Episode Transcript
[00:00:02] Speaker A: Welcome to the Dealmaker Uncut podcast where we speak to some of the UK's most exciting entrepreneurs and hear their investment journeys. We'll discuss the challenges, successes and lessons they've learned along the way with expert deals commentary from Jonathan Boyers, head of Alvarez and Marcel Corporate Finance, and me, Chris McGuire, executive editor at Business Cloud.
Welcome to the latest episode of the Dealmaker Uncut podcast, powered by Alvarez and Marcel. My name is Chris McGuire and I'm the executive editor of Business Class Out. And as always, I'm joined by the multiple award winning deal maker himself, Jonathan Boyers. Jonathan's been involved in deals totaling billions of pounds during his long and illustrious career and he's a managing director and head of Alvarez and Marcel's corporate finance practice in the uk. Welcome, Jonathan.
[00:00:47] Speaker B: Thanks, Chris. Great to be here.
[00:00:49] Speaker A: Yeah. And I know you're really excited to speak to today's guest, but let me tell you a bit about today's show. First we're going to speak to our special guest and then in the second part of the show, Jonathan's going to be leaning on his 35 plus years of experience in corporate finance to answer listener questions and a few questions from me as well. So Jonathan, put the audience out of their misery. Who are we speaking to today?
[00:01:11] Speaker B: Well, Chris, today we're going to be talking to one of the co founders of a really fast growing prop tech business called Street Group, which recently sold a stake in the business to private equity investor HG for a deal that valued it at over 200 million.
Actually a deal I know about quite well because I was involved in it. Unusually, the company was founded by Tom and Heather Staff, who are brother and sister and has been achieving 100% growth.
Technology looks at services, 4000 estate letting agency businesses. And today we're going to be talking to Tom Staff.
Hi Tom.
[00:01:53] Speaker A: Hiya, Tom. Can I just say, for the purpose of people listening, nodding doesn't work on a podcast. Okay, so Tom, really glad that you're able to join us today. So I'm going to ask a couple of softball questions before we get into the real nitty gritty of the deals. But let me take you back to the start. So you co founded a business with your sister Heather. Your parents both ran estate agencies and so you grew up really knowing this sector, knowing the pain points within the industry, hence the idea for Street Group. Can you just explain your relationship with Heather? And what were you like as kids? But also what are your roles in the business?
[00:02:29] Speaker C: Yeah, well, to be fair, we actually always say that Our family is embarrassingly estate agent heavy because it's not just our mum and dad who did have their own agencies competing at one point, but our auntie and uncle were also estate agents. So it's fair to say we kind of grew up in the industry.
[00:02:46] Speaker A: Do you know when you went for a walk on a Sunday and you saw an estate agency board up, would you first of all say, that's going to be about £180,000? Was it at that level of detail?
[00:02:56] Speaker C: It is a running joke that we all look at estate agency windows when we go on holiday. And actually when people come into the business, there's always a milestone where they say, I've started looking at estate agents when I go on holiday.
[00:03:08] Speaker A: I've got a twin brother. And the idea of us setting a business up would never happen. You and Heather, as kids, did you get on or was there any sort of sibling rivalry?
[00:03:16] Speaker C: Yeah, it's one of the questions that we get most is how do you work with your sister?
But no, there's this kind of Me, Heather and Will are the siblings.
We also then have two step siblings, a half sibling, but we've always got on really well.
So the kind of stereotypical sibling fights and disagreements, I mean, we had a few, but that relationship wasn't that kind of stereotypical rivalry. We always got on.
And so for me, running a business with my sisters, as natural as anything, our skill sets dovetail really, really nicely.
I am technical, I love marketing and do a bit of creative side. Heather is brilliant at the commercial stuff, so she's got a very different background to me. She went and had a fantastic career at kpmg. She was the kind of corporate high flyer, whereas on the flip side, I've never had a proper job. I made the weird decision when I was a kid that I was never going to work for anyone and I would just set up my own businesses. That kind of like naivety, arrogance of being 16 and just being like, yeah, I'm going to do it all myself. So we took very different paths and the skill sets dovetail really, really nicely.
