Welcome everyone and thank you for attending today's webinar. I'm David Shaw the publishing director for family business magazine. I hope that you're all well and that your family is all are well and healthy themselves and ready to get back to the real world. Today. We're going to be discussing how family owned and privately owned companies think about accessing Capital to solve their business needs and this promises to be an interesting and vigorous discussion. But first, let me take care of some housekeeping details, we'll make time during and after the webinar for questions your questions, you can use the ask a question but underneath where you see these slide here and type in your questions and comments as they occur to you. We're going to go for no more than 60 minutes today and probably a little bit less than that. So we will end on time or early but we'll get to as many of your questions as we can. Today's webinar will feature two Business Leaders discussing their path to accessing capital and how they think about leveraging different types of capital to solve go forward objects objectives of their businesses to dive deeply into this topic. I'm pleased to introduce our speakers today. First of all, our moderator is going to be Brian block who's a partner at Freedom 3 capital and has more than 20 years of experience as a principal investor and Senior executive of portfolio operating companies Mr. Block is deployed about a million billion dollars of capital and completed more than five billion in successful Capital markets transactions for these companies. Brian will be leading a discussion with Matt Michaelis, the third generation chairman and CEO of Emprise Bank a two billion dollar Bank headquartered in Wichita, Kansas prior to his current role Matt founded an investment firm focused on wireless infrastructure and enjoyed a In your career in bird Acquisitions advisory with firms, including Solomon Brothers and Greenhill and Company. And last but not least Thomas Wilkie. He was the CEO and owner of Highway 89 Highway 89 is a platform company to integrate all technology Services targeted to high density residential developments as a single Source solution and trusted he recently secured funding for the acquisition of four operating companies providing services to more than 40,000 subscribers across the platform in 18 states. So to start us off today, I'd like to introduce Brian block Brian the floor is yours. Thanks so much. I appreciate Matt and Tom joining us for this discussion are hope of this conversation is really to give everybody some insight to how come and that's family business make or have made Capital decisions in the last several years and how they sort of think about Capital decisions today particularly as you you consider just the increased on certainty in every asset class today and in public equities and treasuries get cryptocurrencies and oil and gas. In in all of these Dynamics sort of reinforces the need to choose. what I think is is the right partner and I'll ask you to them to sort of talk through how they think about it as we initially want to kick off this conversation. I think it's important. for everybody to understand we think about it as depending on where your business is in terms of growth exit. Um distributions where you are in the generational transfer whether you're building one Legacy or you're looking for a sale to the next owner. He's got tremendous influence on how you think about a capital provider or a partner. And I'll pause there for a second and and matter Tom. I'll leave it to you. I guess I'll ask a very simple question to start is when you think about the word partner and you think about capital and you think about an investor in your business. What does it mean to you? What does the word partner mean to you? And and how do you think about it and Tom you we went through a recent process? I guess. I'll let you start. Okay, and what you thought about? Well, you're right. We just went through this process and I think about Partners a lot of different ways because as you know, Brian the market was pretty receptive to our business plan. So when I was going through the process finding the capital the right Capital Partner fixed the things that kind of went through my mind is kind of like one everybody, you know, they all can write a check, but I needed more than a check writer. I needed a partner someone who could could help me grow the business help me get to the point where I needed to get to I think about strategic Capital Partners, I think about strategic Partners in our product selections and these are all people who can enhance what we're trying to accomplish as a company. So our Capital Partner is we also needed some speed we needed to do a pretty quick. We're in a consolidating market. We had four companies that we were under Loi that we were trying to. Keep herded and so speed was important but most importantly is knowing that they could help me be successful. In executing our business plan either through their strategic Partnerships through their experience through seeing things that we know we're going to see but we haven't seen so that's kind of how I frame up partner. There are very instrumental to our success or long for the ride. And you know, so those are the kind of things as we went through this process and we just closed our transaction in, you know, late December. So it's pretty we're pretty fresh through the process. And so that's kind of how I kind of I look at the capital. interesting so mad I'll flip over to you because I always pick on certain words Tom use the word investor. And I I think there's a difference right? I think about it as you don't want and Tom shows a partner, hopefully. He likes. Um, I think there's a partner and there's an investor and I think I guess I have to give a unique perspective one. You have a you have someone you might take