M&A Roll-Up Playbook: How Zayo Did 45 Acquisitions and Sold for $14B | Dan Caruso (Part 1)

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Created deals straight from your inbox, follow-ups get tracked automatically. Your pipeline actually reflects what's happening in real time. No more stale data, no more pre-meeting scramble, just confidence when you walk into that room. Check it out at dealroom.net/pipelineai. That's dealroom.net/pipelineai. Alright, back to the episode. I'm Keith San Patel and you're listening to M&A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies, and what actually happened during M&A deals. Welcome, special edition of M&A Science. M&A Science, IRELED M&A. This is where we're really focused on challenging the traditional M&A so-a-led into more proactive, fire-led that focuses beyond closing the deal, making deals successful. Today, I'm joined by Dan Crusoe, founder and former CEO of ZEO, one of the most successful infrastructure roll-ups of the last two decades. Dan's lived the entire M&A life cycle, from forming a thesis, raising capital, executing dozens of acquisitions, buying a company, navigating an IPO, and ultimately selling as a public company. The first day of the year, Dan was inside the telecom boom and bus, witnessing firsthand how capital, leverage, and discipline or the lack of it can build or destroy enormous amounts of value. He's also the author of Bandwidth, which I put in the category of operator books, not theory, not hindsight, but lived experience across life cycles. This conversation is about how deals actually get done, how values actually created, and why most leadership teams still don't measure what truly matters. I'll talk about how the season operator thinks about M&A end to end from thesis and sourcing to integration, capital allocation and exits, now biolet discipline, and IRR based thinking drives enduring value. Dan, how you doing? I'm doing good. This is fun. I even really look at part of this conversation. Thank you for hosting, taking the time from, well, a lot of things going on. I have a conversation in the hosting live here at your studio in Boulder, Colorado. Absolutely. Thank you for being out here. I think I was looking back at the notes. And my first reach out to you was six years ago. Okay. So after six years of persistence, I finally got Dan on the podcast, and with good reason, with the book that you publish, that's one thing I wanted to preface. I really want to focus on the zeal story, but he has so much experience. Maybe we can kick off just a little bit about your background. Sure. Absolutely. I grew up in Kago, just south of the city, and thought I'd be living south of the city, Chicago, my entire life. That's what was more traditional with my family. People just stayed around where we grew up. But for a variety of reasons, I ended up falling a very different journey. After I went to undergrad and got an engineering degree, I joined Management Development Program. Just as the bell system was breaking up, so I was there just after we went from my bell, and one phone company to this bonding off of a lot of phone companies and the beginning of a new era. Well, I was at a Mayor Tech and Management Development Program. I also got my MBA, the University of Chicago, and right after I graduated from my MBA, that the Mayor Tech was kind of to pay for, I moved and joined one of the first big competitors to the bell system called originally Chicago Fiber Optics. We became MFS. We became the not just the biggest fiber competitor in the world, because we moved from US to Europe and Asia. But we also bought the biggest and baddest internet backbone of the early internet era called UNET. We sold the World Com, which is a crazy story in of itself. I then got back together with the CEO and some members of MFS. And together we moved out here to Colorado and we launched level three communication, which became the biggest internet backbone of that next era of the internet, as well as the biggest and craziest fiber network, across not just the US, but again, Asia and Europe as well. I was there for quite a number of years. We went through the big boom cycle, gold rush, and then everything fell apart, and we came crashing down, and we didn't go through bankruptcy, but everyone else did. Eventually I left there and I led the take-private of a public company that was about ready to go through it, second bankruptcy. And that's when I started my journey as a CEO. It was very successful two years from a financial standpoint. We made 25 times our money back, but it was not satisfying because we basically broke a part of company. We fixed it, broke it apart, made money, and we didn't create something, and I'm a creator at the end of the day. That's something we were seeing as a part. So that led to me launching the over in 2007. - Born in Chicago. - Yes. Born in Chicago as well. From there, phone company, Maritech, MFS, level three, I would say a good prerequisite to this interview is to actually read the book, bandwidth. Amazing job in just telling the whole story, it reads like a documentary of just how the industry, I couldn't count how many M&A transactions you referenced in the book. Lots! - But what I loved is that you not only got this historical understanding of how that industry evolved from the rights along the railroad tracks to lay down fiber and everything. How do you get fiber across the ocean in the cities when you're moving around underground? Also just getting into these M&A transactions that happen. But you told the story from both sides, which I found fascinating. You hear a deal, then later it comes back and you sort of get the story from the other side, from buying sell side. So that was a great backer. - I would say you mentioned it's a good documentary. In some ways, it gives you such a deep understanding history. But I also tried to write it so that it felt like a novel. So it felt like a story being told, a story unfolding with multiple errors involved, but wanted to be very ribbing at times. The book, "Barbarians the Gate" was something I had in the back of my mind, one of my favorite books of all time, "Ten of Thieves." So I wanted it to at least impart some of that kind of energy and dramatic, and really understand the personalities and the back room dynamics that were going on and crazy antics. There's so many compelling characters that were part of this big story. - It's one of my favorite books. I put it up there with Michael Dell's biography. I get it really reads well. I got through it. It took me three plane rides and a train ride. And I got through the books. - There's a lot there, but thank you for getting through it. Before we jump into ZEO, I'd love to hear just a little bit contextually how that background and experience that you had prior to starting ZEO just shaped your view about M&A from generally what you've seen work and network. - I was involved in a whole bunch of both M&A transactions, but also lots of other big transactions. Because when you're building out lots of networks, you're always doing deals. Doing deals for right away, which is the permission to lay your network in the ground. So doing big deals with railroads or with copy owners. Sometimes you're acquiring elements of the fiber. So there were acquisitions but not necessarily businesses. Plus we did a lot of M&A at MFS. That was my first big exposure. Actually, that's not true. When I was with the Maritak, I was part of the Corp Dev team. But we were doing a lot of transactions there. Maybe not getting them to finish line, but working on a whole bunch of them. So the transaction exposure I had from a relatively early point of my career. But so many transactions that I was part of and that a young age started to lead a lot of transactions and managing a team of first-daughters. And a lot of people doing transactions that I had to keep an eye on and be part of or critical ones. So I did get a lot of transactional experience before Dale. You've seen some deals blow up too. You've seen WorldCom. So given that experience, like when you started a sale, what were some of the, I'm going to absolutely not do this. Yeah, that's good question. The WorldCom was the biggest bankruptcy of all time. When it happened, it was the darling award. The person who was thought to be the best CEO with the person who was viewed as the best CFO. They're on business week covers and there was so much foreclaw about them. But there was also QuestWitch O'Natcho. And there was a Gary Winnick and certainly the love the MFS team was involved in a bunch of deals. So I was around all these characters doing all these deals. Yeah, I saw a lot of first hand exposure to deals where I knew the business merits behind what they were doing. We were very questionable, but the optics is what they were looking for. We do this deal. That means we get to post a whole bunch of revenue and we could hide all the costs for the deal in our capital program. And guess what? You could do the same thing on your half the deal. So we both look like we're having a really fast revenue growth. and really high margins when all we did was a swap transaction and for some kind of accounting maneuver. So I started to pick up early on that when you start doing transactions or even making business decisions