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.
And the Dealmaker Uncut podcast is back. Thank goodness for that. Powered as always by Avras and Marcel. My name is Chris Maguire and I'm the Executive Editor of Business Cloud. As always, I'm joined by the multiple award winning deal maker himself, Jonathan Boyers. We're even wearing the same outfits as well. Jonathan's been involved in deals totalling billions of pounds during his long and illustrious career. And he's the Managing director and head of Alvarez and Marcel's corporate finance practice in the uk. A big welcome to you, Jonathan.
[00:00:50] Speaker B: Thanks, Chris. It's great to be back after the summer.
[00:00:53] Speaker A: Certainly is. This is the podcast that gets you, the listener and the viewer inside the deal. In the first part of the show, we're going to be interviewing our very special guest. After that we'll have a short break before Jonathan leans on his considerable experience in the corporate finance world to answer listener questions and a few from me as well. So, Jonathan, who are we interviewing today?
[00:01:12] Speaker B: Thanks, Chris. Our guest today is the son of Rochdale Butcher, who went on to become the CEO of Manchester based consultancy PubMe, which is now approaching 41 million turnover. Apubmi has recently taken on a minority investment from private equity Investor CBPE in December 2023 and since then it's made a number of acquisitions. So welcome to Gary Partington.
[00:01:38] Speaker C: Thank you. Nice to be here.
[00:01:39] Speaker A: Gary. In the introduction, Jonathan forgot to mention that you are also the UK's best dressed entrepreneur.
[00:01:45] Speaker C: You know that you've given me that award several times, Chris, so thanks for that.
[00:01:48] Speaker A: Now, I love the story of. And incidentally, the really intelligent questions don't come from me, they come from Jonathan as well. But I love the story of how your parents gave you the name Gary with two Rs. So your dad's called Barry, your brother's called Harry.
[00:02:02] Speaker C: My uncle. Your uncle Rob.
[00:02:03] Speaker A: Sorry, yeah, his brother, your uncle is called Harry. So it came to pass that you would be called gary.
[00:02:09] Speaker C: Yeah, with two Rs.
[00:02:11] Speaker B: Yeah.
[00:02:11] Speaker C: They weren't very imaginative with the naming, were they? When I was younger?
[00:02:14] Speaker A: No, absolutely not. But I love it. I love it. But it sets, sort of separates you apart. I'm going to take you back to the start of the Appadme Journey, you were made redundant. In around 2009, you co founded Apadmy with three of your mates, Nick Black, Howard Sims and eventually Adam Fleming. I think he became known as the Beatles locally. What was the idea for Apadmy at the start, Gary?
[00:02:31] Speaker C: Originally, we just wanted to create a little bit of a lifestyle business. We saw the opportunity in creating amazing products for people. We'd been involved in the creation of smartphones and we saw that building apps was going to be really, really big and important. We'd just come off the back of building things like BBC iplayer, Shazam and things like that, where we'd been involved with different people, and Audible, which nowadays big apps that everybody uses. But back then these were just new ideas and we thought, you know what, we've helped those guys create some of those. We think there's a big opportunity there. So we started building them. But we were treating it as a bit of a lifestyle. We said we'd never be more than 50. People wanted it to be a really cool place to work, which is what we went off and did.
And then we just decided later on in the journey that we had a bigger opportunity than what we were limiting ourselves to.
[00:03:18] Speaker A: And the amazing thing is, quite often there's a reason why you change from being a lifestyle business to being much more growth focused as well. I mean, you'd grown a PadMe to around 70 staff, two and a half million turnover. Then your co partner, Howard, had a brush with death, which came completely out of nowhere as well, while on holiday. You can share a few details about that, but that completely changed your focus. And he came up with this big, hairy, audacious goal to expand into 1500 staff in five markets in five years. So just tell us what happened to Howard and how that came into focus.
[00:03:52] Speaker C: Yeah, it's one of those things that you never really think is going to happen. It was almost, you know, a kind of benign thing that he had. He was away on holiday. He had athlete's foot, so he had a little. A little slit in his foot where he just had cracked his skin. Really, it's nothing major, but he went horse riding and the horse ran through some dirty water and a few days later he had an infection in his foot. It was swelling up. He flew home, had to get rushed into the hospital, ended up with cellulitis, where the skin's all horribly dying off around it, ended up with sepsis and then ended up in a coma. And you think this is something that can happen to anybody because it was nothing. He was just Having fun on holiday.
And after Howard recovered and he's perfectly fine now, he completely recovered. But it made us all think, you know what, we've been building this, we need to leave something from our families. Because when we started the business, we had no money. We all invested, we put all of our, you know, we employed staff, but we put all of our costs on credit cards.
