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Board Governance Best Practices and Stories/Experiences Shared
Elizabeth MacRae: [00:00:03] I'm a big philosopher of this too, is if you plan to exit someday, have those exit strategies in mind because if you understand how you can exit a company, you'll make different decisions every single day. At the micro level, because you'll understand that when you get to due diligence, how those decisions are going to be looked at. I'm a huge proponent for understanding, even if you don't plan to exit yourself for 10, 15 years, if you're not necessarily raising capital today, but you plan on raising capital, understand how that works now, because it's a tremendous amount of work if you have to get prepared for due diligence.
Munir Haque: [00:00:48] Hello everyone, and welcome to another episode of The Boardroom 180 Podcast. I'm your host Munir Haque, an executive coach and senior board strategist. I have partnered with Action Edge Executive Development to lead their governance and political acumen division. In each episode, we meet with governance leaders and step into their boardrooms where decisions shape the world around us. We'll hear the good, the bad and the ugly, but with a keen focus on where the gaps are, discover emerging best practices and real world tools to better evaluate, guide and grow you and your boards.
Munir Haque: [00:01:18] Our guest today is Elizabeth MacRae. Liz is a certified exit plan advisor and co-founder of Village Wellth. That's w-e-l-l-t-h. It's an acquisition management platform supporting entrepreneurs in accessing deal flow and capital for business acquisitions. Her journey into entrepreneurship stemmed from a pivotal moment when she missed the chance to take over the father's family business due to a lack of succession planning. Together with her husband Scott, they embarked on business ownership by purchasing a franchise. Their experience of navigating the inception and the eventual sale of the franchise sparked Liz's passion for business succession. Over the past decade, Liz has acquired and successfully exited two companies. Her expertise spans transaction services running a boutique, business brokerage, facilitating deals between buyers and sellers, and as an exit planning advisor. Drawing from her client interactions and personal ventures, Liz is an avid speaker dedicated to empowering aspiring entrepreneurs and founders by sharing insights into business acquisition and the strategies for proper exit planning. Her commitment to simplifying and enhancing the business acquisition process underscores her vision for improving access o entrepreneurs and business sustainability. She also serves as co-president of Calgary M&A Club. Hello Liz, and thanks for taking the time. I know you've got a busy schedule. Thanks for joining us on The Boardroom 180 Podcast.
Elizabeth MacRae: [00:02:56] Thanks for having me, Munir. It's a pleasure to be here.
Munir Haque: [00:02:58] Is there anything in the intro that I missed or that you wanted to expand a little bit on?
Elizabeth MacRae: [00:03:02] No, that pretty well sums it up. I think one of the missing pieces is that I'm not originally from Calgary. I know we're recording this in Calgary. I'm originally from the East Coast, which coming from that community in such a close knit community fostered in me the support local, the sustainability philosophy. And a lot of the businesses in that area are farms and family enterprises. I was raised in that environment which certainly plays into how I conduct my business and what drives me.
Munir Haque: [00:03:41] Nice. Maybe we'll just jump right into it right now and maybe ask you a little bit more about Village Wellth. What led you and why did you see that there was a need for it?
Elizabeth MacRae: [00:03:49] We started Village Wellth, the conversation for Village Wellth started in 2019, and one of my business partners comes from a wealth management background. At the time I was in transaction services and the business brokerage space and conducting exit planning and working with business owners on their succession plans. When my business partner and I collided, we just started talking more about the space and the issues and that the space was experiencing and does experience today. When you look at the studies and the data that's out there, it's predicted that three out of four businesses will look to exit within the next ten years because of the age demographic of business owners. So the majority of business owners are of retiring age at this time. On the other side, when I was taking my exit planning training, it was reported that 70 to 80% of businesses that go to market don't sell. That only 30% of family businesses transition to the next generation. Then at the same time, on the other side of the coin, the amount of people that attempt to buy a business, it's somewhere, depending on the reports that you read, it's somewhere between 60 and 90% fail. And being in the business broker space, I got to see this firsthand. I got to see at all the different points when a business transaction can fall apart.
