How to Think Like a Buyer Valuation, Risk, and Strategy with Javier Enrile

Kison: [00:00:00] I am Kisan Patel, and you are listening to m and a Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during m and a deals.

Kison: Hello and welcome to the m and a Science podcast. [00:00:30] This podcast is part of a mission to rethink how m and a is done. The old school settle it approach, it's dead higher led m and a is all about strategy, alignment, and efficiency. Putting value creation at the center of every deal. Let's be real. It's not just about closing the deal, it's about making it successful.

Kison: We uncover what truly works in m and a by learning directly from the best. I'm your host, Kisan Patel, founder and CEO of deal room and Chief Scientist here at m and a [00:01:00] Science. Today I'm joined by Javier in Relay, managing director of m and a at T-I-A-A-T-I-A-A is a major financial services organization focused on retirement asset management and insurance.

Kison: Manages over a trillion dollars in assets. Javier spent his career deep in the world of m and a, starting out in corporate and investment banking at Citi before moving to the buy side where he is led deals across investment management, insurance, and [00:01:30] financial services. He's one of those rare m and a leaders whose as passionate about the craft as he is about execution.

Kison: Today we're gonna get into how he approaches sourcing in a relationship, first industry, how he thinks about intrinsic valuation versus comps. Why structuring and contract terms matter just as much as price. Javier, how you doing? Good, how are you? Hey, thanks for joining me live here in Manhattan at our sponsored office suite by VRC, evaluation Research Corporation.

Kison: And we're doing this live. [00:02:00] Thank you for making it happen. Taking time.

Javier: No, no, of course. Thank you for having me. I'm super excited to be here with you.

Kison: We kick off a little bit about your background.

Javier: So I started my career post MBA at Citi. So I was sort of recruiting to Citi in the investment in corporate banking role and started doing m and a advisory and corporate lending there.

Javier: Quickly realized that I wanted to be more on the buy side of things rather than the sell side. I switched into corporate development roles for different firms. I've done corporate m and a private equity venture capital [00:02:30] as well through my career, primarily focused on financial services industry,

Kison: how ideals you've done

Javier: over 60 or so, and if you can count the ones that we evaluated, so hundreds.

Javier: So quite a few. So let's

Kison: say the 60. What was the range? Smallest to largest deal.

Javier: I've done anything from a billion dollar check sizes to a few hundred thousand. I think most practitioners will tell you that it doesn't really matter at the end of the day. So MA is one place where size doesn't matter. So you'll do the same amount of work for a, uh, $200,000 deal, then you'll do for a billion in many ways.

Javier: Smaller [00:03:00] deals, as everyone knows, are actually harder to do. 'cause then every, everything matters.

Kison: That's, that's true. That's a fair disclaimer there. There's what looks good on a resume versus the work you end up Yeah. Learning lessons from, you've done the investment side and then you, you shift over to the buy side.

Kison: Yeah. Yeah. How do you explain to somebody? I feel like there's so many people I interact with that are in banking, they want to go to private equity and a lot of people aren't from the corp debt. If you talk to anybody in business school, they just like don't, aren't exposed to it. Give me the real scoop.

Kison: What's good and bad about, you know, the buy side here, especially in the strategic environment,

Javier: I think [00:03:30] the corporate development or corporate m and a is also doing m and a within a firm. In many ways, the combination of private equity with the strategic thinking, so you have components of both. On the one hand, you have the component of you are in the buy side, meaning when you analyze a firm or buy a firm or you are taking on the risk of taking on that firm, you're taking on that targeting to the firm that you're working for.

Javier: In many ways, then you're a principal, right? Driving that decision, which is different from, say you're an advisor or in investment [00:04:00] banking, which essentially advising someone on what to do, but the decision is theirs. In here, you are essentially making the decision as to whether or not to buy, et cetera.

Javier: And then you combine that with the strategic component. As we underwrite transactions, we underwrite 'em for the financial return. So it has to make sense from a financial perspective. We're also underwriting them for the strategic rationale. So we wanna make sure that it is advancing the strategy of the firm that I work for.

Javier: And those two things essentially need to be true for the transaction to move forward. And that's one of the things that I like the most. It's [00:04:30] not just about underwriting financial merit of a transaction, but it's also just as much in a corporate MA role underwriting, whether it makes sense strategically.

Javier: Firm. So that's different if from a, if you're in a private equity world, right, that you're really underwriting the returns, which is difficult enough as it is, it's just that one dimensional component of it.

Kison: You're clicking into more details, how this is actually gonna come together, how are you gonna realize synergies and what it's gonna look like as a real combined entity.

Kison: I feel like the ideas are there. Right, but I guess the sort of depth, 'cause you're not in the business of how you're [00:05:00] actually gonna execute, realize those synergies maybe isn't as detailed or well thought out.

Javier: It depends what sort of private equity, investing style you're thinking of is more of a buyout, private equity buyout, which is essentially you're coming in as a private equity owner, you're taking control of the firm and you're taking it in a different direction.

Javier: You will have to think through very deeply as to what is the strategy of the target. You're essentially changing everything, coming in, buying it. Taken into a different direction. Right? But it is true from a private equity perspective, you're always thinking about the target. [00:05:30] In the context of a corporate MA team, you're thinking about the target.

Javier: So it has to make sense, right? Synergies have to be there. But you are also thinking about what impact that target will have into your firm, which is something the private equity doesn't have to worry about. They're not integrating anything into the private equity firm investment. I agree with you, it opens a whole dimension of factors that you need to think through.

Kison: I just talked to a person off record, and he was telling me the firm supported acquisition for the company, and they really left him to figure out how to close or how to integrate. Like as soon as they close, it's like, all [00:06:00] right, we'll figure out how to integrate it, right? But it was just the deal that happened so quick.

Javier: Unfortunately, the market is in market, right? So you'll have situations where it's a competitive bidding process, and then the temp is not. Led by you, right as a buyer, but it's led by, by investment banking that is running out a sale processor. Sometimes those, as you well know, those timelines are very compressed.

Javier: I get, so you don't have time to think about integration or you're just trying to win the deal and the integration comes later. It's really unfortunate.

Kison: You minimize it. You literally pull steps out and just do the bare minimum,

Javier: right?

Kison: I've never met a buyer that. Really enjoys [00:06:30] auction processes. No one does.

Kison: Nobody does. If there's anybody listening that's a buyer that loves auction processes, let me know. No,

Javier: they should let me know too that with my, with all my heart. Yeah. And look, I don't think, obviously, I'm sure that you have some sell side bankers listening to this. I don't think they generally work for industry such as the industry that I play my sandbox, which is investment management or in financial services.