not because you're really building genuine value, but because you're trying to show the appearance of value creation that sooner or later there was going to be a big price to pay for that and I fortunately learned that early on without having to be the victim of poor judgment and was able to build on that later in my career. Don't do it for the optics, make sure some strong fundamentals. True value creation. True value creation. What do you see given that experience that first time acquires get wrong? First time acquires, they're going to get it wrong four times in that because they're novices. When if you're first time acquiring, you're trying to do something really big and really quick, you're probably going to make a lot of mistakes. So you better off getting acquisition experience first by working on expeditions that you don't do. Find opportunities to learn. So sometimes I like to, even with my young team today, is at times I'll ask them to go do something just to learn. Don't waste all the people's time per se, but who knows, we might want to do something. So even though we think we don't want to spend a lot of time on it because that's where you learn a lot, where the stakes are very low. The stakes are really just your time and you're going to learn how people react on the other side of a transaction. So it's like you can just essentially do preliminary diligence on anything. Just get your reps in. Yeah, but if it's just diligence, then you're just, you're not going to learn as much, but if you test the boundaries, it's a deal that you're not really sure you want to do unless it's really compelling and you don't think the other side would do it if it's really compelling. Make the offer anyway, how they react. What they come back with, maybe you'll find that there's something forward there than you thought and you're going to learn a lot just by putting something forward and getting a reaction. It's when the expression that it takes to the tangle finds one to tangle with. So that you're learning how people react, not just from doing something on your computer. I'm trying to think the difference between getting there and actually getting a deal done. We're committed versus getting some practice and then experience. Yeah, do some small deals then. Do find smaller deals to do and get your experience on smaller deals. Well, small deals early on as opposed to the first time I would do something that's strategically significant. It's very costly and it's very risky. You're probably not going to be the one who ends up on the good side of that deal to get some experience. The experience matters that when you work in corporate development, you're a part of companies that we're doing acquisitions. We'll all come work for you. This wraps that way. Let's talk about Zayl. I want to go from the very, very beginning. How do you start it? I always like the very, very first because I'm assuming we're going to talk through like Billion Thesis and all this and then. But I got to go build something here. Yeah, so I'm going to go to the period two years before Zayl. That's when I started to work with a couple capital slash private equity firms, Columbia Capital and MC ventures. They were focused on the telecom industry and they had been for quite some time. As I was leaving level three and was looking what to do next, they were trying to figure out how to put some money to work while the industry was in this highly fragile state. And we found each other and together we took the company ICB from being a public company to private who has bought Rago through its second bankruptcy and we made an offer for the equity. And while we were doing that, I worked a bunch of deals on the side to fix a lot of their problems that were contingent on us getting the deal done. So over about a year and a half period, we went through this frenzy period of taking this company ICB and selling it off largely in pieces where we took some of their assets that might have been in one geography like Carolina's and sell it to a company that had more critical mass there and it started giving exposure to what was going on in this state of the industry where it had gone through a collapse and it was starting to reinvent itself but very early. So when we finally sold the biggest PC ICB, ironically to level three, I didn't go with that deal. But what I did do is I had surgery. I had to have, I believe it or not, the young age pulled my hips replaced. So I was going to be laid up for a while and it was a beautiful summer. We had just sold the company, entered the film agreement. It was going to be two months before we closed. I couldn't do anything else anyways. I figured level three doesn't really need me to help do whatever they wanted to do during that too much period. So I got the hip operation done and then I had a lot of time. What I started to do was just get on the computer and started researching what happened to this fiber network, what happened to this company. And it was like, wow, and I was starting to learn the stories. And very early on I'd be like, okay, I know enough. Let me like ping the person who looks like runs the company, introduce myself and say, hey, what's going on with your company. But I started to do that and everyone then would respond to me and say, oh, no one's called me up in a long time. Not since the good old days when everyone cared about what I was doing, now no one cares. And thanks for calling and they started telling me their stories. And that's where the thesis, the combination of what we did with ICG and then we started to ping through the research and just starting to talk to people was where the thesis and say, okay, it came from. You're looking at the space, like what happened in all these other companies out there. And you start realizing, that was quite a few of them. Started talking to folks. What was those conversations like? They basically, they gave you that point. Wow, and we reached out. What was the conversation around what do you do with your business? How do you sort of validate that there may be some real opportunity here? What I was starting to learn was different than what I was expecting to learn. Because I came up with a couple of expressions that I used in the thesis. One was fiber orphans. The fiber orphans meant it was some kind of fiber acid, typically in the form of a business, not just pure acid, but it was on an island of its own. Maybe it was a single metro network in a given city or maybe it was a rural network that covered the outskirts of a certain market. Maybe it was two or three networks or maybe it was even a fiber route that connected one city to another city through these acids that somehow found their way into context that was being worked by whoever owned them at the time. And then the other expression I came up with is accidental owner. Like whoever owned those acids never intended on owning them. There was more opportunistic. It got spun off from another company because it was toxic for that company or it went through a bankruptcy process or someone cleverly saw an acid and bought it when no one was paying attention. Those were two, but the other big thing I learned too is most of them were like our businesses doing well. So our revenues growing are positive margins in fact we generate cash flow. That might not sound like much today, but in 2006 coming out of the heels of the big meltdown where everyone thought every fiber acid was toxic and losing money and worthless. He would talk to these operators and they'd be like yeah all is good. We're growing our revenue. We've got positive margins. But we're generating cash flow. We're getting a lot of traction in marketplace. I'm like holy cow, this is a lot different than what I expected. You learned some of these companies or orphaned businesses or they're just essentially non-strategic but they're performing well. And no one was paying attention. No banker was calling them up. No strategic was calling them up. No venture capitalist or private equity firm was calling them up. They were just like operating the business and making some money and wondering anyone was going to care about what they were doing. Now I can't do these dots. How do you go about building this investment thesis? Is it writing it out formally and then going out and pitching it or do you start calling some of those contacts you already have saying hey I'm seeing something here. Would that look like has that progressed? Turns out and this is going to be shocking to you when you make investors 25 times their money back in less than two years. They don't really care what your thesis says. They just want to give you more money and tell you to go do it again. I didn't have to go shop this deal with other investors. I decided here's what I wanted to do and then work with my investors that we just had come off of a great experience together and I had my management team most of them went with the ICD deal that was sold at level three but everyone them also said just give me a couple of months and I'll extract myself there and hopefully you figure out what we're going to do next and we'll do it all over again. So I had a kind of a team who wanted to resemble around whatever was next and I had investors who were wanting to put more money behind whatever we were