WSO Podcast | E138: PE as an Independent Sponsor to M&A Advisor

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In this episode, Elliott shares his winding path from majoring in Mechanical Engineering to breaking into management consulting at Accenture. Learn why he decided to go to Harvard Business School to break into private equity but made one important pivot before enrolling. Listen to how he hustled during school to make his dream a reality and why he ended up pivoting after a year to work in Sales and Strategy at Work Day. There are some very important lessons in this episode about independent sponsors as a model to get into private equity, so pay attention and learn why he eventually ended up setting up his own M&A advisory diligence business.

 

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WSO Podcast (Episode 138) Transcript:

Patrick (CEO of WSO): [00:00:06] Hello and welcome. I'm Patrick Curtis, your host and chief monkey, and this is the Wall Street Oasis podcast. Join me! As I talked to some of the community's most successful and inspirational members to gain valuable insight into

Different career paths and life in general. Lets get to it. In this episode, Elliott shares his winding path for majoring in mechanical engineering. To breaking into management consulting at Accenture. Learn why he decided to go to Harvard Business School to break into private equity, but made one important pivot before enrolling. Listen to how he hustled during school to make his dream a Reality and why he ended up pivoting after a year to work in sales and strategy at Workday. There's some very important lessons in this episode about independent sponsors as a model to get into private equity or get that private equity experience, so pay attention and learn why he eventually ended up setting his own M&A advisory diligence business. Enjoy. All right, Elliot, welcome to the Wall Street Oasis podcast.

Elliott: [00:01:09] Thank you. I'm glad to be here.

Patrick (CEO of WSO): [00:01:10] I'm excited to be awesome. If you could just give the listeners a short summary of your bio.

Elliott: [00:01:14] Sure, absolutely. So I started my career in management consulting at Accenture. I then left and worked for a search fund here in Atlanta. I then went to business school at Harvard, got into the private equity world, worked at two different private equity firms, then started two of my own independent sponsored private equity firms. After that, and now I run an M&A advisory firm focused on helping independent sponsors and acquisition entrepreneurs execute buyout transactions.

Patrick (CEO of WSO): [00:01:46] This is going to be a fun one. I love your background because it's different from what we typically see as a little more entrepreneurial. So I love it. So let's start Emily back actually at college.so you were at Morehouse, right? Morehouse in Georgia Tech, they have a dual degree engineering program. Yeah. So tell me a little bit about that. Like, you know, mechanical

Patrick (CEO of WSO): [00:02:06] Engineering doesn't scream finance or consulting. So tell me what was the thought process around doing engineering And why you ended up in consulting after that?

Elliott: [00:02:16] Sure. So sometimes they say, you got it, honestly. So both my parents were financial consultants and accountants and CPAs, and so engineering was a great sort of undergrad major to have. But I think very soon when I got to tech and got into my major classes, I realized I was best at the intersection of having conversations with people and the quantitative analysis. And so if I didn't play my best hand, I knew I'd be in trouble. So that sort of strikes me.

Patrick (CEO of WSO): [00:02:41] Doesn't mechanical engineering just mess up your GPA, though? I mean, you did really well, so I guess not.

Elliott: [00:02:47] Yes.

Patrick (CEO of WSO): [00:02:48] So your emotional or your social life isn't like mekki, like the hard one of the hardest majors.

Elliott: [00:02:55] I wear my Georgia Tech hoodie like I was going to war in it. I mean, it really does have that kind of disposition, but I would say Amy was difficult. And so part of my process through everything that I've done and you're starting to hear this again and again is learning how to craft your story in the language that you want to tell it.

Patrick (CEO of WSO): [00:03:13] Got it! Ok, so you were you did this dual kind of program with Morehouse in Georgia. Georgia Tech graduated in Mekki. Tell me about your did you did you do internships like your junior year, like typically like a consulting internship and tell me how you kind of started even stumbled upon management consulting? Sounds like your parents were in it, so they kind of maybe push you in

that in

Elliott: [00:03:35] That direction. Do you agree? They weren't management, consulting more, just regular consulting, and my parents were kind of old school Chicago and Detroit. I did five different internships, so I was in school for five and a half years between the two undergrad degrees. You have two bachelor's degrees. And so I interned with Proctor and Gamble. Johnson Controls System Hill engineering company Accenture. Up starting my career. General Motors and a plant that's here that's no longer in in operation. And so I had a really good opportunity to sort of try my hand at different things. I think your listeners would probably be interested because I've used your site many times. Part of my cheat code was just to get those two to three month opportunities to see if I like something. And so I had five of those before I ever graduated from college.

Patrick (CEO of WSO): [00:04:24] Yeah, that's super useful. You're also a little older when you graduate. So it's like you're a little more mature. You kind of know what you want. So but then I guess by junior year, by your fourth, your summer, did you kind of know or had you found that thing? Like, what was your thought process in terms of what this issue was? A censure like that summer before you graduated

Elliott: [00:04:43] Essentially was two years before I graduated. I got lucky in that I worked at Accenture on the technology consulting side. I remember telling my recruiter I would not be interested in consulting on the technology side, but if they had an opportunity in strategy, I'd be interested. They did not recruit from Morehouse or Georgia Tech for strategy they had like five schools they recruited from. However, they did allow interns from previous years to interview for their strategy practice. And so that's how I got hooked up. And then I ended up having my full time job offer a year and a half before I graduated, so I did an internship after I actually already had my full time offer with the extension.

