Middle Market M&A: The Emotions of a Deal

Joining me today to discuss the emotional side of selling one's business are Stuart Brown and Scott Daspin. Let's do some quick introductions and then we'll get started. Stuart Brown is an attorney and co-founding member and managing partner of Brown Moskowitz & Kallen. He oversees the firm's corporate, commercial, and transactional practices, he provides comprehensive business counseling with a particular emphasis on the needs of privately owned businesses. Stu, thanks for being here today,

Stu Brown:

Jordan, thanks for having me.

Jordan Amin:

Of course. Also joining us is Scott Daspin, Director of Investment Banking at Triad Securities. Scott brings more than 25 years of experience in the capital markets to his middle market clients. He has a strong history of creating new relationships, identifying and closing successful partnerships and transactions. Clients benefit from Scott's diligence, along with his extensive network. Scott, thanks for being here as well.

Scott Daspin:

Thank you, Jordan.

Jordan Amin:

So gentlemen, in our last webinar, we discussed M&A trends, how to select your deal team, some key terminology, and really the guts of a deal, and today we wanted to talk about some of the emotions that sellers may face while going through a transaction and how to deal with these emotions in order to achieve a successful outcome. Now, I know emotions is sometimes a little bit of a fluffy word, but I wanted to talk about why it's so important and why it's just as important as some of the economic and business terms. So let's jump right in. Are you emotionally ready to sell your business? So Stu, why is it important for a seller to be emotionally ready?

Stu Brown:

Well, first of all, an M&A transaction is a team sport, meaning that you need a very comprehensive team around you, and a business owner is rarely ready unless they've been through the process before to sell their business from an emotional perspective. Remember, an emotion is nothing more than a function of the circumstance, and when people are all of a sudden now poking and prodding at your business, it's similar to going through a physical. And toward that end, you have to be prepared, and if you're not, meaning you don't have the proper deal team around you, you don't have the proper frame of mind, it can be a very, very difficult process.

Jordan Amin:

Thanks, Stu. At the start of a deal, Scott, sellers are going to experience a wide range of emotions. Maybe apprehension, excitement, maybe even euphoria if the deal is great but can you give us some perspective from an investment banking perspective, your involvement at the beginning and maybe an example of how these emotions impact the early stages of a deal?

Scott Daspin:

Well, when your emotions get involved with a transaction, Jordan, it's very interesting to see the caution that approaches the transaction, it's really in the decision making process. So when you're speaking to your advisors, banker, lawyer, accountant, you have to make sure that you feel comfortable that this person will be able to help you, keeping the transaction confidential, you know who your point of contact are, and the emotions come when you are unfamiliar with what might be driving in your direction. In a transaction, before you make a decision, with a lot of many lower middle market companies that I personally deal with, there's family involved, and everyone knows that family can make a transaction more emotional.

Jordan Amin:

Thanks, Scott. So one of the things that I see from my role as an accountant and an advisor is sort of this toggle back and forth between excitement and apprehension. "I'm ready to sell my business, I'm not ready to sell my business." "I think I'm ready, I think I'm not ready." Back and forth between that, and I think, Scott, what you mentioned about family and the emotions of other people, you have to consider as part of a transaction, it really plays a significant role. I had a client very early on in my career that's still a client, they'd gone through a transaction, and I'll never forget, they told me very early on, "We have 30 family members in our business, what is it that you think we talk about at Thanksgiving dinner?" So being able to separate not only the individual's emotions but the family's emotions I think is very important, and as an advisor, helping them do that and manage their emotions to achieve a great outcome is very important. Stu, you mentioned the deal team and your advisors and the role that they play, can you share with us a story of how you've helped a client manage through the early stages of a deal?

