Today on the podcast we talk mergers and acquisitions and wholesaler consolidation with RJ Martucci from accounting firm PKF O’Connor Davies.
Key Points
- How to generate the maximum return on a sale
- Strategies to make the sale tax efficient
- State of mergers and acquisitions in the beer industry
- Primary motivations for sellers
Resources
- Learn more about PKF O’Connor Davies
- Join the Beer Business Finance Association
Podcast Transcript: Beer Distributor Mergers and Acquisitions with RJ Martucci
Speaker 1 (00:00):
Hello, and welcome to the Beer Business Finance Podcast, where we combine beer with finance to help you create delicious profits in your beer business. I’m your host, Kerry Shumway. I’m a certified public accountant, a former CFO for a beer distributor, and I love numbers. This podcast will provide you with useful financial guidance that you can implement right away in your beer business. To make more money in addition to this podcast, please visit beer business finance.com. Here you’ll find free tools and resources information on upcoming courses, and you can sign up to receive the weekly beer Business finance newsletter for free. Each week, we cover a specific financial topic to help you improve the financial results in your beer business. Let’s get started.
Speaker 1 (00:51):
Today on the podcast, we hear from RJ Martucci from PKF O’Connor, Davies Accountants and Advisors. RJ and I talk about wholesaler consolidation, mergers and acquisitions, and the state of the union. In the beer industry, we talk about the main reasons why wholesalers buy, why they sell, and what motivates those decisions. So, for now, please enjoy this conversation with RJ Martucci from PKF O’Connor Davies. Just a quick note and we’ll be right back to the podcast. I wanna let you know about the Beer Business Finance Association. This is a network of financial pros, just like you looking to improve financial results, increase profitability, connect with your peers, and share best practices. Our mission is to help your beer business improve financial results through transformational financial training, support, and networking with your peers. If you’d like to learn more, please go to bbb f association.org or simply email me at ka@beerbusinessfinance.com. That’s KAR y@beerbusinessfinance.com. Hey, rj, welcome back to the podcast,
Speaker 2 (01:56):
Kerry. Thanks for having me. I’m looking forward to round two. I
Speaker 1 (01:59):
Am looking forward to it as well. So, for folks who are not familiar with you or your firm, why don’t you give ’em a little bit of background?
Speaker 2 (02:05):
All right, sounds good. So, my name’s RJ Martucci. I’m a partner with the food and beverage practice within PKF O’Connor Davies. We’re a top 25 firm with offices all up and down the East coast and ever expanding. So we can’t, can’t wait to see where, what markets we move into next. But our practice itself has about 50 plus years of beverage distributor experience on top of the more recent beverage manufacturing as well as you know, food distribution and manufacturing as well. But my expertise is on the bedside. So that’s why we’re here today to kind of continue all our fun conversations. That’s
Speaker 1 (02:44):
Awesome. Did you say 50 years?
Speaker 2 (02:46):
Yes. Yeah. So we actually started with our first beverage distributor client in 19, I would say 19 70, 71. Wow. Yeah, so it’s, it’s been a, a great relationship. We’re still got, you know, we’re, we’re still through onto the third and roughly fourth generation coming in. There
Speaker 3 (03:05):
You go. Well, you’ve seen a lot. That’s fantastic.
Speaker 2 (03:08):
That’s, I wish I could say myself. I’ve seen a lot, but I’ve learned a lot from, you know some of my predecessors who are, who are great and talented people themselves.