Elizabeth MacRae: [00:05:20] And so we decided to embark on focusing on the buy side of the transaction and helping. We work a lot with individual buyers, individuals who are mid-career professionals, and they want to get into entrepreneurship, but they're never going to do a startup. They're going to acquire an established company and look to grow it. And then often they look to start a portfolio of companies or do a roll up strategy, almost like a private equity strategy, but starting very small and every private equity group essentially started with one purchase too. So we start at ground zero with folks, and then we work with corporations also who are starting to get into acquisitions. So predominantly for us, we work with first time acquirers, whether they're individuals or investment groups or corporations who are just starting down this path. So Village Wellth is an acquisition management platform, we have a membership and then we have acquisition advisory and debt services. People join our community, they access our software, they can manage acquisitions, we have a marketplace, they can find deal flow through us. And then when they find a transaction, that's where they jump into our advisory services and we help them with navigating the capital markets and moving through the process that way. That's in a nutshell who we are and what we're up to.
Munir Haque: [00:06:36] Nice. You want to talk a little bit about the platform that you have? Is it all online or how does it work?
Elizabeth MacRae: [00:06:44] It's predominantly online. The only thing we do in person is we do in-person meetups every couple of months so far just in Calgary, but they've been extremely well attended. People are like, can you have this every week? , no. It's a lot to plan. But everything else is online. Everything else we do is virtually. We're predominantly Canadian. We have a few Americans that tune in and access our software. But for the most part, we're Canadian. So we have a two sided marketplace where buyers and sellers can register. And then there's an algorithm that pairs them on their inputs. And the unique thing about our marketplace is that the seller doesn't have to actually publish themselves. They can keep themselves private, and they can reach out anonymously to the buying parties so that they can maintain confidentiality. And the buying parties are also anonymous profiles. Anonymity is something that we take very seriously in this market. Acquisition in the M&A space is almost like an underground market. And that's one of the things that we're trying to, bring it above ground. We're trying to make it more accessible while at the same time maintaining that level of confidentiality and discretion so that parties can move within the ecosystem digitally in a manner. So that's our marketplace. And then we also have data rooms and we have a lend ability, a loan calculator for acquisition. So there's a lot of different calculations that go into understanding if an acquisition is bankable when you've got all sorts of different levers to pull, like earnouts and vendor financing and that thing. So we've developed our financial modeling lend ability calculator that runs some scenarios for people so that they can understand if something is worth moving forward on or not. And we're continuing to evolve our tool set and our suite of offerings as we evolve. Tech companies, you're never done.
Munir Haque: [00:08:49] So how involved are the lenders in the platform? If something goes through the algorithm, does that give them a level of confidence that it's something that they would be looking at?
Elizabeth MacRae: [00:09:00] Yeah, great question. The lenders participation in the platform is still managed manually behind the scenes. The banks level of security is very high. So we still navigate that piece manually, which we're hoping to change at some point. So essentially the platform will help the buyers and the sellers match appropriately with each other, and then they'll go through the same due diligence, experience, introductions and getting to know each other that they would typically and then when they are under offer. So we also help them in papering their offer. And once that's through, we're building software for that as well right now. And once that's sealed and they're under offer, that's when we start the financing application process on their behalf and manage the lending process.
Munir Haque: [00:09:55] Nice. I can imagine this peaks a lot of people's interests that are listening to this, I know it certainly has mine. I have been to your website. It looks interesting and I do plan on exploring a little bit further.
Elizabeth MacRae: [00:10:08] Thank you. We appreciate that.
Munir Haque: [00:10:09] As this podcast is about governance, corporate governance, board governance, I thought maybe we'd start a little bit with your grassroots in how you run Village Wellth if you have-I think we talked in the pre-interview that you don't necessarily have a board of directors, but you do work with advisors. And so if you want to talk a little bit about how you manage those relationships with your advisors or the other members of your team and how decisions are made. How do you determine what's the best track forward?
