Written By Basilio Chen

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The Bigger Picture

1. Dream Team – Top performers that have a track record, done hundreds of deals and will lend their name to you.  Will work for a piece of the action and aren’t looking only for money.  They want to be a part of something bigger and will only do it if they can contribute to it.  Looks great on paper and gets financing in a snap.  Daniel Pena used to do his deals like this blind pool in the late 80’s through the 90’s.

2. Sources of Financing – Banks with whom you want to "build a long term relationship" with.  There is always more money out there than there are good deals.  You’re in demand, they’re not…even in a time like this.

3. Top Accounting Firm (The Big 4) – PriceWaterhouseCoopers (PWC) – (415) 598-5000, Deloitte (Deloitte Touche Tohmatsu) – (415) 783-4000, KPMG (kpmg.com) – (415) 951-0100, Ernst & Young (ey.com) – (415)894-8000 (415)263-1691

4. Top Law Firm – Baker & McKenzie, White & Case, Kirkland & Ellis, Wilson Sonsini Goodrich & Rosati, Cooley Godward, Morrison & Foerster,

Sources of Financing (Banks)

1. Identify Banks

2. Identify the

        a. Managers of those bank

        b. Loan Officers of that bank.

3. Choose the least likely candidates to start pitching to (for practice).  Work your way up to the targets.

4. Arrange appointment through a secretary or via a top accounting firm you’ve engaged to make the introduction.

5. Meet with them for lunch (which they usually pay for)

        Interview Questions:

        1. "What is your personal lending limit?"

        2. "Who do I have to go to for an approval on the next level of financing?"

        3. "Are you a centralized loan institution that pools loan requests, or a branch-based lender?"

        4. "Is your bank presently in a lending mode, or in a downsizing mode?" (downsizing = death spiral)

        5. "What type of ventures do you like to make loans on?"

        6. "What was the last deal your bank turned down.  Why?"

        7. "What was the last $5 million deal you did?" (Avoid if reputable bank)

        8. "Can your institution take me to the next level of my Quantum Growth?"

        9. "What is your banks policy on "asset lending" versus "cash-flow lending?"

        10. "Are you an interstate bank, or do you operate within this state?"

        11. "Could you give me some recent examples of companies for which your bank has approved business loans?"

        12. "Do you anticipate any conflict with your present banking clientele in handling my banking business?"

        Rough list of local banks:

  •            New Resource Bank 4159958100 <–New BANK! More likely to give funding.
  •            US Bank 4154316700
  •            Comerica Bank
  •            First Republic Bank 4153921400
  •            Bank of America 4156222378
  •            Wells Fargo Bank 4153964000

Hiring People:

1. Hire somebody better than you.  Most people are threatened by a person better than them.  But why hire somebody who does a worse job?

2. More creative than you.

3. Has EXPERIENCE.  How many deals have they done?

4. Wants my job.

5. Hungry.

6. Good attitude.

7. Surprises me with unexpected results.

8. Commitment.  Chooses getting a deal done than going to his daughters 16th birthday.

How to Treat Your Staff:

1. Pay them well.  Keep them happy with money.

2. Never reprimand them.  You’re their coach.  You’re their leader.

3. Train somebody else for your job.  Focus on the macro, not micro.

4. Let them act on their own.  Trust them.  Let them make minor mistakes and learn on their own.

In finding a Top Accounting Firm

    *Key terms to remember: "value-added fees", "success-oriented fees"    <–important

    Remember to respect their "independence" and you cannot directly compensate them.  However, the "long term relationship" will be built on how strong your team is and how big the company will grow, keeping them as your firm.  Sell them on the future fees, not the short term fees.

FIRST MEETING (Duration: 20-25 minute meeting)

        1. The Pitch (Who are we…)

           a. We’re looking to dominate the industry.

            b. We’re plan to grow geometrically through acquisition. 

The whole is greater than the sum of the parts.

            c. We’re in a highly fragmented industry.

            d. There’s an uptrend in the market, long term growth.

        2. Interview Them (So, who are you?)

            a. We’re interviewing other firms.  (We’re not desperate.  We have options.)

            b. We’re looking for the firm who’s offering the most value. (You’re going to have to fight for me.)

        3. Ask for value.

            a. Asking for "success-oriented fees" and "value-added fees" to be delayed as late as possible.


        ie. Deferring until 6 months after first acquisition.


        1. Draft Engagement Letter.

        2. Settle on terms.