Marcus Magarian Data Driven Investing

Ep 011 Marcus Magarian “Data Driven Investing”

Marcus Magarian is Managing Director at Chatsworth Securities, LLC. Marcus brings more than expertise in technology and data analysis experience to the investment banking industry. Marcus works with multinational corporations in origination and placing capital for private equity, feeder funds, and private placements, between the US, EU & Latin America for Real Estate, Energy, Oil and Gas, Infrastructure, and Corporate interests.

Listen To This Interview as Cliff and Marcus discuss:

  • How data analysis of customer behavior in e-commerce drives investment advice.
  • Examples of what data points to consider in pricing derivatives.
  • Trends in the e-commerce space that affect your investment strategy.
  • How COVID-19 has impacted the investor/advisor relationship dynamic with new clients.
  • How data analysis works in determining risk or predicting ROI.

and more.


phone: (203) 340-2827 Ext 122


Cliff Locks 0:02
Welcome to the private equities profits podcast. I’m Cliff lox your hosts who With me today is Marcus Magarian, Managing Director of Chatsworth securities, LLC. Marcus brings more than expertise in technology and data analysis experience to the investment banking industry. Marcus works with multinational corporations in origination and placing capital for private equity, feeder funds, and private placements between the US EU and Latin America. For real estate, energy, oil and gas, infrastructure, and corporate interests. Mark is welcome. Please share with the audience a little of your backstory.

Marcus Magarian 0:40
Hi, Cliff. Good afternoon. Thanks for having me here. The pleasure. I’ve been watching a lot of your previous interviews, so very excited to be here. I’m a native New Yorker been here all my life, you know, started out working at my dad’s store at the time square area, got my first job at derivatives at Morgan Stanley Merrill Lynch. After that, then Business School, we opened a Brazilian bank in New York and London doing natural resources, private placements, when that whole thing died off, I was lucky enough to get a job at a tech company doing UX analytics for about three to four years. And coming back into banking, we’ve been focusing quite heavily in things in the payment space, analytic space, everything involving data, which is we’d like to call the new oil.

Cliff Locks 1:23
Very true. How does the data analysis of customers behavior and e commerce drive investment advice?

Marcus Magarian 1:29
The most important thing about data is that it’s free. And it’s so telling, I always like to tell my customers or prospects like you know, it’s kind of like, if you have people in a focus group, it’s like you like Coke? Or do you like Pepsi? And then give us your advice. The first person that speaks, they’ll say, I like Pepsi, or they like Coke, it’ll influence everybody in the room. And what happens with data is that like, it’s completely naked, you know exactly what the people are really thinking, without, you know, ever having to ask them, you know, this I gave an example of this was when we were working with Electrolux, we, I told them, like, Hey, 99.98% of your customers don’t want to buy an air conditioning system. And they have no idea why it’s because the most important thing is that the data told me that this was the case. So we are able to change things increase their sales is about 100 times. I mean, it was easy when you do and you have hardly any sales. But every but using that skill, those skills today, you could basically go to any company and say, okay, you have a million people going to your site, let’s say your average order value is $100, you have about a 2% conversion ratio. So I’ll do $100 times 20,000, you make $2 million. From there, we want to know exactly what their goal is, you know, they’re looking to buy a company, sell a company expand by market share, etc, etc. So, very good. It’s very telling. And it’s a way to advise clients without having to ask them questions.

Cliff Locks 2:56
Can you give us examples of what the data points you consider in pricing derivatives

Marcus Magarian 3:00
with derivatives, I mean, that’s I the one thing I love about derivatives is that it’s very similar to analytics. So back in 2000, when we saw and I started working at Morgan Stanley derivatives, were priced kind of like just taking market data, just same way you would take on through a Google Analytics or some kind of analytics capturing tool. And you know, you want to volatility, you want to know exactly what the buzz is on the stocks or some kind of technical analysis. And today, you have, you know, I use those skills from 30 days in order to price companies. Because everything with digital companies is dependent on data flows. And so like, it’s kind of the example I gave before you have a person that comes into a site, I know how the traffic is behaving, but the most important thing I have to know is where’s that traffic coming from. So if I’m selling fishing equipment, and I’m bringing my traffic from the Wall Street Journal, my sales won’t be as good as if I drove it from another site. That was where the person came into the site, thinking about fishing equipment. And it’s the same thing with so everything with data, it’s how do you manipulate the data, which is really the individuals that are going into your website or to your app, the same way that people engage in the stock market.

Cliff Locks 4:19
I’m excited you’re going into a forensic analysis on those companies that you’re looking to help raise funding at this point. But really understanding what drives revenue. And the sources of that traffic. It’s critical at this point for sustainable sale. What trends are you seeing in e commerce space that affect your investment strategy?

Marcus Magarian 4:40
Right now with COVID? Right now, actually, I have a group out of the UK that I’m a board member of here in New York. It’s called it’s a retail group. And what we’re trying to do now is take possession of stores on Bleecker Street and make it into a COVID store. So it’s it’s important because everything we’re doing in e commerce Everything is becoming more omni channel. So what does a store look like in the future with COVID V is put out a report saying that you had 60% of people were paying by phone or the stores have the ability to pay by phone. Now it’s like 85%. And everything is digitally transforming to this contactless payment world and all these things that didn’t exist before. So what you’ve really had is a really massive acceleration in that market, the digital world online shopping has really converted over into the brick and mortar side. Amazon was way ahead of this when they had the thing where you could go into a store, which, you know, there’s more to it, but you go into a store, you can only go in if you have a phone. It’s a problem. If you don’t have a phone, surprised, no one’s saying about discrimination. But if I go into the store, I could walk out without even talking to a cash register person or paying or pulling out a credit card or anything like that. And the concept that we’re trying to do is saying, okay, 70% or 60% of stores on Bleecker Street, are empty. There’s all these things happening with moratoriums, landlords aren’t getting their rent monies. And Nope, because I was walking in safer give stuff stay home because of social distancing. And all those things. Let’s take stores and do virtual fitting rooms and fulfillment centers. No, no inventories are items that stores and make it like an e commerce store, but with a physical presence. But when you have all that information, you’re collecting the data on your customers store. The way this used to be done when we were much younger, used to see guys in the corner of the streets tapping on these little metal things. And what those guys are doing was counting the foot traffic going left to right. Nowadays on you that everything is digitally tracked, you have you carry a mobile device, the beacon captures everything. So in business school, they were went to business school in France. So we obviously the Louis Vuitton case study, when somebody walks into the Louis Louis Vuitton store one on shawnzy, the likelihood is that a Westerner will turn left. So they put their most expensive and most popular items there like women’s handbags, the ones that you see whatever men’s stuff was to the right. And all the way in the back right was smaller handbags, which were more popular for Asian communities. And so they took an old way of doing a method, which today everyone can do, because it’s very expensive to have someone sit there and click all day. And you also have to understand that the data probably won’t be accurate, if someone’s clicking themselves manually, versus a computer collecting all these things.

Cliff Locks 7:32
So how has COVID-19 impacted your investor advisor relationship dynamics with clients,

Marcus Magarian 7:40
we’ve gone from less private placements to more m&a. And I prefer m&a versus it’s harder to do. Because everything. It’s it’s like a marriage. Because the thing is that a private placement, you’ll probably most people will accept 10% 20% of the company. There are those that one like you know more than 50%. But like because of the acceleration that we saw from like those things like the visa reports or contactless payments, or how people are using more digital means. There’s so many players that are completely out of the market. Now they have no choice but to consolidate. And so right now it’s a rush, because it’s like, like, we’re focusing very heavily in the payment space. A lot of our European clients, what’s happening is that they know that they’re having some kind of adverse event happening. But then you have companies like you know, I mean, toast is a bad example. But a company called lightspeed, they’ve raised so much money, they go in, and they just buy out markets. And they’ll overpay, they’ll pay massive multiples. And we’re seeing a lot of those things because and the problem with that is that if these companies don’t sell, because raising capital, forget about it, like because it’s just they’re not gonna be able to be fast enough. This other company, though, they’ll they’ll they buy one player, they’ll have, you know, 10,000 stores or 5000 stores was installed in there with a technology, and then we’ll just start cannibalizing market share, kind of like that scargo thing that, you know, that Walmart did when they first opened and started expanding through the United States. Right now we’re seeing massive land grabs happen. And it’s the Luddite players that either have to move, or they’re going to be out of business. And there are many people that we speak to, who are who know that because of COVID, you had this massive jump in technology, that they know that they have to move somehow it’s either going to sell the company or they get integrated into another company. And we do like a stock swap kind of thing. And that’s really been the play.