Elizabeth MacRae: [00:10:42] Yeah, absolutely. So Village Wellth is a multi-founder team which adds dynamic when making decisions. I'm a director and my partners, who are fellow founders, are directors. So there's three of us in our small board and that's our decision making team. Like any traditional board, we pass resolutions amongst ourselves. We don't have outside board members at this time. We've raised capital, but we haven't gotten to the Series A raise, which is typically where we see a lot of startups start to develop their boards and can be earlier. But what we find is when there is that change of control or a founder has lost majority control, or not necessarily lost it, but forfeited the control. That's when sometimes it's in the investors. It's a requirement of their investment that a board of directors is set up and that they may require a seat on said board. We have clients, we worked with lots of companies who have boards, and that's where we run into it more. And it's interesting, we have clients who we're running search mandates for, and when we find them an acquisition target, that's when we see them have to run it up the pipe for board approval on whether this acquisition is a good fit after they've done enough due diligence that it's appropriate to run up the flagpole sort of thing. But as far as Village Wellth's governance, that's how we manage it and then we have advisors who we lean on for mentorship and advice and certainly trying to reach for individuals who have gone there, done that before us and reaching up for that leadership and support.
Munir Haque: [00:12:36] So it's obvious that a lot more about mergers and acquisitions than I do, and potentially more than a lot of our listeners. One of the things you mentioned just now was you talked about a Series A firm. Do you want to talk a little bit about that? Just give our listeners and myself a little bit more background on what you mean by that.
Elizabeth MacRae: [00:12:54] Yeah, thank you. I sometimes get in a little bit of the lingo. Typically when startups are starting out, they're not always profitable or they need to raise capital in order to cover operations as they scale and grow. The names of the rounds are, Pre-Seed is normally your family and friends round, and there are brackets for this. I don't know exactly what the brackets are, and depending on who you talk to the brackets change. If you're raising a couple of hundred thousand dollars just to get your company off the ground, buy equipment and maybe just cover costs and expenses in the early years, that's usually your pre-seed round. That comes from people that are known to you and usually angel investors, accredited investors or family and friends. And then it moves to the seed round, which would be 500,000, I think, to a couple million in your seed round, which is the next stage. So at every stage when capital is raised there is a dilution. So you're diluting a percentage of the ownership in the company which typically dilutes all parties, dilution of the equity. And then after seed is Series A all the way down to, some companies are raising a third, fourth, fifth round. And instead of it being called a number, it's series A, B, C, D. And at some point there may be an exit at one of those stages. Not every company makes it through a series of raises. Some people stop raising, some people continue to raise, some people have an exit. Some people at some point they may go public and go for IPO. But lots of startups start in those first few rounds and then see what happens.
Munir Haque: [00:14:37] Thanks. So when you're working with your clients going through the acquisition process and they're going through their due diligence, are there any common governance issues that you see on either side, and how would you mitigate them or how do you get involved with mitigating them or advise them to.
Elizabeth MacRae: [00:14:58] Normally the board of directors would participate in whether to, first of all, are we going to make an offer on this company. So there's pre due diligence and then there's formal due diligence in an acquisition. Once a target has been identified as-okay we're going to consider offering on this company, then typically it would go to the board of directors for consideration. And do they all, with the information that's available at that stage, usually before the offer, you don't have all the information. You haven't been invited in to see the kimono and see inside the chest. So you have limited information. So it's more of, so far, can one plus one equal three. And do the board of directors see that this could be a fit as an acquisition. And then normally upon their approval, then a letter of intent would get executed in the negotiations. The preliminary negotiations would occur where both parties agree on a general price, terms, conditions, that sort of thing before it moves to formal due diligence. And then depending on the board's participation and involvement, and sometimes it might depend on the expertise that's on that board, oftentimes when folks are setting up their boards, they want to make sure that there is some M&A or acquisition experience amongst those members.
Elizabeth MacRae: [00:16:24] A lot of people at that level have been through transactions before. So it's always nice when you have that bench strength on the board. Depending on the involvement a lot of, during due diligence, if there's that expertise on the board, they're certainly pulled in for advice and mentorship as well as final approval. So they would offer final approval on the definitive purchase agreement, which is the legally binding documentation. So they would be privy to make sure that all the parameters and the due diligence was successful. So they would be part of that as well. So you're not making decisions in a silo for sure. And you've got a holistic look on a company acquisition and lots of deals fall apart during those two stages, during the offer letter and the final documentation where something was identified and it's not a fit. And then collectively the members of the board and the CEO would either make a decision, either, we're going to re-trade terms or we're going to refine the protections in the agreement and make sure we're covered and mitigating risks, whether it be through reps and warranties or indemnification.