[00:04:36] Speaker A: Came back together in sort of 2015. You set the business up, which was originally called Agent Software Group, which evolved into the business we know as Street Group today. Heather joined in 2016. Like you say, she spent 10 years at KPMG.
As I understand it, what you do is you build software and AI tools for UK residential property sector generally.
I always think, for the purpose of the person listening, who doesn't know your business, just explain what you do in Real simple terms.
[00:05:03] Speaker C: Yeah. I mean the simple boring answer is we make software for estate agents. We started off with Spectre, which is a marketing tool, and then we now have street.co.uk, which is a full software platform for estate agents they run their entire business on.
Was actually one of the interesting things during the deal of what do we call it? Because internally in our industry everyone refers to as the CRM. It's not a CRM, but when we've actually first launched street, we were adamant we weren't going to call it a CRM, but it's what the industry searches for. So we've kind of had to fold on that point. And so we call it a CRM.
Other people might more accurately describe it as an erp, but that's probably not quite right. So it's a full service estate agency and letting agency platform. So estate and letting agents pretty much run their entire business on the street platform and it's also a platform for their clients. So if you're moving house, if you're a buyer, seller, renter, landlord, you also have a Street account.
So it's an estate and letting agency platform. Really.
[00:06:12] Speaker B: It's probably worth just talk giving a bit more of an idea about the scale because you've been growing 100% plus, haven't you, recently? So just about this. How many people you employ, just how customers, Just a bit of the shape of the business.
[00:06:26] Speaker C: Yeah, so we're at about 230 people. Although I always say that measuring size based on headcount is not a great metric. But we serve about 4000 agencies logos across the UK.
Even how you count estate agencies, again Jonathan knows, is difficult, but yeah, about 4,000 logos across the two products.
Street in particular is growing extremely fast at the moment.
So yeah, that's to give you a sense of scale.
[00:06:57] Speaker B: Okay. So you bootstrapped the business for quite a long time and that was the whole attitude to doing that. That's worth talking about. And then you eventually decided to take some investment on from Proctura. So I'd just be interested to hear the thought process of the whole approach to that. And then ultimately the why you did that deal with Procura.
[00:07:22] Speaker C: Yeah, we were quite lucky in that when we started Spectre, it was profitable from day one.
So when we started Spectre, it was just me, so very low cost base.
And so we grew kind of organically with Spectre and Spectre was cash generative. So we were building up kind of a bit of a war chest within the company. We didn't take any of that out. We just let it accumulate because we knew at some point there was going to be an opportunity we really wanted to go after.
And Spectre is a fantastic marketing tool for estate agents. It's incredibly effective and agents generally love it. But it only solves one small problem.
And estate agents in general get a, you know, they have a very bad reputation. They're down there with journalists. Journalists, lawyers, amongst the least trusted professions, Tax collectors. Yeah. And genuinely, it's a very, very unfair perception.
Estate agency is an incredibly difficult job. It is seven days a week, it is long hours. You are dealing with people at their most stressed. A lot of the problems in the industry are actually outside of your control. It's the legal process and it's very thin margin.
Working capital structure is very, very difficult in a state agency. So overall, it's an incredibly difficult job. And 95% of all agents are genuinely hard working, honest individuals who will do the absolute best by their client. There's probably that 5% that maybe don't fall into that category. But the reputation they get is really unfair. And a big part of it is because they are using software that is in some cases quite literally 20 years out of date.
[00:09:14] Speaker A: Some sort of legacy software.
[00:09:15] Speaker C: Yeah. And I could talk for an hour about why that is and the things that led to that. A big contributing factor was just at the point where other industries were going through this kind of digital transformation, estate agency, the prevailing thought, particularly where the money was, was estate agency will go the way of travel agents, it will all move online.
And so we had almost a decade really of money piling into two places, which was the portals, which is fair enough, that's turned out to be an incredible business model.
But then the other one was online agents, so purple bricks yopa. And it took a long time for that to play out and for people to realize, right, okay, no significant amount of people are selling their houses online. And so there was a decade, really, where no investment went into estate agency technology.
And so that was a huge part of the problem. And we got to the point where we were then deciding, right, okay, do we want to take on this challenge? Because it is an enormous challenge. Estate agency software, it's, on the face of it, a limited tam. It's incredibly large footprint software, it's got to do everything.
