Discover the art of strategic mergers in architecture and engineering with M&A expert David Kimbrell.

In this episode of M&A Masters, join me as we engage with David Kimbrell, a seasoned M&A authority in the architectural and engineering sector. With over four decades of unmatched expertise, David has masterminded the art of buying, selling, and advising firms in this specialized niche, revolutionizing the concept of strategic mergers and acquisitions.

• Delve into the intricate world of M&A for architectural and engineering firms.
• Explore David Kimbrell’s unique journey from environmental health to M&A mastery.
• Learn how interest rates and market dynamics influence M&A strategies.
• Understand the critical role of creative financing in contemporary M&A scenarios.
• Gain insights into the nuances of representation and warranty insurance in lower-middle market deals.
• Discover the importance of post-sale transition in ensuring deal success.
• And more

To absorb the full wealth of knowledge shared in this episode, subscribe to M&A Masters on Spotify, Apple Podcasts, or hit play above.

Mentioned in this episode:

• https://www.eenginuity.com/

Transcript

Patrick Stroth: Hello there. I’m Patrick Stroth, trusted authority in executive and transactional liability and founder of Rubicon M&A Insurance Services, now a proud member of the Liberty Company Insurance Broker Network. Welcome to M&A Masters where I speak with the leading experts in mergers and acquisitions, and we’re all about one thing here. That’s a clean exit for owners, founders and their investors.

Today, I’m joined by David Kimbrell, founder of The Enginuity Group. For over four decades, David and his colleagues have been the leaders in buying, selling and advising architecture and engineering companies throughout the US. David, it’s a pleasure to have you here. I mean, when we talk about specialists and niches of niches, this is a fine one. So, welcome to the podcast.

David Kimbrell: Thank you, Patrick.

Patrick: Well, now before we get into everything about The Enginuity Group, let’s start with you. What brought you to this point in your career where you are the US leader in M&A for architects and engineers?

David: Well, I appreciate you pumping me up like that. I don’t know if we’re really the leader. I like to think that we do a good job. And we probably like to think we lead in our little micro niche of architecture, engineering M&A. But I really appreciate you pumping me up. Just keep going. If you got any more things to say, I’m all ears. Oh, my God, how do we get here? I was thinking about this before this started.

Well, I got here through a very nonlinear path. A lot of it’s luck. A lot of it is just gut entrepreneur feelings that you act on. But I think it really kind of all started, I just so happened to be lucky enough to get out of graduate school at University Wisconsin, in May of 1982, which was the same month that the EPA, which had done nothing for the last 10 years other than Superfund, they issued its first mandate. Everybody was waiting, what’s the EPA gonna ever do? What are they in existence for, without putting out mandates.

They finally put out a mandate. And it was the craziest thing. They wanted all the public schools in the United States to comply with 15 very highly technical items, dealing with sprayed on asbestos and pipe insulation and whatnot, as it was exposing workers and children in the classrooms. But it wasn’t very well thought out. The regulation, because the school districts, they didn’t really know how to deal with this.

Nobody knew what asbestos was. There was no, at that time, there was no environmental industry. When I got out, I got out with what’s called environmental and public health degree because nobody really, there wasn’t an environmental industry to go into. But we all know now that the industry is mature, we all know that that was the beginning of everything. The 80s. That decade was the first decade where everybody was trying to find their way.

And I went to work with a small engineering firm, right out of graduate school, and just a few months into it. Well, when I got there, first thing the owner said, he says, David, do you know anything about this asbestos stuff? And I said, not a darn thing. He goes, great, you’re gonna be in charge of this program. Okay. And anyway, we figured this out. We figured out how to do this little one stop shop, provide the training, provide the laboratory, provide the engineering part. And so I took a gamble.

This is where the entrepreneur comes in. I don’t know if I’d be quite this risky today. But when you’re in your late 20s, early 30s, you’ve got a lot of guts, and I just had this feeling that this asbestos thing, which by then it began to spread to lead, and underground storage tanks and all that. But I thought this whole asbestos thing, I think it’s gonna hit the colleges and universities, it’s gonna hit hospitals. The places where you can’t really have this stuff being exposed.