going to do. I needed for wanted more money than those two investors were able to come up with by themselves. But like don't worry, we'll get some of our friends to put in the rest of the money. So I didn't really have to go on a roadshow or pitch anything. We just got into execution mode. So this is what I've been told he's saying you should go exit. They've got one venture that's doing really well. Go exit and it's going to be easier to raise money the next one. You'll be able to build your next success faster but I don't want to be a serial entrepreneur. I want to exit me though. What if you were that entrepreneur? You sort of see this opportunity but you didn't have that network. I get a lot of this outreach too where we have a thesis and doing a consolidation or roll up. We're going to go try to raise money and I'm like, well, you raise money that'll come help you out. But what would your advice be to that person that was at that point? They found an opportunity. They've sort of gotten to a level of a thesis of an area they want to consolidate but they haven't spent the years and have that track record. Maybe they have some operating experience and it can reference that in terms of hey, there's some validation that I can execute this but how are you going to approach raising money? The story I was telling you was 2006. Let's go backwards to years 2004 and it couldn't have been more different because I was that person you just described. I was coming out of level three and like a lot of places in the industry, a lot of us thought we were a big deal. Certainly level three thought it was a really big deal here in Colorado. But I leave level three thinking people would want to like engage with me and what I want to do next and in part because the industry was in families but also in part because level three, I thought we were really successful in navigating through this down to the cycle but the outside world is like, you just like the rest of Yeah, you didn't go to bankruptcy technically, but you went and were able to have cashed free by your debt at $30 cents. So you bankrupt all your debt to avoid the bankruptcy on the equity side and you're still struggling. So no one really cared about me. There was like a bazillion kind of ex-executives of how come Internet, world, and at age, all looking what to do. And there was no money flowing. I didn't really have an independent track broker that I could bring to the table. And I had some skeletons in my closet relative to the crazy cycles that we went through. So for very few people who want to talk to me and give me money to go do it, I want to do next. So I like to say that the reason I got the job of ICP as CEO to take it private is because no one else with a good track record would have ever taken that job. I'm paper was a horrible CEO job because it was a super distressed company that everyone thought was need to go through a chapter seven process. And fortunately, we got introduced to investors by a couple different groups of people who told those investors, this is how you want it back. So at least a few people believed in me enough to get through all that noise. But I had to go then or in a reputation. So what would I tell someone who doesn't have a track record is, yeah, it's really hard when I'm track record and if you are looking at you for how good your idea is, yeah, they want to know your idea is a good idea. But that's like secondary to do you have a track record to investors believe that putting money behind you means it's going to produce a great return on investor and not much track record. It's probably going to be hard to raise money. Always is. You still don't give me shortcuts and not raise money if you don't have a track record. Oh, I forget to mention come from a very high net worth family and just have your, I know we're at the shortcut, but most people don't have that shortcut available and many who do come from high net worth families. I don't mean they're just going to give you money to go do something that doesn't sound so you got to just earn it. You got to think of all the great entrepreneurs that first come to mind who gave them money early on. There's no one they just did what they were doing anyways. What I do give people advice on is if you think you want to be an entrepreneur that starts up a company that say you're coming out of college, don't start up a company. This my advice find a company that already exists is already beginning to scale. That already has a strong team to spend a couple years with that team and learn what success feels like it looks like and build a network and be part of a successful journey in an area that you're interested in. And from there we'll come up really good investment pieces from there will come relationships. And importantly, you'll know what success looks like. A lot of people are starting up something from scratch who've never experienced success. They don't even know what success feels or looks like. They got to learn that often the hard way too. 1000% agree with you. It's number one thing I tell kids undergrad that want to go do a startup. It's a good minus series A, B. Yeah. There for a few years and just you'll learn so much. Exactly. I kind of like the earlier example. Learn it more inexpensively. But that still be true with the roll up. Could you be somebody that's ambitious and wants to do roll up? But maybe I should go join a roll up, participate and help execute that for a few years. Then get that credibility to go start my own platform. Yeah. So one of the things I'm most proud of and what probably means more to me, relative to my expert than anything else is to look now at the industry and see there are so many companies in the digital infrastructure that are led by people who are part of my team at Zayl and or people who are part of my team at level three. There's got to be at least n12 companies right now that are being led by veteran teams for those two contexts. So yeah, they learned to playbook by being part of it first at MFS, secondly at level three and then third, what we did at Zayl and they're the ones leading the significant portion of the industry right now. So absolutely. We're proof of that. So when we look at the Zayl and just having this thesis, those conversations are probably built you some pipeline. Yes. They identify some opportunity. Yeah, it did. When you look at that thesis itself, how would you identify when people challenge it? What most hold true for this to work out and what are the potential threats of it not working out? How do you think through that? Yeah. So some of the best business ideas are contrarian in nature. So everyone wants like a contrarian business idea. That's what you want to fund. Some with contrarian business ideas is most of them are bad ideas. That's why they're contrarians. So the hard part is picking a contrarian idea. That's also a good idea. If it's contrarian, that means most people will think you're wrong. So most people think you're wrong. You really are on the right path. That's where the magic comes from. So what was interesting to me is when I came up with the idea, now it sounds so basic. That can't possibly be investment thesis. What's so unique about that? At the time, even my investors, they won't remember it this way. Even my investors who just make 25 times their money back for it. So I'll back you in anything you want to do. When I went to them said, okay, here's what we're going to do. They're like, really? That's a sound like a very good idea. All right, we'll back you only because you made money before and we know that you know how to pivot. And we hope that by the time you really start spending the money, you would have found something better to do. So if you ask them now, they'll be like, oh, no, that was our idea. But that's how to play it out. Really? Not quite to the black and white degree. I just thought about it. I want to know your words, the premise of the thesis. It's got to be a little more than just, hey, we're going to consolidate these companies and do a valuation arbitrage. It was a combination of, because remember, in that environment, everyone thought fiber networks were toxic. They were commodities. That the only way you're going to make money in our businesses by having value added services and content and whoever's operating at the infrastructure layer is just going to lose money. That was the mindset at the time that these were not assets worth owning. They were assets worth not only. No private equity company, no venture capital firm wanted you to even mention the word fiber optics in their investor meetings because they all lost so much money in it. So that was the context. So the idea was that there's these fiber orphans with excellent owners and their businesses are doing quite well. What they're focused on is the bandwidth layers. So we came up with the term bandwidth infrastructure. In fact, we were originally called NADZEO, but communication infrastructure investments. That wasn't a word back then. Now it's an industry. It was paying with infrastructure, then more broadly communication infrastructure. Now people, that's surprisingly are calling it AI infrastructure. But that didn't exist back then. So the idea that we were going to just get focused on working the depth and breadth of