Thinking about a liquidity event? Click here to book your FREE strategy call.

Aug. 31, 2022

Investment Bankers Adan Sierra and Rodrigo Zuloga Share Little Known Insights To Help You Capture The Best Deal (#156)

Investment Bankers Adan Sierra and Rodrigo Zuloga Share Little Known Insights To Help You Capture The Best Deal (#156)

“To look inwards a little bit more and expand the attributes that I really get a lot of benefits from.” - Adan Sierra

Lionfield Capital’s mission is to acquire an outstanding American enterprise and build upon the owner’s legacy and continue providing its existing employees with opportunities to prosper.

Our covenant with you is to offer a professional, pain-free, and expedient selling process.

Managing partner at Lionfield Capital (www.lionfieldcap.com), a private investment firm based out of Miami, FL. Lionfield Capital is a traditional searchfund with ~20 investors comprised of institutional funds, family offices and high-net worth individuals.

Adan Sierra

Prior to Lionfield, I was a Managing Director at Seale (www.sealeassociates.com), a middle-market investment bank based out Washington, D.C. executing a wide array of m&a mandates throughout the U.S. and Latin America for multinationals, private equity firms and family-owned businesses. Throughout my time at Seale, I worked in several dozens of divestitures, acquisitions and varied corporate finance mandates and closed on ~US$3 billion in transactions in different sectors working for companies such as Coca-Cola Femsa, Cemex, and Tyco, to name a few.

Prior to Seale, I worked in the financial services practice at PwC, and served as interim CFO for Western Technologies Inc – both roles in their Mexico offices.  

MBA at North

Our fund is backed by high-caliber institutional investors and highly successful executives, and is managed by values-based leaders with a history of overcoming challenges through hard-work, resilience, initiative, collaboration and our signature principles.

Rodrigo Zuloaga is a managing partner at Lionfield Capital (www.lionfieldcap.com), a private investment firm based out of Miami, FL. Lionfield Capital is a traditional search fund with ~20 investors comprised of institutional funds, family offices and high-net worth individuals.

Prior to Lionfield, I was a Principal at Kapok Management, a firm I co-founded to provide consulting and advisory services to small business owners looking to improve processes, grow their business, raise capital, restructure their business or prepare it for a liquidity event.

Prior to Kapok I was the Finance Director at Grupociencia, a distributor of high-tech medical devices with operations in 6 countries across Latin America. At this position I led high-impact teams, managed rapid growth, developed and executed corporate strategy, optimized processes and participated in different m&a buy- and sell-side transactions.

MBA at Northwestern Kellogg; B.A. Finance and Business Administration at Bentley University. Rodrigo grew up in Venezuela and Switzerland, and always had a bug for entrepreneurship.

Click here to subscribe to The Sell My Business Podcast to save time and effort.

SELECTED LINKS FOR THIS EPISODE

rzuloaga@lionfieldcap.com

asierra@lionfieldcap.com

Lionfield Capital

Adan Sierra - Managing Partner - Lionfield Capital | LinkedIn

The Deep Wealth Sell My Business Podcast

Cockroach Startups: What You Need To Know To Succeed And Prosper

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

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

 

Did you enjoy this episode of The Sell My Business Podcast? 

Please leave a review. Reviews help me reach new listeners, grow the show, and continue to create content that you'll enjoy.

Please click here to leave a review on The Sell My Business Podcast.

 

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

[00:00:00] Jeffrey Feldberg: Welcome to the Deep Wealth Podcast where you learn how to extract your business and personal Deep Wealth.

I'm your host Jeffrey Feldberg.

This podcast is brought to you by Deep Wealth and the 90-day Deep Wealth Experience.

When it comes to your business deep wealth, your exit or liquidity event is the most important financial decision of your life.

But unfortunately, up to 90% of liquidity events fail. Think about all that time and your hard earned money wasted.

Of the quote unquote "successful" liquidity events, most business owners leave 50% to over 100% of the deal value in the buyer's pocket and don't even know it.

I should know. I said "no" to a seven-figure offer. And "yes" to mastering the art and the science of a liquidity event. Two years later, I said "yes" to a different buyer with a nine figure deal.

Are you thinking about an exit or liquidity event?

Don't become a statistic and make the fatal mistake of believing the skills that built your business are the same ones to sell it.

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

Let the 90-day Deep Wealth Experience and the 9-step roadmap of preparation help you capture the best deal instead of any deal.

At the end of this episode, take a moment and hear from business owners like you, who went through the Deep Wealth Experience.

Welcome to the Deep Wealth Podcast and wow do I have an episode lined up for you all you business owners out there. I know when I speak with you, you're asking me all kinds of questions, Jeffrey, who do you think my future investor or buyer? Who are they going to be? And you talk about thinking like an investor buyer, how do I do that?

