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May 18, 2022

Rene Robichaud On Little Known But Powerful Secrets About Investment Bankers (#126)

Rene Robichaud On Little Known But Powerful Secrets About Investment Bankers (#126)

“In order for businesses and employers and employees to thrive they need the capital markets to work well.” - Rene Robichaud

Rene Robichaud is Chairman and Partner at ArkMalibu.  He has helped hundreds of companies think strategically and become more successful.  Rene has been president and CEO of two public companies for a total of 10 years.  Most recently, he served as the President and CEO of Layne Christensen (a NASDAQ company).  Prior to that, he served as President and CEO of NS Group (NYSE), which he helped grow from a $150 million enterprise to a $1.5 billion company.  As an investment banker for 15 years, he has worked on capital raising and strategic transactions involving many industrial and natural resource companies around the world.

As Managing Director of Salomon Smith Barney based in New York, Rene held various corporate finance roles including co-head of global metals & mining practice, head of steel practice, and head of paper & forest products practice.  Previously, he was a Principal in Corporate Finance at Morgan Stanley based in New York.

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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. 

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[00:00:00] Jeffrey Feldberg: Welcome to the Sell My Business Podcast. I'm your host Jeffrey Feldberg.

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

Your liquidity event is the largest and most important financial transaction of your life.

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 anywhere from 50% to over 100% of their 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 science of a liquidity event. Two years later, I said yes to a different buyer with a nine-figure offer.

Are you thinking about an exit or liquidity event?

If you believe that you either don't have the time or you'll prepare closer to your liquidity event, think again.

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?

Let the 90-day Deep Wealth Experience and our nine-step roadmap of preparation help you capture the maximum value for your liquidity event.

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

[00:01:43] is Chairman and Partner at ArkMalibu.  He has helped hundreds of companies think strategically and become more successful.  Rene has been president and CEO of two public companies for a total of 10 years.  Most recently, he served as the President and CEO of Layne Christensen (a NASDAQ company).  Prior to that, he served as President and CEO of NS Group (NYSE), which he helped grow from a $150 million enterprise to a $1.5 billion company.  As an investment banker for 15 years, he has worked on capital raising and strategic transactions involving many industrial and natural resource companies around the world.

As Managing Director of Salomon Smith Barney based in New York, Rene held various corporate finance roles including co-head of global metals & mining practice, head of steel practice, and head of paper & forest products practice.  Previously, he was a Principal in Corporate Finance at Morgan Stanley based in New York.

[00:02:55] Jeffrey Feldberg: Welcome to The Sell My Business Podcast. And for all our listeners out there, I have a question for you. Are all investment bankers equal? Do they do the same thing? Does it really make a difference? Well, I tell you what, by the time you're finished listening to this episode, you're going to know what that's all about, what you should be looking for, and what you should be running away from as fast as you can in the other direction when everything is not quite right because today's guest is going to offer us a wealth of information from the trenches.

We're going to talk about various stories and you're going to love it. So Rene, welcome to the, Sell My Business Podcast, such a pleasure and delight to have you with us today. And Rene, there's always a story behind the story. What's your story? What got you to where you are today?

[00:03:37] Rene Robichaud: Hello, Jeffrey. Thanks for having me on. I grew up in New Brunswick, Canada, went to University of Ottawa, and spent 12 years living in Ottawa, Ontario. And then I got to go to the Harvard Business School. And so got to know Boston, met the love of my life in Boston. And we've been together for 38 years.

Now, we have two children. When I got out of business school, I had a lot of debt. I had no money and the best job I could get was investment banking in terms of pay. So I said, look, I'll do this for five years. It'll work out fine. And then I'll get a real job. And 15 years afterward, I finally got a real job, but the 15 years on Wall Street, mostly with Morgan Stanley and then with Salomon Smith Barney a real eye-opener, a great educational experience. I have a ton of respect for the work that gets done there. But there are weaknesses to their model that certain potential clients should think about. We'll talk about that in a few minutes. After wall Street, I had one of my clients asked me to become a CEO of a publicly-traded company.

And I did that. That was a wonderful experience of managing people. We had 1900 employees when I got there and unfortunately, they were losing money. That's why they asked an investment banker to come on board. And I made a lot of the hard decisions that anybody would have had to make to keep the company from going under and years later we came out and became very profitable again. When I joined the company, the share price was $6, and seven and a half years later, we were acquired, not sold for $66 a share. So that was an 11X or 38% CAGR over seven and a half years. And that was a success that I'm still very proud of today.