Speaker 3 (03:17):
That’s the best way to do it. Good people. Yep. So today we’re gonna talk about mergers and acquisitions, consolidation in the beer industry specifically for distributors. So maybe tee us up with, you know, what is the state of the union or what, from your perspective, like what’s the state of, of m and a and the beer industry and what’s that landscape look like? Yeah,
Speaker 2 (03:37):
So I, I think broadly speaking, if you just look at how economically the country is doing, I think that obviously trans, you know, transpires into the, the beverage industry. So there’s a lot of uncertainty brand uncertainty labor uncertainty. So you think about all the recent developments we’ve been seeing with unions, potentially striking unions continuing to stay on strike brand, you know, brand transitions things of that sort. There’s a lot of uncertainty. So I think this is a great and relevant time to have this conversation. Certainly if you just flip back through all the BBD emails from the last like two, two and a half months there’s about five or six ma you know, major acquisitions that have happened already commonplace besides OAC being, you know, involved in all these deals a lot of ab houses are transferring hands.
Speaker 3 (04:34):
Mm. It’s a lot going on out there. Yeah. What do you think is, I mean, that that’s, you know, the uncertainty of course. What else are you seeing as like driving sellers to wanna sell? Like, what’s, what’s going on? What are the primary motivations that, that you’ve seen? Yeah,
Speaker 2 (04:51):
I, I think the number one thing is, is a lack of succession planning. I, I think you get distributors are, are deep family oriented businesses and as you stretch those generations out, you, you bring in you, you kind of get further away from the original founder of the business. So you start to bring in a lot more family tension. And, and you also start to pull those next generations further away from the business itself. You, you have the, I guess consider it the current generation operating things, you know, people in their, you know, fifties or sixties and possibly into their seventies you know, have been doing this their entire life, you know, 30, 40, 50 years at this point. And, and the knowledge that they’ve amassed is not always the easiest to transfer. And so I think there’s a discrepancy of if that next generation is ready, if they’re committed to the long haul of, you know, really keeping the business going and, and seeing it through, you know, the, the, the peaks and valleys of you know, this, the nature of the beast in, in the beverage industry.
Speaker 2 (06:09):
So I, I, I think that’s really what’s pushing a lot of sellers to, to transact.
Speaker 3 (06:18):
Mm-Hmm. It’s also tough too, because these are fa by and large family businesses, right? And you have that dynamic where maybe it’s, you know, great-great grandfather, and then it’s, it goes on and on. And before you know it, your, your family is now this cousins and second cousins. You’ve got all these in there. And that could get complicated fast, I would imagine.
Speaker 2 (06:37):
Absolutely. It, it becomes more like a, a trip to the therapist’s office rather than an actual you know, sitting at the, a lawyer’s table and, and trying to just hammer out a deal because there are those things of you know, for instance who might be in the business and who might not be in the business, and how do we split everything equally. You know, like you said, when you get into the, the cousins and the second cousins and you know, in-laws and, and people marrying into the family, you start to really create this whirlwind of positions and emotions toward the business that I, I think can make it very difficult to, to get through an emotional transaction, such as selling a family business.
Speaker 3 (07:29):
Absolutely. We love our families, and it can be challenging.
Speaker 2 (07:33):
<Laugh>, <laugh>, I always, I always joke about my sister. I have an older sister who’s three years older than me, and I always said, if I ever ran for politics, I would immediately be down one vote because she would just wanna make it harder for me.
Speaker 3 (07:44):
<Laugh>, that’s her job. Right. <Laugh>, let’s shift to the, from the perspective of the buyers. Now, we could all speculate on what their motivations are, but what are you seeing from, from your perspective, why are people out there wanting to buy another wholesaler business?
Speaker 2 (08:00):
I, I, I would say it’s the business itself is a, a great model for the simple fact is that if hedge funds and private equity are trying to get in, you know, it’s a lucrative you know, very enriching business to be in. I think that’s one factor, but it, I think when you get down to people who are already in the industry continuing to acquire, it’s it’s territory, it, it’s it’s grow or die kind of mentality. And so when you have even, even non-contiguous territory, if you have someone in the same you know, distributor house as you, it, it, it’s an easy transition to, you know, getting systems connected. People are already in the network of things, so that’s an easy thing, but territory, ’cause you know, the, the more territory you can cover, the more products you have in your house to sell that’s kind of how, how the increase in revenue comes about.