Patrick (CEO of WSO): [00:05:20] Got it. Ok, so you already had so you were kind of set and you were able to actually maybe enjoy yourself at the end of your college years, I hope.

Elliott: [00:05:28] Yes, I even called Accenture and asked them, Hey, so I'm in school now. Is there a certain GPA? I have to have to keep my job offering because I actually have an ability to change it. Now, at the end of the day, I can't, so please don't surprise me.

Patrick (CEO of WSO): [00:05:42] That's funny. That's what they're like, they're like just don't completely bomb, is that what they basically told you?

Elliott: [00:05:46] Essentially, you know, they couldn't tell you anything specific, but they kind of gave me. Don't completely bomb, you know?

Patrick (CEO of WSO): [00:05:51] Ok, OK, that's fair enough. That's fair enough. So you're OK, so you're starting a censure. Tell me how bad transition was coming out of school and well before we even jump there, a little bit about school life. So you said it was a dual degree five years. What did you do first? Was it like you're going back and forth or like, what was the last one?

Elliott: [00:06:07] So it was Morehouse and then Georgia Tech. So the program is amazing. Think about a liberal arts college, HBCU, Morehouse College, the school of Martin Luther King went to. And then, you know, Georgia Tech, the top five and me and top three mechanical engineering program. Yeah, amazing. Started at Morehouse and I finished a full degree in three years and then transitioned to Georgia Tech. And I was sort of halfway through my engineering curriculum and then finished an engineering degree. That transition was hard as nails. Anybody who's gone from a liberal arts college to a top five institution of technology knows that it's a it's a Mike

Elliott: [00:06:40] Tyson punch to the gut. But so it's like, so it kind of prepared me for a lot of things thereafter. Transition was tough. I actually pledged a fraternity at Georgia Tech, and I think that kind of helped balance me honestly at a certain point. To be fair, it was get out of school with your degree and a decent GPA and sort of leverage it to go do what you want to do after. So I wasn't I wasn't A-plus. Georgia Tech guy, I was getting out with the job during a tech guy,

Patrick (CEO of WSO): [00:07:09] And that's fair. I think a lot of people are happy to have a job if they, especially in this market, right coming out of school. So OK, so you're and you were graduating, what year two thousand six? I graduated December 2006

before all the shit hit the fan. Ok, so so you got the job. You're you're working at Accenture. You are in strategy where you want to be. Yup, that's awesome. Tell me a little bit about why strategy? Why? Why did you kind of want that? Was it just like the

more prestigious role? Was it because it had a better trajectory long term? And how did you even know that?

Elliott: [00:07:41] So I probably shouldn't mention so one of the things that I did while I was in undergrad as I attended the Harvard Summer Ventures and Management Program at Harvard Business School. And so I had like a one week view of business school at Harvard. So I had a sense that I wanted to go and I knew that, you know, this investment bank was one of the more clear pathways at that time, strategy consulting one or the other. So I kind of had a sense that this was in the wheelhouse of where I wanted to go. So that was one of the reasons why. Another reason in kind of the transition question you had, it's interesting coming from engineering to business because I had not taken a true business class when I started at Accenture, so I was heavy. Client knew my math, but like return on assets. Return on investment. Reading 10Ks. None of it. And so I had to really get up to speed on that quickly. And for my fellow sort of technical folks that get into business careers and feel a little out of water. I remember asking some of my higher ups sort of help me understand like balance sheet stuff. So when we were in 2008 and all the a hit the fan. And now we have to do cash flow management for people and not profit improvement. And now you have to do balance sheet math and that income statement. I remember asking people, sort of how do you calculate cash flow off of this balance sheet? Blah blah blah. And they said, Oh, you know, the math too complicated your learning in business school. And I was like, Who's lying to me? I'm a mathematician. If you can't, I'm just saying, explain something to me that's mathematical. Somebody's lying. So that was a great sort of additional push to go to business school.

Patrick (CEO of WSO): [00:09:11] Got it. So is that kind of when did you go right after a? I'm looking at your LinkedIn right now trying to get the shit. So. So you went from 07

09 to censure and then that's when you went into HBS. That's it. Yeah. Ok. So tell me a little bit about your time there. What was it like? Was it eye opening? Was it? Was it great? You didn't? Did you love it? And what was the deal coming out?

Elliott: [00:09:33] I loved it. I I also particularly for this audience I knew, probably beginning in 2009, that I wanted to get into private equity. And so I got the advice that I should quit my job early and try to get an internship in the industry. So it's not on my LinkedIn. But I Actually quit accenture early in June and did an internship with the search fund launched by an HBS guy here in Atlanta

Patrick (CEO of WSO): [00:09:56] Before you went to HBS.

Elliott: [00:09:58] Exactly, which is a hunting license.

Patrick (CEO of WSO): [00:10:01] So you get that you get the pre MBA private equity experience. So, so talk Typekit for the listeners that don't really understand what a search fund is. Explain to them kind of just real quick.

Elliott: [00:10:12] How do you think about any private equity instrument? So private equity firms like Blackstone are buying companies all the time? Imagine a entrepreneur who wants to go buy a single company and run it as opposed to just buying it and being an adviser. So they're typically people fresh out of business school or sort of younger in their career. The raise two years of salary to go, search for a company and then use those same equity investors to fill the equity part of their transactions and then go buy a company, hopefully grow the company over five to 10 years, sell it and get a return that way.

