Andrew Greenberg, GVC | Evolution of the M&A Market: A Journey from Information Asymmetry to Al-Enhanced Efficiency

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I am very excited to be here with my friend Andy Greenberg, CEO of Greenberg Variations Capital. Andy, great to be here with you today.

We're going to talk about most of the time about how the face of the M&A markets have changed quite a bit over time. And then we'll talk about some other fun stuff. So maybe to jump right in. Andy, I would love to get a little bit more on your origin story. Can you tell us a little bit kind of your life story? How you came up in the world? Finance, entrepreneurship, where you are today, all those types of things?

A guy named Bob Casey Sr. was running for governor of Pennsylvania. He got elected, and at age 26, I was part of a small coterie of young people around the governor. So, you know, I went from being beaten on to check on post-defective statements with the SEC to working in Harrisburg. And I worked in what was then the Department of Commerce.

It's now called Community and Economic Development. And after a few years, at age 30, I became the secretary of the department, so I had an early, heady experience in politics and governance. Wow.

And there I picked up a discipline that I think has been helpful as an investment banker. Bob Casey Sr. a wonderful guy, a true new deal Democrat. So, on every issue of interest to business, labor issues, government regulation, taxes, he could pretty reliably be expected to line up on the side opposite the business community. So as a young guy, I had to learn how to maintain my credibility with that constituency without giving up the guy in the big office. And a lot of, you know, you can kind of relate to it. The balance that we all need to have as deal makers.

You know, I did not want to continue. I had an opportunity to get into investment banking with Brown Brothers. Harriman. I was based in Philadelphia, but I spent a lot of time with the people in New York. And, you know, you said you didn't know about the political background. I think it's only in recent years that I started talking about it more, because early on it was.

It was such a jarring disconnect, you know, I mean, I was a mid-level banker, learning how to do DCF analysis from younger colleagues. So having had this experience in government, it was it was like I had I was a child actor who had been in a successful TV show.

And now I was expected to be in a Broadway play and I never had acting lessons, so it wasn't. It wasn't really helpful to talk to people about the whole political thing, you know, until I backfilled and, you know, developed some some skills in finance.

But, you know, from the perspective, yeah, I'm a little older than you. But you know, from the perspective of people who are getting into the field now. Or in the past 10 years, it was much more pick and shovel work. You know, the market was less efficient, you know, from the perspective of bankers, people kind of had their relationships. There were not, there were not processes where hundreds of books were being sent out, in part because we didn't send stuff electronically.

Right, you know, we did it by Fedex, and clients didn't. They don't, they don't want to pay for analysts to print and mail out 300 books. So it everything took longer.

The world is making the transition from Lotus one, two, three. You know, you and I are just too young to remember visicalc, right? But, but Excel was just getting the upper hand over Lotus.

And as you and I have discussed, everything was was labor, you know? Assembling a peer group was not something done effortlessly and quickly. You had to put in parameters and wait for a download if you were getting together. Information on publicly traded comps again, no download. Depending on where you work, you were.

You were sweet, talking the librarian to get Edgar filings for you, and then you had to go through them. So people in our age bracket like to think that there was a lot of learning in going through those steps. But there's no doubt that it just took more effort than the same tasks.

But inevitably, you wouldn't get your comments until midnight, and then you'd have to redo all the books because then the graphic artists were gone. And then at 3 a.m you would start printing these things, and then at 5 a.m you would start binding them. If you couldn't, you know if the meeting was in New York that next day, and so I was really good at binding books.

And so I got. I think I was sought after, not because of anything I do about wattage or analytical skills, et cetera. It's just I got fewer paper cuts than others and print well and so, but that was the 90s, you know?

It was like the good old times. And and everyone, I think, as we, I don't know about you, but as we as we think about these times, everyone thinks. It was so much easier back then. It wasn't just because there's so much more asymmetry in efficiency and information gathering, et cetera. So it's still really hard because it was just so much harder to do things, you know, versus today. The world's your oyster.

Everything's in your hands.

