S3. Ep. 6 - Successful M&A Strategies with Brett Rosen of Rosen Advisory

Bridget Haight: Hi, and welcome to On Point, a podcast by Oak Street Funding, where we bring research and data backed insights to dig into the minds of industry leaders to learn how to stand out, navigate, and break through this ever changing industry. I am your host, Bridget Haight. And you can support this podcast by following us on Spotify, Apple Podcasts, our website, or wherever you get your podcasts, we'll be there hanging out, talking to industry leaders and ready to empower you to grow your business. Now let's get on point. So today I am delighted to have Brett Rosen, the owner of Rosen Advisory join me on the show today. Brett is an experienced mergers and acquisitions consultant, and he will be sharing five things that you can do to maximize the value of your business. Welcome to the show, Brett.

Brett Rosen: Thank you so much for having me. I really appreciate this opportunity to speak with you.

Bridget Haight: This is going to be great. So I'm just going to start off really easy. Can you tell us a little bit about what led you to start Rosen Advisory?

Brett Rosen: Sure, absolutely. Prior to starting my own firm, I was with a company called One Digital. And with One Digital, I was in a mergers and acquisitions role, buying insurance agencies on behalf of One Digital.

Bridget Haight: Okay.

Brett Rosen: And I did about 50 to 55 deals with the company. And I was there for 17 years, had an amazing run.

Bridget Haight: Wow.

Brett Rosen: We were one of the most prolific acquirers in the industry. And I felt like after 17 years, it was time to take a step back and get out of corporate America and do what I want to do. And I did that and I thought I could really add the most value to the business by switching sides of the table and taking everything I learned and advising independent businesses on how to sell their firm or perpetuate their firm most effectively.

Bridget Haight: Okay. So what is your favorite part of the job?

Brett Rosen: Yeah, my favorite part of the job is that I get to help people at such a critical juncture in their life. It's a huge responsibility. It can be stressful, but I love it and I know how important it is to these people to get this issue right.

Bridget Haight: Yeah.

Brett Rosen: And it motivates me and it makes me feel really good about what I'm doing. And candidly, I just love it, I love being alongside these owners through such an important transition period.

Bridget Haight: That's great. It sounds like there's a little bit of adrenaline involved in mergers and acquisitions too sometimes.

Brett Rosen: A little bit. The folks that I represent have built a business usually over a career.

Bridget Haight: Yeah.

Brett Rosen: Or easily a decade plus, a lot of times, 2, 3, 4 decades.

Bridget Haight: Wow.

Brett Rosen: And they want to get it right. And I feel I've done so many deals and I do have to... Sometimes there's a psychology aspect to it for folks.

Bridget Haight: Sure.

Brett Rosen: It's getting the finances right, but it's also getting the psychology of it right.

Bridget Haight: Yeah.

Brett Rosen: And making sure they find the right home and make the right decision holistically.

Bridget Haight: That makes sense.

Brett Rosen: So there's a lot more to it.

Bridget Haight: Yeah, a big part of it.

Brett Rosen: Yeah, yeah.

Bridget Haight: So we're here today to talk about M&A in your business planning. So why is that so important?

Brett Rosen: Yeah, so it's crucial to have a deep understanding of the topic of M&A. A lot of business owners actively stay away from the topic of mergers and acquisitions until it's time to sell. And maybe they've come across an opportunity in their career to buy a business and didn't understand the topic well, so they didn't make the purchase. Maybe they've had an opportunity to sell or merge with someone who could have been a great partner, but they didn't have the education and/ or an advisor alongside them throughout their journey, so that they could make a great decision to either to buy or to sell. So I think it's really important that people are students of the M&A business to some extent, and have some level of expertise as a business owner, so that they don't miss opportunities throughout their business journey.

Bridget Haight: Right, that makes total sense. So what is the first thing that business owners should do when it comes to mergers and acquisitions planning and why?

Brett Rosen: Yes. The first thing an owner should do is to understand exactly what buyers the acquirers look for in a purchase.

Bridget Haight: Okay.