Patrick (CEO of WSO): [00:10:45] Yeah. And so typically they can. People can think of a search fund. Just adding to that, it's almost like a mini private equity fund that's independent to one person so that the GP, the general partner kind of running it is just this this kid, young kid that's sharp and smart and wants to go, take a new business,

Buy it and ideally triple it in size or quadruple in size. That's it. And OK, so is that typical like in terms of size, like or search fund? It can typically be a company under like a million revenue all the way up to like five million revenue, depending on how big of investors you have behind you, you write

 

Elliott: [00:11:22] Exactly what you choose to do. I think my company was about a million dollars in EBITDA, so a little bit over $5 million in revenue at the time.

Patrick (CEO of WSO): [00:11:30] And how did you so that that was the internship that you help you help actually close that deal or you help work on it?

Elliott: [00:11:36] I helped do an acquisition screen for an add on. They were looking to do OK. They didn't consummating it, but sort of I looked at the industry and found, you know, 50 companies that could have been decent targets for an add on, you know, pulled what information I could out of the internet called CEO's cold call,

Patrick (CEO of WSO): [00:11:52] All that kind of stuff. That was just good experience to list on the resume. So because you knew once you went to HBS in order to try and break into having that would have been it was super important.

Elliott: [00:12:02] Exactly. And the HBS guy who I was working for was an advocate. And so of course, they made sure I was

Patrick (CEO of WSO): [00:12:07] Doing things that could be, yeah, all the listeners out there that say, I want to go private equity. If you don't do something like this before business school, it makes your life infinitely harder. I've had about two guests on this podcast that have managed to break into private equity from investment banking post MBA with no PE background. But I can tell you it is super, super, super rare because there's so few seats for post MBA. I would even say even if you have a search fund on your belt, you're still going up against guys and gals that have like two to three to four years of pre MBA direct investing experience. You just. Still at a disadvantage. But, OK, so you got that on your resume was smart, you did that for what six months

Elliott: [00:12:48] Actually went for. It was

Patrick (CEO of WSO): [00:12:49] Short. Ok, and then you ended up enrolling at RBS and then tell me how the recruiting went right off the get go. You started kind of networking. What was the

Elliott: [00:12:58] Two answers to that? So first off, I was so naive. I read this book the Glow Cap Guide, on how to get a job in private equity. So I knew it was going to be tough, but I actually thought that the private equity firms that the people at HBS landed in would all come to be part of the official hiring process at HBS. So I remember talking to a person next to me who was an ex X-band cat like, Hey, when's brain cap company went bankrupt coming? And then probably a month and a half two months in the school? She told me, Hey, look, Bancroft's been here. We've all given recommendations on who we think would be great. You didn't make the recommendation list. Most of the private equity stuff is informal, and they're not posting it publicly. And I was like, Whoa. So it's kind of welcome to the jungle two months in the business school, and then I just sort of got on the phone. I mean, I probably called a hundred people my first year and 150 people in my second year to try to find one single internship. And fortunately, through calling and then a local firm here, Atlanta, that I chased down pretty aggressively during Christmas break was able to sort of close them soon after Christmas break. So it was a grueling process, one that was kind of wrought with the surprise of their not going through the official process.

Patrick (CEO of WSO): [00:14:08] You were able to close them for an internship after your first year around the Christmas break, you said.

Elliott: [00:14:13] Yeah, I came home to Atlanta to call it, you know, December 15th before

Patrick (CEO of WSO): [00:14:16] Christmas, and you're stressing out because everyone has Lynch just lined up and you're like, I got to get in if I'm not doing banking. Did you consider going banking to try? And potentially? No, no.

Elliott: [00:14:26] I knew in my heart that at that time. So I came in to school with all the Bear Stearns and Lehman Brothers folks that got kicked out. So the 2008. So there were three hundred people with better experience than me in business school, and people hadn't transitioned from investment banking to post MBA and the private equity and like three or four years. And I could see it in LinkedIn. So I said if I didn't get it right out of business school, then I had to start to make a complete career change. But I didn't. It didn't make sense. I hadn't seen anybody in four years. Go post MBA Investment Banking in Tempe.

Patrick (CEO of WSO): [00:14:56] Yeah, it's super rare. Like I said earlier, so OK. So you. You you scrapped, you're able to kind of get this private equity internship down in Atlanta. How big was the fund? Was it a small fund, another search fund? What was it?

Elliott: [00:15:06] No. $300 million industrial private equity firm started by Lynx Partners, is the name of the firm on my left links partners. Second generation investors started at the Bannigan Incredible People non paid internship, which I think you have to be ready to do if you really want to get into the industry. I did so well, I got a well at the

time, huge at now, pretty small bonus check and an umbrella. I still have that umbrella ten years later in my car because I earned it.

Patrick (CEO of WSO): [00:15:36] You earned that umbrella. Yeah. So do you mind sharing what the bonus cheque was at the end of the summer?

Elliott: [00:15:40] Five thousand big

Patrick (CEO of WSO): [00:15:42] Dollars. Nice, nice. So put that into context of like so you took you only earned $5000 over the summer. Some of your some of your classmates earned what, like sixty thousand thirty thousand something like that. Crazy fifty thousand

Elliott: [00:15:54] Bucks, depending. I mean, I was thinking your fraternity brothers basements and driving at a 20 year old Honda with no air conditioning in Atlanta. Oh, that's anybody who lived in the south in those summers.

