Advising Buyers, Business Strategies, and Setting Clear Objectives


Advising Buyers, Business Strategies, and Setting Clear Objectives

M&A Science

In this episode, Kison interviews Ken Marlin, author of The Marine Corps Way to Win on Wall Street. Marlin has a very diverse background going from corporate development to CEO of a company to running an investment bank. 

They discuss advising buyers, business strategies, and setting clear business objectives. 

“We see small companies all the time that start with a small strategy and have that strategy evolve over time. Not only there’s nothing wrong with having a strategy evolve, it makes sense. If you think you're making dog food, you can have all the intelligence and research in the world about what’s good for dogs, but if they don’t eat the dog food it’s a problem, so you start tweaking the formula to see if you can start them to eat it. If cats come along and they start to like the dog food maybe what you did was make cat food, and you should recognize what the market is telling you.”

Marlin’s extensive journey begins with the Marine Corps, where he spent ten active years, which helped him shape the way he thinks about problem solving. 

His business career started spending ten years at The Dun & Bradstreet Corporation, where he got his education on the technology world. 

Later, Marlin spent a few years leading a technology company owned by Swiss banks that had purchased a technology company that they didn’t understand.

 He eventually bought the company from the Swiss banks, and that formed the nucleus of a company called Telesphere, which he ran and built and eventually sold to Bridge Information Systems, a private equity backed firm that sold information and technology to the Wall Street world, and left after a few years. 

He later moved to the merchant banking private equity world to a company called Veronis Suhler. 

During March 2000, the tech markets crashed, dot-coms crashed, 9/11 happened, and people were not making money in private equity nor in investment banking. 

Differences started growing during the financial crisis. 

Marlin sat on a table with reliable colleagues and they mapped out a plan to build an investment banking advisory firm of their own, Marlin & Associates, and they have been growing ever since. 

A Strict Approach to M&A

Ken’s training has helped him develop an approach on M&A that is as strict as the military’s approach on setting and achieving clear objectives. 

In The Marine Corps Way to Win on Wall Street, Marlin writes about clearly articulating long-term strategic objectives, based on the idea that marines have that all tactics ought to be designed to advance the organization towards a clear long-term strategic objective. 

He often sees companies opening new offices just because they can, taking decisions that are not aligned with any long term strategic objectives, which is a waste of money and energy, and in some cases it may cause businesses to fail. 

“Running a business is, in some ways, like climbing a mountain. You need to have a part of your brain focused on the root and where you’re trying to get you, and another part of your brain is very narrowly focused on the next four inches where you’re going to move your foot. You have to be able to do both.“

Usually, there’s a desire from the advisors to be nice to the clients and tell them exactly what they want to hear. 

Identify Strengths and Weaknesses

Being nice gets you more respect but, according to Marlin, it’s better to go upfront and identify the business’ strengths and weaknesses and working towards strengthening or correcting some of these aspects. 

According to Marlin, taking a stand means being confrontational. 

When you are hired as an advisor by a client, you are not hired as somebody who will do what they say and believe what they believe. 

As an advisor, you should be upfront and say what you think after a thorough research, and if the client still wants to acquire some company or go on with a specific goal, you can help them do it as protected as they can be. 

“You do need to be aware of innovations, not only so that you can keep your own product relevant, but also so that you can stay ahead of the competition. It is the nature of business in general, and certainly in technology business, that people need to be constantly aware of what surrounds them, aware of what the competitors are doing, aware of what the customers are looking for, and what the technology allows to be done. Else, you put your business at risk.”

On firing people, Marlin explains how in corporate America it is often thought that when someone is messing up the only option you have is to fire them, but it shouldn’t be. 

You can tell an employee how they have made a mistake and give them some time to convince you to keep them in the company. 

“Firing somebody is extremely personal to the people who get fired.” They have lives and families to support. 

Marlin prefers giving a heads up to the employee that is going to be replaced, letting them know what their mistakes were and giving them some time to look for new jobs before replacing them.

Advice for the Buy Side

His advice for people on the buy side to not pursue a transaction without thinking about what comes after, and to set up goals and milestones of what should happen in day one, week two, month three and so on. 

Also, he recommends assigning clear responsibilities to specific individuals and paying attention to key players and making sure to keep them around.

Advice for the Sell Side

 His piece of advice for people on the sell side includes controlling the timing. 

”The best time to sell a business is when everything is going well, when revenue is well and the economy and market are strong.” 

When every year is better than the last one, then you come a time when the market, revenue and profit flattens, and you will be compelled to sell, but it will be too late. There are fewer buyers and your price will probably be down. 

Between the common mistakes he has seen in M&A, Marlin highlights people who were not aware that they had to play sales tax, people who think that open source software means they can rip off anything they want, and bankers who talk people into things so they can earn a fee when the thing they have taught them into has great risk. 

”While you can’t plan for everything, you can plan for a lot. You can’t anticipate all the things your competitor is going to do, but you can do your best to protect yourself. You have to impose a discipline when we're working with a buyer on doing evaluation analysis and structuring and do diligence reviews and contract negotiation and employment agreement negotiation and a whole bunch of steps, don’t skip them, do it right.”

 For more insights, listen to the full episode.

00.00 - 05.00 Marlin’s background and professional journey 

05.00 - 10.00 The Marine Corps Way to Win on Wall Street

10.00 - 15.00 articulating long term strategic objectives 

15.00 - 20.00 advising and being upfront 

20.00 - 25.00 Firing employees ethically 

25.00 - 30.00 Communication with the seller side 

30.00 - 35.00 Advice on closing transactions from the buy side and the sell side 

35.00 - 40.00 Identifying companies’ weaknesses and contingencies

40.00 - 45.00 The right time for selling 

45.00 - 50.00 Revenue, financial reports, the importance of discipline 

50.00 - 55.00 Banker’s recommendations 

Join us next week when we uncover more secrets to successful M&A transactions.

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