Andrew Sherman 11:07
But you remember from law school, right, we are taught, unfortunately, and I’m trying to change this in the class I teach at Georgetown, or the course I teach, we are taught to have our horse blinders on, you know, if it’s not a legal issue, I do not compute, you know, I will go by the four letters, you know, four corners of the document. I mean, the law is more fluid and more dynamic than that, especially if you’re in technology, where there are certain technologies right now, including, you know, AI, where there is no law, crypto when they’re trying to find the right area of regulation. I mean, many of the advanced technologies that drive our day to day are largely unregulated, or beginning to get regulated. And so the law is usually playing catch up to the technology into the entrepreneurship. And, you know, we need to take off the horse blinders, we need to be able to speculate and use our experience to give the best guidance we can to clients.
John Corcoran 12:06
And it used to be that businesses were just operating in their geographic area. Now increasingly, you don’t have to be Nike, in order to, you know, have people, team members and clients all over the globe. I mean, we’re that way. And we’re not a huge company. But we’ve got team members in different countries, different states, clients in different countries, different states. And it dear, you’re right, it does get very complicated quickly.
Andrew Sherman 12:28
Yeah. And, you know, tying it back to EO, eo is a big part of that I’m in having filed the articles of incorporation and 88. And seeing the organization grow from 20 ragtag founding members in South Padre Island, which Varun probably shared with you.
John Corcoran 12:46
Yeah. So I want to hear your version. Because I remember his version of the story was that he had organized the college entrepreneurs event, which he got an amazing group of people to come to a Steve Jobs was there and Mark Cuban and a bunch of other, you know, impressive entrepreneurs. And the way Verne tells it, he was inspired because he saw Steve Jobs in the back of the room, looking kind of, I don’t know, downtrodden, or something like that. I think he’d maybe left Apple at that point. And he felt like there should be some community for entrepreneurs. But I want to hear your version of the early days.
Andrew Sherman 13:19
Well, it’s a very similar version, I’ll tell it a little differently, since your listeners have heard burns version already. You know, there was a gap in the marketplace, there was this thing called ACE, the Association of Collegiate Entrepreneurs. And then you had to go all the way up to YPO. Well, YPO had some pretty high membership standards. Well, what about all the companies in between, and what Verne recognized and I give him full credit for is that collegiate entrepreneurs eventually graduate from college, and they want to be a member of something to they want the benefit of forum and events and education and networking, and, and, and, you know, collaboration, but many of them didn’t qualify for YPO. So he created this organization that could be you know, a bridge if you will, so, you know, many members do graduate to IPO. Some don’t some choose not to. But you know, the organization’s always had a little bit of a big brother, you know, little brother kind of relationship. And, you know, the the it took off s there are certain people like Peter Thomas in Canada, who were real catalysts for the organization’s growth. But the organization grew in some interesting ways. And it the two biggest chapters in the early days were St. Louis and Vancouver. You would think New York, Chicago rising, yeah, yes, it was St. Louis and Vancouver. Not they’re not exactly two entrepreneurial epicenters, but it was about personal catalysts, getting together and wanting all the same kind Names of programming that that YPO offered. But for entrepreneurs at their size and their stage of life,
John Corcoran 15:06
how did you get? How did you get involved in that early stage such that Verne or someone turned to you and said, can you file the documents?
Andrew Sherman 15:15
Verne and I became friends when he was still affiliated with ace, we met at a nice conference. Somewhere in my office, I’ve got the original, I don’t turn my computer and mess up the zoom, but the original kind of block from that 1980s Five conference, I think, was in Chicago. And we’ve been friends ever since. And so when it was time to do the legal paperwork, I actually had just left a firm and had my own law firm. And so I was very proud that I had filed the Arizona corporation but also independently qualified for membership, until I, you know, law until I wound up in big law, where I’ve been the rest of my career, but I at least qualified for membership and became a member of the DC chapter for a couple of years before going to big law.
John Corcoran 16:11
Yeah. And tell me about what the early days were like for you. Were you involved in the first couple years?
