My guest on this episode is Sandy Paige. Sandy has been an operator several times over his career, including being a general manager at a Maine paper mill, a director of The Jackson Laboratory, and others which gave him a wide range of experience to use in growing the company he acquired as a searcher, Explora BioLabs.
He’s also an outlier in being one of, if not the, oldest searchers. But his results speak for themselves: Sandy grew Explora BioLabs over the course of 4 years starting in May 2018 to sell for $295 million in April 2022.
Sandy and I talk about the importance of communication as a CEO and his philosophy behind it, how he sought and hired managers who could grow with the company, early career CEO mistakes to avoid, communicating with your board, and his priorities and focus in the CEO role.
Ravix Group — Ravix Group is the leading outsourced accounting, fractional CFO, advisory & orderly wind down, and HR consulting firm in Silicon Valley. Whether you are a startup, a mid-sized business, are ready to go public, or are a nonprofit, when it comes to finance, accounting and HR, Ravix will prepare you for the journey ahead. To learn more, please visit their website at https://ravixgroup.com/
Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
(2:58) – Can you give us your background and career to this point?
(6:36) – How did the paper mill experience influence your management style?
(10:45) – What were some of the characteristics of bosses you worked for that you tried to emulate?
(12:43) – Are there skills that helped you refine your best qualities as a manager?
(15:30) – What do you look for when hiring?
(18:54) – What do you think early career CEOs often miss in management hires?
(21:56) – Are there questions or techniques you use to inform you the hire is a hard worker?
(24:14) – What started to happen after those hires?
(27:41) – As your company grew, how did your team structures have to change?
(33:45) – How do you position a company so that it increases enterprise value?
(35:39) – What made it so different for you?
(37:52) – Did you find it challenging to run the business while going through diligence?
(40:08) – What was your set of responsibilities and priorities as a CEO?
(42:03) – What kind of communication cadence did you have with your board?
(45:08) – How do you ask good questions to your board?
(46:34) – Is there any advice you often give to early career CEOs?
(48:21) – What strongly held belief have you changed your mind on?
(49:48) – What’s the best business you’ve ever seen?
Alex Bridgeman: I think a great place to start would be to hear a little bit about your story as an operator before being a searcher and then your time as a searcher in the business that you ran. Many will be really familiar with who you are and your story, and there’s other podcasts- there’s another podcast we can link to that talks about your story in a lot more depth that we’ll have for folks to listen to. But would you give us kind of a five or six minute overview of your background to this point?
Sandy Paige: Sure. I mean, if you go back from now, backwards, prior to doing a search, I was working at an organization called The Jackson Laboratory, which is a 80 year old genetics research institute, but also alongside of being a genetics research institute, they have a nonprofit business, which is a very substantial business and a very successful business that provides a great deal of funding for the nonprofit, and it is the sale of genetically engineered mice and services to the life sciences world. So, mice would be used in that case for drug development or basic research to figure out the genetic basis of disease or how a drug works or whether a drug works. And so, I spent about a decade at The Jackson Lab in various different senior roles, building large facilities and running them and some finance and operations and business development globally. Prior to The Jackson Lab, I was in a completely different industry. I was running think of it like a paper mill, a wood fiberboard paper mill on a river in Maine. It was the one mill town building, huge building, 120 employees, and trees would come in on one side and you’d ship a wood fiber board product out the other. It was a 24/7 operation, super interesting experience as a general manager to run a manufacturing operation of that scale and very different demographic, obviously – rural Maine versus Sacramento, California. Prior to that, I had done some consulting. I’d done a self funded search for a year, what I call the world’s worst self funded search and most poorly capitalized self funded search and had walked away from two deals the night before closing because of diligence findings that showed up late. And prior to that, had been VP of administration at a large high voltage DC electric transmission development company, very different industry, obviously, electric transmission between, in that case, it ended up as being between Long Island, New York, and New Jersey, 75 mile underwater extension cord for Long Island basically. Prior to that, a couple of different things including being assistant to the governor of Maine, where I’d worked for him previously on his campaign as his driver. That was sort of my first real job out of college was being the driver to a guy who was running for governor of Maine. And that meant picking him up in the morning and giving him a banana and pouring him into bed at night and doing all those things in between that you do as a body man to a gubernatorial candidate. It was a great experience. I guess there’s one other role in there, some marketing, a marketing role for a semiconductor company and picked up a full time two year MBA at Babson along the way. There’s a summary.
Alex Bridgeman: Yeah, your time as CEO at the paper mill had a lot of ups and downs that your previous podcast talked about. But how do you feel like- Can you give a quick 30 second summary of that experience and then maybe how it influenced your management style?
