[00:00:04] Speaker A: Hello and welcome everyone. I'm Peter Lehrman and this is Masters in Small Business M A. This show is an ongoing exploration into the vast and undercovered world of small business m a where we interview both the proven and the emerging owners, operators, investors and advisors whose strategies and methods for transaction success have been put to the test. The show aims to us the nuanced intricacies, the key ingredients, and the important factors that can improve your decision making in your own journey in the world of small business. M A. This podcast is produced by Axial, an online platform that makes it easier for business owners and their M A advisors to find, research, and privately connect with a diverse mix of professional buyers of small businesses. In addition to learning more about Axial, you can find this podcast show notes, edited transcripts, and many other related resources, all for
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Peter Laraman is the CEO of Axial. All opinions expressed by Peter and podcast guests do not reflect the views or opinions of Axial. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Podcast guests may have ongoing client relationships with Axial.
[00:01:21] Speaker B: Hey folks, it's Peter Lehrman back with Masters in small business and M-A-I am really excited to have my first two person podcast in the small young life of this podcast. Got two co founding members of Shaker Valley here to talk with me today. Going to dive into the conversation quickly, but they both have really interesting backgrounds in money management and in public equity money management prior to entrepreneurship through acquisition, and we see a little bit less of that. So we're going to start with their backgrounds. Gordon and Jonathan, thank you guys so much for coming on the pod. Gordon, I'll start with you. Just tell us a little bit about you and the investment management business background that you had before co founding Shaker Valley with Jonathan.
[00:02:04] Speaker C: So thanks, Peter, for doing this and good to be with you. So prior to being involved in acquiring a private business with Jonathan, I was an analyst and portfolio manager at Fidelity Investments. Started at Fidelity in 2005 and covered a broad range of industries and subsectors. Most of that time was spent in the consumer side of the equities group at Fidelity and then managed a couple of different sector funds and diversified funds. And prior to that, I was a student at the University of Wisconsin in Madison, where I did undergrad and did kind of a specialized master's program called the Applied Securities Analysis program that focused on investments. So grew up in the midwest outside of Cleveland, Ohio, and like I said, went to Wisconsin and then found myself out in Boston as part of Fidelity.
[00:02:52] Speaker B: Great. I want to ask a few more questions, but, Jonathan, go ahead and do the same. Sure.
[00:02:57] Speaker D: Yeah. So, always really interested in the stock market. Bought my first stock when I was 14. Was a big collector of baseball cards as a child, and just sort of this idea of predicting the future and making investments was sort of installed pretty early with me. Went to Boston College, majored in finance, did internships on Wall street, institutional sales, equity research, all on the sell side. And then got my first job out of college at a small hedge fund in Boston. Worked there for three years. I got my MBA from University of Southern California in Marshall School of Business in LA. Again focused exclusively on a career in public equities. Worked for a small internship at Fred Alger, which is a growth shop in New York. Got the full time offer from Fidelity, which I was super excited about. And it was really kind of the perfect place for somebody who's interested in public equities to start and have a career. And I was there for 15 years. Started off doing industrial, so I was doing small and mid cap names, looking at pump and valve and motor companies, flying out to Wisconsin and didn't see Gordon out there, but going to motor plants and learning about these different sectors, and managed one of our industrial funds for a period of time, and then was rotated to the oil and gas sector and looked at the oil services space. And that role took me to the Middle east, it took me to Brazil, took me to a lot of different areas to learn about the global energy markets. My last role there was running a multi billion dollar energy specific equity fund, and that's sort of the lead into Shicker Valley.
[00:04:27] Speaker B: Yeah. Quick question on just the portfolio manager role at Fidelity. Could you guys just clarify exactly how the portfolio manager role works at Fidelity? And is there a single portfolio manager for a given fund, or are there multiple portfolio managers? And just give a little bit of context for those who are less familiar with what a PM does in a public equities context, just how the role was defined at Fidelity. Jonathan, go ahead. And then, Gordon, anything you want to add on that's specific to the consumer funds or otherwise, love to hear from both of you, if it makes sense.
[00:04:59] Speaker D: Yeah, for most of the time we were at Fidelity, they mostly had individual portfolio managers running their funds. And one of the products, the last product that I was on was actually what they called like a sleeved fund. So I was running all the energy in a broader S and P 500 fund that touched every single sector. But the firm is structured where you start off as an analyst and learn sectors. You learn how to analyze a company, you learn how to pick stocks, you rotate around to do a couple of different sectors, so you have some experience looking at different business models and different sectors in general. And then they try to groom you to basically be prepared to be a portfolio manager and be able to pick stocks relative to a benchmark. And that was sort of the trajectory for me. And Gordon was running a diversified fund, so he was looking at every sector, not just the oil and gas sector, like I was.
[00:05:47] Speaker C: Yeah, not too much to add to mean you start often in an analyst or associate role. And then there's kind of two broad paths to portfolio management. Many portfolio managers stay within their own sector that they kind of gained industry expertise on. And then an alternative path is going more the diversified route, kind of like in the old days that go back to the Peter lynch era, looking across the broad market as a whole. So there's a couple different ways it's done traditionally, but Jonathan and I both had experience on the sector funds, and then I had a little bit of experience with the diversified side, too. So we saw it from a couple different angles.
[00:06:21] Speaker B: The first book I read on stock picking, one of my older brothers and my dad were great at giving me the initial sort of book list. But the first book that I read was one up on Wall street by Peter lynch. And it was an incredibly easy book for a really young kid to read because it was a highly accessible book. Like, you didn't have to be a CFA in order to understand what he was talking was a lot of the book was focused on consumer products and how to study consumer product companies and just go to the mall and ask the store clerk what shoes are selling. And a lot of the sort of basic sort of scuttlebutt techniques were things that I learned. Still remember that book. It was like the first one that I read. I'm curious, the portfolio manager role, when you're in that role, is there one portfolio manager who's for a given product at fidelity? Is there one portfolio manager? And that portfolio manager is making the final decisions for that fund, and that is the person who's ultimately accountable for the performance record of that product in a given year.
[00:07:27] Speaker C: Yeah, that's the most typical set up. Yeah, there's typically, most commonly at the diversified fund level, there's one portfolio manager. In some cases there may be a co portfolio manager that's sort of assisting in that role. But, yeah, that's the most common structure. Is one portfolio manager or a portfolio manager and a co pm making the ultimate investment decision. That's right. And then there are variations on that, as Jonathan was touching on that some of the funds are actually combination of sector funds that roll up to a diversified fund. So there's a couple different ways that funds are structured, but I'd say probably in practice across the whole industry. The most common structure is similar to the days of Peter lynch, when there's one portfolio manager that's kind of making the ultimate investment decision.
