Page. 1 Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal? Ultra Trail Mont Blanc Are you match fit for a deal? By Charles Whelan Polestar Insights In August I ran the Ultra Trail Mont Blanc (UTMB), a 171km foot race around Mont Blanc with over 10,000m of elevation, in aid of Robbie’s Rehab. Robbie’s Rehab is a rehabilitation service set up in memory of Robbie Keville, one of my youngest child’s friends, who passed away from a brain tumour aged 10. It provides vital help for kids and their families who are suffering in similar situations. Whilst I was running, I got thinking that quite a few parallels that could be drawn between doing the UTMB and executing a deal. Here are my thoughts on the race itself and how that corresponds to a deal.
Transcript
Page. 1Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal?
Ultra Trail Mont BlancAre you match fit for a deal? By Charles Whelan
Polestar Insights
In August I ran the Ultra Trail Mont Blanc (UTMB), a 171km foot race around Mont Blanc with over 10,000m of elevation, in aid of Robbie’s Rehab. Robbie’s Rehab is a rehabilitation service set up in memory of Robbie Keville, one of my youngest child’s friends, who passed away from a brain tumour aged 10. It provides vital help for kids and their families who are suffering in similar situations.
Whilst I was running, I got thinking that quite a few parallels that could be drawn between doing the UTMB and executing a deal. Here are my thoughts on the race itself and how that corresponds to a deal.
Page. 2Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal?
For the UTMB there is a two-year qualification process to get a chance to enter via the ballot. In reality, however, it can take up to five solid years before you get to the starting line. That is five years of training, avoiding injury and remaining qualified.
Only those who are already fit will even start the qualification process and many will not make it due to injury, time constraints or real-life issues.
Before standing in the starting pen in the pouring rain with 2,500 other competitors, I had put in thousands of miles of training through a coached and structured training programme. I had worked out my nutrition plan, prepared for a variety of problems which might arise, and selected the equipment and support team most suited to my needs. Finally, and crucially, I ensured I had banked as much sleep as possible.
I had been planning this for years. The race gives a thorough examination of fitness, mental preparation and physical endurance.
Pictured right: The course plan
If you want to do a deal, be that raising funding or selling your business, then you need to be “qualified” (by which I mean properly prepared); it’s good to start preparing a long time in advance of a transaction; it is never too early.
Talk to potential advisors and other industry players to establish likely buyers or investors. Consider some early conversations with them (like the UTMB, this might involve visiting other countries to find the best route) so you can establish the attributes they will be looking for and be on their radar.
The quality of your earnings, management team and revenue will be their focus.
Before you embark on a deal process you will ideally have selected your support team (hopefully years in advance), followed and delivered a business plan, and ensured that your business model is optimised.
Your shareholding structure, management incentive schemes, employee, customer and supplier contacts must be buttoned down.
How about your intellectual property and other legal issues? Are they deal-ready? Finally, are you prepared for financial due diligence?
1. You can’t just turn up. Firstly, you have to qualify:
2. To complete, you have to be very well prepared:
Page. 3Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal?
I had prepared strategies for injury, stomach problems, wet, wind, heat, fatigue, boredom, exhaustion, hallucinations, and equipment failure. Sure enough, all these things happened.
But still I was caught out! At 2,600m after 23 hours there was an enormous electrical storm, complete with 5mm hail stones. You could see it rapidly building as we crested the highest point on the course. There was no cover to be seen, and the situation was erring on the scary side of frightening. A fellow runner from Malaysia and I started to run down as quickly as we could. The aim was to get off the mountain top and find some shelter ASAP. For about 30 minutes, it felt like we could stay ahead of it but then – bang – the storm consumed us. We quickly put on our waterproofs, but this afforded us little protection from the stinging hail. The mountain paths were rivers of water and hail, but through the gloom we spied a tiny mountain hut.
We found a small opening and crawled in; there must have been 30 people in there! As soon as the lightning and hail stopped, I ventured out into the biblical deluge, slipping and falling numerous times as I continued to descend. The next feed station looked more like a refugee camp; hypothermia and plenty of broken bodies. Cat, my partner, met me with some dry clothes and a change of shoes. I ate some food and was soon on my way.
I later found out that the storm had been so severe that roads had been cut off by landslides and many competitors had abandoned the race, although many have subsequently said they wished they had not.
The storm cost so much time, which you can never get back, but the focus was to keep on pressing for the finish.
