WEBVTT
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In the world of business, not all deals are what they see.
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Fortunes rise, empires crumble, all with a stroke of a pen.
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Mergers, acquisitions, and hostile takeovers.
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Welcome to Mergers She Wrote, where we examine strategies and stories behind the biggest deals in business.
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Because in MA, the real risks are the ones you don't take.
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Let's get down to brass tacks.
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We have a special episode today of Merger She Wrote.
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I'm sitting here today with Chesney Reeves, Paralegal for Nocturnal Legal, and she's going to be talking about her history of rain cow horse riding and how that has a lot of similarities with mergers and acquisitions and the work that we do together at Nocturnal Legal.
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Chesney, thank you so much for being on today.
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Thank you for having me, Paloma.
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It's been so much fun to merge into this world from the legal world, and there are so many similarities with the horse world.
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I'm excited to talk about it.
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I am too.
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So let's jump right into it.
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Can you tell the listeners, for anyone who doesn't know what cow rain, cow horse riding is, can you describe what that is for someone and what's the competitive nature of it?
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Yeah, absolutely.
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So the first thing I always ask when somebody says, What do you do with horses?
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I ask, have you seen the TV show Yellowstone?
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Because it's not always a yes, but a lot of times it's a yes.
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And we do very similar events to what you see on Yellowstone.
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There are horses that are sliding in the dirt, um, sliding 30 feet, um, working cows, taking cows down the fence, maneuvering cows through.
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It's a set pattern and you're judged on the pattern, but there are a lot of variables that go into it.
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It doesn't look like the same thing all the time, especially when you have two live animals that you're trying to get into one sport.
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That's neat.
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How did you start getting into that?
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There's so many different disciplines when it comes to horse riding and horse competitions.
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How did you choose that discipline?
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Um, yes, there are a ton of different disciplines.
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The rain cow horse spoke to me in college.
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I showed competitively at Texas Tech University on a rain cow horse team.
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I call it the ranch horse team, but it's um you show in rain cow horse events.
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And I uh learned through college that you you could start from the bottom.
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Prior to that, I'd shown in rodeo events, which is similar but um a little different, and started from the bottom with very little knowledge of that event in college, worked my way up through the different levels, and now here I am out of college and learning all the time still, but also just feeling like this sport was what I was meant to do for sure.
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It's really neat.
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I've seen videos on your Instagram of all you doing this sport, and I think it's really fascinating.
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So there's a lot of similarities between helping people buy and sell businesses and the world of buying and selling horses.
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And so just jumping right in here, thinking back to your first horse purchase, what were some of the key considerations you had and how did you decide it was the right investment?
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So from a young age, I was able to level up to different types of horses.
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Um started out as a with a pony, very small pony.
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She was honri.
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And then I started getting more and more competitive.
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Um, my dad's famous, famous line has always been, you can't keep them all.
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So that was number one and very integral in my upbringing was that in order to get a better horse to be more competitive, you had to sell the one before from a financial standpoint and just the logistics of we didn't have room for all of them.
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And so, with that first horse purchase, my first major purchase, I was 13 years old, and I called one of the industry leading at the time barrel racers, and she had this horse listed for sale.
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I cold called her, my parents weren't even home.
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I had a list of questions written down as far as what I wanted to know about that horse.
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She answered them.
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She was great to work with.
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I have no idea if she knew at the time how old I was or what my background was, but she was um very good about helping me through that process.
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And then I presented my notes and everything to my parents later that day, and they were like, What did you do?
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What are we doing?
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And we're this this horse was in Texas as well, and I grew up in Nebraska, and so they're like, You want us to go to Texas drive you to Texas to look at this horse?
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I'm like, Yeah, I think it's a great like I don't I honestly can't tell me tell you what spoke to me in that moment, but something did and it worked out, and we ended up going to Texas, um, met that lady uh individually and and rode the horse right there and we hauled him home.
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So it was a great experience for sure.
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I think, you know, as we go through this conversation, I'd love to weave in, you know, the similarities here, and also to educate for the listener that's thinking about their role in buying and selling a horse and how there's similarities in our business world and maybe ideas that they can borrow from the business world and vice versa, ideas we can borrow from the horse world in the business world.
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So for starters, I like that your first horse, you were like, it's in a different state.
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I don't care.
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Let's go drive there.
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Um there's so many ways that you can buy a business, right?
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And it doesn't always have to be in your backyard.
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But to your point, the horse is mobile.
