The Man Bulks Up Owner Managers For Exits – Pete Worrell, Co-CEO & Managing Director of Bigelow LLC

Introduction (helping Owner Managers before an exit)

In this interview, Alan Olsen, CPA, MBA discusses what owners can do pre exit with Pete Worrell. Mr. Worrell is Co-CEO & Managing Director of Bigelow LLC.

Transcript:

Pete Worrell

My interest was all about how, owner managers flourish and thrive. And I’ll just give you a teensy bit of a complication, which you pointed it out. Many times these people have spent their lives in a domain, building an organization, they love the people, they love what they do.

They know they want to put the hands the business in the hands of someone next. But after they do it, there might be a sense of loss, maybe sometimes almost a sense of mourning. Of what is the next thing. So a lot of my work in the positive psychology domain has been to ask the question, Are you driven by the past?

Or are you called to the future? Because if you’re called to the future, if you have something out there, and your next chapter that you’re trying to get to, we can help you with that.

Alan Olsen

Welcome to American Dreams. My guest today is Pete. Well, Pete, welcome to today’s show.

Pete Worrell

Thank you, Alan, it’s great to be here with you. So

Alan Olsen

you work a lot with entrepreneur, owner managers, and you have a really unique business model. But before getting into that, I’d like to take some time. For the listeners for you to walk through your background. How did you get to where you are today?

Pete Worrell

So I grew up in New England, the son of entrepreneur, parents, my parents had a small business, where they were making steel fabrications of buildings and bridges. And so dinner was at the dinner table, the conversation at dinner table every night was about business. I thought I probably would go into that business with them.

And as I came out of undergraduate school, when I went right to graduate school, got an MBA, as it came out of that program, I interviewed with the with this firm Bigelow, and my partner to become interviewed me and said, What are you gonna be doing when you get out of business school?

I don’t know, you know, maybe work for Pepsi or Frito. Lay? Or maybe I’ll go to work for my parents business. Who knows? What do you do when you get an MBA? And he said, Why don’t you think about talking to us, because we have this very terrific consulting practice, which is exclusively to entrepreneurs.

And we want to build it more to do m&a, consulting, merger and acquisition, tech consulting, which private owner managers are not getting the quality of advice they could get, let’s say from Wall Street. And so we had a very funny conversation, Alan, and I’ll stop here. And he said to me, we had a talk about compensation.

I said, Yeah, we should. He said, what’s the least amount you can afford to live on per month? So I’m about a week away from graduating getting my MBA. And I say to him, I don’t think that’s the right question. And he said, Yeah, yeah, it might not be the right question. But just stay with me.

How much can you afford to live on per month? What’s the least amount? And I said, Honestly, I think I have a market value. I’m a newly minted MBA, I’m talking to the computer companies, I’m talking to Frito Lay, I think we ought to talk about what’s the market value.

And he said, Just stay with me stay with me, what’s the least amount you can afford to live on per month? So this is you have to remember, this is 1980. I said, Well, I got an apartment costs, I got a car payment. I got student loan payment. $1,200 per month is the month I could live on per month.

And he said, Great, we’ll pay at $1,200 A month and a third of whatever you close. And Alan, it was as if a bolt of lightning hit me because I went oh, oh, so this is up to me. They said, Yeah, you close transactions for our clients and create great value for them. And we’ll pay you a third of that.

And I you know, I’m only 23 or 24 at the time, and I say no cap. And they say no cap. And I said deal. And so really, I was unbelievably lucky where that bolt of lightning hit me that a I found a place that has been my professional home for the past 42 years.

And be that I found a conversation that led me realize, oh, oh, I have to take personal responsibility for my own economic well being. And I have to take personal responsibility for my own psychological happiness.

And if I do those two things, while that’s keeping the power, where it belongs, right, so that’s really how I got to Bigelow and that was in 1980. And I’ve been making Bigelow my professional home ever since then.

Alan Olsen

It’s a great story and few people find their home and it you know, right out of school and the fact that you’re there says a lot for Bigelow so you must have really not only taking the position but also help to create The culture the landscape. And so

Pete Worrell

yes, I so so I was so lucky to have mentors, who were the partners who ran this firm did Kimball and Phil Ryan, who are still two of my close friends were my big mentors, but also big supporters. I had a, I had a view of the market maybe which was a little different.

