Right to Win Series EP.4: AMA with Lindsey Gray and Aaron Perrine – EP.277

(00:00:00) – Intro
(00:01:54) – Fundraising and identifying industries
(00:09:43) – Evaluating searcher talent
(00:13:35) – Acquisition models and strategies
(00:18:30) – Cap table construction and investor relations
(00:20:28) – Navigating investor relationships
(00:22:12) – Signs of a successful search
(00:24:28) – Key metrics for searchers
(00:27:14) – Lessons from recent deals
(00:30:42) – Building an effective board
(00:35:00) – Creating value in acquisitions
(00:38:15) – Desert island CEO picks
(00:39:48) – Sports rivalries and fun bets
(00:41:45) – Conclusion and farewell

Alex Bridgeman: Welcome to the fourth episode of our Right to Win series with Trilogy and Pacific Lake. I’m joined by Aaron Perine and Lindsey Gray from. Trilogy and Pacific Lake, respectively. We’re trying a new format in this episode. Instead of having a guest, we’re doing an a MA episode. We’ve gathered questions from a number of different sources and organized them into a couple kind of key themes and categories that we’ll go [00:01:00] through throughout the episode.

But thank you both for joining us. It’ll be a, a fun experiment in a new format. I think the first a MA episode on my podcast as a whole. So not just this series, but as a whole. So that’s exciting.

Aaron Perrine: And we, we should say too, ’cause sports are gonna come up later that we’re, we’re recording on January 22nd. I, I am wearing a Seahawks jersey.

Lindsay has been, uh, pretty clear about her, uh, rooting interest in the past. I think we’re gonna circle, circle back around to that in a, in a friendly way. Later on in the episode, it’s al always possible that I don’t think the pats are gonna be out by the time this drops always pop. Well, we’ll be out by the time this drops.

And then, and then that’ll seem silly. But from where we both stand now, hope. Hope springs eternal. A lot of, a lot of excitement.

Lindsey Gray: Absolutely.

Alex Bridgeman: Yeah. We don’t eat too much crow by, but a lot of confidence I think in this threesome circle here.

Lindsey Gray: That’s

Aaron Perrine: right, that’s right.

Alex Bridgeman: Uh, well let’s kick it off. So we have a couple general themes of questions kind of starting chronologically [00:02:00] and fundraising as a, as a category.

We have a couple questions here. Maybe a good place to start would be this question about identifying industries before the search. So kind of during or even pre fundraising and identifying industries that are a fit for search that may have enough targets. But that also may have some personal tie.

Either the, the potential searcher has a background there or is an interest in it, or there’s, there’s some kind of Venn diagram overlap that the searcher can find that works within the industry. So maybe what are your thoughts and maybe feedback for someone who’s thinking about what industries to look at as a part of their fundraising.

Lindsey Gray: I’m happy to kick us off. We talk a lot about, you know, industry driving a search process and often the question comes up, well, how do I know where to start and come up with an industry to dive into? And so I always tell everyone, you know, the goal is simply to, to identify a topic or industry [00:03:00] that you’re excited about exploring and then to continue to drill down.

Into that industry to identify whether or not there’s a business model and ultimately a target that you’d be excited to run as a CEO. And there are a number of ways that you can come up with those industries or topics to explore. But I have found giving searchers a little bit of a structure and how to approach that question makes it a little bit more comfortable.

So we typically talk about three ways that you can identify an indu interesting industry. The first is sort of a macro driven, top down approach. So think about a trend that is observable out in the world that is interesting to you. And it may start very broad. It may be as broad as something like an aging population.

Aaron Perrine: Do you give points for the term silver tsunami in the PPM or, or do you? We, we, uh.

Is

Lindsey Gray: an auto pass through there.

Aaron Perrine: Yeah, I for sure a megatrend, if you can think of a different way to [00:04:00] phrase that particular mega trend, I personally would, would, would appreciate it, but, but silver tsunami can also, can also work.

Lindsey Gray: That’s funny. So you know, you, you’ve got that trend and then you can drill down from there to identify sub niches within that.

That could be exciting. So to kind of continue on the silver tsunami, you could drill down the, to there to say like, well that population is thinking about aging in place. Or they’re thinking about wealth transfer, or they’re thinking about a need for more medical staff and medical attention. And so now you’ve got something slightly more narrow.

And then from there you could go even more narrow. So let’s say you say wealth transfer is an interesting topic. Well, what sub niches does that lead you to? And so you’d get things like estate planning or. Financial education and literacy or whatever the case may be. But the point being you’ve started at something very broad and observable and interesting is a trend, and then can burrow down deeper into something more specific.

And, and that process is, can be done many times for [00:05:00] many trends that are interesting to you, but at least it’s given you some structure. To follow. And then the opposite of that is bottoms up. So start with a customer you’re excited about and think about the products or services that service that customer.