And what are they saying? And what should I know what we're going to learn all that and more in today's episode, I'm getting a little bit ahead of myself Adan and Rodrigo, Welcome to the Deep Wealth Podcast. It's such a pleasure to have you with us. And you know, my favorite question at this point, there's always a story behind the story.

What's your story? What got both of you to where you are today?

[00:02:15] Rodrigo Zuloaga: Thank you, Jeffrey. Appreciate being here. Thank you for your time. On our story, just, you know, I'll start with mine and then Adan can take the mic. Originally from Caracas, Venezuela, Northernmost country in South America, lived in Switzerland for a couple of years growing up and then went to Bentley College, which is a little bit outside of Boston, Massachusetts.

Got my undergrad degree. And after graduation went to work at a company in Florida, distribution of high-tech medical devices with operations in six countries in Latin America learned upon rose quickly through the ranks there really grateful for my time there. It was a great experience.

We bought a few companies, sold a few companies while I worked with the most significant transaction being divestiture, we did of our Colombian operations to a large British multinational. Although I had a great career there, I always had an entrepreneurial bug tried to start on my own couple of times, but had the realization that to be successful, I had to do it a hundred percent and that's when I decided you know, after a few years I decided that was the path for me. So I left my job tried to couple my exit with an MBA that would help me really refine this idea of what's next for me ended up going to Kellogg, which is where I met Adan. And always had this idea that I want to start something in my head it was you know, my skills were more geared towards managing people and processes and rather than being a founder and starting from scratch. So that led me to this realization of maybe I can go and buy a business and run it and operate it and grow it which is where my skill set was. So, very early on Adan and I connected around that same idea. Well, that's Kellogg.

And the rest is history. When we went out to raise a little fund and we went out to the raises and today we are one year into our search and we've been looking at a variety of sectors and I'll stop there and we'll get into what life for this. But maybe I'll let Adan jump in with his background.

[00:04:19] Jeffrey Feldberg: Terrific. And Adan, what's your story? What got you to where you are today? We'd love to hear that.

[00:04:24] Adan Sierra: Hearing Rodrigo makes me wish I had prepared a little bit better. Jeffrey so on the personal side, I grew up in a medium-sized town in Northwest Mexico, Hermosillo, which is a three-hour drive to a Tucson. So I grew up going through the border a lot, going for groceries, and Sunday's coming back at the same day, that type of stuff.

Very modest family, a family of five hardworking people. And for them, education was the theme, so through hard work and educational focus I guess, they were able to put me on a Catholic school, which was the best school there.

I got intimately involved, became a missionary, which sort of unrelated to us being buying firm. But it does speak to you know, the principal focus that we put on, it's became a missionary, it gave me access to a full-ride scholarship at one of the best business schools on there.

And I mentioned all of this because I ended up studying in Canada for a bit through some sort of relationship to that scholarship. So once I was in Canada, I had a phenomenal class on mergers and acquisitions, and I became infatuated with the topic. And I did this at the University of Alberta, by the way.

And this whole thing about M and A, I thought it was fascinating and it didn't really happen a lot on emerging markets, primarily at the time in Mexico, you know? sure. You hear it about oldest big deals with Pemex and all and whatnot, but. Medium small deals was just a thing that happens in developed economy.

So came back to Mexico from Canada, beg every single professional services firm to give me a job in M and A, and ended up working at PWC. But I was in the bench. They had no deal flow whatsoever. So I had a lot of free time and kept looking, ended up working for a Washington DC firm that at the time they were doing a lot of M&A work for US base clients doing all kinds of transactions, loved it, had a very fun time at firm there.

 I always felt like I was just on the sidelines. It was fun, very sophisticated word with a lot of sophisticated people, but I literally didn't really enjoy just seeing the movie happen in front of me. I want it to be in the movie badly. And I of course I had no money to, trigger one of these acquisitions.

So I always kept thinking, how can I make this happen? And, oh, by the way, I was representing buyers and sellers and I kept thinking, geez, I could be one of the buyers and I could do it better. Long story short, somewhere along the way, we ended up where I ended up stumbling upon this model of raising a small fund and enabling an acquisition, which we'll tell you a little bit more and it made all the sense.

It became a way for me to become an entrepreneur mentor by people that have done it, have done this in the past that have the network, the pockets, and the willingness to do it, and allow me to continue doing at least one transaction that was incredibly attractive to me. So obviously, as Rodrigo mentioned, both him and I enrolled at Northwestern Kellogg.

Learn a little bit more about the model. And as we were wrapping up our program, him and I ended up spending a good chunk of fundraising from family offices, some funds, some high net worth individuals and the rest is history. So that's sort of, kind of what led me to this point.

