Stephan May, WelchGroup Consulting Answers the Proust Questionnaire for Dealmakers

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. Read on to hear what their candid responses reveal about themselves and the science and culture of dealmaking today.

Which words or phrases do M&A professionals most overuse?

1+1= 3: Although I agree that combining two companies can create enhanced value and a new equation, I just wish we would come up with a better analogy.

As a teenager, Warren Buffet 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?

I grew up in the country where everyone had large, manicured lawns. I turned this into a business opportunity where I employed the other neighborhood kids to cut lawns. I would negotiate one price with the homeowner, another price with the neighborhood kids, and I would keep the margin. Even at a young age I could see that each player perceived value in a different way; the homeowner was happy to not have to cut the lawn and that was worth something to him, the kids were happy to make some pocket money which motivated them to do the hard work, and I was happy to facilitate the transaction. One deal, but three different perceptions of value.

Are you positive about the outlook for M&A in the coming year?

While deals do continue to decline overall due to economic conditions, we actually have a positive outlook. The reason we maintain this optimistic view is that uncertainty and disruption bring opportunity. We continue to see a significant number of transactions involving tech companies (whether it be tech-only transactions, traditional companies buying tech, or tech buying traditional companies), all of which are competing to acquire the “pieces” they don’t own.

What is your greatest fear when you’re in the midst of a deal?

Our greatest fear is not having been told everything about the company. We don’t like surprises and neither do potential buyers.

What is the trait you most deplore in a client?

Lying! To a certain extent, we expect our clients to exaggerate or embellish a little, however, when lies surface at the eleventh hour; it’s not good for anyone.

With so many moving parts, how do you keep deals moving and avoid bottlenecks and deal fatigue?

We look at every buy/sell-side mandate as a “Project”. We don’t think of ourselves as “Finance People”, but rather as “Project Managers” who use best practices to ensure that each mandate stays focused and on course.

In our shop, we have fully integrated all relevant disciplines into our process (accounting, tax, valuation, due diligence, legal, etc.) thus reducing uncertainty and risk. This strategy addresses the issue of having “too many cooks in the kitchen” as roles and expectations are more clearly defined.

Tell us about your biggest deal disaster (everybody’s got one)?

We spend a lot of time ensuring that we are aligned with our clients and them with us. Because of this, we have been able to avoid major disasters. We also have no problem terminating a client if it is apparent that we are no longer aligned. That being said, some deals do go smoother than others.

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?

It is normal for a business owner to have an unrealistic expectation if they have not been educated on the business value drivers. However, not every business is a “multiple of EBITDA” valuation and an Advisor can miss an opportunity by quickly tempering expectations. Some of the companies we have sold would have been considered ridiculously overvalued using a multiple approach. As with art, the value of a business is often in the eye of the beholder and it is our job as advisors to help highlight this value.

There can be an unfair perception 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?

Like a high performing athlete who knows they need a coach to achieve excellence, our clients know they need world-class experts to help them achieve their objectives. It is up to the investment banker to articulate a value proposition that doesn’t focus solely on fees.

What do you consider the most overrated virtue?

AUTHENTICITY. To be authentic is to be self-aware, and to be self-aware is to continuously learn and develop. Therefore, how could we ever know that we are authentic?

What do you consider your greatest achievement?

I have had a few personal and professional achievements; however, I think my greatest achievement has yet to come.

What’s your favorite thing to do when you’re not at work?

I enjoy any activity that stimulates me mentally and physically. Lately, I have been playing a lot of volleyball. This year, I canceled my golf membership and went as far as putting a beach volleyball court in my backyard.

What is your most treasured possession?

It would be a knife that my grandfather gave to me when I was a boy. When he gave it to me he said, “All you need to survive is a knife.” To me, it represents creativity, adaptation, and limitless possibilities.

What is your greatest extravagance?

I was fortunate to have “foodies” as parents. Give me good brie and a glass of Ripasso and I am a happy camper.

Get out your crystal ball: What do you think the M&A advisory space will look like in 50 years? Will it even exist?

I am hoping it looks like the company we are building here at WelchGroup. We recognize the need for change and have been investing in developing a new kind of advisory firm. The “old boys club” is a dying model. Companies go from zero to $1B in record speed, therefore, it is crucial to build relationships with new and emerging companies, and not just traditional, already successful businesses.

Stephan May, MBA, is the Managing Director of WelchGroup Consulting where he helps entrepreneurs build and capture value by providing advisory services in mergers and acquisitions, due diligence, valuations, business strategy, and contract CFO services.

Prior to WelchGroup, Stephan held Senior Corporate Development roles.

Stephan is a regular guest speaker at Telfer School of Business and University of Carleton. He Chairs a worldwide corporate finance leadership group, and is currently participating on a corporate finance working group with CPA Canada. In 2015, Stephan was a recipient of the “Top 40 Under 40” award.


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