I felt that entrepreneur owner managers, were not being fairly treated by investors, that that the playing field was skewed towards the benefit of the investors and that we could become fearless advocates, for entrepreneur owner managers to make certain that they are able to choose the best next partner for them that they could.

And I had a very passionate then and passionate now desire to want to make sure we were helpful to them in every way we possibly could. So today, we have, we continue to have a scrappy, boutique firm of less than 20 people who are all dedicated our lives and our careers towards helping entrepreneur owner managers only.

So we never have a private, a public company client. We never have a private equity group client, we only work for people who have skin in the game. And our view was always that we could be more and more clear about that if that’s all we did. And we had no potential conflicts.

So today at Bigelow, were just coming up on our alias, year anniversary as a firm. As I said, we’re a little less than two dozen people. But we’re widely widely known for being the m&a firm that deals exclusively with entrepreneurs.

Alan Olsen

You know that that Pete, the the uniqueness of your model is right off the bat they gave you, you basically you do have your own skin in the game, you’re taking the minimum bet in order to survive, you had to bring in clients. Tell me about your first deal that you closed? How did you go about that?

Pete Worrell

Well, it was a fascinating deal. And I’ll make it very quick. I was a young man. And I luckily, had been building relationships with people who were other advisors to entrepreneurs. And a guy who was 20 years older than me, he called me one day and said, he was from one of the now big four accounting firms.

And he said, we have a client in Cleveland, a sorry, a client in Southern New Hampshire, who wants to figure out how to grow through acquisition, can you just go meet them? I don’t know what they want to talk about. But you know all about this, you have a lot of positive energy. They’re entrepreneurs, they care very much about them.

And so would you go just meet with them and see if you can give them some education, which I did. It turned out they had a company in Cleveland that they had in mind to acquire. So I had no idea whether that company in Cleveland was actually available to be acquired or not.

And what I did was, he found out who the company’s attorneys were, which you could find out in those days by going to the Thomas register, because there was no internet.

There were no PCs. And I went to the register and found out there who their attorneys were and I cold call their attorney and said, Look, I have no reason to believe that your client which is name is called Cleveland mixer, which made industrial mixers would be open to a conversation.

But I represent a firm in the Boston area, which is very financially capable, which is identified your clients businesses where we’d love to talk to. And this, this attorney said, My gosh, you must have been in our board meeting last week, this is exactly what we want to talk about. How would we begin this conversation?

And I said, Why don’t we begin with me coming to see you. So I popped out to Akron, like the next day, or maybe the day after. And really, that’s how we did it, we did it the old fashioned way, by building the relationship. First, we got to know the two owners of the Cleveland mixer company.

And they they understood that we represented the other side, but we got to know them. And we realized that actually there was a pretty good match here. And so we were able to architect the acquisition of Cleveland mixture by our client, which is called Greer, CO. And here’s just a little ending to the story.

On the evening that we had the closing, we all went out to a restaurant afterwards, as you sometimes do. And we had all the paperwork like this sitting around on the table. So of course it has the rings from the drink glasses on it. And the two guys who own the firm were bud courier and Bud cameras.

And that night, but courier went home and died. So we did a transaction really, you know, literally just in time for Bob and his family to be able to see the business go in the hands of a really great potential partner, and also obviously got them a lot of chips off the table. So it was a lot of learning Alan going on at the time.

And luckily for me, I had very, very patient clients who you know, were 30 to 40 years older than I was, and but we’re willing to put up with a young man in a hurry.

Alan Olsen

You know, it’s it’s interesting to feel that you work in entrepreneur, owner manager, you know, a lot of these guys are ADHD, super controlling. So I like to, to maybe talk about Roche how he does love these people, you know, they, they’re their own entity. How do you work with these guys?

Pete Worrell

So I understand a little bit about psychology. I went back to school at age 50, and got an advanced degree in positive psychology from the University of Pennsylvania, which is the home of positive psychology in the world.