Speaker 2 (09:02):
Right? Right. Yeah. I mean, you, you’ve seen right with there’s, there’s such a shift in product preferences and, and there’s a new na out every day, a new energy drink out every day. And the, the hardest part is to find the brands that people want to consistently buy. So if that’s through, you know, acquisition, if it’s, you know, expanded territory that maybe those brands will come about after you get the territory it, it, it’s all opportunity. And, and I see from what we’ve been reading, it’s, it, it’s that 5 million and over tier that are going after kind of the 2 million and under mm-Hmm. And, and you get into like the mockler that, you know that are in the teens and things like that. But they’re finding very strategic acquisitions to make that just further enhance their footprint.
Speaker 3 (10:03):
Hmm. Okay. So there’s a lot of people and professionals involved with a deal, right? You’ve got accountants and lawyers and potentially brokers and, and whatnot. Everyone’s sort of helping guide the process. So when you’re working with clients, let’s start with maybe a clients that’s, that’s looking to sell. Yep. We can switch it around too, but what does that process look like? How do you guide them through that?
Speaker 2 (10:28):
Yeah, so I, I think from the selling process it, it’s a little bit easier, right? Because we’re, we’re looking to generate the biggest return on the investment for our clients, right? So if that’s the, the largest sale price a lot of people are focused on that. Our, our value comes into the transaction development with regard to strategy and how we can make it the most tax effective. Because a lot of the times that businesses sell, it usually is with the intention of living off that value, and how do we make that dollar stretch after taxes, right? So minimizing that tax impact our, our firm is connected with we have about three major investment partners that we work with. So it’s bringing them in to say, okay, you know, like, let’s come up with a financial plan, how we can get, you know, certain dollars liquid for them to be able to live, you know, day to day the way their lifestyle’s always been, as well as then, you know, insulate that principle that’s going into investments for them to live on for, you know, for a long time.
Speaker 2 (11:49):
You know, be able to keep involved. ’cause The one thing I notice is a lot of our distributor clients are so heavily involved in their community, and they’re very generous both with product as well as their own financial resources. So it’s that continuing, that giving keeps them kind of connected to the community. So how we can help them strategize their giving and, and things like that. Even if it’s bringing our private foundation team in and helping them set up a private foundation and, and, and, you know, develop the kind of the purpose of, of what they wanna do with that foundation. Yeah, we, we’ve seen private foundations that get set up al almost towards the benefit of the employees. So it’s almost like setting up scholarships that are available to employees or employees, children that the family made available. So it, it’s, it’s a great, yeah, these private foundations have great benefits to ’em as well.
Speaker 3 (12:50):
Nice. Yeah. From a seller’s perspective, I mean, if all goes well, it’s a giant windfall and that’s great, but to your point, there’s a number of considerations other than just, Hey, here’s a big pile of money. It’s like, what are the tax implications of that? ’cause There’s lots of different things I’m sure you guys can help them with. And then how do you make that money last? Because for for many sellers, this is it, you know, this is the payday, and then you, you know, there’s nothing, not a whole lot more coming. How do we make that, you know, last,
Speaker 2 (13:16):
Right? And, and it, it, it becomes one of those things where even if you want to continue on say two, three year, not really earn out period, but you know, kind of a a hang around clause in a sense, you know, you’ll get a, a, a moderate salary out of it, but you’re, you’re not gonna be taken to distributions. You might be able to draw out, you’re not gonna get the benefits and the perks that you would allow yourself as the owner. So there, there is a strategy with that making sure that every dollar counts. What a, a lot of people think tend to forget about is we have all these things we’re selling but when it comes down to like assets, a lot of the time they’re all depreciated. So it’s turning that money back around, right? Because we have gains on that. We have the, you know, the gains in goodwill and the gains on the brand rights. Thankfully those are typically capital gains. So there’s, you know, limits in, in that regard. But yeah, there’s a, there’s a lot that can go wrong if the deal is not structured properly. Yeah,
Speaker 3 (14:19):
No, that’s a great point is ’cause we, we generally think, okay, I wanna sell, I wanna find some buyers. I want to, you know, drive up the value to the extent that I can take care of my people and then, you know, kind of get out clean. But then there’s all these other considerations that can make a huge, when do you, when do you typically come in and do that type of analysis, let’s say, for a seller so that they can understand? ’cause There’s a lot of things happening, like on a parallel track, like, Hey, we’re trying to negotiate the deal, we’re doing this, we’re doing that. How do you, when do you come in as far as, Hey, let’s talk about the deal structure and how, you know, the tax implications of this?