Andrew Sherman 16:18
Yeah, we it was very fragmented. There were no chapters, yet there were no regions, we were just trying to build critical mass and get the word out. Remember, these days, you want to start something new, you’ve got so many fantastic social media, digital media channels, back then, you know, was really pre internet, digital media, you know, if you couldn’t get traditional media to cover your events, no one had heard of you. So there was a little heavy word of mouth. Internet was in its early stages. And it really, the organization grew to your point about international, when people could connect with one another, no matter how choppy it may have been. And I do think the best days the organization is still ahead of us because of the intimacy that we can create, as the as the technology like zoom that we’re on together right now just gets better and better and better. I mean, I feel like I’m in the room with you, John. You know, I know that. Yeah. That I mean, it’s just going to, you know, get into homography, and more powerful computing, it’s just going to get better and better and better. And I think the EO community has grown and benefited from the advancement of technology.
John Corcoran 17:33
Now, eel as an organization is heavily decentralized. It’s got a relatively small centralized staff, the corporate headquarters, and a lot of the power remains in these local chapters. It’s really kind of fascinating in that sense, do you recall was that a deliberate process decided that it was going to be like this, because you’ve got a guy like burn who’s still around who’s around speaking. But this is not like his own personal Firestone. It’s an organization that’s really breathing, and it was
Andrew Sherman 18:06
never intended to be anybody’s personal finance. And really, at least my recollection, you have. My role is as outside general counsel to EO global. So I don’t profess to be counsel to the chapters themselves, they have their own articles of incorporation. It’s a little bit like a quasi franchise. So you know, the the LA chapter, I think you were a member or Northern California. Yeah, that chapter has its charter and that charter has to be consistent with the general guidelines, that’s provided by EO global. And there’s a chapter agreement that governs the relationship. The bylaws need to be submitted to global for consistency with our guidelines. So it feels a little bit like a franchise, the chapter makes a lot of its own decisions and gets a certain portion of the dues remitted to it that local members pay, but it was never designed in Norwood. Nor would the community tolerate because if you think about it, it’s, you know, it’s a community of entrepreneurs. Right. So yeah, they would, nobody’s gonna tolerate heavy heavy governance, you know, from Alexandria, Virginia, they’re gonna want as much pushed out into the network as you can possibly have. Yeah, that makes sense.
John Corcoran 19:30
The other thing I think is fascinating about it is a community of entrepreneurs, capitalistic, you know, in favor of building businesses, entrepreneurs, and yet it’s a nonprofit, right? It’s a nonprofit that is governing the entire entity. I just think that’s fascinating. Yeah,
Andrew Sherman 19:48
I mean, in that way, it feels sometimes more like a trade association. You know, the National Association of Manufacturers is also pretty darn powerful. Well, you know, it has a big voice in Washington, but its members are the largest manufacturers in the world, you know, accounting for billions and billions of revenues. The US Chamber is similar to that. But you’re right, it’s just probably better to be taken offline as the, you know, the way it evolved, might have looked differently. If someone had a crystal ball and could have seen it grow to the level that it has.
John Corcoran 20:28
Well, so hard to anticipate, right? I mean, yeah, so there’s, like 16,000 members now. I mean, I imagine never in your wildest dreams, did you imagine that it would be as big as it is now.
Andrew Sherman 20:39
We, they, you know, initially, there was a couple dozen members, half of which had not paid their dues. And I don’t know, you know, I’ve tried to stay in touch with as many of those founding members as possible, but it’s, it it is, other than my 38 year marriage, and my two children and our grandchild, it is definitely my proudest professional accomplishment. I’ve never been involved in anything quite as dynamic and fluid and exciting. And just a source of, of authentic Glee, you know, for lack of a better term as as the role that I’ve been privileged to play in any Oh, that’s great.
John Corcoran 21:22
Let’s shift to another topic, I want to ask more about m&a, mergers and acquisitions, which is your area of expertise. We’re recording this in May of 2023. The last six months have been kind of a strange economy, kind of hard to predict what’s going on out here? What are you seeing in the marketplace in terms of businesses buying other businesses, businesses selling themselves?