So we made the decision that we wanted to take on that challenge. And so that's when we decided to build street.co.uk.
we predicted it would take a year.
It did not. It Took a lot longer.
And so for a while we burned that cash pile. But then as we launched Street, Street Revenue was coming in. We effectively ran the business at break even deliberately so wouldn't take anything out.
Any increase in revenue just corresponded to an increase in R and D on the other side.
And we could have continued to do that, but we got to the point in 2024 where we were in an incredible position as a business in that Spectre was the market leader in its category and street was by far and away the best estate agency software out there. And it really came down to, we've got this opportunity, we need to go for it. And it wasn't necessarily about capital at that point. We actually had a facility that would have funded that growth.
But Heather and I both knew we were making slightly risk averse decisions. And so that was the purpose of taking on that initial investment, was to force us out of that subconscious desire to return, to break even, which is what we were doing. We would sit down, we would make a plan, we're going to burn this much. We've got the cash, we've got the finance, let's go and do it. And then you'd fast forward four months and we'd be back to break even.
And so we went out and decided to do the first transaction, which was the one that we ended up doing with Praetora now pxm.
[00:12:15] Speaker B: So by then the business is a category leader now, isn't it? And you took on that investment.
Did having them on board change the business in any way? Did it change the way you ran the business?
What sort of partner were they? Were they silent?
[00:12:33] Speaker C: So it definitely changed mine and Heather's mindset. We definitely went more aggressive.
Once you've raised money, you know that that money is expensive.
And so if you then don't deploy that cash, you've done that for no reason. You've just given away part of your company. Especially when you're on the kind of growth curve, you know that that chunk that you've just given away is going to cost you a lot of money. So it forces you into going more aggressive.
Praetora were a great partner for us.
We had Pete Carraway on our board, who was brilliant, I have to say. They didn't have to do a huge amount of intervention because we presented a plan to them. And pretty much from day one we were massively ahead of that plan.
And so Pete was there to kind of guide and question us when needed. But for the most part he kind of let us get on with things, which is pretty much what we wanted with someone there to kind of force us to grow up a little bit. So start doing proper board meetings, bring in a bit of.
[00:13:43] Speaker B: It did help you professionalise the business a little bit, having them on board.
And that led up to a decision to go for a much more substantial transaction, which is the one that you've recently done, where you've effectively sold a.
A minority, significant minority state to HG Capital, who are probably one of the leading software houses and investors in Europe, the world.
Can you just talk about the decision to do that and the thought process? Because that was a big step in the business, wasn't it?
[00:14:21] Speaker C: Yeah. I mean, funnily looking back at it, the rationale behind the second transaction was essentially the same as the first, but at a new scale, which was the software is now even better. We are now growing at an even faster rate. I think what happened with street was interesting, which was we launched the software and as I said before, an agent, whether they're estate agent, let an agent or both, they run their entire business on the platform. So when we launched that software, I think a lot of people looked at it and said, that's great software, we'll wait, thanks.
We won't be the first people on it. And so it's a difficult industry to come into as a new entrant. People are understandably hesitant. And so for the first, I would say, three years especially, a lot of the bigger agencies were just waiting and we kind of proved ourselves over those three years, reliability and everything like that, reliability, security.
We demonstrated that we were a safe pair of hands, we weren't going anywhere. And that's when the real growth kind of started accelerating. And so, you know, Pretoria were kind of midway up that curve and we were then in a position where, you know, the whole market was open to us. We want to do more, we want to go bigger, we want to go faster.
And so it's essentially the same rationale, but bigger things.
[00:15:47] Speaker A: I have to mention, sort of. So Jonathan's a deal maker and I'm sort of more the journalist, a business journalist. You mentioned purple bricks, and at the time when they were introduced, everyone thought, this is it. And we've seen the problems that purple bricks have had in a big way as well. The deal that you did with Praetora now PXN, that valued the business at about 45 million, the deal you did with HG valued the business at circa 200 million, north of 200 million. That suddenly changes your profile, doesn't it? And your dynamic, I bet your LinkedIn inbox is completely different now.
[00:16:19] Speaker C: Well, I tend to stay quite hidden.