Stu Brown:

Sure. Look, there is no right or wrong time to sell a business, and oftentimes clients come to us and they say, "You know what? I have great news. I had somebody come to me and they say they want to buy my business." And toward that end, there's usually some euphoria going on at that point in time, somebody other than the business owner recognizes value in the business. But toward that end, the business owner also has this tremendous fear, fear of the unknown. What's going to happen? What are the steps that I have to undertake? So what we try to do very early on in the process is educate. Educate, educate, educate. Because to the extent that there is less surprise, people are less, per se, anxious, emotional generally. So what we try to explain to people is A, this is not an overnight process, B, it takes a team, C, you have to put yourself at a certain point in time in the buyer's shoes to understand what they're looking for because you cannot be offended when a buyer starts asking you, "Well, why did this happen?" Or "Why didn't you do that?" Remember, in the middle market, a business owner's business is effectively their child, and to the extent that a buyer comes along and effectively offends the business owner by questioning something that he or she has done, and it affects their child, the value of their child, that's very emotional.

Jordan Amin:

Stu, I'm glad you used a child analogy, I heard something years ago where when a buyer comes in and questions something about the seller's business, it's akin to calling someone's baby ugly, and it becomes very offensive, as you said, and the seller gets very defensive. So I think your point about placing yourself in the buyer's shoes and trying to understand what you would want to understand on the opposite side is a great point. Scott, we talked about different types of buyers in our last webinar, we talked about getting top dollar versus finding the right buyer. Can you talk a little bit in your role about helping a seller navigate through the emotions of maybe leaving a couple dollars on the table but finding the right buyer to steward their business forward, because as we mentioned, that business is usually their life's work and family?

Scott Daspin:

It's a very interesting topic that comes up in every transaction. The way that we usually can drill down into whether one buyer versus another buyer is appropriate is really the timing of where the owner would potentially be moving on or not working. Many owners are very involved with the growth and sales of their business, so to retire, an owner immediately would actually affect the valuation typically. And what's very common when you're speaking to sellers, it's very important that your advisors know what's normal and what's not normal in a transaction. As Stuart was saying that there will be certain questions that might feel too personal. Stuart, or you, or myself would be able to identify if that is a common path of inquisition with the company. But the buyers that we work with could be institutional buyers, which would be in the camp of private equity, and private equity has a variation of why they are buying businesses, or it could be a non-private equity strategic who may continue operating the company. So with regards to valuation, and timing of retirement, and structure of payments is usually we can iron out exactly what would be the best path forward.

Jordan Amin:

Do you see instances where it's the emotion of that decision, making sure that their baby's protected, that influences that decision even more so than the dollars?

Scott Daspin:

A hundred percent, I'm glad you reminded me the full question. The last transaction we did, the owner knew immediately they had no interest in an institutional buyer mainly because of a transaction that he tried to accomplish early on when he was deciding to sell and there were a lot of other sellers or other business owners that the seller had spoken to, so the seller would have their own mind of what could potentially happen after a transaction by talking to their peers. So the decision is usually very much so based on the type of person or who you would invite into your family. As Stuart said, it's a child, but this is a family business, and usually when you want to invite someone to the Thanksgiving dinner or a holiday dinner for that matter, then it's very interesting who they would want to sit at the table.

Stu Brown:

Well, it's not always a function, I'm sorry to interrupt you, but it's not always a function of what the buyer wants, it's often a function of what the seller wants. I'll give you an example, we're involved in a transaction right now where the sellers or the purported sellers received an unsolicited offer from a strategic acquirer that's backed by private equity. And when the seller came to me and asked us to represent them, I asked him why they were interested in the transaction. Now, this is a husband and wife team, and the husband said, "You know why I want to sell this business? I cannot stand dealing with my employees but I want to protect every single one of them." So what does that mean, you want to protect every single one of them? "Well, but for my employees," he said, "I would not have this business today, but I can't stand dealing with them." So it was a really interesting dichotomy as he explained it.

And further to that, his wife chimed in, who runs the inside of the business, and she said, "The reason I want to sell this business right away is because my daughter's getting married in March and I'd like to focus primarily on the wedding and I don't want to have to worry about the business." So you never know what the motivation is for a seller, and the buyer can take advantage of that oftentimes by saying, "Sure, we're happy to get this deal done very quickly." It's a sole source deal so the seller has no idea what the true value is at that point, but you have to take each situation separately.