Sandy Paige: Yeah, that was a fantastic experience for me as a leader of things to do and not to do. The short answer is I showed up on the job, first day on the job as general manager and was handed union cards to sign by the guys standing out front on the street. They basically shoved them through the window of the car and said, hey, sign these quick before the new guy gets here. And that was me, the new guy. And there was a union organizing campaign that started that day and ended on my last day as GM when we lost the union vote by one vote, I think. And I had, along the way, accepted a job to come to California and switch from heavy industrial wood products to life sciences and did that, made that change. But within a year, I think that very large 100 year old manufacturing facility was stripped to the ground. And it was a gravel pad. And all those jobs are gone. The union vote didn’t yield better working conditions. In that case, it led to no working conditions for anybody, and everything was moved to Virginia. So what I took away from that was people end up, in cases like that, going for a union when they’ve been treated really poorly. That’s what happened. They were treated poorly by ownership over a series of many years. A lot of it was because the owners had no choice, the business was getting harder and harder and more commoditized. And this plant wasn’t competitive in the way that it needed to be. And so it wasn’t receiving investment. So, they had to cut benefits, they had to cut hours, they had to cut wages. All those things were sort of natural responses from an employer to a declining business. But watching people choose affirmatively to vote for a union, which I knew was going to lead to the loss of their jobs ultimately, more likely than not, you never know for sure, was a really hard thing to do. And it broke my heart. In that case, we had a workforce that was 98% male, average 55 years old, almost entirely white, rural men, high school education, a couple college grads. And these guys were going to go from making 20, 25, 30, 35 bucks an hour to working at Home Depot. And that was just there wasn’t a good future for that decision. And I came to California, and all of a sudden, I’m running a group that’s probably 55% women and everybody with a college degree and a bunch of masters and six or seven PhDs reporting to me. They are from all over the world. They will leave for $2 an hour or more somewhere else without any guilt. And it’s just entirely more diverse and dynamic and just a very different kind of management challenge. But the fundamentals are the same. If you want to retain people, you have to treat them well. They have to feel like what they do matters. They have to- people deserve to be heard and have their contributions worked into kind of their work environment. And if they’re not, then they’re going to leave. And I think generally speaking, whether you’re at a rural Maine wood products manufacturing firm or making genetically engineered mice, people leave bosses. And they don’t leave companies, they leave bosses. And I’ve always found that true. People who have stayed with me I think generally have wanted to work for me, and people who have left have not wanted to work for me for one reason or another. And I think if you keep that in mind, it’s useful. The company culture matters because bosses exist within a company culture. But as much as anything, I think it’s important for a manager, particularly young managers, to remember that. I think people leave bosses more than they leave companies.
Alex Bridgeman: For the bosses you worked for who you enjoyed working for and would continue to work for, what sorts of behaviors and characteristics did they have that you try to emulate?
Sandy Paige: This isn’t something that I’d pull out of a book. I mean, it’s right off the playground, elementary school playground stuff. It’s: are they fair? Are they polite? Are they smart? Are they courteous? Do they give you credit for the work you do? And do they look after your own interests, or do they put their own ahead of you? Those sort of seem like kind of elementary things, and those are the things I always looked for. And when I found them, I stuck around. I think I may have said this elsewhere, but I had some advice coming right out of college from the president of Middlebury College, where I graduated, and he said, when I asked him, can I extract some wise advice, sage advice from you, he said, “The only thing I can tell you is just go find the most interesting people you can work for who have high integrity and are doing interesting things, and you’re probably not going to go wrong.” I was like, “Well wait, I thought I should be a veterinarian or something.” He’s like, “No, no, no, just go find super interesting people doing interesting things with high integrity, you’ll be fine.” And turns out, that’s sort of what I did for a first job. And I actually that’s sort of what I’m doing now too. Now that I can choose to do whatever I want, I’m kind of hanging out with just the highest quality people I can hang out with and doing the most interesting things I can do. And I’ll be darned, but it’s come full circle. He was right.
Alex Bridgeman: Yeah, it seems like you have a personality that lends itself to high integrity and are personable and compassion with people. But I would imagine, even if you have that as part of your personality, there’s still skills and making sure that that’s communicated and you get to work with people and show that in your day to day management. Are there skills that helped you refine those characteristics as you use them to be a manager?