When we work with a management team, we agree on a programme as to how we will drive the best value for the business. Some areas we consider are:
• Profit recognition policy• Customer concentration and retention• Ownership of intellectual property • Working capital optimisation• Employee retention policies.
A key aim is to understand what different buyers or investors will be looking for. When we prepare the information memorandum, we carefully consider key value drivers and try to establish what might diminish value or even stop a transaction.
We check all the information we receive to ensure it is consistent and presented in the best light.
Sometimes, we find an issue so significant we put the transaction on hold until we have a resolution. There is no point heading up the mountain ill-equipped.
This said, even some the best prepared deals have nearly floundered due to the unexpected. During one deal a few years ago, a client, unbeknown to us or the buyer, had several subterranean fuel tanks. Environmental due diligence highlighted that these may be a significant risk to the buyer, who immediately tried to dramatically change the deal. By being fleet of foot, we were able to help them secure the deal, although there was a delay for further investigations.
3. To complete, you have to deal with the unexpected:UTMB Deal
Page. 4Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal?
On the first night, after about eight hours, I really was not doing as well as I had hoped. I did this race in 2016 and tore my ACL about a quarter of the way round. This resulted in the remainder of the race taking much longer than I thought as, due to the injury, descending was excruciating. Second time round and uninjured, I thought I would kill my previous time. Expectations were set.
However, I got the start wrong which meant I was behind many more people along the narrow paths. By 3am I was nearly two hours behind my previous time. At 4am, I felt awful and disappointed as I climbed the rocks up to Col Des Pyramides Calaires; the whole enterprise seemed like a waste of time and energy. I reasoned if I abandoned, I would save my supporters a load of grief and angst.
I then remembered that I was doing this not for me, but for Robbie’s Rehab, and that many people, not least Robbie, have had to carry on, even when expectations were not met.
As dawn broke about an hour later, I was at 2,500m between two peaks with a beautiful valley in front of me; my spirits soared. Life suddenly did not seem so bad.
Every deal has its challenges and unrealised expectations:
• Fewer potential buyers than anticipated
• Trading falls away due to management being distracted• Due diligence finds a problem• Deal fatigue and high emotions• The vendor gets nervous of life after the sale• The negotiation is going badly.
In every deal there is a moment where one or even both parties have felt the need to pull out. It’s fair to say that in every negotiation this point needs to be reached so that all parties feel like they have got the best deal.
At times like these, our job is to help the parties keep a sense of perspective as small issues can often be blown out of proportion. We all know how things can feel at 3 or 4am - it is no different at the 3am point of a deal.
4. At times, it might seem like a great idea to pull out:UTMB Deal
Page. 5Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal?
My team comprised:
• Cat, who watched me be absent from the house for most weekends as I pounded the Downs racking up 100 miles a week training. During the event she and her children supported me at three different locations, bringing spares, changes of clothing, and food to me at halfway and two-thirds distance. Their day was nearly as long as mine!
• The experienced people who devised my training plans and the online community with whom I shared tips and support.
• The wonderful team at the UTMB, who look after the feed stations; awash with so many types of food. For me it was noodles and watermelon, for others it was cheese and salami!
• My generous sponsors, who gave me wings. One sponsor in particular gave a bumper gift and, in return - at his request - I dedicated the trickiest, most gnarly bit to him!
You have built your business and are looking to raise investment funds or to sell. By this time, you should hopefully have the team you need within the business to support a transaction. But what support is needed externally?
It is important to get all shareholders ready and on board with what is about to happen. Do you all agree on a valuation? What are the varying views on earnouts and loan notes?
If you have a partner, are they supportive of your plans? How about other family members, especially if they were previously or are still involved in the business.
You may have already been working with a non-executive director or corporate finance advisor for a number of years to bring you to this moment, or perhaps this is the time to get these on board.
Some try and manage the transaction themselves without independent advice. Whilst completion can be achieved, we frequently see situations where the distraction of a deal has resulted in trading falling or opportunities to either build the business or extract additional value being missed. We could write a whole book on the nightmares for DIY vendors. One such occurrence saw a client get several million in additional value they were not expecting, as DIY vendor simply did not understand how to keep it for themselves.
Finally, don’t forget to get the best tax and legal advice. It rarely pays to skimp on professional fees. Each advisor should be able to add multiples of their fee to the value of a transaction.
5. For the best results you need as much support from those around you as possible:
Page. 6Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal?
