In today’s episode we shake things up and put Patrick Stroth, the regular host and founder of Silicon Valley-based Rubicon Insurance Services, in the hot seat for an exclusive interview with business consultant Steve Gordon.
Patrick is on a mission to tell investors, founders, corporate development teams, attorneys, and anyone else in the world of mergers and acquisitions about a unique insurance product that can save tens of millions of dollars in a transaction and speed deals to completion, while reducing risk for Buyer and Seller.
If this insurance is in place deals are 8 times more likely to close.
It’s been used in 1/3 of M&A deals over $25 million in value in recent years. Patrick says that once more people understand the benefits that number should jump.
We get into the details on how this insurance works, including…
- The alternative to “over buying”
- The only 4 data points you need for a quote for this insurance
- How to manage today’s seller’s market
- What size deals are eligible
- And much more
Listen now…
Mentioned in This Episode: www.rubiconins.com
Episode Transcript:
Steve Gordon: Welcome to the M & A Master’s podcast. I am your temporary host today. My name is Steve Gordon. Today we’re doing something a little bit unique on the podcast. We are putting your normal host Patrick Stroth on the hot seat today. I’m going to be interviewing him. I think you’re going to get just a tremendous amount of value out of this interview.
Patrick is an absolute expert at some fairly new and unique approaches to handling risk in mergers and acquisition. Patrick, I’m excited about this. Before we jump in I want to give you a proper introduction though.
For those of you who don’t know Patrick, he is the founder of Rubicon M & A Insurance Services. He’s a speaker on M & A topics and he’s the host of this very podcast, the M & A Master’s podcast where he interviews thought leaders and folks who’ve had real success in the M & A space. Patrick, welcome to your podcast.
Patrick Stroth: Thanks for having me today, Steve.
Steve Gordon: This is going to fun. I always like turning the tables on folks and doing these interviews. It’s going to be an absolute blast to do with you. To start us off, we’re going to talk a little bit about this insurance product called rep and warranty insurance, representations and warranty insurance. I want to start with, from your perspective, why is having this conversation important? Why would it be important for somebody who’s listening today?
Patrick Stroth: Well, thanks again for having me Steve. The reason why rep and warranty is an issue is because it’s a tool in putting a deal together that has just gained significant traction over the last four or five years to the point where this item, rep and warranty, is being used in about one-third of all M & A deals over 25 million transaction sites. That’s a huge jump from the last couple of years.
For people that are in and around an M & A transaction, whether you’re an investor, a founder, corporate development, everybody is looking to find a tool that’s going to give them an edge. It’s going to improve their deal, improve their terms. So, along comes this item that is, like I said, gaining higher profile status, it’s gaining traction because it’s become effective. The people that have used it are repeat users and they’re using it a great amount.
However, there’s two-thirds of the market out there that may have heard about it. It’s new, they haven’t used it yet, so they’re trying to find out a little bit more to just get a little bit more comfort out there.
The great thing about rep and warranty is it’s not mandatory for every deal. It may not be a fit, but where it’s a fit it saves parties tens of millions of dollars in some cases and it speeds deals to a successful completion. So, if you’re an advisor, legal, financial, compliance, whatever, it really behooves you be aware of this product on a global level, then see whether or not it’s a fit for your particular deal.
Steve Gordon: Patrick, let’s start at the beginning for people who, maybe they’ve heard of it but they don’t understand how it works. What exactly is rep and warranty insurance?
Patrick Stroth: Yeah, rep and warranty is short for representations and warranties. Reps and warranties are the disclosures that sellers make to the buyer giving them details about their company. The ownership structure, legal issues that may or may not be out there, sales, financial aspects … all the facts about a company that the seller needs to disclose to the buyer and the buyer then will perform due diligence to look at those disclosures to see how accurate they are. Based on the quality of those disclosures the buyer makes the decision whether or not they’re going to pay a certain price to go ahead and purchase a company.
Now, because these transactions happen is such a tight timeframe it’s impossible to find out every little nook and cranny detail about a company. A lot of times you’re going on faith that the disclosures that you’re being told are accurate, are truthful, and that post-deal there won’t be any surprises.
Well, in the real world there are surprises that happen, and they often happen after the fact. Now within the purchase sale agreement and contracts right now there’s what’s called an indemnification clause, wherein the seller must indemnify the buyer for any losses the buyer suffers as a result of those reps and warranties, those disclosures being inaccurate and those inaccuracies lead to the buyer suffering a financial loss.