Brett Rosen: Because if someday you're going to perpetuate your business, you can get the answer key from the people who are doing the buying. And there's people like my role at One Digital, as I mentioned, was to buy insurance agencies on behalf of One Digital. And so obviously, I knew all the criteria and exactly what we were looking for, and that usually is pretty common across an industry, that other buyers were looking for similar things to what my company was looking for.

Bridget Haight: Right.

Brett Rosen: And so the M&A professionals who are in my role have an answer key, and it might not be the perfect answer key for you as a business owner, as a business builder. The answer key that I had might not be perfect, but there were 3, 4, 5, 10 other people who did what I do, who throughout your career you could learn from and use those conversations and that learning to continue to fine tune your roadmap and your business plan-

Bridget Haight: Yeah.

Brett Rosen: And ensure that you build the most valuable business that you can.

Bridget Haight: Okay. So that was the first step, what's the second step? What's the second most important step?

Brett Rosen: Great question. I would say that you should take your learnings and have a written business plan. I meet a lot of folks who are building great businesses, and I meet people at all stages of their journey. And I would say the ones that have a plan are building the most valuable businesses. The ones that are winging it a little bit more, and just letting the business control them versus them intentionally controlling the business, tend to not maybe grow as fast, maybe don't have the same level of profitability. And just aren't quite as effective as the folks that are really intentional about what they're doing every day. And having a written plan is so crucial, and having key performance indicators and things that you measure. On the other side, I'd say don't have too complicated a plan that you can't look at and refer to every day, or your team can't refer to every day to stay aligned. If it's more than one page that someone has to look at every day, it's probably not useful. You might have that backup material for later down the line or for more in depth management discussions or team discussions. But having those key indicators is crucial and can align with building the most valuable business that you possibly can.

Bridget Haight: All right. So having goals is certainly important, and those four specific areas make total sense. What is the next area that business owners should be thinking about when it comes to mergers and acquisitions?

Brett Rosen: Sure. My next must do would be to really never fear conversations about whether you should buy or sell a business.

Bridget Haight: Ah, okay.

Brett Rosen: Yeah. I think a lot of times owners, they're independent, they're strong. Not that they don't want to learn, but when you're going to be learning from potential competitors, it can get a little bit tricky and difficult and you need to navigate that gracefully. But there's a tremendous amount you can learn from these conversations with potential merger partners throughout your business development that can be super helpful. And a lot of times when I ask somebody if they've ever talked to anyone about the M&A topic, they say, " No, I don't want people to know that I would even consider selling my business, because it could come back to bite me in terms of it gets out to my clients." Or something along those lines.

Bridget Haight: Sure.

Brett Rosen: I would say that, yeah, that's an understandable fear for sure. But what I would say is that people in the M&A space are very respectful. Even for folks who are just considering buying or selling a business, you can count on confidentiality. I've never in my career seen anyone breach trust or use it for nefarious competitive purposes.

Bridget Haight: That's it.

Brett Rosen: I think people who come to the table in these conversations are sincere about them. Now you can put a nondisclosure in place to further protect. I've never seen a nondisclosure go to court or anything like that, so it's just a formality.

Bridget Haight: That's good.

Brett Rosen: Yeah, it's just a formality to have that document.

Bridget Haight: Okay. So being open- minded certainly sounds like a great strategy for owners to grow via an M&A.

Brett Rosen: Yeah.

Bridget Haight: But we've covered three of five key points. Let's just dive into number four.