Javier: From a sales side, if you run a sell process, it's gonna typically lead to a bit more deterioration of the business by the time you get there. Obviously the counter to that is you're gonna maximize [00:07:00] price 'cause you have competitive tension and all that thing. I don't quite agree with that. Not because I'm trying to avoid sale processes, but I do truly believe that in industries where the main asset is people and investment management and financial services for the most part are those industries.

Javier: I don't think that running a quick, highly competitive stock process is gonna help anyone. It's just not gonna help the target. It's gonna help the buyers, but unfortunately it still exist, so you have to live with them.

Kison: We can talk a lot about that. There's the good and bad of of those processes, but this is why you put a lot of effort in building [00:07:30] proprietary pipeline, right?

Kison: Which is about a big thing I wanna talk about. Before you build pipeline, you gotta get aligned with that strategy. We obviously emphasize that. So you obviously have different business leaders in your organization and you're gonna sit down with those business leaders and really start talking or shaping it.

Kison: What does that process look like? I feel like there's. Organic view to inorganic, right. And bridge it based off of their organic view. Like how do you sit down and start flushing out this m and a strategy for that business? [00:08:00]

Javier: So there's three steps primarily, right? I think the first step is fully understanding their organic strategy.

Javier: First, the process starts there. Typically, most of the businesses in the current firm and other firms that I work with, they do have a clearly laid out organic strategy. So they know. Where they wanna be in the next three to five years. They know how steps or tactics, whether they need to get there, but that's the base in most cases.

Javier: They'll come to us, uh, sorry, to me, to the team where I say, this is my strategy. You [00:08:30] know, it, what can we do to accelerate the progress through inorganic means that it starts that conversation and it could be, Hey, I want to be more prevalent in, in this jurisdiction. I'm already opening some offices already there, but I wanna accelerate that process.

Javier: Can we, is there an option here to then go and buy a company that then we'll accelerate that process? So that's the second step. So a lot of the times it's around getting there faster rather than doing something else different. That tends to be kinda like the second [00:09:00] phase of the conversation. Then the third phase then becomes,

Kison: is the second phase like actually identifying companies or No,

Javier: that's third phase.

Javier: Right? Okay. So I think once, you know, like look for example, it's like, okay, now we realize that, that we need to buy a company next year. Ah. So

Kison: just saying, okay, first step is to understand the organic strategy of like how you're currently planning to do it. And the second is saying. Can you actually do it inorganically,

Javier: right?

Javier: And how inorganically will help you to either accelerate, essentially accelerate that phase of progress. And then the third step is, okay, we know we need to buy something in [00:09:30] this jurisdiction. What are the types of targets that we would be ideal? And then that is the third phase. And then if you go through these three steps, you'll end up with a clear picture and of, first of all, what it is that that company will do will help you do to what types of companies where you want to buy them.

Javier: Then if you think about from a corporate development guy, corporate MI perspective, that's perfect. 'cause then you have essentially the key strategic criteria and then you just have to go out to the market and look for those types of firms. You have a clear [00:10:00] set of criteria that kinda like informs you your sourcing routines.

Javier: But those are the three phases is another phase within that process. Which I've, I've gone a number of times, which is the analysis of whether you buy or you built it, if you will. And these are in areas where there's no current organic efforts. This is a new, new area that you want to get into as a company.

Javier: And then sometimes we get into should you go organic or should you go in organic? So that analysis goes on at times. Most often than not, [00:10:30] here's an organic strategy you already set up and then you're using m and a as a, as a way to turbocharge or to accelerate that, that strategy.

Kison: Step one, understand the organic strategy.

Kison: Step two, really figure out how an inorganic approach can work. Step three is find those types of targets. Ultimately, your deliverable is a clear criteria of those businesses that would fit in to accelerate '

Javier: cause then it's easier. Then you go out to the market with a very kind of narrow criteria. One thing that I think is not helpful is when [00:11:00] you, as a corporate man guy or private equity guy, you just don't know what it is that you're looking for, but the more narrow criteria that you have, that you work with the business to design and the more efficient you're gonna be as you go to the market and start searching for firms.

Javier: The last thing that you do already is thinking about what are the key. Characteristics of the firm, but this is getting even into more detail. Do you want a firm that has a certain amount of ebitda? Do you want preferable firms versus not? What type [00:11:30] of characteristics do you specifically want on the firm you're looking for?

Javier: And those will come a little bit later.

Kison: Yes. I think you'll learn that too as you start looking at companies. That is true. Have you found this? Right size of a target list because I feel like it's easy if you don't do this, that you're gonna end up way too many things to look at. So you want to get that down.

Kison: But then I don't know if there's such thing as too short of a list. 'cause obviously if people don't instantly wanna sell, right? This is a relationship that you have to nurture. So is there an ideal amount that you feel like, Hey, I [00:12:00] want whatever, 8,000 companies that I should be have in my pipeline?

Javier: Well, we've run searches like this.

Javier: 'cause essentially the way we work is that we've got an ecosystem of market participants on. Constant basis. We are informing them of what we're looking for, and then the deals then will come through that ecosystem. Always been a very and very efficient way of getting a pipeline that is quite active. So we've got enough coming to us that we feel comfortable.

Javier: The key there is to make sure that the market participants that you have relationships with, and these are [00:12:30] intermediaries, these are other corporate development teams, other companies in the industry, that they know what you're looking for and then they know you. So you've built those relationships. Then if they hear of a company or they hear of a potential situation, then they'll come to you.

Javier: Right? That's very important. Now, there'd be other situations where we essentially come from the scratch. We are looking for a certain type of company. We look out to the databases, right on market. We go through all the list of firms that have certain criteria, and the idea there is kind of a filtering exercise.

Javier: We want to get to a 10. [00:13:00] 10 firms or so that really you think that, oh, at least on paper, meet the criteria. And then you, you start calling and building and then there'll be out of the 10, 6, 7 will say, don't talk to me because I don't wanna sell. There'll be four that you say maybe, and then you start building that relationship with them.

Kison: How do you approach sourcing targets in a bio led way that builds trust and maintains momentum?

Javier: The approach has to be a soft one. So it can be that you can like pull 'em up and say, Hey, by the way, I wanna buy your firm. Right? That wouldn't work. [00:13:30] It's more around you start the process with just wanting to learn about the firm.

Javier: We typically, uh, engage with these firms more in the context of, look, we wanna learn about what you do. We wanna learn about the industry. Can you talk to us about what you do, the way you do it? It's more around understanding how they do their business and the successes and threats rather than, Hey, I wanna buy you.