And although the mandate never extended to that, everybody thought that. So what we did was, I moved the company to Kansas City from Mississippi, and put out a letter. It was the most brave thing I think I’ve ever done. And with our brand new IBM Selectric, not Selectric, the IBM 283 PC and a dot matrix printer we put out a letter to every school, every college president in the United States. 5000 letters went out. We burned up two or three dot matrix printers printing out these letters.

And we basically said, came up with this idea of how I could do a random selection of a couple of buildings on the college campus and extrapolate the results to project what the whole might look like, by carefully selecting. And so we put out these letters, we spent all the money. We had made $100,000 in the first six months of the company. We netted $100,000. We took about $50 or $60,000, bought the computer, did this marketing, put out all these letters and, and my secretary and I sat and waited for the phone to ring, to see if the gamble was going to pay off. It didn’t ring for several days.

But when it did ring, her name was Dottie. She came in my office and said, David, I don’t know if this was a joke or not. But I’ve got the president of Harvard University on the phone. And sure enough, it was the president of Harvard University. And he, just like we, everybody thought this thing was going to be hitting the schools. And he says, what’s the gimmick? I got your letter. What’s the catch? You’re gonna come up here and do this free of charge. That’s what I offered. Free of charge, we just do it. I said, well, no, that’s what we’re gonna do. We just hope that you know, if you like the results that you’ll give us a contract to do the whole campus.

And then he says, well, let me see. And I go, no, no, wait a minute. There’s one more thing, and he goes I knew it. There’s something. I said, you know, just, we’re a small company just for us to save money, could you put me up in the visiting professor’s dorm, so I don’t have to get a hotel. And then sure enough, he says that’s it? Went up to Boston, used some of that little bit of money we had left, went up to Boston, stayed in the visiting professor’s dorm, did the study, wrote the report, and Harvard University hired us. And then MIT, then Yale, then Princeton, all the Ivy’s hired us and that was our start.

Patrick: Wow.

David: And so then everybody wanted us to come do this for them. Then it was San Francisco State and American University and just one university after another. And all of a sudden, we’re growing and we’re making money and we’re having to hire people. And fast forward, we started that little company with a $20,000 loan. I had to get a cosigner. That’s why the name was Hall Kimbrell, because Hall was the cosigner. But he anyway, fast forward seven years later, and the last week of 1982, sorry 1989, I sold that company to a large engineering company. And by then we had grown from myself to 1150 employees, 30 operations, over $100 million in 80s revenue, which is about 200.

Patrick: That’s the real money.

David: That’s real money back then. Yeah. $105 million. Very profitable, sold into a large company. And then, but to kick that off, it doesn’t get any better than this. To kick that off because of that very, I guess, quite innovative approach to dealing with the environmental issues and stuff that was facing us then, I was lucky enough to be awarded the Entrepreneur of the Year for the United States in 1988. Had a Rose Garden ceremony at the White House by President Reagan. It doesn’t get any better than that from a business.

But yeah, it’s actually, it’s a small business pageantry, it’s called a small business person of the year, but they call it Entrepreneur of the Year Award. Anyway, that helped. And then I sold the company had a bunch of money, didn’t know, you know, what am I supposed to do now? Well, the only thing I knew by then was environmental, environmental engineering, architecture, because we had grown. We had a lot of architects, we had a lot of engineers, laboratory stuff.

So rather than trying to do something new I said why don’t we just keep doing what we’re doing. Now, when we built Hall Kimbrell that was about of those 30 operations, about four or five, were by acquisition. We bought a small architecture firm in Milwaukee and a small one, another engineering firm in Washington, DC, but a lot of our project offices that we just grew up. But I didn’t really realize that we were dealing with mergers and acquisitions.

