The Art of Deal-Making and Business Growth With Jay Jung

John Corcoran 8:36

What drew you at what point did you decide that, you know, I want to go out, I want to start my own advisory firm, and we want to be able to, you know, serve the smaller companies, I met him many of those companies, you know, are not able to take advantage of you know, working with a, you know, a firm like a Goldman, which I imagine has much larger clientele generally. 

Jay Jung 8:58

Yeah, so when I was at Goldman, the last few years of my tenure there, I was working on great deals, I was working on the Yahoo deal with Verizon, I was selling mule software to SanDisk. But I also carved up about 10-50% of my time to meet startups. And back then, you know, a lot of these natural language processing startups and blockchain startups were really hot. I got to meet a ton of them. You know, having that kind of Goldman they impart gives you access. 

John Corcoran 9:27

And I really and by the way, by the way, are any of those are household names now that you talked to when they were tiny? 

Jay Jung 9:35

I’d say, most of them actually got acquired early on even before you got to the current kind of large language model model boom. But yeah, so you know, I enjoy talking to those founders. i And but at Goldman people will kind of have jokes like, why why are you doing that? Why are you spending time? Have you ever made any money there and that’s not what’s gonna get you promoted. And it was one of those things that kind of got me thinking about Maybe Maybe I do something that I really do enjoy. Because you know, it is a tough environment, it is a grind. And that kind of led me to think maybe there’s an opportunity to advise startups, leveraging the toolkit that I’ve learned that last, you know, decade plus working at some great rate firms. And that’s kind of what led to what eventually became Embarc.

John Corcoran 10:24

Yeah. And was the idea from the beginning that we would switch from a success fee model to an hourly fee model.

Jay Jung 10:32

In the beginning, I tried all different business models. I tried a project based model I did, I did look at some contingency models. I didn’t really like the hourly model, because I always thought, well, I’ve seen lawyers work hourly. And I always thought, Well, what keeps me from working slowly? What keeps me from just building more hours? Yeah. People would know anyway, long story short, after experimenting with a variety of different models. You know, lawyers are very smart. There’s a reason they may be you.

John Corcoran 11:02

I was a lawyer before, but I am. Yeah. So there’s a reason. 

Jay Jung 11:05

Yeah, There’s a reason those smart lawyers chose to build hourly. And so after a lot of experimentation of reinventing the wheel, I went back to the tried and true model of billing hourly.

John Corcoran 11:16

Yeah, of course, it doesn’t always work out in your favor. Well, it depends on how you define favor, right. But I know that if you had some clients, where you had a successful B model, you would have walked away with a lot more money in your pockets. But talk a little bit about that. Those types of results where that has happened?

Jay Jung 11:35

Yeah, you know, again, it kind of goes back to unit economics. I think if you build hourly, you might not have a huge home run like an investment bank does. But I think you can build a more consistent and stable business. And the big difference is, if you build only on contingency, you don’t know where you’re going to make a revenue. So that means a typical investment banker has to chase 1020 deals, and when one hits, that’s going to pay for the quarter, or the happier to hit that pace of the year, but you don’t know where you’re gonna get your revenue. 

So you got to work on a whole bunch of deals. For us, it allows us to work on a handful of opportunities and really give our best on those opportunities. Because we know we’re gonna get paid. So it’s a much more stable business. I would say the technology is instead of selling big ERP projects and mainframe computers, we’re gonna go for a SaaS model where, you know, it’s more consistent building consensus, consistent service, and not shooting for homeruns. And I think the flip side of that is also it helps with a team, the team doesn’t have to work at 100 hours per week, we have a much more balanced workload and consistency, that’s predictable. So for those reasons, I thought the hourly model worked better for the middle market and startups.

John Corcoran 12:58

What were some of the challenges for you starting it up in the early years of the business, you know, going from working in Goldman working at McKinsey to now running your own company?

Jay Jung 13:07

Yeah, I think, um, needless to say, business development and sales was hard. But I think that’s a problem that every entrepreneur faces, I say, aside from that obvious one, hiring was very hard, because, you know, finance people in general were very risk averse. And people generally want to work at bigger investment banks, public companies, fortune 500 companies. And it’s very hard to hire for, you know, what wasn’t originally a one person shop. And then we were a remote even before COVID. So when I interview and say, well, we don’t have an office, we’re all remote. And you’re going to be employee number two, or employee number three, the look on their face was more like, Is this a real company? Wasn’t very hard to hire. In the beginning, and not to mention, we can’t pay like a traditional investment bank, or whatever. 