our fiber assets. We were going to focus on kind of that bandwidth layer. We were going to not get involved in the higher layer stuff. Those were going to be our customers and our partners. We were going to be really good at putting our core assets to work. That's obvious now, but back then it was considered very contrarian. He had a clear focus on where you're actually going to focus on the strategy. Do you have a view when you are building this thesis, how in getting alignment with the investors of what are the threats going to be? Like what could potentially make this not work? One of the questions that was faced is what really will translate into true value in this kind of business model that we were describing because a lot of people want to focus on revenue growth as a value driver. And yes, you want your revenue to grow for certain or they want to focus on EBITDA. EBITDA is a really important term and it's really important. The EBITDA in of itself doesn't really mean anything. Could W EBITDA and the question is, could W EBITDA is that good or bad? Could it be good or could be bad? It's good if you W EBITDA and spend nothing to double it, that'd be really good. But if you W EBITDA but spend a gazillion dollars, W EBITDA, but it was at the capel line, therefore it didn't show up in EBITDA by definition, that doesn't mean you created value. You may have destroyed a bunch of value in the process. And when you're doing consolidations, you've got that component that yes, you're going to be growing revenue. How can you not just bought a company? And yes, your EBITDA is bigger. It better be bigger. You just bought a company. How do you know what you're doing to both organically grow the business while you're also combining business together? How do you know financially whether that would translate into something that objectively speaking is true value creation? That part would let us to look at value creation more analytically and having lived through the experience where the appearance of value creation, what people were doing in the Al-Kamboum era, like as long as we're telling really good stories and we couldn't give the appearance of value creation that's enough because then at some point we can sell our company to that next sucker, it comes along and then we're rich and they got the problem of this is just a house of cards. But we wanted to build something a durable, long-term value in an environment where there would, by definition, be a lot of noise because if you're consolidating and then synergizing assets, there is going to be a lot of noise in the financial system. Are there different views to that? Like here early on when you're like just before even to your first acquisition, here's what I hypothesize that's going to be a true value creation versus when you start doing deals and each individual deal may have its own unique view of how you're going to create true value off of that individual asset. Is that sort of like different where it's here's a broad hypothesis of how we're actually going to create value, stream together these series of acquisitions versus like each deal kind of bring its own investment thesis on that specific deal? I'm a state that people think quite often and I still hear things said and when I transition out of Zail and saying the reins over, I really saw them something to do this. I'm like, oh my gosh. And that is, board members or investors think they're being very responsible when they say, if we're going to do this deal, we are going to track that deal and make sure that we can look and hold the management team accountable for delivering on what they said they're going to deliver on. Okay, we're going to be taking these assets that we're buying these businesses but these businesses that have assets. And the first thing we're going to do is we're going to mash them together. We're going to mash them together. That's what we're going to do. And why are we going to mash them together because we want to harness the whole synergies of bringing these assets together. We're going to bring them together so that it increases our ability to generate revenue because If you have double d assets in either a single area or adjacent areas, you could bring more product to your customers. You could sell things that neither one of them could have sold before. And we wanted to do all on one system. And we wanted to look like it's a single asset. So if the investors aboard tell the manager team, we're going to hold you humble for tracking those separately. OK, but now you've just gotten the way of our ability to get any synergies so that we can do a bunch of math. And whether this particular decision was the right decision, well, you have no idea, I was paying no attention on the aggregate of what we're doing. Are we creating value in aggregate? That's what matters. How that particular asset you think performed based on stuff that is just silly to you and try to track is a massive distraction and a delaying of synergies. It's just crazy. You have to get investors comfortable that, no, this isn't about tracking each asset individually, because we don't even want them to look like separate assets. We want them to look like one thing. If we try to make it so that we could track them separately, we're just chasing kind of a full-game. You had a vision for one company. Yes. That's where you're working towards. One company that would be much more valuable than taking two separate things and feeding them as two businesses that you own. This wasn't like having a Burger King franchise and a Wendy's franchise. This was like, no, we're just increasing the size and scope of what we're doing. We're matching companies together. What do you think drove the success of Zeeo between timing, structure, the ideals, and execution? One thing you didn't say there, I guess it's inherent execution, it's like talent. There's elements of all of those, including that our investors and our management team worked together and we were in it together. This wasn't management team doing this, investors doing that, but investors trying to exerting their over-influence on a management team as we were like a team, especially in the first five years. So the investors had their role to play. They were helping, they were really effective at helping us sort through things and the management team. A lot of us have worked together a lot of years across a lot of different ventures. So we all worked really hard, but we also kind of do the playbook, the playbook of what we should do next because we played that playbook before. We had the right thesis, we were maybe a little bit overconfident so we can move very decisively. It just, it was magic, it was first five or six years. - Yeah, you know, all of them, right? - Do you want the returns? - Yeah, you for real? - Yeah, put in perspective, in aggregate, we invested about a billion dollars in equity and that billion dollars in equity when we sold it was worth eight and a half billion. And it was not because we sold it at some kind of inflated value. When we sold it, we only got 12 times EBITDA, which is kind of a middle of road EBITDA, so it wasn't like we were rewarded with the inflated EBITDA multiple. It was an appropriate EBITDA multiple, so the value creation was authentic and it was eight and a half X, value creation was huge. And for the early money, and it was 25 times the money back. So all investors made money all along the way. So objectively speaking, it was a significant success story for us to make that much value that quickly. - Yeah, everything had to be executed really well. The strategy had to be right. The team had to be talented. The execution had to be really strong. When we made mistakes, we had to pivot and adjust pretty quickly because we did make mistakes along the way. - Join Kison Patel and Gwen Pope at Mastery Your Mergers' EPL Synergy Summit on April 21st. Their closing fireside chat explores why integration models break down after close and what fire-led execution actually looks like when it's working. If you're running acquisitions or responsible for post-closed results, this is the session to catch. Register for free at peoplesynergysubmit.com. Again, that's peoplesynergysubmit.com. - How'd you earn the nickname the bear? - How did my nickname become the bear? Well, it wasn't because I was view this a hardly fair, not proving a bears fan, although that certainly is a good interplay. When you reflect on your career and how you got there, at least people like me, you've spent a lot more time looking at the adversity you faced than the things you did wrong. You don't focus on the things that you did, right? Especially when I wrote the book, I had to reflect. I had to really think about the journey and what happened and what didn't happen. I was pretty aggressive manager. Probably still I'm today, but certainly a lot more so when I was in my mid 20s to 40. - Well, we were doing huge things. I had gigantic amounts of responsibility under me and I was trying to navigate a family life as well and I was on the road all the time. So I was carrying a ton of stress and I liked to get shit done and I liked to work with people who were fast moving and smart and get lost, stuck on two. And I didn't have a lot of time for people who were along for the ride or they