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So I like to think about it like if you were gonna buy a business that was in another state and you were planning to relocate it to your home state or maybe work it remotely, right?
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You have to be sure of what you're purchasing, which means you have to physically go visit the business, like you visited the horse.
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And so I like this idea of there are no boundaries potentially, because I do think a lot of people limit themselves when it comes to buying a business and thinking only locally when there's so many opportunities, especially post-COVID, people being able to work remotely or do things more remotely.
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Um, so when you got to Texas on this first horse purchase, like what were the deciding factors?
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What do you do?
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I guess looking back at your first purchase, because some people buy and sell businesses habitually, and and there are people potentially listening that are like, how do I start buying and selling businesses like people who buy and flip houses, right?
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Because it's a potential way to get into a business, make it better, flip it, move on to the next one, kind of like a renovation, res rehab recycle.
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Um, what did you learn in your first horse purchase, the one down in Texas, that you got down there?
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What did you do to assess the situation?
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What did your parents do to assess it?
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Because I'm sure they knew more about the process than you did at that time.
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And what does that look like now, now that you're a seasoned veteran of looking at horses to purchase and whether it's a good investment?
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I think just shooting for the stars or shooting from the hip was the first thing that I did right.
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Um, and and going after a reputable person, because a lot of times in the horse world and in the business world, you don't always know what you're getting yourself into.
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But this woman had so much reputation and had and had so much success on her own.
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I think that that's what allowed my parents to really hone in on this and say, it's worth a shot.
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We'll go down there and see.
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Um, and then when we were actually physically there, again, there was it was kind of an awe experience because this would be in my time and age, this would be like a comparison to Tom Brady, meeting Tom Brady in the horse world.
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And um everything went so well to where really there weren't any moments that we looked back and go, is this worth it?
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And the biggest thing starting out was I knew my budget in mind, and this horse was within the budget.
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So I think that's where people in the horse world, we get starry-eyed and we get um excited about something, and then the nitty-gritty comes down to it, and you're looking at a horse that might might be two or three times your budget, and you're in love with it before you even get to actually realize like, okay, this is not gonna work for me.
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And there's a lot of emotion and there's a lot of um work that goes into that deal on both ends between the seller and the buyer to uh ultimately end up and and go home with nothing.
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So well, and I think that too, I mean, from a similarity standpoint, people look at businesses that are listed for sale either on a listing website or that's on a broker website, and they haven't potentially done the financial due diligence to decide whether they have the means or even the credit worthiness to go and get an SBA loan.
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And I mean, we've seen in the work we've done together, like unfortunately, sometimes people get to the finish line and the and the bank won't make the loan happen.
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And so the whole deal falls apart.
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And so I think to your point, sticking to a budget, whether it's buying a horse or buying a business, you've got to know your financial capabilities, but also be realistic.
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I mean, I can't tell you how many times I've seen people buy businesses where you look at the monthly loan payment and you're like, boy, I don't know if that's possible for what your business is doing, right?
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And so I think other people too, they forget, sure, you might be able to get a loan, but can you make those monthly payments on it from the revenue of the business?
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So I like that you brought that up.
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On kind of a similar note, you know, having now gone and seen horses and bought and sold them historically, do you think you go into it with a different perspective?
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Are you are you more or less skeptical of the horse that you're assessing?
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Definitely more skeptical, um, especially as I prefer to buy the younger ones, the ones that necessarily haven't been in the arena yet, haven't gone through intensive training because I like the projects and I like to put my own stamp on them.
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And so as a young horse, there's not a performance record to look at, say in a young business, there's a startup business, not a whole lot of revenue there yet, but you see the potential.
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There's either the person behind it, there's the investors behind it.
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Same with the horse.
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There's the people behind it that have got it to that point, there's the genetics behind it.
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I think we could tie a lot of similarities with genetics in there as far as the parental line.
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If the if the sire or the father of the horse won a couple hundred thousand dollars, your odds of that the prospect or the offspring go up as far as what that horse could do.
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Um, so definitely I'm cut out again.
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I was rambling.
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Oh, you're fine.
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I I think so.
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Go back to this idea of going in and assessing a horse, right?
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A lot of similarities when there's diligence in a business, right?
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You're wanting to do some research on historicals for the business.
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Similarities you've told me about is a lot of times when you're buying a horse, you go, go bring it to a vet.
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And so what is like tell me a little bit about that process.
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Like, if you decide, okay, this horse is great, what does the vet do?
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They they come in and assess it from a health standpoint.
