Investment Banking with Clint Bundy

May 18, 2022

Clint Bundy, managing partner of advisory firm Bundy Group, joins us in this episode. Tune in as Clint shares tips on how to maximize the value of any business. We discuss The Broken Window theory and private equity’s biggest concern with health care deals.

Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at info@byrdadatto.com.

Transcript

Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real world experiences. Creating simplicity in 3, 2, 1.

Brad: Welcome back to another episode of the Legal 123s with ByrdAdatto. I’m your host Brad Adatto with my cohost Michael Byrd.

Michael: Thanks, Brad. As a business and healthcare law firm, we represent clients in multiple sectors and multiple specialties, especially healthcare. This season we’re searching for common ground. Are you going to help do that, Brad?

Brad: I am going to try.

Michael: Okay. We want our diverse audience to see some common themes and we’re going to be bringing in guests to help us. This season’s theme is The Universal Language – Business.

Brad: Awesome. Now we have a new friend that is going to be joining us today. Because the world is so small, we of course made a common connection when we first met a few months ago in Vegas. Um, oh, sorry. Go ahead. [00:01:00]

Michael: I was just going to say, yeah, maybe speaking of common conditions, but you know, I’ve been wearing you out on this. I can’t stop thinking about an article our friend Robin Pou wrote a few weeks ago. He introduced this idea called the broken window theory.

Brad: Yes. And audience, he just cannot stop talking about it. He mentions it probably every day and several times a day in the last few weeks. Michael go ahead and share with the audience. What is the broken window theory?

Michael: Okay. Well, as I said, full credit to our friend and chief strategist for ByrdAdatto, Robin Pou because this is the first time I’ve ever heard it and it was from him. You can find the article in his weekly newsletter called The Confident Leader on RobinPou.com. And Riley can leave a link to it in our show notes. But the article states that there is a theory among criminologists that a broken window never fixed reveals a level of inactivity in a community that [00:02:00] gives rise to greater subsequent crimes.

Brad: And I’m actually really familiar with this believe it or not. Back in the 1990s, New York City, this is where they kind of launched it. My mom was actually really involved in the New Orleans crime commission and they brought down this whole theory of dealing with, fixing these broken windows. And Michael, I guess the real question that everyone really wants to know is, do you even know how to fix a broken window?

Michael: You’re missing the point, Brad. And no, I don’t know how to fix a broken window. That’s why I’m a lawyer.

Brad: Fair enough.

Michael: But the point is, and then Robin’s point was he applied this theory to leadership. It’s what they call an analogy, Brad. So the article states that serious challenges to your business may be the result of a lengthier chain of events that started with a proverbial broken window.

Brad: Okay. So, Michael, I liked your analogy, word, [00:03:00] audience members who can’t see them using quotes in the air. And so let’s use an analogy in the healthcare industry, and we’ve discussed this in other shows, Michael, where, you know, being compliant is difficult, being compliant in the healthcare industry is even more difficult. And so let’s give it as just an example. So you might have a medical practice that has a nurse practitioner who’s overseeing the day to day services like their nurse injectors. Well, one day the practitioner she quits. And the other nurses just continue to treat the patients without any oversight. The practice keeps growing and scaling. They never replaced this nurse practitioner. They actually even forget why do they even need a nurse practitioner in the first place. Others in the community, they start modeling their business off the same thing. They have these nurse injectors and they just grow their practice doing the exact same thing never having these nurse practitioners involved because it must be okay because the big guys are doing it. And pretty soon audience members who don’t know, this is a state where you need a nurse practitioner to oversee it. And therefore the entire area is noncompliant.

Michael: Yeah. And, [00:04:00] and it actually, we get this all the time, multiple times a week in our calls with potential clients and clients alike that say, well, how’s everybody else doing it?

Brad: It must be okay, Michael, everybody else is doing it.

