Throughout our careers in mergers and acquisitions (M&A), our Deal Guides have found ourselves frequently saying I wish I had known that earlier. In the spirit of paying it forward,  this is the first installment of I Wish I Had Known. From time to time, Private Equity Primer will be sitting down with members of our team and other talented M&A professionals to share insights into things they wish they knew earlier in their career.

The first I Wish I Had Known session is with Richard Grosshandler. Richard Grosshandler is a Deal Guide for Private Equity Primer, co-founder of a commercial and financial due diligence advisory firm—Splash 4 Partners—and has worked in investment banking and private equity. He has a passion for mentorship, a drive to contribute to the team, and a love for digging into the details of a deal.  We sat down with Richard to have him share some wisdom.

What do most junior M&A professionals overweight?  What do they underinvest in?  How does this impact their careers?

Richard Grosshandler: “In my experience, junior M&A professionals overweight technical skills like financial analysis or financial modeling, and they confuse the ability to create the schedules, link everything up, or build the model with the valuable activity.  The valuable activity is not creating the analysis or completing the model. The valuable activity is understanding why the analysis or model was important to begin with, interpreting the results, building intuition from what it tells you, and exhibiting judgment to solve a problem or advance the deal team’s key objectives. There is a quote by the statistician George Box that says, “All models are wrong, some are useful.” I think the quote helps illustrate the point by giving a nod to where the value in the activity is located—not in the model itself but in its utility as a tool of what it tells you or helps you solve. One of my coworkers used to say, “you just need to MacGyver a solution.” I will take a problem solver who can use SWAG math to truly understand an issue and MacGyver a solution over the best Excel jockey any day.

In my view, junior M&A professionals underinvest in what most people consider soft skills, because they are seemingly boring and non-sexy. Most junior M&A professionals fill project manager roles, only no one tells them that or trains them like a project manager. If you understand the process and where you fit into that process, you can become proactive and start to manage your professional world very effectively and efficiently. That can be a huge source of value for deal teams.”

How did working in Private Equity (PE) make you a better advisor to PE?

Richard Grosshandler: “I believe my time in private equity, especially being at multiple firms with different strategies, provided me with a visceral understanding of the investor mindset and what private equity investors are trying to accomplish and the challenges they encounter. I used to sit in the chair. I have had to source, diligence, finance, negotiate, and close deals. I have partnered with management, replaced management, and even stepped into management positions. I have had to go before investment committee. I have had deals go fabulously well and others go poorly.  This perspective naturally positions me be a better advisor to private equity firms. My business partner says that as advisors we get to rent other people’s problems—not own. By renting the problems, we get the benefit of distance and perspective, because we do not have to live with the outcome the same way the private equity firms and their limited partners do. At times this provides a degree of clarity that is sometimes clouded when you are the principal investor.  In our trainings we talk about the value of gaining perspective, having empathy for different roles and views on a deal, and thinking like an investor. I think the range of experiences both within private equity and advising private equity firms as an advisor has helped me hone those skills.”

As an industry, M&A firms invest heavily in getting new hires up to speed.  If you were head of L&D at a large investment bank, what half day, day or two-day training would you mandate for new VPs and directors?

Richard Grosshandler: “I would have all VPs and directors take the course Communicative Teamwork and Foundational Questions^©.  The Communicative Teamwork course is one that we run at least once a year internally, because it is critical to remind everyone how to most effectively communicate in a deal team setting, employing such techniques as setting clear meeting agendas and using active listening. VPs and directors are quarterbacking deal teams, so it is important for them to have the tools to set the tone for how deal teams communicate. Foundational Questions^© is a framework or system that VPs and directors can learn and deploy across their deal teams to ensure everyone is on the same page from the start. This highlights knowledge or experience gaps so they can address, which reduces the amount of unnecessary rework.

From a technical standpoint, I would probably have all VPs and directors take the Mastering NWC Mechanisms and Intro to Purchase Agreements courses.  These are skills that are often not formally taught, and lots of value can be created or lost around these topics. Through no fault of their own, some VPs and directors will not have gotten as much backend deal experience relative to others. It is just a function of which deals they get staffed on and which ones get to a close. Formal training on these topics evens the playing field and knowledge base. These courses are taught from the vantage point of sellers, buyers, lawyers, bankers, FDD providers, among others, which provides a much richer view of these issues and how that can impact deals.”

What did you wish you knew earlier in your career? 

Richard Grosshandler: “So many things! Early on, I wish I had a better grasp on the process and what investors look for. This would have significantly helped with contributing to deal execution. While I kind of understood it, no one provided more of a systematic framework for me to use in thinking about businesses, their free cash flow attributes, and their business characteristics. This is one of the reasons we created M&A Bootcamp; it is the course I wish I had when I was starting out. 

I wish that I understood that as a junior deal professional I was a project and deal process manager. There was so much focus on financial modeling skills, and while those skills were and are important, the process, communication, and people skills took more of my time and were more important.

I also wish I focused more on Habits That Create Value, systems, and essential business skills like communication, organization, prioritization, time management, and how to ask better questions.”