Jordan Amin:

So Stu, I think that as we keep using the child analogy, every business is unique just like every child, but we talked about how the employees in the scenario you just gave were a motivating factor or a mitigating factor maybe. But we talk about employees and family-owned business, many of them have been with the owners for 20, 30, or more years, and they're like family themselves. We've spent a lot of time talking about the emotions of the individual actually selling the business, but how do the emotions of the management team and the employees come into play? You touched on it briefly, Stu, with that story of want to protect the employees but don't want to deal with them anymore. As we're going through deals, especially in these early stages, it's often extremely confidential, there's very few people on the management team or of the employees that are aware of what's going on. How does the emotions of protecting that workforce, many of whom are like family, have shared life events, Scott, Stu, I don't know who wants to jump in on that, but how does that factor into the seller's decision-making?

Scott Daspin:

Well, Jordan, which is very interesting, and I love the way that you phrased what the buyer wants to accomplish, and it is important for the advisors to understand both sides, and that's how they can navigate the process probably with a little more expertise. But with regards to the other employees, non-shareholder employees, it gets very complicated when they're trying to keep a transaction confidential. When you have a family-owned business that's been around for 20, 40, 80, 100 years, it's interesting to see who would be moving forward without the current ownership structure. So many transactions that I do, the non-shareholder employees aren't aware of the transaction until after it's complete because the transaction may not complete and you don't want to create unnecessary waves. But what I've seen most owners do is they know that they're carving out a future forward or they create a future that he believes or she believes that is best for the employees going forward. So it's something that is very important, Jordan, that you say really because that creates a significant amount of emotions, what your employees will feel moving forward.

Stu Brown:

Yeah, let me jump in on that for a moment. It's an interesting dichotomy because on the one hand, you want your key employees to know what's going on and to be able to help you. On the other hand, you don't want to bring everybody, as we say, under the tent or in the know, because if things don't work out, you don't want employees to be nervous that, "Oh, now the business owner's selling the business, I have to go look for another job." Or so on and so forth. Further to that, talking about emotion, it's very offensive oftentimes I find to the business owner when the buyer says, "Well, we need employment agreements for Sally, Jane and Mary because they're critical to the operation of the business." When to the owner, Sally, Jane and Mary are effectively, as you said, family, and toward that end, they work on a handshake, they don't have a formal agreement.

So the business owner now has to work with his or her advisors to make sure that there are restrictive covenant agreements or perhaps some form of employment agreement, or at the very least an employment letter, because in order to close the deal, that's what the buyer wants. And as Scott said before, if these people leave, if the key people leave, including the business owner, the value of the business will not be as great as the buyer is suggesting. So it's very difficult because oftentimes business owners in midsize businesses, there are no agreements, there are no agreements with vendors, there are no agreements with customers, there are no agreements with employees, yet when you're working with a private equity group and you have a young banker who's tasked with doing diligence coming to you as the business owner saying, "Well, wait a minute, where are all your agreements?"

I've encountered situations where the business owner would sit down with that young person who's doing the diligence, and effectively that young person gets hit with a freight train because the business owner says, "Are you kidding me? I've been doing this for 40 years. I don't really need you telling me how to run my business." So you could see that the emotion really starts running pretty high, and it's our jobs to effectively calm that down and sometimes just intervene and really don't allow the business owner to speak directly with the diligence parties as we're going through the process.

Jordan Amin:

So I think it's a great segue into the next stage of the transactions too, and you touched on the key phrase of diligence. So we get into the next stage where the deal's moving forward, the buyers advisors are really under the hood of the business asking a lot of questions. As you touched on, a lot of mid-size and lower middle market businesses are not run as formally as some larger businesses and as the buyers may want them to, whether that's vendor and customer contracts, whether that's employment agreements, and we start to see that euphoria and excitement from the early stages of the deal when they're thinking about the end game sort of wane, and we get into this cycle of whether it's anger, frustration, maybe there's depression, even regret, and a tremendous level of anxiety. In addition to having to try and sell the business, they're still responsible for operating the business the same way they have and working maybe 50, 60, 70 hours a week to keep this business humming to keep results up, everything they have to do with all this now heightened scrutiny.