were not as hard a worker. - Is that where I'm gonna run into problems with you as if I'm just along for the ride? - Yes. - I'm not really shit done, no problem. I had expression, it doesn't suffer fools wisely. People would say that around me. So I was considered a grizzly bear. I'm poked the bear and don't mess with bear cubs and you're getting pressure from the bear, it spurts some honey and so on else so that it redirects to the bear. So they had this whole lexicon about how to deal with me and I embraced it. - Anything you go after now, the sets the bear off? - Yeah, not becoming experts at AI every single moment of every single day I'm looking at my team out here and when I see people being like, "Ten of about AI, I'm like, dude, the world's gonna pass you by and if at my age I could be better AI then you can be something is wrong." So be all array, I am ambitious and be creative and it's okay if you don't wanna look at those things but then it will work somewhere else 'cause I only wanna be around people who care about their journey. Not just their professional journey, but their life journey and who want to be learning that next thing and they wanna be creating value. Now creating value to me nowadays is not just being financial value, maybe that's what it was before. It's sometimes the way we care most about creating value now is what value are we contributing to the community around us but we wanna make a difference and I wanna be around people make a difference. Yeah, if I got people around me who are like not being part of that journey, they just wanna get the benefit and I respect you but they'll do that somewhere else. - All right, are we done more of our up or are you ready for the real interview? - Yeah, let's go. - I gotta ask, do you convince people to sell their business? - Yeah, now let's get to work people or you say that because sometimes the people you're committing is not the "Oh, who doesn't want to sell their business?" Maybe it's the board or maybe it's like an investor who's a little frustrated, so. - My big thing is like critical part is getting deals actionable. Then you can find opportunities, look on a paper, fits into the thesis and when you start talking to whether it's a founder or a nerf there's a mix of investors involved. Is it a conversation? Here's my better together story and I'm gonna wait for you to be ready to sell or do I actually convince you to sell your business? - The first thing is you build your own brand and then you build relationships. Today when we're doing a lot of venture type deals, our strategy is not to be really good at hunting down a deal that no one else knows about. We don't do any of that. What we do is we build up our brand, we build up our awareness and we want the best deals that are out there in our strike zone. We want those best deals to come to us. We want those best entrepreneurs and the most interesting deals, ones that are that anyone who's like good at investing would want to do. We want those deals to come to us first. We want them to want our money. We want them to want us on their cap table when they have voices, bottom investors. So we apply a strategy today, but in the context of the day, the strategy was to really be out there building relationships way before company was ready to sell so that when they started to say, hey, maybe we should sell, you know what, let's call up Dan because Dan's been talking us for three years saying he would like to buy our company. Now what they didn't know is I was telling everyone they wanted to buy their company because I didn't know whether I wanted to buy their company or not, but I wanted them all to think I wanted to buy their company so that they thought I was talking uniquely to them so that when they were, they would approach us and then they would share information and then we could decide whether we wanted to buy their company or not. We wanted to create the dynamic where the deals would come to us as opposed to us trying to wait for them to decide and hire banker and put together a book and then we discovered the deal when they're on a sale process. We wanted to be in front of them. You want to be in front of it? In relationship but also trust, that's a part of it. - Yep, but then you developed a reputation which we did or when we acquired we would bring the companies together really aggressively so we had to balance that we're a really good buyer because we could get deals done. We would do what we said we were gonna do but because we were really aggressive on synergy we'd also create a lot of disruption with the company that sold to us. Some CEOs would be like okay, I'd rather sell a company but I do not want to sell them Dan because I know what Dan does when he buys a company but we had to navigate that as well especially as we got deeper into the process. - So this is an interesting part. This is like your reputation as an acquireer as part of this. You're building a relationship with this company getting to know the founder, curious to know like what that actually entails because there's obviously you have a meeting of a great intro call but then how do you build the depth of the relationship to get some of that trust and then you have the reputation of the market. - Well why was it negative? Was it he takes our company apart blah blah blah because obviously you have the vision of one company and that's probably you do what you got to do to integrate make that happen. - Yeah, we had a really good reputation for being very effective at acquiring which is really important for sellers 'cause sellers when they're ready to sell they want to know that they're working with someone who when we say we're gonna do something relative to buying a company that we're gonna do it. We're not gonna drag them along in a process and say we're gonna get to the finish line and then find out halfway through the negotiation that the buyer really doesn't have the money or they really don't have the support from their investor group and then they try to retrade and get a lower price. We didn't want that to be our reputation be like you're ready to sell, you wanna get the transaction done and fully approved and get your money that were the most reliable buyer out there. But we also as we got deeper into the process and people would see what we did after requiring the investors loved it because we would get the synergies quickly and we prepare ourselves to do the next acquisition 'cause if you take a long time to get the money integrate the companies and you take a long time to get the synergies. That means we also have to wait a long time before you do the next deal. And we had the view that there's this window at time that we can do a lot of acquisitions before others catch on to the opportunity. If we move slow, the funniest stuff we could do is kind of evaporate on us. Others are going to jump in and we're going to have a lot more competitors who are doing the South Asian. So we were moving really quickly, but the result on companies that would sell to us is they would see us take what they were really proud in. The people who were part of that, they thought they had the best provisioning system or the best maintenance system or the best strategy or the best sales team. And my attitude was, this isn't like a comparison. I'm not saying this is better than you're that, but we got a way of doing things and part of that is integrating real quickly. So we're not going to debate whether your system is better than ours because we want one system that is an intense system that brings everything together. We want to get all the data represented in that system. So with all the respect, we're not going to use your system and we're not going to debate it for six months. We've already made that decision. We want to see which ones of you want to be part of us and help us move your processes, your systems and your people over into one unified organization. A lot of times they'd be like, yeah, but we think our, the name of our company is better than your company. Why don't we adopt our name? We already got a name. We're not going to revisit the name of companies. So it helped everyone that there was decisiveness. A lot of companies in our industry would do, and I'm sure a lot of other industries is when you do an integration, you start lining up teams. We're going to put our sales team with your sales team and we're going to give them two months to come up with the integration plan. They both believe in and we're going to do the same thing with our ops team and we're going to do the same thing with our marketing teams. And now you've got like teams on both sides trying to debate who's better and okay, how about we pick this of ours and that of yours and get these Frankenstein solutions and you try to like look across it and it's just a mess. So we reject now we're not doing any of that. We're just going to smash the company together. It's a little bit of this perception of a reputation that you're tearing companies apart, but it's in the greater good. Your phone, that vision of one company, you're integrating fast with the bandaid off, do the right thing for it. It's certainly good for in our case, Zayl exists today in one of the absolute leaders in the bandwagon. In fact, the other co-leader is level three, but