Patrick (CEO of WSO): [00:16:05] Like reminds me when I was in New Orleans with no AC and the car might have a lot of family down in New Orleans. Oh, sorry, my phone just went off. But so. Ok, so this is this is great, so you get that internship, though, and the type of experience you're doing, you're just screening companies. Did you actually do any deals? I know it was only in the summer, but so I

Elliott: [00:16:24] Got lucky again, so I didn't do any deals, but I was able to work on a sort of due diligence process and a post low transaction for a trucking company. They were looking at buying in South Carolina. The deal didn't consummate, But of course, you know, being in diligence is far more close to the actual action than just screening companies. And so I was

Patrick (CEO of WSO): [00:16:43] Because you're running a process,

Elliott: [00:16:45] You're running a process. Yeah. Fortunately, there were other processes going on, so I got a chance to actually lead the one that I was working on. That's awesome. And it was just a complete, complete crash course. I mean, I would get there before everybody do my best to keep up, get everything, stay after everybody left and then call my Wall Street guys that had already been doing P to get like a lifeline from like seven to seven thirty whenever I could catch them.

Patrick (CEO of WSO): [00:17:08] What is this quality earnings bullshit? What is this? What is this other thing? What is it like? Yeah, I get it reasonable.

Elliott: [00:17:14] Oh my god, this thing is all over the place. Why is the balance sheet not balancing? How do I do this? How do I present this 10 model in two minutes to a 50 year old second generation investor? Yeah, I

Patrick (CEO of WSO): [00:17:25] Need a lot of help. Yeah, stressful. So did you? Ok, so you had that you go back to school and then did they say to you, Hey, maybe you can come back after school and come full time? Or they just know there's no seats for you?

Elliott: [00:17:37] There was no seats. And in all, fairness, and the managing director at the time said, Hey, you're not ready yet. I mean, in all fairness, you know, the people who are investing in are way better at modeling you. At this point, you need to sit down with some investment bankers and really sort of improve that. And I'm glad that she was honest with me about that because, you know, I spent the time of my second year doing that.

Patrick (CEO of WSO): [00:17:56] So and then so. But how did you end up? You did end up landing another gig, right? I did. So how did you end up doing that? I mean, you had the internship, but it's still the odds are stacked against you with the with the other banker banking kids or MBA

Elliott: [00:18:11] More people than my competition by far. If I showed you my list of 250 people that told me, No, you'd laugh, but I just on the phone, I didn't do any of the McKinsey, any of the Goldman recruiting I was alumni network on the phone. Can I work for, you know, who can I work for? Can I work for, you know, who should I talk to? Can I work for you? How could I work for you? What kind have you ever seen anybody hire someone who hadn't been? How does anybody get into this? And finally, what happened is through those calls and advocate. Another Morehouse alum who was working at Windjammer Partners at the time, sent me a requisition for a job that was sent to the Harvard alumni. Harvard Business School alumni network. Yeah, for a full

time position at the Watermill Group in Boston. And it was sort of January of my second year, and I called him and said, Hey, look, don't you want the best candidate? Not the best one available now. It's my last semester at HBS. I mean, gosh, I could work 30 hours a week now and then in May, I can work full time. I think this is better for you to do this than kind of pick some whoever person who can do it now. I mean, it's a three month difference. And so I was able to convince them to start me. I started February one, my second year. Like that final semester,

Patrick (CEO of WSO): [00:19:22] You started working 30 hours a week trying to. Everyone else was partying, having their full time gigs lined up and you're hustling

Elliott: [00:19:29] Is what I was doing. I mean, there's no way to say no to something like that. You know, I was hoping for one opportunity. I got one. Yes, OK, so not going to sign it as soon as I sent it.

Patrick (CEO of WSO): [00:19:37] Yes, you could you convince them to let you kind of do a project, but it's still just a project. It wasn't a full time offer, right?

Elliott: [00:19:43] No, I signed a full time job offer. Oh, my final year.

Patrick (CEO of WSO): [00:19:47] Ok, so you were party a little bit, but you had to actually start working with them? Well, yeah,

Elliott: [00:19:52] I mean, it was interesting. I bare minimal, minimally viable party. I mean, I was learning private equity and at a real, full time firm while finishing school, You know, it was just a lot. Again, it was a lot.

Patrick (CEO of WSO): [00:20:06] Yeah, you were learning a lot, probably in the six months or whatever. It was five months. So yeah, I see it here, January. So you were there for a year, for a year. So tell me a little bit about why only a year like you'd work so hard to get into private equity where you were, you still kind of didn't feel like you're up to up to speed on modeling or do you feel like, hey, you were there at that point? What happened to that? You would jump work so hard through business school, only to jump to you? But looks like a strategy roll.

Elliott: [00:20:37] Yeah. So this is sort of the other piece of life, right? Sometimes absolute money grab is not the only thing that's important to you. So I grew up in Michigan. I had moved my mother and my brother down to Atlanta after undergrad, after some messy stuff. Personally, I won't get into here. And so after business school, after going to the number one business school in the world, I'm a two and a half hour plane ride from the people I love. And it felt like I was, you know, if they call hustling backwards like to your point, you work as hard as you can. You do all this amazing stuff. And now am I looking at a five year career in Boston? And I can only see my family like once every two months? And then my mom was asking me, Hey, you moved me to Atlanta. Going to move me to Boston.

Patrick (CEO of WSO): [00:21:16] Yeah.

Elliott: [00:21:17] So I made a decision at that point to come back to Atlanta and sort of figure out how to keep my career going. It wasn't easy. Atlanta is not a financial center.

