Welcome to episode 28 of Offshoot. My guest today is Connor Mitchell, a Managing Director of Cascadia Capital, the #2 independent investment bank in the nation. Connor focuses on the human capital and professional services side of industry, which covers areas like accounting, consulting, and human resources; any area where external human capital comes to client companies to help them execute. His transaction sweet spot is enterprise values of $100MM to $350MM and he’s part of a high-impact team of 17 professionals at Cascadia. Importantly, Cascadia does 65% of its business with family and founder-led businesses.
I’ve wanted to get an investment banker on the show for a while. I know a lot of business owners yet only a few who have been able to build and sell. There’s something in many founder-led businesses that often prevents a sale, and I can’t think of someone more qualified to unpack that notion than a banker’s whose entire career focuses on this space. So for the entrepreneurs that want a window into selling your business, and some of the mindset shifts that might accompany a liquidity event, this one is for you.
Listen in as we cover topics that include:
Where the market is trading today, and how private equity is currently behaving.
How buyers look at creating value, post-acquisition.
How selling a business is less a binary, can I sell or not, issue, but more a function of value. There’s likely a buyer for most companies; the question is if the price justifies the owner walking away.
How a good investment banking client is 1) invested in their deal after the sale and 2) able to take bad news.
Some of the objective measures you want to consider before going to market, for example; the percentage of your employees who are 1099 vs W2, your customer concentration mix, your employee utilization rate, and the percentage of business originated by the founder.
What Quality of Earnings is, and why you’ll need to go through it if you are to sell.
The typical process and timeline of pitching a professional services firm from building a deck, to getting indications of interest, to LOIs, and the through to the closing.
How a soft touch on sales is preferrable to blasting deal memos all over the interwebs.
How culture and compensation play into creating an engaged, high performing team within Cascadia, and the Managing Director’s job of managing associate-level burn out.
How success is better measured in 3 to 5 year chunks than 12 month chunks.
And finally, the value of putting a plan in place if a sale is really where you want to land.
I was really engaged by Connor’s sell-side vantage point and I think there’s a lot for any aspiring entrepreneur to assimilate from this one. I hope you enjoy this as much as I did.
Transcript
[00:50] Kevin Choquette: Welcome everyone to episode 28 of Offshoot. My guest today is Connor Mitchell, a Managing Director of Cascadia Capital,
[00:58] the number two independent investment bank in the nation.
[01:01] Connor focuses on the human capital and professional services side of industry which covers areas like accounting, consulting and human resources.
[01:10] Any area where external human capital comes to client companies to help them execute his transaction sweet spot is enterprise values of 100 million to 350 million and he’s part of a high impact team of 17 professionals at Cascadia.
[01:26] Importantly, the firm does 65% of its business with family and founder led businesses I’ve wanted to get an investment banker on the show for a while.
[01:36] I know a lot of business owners,
[01:39] yet only a few of them who’ve been able to build and sell.
[01:42] There’s something in many founder led businesses that often prevents a sale and I can’t think of someone more qualified to unpack that notion than a banker whose entire career focuses on this space.
[01:54] So for the entrepreneurs that want a window into selling your business and some of the mindset shifts that might accompany a liquidity event, this one’s for you.
[02:03] Listen in as we cover topics that include where the market is trading today and how private equity is currently behaving how buyers look at creating value post acquisition how selling a business is less a binary can I sell it or not issue but more a function of value.
[02:21] There’s likely a buyer for most companies, the question is does the price justify the owner walking away?
[02:28] How good investment banking client is invested in their deal after the sale and able to take bad news.
[02:36] Some of the objective metrics you want to consider before going to market,
[02:40] for example, the percentage of your employees who are 1099 versus W2,
[02:45] your customer concentration risk, your employee utilization rate and the percentage of your business originated by the founder.
[02:52] What quality of earnings is and why you’ll need to go through it if you’re to sell the typical process and timeline of pitching a professional services firm from building a deck to getting indications of interest to Lois and through to the closing.
[03:07] How soft touch on Sales is preferable to blasting deal memos all over the interwebs.
[03:13] How culture and compensation play into creating an engaged high performing team within Cascadia. And how the managing director’s job is also to manage associate level burnout.
[03:25] How success is better measured in 3 to 5 year chunks than 12 month time horizons.
[03:31] And finally,
[03:32] the value of putting a plan in place if a sale is really where you want to land.
[03:36] I was really engaged by Connor’s sell side vantage point and I think there’s a lot for any aspiring entrepreneur to assimilate from this one. I hope you enjoy this as much as I did.
[03:52] Connor, good morning. Welcome to the podcast,
[03:55] Kevin.
[03:56] Connor Mitchell: Thanks for having me.
[03:57] Kevin Choquette: Yeah. Hey, I know you’re super busy.
[04:00] I appreciate you taking the time.
[04:04] If you could. Why don’t you just start with Thomas a bit about Cascadia. Cascadia. Excuse me.
[04:10] And what you are doing at the investment bank.
[04:14] Connor Mitchell: Yeah, I mean first and foremost appreciate this opportunity. Listen to a handful of the prior podcasts and some pretty impressive people. So to be on that list is pretty humbling. So thank you.
[04:27] So Cascadia Capital,
[04:28] we are the second largest independent investment bank in the US which is a title we’re pretty proud of.
[04:36] You know, the firm has been around for about 26 years.
[04:39] Started off as a pretty small boutique based out of the Pacific Northwest,
[04:44] really focusing on tech and services and kind of food and bevit ag deals based in that region.
[04:50] You know, like a lot of the small boutiques over the last 10, 15 years growth has been great, but there’s been a lot of consolidation.
[04:58] You know, our founder and CEO,
[05:01] instead of trying to sell like the other firms that we’re doing in our industry, in our competitive competitors,
[05:06] decided to take on minority equity from Atlas Merchant Partners out of New York a couple of years ago. And what that did was just fuel a ton of growth for the firm.
[05:15] So, you know, fast forward to today.
[05:18] We are a national firm, up to about just over a hundred bankers in total with about 25 managing directors.
[05:25] And what we do is we work with clients in the middle market to either one sell their business or to help them raise capital for growth and shareholder liquidity needs.
[05:36] You know, our clients are probably 65% working with family and founder owners,
[05:40] which is the part of the market that we love.
[05:42] That’s where we grew up.
[05:44] That’s a part of the market that we want to continue to focus on.
[05:47] But as we grow, we’re doing more and more work with private equity firms, helping them sell and recap their Portfolio companies.
[05:55] So it’s a really great opportunity and a great place to be in the market.
[05:58] We’ll talk about it more. But you know, we’re heading into a pretty exciting upswing in the M and A markets.
[06:05] So I think we’re all really excited. And you know, as a firm, I think we’re super well positioned to, you know, not just, you know, provide amazing service for our clients and deliver great outcomes, but continue to take market share and kind of grow our space in the M and A world.
[06:19] Kevin Choquette: Cool. And in the, in the bank yourself, you’re one of the managing directors, right?
[06:26] Connor Mitchell: Yeah, so I’m managing director in our business services group.
[06:29] So my particular focus is working with really human capital focused businesses, consulting, human capital management,
[06:36] business process, outsourcing.
[06:39] We’ll talk about it a bit more. But there’s a very unique angle to those clients being that working with people, the assets are the people and it’s not just the dollar value that makes deals good, but really focusing on culture and what the business looks like post transaction.
[06:53] So it’s a great space. It’s getting a lot of activity now.
[06:57] It’s one of the most active sectors right now in our, in our firm.
[07:01] But we are, you know, across all of our industries, industrials, healthcare, consumer technology,
[07:07] industrials,
[07:09] food, bev and ag.
[07:10] I think all cylinders are firing right now.
[07:14] Kevin Choquette: So what opportunities are you guys seeing at the moment in terms of,
[07:18] you know, market trends challenges is just sort of big picture. Where’s. Where’s the puck that you’re skating towards?
[07:27] Connor Mitchell: Yeah, it’s, it’s a great question.
[07:30] So I think what we’ve all realized is that we’re going to be operating in a, you know, an elevated interest rate environment for the foreseeable future. And so, you know, while that’s not great and it places downward pressure on valuations, I think everyone is confident now in underwriting businesses knowing that this paradigm is going to be pretty consistent.
[07:49] And so the last two years it’s been pretty rough for the M and A markets coming out of COVID 21 22, mean deal flow hit record volumes consecutive years.
[07:59] Now we saw a pullback in the last couple of years. A, driven by rising rates, but B, just that flood of deal activity post Covid really kind of put some backlog into the system.
[08:09] And so a lot of times private equity firms, business owners were focusing on, you know, know, performance of the business getting back to kind of pre Covid levels, you know, getting their organic growth story in order.
[08:20] And private equity firms were focused on, you know, building their platforms,
[08:23] doing a lot of add on acquisitions. And so they were, you know, selling less and less of their companies.
[08:28] And as private equity has gotten massive, you know, in the last, you know, 20, 30 years, and their ownership in the middle market, companies that we are representing, when they stop selling,
[08:38] the market dries up a little bit.
[08:40] So what we’re seeing now heading into 2025 is a reversal there.
[08:44] The dry powder in the system, and that’s private equity dollars that are sitting in funds that are not spent is at a record high.
[08:52] You’re also seeing those same funds that are trying to raise Fund 4, Fund 5, Fund 11, whatever it might be.
[08:59] And they’re needing to deliver capital back and returns back to their limited partners so they can raise their next fund.
[09:06] So that demand side of what we’re seeing in the market is funneling a ton of growth.
[09:10] They’re actively trying to buy new platforms and buy our clients, but now they’re also thinking about selling their portfolio companies again in order to return capital back to those LPs and then raise their next funds.
[09:23] Kevin Choquette: And that. I don’t spend time in this sort of PE world. But the fund business sounds familiar. The capital allocator, right?
[09:34] Private equity focused on real estate. Right. Guys might circle up $500 million and have a strategy and you know, like just distressed real estate has been a theme that a lot of guys have recruited capital around.
[09:47] And similarly, they haven’t been able to deploy.
[09:51] But in that private equity space, when these guys are,
[09:54] you know, they go on and consolidated.
[09:58] Well, maybe it’s not even the consolidation play, but they had a strategy, they deployed capital.
[10:03] When they’re going back to sell, is it always an IPO offering or is it just a bigger private equity fund that still believes in the growth strategy? Like how does, how do those widgets kind of move through?
[10:15] For me, it’s usually something happening,
[10:18] boots on the ground. At the asset level, there’s been value creation and then there’s a takeout buyer who just wants to clip a coupon and sort of hold it. But what’s it look like on the PE side in terms of that?
[10:31] You know, I imagine there’s basically a value add play on most buyers. But when they’re going back out to the market, what’s that buyer look like?
[10:39] Connor Mitchell: Yeah, it’s a great question. And you know, the IPO market’s been pretty dry the last few years.
[10:45] And most of our clients and you know, our deal flow, deal sizes are kind of in the 100 million to a billion dollar enterprise value range with the majority of our transactions in 100 million to 350 million.
[10:58] And so the vast majority of our deal flow are not going IPO and we’re either selling to private equity or selling for private equity to larger strategics or larger private equity firms.
[11:11] And the playbook really is, you know, for, for private equity develop a thesis and find their first platform.
[11:18] Now there’s two ways to get to add value, right? Number one is you know, facilitate growth through operational improvements,
[11:24] you know, adding capital in to facilitate sales and marketing, bringing on key personnel to drive growth.