[00:16:21] Speaker A: I know you do. You never respond to me, so I don't use LinkedIn.
[00:16:26] Speaker C: So Heather's the one that gets bombarded on LinkedIn.
A lot of people in the industry don't know I exist, and I'm quite happy with that.
[00:16:32] Speaker B: I think the.
Obviously this is a deal that I advised on. So on a lot of the people we talk to on the podcast, that's not the case. But this one, I do know a lot about it.
So you, you were fairly clear in your mind that you probably wanted to start to retain a controlling interest, didn't you?
And when. Certainly in the early stages, when we were talking to you about doing a deal and people started hearing the market that was a possible deal. I mean, the amount of attention that you got was phenomenal.
I think we had some over 80 inbound enquiries from people interested, including the strategics as well as pe. But you were fairly clear about the type of deal that you wanted to do. Do you want to just talk about that to get a bit of a feel for what your attitude to that was? Yeah, you had so many options, you could have almost done anything. I mean, obviously the business is a strategic business in the sector, isn't it?
[00:17:36] Speaker C: Yeah. I mean, I think for the reasons that I said before, like the motivations behind doing the second deal shaped what we were looking for. So we were very much wanting to go faster. Not anything near an exit or any kind of, you know, potential exit. We didn't want to touch that. We didn't want certain types of private equity.
So I think before we even started, we had a very clear idea of what we wanted to do.
So we've got a huge amount of belief in the business. We know where we want to go, we know most of what we don't know. There's like unknown unknowns. But we knew what we wanted help with. And so from the off, we were very clear that we wanted to retain control, retain a majority. We wanted proper growth, investment, and we knew what kind of partner we wanted.
And so before we even embarked on the very early stages, I think we had a pretty clear idea of what we wanted, which allowed you to reject lots of people quite early,
[00:18:42] Speaker B: it was clear.
Could you talk about the experience?
Because you met quite a few private equity investors, didn't you? Just the experience of meeting them and how that felt, because obviously a lot of people who are watching will be entrepreneurs thinking about Doing a deal. And it's just interesting to understand how you. Because they do a lot of pitching to you going on and just be interested to see how you felt meeting different people.
[00:19:08] Speaker C: Yeah, it's an interesting process.
I learned a huge amount during the process. So I've never kind of met a few PE funds, but only kind of like the early coffee chats type of thing.
So I was surprised that there was quite a lot of difference between the different types of private equity. I think there was a huge difference between software specialists and generalists, particularly as we were raising during the sasspocalypse. That was fun.
[00:19:41] Speaker A: Sasmageddon as well, is another phrase that they use.
[00:19:43] Speaker C: Yeah. So there was a lot of difference between them, which I thought was quite surprising.
I thought some of them were terrible.
One of them in particular asked, what are you looking for in an investment? And he said, honestly, three and a half times return with zero risk.
That was his answer. And I was like, it's one of the worst answers I've ever heard in my life to any question.
And on the flip side, you had people who had a really strong thesis of, right, this is what we want in this environment.
We've got very strong ideas on how this plays out over the next three to five years. And we could be right, we could be wrong, but we've got a strong idea.
So I really felt like there was a kind of like a bifurcation of private equity, particularly with the AI thesis.
[00:20:34] Speaker B: And it became clear that you wanted a software specialist who was going to add some value.
You were airing towards that, rather than, leave me alone, I want to be in control.
So that sort of became clear.
[00:20:48] Speaker A: Can I flip the question on what you look for from an advisor? Because you know what you look for from an investor. And obviously Jonathan was involved in this process as well.
You and your sister. This isn't your world. I know you know a bit about investment, but it's not necessarily your world. Your world is building Street Group to the business it is today. What did you look for from an advisor? Because a lot of listeners will be out there thinking, what do I look for from an advisor?
[00:21:13] Speaker C: This is going to be awkward because Jonathan's right there, but I'll answer the question.
[00:21:17] Speaker A: Just say whatever you want about him.
[00:21:20] Speaker C: So we had a very strong idea of what we wanted from an advisor.
As you say, this isn't our world and I think it is relatively rare to get to the scale we were at and never having done anything like this before. So we were acutely aware there is an asymmetry of information. Like there is an asymmetry of experience.