[00:07:48] Jeffrey Feldberg: Both of you have such a varied past, but it just all works and it came together. You know, I'm wondering when you form line field capital Obviously you were looking around, you saw some things you liked, you saw some things that you didn't like, but you saw a gap in the marketplace that you said, okay, you know what, this isn't really being done.

We're going to do this better than anybody else. What was that? What were you seeing and what was missing out there that spurred you into action?

[00:08:20] Adan Sierra: From my end, my answer does stem from that time as in the M& A world, I kept seeing phenomenal businesses on the smaller end, anything businesses on under 50 million in transaction value or 30 or whatever. I kept interacting with owners.

What in particular comes to mind, the 80-year-old gentleman had Alzheimer's, his kids, they want it to be musicians and poets. All of them had money. None of them had interest in managing a fertilizer manufacturing and service provider. It was an excellent business, very high margins, very sticky customer base. Because of the size, it was around 20 million in revenue, some private equities wanted it. No strategic wanted the the business and the private equities that wanted one of his business. They were literally making an offer and asking the business owner to stay operating and an 80-year-old guy that have Alzheimer's that shouldn't be driving.

You know, he was being asked to stay in the business. And that was the moment that said, Jesus, I won this business. How can I make this happen? And yeah, I think I'll pause there. I think that'll be my answer.

[00:09:26] Jeffrey Feldberg: And Rodrigo, how about yourself? What were you seeing that you're saying, you know what, I can do this so much better. Adan, let's go. Let's just do this.

[00:09:33] Rodrigo Zuloaga: Yeah, from my perspective, I think, I had a great career and I had learned a ton of things and what I kept seeing was you know private equity source strategics would try to come in replace the owner in the case of strategics, but also replaced a lot of the people in the company and integrate that company to a larger organization.

And that was not necessarily aligned with what that founder or business owner really needed or wanted for the continuation of his business and his legacy. So from that perspective, I thought that an active buyer that would really uphold those values would be more attractive.

And then from then comes private equity and other financial buyers and this buyers are really looking to buy the company. Improve it very quickly. And that in some cases means, you know, unfortunately letting go some people or proven the cost part of the pricing.

And then on the other side is in many cases the private equity companies will not come in and operate the business, but they'll just hold it as part of a portfolio and either require the current CEO or owner to stay with the business or bring in some professional management that they have to hire outside.

So from my perspective, I thought look, I want to operate. I want to run a business and this would be the next type in my career for the foreseeable future. I know I can do it. I've been operating and growing companies for some time. I think I would be a more suitable buyer to this owner that really wants to have their legacy being upheld for the foreseeable future by a younger version of themselves.

 Obviously, I didn't have the money to do it myself. So I needed to set up this fund to have deep-pocketed investors and mentors that would come in alongside of that and myself and really run this show for the long-term. For me, I see it more as a continuation of the business and just with a deep focus in growth and opportunities for the employees, the community, and ourselves as well and our investors so that's the gap that I saw in the market. And what kind of prompted me that this was missing for business owners.

[00:11:41] Jeffrey Feldberg: And what's unique with both of you that you don't often see? And I feel it's a competitive advantage. You've really been on both sides of the table. You've operated businesses, you've bought businesses, you've sold businesses. And what business owners don't realize is when you're dealing with a potential buyer or investor, and they've just been buying, it's a whole different mindset.

Then I like what you said, you know, just sometimes an owner who has been in the business for a long time. They just want to find a younger version of themselves just to continue on and move things forward. But you only know that if you've been there and what that's all about. So I think that's just a terrific, competitive edge that you have.

But let me ask you this because I know. The listeners are saying, okay well, how do these buyers and investors think, but let's flip this around a little bit and let's ask the question to both of you, and let's look at the positive side to begin with. So when you're looking at businesses and I'm sure you've seen your fair share of businesses over the years, what is it about a business that really jumps off the page for you and says, yes, this is the kind of business that we would like to either own outright or invest in what should we be knowing about her or what's working in your thinking of what you want to see?

[00:12:58] Rodrigo Zuloaga: I'll start. I think the first thing is that they're is a fit right with the culture with the people. I think that's key for us. Again Adan and I will be making a career and this business we're only looking to a far, just one. And we'll actually roll up our sleeves, expand management ourselves and run day-to-day operations.

So, I want a business where I can see ourselves really joining that team and leading that team for the foreseeable future. So that, that's one thing that's super important on a personal level, obviously on a business level and correct juristics that we, as a fund are looking in for the business of we're looking to acquire is we like to see or have some sort of revenue visibility into the future. So, recurring revenue model that tends to be something that's attractive for us. That could be in many different ways. You know, If it's contracted if it's not then have some sort of subscription or visibility into revenues.

A good growth story. It's always good. We understand that businesses are not all perfect and, we just came out of the COVID pandemic. We're very pragmatic in that sense. If there's not like a perfect line in the history of the business, that's fine.

