SaaS Interviews with CEOs, Startups, Founders
EP 561: He Did $1b in 2016 Transactions (Takes on avg 3%) at his M&A Firm Marlin and Associates with CEO Ken Marlin
05 Feb 2017
Chapter 1: Who is Ken Marlin and what is Marlin and Associates?
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Folks, many of you reach out to me and you say, Nathan, so many guests on your show talk about the importance of batching. But whenever I try and batch, you tell me this. You go, Nathan, they don't book back-to-back times. Or they don't show up after they book. It's frustrating.
Chapter 2: How does Marlin and Associates operate in the M&A space?
The answer is, guys, you have to use smart tools. I use a tool called Acuity Scheduling at NathanLatke.com forward slash schedule. I'll tell you specifically how I use it later on in the episode. Nathan Lackey here. This is episode 561. You're really going to love it. And coming up tomorrow morning, you'll learn from Nick, who founded Illuminato.
They raised $700,000 and just recently passed 100 customers with their team in D.C. Folks, good morning. Nathan Latke here. Our guest today is Ken Marlin. He's the founder and managing partner of Marlin & Associates, an award-winning mergers and acquisitions-focused investment bank headquartered in New York City with offices in San Francisco, Washington, D.C., and Toronto.
Ken's also the author of The Marine Corps' Way to win on wall street, 11 key principles from the battlefield to the boardroom, which was published in September. We'll talk about that in a second.
Chapter 3: What was the total transaction volume for Marlin and Associates in 2016?
Additionally, between 1970 and 1981, Ken rose from the enlisted ranks to become a Marine captain and infantry commander. Since then, he's been an entrepreneur, a tech company, CEO twice, a senior corporate executive twice. And for the past 20 plus years, an investment banker on wall street for the past 14 years, he's been leading his own firm as articulated again, uh, Marlon and associates.
Additionally, throughout all these endeavors, he's applied Marine Corps principles to leading successful businesses. That's what we'll focus on today. Ken, are you ready to take us to the top? I'm happy to chat. Thanks for having me. Thanks for coming on. Is 2017 going to be a good year for M&A or what?
You know, so far it's starting out with a bang. We actually closed a transaction today. We have eight more that we're working on, which is a fair amount for us. So, so far the year's starting out strong and we're just going to hope nobody does anything stupid to mess it up.
Is the press release for today's one out yet?
Chapter 4: What percentage do M&A firms typically charge for their services?
Can you share it? It's not. We're waiting for the company to release it. No problem. Tell us how the business works. So you founded this company. How do you make money doing this?
Oh, we don't do things for crass money. We just do it for the honor and privilege of working with our clients. They're great clients. But every once in a while, they do pay us. We do try hard to be the trusted advisor to people who want to buy or sell middle market technology companies. We have both buyers and sellers who... pay us a retainer to help them figure out what's the right thing to do.
And sometimes, interestingly, the right thing to do is to put your head down and keep growing your business for another year or two.
Chapter 5: What are the biggest challenges in M&A transactions?
But sometimes the right thing to do is to transact. And when it is, we try to help them do that in a smart way. And we get a small piece of the purchase or the sale price.
What is that typically? 3%, 1%, 10%?
You know, the bigger the deal, the smaller the percentage. So when you're talking about deals that are a couple hundred million dollars, you're at under 1%. And when you're talking about smaller transactions, then it could be as much as 7%. For us, I'd say we probably average around 3% to 4%.
And take us back to 2016. What was kind of the total transaction volume you guys helped process? If that's how you measure it, how do you measure your success in 2016?
Yeah, I don't really measure transaction volume, you know, for for us in 2016. If I think about it, it was probably someplace around a billion dollars. But I don't think of that as the measure we typically work with.
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Chapter 6: How does trust impact M&A transactions?
eight to 10 clients a year. That's about all we can handle. We try to give each one of them a lot of senior level attention. This is a very service oriented part of the business. Unlike when you work with a large publicly traded company and helping somebody buy or sell a big company like that, which is very process-oriented, ours is very consultative. We sometimes have to...
Help sellers communicate clearly what makes their company really cool, what makes it different, what makes it unique, what is their competitive advantage, and why should somebody care. And then we have to help them through all phases of the process, including marketing. helping them understand what's likely to happen next and help them negotiate all phases of the transaction.
And when we work with buyers, it's often similar in helping them to understand the strengths and weaknesses of the opportunities and sometimes the threats involved in the companies that they're looking to buy.
Is it common, Ken, for you to be on both sides of the transaction advising?
No, we've had a couple of times when people have asked us to play the role of honest broker. And the truth is that we always try to play the role of honest broker. But actually, these things tend to work best if both sides have experienced advisors that can help their respective clients understand sort of what's reasonable and customary in this business.
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Chapter 7: What key principle from the Marine Corps applies to business success?
That helps you dilute the risk of trying to negotiate with an irrational group, which is dangerous.
That's right. And of course, nobody believes that they are irrational.
I would never admit that, right?
My mom would say I'm irrational. So everybody believes that their positions are reasonable and logical, and often they are from their perspective. But sometimes people have to understand the other guy's perspective. I always tell people there are no risk-free transactions. And so often the question is how much risk is there and really reasonably who should assume that risk?
And we've seen both buyers who don't want to assume any risk whatsoever, which is not reasonable, and sellers who sometimes don't want to assume any risk whatsoever, and that's not reasonable either. So sometimes we have to help people understand what's reasonable.
You mentioned 2016, you did about a billion in kind of transactions. How many transactions was that spread across? That one was split across six deals. So you do have one deal kind of every other month, whether it's an exit or a fundraising or whatever.
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Chapter 8: What advice does Ken Marlin have for aspiring entrepreneurs?
That's right. I thought that was going to be eight, and two of those deals slipped into 2017. So as I said, one closed today, and we have another one that we expect to close shortly.
Okay.
True or false, one of the beautiful things about the holidays is it's a beautiful forcing function to get some of these things done.
Oh, for many people, there is a certain... There's clarity that comes with starting the year clean and fresh. We have a number of buyers who would like to start the year with the acquisition that they're trying to make. Oftentimes, we have a lot of sellers who would like to get something done early. by the end of the year just because it's clean to end the year that way.
We're not particularly focused on when some deal closes. Do I really care if it closes in late December or January? I don't, but we do see people who sometimes do care.
What is the number one reason? I'm sure you've had deals blow up before. What's the number one reason a deal will blow up?
So many different reasons. The one that drives you the most crazy. I would say that there are many that drive me crazy. I would say that from a seller's perspective, we always tell a seller that that these transactions are based on trust, and both sides need to trust the other. But part of building that trust is being honest with the people on the other side.
And so we tell them to over-disclose if there's something that could possibly trip something up. Let's tell people about it early and get the explanation out early. And we also tell them it's important in these transactions that they put forward a set of financial projections that they're going to meet. Yep.
And we often see people who are not used to having to put out financial projections that they're going to meet. And so they want to be optimistic and they want to show what a great company they are and what great growth is coming. And they think that's how they're going to maximize their price. And they're partly right as long as they actually meet those optimistic forecasts. But
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