Andrew Sherman 21:50
So a couple of things. Number one, even though we were going through COVID, will the worst pandemic in the history of mankind 2021 and 2022, were very kind to the capital markets. I mean, you had almost a perfect storm. For middle market m&a, you had low interest rates, you had, you know, sellers of businesses adopting YOLO. And, you know, they might have been waiting till they were 65. But now they’re going to sell at 55. So you had massive amounts of cheap capital, you had all these quality businesses, that we’re rethinking their lives and their purpose, you have people literally dying, who were at the homes of companies where the company needed a new home, you had, you know, just incredible amounts of wealth transfer taking place. And of course, artificially low interest rates, you had PPTP propping up businesses. I mean, I’ve never seen anything quite like it, you and I were trained to think, Oh, my God, there’s a weak economy and, and the, the whole world’s going through a global pandemic, like, no one will even need lawyers, I mean, we’re just gonna be sitting around waiting for it to come back. And the opposite was the phone was ringing off the hook. So here we are now is the pendulum swings back into a more normal set of conditions. And suddenly, you know, debt is not so cheap. And, you know, there were some people who got into private equity that really didn’t have very good operating experience, and maybe jumped into certain acquisitions that they should have, you’ve got the public markets, slowing down in terms of IPOs and spec transactions and those types of things. And if you look at it in its totality, you know, the market has not stopped, but it has definitely slowed. Now, that’s not good news. If you’re a seller that was gonna hoping to be grossly overpaid, when the buyers cost of capital goes up. They can’t pay as much for the business as terms of a multiple or whatever the Indus inicia value is going to be, but it’s still a pretty strong market. And I say that because number one, the strategic buyers, which are different than private equity, they still have cash stockpiles from money they raised at with with cheap debt over the course of the last couple of years, plus, many of them their stock prices have gone up. They’ve done secondary offerings, they can get money when they want to do a deal. Private equity model is a little bit broken. I wouldn’t say it’s all the way broken. But a deals got to be really compelling. Now in terms of its economics, for private equity to act, because private equity is number one, lacking that cheap debt. Number two companies have failed. There’s been a lot of post post closing disputes and number three, they don’t have the liquidity themselves. Just remember when private equity buys a company, they sprinkle their magic fairy dust on it and then they sell it again in 18 months. You know many of the firm’s Not all of them, well, less than two months that that’s not ABS so that that the WD 40, that greased that cycle has kind of come to a halt. Now, especially PE firm, that’s kind of a hybrid with good operators and good platform companies, strategic buyers, those are still very much alive. And it’s also a bit industry specific right now, you know, if you’re still in a hot industry like AI and parts of crypto and blockchain and healthcare and some other sectors that continue to do well, I really haven’t seen a slowdown in those areas. You know, if you’re trying to sell your defense contractor company, and we’re not sure what’s going on with the budget, ceiling and everything else, it might be a little bit tough to get somebody to overpay, there will always be a market to underpay, there will always be a market to fairly pay. But if you’re a seller hoping to get overpaid, I wouldn’t be too optimistic right now, except in certain verticals, but and then I’ll take a pause and even a sip of my water. It’s a wonderful time to be a buyer if you’ve got cash.
John Corcoran 26:13
Right, right. And that’s actually what what the journey we’ve been on as a company this year has been evaluating businesses to buy but will we The problem we’ve run into, I’m sure you’ve seen this as well is that it’s an expectations issue. Because companies, they’re using fresh memory right now, anyone who wants to sell their company is that six months ago, it was some huge multiple, and they want that. And now it’s like sorry, that’s not what the going rate is.