So we get into the term due diligence, and we talk about due diligence and maybe Scott or Stu, you can talk about quickly what that means, but that's really where I start to see in most of the transactions I've been involved on, emotions really run high. And Stu used the expression freight train, where a young investment banker is maybe getting hit with a freight train of someone that's been running this business for 40 years and is hitting their tipping point. Let's spend a minute talking about what happens during that phase of the transaction.

Scott Daspin:

Yeah, you love adding on to when I finish, so it's even better sometimes. But it's very interesting on the due diligence process because there would be, and to break it down, there is a legal request, the tax request, and then there's the full operations request. And when you're working with your advisors, again, I'd like to bring up, they will know what may be common or uncommon when it comes to questions of looking under the covers. But Stuart said it perfectly earlier, is getting a full head to toe physical with regards to your business, and what I've noticed on the institutional side, half the questions may not be in line with what your business does. So when they ask a question, let's just say about environmental when there's no building involved, or there's nothing built on the premise, or they don't own the building, there could be questions they feel that they shouldn't have to reply to. But then your advisor will hold your hand and the buyer will tell you what you can mark down as not applicable for your particular situation. You need to be very organized prior to a transaction and you need to have access to documents, documents you may have not looked at for more than 40 years.

Stu Brown:

Yeah, that's a really good point, Scott. We've been involved in many, many due diligence calls and meetings. First of all, let's just define due diligence. It's effectively discovery, it's a way for the buyer to really, as Scott said, get under the hood, understand exactly what's going on in the business in detail. And oftentimes it's not just for the buyer, it's for the buyer's lender, it's for the buyer's counsel, it's for the buyer's accountant, just so that the buyer has a full picture. And toward that end, the seller has been running her business for the past 40 years and she knows exactly what's going on in the minute, but she may not remember what happened much less 20 years ago, even a year ago. So it's very important that the seller has their team around them, and what I mean by their team is a good due diligence team on her side.

In my opinion, she has to have her CFO, or her controller, or her outside accountant in the know and absolutely understanding everything that there is about the financials of the business in advance. I like to go through a due diligence process with the seller as practice for the due diligence process with the buyer so that we can answer all the questions and not be hit with hopefully any, at least not too many, surprises. Years ago, I was involved in a transaction where we'd set aside several hours for a due diligence call, this was before Zoom, so it was a call. And on the call, I kid you not, there were 14 attorneys on the buyer side of the equation. Every discipline was on that call and every discipline had about 20 minutes.

So the lead M&A counsel for the buyer was acting as a moderator, and I was sitting in the room with my client on the speakerphone, and he was bombarded with questions. "Talk about environmental." There was an environmental attorney and environmental consultant for the buyer asking him about the various documentation and the investigations that were done when he purchased the building like twenty-three years earlier. I can tell you definitively he was not happy with those questions. So at the end of that call, which probably went three or four hours after 14 different disciplines, he was both emotionally and physically exhausted. So from my perspective, I learned a lot from that. I will tell you that every single time we go through a process now, we make sure that A, the seller has all the information available to him or her, and if he or not comfortable disclosing that information, then they have the appropriate person available to do so, and B, we break it up into segments so that that person is not being bombarded by, in that case, 14 different attorneys or professionals hitting them up in one day.

Jordan Amin:

I think Stu, we've all lived through some of those calls where the owners, so you can see increasing frustration at some of the detail of the questions. Sometimes they're not applicable, so as you mentioned, and as you stated Scott before, it's our job to sort of intercede and be in between as advisors to make sure that the relevant questions are being answered and the things that are superfluous or the things that need to be prepared for, whether it's documentation or additional research, because something happened when so-and-so's mom was running the business as opposed to when they're in charge now, that we have that information available and ready so that the process goes smoothly and sort of keeps the emotions from running hot.

