[00:00:04] Speaker A: Hello and welcome everyone. I'm Peter Lerman, and this is masters in small Business M and A. This show is an ongoing exploration into the vast and undercover world of small business M and 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 surface the nuanced intricacies that key ingredients and the important factors that can improve your decision making in your own journey in the world of small business M and A. This podcast is produced by Axial, an online platform that makes it easier for business owners and their M and 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 free at axial.
Peter Lehrman 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.
[00:01:13] Speaker B: And should not be relied upon as.
[00:01:15] Speaker A: A basis for investment decisions. Podcast guests may have ongoing client relationships.
[00:01:20] Speaker B: With Axial start out at a high.
[00:01:22] Speaker C: Level with a primer on private credit.
[00:01:24] Speaker B: But we're going to take a very deep dive on private credit and what.
[00:01:27] Speaker C: It means for people operating in the lower middle market. I have a great guest to go into this with, Matt Pleuster, founder and CEO of Bridgepoint, an investment bank that he founded. He's based in Omaha, Nebraska. Matt, thank you so much for being here.
[00:01:41] Speaker B: Matt, thanks, Peter. Big fans of you and your company, Axial, and thanks for the opportunity.
[00:01:46] Speaker C: There's a ton of places to get started, but what I want to do, because private credit is, I dont think all that well known and well understood in the lower middle market. I want to just start with a bit of an origin story on private credit. Just the nature of where it began to form and where it began sort of started its life as a capital solution, so to speak, for privately held companies. So lets start there. How do you narrate the history of private credit? Where would you say it started? What is it? And well go from there.
[00:02:18] Speaker B: Yeah, thanks, keter. Fascinating topic, one that we're very passionate about and mission driven about. So appreciate the opportunity to talk about it, particularly down market and what I would call the lower middle market and the middle market. Private credit is fascinating and it's really, it's gone from non existent 20 years ago to now, filling a major gap in the ecosystem or starting to at least, and really shifting the paradigm on options for lower middle market companies, their owners and their boards. So, traditionally, outside of large public companies and sponsor owned companies, private companies had two options. Right. They had a bank probably that lent to them on a secured basis based on their assets, maybe their cash flow, and then they could raise equity and maybe sell a company someday. Those were kind of the solution set of options, right. For a private company. For most of american industrial history in 2000, I would call it 2005 to 2008 time period. Obviously, there was some breakage, right. In the capital markets base tightened, much similar to what were starting to see now. And there was a big gap. Right. And so I would call a capital vacuum, right. For middle market companies along the lines of the dynamic I just described. And so there was born these pockets of capital or this pocket of capital called private credit really about.
[00:03:37] Speaker C: Did it grow out of the great financial crisis or was it emerging?
[00:03:40] Speaker B: It really did. I mean, not that people werent pricing this risk a little bit like at private rounds previously, but on an institutional level like were seeing today, and I think is applicable to company owners. It really became a thing that anybody knew what it was about 2008, which was. You were there. I was there. I would call that financial crisis right in the middle of it. Right. And so, but back then in 2008, there was like two to $300 billion of this capital. Right. There were a few funds. Today, theres like 2 trillion growing to 3.5 trillion. So literally in the last 15 years, this pocket of capital, these pockets of capital have ten xed in what theyve brought to market. And I think thats only going to continue. And we could talk on this podcast, Peter, about the why for that at the utility of this pocket of capital for business owners and why it should be there. But really its something that has really been a phenomenon of the last 15 years period. And I would say for the lower middle market. And the middle market has really been a phenomenon over the last five to seven, maybe eight years.
[00:04:41] Speaker C: So lets talk about where it started. There were a few funds, according to you, in the 2008 period.
[00:04:47] Speaker B: Yep.
[00:04:48] Speaker C: Did those funds exist before the great financial crisis, or did they really spawn.
[00:04:52] Speaker B: In, they spawned out of it. They spawned out of the ashes, out of the dislocation they came about, Preston.
[00:04:58] Speaker C: And so what were those transactions that they were doing? What kinds of, like, lets just, what were the sizes of businesses that they were extending private credit to? Lets just like level set on those initial funds and those initial deal sizes and the kinds of companies that they were lending to?
[00:05:15] Speaker B: Yeah, absolutely. So definitely upmarket originally, right. Like 50 million plus of EBITDA for like first, maybe two, three years when we started. So I started Bridgepoint at 2010. It really hadn't come down market yet. There were a few people that would maybe come down to 15, one, five or 20 of EBITDA maybe in some very selected scenarios. But it certainly wasnt a widespread solution for the company owner that had five or $10 million of EBITDA. I think fast forward over the last 15 years, the 2010 to 2015 timeframe, private credit came down, mortgage, probably $10 million of EBITDA companies with $10 million of cash flow or EBITDA. Before COVID we had really seen an acceleration as more funds came about and it became more competitive, we were doing deals that were five, six, $7 million EBITDA unitranch private credit deals. Interestingly enough, when COVID happened, that vacuum kind of reappeared and funds moved up market. I think flight to safety, if you will, and we'll get into kind of current market conditions, et cetera. Peter Here a bit. But recently, again, I mean, we went under term sheet yesterday on a private credit transaction with company that had $3.8 million EBITDA. Now, that's a small deal for us, but this is a real solution down market or a real option that is a fit sometimes for companies that is unique and that affords them some special thanks. And so I think if you step back at the 30 or 60,000 foot view, back to your question, didnt exist 20 years ago, and then it existed only for super large companies and really high quality companies. And now were in an environment where im sure some folks, including you have seen this, are calling it the golden age of private credit, where its really come down market and filling that vacuum in a meaningful way. I think the exciting thing about this conversation with Peter, much of what I, and we do as a firm at Bridgepoint is educating company owners, because even though it is here and I believe only going to be here to stay and grow as a piece of the universe that it funds and the ecosystem, it is still very much unknown by Main Street America. And thats an exciting conversation to have. Right. Because you can have a paradigm shift in solutions and options for companies.
[00:07:21] Speaker C: Yeah, for sure. So I want to get there. What kinds of businesses north of 50 million of EBITDA were most able to get private credit? And in what circumstances? Were they choosing private credit, and were they choosing it because there was no other alternative, or were they choosing it because it was the preferred alternative? A bunch of questions there, but I just want to get a little bit more detail on the up market. 50 million plus sort of history before we start to go down market.