[00:08:12] Speaker B: Okay, well, let's dive into the big change in career that you guys decided to make. I'd love to just hear about it. Just to kill any suspense for the audience. Gordon and Jonathan left money Management behind and started a investment business focused on buying and operating small businesses. We're going to hear that story in all of its details, but that's the punchline. What I'm really interested to ask you guys about is how did this process begin to take. Guys, did you meet first and then begin discussing what were the sort of key steps that led up to the decision to take your finance background, but to apply it in a very different context. Just take us through that story, Gordon, love to maybe hear how do you remember the story? And then Jonathan, you can chip in.
[00:09:00] Speaker C: From there as mean from. For me, growing up in the midwest, I was always a fan of Berkshire Hathaway and of Warren Buffett. And so I always took a little bit of career inspiration from his path, which know kind of beginning in the public market side and then ultimately kind of bridging toward actually owning a business. And obviously in the case of Berkshire, owning quite a few businesses, and that was always sort of an exciting path for me. I think there's some absolutely wonderful things about the public markets, and I had a wonderful 15 year career in the public markets that I really enjoyed a lot and learned just a ton from. I think some of the things that are kind of fun about the private side is being able to be a little bit more engaged in kind of building a business and being right there, kind of helping set strategy and helping set goals and being a part of a small, medium sized business as it grows. So I was always kind of excited about that as a potential career development. Just studying kind of the history of Berkshire and of Warren Buffett. I'm not sure I could have pinned exactly when that transition would take place, but I'll let Jonathan chime in. We I was just really excited when I kind of first heard about Hilliard's chocolates and the quality of the business, the quality of the people. Yeah, it just seemed like kind of a natural opportunity to kind of explore that next chapter in my investment career.
[00:10:31] Speaker B: So that makes it sound like you were cruising along and you were conceptually open to this idea of sort of a transition to owning and operating businesses. But the way that you just recounted that, it makes it sound like Hilliards was in some way like the precipitating event. To take this all a bit more seriously, Jonathan, is that right? Was it like you heard about this business, you were still moving ahead with portfolio management? Or did you guys step away from portfolio management and begin a search? What was the order of operations? It sounds like Hilliards came pretty early in the whole process.
[00:11:09] Speaker D: Yeah, it definitely came earlier, much earlier than we expected. I kind of thought of this as not leaving the investment industry, but just kind of having a different investment approach going forward. I kind of had like an obvious sort of breakpoint with my role at fidelity, and I was looking at specific opportunities, both internally, externally, and also just sort of reevaluating to see what could be interesting and what can maybe be the next step. So I have a passion for the stock market. Luckily, you can do that in your personal account as well. Don't have to do that necessarily for your full career for 40, 50 years. It can be stressful, and also it keeps you on your toes at all times. The market is always open. And I'd always had this sort of thought that maybe at some point the second half of my career would look different and I would do something kind of uniquely different. The longer you stay at a large financial institution, the more sort of specialized you get. And I think as I started to think about other opportunities, I kind of realized just how niche my experience was and how much I wanted to kind of go back to having a broader skill set and learning how to do new things. So that's kind of where my mindset was, I think Covid as well, changing everyone's lives and allowing everyone to sort of reevaluate what they're doing and what interests them kind of gave that sort of window to kind of broaden my mind in a way I probably wouldn't have otherwise. And kind of started with networking with individuals who had done private investing, talked to some family offices to get a sense for what they were doing, what type of investments they were looking at. And one of those contacts was somebody who recommended axial. And so just as a little bit of a whim, it wasn't Shaker Valley, it was just my own personal, independent account saying personal investor looking to look deals on the axial platform. And some deals came through. There were a few I talked to where I was just going to be an equity participant in somebody else's sort of entrepreneurial, sort of search fund type structure. But then this one came in and I remember the email said, a sweet opportunity. And I dug into it and I was like, wow, this is exactly the type of thing I've been looking at and I've been sort of bouncing things off Gordon and I know he would. I kind of knew as soon as I sent him some of the information around it that he was going to be highly seduced by something that looks so much like seas candies that I knew I was going to hook him on it.
[00:13:32] Speaker B: That's really cool. So you guys were still continuing to manage money at fidelity, and then this opportunity was sort of being explored in parallel as potentially something. And then you guys were able to both roughly step away at the same time from fidelity, or just what was the process by which you wrapped up a formal portfolio manager career? Was it coordinated and synchronized or did you guys have a little bit more like of an asynchronous exit just to wind things down correctly there?
[00:14:01] Speaker D: I stepped away first and know, doing kind of like a more broad, direct search. And then, yeah, I talked to Gordon a bit at different points of time on different things, and I think maybe he can talk about his decision to step away, but I think it was the opportunity.
[00:14:17] Speaker B: Had you stepped away, Jonathan, when the Hilliards chocolate business was sourced by you, or had you yet to step away?
[00:14:25] Speaker D: Actually, I don't know exactly the timing, but I think I was no longer employed at fidelity at the. Yeah, yeah.
[00:14:30] Speaker C: And there's sort of a continuum. I mean, you can invest in private businesses on a passive basis, of course, or you can become more engaged, know, kind of the strategic direction. I think when I first heard about Hilliards, it sounded interesting what Jonathan was kind of finding, and I was kind of intrigued by it from an investment perspective.
I think over time it ended, know, not being necessarily at all a passive investment. It ended up being kind of a passion for me as well. So a lot of it was just educating ourselves about just what's out there from an investment perspective. And the more I learned, the more I was excited about becoming even more engaged with the business and really being. Making it a passion project as well as an investment project.
[00:15:15] Speaker B: Had you guys decided to go into business together and it was just a matter of finding the right deal and having the timing and circumstances line up or was there very much a possibility that Jonathan was going to head off in one direction and Gordon, you were, you know, go in a different direction? Like, how much premeditated partnership was there between the two of you during this?