And it’s a similar process, right? It’s thinking about what they need and then kind of identifying sub spaces. Within the products or services servicing that customer that you’d be excited to learn about. So these are just, you know, methods for identifying a place to start and start learning. And then from there we find, you know, the process typically runs away from there, you know, in, in, in a positive direction.

But Aaron, do you guys use a similar kind of constructs?

Aaron Perrine: Well, I, I’m glad you first because I, I, of course we’ve, I’ve, I’ve heard the how you guys structure and I think it’s super smart. And, and I’ll just add a couple things on top of that, you know. Just a shout out for the very first, I think, think like an owner episode with Ryan Turk.

Right? He, he actually talks about that value chain mapping into and out of Dennis’s office and how that got him to the idea of, of radiation [00:06:00] dosimetry. That’s sort of like a middle gra, you know, I guess there’s a, you know, customer build up trend build down, and then he had like a, something that feels like this middle thing of like a, you know.

Really interesting business. Wanna map all the val, the, the different flows of value in and outta that business. I like that. I, I like, you know, another mega trend that we’ve just been excited about is, you know, it’s like, kind of like AI to data center, to power, to power grid to, you know. You know, gas turbine maintenance.

I mean, there’s just, you know, there’s a lot that kind of flows out of that. It doesn’t all have to be like data center cleaning or something like that. There’s like, there’s a, there’s a ton of different things that, that come in from that. And, and then, you know, you had an, you asked Alex is what’s the value of starting with what you know?

You know, I do think that some of the most successful people doing this, we, we, we had the opportunity to invest in a deal in the fall, a woman who was at bots consulting group in the semiconductor, uh, practice for four or five years had a very strong thesis around printed circuit board assembly. [00:07:00] Like, knew the players, had it called, that was all she was gonna buy.

There is real strength in that, like, like your outreach challenges. If there’s only 30 companies, you have no outreach challenges. You can go sit on their doorstep, you know? You better. The thesis has gotta be right. You better be right there. There. It’s not, there’s no danger to having something or you know, no challenges in having something that narrow.

But there can just be real strength in it too. And of course from like, you know, credibility and owner conversations, et cetera. So like there’s some large fraction of folks that are just, they, they’ve come to this. Specifically because of an industry opportunity that they feel in their bones. And that is, that is awesome.

I think it’s actually harder if you don’t have that. And then you do need these different structures and trends and that’s fine and you can get there and that, you know, we’re, we’re, we’re totally delighted to work with those folks too. But it can be really nice when you come with something you’ve got, you know, you’re feeling conviction about.

Alex Bridgeman: Yeah. And owners, frankly can tell when you care about their [00:08:00] industry and care about their business and are genuinely curious, uh, they notice, they pick up on that and they, they know when you’re, you’re kind of going through the motions versus you’ve spent a lot of time there, you know the lingo. You can speak their language, you can wrap your arms around their business quickly.

They, they pick up on that.

Aaron Perrine: Another part that’s really fun about this, Lindsay’s like. The entrepreneurs we work with, like educate us about these industries in like a super fun way. And, and that’s another part that’s really cool is when you are in a fundraising conversation and you, you know, know, know vastly more about an area at the end than you did at the beginning.

And you know, like I. I do a lot of the healthcare stuff at, at, at trilogy, you know, there’s some stuff about healthcare I have some knowledge about. You know, it’s great if there’s like, maybe we can push each other on that, but it’s just as likely that there’s something I didn’t know anything about and it’s, and, and then you’re like, wow, I get it.

That’s super cool. And it’s, you know, it’s not every discussion is like some, you know, a brand new original thing we haven’t heard before. Right. But that it, it does happen. And that’s, that’s really a fun [00:09:00] part of this.

Lindsey Gray: I agree with that completely, by the way. I felt that way in venture as well. You know, I spent a good chunk of my career in early stage venture and every time I met with an entrepreneur it felt, I felt like they were gonna tell me about where the world is going, and that was really exciting and I wondered how I.

Intellectually interesting. It would be to dig into thesis in the ETA model, and it has been equally, if not more interesting. It’s amazing the, like the, the opportunities that get brought to us and the ability to kind of learn about a sub niche that sometimes I’ve never even thought of existing, nevermind, like have a deep understanding of how it works.

So it, it’s, we’re lucky for, for someone intellectually curious. This is an awesome job

Aaron Perrine: for sure.

Alex Bridgeman: How do you evaluate searcher talent? So when you’re talking to someone who is asking interesting questions and maybe has an interesting industry, what sorts of things are you kinda looking for to see if they’re gonna, if they’re, you know, someone you’re excited to partner with?

Lindsey Gray: Yeah, I, [00:10:00] I can kick this off. We can bat this one back and forth ’cause there’s definitely a lot of things. I think it’s always important for us to start with the, why are you pursuing this path? Do you recognize that this is gonna be a hard journey? Any entrepreneurial journey is a hard journey and are you prepared for that and passionate about what you’re doing?