A great example of that would be you’re buying a chain of restaurants. Unbeknownst to you, the chain of restaurants had given out over two million dollars in free entrée vouchers to beef up business and beef up sales. Well, you’ve purchased the chain of restaurants and now all of a sudden you didn’t know about two million dollars of free food you’re going to have to give out, but you’re obligated to honor that.
That would be an example of one of those types of surprises. You want to be able to have some kind of recourse to come after the seller. That’s done with this indemnification clause.
What has happened though is it gets pretty contentious because sellers want to sell their business and they want to pay their investors. They just want to move on to their next venture. They want to take their money and move on. Buyers don’t want to get stuck holding the bag if there is some surprise out there that costs some money that they just missed in diligence. They’re trying to keep the seller on the hook as long as possible. Seller wants a clean exit. So, there’s this natural tension.
The insurance industry came along and developed a product where they would insure those disclosures, those reps and warranties, by stating that they will review what those disclosures are. They look at what the buyer did in terms of due diligence making sure that they double checked the financials, they looked at the inventories, they did a cap table, they did what they could to make sure that they held the seller to task as much as possible.
If the underwriters are satisfied they simply say, “I’ll tell you what, we don’t think anything bad is going to happen. Give us a couple of dollars and we’ll insure the deal so that should there be a breach of the reps and warranties we’re going to take that indemnity obligation away from the seller and we’re going to take it. Buyer, in the event there’s a breach and you suffer financial loss, come to us with that financial loss and we will pay you up to whatever the policy amount is.”
What it’s done is rather than have this natural tension between buyer and seller, you’ve got this independent third party that looks at everything, has deeper pockets than both the buyer and seller combined that can go ahead and pay the buyer their loss. The great thing is buyer goes ahead and they’ve got certainty that if something bad happens they’re not going to be left holding the bag.
And, the seller gets a clean exit. A lot of times they end up collecting a lot more money at closing because an insurance policy, the rep and warranty policy, begins at an attachment point that’s far below what the seller normally would have to be locked up in escrow.
The difference between an uninsured deal with an escrow versus an insured deal with a deductible could be, in some cases, tens of millions of dollars. That’s the product that’s out there. It was initially used for very contentious transactions where there were big disagreements and only an insurance policy could come at.
Then, there was also a usage for the product where you had buyers or sellers that just were very, very risk adverse and wanted any way possible that they could mitigate the risk as much as possible. But, what happened is that it’s become more of a financial tool.
That’s why private equity has really embraced this product because they’re constantly buying and selling portfolio companies, usually to other private equity firms. Having this product eliminates post-closing losses in terms of financial commitments, accelerates profits and realizing proceeds at closing, and they move on to the next deal.
The private equity buyer knows that should there be a breach or some other loss, those losses are mitigated because there’s a product there. It’s been something that has actually accelerated M & A transactions rather than being some pure risk mitigation thing that a bunch of worry warts wanted to have.
Steve Gordon: Patrick, it’s pretty clear that there are benefits for a seller in this situation. It accelerates the speed with which they’re able to get their cash out of the deal. What are the benefits to a buyer, particularly a strategic buyer? Why would a buyer say, “I really want that as a part of the deal?”
Patrick Stroth: Great question, happens a lot because the buyer in many cases is in a position where they say, “Well, we don’t want to take the risk,” or, “We don’t see the risk. Why should we involve ourselves in this? Let’s keep the seller on the hook.”
The fact of the matter is right now in this environment, this is a seller’s market, so sellers are pressing the terms because they have a lot more leverage these days. What a buyer needs to do is they to make as seller-favorable a term sheet as possible. Now, how can you do that without having to do the obvious thing is well, just pay way more money than anybody else can and then we’ll buy it.
Well, this is an alternative to having to over-buy. If you can go ahead and provide something that mitigates the seller’s risk, accelerates their profitability or their returns without having to raise your offer, that’s a big help.
Another thing is that there is certainty of recovery. If there is a breach and it does impact the buyer financially, they are not worried about sellers scattering out all over the place, particularly if you’ve got situations where you’ve got multiple shareholders in a company and you’re going to exert a lot of expense and time trying to track them down to recover.
So, you’ve got one party. You will go to them and they will partner with you. The fact that using rep and warranty can accelerate the process, the timetable for getting the deal done because if a rep or warranty is insured there’s no need to negotiate it any further. You move on to the next rep and warranty, and the next one, and so forth. It saves time and money with the attorneys on having to go back and forth.