[00:07:45] Speaker B: And yeah I think the key phenotype of those original deals was up market, larger deals and mostly sponsor back transactions or LB lbos if you will right. Leverage buyouts where they were supporting a sponsor coming in with a real equity checkbook behind them to put more leverage on deals in a period where banks were tight. Thats where it started. And I dont know if there was certainly I mean at the end of the day capital providers whether its private credit, even bank or private equity, they all price risk but in that environment they were there filled that gap to get deals done. Thats how it originally started. It was less about sector I would say and more about type of transaction. Mostly started in sponsor backed world mostly around leveraged buyouts to support those which is a different. And the evolution there has been super interesting too is I think down to non sponsored.
[00:08:33] Speaker C: Were those private credit lenders working at that size and scale with those scale of businesses? Were they holding these loans on their balance sheet or were they moving some of this risk off into a secondary loan market?
[00:08:45] Speaker B: Almost all held on balance sheets.
I think if you think about what private credit is, most people know what a private equity fund is and how that works. Think of the exact same setup. So GP with LP's make bets or put capital to work and hold it for a return. That's exactly what private credit funds do. The people that fund this ecosystem we're talking about and except that they're investing up capital structure with more security, less risk and a lower rate of return. So instead of the 30% equity return target for most private equity funds that people would consider investing in and or having fund their company, this is kind of that in between historically eight to 20% market right where it's less risky but certainly not equity risk and a business owner doesn't want to give up control or dilution of their company.
[00:09:35] Speaker C: What is the contrast or similarity between private credit and mezzanine debt? Is mezzanine debt a form of private credit or take us through that?
[00:09:44] Speaker B: It is and thats probably a good nuance to highlight. Mezzanine debt is a form of private credit.
Mezzanine debt funds which actually there just arent as many. Im not getting to why but it was one of the earliest forms of private credit which is its not equity risk. But the bank wont go any further layer in another layer of more expensive debt, nondilutive capital. So mezzanine debt was and still is a pocket of private credit. And I think private credit maybe its a good opportunity to double click there. Peter, is a lot of things. Its unit tranche debt funds, which are just basically supersized term loan lenders. So whereas a bank might go to three times cash flow, a multiple of three times cash flow, we see the entrance folks go up to four to six, maybe even seven times cash flow. Right. So more capital. And we could talk about kind of the terms of that and the pros and the cons of that capital as those unitranch firms came about. They really displaced a lot of the people that traditionally would have used mezzanine who would go get the three times cash flow from a bank and do another turn or two with a mezzanine shot on top of that. Really, the unitranche folks became one stop shops where they just did one credit facility that was just as much capital. But you dont have two providers yet. One, you dont have inter creditor agreements. Its a simpler form of capital, etcetera. So I think as the unitranch populate, private credit has boomed. We've seen them take share from mezzanine. Now, what's interesting and the current environment, Peter, related to mezzanine and unitrage is a lot of companies, right, maybe locked in their bank deal when rates were at four or 5%, right. And now they're so for plus 150 to 300, which is like seven to 9%. So the people now that have a bank deal maybe for two or three or four more years, really don't want to refinance that 4% money, right, or 3% money. And so that is the math now, yields, sometimes in those scenarios, bringing back in as leaving the bank in place, right. Because you dont want to reprice that capital and that polarity behind it. So unitranche kind of at the highest end of private credit, right, or most up, most secured mezzanine, which is a slug of that kind of in the middle. And then also in the capital spectrum of risk for companies, we do a lot. Also at structured capital, structured credit, structured equity dequity. Those are all words that they use where companies say, okay, ive got an equity term sheet, 30% cost of capital. They want a board cull, bunch of governance. I really dont want to give up control. I just want to do something the bank doesnt love. Thats maybe 15% risk. Were doing a bunch of those, too. So what it really is various pockets, which are all funds mostly. Theres some nuance there around, family office, hedge funds, et cetera. But think of funds that invest in those different sleeves at risk across private credit, that are all very similar to private equity funds, have called their capital for private lp's want to put it to work. They want to leave it out there, and they want to give their funds, I'm sorry, their portfolio companies that are working more money, quite frankly, because the return is good.
[00:12:40] Speaker C: Why don't the banks want to lend in some of these cases? What's been your experience about bank hesitancy to lend here? Why do they just say no instead of increase the price?
[00:12:52] Speaker B: Good question. The bank environment is much different. And I don't want to denigrate banks. I mean, we are big fans of banks. They have, America has built most successful economy in world history on the back of banks. And I think one thing that if you're a banker listening to this podcast, I think a lot of times private credit is seen as a threat to bank finance.
[00:13:10] Speaker C: And when you say banker in this concept, you're saying a commercial banker, right? Yeah, yeah.
[00:13:16] Speaker B: You know, all the way up to the JPMs balance. Right. Every one of these private credit deals actually has a bank involved. So most private credit funds, whether theyre mezzanine or unitranch or structured as we just talked through, they want to lend a lot of money, but they dont really actually want to do a lot of what banks do. And actually, where banks make most of their money, which is day to day revolver draws. Right. Like, Peter, you run a business, so do I. Right. Just the ins and outs of the operations of a business financially in cash flow, they dont want to do that. They dont want to do treasury management. Right. Cash management, really. All of the higher return stuff for a bank, banks are still doing that at every one of these deals. The price of capital, though, where banks are regulated, doesnt fit the risk profile of these deals. That might not be bank risk anymore, but theyre certainly not equity risk yet. Thats the gap that private credit has been filling and is continuing to fill in a really exciting way. And theres some case studies around this where traditionally, before private credit, a company owner probably would have had to give up equity, maybe even control, to get something done, even if it was an equity risk, just because there was this vacuum in the middle of the capital stack, between 4% commercial bank money and private equity money at 25, 30, 35%. Thats the vacuum that theyre filling. And quite frankly, banks dont have to fill that gap. Right. They should be disciplined that there should be a lower cost of capital for highly secure deals. And its actually completely complementary to what private credit is doing. And its actually whats been happening for large public companies and private companies for a long time. Like my background, I worked at Deutsche bank at Morgan Stanley. All of our people are here from similar ilk at big banks. And we did the bank facilities, but then we went out and syndicated the high yield, right, or the second lead, the convertible stuff, kind of that I have to 20% risk capital lease funds are now filling that same function down market for private companies.
[00:15:04] Speaker C: Do you feel like this gap existed because of 2008? Or do you feel like if you went back to like 2003, 2004, there was bank debt and there was then private equity capital, and this gap was still there, but nobody really got underway, beginning to price this risk until after 2008, for some reason. Was it being filled by the banks prior to 2008, or was that gap there? And then for some reason 2008, the capital started to rush towards that gap in a way that it hadn't prior to.