John Corcoran 14:06

So, was it harder? It sounds like it was harder to recruit people to come work for you than it was to get clients? Like did the clients have any hang ups about the fact that you were a remote advisory firm?

Jay Jung 14:20

I think in the beginning, there was a little bit of reticence, and some people would ask, Oh, are you going to be on site for like at least two or three days a week and we would just say that that’s not what we do. But given that we work with smaller businesses, there was a little bit more flexibility there.

John Corcoran 14:37

Got it, got it. And tell us about one company you worked with. It was an IT services company that you worked with . Well, they were thinking about selling. They ended up getting a healthy offer of 30 million bucks or something like that. He negotiated it up but they ended up changing just through that process and decided to pursue a different avenue and ended up getting better results from it. Can you take us through that one?

Jay Jung 15:00

Yeah, this was one of our earlier IT services clients, I was introduced by a mutual acquaintance. And when I met them, they already had, like an offer from a couple of private equity firms, I looked at the offer . It was easy to enhance. And so they engaged us, we negotiated the offers and made it much better. And then they chose one and kind of pursued that down the path a little bit. But ultimately, they decided to walk away from the deal, even though we almost negotiated everything. And we’re good to go. Mainly because they realized that they weren’t ready to sell. And they found going through the whole process, they realized, wait a minute, like private equity is nothing special we can actually do our private equity does, which is buy smaller companies at lower multiple, add that to our business, our business grows and gets a higher multiple, and we’re getting that valuation arbitrage anyway. 

So they turned around and said, You know what, we’re not gonna do the deal. And we’re actually going to do our own private equity playbook. And so we helped them do two things. One, we often raise debt. So even though the inside of the whole company there to raise debt, took some money off the table, you know, bought a house and whatnot. And then we helped them find opportunities to acquire and then raise more debt to acquire that business. And then, shortly after that, like more private equity buyers got interested, and we ended up running another process to sell the business. And so I’d say All in all, around 18 months later, we sold for almost $50 million. 

So it was a significant value, lift. And I really love that case study because it kind of shows what Embarc can do. We’re very agile, and it’s not just about sell, sell, sell, sell, sell. But we can actually say, Alright, I’m gonna change your mind. We’re okay with that, we can help you in a different way. And we can help you take some money off the table, we can help you do an acquisition, we can help you sell the whole thing at a huge value uplift. And it doesn’t cost you an arm and a leg.

John Corcoran 17:02

So yeah. I’m curious, you said when you got when that IT Services Committee came to you. And they already had some offers from private equity to sell. And you said that the offer was easy to enhance? I think that was your words. Do you have a process that you go through? When you look at an offer? Obviously, there’s the multiple there’s the total dollar amount, but what’s your analysis? Like? What do you look at in what you ‘re looking for when you’re looking at an offer?

Jay Jung 17:32

Yeah, so I think I have the benefit of kind of gotten through this process multiple times on the sell side. But also we work with private equity firms on the buy side. So we know how to think about it. And normally, on the sell side, when we look at an LOI, there’s probably about 10 to 15 items that we want to look at. It’s not just a headline value. Also, you know, the structure of the terms, escrow all that and use some of these allies, because it’s usually their first offer, just at first glance, there’s already a ton that we think we can go back and request and you know, they will provide they will make concessions. So in that sense, I think having the benefit of looking at so many of these, it was easy to negotiate upwards in value.

John Corcoran 18:21

Yeah. And what’s your approach towards managing the interpersonal elements of these things? Because, you know, I imagine a lot of times you have a client that this is their baby they’ve been building for for many years, most of their net worth is tied up in this company, there can be a lot of anxiety around it, how do you manage those, like a moat, the emotional and psychological elements of the process?

Jay Jung 18:41

And that’s why I read so many books, I see the stat you have a massive stack over your shoulder? No. Well, I think an investment banker or m&a advisor inherently has to be a trusted adviser. And I kind of joke that going through m&a, m&a process, especially a sell side, very much entails part to being a part time therapist. And sometimes that’s their therapy between the two co founders, sometimes it’s just between us with one of the founders that may want to sell one day may not want to sell the other day has anxiety over like, why is the buyer not responding? Or why is the buyer not giving me this? So there’s a lot of emotional factors. And I think we do have to kind of play the role of therapist more often than not, yeah.