And as I said before, it was, it was more pick and shovel work. And you know, I am not one to say that, you know, people in the past were sharper than people today. I think we get to work with a lot of plenty sharp young people, but they get their sharpness from different experiences because they're not called on to.

And I think you're totally right. It was. I think today it's still very much an apprenticeship business, but but just in different ways. You're able to maybe jump through some of the picks and shovels a little bit more. And it's more about the, you know, in some ways, how things, kind of the you can jump past that first step. And so maybe that that's a that's a good segue into, you know, you've been in the business, you've seen it evolve.

How does? How has the business evolved today versus maybe those kind of grand old times, you know, when we were starting off? what does it look like today versus that?

And the end was relationships with strategic financial buyers and an affinity. Where, you know, the person who was a step removed would be talking, you know, in the pitch, would be talking about multiples and macro trends.

And the specialist would be able to say, Oh, is, you know Charlie? you know? Is he back from his skiing injury? Yeah, I mean, they're, you know, they're, they're, you know, getting to be acquisitive again. And you know, the client can't. The clients can judge three things. They they. They can judge whether they like you, they can judge whether they think you're smart, and they can judge whether you know their world. And that really emerged.

And you know the industry boutiques, and you know the larger, higher volume, middle market deal shops. You know, their coin of the realm was just having more distribution based on that, being able to get out, you know, more books quickly into the hands of informed buyers. I started Greenberg Variations Capital in 2019. Because I saw that movement toward industry specialization, I wanted to continue to work with businesses across a somewhat broader range of sectors in the industrial field. Um, so I saw the subset of business owners who, for good reason, we're not headed for a far flung auction.

Is one to five or six buyers, and I don't really like one buyer, you know, two to six optimal. So they didn't need and didn't want to pay for the staffing, the infrastructure and all of the stuff of the auction. So GVC, basically, uh, uncoupled marketing from execution, and we just provide execution, so that's my path to a more structured approach.

And then, of course, you don't need me to tell the Blue Wave story, but you know, I've. I've kind of watched you build a business also based on private equity firms and the deal ecosystem, seeking a more and more refined view of a given business.

And so there were trusted advisors who had access to information and network that no one else had. The world was a smaller place and then tons and tons of private equity firms and investment bankers came in, and then the world became more and more efficient. In the name of the game. And kind of, like the two thousands to maybe the two mid 2015.

ISH was large numbers and efficiency. So the investment bankers would do a 200 PE firm auction with another 50, another 50. Uh, you know, strategics involved in. It was just brute force. Boil the ocean and that would drive an outcome. But then what happened, you know, in my mind since that point was then you entered this era of, you know, you got. There's so much efficiency. They entered a new age of enlightenment, both on the investment banker and the private equity side, where specialization became important, where it all became about alpha, not beta cause.

Beta used to get your results. And the returns were good enough for investment banker, for the for private equity firms, and the money was good enough for investment bankers. And I think what you really, really appropriately pointed out is we're in this new era. And now it's about specialization and it's about being better at fewer things and really driving insights to drive outcomes. And that's true, you know, we certainly saw it in the private equity side, and that's that's really why I founded Blue Wave.

Is I needed alpha? I needed specialization? I needed the right resource for exactly what I need when I need it, and I think that. And then the same thing you're articulating in in the investment banking world. It's about knowing what's going to happen before they do it, and not brute forcing it. Because that gives you beta and what you're doing at Greenberg Variations Capital is bring an Alpha.

And so I'd love to maybe drill down on that a little bit.

And it's it's very easy to caricature. The owner operator is like the classic data miner. And you know, the guy who remembers the one deal that was done at 11 times in his industry. And it beats you over the head with that. But information is information, and somebody built a successful business is usually pretty shrewd, even if they are pushing investment bankers to be more aspirational. So I do think that there are more processes where, you know, to your point, about, uh, Alpha? There are more processes where market clearing value is going to be within a relatively narrow range. And what the market wants on both sides is efficiency, certainty of close and quick, thorough ventilation of the issues that could cause a deal to go sideways.

And that's where my approach comes in, and that's where the appetite comes in for a sponsor calling you. And not not necessarily looking for a general, broad industry view, but say, hey, we're buying this type of business. And we need somebody who can talk to us about how, you know, production lines are assembled in this industry, and there's an answer for that.