We just want to dig in and understand and work side by side with the business owner to see what was the cost of that. And whether it was a one-time event or is there a risk of that happening in the future? And yeah, I think those are the two main criteria that I would point out.

I think at Adan and I are focused on growth. And again, As I said growth of the business growth of the employees, and everyone to have a great outcome at the end. So, you know, we just want to make sure that the business model and the opportunity present that for everyone involved.

[00:14:41] Jeffrey Feldberg: And so you've talked about COVID and how you don't have to see a straight line. And you understand that things have happened. There's been a whole discussion around that even had a new term that came out when the pandemic was in full force.

EBITDA C that they came around, but different buyers, different investors treated differently. They think about it differently. So when you're looking at a business, I said, and some businesses really benefited from the pandemic, but others didn't. And so how were you dealing with that? So when you see, on the one hand, the business where it just skyrocketed because of the pandemic where you see a business that just really didn't do well.

How do you factor that in? I know every business is different. You're probably going to say, and it's really situational, but is there a general rule of thumb that you can share with us of how you view that?

[00:15:28] Adan Sierra: Unfortunately, no, we've been trying to apply sound judgment on each opportunity. And being very, you know, showing a lot of empathy for whatever happened. I think, you know, in some cases we apply, we try to get as much history as possible to apply, try to smooth out whatever happened with COVID.

On other cases where the industry is showing a lot of promise, we probably would focus a little bit more on the last 12 months and the forecast of the business. But we've been very open-minded as to the opportunities we have been seeing and to give you an example, we recently made a lot of progress with a company distributing technological solutions to hotels. So that was severely impacted throughout COVID. Although it showed some resilient trends because it had that software component, it was obviously quite impacted. Nonetheless, we proceeded with a lot of interest and treat them. And that made a big difference to the owner who he had a lot of fall through throughout COVID. Just a lot of buyers were very shy about it. Whereas Rodrigo and myself are like, Hey, we get it. Things happen. We're in the middle of a pandemic. We want the best cause we believe in the future. So that's one example. We also looked at a logistics business catering to retail.

That was also another that him and I did, although this one in particular, they were handling some final mile deliveries for very large retailers, and evidently, it was impacted throughout COVID. But that was one example where we try to focus a little bit more on the general history of the business, for example, imbalanced the prospects of it.

The other thing that I'll add is evidently some sectors have been a little bit more impacted than others, but whatever those businesses that are showing more stronger trends around revenue visibility needless to say that we're less impacted. So for better or worse you know, a lot of the businesses we are moving forward with they show some resiliency.

[00:17:29] Rodrigo Zuloaga: I just want to add, at the end of the day, all of those things could be solved for, and I think Adan and I, the way I see it is that we're problem solvers. You know, If an owner needs help, needs to expand management of the company and wants to grow the business alongside us or an owner wants to step out of the business and either retire into the sunset or has some other personal situation that has triggered the opportunity to sell his business. I think we're problem solvers and all of this issues, it's a business, it's super cyclical.

It's not a deal killer. You know, you can structure around that and that will effectively be priced into the value of deals. If it's not then obviously the business can command higher valuations. But I think my short answer to that is that all those problems or all those negative it could be solved for, and it's just about having a conversation with that business owner, understanding the costs for whatever problems the businesses face in the past, and seeing where those could be overcome. Or if there's things that just can be overcome like regulatory risks then so be it, that would just be something that would have to be priced in. And that's the way we see it, I think.

[00:18:35] Jeffrey Feldberg: You bring up some really valid points and I want to circle back. You mentioned the word deal killer, a moment back. And one of the things that business owners are very surprised to hear is that sometimes, they are the deal killer. Because either they're not prepared or they're only thinking like a business owner, like a seller instead of a buyer or an investor.

So you spoke about what you like to see in a business that you'd like to either buy outright or invest in. But let's flip that when you're looking at businesses, re-analyzing a business and certain characteristics. Again, these ones jump off the page, but they're telling you hey, run as fast as you can in the other direction, this is just not for you.

What would be some of the telltale signs that you're seeing of? Don't like what we're seeing here, it's this kind of characteristic or that kind of characteristic. Let's just move on. We'll take a pass.

[00:19:27] Adan Sierra: And I think we will probably preach to the choir here as to some of the attributes that make it an attractive, some of the deals that have passed on have been around customer concentration. low margins obviously or, industries that are poised to or ceasing to exist.

That sort of thing. And obviously, the one that's quite big is just, if it's around gut feeling is if you perceive some sort of shrewd business practices or just where there's something off. We know we're the owner of the way she or he are running the business, for example.