Speaker 2 (14:54):
So a, a lot of the time with our clients that we are assisting them through the sale we go into it with having that kind of analysis done, and we’ll do it kind of you know, across maybe three or four tiers, right? So here’s, if we sell it X this is what we’re gonna be looking at if we sell it, y and so on. So that we give them kind of a, a good idea of what the cash out outflow will be based on where you sell. So that if they can live with a certain number, then we know we can kind of negotiate into that range, right? If we know it has to be something else and we’re not getting that traction, you know, then we kind of have to start to have difficult conversations, right? Is it might not ever be the value you think it’s, or, or the value someone else tells you it is.
Speaker 2 (15:56):
But if we can, if you be go good with this number, this is what, you know, this is what the taxes are, this is what you know, will be yours to kind of walk away with. And that’s when we will say, Hey, let’s look at a, a long-term financial plan. Let’s bring in the investors you know, investment advisors and, and see what you can do with that money and, and where that brings you out to. Because a lot of times, like you, you know, you could expect there’s a narrowing of the vision when it gets into that selling. ’cause You people just become focused on the number and not really opening it up to see, okay, if I can get this number, I can get this out of it. I pay my taxes, I move on, and my lifestyle is my lifestyle, I’m good with that. So it’s kind of just like pulling, pulling off the blinders to help them through that process,
Speaker 3 (16:52):
Introduce some reality into the situation. <Laugh>, unfortunately, the taxes have gotta be paid and the structure of the deal’s gonna make a difference. So that’s from the, that’s from a seller. Like, so now from a buyer’s perspective, how do you tend to work with and guide them?
Speaker 2 (17:07):
So the first thing right off the bat is kind of getting a sense of the target itself what the cash flow is, what, what the value is, more or less. Then we take, we do a lot of communications with either the current lender that our client is with, or we will reach out to other lenders in the space that we have great connections with, and kind of get a sense of like, you know, what loan to value are you guys looking at? What’s, you know, what are the financial covenants that you guys are looking at? Kind of getting a roundabout idea of who might be able to fund the acquisition, what we’d be looking at as far as you know, future minimum obligation coverage. You know, what kind of cash flow is gonna be needed to, to service the debt.
Speaker 2 (18:04):
What sort of requirements are gonna be made on them. One thing we always try to shy away from is that audit aspect, right? Is if we can get a loan that doesn’t require the annual audit being done, that’s a, a dollar savings to the client itself. It, it tends to be, you know, easily tens of thousands of dollars in, in, in professional fees saved for them. So certainly we wanna look at that. But I think the, the number one thing we wanna touch is how much of our current operations is going to need to be leveraged to acquire that new operation. And that’s what we’ve seen, I would say leading into 22 was the premiums were high, and a lot of the times you were gonna have to dip into, you know, the, the excess profits of your current operation to cash flow the new operation, right? It, there just wasn’t enough cash flow to cover the premium that was being more or less requested at, at, at, at top multiples. Mm. Yeah. You know, what
Speaker 3 (19:16):
Are you seeing? Yeah, absolutely. And what are you seeing for, and this can be a gimme a range, gimme an approximation, but like loan to value and the covenants. You had mentioned that like, and I know this could vary dramatically based on, you know, what the deal looks like and who the players are, but what do you tend to see in the, in the loan to value?