Javier: Right. And then you build that relationship over time. But you're,

Kison: you're trying to get to CEO or the main principal operator? I think

Javier: so, depending on the size of the firm. Like we middle market primarily raised, [00:14:00] so then most of the firms really talking with the founders of the firms. If you're thinking more larger firms, you're at the corp dev level, CEO level, strategy level.

Javier: Vince on the side, you're getting to that kind of like level.

Kison: I get the whole, Hey, I'm not trying to close it right away. I wanna buy you guys. Would they respond to that of, I just wanna get to know what you do. Or they already got a sense of like, all right, I know where this conversation's going.

Javier: Most people, I think they'll be open to dialogue.

Javier: They see this m and a guy calling them, so they suspect that there is a corporate transaction [00:14:30] going on here. They'll be curious without Technic call. It's building a relationship with another firm in any case. So even if this ISN sent that transaction, they have essentially entry point into a firm within their own industry.

Javier: I think most people do take the call, so at the very least we say, again, they've developed a relationship with another firm. They can exchange some ideas or compare notes and learn something new. I

Kison: like this. We're talking m and a pickup lines, so that's what I do. I'm like, Hey, we're in adjacent industries.

Kison: Love to connect and compare notes. I'll either do that or. I got some ideas. Hey, [00:15:00] love to compare notes. Got some ideas that I'll love to share with you. And Akiva super ambiguous because it's, you gotta talk to me if you wanna see what those hear, what those ideas are. That's what I found works. I don't know that works, but it's very similar.

Kison: Very similar.

Javier: Another Im, when a pick up line inquire about their growth strategy, they tell you how they plan to grow and we tell them how we plan to grow. And 90% of the times you can see that there is either there's, there's a gap, that there is a commonality or there isn't. Hmm. A typical example is like.

Javier: Talking to a firm and they say, I wanna grow big in Japan. And I say, well, [00:15:30] I'm huge in Japan, but I wanna grow where you are. There you go. So now that's actually, I

Kison: actually like that perspective. It's not only comparing those, but let's say compare growth strategies, right? That almost goes back to your example of working a business leader of, okay, let me understand your organic growth.

Kison: We can look, let me understand your organic growth thinking and not share ours. Yeah, we can start seeing if there's some common threads to pull, right?

Javier: Then you see where the gaps are and where one can help the other in

Kison: you. Uh. Convince people to sell their business

Javier: generally, no. Right, so it's a process, right?

Javier: So I, I tend to think that it's hard to convince people [00:16:00] to go through that process. What we end up doing is offering them a path or solution to the problem or the strategy that they're after. They cannot convince themselves as to whether they take that solution or no. The classical example will be, we're talking to an investment manager.

Javier: There is a, an older owner, right? An older person that, that was the founder, and then they wanna exit the business, wanna sell. Come in many ways as a solution provider, our solution is look, we'll buy the firm for you so you can exit the business. In my experience, unless they're ready to exit the business, there's [00:16:30] no convincing.

Kison: So you take more of a patient approach where you focused on building this relationship and then you wanna be the first phone call when they're ready to sell?

Javier: Exactly. In my experience, tells me for a seller to sell, they need to be ready to sell. There's no argument that I can make to a person or to a founder, but it is not ready to let their firm that they found go.

Javier: They need to be ready. And it's at that point where we can be useful in the solution. But yes, that could happen over a period of a year. It could happen over a period of six years, building those relationships so that as you put it, where you are there and they [00:17:00] know you, it's critical.

Kison: I don't have patience.

Javier: You don't have patience.

Kison: Maybe this is why people are asking you for such high valuations Every time I look at a deal, right, they're like, oh, if you really wanna buy right

Javier: overpay, right? Give us

Kison: 10 x plus, then we'll sell to you. Maybe that's gotta look. Some patients, maybe that's, uh,

Javier: that's the way to convince you, maybe overpay and then you'll get 'em over the hump.

Javier: I go back here. I mean, patient is tough.

Kison: Telling the devil you're, everybody in my family will agree with that. Yeah, it makes sense. What are you doing to maintain those relationships? Because I feel like that's the other thing I've struggled [00:17:30] with where you meet a founder. I had this actually happen. I thought to my head like, let me check back in with this six months.

Kison: Totally forgot about it, right? And at the end of the year, he end up selling to another competitor and I was like, I didn't have any clue that he was ready to sell or anything.

Javier: It's tough. You requires quite a bit of time and discipline. At the end of the day, you cannot cover everything. You have to kind of narrow your focus right onto certain areas where you know you have interest.

Javier: Then you cultivate relationships in that particular space. When you have to go in Arrow, you can't be cultivating relationships [00:18:00] with a hundred firms at any given point. I think anywhere from 10 to 20, that's probably the max that you're gonna do it effectively. You just need to focus on what is the most important, or like the deliverables and the results that you're trying to achieve.

Javier: And then the way you do it is just, just making sure that you remember to call them. We work a lot overseas Every time that you go around, right? Traveling and you make sure that you meet them Cetera. So just try to

Kison: meet people, FaceTime,

Javier: and then narrow your focus. You can be kinda like holding a relationship in four different sectors and in four [00:18:30] different industries.

Javier: You just can't and you won't do anything. You just have to really narrow in into the areas where you're most active. And then at any point in time, which we do already have a pipeline of 10 to 15 companies, that you are actively cultivating the relationship. Now,

Kison: where do you find the companies? Are you just going through data sets or do your business people already have the relationship?

Kison: I've found private equity recently to be helpful. Yeah, yeah. Building pipeline because they

Javier: wanna sell,

Kison: not 'cause they wanna sell, it's just you build a relationship and they're like, we passed em on this deal. Right. Oh, right,

Javier: [00:19:00] right. So deal flow sharing. Yeah, yeah, yeah, for sure. Yeah. Three primary channels.

Javier: So the first one is intermediaries, investment bankers, big four. They obviously connected and obviously you're investment bankers is your job to sell companies. That's one element of yield flow. The second one is other market participants of private equity firms that they wanna sell or they passed on something other peers, their financial services firms.

Javier: And then finally, the third is essentially data sets, which I find the [00:19:30] most fun of it all, to be honest. You kind like. Filter the industry. You have a narrow account. Your criteria, you go through a dataset, you filter data set, you filter it to 10 or so, and then you start calling them.

Kison: What's your favorite for your industry?

Kison: For dataset?

Javier: Oh, like the one that I use, capital IQ will be one of the best ones that we use in terms of accessing data. Yeah. Are you using that?

