Aug. 9, 2022

Recruiting owner operators with David Marx


 Dave Marx is the CEO of Front Runner Consulting, an M&A intermediary for acquisitions and an executive financial sponsor. He also works as an recruiter for talent acquisitions. With experience in investment banking and executive recruitment, he manages a database of 24,000+ investors & senior level executives that provides his company with proprietary, exclusive deal flow (business investment opportunities) & talent acquisition capabilities. Dave works with thousands of internationally based investors ranging from strategic buyers, PEGs (Private Equity Groups), family offices, investment bankers, venture capital & angel investors covering all industries with a transaction value of USD $5 million to over $100 million. Today Dave speaks to us about recruiting owner operators!

Transcript

Josh Wilson
 Good Day fellow deal makers? Welcome to the deal scout. Now on today's show, we're going to have a conversation about acquiring businesses and around the topics of it. Something that I want to know is what about raising capital for acquiring businesses? I figured I'd go ask one of my friends, his advice on it, and we'll bring them on the show. On today's show, we're going to have Dave marks. Who's going to kind of give us some insights into the industry and maybe be some advice we could walk away with. So Dave, welcome to the show, man. 


 Dave Marx - Front Runner Consulting
 Thank you, Josh. Or appreciate the opportunity. 


 Josh Wilson
 Yeah. You're a up in the frigid north. You're in Chicago. We were just talking about that. I'm in, I'm in Florida. How long have, how long have you been up in the north? 


 Dave Marx - Front Runner Consulting
 Well, then you're about a month. We moved from Cincinnati where he'd been 17 years, but I'm from the area anyways. So it's just like moving back home. Great to be back in the Chicago land area. 


 Josh Wilson
 Yeah. What, what brought you from, you're in Ohio for 17 years? What brought you back to Chicago? 


 Dave Marx - Front Runner Consulting
 Well, when we moved to Cincinnati, oldest daughter was studying her family. We, the opportunity to move there with the oldest grandson graduating high school, it was a good time to come back and help our son with his five and eight year old sons, our grand sense then to help them out, give them a free babysitter and help them grow as well. 


 Josh Wilson
 Yeah. Super cool. All right. You and I are hanging in a coffee shop in Chicago and I asked you, Hey Dave, what are you up to these days? What kind of work do you do? 


 Dave Marx - Front Runner Consulting
 My provide two levels of service for front runner consulting been doing it for 13 years. Now, the two services I provide one as a merger and acquisition, intermediary matching buyers and sellers accompanies. The other one as an executive recruiter, what makes a business rather unique is blending the two services. A lot of the focus I try to work on is working with an executive who's between jobs. I like to call it free agent. They're going down the traditional job search path, trying to find a job. My business model is to make them aware. Maybe they might find a company for sale they'd dealt with in the past. They didn't think about doing it for themselves. The opportunity is still valid, but they don't have the millions of to buy the business themselves. I'll match that up with my network, a context, and Josh, you may not believe this, but it's a database of 24,000 contacts today comprising over 1200 different industries. 


 Dave Marx - Front Runner Consulting
 I get very granular in terms of what industries has as executive lead or what companies do these buyers like. The buyer network could be a strategic buyer, could be private equity. It could be a family office, people that are trying to find that proprietary, exclusive deal, not brokered by say an investment banker sell-side advisor. 


 Josh Wilson
 Got it. What makes you different than, a regular, broker who's helping buy and sell businesses? It's like, what have you found your sweet spot to be your niche or your focus? 


 Dave Marx - Front Runner Consulting
 Well, when I started the business 13 years ago, it was solely as an executive recruiter and literally three months into it. I got to know an operating partner from a pretty large entity. He was like, good grief, Dave, that the context you have, you'd be a good deal flow research to our industry and having been an investment banker series seven and 63 license much earlier in my career, I didn't have the desire or bandwidth to cold call companies to say, Hey, Josh looking to sell your company. I mean, that's so difficult. It's a needle in the haystack, but that's what, investment banking a lot of times is. I said, well, let's leverage these executives who are seeing these opportunities firsthand, whether it's something they've looked at currently or something in the future. That's been kind of the Lynch pin of finding these opportunities is again going back to that database. 


 Dave Marx - Front Runner Consulting
 I like to tell a story about an executive that was the chief manufacturing officer of Motorola, somebody who was doing like 300,000 miles of air travel a year. I deals all the time and he had recently left and was looking for a business to read. I said, well, have you thought about some of these deals that you looked at in the past that were not a fit for Motorola, but could be a fit for you. Literally 20 or 30 seconds passed with not hearing anything. I thought maybe we dropped her a call or whatever. And I said, are you there? He says, oh, I'm sorry, Dave, I'm trying to lift my jaw off the table. I never thought about doing that for myself and say, that's that's the key is that think about these opportunities that maybe they looked at that were not a fit for their employer, but could be a good fit for them. 


 Dave Marx - Front Runner Consulting
 So hopefully that makes sense. 


 Josh Wilson
 Yeah. So, a lot of times, as a deal, I'm always looking externally like, Hey, I'll help this group, do this. And I'm always brokering deals. Sometimes I look down, I'm like, oh man, maybe I could do it for myself. Right. So, so you started in executive recruiting and then at some point people were like, wow, you've got a big database. You're, you're pretty good deal maker. Maybe you should do some MNA work or at least do some deal flow for that. Now, how did it grow into what you're doing today? 