But when it started after selling the company and taking this cash, and we decided to do some more building of environmental engineering type companies, and actually we also did a pharmaceutical drug development company. But I just designed it out, like common sense would say, and what I didn’t realize what I was designing at the time, was what we now call roll ups. I didn’t I didn’t even know we were in the M&A business.

And so we did a roll up in environmental engineering. Then we did one in drug development, which was the most successful one. It was a classic roll up. And trying to just kind of fast forward to get to where we are today. So we ended up being the roll up guys. We would design roll ups in technical spaces, and then execute them. We’d you know would fun part of it, we’d use private equity for some of the funding. And we’d grow them and we would sell them or recapitalize them to make money.

But one day, and I’ll get to the end of my question here, but one day, we were doing a roll up in civil engineering in Florida. What we call a mini roll up, a little local roll up. And one of the targets was a CEO of a civil engineering firm. So I went to meet with her. And she says, you know, David, this roll up stuff, you know, it’s too long term. We just want to sell the company. Can you just find a buyer? I said, well, we don’t do that. I mean, that’s, we are the buyers.

We buy companies and we put them in roll ups. But we’re not in that business, but I can. And she goes, David, you’re in M&A. You’ve been doing this a long time, obviously you know, people that would want to buy our company. I said maybe, I guess so. But I’m not really in M&A. We’re the environmental engineering business. She says no, David, you’re in M&A. Everything you’re doing is M&A.

I went, you mean like mergers and acquisitions. And that’s how I just stumbled into doing this. And she says, come on, you know, I just want to get the company sold. So I decided we’d take on our first paying client. We change the name from Environmental Ingenuity to E Ingenuity, or the Enginuity Group. And we found her a buyer. And then somebody else heard that we were doing that, and we found a buyer for that company.

And then a couple of private equity companies we’d worked with, they heard that we’re doing this for clients, and they hired us to do what everybody calls now buy side to find companies and get them to the table. And that’s how we stumbled into what we do today. And that was about eight years ago. And today, when we first started, we laid out a business plan and you know, figured, well, we’ve got to learn about all these industries and be an expert at all this stuff.

And I said no, this is ridiculous. We’re not experts in any of this other stuff. I wouldn’t know how to sell or, or buy a cosmetic company or a transportation company if my life depended on it. I don’t know anything about it. And so we decided, we’ll just do what we know best. And that was architecture, engineering, construction geotech anything in the built environment. And we’ve been doing it ever since. And that’s a long, sorry, a long answer to a very, very short question.

Patrick: Well, it helps give us perspective where you were literally in a business or an industry at its outset. And you watched it as it matured. And then you were wise enough to pivot when the time was right, and move into other areas. And it’s that experience that everybody is trying to leverage when they want to go ahead and take their company and move it to the next level. So I think that is absolutely tremendous. With what you’re doing, did you ever target and I don’t understand, excuse me, I’m not as familiar with the architects and engineering industry. Do those companies, do they get very, very large? Or is it mostly smaller, fragmented things, so you have to be in the lower middle market?

David: Well, in M&A, we refer to the shape of the pyramid. You got steep pyramids, that means you’ve got a very few small companies and a lot of big conglomerates. And when your pyramid gets very shallow, that means it’s made up of hundreds and 1000s of little mom and pop companies and very few large ones. And that is the architecture industry. Engineering has gotten a little bit steeper pyramid.

In other words, there are a few more say over $50 million in revenue, then there are, say an architecture, over $50 million in revenue. So as a result, it’s always been a good world that AEC world is a good one for roll ups. Because roll up you really need a very fragmented industry, where any one of them really does not have a good market. They might sell for 2x, 3x. But if you can offer that plus rollover equity, where they can actually play with the big boys in value, then roll ups are very attractive to them.

So no, there’re not a lot of huge ones. The average size architecture firm is probably seven or eight employees. Now there are big ones. We represent right now one of the largest architecture firms in the country. And that is only, they’re only about $80 million a year and that’s one of the largest. And they’re about number 25.