in in your core business to help facilitate, whatever maybe generational transfer whatever maybe but then you guys are also lenders. And as a lender, are you a partner? Are you an investor? How do you also think about not only? Taking in the capital but also then providing the capital for these other family businesses, which I'm assuming based on where you're located. You probably have a lot of family family businesses you're lending to Given our location and our size. We do a lot of a lot of business with with generational companies. But Brian you're you're exactly right. I guess I think as you know, as I think about a partner to me what that means is value alignment and I kind of regardless of where in the capital stack that is I come back to to Value alignment. Do they see the world in the same way that we do? But then as I think about our own business kind of that the definition of partner. Changes a little bit based on where in the capital stack they might they might fall. So for example, not quite two years ago, right as the pandemic was was picking up pace. We felt like it was prudent to put it some additional capital on the balance sheet. So we went out and did a subject transaction, you know for us. Being a mature business a fair an overly mature business possibly. You know, we thought about that in terms of meeting speed and certain Vehicles. Right and we were able to do that in 10 days. No control no dilution where you know that that was about speed of execution now if I think about Something further down that the cap stack to help us consolidate the environment or help us with technology transformation or generational transformation. But something that looks more like Equity. I I spend a lot more time thinking about what does that value alignment look like what is there strategic outlook on you know our industry and our company, where do they see the same opportunities and risks that that we do and how do they think about coming alongside a family business where there are members of the family continuing to work and in the business and lead the business and and how do they how do they think about kind of coexisting in in that in thatirement? And actually that as Thomas mentioning bringing value to help us kind of navigate some of the challenges that we face so I do think it means slightly different things based on where the capital stack it is. To flip it around to your to your other point Brian. I mean we lend out to you know, many many family businesses. We provide senior debt. We think about ourselves as being a partner in their business from the perspective of We're providing Capital to them and we want to be a good partner. Let them run the business but be a good senior senior lender to them. That's Reliable predictable acts with Pace does what they say they're going to do, you know when we commit we're committed and and then keep open lines of communication as you continue through the relationship so that that's kind of a summary of how we would think about it. Yes, you can put back the slide just a second slide. I think it's I think it's interesting Matt and Tom the next if you flip the next slide here you guys all use these words. I think Tom you said speed and certainty. We're most important that I think you had said depending on what you type a capital you're raising price was important and so it Freedom three. we think there's really four areas as family businesses businesses think about taking on partners and these are the four buckets. None are more important than the other. at any at any point, but you have to start some are more important than others at different points in time, but it's You got all of them have Merit. And the overarching on top of all of this obviously is relationship. And I think Matt you had said it or commented you had said it. But it's just it's just incredibly important to get. To get a partner that has like-minded values and I think actually was mad that's that you said it so I think you have to start there and then you got away speed price certainty flexibility. I think when we made comes investment, I think it was much more important for from your perspective where you are on your growth profile. to have flexibility to have speed to make sure that you knew you could take advantage of where you were in the marketplace and and grow I think Matt you're at a different point in your business that there's There's different factors that are more relevant. So From our perspective. I think it's it's really important to think through. These four things and and none of them. Not our Irrelevant in any conversation. So so with that I'll sort of hit pause for a second and then go back to something that you would say on. Generational transfers and where you're at, it's what you think about a partner. There are people in the business that have you know, whether it's your father your son whoever maybe within your business that have different desires out of apartment. Right, you're running the business and how do you so there's part of it on YouTube Partner. That's that. Okay. What's what's right for the business? But what's right for the business from your perspective versus what's right for the business from your and I'll pick on your father for for no other person here your your father. Just how do you manage that? Yeah, so let me talk about kind of two two situations the one I mentioned earlier when we were raising sub-det that was a fairly easy conversation. We we both appreciated that there was you know, great uncertainty ahead with the pandemic and where we were able to again move with speed uncertainty to get some what we looked at is insurance on the balance sheet. But I think if you brought into your question, if you if you start to think more about an equity partner that will help with generational transfer that will help with transformation where they're where there is a