The Proust Questionnaire was a parlor game popularized by French writer Marcel Proust. He believed that, by answering a few provocative questions, a person would reveal his or her true nature. In this series, we’ve asked a who’s who of M&A, private equity, finance, and legal professionals to provide short answers to our Proust Questionnaire for Dealmakers.
For this edition, we sat down with Mike Rosendahl of PCE Investment Bankers. Mike leads PCE’s investment banking practice in the northeast United States. His focus is on helping private business owners transition their company to the next stage, utilizing various liquidity strategies. He has closed more than $1 billion in M&A transactions during his career and has developed considerable industry knowledge in a variety of sectors with a concentration in Industrial Manufacturing, Distribution and Services, Power and Heavy Transportation.
With over two decades of investment banking and corporate development experience, Mike offers an impressive track record in guiding high-profile clients on the optimal timing for their transactions. He combines critical analysis with a creative approach to ensure that deals are made with his clients’ best interests in mind. Mike has gained widespread respect and often presents at conferences. He has also been published in various industry journals.
Read on below to see what Mike’s candid responses reveal about the science and culture of dealmaking today.
TOUCHPOINT: As a teenager, Warren Buffett washed cars, delivered newspapers and placed pinball machines in local businesses. What was your first job and what, if anything, did it teach you about dealmaking?
Mike Rosendahl: One of my first jobs was running a photography and videography company that I started. I was a photographer for my high school newspaper and I was asked to take pictures at an awards dinner. At the dinner, I was asked to film another event, which was my first paying gig as a budding photographer and videographer.
This job led to several others, which helped support me through high school. I didn’t plan to start this business. The lesson I learned was that it pays to be opportunistic and ride the momentum, which is critical in dealmaking.
TP: Are you positive about the outlook for M&A in the coming year?
MR: Yes. There is reason to be cautiously optimistic. There is a strong market for companies that have performed well throughout this period. As for the companies that haven’t performed well, we should see an improvement next year as the number of COVID-19 impacted months drops off.
This should result in an improving market for those businesses. Also, you still have an aging population of business owners that need to either sell, develop a transition plan to the next generation of owners, or close the business. This will continue to create deals over the next year.
TP: What is your greatest fear when you’re in the midst of a deal?
MR: The company’s financial performance will drop off.
TP: What is the trait you most deplore in a client?
MR: When you sell a company, you need to have the owner commit to focusing on the company and the transaction. When there is a lack of focus on either, it can create significant issues.
TP: With so many moving parts, how do you keep deals moving and avoid bottlenecks and deal fatigue?
MR: By running a time-tested and efficient process. You need to keep the momentum moving forward and a strong process will help you.
TP: Tell us about your biggest deal disaster (everybody’s got one)?
MR: I was selling a company to a large strategic buyer. The deal needed approval from a German governmental agency. For some reason the agency posted the approval to their website, which announced the deal to the public before we were even ready to sign or close.
My client started to receive calls from customers and competitors asking about the deal. This was on a Friday. We worked through the weekend and were ready to close by Monday.
TP: It’s called the IKEA effect—the tendency to place a disproportionately high value on things that you build yourself. How do you manage unrealistic valuation expectations from sellers who have spent years building their business?
MR: We discuss value with clients before we are engaged. If our views of value don’t coincide, then we would not be a good fit as their advisor. This approach of honest appraisal has worked for us.
TP: There can be an unfair perception out there that investment banking is a commoditized business, not unlike real estate. Do you ever come across this? If so, how do you negotiate a fee that makes sense for both you and your client?
MR: We hear this comparison periodically and have overcome this issue by explaining in depth how we work and advise the client throughout the sale process. Most of our clients have bought and sold homes. Once they see what we do, they understand it is a very different level of service.
TP: What do you consider the most overrated virtue?
MR: I don’t think a virtue can be overrated. A virtue, by definition, is a good quality and we can’t have enough of those.
TP: What do you consider your greatest achievement?
MR: None come to mind. I don’t spend much time thinking about achievements.
TP: What’s your favorite thing to do when you’re not at work?
MR: Besides spend time with my family, Muay Thai training. It’s a great workout and you meet a lot of interesting people.
TP: What is your most treasured possession?
MR: I don’t have one.
TP: What is your greatest extravagance?
MR: I like to travel. I’ve seen a decent chunk of the world, but there are many more places I’d like to go.
TP: Get out your crystal ball: What do you think the M&A advisory space will look like in 50 years? Will it even exist?
MR: Of course it will exist. Business owners will want to monetize the investment they made in their company and parts of what we do can’t be automated. Over the years we’ve seen the process become much more compact.
Two examples of this would be the sell-side quality of earnings reports and the seller providing the purchase agreement. This was not always the case. I expect the sell side to continue to take on more responsibility during the process, to limit risk and create a faster timeline to close.