The Proust Questionnaire was a parlor game popularized by French writer Marcel Proust. He believed that, by answering a few provocative questions, a person would reveal his or her true nature. In this series, we’ve asked a who’s who of M&A, private equity, finance, and legal professionals to provide short answers to our Proust Questionnaire for Dealmakers.
For this special edition, we sat down with M. Will Fischtein and Alex Shteriev of Beacon Mergers and Acquisitions for a joint interview.
Will brings over twenty years of deal facilitation and transactional experience as a commercial litigation lawyer, business intermediary, and serial entrepreneur. Will started his career in operations at a pioneer internet company in New York City focused on supply chain management and technology. Prior to founding Beacon, Will was the CEO of Sunbelt Business Brokers managing the three largest Sunbelt territories in Canada. Prior to this Will ran a Toronto based Family Office comprised of a real estate asset and property management company. Today at Beacon, Will specializes in business valuations and sell-side engagements.
Alex joined Beacon after spending time as a business intermediary, and a number of years in managerial direct investment and advisory roles with SEE Capital Management, and Robert Charles Lesser & Co. Alex has an MBA from Emory University and an undergraduate degree from the American University of Paris. Alex brings to the team a sound understanding of the deal negotiation, and structuring process, and is also responsible for Beacon’s hiring and mandatory training process for new associates. Alex is fluent in English, French, Russian, and Bulgarian, he is a member of the IBBA, and is an avid basketball and soccer player.
Read on below to see what their candid responses reveal about the science and culture of dealmaking today.
TOUCHPOINT: Which words or phrases do M&A professionals most overuse?
Will Fischtein: I don’t know about anyone else, but I’m definitely guilty of overusing …
Alexander Shteriev: EBITDA! It’s used as the holy grail but, in a lot of ways, it’s not the most representative metric to look at when buying a business.
TP: As a teenager, Warren Buffet washed cars, delivered newspapers and placed pinball machines in local businesses. What were your first jobs and what, if anything, did they teach you about dealmaking?
WF: I’ll go first. My first job was at Gaylord’s Fruit stand in Toronto’s Kensington Market on Saturdays in the summer of 1981. I was ten years old. I learned how to place fruit and vegetables in a special way that made them look more appetizing.
Product placement was and is essential, and the strategic pyramids of colour and shapes were a priority. My boss Dave would say, “put the a– end up” of the tomatoes as that was the better-looking side of the fruit.
Designing a fruit stand as a child taught me the importance of marketing your wares. It also emphasizes that whatever job you engage in should be approached with attentiveness.
To appreciate the nuances and acknowledgement of the smallest details in any business or negotiation is useful. We aim to transmit clear and precise valuations for our clients. We hope our clients understand the careful way in which we valuate their businesses, including the smaller details, and more often than not, the “a– end up.”
AS: That’s a great first gig, Will. Growing up in Communist Bulgaria, there weren’t many opportunities to be entrepreneurial at a young age. I think I made my first real money from a side job when working as a bartender at the university bar. My alma mater, American University of Paris, had a student bar on the ground floor. I definitely learned that giving a tip and being generous as a customer really does get you better service.
TP: Are you positive about the outlook for M&A in the coming year?
WF: We’re on track to close over twenty deals in 2019. We’re encouraged by this activity, as we’ve been consistently building since 2007. If we continue on the current track for 2020, it will validate our efforts and be a rewarding experience for our entire team.
AS: That’s a great summary. I tend to be pragmatic by nature. At Beacon we try to never be too optimistic, which keeps us evolving, developing new services, and revenue streams, knowing that macroeconomic conditions and the general M&A outlook will always have an effect on our business.
TP: What is your greatest fear when you’re in the midst of a deal?
AS: That too many things are outside of my control.
WF: I can identify with that. One of my concerns is if the seller suddenly feels like they should receive a higher price just before the completion of the transaction. These feelings are often not realistic or based on facts, especially after they signed a Letter of Intent.
TP: What is the trait you most deplore in a client?
WF: Deplore is a wonderful word, yet it gives the impression that we engage in the dramatic. Although I don’t deplore anyone at present, I have felt the challenge when clients forget the reason they initially hired us. We remain conscientious of the seller’s goals and are also realistic about current trends and precise business valuations. We are most effective when we negotiate towards the outcome agreed upon by our clients and our team. In this way, we avoid unrealistic expectations.
