How does a company succeed in the Mergers and Acquisitions (M&A) space? Is it technical competency, deal flow, and industry relationships? What is the role of other factors, such as trust and skill in building relationships? Perhaps some element of wisdom is useful for true success. What is that element?
Rick Goossen interviewed Douglas Nix, Founder and CEO, Stillwater Capital M&A Advisors, on October 21, 2021. Doug founded Stillwater, based in Toronto, in 2002. They now have a team of approximately 20 people and have completed over 100 M&A transactions across North America. Stillwater is a Gold Sponsor of the upcoming ELO National Forum 2021.
Stillwater helps clients buy and sell mid-market businesses with valuations between $15 -200 million. Their clients are primarily private business owners. When searching for buyer or seller counterparties, the strategic targets can be private equity groups, publicly traded companies, or other private business owners.
In a crowded marketplace, with minimal barriers to entry, what is Stillwater’s competitive advantage? Doug explains that Stillwater’s selling proposition is beyond pure competency. He notes that, “to me the biggest part of our success is that we’re selling trust - that we’ll actually do what we say we’re going to do and get the results that we say we’re going to get. We provide credibility for better outcomes and an increase in value.”
“The best predictor of the future is past performance. Being able to show prospective clients our 100 transactions, the profile of those, and what the result for each client has been, that’s what we’re selling. When people are selling their business, they are dealing, for the most part, with something they’ve never done before. How do you know how your unique entity will be viewed within the market and how do you maximize its value? That’s our service offering and value proposition. We do it really well and we significantly increase returns on sales.”
I asked Doug what he has found to be most personally rewarding and satisfying as an entrepreneur. On one level there is the satisfaction of having built a successful firm. But he goes beyond that. “We’ve changed so many people’s lives. Clients thought they would get less than we were able to get for them. They were afraid they were going to get taken advantage of during a sale process and we protected them. Seeing the outcomes in people’s lives has been really important to me.” In other words, the reward for Doug has been the difference Stillwater has made, which is not just an economic one.
The ability to build and sustain great relationships is, of course, a key pillar to long-term success. Doug advised that the most important personal traits for an entrepreneur are “perseverance, endurance, stamina, wisdom, common sense, faith—and not necessarily in that order.” To acquire these traits is not easy. “If you quit as soon as things get tough, you are never going to make it because there are going to be tough days.”
“You need common sense because you never want to whittle a rotten piece of wood – if what you’re doing is rotten, perseverance is not going to fix that problem. If you’ve got a rotten business model, that’s not going to improve with age, you’ve got to change your business model.”
When asked, Doug had three key lessons for aspiring entrepreneurs. “First, know your business model. How does your business make money? If you’re a sole practitioner lawyer, your business model is to charge $200/hour, charging out 1,500 hours annually. That’s $300,000, it costs you $75,000 in overhead to do that, so your income is then $225,000 as a sole practitioner. Now if you want to grow the business, what are your inputs? If you add more people, you will need more billable hours, and thus the business model scales. If you can reduce your thinking down to a simple business model, it allows you to focus.”
“Secondly, value your expertise and - closely related to that is - don’t steal from your family. Every time you sell your service or your time for less than what you should, what you’re really doing is stealing from your family. Every time I give time away, every time I agree to a discount below what is fair or appropriate, I’m affecting my family. I have a stewardship responsibility to provide for my family.
“Third, go where the money is. You can’t expect to make money in a market where there is no money. It’s not a realistic expectation for most businesses.”
The bottom line is that doing well in the M&A field, as in business generally, is beyond numbers—it requires wisdom. The foundation of wisdom is the skill of practicing your values in the marketplace, building, and maintaining relationships, and effectively making a difference.