Sandy Paige: I think a lot of who I am today has to do with the fact that I’ve had to do it all. I haven’t just been a general manager of a growing life science company where all you can do is show up every day and the business grows and is profitable. Like when I ran that paper mill, we started with 125 people and ended at 80. And I did all those layoffs. And sitting in that conference room across from a 55 year old, 58 year old guy who knows what’s coming and telling him, here’s your yellow folder, thank you for your 30 years, if that’s not the kind of thing that makes you get into your car at the end of the day and sob, you probably don’t have a heart. I mean, that is hard, hard stuff to do to somebody. And it’s not even a fraction as hard as it is to sit on the other side of the table and hear some young punk like me do it to you. So I think the fact that I was sort of steeled by a range of different experiences. I’ve hired people who have worked. I’ve fired people who have not worked. I’ve had to fire good people. And I’ve had to fire bad people. And I think the view that I have now for managers is go get a whole breadth of experience, don’t specialize too early. And the more stuff you’ve done and seen, the more situations you’ve smelled allows you to smell some of those situations coming sooner and avoid them sooner. And most importantly, particularly with respect to wanting people to stick around, the good people to stick around and work for you, you get a nose for what it’s going to take to keep certain people. Some people want space. They want to be just left alone and given the resources to do their job. And other people want to be mentored and touched and cared for and listened to and heard and they need to talk and all those things. You have to be able to handle both those kinds of people. And I think the answer to your question is I happen to have had the chance to do a lot of different kinds of things in management, and when it came time to be CEO, I was able to kind of adapt to different situations and different people pretty quickly. And I think it probably had to do- had the biggest impact on my ability to hire four or five senior leaders quickly. And they were all the right people for the job the first time. And that made a really big difference in our ability to scale quickly. We just didn’t stumble in building and maintaining a good management team.
Alex Bridgeman: You mentioned hiring a management team and having it sounds like a pretty good hit rate on finding the right people. What did you look for in finding those people? I imagine some of the personality pieces is a big part of recruiting. But how do you find people who are good managers?
Sandy Paige: I think first of all, it’s really hard. It’s the hardest and most important thing you do. And so nobody should underestimate that. I made those decisions rather quickly. I didn’t use fancy surveys. I didn’t run a consultant through and have them take a battery of tests. Those are good tools that can work. But I had a pretty good sense of what I was looking for. And of those let’s call it five people, four came through my own network, referral networks or came from people whose judgment I trust, trusted, in other words an introduction. One of them was through a headhunter, and that was actually the first one. So, what I was looking for in all of them was a version, a different version of kind of hustle and hard work. And I’m not always looking for the rawest intellectual horsepower. I’m not looking for kind of the star performer who also wants to be out front on everything, not because I’m afraid of competition as CEO. Sometimes that can be a pain. But mostly, I was looking for people who, like me, were grinders and hustlers and had sort of the desire to work for its own- just because that’s the way you’re wired and you don’t know how to do anything else. And I didn’t want people who weren’t going to respond on Saturday night. What we were doing was really hard. The level of execution required was going to require that kind of work. And to find people who are hustlers and actual hustlers and actually enjoy that was important to me. And I’ve learned how to see that, I think, in people. These happen to be people, for the most part, who were earlier in their careers. And they were stepping into jobs that were a step up. So, they were having to learn at the same time, with maybe one exception of the five. And you need somebody who’s going to learn fast, who’s humble enough to know when they made a mistake and take advice from somebody who’s been there before. I was able to find that. And I think if I had, well, I’ve watched a bunch of folks in search, CEOs who are first time CEOs, first time sort of general managers really struggle with those hires and getting them right. And I think different industries are more competitive or less competitive, and search is like anything else. Those early hires are fundamental to taking weight off the CEO’s shoulders so the CEO doesn’t have to be in the business every day and all day and can be working on the business instead. And that was the case for me. Right out of the gate, I worked on the business. I never found myself sort of at the bench having to do work of that kind. And that’s what allowed us to take advantage of that larger opportunity so quickly. If we hadn’t, we would have been in trouble because we had a big, big 1000 pound gorilla coming down the road at us, and we needed to stay well ahead of them. And we managed to do that.
Alex Bridgeman: What do you think that early career CEOs often miss in those management hires? Like if they go wrong, what are some reasons they go wrong from what you’ve seen?