the previous company now brand and they're looming. So looming and Zayl are by far the two survivors of two leading platforms. They own more of the fiber, particularly in North America than anyone else. Zayl is still very operational in Europe with a very significant position. So the outcome was very good for investors and very good for building it durable. In fact, we started in 2007. We're going on our 20 year history and for level three or 30 year milestones about the ready-to-be-hit. So we built really durable platforms. Level three would do it the old fashioned way. Zayl would do it the other thing and this is maybe a personality flaw, but even though level three had a 10 year start, I wanted to catch level three and Zayl would be every bit bad as it. And it's pretty close right now. Right now, Zayl, when I'm involved with them or Zayl is neck and neck with looming in terms of the top band with infrastructure company, certainly in North America. What are these conversations like with these founders or executives of the company, is you're looking to acquire, like how do you figure out what their motivators are to get your angle of doing the deal? That's important because understanding what is going to make the seller want to sell. And it's not a singular person because there's a CEO involved, there's a CFO involved, but there's also the investors involved. And even with the investors, you might have one investor who has a bigger voice than other investors. Might investors have different motivations. You're trying to figure out the puzzle. What's going to motivate them to want to respond to selling their company and selling it to us? And every one of them has unique stories, so there's not a single one. So yeah, listen, first you got to get their attention and then you got to listen really carefully. And a lot of times you got to do this through a team-based approach. My CFO was really effective. Different personality type to me. Everyone liked him. They everyone trust them. He was a little bit more low-key about things. He was a good guy and he would play that role really well. But they didn't know it was behind the scenes. We were both bad guys when it came to M&A. Our approaches were just a little different, but we'd play the good cup at top. We had to be more focused on the team. We had some other really effective people on our team. Ben Scrantel was one of the early co-founders. He was really effective at certain types of deals. And we had a guy named Aaron Sin who was younger, but he was starting to learn how to do deals. We just had a lot of people who would play different roles and we would do it as a team. This is all very byerlet. You had this specific clear thesis, what you needed, what your criteria was. You approached those companies directly. You didn't wait for them to come on the auction blog. And then you find their motivators, which ranges, what is the range of these different motivators? Because I could imagine there's obviously investors that want to get a return. What does that look like? Time frame for them and the targets. But then there's probably CEOs that are something bigger they want. Is there maybe a post acquisition role that could entice them or some kind of retention package or maybe a some kind of way to feed into the ego? I don't know. But what were the range of things that you saw that were motivators for different situations of these acquisitions? Well, at Zayl alone, we did about 45 deals. So all the above is certainly part of that answer. And then there were a lot of other deals we did before Zayl. Sometimes you're dealing with situations where they don't want to sell and they especially don't want to sell to you. And that's when it gets even more interesting. And the biggest deal we did that really made Zayl was us buying a company that was larger than us and much more established than us and a really great company led by a really great leader called the Buffnet. They had absolutely no interest in selling to us. In fact, they were a public company and their plan was to take their public company private to a management led LBO and they had it all lined up. In fact, it should have been already at the finish line. But for their investors that were going to lead to take private, we're just not able to get the deal done. They wanted to negotiate this more and they wanted to go see it that more. And it started to drag out. We didn't know any of this because they weren't sharing it with us. They weren't sharing it with anyone because they wanted to do one to work with investors and they LBO. So that turned into a hostile situation in that we just interjected ourselves. They were a public company and we made an unsolicited offer that was 100% backed by both equity and debt. We went as far as giving them the whole agreement so that when they were, as a public company, they couldn't pay attention to us. And fortunately, unbeknownst us when we gave them that offer, they were literally hours or days away from signing a deal to sell the company and a managed to buy out. But luckily we came in a price that was higher than a other price. The lawyer said, "Your public company, you can't sell it at a lower price just because you'd rather debt be the outcome." You got to put your public share on this first. And then that turned into over a two-week period of time and then it's, I go into debt and then it bandwidth. And the nice thing is when there's public company transaction, everything has to be documented in SEC funds. After the whole play by play, I was able to pull that up and have an accurate account of exactly what happened. And stuff I didn't know was happening at the time that I had documented. So I was able to tell the story in our bearings of a gay type of riveting format and in a very accurate way. And it turned out we were able to prevail despite the fact that they did everything they possibly could while staying within the law because they can't go and just disclose stuff that they can't disclose. But the investors who wanted to lead the leverage file simply didn't believe the selling company that there was another big. Because how could there be? There wasn't an alternative bid until the very end when we had a little bit of a difference in price they never believed there was legitimate bidder who was about ready to sign on the deadline until it was too late. It was pretty crazy. How do you buy a public company? The Euro CEO, Azeo, this is a bigger organization than you are. You obviously work with your CEO. You built a business case and why this makes sense to do the deal. There's an opportunity for a public company. You just, the lawyers send this offer over like, "How do you sell this?" Because you ended up going straight to the order of the shareholders. Yes. So this was a really interesting story and it played out pretty publicly. Then you had that. Isn't an activist group involved? This was not just one. This was one of the selling sales. There was a big annual conference. In fact, I just came back from the same conference this year. I've been gone on six years since we sold the sale, but I wanted to go one last time. But this was a big part of this sale early story and this particular deal happened literally at this conference. So we went to the conference, totally prepared to make the Sunslister offer. So we came there with everything in writing in a sealed envelope literally, fully backed by debt, by equity. So it was not a verbal offer that, "Hey, we'd like to have a conversation about buying your company." It was, this is a fully big, fully financed, fully funded offer that we're prepared to sign in the next week. All we need is three days of diligence. Think about that. You're going to buy a multi-billion dollar company and you're telling them, "We're ready to sign within a week and we only need a week for diligence and a week to negotiate." That's not a hurdle. That just doesn't happen. Because we knew that their first response would be to try to avoid doing it. We set up the meeting. It was on the last day of the conference. We got together with the CO101. We'll sat down with them and we had the conversation. We've known each other well for a number of years and I made the verbal of sure that, "Hey, we'd really like to combine our companies and we think we have compelling offer to do so." The first response of a person who must have been prepared for this, he must have gotten coached by his lawyers and his bankers that, "If Dan does this, here's what you should do." Because I set up the meeting, he probably had inclination. I know what might be coming. He's like, "Yeah, Dan, I just think we would have different points of view about the value of your company versus the value of our company. It's so really good about ours. I really don't think it's likely that we would come to a meeting in the minds about what the right value value are. Now, okay, well, that's interesting, but I don't know if that's relevant because we have an all cash fully finance offer, so it doesn't really matter what you guys think about the value of our company. It just matters if we're offering you enough. And he like, pause and look, 'cause I don't think they thought through that scenario, like how could this company do smaller, come in with a premium valuation to what they're