control element and a dilution element. I think those conversations become far more robust and and different perspectives come out. I think I've been really fortunate that the family our family in general has been very oriented towards growth. And and believe it's critical to continue growing the business. And so we reinvest our profits and and our continuing to look to to expand and so I think that alignment helps a lot as we would think about who is a right. Through the right Capital Partner is I would also say that you know, we've we've been entirely family owned, you know for three generations and so we we think a lot about control features and and timeline of of investors and things like that. We continue to think about it as a generational business and would want somebody who would share that perspective with us. It I guess Tom that's an interesting segue because you and I've talked about this. I think Matt very much thinks about his business and they in a generational type mindset. I think our conversations have been different and so everybody it has full disclosure. We are a an investor in Tom's business and support his growth. the but you were mindset has been not necessarily as a generational business, but an opportunity. A chance to take take advantage of an opportunity. And therefore did that change your mindset in in your Capital selection is did that change your opinion on? Who to work with who to partner with? As you thought about closing these Investments. Well, you know if you look at the previous slide and you can rate those four four qualities and as I went through the process price was. Speed was one. certainty was to and flexibility was was three and prices for and when I go through this the next transaction that those four components May shift a little different, but we are trying to get a transaction done because we were in a consolidating markets of speed was important. we had four businesses under Loi and yeah, you know that we had to get certainty that we were going to be able to close the Capitol and we loved the flexibility of our Capital Partner. We went through a fairly long extensive process and got lots of positive responses. So we had choices. but it gets back to that kind of businesses guts and and it is relationship and who you want to go to battle with who's gonna be there in the Foxhole with you so a big, you know, So my Approach is you know, it has I look at things. I hope to get this family generous generational wealth. It's very soon. So Matt and I are kind of coming at it from kind of different perspectives, which I think is kind of an interesting conversation. To have because we're starting to build family generational wealth through this transaction. So, you know, my view is you know more entrepreneurial more. Market fast-driven opportunity-driven, but those four things, you know, the things you brought up they shift based on the stage of your company stage of where the markets are. There's a lot of components but when we went through the process we want to do it fast. We want to make sure it was going to get done and we you know, we wanted flexible and we want to Priced Right the market took care of the pricing they always do but again it gets back to the right partners and it always does so it's interesting. So one of the things like I think we promise of Freedom 3 is you know, it's you you're not there when you need the money or they're all the time, right? So we may we may know Matt you for two or three years, but we haven't done anything together. It doesn't make the relationship not valuable to us to you. It's really awesome. I can't speak for yourself. But oh we value the relationship too. Absolutely. I was always I wouldn't be doing this if we did. of Tom, but it's you didn't have the chance to you know, you met that you and I met a lunch here there a few times and looking back at it. How do you how do you know you? What what helped make you make the decision to choose the right partner? Because I think it sometimes is very difficult. One of the things I I will preach on this is don't go look for a Capital Partner when you need it. Go build the relationship for when you when you do need it. And time you unfortunately didn't have that opportunity and what you learn from it. Yeah, I mean again you raised an interesting point. How do you know well There was a couple of qualifiers. We you know, as you know, Brian we had a lot of a lot of response to our offer and I wanted to keep it there's some geographical preferences for me. there was In the National versus International part of the fund which was important I wanted to do with like Partners. We had a group out of the last group. We got down to as a group out of Toronto group out of Miami a group out of Boston and then in the freedom three guys in Kansas City, New York. so there was there was a process of elimination based on some geographical issues. But more importantly there's elimination based on some personality. I think he just know who you can do business with, you know, we met, you know Aaron and we flew out Brian and Jason and we had a lunch that we didn't talk much about the business we talked about, you know. The relationship and you know, it's you do business with people and you just got to feel pretty comfortable with the people and we had I had a great feeling of you know about the freedom three guys. They're direct. They're honest. They will tell you what what they think but they will let you run your business and that was important too some of the people we talked to or you know, or more overbearing. We had four businesses that you know that were good businesses, but not sophisticated businesses. So I guess it all depends what you're trying to accomplish long-term, but it wasn't rapid process in. we we liked Freedom threes approach to they have a policy that they Stout that goes to about the quality of