Kison: Because obviously I have really good coverage on public. Yeah. But you find it good for a private too. Yeah,

Javier: yeah, yeah. Okay. We do, there's another one, which I just, I just remember pre.

Javier: That has pretty good access for private. You couldn't set

Kison: it off, [00:20:00] man. BlackRock acquired them and now everybody's on a buy private company Data frenzy right now, right?

Javier: No, BlackRock. Yeah, they are with all Alladin. And then this one, in terms of private asset managers, they've got a really good, a really good nutrition here.

Kison: Okay, so you go through this, got these different sources. We find these deals, we build relationships. You look for that opportunity when it's like, Hey, the company's ready to sell. Or fortunate enough to reach 'em at the right time. You described yourself even before as a valuation geek. How do you think about intrinsic value [00:20:30] versus relative comps when evaluating deals?

Javier: Every practitioner has a different approach to valuing an asset. And obviously we all know the three methodologies, what's kind, cash flow, intrinsic, and then relative value if you look at, uh, present transactions or publicly traded comps. Right.

Kison: Should you like explain these real quick? Because there's people like brand new to this, so

Javier: Yeah.

Javier: And of course, so then DCF analysis is when you forecast the financials of the firm and then you're discounting them back using a discount rate. Essentially you're supposed to reflect the [00:21:00] riskiness of the cashflow. So essentially you're discounting it. Cashflow, you're discounted back to today using that risk, and then that gives you what in the trade call, intrinsic value in the sense, and that, that, that is in our view, right?

Javier: What is intrinsic value of that asset, and that's the DC discounted cashflow analysis. Then there is the cons, which are not forecasting the finances of the firm, but rather you're saying the firm, it has a certain amount of earnings, ebitda, and then you look at what others have paid as a multiple, right?

Javier: Relative. And then you say, [00:21:30] well, if others have paid X times earnings and there is a comparable publicly traded firm that is trading at X times their earnings, and is reasonable to assume that then the firm, that your value should have the same value. So you use the multiple, the 10 times and apply to the company's to the target EBITDA earnings, and.

Javier: Is what we mean by relative, right? It's relative to what the market is paying for them and what others have paid for similar firms.

Kison: And then you make your nice EBITDA adjustment, pay bel

Javier: less. [00:22:00]

Kison: You try to more, you

Javier: try to, yeah. So these different schools of uh, right, so some people like relative valuation, right?

Javier: Because it's easier, there's less assumptions. It's more market driven. It's easier to, from an easier to explain my view, right, is private equity tend to use relative value just because, 'cause they like to use that approach. And then the other approach is you put more weight into the DCF analysis. It's more complicated, more assumptions.

Javier: More thinking that has to go through it. Much more difficult to

Kison: explain. And this is where you really [00:22:30] incorporate your synergy assumptions on the deal.

Javier: Exactly. Exactly. So the pros of of advantage, you using the DCF F, you can get granular on things like that. You can get granular on the synergies. For example, you can face them in or out.

Javier: You can face them over time. Something that you couldn't do on the comps. So. The DCF analysis allows you to become much more granular about certain things and more precise. You can calibrate the discount rate that that you use. You can separate cash flows and use different discount rates. So essentially it's a much more precise [00:23:00] way of calculating the value of a firm.

Javier: Whereas relative value is a much simpler but less precise. You can't really calibrate or dial up or down certain specifics. But look, it's just pros and cons. Everyone uses some people, which is the approach that I like to use, right? That you use a primary methodology, which I tend to like. Uh, D, c, F, and then you use the comps, the relative value more as a guy, are you off like what the market is telling you?

Javier: Are you very low? Are you very high? But you use the DCF F as your primary [00:23:30] method. Primary, and

Kison: then the secondary could be the relative value. Yeah, that makes sense.

Javier: I think what, obviously for practitioners like I am, we take pride of our analysis, these regulars. We wanna make sure, of course, that we never pay more than what the intrinsic value is, and the only way we can get to that intrinsic value is to the DCF analysis.

Kison: Are you pretty transparent with the model when you're talking to a target?

Javier: Never, never, never. No, no. Right? Never. Never, never. So that's mistake, which I've seen many times before. Number one, which is hoping, it's like hoping that then the seller will agree with you on the assumptions that you're putting for the business.

Javier: It will never [00:24:00] happen.

Kison: They'll just tinker with your model,

Javier: right? You never agree. 'cause then you end up fighting over and over about assumptions on the modeling. Okay. Agree. Right. Interesting.

Kison: Okay, this is good. I need to learn this stuff because sometimes I just, people come, they'll, they do the comp thing, like here, headliner deal, and it's like, okay, a company is like growing like 80% a year.

Kison: You're not growing at all in your flat line business, and you're not gonna get that valuation at all. There's that piece. And then part of me is, oh, let me just show them how I came up with the math.

Javier: Right.

Kison: Trying to think, I'm building a [00:24:30] relationship by being transparent, but you're telling me not to do that.

Javier: I tell you not to do that. Particularly in the DCF analysis. 'cause in my experience is like the death by a thousand cuts. Yeah. So they'll try to negotiate you on thing whether. The equity risk premium that you use for the discount rate is the right source or should be another source in my view. You'll never get there.

Javier: So my typical approach is where I just tell 'em this is how much within your business is worth if you want more than encounter.

Kison: Can you walk us through how you model discounted cash flows, especially in [00:25:00] these cross-border situations where assumptions like discounted rate and currency risk come into play

Javier: When you think about cross border, the two.

Javier: Risks that you're trying to quantify and measure is the currency exchange rate, which obviously the expenses and revenue of a target are denominating, the different, uh, currency. And two, the geopolitical risk associated with a business doing business. Business, doing business, the target, doing business in another jurisdiction.

Javier: Essentially, there's two schools of thought to measure those two [00:25:30] risks. One, the one school of thought is you forecast the cash flows in their local currency. And then you use a discount that is local. So for the discount rate, you use the comparables that are companies traded in that jurisdiction, equity risk premium from that jurisdiction, et cetera.

Javier: You then discount those cash flows at the local currency, and then that gives you a value in the local currency. And then if you wanna translate that into your reporting currency, so. The US dollars and you just exchange at the spot rate.

Kison: Okay.

Javier: The idea there is that you [00:26:00] are all the country risk, all the currency risk is being measured by the, essentially the discount rate, the local discount rate that you're using, and also then you're forecasting local currency.

Javier: So you're essentially controlling for that because you're forecasting local concurrency all based on, yeah, you're based on, this is local as a

Kison: whole model in the currency. Then it's just. Just discount,

Javier: right?

Kison: Yeah. Just adjusted right into it.