[11:30] Really the organic story,
[11:32] the second lever to pull is really the add on story. And these buy and build strategies,
[11:37] these have always been around but they have become extremely popular especially post Covid where when you’re operating in a zero interest rate environment so you’re able to borrow on your credit facilities to acquire smaller businesses almost for free using all debt because it’s so cheap.
[11:53] And so the idea there is, let’s say you buy your platform and you pay I don’t know, 15 times EBITDA for that business.
[12:00] It’s a $20 million EBITDA business.
[12:03] You can, you know, the idea is you find smaller add ons that you as a smaller business can get for value. So instead of paying 15 times for a business, you’re paying you know, eight or nine times for a very similar business, albeit just smaller.
[12:16] And so over time what they’re doing is they’re buying down their entry multiple from that 15 times. By the time they sell it, they’re at a 10. And the platform now that they’re going to sell to next private equity firm that’s larger and or you know, a large strategic buyer is that the whole platform is now at that 15 times plus which has created a ton of value.
[12:36] There’s you know what I will say is going into this next M and a cycle as a firm I think we believe that there’s going to be a premium placed on businesses that really have that organic growth story embedded into the business and operational improvements that can be I think implemented to drive growth and to drive margins and return.
[12:58] Because the high interest rate environment, that bibled strategy, it’s going to continue, it’s going to continue to be very popular. But again it becomes a lot, the math becomes a little bit less attractive when you’re borrowing at, you know, so for 500, close to 10% versus being 6% a few years ago.
[13:14] Kevin Choquette: So that strategy you just articulated is more constrained now. It’s more, it’s contested A little bit because the cost of capital has changed.
[13:23] Connor Mitchell: Yeah. And, and too part of it is the market’s gotten so efficient and so you’d think that these smaller businesses,
[13:30] you know, would be trading for lower valuations but they’re getting called on by private equity firms, by investment banks like us.
[13:37] All these business owners have a buddy at the country club who sold for 12 to 15 times.
[13:42] And so what you’re seeing is upward pressure on those valuations even at the small end of the market.
[13:47] And so that arbitrage opportunity in trying to you know, get buy smaller EBITDA multiple into a larger multiple platform that is shrinking a bit.
[13:56] It is still there, there is still premium for scale but again the market is getting much more efficient and then.
[14:03] Kevin Choquette: Go, go like higher level too. Because I’ve read about this in the past, I can’t remember any of the facts off the top of my head, but the universe of publicly traded companies and kind of the corpus that that represents versus all of the non public companies and that universe,
[14:24] like proportionally it’s, you know, I believe it’s the case there’s far like way, way, way more private equity companies and that, that universe is quite a bit larger than the public.
[14:36] Even though obviously the media and the press would make us think that all, all good things are in publicly traded companies. What’s the proportionality around that, those two markets?
[14:46] Connor Mitchell: Yeah, I mean more often than not we are selling to privately owned NPE backed businesses.
[14:52] We have public companies in all,
[14:55] you know, some of our industries more than others. I mean we’ve sold businesses to Accenture, Deloitte,
[15:00] you know, the larger consultancies.
[15:02] But again, more often than not it’s the private businesses that seem to be a bit more aggressive.
[15:07] I think part of that is the private equity backing. You have the benefits of a strategic buyer that you can realize, synergies, et cetera. But you also have the backing of a large financial institution that can either through pulling levers for growth or, and, or financial engineering, you know,
[15:24] oftentimes pay a bit more than just a strategic buyer that would come in to a transaction.
[15:29] Now those, you know, move in tandem depending on the M and A cycle that we’re in.
[15:34] You know, large public acquirers, you know, if their stock price is hum on all cylinders, that’s good currency for them to do a deal with stock cash for a depressed market environment.
[15:43] You know, it’s a little bit tougher for those guys. And so I think for us we always have to have our finger on the pulse of those Buyer behaviors at the Publix.
[15:52] But the market cycle will dictate how interested they can be and how much they can pay.
[15:56] Kevin Choquette: So my question though is, you know, take the sea of all mid sized mark miss mid size companies and above and put an arbitrary swim lane down, down some portion of it.
[16:10] What percentage of the universe is now a publicly traded world?
[16:14] You know that the 2000 or so Russell 2000 companies versus you know, I know Blackrock and Blackstone and a whole bunch of others have these massive PE positions with a whole portfolio of companies.
[16:27] It’s my understanding that’s like many multiples of the volume of water in the ocean. Is this private side versus the public’s? Is that accurate?
[16:37] Connor Mitchell: Yeah, if I’m putting together a buyer’s list for one of my clients and let’s say that list is, you know, round for round numbers here, 100 maybe there’s six to 10 public companies that will be.
[16:47] Kevin Choquette: There you go.
[16:47] Connor Mitchell: So it’s probably a magnitude of 10 of the privates out there.
[16:51] Kevin Choquette: Yeah, perfect.
[16:53] What got you into this space? Like we, I think we’re in very similar spaces. I think yours is probably considerably more complex in that you have,
[17:03] you know, going concerns and human capital and things like that where we tend to focus more on, you know, real estate assets which are a lot easier to understand and are less influenced by,
[17:13] by management. They can kind of, the management can be swapped out.
[17:17] How’d you get here?
[17:19] Connor Mitchell: Yeah, it’s, it’s, you know, I’d love to tell you it was a smooth road to where I am now.
[17:24] But you know, there have been some, some hiccups and you really kind of started, you know, growing up.
[17:29] You know, I had an economics professor in high school that so, you know, really pushed me to attend this conference in New York called the foundation for Economic Education.
[17:39] And this was a seminar that was really focused on kind of the Austrian economist sell side economics. And really that sort of opened up my mind this complexity of what makes the world work.
[17:53] So at that young age I always knew I wanted to do something in and around finance and economics.
[17:59] Going to college and taking accounting classes.
[18:01] Quickly realized did not want to be an accountant.
[18:04] Um, you have to know all that for what we do. But it’s a different mindset, right. Those guys like to operate in a box. You know, I like to be a little bit more creative and leverage those, you know, accounting skills, but in a way that I think is a bit more dynamic.
[18:17] And so coming out of, of college I went to Miami University,
[18:20] not Florida, Ohio and this was 2008. And so at that point, there weren’t too many investment banks that were recruiting out of. Of Miami, Ohio. Most were focused at the IB still at that time.
[18:32] Today, they do a great job in placing people from our. My alma mater into investment banking and PE roles. But back then it was pretty limited.
[18:40] And so, you know, come to campus recruiting. You know, it’s really two options for me. Consulting. And then there were two investment banks that were recruiting from. From my school.
[18:49] You know, at that point, you kind of understand what it is. You see the movies. It seems like a, you know, a sexy industry, right? It’s dynamic. It’s. People are making money and, you know, naive or not, that’s kind of what you go into the business thinking that’s going to happen to you.
[19:03] And so, you know, was lucky enough to get an interview with. With the investment bank that I wanted to in college.
[19:11] You know, funny tangent story here.
[19:13] So I go to the first interview as a. It was like a cocktail reception, and the managing partner from the firm that was kind of leading everything.
[19:21] I was having a conversation and he, with like five of us, and he goes, you know, every year, the one person that we have the best time with gets an automatic invite to our super day.
[19:30] And the super day is where, you know, 30 of the smartest, best and brightest get to the second round of interviews. All go to one office, and it is a meritocracy at its finest.
[19:39] Everybody’s doing the same interviews, ask the same questions. The cream rises to the top.
[19:44] So I show up to my morning interview, and we start talking about football and just random stuff.
[19:50] I’m thinking, you know, are we going to get into, you know, do I know the industry? Have I done my homework? He’s like, all right, well, I’m going to get in the road a little bit early.
[19:56] He’s like, you were the guy that we enjoyed the most. So we’ll see you in Cleveland in a couple months.
[20:02] You know, really interesting. It taught me at a young age that, you know,
[20:06] credentialing yourself is important to get a seat at the table.
[20:09] But that’s what it is. It’s table stakes, right? To get to the next level. It’s. It’s personal relationships, can you relate to people, et cetera?
[20:16] Um, and so that was a really interesting first data point for that.
[20:20] Kevin Choquette: No, that was founder, CEO or somebody who was discharged with sort of building the team.
[20:24] Connor Mitchell: Yeah, it was a managing director.
[20:27] I’m still close with him today. He’s a great guy. And then one of the associates who came from my alma mater as well.
[20:33] So that, that was a fun little anecdote there, I think.
[20:35] Kevin Choquette: No, no, but keep going. So super day is coming and you got the invite.
[20:39] Connor Mitchell: Yep. So super day. I’m, I’m flying high, right. I’m going ready to ace my interviews. I’ve, you know, researched all the questions and it was a gauntlet, man. I mean, it was really cool to see, I mean, 30 people, very, very bright men and women and left there thinking I did a great job.
[20:58] About two weeks later I get a call.
[21:00] Unfortunately, you know, we only had five spots from Miami and it’s going to go to four others and we’re waiting on one to accept.
[21:08] You know, we’d love to kind of keep you on the list and if it doesn’t work out, we wish you the best.
[21:13] You know, I was grateful and was very thankful. Sent them a letter,
[21:17] you know, thanking them for the opportunity and, you know, kind of focused my efforts on consulting. I had a few other great opportunities that I was running down.
[21:24] Now about two weeks later, get a letter, congratulations.
[21:28] One of the kids had accepted a role at another investment bank.
[21:31] And I was in and so, you know, a little bit of trial and tribulations early, but finally had my foot in the door and ready to go and change the world of finance.
[21:43] This was June of 2008 and so we all know what happened starting exactly. Yeah.
[21:50] So again, flying high again and then get kicked right in the stomach.
[21:54] By December of 08, our entire analyst class was gone.
[21:59] So I’m unemployed, out of a job,
[22:01] moved back to Chicago and I am one of hundreds of investment making analysts that are fighting for the rules that are still there.
[22:10] So, you know, by, by grace of God and luck and whatever it might be.
[22:14] I had a young, a mentor early on in my life.
[22:17] He came from Heller Financial and then was at Dimas Capital and now he’s at Kate Anderson. And he introduced me to a few people that he knew really well.
[22:25] Again, a testament to having good people in your life because they can open up doors that might not be there.
[22:31] So I was lucky enough, landed at another small firm in Chicago where I started working with,
[22:38] you know, my now still partner in the capital market side of things.
[22:44] And this was 09 and so we saw a ton of distressed credits that were held at commercial banks. And now this whole BDC world pops up and was, you know, really kind of taking over and buying these credits from the commercial banks.
[22:57] And we were doing a lot of that work and facilitating Those refinancings I’m 26, he’s 31.
[23:05] And you know, probably a bit of hubris and overconfidence, but we decided that we kind of wanted to do our own thing.
[23:12] And we’re interviewing with a couple other smaller boutiques out of the west coast that wanted to open up Chicago office.
[23:18] And so we, we met with firm called Focal Point Partners. At that point there were, you know, 10 to 12 bankers.
[23:25] They bet on, you know, two kids that, you know, had a lot of confidence to open up an office in Chicago and we embarked on that journey.
[23:33] You know, I’ve always kind of had an entrepreneurial edge, so that was kind of a way to kind of scratch that itch, but then also continue my momentum building a career in investment banking.
[23:43] So let’s fast forward 12 years. So we grew that office from 2 to 25.