trading at, and if we fully finance and ready to be signed, I put the envelope in front of him, and it's right there in that envelope. You're free to take it if you'd like to, but if you'd rather not, I understand. And he's like, okay, let me get back to you. So quickly breaks up, please, I'm sure when he went back and talked to his attorneys, they said, no, you can't just not take off her. That's not gonna look right. When that gets us, goes, you have to text them right away and ask him to give you an offer. That's when I gave it to Gamma Team, and he slipped it under his hotel door and the rest was history. - Wow. I like it. You confronted him as a principal head to head. And you confronted sounds like a negative word, but yeah, approach them. - Approached for your conversation. - And you were prepared. You've got this through from all angles. - Yes. - Can we talk about negotiating and structuring deals? - Sure. - He's me how to do it right. - Negotiating is like a game. You gotta have a lot of different plays in your playbook. One thing that I've always worked for me is to be unpredictable. You're gonna be unpredictable. It means you gotta do things differently each time. Not let the other side really know what you're doing. And obviously all of us use the word Trump in our vocabulary more often than we'd like to. One thing you say about Trump is he behaves in kind of erratic ways. And sometimes when you're negotiating, that's huge advantage. You don't really know what you're doing. But like, okay, I don't really know how to interpret that. So a lot of times what we would do is we'd think a lot about how to behave during negotiation. Sometimes we would do things just to get a reaction. Because once you get a reaction, then if you're paying a lot of attention to learn things based on what the reaction is, sometimes you even rehearse beforehand. Silence in a negotiation sometimes could be really effective. So the times I go to my team and tell them, hey, if you see me starting to not spawn, like seconds start to pass, do not think that's an opportunity to speak next. Because the only person to speak next is the other person. 10 seconds is a long time to say nothing. So if 10 seconds goes by and they realize you're not gonna say anything and they have to say something and it's a 10s part of a discussion or negotiation, you're gonna learn a lot of all these things next. Are they gonna get anxious? Usually it's when they're trying to overplay their hand. You're not quite sure how much they're overplaying it. And then you just wait and see how they react. So when we were at our best, there would usually be three or four of us that were working off of each other in somewhat orchestrated ways and playing around with different tactics and just seeing how to get a clearer picture of what's really going on. And then once the picture is clear, then you can really get focused. Are you good deals? Especially me, I'm brought up by Indian immigrant parents. Like I'm always looking for a good deal. And like some of these deals, it gets difficult because a smart seller shouldn't be throwing a price. And at the same time, you don't wanna come in and offend somebody looking for my bargain deals here. - Yeah, that's an art, not a science. - Yeah, teach me the art. - Yeah, that's like a point where it's like, okay, let's cut through some of this stuff. I'm wondering, even just setting this sort of tone to get value and maybe you've already built a formula and it's templated more. - If you do have a formula and it's templated, that could work for a period of time 'cause that can work, but those don't survive long periods of time, they definitely apply over a period of time, but everything changes around it. So you have to keep revisiting. - I'm looking at a distressed deal right now. It's distressed, so I feel like none of that's gonna apply. - Yeah, it's a little bit like that contrarian comment is you gotta find a deal that the other side is willing to sell it, which means they think what they're selling, of course, is more than it's worth. I gotta sell you my car for $30,000. It's because I think it's worth less than $30,000 or else I would keep it and maybe sell it to the next person. So I'm selling you something that is overpriced and you think you're buying something that's worth more. Now, sometimes it's because it is worth more to the fire than it is to the seller. That's the easiest time to have a win-win outcome that you have synergies that they don't have. You have capability that they don't have. So in your hands, it is more valuable so you're both making a right decision, typically trying to find that win-win scenario is the best path forward. So you should always be looking at the cable. I was just a good deal for them and for us. You find that as opposed to one of us is gonna win and all the ones gonna lose. If you're in that situation, you could be the one losing and they could be one winning. So it's easier if it's a win-win opportunity. - Just making this sound too easy. Because it's not easy. - It's not easy. - I'm gonna say the number one thing, I go to any software company right now. They're evaluation expectations so high. They'll point to headlines for companies. - Not right now, they're not. We got a little bit of a meltdown going on. - We do. - We do. - We do. - We still got, he's still got founders that has it settled in with them. He starts with the public markets and it comes slowly comes down the stream over time. And finally, it's probably the size of deals I'm working on. But to me, that's the number one is this did ask spread that founders have really high expectation of evaluation or someone might have raised in 2021 and there's even another factor in there. How do you call a baby ugly without, explicitly calling their baby ugly? - Is it worth more to you than it's worth the most others? So there's one type of deal where you're more of like a stock picker, like all I'm doing is having a better understanding of what the true value is than others. I'm not bringing any value to the table. I'm just know how to pick the stock better. I know how to pick a company to buy better. I just, I'm able to figure out what the true value is better than other people. That's not something I would do, but that's not. - So that like bargain-chopping, can you just run it on looking at deals and say, oh, this is a good deal. - Yeah, it's kind of like looking at public stocks and saying, I could look at public stocks, all of which individually are trading at a price or the price are trading at means there's sellers and buyers who are agreeing that's the right price. But me as the buyer, I'm really good at seeing that's a, when I invest in a stock, that I could see that I'm buying ones that are undervalued and that ones are overvalued. Okay, I guess if you're a really good stock picker, that I work, but that's really hard to do. But that's different than if you're buying and saying, I really do have something I'm bringing to the table. My company, me individually, I'm bringing something to the table that is truly a value add that most others can't bring to the table. But when you become a synergy buyer, that certainly is the most obvious example that for us, it was included 'cause early on in the day, we weren't a synergy buyer, we had no platform, we were just trying to develop a platform, but we had a conviction that what we would do with the assets would be value-threated in nature. And part of it was because we, early on as part of our thesis, it wasn't that we had a different point of view of the seller. It's almost like we had a similar point of view of the sellers because we knew that platforms they had were legitimately doing well, but other buyers, Universal Other Buyers didn't see that. Looking for, they were still thinking that they'd come meltdown world and the fiber networks being toxic, so we were a fresh face in terms of being willing to pay the seller what they really thought the business was worth. And we didn't disagree with them. We just thought that we held them for five, 10 years and consolidated around properties. We would create something of durable value over the long term. So we had this window opportunity where we could be acquirers where there wasn't a lot of competition, acquire these kind of properties, hence come to a price that would be a good outcome for the seller and a good outcome for us as well. That was, it was a win-win period of time. But we knew that was a window if we were right. Others would catch on and then we would have for buyers fitting up the prices. - How do you keep from over your assumptions getting it out of hand on synergies? I feel like I've seen that a lot of times. We're up to have teams looking at a deal, they're looking at the business case we're putting together and all these synergy assumptions come in play because you want to get the price doable. You end up inflating everything or being very optimistic on those synergies to capture. How do you ground yourself, keep yourself from getting over your skis? - I mentioned earlier, we were about two value creation and our corp dev team was one and the same as our exact team. And we were all big owners of the company. We didn't take much noise salaries. We were all about making money by seeing the value of the