Speaker 2 (19:35):
Yeah, so I would say from a coverage perspective a lot of the times banks are comfortable kind of in like a, I would say a six times low, you know, loan to equity value. Mm-Hmm. <Affirmative> of the of the purchaser. Mm-Hmm, <affirmative>. And certainly a lot of the times they’ll structure the interest rates or other fees associated with it that the more the equity converts and the loan comes down, you know, you’ll kind of drop down on the interest rates Mm-Hmm. <Affirmative>, right? Because it’s less risky in that regard ’cause you’re, you’re putting more value behind that acquisition. So the most, most of the time the covenants we’re dealing with are, you know fixed charge coverage ratio. And I would say, hmm. Ebitda, they’re usually looking for kind of a, a 1.25 times the debt service for that year.
Speaker 3 (20:50):
Yeah. So it’s pretty, that’s kind of what I was familiar with, I guess. Yeah.
Speaker 2 (20:53):
And there hasn’t been much yeah. Movement in that regard. So, you know, what we’ve seen kind of six, seven years ago as things were really kind of hitting the height versus today it’s not really, you know, moved off that position.
Speaker 3 (21:07):
Okay. When you’re looking at the valuation we always joke it’s, you know, it’s worth whatever, somebody will pay for it, but Exactly.
Speaker 2 (21:15):
<Laugh>,
Speaker 3 (21:16):
How do you guide your clients or how do you advise people in terms of that approach? Because I know like traditional valuation methods can do, do this approach and that approach, there’s all these different approach, right? You always seem to, we always seem to come back to like, you know, discounted cash flow, discounted free cash flow. And is that still maybe just take us through the methodology and then what kind of multiples a range of multiples that you might be seeing?
Speaker 2 (21:42):
Yeah, so I, so I would say that any, any deal that can be paid off using the free cash flow within a seven to 12 year period, ’cause a lot of times, most of the times you’re getting a loan that’s 10 to 15 years for an acquisition of this, of this type. So if, if you can, if you can be below that 15 year payback, I, I think it’s a reasonable approach, especially when you consider what the value add is for having that additional territory, those additional brands and, and so on. It’s, it’s when it gets to the point where you’re 12 to 15 year payback and you’re kind of, like I said, dipping into operations in the in the, the predecessor entity that things start to say, you know, I don’t, I don’t think the deal itself is, is a good deal because dollar wise it’s a stretch Mm-Hmm. <Affirmative>. And if you, I don’t know if we’ll ever see another Bud Light again, but if you have something like that and you’ve already kind of maxed your borrowing that really can set you back with regard to now really cutting expenses and things of that sort of your other entity in order to make that deal work. Mm.
Speaker 2 (23:15):
So the shorter the payback, clearly the, the better the deal. But the deeper the pockets are are always the the better position to be arguing from when it comes to purchasing.
Speaker 3 (23:29):
Right. Gotcha. <laugh>, what tell me, let’s shift gears and talk a little bit about brokers. So what’s your, what’s your feeling on brokers using them? Maybe, maybe not your feeling necessarily, but what’s your experience with deals involving them or not, not, or maybe what are your, what’s your guidance or advice for people thinking about that?
Speaker 2 (23:49):
I, I, I, I think it’s kind of a, a, a double-edged sword, just like working with certain, you know, other professionals, right? Certain account, certain accounting teams, certain legal teams. Everyone’s kind of got their own approach. We, we’ve historically had good experiences with some bad experiences. Those, those bad experiences have usually come from, I wouldn’t say a deal in bad faith, but an approach from bad faith where a purchaser was kind of already identified and, and it, and the, the broker was used kind of just to stalk to see if they could bring the price up without really giving any sort of consideration to any other bidders in the process. Hmm. Yeah. So, so that’s kind of been the, you know, we’ve had those experiences that have not been pleasant because a lot of people put time and effort into developing what the projections look like hammering out a deal number because, you know, we’re going back and forth with clients, beating up the numbers, looking how we can work with the current business to make a deal work.