You know, I think we put, at the time, we put £4,000 in each to start the business, which was all of the savings we each had from being made redundant. And we thought, there's something there, so let's build it. So we thought, you know what, after seeing that happen to Howard, start thinking about it and start treating this seriously. Because we kept getting told we're Manchester's best kept secret. Which, you know, is really nice when you, when you're smiling. Oh, yeah, we like that. It's kind of cool. Kudos. But then we thought, you know what, let's take advantage of it. Let's start thinking about marketing and sales and growing and delivering some of the amazing products that we did for people, but start thinking about how we can do that in a wider way for more businesses, you know, and grow. Because back then we were still working with some big brands, you know, we were working with the BBC, we were working with the NHS and Argos, and it was like, do you know what, let's figure out how we can take this further. And so we went on a let's go and do a bit of a strategy day. So I took all the team away for a long weekend and we locked ourselves away and, like, let's come up with a strategy on how we're going to go from here to the goal which we've got, which is getting towards 1500 people. Things always take a little longer, you know, it's a bit more than the five years that it's taken us, but we on that journey to get there.
[00:05:59] Speaker B: So the business had grown and in 2022, you decided to look for an investment partner and you run a process that led to an investment by cbpe. I was saying before, a number of the guys at CBPE used to work with me at kpmg, so I know them well and I'd sold them a business actually, not that long ago.
So I'm interested in just the thought process of what made you decide it was time to look for investment. What were the objectives of that deal and the process?
[00:06:30] Speaker C: So part of it for us is we wanted to restructure with Howard wanting effectively to leave the business and take most of his money off the table. We were like, well, how can we do that? So we went and spoke to a load of people to get advice.
And I really strongly recommend to anyone that's thinking about this to really think about getting a proper advisor on board to help them, because it is a minefield to look at, so you really need to do that. And. But what we did was we went and spoke to loads of different people. I spoke to other CEOs, spoke to some PE firms, and then we thought, right, this is the way that we can do that. So we can. We can go for private equity, we can restructure the business, take on the investment that allows us. Because one of the great things about taking on private equity is it gives you access to capital to grow that otherwise isn't necessarily easily available, you know, through normal banking and so on. So. So through that, we restructured the business, allowed Howard to exit, and the three of us that stayed on really focused on doubling down and growing the business.
And we went through a long process around that. In terms of. I say long, it wasn't that long. The actual fundraise process itself was like three months.
But the process of getting ready before that, which is really where the specialist knowledge comes in, is getting your business ready for that transaction, in terms of what are all the things you need to do are really important.
When we went through that process, we always spoke to. I must. You know, you get sick of being taken out. Because one of the nice things is the PEs always go, what does Gary like? Where does he like to go? I think I went to the same Indian six times. I like a curry, right? And they all. They all took me to the same place and they all tried to get me drunk to. To find out that extra bit of information.
They just didn't realize what they were letting themselves in for.
[00:08:14] Speaker B: Disappearing when they're just pitching to you, they're pitching.
[00:08:16] Speaker C: They're pitching all the time. So we went through and we got down to a. I think we got something like 10 offers in the end, and then we just kind of whittled those down into what the preferred three were that we then took forward into more final discussions and phases, really.
[00:08:30] Speaker B: And the situation where Howard left the business, how did that feel? Was that everybody was comfortable with that or did that feel a bit odd?
[00:08:38] Speaker C: Well, the thing is, for the four of us, we were mates first and most people can't believe this. We've never had a crossword, we've never fallen out. We work together well and Even now, the four of us, like we have, you know, Howard's still part of the four of us. So we have our yearly a pad fest. Howard was there, you know, normally his parents come as well, but they couldn't make it this year, you know, and it's weird, you know, his parents and my parents get on really well and you know, there's all those things that happen outside of business as well.
But we all knew it was going to happen and we'd all work towards it and plan for it and it was what we all knew we were going to do afterwards. So do we still chat to Howard? Yes. Do we still go for a beer? Yes. Does he still come to some of our events? Yes. Is he involved in the day to day now? He's not involved anymore, you know, but, but he's still part of the four of us. And we still, we still have our founders chat where we still organize things and chat about things and talk about other businesses as well.
So, so, you know, we're all still close and friendly. Myself and Adam, we're out tonight, we're going to do a gig tonight. And you know, so we have that friendship as well as working together, which makes a big difference.
[00:09:48] Speaker B: So you are looking for funds to take some money off the table and also to effectively get some funding to buy some business.
[00:09:57] Speaker C: Yeah, firepower for acquisition.
[00:09:59] Speaker B: And like you say, you spoke to quite a few people.
Just talk through. Because one of the things I often say to people is how when you're doing a private equity raise, people focus on the numbers and the metrics. But it's often, well, at least as important to get the right investor.
Could you just talk about how you ended up choosing cbpe?
[00:10:20] Speaker A: Yeah, sure.
[00:10:21] Speaker C: I think that's the most important thing is getting an investor that you feel you can work with through the good and the bad.