Me and Heather having never done this versus a private equity team that do this day in, day out. And so the one thing that we were looking for above all else was trust. Because there's only going to be one party in this entire experience who is going to advise us. And there will be times where things happen and you've got no idea. Is this normal, abnormal, is this a fair request, Completely unreasonable. And the only person you've got to turn to is your advisor.
So we went into it saying essentially we need somebody where when push comes to chuff and you're in that situation and your advisor says X that you trust absolutely that they've got your genuine best interests at heart. So that was the primary thing that we went into that kind of decision with. I don't think I've said that to Jonathan.
[00:22:37] Speaker A: He doesn't like personal glory, but you can spread it to me if you want.
[00:22:43] Speaker B: So there was quite a lot of prep for this process. There was a lot of preparation done.
It was really clear it was going to be a really attractive process. We were getting a lot of attention and you were encouraged to do a lot of preparation. So you appointed almost every type of due diligence provider that you could think of.
And some of that, I think you were being advised to do that and I think you were challenging that, how much you should do. I'm interested in the experience that you had of going through the technical dd, the commercial, the financial.
Just observations on that.
[00:23:26] Speaker C: Yeah. I said before that we were a capital efficient business and very tight. So my biggest thing that jumps to mind is the fees involved. I think that was a huge adjustment, which again, having an advisor that you trust talking you through that and telling you where to spend the money, where not to cut corners, was very, very valuable.
The actual due diligence itself is pretty time intensive.
The technical due diligence was very interesting because we were doing that process at the same time as we were ripping up almost every internal process in our engineering department.
And I naively went into the process thinking that the majority of what technical due diligence was going to be is how good is your tech. We're going to get in there and we're going to write a report of how good is your tech, how good is your code and infrastructure, but really I think the vast majority of it really is around process.
So how mature are you as an organization and how much are you adhering to best practice within the software Development lifecycle.
So we're doing that process and being marked against what almost I know they want to hear.
And on the flip side, we're actively doing the opposite of all of those things internally because just by pure chance we were doing that process whilst the kind of the wave of agentic engineering was coming through and it was just ripping up all the stuff that you knew about software engineering. So that was a weird experience, slightly fraught at times.
Commercial due diligence I thought was super interesting just as an experience, as like a learning experience for me.
FDD didn't get too much involved in, to be honest.
[00:25:27] Speaker B: No, probably as well.
[00:25:29] Speaker C: Yeah. Left that to our CFO Matt, who
[00:25:32] Speaker B: did a good job.
[00:25:33] Speaker A: How long did that whole process take with the HC deal? From start to finish? Jonathan mentioned there were like 80 inward bound inquiries. But from start to finish, how long was the process?
[00:25:46] Speaker C: I think it really depends on where you define the start.
So when did we actually launch the process? April.
[00:25:55] Speaker B: Yeah. So there was quite a lot of meetings with potential buyers, investors in the period before the process, wasn't there? And that was happening when the DD was being done.
But I think from the.
It was in April, wasn't it? I mean, one thing about this process happened very quickly once it was in the market, but there was probably three or four months preparation done.
When the IM went out to completion, I think it was something like 41 days from the IM going out to signing remarkably quickly.
[00:26:29] Speaker A: The reason I asked for, I almost thought Jonathan would put like a sign outside, you know, we rate investment in 41 days or like they do with an estate agent's board as well.
I've got one more question I want to ask, but I don't know. Jonathan, if you've got. This is your deal, this is like a busman's holiday for you. Have you got any other questions you want to ask Tom?
[00:26:48] Speaker B: No. I suppose the one decision we haven't discussed is the decision to actually appoint hg, because we ended up with bids, with several bids, a couple of bids, almost at the same level. We talked about it, over 200 million and there was, you know, they were both good deals, they were pari passu deals.
You could have probably done one of several deals. But just how did. The decision to appoint HG is probably just worth talking about that for a minute. They're now on board with you, aren't they?
[00:27:27] Speaker C: Yeah.
I think HG are probably the only private equity company that we've come across where almost, I say almost, I would say universally, everyone has a high opinion of them.
And so we kind of. We knew that people had a very high opinion of them when we met different PE houses throughout the process, HG were consistently, throughout the process, on it.