[00:15:38] Speaker D: Just. I would say it was more at the early stages, pretty parallel. We were both looking at interesting things and then having conversations about potential avenues to go. I think our original focus was actually to look at franchises and see if there is a collection of 2030 franchises that might be interesting. That was sort of like the original, hey, maybe this is somewhere we can get a real special expertise in, be able to replicate investments in this sort of subsector and make a call on a specific franchise we thought really had a turning point ahead. But as we were doing that, I was also looking at full new businesses that are just kind of straight up like Hilliards on the axle platform. Gordon and I were having these calls together, interviewing, networking together kind of simultaneously, but there was no guarantee that we were going to necessarily do this. It wasn't until we found one deal that we really loved that was like, all right, let's actually sit down and talk through how we see this over like a 1520 year period.
Does this kind of fit with what our expectations and goals are? And it turns out that they really matched.
[00:16:46] Speaker B: I want to talk more about that, just like the 15 to 20 year conversations that you guys had. Because I think what I'm trying to do is get inside the minds that you guys have and the conversations that you had. Because I know that there are so many professionals that are either in public equity money management, or in the hedge fund world or big cap private equity. And I know a lot of them think in the back of their minds like, would I be happier, more fulfilled and still be able to earn a great living if I were more of a sort of private equity owner operator, small business sort of buy and build. Is there a way that I can sort of peel myself away from the management fees and some of the other, the carry and some of the other things that tend to put people on the one way road to sort of like large cap assets under management, private equity and other things? So I want to hear how you guys thought about the 15 to 20 year opportunity, but let's talk about Hilliards. Sounds like the opportunity came in with a pithy title from the seller. What is compelling about the business to you? What was compelling about the business to you? How quickly were you able to develop an unusually high level of interest and curiosity? What were the things that got you excited about it?
[00:18:02] Speaker C: I can start on that. It's a wonderful business and it's a wonderful family that's been involved in the business. The business is almost 100 years old, so we'll have our 100 year anniversary coming up in 2024. So it's an incredibly, obviously resilient business that has a wonderful heritage and history to it. The fourth generation of the family is still running the business today. And so when you think about becoming an investor in a small, medium sized private business, you kind of have to think about just what niche you're carving out there, because by definition, there's a whole lot of larger businesses that you're going to potentially be competing with. So you have to have something unique about a business that's attractive and that makes it defensible. And obviously, the history of being around for four generations and for 100 years means they're doing something impressive, right. To impress and delight their customers.
I'll let Jonathan Chime in. But we couldn't wait to dive in and just learn everything we could about the business. We could tell we strongly suspected it was a great company and we really, really enjoyed meeting the family. And the more we dived in, the more we came to appreciate both the qualitative parts of the business and that it's an extremely strong business on the financials as well. So I'll pause there and let Jonathan Chime in. But we were pretty, I mean, Gordon.
[00:19:25] Speaker D: With his experience, again, consumer companies, mind looking at industrials? I think we both kind of learned a little bit about what are the characteristics of a great business that can lead to long term success. So we were looking for capital light businesses, ones that don't have huge pieces of equipment, where you have heavy sort of working capital requirements that had strong pricing power and recurring revenues. There were kind of like a lot of those sort of factors that we really were looking for. And in our conversations with the owner of Hilliards, we would hear hints to these things, right? So we would be asked like, hey, so how do you think about raising price? And they say, well, we raise price 3% every year. Okay, any impact? No, we haven't really sensed any impact. I'm like, okay, that sounds pretty good. That sounds like a good business that isn't being pressured at all times. How often do you buy a big piece of equipment to be able to deliver on your chocolate? It's, well, we have two enrollers and they're both 25 years old, and we think they'll be around for another 25 years. So we're like okay, so we're not buying huge pieces of equipment every year. That sounds pretty good. Why do people come into their store? It's like, well, you have husband who's been buying the same orange creams for his wife for Valentine's Day every year for the last 20 years, and he's going to do it for the next 20 years. So it was a lot of these type of conversations where we're like, okay, it does have the recurring revenues we're looking for. People want to pay for high quality chocolate, and the cash that you generate from the business doesn't have to go immediately into the business just to keep your cash flow story in. And lastly, we thought that there could be a great opportunity to sort of reinvest capital longer term. It's like, okay, it could generate cash, but what are we going to do with the cash from that business? Well, who's to say that three locations is the right answer for Hilliards? Maybe it's four. Maybe it's five. The IRRs on those type of investments can be really great. So I think that was sort of all the things we were looking for in a deal.
Through countless conversations. We were doing all these conversations during COVID So we didn't get. It wasn't as if we were in a conference room face to face with were, you know, we were doing calls in our homes and trying to get a sense for it all. And they were very patient with us to ask all these questions, but we gained conviction through checking all those boxes.
[00:21:36] Speaker B: There are so many chocolate companies out there making chocolate. There's big, huge chocolate companies. There's big brands, there's niche brands. Why are all of the chocolate businesses out there able to earn attractive returns? Why isn't it competed away? It's not like there's only hilliards and, like, one other chocolate company. There's thousands of chocolate companies.
[00:21:59] Speaker C: Yeah, I mean, I think a lot of it is traditions that are built up around giving right. And around chocolate. And I don't know how your experience has been, but I remember when I was growing up, my parents were always excited to kind of order it from the same place in the same times of year. And it sort of became a part of our holiday tradition, bringing in the box or the Valentine's giving season. I remember my dad always had the same thing, my mom loving it. And kind of. It becomes just kind of a part of your. And so, you know, as long as you are constantly working to impress that customer and be true to those traditions and not deviate from the quality that that customer has come to expect and make sure you're doing right by the customer. I think you can earn that business, as Jonathan says, on a recurring basis as long as you continue to do right by that customer and hold true to those know that makes it kind of a unique product, right. It's something that means a lot to people, right? It's more than just individual piece of chocolate. It's the packaging, it's the location, it's the photos. And people are rightfully kind of attached to the heritage and history of the brand. So it's coming from being a student of consumer brands at Fidelity. All of that sort of just really resonated with me. I sort of recognized it and like I said, when you're a small, medium sized business investor or owner, you're never really going to be competing with the big guys on scale, right? You're never going to be the biggest. So you have to be doing something a little bit. You have to be kind of winning at the customer level. You have to be doing something that's delighting the customer. So I think that's what makes chocolate a unique consumer product, is just the attachment to the history and traditions that.
[00:23:57] Speaker B: Makes a lot of sense. Sounds like the business has multiple retail storefronts. How much of an e commerce business was established prior to Covid? I'm sure the story changed both during COVID and probably is still changing with you guys involved now and looking to try and help develop the business. But what kind of ecommerce versus retail footprint did you find yourselves evaluating initially versus where is it today?
