“It is very cliché, but—it is all about people. Numbers are important, but what makes numbers better? People.” What makes for a successful acquisition? How do you identify good leadership?
Deal Makers Interview Series: Jack Hendler
In the Deal Makers Series, we interview leaders, experts, and innovators in the Merger & Acquisition and the Private Equity space about how they get successful deals done. The series highlights perspectives of investors and buy and sell-side advisors working across industries and geographies.
For our most recent installment, we interviewed Jack Hendler, CEO of Avalon Net Worth, an independent investment banking firm. Jack holds a degree from NYU Stern School of Business and founded Net Worth Solutions in 1999.
CS: What is your current role, and can you tell us a little about how you got there?
I am the CEO of Avalon Net Worth, an independent investment banking firm. I have the pleasure and honor of heading up the Merger and Acquisition division of the firm. I started the Net Worth Solutions part of the company back in 1999 and then merged with Avalon Securities probably eight or nine years ago. I met the owner and CEO of Avalon 25 years ago on a transaction where we were representing clients on opposite sides. Over the years, we developed a great relationship and decided to merge our companies, becoming Avalon Net Worth. At the time of the merger, Net Worth was an M&A company; joining forces with Avalon allowed us to expand our impact as Broker-Dealers. Our clients represent a mix of private and public companies.
CS: Tell us about your experience in M&A, as an investment banker and having done it yourself.
Prior to merging with Avalon, I had started and sold two companies and I was looking for the third leg of the stool—my third opportunity in life. We operate in the M&A business with “middle-market” companies who have enterprise values of $25 million to $500 million. I wanted to change the client experience. I believed I could make an impact by helping someone recognize their company had value, understand what that value is, and choose the best financial venue for selling their company.
So I started Net Worth Solutions and now, it is 24 years later, and I am still having a good time. I have a passion for working with financially troubled companies, helping them find solutions, and easing the stress in their lives.
CS: Help us understand what you do for the companies you work for.
It starts with a personal meeting—obviously in the last two years with COVID, it has been more difficult. But whether it is on Zoom or an in-person meeting, I believe it is critical to connect with the client, to discover what motivates them to seek our support. We get a clear picture of the client’s needs both emotionally and practically.
Whether clients want to sell their business, acquire another business, or need growth capital for their existing business, we are one of the few investment banks who help companies who are financially stressed.
Not all companies need the same solutions. One company may need to sell, another should be making acquisitions to round out their businesses. And yet another may not be large enough in volume or profitability to bring to market. If the company has stress, we look at what created the stress and what the value of the company would be in somebody else’s infrastructure.
By taking the time and interest in the beginning, we can be flexible and creative with options.
CS: How do support your clients in preparing themselves and their company to sell? Specifically, do you address operations, financials, or culture?
For this portion of the transaction, we look to professionals like yourselves to address culture, organizational strategy, and prepare the company for the transition in leadership.
As far as the financials, perhaps we would have a CFO get their books ready for an examination. Since we are experts in marketing the company to the right buyer for maximum purchase price, we put our focus there.
CS: You’ve worked on a variety of deals and acquisitions from both sides of the table. What are some of the factors that you think contribute to a successful merger or acquisition?
Getting the seller clear about their choices and prepared for what they can anticipate is the first step.
Additionally, we have implemented presenting a Quality of Earning Report. When a potential buyer is looking at the company specs, they will notice an independent auditor has completed a financial assessment and has identified any relevant issues. When it comes to evaluating an ROI and completing the actual purchase and sale agreement, the buyer can feel confident they have the information necessary to support their decisions.
Along the lines of supporting the seller and buyer in their transaction, we have become known for including a Working Capital Assessment. We discuss the working capital that is necessary for the company and evaluate what is available. We help determine how excess working capital should be handled. Completing the Working Capital Assessment has saved us from the retrenching or renegotiation that occurs in many sales.
Our experiences have taught us that the attention we give to the Quality of Earning Report and the Working Capital Assessment supports our successful closing rate, which is over 90%.
CS: From your perspective, what are the factors that really drive the success of the acquisition?
One of the main reasons we have success is we bring the appropriate buyer to the table. It is important for the buyer to really understand the philosophy of the business they are acquiring and hopefully, it mirrors the philosophy of their existing business. Sharing the philosophical perspective supports the transition, ultimately decreasing potential unintended roadblocks.