So they knew things about our business that we didn't know.
And that level of professionalism, they didn't miss a beat throughout the entire thing.
And so externally, they have a very good reputation.
At an event yesterday and chatting about it, and every time I said, yeah, we end up going with hg, people say, brilliant, yeah, really, really good partner. And you hear that again and again and again. So, like this kind of external validation, how they behaved within the process itself was excellent. But then we liked the people. The people were both.
It's quite a rare mix to be very personable and extremely impressive at the same time. There were a lot of people we met that were one or the other, but it's quite rare to be, you know, fun to be around and you can have a joke and a laugh and a five hour meeting doesn't feel
[00:29:01] Speaker A: like, you know, how's the relationship been post deal?
[00:29:07] Speaker C: It's still very fresh, to be honest. So it's only been six weeks and four weeks of. That was August.
So after the deal completed, me and Heather hadn't taken any days off in an awful long time. So we've been away, they've been away.
So really we're just kind of getting started. But the resources that they have made available already is a very good sign that we've made the right decision. And one of the other reasons we went with HG is throughout the process, they all talk about what they can do for you as a founder, but what HG do, they do that as well.
But they have a big emphasis on what they can do for your management team. So all of us, senior leadership team that explicitly mapped it out and said, right, this is what we would do for you. Head of ux, head of products, we'd put them on this course.
So it wasn't just about bringing me and Heather up to the next level. It was everyone.
And so that's already started and they've been very impressive.
[00:30:12] Speaker B: So what's next for Street? Where are we going over the next few years?
[00:30:20] Speaker C: More of the same, if I'm being honest.
On Street, We've got so much headroom in the UK to grow.
Growth is still accelerating. We want to get street into as many agents as possible because it makes the move better for everyone. It's a better experience for the agents. They sell more, they make more money. It's better moving experience for the consumer. So we want to get that out to as many agents as possible.
We've got some other plans that we've run by HG early days, and they've been extremely supportive of even the slightly wilder ideas, which thought they might be a bit hesitant on raising the eyebrows there.
[00:31:03] Speaker A: You know, you just sort of tease. You're just sort of teasing the listener.
[00:31:07] Speaker C: Yeah, well, I'm sure some of our competitors will be listening, so I probably won't go into too much detail.
[00:31:12] Speaker B: The reality is that the world's your oyster or the world is the business's oyster. It could go in so many different directions.
[00:31:20] Speaker C: I think the main thing that we want to do is double down on R and D.
Our strength is how good the software is and how quickly we innovate and we are a long way ahead of the competition.
What we want to do is basically just double down on that advantage where you're good. Just pile resource behind that. So accelerate R and D, Improve the software at a pace where no one can catch up.
[00:31:49] Speaker A: Well, it's clear you're loving it and you're not going anywhere soon and you enjoy working with your sister, which is fantastic. Tom, we're going to go for a quick break. When we come back, me and Jonathan will be discussing what we thought of the interview.
I think HG will be very pleased with the interview so far. And when their phone's red hot with inquiries from people who've listened to this podcast and decided they're their perfect investor, that's down to you, Tom, but massive. Thanks for coming in and listen, keep up the good work.
[00:32:19] Speaker C: Cheers, Tom. Really enjoyed it.
[00:32:26] Speaker A: Welcome back to the second half of the Dealmaker Uncut podcast. Just interviewed Tom Staff, one half of the co founders of Street Group. You enjoyed that, Jonathan, didn't you?
[00:32:35] Speaker B: Yeah, I did, I did. I mean, I think the world of them, of them both, and I think they've, you know, they've built an absolutely amazing business.
The potential in that business is phenomenal. And the two of them together, they're both super smart, but together they are a formidable team.
I love working with them and I'm proud of that deal. I mean, obviously I'm proud of it and I was just advising on it, so you can imagine how they feel about the business that they've built. But I think they're great and I think HG have made a great investment and I think that relationship will be really fertile for all of them.
[00:33:16] Speaker A: Yeah, I thought it was my first time having met him. Actually. And he, he's a nice guy. Nice guy who's worked really, really hard. The thing I always say to founders as well is that they bootstrap that business for a long time. You don't start a business and you have an entitlement to investment.