[23:48] Firm had, yeah, it was great, great experience,
[23:51] frustrating and you know, all of your entrepreneur listeners, and I’m sure a lot of the speakers you’ve had on your podcast can all attest to,
[23:58] you know, doing your job is great. When you have to start managing people and office space and all that, it adds a certain level of complexity.
[24:06] But yeah, grew up 25 people. The firm grew to about 90 bankers.
[24:10] And we were acquired in early 2022.
[24:16] So you know, pause there. You know, that happened.
[24:20] Great firm. We are in a great trajectory. I wanted to spend my career there,
[24:24] um, but I kind of looked internally after that transaction happened and realized that the new buyer, new firm wasn’t for me.
[24:32] Um, and so had a great opportunity to join another firm called Solomon Partners in New York.
[24:38] Focus on bigger deals, all private equity backed deals, which was great.
[24:41] Um, you know, a couple lessons learned there. I was working fully remote, um, at this point I was working in Dallas, living in Dallas, and the offices were in Chicago and New York.
[24:52] You know, realize that I’m an in office guy. I like being around the team, the mentorship, the camaraderie. I think deals, you know, go a lot smoother when the team is, is together.
[25:01] And so after about two years there,
[25:04] you know, had an opportunity to join Cascadia and you know, really checked all the boxes. It had that entrepreneurial edge, that spirit, that hustle of a smaller firm, but the backing of the financial institution and the infrastructure of a larger organization.
[25:18] So long way of how I got into the industry and where I am today.
[25:22] A lot of ups and downs, a lot of betting on myself and you know, a lot of good luck and surrounding myself with some good mentors that have given me a skill set that, you know, I think is, is pretty good right now.
[25:33] Kevin Choquette: Cool.
[25:35] This will be a little zig, little zag and we’ll kind of keep going. But I, what I would love to hear about, because you kind of just allude to it with,
[25:44] um, the challenges of managing people, right. You might come into that role at focal point and you and your five year older partner or really good execution guys,
[25:55] and then you start building a team of, of 25, it sounds like on your side on that broader 90 person company. And you’ve got to start managing people and then, you know, overlay the other management side, which is all of your entrepreneurial clients.
[26:10] I just wonder how you guys think about and manage deal process. Right. You’ve probably at this point done,
[26:18] you know,
[26:19] dozens, if not hundreds of deals and you’re getting clients of all shapes and sizes. I can imagine from, you know, really sophisticated Ivy Ivy League educated to second or third generation family owners who, you know, really know their business well, but might do things in a different way or culturally have,
[26:41] have sort of trappings that are different than yours or different than other clients. When you guys come into like, okay, we’ve got a new assignment and now there’s all the humans and there’s a process.
[26:53] Like there’s kind of a two part question here. One, how do you guys think about the process of executing a trade? You’re an advisor and you get paid, I presume when you ring the cash register.
[27:03] That’s why folks would hire you.
[27:06] Um, but you’ve gotta manage all of,
[27:09] all of the people and that process. How does that look for, for you guys going into an assignment? You could kind of focus either on the cultural part or just the actual.
[27:19] It’s A, then it’s B, then it’s C, then it’s D. How much of it is formulaic? And you know, this is the process we’re gonna run.
[27:25] Connor Mitchell: Yeah. So I’ll, I’ll break it down to a couple of components, both from the client side and then my internal delivery side.
[27:30] But the underlying, I think, assumption on both is, you know, my job is not just a banker, it’s kind of therapist too. Right. Managing stresses, managing the ups and downs of a transaction that can last between six and eight months.
[27:43] You know, I think that that works. You have to do that both from a client side and an internal team side.
[27:48] You know, from a client side. You know, I think it comes down to underwriting our clients.
[27:52] Yes. We’re underwriting the business. Right. Does it, is it growing you know, are they in good end markets?
[27:58] Are the, is the margin profile, you know, above industry standard? All the KPI metrics that are pretty arbitrary, that’s easy to do.
[28:06] What’s harder is,
[28:07] you know, finding a true cultural alignment and having alignment on core values.
[28:13] So you know, I, I, I think it’s easy to, to you know, work with clients that have great businesses. But if they’re not trustworthy or if you know, their, their level of integrity doesn’t match yours as a firm, those are opportunities that we will greatly or gladly let pass to focus on clients that I think we,
[28:32] you know, have that alignment of cultural values.
[28:36] And so you know, for me one of the biggest things is, you know, transactions are tough, there are ups and downs. Is a client somebody that I can deliver bad news or negative news to in a timely fashion and have it be received in a way that isn’t, you know,
[28:48] personal attack, but very constructively?
[28:51] You know, bad news does not get better with time. Right. And so you have to have that ability to have open, direct, clear communication which seems like it’s table stakes and pretty easy, but you can quickly tell certain clients where that, that’s not,
[29:03] you know, one of their strengths.
[29:06] And so you know, the other side of it is,
[29:09] you know, working with clients that I think have confidence in their business and don’t just want to step away.
[29:19] So you know, whether they’re rolling equity into the new deal, whether they’re taking some consideration in an earn out over time,
[29:25] I think finding clients that you know, are,
[29:28] are all in and not just trying to you know, cash out today, but really want to find a home for their employees or focus on the right cultural fit. It’s not just the top dollar deal that they want, but the deal that checks all of the,
[29:41] I think softer considerations in terms of what a post merger integration looks like. So I think you can suss all those out pretty early on just by having, you know, direct non business related conversations.
[29:52] But we spend a lot of time making sure that our clients are aligned with our cultural values.
[29:57] Kevin Choquette: What, what are the things?
[30:01] Look, I, I understand that in your day to day you might have that checklist of you know, what are their KPIs look like or what’s their margin look like?
[30:12] What’s the days receivables?
[30:15] I can imagine you have a, a whole matrix of indexes you’re going to check to make sure that the,
[30:23] the potential client, potential business checks the boxes. What are some of those that are sort of mission critical?
[30:34] Connor Mitchell: Yeah.
[30:34] Kevin Choquette: Aside from the cultural thing you just mentioned, which is like being committed to the business.
[30:39] Connor Mitchell: Yeah. So for us. So let me step back. It varies by industry, right. And yeah, you know, as managing directors,
[30:46] you know, part of our, what makes Cascadia a bit different, unique is that, you know, we focus in certain subsectors where you know, we think we have a lot of expertise and so we have the benefit knowledge of being able to benchmark businesses against, you know, a database in our brains of similar companies.
[31:01] So in my, you know, let’s talk about maybe the consulting, right. One of my biggest subsectors.
[31:06] So the first things that I’ll look at is,
[31:09] you know, customer concentration,
[31:11] right. Do they have one customer that is 40% of revenue? That’s going to be a bit of a red flag. So for me, you know, there’s always going to be some customer concentration in a high growth business,
[31:22] but anything above 25% of one single customer is going to be a bit tough.
[31:27] Kevin Choquette: Yep.
[31:28] Connor Mitchell: A big thing for us is the employee mix, right.
[31:31] You’re in California, you understand some of these contractor classification issues that are happening across all industries. And so when I look at a consultancy that has 200 consultants,
[31:41] you know, if 150 of those are 1099s and 50 RW2s,
[31:46] not necessarily a deal breaker, but you got to look there a little bit because the buyers are going to underwrite that a bit,
[31:52] you know, less than they would full time W2s.
[31:56] You know, for consultancies you look at utilization, right? Do they have a lot of consultants that are sitting on the bench or are they billing clients?
[32:04] You know, it’s hard to benchmark a number but you know, good utilization above call it 70, 75% is where I’d like to see a lot of my clients. And so there’s a laundry list of, of a lot of these, these types of businesses and KPI metrics that are pretty easy to kind of compare and contrast.
[32:19] But again, you know, what we think we do well is okay, not just looking at the surface level, but what is driving some of those variations against industry benchmarks, figuring out what they’re doing uniquely.
[32:30] Right. And you know, positioning that specifically for the company and, and not using a broad brush to paint strokes about a company that might not be an apples to apples comparison.
[32:39] And so early on you use KPIs and benchmarking, but again, you gotta get into the weeds and really understand individual businesses, what they do and how that adds value.
[32:50] Kevin Choquette: What about the founder led business? Right. I’ve got a good relationship with a Bunch of guys through EO Entrepreneurs Organization.
[32:59] I suspect you guys are well aware of them and YPO and the others. That’s probably like a prime hunting ground for, for the services you guys provide.
[33:10] You know,
[33:11] customer concentration, employee mix, employee utilization.
[33:15] Oh, founder led founders driving 90% of the revenue or only the founder knows how to sort of make the sausage at the highest level. Like how do you guys look at that when the entrepreneurs are kind of starting to think about phase two or phase three of their, of their business?
[33:34] Connor Mitchell: Yeah, it’s a great question. And you know, we like to get involved with opportunities and potential clients 6 to 12 months in advance or even more just so that we can help them think through some of these dynamics.
[33:46] But one of the biggest issues is that kind of founder led business development sales, right?
[33:53] So you know, I have a client right now where they’ve done a great job in, in de risking that key man risk over the last two years. And if you look three years ago, he was generating 90% of the leads and new business that was coming into the the company.
[34:08] Now when we took them to market that number was below 30.
[34:12] There’s always going to be some key man risk in a founder owned business.
[34:16] That’s what makes these businesses interesting.
[34:18] Again, are, are they willing to stick around in some kind of capacity and role? Are they willing to, you know, participate and roll equity into the new deal?
[34:26] And then again, have they de risked that element of the business to a point that a private equity firm, for example, could say, okay, I can come in,
[34:34] implement a, you know, more of a traditional operational business development structure and by the time we sell this business in five years, that 30% is now 5%.
[34:44] So if there’s a path to doing that,
[34:46] that is, that is great.
[34:48] But it is one of the biggest things that we have to deal with in working with founder owned businesses.
[34:56] Kevin Choquette: Is this is like I think you already had articulated and apologies but I think you’re saying sort of 100 million to 350 million is kind of the enterprise value that you guys tend to operate around.
[35:08] How much of the business is,
[35:13] you know, I think you said 9 to 12 months or even sooner is a good point of engagement for the clients. So how much of what you guys do is that advisory work on the front end to kind of help guys understand, hey, here’s the world of private equity,
[35:28] here’s what they’re going to look for, here’s what you don’t have and let’s start thinking about the plans that we can unfold over the Next one to six quarters perhaps.
[35:42] Is that a point of contact for you guys? Do you start to engage with them early enough in the process that you’re really starting to position them for the marketplace that, you know, or do they have to do that work and then come back to you and go, okay,
[35:55] how about this?
[35:57] Connor Mitchell: Yeah, I think that’s part of what makes us unique is, you know, we don’t need to see a path to a near term fee event for us to get involved.
[36:05] And so I’ll give you some examples. You know, we’re one of our largest referrals is it’s a large wealth management diversified products or diversified wealth management business and deals that come out of their high net worth wealth management team that are too small for their internal investment bank come to us.
[36:25] And so what we’ve seen from that channel specifically is,
[36:28] you know, a lot of,
[36:30] I think, knowledge around the deal process and those wealth managers saying, hey, let’s call Cascadia, I know you’re thinking about something in a year, let’s get them involved and start thinking about this.
[36:40] So, you know, I would say on average we’re getting introduced at least six months in advance,
[36:45] if not more than 12 months.
[36:48] And you know, I think that does a couple things. One, it allows us to, I think, cement ourselves as a value add and a true advisor ahead of actually getting paid to do it.