So that's, that tends to be a little bit difficult. And that's not to say, it's not like we, obviously our owners have personal and family expenses. We get that, but it's just, sometimes you stumble upon much more aggressive business practices, for example

[00:20:15] Rodrigo Zuloaga: I think you said it perfectly. I think those are the main one.

[00:20:19] Jeffrey Feldberg: And what's interesting about that when you're looking at the best practices or lack of best practices, but Adan you said something interesting as well because you don't hear this a lot, but it's often under the surface and I'll thank you for sharing that. It's an instinct. It's a gut feel that something is just off and a lot of sellers and business owners, what they don't understand is some of them are just under the impression. You know what, it's just a spreadsheet. You know what? My company is just a value in the spreadsheet. I would love to hear your thoughts on when you're looking at a company and you're determining the value of the company.

It was interesting because we had a podcast where we had a valuator come on and he said Jeffrey, for me, when I'm looking at a company. The narrative, 80% of the value of the company depends on the narrative. And it could be a good narrative. It could be a weak narrative, whatever that narrative is, that's really going to impact how I look at it.

And then the remaining 20% is the financials as the projections. It's everything else, but that's a data point of one that was him. Where are you? So when you're trying to get a sense of what the value is, obviously the business owner wants it as high as possible. You may want it as low as possible, but what are you looking for as, okay?

You know what? This really is worth something here. Maybe even something that will pay a premium on what does that look like for you?

[00:21:40] Rodrigo Zuloaga: I think that the value is a discovery process. I think that to get to the right value. It has to be a value that both the business owner and the buyer are end up in a good position. As a buyer, you want to end up with a great business and you also want a business owner that leaves very happy with a big nights check in the bank and everyone's happy.

You're going to need that business owner for a period of time. Post-acquisition and you want to have a friendly transaction. That's the best in terms of how we determine value. It's very situational again. I mean, there's one of the things is, you know other comps, comparable transactions that have happened recently, and other one is around, just discounting the future cash flows. And then that gets you into conversation of really understanding the projections and making realistic assumptions about the future. And then there's just what we see as a thesis, that's an opportunity for the business and then that might come at a premium. If we have some strategic advantage said that we think we can pull off by far in a specific business and we might've find a lot of value to that specific thing. And then on the flip side of that, maybe that's the downside. If the business comes with added risks, obviously that's going to discount the value.

And it's just about having that conversation with the owner and explaining, look this is the situation is, let's just talk about it and have a conversation around it. And we just have to be clear that this is a risk and maybe they'll have a position and they'll convince us why it's not a risk.

It's about talking things out and really discovering that values through that process.

[00:23:17] Adan Sierra: Yeah. I like to add where Jeffrey, we're big on listening, and for some of the businesses that we hold the year two or in our pipeline, you know, we have to balance in or weigh in the seller's expectations and that's very important. Sometimes, we can do every single calculation on the planet, but how is my model going to factor in the fact that the owner has been steering the growth of this business for 40 years, and it has sweat blood, and tears on this one and you know, it's a very emotional process for him to let it go. So when an owner tells us, I want 40 million for this business, but our calculations are only factoring, you know, spinning out 28, we do our best to try to get to that number. Obviously, if we really want the business and there's been cases where we have been very aggressive in the spirit of making something happen, but that's something that very important to us. And it's just one of those things that a model is probably going to have a hard time justifying. That's not to say we're emotional buyers or we're being a narrative.

But I think the context of it tends to be a significant part of our discovery process as well.

[00:24:29] Jeffrey Feldberg: And in the discovery process. My goodness, we can have an episode just on that because you hear so many stories, some terrific stories, some stories that aren't so great, but when you're now doing due diligence and you're looking at the company again, what would be perhaps one, two or three. Typical mistakes that you see day in, day out of businesses, that they're either doing something or not doing something that when you're in the diligence mode, it just either lowers the value or has you walk away from the deal.

And the importance of this for our listeners is, failure has oftentimes more lessons learned than success. And so with what we're going to hear now of typical mistakes during due diligence, listen to that, learn from that. And when it's your liquidity event, make sure you do the opposite of that. So, what would that be for you typically when you're going through a diligence phase and you say, oh my goodness, they just did this.

Okay. Not happening or let's lower the value.

[00:25:26] Adan Sierra: One very fresh example that I have is just when owners are very transparent when they have the attitude of here's my information, I'm opening the kimono, feel free to roam around here's everything that you may need. That just gives you the feeling that, hey, this is a company that is prepared.

This is a company that is organized, that they have their stuff and they have nothing to hide. Whereas we've been in many conversations, where the owner and this kind of ties to the gut-feeling thing, the owner is just so shy about the information and not so much because they don't have it because they're afraid that you're going to disclose sort of reveal it or accuse them of something.