So the other 24 are a little bit larger than that, but even the largest one, would be Gensler. They’re very large, but they do like maybe, $500 million or $600 million. But they’re just a handful of those. In engineering, though there are more. Simply because there are more engineers. They’re more engineering subsets than architecture has. And there’s different licensing requirements and whatnot.

Patrick: Yeah, well, I think what’s great about this, and why I really appreciate you being here today is that you’ve got a lot of lower middle market, and even below that business owners out there, owners and founders. And they want to either move to the next level or move on and exit and they don’t know where to turn. And they know their craft, they know their profession, but they don’t know mergers and acquisitions, and what it takes to take that step.

So it was great having a resource like you available, because without someone like you, and the Enginuity Group, a lot of these owners and founders are going to default and go to either really small, inexperienced, low capacity business brokers. Nothing wrong with them, but for these professional services, that’s a challenge. Or if they’re a bit more sizable, successful, they default to an institution.

And the institution doesn’t know their industry, doesn’t like how small they are. And you know, they’ll be underserved and they’ll overpay and be underserved. It’s just, that’s not appropriate but you don’t know where to go. That’s why it is so great having you and The Enginuity Group here, because, quite frankly, I’ve been in M&A since 2016, I had never heard of a specialty just for architects and engineering firms. So this is very, very exciting. And you know, the universe continues to expand.

David: It’s a small niche. Obviously, if we wanted to be a big firm, which we don’t. I have already done that. I already built these big, fast growing companies and got many awards from, I’ve got the Inc. number nine award, Inc. number 34 awarn fast growing companies that we put together by roll up mostly. But I like this industry, because not only do we do, as we say to our clients, when we first meet them, we say the difference in us and somebody else is that we know the difference between a single loaded corridor and a double loaded corridor, and we can talk to you about in detail.

And they like that. I mean, we do surveys of our clients, and they always come back and they say, that’s why we hired you is because you’re not just a generalist, you really know this industry. And so we figured we can just do a better job. But you know, the one of the biggest problems we have in the M&A world, and I don’t think this is just my opinion. It’s a very, it’s a relatively unregulated industry. Yes, we have FINRA, and that’s very narrowly, you know, that’s, that’s for investment banks that deal with securities and whatnot.

And most people don’t deal with securities, not in the lower middle market. So we’re not FINRA licensed, nor do we want to be. We don’t want to be there. And then on the other end, we’re in the middle, the investment banks are here, the M&A transaction advisory firms are here. And then there’s 1000s of business brokers out there. And like you said, no hit to a business broker. But it’s a different model. It’s more like selling a house.

They might have a listing sheet, they’ve got a standard, one page contract. And there, they hope that they can sell it, they’ll put a listing out on their website, just like you go to an MLS for a house listing. And if something happens, it happens, but that’s not what transaction advisors do. We do heavy research into the databases. Determine who are going to be the best buyers, or the best sellers, for our buy side.

And we do about half by side half sell side. But you know, it’s very unregulated. Anybody can hang their shingle out there and say that they’re an M&A specialist. Short of FINRA and short of a couple of states requiring crazy real estate licenses for business brokers, it’s very unregulated. And because it’s unregulated, there’s no, that I know of, it’s not a good solid educational infrastructure to teach business owners about M&A. And they need to know M&A.

Because what they normally do is rush and rush to build their company, pay the bills, keep the cash flow going, deal with the headaches, the lawsuits, and all this. And when they finally burn out or they get to an age where they need to retire, they’re 64, 65, and all of a sudden, they go, I want to sell the company, and they start calling a business broker. Or if they understand that transaction advisors for their size might be a better level, they’ll call us. But they’re very uneducated. Not that they’re uneducated, formally, they’re uneducated in this industry.

Patrick: Inexperience. Yeah.

David: It is absolutely foreign concepts to most sellers.

Patrick: A lot of times, I’ll ask my guests, you know, what are you doing apart from all the other hundreds or 1000s of investment bankers or PE firms out there. What makes you different? Clearly, your presence and your experience in this sector of architects and engineers is unparalleled. I think what’s additionally helpful is for whether you’ve got a buy side client or a sell side client, because you handle both, you know, what the other side is thinking or what the other side is looking out for. So if you’ve got a sell side client, you’re ideally prepared to advise them saying you need to focus on these features of your business, because a buyer, this is what the buyer is going to look for.