Elizabeth MacRae: [00:17:43] Other mechanisms we see used is a holdback of funds so that any post-acquisition risks can be mitigated with funds that are held back. So there's lots of different bells and whistles and knobs that can be turned, but at the end of the day, folks are looking for, does this acquisition make sense for our company? Are there synergies? Can we grow faster because of this acquisition, or does it make sense from a people perspective? We see companies making acquisitions for a new term that I heard within the last year. Acqui-hire. They're hiring for people talent. Lots of different reasons that people are making acquisitions, whether it be geographic reach or people talent or adding different services and product lines. But we're certainly seeing a lot of increase in the M&A space from corporations and all different types of organizations. We're seeing startups make acquisitions to get market share for their product and then deploy their technology inside an established company. So lots of different reasons, lots of moving parts. We're seeing lots of activity in the space for sure.
Munir Haque: [00:19:01] I think you started talking or moving into my next question, and I think a lot of the questions coming up, but we'll work through it and you'll have opportunities to add to it. My next question was around the different ways to grow your business.
Elizabeth MacRae: [00:19:14] There's always multiple paths and multiple scenarios that a company can follow. I'm a huge proponent for companies getting coaching when they're navigating these different strategies. There's the tested and true organic growth where people continue to evolve their marketing and their sales and growing their teams and doing it the old fashioned way, which can be steady or it can be up and down or it can go in the opposite direction too. But I think we're seeing that more corporations are considering growth through an acquisition as a path for sure. So there's traditional through organic growth marketing and sales. There's accessing debt to grow your capacity and access debt to buy more equipment and that thing. Do you raise capital to be able to, if you can see a way that money can inject faster growth, whether it be you need to hire more people, you need to enhance your technology, you need to make an investment to hire sales people. You're ready to go how are you going to access the capital to do that or are you going to bootstrap and self-fund? Can you sell enough widgets or services that itself funds your growth.
Elizabeth MacRae: [00:20:39] So there's different strategies. And some people are of the mindset, I want to maintain control of my company. I don't want to dilute, I like being 100% owner. And so in that case, if those are the motivations, then organic growth or debt may be the solutions where other people say, I'd rather own a smaller piece of something bigger, and that's when they may choose to raise equity or if they're at the level where they can go public and go for an IPO, then that's the path. So lots of different scenarios as one grows, at the core of everything is, do you have a product and service that the market desires, and is there a pathway to growth? Is the market size big enough to validate some of these decisions? So certainly that's where, once you get the foundation of a company, that's when you start to see that acceleration, that's where it's great to have a coach involved where you can have somebody helping to make these growth decisions and decide. But aside from those, just mentioned, the acquisition strategy is one that a lot of small businesses don't know. And small as they get out of that small business category and they get into, in the M&A world, we call it lower middle market before you reach mid-market.
Elizabeth MacRae: [00:22:02] And that's where we're starting to see companies when they reach low millions in revenue. Sometimes that's when they've heard stories, they've talked to other people who've made acquisitions, and they start to go, well, maybe I could do this too. But we're starting to see companies of all sizes go, hmm, maybe I could do this too. Maybe I could buy a book of business from a competitor who's retiring. And maybe it doesn't have to be a massive seven figure, eight plus figure acquisition. It doesn't have to be something monstrous and scary. And I think that's where we love helping first time acquirers is to demystify the process and get them warmed up. The biggest thing that we end up doing at Village Wellth is seeing people's confidence grow and seeing people, their awareness get opened up to, wow, this is possible. This is something that I can do too, regardless of the size of the company.
Munir Haque: [00:23:08] Okay, maybe a difficult question to answer, but just in terms of trends and what's impacting those trends, have you seen those trends ebb and flow? Growth through acquisition versus startup, when there are outside external forces, if financing is easier at that time, does it influence business owners one way or the other?
