's never had their own 9-figure exit.  It's like asking someone to teach you to drive and you're paying them a lot of money and they've never driven a car before.

Why would you do that?  When both Steve and myself saw that we became angry. We were angry that business owners are being taken advantage of.

In our own experience, we thought that the buyer, that Wolf in sheep's clothing, was more the exception than the rule, but we came to understand that.

The first experience was more the rule than the exception. And as business owners, we're the dreamers, we're the ones, ones who take the impossible and make it into I'm possible. We have the sleepless nights; we solve painful problems that people need us to solve. We create jobs in the community. We change the social good of society, one customer at a time.

So why is it when it's time for a business owner to sell his or her business that we are taken advantage of. So that's when we launched Deep Wealth to help business owners find and extract the deep wealth hidden in their business. Steve, why don't you talk about the different components within the Deep Wealth Experience?

Steve Wells: [00:26:22] We came from the online learning, background and so we used that to create an experience that was flexible to your schedule and scalable, and quite frankly, was the best way to impart information. It's not a course.  It's really an experience.

Yeah. But we're using technology to allow you to get the information. And we're using a very unique platform that allows you to communicate with us and with each other to incorporate that information into your business. We know you're busy so we put this into a six-week period of time.

Now that seems very quick, but this six weeks puts you on the right path. . You'll be with a small group of other business people who are exploring that possibility, We found that if you can create a mastermind effect of getting people around you with our input and where Jeffrey and I will be there to help with the information that you're going to be given, going to gain a lot out of it. So, the interaction among each other is, very important. So, what else Jeffrey, did I cover most of the items?

Jeffrey Feldberg Episode 21: [00:27:37] Well, absolutely. The deep wealth experience, it's a six-week experience. That is a step by step by step system that teaches you to master the strategies that worked for us. And look, we’re not perfect. Believe me. We made mistakes in our exits. We reverse engineered those strategies in that experience to make sure that it does work and you learn those as well.

And so really in my mind, I think of it as a four-part proven system. You have access to the exit playbook, to the strategies in an online environment. And Hey, if you're doing online banking, if you're doing online shopping, if you're doing email or surfing the web, you already have the skillsets to access the information online.

 The second part is what Steve mentioned. You have a mastermind group, which is where a lot of the gold is found. When you have discussions with other business owners who are in different industries, that aren't competitors of yours. You're going to be learning from them as much as you're going to be learning from us.

And then the third component is the live success coach. And our philosophy is that the only silly question is the one that never gets asked. And then the fourth and final component is both myself and Steve, where we immerse ourselves in the experience. We're there for you to make sure that you're walking away the master of knowing how to sell your business.

And I'll let you in on a little secret. The strategies that your business is, the same ones to grow your business. So, keep your business forever, sell it tomorrow. Once you've done the Deep Wealth Experience, you have it all. And you now have choices and tell you what the, if you head to our website and you click on the link for a free exit phone call, learn more about this and see if you have what it takes to be part of the Deep Wealth Experience.

So that said, let's dive back into the murders and acquisitions mistake number four, which is you're only as good as your exit team. So, Steve, for someone that's new to selling a business, what the heck is an exit team and why is that important?

Steve Wells: [00:29:33] Well, before we get into the exactly, what is the exit team? I think you got to step back and you got to look at yourself as a business owner.  We've met, thousands of business owners. I've never met one who was not positive in their assessment of themselves. I'm trying to say this nice way.

You know, we are successful as business people because we are out there doing things and making things happen as Jeffrey has described. But with that can come an exaggerated belief in our own ability. And because we have been successful in business, sometimes we think we're going to be successful in selling the business and the, and it's just a whole different game.

So, this exit team is extremely important. This team is the most important team you have ever put together. And you've, might've made your business successful just based on your own sheer intelligence, your own creativity.

You're going to need a team to pull this off. If you want to achieve the maximum value. So, who are some of the people who are going to be on that team?

Jeffrey Feldberg Episode 21: [00:30:42] It's a great question. And this is where many business owners actually get it wrong to their detriment. So, for the exit team, some of the obvious people are going to be an investment banker and following up to what Steve was saying, no, you cannot sell your business on your own and whatever commission you're going to pay it's a rounding error. It's well worth it. You want to find an investment banker who has what it takes, who has the experienced, that you have a terrific chemistry with to take you out there. In addition to your investment banker, other members of your exit team are going to be a lawyer, but not just any lawyer, you already have a business lawyer, but chances are your business lawyer is not experienced in the world of mergers and acquisitions. So, you're going to want to find an M& lawyer who has a terrific track record. In addition to that, it'll be your accountants and you're going to want to ensure that your accountants are going to keep you in tiptop shape with your audit statements and all the reports that are going to be asked of them.

Along the way you're going to want to have a tax advisor, just to make sure that you're set up well before your exit to, have you kept as much money as you possibly can and not give it away in taxes. And then rounding things out. You may want to think about having a strategist or a strategic advisor. Now there's two or three other key people in the exit team that most business owners completely miss altogether. You're going to want to have key employees as part of your exit team. This may be people on management, but it also may be people from the rank and file who can speak to what the company does very well, and speak to some of the more technical aspects of the business that the buyer is going to have.

The other thing that you're going to want to do is to include customers. And you may be saying customers, why would I want to have customers as part of my exit team? Well, your customers, ultimately are going to be spoken with by the buyer. Wouldn't you want to get your key customers onboard sooner rather than later, so that when they do speak to the buyer, they are prepared and knowing what to say and how to direct that conversation>

and we'll talk a lot about that in the Deep Wealth Experience of the timing for this and the communications in terms of what you say and how you say it, but customers should be part of that. And then last, and certainly not least, one of the most important positions in your exit team, this is something that we call a chief exit advisor.