And I say, I give that to you as context, because I believe that the entrepreneur owner managers that I deal with, and who are the most effective ones, I say, build on strength. They’re not trying to fix weakness. But as you pointed out, frequently, they’re add dyslexic misfits, who all their lives have felt like the dumb kids in the room.

When they were in the classroom, and they didn’t get along with their employers, they may not have had a lot of formal education. But boy, oh, boy, when they’re in a domain, they often are outstanding world class in that domain. And the domain may only be this wide, but they’re delivering value to their customers in that domain.

So the way that I deal with them, Alan, is that I really appreciate how hard it is to be them. That if you are an independent, critical thinker, in today’s mass popular culture, man, you are alone. And you might feel very isolated. In fact, you might even feel lonely, you might feel like the world does not understand you.

And so for our clients, they typically do feel that way. And they’re struggling with the thought of how am I going to get my business to succeed beyond me.

And so my approach with them is one of empathy, understanding, trying to figure out what is the stone in their shoe a lot of times with entrepreneurs, you know, you can, there’s a lot of stories out there in the culture about some of the bad behavior that entrepreneurs have.

They can be controlling, they can be wild people, they can be whatever I view, a lot of that is not what’s the bad behavior, but rather, what’s the stone in their shoe, what’s the pain that’s causing them to act that way, and to try to be very understanding of that. And I find that some number of entrepreneurs really resonate with that.

And they appreciate that, and they, they bond with us very quickly, hey, look, some others don’t want that. Some others just don’t want that kind of a intimate relationship. And so at least they know, that’s what we offer, and then they’re not a good fit for us.

So our whole approach really is based not on the company, as much as it is based on the people in the individual, if that’s helpful.

Alan Olsen

So Pete, your your degree is, in advanced positive psychology is very, very unique. Yes. What led you down the path for that degree?

Pete Worrell

So I began to see early in my career. And I was just a kid. But I observed that these clients of mine, most of whom were 20, to 40, years older than me, would make decisions about their businesses.

And sometimes they would make decisions that were not rational meaning from an economics point of view, when we say something is not rational. It’s not in their objective self interest. And I would see them do that make those decisions, which were not in their self interest. And I would think to myself, Oh, it’s just an anomaly.

It’s an it’s an accident, it was a mistake. And then our time years, I began to see that many entrepreneurs made those decision errors that were not in their best interest.

And I began to see that many of them made them very systematically, and even to the point where I could actually predict that they were going to make a decision error.

And at the time, I met Marty Seligman, who Martin Seligman is probably today, the most published living psychologist, he is at Penn and he was developing a field called Positive Psychology.

Very quickly, if you were your son is interested, whereas traditional psychology would be the presentation of an illness, ie I have a psychosis I have a neurosis I have. I’m depressed, whatever. Whenever I go to a psychologist to quote, fix it.

Marty said to me, you know, Pete, I was a clinical psychologist for 25 years and Bharti said, I think I was a pretty good one. And I met a lot of people who are adding like a mega a negative eight or negative 10 in their lives. And I worked really hard with them. And it was really good at what I do.

And I got a lot of them to a minus two, I think I might have gotten someone to a neutral. And I explained to Marty, I have no interest in that might be interested in getting somebody from a plus five to a plus 50. He said, Me too, that turns out to be what positive psychology is all about, which is building on your strengths.

It doesn’t say if you have a broken arm, don’t fix it, of course, you have to fix it. But it says that there are a whole bunch of other characteristics, which if you identify them, and Dan Solomon would call this in your unique ability if you can identify those things. And if you can focus on those things that you’ll actually build on your strengths.

And you will actually be able to have an outcome where you’re flourishing and thriving. So my interest was all about how to entrepreneur owner, manage yours, flourish and thrive. And I’ll just give you a teensy bit of a complication, which is you pointed it out.

Many times these people have spent their lives in a domain, building an organization, they love the people, they love what they do, they know they want to put the hands in the business in the hands of someone next, but after they do it, there might be a sense of loss, maybe sometimes almost a sense of mourning, of what is the next thing.

So a lot of my work in the positive psychology domain has been to ask the question, Are you driven by the past? Or are you called to the future? Because if you’re called to the future, if you have something out there and your next chapter that you’re trying to get to, we can help you with that.