And so for us, we went through a whole process of getting to know those different, you know, those final individuals. And it's key to make sure you know who's going to be involved in your business after the transaction. Not just, you know, you don't want to just find somebody new day, day one, after the deal is done. So we spent a lot of time and effort making sure we knew who was going to be involved, what they would expect, how we would work together. And then I went through a process of speaking to people that they'd worked with before, good and bad. So going, speaking to them, going, you know, what were they like in the good times? What were they like in the bad Times, how did they support you? How did they hinder you?
[00:11:05] Speaker A: How did they.
[00:11:05] Speaker C: And I did that for all the final three that we were talking to. And it was really insightful and for me, in the end, settled down on CBP is what I felt was the best fit for us, that I felt that they would work really well with us. By the end of the process, they really understood our business, what we were doing. They were getting excited because as you're going through this, you're still running a business as well. So they're starting to get excited about some of the wins and some of the opportunities we're talking about as we're going through this process.
And it just felt like a really good match. And thankfully, everything post that has proven to be that way.
[00:11:41] Speaker B: And how did you find the due diligence process after you'd chosen them?
[00:11:45] Speaker C: Thankfully, I took on a CFO earlier who's got a lot of experience in this. And so for me it was quite light touch in the end, thankfully. So, you know, but, but, but for Ken, Ken McPherson, now CFO, he was very heavily involved. Yeah, he's been done a few different private equity deals and so he was a really good addition to the team. And it made my life a lot easier because I can just focus on clients, sales and expansion and Ken can really focus on all of the DD and keeping that side of the business going. Which, which, which was great for me.
[00:12:19] Speaker A: I've got a vision that, you know that Indian restaurant where all these investors took you out on? They probably thought, oh, there's Gary with another investor meeting like that, you know,
[00:12:27] Speaker C: they did know because it's my mate
[00:12:28] Speaker A: that owns it, made an absolute mint. And a lot of people, when they talk about raising investment, they think about it as, right, we need investment, let's raise it.
What raising investment does do, though, is it makes you look in the mirror at your own processes as well. And like, you know, you might look at your business and think to yourself, that's pretty watertight. But then you bring an investor on board and it says, how long are your contracts if they're not recurring? If they're one month, you know, extend them to two, extend them to six, send them to 12. What did you have to change in your business before you actually took the plunge and actually raised the cash?
[00:12:59] Speaker C: So it's a lot of those things where you think about, right, how do I get this business looking so good that everybody wants to invest in it and think about, well, what are the reasons you have to take a bit of A step back before you start the process and go what would stop somebody wanting to invest and then making sure you nail that. But that might have to start 18 months before. So we went through a process because we, you know, as a, as growing from a lifestyle business, we had, you know, we had month to month contracts like you said, we had a couple of non competes in there, you know, restrictions and we thought, you know what, these don't help us for our future growth. We'd signed them when we were only 30, 40 people and we thought it was great getting that deal but we thought, you know what, we want to get more customers like that. So we have to, you know, and if we're showing our value, how we can go and do something for one customer and then replicate it for somebody else.
So we put a lot of effort into restructuring contracts, making our team incentivized for longer and longer term contracts. Because if you're going into any transaction having something that's three months versus three years makes a massive difference to your ability to forecast out your revenue because you've got that contract signed and then it's the processes around that. So making sure everyone's incentivized to the same goals and that everyone understands where you're going as well.
So we wanted to get everybody bought behind us as a business. So we'd already put in place a couple of years earlier an EMI scheme to motivate all the staff that look, this is good for everybody, this is where we're heading. And all of those things come together to make your business quite attractive to a private equity house, that you're all aligned, you've got these things that make the business more valuable, you've got diversity, you know what, you don't want to go into any transaction and he's have 50% concentration on a single client because that's a risk. So you think about all the things that might be a risk for somebody to come in and invest, take all of those away. So we have limits now. No single client more than 8%, 9% of the business and you know, and try and get that diversity among sectors. Now we're focusing on diversity across markets as well because we've got customers in the us, Central Europe, over in Asia and it's like how can we diversify even further to make us more attractive for future growth.
[00:15:17] Speaker A: Jonathan, when you're advising companies and they want to take investment, are you saying to them what Gary just said to us, which is get yourself investment ready?
[00:15:27] Speaker B: Yeah. So I mean all the things you Just described around improving the quality of earnings, aligning the management team, making sure it's the right shape, really value adding stuff to do in advance of a process, much better to get it all done and everything you can do to improve the business done so that you can be really sure footed when you present the business to market. It sounds like you did a good job.
[00:15:53] Speaker C: Yeah. If you don't do the management incentives early enough there's a risk that they're not valid at the time of the transaction as well some tax things to worry about getting that done as soon as possible. If you think that two years from now you might be doing a transaction, get that sorted today because otherwise, you know, because you want people motivated for that journey. Whereas if you do it the week before transaction, it's just seen as, you know, rightfully so as a tax dodge.