What's a chief exit advisor? A chief exit advisor can be anybody that has significant experience in mergers and acquisitions. It could be another investment banker. It could be an M&A lawyer. It could be anyone who has sold and bought companies many, many times successfully. Why do you want a chief exit advisor?

Believe it or not, the intentions and the agenda of your exit team, probably aren't in alignment with yours. Your chief exit advisor only answers to you. And in fact, your chief exit advisor probably won't sit at the deal table. The chief exit advisor answers only to you is there to protect, you know what you don't know, knows your blind spots. And we'll also help you put together an exit team that works. You know what they say, when the team works, the dream works and your chief exit advisor helps you do that. So, see if I've gone into a bit of detail on the exit team, as we begin to wrap up mergers and acquisitions mistake number four on the exit team, is there anything else that you'd like to add?

Steve Wells: [00:34:13] No, I think we've covered it. I think we can move on to number five. the mistake you want to avoid in the M&A, is this dangerous pitfall called an LOI, a letter of intent, it’s at the very beginning of the process, but it can affect the end of the process.

And why is it? I mean, it's just a little letter and as Jeffrey mentioned, we had quite a few LOIs when we were in the beginning of our auction. But, Jeffrey, why is the LOI so important?

Jeffrey Feldberg Episode 21: [00:34:41] You know, for many sellers they become like a kid in a candy store. They see these dollar signs in the letter. They start thinking of their retirement or whatever the next chapter of their life is going to be. And openly, this is what the buyer wants you to do because for most sellers, they take their eye off the ball with the LOI.

So, what is an LOI? It's a letter of intent. And let's talk about that third word in LOI, intent. It is not a binding agreement. It's the intention of the buyer of what may happen. But isn't guaranteed to necessarily happen and where the sellers just lose it on the LOI is having a generic LOI. So, if I came along and said, I'm going to pay you a gazillion dollars for your company.

And I just left it at that. Well, you need to start asking questions, you need to go from a generic LOI, to a detailed LOI. You want to flush things out, how is that going to be paid? Is the buyer having cash in the bank or are they going to be financing that, how is it going to be finance? Are there going to be charges to your company if it's going to be financed? What are the binding and nonbinding terms of the LOI? Is there going to be an escrow? How much is the escrow for what length of time is the escrow? What's going to be the structure of the purchase. Is there going to be an earn out? Are key employees and management is going to be fired or they're going to be, yeah, that's just a short hit list.

And just the beginning, what you need to know in the LOI. And this is where your exit team is so important because you need to lean on your exit team and your chief exit advisor to make sure that the LOI has all of the details that you need to know going into due diligence. Steve, why is it so important to really tidy up those details and have them flushed out before the LOI is signed?

Steve Wells: [00:36:43] Well, if you merely go along your way and you haven't addressed the details as we've outlined in the LOI, you get to the end of the process. And maybe this is even an auction process and all of a sudden thing switch.  You find out, well, there is an earnout and that's the only way they're going to do it.

You've committed yourself. You've committed so much time where if upfront, if that had been addressed, this would not have happened or that buyer would not even been in the discussions. So you can get yourself caught if you don't address these issues upfront.

Jeffrey Feldberg Episode 21: [00:37:18] You're exactly right. Once you sign that LOI, you now go into an exclusive discussion period with that buyer, even though you have an auction, you can't speak to the other buyers that are in the process until you call it off with the buyer that you have the LOI with and you move on. So, it's better to know upfront exactly what you're getting into before you walk into that exclusivity process and tie yourself up and slow yourself down unnecessarily for terms that you could have known upfront and ahead of time.

And when you think about it with the LOI, and as we do a quick recap here of the common mistakes in mergers and acquisitions, the LOI is a combination of doing everything right. When you know that your evaluation is simply an opinion and not a fact that gives you confidence. When you've done your due diligence properly, you know, what's there and you know, what's not there when you have an auction, you know, you have choices. And when you have a good exit team, you know that they're going to help you pick up some of the details that may not be in the LOI. So, we've covered today, five of the most common mistakes in mergers and acquisitions that leaves too much money on the table as a seller and what you can do to protect yourself.

So, Steve, as we wrap things up here, any parting words of wisdom or thoughts?

 Steve Wells: [00:38:44] No, just to say, we're always energized to being around, business owners and entrepreneurs because, we really realize how important you are to our society.  And that's why we really are motivated to help you in this exit.

And that's what drives us. And so hopefully you've captured and gleaned out of this podcast that will help you in your exit.

 Jeffrey Feldberg Episode 21: [00:39:07] So why don't you help us change the social fabric of society, one business exit at a time and become part of the Deep Wealth community. And together we can help you realize your dreams and goals and together we can help make society a better place. As we wrap things up here, I think it's important to mention something that is a big motivator for myself and Steve and part of our mission here at Deep Wealth. When you exit and you exit right.

You create a liquidity event. And while we at Deep Wealth, can't tell you what to do with your capital. One of the things that we find that many business owners do is simply put, they have more capital than they can spend or use. And they'll take that excess capital and they'll put that into charities, maybe they'll create their own foundation.

They'll find a social good that they can make better through the capital just to solve some of the social problems. So, from start to finish as business owners, we have so much to say of our community and the world at large of what we can do. And that's really one of the reasons that drives us here at Deep Wealth, to make sure that you do the best that you possibly can on your exit. 

So, on that note, we're going to sign off and we're going to thank you for your time today and for listening to us. And we wish you only the very best. 

Thank you so much.