Mutual trust is critical for business leaders and their advisors. The key to a leader reaching the desired outcomes in a strategic exit of their business is directly tied to their choices before and during the journey. At STS Capital Partners, we believe that to move forward with a strategic merger & acquisition (M&A) transaction, we must provide honest feedback to our clients. We take the time to understand our clients’ real needs and what matters to them, not only on a professional level but also helping them think through life after the exit on a personal level. By providing a platform of deeper understanding, we can push and encourage a path aligned with our client’s true motivations.
When Partner and Managing Director, Smoke Wallin, M&A journey began, he didn’t maximize his true potential value and left money on the table. Right out of Cornell, he had the great fortune of joining an already-successful business achieving USD$150M a year in revenue. After an MBA at Vanderbilt, Smoke led the company’s growth through 19 acquisitions, expanding geographically and through new products and services, bringing sales to over USD$1B annually with over 350 delivery vehicles and 1500 employees.
Since, Smoke has built a career aligning his personal experience with an innate understanding of the entrepreneurial experience having been the founder and CEO of various companies, to provide his clients with a seamless transition filled with integrity, honesty, and drive. It’s not uncommon to face clients who have feelings of fear and distrust during M&A transactions. At the root of it, fear comes from a lack of alignment with what you genuinely wish to achieve, and from worry about an unknown future state. Smoke is familiar with fear but has garnered a set of habits to tackle feelings of the unknown. He is keenly aware that there are no guarantees in life and that the future is unknowable.
“I try to live my life in the present moment while always considering how my decisions and actions will impact me in the future. Clarity allows you to sync with what you desire, where you are today, and manifest a future state of where you want to be. It’s about being true to oneself and taking actions that reinforce that alignment.”
He experienced a tremendous amount of dealmaking within the company in his 20s and into his early 30s before breaking off to lead other businesses and many M&A deals in the subsequent decades. These experiences give him a unique perspective on the process. He didn’t know then that buying and selling companies are different skill sets. “We never felt we needed investment bankers and advisors because we were quite good at negotiating and understanding financing, structuring, and closing deals,” commented Smoke. In retrospect, he estimates as much as ~$200M was left on the table when they eventually decided to exit that business. The missed opportunity of an earlier potential merger of a part of the business could’ve been avoided if a strong, trusted advisor had been at the table looking out for the company’s best interest. Because of timing, the company merged into a larger strategic group at a lower overall value within a few years. Smoke continued, “It was still a great transaction for the family and leadership team, but we left money on the table. We were good at building the business but didn’t know how best to exit.”
Later in one of the technology companies he founded; he lived through another example of failing to maximize an exit to a public company. In this case, the numbers changed materially at closing based on some specific clauses around working capital adjustments. “The buyers, in this case, had done 100s of software acquisitions and knew exactly what they were doing. I didn’t understand how dramatic that adjustment could be and my then internal team and outside accountants and lawyers didn’t either.”
As a result of his experiences, he has made it his mission to share his knowledge and learnings with other entrepreneurs so they don’t leave money on the table and the buyer does not have such an unfair advantage. Similar to the experience that STS Capital Partners founder Rob Follows had, these shared values have become a vital contribution to the experience of working with STS.
To achieve an Extraordinary Exit and successful M&A transaction, many things must go right. You have to know that the business is in a good state, and you’ve done everything within your control to position it to optimize the value. This involves understanding who the strategic buyers are (including the non-obvious ones), what they’re looking for, and the strategic rationale for the deal. Having a trusted guide in the process to ask you the tough questions and bring strategic thinking to your internal reflection helps ensure desired outcomes. At its core, this holistic process creates as much value as possible. That value consists of money but usually includes many additional factors.
As leaders in business, we care a lot about different constituencies: our family, employees and team, vendors, customers, investors, and our community. There’s a whole host of essential people and considerations within the ecosystem, and every leader places a different priority and emphasis on each of these. It’s critical to understand what you want out of your transaction (and what you don’t want) and to be transparent and aligned with a trusted advisor from the beginning. The odds of a great outcome significantly improve when you complete each step correctly.
As entrepreneurial business owners, we know selling a business is never just a transaction. It’s a journey. Smoke sums it up this way, “There’s never a risk-free transaction; various factors can affect an opportunity, like market timing and recent deals. We help level the playing field with strategic buyers. To mitigate the risk and create the maximum value potential, we make sure we have alignment from start to finish. It can be intimidating, but as your guide, we ensure you’re set up for success by aligning with your core values and desired outcomes.”
If you’re interested in these insights and learning about the opportunities available for you or other private business owners who you may know to reach their true potential value and achieve an Extraordinary Exit, please contact us via email at firstname.lastname@example.org.