David: Exactly.

Patrick: I was thinking on the buyer side is kind of well, not only finding a good qualified target, but are they even in the market? And, you know, I think you can find out because you’ve been there, you know, the triggers where somebody may be very resistant to they’re wide open, and they’re going to be very accommodating. So I think that really helps out.

David: Yeah, it does. You know, what we like to say to ourselves when we initially meet a sell side client is we say, we look at this whole process from the buyer’s eyes, because we were buyers for 35 years. We know what a buyer is looking for. We know the red flags. I don’t want to say, we know, I know most of it, I think.

We know what the red flags are, that will just kill a deal right off the bat. And when I say that, I want to know those red flags before a buyer tells me about this. So I look at it from a buyer’s eye, we run a valuation from a buyer’s eye, we have good valuation models we’ve built over all these decades. And we usually get pretty close to what the market is going to pay.

Patrick: You know, give us a profile of the ideal client that you’re looking to serve. Clearly an architectural, environmental or engineering firm, yes. But, you handle deals throughout the country? Size? Give us a profile of what you’re looking for, who do you best serve?

David: We will take on a client as small as say, $5 million in revenue, maybe $1 million in EBITDA. That’s really kind of our bottom. We work better in the $10 to $50, $100 million, you know, in that area.

Patrick: Well, I just think the value you add by staging of the company the right way, it has got to lead to an extra return on the EBITDA. So I think that’s just an investment to move forward. Also, I would think that your clients from The Enginuity Group, the buyers know where the quality assets are. And so if someone is being represented by The Enginuity Group, I have a feeling you’re gonna get the best level of the buyer’s attention there, and you’ll get final execution.

David: Well, I’d like to think so.

Patrick: I can imagine just the whole operations and just the feel of mergers and acquisitions when you started in the 80s is night and day different from where it is today. One of the biggest differences out there that wasn’t around in the 80s, or 90s was the presence of rep and warranty insurance, which is the ability of the insurance company to come in and transfer some of that indemnification risk between buyer and seller. And instead of having the two sides pointing at each other in the event of a breach of the seller reps, that can be taken away. And you know, don’t take my word for it. David, good, bad or indifferent, what’s been your experience with rep and warranty insurance?

David: Well, first of all, as we all know this is a very litigious society we live in. The business society is so litigious compared to even when we started 40 years ago. Everybody’s suing everybody for everything. And liability is such an underlying theme these days in transactional work like what we do and what you do that you’ve got to really pay attention to it. One of the hardest things that we deal with when we’re negotiating with the buyer or the seller, when it comes to whether it’s going to be an asset sale or a stock purchase or a 338 exchange or some other kind of structure is how tight are these reps and warranties.

How extensive are they going to be for the seller that normally doesn’t understand any of this? Remember, this is not very foreign to them. Where an asset deal, you’ve got two or three pages, maybe. Even on a big asset deal, you might have two pages of reps and warranties. I mean, you’re not repping much. But on a stock deal, you might have 60 pages of reps and warranties. Maybe that’s an exaggeration, but you know what I’m saying.

Patrick: A lot.

David: 15, 20 pages. And you’re repping everything to the point where we say on a stock deal it’s gonna be hard to sleep at night, because you’re gonna be worried about, you know, all of this. And they go, what are we going to do? Yeah, we’ll sign this, and we’ll stand behind it. And many times, we say, you probably ought to get reps and warranties insurance. It’s probably going to be cheaper than all the sleeping pills and the therapy you’re going to need not sleeping.

And we see as we get a little bit larger, the issue of needing reps and warranty insurance, I think everybody should have it, but everybody’s not going to buy it. But as you get larger they do. And they’ll listen to when we tell them. And the lawyer, normally, by that time, we’re working pretty closely with the sell side or buy side lawyer, and he’ll tell them the same thing. And so we’re seeing a trend that more and more people are needing it. There’s still resistance of spending the money. Although it’s a good way to sleep at night.