Patrick (CEO of WSO): [00:21:27] You wanted to be down close to family. You want to be in the southeast and you said, OK, it's got to be Atlanta. So you started looking at companies and opportunities down there. And that's when kind of the position at Workday came along. And how did you find that just through just talking to them and stuff like that, and it's just a natural fit?

Elliott: [00:21:45] Yeah. And in fairness, some of the stuff that's not on my LinkedIn, I'm giving this to the audience because I think your folks will appreciate this particularly. I came back to Atlanta. I did a quick stand at Home Depot, didn't work. I was leaving Home Depot and was working with a mentor of mine that was one of the 250 calls I had at HBS. Yeah, doing them deal. So I was showing them deals and just, you know, Hey, what do you think of this? What do you think of that? I had my Highland Capital One pager going to mezzanine and just trying to figure it out. And then I was on the Harvard Business School alumni network and saw this work day job. I didn't know it. Work day was most people didn't at that time, to be honest, and I had an interview with them and I asked the final question was Can I work remotely? Like, Yeah, the whole job is remote. I was like, Whoa. Yes, sign me up. Because I knew if I had a remote job, I could still do my deal stuff. So I actually bootstrapped the first three years of Elsworth partners working a full time job at Workday while I was spending 40 50 hours with my 40 to 50 hours with my mentor slash business partner on Elsworth Partners. So I actually did those.

Patrick (CEO of WSO): [00:22:49] That's amazing. So yeah, so you're like it's a remote to the workday position, which you were there for three years. Mm hmm. That was a that was a fully remote position, even though they're based in Atlanta.

Elliott: [00:23:00] So they're based actually in Pleasanton, California.

Patrick (CEO of WSO): [00:23:03] You were based here.

Elliott: [00:23:03] You are based in Atlanta. But at the time, I was on a six person team of sort of ops people doing business cases for their Salesforce. I covered everything from New York to Houston. So it was all about getting to where they were selling. And so very little sales were happening in Atlanta. So it was just every week or every two weeks. I was on a plane going somewhere to talk to whoever about workday software. And then I wake up at four o'clock in the morning run. My models go do the sales meeting at 8:00. Talk to the people

Patrick (CEO of WSO): [00:23:33] And explain to that a little bit. So explain to people, the listeners. So I think you said it in your intro, kind of the bible like this job was remote and you're still having to fly places to give pitches trying to close these, this these software deals, basically. Mm hmm. But during that whole time, you were bootstrapping your own business yes. So explain what that business exactly was and. Why so this it was from an alarm, one of the two hundred fifty people you had kind of made a connection with at HBS, you had kind of partnered with him or her, but how much to explain how that even took? Yeah.

Elliott: [00:24:06] So for everyone here, if you want to get a job in private equity, one of the easiest way to do it is to start showing deal people deals like stop asking for a job, go find a deal on this website or biz class or something and show it to somebody.

Patrick (CEO of WSO): [00:24:19] So that's where biz by Best Buy.

 

Elliott: [00:24:21] So this quest, I mean, there's hundreds of deal listing sites, but business brokers list deals. Go find one that you like and go show it to a deal, person. Yeah. So what ended up happening is right around the time I started at Workday, the exercise for three or four months showing a mentor deals, he said, Hey, I actually like this. We should work together and formalize this. So we started an independent sponsor company called Elsworth Partners, where him and I looked at deals between two and eight million dollars and even the industrial stuff kind of similar to what I did at Watermill looking to do those deals as independent sponsors. So private equity groups without dedicated fund, you raise capital while you're in diligence. So I did that while I was doing the work day job.

Patrick (CEO of WSO): [00:25:04] How do you even do that? Like Independent Independent? It's a big thing now. These independent sponsors, like it's very common now for people coming out of HBS ward and wherever the top schools be like, I'm going to go buy my own business. Like, Don't you need to know the right people that have that, those big pockets?

Elliott: [00:25:21] So that was the thing in why it was important for me to work with somebody who had already been doing it. So my business partner and mentor was a guy who had worked at a billion dollar firm for eight years and then had been out for 15 years doing independent deals. So he had the relationships he had, how to get stuff done. He had the tutelage and I just needed

Patrick (CEO of WSO): [00:25:38] So he had he had basically the contacts that were ready to pony up whatever five million, ten, 20 million dollars, whatever you guys needed to get the deal done right. Got it. And so. How I would assume the power dynamics of that, that when you're making a deal with him, he's bringing a lot of value to the table. Yes. Whereas you're like, Yeah, you're doing a lot of the work and they feel like. Tell me a little bit about that like negotiation because he's like, Let's formalize it. But then was he like, OK, yeah, you get five percent of the upside or like you get two percent of the upside. What was that like?

Elliott: [00:26:10] So it was it was nice and then a bit messy, too. So I think he was a great, well-intentioned guy. And so he said the only partnership that I understand is 50 50. Otherwise, it's not really a partnership, and it's a dictatorship to an extent are sort of big partner, little partner. And so our operating agreement was 50 50, although the negotiations weren't right. So we did what he wanted to do. But in our operating agreement, we were 50 50. So what did that mean? It meant I was learning as an apprentice. We really did split the work about 50 50, so people think I was looking at deals and he was running models and raising capital. You know, it was really just 50 50 and everything. And so I think his purpose was both to get deals done and to teach me how to get deals done, which I think is sort of part of the apprenticeship model. And again, there was no salary, right? So he wasn't paying me. I was offering work for the opportunity to help him get deals done. And so that was sort of the arrangement

that we had. But when you got

Patrick (CEO of WSO): [00:27:09] A did you get a deal done with him?