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Yep, a health standpoint.
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They'll look at um the vitals, you know, obviously just do a glance over, palpate the horse, and then you can go as far as to also radiographing the horse as well and making sure critical joints like a horse's, they have a version of an elbow, they have a version of a knee.
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And so you want to make sure that there are any detrimental previous injuries to that horse, and even um younger ones, they can have injuries there before they've even had a saddle on their back.
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And so that's goes back into doing your due diligence and really making sure that if this is an investment, significant investment for you, the resale value as well.
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When you go to sell that horse, and I've had horses of mine that I've sold go through vet checks, is what we call them.
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And a lot of times, sometimes they'll find a problem in there.
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And so then that also goes into the negotiation where I have a set price for a horse that I'm asking.
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And if the buyer who is doing the veterinarian exam finds something that they don't like, that's some negotiation power back and forth.
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And I've had an experience with that where as a seller, you're obviously wanting the deal to go through and you have to compromise and find a happy medium there as well.
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Well, and I think that whole that whole situation is so similar to this idea of okay, you start diligence on a business after signing your LOI, and then you get into the nitty-gritty, and if you're doing it right, you usually bring in your accountant to look at the financials, right?
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So kind of the vet check.
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And then at some point, if the accountant says, hey, red flag here, there's some stuff that doesn't make sense in the financials, you could at that point back out of the transaction, similar to you saying, Hey, the vet didn't sign off on this horse.
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I'm not interested.
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Absolutely, absolutely.
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And I want to touch base where you said back out, because that's something where I feel like a lot of horse people or business buyers in general, we get so narrow-minded and we get the blinders on where we we want this horse.
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It's perfect, perfect color, perfect size, perfect name.
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And then we see something that pops up that's probably not going to go away.
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And it's a matter of assessing that and knowing, okay, I do not want to take on this problem today.
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Let me back out, let me think about it, let me consult with somebody else, phone a friend, and figure out if it's really worth it or not.
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No, and I I cannot stress that that is an amazing point to make because honestly, people do get wrapped up in the idea of, well, I love it, and so I'm gonna just ignore the red flags, or I'm going to ignore the pieces that aren't so great, and they just continue forward, even if the decision probably that wouldn't be so great would be to back out or to say, hey, I need to renegotiate with you because the price isn't right.
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Um, in passing, we've had a lot of conversations about how in the horse world there's really not a lot of paperwork like traditionally used.
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So when you're talking about coming in looking at a horse and deciding you want to purchase it, obviously, like with a letter of intent for a business, you're putting in a deposit, an earnest deposit, and then taking the time to do your due diligence.
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Is there something similar in the horse world?
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Sometimes a deposit um comes up.
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A lot of times, if it's a hot commodity type horse, where this is a hot a popular horse, it's either on a website or it's on social media.
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You can tell, especially on social media, you'll see the comments start popping up where you're like, okay, I better make a phone call.
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I'm really interested in this horse.
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And so people will ask for deposits, but going back to your lack of paperwork comment, getting that deposit back sometimes if the deal falls through, there's no black or white answer unless you do physically have it in writing.
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And I do think in our industry there is a lack of having things in writing that's not necessarily scary to either party, but mute mutual benefit of both parties to say, hey, we want this to go through as smoothly as possible.
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We know there's a lot of money at stake, there's a live animal at stake.
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We should do our due diligence and have a contract there so that everybody leaves happy.
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With getting to see the MA world on the deals that we work on together, what would you suggest from that similarity?
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Like, should there be a letter of intent of some kind or a bill of sale?
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Or like, what do you think would be great for the horse world?
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For anyone listening who's in the horse world that is accustomed to doing these transactions without the paperwork and maybe has seen the bad side of doing it without the paperwork, what could they be doing differently, do you think?
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Bill of sale, first and foremost, a thousand percent.
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Bill of sale stating the horse's name, stating if it's registered with a breed registry.
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Horses are like dogs, they can be registered within their respective associations.
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So having that horse identified in one way, other than just saying it's the brown one.
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And um then also having representations and warranties of both the buyer and the seller, I think that that's huge as far as this is what the horse has done previously, this is how old it is, this is its track record, and not guaranteeing anything past the point of transaction.
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So once um the money, the money is once the money is exchanged and once that horse is loaded onto the trailer, it is as is.
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There's a lot of different things too you can do to protect yourself after you buy a horse.
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One thing is insurance.
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I do have a little bit of a background in that as well.