people. Brian you can share that if you care to but it goes to the quality of them and the people they want to do business with so, I think it's a two-way street. You know who they want to do business with who we want to do business with and when they're aligned. It's like Matt was saying it's about the alignment of the values and once you get them aligned, it's pretty easy decision. So that I'll ask you more because I know you have a banking background. So I'll put you on spot a little bit and and now you sit on this side and you know, I think you share the same philosophical Viewpoint that you look for Capital when you don't need it, right and you find the partner then. and as you said sort of on both sides what mistakes have you I mean, I'm sure you've raised capital for folks before what mistakes have you seen people make in terms of? choosing the Let's call it the price the price alternative versus the right partner alternative. and and other things that you would say guys if you learn one thing from this conversation, just make sure you don't do you don't repeat this mistake that I saw? and particularly assume it's even more so Obviously now that you sit on the other side of the world. Yeah, well and absolutely Brian and I would I mean, I can't Echo your comment enough to build those relationships when you don't need capital. They will be incredibly valuable when you do need Capital, right and and you know sitting on this side sitting on the banking side of it on the commercial lending side of it. It is so much easier for us to make decisions around credit opportunities. When we have a relationship, even if they even if that individual or that company wasn't doing business with us before even just having that relationship and following their progress. is hugely helpful when there's a real opportunity in front of us, so I guess one one would be build, you know build a couple of key relationships before you think you will need access to Capital, but then I think Brian maybe more specifically to your point and and this I think ties back to what I said earlier and to what Tom was saying, it's it's relationships and you know, you you put up for boxes Brian around things that are important around around the capitol race transaction. I would just say that they're all important and don't lose sight that that your Capital Partner will be a partner going forward. So focus on on the relationship as Tom said on somebody that you can work with going forward. Somebody's going to be your partner in the business and You know that that may mean that you at least from my perspective, you may give up a little on some of those four boxes, but but think about it for the long term of what what how will that partner engage when things get difficult how will that partner engage when you have it an expected opportunity in front of you? You know, who do you who do you want on your team as you think about growing your business? Now if you see anything successful and Tom you with this product. It's it's so everybody always feels good in the meetings. Even when you get to know even when you're meeting somebody and you're not working with them. The relationship is different, right it just is the you raise the point Matt of of the it's really important to figure out how people react when business doesn't go perfect because it never will right and and yeah this this HR chro that I worked with for very long time and said to me Brian the best leaders or the calmest in the most difficult times right, like just you can be agitated and grumpy, but but when it becomes challenging take a breath. How do you know how you diligence that you're that your partner is gonna be that type of person I can say it right? I just said it to you, right? It just it's really easy telling you and I can have this conversation, but there's there's no challenges right now. How do you diligence that get in the bed with someone like that? Brian that's I think that's one of the reasons why it's helpful to build a relationship in advance of needing Capital. It's it's nearly impossible to determine that if you don't know the individual or the company one of the things that I've seen be effective as as a company is building a relationship with a potential Capital provider is is to have periodic Kind of business updates. Here's my plan for this year come back. And how did I how did I perform against that plan? And how did I how did I adjust and pivot through the course of that? How did I handle the challenges of that year and I think having some of that dialogue although it doesn't replace being in the trenches with them through those time periods. And those decisions I think having some of those very explicit conversations about opportunities and challenges against the plan that they set out can be helpful in and at least getting some sense of that. Just a couple things Brian on that. Matt and both of you have talked about the relationship which is key and my Investment Banking relationship goes seven years before I even met Freedom 3 and so You know, I knew Bill through some other transactions that we worked on but I you know, we we didn't do any business but we formed a relationship we stayed in touch and he said at the appropriate time, you know come back and see me and if we got the right dealing get it done and sure enough seven years later. They pay dividend so that the nurturing of the relationship can never be under appreciated. and I believe There are people that have some are wired similarly. So they take you to similar type people. They know where there's a fit or not a fit Bill new who would who would do this deal and how it fit? You're quite one of your questions Brian was how do we how do you know you don't know until you come across your first? issue and my first issue was I decided not to for our CFO a employment agreement because there was a cultural disconnect and