[00:15:38] Speaker B: I think its the latter, Peter. The vacuum has always been there. The reality is the solutions just didnt exist. And so people didnt do things unless they were willing to give up equity that the bank wouldnt finance. I think the common conversation for the last 100 years on Main Street America has been, go to your banker, you want to do this? They say yes or no. If they say yes, you do it, and they say no, you dont until you can, unless youd want to give up equity or sell the company. And the reality is, even the equity capital markets, the private equity capital markets down market really werent very efficient places where we spent time with our two home offices in Nebraska. There was a guy or a firm in town where he went, he did. Dennis Doctor money. I think its more about the capital of vacuum has been there for a long time. Its more about markets just becoming more efficient and pricing and filling the gap to price that risk.
[00:16:31] Speaker C: And the history of the leveraged buyout transactions north of 50 million of EBITDA using private credit. The reason they were using private credit was because they just ultimately concluded that they would be over equitizing these transactions if they fully funded the gap with equity, correct?
[00:16:51] Speaker B: Yeah, of a 30% to 50% LtV or loan to value. It's like you buy a house, right? How much debt are you using? 80 20. Traditionally, private equity deals have been like 50 50, 60 40. And if a bank is going to go to 30, maybe 40%. If you fill that gap with equity, youre not going to win the bid. If youre a buyer on an LPO, because somebody else is going to get more aggressive on leverage, which is a direct correlation to IRR, which is the business model fundamentally of private equity firms. And so the more leverage you can use, the higher your IRR is going to be, the higher you could bid, and youre going to win more deals.
[00:17:25] Speaker C: Lets turn to like, what do you see business owners, how are they reacting to this product? I understand a private equity firm looks at this and says, well, I can put less capital in, and as long as everything goes okay, im going to have higher returns on this. But like, how are business owners responding to this product? They understand bank debt and they understand the idea of selling their company to a private equity firm or to a strategic buyer. I think a lot of business owners kind of understand that. What are the reactions you're seeing from business owners when the private credit solution starts to get put in front of them? Like, how do they respond to it? What questions are they asking? How are they navigating, like, this new product or this theoretically new product?
[00:18:04] Speaker B: Yeah, Peter, I think it's a really smart question, and it's something that we kind of, we spend our lives and our mission doing. I think fundamentally, it's unknown, quite frankly. A lot of business owners are averse to debt. Right. A lot of people are like you and I, where they bootstrapped a company and theyre not really super excited about putting themselves at risk again if they dont have to. I think the word debt is a scary word for a lot of business owners. Now, certainly theres a spectrum there of risk tolerance, but I think on average it sounds scary and it sounds like debt, and it sounds like something I dont want if I dont have to have it. We actually use the term a lot, non dilutive capital instead of debt, because thats really what it is. And really debt and equity are terms that dont really mean anything. Its a spectrum of governance, covenants, risk and strings, if you will. We spend all of our time in the, I would call it like msas from three to 50, educating. It's a ton of education devils in the details on these structures. But I think it's a lot of education. And I would just, just to be blunt, a lot of people at first are like, that sounds, let's talk about equity, just because I know what that is. Right. I emotionally understand that's like the ecosystem we've lived in. The reality is, and there's some awesome case studies here, which I think maybe we'll get into. I'm not sure.
[00:19:16] Speaker C: But yeah, let's do that about like.
[00:19:17] Speaker B: The before and after when you get, when you take off the like oh the headline sounds scary maybe that are really paradigm shift taken transformational, but no bones about it. Its an obscure pocket of capital or at least has been where education is key and understanding it well is something and a challenge that we deal with every day. Id say its a lot of education and I think the common thing even when last week, Peter, we were in your neck of the woods in New York, even the biggest law firms in New York really are still getting up to speed on this pocket of capital which is why this is an exciting conversation.
[00:19:48] Speaker C: The case studies sound really good and I think it'd be really interesting to go through the case studies. Maybe at least two if you've got them on the tip of your tongue, which you probably do Matt. I mean one where it's a change of control transaction and private credit is employed. And then my hunch is that private credit has this opportunity to be deployed and is being deployed even when there is no change of control. So anyway I have like a sneaking suspicion that you have plenty of expertise with that as well. And so I want to cover that as at least one of the case studies. There's no change of control. The owner is accessing private credit. And we go through sort of the case study of why he or she did that and the amounts and maybe some information on terms. But yeah I'd love to go through those two case studies. I think we can just jump right into them now if you're ready.
[00:20:35] Speaker B: I'd love to. Yeah. And I think those are maybe the most effective at education even not just with company owners, even with other trusted advisors, right. Attorneys, cbas, et cetera. We case studies are always effective I think because it helps you actually see it. Right. So maybe too, if it's okay with you Peter, I'll maybe flip the script though and start with the non control, non change of control. Because I think the reality is, I think the highest impact use case for private credit is actually the non change of control. Now don't get me wrong, we still love selling companies and making people rich, right, for their multi generational or life's work. And private credit as ill get into on the second or third case study can support that and more value. But I think the most exciting, probably paradigm shifting outcomes for private companies in the middle market are the non control transactions which by the way, thats where were seeing what I would call most of our most exciting transactions where were. And theres definitely a lot of momentum in that area. So ill cover one or two. One would be a West coast software company that we did a deal with that must have been twelve, maybe 18 months ago.
They had a bank who had been funding them for a long time, like 20 years. This is a very mission driven software company, which is an impact investment bank we love. It's actually in the educational space, very mission driven about access for underprivileged people to education, et cetera. But effectively the bank said no more. They said, okay, you've never really made a lot of money. You're always investing in growth and this really isn't bank risk. And you've grown up and you're big enough where were uncomfortable. So go find another lending, another solution.
[00:22:10] Speaker C: Roughly how big a software business?
[00:22:13] Speaker B: Like 15 and ARR and they were.
[00:22:15] Speaker C: Accessing debt capital from their bank, or it was just a bank, just straight.