 Dave Marx - Front Runner Consulting
 Well, that's been a Kevin ongoing process of adding any type of buyers that I see that could be a good fit, whether it's today or in the future. Literally when I started off, I could be adding a dozen to maybe a hundred different buyers to the database. Through the recruiting was reaching out to these executives and planting that seed and making them realize it's not just going through LinkedIn or ladders or any of the job search boards, but thinking about a business that might be for sale. I would send out a quarterly email distribution that today's over 18,000 contacts and making them aware of what I do. Even if you just got five responses, if one of those opportunities resonated in a transaction, that's perfect. Again, it's that patience and persistence and personality that keeps you in front of these people. The classic example, just two weeks ago, CFO of business had reached out to me and he literally was a very early contact, 12 years ago. 


 Dave Marx - Front Runner Consulting
 I said, Hey, Dave, I get your emails. I appreciate what's going on. My owner's looking to sell a division of the company. It's too small for a personal banker to look at. Can you help find a buyer? Literally two hours later, get somebody engaged that had a deal closed just a week ago that likes that industry and offer go into a discussion. 


 Josh Wilson
 Yeah. You built up this database, you stay in touch with everybody and you've built up a database of buyers, right? You've mentioned a few different types of buyers for people who are buying businesses. Give us an idea of what are the different types of buyers that buy businesses. 


 Dave Marx - Front Runner Consulting
 Sure. Well, you'd have your, what I would call a strategic buyer. The challenge with somebody like that is if I get this opportunity from an executive who wants to run that business, typically a strategic buyer would just roll that company into their existing portfolio and not have the need for my referrals stores. The executive run the company. With more of an optimal buyer base would be like a private equity group or a family office. Somebody that doesn't have the manpower to run the business themselves. They want to financially run the business, but they're not the day-to-day operations on the recruiting side. Maybe that buyers find a business for sale. There's no succession plan. Maybe they're not enamored with the owner staying on. They would reach out to me by an executive that could help run that business at closing. If that buyers private equity, somebody that used to running a business and having it sole and re five, seven years, but the buyers for me, that's, this is somebody that wants to engage that executive to run it at closing. 


 Dave Marx - Front Runner Consulting
 I have a kind of a unique program that if closing that referral source is not a hired to run the business, then what I do is share my finder's fee with that executive. I've been compensated in the opportunity. That's what happened in the last two transactions. Over six months, it turned out that the buyers ran, the business, found resources themselves to run it. I shared that fee with them and each fee was a six-figure amount. It's certainly, a good transaction, but certainly a good way to compensate that person for bringing that opportunity. 


 Josh Wilson
 Yeah. Yeah. There's with these kinds of deals, there they're big deals and, seeing these kinds of opportunities come across the plate, like it incentivizes people to share and to open up networks. Now I've worked with some groups where I start talking about, like, Hey, we can do a deal together. I worked with one group and they were very well, I didn't work with one group. They were very like close to the chest, ? They wouldn't, they wouldn't, they weren't open to like sharing fees and, referral fees and such like that. Like, do you get that in the industry, experience that you have versus someone who is openly, wants to do deals together. 


 Dave Marx - Front Runner Consulting
 Yeah. I would say out of the universe, that context I have, it's a small amount. They don't pay a finder's fee to somebody like myself. Cause I, as wine, they get paid by the buyer. The, the, and the reason why is if I'm representing the seller and I say it sarcastically, if they're cooking the books or something that is not proven in the financials, don't want to be liable for that. Any type of buyer that I'm going to work with is going to have their own resources to do their own due diligence and the type of work that I do on the M and a as an intermediary that the sec has said, if you don't provide due diligence, if we don't provide advisory service, if I don't put my arm around you and say, Josh, you need to do this. We don't need to be licensed. 


 Dave Marx - Front Runner Consulting
 That prevents me from going through to the investment banking aspect. That's why I always want to get paid by the, by the buyer. Out of that universe, probably not even 5%, we'll say we don't pay a fee because we see enough deals from bankers and that's fine. There's enough entities that are more than happy to reach out to me. And, and I get contacted daily by buyers trying to find that exclusive proprietary opportunity. That's not being represented by a banker or a sell side advisor, but even if it is, if it's somebody that I'm working with the banker and sharing my buyer list and they recognize I have a database that's pretty robust and it's a pretty high, I have buyers that are not in their network. I've had that happen numerous times where I introduced people that get engaged in the opportunity. For the most part, more than enough entities are more than happy to pay that binders, Phoenix, contingents. 


 Dave Marx - Front Runner Consulting
 So there's no risk to them. The deal doesn't close, there's no risk or no financial aspects, but a good way for us to know each other and build upon that relationship and hopefully work another opportunity together. Yeah. 


 Josh Wilson
 Yeah. When you're looking for, for one of your buyers, you mentioned, private equity family office, a strategic buyer, right. You have your component of recruiting, right? Where it's, you're working with someone who's going to become the owner operator. They're going to step in and, run the business. That's like the perfect kind of deal for you is the person and the business two deals in one. That's, that's something that I don't see other brokers doing or other M and a and M and a people doing. So it's, it's really quite awesome, right? It is helping not only to buy the business, but find the person to run the business. Did I miss something out there? 