Andrew Sherman 26:39
I mean, it’s a it’s a great time to be a buyer. This is filling in some missing strategic puzzle pieces. But you nailed it, John, you can’t bring two parties to the table, if the expectations are unreasonable. And part of our job as lawyers, or accountants or investment bankers, is to see if we can bridge the gap creatively. You know, it’s not that the seller doesn’t deserve some upside. But they might have to take more of it in a contingent payment or an urn out or deferred payment, or even a royalty license on their IP or something like that. Just last night, I was watching Shark Tank. And this father son team comes on to present to the sharks, and the guy is very modest, very quiet. And, and he finally admits to the sharks that he was the inventor of Gorilla Glue. And he sold Gorilla Glue pretty early on. And Kevin, of course, jumps in and says, Well, I hope you got a royalty. And he said, Yeah, I did. And you can tell that if he’s still getting royalty payments on inventing Gorilla Glue, he’s probably doing all right for himself. So just because there’s a deferred payment, doesn’t mean it’s bad, or there’s going to be a default, it just means that you know, you’re going to have to adjust your expectations a little bit and you may not get all of your consideration all at once. Which by the way, if if the buyer is reputable isn’t a bad thing. From a tax planning perspective, it spreads that that income out over over the years,
John Corcoran 28:12
right right now, you’ve written almost 30 books, Mergers and Acquisitions from A to Z, Franchising and Licensing, and Raising Capital. Go to Amazon, look for Andrew J. Sherman. You’ll find all his books there. If you were to write a book right now, and I’m not saying you are although you probably are, what would the topic of that book be given everything you just talked about? And what is the zeitgeist right now in the m&a world,
Andrew Sherman 28:38
You’re gonna be a little surprised. So in 2008, I think it was, I wrote a book called Road Rules. And I had written at that point, 16 business books. And I wanted to write a book about life
John Corcoran 28:52
And be the truck, not the squirrel.
Andrew Sherman 28:56
Out the squirrel learn the
John Corcoran 28:57
Essential rules for navigating the road of life.
Andrew Sherman 29:01
You nailed it. So that was a fun book for me because it took me off my business game a little bit. And I got to write a fair bit about life and my own life philosophies. And I really wrote that book for my two kids, hoping that if I’m not here, one day, they’d be guided by some of the core principles that guide me. It’s been on my to do list for 15 years now, to write a sequel to that book for entrepreneurs, you know, aim specifically, kind of road rules for business owners, and have the same 12 set of rules but don’t apply them just to the general citizenship but specifically to business owners. So I think I think that’s probably going to be my next book. I don’t know the timing of it yet. But I’ve got a lot of pieces of it written fragments, posted notes. You know, when I get to that book, here’s something I want to I want to put in I think it’s also you know, I’ll be 62 This fall, technically, that’s not that old, but it feels old some days. And I, it’s the kind of book I would want to get as many of those thoughts down, you know, what’s it like to interact with, with entrepreneurs for 35 years? What? What are the best practices? You know, what, what are the are the true rules of the road in building a successful entrepreneurial company? So, I, I may vary that answer. And if you ask me again in six months, or put me back on the show, but that’s where my head is at the moment. And I
John Corcoran 30:32
hope this is me speaking selfishly, but probably on behalf of a lot of other people to help you make it a podcast to because it can be both a book and a podcast. And I think that would be amazing.
Andrew Sherman 30:42
I appreciate that my daughter is, is in the digital media business. And she’s leaning on me to expand my digital media assets. So I think she would, she would very strongly agree with you.
John Corcoran 30:54
Excellent. We’re getting a little short on time. So I want to ask you a question I ask a lot of my guests, which is just given everything we talked about given the state of the market right now, what do you have your eye on? And what are you excited about in the world of entrepreneurship? You talk to so many entrepreneurs, you advise the EO global board? What are you excited about?
Andrew Sherman 31:18
So I was excited about 12 months ago, by how few of my clients failed during COVID. You know, I have a lot of restaurant and hospitality clients, some of their revenues dropped almost zero. They’re still around today, they didn’t file for bankruptcy. Yes, there was some government intervention that helped them, of course, but for the most part, I was excited with how they pivoted around a global crisis. So now, hopefully knock on wood, that global crisis is over or behind us. Now, are they going to pivot again, we have a huge pivot coming around the future of our workforce. It’s not just post COVID work from home, it’s not how to maintain engagement of your employees and your networks and your circles of influence. It’s not just automation, and AI, and robotics, it’s all of those things. I mean, you think about it, significant industries, will need to pivot in a big way, again, in 2024 2025, hopefully not because we have another pandemic or anything coming. But because of the impact of technology. The latest data I saw is almost a billion people, their jobs will be irrelevant in the next couple of years. next couple of years, not 2070. I mean, we’re talking 2027 2028? How are we going to first redeploy that workforce into things that can be productive? How do we avoid having a billion homeless people who don’t have jobs? What can entrepreneurs contribute to this complete transformation of the workforce? I am a glass half full kind of person, I think we will figure it out. But it’s going to take a lot of work. And there will be business models we’ve never seen before pricing models and service models we’ve never seen before, because of this transformation of the workforce. And, you know, I will tell you people with ASQ, after the names are not going to be exempt from this. You know, sure, I agree. There are already portions of our profession that have become irrelevant through AI and big data and electronic discovery. And there’s going to be more down the road. So
John Corcoran 33:40
you mentioned you mentioned those things. And And the funny thing was, I was gonna mention that when I graduated from law school, which was 15 years ago, many of my classmates went into, you know, a room full of boxes of documents, and sat there reading over these documents, and trying to find some tiny little phrase. And now of course, you know, that’s gonna happen. And by
Andrew Sherman 34:02
the way, let’s be transparent in your pocket. They were paid six figures to do so.