[00:22:18] Speaker B: Debt capital, a revolver and a term loan, right? Personal guarantee. Kind of all the bells and whistles that every business owner listening to this podcast will be familiar with. They did what they're, and I would call it like a mid sized city, right? They're not inches New York, not in Chicago, not in San Francisco. They called friends and kind of did the equity thing. They had a couple investment banks pitch them an equity raise, right? Go out and throw it against the wall, see who wants to get into your capital stack. We were actually introduced to them by one of their advisors, and the equity term sheets that they had on the table were for anywhere between 45 and 60% of their capital stack. In other words, they probably were going to give up control to keep going and keep growing, right? Unless they just wanted to shut it off, be steady state. Our team went out to private credit and sourced them a structured debt series of term sheets. Structured debt. Structured equity term sheets. The rate was not cheap. Now for those listening that are used to bank debt, not cheap like mid teens. But their equity term sheets were 30 plus percent giving up over half the company went out and got $40 million of capital. They had like 17 with the bank so refinanced that out gave the owner actually some personal equity. Typical entrepreneur who had never taken anything out, actually got a dividend check, got rid of his personal guarantee and got a $20 billion delayed draw term loan to actually go fund future growth.
By the way, heres the real interesting thing about this that I think is really exciting. Instead of 60% dilution, giving up control of this company, he got 6% dilution. So almost zero. And it came in the form of warrants with no governance, nobody on his board. Continue the mission. And he calls it fuel. Right. I needed fuel for the plane, right, to keep growing.
[00:24:06] Speaker C: I was going to ask, what is he trying to do?
How is he using this capital in excess of just his net profits?
[00:24:16] Speaker B: Most of it was he had existing cap, he had existing debt, right. So you had to refinance that, right? That was just growth capital hed already spent. He wanted some personal liquidity and he wanted access to additional growth capital to keep reinvesting at burning cash instead of turning it off and then starting to achieve additional profitability. So all three, refinancing existing debt, personal liquidity or dividend, if you will, personal dividend, non recourse and growth capital. So thats pretty exciting, right? He gets to set up to stop mission and give up control of this company. He gets no personal liquidity. He gets personal liquidity, continue mission, get rid of personal guarantee, and now I have a growth partner for the future. And oh, by the way, I still own 94% of my company that I thought somebody else was going to be my boss the day after closing.
[00:25:01] Speaker C: Did he think carefully about just de levering the business with his existing bank and just continuing to own 100% of the business? Why was that not what he ultimately decided, in your view? I mean, obviously you can only speak for him to the best of your ability, but why do you think he didnt just let it deliver and be fully debt free, own 100% of it, and take no private credit risk with.
[00:25:23] Speaker B: 15% money, passion and mission for the business and the opportunity. And if you turn off the spigot and you've got a software company with 0% growth, there's an equity value conversation right there, or a value creation conversation too. You wanted to continue to serve mission and create value and saw a lot of opportunity.
[00:25:40] Speaker C: And how does he get comfortable with that interest, with that cost of capital? Because obviously the cost of capital, when you sell the company for, sell 40% to 60% of the company, you know, your cost of capital is, you know, is the equity return that's being derived by the equity investor who's deciding to give you equity capital in exchange for ownership. But there's no, you don't have repayment risk, right. You don't have interest payment. Like, what is the nature of this private credit in terms of when? How is it, yeah, just how is it structured? Like when does he have to write a check back to the private credit investor? Because that money that hes writing back to them is money that hes not writing to grow the business. So how does that work?
[00:26:20] Speaker B: Great question. I think this is one of the things that can be a little bit of magic around private credit. So I think when people think of private credit, theyre like, okay, just more, a more expensive version of the debt that Im already used to. Right. This is actually is cushion from a cash flow standpoint, actually went up in this deal. So the traditional like amortization or principal repayment for a bank debt deal or a traditional, a main street debt deal is what, five years probably on a term loan. That's a pretty standard deal, maybe seven, but usually five or 20% a year if you will to be simplistic, private credit, this deal was actually done at 1% amortization, 100 year amortization, which if you do the math on like, okay, it sounds scary, it sounds like a big rate. Like the first, I think the first business owner question is always what's the rate? Right. Like that's what we're used to at the conversation around credit or debt or non dilutive capital. But if you actually do the math on the difference between a 15% deal at 1% to 5% amortization or 20 to 100 year amortization versus a bank deal at five year am, theres a lot more cushion in a lower amortization deal. So lower amortization, more cash flow flexibility. Two, that these are highly bespoke transactions and highly negotiated. Think about how you would negotiate a private equity term sheet. All the things, how much are you rolling, whats the value, whats the incentive plan, all those nuances that really are different than just whats the headline, enterprise value or sale price number. Some of this deal was also done at picked, which is payment in kind. So its actually not a cash payment, it actually just grows the balance. Right. And so if youre confident in your growth and a growing company, you print all the margin between 15% and 30%. The traditionally private equity funds print it for themselves. You put that back in the pocket for you and your company and to reinvest in growth. So theres a nuance here on structure, both on how much has to go back and when. Right. Those checks that you referenced, feeder that you're writing, they dont have to go back as quickly. And the magic of flexibility, particularly for a growth business where you can put that back in as your own equity is really impactful and really allows business owners to one have more flexibility and to create value for themselves instead of for a third party equity part.
[00:28:28] Speaker C: I have to ask these questions. Why does a private credit fund. Why is it exciting for them to create that kind of amortization flexibility? What makes that work?
[00:28:37] Speaker B: From their perspective, it's actually great for them. So this is another, I think, paradigm that's different for private credit versus traditional banks. Traditional banks are generally like, okay, here's $100. I want it back in five years and I'll feel better. The more I get back the reality, the fundamentally credit, you make money. Right. On the interest rate, on having credit extended. Right. So I think its a different mentality for this pocket of capital that is more risk tolerant. Actually, private credit is more focused on you not paying them back a lot of times. So we actually spend a lot of time negotiating down for our clients once weve got a group of term sheets or lois or iois on these deals, negotiating down the prepayment penalties because they actually want call protection. Its actually more like a bond. Right. They want call protection. If they give you $50 million, they dont want to get to 30 next year. They want their interest rate on the 50. And quite frankly, they also want to give you more. Its like, okay, well, youre performing. We like the rate. How do we give you more money for all the things that this does, which are a little different than bank acquisition, financing, gross financing, partner buyout, uncollateralized cash flow lending, SaaS lending, all of those things? Its a totally different paradigm on how quickly does the lender get their money back and do they want it back? Do they want you to have the outstanding.
[00:29:57] Speaker C: It's fascinating.
[00:29:58] Speaker B: Has huge utilities, but so does bank capital, right? I mean, we often, we often, Peter, as we're advising clients, which our passion is exactly this. Advising private companies in the lower middle market about these pockets of capital. Often our advice is like, if the bank will do that, you should take it like that is your best capital. So I don't mean to paint private credit as like, the end all, be all. Sure.