Elizabeth MacRae: [00:23:33] Yeah, it absolutely does. And the trends in the last few years post-Covid have been so interesting as well. In the industry, they've been talking about the succession tsunami for a long time. There's been studies published over the last 20 years that, there's a succession bubble. Is it coming, are we in it, when is it coming? That thing. And it was slow and steady up until Covid and then Covid hit. And the M&A market just stopped. Like there were deals on the table, it was just deals off the table. People at that time in March 2020, if you've been in due diligence for nine months with a company and all of a sudden you don't have a deal. There were some scary moments for a lot of people during that time. And it was from March 2020 to June, there was things that just came to an absolute halt. And then in 2020, June, when things started to open up and people got used to, okay, we're still in a pandemic, we're still in lockdown, but we're going to figure out this remote working thing. And deals started to get done again in 2020.
Elizabeth MacRae: [00:24:41] And then 2021, 2022 was huge records broken years for M&A. There were so many acquisitions and transactions happening. And part of it due to the cost of capital at that time and anybody that was in a place of movement was making moves. And then interestingly enough, we've seen a bit of a-2023 was a little bit of a lull. Activity dropped down in the market from lots of sources that we've been following and that we see because interest rates are a component. But interestingly enough, there's other reasons where, yes, things taper down a little bit. It put pressure on valuations, but at the same time you're seeing people go, I've come out of Covid, I've rebounded or my business did really well during Covid and now we've stabilized again or we didn't do well during Covid, and now we've stabilized again. And, for whatever reason, if they were preparing to sell during Covid or shortly after, and if they decided to postpone their exit because of the volatility from Covid, now we're seeing that people are going, regardless, I'm selling. I can't wait anymore. I'm selling. If there's pressure on valuations, I'm still selling.
Elizabeth MacRae: [00:25:58] But at the same time we're seeing more people enter the market. In the US, valuations are, they're getting higher multiples because there's more people entering the market now because more people are starting to think about acquisition. We're just seeing a lot of different scenarios all over the map. And also in the banking, where interest rates are high, there's not as many people buying real estate or financing equipment loans, but because of the way that acquisitions self-finance themselves, you're using the cash flow from the acquired company to service the debt. That's where we're still seeing people make acquisitions, even though for some reasons, it's a tight market. For other reasons, it creates a lot of advantages. So we're seeing a lot of, are we seeing trends? Yes, we're we're certainly seeing trends. Then the other trend that I'll mention is, we are seeing more interest from traditional VC investors, venture capital investors who typically invest in startups where it's been super sexy and super buzzed and the money flowing in the US to startups. That activity was really high. And then we saw a number of factors in the US that tempered the market a bit last year. And so the VC environment of those types of investors have become a little bit more cautious, I feel.
Elizabeth MacRae: [00:27:21] And it's a little bit opinion based, but in both markets, are we going to put our money into startups where I think the due diligence on startups is getting more in depth. They want to see revenue generating companies. In some communities, they're saying, we don't want to invest as much in pre-revenue companies. We want to see established companies. We want to see traction and investments that are being made are going to companies that have traction. Well, how do you grow a company. And if you need the capital up front, it's a hard market to raise capital in. It's just hard market. And then we're seeing the VCs market look at acquisitions more curiously, I've talked to a handful of VC groups in the last month that are going, we're changing our entire approach. We're looking at acquisitions. We want more stability. We don't want to wait years for a return and have 1 in 10 of our investments turn around and give us a return. We want more stability. We want to build a foundation. We want to build a portfolio on acquisitions. So we're seeing that come into the acquisition space as well.
Elizabeth MacRae: [00:28:33] And then there's another category of acquirers that we're seeing which is search funds, which just came out of Stanford University, I think in the 80s is really when it started. But that's an investment trend where you would certainly see more board involvement there. So search funds, I'll try and make this a short explanation of search funds, but it's where individuals raise capital for a fund that covers usually 2 to 3 years of their expenses to search for a business to buy. It's the mini private equity approach, and so they won't typically be using a lot of their personal funds. They're raising capital for a fund in order to go and find a business to buy. And then when they find one, they will go back to those investors and they will raise the equity needed to buy the business. And so there's a growing search fund community in the US and in Canada. It's mostly a path taught at the NBA level. So in Canada, Concordia and Haskayne teach this philosophy. And so they have, the search funds would typically have, an investor board. And because searchers who are spearheading the search usually have a minority control, then they would have a board that they report to as well. So that's an environment that we're also seeing.