 Dave Marx - Front Runner Consulting
 No, no, he didn't get it right. Hit his nail around head. I used the analogy, whether I'm praying to place an executive with a company or company with a buyer. The reason why I named my business front runner consulting was trying to find that frontline or candidate or that front winner deal to get the closure, whether it's hiring that person or closing the opportunity. 


 Josh Wilson
 Yeah. So, all right, so you and I are having coffee again, and we're looking at some executives and we're looking at some profiles and we're going to go head hunt. Right? We're going to go, we have a business in mind, but we need to find an operator. What, what should we look for? When we're looking for a good candidate? 


 Dave Marx - Front Runner Consulting
 Well, there's three things that I hone in on and say the example that my buyers, private equity, one is relevant P and L experience two is industry alignment, and three is, have a work for our PE backed company. I'll use the example for a lot of buyers that I work with, maybe that target companies, 25, 50 million in revenue. I look at what industry is it. With the database of 1200 different industries, I get very specific manufacturing can cover so many different industries. I wanna know what do they do? With the relevant P and L experience, if I have an executive that's run, say a $500 million business or $2 billion business, that's not usually a recipe for success because when you're dealing with a multi-billion dollar company, they're pay petty cash funds, probably bigger than the revenue of that target company. To try to find somebody that's maybe run a 50 or $75 million business, that's used to scaling the business that is ideal. 


 Dave Marx - Front Runner Consulting
 I'll probably say if they work for a PE back company, because if they work there, say their career in general electric or Proctor and gamble, publicly traded company, it's a different mindset where you've got decades runway versus somebody that's successfully sold a business in that two, three, or five-year timeframe, and been rewarded the back end with an equity component. That's always attracted to the executives is, the salary aspects and bonuses is one thing, but if they can make instrumental and more on the equity side, that's a practice for all parties. 


 Josh Wilson
 It comes to an executive, who's looking at maybe corporate America and, their stock bonus options, their stock options, their, their school things, but maybe for a private equity backed company, they might get, equity options. It's a private business. They might, they might have a better ownership route, would that, 


 Dave Marx - Front Runner Consulting
 Okay? That's the attractiveness of working with somebody that's maybe got 20 years in with a business, but wants to be able to take your career to the next level. One of the things that always enticing it was when you talk about it in a life altering aspect, where you get a company sold and can provide like multi-generational income for your family, that's obviously going to be pretty attractive than working for maybe a publicly traded company where you got stock options and grants that can pay more. But, I'd say half a million dollars, but if you're got a company sold for a private equity firm and you're walking away with two or 3 million, that's obviously much more attractive. 


 Josh Wilson
 Yeah, totally. How did you get into these deals with these private equity groups? Like, how did you start those conversations? How do how do you get engaged with them and then how do you go find the deals? 


 Dave Marx - Front Runner Consulting
 Sure. Well, it goes back again to leverage in my contacts, they executives to try to find those opportunities are developing a relationship with people that have opportunities, both take bankers are a great resource because they're a smaller shop, maybe a half dozen or less people that maybe have a company for sale, but they don't have a big database. Or the other aspect that I talked to them about is maybe they have a company for sale and there's no succession plan. They're rather apprehensive about taking the business to market. I can come out to them and buy an executive. They could give everybody comfort to go out and take it to market. Again, that quarterly email that I would send out talking about my services in verbally, it brings up some kind of a discussion where maybe somebody goes, Hey, I could actually use, find me an opportunity or find a business for sale. 


 Dave Marx - Front Runner Consulting
 I had one situation for somebody that I had no one for over a decade. He said, I get your emails. You've never had an opportunity to talk, but my company is looking to sell. They're giving us the blessing to run it. Obviously we don't have that transaction size would have been about 60 million to go out and find that kind of capital. So that was a good opportunity. That's the sweet spot, finding something that is not being marketed buyers obviously like that, because it's not a competitive situation. For me, sometimes I can even get a higher finder's fee if it's proprietary. Those are the things that I look for, but they don't happen all the time. You may only have one or two a year that can actually get to the finish line. So it's very low transactional. It's not like selling widgets where you're in high volume aspects. 


 Dave Marx - Front Runner Consulting
 That, that, again, you have to be able to understand the dynamics, the low transactional aspect, and being a runner and marathon runner. It's like running a marathon. You're not going to get there in 15 minutes or so. If you think, Hey, I'm just going to pick up the phone and get deal flow coming out of the wazoo. It just doesn't work that way. If you go in with the right expectations up front and pace yourself, well, you're going to do okay. Again, it's such a low profitability of success. If you're doing the right kind of deal flow, imagine the right opportunity with the right buyers, with the relevant investment criteria. What's the size of the company. What's the EBITDA that they look for. You're going to increase your probabilities of success. 


 Josh Wilson
 What are, what's a sweet a deal for you? Like when, what's too small where it's just like, guys, this is too small. I don't know if I could help. There anything too large that you'd be like, we need to bring in some bigger guns for this. 