John Corcoran 34:07
Yeah. Well, and it looks led, of course, to very high costs, right? Yeah.
Andrew Sherman 34:12
And I don’t I think there’s a general intolerance and unwillingness to to let that ever happen again, and I don’t think it will. So I get a little bit nervous, but also very excited about this transformation of our workforce that’s coming. We’re already we’re probably in the first or second inning of it, but we’ve got a baseball game that may go to extra innings. And I think that within that chaos, rescue opportunity, and that’s really, you know, if we’re going to wrap up the podcast, that’s really what entrepreneurship is. It’s people who are entrepreneurs are comfortable in the chaos, and they find opportunity in the chaos and they go places that other people won’t go They’re just too afraid, or unwilling. And the thing I admire most about the 1000s of entrepreneurs I’ve met and interacted with and had the honor of representing is there. It’s not that they’re fearless. It’s that they don’t let fear block, you know, the chances and the things that they, you know, they’ll take a mitigated risk to unlock an opportunity that the average person is not willing to do.
John Corcoran 35:27
Yeah, well said. And that’s a great transition segue to my last question, which is, you know, I’m a big fan of gratitude. I’m a big fan of expressing gratitude, especially publicly to those who’ve helped you along the way. Now, we mentioned Verne Harnish. We’ve mentioned some other names. You said Peter Thomas. Before the recording, we were talking about Sean Magennis, mutual friend who has been in the real world in the YPO. world for many, many years. Who out there, would you want to shout out publicly and just acknowledge them, thank them for being a part of your world over the last 30 plus years of practice.
Andrew Sherman 36:06
This is hokey, but I want to thank my wife, Judy, I want to thank my son Matthew and my daughter, Jennifer and I, they are the inspiration to everything I do. That everything I’ve ever done that I always wanted to give them a life differently than my own. And I think I could finally say that, that that I did that. But everything goes back to them. There are You’re right. Hundreds of people I would I feel like the Academy Awards, I would omit too many people. If I started naming names. Verne has been a dear friend and somebody I, I would walk in front of a train for and I hope he knows that if he’s listening to this podcast, but my wife and kids are everything to me. And it’s every day I get up and I’m thinking, you know, I take nothing for granted. And I gotta get out there and make some things happen. I am grateful to the clients and referral sources that have put their trust in me. Because that is a privilege. And we’re not taught that in law school. We should be you know, when, when a client engages you it’s a privilege. It’s it’s a privilege to represent them. And it’s a privilege that they put their trust in you. And I still I know I sound old school, but I still take that very seriously.
John Corcoran 37:26
Yeah, that’s well said, Andrew. I will point everyone and we’ll link of course in the show notes to your Amazon page. You got, as I said about 30 books on there. You also practice your partner with Brown Rudnick as well you got your LinkedIn page, where would you want people to go to get in touch with you if you have questions.
Andrew Sherman 37:45
Anyone that can wants to contact me and I’m happy to take questions follow up to the show. John, I think you did a fantastic job hosting you already know that. All my contact information is on the Brown Rudnick website. We’re we’re a very entrepreneurial firm with a great team and we’d love to help in any way we can.
John Corcoran 38:05
Excellent. Andrew, thank you so much.
Outro 38:07
Thank you for listening to the Smart Business Revolution Podcast with John Corcoran. Find out more at smartbusinessrevolution.com. And while you’re there, sign up for our email list and join the revolution. And be listening for the next episode of the Smart Business Revolution Podcast.