[00:24:23] Speaker D: Yeah, so it was far more retail, almost predominantly retail, and it still is. And it seems to be as far as our sort of due diligence and networking within the sector, it tends to has kind of stayed at low single digits in terms of ecommerce exposure. That's what you might see from seas and other sort of large ones as well. I think that's one of the things that's made sort of the retail business so sustainable. People, where does chocolate land relative to other sort of consumed food items in terms of how people purchase it? Like you wouldn't buy baked goods or muffins online really, and have them shipped to your house. And it turns out I think most people kind of feel the same way about their fine chocolates is that they want to go there, they want to see the display case, they want to smell the chocolate. And even though some of that stuff can have pretty decent shelf life, it's something that they do actually want to purchase face to face. Now we've made efforts to grow the e commerce business. We know the original website that Hilliards had when we got involved was pretty archaic, and we made the transition to Shopify, which has done a lot in terms of our ability, track our sales, our products, and advertise a little bit better and have just a cleaner website with easier checkout process. But even so, even with all those investments, we've still kind of grown. A lot of our growth has come from just good organic growth through our retail stores, and we think that's sustainable long term.
[00:25:49] Speaker B: Just sticking with, I guess, the sort of deal and the deal process a little bit. Am I correct that this was the first private company control buyout that either of you had executed?
[00:25:59] Speaker D: Yeah, definitely.
[00:26:00] Speaker C: Both of us were coming from our public market backgrounds, so we were very familiar with analyzing businesses and assessing businesses and getting to know management teams. But executing deal was brand new to both of us, and I think we were leaning heavily on a couple of great partners on the CPA side and on the legal side to kind of help us get across the finish line in terms of actually executing the deal.
[00:26:25] Speaker B: Gordon, had you lined those partners up prior to the deal, or was that something that you guys secured at some point during the evaluation of the opportunity?
[00:26:35] Speaker C: Yeah, we had not. So we were fortunate to have a couple of mentors that we were introduced to along the way, and one of them made a great introduction to us on the CPA side, and the actual work there is the quality of earnings on the diligence, but the network and expertise and advice of individuals like that goes a long way beyond just the Q of itself. And so, no, we were new to it, and we really just tried to lean on people that had experience in that area, and we were really fortunate to have some great early introductions to. It was Grey, Gray and Gray on the QV side, and Jim DeLeo, more specifically, has been a great partner to us. And then on the legal side, we were fortunate enough to link up with camp corporate law in Wellesley, Mass. And we've just been, I think, really lucked out in terms of both just having some trusted partners to kind of shepherd us across the deal environment that both of us were drinking from a fire hose to get up to speed on quickly.
[00:27:37] Speaker B: What about the deal, the dynamics themselves in terms of working with the family, working with and corresponding with brokers, and also just thinking about other potential buyers who might be at the table exploring the opportunity. Sometimes you're alone, but usually you're not alone. How are you guys thinking about those considerations, and how do you guys size up at the end of the day? How do you guys think about why you won and how you won the transaction relative to whatever the alternatives were? Go ahead, Jonathan.
[00:28:12] Speaker D: Yeah, we didn't have much in terms of experience on winning sort of these type of offers, but our attitude was to be as honest and straightforward as we can. We thought that we were high quality buyers because we had the capital to do the deal. There wasn't any strings attached. We were sincere in our desire to keep the company and everything that made it great, very consistent. And we also weren't interested in coming in and changing things aggressively and shaping it in our form. It was more we wanted to learn the business. We wanted to work with the fourth generation to have them develop us, and us develop them in terms of being able to run this business and fill the void of the parents that had been running this business for 40 years together. We came in with very easy going, smiling faces, saying that we're interested in really taking this company on a ride over a 2030 year period to really see what it can do. I think also that sort of more perpetual owner was also probably pretty attractive. We saw this as sort of a generational asset in the same way the McCarthy's did. So kind of coming into it with this attitude of, yeah, we're not looking to buy four candy companies and flip them and sell them, or we're not looking to jam three new stores and hand it off to a private equity firm. Like our attitude was, let's do this one step at a time and grow the cash flow stream over time with good, sensible decisions, and we'll present our ideas and what we think is a good idea. But if we can't convince the general manager and the two sisters that run the business that it is a good idea, then it probably isn't because they know the business better than we do, because they've grown up in it. That was sort of the attitude we took, and I think it was attractive. And the relationship today is better than even was at the time of the transaction. So everyone feels quite good with how it played out.
[00:30:03] Speaker B: I think it's interesting to just keep talking a little bit about the nature of the generational and the family involvement in the business, because I think that a lot of small business m and a, I think the prevailing understanding is that if you're selling a family business to folks like you and not to a private equity firm, well, yes. You're not selling it to a private equity firm. If you sell to Gordon and Jonathan, but still you are selling know, it's not like it's being handed down to the next generation, so to speak. And so to the extent that you guys are developing a model by which the families can stay involved and subsequent generations of the McCarthy family could stay involved, I think that's actually pretty interesting because that, I think, flies in the face of a lot of family owned business assumptions, which is, okay, if I sell to anybody other than a family member, it's no longer going to be something where the family can run it and can partially own it. Can you guys talk a little bit about that and how you think about multiple subsequent generations of McCarthy's being involved and how you leave room for that, how, you know, maintain some level of control and accountability over. I just think that's a really interesting structure that you guys have chiseled out. It tends to be a little bit more like we've sold it and we're moving on, or we haven't sold it to an outside buyer and we're going to continue to run it as a family business. Sounds like you guys have put 1ft in one side and 1ft in the other, and so far it's working really well. Gordon, go ahead if you know what I'm getting at. I'd love to hear what your thoughts are.
[00:31:37] Speaker C: No, I agree. I mean, I do think it's a rare, or it's probably not the most common approach, but for us, it actually was a pretty familiar approach. Just coming from the Berkshire Hathaway School of investing. Right, where Berkshire is kind of famously hands off on acquisitions and has really kind of created a culture and a model of acquiring family businesses, in part for that reason. So that companies know that Berkshire can be a long term home for these businesses and that Warren Buffett isn't going to come in and tell you famously, he said he's not going to tell 400 hitters how to swing the bat. Right.