Munir Haque: [00:29:59] Thanks for that. And we talked a lot about either getting into the market or growing. Maybe pivot a little bit and look at your certified exit planning advisor. So maybe talk a little bit more about how you prepare to exit, and maybe some of the governance aspects around that. As you're preparing to exit, would you change anything within your structure, your governance, to better suit potential buyers?
Elizabeth MacRae: [00:30:25] To change anything in the governance, it can depend if a group is looking to grow before exit. Some people are just preparing to exit, some people are, let's grow before we exit. And again that comes back to the growth paths. Are they going to set up a board in order to be that much stronger and grow, or are they raising capital and then have to set up a board because it's a mandate of the investors. And then when it comes to exit and they're looking at their different exit strategies, there's the internal and then the external strategy. So the internal strategies are a sale to key employees, a sale to partners. One exit strategy that is growing in Canada because of more recent tax changes at the federal level is transition to employee ownership trusts. So a trust is established, is set up in the company for employees and the trust. I'm not an expert, so don't quote me, but my understanding is that the trust acquires the entity. And so it would be more common that you'd see boards set up when there's an employee ownership trust as well, because the employees are not necessarily the decision makers, but they have the opportunity to then become owners of the companies.
Elizabeth MacRae: [00:31:51] And ESOPs, referred to in the US employee share ownership plans, they've had this model in the US for a long time now. And the tax advantages to selling to employees are different than selling to private equity or an outside party. They wanted to bring that to Canada. They wanted to bring tax advantages to privately owned entrepreneurs so that they would look at selling the option of the strategy of selling to employees. So it's very new in 2024. So I predict that we'll see more board governance and board shifts when it comes to exiting to employee ownership trusts. Fascinating environment for anyone who's interested. There's lots of folks that have been in that space for a long time, and they're just absolutely thrilled. And they're so excited to talk to anyone who wants to listen, because now they're on the board, and now things are heating up. There's lots of buzz in that space right now for folks that work with employee ownership trusts. That's one exit strategy that we're seeing on the rise as far as external sale to external parties, that's where we see, depending on the company size, who is a size is a fit to buy.
Elizabeth MacRae: [00:33:04] That's where we see, is the company a fit for an individual to take over? Is it a fit for a search fund to take over? Is it a fit for a strategic buyer which is being bought out by another corporation? Maybe it's a competitor or someone else who's complementary in the space, or private equity is the traditional buyer in a lot of spaces, but it can come down to the size of company and how much that company is earning. Typically we see private equity companies interested in businesses that are doing over 2 million in EBITDA, and then search funds fall below that. So they might be looking at companies with 1 million to 5 million EBITDA. And then individuals and smaller groups look below that EBITDA threshold. So there's brackets and pockets of where companies and advisors play. I love demystifying the space for folks. It's one of my passions, what I end up speaking on a lot. Just how does this ecosystem work? Who plays where? There's lots of lingo that gets thrown around.
Munir Haque: [00:34:09] Would you say, I don't know if you can make a generalization about this, but would robust internal governance system help enhance the value of a company to potential buyers? One of the things that came up during our pre-interview was, I think the term you used was, or maybe I used it was, act like a big company. Does that, in terms of your governance, is that something that you see makes it more attractive to a buyer?
Elizabeth MacRae: [00:34:36] Yeah, I think when you get to the level of having a board, there are expectations that the board has for your internal operations and your organization, your level of reporting, your level of-the quality of your financials. When a board comes in to they're doing their level of due diligence on a company. The same happens when you raise capital. You go under due diligence with investors on the company. And so when there's a board in place, usually a company is more organized. And if at the board level there is a level of management in the company as well, you've gotten to that size where there is maybe a C-suite team, there's management in place, there may be audited financial statements at that point. And it was interesting, coming back to the 'act like a big company' philosophy, I heard that by a large Canadian company, they were in safety products. They made safety devices that were worn by folks in the field, Canadian company. And they went public and they made comments that, before they went public, they always knew that they wanted to move in that direction and before they ever got to that stage, they said, we're going to act like a big company before we are a big company. And they started to, before they even needed to, and I'm a big philosopher of this too, is if you plan to exit someday, have those exit strategies in mind because if you understand how you can exit a company, you'll make different decisions every single day. At the micro level, because you'll understand that when you get to due diligence, how those decisions are going to be looked at. I'm a huge proponent for understanding, even if you don't plan to exit yourself for ten, 15 years, if you're not necessarily raising capital today, but you plan on raising capital, understand how that works now because it's a tremendous amount of work if you have to get prepared for due diligence. Redo instances, I've seen people have to refile financial statements, which is a tremendous cost and expense. So before setting up the board, before raising capital, before going through an exit with due diligence, if you can get the ducks in a row and pretend you're a big company before you are and do all the things that a big company would do.