Michael: Yeah, exactly. And we’ve talked about that on prior episodes, but I do wonder if you could trace it back to a broken window using an analogy again. Brad, not an actual broken window. But another kind of example I thought of when I was thinking about Robin’s article that he wrote was we had a client a few years ago that started up, they got into their space, they’re running it skinny, nothing new about any of that. And they got in and they didn’t have their internet set up so they just started using the building’s Wi-Fi for everything they did to run their practice. Their buildings Wi-Fi was an unsecured network for all the guests and they just kind of [00:05:00] kept going. They got busy, they started treating patients and they built some infrastructure. They bought HIPAA compliant software, but it was all being run on an unsecured network through their building. And so you can imagine the broken window was their choice of internet at the very beginning. Fast forward a half dozen years later and it didn’t work out very well. And they had a HIPAA breach.

Brad: Yeah. That’s an easy one. It truly is a broken window, I guess. You know, Michael, you start thinking about our office. You start thinking about what broken windows we have. And I really been thinking hard about this. Are you my broken window?

Michael: Ouch. I don’t know. You haven’t been dealing with it for about 16 years. I think you have the problem if I’m the broken window. But yes, we will just say we’ll call it a draw on we are each other’s broken windows and  [00:06:00] we’ll live with those consequences. But I can’t stop applying this across different aspects of my life. I started thinking about it from parenting, and where will that lead? It’s this whole theory is like a brain worm that won’t go away.

Brad: Let’s fast forward, Michael, since we have a guest coming on. What did Robin actually say on how to fix this broken window?

Michael: Well, you fix it.

Brad: Come on.

Michael: Oh, I was just making sure that you’re engaged and paying attention. Well, Robin’s overall point is to pay attention to the small things. Remember he was using this broken window theory to talk about leadership. So he said things like starting your meetings on time, address undesirable employee behavior immediately, establish processes and stop taking shortcuts and stuff like that.

Brad: Yeah, it definitely can be a brain worm audience members if you start really applying this. Of course I’m not sure what the broken window [00:07:00] theory has to do with today’s guest, so that was a total sidebar. He may have some thoughts on it, but Michael let’s bring on our awesome guest today.

Michael: Excellent. Well he’s not the broken window, but I’m sure he will say you’re the broken window. I’m still trying to catch up. Our guest today is Clint Bundy. He is has 17 years plus experience in investment banking. He’s the managing director of The Bundy Group. He was previously at Wachovia Mergers And Acquisitions Group. He is a UVA undergrad, Wake Forest MBA. And I think you’re the one that found common ground with Clint first.

Brad: Yes, audience members. Clint mentioned to me that he went to UVA and somehow we immediately started talking and he found out it was from New Orleans about crawfish. And it turns out he had pledged a fraternity that a mutual friend of ours who’s a lot [00:08:00] older than both of us combined, basically had started a giant crawfish boil for the KA house at UVA and the New Orleans family is the family that actually started with Mr. Mudbug and he was still familiar with it years after the fact. Clint, welcome.

Clint: Michael, Brad, thanks so much for having me on I’ve really been looking forward to this. So thanks for having me on.

Brad: Yeah. Do you still ever go back and go see the mud bugs?

Clint: Well, I haven’t been to a crawfish party in a long time, so you’re testing my old guy memory now, but I have some very fond memories of having a lot of crawfish and maybe having a couple beers to go with those crawfish back in the day.

Michael: You might want to make sent a roll aid too, as we get older before you do that. Well, we’re so glad you’re here. I mean, we enjoyed meeting you just a few months ago at a conference and connecting. And I would love just for [00:09:00] you to share kind of your professional story for our audience.

Clint: Yeah. Thank you guys again for having me on and I’ll try to summarize my kind of career life story in a minute or so here, just to keep it brief. But I grew up in Virginia, as Brad mentioned with University of Virginia. I had a prior life and kind of consulting, but worked on kind of the operation side of consulting and gotten into the financial arena. But kind of most importantly, I guess, pertinent to this conversation, my father started, back when I was much younger in my middle school days, a boutique investment bank. He had always wanted to start his own business and wanted to advise business owners on some type of topic that he was passionate about and what that ended up being was advising them on exit [00:10:00] planning in business sales and related topics, which he started our firm in 1989. And so I guess you could say I’ve kind of had investment banking in my DNA or bloodstream for much of my life. And also just was lucky enough to not only grow up around it, but really enjoyed it. And so after kind of testing out my career chops and other areas, I ultimately came back to that profession. I got a little bit of time in the corporate investment banking world as you all mentioned earlier at my time at Wachovia securities which is how I landed in Charlotte, North Carolina, and then ended up marrying a tar heel, which kept me in Charlotte, North Carolina, but came back to Bundy Group back in about 2008 to work with my father who’s now retired but I was fortunate enough to work with him for a number of [00:11:00] years before kind of taking the reins with a couple of our senior team members and building our firm. So hopefully I didn’t bore you too much with that story, but that’s a little bit of background on me and our firm.