 Dave Marx - Front Runner Consulting
 Well, I specifically seek out buyers that like companies that are maybe five to 10 million revenue, maybe a million or more EBITDA, maybe not even profitable, because those are really the underserved companies where a traditional banker may say, Josh, that's going to cost you $50,000 just to speak to us well, company that size can't afford that. They're out in kind of that land. For me to find buyers, a look for companies in that sides are great. That previous example that I talked to you about a transaction size would have been 60 million of a close. Those are more unusual, but they're definitely, it'd be great if it gets up like that all the time, but it just doesn't happen from that kind of a size. Up it does again, I go through my database, okay. What's the industry who likes companies that are, have that EBITDA size and go from there because so much of it is not wasting buyer's time. 


 Dave Marx - Front Runner Consulting
 They want to hear from me, what do you have going on? If we're presenting not a fit or not industry alignment, you're not going to get a response back. That was something in the first few years doing, this was just getting in a heartbeat from somebody, Hey, is this of interest to you or not? Understand again, daily news with opportunities all the time. It'd be felt, you just got a response back and saying, Hey, Josh, this isn't a fit, but here's the reason why, well, great. Those are going to be the people that I'm going to be responding to more often. Now it's kind of flipped where I'm getting called all the time, looking for deals, which is great. Again, it's matching up that opportunity to the right buyer. He gave me that higher probability of close. 


 Josh Wilson
 What, how do you keep track of the conversations and deals? Right? Cause you're working at a volume 24,000, like how to keep track of everything. 


 Dave Marx - Front Runner Consulting
 Well, that's a good database. My CRM is pretty robust. It's called act on my swift page. The thing that I love about it's customizable. You come out with a good starting template, but from there you can put in your own user fields. Cause I think back to the old days of PR, you're probably not old enough to remember this, but before the internet day planners and things like this, where you'd have like a Rolodex, they can, I think today with 24,000 contacts, how in the world, he managed that from a paper perspective. You have a good CRM that can keep track of when was the last email sent, when was the last call made? What kind of follow-up do you need to do? What are the opportunities that these people have looked at again, back to investment criteria? I have three fields that are industry specifics. 


 Dave Marx - Front Runner Consulting
 Those are all the things that tie in together. If you don't have that robust database, they're just flying by the seat of your pants. It's critical for what I do and being a sole proprietor, I don't need something like Salesforce or something like that. It's just too, too large for what I have. So, but that's a great question because if he can't manage it, you're not, you're just going to fall apart. It's critical to keep on top of everything. 


 Josh Wilson
 Yeah. I know one of the founders of act software, they, it was like, it's one of the earliest to the game and they've evolved. They, they had a good sell off, but yeah, it's really cool. I always like to ask, when I'm talking about the deal maker, specific and strategic, actionable things, right? Sure. With the deal maker, like you're, you're doing large value deals, right? Like these are big ticket deals, but you're doing it. You might do a few deals at a time, right? For some advice, for other deal makers, right? Like we work on some big deals and sometimes it's sporadic, right? What's what are some ways that you've learned over the years, how to plan and how to, how to handle your own finances when, you might, you just mentioned, we, you just did a few deals and it's a six figure deal, windfall of cash. 


 Josh Wilson
 You might go wild before we make it money again. How do you, how do you do with that? 


 Dave Marx - Front Runner Consulting
 Well, that's the million dollar question and literally million dollar question in light of these opportunities. I joke that the recruiter fees pays the bills, the M and a fees fund, the retirement account. Going into the aspect, it's like being like a restaurant startup on, or, the aspect of you need to be able to run that business for six months. If you can do that without making a penny, you might be able to survive. If you think you're going to unlock the doors and getting 10 or $20,000 a day in cash, isn't realistic. It's the same thing to what we do now. Again, being very low, transactional, being able to have, being self-funded to go once a year or more without anything is extremely critical. When you get that, when fall opportunity, being able to budget it to last a while, because you don't know when that next check is coming in. 


 Dave Marx - Front Runner Consulting
 We talked about straight commission work and I've been in that world before. I used to it, but if you're not, you're going to get blindsided. Again, you may think you're the greatest thing since sliced bread and consult ice to Eskimos. If he can't get a deal closed and it's not going to pay the bills, if you can't last a few months, it's not going to be the right industry for you. So that's a great question. 


 Josh Wilson
 Yeah. I mean, that happened to me is, I put together some large deals, but they take a long time. At the time we didn't have other sources of revenue. You could go broke, chasing big deals and big whales. Right. And, and you might not be able to sit long enough to actually see them, fulfilled. Right. For younger guys and gals getting into the industry and they want to chase big deals, they want to do M and a, and they, they liked the idea of chasing after the big ones. And they're not so much transactional. They're, they're more like big value, high ticket long-term deals. What advice do you have for us? 


 Dave Marx - Front Runner Consulting
 Well, there's, I've, you've heard of search fund. I'm sure you probably heard of that entity. A lot of times, these are young people who just got their MBA want to go out and try to run a company. There are certain backers that will provide a stipend to these people that keep the office door open, pay the phone bills, kind of get them by on a shoe string. The premise is when you find an opportunity, you bring it to us exclusively. If they do acquire it, then they can get to run the company. Whatever compensation they work off of a salary carried interest management fees, whatever. We'll pay the bills beyond that. If you can find that's great. If you're trying to start up your own fund, and a lot of these entities are called a fundless sponsor where you don't have the money in the bank and you have to go out to the market to raise capital. 