Patrick: What’s great about that is reps and warranties was originally designed for larger deals. We’re talking transactions of $100 million and up. And you had very sophisticated due diligence, you had a lot of information, you had audited financials, there were a lot of things that underwriters could access to evaluate the risks. As deals, you know, on the lower end, sub $50 million, those got tougher to underwrite. And they’re very, very expensive.

And a lot of times the insurance carriers just wouldn’t cover them. They just said, look, I’m sorry, it’s just too small to be eligible for what we did. And also the deal parties really couldn’t justify the cost of spending six figures just to get all the diligence reports to qualify for insurance, which was a six figure other bill. What’s been nice, and one of the reasons why we’re talking today as well is that in the world of architects and engineers, many of those companies in that flattened pyramid probably have a purchase price of $30 million or less.

And what’s nice is there is a new insurance product out there. It’s called TLPE, transaction liability private enterprise. It is a policy designed exclusively for transactions that are under $30 million. All the way down to a million dollars of purchase price. It is ideally situated for professional services firms just like these, and it is what we call a sell side policy where the policyholder is the seller.

So we don’t rely on the buyer, we just gotta go ahead and cover the seller, right. And it is triggered in the event that if there’s a breach of the seller reps, buyer notifies the seller of the breach, seller forwards that notification up to underwriters, policy is triggered, underwriters will assign an attorney to negotiate a settlement with a buyer. Just like on a buy side rep and warranty policy.

So it is a mirror image at a cost of $15,000 to $20,000 per million dollars in limits. Okay, this is a very inexpensive option. There’s no underwriting fee, and the processing time takes days, not weeks. And so what we wanted to do is to have a product that was scalable for the lower middle market that you want to be able to issue a lot of policies that are simple, straightforward, and inexpensive.

So we can grow by volume rather than by size of deal. And, I think this is a great area, because like you said, there’s no substitute for peace of mind, particularly when you’ve got a, quite frankly, a life changing event for a lot of owners and founders. And this is a great way to bring this forward. And we couldn’t be happier with how the market is developed, to meet this new need.

David: Well, you’ve you’ve come in at a timely, they say the sign of a good entrepreneur is not that he knows when he’s there at the right time and place, but that he has the guts to jump on it, and execute. And you’ve you’re coming in at a time where it’s absolutely critical because these, these mom and pop companies they cannot afford for additional reps and warranty insurance. It’s just simply too high for them.

Yeah. And they can’t put their arms around what that damage suit would be for a death of a child on that waterslide compared, and what’s the probability of that and all that. They can’t get their arms around that at that small size. But the risk of some tail happening at a $10 million a year company versus $100 million, those deaths still cost the same.

Patrick: Yeah, exactly.

David: And there’s not nearly as much quality control with all the smaller companies to kind of offset that risk. Where bigger companies have sophisticated QA, QC programs, better training, better safety training, and all that. So, actually, it’s the smaller ones are probably needed more.

Patrick: Yes, that’s kind of what we’re thinking, and we’re just hoping that some of the checks we have to cut aren’t going to be as large as $150 million deals. But also, they’re simpler, and a little more straightforward. So we feel so far, this program has been around for two years. And as the rep and warranty insurance market, it started very slow, then exponentially went up, where it’s literally ubiquitous, on deals north of $70 million.

So we’re very happy that at least we have some of this meeting a need for owners and founders who really can’t afford to lose a million dollars. And so, we’re very proud of the industry for coming up with this. Now, David, we’re right at the beginning of the year, fresh new year, clean slate, what do you see out there? What are your trends that you’re expecting to see either for The Enginuity Group, or M&A in general?

David: Our vantage point is not a big overview umbrella of the market. We’re so focused into a niche of the built environment firms, that we look at everything kind of from that. We look at that, and then we look out as opposed to looking in. And what’s on everybody’s mind, right now, are interest rates. Interest rates affect our clients tremendously, because they’re in the business of designing something. It’s either a bridge or a building, or something.