Javier: I don't like that method. No. The second one, which is the one that is more rigorous and I like better, right, is you continue to forecast in the local currency, [00:26:30] because I think that's better, and we can talk about why that is.

Javier: But then for purposes of discounting in the UDCF, you first translate those local cash flows in local currency. Into your reporting currency using a forward curve. Now, the forward curve, right, so this is the forward curve. I will tell you essentially that's a measure is trying to measure the inflation rate, right?

Javier: So an exchange rate going forward, right? So you are exchanging local currency into yours at a future exchange rate, and then that's supposed to capture all the currency risk. So then you have then [00:27:00] your reporting currency, cash flows, and then for the discount rate you use your own country or your own reporting discount rates or using, for example, in the US, US companies.

Javier: Then what you do is you add a premium to the discount rate. It's a country premium, which is supposed to measure additional risk with the cash flows that now are coming from a different jurisdiction. I like that better overall. 'cause you're then able to, again, you have more position. You're able to dial up, dial down the country, risk the way you feel, depending on the geopolitical [00:27:30] risk of that country, and it's more transparent overall.

Kison: That's interesting. You'll actually forecast the currency.

Javier: Yeah. Yeah. We use, uh, sources. I don't think that I can forecast exchange rates, but you can get the four, right. You can get from bankers. Still get their consensus on the expectations of currency. That's

Kison: interesting. Look at the Euro and we've seen like pretty significant changes just in the past year.

Kison: Yeah. Changed are favorable dose Now they're not as favorable to us. No, that's favor. That's right. That's right. Yeah. Yeah. And then the same, likewise with adjusting the cash flow your other of. Overall risk of doing business in this country.

Javier: The [00:28:00] important thing at the end of the day is not to particularly cross border, is to somehow measure currency risk and and geopolitical risk.

Javier: And there are two ways of doing that. They're both valid, so there's nothing wrong with anyone of em, right? It's just that the second one is more intuitive and it is more

Kison: directive just, Hey, this is. Where we think things are right, both in currency and the geopolitical side.

Javier: The other advantage of using that second method where you are forecasting local currency, but then you translate into yours using the four curve, it is that it is changes to the four curve.

Javier: The example [00:28:30] of changes in the expectations of the currency exchange. Then you can adjust it live and then that will have an impact. Whereas in the first method, you can't.

Kison: These are good stuff.

Javier: Yeah.

Kison: Other things, the deal structuring, what are the most overlooked aspects when it comes to deal structuring?

Javier: Yeah, look at deal structuring in, in many ways has to do with protecting, in my mind, at least protecting the downside. So in my mind, you've gone through the evaluation exercise, you've come to a price that you think, okay, this is fair. How about if the [00:29:00] firm. Doesn't perform going forward. It is not what you expected from a financial perspective.

Javier: So deal is structuring in my mind, has a lot to do with putting place tools within the structure that independent the company underperforms financially. Then you're able to reduce the amount of money that you pay essentially, or you're able to then get priority returns. So get more money ahead of the other shareholders of the company.

Javier: That'd be another way to structure. Priority, right? At the end of the day, that's really what matters because at the end of the [00:29:30] day, if the company performs as expected, if you can forecast the firm and the company performs just fine, then you are gonna be happy. No one is gonna complain. The issue is when it totally underperforms.

Javier: Having things such as earn out in place, priority returns, guarantee returns, or minimum returns will allow you to continue to perform at the returns that you expected, even if the company underperforms.

Kison: Okay. Like warranties. I know.

Javier: Yeah, yeah, yeah. Yes. That's another set of instruction that you can do, right?

Javier: If you think about sort of risk management on a [00:30:00] transaction.

Kison: Yeah. I say we just, so the, you have warranties, then you got a whole reps and warranty policy, right? There's like other things, but you have reps for warranties, your earn out, and then you mentioned priority returns. Well, let's start with that one.

Kison: How does priority returns work in m and a?

Javier: What happens is you say, well, we're gonna structure your deal. And say, typically the way we work better is like if we are 80% shareholders, so we buy 80% of the firm and 20% remains with with someone else. So we buy 80. It's easier way to explain it and then, oh, you in the context, you are gonna get 80% of the earnings.

Javier: The other person's gonna get [00:30:30] 20% of the earnings. But then we structure idea where we say, look, over the first five years, over the first a couple of years, I'm gonna get 100% of the earnings. You are gonna get nothing. That's priority. I'll get first priority on the money, on the earnings. Either for a period of time or until certain performance is achieved.

Javier: And then you, the other shareholder, you don't get nothing until certain things happen. That's the way priority returns. Okay, so, so if it performs the way you think, then everyone, I get 80, the other person gets 20. If it [00:31:00] underperforms, I'm gonna get my first.

Kison: Yep.

Javier: So I'm gonna get my 80 and the other person's not gonna get, he's not get nothing.

Javier: But even in under performance, I continue, to me, I continue to get my 80%. There's many ways of or structuring right. But that's essentially. So you will get the first priority of the earnings ahead of anyone else. And of course, if it doesn't perform as well, then that will obviously do To an extent it be, if you totally underperforms, you're gonna be worse than you expected, right?

Javier: But that protects you somehow.

Kison: That's interesting. I [00:31:30] can't reminds like the vc, like getting your reference.

Javier: That's right. So VC works like that is the same concept. Apply more to a cash flowing competency VC guys, what they do is like, so when the company sells, they will get their preferred return, whatever that is, and then after that, the proceeds go to the remaining shareholders.

Javier: That was sometimes the common, the equity get wiped out. Unfortunately, it's the same concept. Really? Yeah. It's just more applied to cashflow. Right. It's more applied to cashflow like year over year. Cash.

Kison: So we got that covered. Yeah. What was the other tools we got? We had earns, you're familiar with Earnouts.

Kison: You love them, [00:32:00] hate them. What's your,

Javier: most practitioners are cautious about them because there's litigation risk associated with that. There is issues with obviously restricting the operations of the firm. Whenever you are buying a company and you're in place, an earnout. Chances are that the seller of that company will put some restrictions for you.

Javier: You can't do anything as a buyer that you want. 'cause that might impair their ability to make burnout. So those are the negative burnout, right? The positive courses. Structure, then you end up paying less if the company [00:32:30] underperforms. So I like em, but I think you have to be careful. There is some people out there like they think their earn outs is the solution to overall, which is not.

Kison: It's easy to be the solution to all. It's easy and it

Javier: sounds, and it sounds great, right? Of course. Why wouldn't it pay less money up upfront money? You know, it's, your

Kison: number is fine. No worries.