[00:30:20] Speaker C: Yeah.
[00:30:21] Speaker B: The use cases for the in between are fascinating and hugely impactful. So that's one case study on a non controlled transaction. I'll just very quickly mention another, just because I think we're seeing a lot of it on a non controlled basis. We did a series of transactions for a small town midwestern vet, series of vet clinics.
And this is, I would just call this like private equity. Without the private equity, we have multiple transactions with some of our team members, Peter, who, you know, going on right now, where theyre doing exactly that, where theyve kind of done this analysis that we just walked through, and theyre like, okay, well private equity is good. Do I need the private equity firm to achieve the returns for myself that they otherwise are achieving? And so were seeing more acquisition finance and roll up plays with private credit and without the private equity firm. So one we did was in the animal health space and this is really cool mission. This is not a target geography. In fact, its in a small town in the middle of nowhere. We brought in $70 million of growth capital for them to acquire other practices without a private equity firm and also to buy out old partners. And so we brought in $70 million of growth capital for a business that had sub $4 million of existing EBITDA around a thesis. And when we talked earlier about how far down market has this come, were even seeing that down to, ok, were an operator in the space and weve got a series of lois or a series of targets where we can acquire that.
I dont want to say zero. You could die. I dont want to oversell it or be disingenuous, but down to the private equity thesis, but without the equity, its fascinating.
[00:31:56] Speaker C: Preston, in what circumstances does this go wrong? How does it pan out? Poorly. Obviously, when a business is doing poorly, not a lot of things can go right. So the obvious answer is, well, when the business starts doing poorly. But is there nuance to that in any way?
[00:32:14] Speaker B: Yeah, I think theres a ton of nuance to that. Not this similar to how theres a ton of nuance to private equity. Right. I mean, you guys see this, you guys have great relationships with the funder universe. On the equity side, private equity firms come in all different shapes and sizes and characteristics and personalities, right. And how they behave in certain scenarios can be very different from fund a to fund c. So knowing the funders, which is difficult, which is why I think our business has a lot of impact. We know them so well, uniquely, is hugely critical. We see, I think just given the lack of education and sophistication, down market of private credit, there are companies that get a term sheet on a one off basis, just like people get a one off equity term sheet to sell their company. I think thats really a dangerous thing because there are, I think you asked a really important question, particularly when youre talking debt or credit or non dilutive, right. I mean, they have private credit, has less covenants and no personal guarantees, but there are covenants, right. And there will be consequences if it doesnt work, that are different than equity and different than a bank. But there are definitely a few that are loaned to own. Right. And theyre like, okay, ill give you six times leverage on that lBo because I think maybe like my downside is pretty good. Im actually buying the company for six times right. In a ten time space. I would say on average though that's the exception. So those do exist. And companies that are thinking about this DDev, I think trusted counsel who actually have been through deals with those folks know how they act because that's where it's easy to say, oh, we're good friends at management until you're in bed together and something goes wrong. Right. How do you behave when it happens? On average though, this pocket of capital does not want to own companies. Think of the private equity like generalists. That is kind of similar to this kind of phenotype. There's usually like a 2% trigger on a default right where your rate might go from sofa plus 600, sofa plus eight if you miss the covenant, et cetera. But generally they don't. One, they want their money out there and they want you to go full cycle and they want to be refined out. Five years like that is their base case. That is what they want to happen. This is not the, I'm going to put it, some gotchas in the 100 page credit agreement and hope you trip it and then own your company. That is not for most of this universe. They don't want to own it. I would say theyre pretty good partners, maybe better than most people would expect. We have banks ask us that a lot because I think thats one of the defense mechanisms of like, oh its all great, theyll lend you more money but until it goes wrong right then you want a bank. I think on average folks in this space its small enough and well known enough in its little niche pocket that the good actors are pretty good actors and they dont want to own your company. At the end of the day, quite frankly they hope you knock off the ball and they can lend you twice as much in five years. Thats the dream outcome.
[00:34:47] Speaker C: Yeah. What are the covenants? And what is different about these covenants from bank covenants?
[00:34:53] Speaker B: Yeah, I think probably the biggest difference down market, a couple things. The biggest difference down market though from a covenant standpoint is less covenants. Usually on a private capital deal there's one covenant which is a debt leverage covenant, whereas in bank credit a lot of times you'll have three, four covenants. Right. Net worth, tangible net worth right DSCR, et cetera. So I would say simple from a coverage standpoint but highly negotiated. With our clients we spend a lot of time in the weeds. Not just how much money you need, Glenn, and what's the rate? What's the AmBA like on pushing two covenant? Right. How safe is it? That's critical. That's the biggest difference. The second biggest difference, I think, is for this audience, your podcast, Peter, is personal risk. Most bank deals down market a personal guarantee, right, of people like me and you that own business.
Yeah, we lived it, right? Like, at the end of the day, if it goes wrong, they're going to come get our house, right? I mean, that's collateral. We have never done a private credit deal that has a personal guarantee. And that's. That has a lot of utility. Right. People that are like, okay, I've run the race. We're in a good spot thinking about like, personal liquidity. And honestly, I'm just tired of like, signing my family up for the risk. Right. At some point. So personal guarantees generally go away under these things, which is meaningful. That's kind of the. Those are, I would say from a covenant like personal risk, corporate risk standpoint, it's pretty simple. Those are the two biggest components. The other benefits, if you will. The con is the rate, right. The cost of capital. That's the con versus a bank deal. Worse than bank debt, but better than equity. Like half of equity but twice bank debt. That's kind of your spectrum, I would say, on average. But more capital available than from banks, for sure. More capital available for things that banks don't like. Right? Like, I want a dividend check. Now, there's a little less of that in this market, but we've done a lot of debt. Dividend recaps with private credit the last couple of years. Partner buyout, right. Lending to software companies that really don't have any collateral. All those things that a bank might say that's not really bank risk, you know, so amount of capital, things you can use it for, and personal risk as well as a committed growth partner. Right. Back to the dynamic of most of these funds actually want to lend you more money. That is their business. And they want to leave it out there versus get it back quickly. Those are the biggest, I think, pros and cons of this pocket of capital relative to bank debt. And then on the relative to equity, a huge pro is lack of governance. If you take equity, even a minority deal, you're probably going to have two gals or guys on your board that have real say in what the business does. Most of these deals come with very limited governance, usually just information rights. They want the board back. They want to know what EBITDA is, but they don't actually want to tell you how to run, quite frankly. They don't want to sit on the board. And for private companies, private company business owner here, thats impactful right. That is a meaningful consideration.