For strategics, it can remove a real uncomfortable situation. When you purchase a target company, you’re usually bringing that management team on board with you. It gets very uncomfortable in the event there’s a breach post-deal. The company now has to go to those rock star new members of their team and say, “You know what, I know it’s not your fault, but something bad happened, it cost us money. We’re going to have to claw back a significant amount of your escrow or a significant amount of money that we had promised to pay you.” This removes that.
The other issue about this is that it can provide a little bit of a backup on your due diligence. If you’re performing a bunch of diligence and you’re not insured, you’re going to be moving forward in to the great unknown hoping that diligence worked and hoping that you got that escrow or that seller on the hook if something goes wrong.
Well, if you’ve got insurance there and they’re looking at it and they say, “Yes, these reps are covered,” now you’re not as worried about your diligence issue because it’s insurable should the event happen. Then, you’re taken care of.
The bottom line, the biggest thing that’s a benefit for the buyer is … We get this information from multiple investment bankers, is that at the end of the day you want to get the deal done. Okay, deals with rep and warranty are eight times more likely to successfully close than deals that are not insured. If you’re a buyer and you’re going into this, think about it, why are you even going into this exercise unless you want to get it done? Okay, this is a way that’s going to make it much more likely for the deal to be successfully consummated. You know the great thing? You don’t have to overpay to get it.
Steve Gordon: Patrick, you’ve touched on a number of the benefits of using this tool in a deal. What do you see as the most important one or two advantages of rep and warranty compared to a standard escrow arrangement?
Patrick Stroth: Honestly, the deal is going to get done. When you go in to a venture, I mean, if it’s meant to happen it’s going to happen, but the issue is if you’re going to go forward with the expense and the time to perform diligence on a target company, and go through all the work to get it, you want this thing to happen successfully. The great thing about rep and warranty is that it removes the tension between buyer and seller.
Now, there’s this theory out there with regard to parties that really insist on having a good sized escrow there, so you have cash on hand. If both sides go ahead, they’re in good faith, they tell everything, they do all the due diligence, and everything is on the table let’s say. The fact that we’ve got a little cash on hand, off to the side, that if something does blow up, “Hey we’ve got the cash. We just go pay it.” Money on hand is going to remove any tension between the two sides. That’s just not necessarily true.
I think that when you’ve got this situation whereas you’re going forward with of the deal, particularly as you get to the reps and warranties and the disclosures and the indemnification clause … Indemnification clause, I mean, is almost like negotiating a pre-nup agreement between a loving couple before marriage. Suddenly, all these bad thoughts, bad ideas come up because the nature of it is you’re thinking worst case scenario, both sides are.
The advantage on having rep and warranty is that you’ve got a tool that brings a third party in. So, it’s not you versus the other party. Well we’re going to make sure that you’re honest, so if you have skin in the game in the presence of a big escrow amount, hey that will make you more honest.
Then, you’ve got that subliminally, the seller may be saying well, “You don’t trust me?” I mean, there are a lot of dynamics out there that you can completely bypass and transfer a lot of these things out to a third party.
The other really nice thing about this is if you can lower the temperature in the room, remove a lot of the contentiousness in the negotiations, why not look at it? Because what’s going to happen is you’re going to have a buyer that’s in a position of possibly fear that they missed something. You’re going to have a seller that’s very defensive, “Why are they asking me these questions? I told them. Why don’t they trust me?”
It’s just that element, there’s enough stress in these deals to begin with, particularly the money involved. If there’s a way that a tool can be used to lower the temperature in the room and successfully get the deal done, that’s not just win-win, that’s win-win-win for everybody.
Steve Gordon: Patrick, let’s talk about the elephant in the room for a minute. We’re now going to involve a third party insurance company. I know the thing that is probably in the back of some people’s mind is well, when it comes time to actually make a claim … If worst case scenario that something does go wrong in the deal post-close and we’ve got this insurance policy in place, is the insurance company going to pay the claim or am I now going to have to go fight them?
Patrick Stroth: Probably the most common question I field with this … This is just unfortunately the rap that people get with insurance, on any insurance product is that, “Well, that’s great. We’re going to pay all this money, but what happens when the claim happens? I’m not going to collect what I wanted to do.”
What happens with rep and warranty is unfortunately it’s called an insurance policy. It is an insurance policy. However, it is different from another other policy that’s written for a couple of reasons.