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And I think having an insurance policy on a horse is critical.
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There's different options you can do.
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Um, the basic one is mortality, and that at least protects if something, heaven forbid, were to happen, you would be reimbursed your purchase price.
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Well, I like what you said there because there's there's two really key considerations with horse purchases and business purchases that we can really touch on there.
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One is this idea of having insurance, um, which by the way was completely new to me before Chessie and I had talked more about the horse world.
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I think it's incredible that, you know, you can, especially if it's being sold as is, um, for anyone who is going through the sale process, something to consider, and it's not always financially reasonable, is to get a representations and warranties insurance policy.
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The underwriting process can be quite overwhelming, but for anyone who feels like there's a chance that a breach of reps and warranties will occur after closing, that insurance gives that additional coverage, like you're talking about with the horse, where maybe you're you think you've seen the full picture, but you're not entirely certain.
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And so having that insurance policy can really add an additional layer of protection, especially if you're not negotiating, and of course in the horse world, you're not negotiating this, but some sort of holdback in the purchase price where you're protected in case some breach does come up and then you're needing to pull down the purchase price because you have losses.
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Um, but I think, you know, we were talking about this the other night, about how it's crazy to me that horses are sold as is without any warranty.
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And I I had asked Jesse in passing, I said, well, there's, you know, dogs that are purebred that come with warranties, it blows my mind that someone wouldn't warranty, maybe a breeder of some kind would warranty it, but not like an average Joe, right?
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Makes sense.
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But same concept too in the business world.
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There's times when people are selling assets, as is where is.
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And I don't think people quite appreciate the gravity of that situation because I'm sure you've seen or heard stories where people bring home a horse and things don't go right or they're they're not in good health.
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And and then what is their recourse?
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Nothing, right?
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If they don't have the insurance policy?
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Correct.
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Sometimes if they did their due diligence again with the vet checks, you can go back.
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But veterinarians are very straightforward as well.
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It is an as is on that day, they'll have their own report drafted and you can go back to the veterinarian's report.
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But one thing you can do as well, which this um I don't want to get off on too much of a tangent here, but you can do a drug screening to make sure that there weren't any inflammatories or anti-inflammatories or anything as far as that goes.
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But really, as far as going back and seeing what the horse was before, you need to have documentation as what its physical condition was.
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Um, again, with the business, like you want to be able to look back at the previous records, profit and loss, and make sure that everything up to close is still on track to be better than it was prior to closing.
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Yeah, I think that's really fascinating.
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I mean, obviously in the world of horse purchasing, it's it's it's a whole nother animal, pun intended, right?
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That like it's a living, breathing entity that has historically a health track record, right?
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And I like that you brought up that you should be getting those vet records, right?
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No different than, like you said, finding out the financials, but also finding out if the company has contracts in place, right?
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Some of this historical paperwork that helps you paint a picture of the health and well being, whether it's the horse or the business.
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Right.
00:19:57.759 --> 00:19:59.519
Um, I I like that you brought that up.
00:19:59.599 --> 00:20:24.640
And So generally speaking, I know we've kind of touched a little bit on this here and there already, but so when the comparing the horse market to the business market when it comes to you know strategies and figuring out how to research and negotiate, you know, what can you describe as something that could be borrowed from the horse industry into the business world or vice versa?
00:20:25.039 --> 00:20:25.359
Sure.
00:20:25.519 --> 00:20:40.319
Um, I want to start with a similarity first, is that there are so many connections within the horse world of people knowing somebody, you know, like I said in Texas, I had a connection in Texas that I could reach out to, or I have connections um all over the place.
00:20:40.400 --> 00:20:48.400
And in the business world, with when you're within an industry to niche, it does not take very much work to find somebody that can help you out.
00:20:48.559 --> 00:20:54.720
So biggest thing I would say is to find somebody that's also willing to um help you do the research.
00:20:55.279 --> 00:21:06.559
Well, and I was gonna say too, like, because the industry is so supported similarly, similarity-wise, I do think this idea of don't go it alone, right?
00:21:07.039 --> 00:21:19.759
Like your original story is you brought mom and dad because you were a kid, and now you have people in your realm that you could bring to give a second opinion, whether that's a vet friend or another friend who rides horses who can maybe be a little more objective.
00:21:20.000 --> 00:21:27.359
I like this idea of bringing in someone when you're doing the horse sale, but I think that could be extrapolated and people don't really utilize it in the same capacity.