Elizabeth MacRae: [00:37:14] We have a data room at Village Wellth. We have a data room that's ready and organized and prepared to go all the time because we know how this works. And then when we need it, we can rely on it, whether it be for investors or lenders and that thing. And the same thing goes for when you're applying for debt too, is there's a period of due diligence when the banks are going to go through things. And so, yes, back to your question. If having a board of directors, does it set you up more for success? Yes, because that board and under their direction is going to keep you accountable to have these processes and procedures and a certain standard and quality of financial reporting, so that you have optionality at that point of how you grow and how you exit, because you've created more openness to your options. And at that point, you can grow and you can exit in a variety of ways, and you're not restricted to 1 or 2 ways of growth or ways of exit.
Munir Haque: [00:38:20] You got some ideas stirring in my head when you talk about acting like a big company or growing to exit, I wonder how often that happens when they start making these changes and then find out that it's that much better a company to be involved with and decide not to go in and sell, that at that point it's too lucrative and it's gone past our expectations.
Elizabeth MacRae: [00:38:45] Absolutely. I've seen it, I've heard it. When you start putting those building blocks in place and you go, oh, wow, I have a team. I'm not doing everything. I have more capacity, I'm making more money. I'm not as tired. That's the biggest thing that I used to hear as a sell side advisor is those two words. I heard them repeated in almost every conversation. It was, I'm tired. Well, exit's not your only option here. You can create this other optionality if you're aware of what has to happen in order to get there. But one of the things that I've seen time and time again is, when there is a lack of urgency, people don't take action all the time. There's a certain mindset of people who tend to be more prepared and proactive, and those are the companies that we see grow in scale. And then there are others who are less proactive, and we see people get into a situation where there is a death or, I think there's 4 Ds. Death, disability, disengagement and divorce. There's instances where things are forced upon you through unfortunate circumstances. That's why I love the exit planning methodology as well as when someone starts down the path of exit planning, you may not exit for 20 years, but you're putting the infrastructure in place that you can exit at any time. And during that process, you're also doing value acceleration activity to increase the value of the company in a very specific way, so that you can create that optionality for a company. And this knowledge is usually, board members usually have this knowledge which is one of the advantages of setting up a board is you're leaning on folks that have been through the wringer and they're helping to guide the company through these channels. So that's why you pick your board and you pick your members or pick your investors that bring this level of expertise. But at the same time, know what you want. You want to own a bigger piece of something small or a smaller piece of something big. You don't want to go into those decisions blindly either.
Munir Haque: [00:41:04] You touched on some of the philosophy that Action Edge Executive has, when we're working with our clients, it's about surrounding yourself with the right people and moving from being a manager and a business owner to being an investor, in which you can release the reins on something. It doesn't become your day to day. You have the right team in place, essentially a retirement strategy. So it can still make money when you're not there day to day. You don't have to be worrying about it all the time and moving into that more of an investor in your own company approach. Can you speak a little bit to post-acquisition integration in terms of governance, where you've seen, what are some of the specific challenges you see if a company moves into a new area and needs to change the way they operate.
Elizabeth MacRae: [00:41:58] So the acquiring entity, their governance taking over the acquired entity. And this is where if it was a corporation buying another corporation and the leadership is in the process of changing over, that's where the plan for post acquisition integration is so powerful. And we see the most success when it's been pre-planned or there's a longer extension of that plan even before the acquisition has started, that there's some thought and consideration and there's a foundation for how the integration is going to take place once that acquisition has been solidified and then it moves into post. We're not as involved in the post acquisition piece. We see that the folks that have the most success are the ones that actually, they involve a third party as well in guiding the integration and that they have started to plan for it in advance of day one. I think that's where you guys play a role more than what we would see. So I'm curious to hear from you, what what you see.