[00:16:17] Speaker B: So I often think that people, when people deploy a bit of money to the team to incentivize them either in a formal scheme or some sort of bonus, it's usually money well spent.
[00:16:30] Speaker C: Definitely it's the best thing we ever did which is getting all the management team motivated, incentivized on the journey, you know, and it's whatever you're giving away, it pays itself back many times.
[00:16:42] Speaker B: And how involved have the investor been since the deal happened? I mean it looks like it's gone pretty well so. But I'm just curious about how involved they've been with the business.
[00:16:54] Speaker C: So we obviously have the board meetings, we chat to them, give them an update, know once a week, every, every two weeks.
But if there's anything we want their help on. So when it comes to acquisitions, so when we're doing due diligence on acquisitions, we want to run the finances, you know, that's where their sweet spot comes into when it goes into the numbers. Even though they use Claude quite excessively now, you know, as most people do but you know, they really think about those in a different way to the way that we would have. We would naturally think about it. I've got a great M and A director in Jasper who's been along for the journey for a long time now. But you know, thinking about how to structure transactions, that's one of their sweet spots. And that really helps when we've got any wider questions about what else is going on in the market, what's the rest of the portfolio seeing that's when we can get some really good insights. So they run a. We've got an AI day at Bletchley park in a couple of Weeks, which is going to be really interesting. Cool venue to go and do it. You know, obviously home of computing with the enigma there. And you know, we're having a real in depth day there across all the portfolio. Talking about just sharing what everybody's doing around the different businesses on utilizing AI and those are some of the nice things that happen which are really useful.
They also do, obviously they try and get CFOs together, they get the people, HR teams together across the group. Just so it's almost like in our business we call it a community of practice where you learn from each other.
They do that across the portfolio as well. But if there's any questions we want to ask or any help we need, they're always available to do that. What they don't come in and do is tell you how to run the business.
Their sweet spot is being there to provide support when you need it, not to come in and tell you how to do the day to day.
[00:18:41] Speaker B: So it sounds like you've got a good collaborative relationship with them.
I'm often interested in how entrepreneurs come to work with private equity.
Some people take to it really well, others struggle a bit. And so it sounds like you're pretty collaborative with them.
[00:18:57] Speaker C: Yeah, very much so. Completely different to in my previous life. I've had experience with vc. Definitely not as enjoyable in that space. I didn't, didn't enjoy that one, but that was many years ago. But with private equity and these guys in particular, you know, I can only vouch for them, but I've had a really good experience with them. And I think it comes down to choosing the right people, making sure you get to know them, do your due diligence on them and make sure that you feel you can work with them, figure out what it's going to be like in the good and the bad days and then make sure you can deal with that.
[00:19:30] Speaker B: Yeah.
So you went on and you've made three acquisitions so far.
Could you just talk about that? It's not always easy finding commit to make acquisitions. It's not always easy to find the right ones. You just talk about the process you went through too.
[00:19:47] Speaker A: Yes.
[00:19:47] Speaker C: So we've got our own, We've got a CRM dedicated to acquisitions. We've got about 1,000 companies in it that we've had some conversation with.
Jasper and his team constantly talking to new people. And what we're trying to find is those were for a lot of our acquisitions, it's more geographic expansion.
We are looking for some sweet spots sometimes, but mostly it's been about expanding our customer base. And so there's a lot of work that goes into meeting and greeting those people.
Thankfully, Jasper, who brought on board to do that, he did 22 acquisitions in his previous life for a big agency. So he's been through that and done it a lot. And it's just about building that network of companies that you might be interested in. Then it's just like, it's very much like a sales job, getting to know them, is it a right fit? Trying to understand their earnings? Is there, is there an opportunity where one plus one equals three? You know where you've got, for example, with our acquisition of Pinch, which has been rebranded to a Padme Media now, you know, they had a load of products in the, in the media space, so newspaper distribution.
And we've taken that and we've, you know, we've just signed big client outside of the Netherlands and we've got other client discussions in, in other countries. And that's where bringing them on board allows us to take what they've done as a real core skill, understanding how best to transform from print to digital media into other markets.
And it's really a lot about doing the research where you can find a company that bringing it on board will be additive to your business. Because obviously there's risk in acquisition. There is that element of risk where you've got to think, could you mess it up? Could it be a big cost? Could it decrease your value if you do it wrong? So you have to manage it really closely.
[00:21:35] Speaker A: Jonathan's a deal maker amongst us. Okay, so talking to a layman, because I know we have different levels of knowledge among our listeners and our viewers as well, you've got a thousand businesses in that CRM system. You may have had some type of conversation for as little as an email to sit down, coffee and a bit further. Okay, you've done the three deals so far. Okay, you've got over the line.