So the due diligence phase, it stretches on for quite a while. Scott, you mentioned, and Stu, you mentioned the different disciplines, whether it's tax, or legal, environmental, employment, whatever it may be. From the tax side, oftentimes we're involved and our job is to speak with the buyer's, accountants, make sure that we're taking the things that aren't applicable off the table and really discussing the key areas of risk from the buyer's perspective. And again, oftentimes this is an area that the owners are not comfortable in, they rely on internal and external advisors in the tax and accounting arena, so it's our job to play the role of expert and keep the owners sort of at bay and let them run their business and focus on the things that they have to.

Stu Brown:

Well, Jordan, the other thing that you in particular do very well is manage expectations. If you go into a deal and a buyer says, "Well, I'm going to provide you with, make up a number, $30 million for the sale of your business." Well, that's what the seller hears and that's what the seller thinks the seller is going to receive. From my perspective, I know Scott would agree with me on this, it's very important that early on you bring in your qualified accountant to come in and say, "Okay, if the gross selling price is $30 million, what are you going to net at the end of the day, after you pay taxes, after you pay all the fees and expenses, what are you actually going to get?" Because managing the seller's expectations is critical. Nobody wants a seller to be upset at the closing table because that person is only getting X dollars when they thought they were going to get $30 million.

Jordan Amin:

So I think that's a terrific point, especially the part about the accountants playing the most pivotal role in this deal, I'm not going to argue with you there, but I think it is vitally important at the beginning to set those expectations. And we spent significant amount of time sort of walking through the deal structure and putting a roadmap or a template together so that as each kind of deal term comes through and there's pieces of negotiation, that the sellers understand what the impact is on their bottom line, because as you mentioned, whatever number they get stuck in their head at the beginning is the number they expect, they actually expect a little more, but that's the number that they expect to come through at the end of the deal.

Stu Brown:

I will tell you that as seller's counsel, almost always, I suggest that the seller undertakes a sell-side QofE, which doesn't have to include the actual report, but as long as the data book is prepared, and I know we're getting a little granular, but as long as the seller's accountant puts together the roadmap for the buyer to do its quality of earnings test or report, I think the seller is so much better off. Because I was preparing for this conversation over the weekend, the QofE is often equated to a proctology exam, and I don't think it's frankly as much fun as a proctology exam.

Jordan Amin:

I'm just going to let that sit still, I'm not sure I have a follow-up question for that.

Scott Daspin:

Well, one other thing we didn't touch on with regards to, it's interesting when you do the quality of earnings and just I want to make sure we continue talking about emotions, but when you're selling your business, there might be some expenses depending on the structure that may not move forward in the transaction. For example, maybe paying family members that are not working, maybe expensing certain types of meals or memberships, and it's very important prior to a transaction to understand what the new owner may not carry forward on expenses, which will increase your value. And when you do the quality of earnings, they actually look at these expenses as well, so it's a little bit of emotional where you have to now kind of show how you've been running your business and what you spend money on. It's very important to make sure that you understand how much capital is necessary to run the business and which expenses would be normal moving forward.

Jordan Amin:

Without getting too far off-topic, I think that the expenses that may be non-recurring running through a business is also a valuable exercise for the seller to understand what cash flow needs might be after the sale of the business, certain things that may be paid for by the business previously that the seller is now going to have to pay going forward, whether that's memberships, cars, support of family members, whatever that might be. So I think that that's sort of a dual purpose exercise, Scott, when you're looking at all those non-recurring items that get added back, so to speak, to a business.

So we sort of talked about the excitement and euphoria at the beginning, and then we just spent a lot of time talking about the stress and anxiety of going through the guts of the deal and where there may be some unexpected items that come up and some surprises, some items that cause emotions to run hot and heavy. But we get through that process and now we're seeing the light at the end of the tunnel, we've confirmed it's not an oncoming train, and we're moving towards closing. What do sellers experience at that point, Stu, and how do you manage that to get them through the finish line and through a successful transaction?