[36:56] So hopefully by the time they do want to sell or raise capital, they’re not going to, you know, go talk to six investment banks, but we’re in a pretty good position there.
[37:04] And then two, it’s something that we enjoy, right? I mean, you know, our job is a thousand percent easier if these, you know, business model or different issues are worked out in advance of us going to market.
[37:16] And so it’s a bit selfish in our, you know, dealings is that to get a business that is cleaner, I think more receptive to the private equity community, for example,
[37:25] it’s a win win for everybody.
[37:27] So if you look at, you know, my prospecting, I’m probably spending, you know, 30% of my time with businesses that will not be a client of mine probably for the next six to 12 months.
[37:38] Kevin Choquette: The universe of prospects from your perspective, if you kind of put yourself on the side of the dock, you’re out there fishing in the river of potential clients.
[37:48] How many are throwbacks? How many business owners that are getting some sort of scale are in a position to be well received by yourself as an investment banker or by the private equity marketplace as a whole versus,
[38:06] you know, Just kind of don’t get it. Don’t really get how to professionalize the, the operations and become a business that’s not about the family or the founder.
[38:18] Yeah.
[38:19] Connor Mitchell: I mean, barring any, you know, issues on, on fraud or credibility of owners, it’s not as binary as saleable, not salable. It really is a spectrum of where the value is.
[38:31] You know, there’s plenty of companies out or of investors out there and buyers out there that, you know, have no problem looking at deals that have blemishes on them, that are turnarounds, that have a lot of issues,
[38:44] but they’re not going to pay, you know, a growth multiple for those types of businesses.
[38:49] So one thing that we’ve seen, it’s been interesting is, you know, coming out of COVID and that two year boom of M&A in 21 and 2022,
[38:57] you know, in my industry,
[38:58] every business,
[38:59] whether it was a, you know, C asset or an A asset, you know, was getting, call it 12 times.
[39:04] If you look at deal flow now,
[39:06] that average is still at about 12 times.
[39:09] But the range from good to, you know, bad or mediocre to good to great is, you know, from seven times to 16 times.
[39:18] And so I think that’s where we are right now is there’s always going to be in my mind, you know, maybe I’m optimistic as a banker,
[39:23] a. A home for a company, a business, an asset.
[39:27] It’s just. Are the value expectations aligned and are both groups going in kind of with open eyes about what’s available in the market?
[39:35] Kevin Choquette: Yep.
[39:36] I don’t want to put. Well, I will put you on the spot here, but I could appreciate that it could be difficult to just pull something out of a hat.
[39:43] But any deals you’ve worked on either in the very recent past or over whatever time period you want to think about, it’s kind of a favorite,
[39:55] potentially significantly challenging and highly rewarding that you could draw on in terms of lessons learned from complex transactions.
[40:05] Something we could just dissect here.
[40:07] Connor Mitchell: Yeah.
[40:09] So one that comes to mind that was a bit complex and I think speaks to buyer behaviors in the market, et cetera.
[40:17] Sold a business.
[40:20] Not sure if I can use exact.
[40:21] Kevin Choquette: Names right now, so I’ll keep your compliance people happy.
[40:26] Connor Mitchell: I don’t want to, I don’t want to get slapped on the wrist here, but this business was really unique business. They were.
[40:32] Kevin Choquette: Do you say clothing business?
[40:34] Connor Mitchell: No, just unique. It was a, it was a leasing and servicing business. They provided ice machines with a service wrapped leased model to restaurants, hospitality Et cetera.
[40:47] Kevin Choquette: Okay.
[40:48] Connor Mitchell: It was you know, pretty sizable deal it was in that call it 25 EBITDA range.
[40:54] But was what was unique about it was when we were selling the business that our client had gotten another competitor business under LOI that they had not acquired yet, but they had an agreement to acquire I think in 45 to 60 days.
[41:13] So we were able to go and talk to buyers and sell a business that was a consolidated entity, our client and this add on business that was not yet a part of the organization.
[41:26] And you know, through timing and I think proper process design,
[41:30] we had our buyer buy both businesses simultaneously, combine them into the same entity and we were able to generate the value of what our business was sold for, which was about 12 and a half times and what we were paying for that add on company which was about eight and a half times.
[41:49] And so we created I think $80 million of incremental value that went into our shareholders, our client shareholders pocket just because we were able to navigate that unique element of the business.
[42:00] So our client didn’t take any execution risk. They didn’t lay out any capital to buy this business yet. They got the benefit of that incremental arbitrage on EBITDA for what they paid and what they sold for.
[42:11] Kevin Choquette: Bought it at 8, sold it at 12 and never had to capitalize it.
[42:14] Connor Mitchell: Exactly.
[42:15] And I think that spoke,
[42:17] it was fantastic.
[42:19] And you’ve seen that a lot recently with these buy and build strategies where you know, we’ll go to market with a business and let’s say we have three assets under loi.
[42:28] What I will say is the market has been a lot less receptive to that in the last couple of years and heading into next year. And there’s a premium put on, you know, full integration of these businesses that are these, these buy and build strategies so that you’re selling,
[42:43] you know, a true platform that is fully integrated. And not just the, the analogy I say is, you know, a duct taped together eight, nine companies that you know. Yeah.
[42:52] On the surface look like one business but are really, you know, disparate business units that haven’t been integrated yet.
[42:58] Kevin Choquette: Yeah. So look in my world like I’m glad you brought that up but you know, like I’ll get a little bit granular for a second.
[43:07] You know, $30 million asset going to get a perm loan. Here’s the,
[43:12] here’s the revenue, here’s vacancy,
[43:14] here’s credit loss, loss to lease, here’s opex, this is noi. Give me my perm loan and then you get into a whole bunch of granular things with the property management and you start realizing that the accounting isn’t going to properly.
[43:27] And so you start shifting line items around and you realize opex isn’t opex, but it’s like 1.1 opex, which means less noi, which means you’re going to come up short on proceeds.
[43:36] And a whole bunch of stuff happens because it’s no longer just conceptually like, hey, take my noi, give me a debt yield, there’s my proceeds, give me my loan, let’s close.
[43:46] There’s, there’s noise in the, in the signal, if you will.
[43:51] And I think about these kinds of things you just spelled out where it’s like, oh yeah, bought a delay, it sold it at 12. Okay, yeah, but somebody’s running the HR department, somebody’s running marketing, somebody’s running sales.
[44:01] There’s a whole bunch of gearing that’s going to happen between,
[44:04] you know, hey, here’s our ICE company, here’s the company we’re acquiring.
[44:08] It seems at a certain level,
[44:11] you know, like, I can see that it goes from high level concept to like, okay, we’re actually going to have to get in the weeds and apply some horsepower here to solve the noise of this single asset in your world.
[44:24] Like, how does that noise get cleaned up? And it’s always a little bit amazing to me that you can kind of tell the story the way you did, which is like, yeah, we got a 50% premium and we never capitalized it, but we were smart and we were in the right place at the right time.
[44:38] It would seem that downstream from that there’s still some messes to be cleaned up. I just wonder,
[44:43] like, how does that show up? Like, you guys get to fly at a level where maybe you don’t have to deal with it. I don’t know.
[44:48] But somebody’s dealing with it, I suspect.
[44:51] Connor Mitchell: Yeah, you definitely have to. And so,
[44:54] you know, I think one thing that’s happened in the industry in the last, you know, probably five years is the use of kind of third party accounting advisors to come in and validate a lot of these things.
[45:07] We use the word quality of earnings.
[45:09] And so, you know, for a lot of our clients,
[45:12] even the smaller ones, you know, we’ll mandate a, we call a sell side quality of earnings.
[45:16] That’s what the buyers do, right? When they get under loi, they’ll do the same analysis. But we want to get ahead of things. So we want to know that the business that we’re underwriting let’s say if we think it’s $10 million of EBITDA, we’re going to base our fee structure based upon what we think enterprise value is.
[45:30] With that assumption, we want to have a lot of comfort in that number that also goes. And those come into play in situations like EDIS mentioned where we had met this asset, we had negotiated an LOI.
[45:42] But again, what is the true incremental EBITDA? Because of overlapping cost structures, you don’t need two CFOs, you don’t need two HR people.
[45:50] So we hire third party advisors to come in and really get granular into the data, into the work, find these areas of cost savings and synergies, et cetera. So that buyer isn’t just taking our word for it.
[46:02] There is some third party validation through the accounting and then also some broader consultancies that might look at the business from an operational standpoint as well.
[46:11] These were small enough that we didn’t have to do, you know, a true, you know, get like an ey, Parthenon or an LEK to come in and validate market and stuff like that.
[46:20] We were just able to use the accounting team to validate numbers and take a look at where synergies and cost savings could be.
[46:26] Kevin Choquette: Okay.
[46:26] Connor Mitchell: So it really is a team effort for sure.
[46:30] Kevin Choquette: And then the buyers just got to deal with,
[46:32] you know, like probably not their first rodeo. They know how to manage some of these post acquisition integration issues and consolidated the apps in the team.
[46:43] Connor Mitchell: Yeah, I mean oftentimes they’re pretty happy. Right. Because it takes it off of their plate because they have internal teams and all they do is go and find these add on acquisitions for their platforms.
[46:53] So if the economics work out well,
[46:56] they’re pretty actually excited to go through that exercise and give value to the seller for work that they’ve done even though that the buyer is going to be taking the integration risk.
[47:07] Kevin Choquette: So switching slightly on the, on the buyer side. Right. Like our, we’re market makers, same as you.
[47:13] I’ve got to have array of capital allocators each with slightly different strategies and know where they’re the market clearing bid and where I don’t need to bother talking to them because they’re not strong in that space.
[47:28] How do, how do you or Cascadia as investment bankers think about the other side of the equation? Right. Like obviously you’ve got to procure your clients have a value prop for them that’s robust enough that they’re like hey, I would, I would only hire Connor and his team but on the other side,
[47:46] you’ve got to have enough capital allocators to make an effective market. So how much of your time, effort and energy is focused on nurturing those allocators, those relationships? And, and how do you think about,
[48:00] you know, speaking to both sides of the transaction?
[48:03] Connor Mitchell: Yeah, it’s tough. I mean,
[48:05] the world is evolving daily. You have offshoots of private equity firms, partners starting their own little pockets of capital.
[48:12] And so it really is a living, breathing ecosystem that is constantly changing for us internally.
[48:18] Again,
[48:19] in our industry expertise, we know the 50, 75, a hundred of the private equity buyers that the situation is an industry fit, a size fit, et cetera.
[48:29] But we have a full internal team. We call it Financial Sponsor Coverage Group.
[48:34] And their job is just to maintain the relationships with the, you know, 500 private equity firms that across our, all of our industry groups we have relationships with. And they’re kind of playing quarterback for a lot of that.
[48:47] So for example, you know, I’ll put together, my team will put together,
[48:51] you know, my team is all,
[48:52] we all are industry focused. So our business Services team has one director, we have five MDs, one director, two vice presidents, four associates, four analysts. So we have some industry mindshare in our group alone.
[49:07] And so they’ll go ahead and put together a buyer’s list using databases,
[49:12] using prior deals and similar industries that we can leverage buyer interest from.
[49:17] And when we do that, we’ll send that to our financial sponsor coverage team. They’ll look at it and say, hey, by the way,
[49:24] you know, this managing partner left Audax and started his own firm, right? That happened pretty recently.
[49:30] It’s a firm called the Jealous that we know really well. We just need to deal with. And all those splinterings are happening at all times. And so it’s kind of a check and balance.