Javier: You need to be cautious of the knock on consequences like the strings attached that come with the this contingent.

Javier: Structures and then there is litigation. So there's quite a bit of the litigation will come here in place where the sellers don't make their earn out and [00:33:00] then they sue the company. 'cause they say, oh, you did X, Y, and Z and you didn't.

Kison: How does those usually turn out if I'm looking at a deal right now and I'm like, okay.

Kison: They want a big headliner deal price to get that. So we'll structure it and, um, you're like, okay, yeah, you know that this is gonna be hard to do and it's, but given that now I'm probably gonna anticipate some litigation because they're not gonna be happy. What ends up happening?

Javier: You know, it comes down to clear drafting and I know can like, is an generic answer, but it is true the way you draft there hour, right on the contrast has to be [00:33:30] very simple and clear and not ambiguous.

Javier: The room for litigation in, in many ways it will come when something was not drafted precise enough. So there's room for interpretation. If you drop it early, if it is simple, then they might litigate. They just will have no grounds. Right?

Kison: These are good points. We got prior return, earnouts warranties.

Javier: So we talked about, if you think about like priority returns, earn outs, it's more about financial and net performance, but the other risk that you need to manage as an m and a, right?

Javier: How about if what you get is [00:34:00] not what you think you got? How about if this firm that you just purchased, in fact has a massive liability, a lawsuit that wasn't disclosed to you? It wasn't public. Somehow you couldn't even find out through diligence because these companies primarily have been, many of these companies that we work with have been operating for many years.

Javier: There's no due diligence in the world that will allow you to be 100% certain. Are you always inheriting an unknown risk? Warranties and indemnities is a way to shift the risk of unknowns onto [00:34:30] the seller, to your question at first, but as to one of the things that people don't care much about. That is one.

Javier: People don't tend to think that negotiating a very robust rep and warranty package on your contract from a buyer perspective is critical. They just don't care too much about it. And you know why? Because they've never had a deal that went wrong. If you talk to practitioners that haven't wrong for a while and some deals that they've had had have gone wrong, they totally understand how important it's because what happens is if the deal is going no problem, and it's [00:35:00] going well, your contract rate is on the drawer and no one cares about the contract.

Javier: The moment that things start to go south, I can assure you that then the contract is gonna be essentially the most important thing in the world. And when you've gone through those processes where you know what is important is what is in the contract, is that then determines what you can recover, you can then you realize how important it is.

Javier: But most people don't think about it 'cause they say, who cares? What is this contract? I'm here with the re, I don't even quite know what is this for. It is critical. 'cause if the deal goes out, that is the one area that you're gonna use to be [00:35:30] able to record.

Kison: Can you gimme examples of these warrants?

Javier: Yeah.

Javier: Yeah. You remember the made of disaster? Of course. Yeah. Back then, when you were buying investment managers, we wanna make sure that we weren't buying an investment manager that had made of exposure. But of course you go back, there was these invest, well, a lot of investment managers were involved in into that, and so you would want the company to warrant to you that they didn't have any exposure to meta 'cause then you close the transaction on that basis.

Javier: Then if you later it find out that in fact they had it because there was something that you weren't aware. [00:36:00] And it was there, then you can go recover and, and sue the farmer and get some compensation. So that would be a good example. Another typical warranty will be representation where you, you don't have any lawsuits to the extent that you close, and then all of a sudden you realize, oh, you find that there was this lawsuit that company didn't disclose to you and that you didn't find through diligence.

Javier: Then you have the ability to do then go and, and sue the company and recover some compensation. So it's essentially you are asking the company to tell you that certain things that are bad are not there. Because in [00:36:30] fact, if there is cross closing, you have the grounds to be able to recover. Otherwise, you got nothing.

Kison: No,

Javier: as a buyer and just stuck with a liability that you didn't know about. I have no ways to recover.

Kison: What's the difference between warranty reps?

Javier: So a rep and warranty insurance.

Kison: So there's not just separate reps.

Javier: It is kinda like the same. So it's a statement of fact that the rep or the warranties is they're using interchangeably.

Javier: So you can use 'em both the same way.

Kison: Okay. So when you say warranties, you interchange the word as reps and then when you hear reps and warranty policy, they cover both. Cover both. They cover both [00:37:00] terminology. Just general like, hey. Walk a little bit through about how you use those policies.

Javier: It's relatively new financial innovation with rest and warranty insurance.

Javier: It's been around for a while, but only for a few years without rep and warranty insurance. If a warranty is breached, then you go and sue the company you buy, or the shareholders of the company. Now, if you buy insurance, then it is insurance company that will be providing you with compensation rather than the shareholder or the firm that you just the shareholders or the firm that you just bought.

Javier: So essentially shifting the risk from the [00:37:30] seller. To the insurance company.

Kison: It's interesting 'cause before you do always do a holdback.

Javier: So you could do a

Kison: traditionally, traditionally you could, right? Mostly you do a holdback, and I feel like it's alternative is reps and warranty, which you pay, who usually pay seller or buyer.

Javier: So in this case you're buying, right? So then the, the seller has breached the warranty. So then the seller is paying you the buyer. We pay for

Kison: the policy at close.

Javier: Typically it'll be the buyer.

Kison: Buyer pays for the policy. They get that coverage. They don't have to do a holdback. Seller is happier about that.

Kison: Super happy. Right. Something does happen though that reps and [00:38:00] warranty policy usually just goes up to amount. You typically have a holdback on.

Javier: Yes. It depends. You negotiate with insurance company, so it could be the whole amount of purchase price. It could be something less. For example, it could be situations where the insurance company does not cover a particular warranty for rep because, 'cause they don't wanna cover it.

Kison: They got their exclusions that they put in there. Exclusions. So they'll do their own diligence and say, all right, we're not gonna exclude all this stuff

Javier: warranty. In which case then you go back to then having to put some of the proceeds in escrow so that it covers it in case of a breach. And then the responsibility [00:38:30] shifts back to the sellers because they weren't, the insurance didn't cover it.

Javier: But it's important to understand that the creation of this. Business, which is prep and warranty insurance, has totally transformed the business. The salary's happy because they're not on the hook, right? For most of the warranties, the buyer is happy because the insurance companies are much better paying than the sellers.

Javier: So everyone wins in that situation. You can check, there's a lot of literature out there that is monitoring how often the insurance companies pay for. They've always paid for the most part. So this a record of insurance companies paying when they need to pay. [00:39:00] In most cases, to be honest, people are honest.

Javier: So then there won't be a a necessity to the, it will be true. So it's good for everyone.