You know, this isn’t a fallback option ’cause like the job at McKinsey didn’t, uh, come through. I, I think, is important level setting. And then from there, you know, we, we often get asked like, what needs to be on my resume? What experience do I need to have, had to be good at this? And, and my answer to that is like, really there are no set experiences that we have found that make.

A search or a, you know, A-A-C-E-O role, more successful. It’s really, you know, have you been successful in whatever it is that you’ve pursued before, and that is personal attributes that, that sort of drive success. So it’s things like an ability, intellectual horsepower, and curiosity and ability to underwrite an industry.

Uh, quickly and efficiently its ability to [00:11:00] build relationships because at every stage of this journey, building relationships is important from getting a company under LOI all the way through kind of, you know, managing your investor group and employee base going forward. Then lastly, you know, I’ll turn it over to Erin to add on here, but you know, in an entrepreneurial journey, there are always gonna be challenges that you didn’t foresee.

And so do you have both the willingness and the ability to roll up your sleeves and figure it out in hard circumstances and can have you demonstrated having had done that in the past? So, you know, those are, those are some of the things we look for. But importantly, it’s not like we’re checking boxes on a resume.

That’s definitely not how the. The process goes for us.

Aaron Perrine: Yeah. Real, really similar. I mean, I, I just to, you know, be, be super clear for us it’s a distinctive record of achievement drive and ambition, which is sort of like a, kind of like a killer instincts category, EQ and then strength of thesis research.

And, you know, we want you to meet with a lot of the folks here at Trilogy is gonna be at [00:12:00] least four interviews. We do behavioral interviewing. We want to get underneath, you know, what drives you, what you’ve done in the past, you know, the feedback we. Get is that it, it feels intense and it sometimes feels a little bit less like a, you know, sort of like big cheerleading exercise than, than maybe other fundraising processes or other discussions.

And, and that man that’s, that’s, you know, that’s by design. Like it’s a long, it’s a long partnership. It’s a long commitment. It matters to us. We want it to matter to you, you know? Lindsay, I won’t speak for you, but I, I think both of our firms are, you know, wanting to be kind of lead or co-lead partners and, and so, you know, those are relationships that it should really make sense to invest in.

And, and we, we really try to do that. We, we want it to be an interesting, you know, fun but probably intense process of getting to know us. You know, at the same time, you know, we, we are trying to do, make assessments across those categories and so that’s, that’s part of the process too.

Lindsey Gray: By the way, I think that’s a very fair question for [00:13:00] entrepreneurs to ask their investors in the process what matters to you.

I love it when entrepreneurs ask me that question, what matters to you in this conversation and what we’re looking for? And it’s, you know, it can be answered in a way that doesn’t give away the cheat sheet, but that makes it clear. Like we’re not, I don’t think Trilogy is either like hiding, hiding the ball on these things.

These are the qualities that we look for because we believe that they. Are, you know, what leads to success? So that’s a fair question to ask your investor. What are you looking for in this? By the way, I’ll turn it right back around and say, what are you looking for in this partnership? And I think that that’s a great way to lead off a relationship.

Aaron Perrine: Hundred percent.

Alex Bridgeman: We have a kinda acquisition model question, which I think is kinda interesting. So there’s a number of like developing other acquisition models that have been slowly becoming more popular, some fast than others, holding companies are permanent capital or consolidations. Do you think there’s kind of one of that cohort or some other model that in the next couple years will become more popular or will be [00:14:00] a bigger part of kind of what searchers are looking to go do?

Aaron Perrine: You know, I, I think there’s always been, uh, innovation and flexibility in this model. That’s, that’s what makes it great. That’s what’s made it really resilient. Well, we are certainly flexible around, you know, how these things are, are set up, you know, I guess that is just observed a. O Often at the end of the day, the underlying structure does not look that different even when it’s called something else.

You know? No, no, no sweat. But I think it’s important for entrepreneurs to, to be able to articulate like, what, what is the goal behind the label? You know, good example would be a committed capital vehicle. You know, my whole business and professional life is investing capital behind good ideas in, in if possible, more of it over time.

And so, you know. Asking folks for capital equipments can definitely make sense in some industry context. I think sometimes entrepreneurs have the idea that if they, if they don’t have a significant [00:15:00] committed capital vehicle upfront, that capital’s not gonna be available, not the case. I mean, it can be, it could be absolutely the right answer to, you know, reprice that capital, think about it in a later round.

So, you know, I think. In general, it’s kind of a horses for courses discussion. We’re delighted to be flexible around these things and it’s, and, and some of the new structures have been a great fit for different industry strategies that, that folks are going after.

Lindsey Gray: Yeah, I, I would echo that completely. I, I.

Love to start the conversation with. Tell me what the, what you’re trying to do here. Tell me the strategy that you’re hoping to employ in on this entrepreneurial journey. And then we can figure out a structure and a model that will set you up for success with that versus, you know, coming in with like a investment model label and then trying to back into like, well, does that fit what you’re trying to do?