[49:37] We should know the buyer universe for our clients given our industry knowledge and experience.
[49:42] But we have that kind of oversight to say, hey, you know what, here’s 20 more that you might want to look at.
[49:48] Kevin Choquette: And then the process of actually marketing to them,
[49:53] like, I don’t need, you know, the secret sauce by any stretch. Is it just pick up the phone and, and call up Mark at Capital Allocator XYZ and say, hey Mark, I got a deal for you.
[50:07] Like to walk you through it. It’s just sending over a Dropbox link. Is it just a two paragraph survey with this? Like, how do you guys go about actually running a marketing process from kind of A to Z to get,
[50:22] you know, some number of bids and Then your clients clearly like, okay, that guy wants it more than anybody else. Let’s sell this thing.
[50:28] Connor Mitchell: Yeah, I’m glad you asked that. I mean, it is extremely. It’s an extremely structured process. And, you know, all of us kind of do it the same. By all of us, I mean investment bankers.
[50:37] But, you know, I’m a big believer that the negotiations start from that first phone call and that a true process can.
[50:45] That can create competitive tension, really drives value. And so the first step is, let’s just say, you know, we’re not a firm that’s going to go to, you know, 300 buyers on a deal and just send a, you know, one page teaser that is an anonymous overview of the business and an NDA.
[51:02] We don’t do business that way. So every single one of our buyers on our list, let’s say we’re going to 100.
[51:08] We’ll get a phone call from the managing director on that deal to preview. Hey, here’s the client. You’re going to see this come across your inbox. Here’s why we think you’re going to like it.
[51:16] So that first call is kind of painting the lens that they. We want them to see the business.
[51:22] So, you know, let’s just say we go to 100. You know, we have those calls. We send teasers and NDAs.
[51:27] You know, let’s say 75 execute the NDA.
[51:31] At that point, we send them. It’s called the confidential information presentation. It’s a 50 to 80 page document outlining everything about the business.
[51:41] And the goal of that is to answer 95% of the questions are going to have so that we’re not pestering our management team, say, hey, we have a call with these groups.
[51:49] So they’ll take a look at that document.
[51:51] And typically that’ll be used to get enough information to submit an indication of interest.
[51:57] Kevin Choquette: You’re trying to make sure that deck’s comprehensive enough that they have 90% of that, meaning the buyer has 90% of their potential questions answered.
[52:06] Connor Mitchell: Yeah.
[52:06] Kevin Choquette: And that takes about burying your team with a bunch of Q and A. Back and forth.
[52:11] Connor Mitchell: Yeah. And that takes about a month to 45 days to put together.
[52:15] It’s an in depth document.
[52:18] There’s a lot of back and forth with our clients and the management teams and putting that together. But again, our goal is to not bother them once we’re in market.
[52:25] Let them run the business, grow the business and focus on what they do best.
[52:29] Kevin Choquette: Yeah. Okay.
[52:31] Connor Mitchell: So let’s just say we send those books out to all groups. Under NDAs,
[52:35] you know, within about 30 days we’ll request indications of interest.
[52:39] And this is, you know, the first,
[52:42] you know, point that we, data point that we have about where valuations are coming in, how many groups are interested. You know, we’ll typically get a valuation range.
[52:50] So more just an opportunity for us to, to weed down the herd a little bit to the groups that, you know, we think are attributing the highest value that can be the best partners, etc.
[53:00] So let’s say, you know, in a deal of 100 buyers, we go to 75, 70, sign the NDA, get the book, maybe we get, you know, 12 IOIs.
[53:10] So we get those IOIs, we talk with our client,
[53:12] we, you know, compare contrast and we’ll invite of those 12, maybe six to eight to come to what we call manager presentations.
[53:22] They sit down with the management team. It’s a two to three hour meeting, a dinner before,
[53:26] you know, let our clients poke holes on them. It’s really more of a collaborative discussion to now kind of get to the secondary and tertiary level of the business above and beyond what the data in the book was.
[53:38] So we’ll hold those over a couple of weeks.
[53:40] Everyone goes back to their respective corners.
[53:42] We’ll provide more information and request Lois at that point.
[53:47] So if you back up here, let’s call it, you know, the first 45 days is market prep,
[53:53] call it 30 days to get to that IOI and that initial marketing phase.
[53:59] So that’s what we’re at. Two and a half months there,
[54:02] you know, probably another 45 to 60 days in manager presentations, diligence and to get to an loi.
[54:10] And then once we get Lois again, we weed down the herd, we compare contrast, negotiate and then, you know, most of the time go exclusive with one party.
[54:19] And then it’s typically, you know, 45 day close is what we try to attract toots towards.
[54:25] So, you know, if all goes well,
[54:27] you know, it’s probably a six to five to six month process.
[54:31] But again, we want to be actionable to buyers, we want to be actionable to market trends. And so there might be times where we speed things up, slow things down,
[54:38] but a typical process usually,
[54:40] you know, unfolds that way.
[54:43] So.
[54:45] Kevin Choquette: Let’S go like the spectrum is few bids,
[54:48] maybe even one,
[54:51] a healthy number, I’ll say four or five, enough that you feel like you’re, you’ve got a good market and then maybe also feeding frenzy,
[54:59] you’ve got 20 bids or something like that. How would you respond to the,
[55:03] the three Potential outcomes.
[55:06] Once you’ve gone to market, maybe something’s happening, macro that’s disrupted the whole play and you still have one buyer and the seller’s like, hey, let’s, let’s see if we can trade here.
[55:15] It’s not obvious in front, not what you want. But how would, how do you deal with those different scenarios once you’ve called for offers?
[55:22] Connor Mitchell: Yeah, so it’s, you know, it’s been interesting in this market. So in the last, you know, call it year and a half,
[55:27] and Even currently,
[55:28] that IUI number has been really high. Again, private equity is looking to put money out. They want to show that they’re looking at deals. And so,
[55:37] you know, we’re seeing elevated numbers of iOS. So it looks like a really hot process.
[55:43] The issue is, when you get into diligence a bit more,
[55:46] a lot of those initial interest buyers are, you know, spooking at the first sign of something that’s not perfect.
[55:53] And so I think, you know, I’ll speak from my practice in my sub vertical, but I hear it across the industry is that the hit rate from IOI to LOI has gotten very small.
[56:05] So maybe you have 20 IOIs, maybe you have, you know, three to four. Lois,
[56:09] now there’s outliers out there, super attractive end markets and industries.
[56:13] You’re always going to have really good participation.
[56:17] You know, businesses that are 20 in EBITDA, great margins. Yeah, those will always have hot processes.
[56:22] But I think the, the art really is,
[56:25] you know, navigating that IOI to LOI conversion and then making sure that, you know, the group at the end is the right group. All you need is one buyer.
[56:34] You know, having two makes a competitive auction.
[56:37] And so we’re less concerned about the number,
[56:39] but more concerned about the quality. And is it in the range that our client wants to transact.
[56:44] And that gives us what we need to go in, negotiate, push the bid up, et cetera.
[56:48] But every deal is so different, Kevin. It’s, it blows my mind. I don’t think.
[56:52] I’ve never had a deal. I think I’ve closed, you know, 45 or 50 transactions in my career. I’ve never been able to predict who the buyer is.
[57:02] I always think, I know it’s going to be one of five. It fits perfectly. There always ends up being somebody that comes out of the woodwork that you thought might have an interest, but just comes out and is really putting a great bid forward.
[57:13] So we have to stay, I think, open to new buyers, new opportunities. We go into every deal, I think With a unique lens.
[57:21] Because if we use our past history to dictate how we’re going to run a current deal,
[57:26] chances are we’re going to be missing out on something.
[57:28] Mm.
[57:29] Kevin Choquette: You have any favorite failures in these processes? Have you ever had some of these just blow up gloriously where you’re like, well, I’ve got to learn something really valuable here.
[57:43] Connor Mitchell: Yes.
[57:44] I won’t go into the details of the business, et cetera, but the lesson learned is only do deals in industries that I know extremely well.
[57:56] Yes, we underwrite our clients, but we have to understand and underwrite the underlying market dynamics.
[58:02] This business was connected to an industry that is restricted from a lot of private equity investment.
[58:11] It’s, you know, in and around the gambling space.
[58:13] And so an incredible business.
[58:16] It makes a ton of money, it’s growing like a weed.
[58:19] But just unique dynamics about that industry.
[58:22] And, you know, we didn’t fully understand.
[58:25] I think it was a rude awakening. You know, stick to my subsectors I know extremely well.
[58:30] You know,
[58:30] stry away when you know, it’s tangential enough that we, I think, can understand and know it.
[58:36] But don’t extend ourselves into areas where I think we can’t be quote unquote experts because, you know, things pop up all the time and you know, it’s tough to get around some of them.
[58:45] Kevin Choquette: Yeah, yeah. Even though it’s shiny and there’s a huge fee and you know, you can do it and then oops, maybe I didn’t know what I didn’t know.
[58:54] Connor Mitchell: It’s chasing fees as you know, Matt. It is.
[58:57] You know, you get wide eyed and you see, oh my gosh.
[59:01] But yeah, sometimes you gotta know when to pull a deal and regroup and you know, those are not easy conversations. But you know, again, that’s my point about having clients where you have alignment of integrity, being able to talk and directly communicate.
[59:14] Because if I can’t, you know, deliver clear communication and you know, potentially negative news,
[59:20] you know, it’s going to be a tough relationship.
[59:22] Kevin Choquette: Yep. All right, so related, and I probably should have asked this sooner, but we’ll do it now.
[59:28] The, the entrepreneur who maybe isn’t even in the nine month window for you,
[59:35] he might be in the two or three year window. He’s your early, early pipeline. He’s got a good business,
[59:43] but there’s some piece of enterprise value creation that he hasn’t internalized, he hasn’t conceptualized. He hasn’t made the transition from like this,
[59:56] I’ll bleep myself. So we don’t get the explicit rating. But I heard Michael Gerber speak years and years ago. He’s the guy who wrote the E Myth right up in Seattle at a conference.
[01:00:06] And it was one of the more bizarre public speaking things I’ve ever witnessed.
[01:00:13] But he literally stood up on stage and just dropped F bombs and said, look, you blank blanks are not your blank blank business over and over and over. Meaning, like you aren’t your business and your business is something that’s quite different than, than the founder creating their own little economic engine.
[01:00:30] But I wonder, like, you must see entrepreneurs who haven’t had the penny drop on some portion of getting away from like, hey, I started something, I’ve got, I’ve got fire, right.
[01:00:42] Wilson and Castaway, where he gets the, the fire. I have fire. Right. Like a lot of entrepreneurs, like, that’s a hard thing to get going. They get going and, and then they might not transition from that into creating real enterprise value.
[01:00:54] I wonder if that’s something that you see and if you see it, what are the things that people typically fail to assimilate or abstract in a way that they can start to play in the space where you guys are operating.
[01:01:08] Yeah, hopefully that question makes sense.
[01:01:10] Connor Mitchell: I think so. And you know, we see it a lot in industries where it, I wouldn’t say it’s easy, but it’s, you know, I think easier to grow from 0 to 5 million.
[01:01:21] Right.
[01:01:22] Harder from 5 to 10.
[01:01:24] And in most sub segments and industries there’s kind of that ceiling that at some point you need to start investing ahead of growth and that’s bad for margins. Right. And so if you’re a business owner, it’s, it’s, it’s your, you know, it’s your ATM machine.