I got another chance to work in business with a billionaire family office that didn't work for me so much. I've felt like a bird in a cage waiting to go out and do things. And then I got another opportunity to be a CEO of another billion-dollar public company with 5,000 employees on five continents. And that was an amazing cultural challenge to try and touch people and get them to be motivated for the right reasons. Ultimately that company has been sold as well. And that's why I've come back and joined with my partner, Peter Kubasek and we formed ArkMalibu to do some investment banking work that we don't think other investment banks wanted to do.

[00:06:09] Jeffrey Feldberg: Wow. Rene, that's quite the story from Harvard Business School to Wall Street to a publicly-traded company, a family office, a publicly-traded company. And then in essence, back to an investment bank. But I'm curious, let's go back to something that you said earlier, because for most business owners, they're so busy running the business.

Next thing they know, typically there's a knock at the door. Someone has an offer. They're not really prepared and ignorance is certainly not bliss. And we all know too well what typically will happen from there? I mean, the statistics say it all 90% of liquidity events will fail. And business owners typically leave 50% to over 100% of the value of the business in the buyer's pocket when they're not prepared when they're not properly represented.

So when you're on Wall Street, And you alluded to this Rene when you're looking back now and while you were going through it, what were some of the takeaways that you learned?

[00:07:01] Rene Robichaud: Well, I wrote 10 industry business plans for a combination between Morgan Stanley and Salomon Smith Barney over the course of the 1990s, I represented at one point, several industry groups. But the business plans were essentially the same between Morgan Stanley and Salomon Smith Barney.

The investment banks are in the repeat client business, repeat customer business. And that's the number one thing to keep in mind so let's say you're a one-time client for an investment bank. You're not likely to see the investment bank again after the transaction. They're not likely to see you. There's really no business relationship expected after this one deal. The investor banker's mentality is they'll do a good job for you and they'll likely get fair market value for you if there is a buyer out there.

But the chances of them negotiating as hard as they possibly could on your behalf and against some of the buyers that are their clients, or even their prospective clients, those chances aren't that good. So it's unlikely in our judgment and according to several studies and lots of newspaper articles and research that investment bankers we'll get you a fair deal, but the idea of getting a maximum value and maximum fit, that kind of effort is unlikely from most repeat customer investment banks and the vast majority of investment banks are in the repeat customer business.

[00:08:34] Jeffrey Feldberg: And so Rene, just to make it clear for our listeners, when you're talking about an investment banker on Wall Street at one of the big banks, who's in the repeat customer business. When you're talking about their clients, you're talking about not us as business owners, you know, we're a one-hit-wonder as far as they're concerned, because there aren't other transactions from us.

Or even if there are, we're going to count on our firsthand, the number of liquidity events that we're going to have. So when you say their clients, you're talking about their bread and butter clients are the buyers that they're continually dealing with. Am I correct with that?

[00:09:09] Rene Robichaud: Yes, you're correct. You know what, on the transaction where they represent a one-time seller, you know, the buyers that they'll be talking to will be a combination of relationship clients, transactional clients, and prospects that they have never done business with, but they wish they could. And the opportunity for them to introduce your company, to all of these potential clients of theirs is an opportunity for them to reinforce their relationships, help their transactional clients, or even break into a prospect that has never done business with their bank. That opportunity they're not going to waste on a one-time seller.

[00:09:48] Jeffrey Feldberg: And so talk about a conflict of interest. So for all you business owners out there, as you think about this for a moment, your liquidity event, this is the single largest, most important financial decision of a lifetime. And Rene with what you're sharing, what we're hearing from you is not all investment bankers, but some investment bankers I'm going to say a lot of investment bankers, their loyalty are not to us as a seller, as us as a business owner, the loyalty are to the buyers that they do a regular book of business with, or they're going to start doing regular business with those buyers.

So Rene, when you're in Wall Street you were going through this, and you were seeing this anything that you can share in terms of deals where you thought yourself, oh, this deal really could have gone for X, but it really went for X minus Y?

[00:10:37] Rene Robichaud: Oh, there's a lot of stories on that Jeffrey, and I don't know that your audience is interested in that many. Let me give just a few examples for the audience to get an understanding of what conflicts of interest could mean if they were trying to sell their company in an auction process, managed by an investment bank.

The first thing that you want to check on is go to and type in five words: " wall street conflicts of interest." You're going to get probably 30 to 40 million hits there's a ton of research and articles on people who are very disappointed, too furious that they were not well-represented in their most important transaction. So that's one thing.

Another thing to understand is that if you know that your investment bank is in the repeat customer business, and you know, you're a one-time seller for them at best, it's incumbent upon you to ask them of the buyers they intend to contact about your company's sale. Which one of them has the investment bank done business with, consider a relationship client or transactional client, and which one of them are legitimate prospects for their investment bank?