Elliott: [00:27:11] Sure, we did two or three deals add ons into his portfolio. We got close on a couple of platform acquisitions and just didn't get a platform acquisition over the finish line. So.

Patrick (CEO of WSO): [00:27:22] And so what were those like? How big were these acquisitions?

Elliott: [00:27:25] They were like half million to a million two and EBITDA, mainly in the tow truck industry. That's where one of the bigger portfolio companies was.

Patrick (CEO of WSO): [00:27:33] And then when you guys would acquire those businesses, did you actually do a lot of operational stuff to help them and go in there and get your hands dirty? Or were you just say, tuck them into your portfolio and you have a team? Or what was that like?

Elliott: [00:27:45] We were very hands on, particularly at the beginning. You know, you buy a company that's under a million dollars or at a million dollars of EBITDA. You're typically not buying much in process, not buying much and systems, not buying much in terms of financial infrastructure. And so you end up having to sort of be the stuff that you need in the company until the company can afford the stuff itself or you can integrate it with the mothership. So the role that we were playing was not just advisory, but actually, you know, I was interim CFO with some of those companies, you know, I was running some of the financial reporting for the lenders. You just kind of get in there and get done what you need to get done.

Patrick (CEO of WSO): [00:28:19] Oh, OK, so you were you were partners with him for about three years. Is that accurate? And if so, tell me how, like, when and what transitioned or how what was going on? Were you thinking, Hey, I want to do this myself? Or are you thinking, Hey, I really needed to salary? This is not paying the bills, what was the what was going on?

Elliott: [00:28:36] So about three years into it, we hadn't got a platform acquisition done.

 

Patrick (CEO of WSO): [00:28:40] And so for me, like big enough, like a big enough

Elliott: [00:28:43] Like anger and one that I could own the equity in the mothership, right? So the add on acquisitions because of him owning the company already the part that I owned was so small because there was all the risk was being now, you know, we were getting debt to finish those acquisitions, not equity. And so the ownership that I had was very, very, very small. Yeah. When you're when you're working sort of in a bootstrap way and you're only younger in your career, you have to get stuff done like you can't work for free and sort of pontificate about this. So when I start to realize is that my partner was effectively semi-retired, right? Like he was in his 50s going on 60s. He had already kind of done the personal guarantee stuff. And when you do a deal, you think about owning somebody 20 or 30 million dollars and now you have a board that's kicking your butt and sort of your freedom gets restricted again. I just don't think it was all that appetizing to him unless it was sort of a perfect type deal.

Patrick (CEO of WSO): [00:29:41] And so he really so. So there was a little bit of a conflict around like he didn't necessarily want to do the same types of deals that that you were ready to go. Exactly and he's like, Why are we going to rock the boat here? He's like, This isn't this isn't a slam dunk, and you're like, Well, we can work on it and make it a slam dunk and get it. OK, so there's a little bit of that. Well, that makes sense. There's like a generational thing like, you're ready to go. He's like, It's got to be perfect. And so I can see there's some tension there, even though he was giving you 50 50 of that.

Elliott: [00:30:09] Yeah, and honestly, looking back on it. Part of what I was looking to do was to be an independent sponsor, and I think part of the beauty of that model is that you don't have to do things right. You're not forced to put capital to work. And so you can say tension. But it was also sort of I learned sort of the flexibility of the independent sponsor model through the fact that, you know, he was in the 50s and effectively retired, you know, he didn't have he didn't. He didn't owe anybody significant enough amount money where he couldn't go, spend three weeks with his wife. And that was kind of the life that I want it to.

Patrick (CEO of WSO): [00:30:39] Yeah. So tell me a little bit about kind of how you thought about your transition and then the next transition.

Elliott: [00:30:43] Sure. So I still wanted to work on deals. I just needed sort of the freedom to do it without a partner that was semi-retired. So I spun out and started sparking capital, which was my own instrument to go do deals about the same size. I looked at some stuff that was sort of under two million, so I'd look at stuff that was seven to eight hundred thousand in EBITDA. Yeah, but it was essentially the similar

Patrick (CEO of WSO): [00:31:06] Thesis to those sorry for the listeners, those companies are doing about 700 of Ebitda. They typically go for like a little bit of a compressed multiple, right?

Elliott: [00:31:16] Yeah, it's typically three times. And typically they're sort of at least 30 percent self-financing. So effectively, you know, little over two times

Patrick (CEO of WSO): [00:31:23] Over two times, you've got to come up with a little over two times capital. So if it's a seven hundred K, it's two point one million, but you're only really having to come up at one point four or one point five. Yeah. Ok, so tell me a little bit about. Who you knew, did you have enough contacts at that point where you could help with the financing or did you have? I mean, I don't think you had a million dollars in the bank at that point, right?

Elliott: [00:31:43] No, I was I was flush with relationships and opportunity. I mean, I had a database of probably, you know, two or three hundred mezzanine lenders. You know, four or five hundred senior lenders. You know, a bunch of family offices and sort of high networks that did deals. I mean, I inherited my business partner's database because we use it. It was in our CRM. So I called the same people pitch the same deals. I was a known entity, not, you know, 30 years known, but I wasn't, you know, yeah, I was the newest kid on the block, either. So I leveraged those relationships to take a run at a couple of things. The main industry I was looking at the time was durable medical equipment. And so people who distribute like wheelchairs, CPAP, CPAP machines, so sort of health care equipment for older people typically who are taking care of themselves in their home. And you know, in fairness, I had about two years of runway and kind of took a run at a pretty big deal sort of near the one year mark and the deal blew up. And so why

Patrick (CEO of WSO): [00:32:40] It's very common for two of them all up. But why did this one blow up or can you share?