There’s no doubt we’re seeing more folks who are interested in multi acquisition strategies. But even within that, there’s a lot of diversity, right? There’s still the, I wanna buy a large [00:16:00] platform and then we’ll, you know, do m and a in organic growth as an important value creation lever That’s been around a long time and is, is still popular, you know, increasing popularity for the last several years around consolidations and roll-ups, and now different models of holding companies are becoming more popular too.

So it may be, you know, buying multiple companies that have a correlated thesis and you need to capitalize the business to be able to buy those correlated businesses over time. And then definitely we’re seeing holding companies with sort of uncorrelated underlying assets as the goal. It’s simply a holding company that’s gonna buy uncorrelated businesses.

So even within sort of multi acquisition strategies, we’re seeing, you know, proliferation of the model and. I think if you have a, a thesis that’s compelling and a why behind what you’re trying to do, the capital structure will follow. And I, I agree with Aaron, like the beauty of the ETA community since it began as its ability to innovate and [00:17:00] invest in different, you know, different entrepreneurial journeys as the searcher and entrepreneur community identifies different things that they wanna do.

And I, I expect that innovation will continue.

Aaron Perrine: I thought of one more thing I wanted to say about this, which is sometimes there’s anxiety that if we don’t label this as kind of a, a hold Co or, uh, something that indicates we’re gonna do it for a long term, that my investors are gonna make me sell it. Like one of the, the, the identity properties of this kind of investing is that we’re all minority investors.

Nobody cares where Trilogy is in its fund life. And, and I, you know, much respect and love to my colleagues at Civic Lake. I don’t care where they’re in their fund life. People do what’s right for the company. So like the, the, the in. Almost every case, the decision to recapitalize or sell or move on is instigated by the entrepreneur, by the CEO.

It would be not an adaptive behavior from a brand perspective for one of us to force someone that’s to sell that didn’t wanna sell. You know, Alex folks can go back [00:18:00] and listen to, you know, to your episodes with Colin Hathaway. I, I understand that that happened to, to, to Colin. It’s a fantastic story.

People should go back and listen to it. That was not us. That was a, that was a, uh, you know, a majority owner, right. Of his first business. And so I think the, you know, we, we don’t like paying taxes mu as much, you know, more than anybody else. Like, we’re delighted to compound. Last time I checked, you know, Pacific Lake guys a non-trivial part of its strategy about doing that for the long term.

Right? And we’re happy to go along for the ride with those things.

Alex Bridgeman: Some searchers say they can only have one like large institutional firm or maybe one of between the two of you on a cap table at the same time. How true is that and how often does, you know either case happen?

Aaron Perrine: It’d be funny if I say not true.

He says true, but I’m just,

Lindsey Gray: let’s do it. Let’s rattle it out.

Aaron Perrine: Yeah. I, I, um, no. We, we, we didn’t probably sponsor the podcast together ’cause we all like can’t work, can’t work together. So I, maybe the answer is a little bit obvious, but I think our view on cap [00:19:00] table construction is there are a number of reasons why you might assemble a different group of investors.

A great one is that you want investors that are gonna be engaged, that are gonna do the things they say that they’re gonna do, that are gonna really be helpful. And so, so that we had talked earlier about, you know, fundraising questions. I think it’s great when people call CEOs and they ask, it’s the unaided awareness question, right?

Not, not was Trilogy helpful, but who was helpful? And if you do that 10 or 15 times and you do have just a, a, you know, cred chart of the answers, that’s. That’s telling you something. I think the failure mode is that it, it is economically rational for some investors to be not super involved or involved in only very specific parts of, you know, what it takes to, to buy and operate a business.

That’s just not our. Model. Our model is high intimacy and availability and engagement. And I don’t think that having more than one investor with that theory is bad. In fact, I think it’s essential. And, and we are [00:20:00] not the only two. There are many great investors in our asset class that do that, that do that along with us, that we who, you know, who I, who we value partnering with.

But you know, candidly, when we see that civic lakes on a cap table, that’s, that’s a delight for us. That’s a cap table we wanna be part of.

Lindsey Gray: Yeah, unfortunately we’re not gonna get to debate on this one ’cause I, I totally agree. It. It’s definitely not true that, you know, you can’t have more than one institution.

Of course, every entrepreneur gets to design their own cap table. It’s the beauty of this model. You are captain of the ship and you can design it, but there have been many circumstances where we’ve been with Trilogy or other kind of. Institutional investors, if you wanna call them that, and, and are very happy in that position.

And in fact, it, you know, there, there are many circumstances in which we’ve made extra room. You know, if our allocation initially was 20%, we’re like, if you need to take that down to 17 or 18 to get this other investor that we know is going to be value added during the search and operating phase, we will make room for that.