That question almost never gets asked to the investment banker. And oftentimes they're going to say, don't worry about that. We have a Chinese wall. We're going to get maximum value for you. All of the words you want to hear may well get said. But at the end of the day when you assess what your reserve price is, the lowest price you're willing to sell, what fair market value appears to be based on what other transactions have happened in the marketplace, in and around your industry space. You're likely to get a deal somewhere above your reserve price, somewhere in the fair market value space and the investment banker goes this is fair. And by all accounts, it would be fair. That's not the question you want to answer. Is it maximum value? Is this the best we can get? I'm not doing this twice and you need to press your investment banker on being completely open about what all the buyers have said. And if we press harder, is there another 10, 20, maybe 30% more from the buyers they're talking to?

[00:13:05] Jeffrey Feldberg: Now, Rene, that that's, that's huge. And at Deep Wealth in our 9-step roadmap. We look at investment bankers and really put them into two buckets and Rene, we're going to talk about what you're doing at ArkMalibu and how it's different, but for our listeners out there, what Rene is talking about, we call that a transactional investment banker and that term may not be familiar to you, for our listeners.

But you know who these people are because you will get the phone call, the email, maybe you even met with them. And what you'll hear from them is, hey, we are specialists in your industry. We can tell you all about your business, the last number of transactions. We were the ones that actually led it. We know who all the players are.

We can get you out there quickly. We'll get your company sold quickly. And because this is all we do in this area, we'll make sure that we get you a really good deal. And from the outside looking in, they're saying all the right things, and it sounds like the way to go. It's going to be quick. They're experts in the area.

They know what they're doing. They know everybody, but Rene there's big, big downsides to all of that. So I've painted a very rosy picture. Why don't you share with our audience from your experience why that rosy picture really isn't the best direction to go as a business owner?

[00:14:14] Rene Robichaud: If you're a one-time seller, I don't know if you have a great 10, 20, 30, $100 million dollar business, $200 million business. That's a really great size company. A lot of buyers would want to take a look at that but from you know, an investment bank's perspective that's not that big a deal for any national firm.

And because it's a one-time fee, it's unlikely that for that one-time fee, they're going to really press any of their relationship clients for you. Meaning that if they were to push harder and ultimately one of their relationship clients agreed to pay another 10, 20, or 30% for your company and found out that last bid was 10, 20, or 30% above the clearing bid, which was the next highest bid. It's most likely that buyer will tell the investment bank don't ever call us again. I never want to deal with you again. And so that investment bank has just lost a big multi-billion dollar client that has a big future revenue stream for them. For your behalf, your one-time deal. And you can understand there's not a lot of business people that would make that trade. And so that's why you have to think hard about, are you getting a trusted financial advisor when you engage a given investment bank?

[00:15:31] Jeffrey Feldberg: So much there to unpack and Rene to put some numbers there for our listeners, for a business owner, getting 5 million, 10 million, 20 million, even 30 million more dollars than you could otherwise that's a big deal, but even if there weren't conflicts of interest let's just look at it from just a pure selling side of things.

And this happens not just in liquidity events, that it happens across all industries, whoever you're working with as a professional representative for you, are they going to risk a deal for an incremental small increase in their success fee or their commission? The answer is probably not. And then Rene, when you throw in the conflicts of interests that they have, well I'm going to lose a billion-dollar company for this one-time transaction, forget about it as it's not even happening.

So for our listeners, 5 million to 30 million, everything in between or above or below, that's real money in your pocket that you're not going to see in that kind of scenario.

So, Rene, when you got back into the investment banking industry. And you decided to go out on your own with Peter and start ArkMalibu. I imagine you wanted to address some deficiencies that you saw out there.

You want to solve like a typical entrepreneur. This is what we do find a painful problem and we solve it. So what was it with ArkMalibu that you thought, hey, we're going to do this differently, and here's what we're going to do? What was that for you?

[00:16:56] Rene Robichaud: Well, I've known Peter Kubasek my partner for almost 20 years. And I've been on his board since 2010 and he was running an investment banking boutique. So he had multi-services and multiple types of clients and was doing fine, but he asked me if I would join him and grow the business with him.

And I told Peter that I don't think the world needs another investment banking boutique, there are lots of them. The world doesn't need another industry specialist, doesn't need another national firm. I don't think it needs another global firm. There are plenty of investment banks out there that are what we call financial intermediaries and a financial intermediary by definition stands between a buyer and seller all day long.