Speaker 2 (25:04):
And you spend, you know, several weeks doing that, you put a, a bid in and it really never mattered. It was just kind of to test the waters to see that the market would pay roundabout what someone had already offered. Yeah. But we’ve had, I mean, we’ve had great experiences with brokers as well working from the same side of the table. You know, the, they’re, they’re very well connected within the approval layer, I would say. So, so they kind of have that inroad into you know, your Molson Coors brass, your ab brass as far as getting a deal done and getting the proper sign-offs and things of that sort. So it’s been good like that where it kind of has sped the process up.
Speaker 3 (25:51):
Sure. Yeah. Absolutely. They can, yeah. So eyes wide open when you go in, just ask those, ask the right questions and
Speaker 2 (25:58):
Oh, it’s, it’s just like teaming up with, you know, any other professional advisor. Un understand that there, there are some that will completely deal with you in, in good faith because, you know they’re committed to you as far as you know, doing the best for you. Mm-Hmm. <affirmative> versus, you know, possibly playing both sides. That’s usually the worst where you have any sort of advisor that’s working with both the seller and the buyer, you know? ’cause You have that conflict.
Speaker 3 (26:30):
Absolutely. Tell us a little bit about, let’s talk a little bit about sort of making ready for a sale or for, you know, to become an acquirer and then maybe dovetail it into the due diligence phase. Yeah. Like what, what are the types of things that you recommend people kind of look at in advance of, you know, actively looking to buy or sell? Like, what do you typically see, like you know, housekeeping items or numbers or corporate docs, you know, what’s, what’s usually a mess out there? Yeah.
Speaker 2 (27:01):
So I would say the, the number thing, the number one thing we always look at is that, you know trailing three year look because that will be a true indicator of things that you can take the projections that are being provided because obviously the if you’re a buyer, the seller’s coming to you saying, this is how much it’s worth. Look, here’s the projections. This is how much we’re gonna sell. These are our operating costs. You can expect this. You wanna look at that trailing period, right? Those three to five years to see were they doing the things that they said in the projections. Because that’s the one thing that always kind of seemed unusual to me is that if we could sell our products for a dollar more or, or we could incur less in expenses, you know in, in operating expenses, why wouldn’t they be already doing that?
Speaker 2 (28:05):
Right? Like, why would they have left that money on the table unless it’s just not there, right? It doesn’t make sense. But if you look in the, the trailing few years and where they’re at today, were they making strategic changes to position themselves in better light to sell? Because that’s what I would tell our our clients who are thinking about selling is let’s have the conversation maybe three to five years before they’re really ready to pull the trigger. Because like we said, it’s psychological selling as well as it, it’s getting the business in order, right? So we have that three to five year window to say, okay, let’s start, let’s start making decisions that really show the results as what they can be. Because then when we say, you know, here are projections based on recent results, right? It’s not, here’s projections based on projected results.