Sandy Paige: I don’t think there’s one reason necessarily; I think it’s probably a range of reasons. I think they may overweight, frankly, equity, the equity package as an important driver of people’s motivations. They may overweight experience, direct experience as being fundamental to somebody’s success on the job. Whereas I think cultural and fit, not cultural but like business culture, fit matters like hustle, like transparency, like humility, like teamwork, those sorts of characteristics that I call fit, those are way more important, frankly, then high levels of industry specific expertise. And so, I guess I would say industry expertise, the role of the equity package. You can overthink that. I guess I’d point to those two things as probably being the things that I often hear people looking for. Like they’ll tell me, I want to go out and find somebody to be my COO who has been COO of a vertical SaaS company in the travel industry, for example, just making that up. And yeah, well, that might be fine. I don’t think that’s the thing you should be looking for. You should be looking for somebody who wants to get in the trenches with you and who wants to take weight off your shoulders and knows how to do that in a way that you trust, and yes, who has exposure to SaaS and understands the difference between a server and a laptop. Those things matter. But I just think it’s- I think people overweight specific technical expertise and specific background. And I think generally speaking, people, also, this is a bit of a contrast, under hire. If you think you have a big opportunity in front of you, hiring somebody terrific and spending a little bit more money right up front is one of the single best things you can do in order to advance your own interests. Hiring somebody who’s really a supervisor by training and nature when really what you want is a VP who understands the difference between being VP and a director and a supervisor is a big difference in your day to day life as a CEO and your ability to advance the business will be- your day will be quite different if you hire the right person versus the wrong person. And the delta in cost is probably only 20 or 30%. So generally, I tell people, if you find somebody who you’re sure is going to be fantastic and is going to make your life easier, go ahead and overspend on the budget if you’re certain that’s going to be worth doing. I just think it’s one of the other things I see people do that I wish they wouldn’t do is under hire at a lower level.
Alex Bridgeman: Are there any sorts of questions or techniques you use to try to figure out if somebody is really a hard worker, the type of work ethic that you want to see?
Sandy Paige: I don’t know that I have a particular technique. It’s really hard. Because the good people are brilliant at interviewing. They know what you want. They know what they’re supposed to do. Their resume should be fine. The references should be fine. Their ability to show up and look like a hustler should be fine. So how do you peal that stuff out? I don’t know. I think I’d probably write a book on it if I had a sense of it. As much as anything, I probably just got lucky five out of five times on those five hires. But I hate to admit it, but there’s a lot of gut. In a data centered world where there’s surveys for everything, that’s probably not the popular answer. But I do do referrals and recommendations. And I do have those conversations. And I do test what people say. And having given those calls on the other end, I can read the body language or the voice signals from a referral, or reference, I mean. What people tell me and what they don’t tell me tells me as much as anything, whether this person is- whether I’m getting a true read. You have to see somebody a couple times. You have to see them a few times, and you have to see them in different scenes, scenarios. You have to see them at coffee. You have to see them at dinner. You have to see them with maybe a glass of wine in them. And maybe you want to see them interact with colleagues and also the janitor. How people react in those situations matters. And if you can get all those things in a virtual world, I think you’d begin to triangulate in and maybe pierce through some of the layers of acting people can do in order to try to get a job. I also think to the extent you can get references from people you know who will tell you, yeah, this person is strong here and weak here, that’s useful. And if they can do some consulting ahead of time, for example, and you can begin to see them work and get a feel for the cadence of information and the type of information you get out of them, that’s really valuable. So some sort of trial period on an important hire is always useful. Not always possible, but useful if you can get it.
Alex Bridgeman: So those five hires you made enabled you to grow and scale pretty quickly after that. What started to happen after you made those hires?
Sandy Paige: Well, it didn’t all come at once. They came over the course of a little more than a year I think. And we were in the process of figuring the business out. From a finance perspective, we were auditing the business for the first time, for example, in that first year and cleaning up some accounting troubles. From an HR and marketing and sales perspective, we were building a team for the first time in each of those areas that we’d never done before. And what these folks allowed me to do was- assign them those roles, help them get a sense of what that needed to look like. But I didn’t need to do it. I wasn’t hiring the sales team. The head of sales was building her team. And likewise in finance, the VP of Finance, he’s a CPA, he was perfectly qualified, exactly qualified to do what needed to be done to our books to get them cleaned up. And all he needed from me was the support to do that. And in fact, in his case, he probably needed more support than he asked for. And that was sort of a lesson. I watched him working really, really, really hard and almost to his own detriment. And I should have forced him to hire some help sooner, for example. But like a good finance guy, he didn’t want to carry the overhead on his department. And so, he didn’t. But it would have been good for everybody had he hired one person sooner. But these are imperfect decisions. You don’t ever have perfect information at the time. And you do have to trust people that they’re giving you straight answers when you ask if they’re okay. We were growing fast. I mean, to grow a business at 40, 50% annually, profitably, we were growing 40, 50% with 25% EBITDA margins, and we had a tiger by the tail for sure. And there was an awful lot of moving pieces that the team had to handle, and there was no way I could have handled it. So, I had to hire good people. I probably hired most of them- even at that, hired them a year late. I mean, just having any one of them a year sooner would have made our job easier. And actually, we might have been able to grow more. There were a couple of points where I just felt we had to hold back a little bit, tap the brakes as we were, my team was just buried. And they were doing great work, but they were not getting to stuff. And we just joked about this the other day with our seller, the guy from whom we bought the business, there’s still, I think, even now that we have been acquired, and there’s a new owner, and I have nothing to do with it, I think there’s a FileMaker server running the accounts payable system. It’s like that was there when we bought the company. It was on the list every time we did an IT review, we’re going to get rid of that damn FileMaker server, and it just never got done. It really should have gotten done because it was an awful lot of important things sitting on that server that was probably 10 years old by the time we sold the business to somebody else. I’m sure it’s not there anymore. They’re on some big ERP. Anyway, it’s just an example of the stuff, stuff wasn’t getting done that really should have gotten done.