We couldn't care less. If you pay your kid's tuition out of the business, if you pay the country clubs, it's fine, we get it. But what if you start being coy about it is just plan to see that in the buyers that there's something off. And if there's nothing off, it will at least delay the transaction.

That'll be one for me.

[00:26:28] Rodrigo Zuloaga: Yeah. And I think just jumping on top of that because it's related to the way I see diligence, that's a confirmation of what has been discovered during pre-diligence I would say mistakes would be where we find out about things during diligence that were not disclosed prior to diligence. And a deal or deal terms where we're agreed upon based on certain information.

And then, around, come see the diligence and you find out things that were not disclosed. And when that happened, undoubtedly, that creates on some sort of friction and price has to be adjusted in some cases and other cases simply, it might be something that goes against what you thought were your key bags when analyzing the deal right then, and then you just have to walk away.

But I think it's around that. I think diligence is about verifying the information that was shared earlier in the process. And it's about being honest and having those hard conversations early on because billions is not only expensive for us. It's expensive for the seller. The seller is committing a lot of capital, a lot of time, and a lot of resources to get into this field through the finish line.

And It's in their best interest to have those hard conversations early on in the process, in my opinion.

[00:27:43] Jeffrey Feldberg: And for our listeners out there, I hope you're really paying close attention because what you heard. It's as I like to say, it's not gold. It's platinum in terms of the wisdom and the advice coming out of here. And we talk a lot about these gentlemen in our 90-day Deep Wealth Experience, and it's all around the preparation.

And you know, both of you are absolutely right. When a business owner comes and says, okay guys, look, here's my due diligence room. There's a data room. Go at it whatever questions you have or an open book. It gives you confidence. And I don't think you would disagree with me. I think you'd agree with me when I say that the currency, when it comes to mergers and acquisitions, it's not money it's trust, and everything that a business owner can do to earn your trust, makes the deal process so much easier down the road.

And that brings up another question. I hear a lot from business owners well, Jeffrey, if I'm completely open with them, you know, but this really bad thing happened on this particular occasion. And I don't really want to tell it to them because if I tell it to them, they're going to walk away from the table and I've just lost a deal.

So what would you say to business owners? And we're all laughing on the call, but in all seriousness what would you tell a business owner who's thinking those thoughts of? Geez, I really want to keep that skeleton in the closet.

[00:28:58] Rodrigo Zuloaga: I think the skeleton will come out eventually. So like, I honestly think you're better off having that conversation early and you'd be surprised. Adan and I, as we've shared here in the podcast we are very understanding and we're people too. We really intend to have a great outcome for everyone.

So, having those conversations, I think actually strengthens the relationship rather than diminishes it. And if for whatever reason that specific situation what's the deal killer, it was going to be a deal killer later in the process. So, you better get through it before spending too much time and money, and effort.

That would be my advice.

[00:29:33] Adan Sierra: I love that answer. I mean, It's just got your buyer on the same side of the table as you, the seller, and things will go smoother. And you know, if you feel like there's a significant haircut coming in, you know, to your evaluation, then sellers, try to hone in on the value proposition of your business.

If it's just because you lost, eight contracts then, okay. Is that all of the value of your business? No, how can you solve around it? But like Rodrigo said, it will come out at some point. If it comes out bolstering section rest assured there will be some sort of claim.

Some might as well save all of that effort and headache beforehand. And you know, just try to be on the same side of the table and things will go smoother.

[00:30:19] Jeffrey Feldberg: Terrific advice. And it really, again, words for the wise. What you're hearing is whatever you have, it's going to come out anyways. And so that's why preparation is so important. When you take the time to prepare, you can either do one of two things. You can either identify that skeleton and remove it well before a liquidity event. Or if you know about that, you can at least disclose that right upfront, make no issues about a hey, by the way, I just wanted to let you know, you're probably going to find this, and here's why that happened. And I would even go on to say in both of you, you can tell me what you think. If a business owner comes to you and says, hey, look, we really failed.

We tried expanding internationally a couple of years ago, we lost money. And when we reviewed why we failed, it was simple. We didn't give it enough capital and we really lack the experience, but you have the capital, you have the experience, we researched your company and we feel this would be a perfect fit for you.

How do you interpret that when you're hearing a buyer being number one vulnerable and then number two, sharing those things with you?

[00:31:22] Rodrigo Zuloaga: I think it's about analyzing that specific event and making sure. One, if that's our thesis, because maybe we can come in with a different thesis around the business, and maybe expanding international was not our initial idea. But if our thesis is around that same kind of go-to-market that the owner had and that same strategy then it would be about confirming that.

And that would just become part of our key bads. As I said before, you know, the things that we need to confirm. And honestly, I rather, they shared early so that we can really go deep into those things that are important. And if they're important for the business owner, who's had a pulse of the business for very long time, then I'm pretty sure they're going to be important for us as buyers coming into the deal. So I think again just sitting on the same side of the table, discussing it and solving for that I think, that's the best approach.