John Corcoran 19:33

There’s another case study that we were going to talk about, a recent deal that you had. It was a company that tried to sell twice with an investment bank. It didn’t work out, they got introduced to you and told you to take us through that process.

Jay Jung 19:48

Yeah, so more recent teal, where like you said it’s actually a sizable company, owned by a husband and wife. They Want to sell the business. But it didn’t work out the first go around. I think the first goal was to be an investment banker. It didn’t work out. And then they said, You know what, we can do it ourselves. And they gave it another goal by themselves that didn’t work out. And they had interested buyers, they just couldn’t consummate the transaction for one reason or the other. 

And so then we got in touch through their legal counsel who we had done some deals together before. And they hired us. And, you know, we ran the process. And again, I can see there were a lot of complexities and nuances in the business. And you know, we had the Bennett, we have the luxury of being able to spend a lot of time on a specific deal, since we’re not choosing 10 deals at the same time. Long story short, we’re going to prop we run a process. And I think we got almost like a dozen plus bids. And a handful of them, four or five of them, were actually significantly higher than what they were expecting.

John Corcoran 21:02

And what do you attribute that to?

Jay Jung 21:06

Well, I think, if you think about it, what the same facts tell stories sell. And if you’re out in the market to buy a company, and you get a sim from an investment bank or a broker, chances are it’s 5080 pages, it’s a bunch of slides, and you go through it. It’s called a confidential information memorandum. So it’s a bunch of facts, there’s no real story. And I think what we as a firm do really well is we take the facts, and then we actually have a shorter deck. Typically our decks are maybe 15 to 25 pages, but it’s all about weaving a story. And I think that really sells well with the buyer because they understand what they’re getting. And I think that allows the people that are really interested to invest to stretch a little bit further. And that’s what matters in the margin, who can stretch a little bit further, I don’t need all 12 bits to stretch, I just need three or four bids stretched on the margin.

John Corcoran 22:10

And is that ever hard with your clients, the companies that are looking to sell to convince them of the story? Or did they place their trust in you and say, you know, you tell our story, the way that you think is most compelling to the buyers?

Jay Jung 22:23

Well, it’s an interactive process. For every transaction, we probably spend about six to eight weeks together. I’d say the hard part is getting a lot of the raw data out from them. Because most companies don’t have a robust KPI tracking mechanism, a lot of their numbers are not clean. So we have to once we get the data together, and then we hear their story, their positive story, I think that where the magic happened is where you can take the story, weave in the numbers together. 

So it’s kind of like a story told in data. And that’s what really resonates with say, a private equity or a strategic Corp debt buyer, because they’re very, they’re all finance people. Right? So numbers, numbers oriented stories are what sells really well. And I think that’s where we make a big difference. And usually when our clients see that, because it’s still their story where we might sprinkle a little bit of pixie dust on it. You know, they’ll, they’ll buy into it. And it’s a collaborative process.

John Corcoran 23:27

Now, I know when these bids came in, they had an interesting reaction. You want to share that? 

Jay Jung 23:32

Yeah, so it was probably one of our highlights, and this is why I really do this job. So we got over a dozen bids. We went through it with them. And always ask, ” Okay, any questions? And it was a little pause. And the one question that the business owner asked was, why do they want to pay so much?

John Corcoran 23:54

You must absolutely love that.

Jay Jung 23:56

I’m always prepared with a Q & A and try to get ahead of it. But I didn’t have an answer for that one. Because your business is great.

John Corcoran 24:06

Well, and you told the story in a compelling way backed up by data.

Jay Jung 24:10

Yeah, well, so what do we do? 

John Corcoran 24:13

Yeah, that’s great. That’s great. Well, Jay, this has been great, really interesting diving into your story about Embarc and excited to hear what happens with you in the future. Where can people go to learn more about you and the work that you do?

Jay Jung 24:26

Yeah, so I’m pretty active on LinkedIn. I think my LinkedIn name is Jay Jung, but it’s a LinkedIn/embarc. E m b a r c. And then our website is

John Corcoran 24:40

Excellent. Jay. Thanks so much. Thank you, John.

Chad Franzen 24:47

Thanks for listening to the Smart Business Revolution Podcast. We’ll see you again next time and be sure to click Subscribe to get future episodes.