They've done that for a hundred years. They started with currencies and copper and gold. They do it with food products. They do it in size today with bonds and stocks and, for the last several decades, they've been doing it with companies. Financial intermediaries stand between buyers and sellers, selling companies.

That's the mergers and acquisitions marketplace. So I told Peter because I don't believe we need to add to the supply of financial intermediaries. Let's be a financial advocate. Let's do something that nobody else wants to do. And just represent the one-time seller. And that would be something that is you know, a different model that some people would say, I like it and we'll get some business.

Peter thought we could starve. And at the beginning, it was a little tricky getting people to understand the model and why a financial advocate could be better for them than a financial intermediary. Today, many of our clients get it. We've never had a pipeline so big. And we feel blessed with our business.

Peter finally agreed that you know, we would only have one service, which is selling family-owned businesses or entrepreneur-owned businesses where this is the biggest deal of their lives. There's a certain joy that comes from getting that done well. It's certain feeling of satisfaction and of course, it pays the bills for our young bankers who are learning and working really hard on behalf of our clients.

So, as a business model, you know, don't try this at home. It's really the world's dumbest model where you intentionally reject, repeat customers. Where are you going to get business, you know, next year? I mean, you can't wave a sign saying we sell one time, you know, sell our company.

People will get it. It's all word of mouth. And thankfully, we now have the largest pipeline of business we've ever had.

[00:19:32] Jeffrey Feldberg: Wow Rene. So it's really in stark contrast to what we've been talking about. And at Deep Wealth, we refer to that as having an advocate as an investment banker, as you so eloquently said, Rene. And so for our listeners out there, you've talked about it before of what a transactional investment banker is not doing.

So when a business owner signs up with ArkMalibu, who's an advocate. What specifically does an advocate investment banker do that you're not going to see with other investment bankers?

[00:20:03] Rene Robichaud: Well, We're going to go do any and all buyers that the client is interested in. We don't have a horse in the race. There's no favored buyer for us. There are at least three pools of buyers that all potential sellers of good companies should be thinking about. Obviously the strategic buyers, the ones that could have the greatest synergies upfront.

Then there's a pool of financial buyers of which there are thousands in North America. And then there's a pool of billionaire family offices that are also very active in the M and A marketplace. And there are many of them. So if you're different, offer the buyer. Your investment bank should be targeting all three pools of buyers.

And yet time and time again we've spoken to sellers whose process failed. And they said well, we, didn't go to any but one pool of clients, so many national investment banks today make 80 to 90% of their revenues strictly from the private equity market because of the global firms have relationships with virtually all of the big public companies.

And so the national firms and the regional firms have grown up servicing this very active, private equity market. If the financial intermediary you pick to sell your company only goes to the private equity market. It's likely you're not going to get seen by those who have the greatest synergies earliest on in the process and that's the strategic buyers.

You're not going to get to see the family offices that have their own corporate culture that could fit well with your employees and your culture. And so there are trade-offs.

[00:21:43] Jeffrey Feldberg: And so Rene, it's interesting because what you're talking about is a different way of doing things perhaps for our listeners that they never thought of before. And for our listeners, what you're hearing from Rene is that ArkMalibu and an advocate and Rene and company, they're not specialists.

They are generalists so that they're not going to come to you and say, hey, we only specialize in this one industry and we know everything and all the buyers, and we have all the connections. And from the outside, looking in that may seem like a bit of a downside, a negative when you compare that to the transactional investment banker.

But what you are hearing from Rene is yes we're a generalist, but we're going to go to all three buying pools. We're going to cast a very wide net. We're going to get the same prospective buyers that the transactional investment banker would get, but a whole lot more on top of that. Because we don't have any allegiance to any one buyer.

Our allegiance is to you as a seller, and that's where we're going to make the difference. And so Rene, what I'm wondering as you begin that process of working with your clients a little earlier on, you mentioned the auction process and at Deep Wealth, we are big, big proponents of having an auction, a competitive process.

When you're having a liquidity event, can you share for our listeners why you prefer the auction process and the power that comes with that?

[00:23:00] Rene Robichaud: The auction process has proven itself over the decades, Jeffery to benefit the client, and the two fundamental ways one is to assure yourself and your other shareholders, even your board of advisors that you've done the best in this one-time event to that list interest from all the logical players who might have an interest in acquiring your company.

And so that at the end of the transaction, you can say you've done the best as a fiduciary of your company and to make sure that you heard from the entire buying community and In the auction process there is a dynamic and negotiating dynamic that happens that is really impossible to replicate on a one-on-one deal.

And that is that all the buyers have a timetable, have to stick to the timetable, moving along in the indication of interest process, the management presentation process, the letter of intent process, those negotiating dynamics keep the buyers honest and saying I can't really bottom fish here because I'm just going to get thrown out of the process.