[00:32:14] Adan Sierra: I loved your question. I think, speaks to the vulnerability of the seller, but beyond that, it's a phenomenal and smart way of the seller to get additional people working on the problem. If you can have outsiders that are semi-smart, like Rodrigo and myself to kind of brainstorm and bring a broader perspective as to how to break in different markets or challenge that idea a little bit better. You know, there's only good things that can come from that exercise.

[00:32:47] Rodrigo Zuloaga: Yeah, by the way, I'll jump on top of that. I think that's critical. I think it's when business owners goes through this process, they end up, even if that transaction doesn't happen, the business ends up in a better standing because of those conversations that they had so I think that's value in any case.

[00:33:03] Jeffrey Feldberg: Yeah I definitely agree. And there's power behind vulnerability and there's even more power behind preparation. And I know we're going to start to wrap things up here momentarily, but before we do that for our listeners out there, some of them are saying, okay, you know what, guys, I'm just getting barraged by all kinds of calls from firms like yourself and different buyers and private equity.

And it's just so confusing to me. What's different about you? Why you, what would you say to the listener? Who's thinking that, and they're saying, you know, I kind of like what I'm hearing here, but what's different about you that should really move the dial for me?

[00:33:38] Adan Sierra: I think sellers nowadays have a variety of options. We really are better positioned to those sellers that are really looking to bring in renewed management. That might be your older seller. Like the one example we've mentioned before that selling to a strategic buyer, it's not an option selling to a private equity.

It's a little difficult because the private equity will invest perhaps on minority positions. And we'll ask the owner to stay for a number of years and you know, if you're 70, 80, that's not ideal. In our case, we actually intend to replace that owner. So we can be very efficient with that transition.

It's Rodrigo and myself rolling up our sleeves and jumping into that operational seat. And so that's great, just a situation where we can add proper value by jumping in the operational seat. The other is, if you care about the money, mostly about the money, good for you.

You'll also find a variety of options. Rodrigo and I, money's great. We look, we're not bargain hunters. We're looking through their great deal at a great price. If it comes to that. But we hone in a lot on principles and values is what United this partnership. And we like to consider ourselves, principal-based executives. And we're looking for those types of companies, that care about, who's going to be the next year four shoulder of the business that care about the future. Why are treating their employee base and customers? Those kinds of things, those sorts of things that keeps us up at night.

And we wish that our seller is aligned with us on that.

[00:35:16] Rodrigo Zuloaga: Yeah, I'll also add that really, one thing that I think sets us apart from other buyers that are approaching that seller. Is that we can really do a large transaction with the group that we have? But I suppose to many other buyers, we actually intend to operate, the owner gets to sell and exit the business while preserving the culture of the company and for serving the, his legacy and what he has built or he, or she has built over the years. So I think that really differentiates us from other financial or strategic buyers in the market.

[00:35:47] Jeffrey Feldberg: Well, I really like that. And how you're focusing on really continuing, what would be a legacy for a buyer who may not be directly involved at this point, but the business is continuing and there's a lot of value and really a lot to be said for that. Just the importance of that. But gentlemen, we could go on and on.

I have more questions than we have time itself, but we're starting to bump up against some time here. So let me ask you this. As we begin to wrap up the episode and it's one of my favorite questions, I'd like you to think about the movie Back to the Future. And in the movie, you have that magical DeLorean car that can take you back to any point in time.

So imagine now it's tomorrow morning, you look out your window, and there it is. The DeLorean car is not only sitting there, but the door is open and is waiting for you to hop on in. So you now go into the car and you can go into any point in time. Perhaps you go back to yourself as a young child or a teenager, whatever the point would be what would you be telling your younger self in terms of life, wisdom or lessons learned or, hey, do this, but don't do that. What, that sound like for you?

[00:36:57] Rodrigo Zuloaga: So I'll take a stab at it first. On a personal level, I can think of a few moments in time that I was not to go back and spend more time with loved ones that we've lost, but from a career standpoint and more in the scope of this episode, something, I typically tell our interns here at Lionfield and the people that work with us is that you know, I wish I'd be more intentional about when I was younger.

I would go back to probably my freshman year in college and tell myself to think longer term. I figure out where I want to be professionally in 5, 10, 20 years from now, and then work back from that and see what skills I need to learn and how I should plan my career. You know, to hit those milestones earlier.

The reason I say this is because I'm really happy where I'm at today. And in a way, I think the different experiences I had led me to this but I think I could have also gotten to this page a little sooner. That would be my answer then.