Market is in effect right now, and it could be. I need a commercial due diligence provider, and it used to be. I'm going to go to the large firm that everyone knows that does commercial due diligences. And on that same vein, they're like, No, I need the commercial due diligence group. That knows. The high mix, low volume, multi-tier distribution food snack manufacturer in the Midwest, who already knows that world. And so I think that you're, you're right in that, that's where the world maybe is and is going.

And, to your point, the information can be available not only for the private equity firms, but the same vein the investment bankers are continually evolving in their own right. And so maybe let's talk a little bit about that in terms of how did that lead you to? With that in mind, to bring Greenberg Variations Capital into being.

But there are other businesses, as I said before, where valuation can be higher or lower within a trading range. But the center of gravity in the assignment is understanding where you need to take the clients to cement a value proposition that will carry through to closing. So, in the past year, we've done a couple of deals in medical devices, extremely profitable, highly valued businesses. I am not a boutique authority in the medical device industry, but I understand, looking at strategic buyers, strategic buyers owned by private equity groups. On the other side, that the value proposition there is helping them understand, with incredible particularity in each case, how a an extremely profitable business makes its money. What are production cycles?

What is the usage of material? How is labor dealt with at a business where there's almost no direct labor involved? And whether it's the company's management team or retaining the kind of outside experts that you're involved with. You know. I saw an ability to get involved with business owners away from the wide open auction and say, Look, there, there are five, you know, five, six, eight likely buyers for this business. They're all knowledgeable, none of them needs us to educate them on the market and the opportunity. But let's talk about the questions that they will ask in order to get the closing. Of the kind of elevated multiple, you know, that industry, double digit teens multiple, and let's figure out how to make that happen.

And you've taken that same approach to investment banking advisory, and I think that's got to resonate really well in the same vein with your approach. You're not turning companies upside down. Because we would when we would go through the big machine, and I think that's evolving in many places. But when we would do it, your company was just exhausted by the time you got through it.

Well, it could be that there are three or four dozen private equity groups that would be interested in that business as a platform and it. It's not a good use of my time to try to suggest anything else to them, but it works the other way. We get referred into situations by attorneys, wealth managers and other trusted advisors, and it often is helpful for the clients to have come from discussions with more traditional M&A firms. Where part of the pitch was being talked into something that they didn't really want to do right? There was a theory of why it made sense to be interested in a handful of of buyers. And, you know, for traditional investment bank, it's not really economical to do, like the way we're set up.

If you're doing little marketing and focusing on execution, you can charge less. So we priced at a discount to what a traditional M&A firm would charge for the fully loaded sales mandate. You know, if they work with us on a one-off and it becomes something else and they don't want to continue, then I don't want to make their life contractually complicated. So they like the fact that we just focus on the thing.

And for that, they give you all the trust in the world, with their most important asset, probably of their life, other than their their friends, family and children.

So, you know, I think that's a good, it's a good thing to kind of transition here on. And that we've talked about where the market has come from, where it is today. With this really unique vantage that you have, where do you see it going in the in the visible future?

You introduced this great tool called GF Data, that gave everyone insights into key capital market metrics that help make them make their decisions better. So all of this is playing out into this world that has been gradually maturing, as every industry does. And it seems to me, you know what's happening and what will happen, will, you know? Follow some of their markets and see how they've evolved, they become more sophisticated. You know, with the advent of AI, this is going to be the greatest efficiency enhancer in my mind since the advent of the modern internet in 1995, Netscape.

Um, and so I, I a hundred percent agree that the world is going to be playing this game and it's going to be, like anything else. Harder and harder to find alpha, but it's still going to be really good compared to most other things. So in my mind, it's not a message like, Well, it was me. It's just okay, don't hate the player, hate the game. We're all going to have to work a little harder.

The big will probably continue to get bigger and and there are going to be the boutiques that address the lower end of the market. That, in some ways, is the most interesting, highest returning end of the market. But it's just harder to do at scale, does. How does that resonate with you?