Of those thousand, where would you be in terms of pipeline? Would you have one that you're looking at heads of terms? Would you have a couple that you are six months down the line?
What does that pipeline look like of deals for us?
[00:22:07] Speaker C: It's pretty much taken about, I think on average 12 to 18 months from being really happy with a business to then completing an acquisition.
And so if you imagine now what we're talking to three companies in Germany, one in Czech, two in the UK that are at progressed stages, but they're not quite ready, you know, they're not, you know, we're Setting them up for when is the time right, because either one, their numbers aren't quite right because nobody wants to trade off a little bit of a, you know, especially over summer where numbers might be a bit softer.
So it's just about getting to know those people. So we've got a pipeline, so there might be a thousand in the chat too. There's probably 700 of those we've already discounted and there's probably a couple of hundred that we're just carrying on to get to know.
[00:23:00] Speaker B: The sellers of the businesses, have they stayed on?
Have you brought them into the business and have they invested into the business?
[00:23:09] Speaker C: So one thing we always do is we get them to invest in Topco so that they're all motivated by the overall journey that we're going on.
Because you know, for us it's about, for me, I've always been really open about this in that I'm really keen to do another private equity transaction at some point, probably in the next couple of years and then maybe it might be a trade but by making sure that everybody's motivated in that top co, we're all aligned to the same journey now on that.
So Voy, who's our from Droids on Roids which we acquired, he's the CEO there and really motivated, wants to learn. He's been growing the business since we brought them on board. That's all great. And then we've been wrapping things around him to really help him because he was a sole founder and really helping him with things that he can kind of get productised in the business and get better with. With Pinch and with the mobile company that we've rebranded into Padme Netherlands now and Padme Media, they, they really, you know, some of them wanted to exit. You know, one of the guys was, you know, I think he was 70. It was part of what he wanted to do over time. So, so, so, you know, most people have stayed on but there's a couple that wanted to exit as part of this transaction. So, so but we're, we're fully aligned on the people that are left fully bought into the business.
[00:24:35] Speaker B: It's interesting because it changes the dynamic of a deal. If you're trying to buy a business where you really want the people in the business, particularly the senior people, to stay in. They're pitching to you because you want to buy the business, but you're pitching to them because you want them to invest and you're effectively recruiting partners as well as buying a business.
[00:24:56] Speaker C: It's a two way sales job. You know, we're both selling to each other and at the end of the day you've got a, you know, you've got to decide if you can make it work.
And you know, and you really want those people to run those businesses and grow them and to be. We want to wrap support around them, but you want them to be having that appetite to grow a profitable business with our support around it. The nice thing, what we've done so far with everybody is we've brought additional revenue to each new acquisition. So with our. One of the things that we've built really well is, is a sales engine, you know, that helps us find and grow new business. You know, a lot of people are envious of the clients we can get in front of. And through that we've done that for each of the countries as well. You know, I think within Poland, with our sales process, within six months we found them their biggest ever new customer. And that was run from our UK business development team, then delivered to our Polish team.
[00:25:57] Speaker A: You've got two acquisitions, Netherlands based businesses, one's Poland.
[00:26:02] Speaker C: Yeah.
[00:26:02] Speaker A: Okay.
What's your Dutch like?
[00:26:05] Speaker C: Not very good.
Slightly worse than my Polish because I think Jim Dobra is. Because that's all I know in Polish. I know nothing in Dutch, but then I know nothing. We've also set up in Sri Lanka. We've got a team of 15 out there now, which we have done through the build approach, but I don't know Tamil.
[00:26:24] Speaker A: You're looking to expand into the U.S. aren't you?
[00:26:26] Speaker C: Yeah.
[00:26:26] Speaker A: You know, what's the plan there?
[00:26:28] Speaker C: So we've already got about, I think it's about 4% of our revenue comes from US based customers. So we're in the process of winning another one at the moment. And so we're looking at how can we do that transition to having a team permanently based in the us so I'm looking at moving over there myself.
Not full time for me, but some of the other team will be full time because I've got to spread my time between, you know, between all the different locations.
But the way we're looking at it is we will have senior leadership there and I will be there regular.
[00:26:57] Speaker B: Did you, were there any US based investors that you talked to?
[00:27:02] Speaker C: They had US offices and that's where this time round, that's one of the interesting things because when we go to that next stage, when we want to do a U.S. acquisition, having that as part of the. For me, I always look at what's in it for the investor and how are they Going to add more to the process.
For me, someone who's got experience of investing and acquiring in the US will be really valuable for the next stage of the process. And it gives them something to think about as well and where they can help. Because it's for me, when you're looking at the next transaction, it's how can you get something where there's a win win for both parties? One, they've got experience that can add to us and two, for us it gives us access to that market better.
[00:27:42] Speaker B: So when you did that deal and probably a number of the acquisitions, AI was just an emerging thing. Whereas now I'm pretty sure that the next deal AI will be quite a big feature of at least the due diligence, if not the plan it still
[00:27:58] Speaker C: was last time around.