Brad: That’s awesome. Well, you know, so you have this growth and you’ve obviously had this experience with all these other industries. And, you know, as we’ve talked about this before that most of our clients do fall in the healthcare industry, but I’d love for you to talk about some of the things that you see that emerge in your experience when it comes to healthcare and non-healthcare deals, what do you see that is common?

Clint: Yeah, common themes. You know let me first say that our firm, for much of our 30 plus years, as well as myself professionally, a good chunk of that has been centered around healthcare. And that could be health care services that could be physician practice services, that could be manufacturing technology related to healthcare. [00:12:00] So we know that healthcare universe very well. We’re very passionate about that sector. And obviously it’s, as you all know because you are knee deep in that sector, too. It’s a vital part of our economy. Key themes that we would see, let me start with the key themes that spread across the healthcare and non-healthcare, because I think that’s an easy way to start. I’m going to start with the kind of the four legs of the stool that we often use analogy for companies. And we often, when we talk about this, we talk about this from a value standpoint. How is it you build value in your firm or your practice and those four legs are stability, profitability, growth, and then we usually will add in scale in there as well. And when you all talk about the broken window theory, I love it I’ve written it down. I’m going to have to go find that and attack that piece of content because I love it. [00:13:00] Those are the little things that ultimately lead into these bigger agriculture, more strategic value initiatives of stability, profitability, and growth and scale. And our view is in most client engagement is if you are able to tick the boxes on those kind of four key fundamentals, then you’ve probably built a pretty valuable organization and there will be value in the M&A or capital markets for that. So that’s kind of a healthcare and non-healthcare. Now, if you want to isolate healthcare, you know, those four fundamental principles are very critical. Now you really can look at the different elements of healthcare or different sub-sectors. So if you’re talking about the physician practice side of the fence, that’s going to be a people heavy sort of end of health care. It’s all about your providers and your support staff. And are you centering [00:14:00] your fundamentals on okay do we have this stable infrastructure in place to then grow off of, or if you’re talking about maybe the technology side of health care or have you developed a technology platform that drives recurring revenue and that you can scale off of and that you’re in an industry where you can explode that technology and really get rapid, rapid growth and scale. You know, we could get in a whole bunch of different sub-sectors and really that’s where my line of thinking starts to really get more granular. And hopefully I’m giving some good broad strokes.

Brad: Yeah. That’s great. Yeah, because it makes sense. No matter what business you’re in, if you don’t have those fundamentals, you’re not going to be able to grow it to the point of a decent or a decent return, basically.

Michael: Yeah. And you know, what occurs to me as I was listening to you is thinking that many of our audience may not be familiar with what an [00:15:00] investment banker does. And like all of us know what an investment banker investment banker is, but…  

Brad: They eat the crawfish in college.

Michael: Yes. And. They do what else? Talk a little bit about kind of an investment banker’s role working with the client and kind of how you ended up taking a client from wherever they are and then trying to execute on a strategy.

Clint: Yeah, a really good question. So, let me give the kind of textbook definition of what an investment banker does, but then when we talk about some things that are important that contribute to that. What we as an investment banker are advising clients on is kind of what I would say are three main areas. We’re representing business or practices or some kind of a business sale and a sale could be the sale of a hundred percent of a company, or it [00:16:00] could be a majority equity sale of a company. We represent kind of our second areas. We represent businesses in some kind of capital raise event. So that could be owners in need of growth capital, refinance debt, buy out a partner, it could be one of a hundred reasons. And then the third one, which admittedly for our firm, we probably spend the least amount of time on, but we’ll some of it as representing companies in an acquisition in my business, we call that buy-side advisory. Normally we Bundy group are spending better than 80 or 90% of our time representing an owner in some kind of sale event or some kind of capital raise event. And usually our end goals in those two circumstances are helping it or maximize value as well as find the best fit for them, whether it be a buyer or a capital partner. So that is kind of our legs of the stool I guess you could say in terms of [00:17:00] services. I will tell you that those are in their nature transactional. What we do, which I know the two of you do as well in a lot of our situations, we’re doing a lot of advisory work sometimes years in advance of when that actual transaction occurs. So I sometimes get the question are you in the transaction business and sort of my response is, well, yes I am. But that’s after all, they’re doing a whole lot of advisory before the transaction occurs, if that makes sense.