Kison: Yeah, it's interesting. I got some data on the stuff of policies that get paid out. It's really interesting, the stories. Yeah, that's super interesting. Hoping we can publish that. Yeah, that's a good reason to follow me on LinkedIn.

Kison: I always post silly stuff like that. The question I have was around alignment. You have valuation. We talked through the deal structuring and how that's important When you look at correlating between valuation, diligence and integration planning. Yeah. As the deal [00:39:30] progresses, how do you think through that?

Javier: If a kinda like continuous circle in the way I typically do it, right? First you come to a value of the firm that is on a standalone basis. So you don't think about synergies for now, and then you add on either expense, revenue, both synergies, that increases what you think the company is worth. And then you typically make some number of assumptions.

Javier: You come to a value. Then in the diligence process, it's all about retesting those assumptions. So for example, if you think next year the company's gonna win five clients, then you're gonna check in the diligence process rather than in the past, they've [00:40:00] won five clients every year. So then you feel much more secure about that assumption.

Javier: So the diligence is, in my mind, is a process of continue to test your operating assumptions. Then drive. Then the this C then in diligence as well is a way to then is obviously you're starting to think about refining your synergy assumptions. So how much cost, if any you're taking out or revenues you're gonna increase.

Javier: Then you, in the diligence, you continue to then retest and refine those assumptions. It's gonna have issues.

Kison: Yeah. So you'll find stuff out in diligence [00:40:30] that's, wait a minute, we gotta adjust that assumption on the synergy. Right. Based off what we found in diligence. Exactly. You know, there's certain things that we.

Kison: Not gonna hit as much revenue synergies like we thought we are, right? Because totally different sales market or we don't have as much overlap in customer base like we thought we did, for example, right? So we'll, we'll adjust that. Okay. That makes sense. On diligence, feeding back to the model, and then integration.

Kison: Right? Integration plan. Yeah. Yeah. Nobody wants to talk about integration these days. Who wants talk

Javier: about integration? In many ways, integration will have, and that's what I mean by a vicious, but not a vicious circle, but a circle, [00:41:00] sorry. Integration has a big component on this synergy. So for example, you will need to think about how you integrate.

Javier: So you have two teams that are overlapping, so you will need to understand how those two teams will integrate to see how much cost you can take out. So in diligence will start digging into how you're gonna integrate the two businesses, and then that will then not only. Inform your plan as to how you're gonna execute on that integration, but then we'll confirm your integration assumption.

Javier: For example, on the revenue side, you're planning to integrate two sales teams together, and then, then you have to [00:41:30] come to a view as to whether those, that combined team is gonna sell more or less than your standalone. That will, in the integration, that will inform your synergies. So essentially it's a, it is a circle that continues, goes on.

Javier: The more you learn about integration, the more you can refine synergies, and then you can adjust your evaluation, right? The more you learn about the company. Or you can test your assumptions and et cetera. The key is on right in invite is, and I see some practitioner donor making sure that you know what you're paying for the standalone [00:42:00] and then what are you paying, if any, for your synergy.

Javier: I've seen some practitioners out there where they have one synergistic view value and then they say, I, I pay X for that. That's not the right way in my mind or the right way to do it. You need to have come to a view of value on a standalone basis. This is what if this company. Hypothetical buyer, there's no syn, there's no no integration.

Javier: What will the company be worth? Then you then layer on synergies, and then you decide whether you wanna in fact, pay for those synergies or not in your purchase price. But differentiating between the two is, is [00:42:30] critical and it adds lots of discipline. Yeah,

Kison: no, this is the right way to really think about it.

Kison: Yeah. Is it, it does all feedback into each other.

Javier: One of the pitfalls that I see, right, of course doesn't happen in my shop, but I see it in, in other firms where it is hard to change things and we'll talk about inertia a little bit later, but it's hard for deal teams that you go into diligence and you find something that that is really telling you that the assumption that you had free diligence when you submitted the non my new lawyer, it's just not right.

Javier: It's just hard for the teams to come call us and say, okay, we are gonna [00:43:00] change this assumption. That may mean that we might too. We might have to go back to the seller and say, we have to pay less. Having that discipline and being able to, to in fact, do it when you feel that you need to is very important.

Kison: It is. I agree. I first learned about this from Carlos Ssta. I think you're a tried and true corp debt person when you really think about it this way. Because when they teach m and a, they teach you the phases, like in a linear line. Mm. And, but actually it's, no, it's, it should be like more of a 3D thing with this, a spiral framework is what we call it.

Kison: Right. Because it's like [00:43:30] a spiral. I actually working on a course to teach like that many lifecycle. I'm adding that in there. Okay. This is a lifecycle, but understand it's not, it actually goes like this.

Javier: No, no. It is very circular. That's the key to one of the, in my mind, one of the successes in m and a, and it's not just m and a raised buying an asset, however you wanna about it, is that if you think about everybody's very imperfect situation, the sellers, particularly in a private asset, if it's publicly traded, then it's different.

Javier: But in a private situation, you as a buyer will never know enough. As much as the sellers. The sellers [00:44:00] will always know more than you do. A critical thing here is digging as deep as you can, and as you have more information, then always filter that information into your operating assumptions that drive value and other things.

Javier: And if you do that and you do that dynamically, you're constantly doing it, then I think you'll end up with a very good, precise price for that particular asset.

Kison: Everybody always rushes to get to LOI. And then afterwards you still should be doing this, adjusting your model afterwards. Right, right. That's definitely a lot harder.

Kison: You know, if you wanna go back and [00:44:30] renegotiate, that's always a tough thing to do. Or things that should, some people like religiously will avoid it. They won't do it. They just either.

Javier: So I think there are two schools of processes here, if you will, right? There are people that can like to get fast into a low.

Javier: I like a very high level assumptions. There's some analysis, but not that much. And they go deep in diligence. Right. But of course then there you have to be willing to then like. Change things 'cause you learn more. The other school of thought is that you're going to put a lot of work into the LOI itself.

Javier: Sometimes you can't do it. It's a competitive process and you have to do what you have to do. But if you are able to, right [00:45:00] then you have the choice, then people wanna put a lot of work on the front end. So they have a very well baked price that they feel very comfortable with in the L oi. Such that then the diligence more confirmatory is making sure there's nothing like totally wrong with the company.

Javier: Right? Or weird. Or illegal. You can calibrate in between the two approaches. If I can, 'cause the process allows me, I like putting a lot of work on the front. Rather than putting a value there that I'm not so sure about. Right. And then having to retrade or to renegotiate diligence. Right. 'cause that that doesn't, doesn't help anyone.[00:45:30]

Kison: You gotta stay outta auctions to do that. Right.