Stu Brown:

Well, there's usually a sense of excitement, as we get towards the closing. One thing that we have to address though as we get close to closing is the sense of remorse. What is a seller going to do when that business is no longer in their lives? Remember, oftentimes the business is the reason that that person wakes up in the morning. They don't have hobbies, they don't have outside interests, this is their life. So to say to a seller, "Hey, congratulations," using my example before, "you're now going to have $30 million, go enjoy yourself." That person may have a very empty life, notwithstanding that they have a lot of money.

So oftentimes you find some seller's remorse as we get closer to closing, in fact, years ago I was at a closing where we sold a very large refrigerated foods company to a very large food company, and we got to the closing table, everything was done in effect. The seller came to the table, and when it came to sign in pen, this is how long ago it was, the seller started to cry and walked out of the room and said, "I can't do it." So we spent probably several hours, we went to lunch, we relaxed, we had a very serious frank conversation about what that person was going to do on a going forward basis, and ultimately he came back and signed the documents. But you begin to realize that at the end of the day, people have to have a true understanding of what it means to sell your business and no longer be involved in the day to day. What are you doing? What is your existence on a going forward basis?

Scott Daspin:

The one thing that I bump into, and Stu that was a very good overview, and maybe this is maybe on the five yard line, not on the one yard line, but every decision and word you state moving forward while you're doing your contract and quality of earnings may lead to a potential change in purchase price. So when you're working with your advisors, it's very important that as you report information into the data room for your buyer, it's important to understand that if there was information that was uncovered that was not brought to the table initially, not intentionally, but there's a lot of emotions that come down in the final lines when you're looking at your reps and warranties and reading that final quality of earnings report that you actually really sets in. Many of the owners that I work with in our transactions usually have an employment agreement, and I would say the emotion that comes forth is these owners have never worked for anyone ever in their whole entire lives, they don't have an employer, and that change usually can be difficult for an owner to understand. The owners that are doing full retirement, which we have seen as well, don't have hobbies, also remorse, it can be very depressing, depending if they have a significant other that really wants them home.

Jordan Amin:

Yeah, I think the range of emotions that you both shared is somewhat normal that we see in transactions. Each transaction's unique, but there are some trends that we see in terms of emotion, and I think as we've stated numerous times, having a deal team together that obviously knows their client, number one, in addition to just knowing the business, knows their client, understands how they operate, what makes them tick, will help work through some of those emotions as we're going through the process, and really be prepared for them and keep those emotions from stopping the show and keep the deal moving on. So I think that's sort of our role in doing this, I think that emotional roller coaster, when you go through the stages of excitement, to trepidation, to anxiety, to frustration, to depression, to relief, and then moving up to elation, still, even if they may not know what they're going to do next, that successful transaction, knowing they're secured oftentimes generational wealth for their family and knowing that things will be different for their family going forward than it was for them when they began this business in many instances, is a tremendous sense of satisfaction and accomplishment, not only for the owners, but for the deal team and helping them get through that in some small part.

Stu Brown:

Of course, the other thing that it does, it validates the work that the business owner has done for all of his or her life or working life. One other point that I wanted to bring up is it's very important during the process that the business owner understands what he or she is going to do with the net proceeds, meaning if that person has a family, are they going to be distributing cash to their children, to their grandchildren, to their spouse, to their other family members? Because oftentimes we get calls shortly after the closing saying, "Can you believe it? Sally came to me and said, 'By the way, I'm entitled to X percent of that money.'" And obviously Sally's not truly entitled to it, but as a family member, Sally feels as though entitled to it. So what we often do is counsel our clients, and we're not financial planners, but we often counsel our clients to work with their deal team, including their financial planners, to make sure from the onset people understand and manage expectations properly of what's going to happen with the net proceeds after the closing.

