Tom Klein - Pre-Close M&A Value Creation Playbook Ep.220

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Apr 23, 2024

Former Morningside Co-CEO and M&A expert Tom Klein discusses pre-close M&A value creation, industry selection, sourcing methodologies, building reputation, and working with lender partners. Topics include deep focused search approaches, mastering industry-focused M&A research, strategic acquisition identification, audacity of search fund model, and navigating complexities in M&A deals.

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ADVICE

Deep Industry Focus

Conduct deep, focused industry research for M&A.
This builds invaluable comparative knowledge and expands your network, increasing credibility.

INSIGHT

Fragmentation Rule

Fragmentation is key for consolidation, ideally with the top 15-20 players holding less than 50% market share.
This allows for easier platform acquisition and bolt-on M&A.

ADVICE

TAM and Targets

Ensure the Total Addressable Market (TAM) is large enough to support your target acquisition criteria.
Aim for 50-100 potential targets to avoid running out of options.

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My guest today is Tom Klein, former Morningside Co-CEO alongside recent podcast guest Roland Lessard. This episode with Tom acts as a part two pairing with our February episode with Roland where we talked about M&A value creation after close. Tom and I today discuss M&A value creation largely pre-close of add-ons, talking through industry selection, sourcing methodologies, industry knowledge snowballs, building a reputation, and working with lender partners. Tom has been involved in 12 M&A transactions across Morningside and his previous experience in background screening.

As an aside to you the listener, I’m really enjoying recent discussions on M&A value creation and consolidation strategies. If this is an expertise of yours or someone you know, I’d love to connect and chat more so please reach out.

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Links:

Tom on LinkedIn

Greenwich Point Capital

Topics:

(00:00:00) - Intro

(00:04:37) - Deep focused search approaches vs. scattershot approaches

(00:11:18) - What numbers and measurements do you use when determining interest in an industry?

(00:20:42) - How do you think about proof of success when examining companies within an industry?

(00:28:29) - What are some of your favorite ways to research an industry?

(00:34:11) - What are the key characteristics of a business you need to see when acquiring?

(00:39:47) - What are some industries you were close to investing in but passed on?

(00:43:50) - What do you start looking for once you’ve finalized a platform acquisition?

(00:54:50) - What are some key questions you ask sellers?

(01:01:35) - What do you look for in lenders?

(01:18:30) - Advice for folks pursuing consolidation thesis’