Michael: Absolutely. And so what I hear when I hear you talking about that on the advisory side is probably, you talked about those kind of four big areas and a client may not check all those boxes and you help them get where they’re trying to get on that front. Is that, is that a good summary?

Clint: That’s a very good summary. And to add to that and to give a case study. I’m a [00:18:00] case study guy. Sometimes it’s not uncommon for us to have a practice owner or business owner or call us and say I’m thinking of selling and may want to sell in the future. And we begin to learn more about the business. We take a look at financials, understand their organization chart. We might have a meeting with them or even with their management team, if they want us to have access to them. And then we come back and give them a kind of a read or analysis of, hey, here’s where we think your strengths are maybe some of your weaknesses. Here’s where, and a lot of times a big one, they want to know where do you think my valuation range is. Which we we’d have that covered very open dialogue with them about, and if there’s work to be done while we may not be the guys who roll up the sleeves and come in and help them do the work, what we can do is say here’s some improvement areas for you in order to build value up until the day you’re ready to then go realize that value. We will ultimately help you realize that value. But until then, we’re here to be kind of an advisor on where you can [00:19:00] solidify your value.

Brad: And audience members, I think the big takeaways to make sure you understand is we’ve talked about this in other episodes is when you do go to market, whether it’s a private offering or even a public one, you have to do the underwear drawer, you had to show everybody what’s going on and what your group does when you come along and partner with them, as you’re trying to get those four elements all in order. We obviously do it in the legal piece, but each piece is very important in that puzzle. So I think that is an important takeaway for the audience to understand. So let’s just kind of fast forward a little bit here. Let’s talk about one of your proudest business strategies or accomplishments that you have had and is beneficial to basically any industry.

Clint: Um, good question. I’ve got a lot, but I’m going to take a recent one if that’s okay. And I’ll preface this with saying that I couldn’t have accomplished this without a great team on our side, but that’s something we really pride [00:20:00] ourselves on at Bundy Group is a first class team. But we, at the end of 2021, we represented, we actually package three companies together. They’re based in Western US kind of stretching from Oregon, actually Washington state all the way down to Southern California that were let’s call it more kind of industrial services and energy and power related companies. We actually packaged them together and sold these three independent companies as one combined platform with the thesis being that these were highly complementary, not competitive, highly complementary companies. And the theme being that we could get them more value by selling them together versus separately. And it’s actually been a strategy we had talked about for a long time, even back when my father was still working, he and I talked about it. We finally found three great companies to kind of move [00:21:00] forward with and the thesis proved out to be true. And we sold the company, the three companies to a private equity backed strategic buyer. And we were very excited and proud of that and we’re actually going to be, it looks like we’ll be doing this again hopefully in 2022, including with some healthcare practices, which we think it’ll be very applicable to. So that’s a recent one.

Michael: I can’t even imagine how you go about finding those three, you know, in this case, three companies. Seeing those commonalities and I mean, my mind is kind of spinning thinking about how you get started on something like that, much less the challenges of executing.

Brad: Yeah. I was thinking that’s the opposite of the broken window. This is the, I’m going to make it happen.