 Dave Marx - Front Runner Consulting
 That's really challenging because when I'm working with an owner of a company, a lot of times they'll say, well, who's your buyer. Do they have committed capital meaning money in the bank? Just the cost of capital to raise that a lot of times can be challenging. You have some buyers that I call like a pledge fund. They may not have the money in the bank where they don't have to go out and find that needle in the haystack. They have somebody like Josh Wilson who will go on and fund that opportunity again, provided it fits the right criteria. It gets into how long of a runway can you go on your own or using friends and family to fund it or finding somebody that will spawn to you. That's a lot of times challenging for somebody to just get into the industry on the flip side, if you can get in with like an investment banker or private equity group, as I can associate or animalistic, did your teeth cut that way? 


 Dave Marx - Front Runner Consulting
 You see a lot of times somebody that goes out and starts their own fund it's because they work at a shop for say, three or five years, understand the dynamics, have some money in the bank and then can go out and have a higher, a better time raising capital to go out and buy those companies. And that's a prudent way to go. 


 Josh Wilson
 Copy that. All right. You and I are working together and we've got a target, we've got a great candidate to run it. We just need to come up with some money. Let's talk about capital raising for acquisitions. Like what are some strategies? What are some different tactics? What are some directions that you have seen work really well? 


 Dave Marx - Front Runner Consulting
 Well, for me, the capital raising gang gets into that fine line between being an investment banker and raising capital versus just going to the equity market. For me, finding an executive who was found that company for sale, I don't go out and raise the capital. That's what, like an investment banker duty. So stay compliant with FINRA. I go out to my network of buyers themselves who have the capital. It gets into this company for sale to that's that this executive has found. It a fit for what they're looking for? I don't go out friends and family or high net worth individuals there. You need to be licensed to do that. For me, it's not as difficult when you have a buyer network out there. The question is that the type of company that they're looking for is it that the dynamics that they're looking for and it could be any number of aspects that could be in alignment. 


 Dave Marx - Front Runner Consulting
 You say to yourself to that, to get something close is such a low probability of success that you are creasing your eyes to get to that finish find. If you meet that criteria again, revenue size, EBITDA size, the industry itself has that executive led companies in that path. It gives comfort to that buyer to engage. They go through the due diligence and get into the weeds of the opportunity. It's a, if it's a fit great. I always say that nothing's for certain, until the deal is closed, the paperwork sign and money's in the bank until then it's still an opportunity. 


 Josh Wilson
 Yeah. Yeah. Don't cash your check or don't count the money until the checks in the bank. Right now, I'm looking, this is kind of side topic, but I'm looking at your LinkedIn and you're a photographer. Barack Obama, Michael Jordan, Chicago bulls, Andre, the giant kind of talk to us. What in the world, how did that happen and how does that fit in with M and a, 


 Dave Marx - Front Runner Consulting
 Well, it doesn't fit in to, it just makes a great conversation. It's yeah, it's been pretty fortunate over the years, they have kind of a dynamic relationship with a lot of, world, no one people back in my high school days, I was a photographer for professional. Wrestling's always joked about having the backseat of my car, Andre, the giant and dusty roads. And I haven't put skating. How in the world do they fit in my 1974, a Monte Carlo. During the 1990s in Chicago, the Chicago bulls and the United center Reinsdorf, and the words family wearing the blackhawks and bulls were clients of mine. I had access to sit on the floor of the old Chicago stadium for the first three ream presentation games for the bowls and taking pictures of them. It gave me a unique aspect and access to that being to bill Jackson's house and mean people like Walter Payton and other idols, like that's been pretty exciting. 


 Dave Marx - Front Runner Consulting
 It just makes a great conversation piece when you get into that. And, photograph in a sitting us president was something that I've always wanted to be able to do. Being at an event like that, they, that close up to a sitting us president was certainly a, a golden moment for me. 


 Josh Wilson
 Yeah. Are you still doing photography and w w what kind of focus do you think? 


 Dave Marx - Front Runner Consulting
 I mean, it's up in that, taking pictures of the grandkids or, local spots in the area, things like that, it's all a hobby. I got to know the individual from a Time-Life magazine. Can you set up a, a photo website unique to them? He gave me a great compliment talking about the fact that even though I'm not a professional quality photos that I've taken, or our professional likes, so that was a great compliment. And I get that from him. I've just been, having a good eye for photography and the right timing to take a good action picture, or having a good item, looking at an opportunity and say deal or no deal. I ended up, I guess, can kind of Lincoln, from that aspect too. Yeah, when I send out my email distribution, I always have that in the back of it, the photographs and every once in a while, so I'm going to go, wow, that's pretty interesting. 


 Dave Marx - Front Runner Consulting
 Being able to see pictures of, Robert plant from led Zeppelin, or like he said, Andre, the giant or stuff like that, it's always a unique thing that you wouldn't probably come up with every day. 


 Josh Wilson
 Yeah. If you, have you ever wrestled with Andre, how'd you do. 


 Dave Marx - Front Runner Consulting
 No. Seven feet, four. He's a pretty wide. I just remember being in the locker room one time and having, and stand next to me. It's just, whether it's, I've stood next to Shaquille O'Neal and some of these guys there's just unbelievably huge. It's just amazing. Sometimes when you think of just the girth of some of these people, what they're able to do is pretty amazing. 