Munir Haque: [00:43:26] Thanks a lot for that. That segue into the services that we can offer. And often they're similar to services you'd offer to any existing business. We do things like one on one coaching with the CEO to make sure things are, or the buyer, to make sure that things are progressing in the right direction. And we don't do the work for them. It comes from them, but we give them somebody to be accountable to, especially if they don't have an existing board of directors. So we give them somebody to be accountable to. Essentially, they're being accountable to themselves, but we keep them on track for that. We can help them with post integration or pre integration of doing some strategic visioning and planning for the corporation and the new entity to make sure that they have a vision and that the new players and the existing players are all on the same page as they take on this new venture. One thing that we find very useful in general with businesses is if you work with them on 30, 60, 90 day planning and stuff like that is very important right when you're starting something off to make sure that you are leading in the right direction.
Munir Haque: [00:44:43] And not to say you can't pivot and move, but you'll have checks and balances along the way to ensure that you thought these things through. And it's nice to reset every 30 days to make sure that we've accomplished this or this is where we're moving, is that the right thing for this new entity? And you still have that ability to pivot. If you're coming into a company where you're basically taking on an entirely new team. There is a lot of personal relationships and business relationships that have to be developed and secured so we can come in and do some team building, facilitation of meetings, discussions. Once again, it's nice to talk about the corporation's vision mission to make sure that everybody has an understanding of what it is and see what their role is moving forward, especially if there's a new company, a new ownership, and they have a slightly different vision. And some of that is a bit of a marketing tool to work with your new employees, new staff to make sure that we're not turning the world upside down for you. This is your role in it. And I think you have some value you're bringing to it.
Elizabeth MacRae: [00:45:52] Absolutely. And the biggest thing that we see, is when people are starting to plan, what are you going to do on day one. What's day one going to look like? The biggest thing is, make sure those employees feel a level of comfort immediately that they're, that's that core relationship that you have to maintain, protect the base business, protect the relationships with those core employees right off the bat. And make sure that they are not feeling anxious in that change. And getting in really fast. Those can be really delicate relationships. I actually moderated a webinar yesterday, and the firm that we were interviewing had just made an acquisition, and a lot of the employees didn't stay. They offered them new employment agreements and they didn't stay. And they said, we could have done that so differently. So yeah, certainly, you don't want your investment to dissolve at post-acquisition. And so it's really critical to really make a solid plan and have the support and a foundational plan for that post acquisition integration piece. It's pivotal. It's worth the investment to put some dollars behind a clear strategy ahead of time, not to be reacting to a situation once you're in it, is to be proactive.
Munir Haque: [00:47:12] I see that we're pushing right up against your hard stop. So the question is, where can people find out more about you? Do you have a Twitter handle, a website?
Elizabeth MacRae: [00:47:22] So Village Wellth is www.village, and then, as you spelled it out in the beginning, thank you so much for doing that, wellth.com. We have a unique spelling so please be aware of that. And then I'm on LinkedIn as Elizabeth MacRae. And I love to connect and chat with folks and we have a whole team at Village Wellth that can answer questions as well. Not all of it falls to me, but we have a team that's in the waiting and happy to chat with anyone exploring acquisition. Thank you so much for having me on, this has been a lot of fun.
Munir Haque: [00:47:57] Well, thanks a lot and I look forward to having future conversations with you. Have a good rest of your day and we'll talk to you soon.
Elizabeth MacRae: [00:48:04] Likewise. Thanks a lot, take care.
Munir Haque: [00:48:06] Thanks everyone, for listening to The Boardroom 180 Podcast. You can learn more about me and Action Edge Executive Development on our website at aeednow.com. That's aeednow.com. Fill out the form if you want me to reach out to you, or if you have any thoughts for future subjects or guests on the podcast. We also have a free board self-evaluation that will be linked on our website. You and your board can fill this out either individually or together, and it gives you a bit of a quick temperature check on how your board health is. As always, don't forget to hit like and subscribe to The Boardroom 180 Podcast. It helps us grow. We're recording from the Pushysix Studios in Calgary, Alberta, with production assistance from Astronomic Audio. You can find their info and the links to AEX forums in the show notes. We've come full circle to conclude this episode of The Boardroom 180 podcast. Goodbye and good governance.