I have to continue to put my best foot forward. Even then, you know, I'll give you an example, if a given buyer is allowed to bid 100 as an index. It's still likely they're going to come in at 65. And then, when they're told they're not let in and they'll ask well, you know, I can move that and they'll come back at 75 and they'll try to buy it for below what they're allowed to bid on.

And you would do the same in an auction. So it's really important that dynamic pushes the buyers towards their 100 indexes. And it takes a little bit of courage on the seller's part and a certainly on the investment banker's part because if your reserve price is 70 and somebody's bidding 80, some investment banks would go, we're done.

We're good. Let's do this deal.

But there could be 25% more on the table from 80 to 100. And you have to ask yourself, do I want to fire this buyer that bid 80, get them out of the process, take the chance if they don't come back, or do I want to just take the 80 and the investment banker has got that risk too. And the dynamics are well, who else have we got in the process who is at 82 or 85?

What's the likelihood? What have they been toll? The investment banker is hearing all this regularly. They've talked to everybody who's at the final stages. You, the seller don't get to hear everything and it's completely unfair for you not to get a full understanding about all of the last players are saying and why. But if that investment banker got our horse in the race, it's likely he's going to shed information to a selected buyer that all buyers want to know in an auction process. One is, how many people am I bidding against? The other is who are they? Some people matter more than others to a given bidder. And lastly, what's the clearing bid because if the clearing bids 80 and I'm authorized to bid a hundred and I bid a hundred and I find out after the fact that I take 25% more than I needed to win, I could lose my job.

Once the CEO finds out, the board finds out that's a problem, and I'm going to take it out of the investment bank who pushed me. If that investment bank was one of my investment banks, I will be so angry with them. I will threaten never to do business with them again.

[00:26:38] Jeffrey Feldberg: So we're hearing some of the power dynamics as business owners that we typically aren't privy to. And think about this, if you're an investment banker, you're the transactional type and you have a regular book of business with one buyer with what Rene was saying, you're going to want to say to that buyer, hey, if I can get you this deal for 25% less than X, whatever that is. Can you help me out with a little bit more business on the other side? Can we do some more transactions with you and really your business, your livelihood as a business owner, it's being juggled around like it's nobody's business and it's really for all of their benefits.

And so Rene, you've done a terrific job of illustrating the difference between an advocate and a transactional investment banker. Let's turn the spotlight now onto business owners because as business owners, oftentimes we're just so busy, focused on the business and a question I love to ask business owners, it's a rhetorical one.

How can you master something you've never done before? And so the skills that help build the business don't make the fatal mistake of believing that it's the same skills that can help sell the business. Rene, let's look on the negative side for a moment when you're speaking to various businesses over the years that have asked you to represent them, what are some of the typical mistakes that you're seeing businesses make that can either cost them the deal or penalize the enterprise value?

[00:28:03] Rene Robichaud: Wow, again there are a lot of reasons to buy a company and any one of those reasons is another reason not to buy the company. So it's actually a long list of mistakes that a seller could make in a process. One of them is to mislead the buyer and the minute you are caught misleading the buyer everything that you've said that they believe to that point is now I've got to go back and check due diligence.

We'll check a lot of things, but the minute that they get a sense that you're not really factual, perfectly factual that'll hurt. A lot of buyers want their sellers, the managers to stay on post-transaction sometimes for five years. Sometimes it's okay for three years, two years, one year.

It's rare unless the owner of the company is not as a chairman is not part of the day to day that they want the owner-manager, that it's okay for the owner-manager to take the money at closing and then leave the company and have the buyer then go, okay, who's left? How are things going?

It's always in the best interest of the seller to convince the buyer that the key leaders of the company will stay on for a period of time to ensure a proper integration of the selling company with the buying company. So that's another kind of mistake in leadership.

Another mistake is to think that, your baby is the most beautiful baby in the world and that everybody's going to see that. That's not necessarily how the buying community is going to see it, the buying community will look at hundreds and hundreds of transactions in a year. Deal flow is everything to them. You'll be an attractive deal for a select number of buyers.

But it's really important that you respect the buying community, respect their time. They're spending a lot of management time, legal time, accounting time, learning about your company, and to treat them professionally throughout the process. Part of your baby being the most beautiful thing in the world to you sometimes means that your expectations of value are above fair market value.

If your expectations of value are too high it's likely you'll be disappointed in the sale process. We always look for a ZOPA as early as we can in a potential transaction, a ZOPA is a Zone of Potential Agreement between buyer and seller. So if we feel fair market value for the company is indexed at a hundred and they're asking for 150, we go, you know, it likely that you're going to have to wait to get your 150.