So, uh, uh, you know, we, we [00:21:00] recognize, as Erin said, that surrounding yourself with people who are gonna be helpful is good for you as an entrepreneur, and it’s good for me as your investor at the end of the day, and we’re aligned on that. So, you know, again, uh, entrepreneurs get to choose how it goes, but it’s certainly possible to have folks like Trilogy and Pacific Lake together on a cap table.

Aaron Perrine: And, and, and maybe we should just acknowledge on the flip side, you know, there are occasionally times where we find ourselves. Without as much help in the cap table as we would wish. And that’s, that’s really tough. It’s, it’s, you know, that that’s, that’s tough for the entrepreneur because if for some reason the deal’s not gonna be the right fit for us, it’s, you know, you don’t have as many good alternatives for somebody to come in and lead.

But it’s also then becomes like a cat herding exercise of, of, you know, trying to align folks and get folks on the phone and man, that person was so available during fundraising, you know? But they’re just one person and now they’re on vacation. I can’t get in touch with them again, it’s not that there’s not a great place in the ecosystem for folks that are doing this off the side of their [00:22:00] desk or that are doing it as an individual.

It’s always been the case with search. But you know, for us folks who do this for a living, you know, that’s, you know, there’s, there’s real value, uh, to that.

Alex Bridgeman: Absolutely. Alright, let’s get into some searching questions. So what does it feel like when a, a search is going well? Like what tells you that a search has been, you know, off to a, a good start or is hitting a stride?

Especially because the outcome, especially for the searcher, feels very binary. Like either I find something or I don’t. And that can be certainly nerve wracking as a searcher. And don’t ask me how I know that that’s the case. But when you are as an investor and you’re receiving communications, or maybe you have a more regular.

Cadence of communication with your, with the searcher. What does it look like when it’s going well, and what does it sound like and what does that kind of imply for other searchers who obviously wanna have a good search too?

Lindsey Gray: Yeah, I’ll, I’ll say what it sounds like is that the searcher’s learning is compounding over time, [00:23:00] which can be really hard to measure, but I’ll, you know, try, try and give some hints so like they are connecting with industry insiders and getting a deeper understanding of that industry or market with every conversation.

And those relationships are strong enough that they lead to new introductions that lead to more information that makes you more of an insider. That leads to more relationships and that flywheel of, you know, relationship building and knowledge building is, is continuing and building upon itself over time.

And so a question an entrepreneur can ask themself if they’re kind of in this mode is, do I understand that this industry or this niche well enough that I can start to outline the dimensions of what a good business looks like in this industry? Or do I still have major gaps in that understanding? And like really having an honest conversation with yourself about if you can do that, will tell you if you’re getting deep enough in your learning.

And then the second question is, do I currently have. Depending [00:24:00] on where you are in the timeline, the number may change, but two or three or more relationships that I can call on for the next round of introductions. As I seek to fill my knowledge gaps, do I already have warm enough relationships that I can call upon those people?

And if the answer is no, then I’d say, you know, you may be talking to a lot of people, but maybe not truly building a relationship that you know you can use. Leverage to, to grow your knowledge base over time. So those are two questions we tell searchers to ask themself. And, and the last thing I’ll say on this is, we just looked at this data for 2024 and 2025 for deals that Pacific Lake Searchers closed in 20 24, 20 25.

The deal that they closed was put under LOI at the 19 month mark in their search. And then it probably took another four to six months to actually close that deal. So don’t get frustrated if you’re in month six and you feel like you don’t have objective me measures of progress. Come back to what I just said to look for and you know, ask yourself the question, is your [00:25:00] knowledge confounding over time?

But recognize it does take time and searchers who sort of, kind of give up on this, you know, industry thesis, compounding knowledge approach. I think come to regret it and they give it up too early. So I know it’s hard in the, like the 12 to 19 month slog is a hard one, but the power through was my advice.

What do you think, Aaron?

Aaron Perrine: No, I, you know. Yeah. Yes. All that. I, I, I was gonna just, if I distill it down to one thing, which it’s not just one thing, but just, just, you know, for, for, for podcasting sake, you know, seller, seller meetings, we ask folks to track this metric quality seller meeting, which is. You’re under NDA and you’ve shared financial information and you’re having an in-person meeting with a seller.

And so that there’s some indication there that like they’re a real seller if they’re taking you seriously. It’s not just a, not just a Zoom meeting, you know, whatever. And I would just say like, when you’re having seller conversations, you’re not, you know, just sitting in your WeWork and emailing people, you know, you’re not on the fringes of a trade show.

You know, you know, you’re, you’re, you’re sitting down, you’re having [00:26:00] coffee and, and. And that just that I just, I just think that tends to lead all the things that you’re, that you’re identifying, you know, to Lindsay, which is like introductions to others, introductions to river guides, you know, what, you know, whatever increased competence, you know, and increased fluency.

We are both in this deal as a little while ago now, but you know, Tom and Roland, who I know work with you guys, I mean. There was this thing about they, they had just really become industry experts, but people were calling them to ask them about the industry. You know, because they had so many seller conversations.