Because we can help you get to the next chapter by doing a capital gain transaction and getting you freedom, if that’s what your desire is. So a lot of the positive psychology world, we brought right to Bigelow, our team loves it. And candidly, our clients love it. So I’m really happy we did it,

Alan Olsen

you know, in the in the field that you’re working with m&a advisory? Are they one time engagements? Or are they recurring? Do you continue to work with the companies after you’ve helped them succeed at acquisition or major transactions?

Pete Worrell

So usually? That’s a great question, Alan, I think I understand what you’re getting at. So for Bigelow, we deal exclusively with entrepreneur, owner managers, and we deal exclusively with helping them to build enterprise value and capture it in a capital gain.

And so an example might be of a company we met four or five years ago, when we met them, the business might have been worth 20 or $22 million.

They had a minority ESOP and employee stock option, plan minority, let own 30% of the business and two brothers on the business, the two brothers knew that they wanted to have a capital gain someday, but they also knew that the business wasn’t ready for it, nor were they quite ready for it.

So we began a conversation over a period of years. That said, basically, to them, you know, do you want to understand what the drivers of value are in your business, because we can identify them together. And this is not just window dressing, these are really the drivers of enterprise value in your business.

And you can actually optimize those things if you want to. And those two brothers, God bless them are incredible operators, and they, for the last three or four years have done incredible execution. We had an outside market study done with that together with them. They went to and got a new CEO from the industry.

They separated some people who they had to let go. They have a business plan, which focuses on certain market segments. And we just I’m happy to tell you, we just did a transaction for them, which ultimately sold the business for $120 million, not a $20 million.

And I believe it’s accurate to say that are the ESOP. 15 of the employees in the ESOP became millionaires. So for us, it’s not as much about working with them through multiple transactions, as it is, in taking our time be infinitely patient to work with them on this single transaction. And you are correct.

Most entrepreneurs go into the private transaction market for one time in their life, for the largest single financial transaction of their life, and the one that affects their legacy and their longevity more than anyone.

So like, we take that really seriously. We feel that weight on our shoulders, and we really try to make sure that we’re performing, you know, to their expectation.

Alan Olsen

How do you decide who you want to work with?

Pete Worrell

It’s the most important question in our business. For a lot of reasons why One of which is obviously, all of our intellectual satisfaction comes from who we work with. But also in our business, there’s a little truth serum Allen. And the truth serum is that we only get paid when something great happens for our clients.

So right now we have some conversations going on. It’s funny, you mentioned this, I just mentioned this to a client yesterday, I said to her, I know that you are evaluating us. But it’s important that you understand we’re evaluating you too, because you see if we work together, we only get compensated when something great happens.

So we really need to make sure that we love you that we’re going to get through the hard parts together, that we’re going to have this mutually intimate and mutually profitable relationship, and that’s what you want. And so they have to be private business owners, the business has to be of a certain size.

So for example, we bring more value to businesses that have an enterprise value of over 50 million, they have to be in an industry that we can be helpful to. So just to be ridiculous, there are some industries that don’t have investors that will come into them. And so we need to make sure it’s not one of those industries.

And I meant what I said, we need to make sure we really liked these people, actually, I would say to my team, no, we need to make sure we love them because it is going to be hard to do this. And there’s a lot of tension and rubbing along the way, we need to make sure we’re you know, alight.

And so happily for us, we have clients who are for the most part deliriously happy.

Alan Olsen

I expect with the the aging of America, the baby boomers and the transition to next generations. There’s an abundance of opportunities out there.

Pete Worrell

There really are and in fact, thank you for saying that, because it reminds me of a comment made yesterday by an entrepreneur who he said, How has the increase in the interest rates affected the environment for buyers, because, boy, I don’t think I want to go to market now.

The interest rates have gone up the most in history, and it must have really killed the enterprise values. And I said to him, you know, that’s not the way the private market works. The private market is made up of strategic investors and private equity firms who use on average, about 50% of the purchase price ends up as debt.

But it’s not debt from a bank like you or I would go and borrow from its debt from a non bank bank. And that’s why interest rates going up or down doesn’t affect the market very much.