 Josh Wilson
 Yeah. All right. Back to deal. Sorry about that. I got a little bit distracted. With the, with the deals you're working on, you say you had this eye for deals to see a good deal, a bad deal. What are some red flags about a bad deal, right? Let's just say the numbers even look good, but there's other components. You're like, that's a bad deal. I'm out. 


 Dave Marx - Front Runner Consulting
 Well, there's getting into ways, the company for sale. And I had a great example. There's probably like this story. There was a gentleman on for a while who was in the automotive business and he knew a automotive software company that was for sale. I said, well, that's great Ray, but what is the one I want for the company? What's, what's the revenue, what's the EBIT. That was like 10 million revenue, a mailing EBITDA and said, well, Ray, what is the guy I want for the business? Oh, don't worry, Dave, he's looking to sell. Well, that's fine. Right. What does he want for the business? After he came back a couple of weeks later, he wanted 30 million for the business. That's a 30 time, multiple off of EBITDA. I said, Ray, nobody's going to pay 30 times for the business. Oh, but he's looking to sell, don't worry about it, Dave. 


 Dave Marx - Front Runner Consulting
 And I just didn't talk to him. I said, it's just, doesn't make sense. Well, about three months, the blue, he calls back and says, Dave, that was a great reason not to pursue it. That just, would've been a wasted time for all of us. A lot of it gets into, why is the business for sale? If the owner says, Hey, Josh, for the right reason, I'll talk to anybody. Well, that's not a motivated seller, right? Yeah. No persons at retirement age, no succession plan, nobody in the family wants to run the business or, whatever it may be. Well, that's a good reason to engage in the opportunity, but also it gets into what does the owner want for the business? Again, of it's unrealistic, we're going to be wasting everybody's time. If I can identify that upfront, that's huge. 


 Josh Wilson
 Yeah. So you talk about motives. What, what are some good motives where when you take a look at someone selling a business, you're like, okay, that makes sense. And you can work through, so what are some green lights where you as a buyer, you're going, Hey, we have ourself, a motivated seller. 


 Dave Marx - Front Runner Consulting
 Well, there's this classic when they came last week or the founder of the business had been running the company for 40 years and he's in his mid sixties now. And he's just at that time. And I just wants to move on. Right off the bat, that's a good example. Dealing with the CFO, who's my referral source. I said, is there anybody in the company today that can run it? He said, well, the nephew wanted to run it. After a discussion, they began to realize he just wasn't suitable to run it. That was helpful to know that there's nobody in the business, whether in the family or the number two or number three person just wasn't qualified to run the business. That's a great example to say, okay, well, let's go ahead and move into that opportunity. The challenge I have is not only trying to find a buyer, but find a successor to run the company, but that's the double play that I look for. 


 Dave Marx - Front Runner Consulting
 Not being able to find a buyer and hopefully get that close, but buying an executive to run the company. So, I mean, that's the classic example of matching up the two services that I provide. 


 Josh Wilson
 Yeah. How many, how many executives do you think you place in a year or like, 


 Dave Marx - Front Runner Consulting
 This is all serendipity driven. Whether it's somebody comes to me and says, Hey, I found a business for sale. Can help find a buyer or somebody says, I need somebody to help run a company. I could have four placements in a year and I may have none in a year. Again, as a sole proprietor, it doesn't take a lot to be able to pay the bills. It's just a question of trying to find, that opportunity. Again, whether it's recruiting or the M and a, I don't care whether the opportunity is, but whatever it is, once that lands, that's where my focus is. The thing that I just had an operating partner that is going to be he's already in place now. That'll be something else I can bill on in a couple of weeks. Those are the things that I reach out to, for like a private equity client is they have businesses in the portfolio. 


 Dave Marx - Front Runner Consulting
 Do you have a change of management? There an opportunity that I can come forth with? They'll buy an executive. Do you need an outside board member? What's been unique in the before. COVID was the number of buyers that came to me, looking for subject matter experts. Now I need somebody to level set this opportunity and there's a situation. That's great. Cause they may look at the deal and say, Josh, I wouldn't touch this. Here's the reason why, well, that's invaluable. That's great. That's what a buyer is looking for. In a case like that, the buyer gets to know my executive gets to know the buyer. Even if there's no transaction, something could help later. Those are the things I try to engage with. Again, following up with the database every three months, every six months, Hey, is there something that Josh could help out with? 


 Dave Marx - Front Runner Consulting
 You remember helped you with XYZ company and they go, all right, let me find out something because I may not be top of mind, 99% of my contacts. If I reach out to them on a regular basis, then they make all that sprayed. Now it uncover something that maybe is on their table, but I'm going to have any way. I know it, but had I not reached out to them, we wouldn't be engaged. So that's why it's always critical. When you're talking about somebody to get into the business guys, stay on top of the situation. You don't want to be reaching out to them every two or three weeks, but maybe every two months, every three months is a good way to stay in contact. Cause that's something I always like about when buyers reach out to me, if they reach out every week, that's way too much. 


 Dave Marx - Front Runner Consulting
 If it's every two or three months, it's a good timing. Because again, they don't know what's on my table as well. It's a lot of, it's just timing and timing is pretty important, but you can create that time and in staying on top of your context. 


 Josh Wilson
 Yeah, absolutely. In your years of doing this, tell me about one of your favorite deals that you ever did and maybe a deal gone wild. 