it was better to have that conversation before we got into employment agreement. And as soon as I made that decision, I received a phone call from both Brian and Jason walk saying hey, you know respected decision. It's the right decision might not be difficult. I mean might be difficult. A lot of people don't terminate their CFO, you know three days to closing but just know and so that was it early on I knew cheese. I got the right guys, you know, they they didn't freak out that they and they supported the decision. They says right decision because they have a longer term view stuff. So I think it I think those opportunities come quickly. You know quicker than you think and we hadn't even finally closed it. And so those kind of things kind of give you some reassurances, but you don't know until you do it. You know, Tommy you don't know as I have a very good therapist that talked me off the ledge that week, okay? Day one but it was a calming conversation, right? There's a And and Matt's point about you know calmness and you know, hey, it's all gonna be. Okay, and how do you perform under pressure and You know, but if you're freaking out. So now yeah, I'll ask you so so sort of where we sit in today's world. We started with the We're just in such uncertain times, right? I I think. People use the word volatile. I actually like the word Jason and I were talking this morning. I like and Eric. I like the word uncertain because it is an uncertain time. and if you look at today versus three years ago. right it has I'll ask you the question. Has your mindset changed on a Capital Partner. Has your mindset changed on? How you think about making sure you have the right capital structure as you're you know, you talked about having to go in the middle of covid go to a quick to share up your balance sheet. Has that changed how you manage the business today going forward permanently? And your partner reflection? Yeah, so maybe two answers to that Brian. No, the the sub-det kind of the what I think about is the insurance policy for what happens if if covid if those if the lockdowns continue even longer if federal assistance doesn't come I mean that so A material weakening in our in our credit portfolio that that obviously didn't happen. And so that that subject piece has not changed how we think about the business going forward. What I will say is maybe partially related to covid but just partially that the Natural Evolution, you know, we're in a mature business and we see disruption accelerating all around us. And and so we do think about you know, do we have the right Capital available to to make the Investments necessary to counter that disruption and continue to to Grow into the future and to invest in new new capabilities new lines of business that we think will will spur the growth over the next decade or the Next Generation. And so You know I think is as we think about an environment to your word Jason uncertain my view more more disruption. That's certainly changes how I would think about it a Capital Partner relative to you know, maybe three or five or ten years ago when it appeared to be more. I would say stackwell. So today I'm the flexibility starts to rise in terms of importance. You know bringing capabilities and relationships beyond what we might have especially as we think about technology and and some of the crypto and some of the areas we're seeing pressure from that certainly adds value that that we wouldn't have assigned value to five years ago. So yeah, I think it I think views of partnership are always evolving. as your and it's a little unique I guess because you're a bank and I'm trying I I I'll be honest. I don't know actually don't know how it works in totality. has your Viewpoint of the your risk as your risk tolerance changed in the last. two years or is it always been a has always been low on the risk tolerance anyway, because you're a family generational business. Yeah, okay. I think that's a great question. So so risk shows up in our business in several different places and you know, I think where where Most people think about risk in a bank is the credit portfolio, right? We're levered eight or nine to one. We have big loan book. Certainly there. We continue to be low risk, right? We we always put a premium on high credit, even if it means the spread or the profitability's less. So that has not changed. I I think what is absolutely changed over the last four years is our willingness to to experiment to try new things largely around technology. So delivery channels digital delivery channels to our customers platforms to attract customers online to remove barriers for them signing up digitally all all the things that in enhance the customer experience and so we've had to we've had to get comfortable with putting more dollars. Investing more dollars back into the business and also acknowledging that not all of those investments will pay off and how do we monitor those take a step back from those that aren't working and and pivot and and focus on some of the areas that are that are working better. yeah, it's you know, it's having been an X operator. It's an interesting comment. your comment on partners and Tom you said it is someone that can you know add some value and and relationships and and I think it's almost some operating acumen. But I think there's a balance of that right and I always as I sit here and I think about how we we convince folks like yourself to take our Capital. I'm always um, very aware that one you guys on the business and to you guys run the business right? Just given where I sat. How do you make sure you don't? you you get somebody that can can can partner in what you guys had in terms of operational help but not bother. And and how do you how do you balance those two? What were you looking for as when you thought about a partner that someone has some operational but maybe let you run