Javier: Right. And I mean, sometimes you can't, you, you need to do what you need to do. Right.

Kison: True. And I, I found too the nature of the deal. Sometimes it's very direct competition that makes it really tough. And then it's just a lot of factors of the people. Some people are just finicky like that.

Kison: They just wanna see where you're at with price and they wanna do that with this little information. But then I agree, generally if you could do more upfront, really at least the key things, you're real big assumptions, you're betting. You can do that up front. Maybe it's requiring [00:46:00] a few technical folks to talk to each other and Right.

Kison: Things like that. But

Javier: that's what I think, like bilateral situations tend to be many ways more efficient because then you can get to an L oi they feel comfortable with, and then if the press is not there, then you stop there. Right? You don't do it anymore and then you power ways, whereas you're more competitive action processes.

Javier: You might end up with two leaders that just put a price or number just to get into the next phase. And then the next phase, they find what they find and they don't like it and they walk away. Right? In many ways, the bilateral situations tend to be more efficient, but. But again, I'm [00:46:30] sure south side banker friends will disagree with me.

Javier: Right.

Kison: We'll settle that outta the bar. Any bankers listening to this? We love you. There's points. I'll tell you, I got one of my classic guys, Nick Chuma over here. He's, I can't get him on the podcast. He's a little microphone shy. But, uh, I just learned so much about negotiating deals and structures from him.

Kison: 'cause he is just, yeah, he's just done it and it's just, there's things like I would wanna pull him on a deal right? In the situation where it's like, yeah, I can tell he is done this. He'll know how to like really negotiate it Well when he is really intricate.

Javier: Oh no, I bet.

Kison: But we just, we don't like the auction processes.

Kison: I gotta find [00:47:00] something new. Our co

Javier: of the podcast. This sucks. Yeah.

Kison: Listen to interview. Can you share a negotiation story maybe where there's a moment where theory clashed with reality and what you learned from it?

Javier: Oh geez. So there was, one comes to mind right now 'cause we're talking about changing the price and the diligence.

Javier: So there was one situation where we were in diligence. We had negotiated the price Nomine law, but then we had in the non-mining law for the valuation, where we had assumed that a couple key clients, big clients, will come in. In diligence, we learned that in fact, most likely than not, [00:47:30] those two clients are not gonna come.

Javier: And we learned that because we were able to see some data that suggested that they were not gonna come in. Of course, we learned that in diligence is significantly, it's gonna reduce the value. So kinda like the rational, unlike the subscriber of the school of thought in negotiations, that parties are rational and that you find a common modality, et cetera, which is, it was early in my career, so that's what I thought.

Javier: I said, of course if I go back in front of the seller, I'm gonna tell the seller, look, those two clients are not gonna come in. So I totally understand that I need to [00:48:00] lower the price. So that's what I did. I went back into the boardroom. I sat down with, imagine like six, seven people on the sell side, sellers when I side and explained, look, we would just learn as that these couple clients are are not likely, so therefore we need to lower the price to X.

Javier: And the interaction was like a cell phone thrown me and then set up entire. Wait, did you literally have a cell phone thrown at you? Yeah, literally. And the entire team left. Obviously the CEO kind of got up and left first, throw the phone, got up and left, and of course [00:48:30] everyone has to follow him. And then got outta the room.

Javier: The guy picked up his phone behind me and left the room. And then I learned a real valuable lesson there, which I can explain later, but that is to the example, people are rational. You think that people are gonna. Understand a very clear example where it wasn't a factual conversation. We, he knew that those two clients were unlikely to come and he knew that they were likely when we purchased this 'cause he told us.

Javier: But it's in many ways, which is what I subscribe to, if we. Talk about negotiations, we can expand on that. Negotiations. You are [00:49:00] talking with irrational beasts. People are very rational animals.

Kison: Man, you subtract 20 foot off anybody's yacht, they're planning to buy. That's enough to throw a cellphone. Exactly.

Javier: That's gonna happen. Right? So there's no rational behavior. Right? Sometimes it's rationality that goes right out the window. 'cause again, the argument was very rational and he should have understood it. It was a big drop, but at the same time it was, I didn.

Kison: I was gonna ask you, what's the craziest thing you've seen in m and a?

Kison: Are you anything crazier than you're gonna get a cell phone thrown at you?

Javier: Negotiation tables tend to be quite crazy, right? So I think that's where you get most of [00:49:30] the crazy stuff. I've got people telling me like, oh, your offer is cheap and you are cheap attacking you on the negotiation tables, it's primarily there in the negotiation tables when the egos come into place, and sometimes it's not black and white, but it's a lot of gray, crazy things.

Javier: Being thrown at you and people telling you you're a cheap, and things like that do happen. My advice to everyone is to always kinda be calm. Yeah. I try to Dutch Yeah, to duck. Sorry. The, the phone. You should, yeah. Touch. But try to try to stay calm and understand that [00:50:00] at the end of the day in these negotiation processes, rationality sometimes, most times just goes out the window.

Javier: Yeah. All the things that you can do to ensure that the process is well run, but sometimes it's not about finding common ground 'cause you won't find it.

Kison: I appreciate you taking time.

Javier: Yeah.

Kison: For this conversation, helping me become better scientists.

Javier: Of

Kison: course. Love to fellow listeners, love to get feedback, hear from you, especially if you've gone all the way this far.

Kison: Like I want to eventually give some reward for how many podcasts you listen all the way to the end. Reach out to me. I like [00:50:30] connecting with listeners on LinkedIn. Love hearing your ideas on how to make this podcast better. Topics I haven't covered and I take the criticism. I like taking that so I can get better at this.

Kison: That was a wrap on part one of our conversation with Javier and Relay. We covered a lot from strategy alignment to sourcing philosophy to how to model intrinsic value, but there's more in part two. We'll go deeper into the negotiation side of m and a term sheets shifting leverage and how to structure contracts that actually protect you when things go [00:51:00] wrong.

Kison: So stay tuned for part two, this interview. So next time, here's to the deal.

Kison: Thank you for taking the time to explore the world of m and a with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcast. We'd love to hear from you. If you need help standing up an m [00:51:30] and a function or optimizing one that you already have. We're here to help, and if we can't help you, we probably know someone that can.

Kison: You can reach out to me by email Kisan, K-I-S-O-N, at ma science.com, or you can text me directly at 3 1 2 8 5 7 3 7 1 1. If you just want to keep learning at your own pace, visit ma science.com for a lot more content and resources. That's where you can [00:52:00] also subscribe to our newsletter. Again, that's ma science.com.

Kison: Here's to the deal.

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