 Dave Marx - Front Runner Consulting
 Well, when that gone wild, I guess it would be this, this executive that I had known for like 12 years, we worked on something literally the first year that I started my business and appreciated the contacts that I've been doing. This was in the payment processing space and the ownership wanted to move on, but they liked him and the president to run the company 60, the transaction size would have been about 60 million, but it says right off the bat, I have to warn you a day. We, they have some unique customers that may not be attractive to your buyer base, private equity. I'm thinking, oh, this will be interesting. About 20% of their revenue is we'll say adult themed entertainment. So, so during COVID, their sales had one up a lot because you weren't at home and looking for that kind of entertainment, but usually general partners and private equity don't like that in the portfolio. 


 Dave Marx - Front Runner Consulting
 Through that process, I found more of a, I would say a holding company that knew and executive in the payment processing space and in the realm of small world, they knew each other, the president and the buyers operating partner. Things were going well, conversations were good. Financials looked great. From the start of that discussion, the valuation went from say 60 million till about 80 million. The company in three months grew so much, they needed to recalibrate. And I said to the buyer, okay. Their initial offer was 63 million, which at the time wasn't too bad, but they needed up at them out. I coached them on where they needed to be. This was not their first rodeo. I should not have had to coach them on this, but the valuation was I think, seven times EBITDA. If they did the math, it would have been around 83 million where they came back with basically the same offer of 63 million, which was so insulting. 


 Dave Marx - Front Runner Consulting
 For our fee like that would have been a seven figure fee because for how that worked and those are, for me career changing. I mean, that's just something that doesn't happen that often. So that was extremely disappointing. That fell through the company, got disappointed, obviously put it on the back burner. I checked back every two to three months to see what was going on in a strategic, bought the company. They kind of took it off the mark and it just let sit back and until they got an unsolicited offer. That was one that went sideways that kind of use as an example of being able to work with the buyer, keeping that level of expectations. Correct. Where the valuations are, if a company rose and when they didn't adjust, the offer to me, I can't work with that individual anymore because that was such a disappointing situation for them not to realistically adjust the pricing. 


 Dave Marx - Front Runner Consulting
 It's like, well, if they do it on this one, they're going to do on another because it was a good relationship with, so it was pretty disappointing to have that go south. 


 Josh Wilson
 Yeah. And it keeps you out of trouble too, because if you're doing a company research and a wife walks in, you're like, sweetheart, this is my job. I've got it. Got to research the company in the portfolio. Yeah. 


 Dave Marx - Front Runner Consulting
 Well kind of along that line, I had a buyer wanting me to find executive that had Amazon experience selling online. Again, I tried to get very there to, well, what is it that they're selling? Because if I can find somebody that's used to that kind of product, it's different, medical things versus athletic equipment or whatever, does the widget aspect make a difference and said, well, now we want it to be, it's a brick and mortar business, but I'd be surprised if we had somebody there. I said, well, help me understand if I can find an executive it's in that space. He goes the Dole theme products. I'm like, good grief. Here we go again, 


 Josh Wilson
 You just attract those kinds of deals. 


 Dave Marx - Front Runner Consulting
 It's just like, but that's how the database gets to be 1200 no industries when you come out to these kind of obscure industries, but they just get back in again, trying to find that Y as perfect as you can, executive that can step in day one and do the job versus having to try to learn it, six months, a year down the line, cause for private equity, they could be half of their whole period. They're not going to go for that. If I can find somebody that can say they, one can step in and know where the bodies are buried and have the context and place right off the bat, that's huge. 


 Josh Wilson
 That's huge. What, what was your favorite deal that you've ever done? 


 Dave Marx - Front Runner Consulting
 Favorite DOL? Well, I think there's this one that we just closed last month, it's in the home inspection business is kind of interesting and they've branched out that offering other services and working with a company. The gentleman that was in that space, who was at the company who was kind of running the deal and then having to work with him kind of a unique individual that a bull in a China shop and being able to now find a buyer that could deal with him and get the deal closed. It was, it was pretty good at because you'd be taking him out of the equation. It wouldn't have been pretty clean, but he was integral in the process as well, too. Managing the dynamics of unique personalities and finding a buyer that could handle that and get through it isn't necessarily easy. You get into, aspects of just praying to find the right buyer with the white industry and the right criteria, you've got the human dynamics as well, too. 


 Dave Marx - Front Runner Consulting
 Sometimes the owner may say, well, it was kind of difficult working with the buyers when they're letting they're the smartest guy in the room. Well, you've got the flip side and maybe you can get that owner, owner representation that maybe it's is challenging any number of ways. You get something like that, it actually does close and everybody's still friendly afterwards. That's pretty good. 


 Josh Wilson
 Yeah. That, and the payday is fun too, right? 


 Dave Marx - Front Runner Consulting
 Sure. Absolutely. Yeah, when you, I always say that, anything can happen at closing. I had one buyer that said they work with an owner for a year and a half on a deal. As the owner was driving to the private equity firm to sign the paperwork, he died of a heart attack in the car. The thing that was so horrible in the whole situation was he had nothing, he had no family set up in a trust or any kind of will to run the company. He was so ill-prepared for our transition ownership that it obviously was. I mean, that was like the worst case example. You think of, well, what can go wrong? I always think of that. If you had the aspect of just keeping an open mind and again, not counting your chickens before they're hatched here, you're going to set your up, set yourself up for less stress because it's stressful when not if you're doing it the right way. 