First of all, the scope of the insurance policy for rep and warranty is very narrow. It is only covering the stated reps and warranties that are in a purchase sale agreement. That’s the only scope. It’s doesn’t go beyond that, so if there are any other side agreements or whatever, those are not part of this. Anything that is known by either party prior to closing of the deal is not covered.
All that is out there are these reps and warranties where both sides are warranting that they don’t know of anything else. You’ve got a real narrow scope of the coverage that needs to be applied. Unlike other policies such as directors and officers, which are so broad that they have to respond to everything, which ends up meaning that they’re going to decline 90 percent of the claims that come in initially just because they’re so broad and they want to get a little narrow.
The second area where these policies are different is the amount of diligence that is performed on placing a rep and warranty policy is so much more thorough than any other insurance policy that’s issued. The underwriters have a very good, wide-open-eyed view on what they’re getting into. They’re essentially sitting there in the room virtually with the buyer’s diligence team.
So, when they go through the underwriting process keep in mind the underwriters for rep and warranty are all M & A attorneys, they are not actuaries, they are not insurance people, they are attorneys. So, you have attorneys that are reviewing M & A legal documents. They are attorneys that are looking at the due diligence materials, and so forth. It’s really hard for an insurance company to say, “You know what, you didn’t tell us about this when we were putting a policy together. We’re a little reluctant right now because you didn’t tell us about this.” They can’t do that. They’re tied in with this because they were in the room when the deal was done.
You’ve got the narrow specific coverage. You’ve got the fact that they’ve seen everything, so if something comes up as a surprise, like I mentioned the free dinner coupons or whatever. Hey, if they missed it, everybody missed it, it’s going to be covered, and so forth. They’ve got that which is different from all other insurance.
The other issue, and this is a real profound issue particularly with regard to private equity, is that rep and warranty policies are very profitable. They have very few losses and they’re being used by repeat buyers, private equity firms, particularly buying these policies over and over and over again. Because the diligence is so thorough and because the risk is actually significantly low, compared to other policies, there haven’t been very many claims.
So, the absolute worst thing an insurance company can do after having a narrow scope and being in the room with everybody is to show any kind of reluctance when a claim comes in. The minute they do that their credibility with the marketplace is eliminated. Private equity and the law firms that work with them will leave them immediately.
There’s a financial pressure on the industry unlike any other product where if you don’t do your absolute best to get it right when a claim comes in … That’s their thing, they don’t just want to pay claims. They want to get it right. That’s over and over what the insurance attorneys tell me when they are helping to settle claims on these.
They pay a lot of these claims, even though again, the losses are small compared to the amount of business they are writing. There is this obligation that they are going to show up and they’re going to do what they say and say what they do, which is unique in the industry.
Steve Gordon: Patrick, can you share an example of how this has been applied to a deal, maybe to give folks who are listening a little bit of a specific example of how this played out?
Patrick Stroth: Oh, absolutely, yeah. Here’s a case with a strategic where you had a large top brand auto company that was purchasing a software company because they were doing on demand drive sharing programs. The auto company wanted to get involved with that and move it over.
Well, it’s easier to go buy this technology company than develop their own tech. The technology company had two major shareholders and had about 10 other investors. While the large auto company was making this purchase, it was a nine figure purchase, and the auto company could afford if there was a loss or whatever. They weren’t really worried about risk.
But, the sellers, the technology company, was afraid because you had the two major shareholders were real concerned that hey, they’re going to be the deep pockets in this deal. In the event something did blow up it wouldn’t be the other 10 investors that the auto company would go after, it would be them.
So, these two shareholders were very, very concerned. They came to us and said, “Is there a way we can insure the deal so we are protected?” We talked to the auto company and said, “Well, if you agree to put this policy in place where the auto company is the policy holder, if there’s a breach of the reps, auto company gets paid and these two major shareholders are off the hook. They don’t have to worry.”
The auto company said, “Hey, we’re all for it. We don’t see the risk. We want these people happy. Tell you what, we’ll split the cost. If they’re willing to pay a majority,” they paid most of it, “if the seller is willing to pay for it, then we’re willing to go forward. We’ll share our due diligence with the insurance company, we’ll go.”
That was a case where even though you had a large corporation, weren’t worried about the risk, but to accommodate their target they went and did this. You have investors and shareholders that are really pushing to get reduced exposure so that they can get their proceeds and move on and not worry about a claw back.
There was another situation with a telecom company where it was being purchased by a larger telecom company. The owner/founder actually beyond the threshold that his attorneys had wanted him to do, bared his soul, disclosed more than his attorneys thought he should have disclosed, but he wanted to be out there honest and did everything.