Speaker 2 (29:07):
It’s you’re giving that buyer, Hey, you know, this is, these are reasonable expectations for you when it comes to this business. Versus do you know, do we think we can bring it up a dollar? Do we think we can cut costs here? Cut costs there? You know, so I, I think the strategic approach to selling is certainly being aggressive in managing revenues and expenses going into the process. Mm-Hmm, <affirmative> Yeah, absolutely. Right? Because then you’re, you’re saying, here’s reliable figures from the last few years of what we’ve been able to do. And you, you know, you Mr. Seller can come in and if you think that because you have contiguous territory, you might be able to bring our area up maybe based on what you are selling your products in your areas. Hey, that’s, that’s all a benefit to you. Mm-Hmm. <affirmative>. ’cause We had, we had a clients of ours who had an opportunity to buy some territory that was contiguous. And the sole reason they were like, this is a good deal is ’cause they knew that day one they could walk in, adjust the pricing in that new territory, and it would, it would not be a problem because they were already selling those same products in their contiguous territory for that price. So, you know, it’s, it’s one of those, one of those like, Hey, go in and go in and do it then
Speaker 3 (30:44):
Easy money. That’s nice. Yep. Yeah, I think there’s, that’s, that’s a good that’s a good exercise too. Even if you’re, maybe you’re at the point where everybody’s always thinking about buying or selling, right? It’s like always in your mind. Yeah. If you were to run that, whether you’re simply just thinking about it, it’s just this little thought that floats away to do that exercise in your business, I think would be interesting. Three to five year back, what’s your, look back, if you, if you were to pitch this now, what would be the things that you might spin to a perspective seller? This is from the, obviously coming from a buyer. Yep. And then if there’s that extra dollar here or a dollar there, is that something you could actually do in your business? Because maybe it is, you know, right. Maybe you just need that little mental, mental push. You know, so that’s one. And then the other is, you know, synergies are kind of, they can be a real thing, right? I mean, one plus one equals three. That’s the whole whole idea. And maybe what a, you know, a strategic buyer is looking to do, you know, is roll up, you know, that volume and not have to add the same amount of costs. And so, so those are legit as well. Is that what you guys, do you get into some of that modeling for perspective buyers or sellers?
Speaker 2 (31:52):
Definitely. Definitely. So we do, we do many different iterations of financial statement projections, balance sheet, income statement, cash flow across a number of scenarios where, you know, we look at all the different operating costs and see what, what those could, you know, how they could be impacted, right? So we had a client that acquired contiguous territories, a a separate client, and they, we were running through how many drivers would we need, how many, how many warehouses would we need if we consolidated the warehouses because they were not that far apart, you know, maybe 45 minutes to an hour. If we consolidated that, do we have the footprint to handle it, first of all in our current warehouse how does that impact the lives of the drivers, right? Where if they live in that area we just acquired, now they gotta come into our area to pick up their truck, load up their truck, and, and then go back down or over to wherever they’re from.
Speaker 2 (33:10):
What is that from a lifestyle perspective, right? What, what sort of premium might we need to layer in for some of them? That’s the one side, right? What’s the other side? How do we make sure that our current drivers and our current employees don’t go, Hey, whoa, whoa, like, how you gonna turn around and offer this guy that and keep me here, you know, because now I got, you know, maybe new territory or expanded territory or other products to carry. So those are other things that we look at when we get into those projections is, is not only bringing new people in, but bringing our current staff. Maybe they are underpaid and relevance to those new staff. Mm-Hmm. <Affirmative>, you know, so we can’t bring new staff down because that’s a moral issue in the sense of the morale side of things. But then, you know, we have to incur some costs that we wouldn’t have normally thought about because we have employees right now at certain rates, but we have to adjust to make sure everyone’s kind of level playing field, right? So, yeah.
Speaker 3 (34:17):
Yeah, there’s definitely a lot of moving pieces. So you’ll do sort of the modeling and the analysis for those types of, you know scenarios. And then, you know, the, hopefully the deal gets done, the value’s agreed to purchase and sales signed, closed the deal, and now you’re on the other side of it and the buyer is now gonna actually implement. Do you work with buyers sort of post closing on, Hey, here’s what we thought we would do. Let’s, how do we actually go out and make that happen?