You know, that that’s, that, that stuff’s really great. I’m not saying that’s easy to do by any means, but I don’t think emails sent or response rate. I. I, I do not find, we do not find that comparing those, is that helpful? It is. It, it, it goes into like these kind of entrepreneur anxiety cave a little bit and, but I, I just can’t correlate them.

It just, it depends too much on the industry and on your strategy. But quality seller meetings to us is, is a metric that, that there, there really is, you know, some correlation with, and so we, we, we like to, you know, ask folks to, to keep track of that one.

Alex Bridgeman: One funny one I was [00:27:00] just thinking of as, are they flying enough that they hit status on an airline?

Like, like, are they getting in person enough that they occasionally get, you know, maybe a first class upgrade or something like that? You know, those are the things I, I think about sometimes on a deal question. Are there, we’re kind of just talking about it, uh, right now actually. What are some maybe learnings from recent deals that other searchers should be aware of or start thinking about, and maybe also some stumbling blocks to avoid too.

Lindsey Gray: Yeah, I, I can take this one. I think two key headlines. When we look at sort of deals that have gotten done or where searchers have struggled, one is like quality, quality, quality, right? In a tougher environment, it is tempting to lower your bar for quality to put a deal under LOI, and we would say. Don’t do it, like maintain the, the bar for quality and be ruthless about calling opportunities that don’t meet that bar, which again is, um, easy to say, hard to do in a challenging environment when you’re in month 18.

Right. I I, I appreciate that. And then, you [00:28:00] know, we talked about relationships being key, but we looked at the 16 deals. We acqui, you know, we, we participated in last year that our searchers acquired, and eight of those 16 deals in 2025 came from warm intro. Relationship that had was longer than 12 months.

So relationships look really are key. And then we looked at the 16 deals that were under LOI in 2025 that we didn’t get done. Coincidence that. 16 that we did and 16 that died. But you know, there were kind of four key reasons. The first one was sort of like a weak value proposition remote. Like it was not a mission critical business.

It was in a highly competitive market where it didn’t have a, you know, a sustainable right to win. So that was kind of the first one. The second is poor revenue quality. Which is probably very much related to the first. So again, like quality, quality of, of business and revenue. And then the third one, valuation.

But I, I’m with Erin, like I wouldn’t get too maniacally focused on valuation at the beginning because if it’s a super [00:29:00] high quality business with tailwinds and growth, you know, valuation can, can usually be figured out, sometimes it can’t. And those, and those deal died. And then the fourth one is AI risk.

There were a couple, including the one that I mentioned that, that, that died on that. So, you know. Metrics alone, don’t get a deal done. Many of these companies had, you know, rule of 40 plus, but at the end of the day, we couldn’t look at them and say, these are gonna have sustained right to win in a mission critical industry.

And so, you know, those are the ones that die. So quality continues to be the key.

Aaron Perrine: I love it. I, I’m gonna just, you know, go to different direction, say something like hyper-specific, which is MSO PC structure. So I, I just, uh, get to work on a lot of different healthcare deals. If, if it’s a, a healthcare provider, you know, often need a, a professional corporation and, and a, a managed services organization on top of it, that, that’s getting more complicated because among other things, uh, you know, law and Oregon, that, that changed that structure in a way that probably makes it harder or impossible to invest in the different.

Laws around M-S-O-P-C structures are different in [00:30:00] different states. The, the, the very specific thing is there’s, you know, deal I, I’m gonna call the ball. I think it’s actually gonna close while we’re taping this podcast that I are both a part of. Very, very exciting. I won’t say too much more about it, except that if the lender thinks they need to have a security interest at the PC level, they do not.

In fact, they really shouldn’t in most states, and their attorneys may not really know that. And so. Maybe I’ll, the bow I’ll tie around it is if you’re doing healthcare, it does, I think, help to have investors that know something about that and can help guide some of those discussions. But so in, in, in the broadest sense, love all of Lindsay’s points.

That’s just one that I have a recent headache about, although it all worked out.

Alex Bridgeman: Uh, moving into some operating questions, what does a great. Board look like and how do searchers pick good board members for both themselves and their own personal goals and the company that they’re gonna go run?

Aaron Perrine: Can we just like direct people to, to, you know, [00:31:00] Chris Hendrickson’s re like guided research.

But, so this is a topic that we’ve all been talking a lot about and a number of folks from Lindsay’s firm led a discussion about it at the, at Stanford conference. Mitch Coen on our team and Chris at Ppac Lake and, and other investors had a great discussion about it at the HBS conference. It, it is, it’s something that we really care about I think.

I think self critically, I think. You know, those of us that feel like we’re in this, you know, conveners or, you know, you know, leaders in this community feel like there’s been a, a, a degradation in, in some cases, in in searcher’s ability to form good boards. That’s really, really important to us. And so it’s hard.