[01:01:37] Right. Which, right, again, that’s your prerogative. It’s your business. And if you’re pulling out a few million bucks a year, again, I would love to have one of those companies.
[01:01:45] But at some point,
[01:01:47] you know, to get past that, you know, ceiling, you need to bring on the next level of management. You need to bring on two business development representatives to go out and bring in new clients.
[01:01:58] You need to hire an actual CFO and not just your bookkeeper who, you know, does your month end closings. Right. And I think that is something that a lot of clients don’t think about early on is sacrificing near term profitability for future growth.
[01:02:13] That could take a lot of different looks. It’s, you know, it’s personnel, it’s inventory, it’s all sorts of different cost elements. But that’s one thing that,
[01:02:22] you know, if you talk to clients, potential clients, is what can you start to do to accelerate revenue growth,
[01:02:29] even if it’s at the detriment of current margins?
[01:02:33] Kevin Choquette: Yeah.
[01:02:36] You find it’s well received. 50. 50. Like what percentage of the people.
[01:02:42] A really generic question might just say, hey, I’ve got a great lifestyle business. I’m making $2 million a year,
[01:02:48] like Connor Levia. But like, I’m making 2 million a year. I’m just gonna, I’m just gonna sit on this thing for the next 10, 15, 20 years and call it good.
[01:02:56] Connor Mitchell: And I love those conversations.
[01:02:58] More power to you. I’m happy for you. Go ahead and do it.
[01:03:02] Getting that out early on, you know, I don’t want, I want to spend my time with those, fostering those relationships of, you know, sellers that actually want to sell.
[01:03:11] And both sides, if you want to run it and kind of pull all the cash out for 20 years or sell it, both are amazing situations to be in.
[01:03:19] No ill will, but that helps me to weed those out and focus on the companies that, you know, we can really add value and create generational wealth. Right. I mean, a lot, A lot of what we do, which is exciting and the founder own stuff is we sell a company for 150,
[01:03:32] 200 million bucks.
[01:03:34] You know, that creates real multi generational wealth that changes lives.
[01:03:37] So those are the types of clients that we love to work with. And, you know, that’s a rewarding aspect of what we do,
[01:03:43] above and beyond just generating our fees.
[01:03:46] Kevin Choquette: Cool.
[01:03:47] Let’s talk about your, your team,
[01:03:49] Cascadia. How do you guys go about finding and developing talent for,
[01:03:54] you know, for, for what you guys do? I mean, this,
[01:03:58] there’s a deep expertise here articulating around certain industries, sizes of companies, how to navigate them, how to manage those relationships. How do you find the right people for your team to support your growth and execution?
[01:04:14] Connor Mitchell: Yeah, it’s the hardest part of the job.
[01:04:16] There’s a lot of smart people out there.
[01:04:19] But finding the right person to join a team is really difficult across all industries. Right.
[01:04:26] You know, one thing as a firm we’ve done is, is really defined our firm culture.
[01:04:31] I’m a big believer that, you know, culture has to be intentional.
[01:04:35] And culture is dynamic and evolving.
[01:04:37] We can put some guardrails on it by establishing our firm’s core values, but you have to be flexible. And those, those, those guardrails have to bend a little bit as you bring in new people into an organization.
[01:04:49] So I think the first part of it is, is hiring people that know, have our s core values and fit into our both firm and then our business services team culture.
[01:04:58] You know, I, I think second, you know, it really is,
[01:05:03] it’s incumbent upon us as, as managers, right, to understand how, how people tick.
[01:05:07] And so, you know, what we’ve decided as a firm is, you know, there’s no one size fits all for what motivates people. So we have to individually,
[01:05:16] I think, figure out, know what drives somebody, how to get the best out of them.
[01:05:21] Now that happens when we first interview them, right. We get a sense on who they are, what motivates them, et cetera. And then we can tailor how we work with them accordingly and helping them grow and develop and be, you know, the most value added team member that they can be.
[01:05:34] And you know, I’ve had a conversation,
[01:05:36] you know, it’s pretty recently on another podcast about, you know, this whole stigma of Gen Z younger millennials not wanting to work hard.
[01:05:44] I completely disagree.
[01:05:46] You know, some of the, of the, of the men and women that we hire from college and you know, they are working extremely hard and they love doing it.
[01:05:54] What I’ve seen that’s changed is what motivates,
[01:05:57] you know, me coming up in the industry. To me, for better or worse, just being naive, it was money. I wanted to make as much money as possible and to me,
[01:06:05] hours equaled money. And I was more than happy to do it even if I was working in some, you know, pretty, you know, stereotypical rough working conditions in investment banking.
[01:06:16] Now what we see is yes, yeah, money is, is important. But, you know, the one thing is, you know,
[01:06:22] do they feel they’re doing meaningful work? Is what they’re doing adding value to a transaction and are they an integral part or are they just doing busy work? That doesn’t matter.
[01:06:30] If they’re working on things that they think is materially important,
[01:06:33] they’re going to bust their *** to do it.
[01:06:37] You know, I think number two is, you know, do they feel that they’re operating in a meritocracy?
[01:06:42] If they do good work, will it be noticed? And when it’s noticed, will there be upward mobility?
[01:06:47] You know, that’s one thing that we, I think do as a firm really well is,
[01:06:51] is, you know,
[01:06:52] promote and really, you know, we don’t take a analyst class of view of things. We take it on an individual basis and someone that’s contributing a ton is going to be given opportunities to punch up a weight class and really work into that next role.
[01:07:04] And they Love doing that.
[01:07:08] You know, trying to think of some other things. You know, one thing that we really admire and as part of who we hire and how we operate is, you know, upward and downward communication.
[01:07:17] I want somebody who hears me on a call to come in and say, hey, Connor, I hear you talking about, you know, this purchase agreement. Mind if I sit in to learn a little bit?
[01:07:26] I want somebody to say, hey, you know, Connor, or you know, vp, my vp, Kyle on the steel.
[01:07:32] You know, yeah, this is good. You know, I had a different idea here, right. I want people to have the confidence to do that and I want our team to have a culture that accepts that.
[01:07:39] Right. The best ideas are the ones that we use.
[01:07:43] So small things like that that, you know, really help impact who we hire.
[01:07:47] But more importantly, when we get somebody in the door, you know, we’re believers that it’s incumbent upon us to make them great bankers. And so if somebody is struggling, we don’t, you know, cut bait and bring in the next one.
[01:07:57] Right. We, we have mentorship in place.
[01:08:00] You know, we really take an effort to foster the talent because, you know, we can only do our jobs when the leverage model in an investment bank works. There’s a managing director, a vp, an associate and an analyst on a deal.
[01:08:12] I can’t do my job if my VP’s not doing his job. He can’t do his if the associate isn’t, and so on and so forth.
[01:08:19] And so, you know, it’s, we’re motivated to keep people inside the firm, to grow from within,
[01:08:24] establish that institutional mind share within the organization so that it’s much easier to maintain that leverage model and the firm can keep growing.
[01:08:32] So it really is, you know, it’s a long winded way of saying, you know, our hiring is based upon, you know, our cultural values at the firm level, at the team level, industry group level, and then at the individual level.
[01:08:43] Kevin Choquette: Yeah, that was actually really clear. Thank you for sharing that. Do you have one or two sort of lightning rod cultural issues or cultural values that, you know, are kind of an attract repulse,
[01:08:58] Meaning like, hey,
[01:08:59] these guys are all about X. I would never work there. These guys are all about X. It’s the only kind of place I’m going to work. Do you have any of these cultural things that,
[01:09:09] that are doing the work for you that are getting people to say like, hey, it’s not for me,
[01:09:14] and you’re kind of like, great,
[01:09:16] I’ll take the guy that likes it. Right.
[01:09:18] Connor Mitchell: You know,
[01:09:20] I can’t think of any controversial Cultural elements that,
[01:09:24] you know, are unique to Cascadia. One thing I will say is there are some people,
[01:09:29] you know, really, really smart, quantitatively imperfect modelers, whatever it might be,
[01:09:36] that come in and,
[01:09:38] you know, don’t really want to develop those soft skills for upward mobility.
[01:09:43] There’s a great place for you at a quant hedge fund at Citadel. Wherever you want to go, you’re going to be perfect. There’s, you’re not going to great with what we do.
[01:09:49] We want you to get out of your comfort zone and build into, you know, not every analyst is going to be a managing director,
[01:09:54] but our goal is by with hiring, you know, every analyst we hire, we should see a path to making them the VP at some point in, you know, six to eight years.
[01:10:03] I think that’s one thing for sure.
[01:10:06] You know, I always use, I mean, again, maybe it’s unique for us, but I always use the, the analogy that, you know, I’d much rather have a, you know, a baseball player from a Big Ten school with a,
[01:10:16] you know, 3.2 GPA in accounting than,
[01:10:19] you know, some, you know, Ivy league, you know, 5, 5.0 GPA that, you know, wants to come in and kind of be the headshot.
[01:10:28] You know, I find that working with athletes, we’ve had extreme success in making those people in the great bankers, time management,
[01:10:35] personable, team alignment.
[01:10:37] So there’s certain things that we’ve developed over time where it’s not, you know, here’s a certain profile, the person that we want, we want to have different ideas, different viewpoints,
[01:10:47] you know, male, female, different races, cultures, et cetera. The one thing that we’re not negotiating on is alignment to all of our core values. That’s one consistent that we want.
[01:10:58] And I actually stole that from a current client who has mentioned that a couple of times in meetings. And I think he put it so eloquently. Right. You know, we want to be diverse by the people we bring in, but homogenous by, you know, the core values that we have.
[01:11:11] Kevin Choquette: And so you’re saying that your intelligence,
[01:11:17] it might be secondary to your ability to be a part of the team, understand your role, understand the value of the team, understand that we’re all in one fight, one team, one fight kind of a thing.
[01:11:26] Take that guy over the 5.0 quant who doesn’t want to talk to anybody.
[01:11:31] Connor Mitchell: Exactly. Yeah.
[01:11:33] This isn’t rocket science. What we do isn’t that hard, right? There’s tricks and tools. There’s an art to it.
[01:11:40] So yeah, you don’t have to be the smartest person person in the room. And you know, my goal is to not be the smartest. I want everybody on my team to be smarter than me so I can get maximum leverage from them.
[01:11:49] But again, we work a lot of hours, we work close together and you have to like the people you work with or else the money you make, the time you spent really isn’t worth it.
[01:11:58] And so sharing in those successes with people that, yeah, not everyone’s going to be your friend but you know, you get along and you have a team culture,
[01:12:06] you know, that makes the job a lot easier.
[01:12:08] Kevin Choquette: Cool. And then what about compensation? And I don’t want specifics but just in terms of driving alignment. Right. If it’s the case that it’s, it’s going to be a 70 hour week, guys, like, it’s just, we’re just in the thick of it with, with these two deals and that’s what’s going to be required in order to move the needle and keep this deal on track.
[01:12:28] How do you get the whole team to just kind of go, yep, that’s this week I understand, let’s go.
[01:12:35] Is there an alignment component in terms of compensation that, that,
[01:12:40] you know, just sort of gets everybody on the same, on the same page or if you want in the same boat and kind of rowing the same direction?
[01:12:47] Yeah.
[01:12:48] Connor Mitchell: At the junior side of the deal, team analyst associates,
[01:12:51] you know, they’re kind of range bound. Their, their compensation doesn’t directly tie to the deals they work on in those fees. Now there is some upward and downward within that range of that, that class depending on the deals that they work on.