Well, the technology company said, “Fine, thanks very much. We need an indemnity cap that’s going to be about 20 percent of the transaction value.” The owner was offended. He just said, “Wait a minute. I just bared my soul. If anything is out there, I have no idea. You don’t trust me. Forget this. I can’t fathom having that kind of exposure out there when I’ve just shared with you everything.”
The telecom buyer, more of an institutional player and they said, “Look, this is the rules. This is what we do. We want a 20 percent indemnity cap and that’s just the way it is. We’re sorry. We don’t think there’s more exposure than anything else, but this is how we do it.” So, you had an impasse.
We came in and presented a rep and warranty policy at the 20 percent indemnity cap. Seller did not have to worry because now he is not on the hook for this. Buyer, they were able to check the box, got their requirement in there. Everybody was happy. Deal had been sidetracked was going to not happen solely over this blowup. A policy was plugged in and solved the deal, bridged the gap between the buyer and seller. You have all kinds of examples of things like that out there.
Steve Gordon: That’s clearly a powerful tool and can be used very strategically in a deal to keep things moving forward. Patrick, that really brings me to the next most important question, for somebody listening, how do they know if they’re working on a deal that would be a good fit? What would constitute a good fit deal for a rep and warranty policy?
Patrick Stroth: The way we look at this, first of all, we’re asked often, what sector can you write, what sector can’t you write, and so forth. The insurance industry out there is open to all sectors. I mean, from aerospace to zoology, A to Z. They will entertain and look at pretty much everything. If there are businesses that are in highly regulated fields or businesses that are in non-regulated fields, like cannabis for example, the appetite is a little bit trickier there.
However, as time goes on there’s more comfort that comes along with underwriters. The best way of saying this is the insurance underwriters are industry agnostic. Some like some things more than others, but there’s a variety of places out there. The issue is really if a deal has an indemnity cap in it of 10 million dollars or more. Now, we can do smaller deals, but transaction value, we’ll hear about that where if it’s a transaction value of 25 million and up to a billion dollars, we’d look at that.
We prefer to look at the indemnity cap. What is the buyer looking for? If you look at the 10 million dollar indemnity cap … Because that’s how big the policy is, that’s a great starting point. So, if you have a deal, whether it’s a 50 million, 30 million, whatever, if you have a 10 million dollar indemnity cap or up, rep and warranty is an ideal fit, okay?
The reason why I say 10 million, because the minimum premium for a policy right now is about 250 thousand dollars. That happens to be the rate for a ten million dollar policy. If you’ve got a smaller deal and you need a five million dollar policy, you don’t have a ten million, that’s fine. We can still do it. There are markets that are willing to write a five million dollar policy for that indemnity cap, but again, it’s going to be that minimum 250 thousand dollars. If it makes sense, great. It can be a fit. Ideally you want to look for risks where there’s an indemnity cap of ten million, all the way up from there.
Steve Gordon: That’s, I think, really helpful for folks to draw a fence around where this applies as they’re working through deals. Patrick-
Patrick Stroth: Yeah, what happens often in this … Some people may say, “Well, why ten million? Why so big? What’s going on?” It’s largely because we’ll get asked about sub-ten million dollar transactions. Wouldn’t it be great if there was a market that could handle the two million to ten million dollar deals because there are thousands and thousands of those out there.
The reason why the underwriters want the larger deals is because you’re looking at the buyer’s due diligence. The buyer’s due diligence has to be pretty thorough. You’re not having a real thorough due diligence done on the smaller transaction value deals.
Once you get over 25 million transaction value and up you’re having M & A attorneys. You’ve got to invest in bankers. You’ve got professional advisors. You’ve got audited financials, or at least reviewed financials. The elements that make a risk eligible as opposed to ineligible. So, I definitely want to put in that issue on the ‘why’ at that threshold.
Steve Gordon: I think that’s good information. Patrick, we’ve only got a few minutes left and there are a couple of questions that I think are important for folks who may be looking at trying to learn more about this. The first is, I know you do a tremendous amount of education around rep and warranty insurance and M & A in general through your podcasts and your website and all that. You guys publish articles, I think at least twice a month on these topics and on other M & A related topics that folks can get to. I know that you go and do presentations and that you do webinars. How can folks tap in to all this education that you are doing?