Cliff Locks 9:38
I really do get it you have to disrupt yourself at this point.

Marcus Magarian 9:42
Like when I I was an engineering student in college and like I didn’t touch coding for a long time. But I will not go into a deal with I go into a deal I never asked for a pitch deck. I think it’s a waste of time because it is marketing puff and having worked at it. The problem with working at a tech company when you come from an investment bank They have FINRA, so everything has to be transparent, clear. And all these things, how does data analysis work in determining the risk or predicting ROI? It really with data, or with a website, it’s all about your goal. And it has to be very clear. Like, if you take a company like WeChat, they do everything in the United States, WeChat wouldn’t really work. And so the closest thing you have is like Facebook, or like an Amazon, which is not really, it’s still pretty specific. When you work with data analysis, the first thing you want to know is what the purpose of the data is for. So like, if you’re capturing data from a pharmaceutical company versus a cosmetic company, the purpose of the data changes significantly. And this goes back to a point that I was trying to bring up before is that an investment banker today really has to understand database language. So I don’t ask for presentations when I asked for schemas. And I want to know what data you’re capturing and how you’re capturing. Because many times when you’ll speak with a company that’s like in the healthcare space, they said they want to do something with analytics. Great. Are you allowed to get that data? The answer is no. So then you can not do anything with that data, nor will you capture any of that information.

Cliff Locks 11:11
It’s interesting, because we’ve had some conversations with an organization called burst IQ. So it’s the blockchain, HIPAA compliant. And then I’m working with a team and I’m on their board. And we’re using an activity band, you something you and I would like it. And I will watch from Apple at this point in that data is being uploaded to the blockchain permission granted by the user at this point, and then we’re putting analytics against that. And then there’s a chat bot that goes back to the individual to try to motivate them to be more active. And they will actually reward that individual with tokenization, meaning similar to a cryptocurrency, yeah, to be more active than they can convert the crypto to buy organic food products in our Shopify store. So it’s an ecosystem, but it’s really about the wellness of the individual that is our customer at this point, utilizing the app.

Marcus Magarian 12:04
So yeah, like, one thing that you mentioned I love was the tokenization technology, because it prevents credit card fraud. It’s a way where you basically say I want to do a payment. But instead of sending the credit card information, you send a token. It’s like those little grasshoppers used to get back in the day, it’s like you want to log into your email from random country, you had to use the token, despite having to know your username and password.

Cliff Locks 12:29
The technology is accelerating. And the cost to actually build something is decreased substantially, which is somewhat of an equalizer, but you need brilliant people like yourself, Marcus, to step in and analyze, do we really have a market at this point is addressable? Is it going to be vibrant? Do they have the ability to pay? You know, what’s the vision of the future look like? What’s the vision of success, and then work it backwards at this point, it’s got to be profitable, it’s got to iterate. It’s got to be fun, you got to have a really strong team around, you know, when you’re building it out, it’s not just engineers, you need to know business, you and I had a conversation there, you know that the CEOs really need the vision Plus, they got to be able to run a business and allow the company to flourish. And the engineers are really more on the product side and the seamless in the user interfaces. It’s an exciting period of time. That’s the way I look at it. At this point is we digitalize in pretty much everything we’re touching at this point. Yeah.

Marcus Magarian 13:22
But I think because of where we are in the market today, this is why like, now you’re just seeing massive consolidation, or you’re seeing companies that received way too much cash, trying to go public. I haven’t seen as many IPOs since my days, like, you know, Merrill Lynch, where they’re having like an i one to five IPOs a day almost every week, that was like dude, just throwing them out. And what was interesting is that like, the reason why I find it interesting is because there’s the index called the Wilshire 5000. Sure. And it used to have in 1997 7500 stocks on the market. Us USA Today, a couple years ago came up with an article saying like today that 7500 stocks is now 3500 stock, less than half, or at least it’s around half a little more than half. It’s telling because what does it say? The IPO or the publicly traded company isn’t as well, it doesn’t have the same value as did before. So what does that mean? Take, you know, we have the credit crisis in 2008, you had the mortgage backed security. And those things were put into one piece of paper securitize. And yet, let’s say a million mortgages be broken up into millions of pieces and send it to a bunch of pension funds in Scandinavia, Europe or Asia. Today, if you want to manage those mbss there’s a tech company which will cover every single thing for you using analytical data. So you’ll buy the mortgages individually and you say I want specifically these kinds of mortgages, so you no longer have to buy these pre packaged mortgage backed security things. And the way it works is You go to like a, I need a mortgage, you put the mortgage, they sell the lead to a loan provider. The loan provider is like crossover bank. And their job is to structure the mortgage provide the capital in three months, they’ll resell that to a hedge fund. But the hedge fund obviously needs to track it using this technology, which friend of mine actually was one of the founders for its company called pure IQ. And they and so the the, you know, then you could track every single thing individually, but because the computers doing it, and they have a very homogenous way of looking at it, the computer just has to track everything over and over and over again. Did you pay that you’re not paying foreclosures? And what are the risk profiles? When you customize,

Cliff Locks 15:48
strong analytical tool in the right hands?

Marcus Magarian 15:51
Yeah, and you basically it’s like, you invented dishwashers, or washing dishes. And that gives you the opportunity cost to do something else. It’s like hiring a secretary or, you know, getting a car to get you to point a to point b faster, or using a plane to go to another country.

Cliff Locks 16:08
Describe the culture and the philosophy of your firm.

Marcus Magarian 16:12
Well, we are a firm that’s been around for over 30 years. It’s got a lot of great people we had, it started out really as a big IPO shop. And over the course of time, it’s obviously been transforming to now we’re doing tech deals started to become very successful. And the great thing is that you have a lot of people that are very willing to grow. And it’s interesting because a lot of the players come from very top end Ivy League schools, they were founders of divisions at Goldman Sachs worked at UBS worked at family offices, like the Qatari family fund, and a lot of a lot of very intelligent people. About the opportunity today is taking that knowledge and transforming it to something more digital for the younger generation at Chatsworth, what we’re trying to do, make it more, make it younger. And so like, the great thing is that they’re very open to it, we’ve been successful at it. I know it’s very exciting. I can tell you, it’s better than having a nine to five job at a bulge bracket bank, because you but you have to have a group of people that are open to going next steps,

Cliff Locks 17:19
describe your approach to helping companies structure their corporate direction, great strategy, preparing them for long term and capital stack.

Marcus Magarian 17:28
A lot of the times today on top of all those things that we do is a lot of times CEOs are looking at things at a very granular level, they only see their company’s day to day problems like problems that we will never know. And a lot of times it takes months or weeks to fully understand what a company is going to because people like CEOs exaggerate. They’re afraid there’s a performance factor and the CEO, you know, as we said before, he’s the number one sales guy or company. So he’s he’s selling even if he’s not supposed to sell to me, because my job is to be the buffer for him with investors or buyers. Nowadays, it says we mentioned before, it’s all about acquisitions, for you to be a company, you know, looking to do a startup and do some new idea, etc. It’s a little more challenging today during the Age of COVID. Unless you’re doing some it’s very COVID link, but we’ll have continuity after that. A lot of times we’ve had opportunities where we’re working with the CEO, one CEO for 10 years was paying over 20% cost of debt. Like how do you survive, you’re selling, you’re selling airplanes. And when I looked at the balance sheet, I started noticing they’re putting things like on their current light current ratio, or the current liabilities, making the current ratio going on, like 1.7 or something. And what happened was, I was like, well, no one’s gonna give you a loan. Because you look like you have terrible books. When we restructure the entire balance sheet. We got no current ratio of like four and a half, which is ridiculous, because you’re basically, you know, you’re destroying the value your company, got them alone right away. After 10 years, we cut the cost of the debt from 20 something percent like 22%, down to like 910 depending on what the line of credit was. And it was all because of format. And it was the reason was we had to get rid of the the bookkeeper or the accounts and hire new one restructure the thing cleaned it up.

Cliff Locks 19:18
It’s a millions of dollars worth of savings there.

Marcus Magarian 19:21
Oh my god. It was crazy and getting too specific on what the who the company is. They were not an American company outside. They were operating out of the United States.

Cliff Locks 19:31
What do you love about what you do? And what do you find most rewarding personally,

Marcus Magarian 19:36
at a place like Chatsworth, it’s kind of like a sandbox, you have a lot of free rein to do what you want. It’s very important that we focus in a very specific sector. So we were very focused on things like in the payment space, which payments means everything. It starts with payments, because it’s credit card processing, which became digital banking, which became things like you know, digitizing things like Western Union and things Like analytics companies, which is just, you know, data flows all about the law of large numbers, solving those puzzles for those CEOs is the best, the hardest part is getting cost that barrier where like, you don’t, you can’t tell the client that they’re doing something wrong, you have to give them the idea for them to come up with the idea and then solve the problem. But usually, it’s something that it becomes a difficult thing for people in positions of power, is that you have to do things in a way that makes it seem like it’s where we’ve transformed, we’re doing things very successfully. And we’ve been successful at it, we’ve been transforming those things. And it’s a lot of fun.