[01:13:05] But you know, the idea there is, you know, they don’t choose the deals they work on, who they work with.
[01:13:11] And so they’re kind of range bound and they’re all kind of at the same levels.
[01:13:15] So you know, the one thing that I think is important is they all think no, they’re going to work a lot of long hours.
[01:13:21] It’s incumbent upon us as the managers to have a pulse on that. Is there somebody that is getting, you know, overly worked versus the rest of the group?
[01:13:30] Can we staff differently to pull something off of someone’s plate and put it on somebody else’s?
[01:13:35] Because it is really hard in this industry. As, you know, with real estate too. You know, deals tend to ebb and flow in a way that you can’t really predict.
[01:13:43] So we might go into a week thinking, hey, it’s going to be a pretty light week. Something comes up and it ends up being a massive time suck week. And so I think, you know, we really have to manage on a day to day basis.
[01:13:54] That and as an md,
[01:13:56] you know, I’m getting,
[01:13:57] you know, I think, you know, scrutiny from my CEO and coo. If they’re seeing that we’re not managing our team correctly,
[01:14:05] if there’s overwork, if there’s stress in our group,
[01:14:08] that is a bad look on me,
[01:14:10] not on the analyst that is saying, hey man, I need a break. And so, yeah, I think that’s one thing that’s changed in the last, you know, 16 years since I’ve been an analyst is,
[01:14:18] you know, back then it was work your butt off no matter what.
[01:14:21] You know, if you say something, you’re weak.
[01:14:23] Now I think it’s a much more collegial environment that respects, you know, I wouldn’t call it work, life balance, but,
[01:14:31] you know, understanding that, yeah, this job is stressful and it requires a lot of time,
[01:14:36] but not to the detriment of your well being,
[01:14:39] your health, your mental state, you know, those things that we really kind of focus on.
[01:14:44] Kevin Choquette: Yeah, cool. And how many people on your team?
[01:14:47] Connor Mitchell: So we have. Our team is 5, 8, 17 in business services.
[01:14:56] Kevin Choquette: Yeah, yeah.
[01:14:58] Reasonable site.
[01:15:01] Going all the way back to like how you got here. You mentioned getting out of school,
[01:15:05] turned on to a conference, kind of getting this macro view and the complexities of the world. And I think you said it was like the Austrian school and understanding that some sort of a role in finance was going to be in the cards.
[01:15:22] I wonder in terms of like mentors who you might have had that’s brought you along.
[01:15:27] You’ve clearly had a really good run and I suspect have a really nice journey ahead of you from here. But what kind of impactful relationships have you had that have really kind of refined your understanding of, of the opportunity set and maybe kind of helped you get into this,
[01:15:45] this industry, this role.
[01:15:47] Connor Mitchell: Yeah, it’s, it’s a great question. And you know, I think my view on what a mentor is, has developed a little bit. It used to be, you know, a big figure, super successful, et cetera.
[01:15:58] Right. You want to be that person.
[01:16:00] The older I get, I think, you know, mentorship to me is, is more fluid right. At every stage of where I am in that part of my life, I’m finding a mentor.
[01:16:09] So a couple of good examples. So I mentioned the guy’s name was Al Riccio who, you know, helped me open that first door in investment banking. You know, really gave me an understanding of the industry, etcetera that’s one type of a mentor,
[01:16:21] you know, at. At focal point.
[01:16:23] One of our founding and managing partners, Nishin Radha,
[01:16:26] one of the best bankers I’ve worked with. And, you know, I was an associate when I joined there. That was a guy that brought me under his wing, gave me a lot of exposure to different aspects of a deal.
[01:16:35] Um, so that was a really great mentor.
[01:16:38] You know, I’ve worked with. You know, another great mentor is my prior client. His name is David Lewis, which is an interesting dynamic that a prior client would be a mentor.
[01:16:47] But throughout the deal, post closing has become a great friend. And I think, you know, having him knowing we shared a very,
[01:16:55] I’m called intimate experience. But when you sell someone’s company, you get very, very close with them.
[01:17:00] And so I didn’t expect to find a mentor and a client, but here we are.
[01:17:04] And then, you know, I think big believer in surrounding myself with is generally people that have attributes that I strive to.
[01:17:12] So you mentioned eo. I have some friends here in Austin in the YPO community.
[01:17:17] So yeah, they’re by no means, you know, a big figure in town that everybody wants to be and a big mentor. But, you know, I have a buddy who has a great family life that has been able to manage working in high finance with having five kids.
[01:17:29] And that’s something that I’ve struggled with. Right. Is managing both sides of that life. And to me, it’s been a bit of a zero sum game. The more time I put into work, less time goes into my personal and relationships, et cetera.
[01:17:39] And so he’s been a mentor with me, helping to figure that out. And so I think the term mentor, I think is just developing as I move through life. And I’ll probably have a new mentor next week, a new mentor the following week,
[01:17:50] which I hope so, because that says I’m, you know, spending time with people that I think have qualities and traits that I want to strive to.
[01:17:58] Kevin Choquette: Cool. I get it.
[01:18:00] Sort of learn, learn by osmosis. Right. Surround yourself with good people, see how they’re doing it, and see what you can pick up,
[01:18:06] you know, from their role models.
[01:18:08] Connor Mitchell: Exactly.
[01:18:12] Kevin Choquette: I sort of asked this a little bit early on, but, you know, look, you clearly have the agency to probably do anything you want, or at least more than what you self describe as not rocket science in the world of investment banking.
[01:18:29] So of all those things that you could do, why, why this? Why is this the thing that gets you out of bed and,
[01:18:35] you know, you keep doing year after year.
[01:18:37] Connor Mitchell: Yeah. No day is the same,
[01:18:40] which I love.
[01:18:41] I wake up, you know, again, it’s so dynamic.
[01:18:44] So that’s number one, the variability in just the day to day.
[01:18:48] Number two, I’m surrounded by amazing, incredible people every single day.
[01:18:53] It’s people on my team, it’s, you know, leadership in our organization,
[01:18:57] it’s my clients.
[01:18:58] You know, I think that is such a big part of what I do, is those personal connections. And in this industry, I think is unique that you surround yourself with very intelligent, very successful, very unique people,
[01:19:10] which is great.
[01:19:12] Number three, I don’t know what else I do, to be honest.
[01:19:16] I think I’m moderately good at what I do, but I have no idea what else I’d get into. And I think like most investment bankers, you know, we all had the itch to, you know, do I go out on my own and, and build my own practice and firm and,
[01:19:29] and do it myself and you know, to me, no, I like being with a team. I like being in an organization,
[01:19:36] you know, having people around me that I can learn from on a day to day basis. And so I learned that’s not for me.
[01:19:41] I want to stay within an organization like Cascadia, which has been just incredible in the eight short months I’ve been here.
[01:19:48] And then three is the challenge, right. You know, I, I’m competing against some of the largest investment banks in the U.S. you know, I’m a younger MD, I’m 39,
[01:19:58] you know, building my practice and having those opportunities to, you know, slay the dragon, if you will, for some of these larger deals that I’m pitching. To me, that is the pinnacle.
[01:20:07] Right.
[01:20:07] Grew up playing sports, competitive soccer, played a little bit in college. To me, that is the closest thing to having kind of athletic competition is, you know, that uphill battle, chip on your shoulder to keep growing, getting bigger and bigger deals, better clients, and then taking market share from those guys.
[01:20:22] That keeps me going, gets me up in the morning,
[01:20:24] gets me super excited about the future we have here.
[01:20:28] Kevin Choquette: Right on. I dig it.
[01:20:32] I wonder,
[01:20:34] you know,
[01:20:36] I asked almost everybody that comes on the podcast about this. So you go back to 2008, 2009, world falls apart.
[01:20:46] You know, you’re you, you are undoubtedly just hoping the phone might ring and somebody’s going to say, hey, Connor, I got a little opportunity for you here. Come on over and let’s get going.
[01:20:58] When you know, you and hundreds of others of the,
[01:21:01] you know, year one associate recruits are blown out thanks to Lehman Brothers and the Great Recession.
[01:21:08] To Fast forward, you’re 39, managing director team of 17,
[01:21:12] number two independent firm in the country. You know, winning good clients, building a book of business, getting bigger clients. Like there’s a lot of things that are coming your way in, in the way of success.
[01:21:24] And so that transition from like please phone ring to today, where I suspect opportunity is abundant and there are lots of things that you could do.
[01:21:37] You’ve already articulated the ability to triage deals and be able to say, hey, that’s not for us. It doesn’t sound like the founder is really committed. Post,
[01:21:46] post close.
[01:21:47] He doesn’t really want to be in the business. You’re not a client fit or hey, you just want to clip $2 million for the next 20 years, run and be free.
[01:21:55] How have you transitioned from just waiting for that call to,
[01:22:00] to come through to being overflowed or overwhelmed if you will, with deal flow and just managing that success? Like how do you, how do you not get steamrolled by the opportunity set that’s so much larger than it would have been 20 years ago?
[01:22:21] Connor Mitchell: Yeah, I think first and foremost to me it’s, you know, I’ve realized that you know, success isn’t defined in a 12 month period.
[01:22:29] It is 3, 5, 10 years.
[01:22:32] You know, we work in industries that are susceptible to market turns and cycles, etc and so if you are defining your success on a year by year basis, those ups and downs,
[01:22:42] it is really tough to deal with. And so taking a step back and you know, taking a look at the body of work the last five years and not necessarily the last 12 months, I think gives you that confidence to kind of keep going.
[01:22:54] You know, I, I think, you know,
[01:22:56] for me success,
[01:22:58] you know, is, is humility too. Right?
[01:23:00] The highs are high, the lows can be low. It’s, how do you kind of just maintain throughout that so you know, close a deal, it’s great, celebrate that quickly.
[01:23:09] But you have to bring in the next one, the next two, the next three. And so to me those, those successes are, are, are short lived and you have to move forward and, and kind of sequentially put those things together.
[01:23:19] That’s what builds a successful career.
[01:23:22] That’s number two.
[01:23:25] You know,
[01:23:26] when I think of success too, it’s again, I think more recently in the last few years, it’s you know, bifurcating professional and personal success.
[01:23:36] And so, you know, 10 years ago, hey, you know, 10 deals coming in, I’ll sign them all up, I’ll work my butt off and just close them all. That’s success to me.
[01:23:43] Now it’s okay, let’s you know, put a little bit more time into the personal life, you know, fostering relationships, sharing that success with people outside of work,
[01:23:52] you know, struggled with that in my 20s and early 30s. And so I think that’s a focus of dealing with success is, you know, being able to,
[01:24:00] you know, realize success. You have not always be pushing and asking for more and just taking a step back and saying, you know what, this is pretty good right now.
[01:24:07] Let’s, you know,
[01:24:08] breathe in quickly and then move on to the next one.
[01:24:11] So I think a lot of things,
[01:24:12] you know, the, the definition of success has just evolved in my mind a lot.
[01:24:17] It’s not just money anymore. It’s. It’s a lot more than that.
[01:24:22] Kevin Choquette: In the day to day though,
[01:24:23] do you have ever a feeling of overwhelm just in terms of inbound deal flow, inbound opportunity? Hey, got another one. Hey, I got another one. Hey, I got another one.
[01:24:35] Hey. Like I, I have to imagine you’re at that place in your career, but I could be, I could be wrong about that.