AS: What Will said! And, in not so many words, a big ego.
TP: With so many moving parts, how do you keep deals moving and avoid bottlenecks and deal fatigue?
AS: By keeping things light and reminding clients what the end goal is. Kidding around and joking also helps.
WF: Haha. Though on a serious note, don’t let post LOI due diligence go on forever. Due diligence should be short, with a quick closing, with one built-in extension. Our priorities include collecting and all of the due diligence data prior to going to the market. This can prevent deal fatigue, which is what we want to avoid.
TP: Tell us about your biggest deal disaster (everybody’s got one)?
WF: We had a client who arranged to have the closing proceeds paid to them directly, bypassing the lawyer’s trust accounts and jeopardizing payment of our success fees. We felt there was a distinct miscommunication but, in the end, cool heads prevailed.
AS: I got a call on the Friday before a big deal completion on the following Monday that my seller has had a change of heart and will leave the business to his employees rather than selling. I lost my sleep over the weekend but advised my client to sleep on this idea. Lucky, he changed his mind by Monday and we closed the deal.
Conversely, as another story with a non-happy ending, there was a seller that didn’t disclose that they had lost their largest account, which accounted for 40% of the business, hoping that the deal would close before this became obvious on the books. The deal didn’t close. I think they’re still working there, where the business is worth a quarter of what it once was.
TP: It’s called the IKEA effect—the tendency to place a disproportionately high value on things that you build yourself. How do you manage unrealistic valuation expectations from sellers who have spent years building their business?
AS: By providing the client with a reality check: sharing stories of much bigger, much more successful businesses and entrepreneurs that failed because any business is a risky venture in itself.
WF: And doing the work. We always start our process with a deep review of the historical financials. We look at the target businesses’ annual cycle, the desires of our exiting client, combined with our expectation of how long it will take to get done. With this information, we build our valuations with a range of values based on different scenarios. This way we can have a preliminary candid conversation about timing and price.
TP: There can be an unfair perception out there that investment banking is a commoditized business, not unlike real estate. Do you ever come across this? If so, how do you negotiate a fee that makes sense for both you and your client?
WF: I listen carefully to our clients to better understand the time frame that we’ll be working together. My inner voice asks, “ Is this a six to eight-month process from start to finish? Or will this be a protracted, drawn-out affair?” On shorter process engagements, we like to work on pure success fees. On longer-term advisory roles we work on a retainer basis.
AS: If a client does not value or disregards our advice and takes my time for granted, I will let them know. I notice this a lot more when somebody looks at us as an agent or a broker, which is why I would like to be known as an M&A advisor. As far as the fee, I explain to them that a higher fee is good for us both—more incentive for me to do the best job possible that would lead to better offers for their business.
TP: What do you consider the most overrated virtue?
WF: Patience. Time is short. Midlife sneaks up on you before you know it and in our business, client engagements can be measured in years. I once had a sell-side client for over five years, 64 months to be exact. A lot of things can take place over 5 years: FX risk, deal fatigue, financial downturns, etc., but in the end, we were able to get the deal done.
AS: I would probably say kindness. In business, I have learned that most of the time this is a fleeting virtue that only means you are on somebody’s good side… until you aren’t.
TP: What do you consider your greatest achievement?
WF: My children, all four of them, each unique in their own right. I love seeing how their own life mystery unfolds.
AS: Same with me. My kids.
TP: What’s your favorite thing to do when you’re not at work?
WF: I love learning about new technology, specifically in the digital marketing arena. So, although not something I would consider work, I do employ a lot of my findings in our business.
AS: Travel. Watch sports. Be with my kids.
TP: What is your most treasured possession?
WF: Time spent with my wife, my children and my friends. Nothing is better.
AS: My Canadian passport!
TP: What is your greatest extravagance?
WF: Taking time daily to practice Transcendental Meditation with one of my sons. It’s a must!
AS: Along with travel and my passport, I can spend a lot of money travelling sometimes.
TP: Get out your crystal ball: What do you think the M&A advisory space will look like in 50 years? Will it even exist?
AS: Of course. I will be probably still doing this as well.
WF: We are talking about people being born now and over the next 15 years. I have no idea what their world is going to be like. But I am very bullish that it will be fun.