And if these projects are not going to, they can’t get funded, or they can’t proforma it out with 10 and 11% term debt, where they were used to 5 and 6% term debt, the projects are getting put on hold. They’re getting pushed. They’re getting canceled. And the architecture and engineering community is having a very hard time forecasting for their labor, for how much revenue they’re gonna be able to bring in, and then if it’s going to be a downturn, how are they going to keep the staff and suffer on the EBITDA line.

They’re gonna lay off staff to maintain the percentage of their EBITDA. Interest rates are kind of the governing thing right now in the AEC world. Architecture, engineering construction world. And it kind of backs up from construction. Because if the clients take a big real estate developer that’s got a big multimillion dollar development plan, but all of a sudden, the rates that he hadn’t pro forma’d for have gone up, or it’s even tight to even get the loans, then what’s going to happen to that development?

They’re gonna have to send a notice to the architect to the engineers, we’re going to be slowed down, we’re going to postpone this. Where are you going to put these people to work? You’ve all of a sudden lost of this. So that’s the big thing right now. And there is market compression. Especially in the kind of more of the architecture side, because that gets more into the front end of a planned development project than engineering does.

So there is compression going on. Everybody’s trying to speculate when the Fed is going to lighten up. And like you and I were saying earlier, it’s probably not going to happen in the first half of the year. I’m not an economist, but I just read and what everybody reads. So that’s the big type thing. So as a result, what we’re seeing, now that’s what we are seeing with our clients. But what we’re seeing as a result of that is more of an acceptance and more demand on us for coming up with creative financing rather than traditional term debt financing.

So where three years ago, almost all deals for the cash component, there would be a hunk that was term debt, hunk that was equity that came right out of a PE fund, and then whatever the other backend stuff like notes and rollover equity. But what we’re seeing now is more rollover equity, more 51% deals with rollover equity and we’re finding more and more even of the cash they want the seller to finance.

And so we’re finding that the demand is higher, but also the sellers are more agreeable now to take a 10% on the back end on a 7% interest rate note than they were before. Before they said heck no, we’re not gonna do that then go to the bank. But they know they can’t go to the bank now, so if they want to get their company sold without a big discount, they need to play ball on the financing. And so that’s the biggest trend right now that we’re seeing.

Patrick: And I think creativity and acceptance of the creativity for structure is definitely something that’s going to stay with us for a while. And as you and I spoke before we got on to this show, there’s a possibility in an election year where we’re not going to see any massive increases. But I don’t think we’re going to see the decreases coming for a while. And so if the sentiment out there in the investing community is oh, great, things are great, because we’re not going to see rates go up.

Yeah, but they’re already still pretty high. We’re not going to see some material reductions before, I think you can open up the floodgates. But I believe that in the lower middle market, there are a lot of other forces that are happening, that are just particularly, time hasn’t stopped. And we’ve got a lot of owners and founders that are not getting any younger.

And so I think that’s why they’re being compelled to creativity, I would say anybody that is in the A&E and construction space, really should reach out and look for David and his team at The Enginuity Group, because if there’s one thing you know, is you know where the buyers are. And if you’re selling, you always want to know who knows the buyers. So, David Kimbrell of The Enginuity Group, how can our audience members find you?

David: Well, you can just call me. We’re not too formal around here. My cell phone is 785-766-1756. Again, that’s 785-766-1756. Our website is eenginuity.com. That’s with two E’s. Eenginuity.com With two E’s on the front of enginuity and my address is dkimbrell@eenginuity.com. But it’s all on the website. You can get it there.

Patrick: That’d be great. It will also be in our show notes, too. So if you look up Rubicon on Apple iTunes and pull up David Kimbrell’s interview there, we’ve got the show notes there. David Kimbrell of The Enginuity Group, I mean, absolute pleasure meeting you and thanks for being here today.

David: Well, thank you so much for having me, Patrick. And we’ll be talking soon.