[01:24:41] Connor Mitchell: I wish, man.
[01:24:43] The overwhelming part is,
[01:24:46] you know, really just the,
[01:24:48] the vast sea of potential clients and having to find them.
[01:24:53] I wish my phone was ringing off the hook.
[01:24:56] You know, it is. Sometimes it’s great. Like, yeah, that’s the best thing about closing a deal, right? You put on a press release, it goes out to similar companies, that’s when the phone comes in.
[01:25:05] Um, but in, in between those times, it’s just a lot of outreach.
[01:25:10] And you know, if, if you’re a young banker that is relying on referrals to come in,
[01:25:15] you’re not going to do a great job and build a great career. You know, you have to have a little bit of that outbound effort.
[01:25:21] So, yeah, I’ll, you know, hopefully next time we talk, I’ll be overwhelmed with inbound leads coming in for great deals. But for now, I’m just going to keep chipping away at the,
[01:25:31] you know, the companies that I’m following right now.
[01:25:34] Kevin Choquette: So personal mindset, daily routines, habits, et cetera. You just mentioned, like, hey, success.
[01:25:40] In my earlier days, it might have been, I gotta go 10 for 10 on all those deals. Now maybe you go, hey, those seven are really great. Those three are kind of marginal.
[01:25:48] I’m gonna let them go and let a bit of this kind of idea of balance show up. I wonder what you might have by way of daily or week weekly routines to sort of sharpen the saw, you know, keep yours your best mind, your best energy, best self in the game.
[01:26:07] Connor Mitchell: Yeah, I mean, number one, you know,
[01:26:10] wake up every day before 6:00am and get a workout in five days a week, during the week, one day on the weekend.
[01:26:18] I never thought I’d be a get up in the morning, workout in the morning kind of guy.
[01:26:22] But you know, right. The day gets away from you and if you don’t put that time in early, you never know if it’s going to kind of be there in the afternoon or evening.
[01:26:30] And so that is number one.
[01:26:32] And I tell you know, all of our junior guys sweat every single day. It’s not to stay in shape, it is to have the mental clarity. I have some of the best ideas on a deal when I’m on a treadmill in a class, etc.
[01:26:44] So that’s number one,
[01:26:46] you know, number two. And you know, again as a younger banker, I struggled with, you know, anxiety up and down. And you know, I got a dog two years ago.
[01:26:56] His name’s Bridger. He’s a two year old goofy bernadoodle.
[01:27:00] Best dude in the world, my best friend.
[01:27:02] And you know, having him in my life last year has been a game changer. So non negotiable. 7am every day after workout we go to park here in Austin and spend 30 to 45 minutes just running around and having a good time.
[01:27:18] So that, that, that’s also non negotiable.
[01:27:21] You know, other things that, you know, I’ve tried to,
[01:27:24] to do some of the yoga stuff and clear the brain and that’s just not me.
[01:27:29] And so, you know, I wish I could tell you I meditated and had some secret sauce to mental peace and well being. No. Yeah, it’s just get up, sweat, play with my dog.
[01:27:39] And then you know, really to step back and appreciate the good things you have in life, it’s, it’s tough to get lost in the minutia. And you know, I always see someone doing more deals or making more or whatever it might be,
[01:27:49] you know, the older I get, the more I have the ability to step back and appreciate it.
[01:27:53] That doesn’t stop me from wanting more and pushing hard and going to the next level.
[01:27:57] But enjoy life a little bit more.
[01:27:59] Kevin Choquette: Yeah. Well this idea, what is it? Comparison is the thief of joy, right?
[01:28:07] Connor Mitchell: Yeah.
[01:28:07] Kevin Choquette: Instead just be like, hey,
[01:28:09] where’s my burnoodle? I’m going to have a nice morning and then I’ll get into work. I like it like future cast and give us like you’re saying, I wish I was getting inundated with inbound leads but where are you headed?
[01:28:27] What do you think your career is going to look like,
[01:28:29] let’s just say arbitrarily, ten years out.
[01:28:33] Connor Mitchell: Yeah, I mean, I’ve never been more excited or bullish.
[01:28:36] I think I’ve developed some really good sub industry expertise.
[01:28:42] You know, one example, there’s a couple, but one example is in, you know, this office of the CFO finance and accounting space. So professional services in that realm.
[01:28:50] Fast forward to 10 years. I want to be, you know, one of the two to three leading bankers in that space.
[01:28:56] It’s a great consolidation play. It’s super active with private equity, a lot of interest, and I think I’m really well positioned there.
[01:29:03] You know, I want to have, I want to, you know, have our team grow.
[01:29:08] Right now we have five MDs in our group. It would be great to be at 10,
[01:29:12] double in size, you know, have more analysts, more associates that we’re mentoring, you know, really build our group. Not me personally, but just for all of us.
[01:29:22] You know, our biggest competitors, some of their business services teams are 60, 70, 80 bankers. So we have a lot of Runway to grow, to grow our team to be truly competitive.
[01:29:31] And to me, that is a definition of success is growing that team.
[01:29:36] You know, I’d love to be, you know, working on,
[01:29:39] you know, deals that, you know, are pushing a billion dollars.
[01:29:43] That is a goal for me within the next 10 years to have, you know, multiple $1 billion transactions.
[01:29:49] Massive goal, and I think it’s really attainable.
[01:29:53] Yeah, I think those are pretty good. Yeah. If in 10 years, our, our team is double in size, I’ve done $2 billion deals,
[01:30:00] and I’m one of the top two in that office of the CFO and Specialty Consulting space.
[01:30:05] I think that’s a great career for me.
[01:30:08] Kevin Choquette: Love it.
[01:30:09] So I’m going to ask you two sort of opportunities for advice.
[01:30:15] One, for the younger listener who might be contemplating a career in investment banking,
[01:30:25] what advice might you give? Like imagine you’re.
[01:30:29] I was gonna say 19, but I don’t think that’s. I did say 19 before. When you’re coming out of college, clearly we’re not 19, but let’s say 23 is. It’s 2008.
[01:30:39] You know, that person who’s thinking about, hey, I might want to. Might want to be in investment banking. What kind of advice would you give to somebody who’s looking at the space now?
[01:30:49] Connor Mitchell: Yeah, I’d say to do it,
[01:30:52] but to not mortgage your 20s for your 30s and 40s. So maintain some of that work life balance on your 20s. And, you know, looking back, I gave up my 20s,
[01:31:03] you know, working 90, 100 hour weeks. And to me it was worth it, looking back now, but I missed out on a lot of good stuff.
[01:31:10] And so I think where the industry is right now, with technology, with AI, with databases and tools, that doesn’t have to happen. So find a place where you can make money, learn a lot, do great deals, but still be 25 and have fun.
[01:31:25] You know, to those same people that get into the industry, I’d say, you know,
[01:31:29] make mistakes and ask questions.
[01:31:32] I’ll give a quick story by when I joined that firm after those 2008 layoffs in Chicago. It was a firm called Livingstone Partners and I was in a pitch, I was an analyst at this time and one of the founding partners of the firm.
[01:31:46] You know, we were in this pitch and he goes, connor, why don’t you give him the intro and overview of the firm?
[01:31:51] That’s not what an analyst does. We sit there, take notes, ask questions about the model, right? So I’m like, oh, ****.
[01:31:57] So I, I stumbled through it like an idiot. It was awful.
[01:32:02] And again, it was a client we’ve had for a long time. It didn’t impact the deal. It was fine. So he leaves.
[01:32:08] My boss, owner of the firm, asked me. He’s like, how did that feel? I told Omega it felt absolutely miserable. He goes, you’ll never do that again, will you? I’m like, nope.
[01:32:16] He’s like, you’ll be prepared for every single thing, will you? He’s like. I’m like, yep. And his response still resonates. He’s like, he’s like, I’m always going to put you up on that surfboard, but I’m never going to let you drown.
[01:32:27] And so I think, you know, making mistakes lets you grow.
[01:32:30] And I’ve taken that along with, with my junior people is, you know, letting them, I think, extend a bit above their role in a way that gives them exposure. But again, it’s not going to be if they do make a mistake impactful to the deal whatsoever.
[01:32:44] So, yeah, I think that was a pretty cool story that really resonated and has for, God, 16 years now.
[01:32:50] Kevin Choquette: Yeah, I’d say, I’d say it made a mark.
[01:32:54] And then what about the entrepreneur, the emerging entrepreneur, the entrepreneur who’s 10 years into it. The entrepreneur. And maybe 20 years into it, as you said, the, the highs are high, the lows are lows.
[01:33:03] You never really know how the day is going to shape, shape up.
[01:33:07] But in particular for those who might be wondering about,
[01:33:12] you know,
[01:33:13] liquidity points and different Ways to transition from founder owned business to, you know, kind of playing with the big boys. Any, any advice or nuggets you might want to share with them?
[01:33:25] Connor Mitchell: Yeah, I’d say, you know, having a growth mindset and not just looking year to year, but putting a plan in place.
[01:33:32] I think when you do that, you uncover those areas of the business where you can invest more into, you can drive growth faster.
[01:33:40] So stepping back and thinking about what your business needs to look like to facilitate that liquidity event,
[01:33:46] I think it’s extremely important.
[01:33:49] You know, I think surrounding yourself with good people.
[01:33:52] You know, a lot of business owners that I talk to take everything on themselves.
[01:33:57] Burnout is real. By the time they get to a transaction, it’s almost a, you know, I need to get out of this event because, you know, my life is, you know, focused on this business.
[01:34:07] You know, I think surrounding yourself with a good team,
[01:34:09] eliminating that burden will help you out just in the long run.
[01:34:13] But B, it’ll remove some of that key man founder owner risk that we just talked about earlier is detrimental to deals.
[01:34:22] And you know what I’d say too is, you know,
[01:34:25] find peers that you want to be and use them as a sounding board.
[01:34:30] More often than not. You know, a larger company is not going to feel threatened if a smaller organization is saying,
[01:34:36] hey, how did you do this? You know, what helped you grow to this size?
[01:34:40] You know,
[01:34:41] asking people who have been there and done it I think is really important. And groups like eo, ypo, Vistage, I think those forums are so good because it allows for that communication.
[01:34:52] But there are so many trade organizations that companies can be a part of that have business sizes from small to large that can open up some of those lines of communication.
[01:35:01] A lot of companies done a great job growing. They have the playbook. They’ve done it before.
[01:35:05] Ask them.
[01:35:08] Kevin Choquette: I love that.
[01:35:10] Connor, thank you for taking the time to do this. Listeners, thank you for coming along on the journey.
[01:35:16] If you drop to your app, follow us like us drop a five star review,
[01:35:22] all of that. My production team always reminds me to say that.
[01:35:27] But Connor, the mic is yours for any closing thing.
[01:35:31] And again,
[01:35:32] thank you very much for taking the time and, and being so transparent with what you’re sharing here. But really appreciate it.
[01:35:39] Connor Mitchell: Yeah, Kevin, really appreciate it. Really enjoy the conversation.
[01:35:42] To those entrepreneurs out there that are thinking about doing a liquidity event, raising capital,
[01:35:48] you know, reach out to myself, other investment bankers, we love those conversations.
[01:35:53] The time is good, the time is right.
[01:35:56] So yeah, best of luck and we’re here to help.
[01:35:59] Kevin Choquette: Thanks, Connor. Appreciate it.
[01:36:01] Connor Mitchell: All right, take care.
