Why Can't Transactions Be Faster

Short answer: they can. And they should.

As recent Invest like the Best podcast guest Brad Jacobs, executive chairman of XPO, attested. They do theirs, for a F100 company, no less, in ~2-4 weeks. Brad has started 7 companies that have all exited for more than a billion dollars, with a B. His new book "How to Make a Billion Dollars" is out soon so he was on the podcast discussing the nature of scale, acquiring for growth, and running quick transactions.

Some of you may be intrigued by this scale and think anyone can get it done at higher multiples paying higher prices, but the average multiple is mid-to-high single digits, maybe low double digits for a few. He pointedly said that he looks for companies that are tech forward but not tech-driven, as in, it's not tech that he's after but the efficiency driven by an enablement or process where you have some information advantage. But more than the technology, Brad implored that he has to like and want to work with the seller, / executive team else it is not likely to be a smooth transaction.

He liked the acquisitions where there was availability for a tight integration of systems, where you could immediately rip a bandaid off and get onto a system with other companies in the portfolio so that metrics/numbers were apples to apples, typically. This was true of branching out into different parts of industry.

Getting buyin from management and executives on a big goal and then having the people on your team who will execute drives the results that make impacts. Time wastes away otherwise. So what makes it typically 60-90 days, in good situations? Bankers. And people not wanting to move forward. And posturing, and internal politics. Why should we need memos and diligence and details that nobody is doing except to pass to the next person, wasting precious people hours. The diligence, outside of basic paperwork, will come from being in the room with sellers and the management/executive team. He makes a point that he does not need a report on why SG&A is a fraction higher from forecasts or comparisons. It's unimportant.

Getting buy-in from everyone that would need to be a part of a deal to see if this is worth doing, 4-6 people for an hour or two each. What would you change? What are the strengths? What are things the company does differently? How would you alter anything in the company? What are opportunities that they have yet to pursue? Then asking the people levels down how they see the company and listening. Listening to the people who are vital to the success of the company, past, present and future.

Interestingly, I am reading Morgan Housel's "Same as Ever" book. He espouses truths that have stayed the course over history. Much of it would boil down to entropy and how chaotic human decisions often can be. We get in our own way. Something similar to overcomplicating so many things. He noted "Complexity gives a comforting impression of control, while simplicity is hard to distinguish from cluelessness." We can take this a bit further and suggest that if you're not particularly curious to learn, in our case here about transactions and the companies at large, you're more likely to appear clueless. If you have a 25+ page report on a number, nobody could POSSIBLY accuse you of being clueless though - you did all this research! Well, time wasting in a report that nobody reads past the summary, if even that, may not mean you're clueless but it's certainly not something that would require that much time, effort and money. Compound that over teams of people and bankers, and we end up with the expense of time and money.

Hundred-tab spreadsheets or big data analysis can sure aggregate and analyze the minute-most details, but unless the business is specifically driven by what its inputs show, you're running wheels for the sake of running them, not driving the attention to the core details that run the company. And that's the difference between being good or poor and being great. It is certainly a shame in thinking length conveys efforts and thoughtfulness.

We should heed the lessons from Feynman and be able to boil complex topics into simple, first principles and build the learnings from there. This is true of chemistry, physics, math, and applicative scenarios such as our transactions and so many other topics. Complexity breeds a misunderstanding that hinders the growth of the topics. Or worse, incentivizes the wrong people and products. Let's look forward to a future where people trust that we aren't looking to waste people's time, certainly not on purpose, and instead provide the details for what's pertitent and how best to acclimate to the new learning. Banking and running long processes for the sake of running processes and what has been past ails us from the progress we've made for sharing information. Now that that can be done quickly, why bother with wasting the whole chain.

Hope this encourages some listening or reading for the mentioned materials, and that even I will take a better lesson in brevity.