Elliott: [00:32:46] So, yeah, no, absolutely. So I had equity guys that were fraternity brothers of mine from tech that were sort of older than I was. And one of their mentors was owner of a business in a similar industry. And so we were sort of leveraging him to be sort of an advisor and sort of help us with the transaction. And what I didn't realize at the time was that part of the reason he was a mentor of one of my buddies was because he was getting business from my buddy's company. And so he actually had no interest when I really think about it and creating an economic instrument significant enough for my buddy to leave his day job. And so the guy our my equity guy's mentor blew the deal up in like a sign of like it was a weird kind of torpedo kind of way, and I was kind of left pretty extended. I'll say it that way. So you were doing it yourself? What's that paying for? Diligence yourself?

Patrick (CEO of WSO): [00:33:40] Yeah, yeah. So you're kind of at this stage and tell me kind of when what the next kind of so you're here, it's like, what? And now you're 10 and 17, 18, 2017.

Elliott: [00:33:53] I kind of went to the drawing board, honestly and said, Hey, look, I have these amazing skills that I want to use in the marketplace. The independent sponsored thing has not worked out for me yet. So, you know, do you want to keep beating a door down or try to figure something else out? How do you sort of play your hand in the market? And what I decided to do was to start a boutique M&A advisory firm, helping other independent sponsors and acquisition entrepreneurs, which are just probably less informed. Independent sponsors, arguably, and sometimes career people who want to go buy a company helping them execute transactions. I mean, I knew

good and darn well how difficult it was to find good advisors for deals a million to four or five million dollars in EBITDA. I knew how intense it got as a sponsor trying to manage a portfolio company had 10 deals in your pipeline, two of which you have Luis on. And I also realized that most of the other people who are selling these services, we're selling them a, I think ineffectively so like a buy side person on a seven person investment bank on the sell side, that never felt trustworthy to me. And they also weren't using sort of digital means to market. So I saw an opportunity to sort of own M&A advisory and digital marketing. And so I went off to start gardening and due diligence, which is the company I I own and run currently.

Patrick (CEO of WSO): [00:35:12] And so you started that one twenty seventeen. Okay, so it's been a good three years. Tell me how that that I mean, it's always hard starting a new business, but tell me about like the trajectory of getting clients and how that's been. I mean, you obviously have you had a lot of contacts through all the lenders and stuff? Are they feeding you deals as an advisor? They recommend you. How are you actually? And you said, Hey, there's an opportunity around digital, like you mean, like social media, LinkedIn, what are you doing to generate you're getting on podcasts like this, but what else?

Elliott: [00:35:40] Sure. No. So the first two years, it was all word of mouth from people who I knew. So it was independent sponsors or Harvard Business School friends who had companies that were looking to do add ons. It was all sort of, you know, five 10 year relationships initially, right? And most times when you start a company, that's where you start and

Patrick (CEO of WSO): [00:35:57] How do you even make like, what's the fee structure look like for such small deals like I know you're obviously not making the same as like an investment bank that's doing a 200 million dollar deal or 300 million deal. But if it's like a five million dollar business or this easy numbers at $10 million acquisition, sure. And you're the main M&A advisor for that. What would what would it?

Elliott: [00:36:16] It all depends on what you negotiate. Arguably when you start a company, you sort of negotiate probably a little bit less than you would, you know, 10 years in. So on the low end, you sort of at least I I structure that was a retainer just kind of covering my downside in my hours and then a success fee that looked like a mean formula if the deal closed. So it gave me sort of a steady coupon. And then some upside opportunity for close stuff, because, you know, during diligence, you know, people aren't going to pay you for 80 hours a week, right? So you kind of have to give yourself some ability to get upside on that. And then what was interesting is that there's a lot more work to do on smaller deals because there's no like Harris Williams Investment Bank or Goldman Sachs or Bank of America showing you some hundred page book with like, you know, four hundred pages in a data room. It's like, you know, two tax returns and a

Patrick (CEO of WSO): [00:37:00] Do like what data room? Here's like documents. Go figure it out, right?

Elliott: [00:37:04] Exactly. And so you priced it almost like you're consulting and then you have the deal kicker on the Lehman formula and then you try to sort of.

Patrick (CEO of WSO): [00:37:12] And what does that kicker? I mean, maybe you don't want to share your pricing here, but like arrange so like a retainer would be like what? 10k a month, five k a month, something like that just to keep you somewhere in

Elliott: [00:37:21] Between there and then, you know, formula on a on a five gig, you know, deal can be, you know, over 100 grand.

Patrick (CEO of WSO): [00:37:28] Yeah. On the on a success fee. Yeah. Very cool. And so you kind of lot of word of mouth for a couple of years. And then how else are you marketing your side? I think it's I love to hear the hustle. I love to hear entrepreneurial stuff because you talked about social media, and it's obviously a huge opportunity if you're putting out stuff on yourself. Are you doing YouTube? What are you doing?

Elliott: [00:37:47] Yeah. So I started taking digital marketing classes a couple of years ago. You know, eight years are

Patrick (CEO of WSO): [00:37:51] Going to have to share some secrets.