Cliff Locks 20:41
So it’s really a partnership between you and the client at that point. 100%.

Marcus Magarian 20:43
Okay, 100%. And the clients use it on an understand like, in the beginning, they’ll have an idea of how things are supposed to be done, when they actually go through it. It’s like, like, I’ve had my last deal, I, we had a, we had an issue with the lawyer, if the lawyer comes, once we pass the deal to the lawyer, it becomes no longer our deal, we have to be polite to the lawyer making sure whatever. And then you have to make sure the lawyer has experience, I’ve had three or four deals where like they hired the wrong kind of lawyer, or they mix the one lawyer to do something else. So simple things like, you know, registering things with the Department of State to transfer the share with the ownership of the shares, or declare that the transfer owner shares the state, you know, lawyers not knowing how to do that, because they’ve never done it never done it before, or lawyers creating adverse things in order to increase billable hours or, you know, sometimes before everything is happening, the client starts getting worried about things like fees. But and I always tell them, it’s like, you haven’t even sold the company yet. So you have a long, long, long way to go. And there’s the issue with clients, the buyer could go away. And then you have to, there’s a lot of massage. So it’s very complicated.

Cliff Locks 21:58
So you had to hold the deal together. That’s really what you do. But you have to make it seem seamless, very positive. You know, I’ve had the privilege of building three companies and selling them and you really, it’s people like yourself and your fine organization that allows these deals to get done. But there’s a lot of emotion involved in it, you know, especially for the entrepreneur. And it’s a privilege to work with professionals, and deals get done now. And that’s the exciting part. What will be your personal legacy?

Marcus Magarian 22:28
My personal use, just enjoy it. That’s it, there’s no The most important thing is not having ego in this business. So like, legacy just got to be make sure you have a good family that you pass the education along and move things forward. The culture of everything I think has changed significantly. Like one thing that Chatsworth used to be was a very private bank, the world has done Facebook and Instagram and Tiktok now and etc, etc. The way you have to present yourself as changed significantly. Like try joining a private club. With a family. We don’t have to just join Facebook and everything shared private clubs have social media things, putting pictures of their parties in there. Things like that. So old legacy systems, or legacy social circles have changed significantly.

Cliff Locks 23:15
I look forward to being back with you shortly for another episode of the private equity profits podcast. The show is produced by market domination, LLC.

Transcribed by

John Jennings

John Jennings – Balancing Customization and Scalability

John M. Jennings is President and Chief Strategist of The St. Louis Trust Company. In these roles, he leads the client service practice and is responsible for developing and implementing strategic initiatives.  John is a member of the firm’s Management Committee, on its Board of Directors, and also serves on the Investment, Risk Management and Trust Committees.  

John works closely with client families, advising them in all areas of wealth management. Prior to joining The St. Louis Trust Company as a founding principal, John gained varied professional experience in investments, tax, estate planning and trusts in the Private Client Service group at Arthur Andersen LLP and in the Estate Planning and Tax practices at the St. Louis-based law firm, Armstrong Teasdale LLP.  John earned both his Bachelor of Science in Finance and Banking (cum laude) and JD degrees from the University of Missouri.  

A past St. Louis Business Journal “40 under 40” honoree, John is a frequent speaker on investment, trust and various other family office topics. Personally, John is married, the father of two teenage daughters and an avid reader, skier, music lover and is vegan.  He serves on the Boards of Logos School and the St. Louis Community Foundation, where he chairs its investment committee. He is also a trustee of The Saint Louis Symphony Orchestra Endowment Trust. He is an instructor at the Olin Business School at Washington University in St. Louis. Daily he produces an “interesting fact of the day” which can be found at 

Additionally, John is a Forbes contributor writing about wealth management topics.


Seth Greene 0:00
Welcome to the podcast. This is your co host, Seth Green. Today I have the good fortune to be joined by john Jennings president and chief strategist of the St. Louis Trust Company. JOHN, thanks so much for joining us. I’m super happy to be here. So, all right, so for our folks watching and listening and tell us about the St. Louis company, St. Louis Trust Company, what do you guys do and who do you serve?

Unknown Speaker 0:21
Yeah, so we our multifamily office started about 19 years ago out of the ashes of Arthur Andersen. So, you know, I worked at Arthur Andersen for about four years. And when it was imploding in the wake of the Enron scandal, I was like, Oh, this is horrible. But looking back, selfishly, you know, personally for us, and I think other people that were there, it worked out really well. So. So being a multifamily office, we work with 60 client families, and we have 55 employees, so nearly a one to one ratio.

Seth Greene 0:51
That is awesome. That’s it? Yeah, that’s a great ratio. And so what is it that you think makes the St. Louis Trust Company other than the ratio obviously, stand out? And how do you differentiate yourself?

Unknown Speaker 1:04
Yeah, so I’m kind of to borrow from Peter Thiel, the venture capitalist, you know, he had this great book, zero to one and other venture capitals have talked about this, like, truly successful companies need to have a secret. And the definition of a secret in their parlance is what do you believe that most other people or businesses don’t believe? And if you told them that, you’d think that a sort of crazy so and pretty much every business, but especially financial services, there’s a trade off between customization and scalability. And the goal for most businesses, almost all of in the financial services industry is to increase scale. So for instance, we work with 60 client families and oversee and advise on about $13 billion of assets with 55 employees. So imagine just the profits, if we double that to 120 and 26 billion with the same 55 employees, we’d be like, where do we stack all our Benjamins? Right? What our secret is, is, we believe that if you are as customized as possible, and you don’t scale, that that’s a great business. And you can be profitable, and you can really be among the best in the entire country, or entire world, which would mean the entire solar system. And I don’t go further than that, because who knows what else is out there? Right. So

Seth Greene 2:35
that is an excellent point.

Unknown Speaker 2:37
So we want to be as close as possible for our client families to a single family office. And we’re able to do that, because we’re 60% owned by clients. So the main, you know, our main ownership group, you know what, it’s kind of nice when you know, they get a nice dividend. The number one thing is they want us to be customized and serve their families well.

Seth Greene 3:01
Alright, so that could that that’s very interesting, talked a little bit more about the and that’s probably another thing that differentiates you talk a little bit about the ownership structure.

Unknown Speaker 3:11
Yeah. So when we started, we decided to be a Trust Company, and we needed working capital, but we also needed capital to be a Trust Company. And so we turned to, you know, we turned our initial set of clients. So they were, they were early investors in the company. And as we’ve grown, we’ve had some other clients that have bought in and we are overseen by a board that is all, you know, all but two of us are, you know, clients on our board. And so, you know, clients that are on our board, buy in, and and it’s really, it’s really great. The other 40% is owned by, you know, our primary founder owns a chuck chunk, who’s now retired, and the rest is principals of our firm. So

Seth Greene 4:02
and, obviously, we’re not asking you to break confidentiality to, quote, disclose any names, but what types of families do you work with? Yeah, so who is an ideal client for you?

Unknown Speaker 4:14
So it’s interesting. So if you look at the size of our clients, you know, I don’t believe we have anyone that just made a lot of income, like we don’t have any wealth generators that are doctors or lawyers. And we don’t really have anybody that just saved money and invested in the stock market really, really to create great wealth. You have to have equity in a single company usually. So you put together your you know, you’ve taken a big risk, you’ve been concentrated, you put your own sweat equity into it, and you get lucky. So our client families, somebody did that. Whether we’re working with a first generation or you know, we’ve worked with we have sixth and seventh generation. We will So they, they either started a company, and then over time it was was sold, and sometimes they start multiple, or they were an executive at a public company and and was able to buy in or be granted a lot of equity. So that’s who our clients are, or their descendants.

Seth Greene 5:17
What are you finding some of the biggest mistakes they’re making are that they’re coming to you to help fix, or that they want to help your help to avoid?