When we have recognized a cultural difference between the two companies, we acknowledge the different operating styles, different philosophies, or different structures, and suggest they receive support from professionals who will help them integrate and merge properly. We make it clear and ensure they understand the complexities and the need for professional support. We can see where there are potential issues, and we highlight the need to be proactive in addressing these issues for the sale and acquisition to be successful.
CS: How do you go about identifying those cultural differences?
Interestingly, they begin to show up in the conversations and due diligence efforts by both parties; either the questions they ask or the way they answer questions. Since we are actively involved in those conversations, we are attuned to potential risk factors and listen intently for expectations or conflicting perspectives.
In general, we want to explore whether the selling company will stay intact, which—if any—current managers will remain in place, will there be a transition of power, or the magnitude of the infrastructure transition. These answers help us determine if the companies are parallel in their thought processes and what kind of support they may need moving forward after the acquisition is complete.
CS: How do you evaluate the leaders who will be moving forward for their fit in the organization?
At the onset, we look to understand the principal’s role and history with the company; did they start the company, did they inherit the company, what generation of inheritance is there, what portion of the company are they involved in, do they meet with clients, do they take care of financial aspects? We want a clear picture of their strengths and potential areas of weakness.
Additionally, in our conversations we are evaluating the fit for leadership by observing their overall attitude, how they handle stress, the respect they show during meetings, how they make decisions, the depth of their company awareness, do their day-to-day activities match their title, and their presence. Presence—or lack thereof—is very telling.
CS: Have you ever seen a situation where the leadership or the culture negatively impacts the success after the transaction closes?
Yes, I have seen it happen. Adjusting to a new leadership dynamic is often more difficult than anticipated, and surprises do happen. We may have overestimated synergies, the buyer may have mis-aligned expectations, and/or unexpected cultural or leadership issues may arise.
CS: How about on the flip side? Where have you seen strong leadership or cultures drive growth?
Absolutely! When a buyer can enhance productivity or the management team could save costs or drive the company in a positive direction, subsequently it puts the seller at ease. If the acquiring company brings an asset the selling company is currently missing, it becomes something we can leverage. When we recognize how to best match the seller and the buyer, everyone is happy.
CS: Not only have you helped other companies, but you have merged companies yourself. When you merged, what was the most difficult part?
That first morning after closing the deal… I parked my car in the same Manhattan garage I had parked in for years. I walked to the corner, and I became very emotional. I felt lost and did not know where I belonged. I had lost my “place” and did not know what was next. It took some time to find my balance, re-group, and discover what was next; ultimately, Net Worth Solutions was born.
CS: When Net Worth and Avalon came together, were there difficulties after that transaction?
Yeah, a bit. Avalon’s owner and I were relatively successful running our own businesses, and when we worked on a transaction together it was a positive experience. I was attracted to their strengths and attitudes about business and running their firm. Over the years, I had developed a great deal of respect for them and saw the potential in joining forces. I knew our personalities were a bit different, as were our philosophies. It was those differences that I believed would benefit our merger.
However, adjusting to the differences was more difficult for me than I expected. It was the very differences I admired so much that were the most difficult aspects for me to integrate. What attracted me most to my business partner was exactly what I needed to adjust to. I discovered that as I became more flexible, I was able to step back and allow the differences to coexist. Our differences have made us stronger as leaders and our company more successful.
CS: As you think about the next few years, what are you most excited about?
We are one of the few investment banks that support people who are under financial stress. I have met past clients on the street, and I nearly did not recognize them. They no longer carry the weight of stress and anxiety. They give me a hug and say, “thank you for helping me save my company, thank you for helping me save my home and my mortgage.” I look forward to meeting and supporting new clients, helping them see what is possible, and ultimately resolving their struggle.
We’re so grateful to Jack for sharing his expertise and insights on M&A. Check back here for more future installments of the Deal Makers Series!
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Based in Washington, D.C., Conscient Strategies is comprised of a talented group of consultants, executive coaches, strategists, and account executives. The team has worked with organizations of all sizes in the private, federal, and non-profit sectors across the United States and Internationally.
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