[00:37:39] Speaker C: Yeah. Thats a big difference from equity. Thats for sure.
[00:37:42] Speaker B: Do you want me to cover a change of control deal?
[00:37:44] Speaker C: Yeah, I would love to cover a change of control deal. I have a couple of other questions on just is there any positive selection for private credit in terms of business models that they like or business models that are particularly well attuned to this, like what kinds of business owners and maybe, maybe there's a lot of flexibility here, but what kinds of business owners or what kinds of business models tend to be ones that can attract private credit in ways that don't endanger the business owner and endanger the business inappropriately?
[00:38:14] Speaker B: Great question. And it is different than equity, which our business, for example. Right. So we're at best and bank historically, 40% to 50% of our deals have been private credit. And what I would call leverage finance or corporate finance, 50 to 60 are still sell side. The way we service people on the sell side is sector focused because it matters, strategics matter, the buyers are different and you can drive value through understanding sector. Private credit. Almost across the board are generalist funders. So its less about sector. Now. Certainly certain sectors lend themselves to the dynamics of what theyre looking for, but they are generalist funders for sure. And theyre credit folks. So theyre more worried about can you service this debt package or this structured package than they are the upside. So things they like or don't like, maybe I'll start with don't like, don't love huge customer concentration. Right. Where Amazon turns the lights off on you and you're dead overnight. Right. That's a bad outcome. Right. So customer concentration, I'd say that's a big one. Recurrence of revenue. Right. Is it a project based business? I don't mean recurrence necessarily in like software SaaS. That's great. Obviously that's some of the best form. But I think it's really good for people that have some track record of recurrence, re occurrence, if you will. It's much harder for construction companies and true project based, bulky project risk businesses. And I think a lot of it, most downmarket, just like equity, they're mostly jockey bets. So a lot of it is the management team, how sophisticated the management team. A lot of private credit deals fall apart around financial reporting and what level of trust do we have for them to strategically manage the finances of a business? So its definitely somewhere in between bank capital and equity capital.
[00:40:00] Speaker C: Preston can you talk about that, the financial reporting, a lot of small and mid sized businesses hit the skids when theyre selling their company because of financial reporting, financial hygiene, the ability to furnish that data in diligence, the ability to demonstrate that their definition of EBITDA is reasonable and survive a QEV, can you talk that sounds like a similar problem here. What does financial reporting, what does good financial reporting look like from a private creditors perspective?
[00:40:28] Speaker B: Steven yeah, I think the dynamic, I mean, obviously we live exactly what you just described every day as middle market investment bankers. It is identical on the equity side as it is to private credit. I think the diligence financially and actually the deal document looks a lot more like private equity than debt capital markets or, I'm sorry, commercial banks. So all the same stuff. We actually usually do a pre market quality earnings on private credit deal, just like we do a sell side deal. Certainly the buy, the buyer or the funder, in this case the lender is going to do quality of earnings, have to have at least a part time CFO. This isn't the, hey, here's my financials on a, here's the receipts. This is real financials, right? You're going to have a Q of Eric yeah. You're going to have an audit. Right. And we see the same dynamics, the same pick an $8 million EBITDA company on the equity side, the same issues that we see Appa in sell side deals around QV absolutely happen on private credit. And in a lot of ways maybe, or even more important, right. Because at the end of the day, it takes EBITDA service down. Right.
[00:41:29] Speaker C: So if they don't have an audit.
[00:41:31] Speaker B: Yet, most of our clients that are doing private credit or considering private credit don't yet have an audit.
[00:41:37] Speaker C: So does the Q of E stand in place for that? And then they get, and then the private creditor will sort of require an audit once the transaction is completed on an annual basis. How does ongoing financial hygiene and reporting get mandated or changed? Does a Q of E handle it for the purposes of the transaction, or do they have to go through a full audit process before they can close a transaction?
[00:42:00] Speaker B: No, you nail it. Peter so for the purposes of closing the transaction or importing the capital to the company's balance sheet or the owner's balance sheet, the Q of E is the financial verification that's required, right. So our standard process is we'd love to do a pre market. Right. Because we don't like surprises for our clients and then in a good process or for yourself in a good process. Right. Then we'll where we got a lot of funder interest, we'll have them actually just update that, have them assign it fundraiser ongoing financial reporting is agreed to like before closing, usually an audit. Not always. Usually. I think the real thing though is just like an institutionalization of financial management of the company. So board backs, which is, by the way, as somebody that runs a company that this is good stuff for a company owner and creating value. But much similar board reporting focus on EBITDA and the KPI's and the metrics that actually go into that versus be receivers of information financially driving the business. But to get the deal done Q of the ongoing as agreed usually. Okay.
[00:43:04] Speaker C: That all makes a lot of sense and sounds similar to what youre definitely going to stare down as a business owner if you decide to sell the company. Yeah, for sure you want to cover the case study where its a change of control transaction and private credit is invoked in lieu of some other form of debt.
[00:43:19] Speaker B: Yeah, I think its interesting, particularly for your audience, Peter. So we actually, given our unique focus on private credit, we actually employ it very impactfully on sale transactions or majority recap transactions, uniquely. So at Bake ops were usually, I think, only folks talking about it. But its really mattered. If youve gone through, if youre a business owner listening to this and youve got through a failed sale transaction the last two to three years, a lot of those have failed because of, hey, I had a term sheet or an loi, we signed it and then the private equity firm came back and said, hey, we underwrote this with four times leverage. The lender said we can only get three times. So Im going to retrade you, poof, there goes the deal. Right. And a lot of times buyers have used that as leverage, whether thats actually happened or its just a tough financing market. Right. Its the reality of the market and the kind of leverage a buyer has in this type of environment. We do what we used to call it big bank staple financing on every deal. Some people call it paperclip financing, right. But it would be in very simplistic terms. Its like if you hired a sell side broker for your condo in Chicago. The broker comes with the debt, support the transaction. Right. Versus saying, hey, I hope we find a good buyer and I hope their credit worthy can get the money. So we do staple financings with private credit on every deal where we go out and say, okay, XYZ credit fund and three others like it are going to land between four and five times EBITDA at these terms. And we've seen that have a huge impact, probably most importantly on just getting deals across the finish line versus them blowing up lack of finance ability, if you will, but also too on driving value. I'll give you two case study if it's helpful. Peter, we did a deal in the last year or two. It was two years ago actually. Typical founder owner, bootstrapped company. It's a nice company.