I think that comes naturally, that approach to Jonathan and I. But it also fits well with our own skill set, because obviously Jonathan and I are coming from 1520 years of finance background, but we aren't coming from operating businesses ourselves, and we certainly aren't coming from having direct experiences as candy makers. So we really need to rely on the expertise of the family. And in the Hilliard's case, the fourth generation. We want to kind of help these multi generational businesses grow over time. Right. So Jonathan's mentioned, one of the first things we do is try to put some more resources behind systems, for example, with the replatforming to shopify on the website, for example. So, I mean, we're coming at it from a perspective, know, we try to be humble about what we don't know. Right. We aren't coming in saying we have a better way for you, Mr. McCarthy's, to run Hilliards. We're kind of coming at it from, you have a wonderful business. It's already growing. What are the resources that it needs to kind of plan out the next 40 years? Right. So, yeah, we've been incredibly fortunate to have a wonderful relationship with the family at Hilliards. And like I said, the fourth generation is still managing it today.
We think of it as kind of a long term partnership, very much the way that Berkshire does. We've seen it be, you know, and we have a model kind of which to believe that it'll be successful. And it's kind of fun to, we're only two years in, but it's kind of fun to be able to employ it with billiards. And I'm sure you'll ask about harbor suites as well, but they're similar approach. Yeah.
[00:33:54] Speaker B: Before we get to harbor suites, I mean, is there a fifth generation that has already presented itself? I mean, are there little kids that are the fifth generation or how far along is the fourth generation in terms of running the business versus the fifth generation?
[00:34:08] Speaker C: Well, they're pretty young still.
Yeah, go ahead, Jonathan.
[00:34:12] Speaker D: The fourth generation is young, so they are in their early to mid 30s. Well, yeah, but there is a fifth generation already working, I believe, promoted to supervisor recently at the store. So we don't know how much interest longer term beyond that. But Megan, the president is quite young, and we think I have many, many years with her at the helm. I wanted to share one quick story, though, as you talked about the process of getting comfortable with the family, we had had multiple conversations and we were quite close to, they were post loi before we had closed the deal. And we finally felt we have the additional challenge that this is a highly seasonal business. We closed this transaction in February, so we were in the heart of sort of due diligence and all this during the holidays. So the family was just completely blitzed with the amount of work that they were doing. But the day after Christmas, I came out to the factory and Gordon couldn't come because for Covid, and he had some family in town that he needed to be mindful of. So he was on a screen, but I was meeting these people in person for the first time and it really felt like I was the new son in law.
That was just how sensitive and the whole experience was where I was like, okay, this person now who's here in front of us is going to mean a lot to us as a family, considering this partnership that we're going to go in for the many years. And it was not the experience I was expecting being in that room.
[00:35:42] Speaker B: What element of it were you not expecting?
What caught you off guard?
[00:35:47] Speaker D: Just how emotional would be kind of both sides, right? I mean, their lives were changing and our lives were changing, I guess.
[00:35:54] Speaker B: Let's cover the acquisition. Was that the first acquisition that Hilliards had ever made as a business?
[00:35:59] Speaker C: Yeah, I think so. I was just going to say, yeah, Hilliards has never acquired any other companies. I'm just thinking back through the hundred year history here to make sure I have that right. But I think we can confidently say that, yeah, Harbor Suites is a business that we think of as a sister company to Hilliards. So they are separate companies with their own separate brand identities and histories and wonderful heritage for both companies. Harbor Suites is almost 50 years old itself, so quite a bit of history there as well. So it's really important to us to keep their separate brand identities and these wonderful relationships they have with their communities and preserve those. So we do think of them as separate companies, but they're sort of sister companies in the sense that there's a lot that we think they can learn from each other. They have different areas of strength. Harbor Suites is much stronger. It comes from more of a catalog background. So the direct to consumer business has always been large for Harbor Suites. Harbor Suites also has a significant wholesale business, which was never a major business for Hilliards. And so we're kind of in the early days, the acquisition of Harbor Suites closed on September 1. So we're in the early days of just trying to kind of get a shared learning process in place where Harbor Suites is starting to educate Jonathan and myself and also the Hilliards team about wholesaling. And we think there's probably a little bit on the retail side with Hilliard's success in retail, that is of interest to harbor suite. So they have opposite kinds of strengths, and it's kind of exciting to kind of cross pollinate some ideas about how the two sister companies can work together to kind of make each other better in their own areas of strength. So, yeah, it's been an exciting start.
[00:37:52] Speaker B: Obviously, the way that I got to know you guys was through axial, as customers of axial. And obviously that's how you found the Hilliards business. Initially, the harbor suites business was something that you found on your own, or at least not, certainly not through that. Tell us about hunt. Did you not go knock on their door? Did they knock on your door? What's the story behind that first acquisition in terms of how it took shape? Go ahead, Jonathan.
[00:38:15] Speaker D: Yeah, so we networked in sort of the Massachusetts area after the Hilliards acquisition, so people got to know who we are and that we are two individuals looking to buy high quality, small, low, mid market businesses. And I think one way or another, it got back to the broker that was interested, that was responsible for selling harbor suites. So I think it was really more of a, we were reached out to as sort of a strategic buyer, though, in reality, for Gordon and myself, it's a separate business, separate sort of personal investment, though you could say we had a reputation for having interest in chocolate or a sweet tooth for these things. That's how basically it got started. That was a little bit more of a competitive bidding environment, because with it being more of a catalog business, a little bit more online, I think there are potentially other type of buyers out there that were different from us. But we went into this process of private investing, just wanted to make a good deal, not really knowing what our niche could be. And I think kind of going through the Hilliards experience, we realized that, to your point, like these family businesses that are so important to those who have grown and bid in their whole lives, they want people who are going to buy it, that really care for the brand and are going to treat it with the utmost respect. And so we had some early conversations with harbor suites about potentially buying it. And we were kind of seen as a little bit as sort of financy guys looking to do a deal. And then they finally met somebody from the Hilliards and our president, Megan. And the way that she sort of explained how this relationship had worked kind of, I think, made us a much more attractive potential buyer. And so maybe that's kind of a focus on what our niche is here, being able to kind of handle these kind of generational, wonderful small businesses in the Massachusetts and New England area, where you have really impassioned owners wanting to see their business continue to thrive and be in good hands for the foreseeable future.