[00:27:59] Speaker B: It.
[00:28:00] Speaker C: It's quite a bit.
[00:28:01] Speaker B: So do you want to talk about how you're approaching that?
[00:28:04] Speaker C: So I mean we use AI relentlessly through the business. Adoption is pretty high across the board.
If you imagine we're a tech company, so we have access to.
Originally what we did for a period of time is we took all the tools and we're trying to assess them all. The problem is they're changing so fast. So we were like, right, we're just going to have to centralize on one for now.
And we centralized on one tool across the whole group for coding, for development, where we use it on the projects where clients allow us to because not all clients will allow us to at the moment, which is interesting. Depends on the sector and their appetites because of security, security risk concerns. You know, not everybody wants to use it right now, but a growing number do.
And it depends how far you go with it. So we've engineered our AI software development life cycle with all the human in the loops for certain areas and restrictions on what it can and can't do and keeping it away from certain elements.
But then throughout the. Even though that's just one element of it, you know, Claude, for, for spreadsheets and ChatGPT on. On analyzing data can streamline a lot of the process where, you know, where it might have taken a couple of hours to do something meaningful. You can just send an AI agent off to do something for you for a while. But then also our business development processes, you know, we've. I've spent a lot of time building. Basically it's the, I call it the Gasbot. So it's basically me in reviewing proposals and pitches in what I see as the win method.
How do we make this better to win and I can throw a document into it. It's got all of my Persona, what I look for, how I do things. It's got examples, it's got all of that in there and it pulls back an amazing win plan that makes it so that people can do that constantly. To go, does this meet the APADMI standard? That is, will it pass Gary's review?
And that's brilliant.
[00:29:58] Speaker A: Is this Gasbot? Has it got like an avatar, like dressed in a Hawaiian shirt?
Dreadful fashions, just. Jonathan, I mean, you mentioned AI. You literally can't go 10 minutes without mentioning it. Now, in this day and age, in your business as well, when you're speaking to clients and also potential investors as well, what's their take on AI?
[00:30:17] Speaker B: So I think what I've just heard is, I think your business sounds like it's almost become AI. Native AI is now driving the business.
So rather than being a threat to the business, it's an opportunity. I mean, there'll always be some threat, but it's essentially an opportunity. It's become a functional part of the business. So what we're looking for, generally from an investor's point of view they're worried about, is the business vulnerable to some sort of threat that AI could, an AI powered competitor could take to undermine the model or whatever. Whereas here it sounds like it's fundamentally part of the business.
[00:30:56] Speaker C: It is. And we have to remember that people get hung up on things like coding especially, but coding is only 30% of an overall digital product in terms of what you deliver.
And the thing that's been interesting, so I've been doing this since what, so what, 1996 were been developing digital products for people. And I think about the first products that you could build, you could have one engineer building it. You know, it was easy enough to build. One person could build something, they talk to the team, they'd get the requirements and off they'd go and make it work.
It got to the point where, you know, a year ago those teams had got to six, eight, you needed 10 people, you know, more than that to build these products because everything we do now is digital. We want more and more products.
And there will be that need for the experts to help in certain areas and keep certain things optimized.
But really where a lot of the effort goes is in understanding what the product needs to do in the first place. What is it that you need to build that's going to make a difference for your customer or your B2B business?
And that that's where, you know, speeding up the interaction between customers. Yeah, you can, you know, Most people use AI notetakers and they, they use AI to help them make docs and documents and PowerPoints better.
But you still have to have those conversations with customers. You still have to understand what it is that's going to make a difference for their business. And then you have to prove that. So, so the, the overall process, yeah, you might need, you know, half the number of engineers in the future, but likewise, you're gonna have to deliver twice as much code in a year's time. Because what's happening now is people are, people are wanting to build more and more features faster and faster. And so even if you only have a. So when you look at it right now, do you have just a review process where you've got a senior engineer in the, in the loop to review the code? When you look at everything that's happening, the bottleneck is now coming on reviewing the pull requests because you can generate so much and you need an expert to review it before you ship because you know if you, you're doing a billion dollars a year on a, on an, on a product, you don't want to just let all the guardrails down on it. You have to be really clear what you want to review and what you don't want to review. Because the last thing you want to do is suddenly lose 5 million on a Friday night of revenue by a simple, simple, simple issue. So there's elements of what you do and what you don't do, but things are only going to get. All we can say is all the products we build today are the simplest they've ever been in terms of what's going to come tomorrow. You know, we know that everything we're adding every day is the minimum bar for features is going up and we're just going to have to build more complex. Like look at the launch of the yesterday, the iPhone duo, you know, with. Now you've got to cater for whole new screen orientations on, on, on a phone that's, you know, that opens up that become an iPad. It can have two different apps running. You know, you've got to re architect your apps to support multiple modes. Now that you didn't have to do before.