I don’t wanna try to like summarize all of that now, other than to say, I think, you know. It starts with your fundraising or, uh, right, like, like you need to have investors who are gonna be prepared to commit time to your board. And then even within that group, we have lots of folks in our community who know how to coach.

A new CEO and getting their arms around the business in the first two years. It’s a [00:32:00] really specific skillset. We’re gonna talk a little bit, I think about, you know, value creation. Look, part of how we create value is we professionalize businesses, middle market private equity funds wanna come buy our businesses because we have put good systems.

We, we supporting the entrepreneur, CEO, who’s doing the hard work of this, has put really great systems in place and has created something that’s easy to understand and easy to underwrite for the next set of capital in it. That said. There’s another kind of board member who can start from that first two years, get your arms around the business, and then transition to a sort of talent strategy, risk focus of how of, of maybe what a, a, a board of a bigger company might look like and what that entrepreneur may need in their next phase.

It can be a little painful if you’re stuck with the, the, the person that is, you know, whose special skillset is just that first two years. That can be a reason for, uh, board terms. That can be a reason for just diversity on a board. But it is a, it is a really important topic and something that folks should be really thoughtful about.

Lindsey Gray: Yeah, I, I agree. [00:33:00] And there’s a, there’s a lot of great work a, across the ecosystem I think that’s been done on this topic because for companies of this size and operators who are usually, you know, new to the CEO seat, I think a board can be a really powerful tool in the, in the early days we talk about, you know, the different personas, like the CEO coach is one persona that is helpful, particularly in those early days.

The former operator. I, I usually call the person the operational hammer, who can really help you drive through the operating, you know, changes and professionalization that Aaron referred to a capital allocator is really important in certain business models. Somebody who really can kind of dive in on that.

Oftentimes it’s helpful to have someone who’s an industry insider or is, you know, really deeply understands the business model if it’s sort of a nuanced one. So, you know, there are different personas to think about. At the end of the day, though I agree with Erin, it’s someone who has the time and the willingness to dig in and and tackle whatever unforeseen things [00:34:00] the business will face.

Aaron Perrine: That’s right. You know, there’s a, McKinsey probably didn’t invent this, but this is where I learned it was the trust equation, which is, you know, trust equals competence plus reliability plus intimacy divided by self-orientation. You, you need somebody that you can trust. Searchers get anxious about their boards and they probably over prepare sometimes for, for meetings.

And I think having real trust, particularly in your investor directors, is, is really important. And, and that takes a long time to, to build. That’s not necessarily just someone that’s your buddy, that’s somebody who you trust and have enough intimacy with that they can give you hard feedback, you know, and the self-orientation side, like you, you gotta kind of believe.

They’re, they’re actually really there to support you. And if you, you know, we’re at the HBS conference and sort of suffered through like a two hour commercial for one firm at the beginning of it, like, I guess, I think you have to ask the question is that what level of so self-orientation does that imply?

And like, what do you want, you know, what, what kind of group are you trying to build around you? [00:35:00]

Alex Bridgeman: We were just talking about it, but the, where do you see value being created most in terms of categories like EBITDA growth or professionalization or multiple expansion or debt pay down? Like where, where do you see kind of most value being driven from?

Lindsey Gray: Yeah, when, when we’ve looked at, you know, where value was created among the realizations, the 60 ish realization specifically has had in its history, 50% of the value comes from multiple expansion, and 50% comes from growth. But you absolutely do not get multiple expansion without the growth. So it comes down to growth.

And so there, there are different things that are done. Uh, I agree with Erin’s comment around, like, a big part of our job is to professionalize the business and in doing so, drive growth. So there’s, you know, very commonly a building or optimizing of the go to market motion. You know, hiring sales leaders, honing who the ideal customer is, professionalizing the go-to market [00:36:00] motion.

Pricing often is a value creation lever that leads to, you know, Bo bottom line growth. Often it’s a part of a business that was just ignored. And so pretty early on you can identify there’s value being left on the table. And so, you know, kind of optimizing the pricing model is, is pretty common. Building out in a professional executive team.

Again, some businesses we acquire. Have, you know, great leadership teams in place, others we acquire, knowing that’s gonna be an important sort of value creation lever to pull. And, and so going in with eyes wide open and surrounding the CEO with resources to help them do that has been important. And then to our earlier conversation, you know, in multi acquisition strategies, really being able to dig in and help build a sourcing engine.

And then importantly, an integration process for the, you know, acquired companies I think is another place. Value creation is, has been important in our ecosystem of late.

Aaron Perrine: My, my only two hot takes on that is that what, what really constitutes an m and a engine [00:37:00] is a non-trivial thing. One, one small acquisition does not an m and a engine make.

And the fact that you pulled one off does not mean that we have an m and a engine yet. Ha. I’ve seen m and a engines. They’re awesome. They are hard to build. And, and then, you know, your point around no multiple expansion without growth, I mean. Yes, may, maybe, maybe a little, little expansion like, ’cause again, I think we do sometimes we’re involved with situations where like we just make it a better, we have had times, we made a better business.