[00:40:15] Speaker B: I was going to ask you guys maybe a little bit about your Monday to Friday schedule. Just how are you guys spending time? And you alluded to that a little bit, Jonathan, just now, but I'm curious just how much time, Gordon, are you spending in the chocolate business and with Hilliards or harbor Suites? And when you're not spending time on the chocolate businesses, what are you spending time on? You're not managing a portfolio anymore. What does a Monday to Friday look like? You guys are not looking to become the operators of these businesses. That's very deliberate in terms of the businesses that you bought. So how are you spending time and what are you learning about the best ways to spend your time? Gordon, we'll start with you.
[00:40:58] Speaker C: Yeah. So right now, we've sort of settled into a cadence where we are on site both companies once a week. So right now we're on site in Salem on Tuesdays and on site in Easton on Thursdays, which seems to be working pretty well from kind of staying engaged, but also making sure the managers have enough room to run the business as they see fit. And not having Jonathan and myself kind of looking over their shoulder day to know. Initially, we thought we would probably have too much time on our hands and have to start finding some ways to fill it, although we would have probably never guessed that harbor suites, the opportunity would have come this quickly. So in the first, let's see, if I think about it broadly, Hilliards probably was about nine months of pretty intensive effort on the diligence side and the closing process itself. And then when the acquisition closed, we pretty quickly dived into replatforming onto Shopify. So we had our hands pretty full, really, for the first, I would say, year of engagement with Hilliards, and we were just starting to free up some time. And then the harbor suites opportunity came, really. Haven't, we have not found ourselves to be bored by any means. As soon as there's extra time, it seems to get filled up pretty quickly. What we've learned is there's always work to be done kind of on a project basis. Right. So the replatforming to Shopify was a pretty big project for hilliards, and we're sort of exploring similar systems opportunities to harbor suites right now. So that's where Jonathan and I tend to get involved and try to help kind of set a little bit of a strategic priority and a strategic path for those types of investments. So even though we're on site once a week at each location, I'd say the rest of the week is spent usually assessing some sort of project, whether it's systems, platforms, or store potential or wholesale potential. That's really kind of how the days tend to play out so far, Jonathan, anything you'd add to?
[00:43:06] Speaker D: I mean, I would say that it's been a lot of work, but at the same time, we've been able to kind of control our schedules in a way that we couldn't before. As two individuals with little kids and career driven wives having the ability to sort of kind of customize when we schedule our calls and when we do everything to kind of work. The business has been a nice benefit, except for kind of those four or five month windows where you're focused on the transaction itself, which has its own, was probably as busy as we've ever been in our lives during those times. And so I think our attitude now is more to just take our time and really be selective. Go back to the Warren Buffett thing, he said.
I forget what it is. If you have that list of 20 great investments to swing big on in your life, just check them off one you have a little piece of paper you can check them off on. That's the way you should invest. And that's sort of our approach going forward. And with the kind of the balance in our lives now that we didn't have before, it's kind of a good time for us to be that selective in the public markets. There's this phrase that you can always speak with your feet on any investment. If you don't like the direction it's going, you can just sell the stock and move on. That's not what this is. Right. You're in it for the long run. You are owners. This is very long term, so the diligence is important.
We're going to be very patient about adding more sort of businesses to the portfolio.
[00:44:32] Speaker B: Do you guys think about yourselves as sort of like emerging builders of a great chocolate empire, or do you guys think of yourselves more organized around what Jonathan referred to earlier as being interested in buying great northeast New England based family businesses? I'm just curious how much you're thinking about capitalizing on the expertise that you're building in the branded foods category now that you have some real momentum there, versus looking at a wider aperture that's more organized around great generational businesses. I'm sure you've got the ability to consider both. But at the margin, over the next few years, where do you guys think you'll be spending more time in a more specific way around hilliards and harbor suites and the opportunities there, or around finding and buying great family businesses? Go ahead, Gordon.
[00:45:21] Speaker C: I think it's probably been a little bit of an evolution, as you alluded to Peter, where we were coming from, having fairly diverse investment backgrounds, Jonathan was more on the industrial and energy side, I was more on the consumer side. And so I think in the early days, we would have described ourselves as being truly open to any wonderful business and wonderful partnership with a family. And I think that is still true to your earlier point. I think what we found is that with harbor suites, for example, the deal kind of emerged directly to us. Right. We didn't have to go out and source it, and we had a little bit of experience under our belts, which we were able to kind of describe to the seller, in the case of harbor suites, what this would look like after the closing. And we're able to kind of leverage the experience we had with Hilliard's to say we aren't coming in and trying to put our footprint on this business. We really want to capitalize on and sustain the success it already has. And so I think as time has gone on, it's become probably a bit more likely that the niche within candy and confectionery is probably going to be fruitful. So I don't think we would rule anything out. But to your question, I do think the more time you spend within a niche, the more that niche sort of serves you. So I think that's what we have found so far.
[00:46:54] Speaker B: It sounded like you guys have kept these investments separate from one another from some sort of a corporate perspective. Tell me about that. Because they're both chocolate businesses, and there's obviously a lot of precedent in this sort of world of creating a holding company or creating some sort of platform, if you guys wouldn't mind sharing. I'd love to understand sort of why you bought two chocolate businesses, but think of them and structure them from an entity perspective as distinct. Yeah.
[00:47:23] Speaker D: What you're really sort of acquiring when you get involved with these chocolate companies is really the brand and its relationship to the neighborhoods in which it operates. We knew we just going through hilliards. What made it so great was the people in east and Norwell, Mansfield area had such a tight and comfortable relationship and love affair with the brand that you don't want to change. You want to keep your factory and your employees in that geography. You want everyone to come in and be able to see the chocolate being made in those areas.
It is kind of its own thing, and similar to harbor suites. It's so beloved in the North Shore area. That is important that everyone involved know that these are staying sort of separate in what they're doing.
[00:48:09] Speaker B: Yeah.
[00:48:09] Speaker D: And so our investment, we think that there are skills that we can sort of cross reference and sort of build on from each company, but we wanted to make sure that they were run separately and have sort of separate motivations and treating their customers, which are different customers in its own unique way. It's interesting, as we kind of went through the process of structuring it, we kind of learned, since both businesses have the same sort of ownership structure, there are certain requirements that the government has for us in terms of benefits that we need to raise.
The government sees it as one large company because of the ownership structure. So we have been able to do things like structure a 401k for both companies and stuff like that. But otherwise, we kind of see it certainly as two different businesses.