the business on a daily basis. Well, I guess. I think about that is again, it goes to the partnership and how it starts out in. I think people will say that you know, hey, we'll let you run your business and sometimes it's hard for people to do but I think the people who take the capital have a responsibility to to give the capital provider the Comfort level where they can you know feel more comfortable about about hey, we'll let you run the business and that starts with the right plan. and it it continues through the communication and the update, you know, we We like to keep our Capital Partner. I don't know what breast of what's going on and we're still trying to figure out how much information they actually do on. But they need to get comfortable with us. Just like we need to get comfortable with them and how that happens is just it's already get back to the relationship. It's spending time with them and in non-business as well as business and performing There's nothing like performance to get. You know to get people comfortable. So I think it's a two-way street. I think it's the capital Partners saying hey, yeah, we'll let you run your business. Well, we we know that they're gonna we want them to have some say in the business because we think the capital Partners we have at Value. They've been through some things that have seen things that we haven't seen. So I think it's a two-way street and it gets back to what Matt said his line in the values and it's trust and it's all those things. It's built strong relationships. And you got to perform. We can say a lot of stuff but you know, we just got to communicate in, you know deliver so it starts out great and sometimes it doesn't and but that's a two-way obligation by both capital and in the company, I think. I would agree with. if I can jump in for a second Brian, I would absolutely agree with Tom and I think one of the if you're a company evaluating Capital providers, I think one of the best Ways beyond having built a relationship one of the best ways to to judge their desire or to get involved Hands-On in the business is to look at some of their prior Investments and and actually see, you know, look at the circumstances and and what their level of involvement and activity has been that's been my experience at least. It's interesting too that you know our Capital Partner invited me to dinner with one of their Investment Group that that tells you a lot too. There's very transparent so You know, ask them any questions and they'll tell you you know. The truth about how it's been and you know, so I think it speaks. Well if the partners is transparent about opening up those other really talk to my you know the other deal we did and our Capital Partner put us in touch with you know, prior Investments and hey Venice out, you know, we're not hiding anything. So I think that's it's something I'd also ask too. Here, so it's interesting. I always I'll say this in Freedom three, we philosophically believe it you. both want to go in eyes wide open because if you you both don't understand how each other Gonna Act and by the way, there are things that Tom probably found that to eat in love with us, but in aggregate, it's it's okay because as long as you're aware of how we do things then Going in will all be successful. Right? It's it's the surprises that to me are the worst kind of things that occur when when you choose a partner. And and that's transparency to your point. Tom is really important from our perspective. I guess the last one final comment Tom question to you Tom. So you sit here now, it's I guess three months in you start the process probably a year ago, if not longer in terms of capital raise. Anything you do differently anything you would say, I you know, I ran it with a banker. I went higher Banker or I would have just called Brian because now I know Anything you would have done differently in terms of of the process of choosing a partner and maybe give some perspective to folks on. But not in the in the process. I mean, I one of the things I think's crucial to success in anything is understanding, you know, kind of what your strengths here weaknesses are and then start surrounding yourself with people who can show up those those weaknesses and enhance, you know your strength so I you know, I was able to pick up great investment banking group. To answer your question. What I would do differently, I would not do four Acquisitions close at the same time and integrate for companies, I would I would kind of rethink that whole process. Took a patient Capital Partner took a patient Investment Banking group. And it put a lot of stress and strain on the Acquisitions because we were in a due diligence phase for eight months. And so I guess that's the only thing I would. Maybe have some smaller bite at the Apple. But again, I mean I I couldn't be more pleased with the process in the success of it. We had a lot of people that were very interested in our in our plan. and so I guess in retrospect thinking about it. forwards pre-aggressive three was probably a better number, but in order to accomplish what we wanted to accomplish we needed we needed you know that that fourth piece in it kind of rounded out our positioning as a company. So yeah. No. Yeah, I think and look we'll talk about its price feed certainty flexibility again all you know, look at certainly from my perspective fruit and three perspective Matt you it goes without saying that value personal Integrity value core values are sort of first and foremost before you even get into those four choices. And and that is as folks. Think about Capital partners. As folks thinks about Investors in their business certainly their personal businesses. I think there are you really have to take the time to get to know the people here. You're inviting into your home. I mean, I you know, a lot of we invest in family businesses are