Unknown Speaker 5:28
Yeah, you know, we get, we get a quite a few client families interested in us that realize that they need a higher level of customization and service. And really, at this sort of wealth, the wealthy families that kind of the waters we’re swimming in, kind of use a shark reference. So yeah, it’s, there’s a lot of, there’s a lot of sharks out there. But the level of wealth we’re dealing with, there’s no real just platform they can be on. So if you go to a lot of investment firms, they’re like, okay, here’s the way we do things. And the family needs to fit into how we do things. And we flip that on its head, we say, you know, we’re going to help you invest and do everything else in your lives, the way that fits your values and your goals. Right. So that’s, that’s number one. And number two, we see a lot of client families have just really been burned in the financial industry, even if they’re working with, you know, some of the really big name, you know, kind of gold standard firms, they just feel like, you know, the desire is the firm, the investment firm, just throwing things at them, just trying to sell them. And it’s all about their profitability, the investment firm, rather than what the family needs. And so we were having come in, they may still work with that firm, but they’re like, okay, we need somebody to help us to look at all this stuff and say, Okay, this makes sense that doesn’t, and we really start focusing on fees and taxes and things that the investment industry really doesn’t like to talk about.

Seth Greene 6:53
Okay, so you say you segued into the next question perfectly. So what are the services that you offer beyond the traditional investment management that they’re attracted to? They go beyond that Main Street offering, right.

Unknown Speaker 7:09
So you know, one of the we have three main lines, one of the three is, you know, investment management. And, you know, we do a nice job of investment management, but you can find good investment managers all over the place. The second thing we do is family office, and I think a great thing. And we sort of, you know, we started in 2002, we rode this wave, where, you know, people didn’t know what a family office or multifamily office was, you know, nearly 20 years ago. And so we really wrote this way we were, we were sort of early. And I think what’s great for investors is pretty much every, you know, financial advisory firm or investment firm out there says, Okay, we’re going to provide some family officers, I think that’s great. But it’s hard to do, if you have 100, you know, every advisor works on 100, or 250 200 200. accounts. So the way we do family office, is each of our professionals only works with, you know, five to seven families. So it really allows you to dig in and do bill pay and cash flow and help with charitable planning and educate kids, you know, the next generations about wealth and put together a strategy, and on and on and on and on. I mean, there’s just all these these ones off, you know, private jet charter, and, you know, should I lease or buy my car, or, you know, the next generation, I’m starting a business, can you help me on that, and we do all that. The third line of business is we can either be trustee, which is a really a convenience for our clients, there’s different reasons, they may need a trustee, or they had it, have a corporate trustee, that’s, you know, some big institution that they don’t feel like they’re a fit with anymore, and they can move to us. But probably a bigger thing is a lot of family members serve as trustee for trusts, and, you know, partnerships and things like that. And we help them be good trustees or, you know, managers of their LLC and do all the legwork behind the scenes. And, and there’s liability, you know, I, you know, there’s, there’s all these cases you hear, you know, both around where I live and nationwide about, you know, families Sue each other, and there’s, there’s real liability when you’re trustee of a family, family trust, so we help them with with that. And by the way, real quick, you know, even though our name is St. Louis trust, and we’re actually in the middle of rebranding to St. Louis trust and family office. So it hasn’t really been released yet. But we have clients in 33 states and some some, you know, family members live out of out of the US and, you know, our biggest growth areas have actually been on the coast. So, notwithstanding our name, we are not a local organization. We are nationwide.

Seth Greene 9:38
Understood. Now, you talked about a lot of the majority of the families be having a at some point in their history. There was a business that was started perhaps there’s some liquidity event or something that qualifies them to have the cash to work with a fat multifamily office like yours. How are you helping them because I mean, there’s a stereotypes and cliches of shirt sleeves to shirt sleeves in three generations, and how many businesses don’t make it past generation three? How are you helping them bridge that gap?

Unknown Speaker 10:09
Yeah, that is that is a real issue. And really what drives shirt sleeves to shirt sleeves, and you know, three, or four or five up here, stated different ways, is is a big part of that as math. So I’ll give you an example. So there’s a CLI family we’re with its, I think the main, the main ones we work with are depending on how you count fifth or sixth generation. And if you look at their, you know, this, this generations grandmother, so the grandmother and the grandfather, so they had a big chunk of wealth. And then they had six kids, and they paid a state tax. So the six kids then had one six of the wealth, less tax. And so the grant, the grandparents lived amazingly well, like they had just money just flowing it, the six kids, also very wealthy lived well, but it was a step down, right. And then those six kids, it varies between having two to six kids for each of those six kids. And then that drops down and there was a state tax. So a lot of it is math, that you know, even even if you invest well, and you control your spending, you know, some of it’s just math, and where we see some families not go shirt sleeve shirt sleeve, some of it is just because they don’t have as many descendants. So if the grandparents had one child who turned out had two children, you know, you can out earn that math, so part of it is just looking at the math and setting expectations, and just telling a lower generation, by the way, you know, even when all the money flows down to you, just because of the math, you probably can’t live as your parents did. And you definitely can’t live as your grandparents did. So that’s the first thing. So some of us just, it is what it is. The second thing is, is fees, and taxes are huge. So limiting fees, and taxes is is is really important. Investing well. And investing well isn’t just always, okay, I’m going to go out and you know, I’m going to find the next Facebook while it’s private or beyond meat or whatever, you know, Tesla and SpaceX is gonna be all this, this growth. I mean, that’s great. But that’s really hard to do. Part of it is just not making big investment mistakes. That’s, that’s, that’s a big deal. And then a state planning. So the way the estate tax laws are in wealth transfer tax laws are now you know, paying a state tax is largely optional, if you plan it early, and often, and you’re willing to do what it takes. And we’ve seen this time and time again, people that have 10s of millions of projected estate tax liability, and 10 or 20, late years later, it’s it’s zero. So, you know, we’ll see what the future tax laws hold. But it it really is optional. And all the time we see people that wait till they’re their 60s or 70s, or have a family owned business, and they’ve done little estate planning, and it can just be devastating, again, in terms of the math, and how that that passes down. So that was a long answer. I could talk more on it. But I think that’s it’s probably pretty good.

Seth Greene 13:16
How has the COVID pandemic affected your business and your clients?

Unknown Speaker 13:25
If you would have told me 18 months ago that this was gonna happen, you’re gonna have this pandemic, and we’re going to work virtually and we couldn’t visit, even our clients live locally because of, of health concerns, I would have been like, Okay, this is good, it’s gonna be devastating. And what has been surprising is how well it’s gone. So we’ve been able to, we transition remotely, you know, over a three day period last March. And our people just done a great job. You know, meeting with our clients virtually, and staying in contact with them, you know, we call them a lot. They didn’t call, it’s gone really well. Now, I will tell you that my analogy I use is both in terms of our company culture and working together and client relationships. I felt like we were running on battery power. So it was working. But I felt like the battery was degrading and training over time, right? And I wouldn’t want to do this for you know, two years or five years. And we are, you know, with the vaccines and almost everybody in our company is vaccinated, more people are coming back to the office. We’re bringing them, you know, everybody’s gonna start coming back to the office more The day after summer solstice. So he didn’t want to interfere with summer solstice celebrations, but it’s going to be the day after the summer solstice. We’re traveling to meet clients, we’re meeting him in person. It’s really fantastic to see everybody again, but again, I was just stunned that there wasn’t more of a disruption and how well it went. And I just think about him. What if this was, you know, even 10 or 15 years ago? And we didn’t have all the technology we do, it would just be a far different situation.

Seth Greene 15:06
Absolutely. How has it changed the investment advice you’re giving your clients?