We don't see that in the market today. We think fair market value for you is 90 to 110. And we think it's possible that you could get 120, but the probability goes down markedly. If fair market value was 90 to 110, there's a hundred percent chance you'll get a sale, hundred, I should say, 99 at 80, there's a 90% chance you get it at 90.

There's an 80% chance you'll get at a hundred and maybe a 70% chance you get an at 110 and maybe 120 is possible would that could be somewhere between 25 and 50% chance. So you know, it's probability-weighted as you think of a bell curve of possibilities.

[00:31:22] Jeffrey Feldberg: Rene some wonderful insights. And I know we could just go on that could be a whole episode in itself. What not to do that you see with business owners and for our listeners out there, what Rene has really summarized in such an eloquent way. I mean, that's step number three of our 9-step roadmap. We talk all about the future buyer and it's really mastering the art of thinking like a buyer.

And so Rene, you shared with us things of what not to do. And so this is things like trust, you lose the trust of the buyer because you didn't quite say this way, but essentially as a business owner, you've lied about things or you've misrepresented things, you know, there goes a trust. There goes either the deal or the enterprise value. And then does a business run without you? That's one of our other favorite questions that we love to ask business owners. Does your business run without you? That's going to be a big negative if it doesn't and the list goes on and on, but let's flip that Rene. I know each of the things that you mentioned, we can take the opposite of that and say, that's what you should be doing as a business.

But here's the question, in terms of getting things right. If you could wave your magic wand and you look at all the transactions that you've done in the past, what has stood out for you from a few businesses or a business that just did things perhaps other business owners haven't done that really made them stand out from the crowd that it, it made it easier, not only to be successful in the liquidity event. So there goes your deal certainty. You're increasing it, but it also made it easier to increase the enterprise value. Any insights that you can share on that?

[00:32:56] Rene Robichaud: Well, there are several ways on how to be most successful in a sale process. And the first thing is we believe in the 5Ps. Prior preparation prevents poor performance. So before you go to market, do a lot of the homework on all of the questions that you're likely to be asked and have the appropriate answer. The 5PS also means that you put together a document for those buyers that have signed a nondisclosure agreement. That document stands alone read well. Flows well. That the beginning, you know, fits with the end of the document. And is so clear that the potential buyer thinks this is a professional group, let's go talk to them see what we can do.

In that marketing document, you're, teasing the buyer on there are some things that we could do with the right buyer that we can't do by ourselves. And if the buyer sees that and they believe that of themselves, then they can see value-enhancing synergies for lack of a better term. Synergies, I'm going to say to take a tangent, we look at six buckets of synergies for every one of the final buyers and those are revenue, opportunities, price volume, mix for both the buyer and the seller. Cost savings opportunities, fixed and variable for both the buyer and this. And risk mitigation synergies for both the buyer and the seller, those six buckets when analyzed properly, sometimes create as much value as the standalone value of the company itself. And then who's going to share in the bidding process, some of those synergies with the seller. So that's how you get above fair market value when those synergies are so compelling.

So that Jeffery is another way to maximize your opportunity is to show the opportunities for the right buyers on how you can materially enhance not only your business but potentially the buyer's business.

[00:35:09] Jeffrey Feldberg: I love that. And for our listeners out there, I really hope that you're listening. Rene as I like to say on The Sell My Business Podcast, what you shared wasn't gold that was platinum. And you've shared a number of strategies, but particularly on the synergy side. And let me ask you this for all of our listeners out there.

And we talk about this in the Deep Wealth Experience. It's step number three, and step number four. When you master the art of thinking like a buyer, you're creating a narrative, and that narrative paints the picture of a very bright, prosperous, and hopeful tomorrow to what Rene was saying, this is where a buyer says, yes.

You know, Whether it's cost savings or revenue or risk mitigation. You're solving a very painful problem for me. And I'm prepared to pay above market for that. But then on the flip side, Rene, and this is our wheelhouse at Deep Wealth, you're saying with your five-piece, hey you better show up prepared and that's step number four, where we have an internal due diligence audit.

And the mission there is really twofold, find all those hidden skeletons in the closet. And you remove them ahead of time, even before Rene to start working with someone like yourself or ArkMalibu, and then at the same time, as we like to say, find those hidden Rembrandts in the attic, those things that you're world-class in and you put them out for public display. So that all the potential buyers can see why you're such an attractive option for them to consider as their next deal, the next investment.

So, Rene, you've really given us a roadmap of both what to do and what not to do. And so I'm wondering where you sit today you have a very difficult business model because you have no repeat business.