Freedom three. And you know, we always say it's there's probably more business done at Sunday night dinner than any of us ever imagine. and you know, the the best Partners don't get phone calls when there's problems. They get phone calls when they want to talk about opportunities or their potentially is a problem. To me that that's when you know, you have a good partnership when you're talking about the problem before they became the problem. So with that all you know, turn back to you if they're questions or yeah, we certainly do have some questions. This is this one occurs before you even begin to build the relationship and and you know, maybe Thomas can start Matt can follow up but what's the most efficient way to scan the market to begin with to identify potential Capital Partners? Where do you start? Well we started with a great investment banking firm who will handle Loki And they kind of ran the process for us. And they they kind of Quantified. The potential Capital Partners based on appetite based on you know size based on what we were doing. So they kind of they kind of filtered out the market for us. They they took us to 30 some odd Capital Partners who they thought would potentially be interested and then we quickly got to four. Based on a lot of things we've already talked about and then then we had, you know four that we felt pretty comfortable with so the screening my personal screening process got to ice cream down to the floor. and I kind of knew based on what I talked about earlier geography or personality or whatever speed certainty flexibility then once we got to the Final Four it takes time, but it's got It's a Instinct. It's you know, how you feel comfortable with? You know people so it was it was a very easy screening process to get down to the things that to the guys that we thought. Were a good fit? the last part of it was part of the process, okay. I'd say that find a great event in finding green partner who can screen it out. You can waste a lot of time. You know pitching deals to people who? Don't get the business not understanding it. Don't have the appetite for it. Okay. How about you Matt? Well, I mean having spent a significant portion of my career as an investment banker I'd have to agree with Tom on is that his endorsement on his endorsement of investment bankers? So so they're better than others. Yeah without a doubt. Well, it goes back to partnership and value alignment and seeing the world in the same way, but I would agree that they're probably as knowledgeable about the broad Market as maybe about anyone and can help you get to the right folks quickly both in terms of knowing who what capital providers play and what spaces but also having a relationships with them that where they can help with introductions and you know to kind of telling representing your story to make sure that introduction is happens in as positive ways possible. Okay. Well so many family businesses. This is a question. That's come in have seen debt as a four-letter word. What for those who haven't really explored using debt as a growth. Yeah engine what what kinds of things should those businesses be thinking about now. I know that you talked a little bit about the kinds of the different kinds of debt the ones that would be more generational versus transactional I guess right or or yeah, so what do you think how and you're a banker too? So, how do you how do you How do you get family businesses to feel comfortable with taking on death? Yeah, so I'm fully in supportive of debt financing. I say that in chance, but but in all seriousness, I I do think that there's a real place for for dead in in capital structures. Now all things in moderation and different businesses can support different levels of debt. So you have to be thoughtful about you know, what is the what is kind of the financial profile of my business? What are my growth objectives? And what is a at least for me? What is a moderate use of debt where you know, I certainly don't want to for again for my perspective where I have a fiduciary responsibility for my broader family. I I think about it from a generational perspective. I'm not trying to put as much debt on the balance sheet as I can to accelerate growth instead. I want to grow at a at a Double click for a long period of time and so how do I think about leverage in that scenario? And and I that there is there is some moderate level that I think makes a lot of sense it it increases your access to Capital. So whether it's investing in technology, whether it's Acquisitions, whether it's share repurchases and generational transfer, you know can help with all of all of those it also lowers your your cost of financing, right? So you get a better return on your equity in in theory as you grow. So, I think there's I think there's a variety of cases where that makes a lot of sense again, I would just say all things in moderation. Yeah, I think Matt I would. I actually think there's one other thing and I you know, I people may not like the comment but I think the maturity the family Dynamics. Yes, and I as you think about. As you think about taking on Leverage. I think that's in no one may like to talk about it. Right? I have a family business. I work with my brother. Oh, you don't always like to talk about it, but I don't think it's irrelevant because I'm sure there will be an issue. And then the question of is how does your family how are you structured to handle any potential discussions or negotiations with any partner whether lender or equity? Yes, I would absolutely agree with that Brian. Well, it's it what's interesting is the last two years have been in a from our anecdotal point of view very interesting for a lot of family businesses because many of them went through some pretty significant recapitalizations in order to survive and then came out of the back end of this or you know, the front end of the