[00:48:57] Speaker C: Yeah. Peter, just to expand on that a little bit, the distinction is really one between the corporate structure, which is, to your question, actually one holding company and two subsidiaries underneath it. So it is traditional in that sense, but the way that we really operate the business, and we think of them as sister companies, they each have their own very long history with their customers, and we want to keep the brand identities separate, and we want to keep the labor force separate, and we want to keep the connection that they have with their communities intact. So there's the legal structure, which I know you're specifically asking about, which is a holding company structure, but we think of them operationally as sister companies, and they each have their own identity that we want to respect.
[00:49:43] Speaker B: That makes total sense, and that's really helpful. I actually thought they were totally separate from a legal perspective. I didn't appreciate that. But I understood you guys wanted, for all of the reasons you enumerated, that you would want to keep them totally separate businesses with no idea around sort of synergy other than sort of expertise transfer and stuff like that. But I wasn't sure whether or not you Guys had set up Shaker Valley or something like Shaker Valley as a holding company or not. And I just wanted to clarify that. I'd love to just get your advice to listeners who are at their desks in a hedge fund or an investment bank or a money management firm in New York, Los Angeles, Boston, Chicago.
What is your advice to someone who's sort of listening to this podcast who's passively got, their mind is beginning to wander around this. I mean, if they called you and said, hey, I'm thinking about doing something similar to what it looks like you've done, how would you recommend I get started? And then how would you recommend I think about pulling the like, how would you try and answer those questions? And definitely want to hear from both of you on this one. Gordon, why don't you go first? And Jonathan, you can close on this one.
[00:50:58] Speaker C: Yeah. So I would say it's interesting with my initially, when I was still at Fidelity, I was sort of initially thinking about investing in private businesses on a passive basis. And then today, it's really, like I mentioned earlier, a real passion for me. So I think you're going to naturally get engrossed and you're going to really dive into the business that you become involved with. So I think from that perspective, I'm really excited that we're a part of a company and a group of people that I really like going into every day. And I don't know if I would feel the same way if it were a business that wasn't quite as exciting. I don't want to put any other industry down on the podcast, but I think you have to be fired up about what you're doing day to day, what the company is doing. So it helps if you have a product in a history and a group of people that you're excited about. So while it's cliche, I would say the nature of the business and the people are really important to what. I wouldn't just buy anything. I wouldn't just buy the first couple things that show up on that screen when you first get a broker. Mean. And then beyond it, you have to think about kind of who your partners. Right. So it's. I think it's definitely helped that Jonathan and I have very similar kind of investment approaches and come at it from a similar perspective. It'd be very difficult if one of us was thinking it was going to be seven days a week, kind of in there on the factory floor kind of operating day to day, and one was going to be a totally kind of board level kind of observer. So I think who you partner with, another thing, I suppose, is obvious, but it is really important. And from that perspective, it did help, obviously, that we were targeting deals that we were able to just be the two equity partners in. I think the more complex the structure gets, you have to be a little conscious about who you're bringing into the equity group and just what the expectations are.
[00:53:00] Speaker B: There it is you two, and you two alone who capitalized hilliards, correct?
[00:53:05] Speaker C: Yeah.
[00:53:05] Speaker B: I see. And was it all equity or was there any debt at closing?
[00:53:09] Speaker C: There's a little bit of bank debt at closing, but it was not a highly leveraged transaction.
[00:53:15] Speaker B: Got it. Jonathan, what about you? What do you recommend to someone who's managing the industrial's portfolio at Capital Group?
[00:53:22] Speaker D: Right now, yeah, I mean, a lot of. Of that, the same things. I would say finding good mentors was really important because it made it feel so much more tangible. And there was probably three or four different times during the first transaction where we were going back and forth and we couldn't either agree on something or we just didn't understand what sort of risk potentially we were taking. And we called up people who had bought private businesses and run them and asked their advice on these things and always gave us clarity and made it seem like, okay, we can do this. We know that's a good approach.
So having those type of mentors to kind of help, you know, exactly. To kind of at least have an idea of what's coming around the corner in each one of these stages. And Gordon talked about partners and how important that is, and that's for sure. The other partners that are important is the people in your life, your spouse, and are they on board for the risk that you're taking? Have you laid the groundwork to kind of take this transition and this risk in a way that you feel comfortable with it, that you've stress tested to multiple different ways to make sure that, okay, if it goes this way, we can do this. If it goes that way, we'll do that. And I think that knowing that you're kind of grounded in all that, once some of those big issues pop up for the business, that the two of us feel comfortable kind of handling it, there's not other stresses that are involved in making those decisions.
[00:54:48] Speaker B: So two follow up questions there on the mentor side. Were these people who you already knew prior to getting into the sort of exploring entrepreneurship through acquisition and doing what you're now doing with Shaker Valley and the two businesses, or were they folks who you sought out once you moved in this direction from a career perspective? Then the second question is, how did you lay the groundwork with your know, I'd like to just hear a little bit. I think that's really important advice. That's an easy step to skip, but it's a really bad step to skip. So just what did that sound like? How did you do that? Where were you in your career at fidelity when you started having conversations with your spouse versus just having a conversation in your own head? So if you could take those two on, that'd be great.
[00:55:34] Speaker C: Well, maybe first on the mentors. So we did really seek them out because it was such a different career path. For know, I know Bob Winnigan, New England capital partners, was one of our first really helpful mentor conversations. And that introduction was through just a common friend that just mentioned, hey, if you're going to be operating in the lower middle market or looking at the lower middle market, here's someone you really have to speak to. And Bob had decades of experience in that market, which was invaluable. So, yeah, I do think we really did seek them. You know, I think Bob was the introduction, now I think about it, to Jim DeLeo at Grey, Gray and Gray, who comes with a ton of experience there. And I think Jim may have been the introduction to Middlesex savings banks for, you know, Lynn Shade has been a tremendous partner with us at Middlesex. So a lot of it was kind of organic networking, but trying to specifically seek out people that had experience in this area because it was totally new to us, as you mentioned. So we did really have to go find a network of people that could kind of shepherd us through the process.