Unknown Speaker 15:11
I don’t, it really hasn’t really hasn’t, you know, going in even going into the pandemic, you know, we’re big on on the belief that, you know, the financial industry, models risk and returns using the standard bell curve, or the normal distribution, the Gaussian distribution, that doesn’t work, that math does not work, you cannot take projections and and say, Oh, well, this is your downside risk, or this is what’s going to happen. So we’re very big on investing. Acknowledging the uncertainty of the future, part of that means having an adequate margin of safety. And so when we hit the nearly 35% doubt, and just over 30 days, so, you know, the the, the 30% down that occurred in it was the fastest drop in the stock market ever, even faster than some of the times in 1929 1930. So, really, No, none of our clients panicked. And some of them rebalanced and really rode the, you know, sold high and our, you know, take to liquidity and bought low thing. So, you know, they really did quite well, or did fine through it. Now, if it had gone instead of 34% down, if it had gone 70% down. Yeah, that would have been, you know, it would have been, it would have been more difficult, but it just really reminds you just the folly of trying to forecast when investment returns are. And a lot of the industry says okay, well, you know, and I did it. I am also a contributor for Forbes, I wrote an article wrote a few hours, I’ve written a few articles kind of lambasted this idea that you can predict and a common excuse that people give when they predict is, well, I couldn’t have foreseen that, I could, I didn’t know that there was gonna be a pandemic, or that, you know, going back that you know, 4% of the mortgage market of some Prime’s would be one of the main things that led to, you know, unraveled the, you know, the entire financial system, almost or, you know, who had on their, their, their scorecard for 2021, that a boat, we get stuck in the Suez Canal and further disrupt global supply chains, or that a tsunami would take down the, the reactor in Japan, you know, and these things happen. And it just reminds again, with a pandemic, you, you should invest in a way that’s robust to the unexpected. So it’s just, it’s really been a great lesson. And if you don’t mind me saying another lesson that just says home again. So the stock market and economy are not correlated, you can’t look at what’s going on in the world or the economy or even geopolitically and say, now I’m going to make investment decisions. And three days after, in retrospect, what was the bottom, I wrote an article in Forbes, and it was advice we were giving their clients and reiterate with the clients, that they’re just not correlated. And the point of the article was, we’re heading into a really bad recession, unemployment was spiking. The stock market was dropping, everything just seemed horrible. But the point was, is you shouldn’t sell out of your portfolio, just because the news is bad is going to get worse. Because they’re not correlated. And then what happened is, you know, turned around and had a, you know, 70 some odd percent gain from about the time that I wrote that article, and what people have said to me is, Jennings, how did you know, we had bottom? And I said, No, you don’t understand the point of the article is, I didn’t know and that nobody knows. And you should invest, like you don’t know. And a challenge we have sometimes is talking to prospective client families that want us to give them the certainty of, we know what’s gonna happen. Instead, we say, we don’t know what’s going to happen. And we’re going to invest that way. And we find that our clients that are very sophisticated investment wise, love that. And some investors that are less sophisticated, you know, don’t choose us, they want to go to the big bank or investment firm that says, you know, here’s our chief strategist, and you know, the s&p is going to be up 14% this year, and blah, blah, blah, blah. And they like that certainty. Because as humans, we don’t like uncertainty. If somebody says, I know what the future is going to be, we get this dopamine rush or like, we feel good. So, again, I’m just like, sorry,

Seth Greene 19:30
that’s quite a fascinating answer. When you are not serving as president, what do you I know that you are an avid reader? What are a couple of the best books you’ve ever read that had the biggest impact on your career?

Unknown Speaker 19:44
So, you know, the Black Swan by Nassim Taleb had a huge effect. I read that shortly after it came out in in 2007. I’d like to say that I read it was like, Oh my gosh, I see you know, 2008 coming, but let’s, let’s at least open my eyes to it. And it really last few years, one of the books that has, you know, just, I was just like, wow, just really, you know, knocked me as like I’ve learned so much and really caused me to see the world a bit differently. There’s a book called scale, by Geoffrey West, who was a physicist at Los Alamos, and then went over to the Santa Fe Institute, and was the head of the Santa Fe Institute, if you don’t want the Santa Fe Institute is it’s a academic think tank and their, their main area of research is complex adaptive systems. It’s how things interact, when you have intelligent agents and feedback loops and everything, which is really how the stock market works, by the way, why we that’s why we can’t predict it. But this book is all about scale, like power laws, it’s on about organisms and businesses and things and what a power law really is, is, I’ll use an example of let’s let’s use the example of book sales, you can look and say the, you know, that there’s, you know, how many ever books published in the USA, every year, it’s, you know, hundreds of 1000s. And you can say, the average book, you know, sales 10,000 copies. And if you think in terms of a bell curve, you’re thinking, Oh, you know, there’s, you know, kind of, if you’re listening, I’m sorry, I’m like drawing a bell curve with my hands, high in some low, but a lot around the $10. That’s not how it works. You have people like Stephen King, and JK Rowling, you know, you have this very small percentage of authors that sell a ton of books, and then drops off immensely, we have this very long tail of most books selling, you know, less than 2000 copies, less than 1000 copies. So that’s a that’s a power law distribution, or think about wealth. So, you know, if you take a, you know, you go to a concert venue that has like, 2000 people, and you go, okay, the average income of these are that, let’s say, the average wealth of these people is, you know, $250,000, if you average it, right body, and if you think bell curve, you’re like, oh, okay, but imagine if, you know, Bill Gates walks into the room, okay, the average just skyrocketed. And it doesn’t tell you anything about what everybody else has. And, and that’s the way wealth works in America, too, is at every stage, you know, you look at the top 50 versus the low 50. And then the top 10%, the top 1%. At every stage, there’s a few number of people that are massively out of range that that affect everything else. So this book is all about that is a little technical. Like I’ve, I’ve talked before about how much I liked this book, I’ve had people that have like I couldn’t get through it. So if you want to just really expand your mind, but it’s work scale by Geoffrey West.

Seth Greene 22:40
Great recommended patients fascinating interview, and anything else want to share that we didn’t think to ask you yet.

Unknown Speaker 22:46
Well, I would just like to, if I could plug my blog, of course, please. So I write a blog a few days a week, it’s called the interesting fact of the day, it really should be called what Jenny’s thinks is interesting, but I get a you know, it’s very well received. And it’s just all sorts of different things. Some some times as things on leadership, sometimes it’s as simple as its national Grilled Cheese Day, you should go eat grilled cheese, and, you know, today’s sent out as a rerun because my daughter guys, graduates from college tomorrow, and it’s on the five best commencement speeches. So it’s just a lot of different eclectic thing you can think you can find it

Seth Greene 23:22
at V th e.

Unknown Speaker 23:25
iPod, which stands for interesting fact of the day. So th e, i fo D calm, feel free to subscribe, feel free to unsubscribe. But just me, I find that people say that it kind of kind of tickles their interest in things. So.

Seth Greene 23:39
All right, well, this has been Seth Green with john Jennings of the St. Louis Trust Company. JOHN, thanks so much for joining us. Thank you so much. Thanks, everybody for watching or listening. We’ll see you next time.

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Three Investment Lessons To Learn From Warren Buffet

If there ever turned into any investor that one must pay attention to that would be the notorious Warren Buffet a stock dealer who began operating his father’s brokerage at a young age of eleven whilst he made his first stock buy. That’s why these three funding training to research from Warren Buffet that are so precious.

Be a price investor is one in all 3 investment lessons to analyze from Warren Buffet which are so precious. Buffett’s philosophy is a from the Benjamin Graham college of Value investing. A fee investor will look for securities which have unjustifiably low charges attached to them primarily based on intrinsic cost which may be decided by way of evaluating the organization’s basics.

International trading strategy is quantity of three funding lessons to research from Warren Buffet which are so precious. Now allow’s have a glance his worldwide trading approach. Trade deficits arise whilst a country has a developing economy so those stocks are a wise pass.

There is not chance because because the economic system grows so do new belongings that foreigners can spend money on and purchase wherein is part of the 3 funding lessons to study from Warren Buffet which might be so treasured.

Your global investments can reap you first rate earnings as the usa grows and develops and the dollar price grows via investments and traits. That’s why this is a part of your instructions to research from Warren Buffet which are so precious.

Costs possibility is variety the three funding classes to analyze from Warren Buffet which are so precious. According to Buffet you must study all your fees because the cost of possibility. Don’t evaluate your losses for the 12 months while the returns of that investment gained be visible for a widespread duration of time.

There are a many traders which have excellent information to percentage with you but we have shared 3 investment instructions to analyze from Warren Buffet that are so precious because he is the excellent making extra cash than every person else inside the world.

Warren Buffet is an investor that the world pays interest to, which is why we’ve got shared 3 funding classes to examine from Warren Buffet which are so precious. . They will begin you on the right song on your destiny wealth. If you are interested by investing and earning profits use those three investment classes to study from Warren Buffet which might be so precious.

Copyright © 2007 Joel Teo. All rights reserved. (You may additionally publish this newsletter in its entirety with the following writer’s records with stay hyperlinks most effective.)

Beatrice Mitchell “Selling Your Business Post-Covid”

Beatrice Mitchell “Selling Your Business Post-Covid”

– The Private Equity Profits podcast with Seth Greene Episode 003

Beatrice Mitchell The guest is Beatrice Mitchell of Sperry Mitchell and company founded back in 1986. Today one of the oldest and most active independent m&a advisory firms in the United States. Beatrice is a Co-Founder and Managing Director of Sperry, Mitchell & Company, an investment banking boutique which specializes in arranging the sale or merger of private mid-market companies. She also co-owns Percival Scientific, a leading Iowa-based manufacturer of biological incubators and plant growth chambers.

  • Listen to this informative Private Equity Profits episode with Beatrice Mitchell about Selling Your Business Post-Covid.
  • • What differentiates Sperry Mitchell as an independent m&a advisory firm.
  • • What an ideal company to help negotiate a sell off exit looks like.
  • • The biggest difference between an entrepreneur and non entrepreneur.
  • • How COVID has impacted buying and selling strategies
  • • Lessons learned from challenges faced
  • • The book, The Complete Guide to Selling your Business
  • • How the current interest rate environment affects sellers coming to market.