What you said is one of the biggest drivers in the market is hey, there’s a whole group of baby boomers, someone told me 10,000 of them per day are hitting retirement age, and many of them are business owners. And one of the big thing, there is a an abundance. No, there’s a super abundance of capital out there.

That’s here for the long term that our retirement plans at our endowments have found the private market, and it is an excellent market for those firms to invest in. And so they found that firm in that abundant of abundance of capital is not going away.

Alan Olsen

How do one enterpreneurs capture the value of their business? So we’ve been in, let’s take the example of the entrepreneur who you took from 20 to $100 million on the transaction, what was what was the secret sauce to put the value to where it really needs to be?

Pete Worrell

Yes, thank you for asking that. So because you’re entirely correct that for all firms, including the one that we talked about, so that firm is in the synthetic lubricant business. So they make oil and grease, but not from oil and grease base, its chemical business, and therefore, they haven’t superior financial performance.

Therefore there will be both strategic investor interest, we call a strategic investor, somebody that’s got a synergistic reason for being in the business, as well as financial investor interest.

And the thing is, Alan, that we’re not looking for average investors, that our clients have these businesses they’ve committed their lives to their careers to, they’ve built the culture, they hired all the people who the next owner of the businesses really matters to them.

So we’re trying to find the best fit owner in the world from all of those categories. So we go out and talk when we think about 1000s of investors, we talk to possibly hundreds, and we basically screen the investors so that we only expose our clients business to maybe a dozen or two dozen.

We’ve always used a technology enabled methodology to do that. We don’t Write a prospectus, we don’t send out a book, we go at it a completely different way, we’re really, we’re proactively interviewing investors, asking them, show me why you deserve the opportunity to be an investor in this beautiful synthetic lubricant company.

So we’ve completely turned the tables on the investors, to help them sell us or our clients on why they’re the best fit.

And we work really hard at doing that. And when you do that, Alan, and you find the best fit investor, you very frequently find what would be called a spike, bitter, where if you could draw a normal distribution, of course, if there’s 25 offers, many of them will be right near the mean, right around the mean.

But if you’ve got the right conversations going on, there’ll be some down in the right hand tail, who fought for them, this business is worth a lot more, those are the ones that we’re interested in. And those are the ones we go after.

Alan Olsen

You know, the one thing about the entrepreneur owner managers that they have they created something, it’s their, their life legacy. And then we come down to a sale, I imagine that that is probably a big issue of once this thing goes through. It’s it’s not just about the money, but you know, how is it going to leave a positive legacy in my life?

How do you handle that?

Pete Worrell

I would say that is the overarching goal for all of our clients. Because you see, they didn’t do a Silicon Valley startup to sell out. It wasn’t even in their mind that they were trying to build enterprise value until the business usually was quite mature.

And so what really is mattering to them is the legacy that they’re leaving, and how their employees are treated in the culture? And will there be an investor who respects the culture, et cetera, et cetera. So for us, we lead with that, with investors, we lead with that culture. And, you know, investors are not shy, they’re really smart.

So if we’re leading with culture, and they don’t agree with a culture, they’ll tell us, you know what, that’s not something that resonates with us, hey, great, no problem.

There’s plenty of other investors. And so really, the tables have turned Allen whereas when I began my career, it was really the people with capital who had the power in the relationship today. It’s the private owner manager who has the power.

And the capital providers are really a commodity where they can provide capital to anyone at any time. So we’re working really hard to find those investors. We’re really gonna appreciate the culture and the legacy of our clients for and you know, lo and behold, when you do find that they’re the ones who pay the highest price.

Alan Olsen

Well said, well, Pete, it’s been wonderful having you with us today on the show. Final question here. If a person wants to reach out to you, and you know, learn more about Bigelow, how would they go ahead and do that?

Pete Worrell

Thank you for that question. I have two ways. Number one is we have a book which continues to be an Amazon Best Seller. It’s called business best seller, excuse me. It’s called enterprise value you can get on Amazon, you can get it on Audible. it’s read by me.

And it’s filled with real stories of our clients who’ve gone through what maybe these people are thinking about going through. And otherwise, please contact me directly. If you go to big Alo llc.com. My email address and my private cell phone number are both on there immediately accessible by anyone who would like to reach me.

Alan Olsen

All right, thanks. Thank you Pete

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