Brett Rosen: Well, I had five points today, so I think I can jump into the final two points together. They both have to do with owners who might be a little closer to selling or perpetuating their business. So let's say you have a business owner, they're within three years of selling their business. So it's really getting down to crunch time of, " I really need to understand this M&A topic and know where I'm headed." And what I'd say is, when you get to this stage in your business life cycle, it's time to ensure that you have a great team around you for the transaction. You should have an M&A advisor. And there's just so much that you can learn from someone who's doing deals all the time. And as a professional, I obviously believe in the return on investment in the services that we provide, and candidly that my competitors provide. I don't think anybody should go it alone. It's expensive, but it's very easy to get a return on that investment of 200, 300, 400% of what you're paying for the services, candidly if not a lot more. I'd also recommend that you have a great M&A lawyer or law firm that you have at your disposal to get questions answered if you're thinking about selling even in the next three years. And candidly, everybody should probably talk to a legal expert or an M&A advisor or someone to make sure that they're building the supporting documentation for their business all along the way. Because when it comes time to actually get a deal done, you don't want to be racing to put materials together that you know should have been doing over the course of years. Or you might not have set your corporation up the right way, and it could cause tax problems or things of that nature. So you want this team to look at your business and ensure that there's going to be no red flags or issues that end up surprising you when it's time to do a deal. And then the final point would be to create a framework maybe for a deal that you would take on either side. If you're a buyer, create a framework and criteria for a deal, what would it require in the deal for you to make the purchase? Obviously, the price has to be right. What should the return on investment be? What type of culture and people would we want to work with? And you should have that really thoughtfully laid out, so that you have a plan if you're going to buy a business. And then the same thing, if you're going to sell your business, you should have clear criteria so that when you get into the flow of a deal, it's easy to let momentum take over as a seller. And you've got maybe a big offer in front of you. And that's the number side of it, and it's the financial piece. But what else is important? So for my insurance agency clients, I've got a three pronged approach that I think has worked very well in that industry, which is, it good for me financially and good for my family in terms of what we're doing next? Is it good for my team and is it good for my customers?

Bridget Haight: Sounds like you just make everything so much easier in a time that could be fraught with difficulties and stress.

Brett Rosen: I hope so, I hope so.

Bridget Haight: Yeah, I mean, these are great points. Do you have any final tips?

Brett Rosen: I would just say back to being open- minded, having a plan. I think just repeating some of these common points of have an expert by your side. And it's a little bit self- serving to say, but it is what I do. And again, if it's me or any... It's become an expert too, if you saying on a scale of one to 10, you should be a three as a business owner M&A expert, and I should be a 10, right?

Bridget Haight: Right.

Brett Rosen: And it'll help you manage me or one of my competitors in your business journey and in a transaction someday.

Bridget Haight: Excellent. Well, I have one last question for you.

Brett Rosen: Sure.

Bridget Haight: Can you tell me your favorite travel memory and what made it so special?

Brett Rosen: Okay. Wow. Favorite travel memory.

Bridget Haight: This is just for fun, Brett.

Brett Rosen: Yeah. And it was fun. So I went to Costa Rica with my family last year.

Bridget Haight: Oh, nice.

Brett Rosen: And it was amazing. If you've never been to Costa Rica and you can get there, I highly recommended. And what made it, I think it was just great family time and an absolutely gorgeous place. The people were tremendous. But one very specific thing is we went on a waterfall hike, and it was a very long hike, uphill. And then on the downhill, we repelled down waterfalls, and that was-

Bridget Haight: Oh my gosh.

Brett Rosen: It was like the family team building event.

Bridget Haight: It sounds... How old are your kids?

Brett Rosen: My kids are 24, 21, and 19.

Bridget Haight: Okay.

Brett Rosen: Old enough to comfortably do that.

Bridget Haight: Yeah.

Brett Rosen: And make fun of me for being the slowest one and all that good stuff. And I had to fake that I wasn't terrified, so that they wouldn't make fun of me the rest of the trip, but it all worked out.

Bridget Haight: It sounds amazing.

Brett Rosen: Thanks for asking.

Bridget Haight: Brett, thank you so much for being here and sharing all of your wisdom. We really appreciate it.

Brett Rosen: I appreciate you having me. This has been great. I appreciate it, thank you.

Bridget Haight: Thank you. Thank you all for listening to On Point, a podcast by Oak Street Funding, where we bring research and data backed insights to dig into the minds of industry leaders to learn how to stand out, navigate, and break through this ever changing industry. I am Bridget Haight and tune in next time wherever you listen to podcasts. See you then, as we get on point. And don't forget to subscribe and leave us a review. Thanks for listening. To get in contact with someone at Oak Street Funding, please call( 844) 3538022. That's( 844) 3538022 to learn more.