Alex Bridgeman: Yeah, that makes a lot of sense. As your company grew and scaled, how did your team structure have to change? Like, where did you find breaking points where either new hires had to be made or a manager’s job was shifting perhaps dramatically? Do you recall the growth points in your team structure where it had to change or evolve or grow or whatnot?
Sandy Paige: Yeah, some of it was deliberate. You put the org chart out with a growth plan. And you say, okay, well, I need to- I’ve got one person in charge of marketing or sales, I’m going to have to split that up or whatever. And then some of it is you face a change, or you lose somebody that leads you to need to restructure. And we had that happen fairly early on. We had bought the company and had a COO, and for various different reasons, she didn’t stay, and we needed to quickly sort of fill that hole. And it turned out not to be that hard because I had hired somebody who was going to be very good and was going to grow into a role like that within a few years. And she just grew into it on a Monday morning basically instead. And she did exactly what I’d hoped she would do. She just did it all a lot faster. And so you have the combination of both being thoughtful and strategic and doing what you told your board you would do and also just dealing with the business and the people you’ve got in front of you and responding. So, I think there were a couple of places like marketing and sales where I had hired one person to do that. And she had tons of sales experience. She’s one of the best salespeople you’ll ever come across. She’d never run a marketing department or built a website or laid out a marketing strategy for a board of directors of private equity firms. And so, that was a weak spot. And we knew it. I knew it when I hired her. And that was something I was willing to do because we were growing so quickly, even without that function. I almost didn’t want a high performing marketing department to kind of double us again because we just didn’t have the capacity to meet that need. So, there were times when we struggled with those sorts of things. We added facilities; every year, we’re adding 5, 6, 7 new facilities, think of it like new retail stores. And we were a year and a half late hiring a head of facilities and engineering. And by the time I did, he spent a lot of his first year doing stuff that a head facilities and engineering shouldn’t be doing. He was climbing on roofs, cleaning out air filters on HVAC equipment, and it took him a year to kind of get his feet under him and fix all the things that I had broken and that had not been done properly in the scaling up. So you have a lot of that sort of thing too, firefighting when you’re growing that rapidly. And you just have to have people who can handle it and who can manage that level of change and still have an attitude in the Monday morning meeting that is not full of complaint and whining, but it’s a problem solving attitude. You have to have sort of the combination of two things, the ability to say, yeah, I know, I came in Saturday night to fix the water leak, with also hey, we really need a few more people to do this, when can we work it into the budget? And not a childish sort of slamming a fist on a table. But I want us to be profitable and hit our EBITDA numbers this quarter and this year, but can you help me figure out how we can solve this longer term? Because you don’t want me coming in and fixing that leak on Saturday night. And the answer, of course, is yes, yes, let’s sit down and do it. So I think the answer to your question is not a direct one. But when you look back on it, it kind of seems like a hodgepodge of responding to fires that are being fought and also trying to lay out some strategic framework so that you’re allocating resources responsibly in a planned way in the next year.
Alex Bridgeman: Yeah, it reinforces your focus on finding people who have curiosity and drive and are wanting to learn and are learning machines because it’s probably hard to visualize the compounding of somebody’s role, like if your company is growing 40, 50% year, in a couple years, it’s hard to imagine what that role looks like. So you need someone who can navigate through that change and keep growing and expanding within your business.