[00:56:43] Speaker B: Neither one of you has answered my question about how you engaged your spouse on this topic. You're 15 years into a great job at fidelity, and you're like, I think I want to go and speculatively buy a chocolate business. What do you think about that, wife? So I don't think it went down like that, but I really want to hear, how much career dialogue were you all having? Jonathan, when and how did you sort of have these kinds of conversations? It's a big decision for a family to make a change like this, and it's a really important decision. Particularly when you're on the other side of 30 or 40, it's an even bigger decision in certain ways. You've got a lot of momentum in a career that you know well, you know how to succeed in it. It's a big bet. And I think that there's a tremendous amount of talent that is kind of like, there's a tremendous amount of talent that's happy in that career path, but I think there's a lot of talent that might be somewhat trapped in that career path because of those issues. They very much would love to go and do something along the lines of set up a holding company and buy businesses, but I just don't think they can break free of some of these things. That's why I was diving into some of these details, both on the personal side as well as on the business side.
[00:57:49] Speaker D: Yeah, I probably lay the groundwork for a few years in terms of feeling like it would be nice to do something different for the second half of my kind of working career. I love the stock market and I loved being a portfolio manager and my wife was very much aware of that. But there are some sort of different aspects to being a small business owner that really resonated with me that I think that I was communicated to her about. When you're running against a benchmark, you could have a wonderful year and the next year you can give it all back, because Covid happens, and there's just a lot of volatility in the stock market. And this sort of sense that you kind of are building something over time is never quite there at. You know, that's something that. What I really liked about the idea of buying a company like Hilliards is okay, if we make a good investment, if we free platform to shopify and that grows our Internet business, that's something I can hold on to, right. That's something that'll be a cash flow stream that'll continue to grow if we open a store. And that does well. This is all cumulative over time and it's building. So it was very exciting in an entirely different way. And I think she can sense that. I was more intrigued about talking about these things than necessarily breaking down my exposure to oil services versus refiners in my was. I think. I think she could sense that.
I guess. I think I could probably speak for Gordon on this. We're both incredibly lucky with the women that we married in terms of their support and their wanting us to sort of reach our own personal goals.
[00:59:21] Speaker C: Yeah, I would say I would echo just a lot of those comments that Jonathan just made. I think when you're really excited and fired up about something, I think that speaks for itself in a lot of ways. And it did take quite a bit of time to be able to make that leap. So it's not an easy leap to make, but I feel like if people can tell how excited you are about the opportunity, they can get behind it. And I think that goes for your partners, your spouse, your investors.
I think that the opportunity is really what dictates what allows you to be able to make that big leap in life. If you're fired up about it, chances are you're on the right path.
[00:59:59] Speaker B: I think one of the things that's also worth highlighting is just you guys did not jump in the day after closing, sort of like take the keys from the owner, have the owner hang around for sort of 30 to 90 days and basically just go right into the deep end and just have your hair on fire for the first one to four quarters. And I think a lot of SMB entrepreneurship through acquisition kind of starts that way, because in many cases, the searcher is really the whole idea is you'll be buying the business, but you'll also be stepping in to run the business, whereas setting up a holdco entity being very clear before you even move ahead with any transaction, what is your role? And your role is to be very involved, but not to be someone with line accountability to the employees in the organization on a day to day basis. That's a very different version of SMB acquisitions and career around it. And it probably is just worth punctuating that to those folks who have spouses and have children and have other things. Because when you step into a small business and you need to operate it the day after you buy it, you need to be ready for at least a year of like 100 hours, weeks. And that conversation with your spouse is not as easy as we're going to be buying these businesses. But there's a management team that's going to be running these businesses. We're going to be working with them on site one or two days a week. It's a really different version of stepping away from big cap money management. What you guys have done. So very important, I think, to know exactly what your role is going to be after you buy.
[01:01:38] Speaker C: Just the visibility of keeping that management team in place is also really helpful to the workforces, obviously, at these small businesses. In many cases, they're coming from Hilliards have been operated for almost 100 years under one family. Right. And Judy McCarthy and Charlie McCarthy, who we bought the business from, were running it individually for 40 years. And so there's a very similar story at Harbor Suites, where Phyllis Leblanc had been managing the business and owned the business, had been involved for 40 years, and an owner for more than 20. So there's quite a bit of anxiety when ownership transitions take place. And I think not only is it helpful to the owners to have the management team in place, but it's incredibly, I think, helpful to the employees to know that the direction that the business is going in is not going to be radically different. We aren't talking about plant closures and we aren't talking, know, massive layoffs or anything like that by any means. Right. We're trying to perpetuate and grow companies that are already doing great. And so I think that keeping the management team in place is also really helpful from an employee perspective.
[01:02:50] Speaker B: Jonathan, you want to take the last word here, and then I'll let you guys get back to building your chocolate.
[01:02:57] Speaker D: I'll say to sort of that try to sell your spouse on this. I also said, look, this business has been around for 100 years.
We're not really putting any data on this thing.
I really have to screw this up for this to be a real problem.
There was a selection bias in there as well, of buying businesses that were where the brand is so important and the company is so beloved. So that was also sort of one of the kind of derisking components to the transaction and the career transition as well.
[01:03:31] Speaker B: Yeah, it seems like you guys should just have the holding company be organized around one investment criteria principle, which is whether or not the business has been around for more than or less than 100 years. And if it's on the right side of 100 years, you guys are in good shape and your spouses have nothing to worry about. I really thank you guys very much for spending this time with me and for sharing your own stories, particularly the career transition story. I just think that there's not a lot of those stories out there, I don't think yet, and particularly people who are as far into a great career and a lucrative career like public equity money management as you all were. And it's also just fantastic to hear about family owned businesses in the northeast continuing to thrive. So everything about is a great story. I wish you guys a lot of continued success. I hope that a couple of listeners buy from the Hilliard's e commerce site that's now on Shopify or through the catalog at Harbor Suites between now and the end of the year. But it's a great pleasure to have gotten to know you guys through the Axial platform and to be able to have you guys on the show. So thanks for the time and hope to meet you guys next year at some point.
[01:04:36] Speaker C: Thank you very much, Peter.
[01:04:43] Speaker A: If you enjoyed this episode, check out axial.com. There you'll find every episode of this podcast as well as our recorded Axial member roundtables, some downloadable tools for dealmakers, Axial's quarterly league table, rankings of top small business acquirers and investment banks, and lots of other useful content that we've created over the course of time. If you're interested in joining Axial as either an acquirer, an owner considering an exit, or as a sellside M a advisor, you can get started for
[email protected] as well. Lastly, if you have ideas for podcast show guests, feel free to reach out to me directly at
[email protected] I promise I will respond.
[01:05:21] Speaker B: Thanks for listening.