 Josh Wilson
 Yeah. For, for dealmakers, man, it's so exciting when you have a big deal on the table and you're like, oh my gosh. You start thinking and you plan out your future. Like this is a game changer, right? Like there's of course like big deals are good, but like you find the ultra big deal, like holy moly, this happens. But then you have to get grounded. You have to get, go back to, keep your foot on the gas, keep your foot, keep the other deals coming in because it's easily get to get distracted. Especially if your name is Josh Wilson, 


 Dave Marx - Front Runner Consulting
 It's keeping your funnel full. That he kind of had, if you remember the movie, pretty woman, that was just, we just watched it the other day. Jason Alexander character is working for Richard Gere in the M and a world. This big deal they were working on for a year, never closed. And Jason Alexander's character was so devastated. We worked on this no for a year. This is a multi-billion dollar deal. If the transaction's not right, it's not gonna happen. So, if you have the wrong perspective of where this should go, you're you're just setting yourself up for failure. 


 Josh Wilson
 Yeah. That's a great movie. It's a really great, especially if you want to learn about M and a right. 


 Dave Marx - Front Runner Consulting
 Whereas it's kind of funny how that hide in out there. Oh, wow. Here it is, 20 years later or whatever, and somewhat in that business. I always think if you're working with a buyer that you have a good relationship with, that's obviously going to be huge versus somebody that, where I'm just a number. If it takes me three weeks to get a response back, just where are you at in the deal? It's usually not a good science like pulling teeth. Are you still interested? It's still moving. Where at versus buyer reaching out to me, giving updates. Obviously I want to go to those people on a more regular basis when I do have an opportunity. And that's the synergy that you want. If somebody is looking to get into the business again and find somebody that will pick up the phone and talk to, I mean, right off the bat, they should be a preferred contact for you and build that relationship from there. 


 Josh Wilson
 Yeah. Now I'm looking at your website for fellow dealmakers, especially if they're looking to buy business. If they're looking to maybe even sell a business, or if they're looking for a recruiting help for a owner operator kind of role, what's a good place for them to connect with you? 


 Dave Marx - Front Runner Consulting
 Well, I think the, whether it's through dave@frontwinterconsulting.com, that's my email phone number (630) 325-0325. There's no cost to talk, always willing to help out people. I always think it's, that's how the database grows is when can come out, talk to somebody, whether it's, getting a resume from somebody that's in a leadership position, maybe they're not looking today, but something changes tomorrow. If it's somebody out in the buyer network that wants to expand their deal flow contact. Great. No, but a business owner, that's listening to this and they're saying, Hey, gosh, if I can sell my company and not have to pay a fee by engaging a sell site advisor, Dave is going to get paid on the buy-side. Now that can save them tens, hundreds of thousands, maybe a million dollars or more let's talk. No, no cost to talk. 


 Josh Wilson
 There you go. We'll put your contact information in the show notes below. Our fellow deal makers in the audience, they can reach out and connect with you. David sir, question. I should've asked you that I completely screwed up and did not ask. 


 Dave Marx - Front Runner Consulting
 No, I think he covered. I think the thing that helps a lot is you understand the uniqueness of the boat services that I do. I mean, there's a plethora of M and a intermediate intermediaries areas. There's a plethora of executive recruiters. I hear this all the time for people that understand what I do, very few do both. When you get into that sweet spot of finding that executive, who's looking for a job and I coach them on leveraging their network to look at companies for sale. Maybe they have a next door neighbor. That's running a business that they could run. Maybe it's a deal they looked at in the past, seen him behind the desk of their employer. They didn't think about pursuing themselves finding that opportunity, but they don't have the capital to buy it themselves. I reach out to my admire network. That's the sweet spot. 


 Dave Marx - Front Runner Consulting
 Again, if you've got maybe a company that owns a business and you had a change in ownership, or you need an outside board member, I can help. And all my work is contingent. I know it's somewhat unusual, but I think I increased that probability of engagement working contingent versus getting that retainer fee. Again, it's no cost to talk, love to be able to help people. If I can make a positive difference in somebody's life, Hey, we all win. 


 Josh Wilson
 Yeah. Awesome, awesome. Fellow dealmakers in the audience as always reach out to our guests, say, thank you, man, if you are looking to, as a executive and you're saying, Hey, maybe one day I should re run my own show, right? It might be a really good connection. Meet with David and have a chat. Maybe it'd be a good fit. The purpose and mission of the show is to poet deals and deal makers together. As always reach out to our guests and say, thanks for, being on the show and find a way to do a deal with them. If you are working on a deal and want to talk about it here on the deal scout, head on over to the deal, scout.com, fill out a quick form and maybe get you on the show next, man, I am stumbling over my words. I've done this a thousand times and I'm completely screwing up my own outro. 


 Josh Wilson
 So with. 


 Dave Marx - Front Runner Consulting
 That, 


 Josh Wilson
 So with that, I love you guys. We'll talk to you all on the next episode,

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Dave Marx

Founder & Managing Principal

Founded in 2008, M&A intermediary & executive recruiter with 25,000 contacts comprising 1,200 industries.