Connect with Beatrice



Phone: (212) 832-6628

Sasha Grutman

Sasha Grutman – Identifying Ideal LBO Candidates

The Private Equity Profits podcast with Cliff Locks Episode 002 Sasha Grutman The guest is Sasha Grutman founder and Partner of Middle March Partners. Sasha co-leads the firm’s merchant banking and investing efforts. He has spent his entire career investing and advising high-growth financial services and business services companies that leverage technology to create sustainable advantages.

At Middlemarch, Mr. Grutman advises clients on business and capital strategy issues, has sourced over $730M of capital for clients, and serves as a board member for a number of Middlemarch clients and portfolio companies. He has deep domain expertise in specialty finance and transaction processing, sectors where he has been exceptionally active both as a merchant banker and as a private equity investor since 2002. Active with both private and public companies, he has participated in over $3.2B of transactions over the course of his career as a merchant banker and private equity investor.

Prior to founding Middlemarch Partners, Mr. Grutman served as a Partner at TH Lee Putnam Ventures, a $1B growth equity fund, where he co-led the firm’s financial services investments in specialty finance, insurance services, and electronic capital markets investments. Previously, he was a Managing Director at Citigroup where he oversaw the firm’s on balance sheet financial services private equity holdings as well as managed the bank’s $6 billion private equity fund-of-funds business. He has also held private equity investment roles at Goldman Sachs and Frontline Capital.

He began his career at The Boston Consulting Group in its Financial Services and e-Commerce Practices. Mr. Grutman received an MBA from the Wharton School where he majored in Finance. He was a Fulbright Scholar in Italy where he pursued independent research on Dante. He graduated from Yale University magna cum laude with a BA in Humanities. He holds Series 7, 63, 79, and 24 FINRA registrations.

Listen to this informative Private Equity Profits episode with Sasha Grutman about Identifying Ideal LBO Candidates

Here are some of the beneficial topics covered on this week’s show:

• What makes a good private equity dealmaker, fundraiser, researcher, associate

• important personality traits in finding value where there doesn’t appear to be any.

• The worst investment mistake he ever made, and what he learned from it.

• The most rewarding part of doing what Sasha does.

• Leaving a personal legacy

Connect with Sasha Email:


Phone: (212-913-9660

Connect with Cliff Locks:

“Are You Destined to Deal?” With Goldman Sachs Managing Director Jim Donovan

“Are You Destined to Deal?” With Goldman Sachs Managing Director Jim Donovan

undefined JIM DONOVAN: The topic today is, are you destined to deal? And I’m going to talk about what it’s like to work as a lawyer, or an investment banker, on transactions, corporate transactions. And I’m going to split the talk into two parts, mainly the second part.

The first part, I’ll spend a little bit of time on why it’s exciting to work on transactions, why it’s exciting to do deals. And then the second part will be on the skills that I think are necessary to do this job well. OK? So first part, why I think it’s exciting to work on transactions.

There are three reasons, I think. The first is what you’re working on is important. So you’re hired by the CEO of a company to advise them on taking the company public or on selling the company or on buying another company or merging their company with another company. That is, by definition, very important to the CEO.

It’s probably the most important matter the CEO has ever come across professionally. So it’s important. And secondly, you can help. You’re being hired because you have some expertise, because you know something that the CEO doesn’t know or doesn’t have. He does not have the expertise that you have.

So I think it’s exciting because it’s important and because you can make a difference. The second reason I think the job is exciting is because it’s dynamic. Every deal is different. Even within a deal, the deal changes. It morphs over time as the deal progresses. So when you work on a transaction, you’re constantly confronted with new challenges, with new issues.

And then from deal to deal, they’re entirely different. The people are different. The companies are different. So it never gets old. It never gets boring. I think that’s fun. So it’s exciting because it’s dynamic. Every transaction is different. That’s atypical for jobs. Typically, a job becomes somewhat routine over time and can become somewhat boring.

Not true on deals because every deal is so different. Third reason I think it’s exciting is because it’s intense. You are going to spend a lot of time and a lot of energy working on transactions, if you become an investment banker or a corporate lawyer. You’re going to be sequestered in conference rooms with your clients.

And you’re going to get to know them very well. And you’re going to work very hard. And that’s not always fun. But it’s mostly fun, I think. And in hindsight, when you look back on it, you’ll appreciate that it’s fun. But it’s exciting because it’s so intense. So I think the job is exciting because it’s important.

What you’re working on is important. And you can make a difference. Because it’s dynamic. It changes from deal to deal and even within a deal. And because it’s very intense. So what skills do I think are necessary to do the job well? I think there are six tangible skills that I believe are necessary, and then four intangible skills.

The six tangible skills start with interpersonal skills. You need to have strong interpersonal skills. Now, I don’t mean that in the sense that some of you may think in this room or people outside of this room may think. I don’t mean interpersonal skills in the sense of sort of slap you on the back salesman or saleswoman types of skills.

I don’t mean schmoozing skills. I mean the ability to convey to the client that they should have confidence in you, that you are competent. And that they should have confidence in you. Secondly, quantitative skills. Quantitative skills are important if you’re going to work on transactions. Now, you do not need to have been a math major or a physics major or an engineer in college to have the prerequisite quantitative skills.

undefined But you need to be facile with numbers. You need to be comfortable with numbers. Because much of what you do as a transaction lawyer and definitely as an investment banker will involve numbers and numerical analysis. So you need to be comfortable working with numbers. Thirdly, you have to have an interest in business.

You do not, contrary to popular belief, need to have a business background. You do not need to have worked in business for four, five, or three, or two, or one year. But you should have an interest in business. And the way I would say you could manifest that interest now, or what you might want to be doing now at this stage of your careers, is just The Wall Street Journal a couple of times a week, not even everyday, just a couple of times a week, just the front page, just the front page.

So take 10 minutes, that’s all it takes to read the front page of The Wall Street Journal two or three days a week. And you’ll become familiar with what’s going on economically around the world and what’s going on among some of the leading companies around the world. So develop an interest, acquire an interest, fake an interest in business.

But you know, have an interest, at least, in business. undefined Fourthly, you need to be discreet. You will be entrusted with confidential information that’s very, very valuable. And you don’t want to be the person who’s talking about the transaction upon which they are working when they’re on a train, or in an elevator, or at a restaurant.

You do not want to be divulging this confidential information. You need to be discreet. You need to treat it with discretion. And you need to exercise good judgment. undefined Next, you need to be OK with confrontation. A popular misconception that some people in law school have is they think of litigators as sort of conflict seekers.

And they think of transactional lawyers, or corporate lawyers, as the people who want to avoid conflict. You do not get to avoid conflict by becoming a corporate lawyer or an investment banker. You’re going to work on a transaction. The people sitting on the other side of the table from you have adverse interests to those of your client.

And you’re going to have to conflict with that person. You’re going to have to negotiate against that person. And you’re going to have conflict. So you have to be OK with that. You have to be OK with conflict. Last tangible skill is you need to be able to put the client first. A lot of people say that.

What does that really mean? It means that you need to be there for the client whenever they need you. You need to respond to their emails immediately. You need to call them back immediately when they call you. One, you want to really be responsive to the client. But two, you want to just as importantly, convey to the client that they are a priority.

So you’re going to get calls at 2:00, 3:00 4:00 in the morning. You got to return emails 2:00, 3:00, 4:00 in the morning. You got to return them really fast. You’re going to spend all-nighters with the client. You’re going to work very hard. You want to do, on top of that, whatever you can to make the client feel comfortable that they are a priority for you.

So those are the six tangible skills that I would say are necessary to do deals or to work on corporate transactions. Four intangible skills, the first is it’s helpful to be an open book, or a blank sheet of paper, whatever analogy you want to use to convey what I’m trying to convey, which is that you want to be a student when you first start out on this career as a transactional lawyer or an investment banker.

You want to find somebody who does this job really well. And you want to study that person. Put your ego aside and learn as much as you can from that person. You need to be a student of the business for the first couple of years. I can’t tell you how many people make this mistake. They come in with preconceived notions of what will make them good or bad at doing deals.

And they’re usually wrong. And you can’t do that. You need to put aside any preconceived notions that you might have and be willing to learn from people who are really good at doing what you’re hopefully going to do. So be a student. That’s very, very important. Secondly, have a system.