Patrick Stroth: The best way to find stuff, I’m pretty proud of the work that we’ve done on our website on this, is first to visit our website at Rubiconins.com. If you click on the insights tab there we’ve got a list of our articles, links to podcasts, and so forth, just to get a flavor. I would say this, as an insurance broker in the M & A sector, we have probably the easiest, most user-friendly website when it comes to finding M & A-related material.
There are videos in there with some side-by-side comparisons on an uninsured and an insured deal. There are other resources there that it’s one click and you’re in. I’m very proud of that because when I had to do my research on this years ago, you were hunting and pecking all over the place. So, I would say the first place would be to go there.
The other issue is that we do routinely is, on a regular basis, we’re providing ongoing continuing education to the corporate groups and the M & A practices for a number of law firms. We can do these either live or I have a webinar where we go point by point on how to execute this product, pricing on the product, and the comparisons. It’s really difficult when you’re listening to something when you hear numbers here and there, and comparisons, and so forth.
It’s important to have some visuals. I would argue we probably have the best visuals when it comes to an M & A webinar presentation. So, those are available just by reaching out to me and scheduling that to give you on the ground work on this.
I would say that without exception, if you attend one of my webinars on M & A for rep and warranty you will know more about rep and warranty, and how it can be executed, and how can it impact a deal than about 95 percent of the people in the insurance industry.
There are a lot of commercial insurance agents and brokers out there that are very good and they do great work … They don’t know this. It’s not just how the product works, but how you can go from dead stop to getting a policy placed and get it set. That’s a real problem when you’ve got something new.
When you’re into M & A transactions and you’re dealing with bankers and their fees, you’ve got advisors and their fees. If you want to stage your company you’re going to have some compliance issues and costs to get yourself set up, IT expenses to get your security up.
Then, you’ve got legal costs. You have all these things you’re going to incur before you’re even going out there on the road to get an offer for selling your company. There’s all these expenses out there.
To get the idea of rep and warranty in there, that’s just one more thing on the pile of other to-dos that you have. It becomes a reluctant item because you’ve got so many other things out there. What we show with both the webinar and in speaking with me is that there’s a step-by-step way of doing it. It’s a very simple process and it’s manageable. The best thing about it, it’s at zero cost. Until you’re committed to where you want to move forward on a policy you don’t spend a dime.
So, that’s a nice departure from traditionally getting other services where you’re going to incur some kind of retainer fee or expense just to get started. That’s not the case with this. The more people that know that there’s this free resource for a key tool, the better.
Steve Gordon: Excellent, Patrick. I know you do a tremendous amount of work to put all that together. So, for folks who have listened to this and now they’re thinking, “Well, maybe I have a deal that could be a fit,” what’s the best way for them to maybe get in touch with you to begin to talk some specifics, just to see if the deal is a fit? How do they go about doing that? How do they get in touch with you?
Patrick Stroth: Absolutely. The easier it is just to get a quick snapshot look, I think, the better. So, the way you do this is you either reach out to me by email, which is pstroth@rubiconins.com. You can also find it on the website or call me, 415-806-2356. Give me a call.
Here’s what I need. This just shows you how simple we’ve made it for you, okay. If I have four data points: the transaction value that you’re thinking about, what the indemnity cap is, is there an escrow amount, for comparison purposes, what escrow if you were uninsured, what would that be, and then what is the state of domicile for the buyer? That’s important because all policies have taxes and it depends on where the buyer is domiciled, so we can get that.
If you have those four items, I don’t even need to know what type of company it is. If you give me that, we can at least give you a real back-of-the-envelope number. Then, it’s just a matter of is the due diligence eligible for the underwriters? And we would go through that later.
But, at least with those four data points, that’s all I need and you’re going to at least have pricing. If you can get that idea budgetary-wise what’s out there, as you go into the letter of intent stage, it’s a lot easier to incorporate this powerful, powerful tool without having to stop doing what you’re doing in the deal to then inject this process and then do it later. It’s much more effective if it’s baked in to the deal at the outset.
Steve Gordon: Very good, Patrick. This has been really educational. I know I’ve been taking notes as we’ve talked. You’ve shared just a ton of information. I appreciate you doing that. Folks, Patrick will be back as the official host of the M & A Master’s podcast in the very next episode, so be sure and come back for that. Patrick, thanks for giving me the opportunity to turn the tables on you today and put you in the hot seat. Thank you again, for everything that you’ve shared. It’s been great having this conversation with you.
Patrick Stroth: Thanks very much, Steve. Appreciate the help there.