Jordan Amin:

I think that's a very good point, and again, it goes back to the repetitive theme that we've had throughout this, which is really managing expectations. Managing expectations of the seller, that's our job as the deal team. For the seller, to manage expectations of their management team, their employees, family members, and so on and so forth. So the more clear communication we can have from the beginning will help manage some of those emotions going through. Still, Scott, any closing thoughts on the emotional rollercoaster of selling your business that you'd like to share before we close out?

Scott Daspin:

Well, the one topic we didn't touch on I think would make sense would be just to talk about maybe some recent trends. In the last few years, we've seen interest rates go from basically 0% to over 5%, we've seen wages having pressure, and when you're in the middle of a transaction, it can be emotional. And I think I've seen on every transaction where employees are trying to get raises prior to a deal closing, which causes significant changes in some potential earnings and employment agreements, and the trends recently have been, well, flat is the new up, and I believe that there's less quality businesses out there that are growing and profitable. So I think it's gotten actually competitive and pricing has gotten really positive recently for that quality transaction.

Jordan Amin:

Stu, anything on the trend side that you are seeing that differs from maybe what we talked about a few months ago?

Stu Brown:

From my perspective, what I've seen recently is a lot more employment or use of earnouts in transactions, and earnout again is just a bridge to the purchase price. Buyer believes the purchase price is a little lower or should be a little lower, the value should be a little lower, seller believes the value should be a little higher, so we use this technique called an earnout to effectively bridge the gap. And without getting into any detail, it's important to understand the parameters of the earnout because it means generally speaking that the seller is going to have to remain within the active employee of the business for a period of time in order to maximize that value. Similarly, it's important to realize that the key employees are going to have to remain employed for a while in order so that the seller can maximize that value.

And it's an interesting dynamic. I was sitting in a meeting last week with a business owner and that person's CFO who's been with him for at least 20 years, and the owner of the business received an unsolicited offer to sell, and the three of us were sitting in the room discussing it. And I was looking at the CFO, and I could tell by the bubble over his head, he was thinking, "Well, what does this mean for me?" And that's just a natural reaction. So when we were talking about the earnout component of the transaction, it was an interesting dynamic between the seller and the CFO because in the seller's mind, I could see him saying, "Well, the CFO is going to remain loyal to me, I know he is." In the CFO's mind, he was saying, "I have six kids, I need to make sure that I'm feeding my kids on a going forward basis."

So I tried to bridge that gap by opening up that conversation, and it was really very interesting because that's exactly what they were both thinking from different sides of the equation. So we wanted to make sure that we had an open, honest conversation right at the get go. You want your deal team to be rowing in the same direction from day one, so that. And one other thought I'll leave you with is I often tell sellers, "Don't get ahead of yourself on the transaction." And by that I mean, and I may have mentioned this to you in the past, I was involved as a very young lawyer in a deal where a guy was selling a business and he was a real car enthusiast. Before the deal closed, everything was basically done, he went out and he bought that red Ferrari. And guess what? The deal did not close. So he now had to explain to his employees why he went out and bought this very expensive car for no particular reason. So lesson learned, don't get ahead of yourself.

Scott Daspin:

Stuart, and I would agree with you on this. I have advised numerous times throughout every transaction, "Run the business the way you would normally run the business until that wire hits your account." That's one piece of advice, and to answer your actual question, Jordan, and I apologize, but there are many family members that are not shareholders that will not know about the transaction until you close. So managing the family expectations post-transaction or hours before a close can be daunting. So it is very important to understand how you'll deliver that message and your advisor should be able to help you with that.

Jordan Amin:

Well, Scott, Stu, I thank you for joining me today to talk about the emotional side of selling the business. And as we said at the beginning, we focus a lot on the numbers, and the guts, and nuts and bolts of a transaction, but as we talked about for the last little while, the emotional side and making sure that everyone's prepared so you can have a successful transaction and capitalize on a lifetime of work is equally as important. So the emotion I want to use is gratitude in thanking you both for joining me today, and we'll speak with you again soon.

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