The best transactional lawyers and investment bankers have a system that they use for covering clients for doing deals. And it involves everything from mundane things to more sophisticated things. They don’t just wing it. They actually have a system that they’ve put together over time. And they follow that system throughout the course of the deal, from the time they make the pitch to the client to try and convince them to hire them to the time they attend the closing dinner and toast the client for the transaction being completed.

Have a system. Third intangible skill is take control. Most clients, in fact I think every client, wants you to take control. They’re hiring you because you have expertise that they don’t have, as I mentioned. They want you to tell them what to do. So tell them. Tell them. Don’t hem and haw.

Don’t sort of equivocate. Say, here’s what you should do. And if you do it, this is how things are going to turn out. And if you don’t, this is how things are going to turn out. But take control, take control and don’t be afraid to give the client advice right up front in a confident manner, as I said earlier, by conveying to the client you know what you’re doing.

You’re very competent and that they should have confidence in you. The last intangible skill that I think is very important, and maybe the most important of all the skills, is empathy, which is the ability to put yourself in someone else’s shoes. And too many advisors on transactions, too many deal lawyers and deal bankers don’t do this.

Take some time and think about what the CEO, or what your client, is going through. Think about what is probably important to that person across a spectrum of things, from emotional to professional. And articulate those concerns to the client as you advise them. Say I understand. You know, I bet you are under enormous pressure.

This is your company that you started. And we’re taking it public. You’re about to take it public and sell a big portion. Your name is on the sign, is on the billboard, is on the company letterhead. This is a big deal for you and your family. We got to get it right. Things like that. Have empathy for the client.

Put yourself in their shoes. Advise them accordingly. And make them understand that you appreciate the position that they’re in emotionally, professionally, and all across that spectrum. OK, so those are why I think the job is exciting. Those are the six tangible skills I would advise people to work on and to have, if you’re going to be successful in advising clients on corporate transactions.

And then those are the four intangible skills that I think are necessary. I’ll open it up for questions now. I could take questions for about 15 or 20 minutes if people would like. AUDIENCE: When you said, have a system that works for you from the danger that there’s too many things. Do you have any experience as to how you would build up that system? Do you just kind of borrow it from whoever you’re learning from? Or how do you kind of figure that? JIM DONOVAN: Yeah, that’s a very good question.

I think the best way to do it is to borrow it, as much of it as you can, from someone else. Because it’s very hard to recreate the wheel. It’s say, it’s inefficient to recreate the wheel if somebody has already created it. And so what I did for my system is I found somebody who is really good, objectively really good, I just didn’t think they were really good, they had done very well at my firm.

And I like to say about 80% of what I use in my system I copied, plagiarized with his consent from him. And then I added my own 20% over the years by bumping into walls and making mistakes and learning. But 80% I got from this person. So I didn’t have to start from scratch. If I had I would have probably been delayed five years in terms of my success.

Because that was able to really help me jumpstart my ability to advise clients and to do it effectively, not only advise them, but bring new clients in. Good question. undefined AUDIENCE: You said that you should confidently give an answer to your clients and tell them what to do. What do you do if aren’t confident in your answer or you don’t know the answer? JIM DONOVAN: I’d say two things.

First of all, the best way to convey a sense of confidence to the client is to be competent. And when I started in my job, I had these preconceived notions about– you know, I looked around the room at the other 500 people who were in my new associate class at Goldman Sachs. I looked around the room.

And over the course of two months I thought, well, that person is going to be really good. And that person is going to be really good. And that person is going to be terrible. And that person’s going to be– and I was completely wrong. Like 10 years later, all of who I thought were going to be really good, I don’t know where they are.

They’re no longer at Goldman Sachs. And some of the people I thought were going to be really bad turned out to be really good. Because what really mattered most was not how charismatic they were at that time or what business background they had or experience. It was how competent they became over the next two to three years.

So two answers to your question. First is hopefully, if you’re competent, you’ll never be in a position where you don’t know the answer. But if you don’t, don’t give the answer. Don’t fake it. Because there’s no better way to lose the client’s confidence than to give an uninformed answer or not well thought out answer.

A corollary to that is that more about this than the client does, no matter how smart they are. You’ve been doing this for some number of years or months or weeks. They’ve never done it before. And you have the entire firm behind you that you’re bringing to bear for this transaction. So the client may know a heck of a lot more about manufacturing pieces of chalk or desks or computer equipment.

Because that’s what they do. But they don’t know nearly as much as you do, even as a first year associate, about finance or about corporate law, depending on what you’re advising them on. So you will be more competent than they are. Don’t forget that. And give them the advice that makes sense.

If you don’t know, try and put the question of until you can become confident. And you can get the answer. You just have to work hard to get it. And if it’s a judgment call, give them your judgment. And tell them it’s your judgment. Lucas. AUDIENCE: I was just wondering how you– I mean, you obvious said it’s very intense.

How do you keep a balance with keeping it being very intense and you enjoying that, but also having time to release and relax without going crazy? JIM DONOVAN: Yeah, that’s a good question. And I’ve got three of my four children here. So they have different perspectives on this for different reasons.

But the short answer is for the first 10 years of my career– my oldest daughter is 16. She’s sitting there. The first 10 years of my career, I had no balance. So Emily didn’t see a lot of me from age one to six. And after that, I achieved balance by becoming senior enough at the firm and developing other interests and sort of partially transitioning out of the firm and doing things like teaching at UVA and other things.

But what I did during the first 10 years of my career, when I was really, really killing myself, pulling all-nighters, not coming home, all over the world, is I picked one thing that was really special to me. And I protected that one thing. And some of you who have been my students know this. But it can be anything.

So you pick this one thing that’s really special to you. For some people it’s reading a book, right? And you protect that. You read that book for half an hour. And that’s your release. And you don’t ever give it up every day. Because if you give it up for one or two days, all of a sudden, it’s three years later.

And you haven’t read anything. Right? Pick the one thing, if it’s cooking, cook for half an hour. If it’s wine, don’t drink for half an hour, but study wine for half an hour. Whatever it might be, do that and protect it at the expense of anything else. Because you need that to do the job well.

And you need that release. For me, I had to do a run. I did a run every day. I ran every day for 35 minutes, same run every day no matter what. You know, wherever I was, I had a pair of sneakers and shorts and a t-shirt, sometimes a hat and gloves depending on where I was. And I would just run outside.

And for me, I protected that. It didn’t matter what time of day. It didn’t matter how sleepy I was, how little or no sleep I had gotten. I did that no matter what. And that kept me grounded. And it gave me the perspective. Now, some people would say that’s not really balanced, right? That’s the one thing I did.

But that was the one thing I did. And then I achieved balance over time later. As my boys will tell you, I spent a decent amount of time, sometimes more time than they would like, with them. And I did that by just really working very hard at the beginning and building up enough of a reputation and enough confidence in my peers and being senior enough that I could do that.

AUDIENCE: So my question kind of combines two comments you made. One was where you talked about how there’s bound to be conflict when you’re negotiating with counter parties of transactions. And then your other comment was empathy for your client. Do you think the empathy could also apply to empathy towards the counter party? Because if you understand where they’re coming from, why they’re pushing a point, it might be able to help you navigate those tense moments.

JIM DONOVAN: Absolutely. Absolutely. So if you can put yourself in the counter party’s shoes, it can help in a couple of different ways. Substantively, it can help you come to an agreement. Because you kind of understand what their priorities are. And you see where there’s maybe some overlap between your client’s priorities and theirs.

And secondly, it can help you from a foreign perspective. Because it can just make you appear to be more conciliatory. Now, the thing you have to be a little careful about is sometimes your client doesn’t want you to appear conciliatory. Right? Because he’s very upset or she’s very upset with the party on the other side.

And sometimes, by the way, conciliatory can be viewed as weak. And so you have to know when to do that and when not to do that. But no matter what, having empathy does allow you to find common ground. Even if you’re not acting empathetic, you can find the areas where there’s some way for you to give.

And then a deal can get done. But you have to be careful not to– it depends on the situation– appear too empathetic or conciliatory. AUDIENCE: I was wondering if you had any advice for someone who is going to be a corporate lawyer at a firm focusing on finance on the legal side who might be interested in switching over to the business side of finance? JIM DONOVAN: Yes, I have advice on that.

So poor Kevin here, I am hesitant to answer this question in too much detail. I’ll tell you a story at first. And then I’ll answer the question. So Paul Mahoney, who was the Dean for most the time when I was here teaching, used to say to me, Jim, why is it that after your class, all these kids come out of the class and don’t want to practice law? What are you doing in there? What are you telling them? Right? And so I told him I’m just telling them there’s options.

Right? That you have options. You don’t have to practice law. You can also become an investor banker, consultant, public defender, whatever you want. So for people who are interested in going into let’s say investment banking or working in private equity, or consulting, or whatever it might be, I’d say two things to you.