Elliott: [00:37:54] Yeah, go to work like anything else. I mean, the funny part is we all know how to do it for deals or investment banking or whatever, right? So we read volumes of stuff. Anything that you want to get good at in my mind, you go read the people who are smart about it. What are they saying? What are they putting out? I think in the next 10, 20, 30 years of this, there's going to be a lot more digital connections driving business than golf courses and expensive lunches. And so if you get good at sort of managing a digital marketing platform, which is your LinkedIn, which is your website and AdWords, which is your email marketing, which is all of these things, you know, I had to go back to like marketing one on one from business school

Patrick (CEO of WSO): [00:38:32] And like, yeah, tell me about the thought process. Let's talk a little bit entrepreneurial startups and all that stuff. I think it's fun, and I obviously know that world now. After 14 years of running this beast, you know, it's funny because people think the reach is really big. Wall Street noise is the business is really small. So, you know, as much as we've done a great job in terms of building community and stuff where we're still, we're still working and working our ways up to grow the business. But in terms of, I'd love to hear your thought process in terms of what you thought of building your personal brand versus building the due diligence brand.The Guardian, right? Due diligence.

Elliott: [00:39:11] Yeah. So I knew it was very hard to sell businesses with your last name in them. Yeah. And so I learned that with my first Highland Capital thing several years ago.

Patrick (CEO of WSO): [00:39:20] So the thought process is if I grow this to a big enough advisory fund, I could potentially sell it down the road.

Elliott: [00:39:26] I can sell it, I can bring on partners, I can collaborate, I can sort of be a face that doesn't do any work. I have optionality. If it's if it's Holland Diligence Services or Holland and partners, then people want to see Elliot every single time, and that's that business doesn't scale. So that was my first thought is don't put your name in it. The second thought is what is the hardest part of executing deals, right? And it's diligent. It's which deals that you do, which deals should you leave and how much time should you spend on any particular deal? That's the crux. The great investors beat down diligence better than the mediocre ones and the ones that are just starting. Don't even know that that's the thing. And so my thought was, look, start with due diligence because people are going to be troubled with it. It's hard. It's complex enough to sort of bite it off and solve it for people. And then over time, you'll become sort of a more comprehensive investment bank of sorts on the buy side as people sort of need

you for more thing. So that was my thought process when I started.

Patrick (CEO of WSO): [00:40:28] Very cool. So a lot of little twists and turns there throughout your career. Tell me a little bit about just. Like your life, are you like still grinding 80 hours a week? Like, what are you doing now? That's your own thing. I mean, it's your own thing, so it probably doesn't hurt, but as much as been before. But tell me a little bit about like just how you balanced all this stuff because there's been a lot of kind of twists and turns you've worked for other people you've worked for the larger software start ups, you kind of run the game and the consulting firm. So tell me a little bit about like how that's progressed. Sure. So, you know,

Elliott: [00:41:02] For the first eight years out of business school was actually a grind. You know, I was working as hard as anybody on Wall Street, you know, maybe piecing together two or three things at a time, but sort of definitely putting in hours. And part of this was to enable myself to put in hours if I wanted to, but not have to. And so right now, I can do as many deals as I want to, but I don't have to do every deal that comes. I don't have to work with every customer that comes, you know, there's a lot of jerks in finance. As we all know, I'll have to work for them or with them. It's a high enough service business with a high enough margin that there's enough juice for the sort of the squeeze. And then there's strategic client

Elliott: [00:41:44] Relationships that sort of matter. And so I'm able to manage a way more healthy sort of work environment now and get to know a lot of great investors and sort of industry participants as well.

Patrick (CEO of WSO): [00:41:56] Very cool. It sounds like a like a fun ride, and I'll be watching to see how it grows, but yeah. Anything else you want to share with the listeners in terms of where they can find you or any sort of final words of wisdom that you've learned kind of coming through

Elliott: [00:42:13] Your path? I believe one word of wisdom and then I'll share where you can find me. Well, I think when I got to business school is sort of the quintessential time in my career where I had to either put up or shut up. You know, I'm in line behind 300 people that had already been on wall Street in a private

equity or investment banking capacity. And the fancy Harvard thing wasn't going to put me to the top of the line. And I think for a lot of people who find themselves just not on a path, right? Because you can't sort of if you're at, you know, Pitt and you want to get into private equity, you can't sort of all of a sudden go to Yale. Right, the way you beat this thing is you work harder than the other people doing the stuff that they don't want to do. People don't like getting on the phone, they don't like cold calling, and they're like emailing. They don't like managing a CRM full of people. They don't like hearing. No, they don't like going and finding deals and then giving them people essentially for free to get a job. If you can do those things, you can win and then people will tell you that's a waste of time and you don't need to do that. You can just apply. Good luck. But I'll tell you, the people that get my attention right away are the people who are already hustling, showing me value when they start. So I think that's sort of my words of wisdom. I would embark upon anyone listening in terms of how to find me. Guardian due diligence. Dewey, of course, and then LinkedIn. Elliot Holland. Pretty easy to find there. I'm very responsive in both places and so

Patrick (CEO of WSO): [00:43:37] Well and to tease

Elliott: [00:43:39] To our students. And then actually, you can also find me on Elliot Hyphen Holland. So L.L. iOttie Hyphen Holland, Hll A and. And my emails and phone numbers are there and I love to speak with you.

Patrick (CEO of WSO): [00:43:56] Awesome. Well, thanks so much for taking the time and sharing your wisdom.

Elliott: [00:44:00] Patrick, thanks for having me. It's a pleasure being here

Patrick (CEO of WSO): [00:44:02] And thanks to you, my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. Patrick at Wall Street Oasis dot com.And till next time.