As you said earlier, it's all word of mouth. So oftentimes business owners we can be selfish and we don't tune in to what I like to call the world's favorite radio station, WII.FM the what's in it for me radio station. And so Rene, when a business owner comes and they pitch themselves to you because business owners don't realize that as much as they're considering you you're also considering them.

You only have so much time. You can only take on so much deal flow. Again, another magic wand question, if you could wave your magic wand, Rene, what does it look like for a business owner to be the perfect client for you? What would you want to see or hear?

[00:37:28] Rene Robichaud: Well, we want, you know to agree that the probability of meeting their goals is high enough for us to spend the 2,000 to 3,000 man hours we often spend on a client. And I will tell you one of the national firms that I've talked to have said that their standard is 800 to 900 man-hours per transaction.

So it's very different. We bring senior advisors, subject matter experts. We bring a lot of consulting to the table in the 5P process to make sure that when we go to market it's as compelling as possible. And it's a different model. It's a more expensive model for us anyway. But it pays off so well for the clients that the clients are typically very, very happy that they've gone through this whole process as thoroughly with us.

[00:38:20] Jeffrey Feldberg: What's amazing with that is you're spending two to three times more hours, and we're not talking a small number of hours. You're saying some of the national firms are maybe 800 to 900 hours. You're at 2,000 to 3,000 hours collectively per client when you're working on the liquidity event. And so what would I have to do Rene, to be the world's best client for you as an investment banker?

[00:38:43] Rene Robichaud: Well, If we can agree, you know, that your expectations of value, which combination of dollars and fit with a potential buyer is doable. And for us, we typically look for clients that have a total enterprise value above $25 million because to spend the number of hours we do our minimum fee has to get covered, and it's hard for a company below 25 million to cover that.

So it's a probability that their value expectations can be met, that they'll be viewed by a number of buyers is an attractive company in the next 5 to 10 years to own, you know, that the management will continue on. That it's unlikely that the corporate culture will be severely damaged with a combination with the buying firm. When we assess that upfront, we see that as a very attractive client.

[00:39:40] Jeffrey Feldberg: Absolutely. And I know I'm thinking of really some of our listeners and I know what's running through their minds. It's one of two things and I'm usually a glass-half-full kind of guy. I'm going to go to the being a glass half empty. And what some listeners are saying is either number one, you know what, Rene, this is all fine and good.

But why would I even want to have professional representation anyways? My competition, they're going to come. They're going to just give me an offer or I'll get a knock at the door from a private equity company. They're going to give me an offer. Aren't I better doing that. I mean, I'm not going to have to pay any transaction fees.

I'm not going to have to go through a whole process. And yeah, maybe I'll get a little bit less, but probably not that much less. And it'll just be quicker and less painful for me. Rene, what would you say to that?

[00:40:25] Rene Robichaud: So, you know, I typically don't try and convince potential sellers who think they can do it themselves to come with us because it's too hard. You can do it yourself. Guaranteed, you can do this yourself. But it's like selling your house, good luck with that.

You're just not going to get the kind of traffic you want, and it's harder than selling your house because your house kind of stands there and says everything after you've done a little due diligence, you're done, you know, understanding how to make your business sing in the next 5 to 10 years is a story.

It's involved and it requires a presentation that is compelling and concise and clear from the get-go. So if you're not those things, busy buyers don't have time. And if a busy buyer senses, they're the only buyer at the table. If their index is a hundred, you're likely to get 65.

[00:41:19] Jeffrey Feldberg: Fair enough. I think the number of says it all on that one. And then the second school of thought that some listeners may be thinking is Rene, you tell a great story, but there's a good chance that perhaps you're going to be more expensive on the fee side than what others are going to be charging.

What would you say to someone who's thinking well, yeah, good story, but I'm just going to go elsewhere. I'm going to save on the fees. I'm looking for some lower fees. Why is that right? Why is that wrong? What should I know?

[00:41:45] Rene Robichaud: I think you should always look for the lowest fee, but the lowest fee is not necessarily black and white. The lowest fee is what it gets you the most net after-tax dollars, when the deal is done. So you could end up paying a higher fee signing on for somebody with a higher fee who actually gets you 30% more.

And all of a sudden, the extra point or two that you paid was washed away 10 times, 15 times by a properly addressing the entire buying community in a professional way, in a professional process, giving you complete clarity in what the buying community is telling you in this one important transaction.