One thing, which may not be that helpful, but I’ll say it anyway. And then the second will be helpful. The first is that statistically speaking, if you’re not going to practice law, if you’re a law student and you’re not going to practice law, statistically speaking you’re most likely not to practice law if you do it right out of law school.

So the people who have law degrees, but are not practicing law, like me, statistically there are more of them, a greater percentage of them who never practice law. And that makes sense. Because if you start practicing law, you kind of like it. It feels comfortable. You have a salary. It’s paying off your student loans.

You have an assistant. You’re at a firm. And things feel OK. So you’re not likely to leave. So if you’re going to not practice law, statistically, you’re most likely to make that move at the very beginning, not later. However, that’s not that helpful. Second point though, more to your question was, OK, if you’re going to practice law, how is the best way or what is the best way to make a transition into a different career, whether it’s investment banking or consulting or private equity, whatever it might be.

I have a very strong opinion on this. And it’s also backed up by statistics. The best thing you can do is you can practice law in the area that you think you might want to work in outside of the law. So let’s say you are interested in– I’ll take investment banking out of it– let’s say you’re interested in working in private equity, not as a lawyer, but as a private equity partner investor.

What you would want to do is work at a law firm where you cover private equity firms. And you would specialize in covering those private equity firms for a couple of years. And that’s helpful for two reasons. One is obvious. The other is not. And the other is more important than the first. The first is it helps you understand the business.

Right? The lingo, you understand what’s going on. You get educated in the business of private equity. That’s not the most important. The most important, the more important are the two by far is you develop relationships in the private equity space. Because nine times out of 10, and it’s actually more like 95 times out of 100, when a firm, whether it be a private equity firm or an investment bank, hire someone out of a law firm to come in and work, not as a lawyer, but as a banker or as a private equity person, they are hired because they knew somebody at the firm.

Not they schmooze with them or took them to lunch or played tennis or golf with them. They had worked with the firm on transactions. So you’re a second year associate at a law firm at Sherman and Sterling in New York. You’re covering private equity firm X, Y, and Z. You’re going to be sequestered in conference rooms with those private equity folks a lot.

You’re going to spend a lot of time with them. Remember it’s intense? You’re going to get to know them. After the transactions over, keep that relationship going. Because a year later, you can call up your peer at that firm. And you can say, you know, I’m really interested in potentially working in private equity.

I like what you do. And I’d love to have lunch and talk about it. And that person will say, great. You know, it’s not a cold call. It’s very warm. You’ve stayed in touch with them. And they’ll say, not only should you come over, but here’s the group that’s actually hiring at our firm.

Here are the people you’d interview with. Let me talk to him first. Oh, this guy here is really mean. Stay away from this topic. This woman over here is really nice. Focus on this with her. They’ll coach you through the whole thing. It’s like you can’t lose. Right? So you get hired. That’s the best way to make the transition.

Focus on the relationships that you make with the firms you cover, the people at those firms you cover, if you want to make that switch. Much easier to go that way than through some headhunter. That’s very rare that that route works. Long answer to your question. Kevin. AUDIENCE: So I have a question about you talked about the dynamism as one of the things that attracted you to practice.

JIM DONOVAN: Yes. AUDIENCE: In my experience, dynamism is a two way street, right? I mean, there’s the ups. And there are the downs. And I do think that like getting to the point in your career where you embrace the dynamism and start to enjoy the dynamism is a really key part. It strikes me from listening to you talk over the years, that happened fairly early in your career.

And I was just curious if you could talk about how you came to embrace the dynamism of the work. JIM DONOVAN: Yeah, that’s a very good point. Because what will often happen is the changes will– I mean, they can either perceived and embraced as fun. Or they can be stress-invoking, stress-inducing.

Right? You can say, oh my god, everything I just worked on is now thrown it away. I got to start from scratch. This is a disaster. And by the way, the CEO just left. I got a new CEO. I don’t even know this person. All the time I spent with the CFO, whatever it is– the people can change in the middle of a deal.

The deal can change. You can view that curveball as a positive or a negative thing. You can either embrace it. Or you can become intimidated by it. And so I’d say a couple of things. The first is I early on– I think it’s helpful, by the way, to work on more transactions, rather than less. So if you’re going to work as a corporate lawyer or as an investment banker, put yourself in a position where you’re working on many deals, not just one or two.

Because one, it gives you the experience earlier to deal with curveballs. Because if you’re five years into your career and you’ve never had a deal blow up, on the one hand, that’s really lucky for you. On the other hand, you haven’t faced that adversity. And when one does blow up– and it will– you’re going to freak out.

Right? So the more transactions you work on at the beginning early on, the more likely you’re going to be able to deal with any curveball that your thrown. I was fortunate in that I got to work on a lot of different things my first couple of years, because of the way my firm operates. And so in the first couple of years, I probably got 10 years worth of curveballs thrown at me.

And after the first couple, I realized actually, these can be good. And you can learn from them. And it didn’t ruin me. I didn’t die. I wasn’t, you know, fired. The deal went on. You pick yourself up. And you proceed. So one of the best ways to deal with that issue is to try and work on many deals.

So that you experience it as early on as you can in your career. And you realize it’s not career ending when that happens. Secondly, is you just have to have the right attitude. You have to realize that along with this being a dynamic job and a dynamic process, comes the fact that it is exactly that.

It changes. And so you can’t get wedded to a particular ending to the transaction. So if you’re working on an exclusive sale, don’t pick a buyer who you think, OK, this is the perfect buyer for my client’s company. We’re going that way. Because chances are it’s not going to end up there.

So don’t become intellectually wedded to a certain outcome early on in a transaction. By the way, don’t even become intellectually wedded to the transaction occurring. Because the best advice you can often give to the client is don’t do this deal. Don’t do this deal. Talk about trying to establish credibility with a client, right? You’re advising them to do something that is directly opposed to your own interests.

You don’t get paid if this stops, right? Your mandate is over. You’re no longer being paid. And you advise the client to say, no, don’t do this deal. And by the way, terminate me. That’s basically what you’re saying, terminate our relationship. That’s a great way to establish credibility.

But also, another way to deal with the ups and downs of the dynamism of the business is to not get wedded to a certain outcome right away. If you do, you’ll probably be disappointed. If not on that deal, you will be at least 50% of the time. Because the deals never end up ending the way you think they’re going to end, or usually don’t.

Actually 60%, 70% of the time they don’t end the way that you– that answer your question? What else? Time for maybe one or two more. Anything else? AUDIENCE: How do you deal with like, an unreasonable demand from a client, maybe in terms of like a deadline that they want something done or if you’re doing a certain deal and they want something that’s sort of a provision in the agreement that’s very unreasonable? How do you balance that between explaining to them that it’s like not possible? JIM DONOVAN: Yes, that’s a very good question.

Because you will get that. You will confront that often. I believe the best way to do that gets to my intangible skill number three, which is take control. So what I would do in that situation, what I’ve done thousands of times, is I will say to the client, no, not in your interest to do this. And I’m sorry.

My job is to protect you. I can’t do it. It doesn’t matter to me. I’m happy to put this provision in. I’m happy to accept this deadline. If I put this provision in, it’s going to be terrible for you and your company. I’m not going to do it. If you give me this deadline, I will not be able to achieve the product, the work product, that you want me– I will not be able to deliver the work product that you want me to deliver.

I will not do a good job. I’m not going to do that to you, client. So you turn it around on them. You don’t say– you never say, well, that’s unreasonable. I can’t work that hard. I can’t make that deadline. No, no, no. That’s not what you say. You say, I’m not going to do that to you.

You want me to finish this in two weeks? No. I won’t. I’m sorry. I won’t do that to you. You’re too important to me for me to do that to you and your company. Because if I do meet that deadline, it will be bad for you. Because I will have not have done the work that’s necessary for this transaction to complete in the way that it should be completed for you and your company.

That works most of the time. If it doesn’t work, then they’re not a good client. Right? Because I mean, you really don’t care about the provision for yourself, that they’re asking you to do something unreasonable. You know it’s objectively unreasonable. And it’s not going to go anywhere.

Right? So you tell them, I’m not going to let you do that to yourself. I’m not going to do it to you. I won’t be part of that. I care too much about you. Right? Sometimes I say similar things to my kids. They’re here. So I can’t elaborate more than that. But I’m not going to let you do that.

Because it’s bad for you. Right? No, you can’t have 17 somethings, you know, candies. It’s not good for you. Not going to let you do it. What else? undefined Anything? OK. No? OK, great. Well, thank you, everyone. And have a nice break. Thank you for sitting here on a Friday and listening to me talk.

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