Sandy Paige: Absolutely. I mean, imagine what it’s like to take a job and have five or six people reporting to you, and two years later, it’s 75 or 100. Those are two very different jobs and two very different skill sets. You need to have hired people beneath you who can manage those people every day because you don’t know everybody’s name anymore. And those sorts of people are hard to find. They’re certainly very hard to interview for. But I guess what I would say is one thing for sure is I knew all the people who I hired really aspired to higher roles. They wanted the chance to be a C level person and make an impact. They just wanted- they knew they were good. They wanted to be heard. They wanted to be a contributor, and they wanted to see a mark at the end of the week in the work they’d done. And ultimately, four out of the five of those- well, let’s say four out of the six of those folks who I have in mind as I’m telling you these stories didn’t stay after the acquisition because they lost that in the larger corporate acquire. They lost the ability to make a dent and be heard, and there was too much corporate mumbo jumbo and nonsense that they had just lost touch with the top. I think had they had a chance to really be heard and make a dent and be listened to by the head of that business they might have stuck around. But there were too many people in between who were just filling the air with meetings and Zooms and emails and not really doing anything.
Alex Bridgeman: Yeah, speaking of selling, you’ve talked about building your business to sell or for the ability to hold for longer. Can you talk a little bit about how you position or build the company in such a way that it increases enterprise value beyond just more revenue, more EBITDA, and what have you?
Sandy Paige: Yeah, I think what you’re referring to is the dichotomy of needing to do two things at the same time. With the business, you have to be responsible for your equity providers, you need to be able to sell the thing if you need to. That means having audited books, three years of audited books. That means having a management team that is capable of carrying on if you get hit by a truck. It means having a growth plan that holds together and has capital allocated to delivering the growth. But it also means building something that you might never sell and running it in a way that is a long term not a quarter to quarter decision process. And those two things can feel like they’re sort of opposed to one another. But I think if you’re able to manage those two paths as a strategy, as a director of corporate strategy or as a board member, you end up with options. It’s about creating options. So, when you’re wondering what it’s going to look like in 5 or 10 years, you can imagine it and you can make decisions that will enable that. But also, when a strategic acquirer comes along and drops a boatload of money on the table and says, “Do you want this?” you can get through due diligence in a way that doesn’t ruin the value and holds up because that process is not for the faint of heart when you’re doing a very large transaction. That’s a very different kind of acquisition process than when a searcher buys a search business. It’s just a whole nother story.
Alex Bridgeman: What made it so different for you?
Sandy Paige: Well, I mean, a searcher largely does the whole thing by him or herself. When you find a business, you do the diligence. Sure, you’ve got a law firm helping with the legal stuff. Somebody’s doing a Q of E. But in the end, the searcher is doing all the diligence. And you may have some interns that you can turn to to run some numbers and to create some slides, but you’re on the hook for diligence by yourself. And in an average of a $10 or 15 million enterprise value acquisition, that’s not unreasonable. And by then you should have some practice and some reps under your belt to be able to pull that off. And the equity providers are accustomed to that and part of what they’re evaluating you for over the course of your search anyway. But when you go to $300 million for an acquisition by a publicly traded buyer, there’s just stuff in there that makes your head spin. I mean, I think they spent as much money on legal and accounting and consulting fees as we did on an investment banker. I mean, it was just crazy. The number of people who would show up at the diligence meetings or were on the Zooms for the review of the diligence findings over the week were 20, 25 people, not even including management. I mean, it was just nuts. So, you have to be ready for that because they’re going to strip you bare, they’re going to find any weakness. And that’s their job. And when they hire Pricewaterhouse to do that, you can bet Pricewaterhouse is going to earn their fee by finding something that they can hit you over the head with. That’s what they do. And they did. But not much. Fortunately, not much. Because we had our act together. Yeah, I mean, that’s my point is we were ready for that. We hadn’t been building that case in order to sell at that moment. But if it made sense to sell at that moment, we thought we would hold up pretty well to that sort of discipline or that sort of professional inquiry. And as a result, I think we survived it. And I think the buyer’s happy with what they bought. They largely got what they thought they were getting.
Alex Bridgeman: Did you find it a challenge to run the business while going through diligence? Or did you have enough of a strong management team that that didn’t have as much disruption as you may have thought it would have had?