And that comes across loud and clear. And also clearly him and his sister get on. There's no falseness there. So no, I could see they were really nice. And actually his honesty about the investor who said, what do you want out of this? And they just said three and a half times return and zero risk.
And you think, are there really people out there like that?
So, no. Absolutely fascinating. The second half of the podcast is entitled Ask Jonathan and it's where listeners can ask you any question they want. Our first question comes from somebody who said that they've been down an investment process, they've gone through their due diligence, and at the last minute the investor in question has tried to chip them down. Now, obviously, just explain what that means and also what would your advice be to somebody when they get that 11th hour request to chip the deal?
[00:34:19] Speaker B: So what this is talking about is if you run a process with an advisor, you'll often end up being asked to give somebody exclusivity on the back of a final. You might run a first round of bids and a second round of bids and then somebody will want exclusivity.
Sometimes you have to give exclusivity.
They'll then do a few more days or weeks work and what can sometimes happen is when that work is complete, they'll amazingly have found some more things that are negative and then you can end up with a price chip.
It doesn't always happen, but it's just this thing that the balance of power between the seller and the buyer changes during a deal. At the start of the deal, the seller doesn't need to sell. It's a choice they're making. But by the day before completion, the buyer knows everything about the business. The sellers started to think about where to put the money. They started bringing IFA wealth managers. And so when a price chip comes, it will often be a really difficult decision.
Often the question is, is it real or is it just spurious?
The way to counter it is to have competitive, competitive process.
If you've got an underbidder that's just behind in terms of deal structure and you could have gone with them if you worked an underbidder up, if you're in exclusivity for a week or two, you've always got the threat of being able to go to the underbidder. So that reduces the risk of a significant price chip biting.
But I mean it's the age old problem with dealing with corporate finance is how you negotiate the final deal and each case is different.
[00:36:12] Speaker A: You've been really busy at Avras and Marcel with lots of deal activity recently.
There's a perception in terms of the deal market that private equity has got a lot of dry powder looking for a home.
Is that still the case and what's that doing in terms of numbers?
[00:36:31] Speaker B: Yeah. So there's still loads and loads of private equity money looking for a home and essentially what they're looking for is quality investments to make.
The deal market has been a difficult market for two or three years and what we find is if you've got a brilliant business, we talked about street earlier, brilliant business like that, you end up with 80 people wanting to invest in it.
In reality, by the time you've run the process, you end up with a much smaller number, but you get well attended processes.
If you've got a business that is good but you run the process, you can sometimes end up with a smaller number of bidders and so you can still get deals done, but it means you need to prepare really thoroughly and you need to be careful how you warm up bidders. Then you conduct a process so that you do create optionality in the bidders, but there's loads of money around, but it is choosy.
And like I say, the thing to do is to present the business in the best light possible and prepare really thoroughly.
[00:37:43] Speaker A: The final question is from one of our regular listeners who loves the show, loves you as well, Jonathan. That's nice. And there he said, my intention's always to retire at 60 and sail off into the sunset.
At what age should I prepare my business for sale?
[00:38:00] Speaker B: To be honest, I don't think there's a single answer to that. The question is for people is why are they thinking of selling the business and what sort of deal do they want to do? Some people want to sell, don't want to work for anyone else, will find a trade buyer, sell it, they might stay for a year or two and then they'll walk away.
Other people want to do a private equity deal, they want to take half the money off the table and then get some money in the business, go on and grow for another few years.
I don't think you can say at this age you should think about doing this.
Some people want to retire as soon as they can, other people will never retire.
I think one of the points that we'll always make is people need, need to think about once they've sold the business, they've sold it, it's not theirs anymore. And what are they going to do when they're no longer needed in the business?
And making sure that they've got a plan for that is important.
[00:38:58] Speaker A: Really good advice as always. So massive. Thank you to you, Jonathan. That's all for this episode of the Dealmaker Uncut podcast, powered by Alvarez and Marcel.
So don't forget to subscribe to the podcast. If you like it, tell your friends and family, follow us on social media. So my name, as always, is Chris McGuire. Thank you to you. And thank you to you, Jonathan.
[00:39:17] Speaker B: Thanks, Chris. Enjoyed that.