[00:37:50] Adan Sierra: You really got me thinking. But I think on a personal side, I think I will go back to my time as a permanent missionary, I think extremely fondly of that. And it really created the foundation for a lot that happens in my life personally and professionally you know, I would probably try to look inwards a little bit more and expand the attributes that I really get a lot of benefits from nowadays.

And on the professional side and somewhat related, I think I will go back a few years ago while I was doing you know, larger transactions and try to hone in or apply on being humble. I think I, at some point I let myself be contaminated with that environment and I ended up kinda shutting down that missionary portion of my life, that it's everything for me really. So I think similarly to Rodrigo I think it slow me down. Now that I'm in a different position that I shrunk all of that. I get to move a little bit faster just because I don't have that noise around me.

I don't know if that makes sense.

[00:38:54] Jeffrey Feldberg: Well, some terrific advice from both of you and you know, go figure from a someone who's doing missionary work to later on becoming just on the whole mergers and acquisitions and buyer side and just your backgrounds, but it works. And that's your story. Well, gentlemen, as we begin to wrap this up one of the question for you, if somebody would like to find you online, what would be the best place for them?

[00:39:19] Rodrigo Zuloaga: I would say our website is it's honestly, the best place to start is lionfieldcap.com and we are always happy to hop on a call another way to find us, which is we leverage a lot on LinkedIn. So either Rodrigo Zuloaga on LinkedIn or Adan Sierra, or even looking for Lionfield Capital on LinkedIn, you'll be able to private them.

 I guess we'll share all our emails and with you Jeffrey so you can put them on the show notes as well.

[00:39:48] Jeffrey Feldberg: Terrific. And for our listeners, we'll have all that in the show notes and it'll be a simple point-and-click or copy-and-paste for the email addresses and why not take them up on a very generous offer to reach out and have a conversation, see where that goes and what that can look like for you.

Well, Adan and Rodrigo, Thank you so much for taking part of your day and spending it with us here on the Deep Wealth Sell My Business Podcast, and as always, please stay healthy and safe.

[00:40:14] Rodrigo Zuloaga: Thank you, Jeffrey. Appreciate the opportunity. Great to be here. Thank you.

[00:40:18] Sharon S.: The Deep Wealth Experience was definitely a game-changer for me.

[00:40:22] Lyn M.: This course is one of the best investments you will ever make because you will get an ROI of a hundred times that. Anybody who doesn't go through it will lose millions.

[00:40:32] Kam H.: If you don't have time for this program, you'll never have time for a successful liquidity

[00:40:36] Sharon S.: It was the best value of any business course I've ever taken. The money was very well spent.

[00:40:43] Lyn M.: Compared to when we first began, today I feel better prepared, but in some respects, may be less prepared, not because of the course, but because the course brought to light so many things that I thought we were on top of that we need to fix.

[00:40:58] Kam H.: I 100% believe there's never a great time for a business owner to allocate extra hours into his or her week or day. So it's an investment that will yield results today. I thought I will reap the benefit of this program in three to five years down the road. But as soon as I stepped forward into the program, my mind changed immediately.

[00:41:21] Sharon S.: There was so much value in the experience that the time I invested paid back so much for the energy that was expended.

[00:41:31] Lyn M.: The Deep Wealth Experience compared to other programs is the top. What we learned is very practical. Sometimes you learn stuff that it's great to learn, but you never use it. The stuff we learned from Deep Wealth Experience, I believe it's going to benefit us a boatload.

[00:41:44] Kam H.: I've done an executive MBA. I've worked for billion-dollar companies before. I've worked for smaller companies before I started my business. I've been running my business successfully now for getting close to a decade. We're on a growth trajectory. Reflecting back on the Deep Wealth, I knew less than 10% what I know now, maybe close to 1% even.

[00:42:03] Sharon S.: Hands down the best program in which I've ever participated. And we've done a lot of different things over the years. We've been in other mastermind groups, gone to many seminars, workshops, conferences, retreats, read books. This was so different. I haven't had an experience that's anything close to this in all the years that we've been at this.

It's five-star, A-plus.

[00:42:29] Kam H.: I would highly recommend it to any super busy business owner out there.

Deep Wealth is an accurate name for it. This program leads to deeper wealth and happier wealth, not just deeper wealth. I don't think there's a dollar value that could be associated with such an experience and knowledge that could be applied today and forever.

[00:42:48] Jeffrey Feldberg: Are you leaving millions on the table?

Please visit www.deepwealth.com/success to learn more.

If you're not on my email list, you'll want to be. Sign up at www.deepwealth.com/podcast. And if you enjoyed this episode of the Sell My Business podcast, please leave a review on Apple Podcasts. Reviews help me reach new listeners, grow the show and continue to create content that you'll enjoy.

As we close out this episode, a heartfelt thank you for your time. And as always, please stay healthy and safe.

Click here to book your free exploratory strategy session.

Enjoy the interview!