Sandy Paige: It’s very hard. But I mean, it’s a whole nother job for you, is managing a process like that. And it can be a full time job just to manage the diligence. And so, it takes away from whatever else you might have been doing. And it’s fair to say, for those two or three months, we tapped a lot of brakes and didn’t sign a lot of leases that we otherwise might have signed because we just didn’t want to introduce new commitments in the middle of a process, so we weren’t sure how it was going to play out. Fair to say, there were other dynamics at work leading us to want to tap those brakes. But the process is, in our case, it was really quick too. A three months sort of start to finish process is quick in this world. And one of the reasons we chose this buyer was we felt they were capable of moving that quickly. But it is hard. It’s hard because there’s certain people on the transaction side of the wall, and the rest of the world doesn’t know anything about it. And so, you’ve got to have all these conversations. You’re in the process of choosing benefits knowing that in two weeks, you’re going to tell everybody that their benefits are going to change, for example. Some of it feels disingenuous, and hopefully feeling disingenuous is a feeling you don’t like, and so it should be uncomfortable. And yeah, so there were quite a few moments like that. And the workload goes right through the roof. Obviously, for CEOs who have done it many times before, I suspect that’s a different process. And maybe if there isn’t as much in it for a CEO, it’s more just part of the job and you handle it. For me, it was this is life changing sort of experience for me in terms of doing a deal like this and doing it for the first time. The last deal I had done was the acquisition of the company, which was for dramatically less money than what we were selling it for it. And so, it’s not like I was a deeply experienced deal guy. This was essentially the first big deal I’d ever done.
Alex Bridgeman: So can I ask, that kind of begs another question. What was your set of priorities and responsibilities as a CEO? Like by the time you were selling the business, what did your day to day and focus and key ideas in your head look like as CEO?
Sandy Paige: It was largely all around the growth plans and people. So making sure you have the right people who are properly motivated and happy, and you’re properly staffed to do the work that you’ve got to do today. And that you were building the infrastructure to grow in the way that you wanted to grow for the next few years. And that infrastructure may mean physical infrastructure, having the space to do it. It may mean having the facilities, in our case, to do it. It may mean having a management team whose incentives were properly aligned, so that if they achieve that goal, there would be something professional in it for them and also something financial in it for them. And managing a board is always part of a CEO’s job. I had a fantastic board. They were quite low maintenance. But I think that’s probably because they were getting good, consistent, reliable, credible information out of us on the right cadence and the right kind of communication. And we were probably their best performing asset. So, put those things together, and they’re not going to be high maintenance. They’re going to be like, go, go, go, keep doing what you’re doing. What do you need from me? That’s the kind of board experience I had. And with some responsible inquiry, for sure, about what kind of financial commitments we were making. Largely, those were the deepest questions, what sort of leases were we signing, and we’re signing a lot of leases, and there were big, expensive leases, and they were very good about making sure they had done their diligence to be comfortable with each one of those.
Alex Bridgeman: Yeah, what kind of communication cadence did you have with your board? What worked well for you?
Sandy Paige: Yeah. It varied. I had sort of the formal communication of a deck we put together for board meetings, which were generally roughly four times a year. And then in between, because we were making fairly big bets along the way, we would get them board decks, shorter board decks around particular opportunities, where we’re looking for approval, for example. So if we’re signing another big lease for a big facility in Boston, there’d be a board deck around that. And usually some phone calls to walk them through it and make sure they were ready and comfortable when the time came, or an acquisition, same sort of thing. But also, at the sort of human level, I had a fair amount of texting going on with some of them more than others about small things. And I also got into the habit of informally, inconsistently, I would send out what I called a Friday night note. So I’d get kind of to the end of my week, which often would mean I was on a plane home. And I’d tap out just a short note to the board, informal email, like call it a Friday night update. And usually, it was following up on something that I may have told them, or if I’d had a thoughtful, useful conversation with one during the week about something, I would tell everybody that so that everybody kind of had the same information. And sometimes it was just an attaboy, a shout out to a couple of people who may have done great work on the team that I wanted the board to know about, a big win. Likewise, if there was something I was all of a sudden worried about, that would absolutely go into that. General rule of thumb, you just never want a board to be surprised. Just like any boss, you just- there’s no excuse for a board being surprised unless there’s nothing that could have been done about it. But if there was bad news, I wanted them to have had plenty of notice and to have been a little bit worried about it by the time we solved it. That’s sort of the way you want it to go. You want them to start worrying about it. And then you want to have come to them with a solution for it, rather than kind of, hey, what do I do? Hey, what do I do is not a good question from a CEO to a board, as generally, you’re being paid to provide solutions. That may not be the right solution, and a good board is listening to your proposal. But generally, you don’t want to go to a board, at least if you’re in a rapidly growing, substantial organization. You got to have your act together better than that. So I feel like I managed the board pretty well. It wasn’t big. I had three other full time board members in addition to me, and we had an empty spot on the board that we never bothered to fill. And each of those three board members were very different in their interests. Which was of great help to me. So I didn’t have three people asking me the same questions. And all they really wanted to do was help me just be better at my job, which is all you can ever hope for.
