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.