Suddenly you think, well, you've got to write a lot more to cater for that. So the amount of, just by having multiple form factors for a phone now you've got lots more to do and those are the things that will happen more and more over time. So the, the size of, you know, the Size of the different products you're building, it's just getting bigger and bigger and bigger. So when we think about it, I always go back to when I first started developing. I was using VI originally, if people remember that on Unix.
[00:34:30] Speaker A: Check it out on YouTube, kids.
[00:34:32] Speaker C: Yeah, exactly. And then Emacs and then Xemax, and then finally into ides like Visual Studio. And then now you're into really, really powerful environments that have got your coding agents built in, where you can just go, write this for me, do this, do the other. And it's just, you know, and then agentic workflows where you can, you know, you can build things into a. Take things to. You can put things into a ticket in a ticket system, describe a piece of work, and then you can get that refined further with AI agents to question it, to make sure it looks good.
[00:35:06] Speaker A: We're going to go to a break in a second. Gary, I've got one more question. I don't know if you have, Jonathan, but we just spoke about AI. I think there's a bit of kickback at the moment in terms of AI slop. In terms of. On LinkedIn, like Jonathan and I both,
[00:35:20] Speaker C: most of your jokes.
[00:35:21] Speaker A: No, no, that's recycled slop. No, but I look at AI now and I look at some of the press releases we get sent, and you can pretty much tell which is AI generated and there's kickback against it.
Are you seeing that, Jonathan? And are you seeing that, Gary?
[00:35:38] Speaker B: Yeah. I mean, everyone's still trying to work out how to use it, aren't we? There's a lot of focus on the proprietary data that a business like yours will be able to use in the future as a defense to AI coming through.
I think inevitably there'll be detailed AI due diligence done on almost every deal. Now, even if you do like a fire prevention business in the an AIDD exercise.
[00:36:05] Speaker C: So that's it. And you know, and we're seeing that there is a lot of slop that comes out.
We got a. We got a review document from, from somebody who remained nameless the other day. But you read it and you go, you've misunderstood it all. It was all wrong. But, but, but, yeah, and then you get the emails that, you know, you get the AI generated SDR emails where the AIs gone wrong and it goes, put relevant information here, put business problem here. And you think, but nobody's checking. Nobody's checking.
[00:36:35] Speaker B: It's a risk. It becomes a risk fact. People need to actually read what.
[00:36:39] Speaker C: And this was one where they wanted. This was a sales company that was trying to sell me their outreach services and their AI had broken.
So I just replied with, not with that AI slop I won't. Which, but, but, you know, I was just like, you've just made me read something. But you get so many of them now. It's, it's, it's, it's unbelievable.
[00:36:56] Speaker A: You know, we talk about all this growth and we're talking about, you know, plans to have another transaction 12 months, 24 months down the line, etc. Etc.
If you think about the last five years and you think about some of the, you know, geopolitical events that we've had, Ukraine, a change of government, US tariffs, national insurance. Yeah, national insurance. You know, the conflict in the Middle east as well.
[00:37:15] Speaker C: Yeah.
[00:37:16] Speaker A: Do you ever think to yourself, why did I become an entrepreneur for?
[00:37:19] Speaker C: I definitely think that a lot. You know, when sometimes, you know, it's quite interesting, you can sit there and go, how the hell are we still doing okay with all of this crap we've just been dealt over since 2020, you know, since COVID there's been some goods of that, but you know, the digital transformation that's happened on the back of it, but then we've been kicked in the teeth every year since and it's just been relentless and you know, and the instability in the uk, we just need. All I want is just a couple of years of normality.
[00:37:48] Speaker A: Boring.
[00:37:49] Speaker C: Yeah, just boring times ahead. Please, no more changes. No more, no more changes to the tax laws, please. I'd ideally like a bit of a wound back, but, you know, I don't think that's going to happen. But you know, it's just like, please, just let us get on with it for a bit. Because what kills us is uncertainty. And what we don't want is more uncertainty because businesses just get a little bit, they start tightening the puss strings when they don't know what's going to happen. And that was what was awful last year.
And you know, we just need a little bit of normality. Nothing exciting. Just crack on and let us grow the business.
[00:38:25] Speaker B: So now you've, now you've mentioned that you're starting to turn your mind to what the next deal might look like.
Queue dozens and dozens of inbounds from private equity houses. This goes live. Thank you. That really, really interesting story.
[00:38:40] Speaker C: No worries.
[00:38:41] Speaker A: Gary, thanks very much as always. We're going to go to a quick interval. When we come back, we'll be talking about what we really think of you. And also Jonathan will be answering some questions from some of our listeners and our readers. Thank you very much.
[00:38:55] Speaker C: Cool.
[00:38:55] Speaker B: Thanks, Gary.