investment go up over time. So making money alongside our investors. There was no room for, we want to get a deal done. So we're gonna make the synergies look better than we really think they are 'cause we would lose. Corp dev teams can win in those circumstances 'cause they get rewarded for doing deals and then they handle all the people to implement them. The synergies didn't happen as we overestimated synergies or because the people were implementing it into their job, you could get in those situations but our culture was we're gonna do a deal. We're gonna get the synergies, we're gonna be us getting them. We're the ones saying we want to do the deal. So there was a buck stop here in Tauley. We held ourselves accountable. And if we made mistakes, there were arm mistakes. They weren't part of department's mistake or the integration groups mistake. But they were gonna make some mistakes but we're gonna need to own those mistakes, learn from them quickly and hopefully make a lot more good decisions than bad decisions. - Out of, we said, 45 deals is there? - Yeah. - How many were proprietary versus through the noxion process? - Oh, I would probably say 80% would be more proprietary. Now, some of those proprietary ones, there was a process but the process was triggered by us and by our activity. So then we're gonna sell, we're gonna need a higher banker. We're on the process, they were creating that out of the proprietary dynamic. But that way, do you usually win on those deals? - Early on, we would tend to win because we were a very effective acquirer. We got to finish line and negotiations really quick. We could give certainty of flows really quick. But we were the preferred buyer. But later on, I tell the story and I stand with, when we went public and I didn't understand this at the time, I understood it from a textbook standpoint, but I never really experienced it directly. But our process to go in public, then we had to open our component. Now, we were really transparent with what we were doing before we went public. But it was like the big investors, I don't think really believe it until we went through the public offering and all sudden steering in their face was how much money we made for our investor. And for ourselves too. That was the first time I think the broader universe of investors got a full understanding of holy shit. This is what those guys were doing financially. We know what they were doing. And initialized, but now we know what the financial equation is. Now we could see why their investors are thrilled with this management team. This is the management team is making them a shitload of money. Now, investors were part of that too, but they could see even at the time when public that original investors were already eight times in money and it was only like what six seven years. And they were able to see our financial playbook while that triggered the next stage in industry. But then a year after we went public, all sudden the money started flowing in industry. Infrastructure funds started to become a big thing in our industry and they were outpinning us on deals. Then we all started instead of us getting deals done. We were like, we're going to deals that were being done by someone else at four multiples for extra turns of EBITDA. Then we were comfortable willing to pay. And that's when starting in Haruket. Do we do the deals that prices were less comfortable with or do we watch others do the deal and start to take the wind out of our sales? Some of it sellers are even more ambitious on valuation expectations knowing that the public company is saying. Yeah. I mean, not necessarily because we were public, but because there were now a lot of buyers and some of them with very deep pockets who were extremely motivated to get, in fact, some of the buyers they used the expression and this sounds pretty alcohol. We have a lower cost to capital. So that's what they would say and I won't repeat it. They're really good buyers. They have a lower cost capital. And I'm like, what does that mean? All that means is they got lower expectations for what returns they're going to deliver to their investors. That's what it means. Like, we're going to get up the price higher because our investors expect much lesser outcome because they have a lower cost guy. Okay, yeah, from a seller perspective, I get that to compete with them as a buyer. No, I'm not doing this just to become bigger. I don't want to just pay the seller a lot more money and then we got to run this asset of theirs and we're not going to make any value creation in the process. So it put us in more difficult situation and it post IPO here for us. I'm for and was structuring these deals. Obviously, we talked a little bit about valuation gap. Earnouts is a very common tool used. Maybe you can roll over equity. Like what was your sort of philosophy on structure and how to help you with deals? People talk about earnouts and sometimes earnouts get overplayed. So we barely used earnouts for one, we wanted to mesh the deals together really quickly. If that thoughts that because how are you going to track? Exactly. So if you have an earn out, then you got to track like the performance and this and that. So it was more important like for us to identify the talent that was coming with an acquisition. What three people did we really care about and how do we bring those three people, make them part of our team? Not them stick around for an earn out because you are sticking out for earn out. All they care about is what's that earn out metric and how do I make that earn out metric? And then if I don't hit it, how do I exert leverage to get paid anyways? Then you're both sides are spending all their time on the earnouts. After that, we just need to go and we bought that company. We need to own it and we need to be accountable for it. And yeah, if we could find some people there, want to be part of our team and part of our value creation. Brave. Let's make them part of what we're doing. Not keep them separate so that they could quote unquote earn out during a transition period. So you lean in more on filling out this like executive retention plan. Yeah, overdoing to earn out. A lot of times if you give someone a clean exit, they'll sell at a lower price. Versus if it's a messy exit, they're going to discount earn out. They're going to treat earn out as like we're nothing and maybe a little bit of upside. But it's a messier deal. You got a negotiale of that. So it slows down to deal. It's less appealing to this dollars. You're going to do an earn out. Make sure you really thought through what you're trying to achieve in an inter. That's interesting. From a seller's perspective, I hate here's a clean offer. There's no earn else to it. Actually more attractive. Maybe take less of a price. And we'd also tend to give them cash at stock because you start using stock again. That's a messiness from a seller perspective. How do I really view this stock? Really going to be worth that? They're never going to be like, yeah, I want to get that stock because it's going to be worth double the amount. They're going to be like, okay, whatever I'm getting in the form of stock, I'm going to value it half of what it currently is worth and everything else is upside. So you're giving what is true value away and stock price, but they're discounting what they really think their values. So they often cost less if you're willing to take care of the financing itself and offer them your cash. How do you leverage this? Because I feel as an operator myself, I'd want to hold as much cash as possible. And that's why I'm always like ideally, if you have third cash, third or no, third role of equity, you're not doing that. You're not rolling over equity. You're avoiding the earn out. What levers are you pulling? Are you having them hold a note? Are you leveraging getting debt on the business yourself? Yeah, we were very good at lining up our capital separate from it. We would line up our equity, line up our debt. We'd firm those up. Like when it went off, I talked about earlier where we put the fully funded envelope. Yeah, we had to do the hard work of getting banks to say, we're going to sign on the deadline that we will have the money there to support close because the seller is going to build your staff. The person in that case and in others that they'll do is they said it's fully funded offer. Is it fully funded? So they'll give it to the lawyers and their bankers. They go check this out. They'll go and look at the paper and say, did this paper that JP Morgan signed? Is that truly wholly backing it or is that just a piece of paper that says, yeah, if all the stars align and we feel like it will provide you the funding or is it say, yeah, that funding is there. We can make sure that it would look really well when they would diligence it. Yeah, they really do have funding lined up. You manage it at the organization level and then you cash offers on the table. My teams were really good at that. I didn't have patience, but my CFOs were and others were, yeah, they would know how to do that stuff. I'd say we need a fully backed offer and they do all the hard work and get a fully backed offer. That's where we'll pause the conversation for now. 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