Alex Bridgeman: How do you ask good questions to your board?
Sandy Paige: I think you have to know what their interests are for one thing and where they are likely to be able to be helpful. I had one board member who I would never have asked him a business development question. It’s just not his schtick. But financial statements and balance sheets and planning and strategic thought about kind of how to manage the commercial, the business risk of the business going forward, he is great for that. Another guy was brilliant at BD and had a fantastic understanding of the customer and the value proposition and how they should be packaged up, particularly as it related to larger opportunities. That was a great use of him. And the third guy is a private equity trained guy who’s bought a lot of businesses, been on a lot of boards, but I could have conversations with him. Frankly, he’s the one I probably spoke to the most. I’d speak to him once a week or so. And we were friends and he still is. He’s a great guy. And so we had a lot of conversations about everything from kids and Notre Dame football to how to use the cash, should we pay a dividend, are we growing quickly enough, are we not growing, just a little bit of everything. So, I just had a very good experience with my board.
Alex Bridgeman: Is there any piece of advice that you often give to early career CEOs in regards to their role and priorities or their board as well?
Sandy Paige: Well, I mean, the general rule of thumb with search is do no harm out of the gate. I mean, the idea behind search is you buy a business that is harder to screw up than others might be. So, good recurring revenue, you’re not making large capital bets initially because- to be capital light, and hopefully, there’s some established momentum that you can ride as you get to understand the business and learn it. I would generally say, you need to maintain a great relationship with your seller, if you can, to the extent you can get great value out of a seller, you should. And also, again, this kind of dual path, just like we were talking about earlier, you should have a plan B in case your seller blows up. It just happens with some degree of frequency, and sometimes it’s not binary, it’s not clear they’re blowing up, that maybe takes a year for them to wind down, and it’s a little bit hard or ugly. But generally speaking, I think two things can be true here. One is a great relationship with the seller is invaluable. And also, the company isn’t probably really yours until you get rid of the seller as a leader. So it’s very rare to have a seller stick around and not be involved heavily day to day and not be some sort of problem or at least pose a risk of one. And so, I encourage people to look through both of those lenses. And don’t be afraid to move beyond your seller. But just make sure you don’t have to do it faster than you really want to, make sure it’s on your schedule.
Alex Bridgeman: Moving to closing questions, what strongly held belief have you changed your mind on?
Sandy Paige: Yeah, you told me you were going to ask that question, and I thought about it this morning in the shower. And because I’m a lot older, I’ve had a lot of- older than most of the search CEOs, I’ve had a lot of strongly held beliefs which I was wrong about over the course of a career now. I think, so I could give you a lot of answers. I think generally speaking, the earlier in my career, I felt like people I needed to hire had to have a specific set of experience in the job description that matched the job. And I think both from my own experience, given that I’ve taken on roles that have rarely been supported by my background but have been supported by my style and my fit and my hustle and my intellectual curiosity, hopefully, far more than intellectual horsepower, just emotional intelligence. I think those things are- the strongly held belief that has changed I guess would be that emotional intelligence is more important than specific skills. And I know it’s not all that surprising because there are books that have been written about this. But that is a position I held early on that I’ve changed over the course of 15 or 20 years of managing people. And if anything, I’m even more convinced of it today.
Alex Bridgeman: What’s the best business you’ve ever seen?
Sandy Paige: I saw that question coming too, and in the search world, you see some pretty cool businesses. And best in air quotes means a lot of different things at different times. Certainly, the business we sold was a business I would have been happy running forever. I loved it. I loved it on a bunch of different human levels, just human levels. We were helping develop new drugs to cure diseases, like that’s really important. It’s a different kind of equity that grows in your heart sort of rather than your pocketbook. And so, I loved it from that perspective. It also created cash like nothing you’ve ever seen. It was just beautiful from that perspective. And so there were a lot of reasons to have wanted to hold on to that business forever. And I was, I think, naturally fit to run it. It was fun to run. I had a great team. They were just fantastic. And in truth, they did pretty much all the work, and I had the easiest job of all. So I’d say the business we sold was the best business I’ve ever seen. And I guess that’s the way I should leave that answer.
Alex Bridgeman: That’s a great answer. Thank you, Sandy, for sharing a little bit of your time. I really appreciate it. It’s always good to chat, and I’m glad we got to record one. This has been really fun. Thank you for sharing.
Sandy Paige: Thanks, Alex.
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