[00:38:56] Speaker C: Cheers. Thank you.
[00:39:02] Speaker A: Welcome back to the second half of the Dealmaker Uncut podcast. We just interviewed Gary Partington, the CEO of Appadme. Jonathan, what did you think?
[00:39:10] Speaker B: Really interesting story.
I loved hearing the, the thought he put into preparing the business for the transaction.
I mean, he's an innovative, creative guy, isn't he? So he's put together a really, I think, a really impressive business.
[00:39:30] Speaker A: I think there's some really good advice there for people listening and watching the podcast as well, which is if you do want to raise investment, get yourself investment ready. Don't just think it's going to be like a switch that you flick on. But Gary is also a really, really nice guy and he's got two R's and he's got two R's in Gary.
This next section is called Ask Jonathan. It's where listeners and viewers can ask Jonathan any question they want and I can ask any question I want. So question number one is I know you had a lovely summer holiday in Sardinia, but I Also read your LinkedIn posts about M and A activity. It seems to me that you never switch off.
You've been away for a while or we've been away for a while and now we're back. But what's the health of the market like right now and what do you think the outlook is for the M and A market over the next 18 months or so?
[00:40:15] Speaker B: Well, it's interesting because we're back from the summer now. This is the period between sort of September, October to Christmas where corporate financiers effectively fill their pipeline for the next year. And so there is lots and lots of pitch activity. So a lot of entrepreneurs are thinking of selling their businesses, even some private equity houses who a lot of them have sat on their hands for a year or two. But even quite a few PE houses are talking to us now about selling businesses.
So if you'd have asked me just before Donald Trump started the stuff in Iran, I was really bullish about the market. I was thinking that the time was ripe for an improvement in the market. There was loads of pent up demand from people who wanted to sell businesses and there was a whole load of private equity money needed to be invested and I was really bullish. And then there's been a setback with all the things that have happened in the Middle east and obviously we've had a change in Prime Minister in the uk.
I deals are still hard to get over the line. But if you've got a good business, you can still get a really good deal and I think we'll see quite a significant uptick in the number of completions.
The risk of capital gains tax changing going up is driving a lot of people to want to get out. So there's almost bound now to be a flurry of activity between now and certainly by October, although those deals are now well advanced. But by the end of the tax year in April, I'm pretty sure we're going to see quite a lot of tax driven activity. But I think the market generally is improving and I'm hearing that from other advisors and from private equity houses as well.
[00:42:16] Speaker A: That brings us neatly onto the second question you touched on it. Change of Prime Minister got the autumn budget on October 28 off memory. A lot of talk about capital gains tax and whether business owners should accelerate the timing of a sale. What advice are you giving to your clients and what are your clients saying to you, Jonathan?
[00:42:32] Speaker B: So you've got to be careful not to let the tax tail wag the commercial dog.
But people are worried that the capital gains tax rate might go up quite a lot. And so, you know, a lot of people are, if they're being in talks with a buyer, a lot of people are trying to get a deal done by the budget and a lot of people are really focused on the end of the tax year. So people, whatever we tell people, a lot of entrepreneurs are going to sell, who had been thinking of selling their business will do it before April.
You're just not going to make sure that you, if you, if the business is on a good growth trend, you've got to make sure that is still the right thing to do.
[00:43:18] Speaker A: Final question. I interviewed an entrepreneur called Des Derry recently. He grew a business called bloom to around 30 million turnover before exiting. And he said he hadn't considered the loss of identity and purpose that he would feel after selling his business. Is that a common feeling among founders that you speak to?
[00:43:35] Speaker B: Yeah, very common.
A lot of entrepreneurs, when they're thinking of selling their business, they're worried about what they'll do with the money. That's one concern that not many people would expect.
They're thinking, well, there's nowhere better to put my money than in my business.
So they're worried about will the bank go bust and stuff like that. So obviously there are wealth advisors that can help with that.
But another thing that people often underestimate is when a founder sells a business, particularly if he steps back, they are vulnerable to often I've seen a number of people become quite almost depressed.
So there is a feeling of loss when if you spend 30, 40 years building up a business and then sell it, it's important that you know what you are going to do. So one door is closing. It's important to plan for, well, the door that's opening, which is a new life.
Are people going to become non exec directors? Are they going to become an investor and invest in other businesses?
Or are they going to follow a philanthropic lifestyle?
But it's important not to focus entirely on selling the business and then once it's sold and it's gone and you're out of it, to start thinking about what to do is too late.
[00:45:00] Speaker A: And it's fascinating how many founders then come back and they launch another business as well.
That's all for this episode of the Dealmaker Uncut podcast. Powered by Alvarez and Marcel Massive. Thank you to you as always, Jonathan. Don't forget to subscribe to the podcast, tell your friends and family and follow us on social media. Thank you, Jonathan.
[00:45:18] Speaker B: Thanks Chris.