Initial kind of winning Loi or preferred party. Was that $95 million of enterprise value or sale price. $85 million of that was in cash, 10%. Was it non cash yet. Equity role we then brought to bear one of our private credit relationships for staple financing, who underwrote six times leverage on this business and the package went to $120 million sell price only. The only thing that changed was bringing private capital to the table. Private credit to the table for stable finance. We went from 95 to 120 on purchase price and cash at close went from 85 million to 117 and a half.
[00:45:48] Speaker C: Same equity partner or a new equity partner?
[00:45:50] Speaker B: Same equity partner. No change in EBITDa quality of earnings. The only thing that changed was amount of leverage on the business run through an equity partners LBO model. I mean, obviously some negotiation, but I mean an absolute period like 22 and a half million dollars of extra cash at close on $100 million transaction. Hugely impactful, right?
[00:46:09] Speaker C: Huge. Yeah, for sure. Has this influenced the order of operations for you as an investment banker in terms of how your engaging with the different sort of sources of capital in the stack? It sounds like in that case you had a deal lined up, $95 million, the equity was there and then you were going out and procuring debt. And when you procured the debt, you ultimately were able to completely change the purchase price of the transaction and keep the same equity in place. It sounds like in other cases youre stapling the financing together to the business and then going out and securing the final equity partner for the change of control transaction. Is that right? We're inverting, inverting the order of operation sometimes.
[00:46:51] Speaker B: If you think we've only gone earlier in the last twelve to 18 months on staple financing. And so now when we basically, when we really hit market, we also have the same conversations with our staple partners and early, earlier and more often, I guess is where we're headache in that conversation with the equity funders. I mean, you dont want to, I mean theres a nuance there to kind of negotiation staging, right. With buyers on the sell side. So I would say its a little bit bespoke based on nature of the fund. Right. And what theyre messaging to you on how theyre going to capitalize the transaction. This was an example of like where we really liked our client, really liked one buyer, but our buyer didnt have as aggressive of debt relationships as we did. I would say more often in this dislocated like kind of bank traditional financing market, we're going earlier and more often and leading with like okay, here's your stable package for 4.5 times debt. Right. With two and a half percent amortization at this rate. Use that to send us better news on purchase price structure.
[00:47:53] Speaker C: Yeah, absolutely. No, for sure. That's fantastic. Do you find that the equity is generally excited about partnering with your staple partners or do you have to thrash around when they want to switch it out but keep the terms with somebody else?
[00:48:09] Speaker B: I would say maybe half the time they actually closed with those parties. But at worst it allows them to drive their incumbents. Right. Their best relationships. Quite frankly, we don't really care. Right. Because we're sitting on the side of the private company. We just want the best outcome for them. Like that's true for us, full stop. I think, though, back to like the genesis of Peter White. We thought this would be an interesting podcast. I think when you ask about like how efficient is it down market, it's still so inefficient that most of the private equity funds like call it the sub half billion dollar current fund folks still are pretty unsophisticated about private credit. Right. Which I think only speaks to. And those are people that grew up as investment bankers, most of them, right. So there's still a ton of opportunity to drive value down market through education and knowledge of this product set. Because a lot of times they say, hey, I know you guys are on a fleeting private credit investment banks, we don't do that. What do you have that could allow us to prove our bid and keep our IR charts cash on cash targets?
[00:49:05] Speaker C: These are such good case studies. They're fantastic examples.
[00:49:09] Speaker B: I won't bore you with any others, I promise. I got three in there, Peter, so thanks.
[00:49:12] Speaker C: What would the sharpest bear on this whole product? What is the best argument that you've heard against this? Im just trying to figure out what would the smartest person that youve come across whos been skeptical or bearish on these approaches, these new forms of capital? I mean, what do they say, how do they try and poke holes in it? Is anybody doing that in a way that is sophisticated and really thoughtful as opposed to just its new and unproven? And I dont understand it very well. So im going to sort of throw shade at it.
[00:49:50] Speaker B: I think the best, I mean, at the end of the day, the entire capital ecosystem, even the traditional pockets of equity and bank debt, its pricing risk, I think its less about the who here.
I think the argument of its new is nonsensical. Quite frankly, thats just fear or selling fear. I think the best board members, I would probably say we service only private companies uniquely. Right. And entrepreneur, talking to entrepreneur, the future is always bright, right. We're always excited and it's always up into the right. I think the best board members are probably less critical about the product that may be astutely critical of projections. Right. And where the company's going and actually saying, okay, that's great. Thank you, CFO, for the equity case. Like, what is the downside case, really? What could go wrong here? You need to think about that. If you're considering private credit, as any company should. I think a lot of private companies are always probably a little bit optimistic on the projections, which I think private equity funds will tell you the same. You need to think really critically about what is the downside case of this business? What could go wrong? What is a recessionary environment look like for this business? What does the customer base look like? Whats our key band risk? All those, id say much more focused on the downside risk of the business itself. Thats really how this doesnt work. It doesnt work because KKRs debt fund isnt a real fund, that theyre going to do something nefarious. Its more about the credit side and the operational side of being able to underwrite what this business is going to do financially for the five years. Why theyre going to be our partner.
[00:51:29] Speaker C: Robert, is that the right way to think about duration, five ish years?
[00:51:33] Speaker B: Robert yeah, I think so, yeah. Because most of these are five year facilities. Theyre all four to seven. But five is like the standard cookie cutter deal. And given the different amortization, this is more like a bond, right. You need to be confident you could not only service it but refinance it.
So this, instead of in year five, you having paid down your entire term loan, or when year 30 of a mortgage, you got zero debt. This is more like in year five, youve got four years of debt left.
If EBITDA is the same or the credit markets going to be as good to support Refi partner or am I actually going to perform to my cash flow targets? And it's actually now maybe it's, maybe it's actually a bank deal. I think that's kind of our base case. We see Peter is like, okay, this is for now, but it's actually probably a bank deal. Again, if we perform right, we'll probably delever from four times leverage to one and a half or two during that period. And as a result we will be a much bigger company. Right. Because we've been able to reinvest those proceeds in our base business versus serviced it.
[00:52:30] Speaker C: What about like the rates of change or the ways in which things have changed within private credit like as its continued to mature? What are you seeing private credit firms doing differently today versus a handful of years ago? Where are they getting better? Where are they getting smarter? How is the private credit product evolving and getting better?
Are they getting better at pricing risk? Or are there other things that are changing too?