And I guarantee you, there are a lot of firms that big national firms that'll charge less than people that do what we do. In part, because they're only going to spend 8 to 900 hours on it in part because they're going to take you right to their 30 to 50 most cherished buying community. And they need to feed that community because that's their regular customer base. So sure they see multiple deals coming from your one transaction. We see one deal coming from your transaction. We spend a lot more time on it. So it's really up to you if that model fits for you. Great. And if it doesn't, we understand.

[00:43:09] Jeffrey Feldberg: And so Rene really gives a whole new meaning where we're going to change a saying or a slogan out there. Usually, you hear buyer beware, but what you've just shared is really seller beware because you have one thing which is the price or what you're paying, but then you have another entirely different area, which is where you want to be. And that's the value that you're going to be getting so the old price value comparison there.

And so Rene, as we start to wrap things up, I would be remiss if I didn't quickly ask you about a book that you and Peter wrote. And I'd love for you to talk to our listeners about that, The Sell Well: Understanding the M&A Process and Avoiding the Most Common Mistakes of Selling a Business. So what was the book all about?

[00:43:51] Rene Robichaud: So it's a guide to the M and A marketplace for the one-time seller. It was also written by a third author Bill High who's a professional wealth manager to, you know, very wealthy family. And the three of us all agreed that if our potential clients could read this before they came to talk to us or anybody that our conversation would start off at a much higher level.

And so it's not a hire ArkMalibu book. It's got 14 chapters in it. It's a hundred pages. It's not a textbook it's written for the manager of a private business, you know, medium-sized private business. It's available on Amazon. We've had thousands of copies out in the marketplace and good feedback that it's a helpful guide.

[00:44:39] Jeffrey Feldberg: Terrific. And for our listeners, we will put a link in the show notes. It'll be very easy. It will be a point and click for you. And so Rene, as we begin to wrap up this episode, we're at the point where I get to ask my favorite question. And the question is this, every guest answers this question and just the wisdom that comes out of it is amazing. And Rene, here's the question I'd like you to think about the movie Back to the Future and in the movie, you have the magical DeLorean car, which will take you back to any point in time. So Rene, imagine it's tomorrow morning, you look outside your window.

And the DeLorean car is there. The door is open, it's waiting for you to hop on in. And you're now going to go back to any point in your life. Maybe it's Rene as a child or a teenager, a young adult, whatever point in time it would be. What would you be telling your younger self in terms of life lessons or life wisdom, or, hey, do this, but don't do that. What would that look like for you?

[00:45:36] Rene Robichaud: Well, I guess I'd go back to when I entered wall street, I was fairly idealistic. I knew that I wasn't saving the world by helping companies raise money, sell businesses. But I felt our business was always in demand that in order for businesses and employers and employees to thrive they need the capital markets to work well.

They need the marketplace to work well and yet when I got in there, there were selected practices where it was quite clear you know, like every business you have to take care of your best clients. And sometimes the best clients got better service than the less than best clients.

And yet, as a younger man, I was making promises that ultimately the firm didn't keep. I should have stormed out in a huff, I just didn't know that at the time I needed the work at the time and today I could have figured out there are some people when they say things that really don't work for the firm that may work short term, you need to stand up to them and not necessarily challenge them, just ask them an ethical question upfront and that usually we'll send them back and go. Yeah, you're probably right. We shouldn't go that direction.

[00:46:50] Jeffrey Feldberg: Wow, what an insight and hindsight's always 2020, and it sounds like you took that experience and you've just paid that forward now with what you're doing with ArkMalibu, and congratulations with that. And so Rene, I'll put this in the show notes. If any of the listeners would like to reach you, what would be the best place online that they can do that?

[00:47:10] Rene Robichaud: My work email is rene[at]ark malibu[dot]com.

[00:47:16] Jeffrey Feldberg: Terrific. Well, there you have it. And you have the generous offer from Rene to answer questions through his work email. And thank you for sharing that. Rene, as we wrap up this episode, thank you so much for taking part of your day and spending it with us on The Sell My Business Podcast. And as always, please stay healthy and safe.

[00:47:32] Rene Robichaud: Thank you.

[00:47:33] Sharon S.: The Deep Wealth Experience was definitely a game-changer for me.

[00:47:36] 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.

[00:47:46] Kam H.: If you don't have time for this program, you'll never have time for a successful liquidity

[00:47:51] Sharon S.: It was the best value of any business course I've ever taken. The money was very well spent.

[00:47:57] Lyn M.: Compared to when we first began, today I feel better prepared, but in some respects, maybe 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.

[00:48:13] 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.

[00:48:35] 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.

[00:48:46] 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.

[00:48:59] 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.

[00:49:17] 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.

[00:49:44] 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.

[00:50:03] Jeffrey Feldberg: Are you leaving millions on the table?

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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. 

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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? 

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