Clint: Well, there was some complexity involved and I will say this is where having a key law [00:22:00] firm like yours in a deal will be critical. Frankly, if I were to do it again, I say what would be helpful is to have one law firm representing all three companies, because I think there’s just a lot of benefit to that from a synergy standpoint and it’s kind of like having one investment bank representing all the 3 firms. But for us, you know what I think, and this is a takeaway maybe for some of your viewers, practice owners, business owners is it’s actually easier than you would think in terms of originating the companies. Because if you talk to a lot of practice owners and you say, hey, do you know anybody who that is maybe a competitor or complimentary and you think, well, they’re firm, and they’re similar cultures and what have you, I think a lot of businesses owners out there would say yes, I actually do. And then if you extend that question and say, what do you think they might be interested in joining you in [00:23:00] this consortium sale concept? I’ve bet better than 50% of business owners out there and say answers to question one and two are yes and yes. So that’s kind of how this one started on our recent project.  

Michael: Makes total sense. That’s crazy. Well, we have just a little bit more time and I’d love just to hear from you, do you have any other stories you want to share or any final takeaways for our audience?

Clint: You know, I think the central theme, which I know you guys spend time at panels and conferences kind of preaching this and so do I is I would tell any business owner whether you’re going to consider a sale or capital raise, or what have you down the road or not. You should always be thinking of how do I build value in my firm? Because we always want our [00:24:00] clients to be in the best position of strength possible, because even if they don’t think they’re going to sell one day, that could change. Life happens sometimes. So I would always encourage any business owner always be seeking ways to build value and make that an annual, if not more frequently than an annual kind of exercise of evaluating.

Michael: That’s awesome. Well, Clint, I can’t believe our time’s already passed. I feel like we say this every time, that was really interesting. And we’re grateful that you joined us today. We’re going to go into a commercial and on the other side talk about some legal insights from our discussion. Thank you.

Clint: Thank you!

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Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host Brad Adatto with my cohost Michael Byrd. Now Michael, this season we’re searching for this common ground. Our theme is The Universal Language – Business. And, you know, that was awesome listening to Clint walk us through what his organization does and how they work with their clients. And I think for our audience, one of the big takeaways that I had, hopefully that the audience caught on is, you know, as he said, you have to have that four legged stool of doing a lot of different things, but getting there is not something that you snap the finger and it happens. There’s a long timeframe from when you make that decision to get your house in order with Clint’s group you know, where they’re like, hey, we got to come in here and get your house in order. That’s the same thing that we see from a [00:26:00] legal perspective, which is there are a lot of regulatory traps. We’ve talked about this and some other ones that if you are going to go there, that you have to get your house in order just to get yourself ready to go to the market. And as he says, we do transactions, but we’re more on the advisory side because that’s the buildup to get you at a spot to then sell you at a higher dollar value.

Michael: Yeah. I mean, it’s great. As we’re wrapping up, I am just almost cracking up that we started talking about the broken window theory at the beginning and he ends up talking about kind of the inverse of that. And you’re talking the inverse of that. You’re talking about getting your house in order and so I guess if you have broken windows fixing them, and I just would say that from a legal perspective, things that build value are the windows. Fixing broken windows. It’s having your policies and procedures in place. It doesn’t [00:27:00] matter if you’re healthcare or not, having your employee handbooks, having employment agreements for key employees, having in healthcare, having your compliance in order, having the right people doing the right things.

Brad: And I can’t remember if I talked about this in another episode, but you know, when we were on that panel in Las Vegas, we had those three different private equity firms up there and all they kept talking about was their biggest concern in healthcare deals was compliance is making sure that they’re looking at a compliant entity because of how much oversight that the government and the states are looking at these big PE firms showing up.

Michael: Yeah, absolutely. But yeah, I mean, I love it and I love the tie into the broken window and how that connects to both Clint’s points from a business perspective and what we just talked about from a legal perspective of, [00:28:00] as you said, getting your house in order.

Brad: Well, that’s all the time Michael we have today, and guess what? Next Wednesday, we have a special guest joining us to help kick off and celebrate the Memorial Day weekend. We have Jeff Houston, who’s an Army Special Forces, also known as a Green Beret. So we’ll have him in studio and ladies, definitely want to tune in because he’s a good looking boy. So you’ll want to see Jeff when he shows up.

Outro: Thanks again for joining us today. And remember, if you liked this episode, please subscribe. Make sure to give us a five- star rating and share with your friends. You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com. ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. [00:29:00] The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues.

ByrdAdatto founding partner Michael Byrd

Michael S. Byrd

ByrdAdatto founding partner Brad Adatto

Bradford E. Adatto