back end of the pandemic stronger than ever which is, you know one it sounds to me like Matt you did part of that as well just to make sure you'd be okay, right? Okay. Well, let's let's talk about sort of the the elephant in the room, there's inflation and potential interest rate increases and cost of capital may become more. What what do you think is Out ahead Brian for the cost of capital and and this kind of debt in the year ahead or more. So look, I think. I your question as I think about relative what we just talked about price beat certainty flexibility. I'll go back to it and and Matt made the point everything moderation. if whether or not you're seeing higher interest rates or whatnot if you've matched your business plan as we think about it Freedom three is you matched your capital structure to your business plan You will be successful and as long as you continue to think about. providing yourself enough liquidity Enough Capital to manage through what will be ups and downs in interest rate environments in Economic Times as long as you have the capital available to manage your business in the long term. And you are investing in your business in the long term. You'll be successful. and so I can't sit here in prognosticate on it's a hundred basis points and cost is gonna go up but what I can tell you is When you think about get or investors and this Capital as a tool to enhance your business? do it in the context of making sure that you have the capital to to execute your business plan in the long term. I don't know Matt. You probably have a perspective on this as well given sort of where you sit but. I'm not smart enough to get. Well, and I mean obviously I don't have a crystal ball either. We're seeing rates continue to rise. We're seeing the FED certainly signal additional increases in inflation. I think is has proven to be here. Not just transitory. Yeah. So yes, it's a I think it's Brian said an uncertain environment and That's where I go back to debt in moderation right? Make sure you give your self cushion right if you push leverage to to the extreme. Then you you increase the risk of what you're of being able to continue your your business. And so I think it goes back to what Brian said. You know, how do you how do you match your business plan and the potential ups and downs of your business plan with a capital plan that that supports that? Yeah, you're the ability to execute your business plan far out ways any Any additional cost in terms of basis points, you know measurement of interest rate. Yeah, you have the capital available to execute your business plan and and the flexibility whether you're paying 5% or 7% or 8% It's not gonna it's not going to impact the long term value. It's not the thing that's getting impact the long term value of your business is your inability to make investments when you need to period for not 100 basis points of cost account. Yeah. Yeah, like in our business, you know, we have with long sales cycle so delays and construction impacts. kind of impacts our ability to you know, our cash flow, but you know, you just got to manage through those kind of hiccups and there's some supply chain issues that that were confronted with but I mean I fully you know, I agree 100% with both Matt and Brian is if you're executing the business plan, I mean, it's Salt a lot of the other issues if you're struggling. To sign contracts, you know where our business is valued on active subscribers and contracted. We're still signing contracts. the market still robust the timing may move a month or two and You know we can work with that. But if the fundamentals of the business aren't there. You got bigger problems in the cost of capital. Okay, fair enough. Okay one one last question and it may be unanswerable but not You are young what are the succession plans to take your bank into Generation 4 are there any yeah, I'm not that young but I appreciate it. So I've been in this role four and a half years a week. We just moved from generation two to three. So I would say it's while we think about it. It's still a little premature Generation 4 is is still navigating the oldest of generation for still navigating college. So we're we're talking about how do we how do we get them summer internships and things like that in the family business so still a little premature, but but we certainly think about it and try and plan around it. Terrific. Well, it wouldn't be a family business webinar without a question from the audience kind of like that. That's one of the biggest things many of you. Well, you know, I will I will say David one one of the things and it's not directly related to secession planning within the company. We are trying to get more organized around family meetings and and as the family expands and you know more more people in generation for than three and and how do we how do we continue to create some of that connectivity amongst the different branches of the family and I think that's that's important for us. So that's that's kind of where we are in that Journey right now. Well, thank you very much. Thank thank you. All Brian Matt Thomas really interesting discussion and the audience and I'm sure enjoyed this there were some really interesting questions as well. So I thank you for your time. Before we close here. I would just note that if you're a family business like Matt's please join us. If you're an ownership member of the multi-generational family business. We're back live and in person, March 30th through April 1st for our transitions spring conference. If you can join us, that would be wonderful. And in the meantime, I'm going to wish all of you a good rest of your day, and we hope you'll join us for the next webinar. Have a great day. here
Family Business Perspective: Capital Partners and Types of Capital to Solve Your Business Needs
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