It was actually harder to grow than we thought. And we did better than we thought because the business was just so much more viable at, at, you know, at the end. So, so we’re much rather bet on growth. That said, sometimes a really talented CEO is like pulled a rabbit out of a hat by, you know, modest growth, but also making it, you know, a much better looking business.

Lindsey Gray: Yeah, I, I love the kind of the spin you, you put on that or the nuance that you, you just gave, which is we don’t underwrite multiple expansion because you typically can’t control it. It’s out of your control. However. Oftentimes when you do all the right things, you [00:38:00] get that multiple expansion. Even if like growth wasn’t what you hoped it would be.

The, you know, improvement in quality of the business, plus timing plus the right buyer leads to multiple expansion. And yeah, I, I agree with you. I think, I think that was a right, the right framing of the, my comment.

Alex Bridgeman: Alright, desert Island, you get one CEO, who’s it gonna be?

Aaron Perrine: I, I knew that you were gonna ask this question, Alex, and I, of course, I think we’ll will say like, we, we love all of our CEOs equally, and so this is a, but as a fun thing, you know, I, I think, I gotta say Vince Char, who is the CEO of a company called RMC that we’re investors in, I, I literally went to war with Vince.

I knew him in the Army. Pretty sure he is an equal scout. He’s got a like. Fantastic family and two beautiful daughters. I know you’d be very, very motivated to get back to, so I feel like we’d be, you know, very, you know, very aligned on that way. You know, c Kush das is like an EMT, like, if I was gonna get hurt, there’s, so, you know.

Anyway, there’s lots, lots of good options, but I, I feel like in terms of, you know, building the boat, getting me off the island, well, Ryan [00:39:00] Cher could also be good, right? Like, there’s our, you know. Army. We don’t really do things on the water so much. Maybe you need a, like a Navy, Oxford. It’s gonna like, you know, like, like put the, put put the raft together.

At the end of the day, I think, I’m pretty sure Vince is the only, uh, officer I know who has thrown a grenade in combat that’s gotta count for, for, for something. Uh, so I’ll go with Vince.

Lindsey Gray: Good one. Good one. Yeah. I, I, I’d go with Ryan Turk, as you said, spent seven years as a submarine officer in the US Navy.

I’ve heard him talk a lot about what it takes to succeed for a long period of time and confined. Underwater spaces, and after hearing those stories convince anybody that he’d be a guy you’d want in your corner on a Desert Islander. Otherwise, also just a wonderful human being, fun to be around. Also has three beautiful daughters who he’d love to get home to.

So that, that’s a good one. That that’s a good motivator.

Alex Bridgeman: Very good motivator. Given the the Seattle Boston locations, is there a Pat Seahawks rivalry firm-wide? Obviously the two of you have your very passionate stances, but is there a kind, a firm to firm, [00:40:00] you know, back and forth that we have going? I.

Aaron Perrine: I think think we, I think we should embark on, uh, on an even more in intensive one.

And, and, and I’ll, I’ll just say there’s some good, you know, kind of community analogs here and, uh, Trilogy’s had a great set of, of bets with the folks at Miramar where, you know, our we’re, we are, we’re Mariners fans first and foremost, candidly. And they at least one of them. Kurt is a big Astros fan.

That’s the team that cheated their way into the championship a few years ago, in case anyone, anyone doesn’t remember that. And so I’m like one for one there. So we did a hockey one that the Kraken lost the stars and that resulted in me wearing a Stars jersey on LinkedIn. I think you can look it up. And then, but in the college ball playoff two years ago, Huskies persevered and so.

Kurt looked so good in, in that Huskies jersey, so I, I’m, I give, I’m just saying like, I’m, I’m, I’m here for it. The hawks part of it is that it’s not been long enough for the, for the pets. It’s, I think it’s been six or seven years. Brady was here announcing the Seahawks game last weekend. [00:41:00] I think he and I are the same age.

That just doesn’t seem. Uh, uh, right to me, and it seems like it, it seems like you guys should be in the wilderness longer before you get to be this good again. So I’m putting the shit down. We’re gonna, we’re gonna get there. If not, I am, you know, I am willing to wear a Pat’s jersey on a, on a Sunday of Lindsay’s choice in the, in the 2026 season.

I say that ’cause it’s just not, it’s just not gonna, just not gonna happen.

Lindsey Gray: Alright, we’ll, we’ll, we’ll challenge met. And I’ll, I’ll, I’ll add to it next time we’re together. If either of our teams win the Super Bowl, you gotta buy the other person dinner. Whether or not, whether or not they play each other that that’s the wager.

Aaron Perrine: Sounds reasonable.

Lindsey Gray: All right. This was really fun guys.

Alex Bridgeman: Yeah, new, new format. Lots of questions from all over the place, which keeps it interesting. Keeps us on our toes. This was, this was great. Yeah, this was a lot of fun.[00:42:00]