[00:52:56] Speaker B: I think the biggest thing is theres more of them. Its still a very niche group of funders. Theres probably 200 of these funds versus private equity. Theres 4000 that and its a small group. So like last week in your city, Peter, in New York, we had our private credit funded happy hour. We had 80 people registered. Thats like literally a third of the universe, maybe 40%. Right. And its a very tight community. Whereas you could go to every private equity ACG event in the country, you still wouldnt run into half of them. Right. So theres more out. And I think what that means is its more efficient. Early days private credit maybe up until a couple of years ago, it was like, okay, theres a unitranch bucket and a Mezni bucket, right, you fit. But there were still vacuums there. What do you do with the 16% risk? Weve got the eight to twelve. Youve got some mezzanine maybe up 16. But whats the quasi debt equity pocket look like? The efficiency across the risk spectrum is becoming more complete. And so as such were seeing not just enitrage funds and mezzanine funds, but more flexibility within those funds across their mandate to be kind of one stop debt equity kind of hybrid. Right. Go deeper in the capital structure, but also just dedicated very targeted strategies around structured credit or structured equity. Sometimes those are even around like weve got a structured credit fund for software, right. Because thats a pocket so much of the, I think, efficiency thats been gained in down market and private equity over the last 30 years now coming to private credit. And I think as a result, also being better partners for private companies because not trying to fit sword bags and round holes as much, there's really truly a spectrum now of funders to price those deals and partner with companies. The, our joke is like, what's kind of like when I started, we were, I was a big bank and we were proud because we knew the 20 original private equity funds, right, the KKRs, the TPGs, the Carlyles. And then it was like probably like you, right, everybody, the, everybody that you have a certain private equity fund that's starting to happen in private credit, right. Like we're really proud to know them all. And now we have to work harder because there's a new one every day versus there was a new one every three months. And I think thats there because theres a need for this capital, right. As banks have tightened a little bit and theres an inefficiency there at the market that could be filled with this in the right way by this pocket.
[00:55:07] Speaker C: Do you think retiring business, like, how does a retiring business owner think about this? Is it really just in the context of changing control transactions? Or can a retiring business owner think about private credit like the software business that you mentioned on the west coast? Clearly the founder is still running that business, still wants to grow that business. He's or she is not. They're not stepping out. What about for baby boomers? What about for people that are ready to sell the business entirely or transition into the next generation? How does the product work for them? How would, is it at all different or how do those use cases change?
[00:55:42] Speaker B: Absolutely. Great question. I think it's a baby boomer, the generational thing that everybody in deal world talks about certainly should know about this, right? It's an option. It's not the option for everybody. No option is the option for everybody. Right. But based on wants, needs, desires, it is certainly something. I think if you're going to sell your company, like we use the mom or dad advice, right. If it was your mom's company or dad's company, that's the advice we better be giving. Here's where the rubber meets the pavement, right. My mom owned $100 million business and she was going to sell that business. I would want her to know that this existed, know what it meant, know what the pros and cons were financially and permission and all that stuff. So absolutely, we do a lot of that. What are your capital options? Okay, you said you want to sell your company. Timeout. Are you saying you want to sell your company because you want money? Are you saying you want to sell your company because you actually want to sell your company or you think thats the only option? You want liquidity. Weve done a lot over the last six, eight years in partial liquidity situations. And I dont want to oversell this or be disingenuous. I would call those debt dividend recaps where you go instead of selling your business for seven times EBITDA, you get a debt provider for four times EBITDA. They send you a check for that four times. But oh, by the way, still on your company. That's pretty interesting for some people, right. You get to continue your mission. You get to keep the front desk person who your grandpa hired there, right. The family name stays on the sign up front. And oh, by the way, now you have a lot of money. You don't have all the money, but you've got a lot of money and you can continue your mission. Theres some cool case studies around that for very mission driven businesses, legacy driven businesses that I think are really neat. Weve even had clients were like, well, why would I ever sell? Im just going to do a debt imminent recap every five years. We did one of those. The math works. And oh, by the way, we control our destiny and get something to do every day or the kids do. But the reality is youre not going to get full value. You get sell side through that. Youre going to get a lot, but youre not going to get full value. So thats the push pull. Right. On the economics. Liquidity versus control of destiny, issuing multi generational opportunities.
[00:57:42] Speaker C: I would think the private equity firms that own portfolio companies are making use of private credit to do dividend recaps more and more as well. Right. They know this trick. Yeah.
[00:57:52] Speaker B: There's the proof. Yeah. What do they do? It's like the private equity firm that tells you you don't need a banker, but ask them how many portfolio companies they sold without a banker.
[00:57:59] Speaker C: Zero.
[00:58:00] Speaker B: And I've kind of talked to smack, they're obviously dear friends, a lot of.
[00:58:04] Speaker C: Them, but it's okay to talk smack to your friends.
[00:58:08] Speaker B: It is, yeah. Right. Yeah. In environments like this where a private equity board, if you will, right, or the board of a company might say, okay, we're in, software valuations are down. Right. But we could take out one and a half times recurrence right now. Right. That's good for our kind of financial analysis and IR targets. Yeah, absolutely. So in a down valuation environment, like we've kind of been in I think that's a little bit oversold personally, what we're seeing in the m and a side, but it's back to the same dynamic. It's a way to partial where equity valuations might not be as high as you expect them to be or where they've been.
[00:58:42] Speaker C: Matt, this has been just a fantastic conversation. There's so much to take away from it for so many different kinds of listeners, not just business owners, but just anybody who's operating or acquiring or selling anything we've missed.
[00:58:56] Speaker B: No, I think it's, look, Peter, I just appreciate the opportunity, like always with you guys. And I think it's exciting to talk about because it's different and it's different and it can yield solutions that don't get me wrong. We love selling companies, right? But we're really excited about this conversation just because you're speaking to companies that matter right on Main Street America about different options that they didn't know were available. So I think just education about this product is super impactful, not only for companies owners, the rich person at the core office, but for growing companies, growing our economy. And so just excited to be able to talk to you about it. I mean, obviously if anybody ever wants just the education piece even like what is that? Right? How does it work? Could we do it? That's what we do every day. So love that conversation. That's our mission.
[00:59:41] Speaker C: It's been great. This has been fantastic. We'll leave it there. Matt, thank you. Thank you very much. This has been terrific.
[00:59:47] Speaker B: Thank you, Peter. You're a star. We appreciate you guys.
[00:59:56] 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 deal makers, 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 sell side m and a advisor, you can get started for
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