And then 10 years later, to go, Oh, I wish I was 10 years old, 10 years later. Well, okay, I'll stop with the tens and then. But it was, but they were all still good times. It was just relative to maybe a more distant past. It seems like it wasn't as good.

And I think when people and I look at 10 years from now, it's going to be like, Oh, I wish I was 10 years old. But it's still going to be pretty darn good. So maybe as a as a good turning point here, let's talk about we, let's talk about a little bit more about the lighter topics. And one of the things that, you know, I think we all do. When we're after a long day and friends like you and I and Charlie, we're at a bar afterwards or something and drinking. You know, being responsible is is that we will wax poetic about, you know, some of the look in the in the rear view mirror? And the things we knew now that we wish we knew then, and if we only had a time machine? So I, I'd be really curious. Eddie, Maybe what's one of these things that you'd go back to to young Andy and say, Hey, kid, listen up?

I did more sports when I was in junior high school, and I got into high school. I was small, I gravitated to brady activities like like, debate. And uh, the guy who is the lacrosse coach at my high school, uh, came up to me after he was a history teacher and came up to me after class one day. And he, he said, You know, the varsity is looking for a Coxswain. And I just looked. I looked down my nose at it, and, uh, you know, I. I thought Coxswain was like, glorified equipment manager, uh, uh, on uh, the rowing team. That's an example of something I really regret as I've gotten older.

I don't know that it would have been a life changing event, but of course, as you learn about that sport and and what that means, that would have been a terrific challenge for me. And, uh, you know, that's an educator, right? I mean, that's an example of a teacher looking at a kid and thinking he does, okay, you know, in in class, but this would be a good thing for him. And I didn't say, I didn't say yes. And I think, you know, we, we all get into those situations.

We recognize we recognize them more readily as we get older, but, you know, my advice for younger people would be, where possible, try to say yes.

And so I go into this thing, and our coach was a former All American tight end for the University of Texas, and so I go into this thing. And like you, in eighth grade, I was five feet tall and I probably weighed a hundred pounds.

And my freshman year, I think I did something where I couldn't get into it. So sophomore year, I'm starting to grow a little bit and springing up and very awkward, awkward years. And. But the coach looks at me. And my dad was is is six, four, and my brother is three years younger than me, but it was at that point taller than me. And he goes, Sean, you're going to be tall like your dad.

And so we're going to put you at tight end, cause that's my favorite position. And the only good player we had in our team was the all was. The all State tight end who grew up on a ranch and chewed tobacco since she was age four. And so immediately I go with, they're like, you got it, coach. Three concussions later, every day he's jamming my head into the dirt. I had a one year career in football, but on the up flip side.

I then started studying a lot harder, I joined the student Council, I found my ways, I left my football career behind, but it led me to another road. So, but if I had to say then yes to that, I probably would have, you know, gone on a whole different path.

So I love that example. And you know, you think about, you know, the things that we do. They require a lot of time. It's a lot of effort and one of the one of the things that I'm always kind of thinking about it is I've gained a little bit of perspective. It's like, how do I find little life hacks that are like, not only not even just business, but just things that make my life a little easier? And so I'd be curious, do you have anything that you've kind of figured out recently or previously?

Recently, you know, this thing makes a lot of sense. And boy, I'm really happy that I, that I, that I have this in in my world, because it just makes things just a little bit easier.

So my youngest son is now 16.

I still have a booster seat and when I go to get the propane refills for the grill, just pop it, pop it right in, and it works good. So that that's my life.

I'm really, I'm really, really angry with myself right now. Because why didn't I keep those car seats, you know, from when my kids were younger? Because every car I've ever owned has that little like slash across the glove box where the propane tank kind of like, juggles around as I'm driving and just carves up, you know, the front of my seat.

Literally every car.

So I think it's a great life.

She's the wiser one.

So don't think less of me, listeners.

Special thanks to Andy for joining. If you'd like to learn more about Andy or Greenberg Variations Capital, please see the episode notes or links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcasts, including Apple, Google and Spotify. We truly appreciate your support. If you like what you hear, please follow, rate, review, and share.

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