Speaker 2 (34:45):
Yeah. I, I mean, if, if we have, if we have a, you know, a, a client who’s selling, if the buyer has, you know, a a a deep firm that they’re working with, a lot of the times you kind of just have that separation where it’s with our sellers, it’s what’s the next thing where, what are we gonna do Now if, you know we get into those, like I said, private foundation conversations, investment banking, other, you know, ideas that they want to, you know, do for their, for the rest of their life. But when we have clients who then buy, then it’s the, okay, when are we gonna do a cutoff? What do we need to do with regard to ensuring that trial balances convert over and data converts over and no ar accounts get screwed up in the process. Right? ’cause we had, we had one that closed on a Friday and just the, the trickling in of receipts and everything through the weekend into Monday, because you know, just naturally how bank transactions were processed, it became a nightmare when it came to the true up the 90 day true up of things.
Speaker 2 (35:58):
Yeah. So it, a lot of the times we like to kind of stay involved just to ensure all the data migrates over and our, our opening balances are right. We can, we can touch the ending one day of two separate businesses in the opening of another day with just one business unit. So yeah, it’s, it, I I think signing the papers is when really things kick off from a deep accounting perspective. Absolutely. <laugh>
Speaker 3 (36:31):
All that work that you thought, no. Oh, now I’m done. Well, you really just kind of beginning, aren’t you?
Speaker 2 (36:35):
<Laugh> Oh yeah. Especially if your client purchases, because then it’s all right, let’s make sure everything transfers over properly. Let’s you know, if, if we do quarterly work or monthly work, it’s like, okay, how is that gonna change the financials? Do we have to you know, work with like an Encompass or a VIP to make sure that the GL codes line up so that they’re mapped together? The, the banking auto withdrawals and all that other stuff is updated. So yeah, there, there’s a lot more after the close that, that is is is fun to deal with. <Laugh>
Speaker 3 (37:20):
<Laugh>, that’s, yeah. You, it says you. Yeah, that doesn’t
Speaker 2 (37:22):
Sound like much fun, but it, it, I will tell you it’s not. ’cause I’ve, I’ve run into this is probably one of my favorite stories. I, I ran into the accounts receivable manager for a client in the grocery store about a week and a half after a merger. And this was like, it was like seven o’clock and, and I ran into her and I was talking to her and I’m like, so how are you doing? She’s like, I’m getting groceries for the first time in two weeks. I’ve worked every day. How do you think I’m doing? I’m like, that’s all I need to hear. <Laugh>,
Speaker 3 (37:59):
Man. It’s tough. Yeah. Yeah. Well, RJ this has been great. I really appreciate all this information. Giving people a lot to think about. Somebody’s listening to this, they wanna connect with you, learn more about what your firm does. Yeah. The best way for them to do that.
Speaker 2 (38:12):
So if they go to www.pkfod.com, that’s the firm’s website. If you go into the industries and things like that check out food and beverage and then if you drill down the food and beverage to the beverage and distribution things, you’ll find you know, my profile, my biography, my contact information can reach out that way. But I’m sure, I’m sure there’s a lot more meat on this bone that you and I can get around three in for sure.
Speaker 3 (38:42):
Absolutely. Absolutely. And are you on LinkedIn or is there a way, folks, if they wanted to connect with you that
Speaker 2 (38:47):
Way? Yep, I, I am on LinkedIn. Let’s see. I’d have to, because that the problem being Ralph Marucci, which is my legal name I always wonder like, how do I have it set up? Is it under RJ or is it under Ralph? From a profile perspective. But yeah, if you, it’s RJ Marucci, LinkedIn so feel free to connect there. Definitely available for conversations that way too. That’s
Speaker 3 (39:15):
Awesome, rj thanks so much for the time,
Speaker 2 (39:17):
Kerry. Thank you as well. And I appreciate the invitation again, and look forward to continuing our conversations. For sure.
Speaker 1 (39:23):
Thank you for listening to the Beer Business Finance podcast, where we combine beer with finance so that you can improve financial results in your beer distribution business. For more resources, tools, guides, and online courses, please visit beer business finance.com. And don’t forget to sign up for the free weekly Beer Finance newsletter. Until next time, get out there and improve financial results in your beer business today.