The last section down from Flegere was a dream (well, I was almost asleep!). 8km with 1,000m of descent on a very rocky, tree root-littered track. It winds its way down the mountain steeply, short cutting a red ski run.
My legs felt great. Last time I did this it took me over two hours; this time I flew down in less than half the time. As the track turned to road for the last few kilometres, my speed increased. Endorphins pumped! I was passing competitors like they were standing still. I ran faster and faster and, as the pain in my legs disappeared, I could smell the finishing line. With a kilometre to go, there was a temporary foot bridge over the road; the walking wounded were creeping up and over the 40 or so steps. I bounded up and down, taking four steps at a time on the descent. In short, I was elated.
A sprint towards the finishing line, where I was met by Cat and her kids, Samuel and Olivia, and we all ran the final 200 meters with crowds cheering (and no competitors in sight). Cat then embraced one of the world’s smelliest men!
Within five minutes I was hit by a wave of tiredness and, whilst pleased to have crossed the finish line, I was mostly just relieved. Like much in life, it is the journey as much as reaching the destination that is important.
Finally, the legal documents are agreed, the 100+ documents have all been signed, the deal is done, and the champagne has been drunk. How does everyone feel?
In a sale, the vendor sometimes has mixed feelings: They might be left feeling a little empty, seeing their life’s work leave them, but pleased to have secured its value (particularly if they have plans for the cash). In a capital raise, management is usually elated.
Buyers or investors are generally excited but also a little nervous about whether they have bought what they think they were sold. For them, the hard work starts here.
We, the advisors, feel relieved it is over, and are normally pleased that our work has come to fruition. We do this because we want to help our clients achieve their goals; this gives us real satisfaction.
This is where a deal differs from an ultra marathon. In a deal, it is all about the completion and certainly not about the journey. That said, there is always something to learn from the process.
6. When you finish you may feel a moment of elation and celebrate with those around you, but often relief is the overwhelming emotion:
Page. 7Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal?
Only 1,500 of the 2,500 entrants for the UTMB made it back to Chamonix by foot. That is quite a remarkable drop-out rate.
Nearly everyone I have spoken to that did not complete said that their preparation or strategy had been sub-optimal, or that they could have been more patient, got their heads sorted out, and then pressed on to the finish. Some, however, were just unlucky with an injury.
Most want to go back again and give it another try, but, having missed the mark once, know it will take some time before they can return, hopefully having dealt with whatever issues arose.
In the meantime, those competitors will continue to do the qualification races so they can have another go at the UTMB.
We are asked what percentage of deals complete. The true answer varies widely by type and size of deal, with some sectors and smaller businesses being a greater challenge.
There are many reasons why deals don’t complete. Sometimes, we are testing the market, almost having a dry run. Other times, the reasons are outside the control of the vendor, say a change in market conditions, or issues within the business, such as a reliance on existing management, a single product, or a customer. These can lead to offers lower than had been hoped for, or a less attractive deal structure.
At this point shareholders need to decide whether to take what is on offer, consider a partial exit, or go away, make the required changes to their business, and then come back to market.
Fortunately, it is very rare, even in the event of no sale, that a client does not think we have added a great deal of value to their business as they prepare for exit.
Page. 8Polestar Insights: Ultra Trail Mont Blanc - Are you match fit for a deal?
Polestar is an independent advisor to private businesses and their owners, assisting them to raise cash, make an acquisition or sell all or part of their business.
We are often asked what makes us different. We what sets us apart is that we will simply tell it as it is. If it is a bad deal for you, we will tell you to walk away, and if it is a good one and you are less sure, we will reassure you.
Robbie’s Rehab is a charity dedicated to providing specialist help and rehabilitation to children with brain tumours. Set up in memory of Robbie Keville, who sadly passed away aged 10 after battling a brain tumour, it aims to help other kids and their families who are suffering in similar situations.
The charity is run from Southampton Hospital by a team of specialist staff (pictured below) who provide a unique home-visiting and outpatient service to approximately 50 children every year.
Below is the link to Charlie’s JustGiving page where ongoing donations are welcomed to help Robbie’s Rehab reach their future fund-raising milestones.
Or maybe you could give it a go yourself! Robbie’s Rehab has a history of inspiring endurance fundraising events similar to Charlie’s ultra marathon, so why not take the plunge and do something amazing for a good cause! Further details can be found at: https://robbiesrally.com
About Polestar:About Robbie’s Rehab:
Our partners have over 100 years’ combined experience advising, with more than 300 deals worth in excess of £5 billion across our five sectors.