00:21:27.519 --> 00:21:37.440
If you have friends that have owned businesses in the past or maybe work in financials or financing, and you know, have some sort of tangential space.
00:21:37.599 --> 00:21:45.920
I mean, I was thinking about some of the people in my network that, you know, if I was going to buy a business, would I bring the information to them to get their second opinion?
00:21:46.160 --> 00:21:46.720
Absolutely.
00:21:46.960 --> 00:21:49.759
But I don't think we see that very often, generally speaking, in the industry.
00:21:50.000 --> 00:21:55.759
Yeah, and I think it can be a little bit intimidating too, is that people they they want their idea to seem great.
00:21:55.920 --> 00:21:57.599
And so it's the same thing with a horse.
00:21:57.759 --> 00:22:04.079
You want this horse that you think will be great to um attract everybody else to think the same thing.
00:22:04.240 --> 00:22:09.519
And if somebody shoots you down, it's handling that and going, Well, I guess I'll keep looking.
00:22:09.599 --> 00:22:10.880
And same thing with the business world.
00:22:10.960 --> 00:22:19.759
If you have a great startup idea, it it goes back to finding um an outsourced outside source of logic to kind of talk you through each step.
00:22:19.920 --> 00:22:29.200
And that way, again, with the horses, is I've I've had great ideas of traveling across the country to go get one, and then I'll call my mom and she'll say, You cannot do that.
00:22:29.359 --> 00:22:31.839
And so going back to that for sure.
00:22:32.240 --> 00:22:48.720
So I think kind of going back to your experience and looking at horses and having an outside perspective and also looking at the purchase from being arguably like if we're using the symbolism of being a previous business owner, like being a previous horse owner, right?
00:22:48.799 --> 00:22:50.400
So you've got all that background.
00:22:50.559 --> 00:23:00.240
You know, can you share a story where negotiations got tough regarding a whether it's a horse purchase that you had personally or someone else's horse purchase that you had heard of?
00:23:00.559 --> 00:23:05.200
So the last horse I purchased was actually two years ago out of Mesa, Arizona.
00:23:05.359 --> 00:23:15.279
And I had seen him online, loved his pictures, called the owner before driving to Mesa, which again wasn't that far, but doing my due diligence, wanted to make sure that the horse was available.
00:23:15.519 --> 00:23:19.759
Called the owner, he said, absolutely, you can come down and look at him.
00:23:19.920 --> 00:23:23.920
Um and this was a young horse, he was only a year old, so there was no riding involved.
00:23:24.000 --> 00:23:30.319
There wasn't really a whole lot I could do besides make sure that he looked the same in person as he did on the photos, and he did.
00:23:30.480 --> 00:23:32.319
Um, and I took a friend with me.
00:23:32.400 --> 00:23:43.279
So, again, going back to having somebody with good logic, took a friend, and I had not discussed purchase price prior to going down, which was one thing that I do think is important.
00:23:43.359 --> 00:23:45.440
But again, it was it was a close enough drive.
00:23:45.599 --> 00:23:48.640
I had a good idea that he was in my budget, I thought it was worth it.
00:23:48.880 --> 00:23:55.200
Went down, and the owner ended up telling me the purchase price, which was not in my budget.
00:23:55.359 --> 00:23:58.960
And so I took a deep breath and I said, Okay, I really like this horse.
00:23:59.039 --> 00:24:00.000
We've had a great time here.
00:24:00.079 --> 00:24:01.680
I have a connection with him.
00:24:02.000 --> 00:24:10.240
And I gave him what my budget was and said that this is the this is the top of the line, and said to call me if you change your mind.
00:24:10.480 --> 00:24:14.400
Five days later, he called me and he said, I'll take your offer.
00:24:14.640 --> 00:24:23.119
And so at that point, I got to load up my pickup and trailer, go back down to Mesa and exchange the the funds and a bill of sale, and brought him home.
00:24:23.200 --> 00:24:27.440
And two years later, he's an awesome horse, three years old, and I'll start showing him next year.
00:24:27.599 --> 00:24:37.200
So just going and having the foundation to again stick with my budget, have a plan in mind, and the power to walk away was huge.
00:24:37.759 --> 00:24:58.079
Well, and I like the fact that you didn't give, even though you really wanted the horse, because I think part of I wanna I wanna stress for anyone listening that when you're going through the process of buying a business, there's a lot of negotiation that goes on upfront.
00:24:58.240 --> 00:25:12.880
And I think a lot of people, because it's not always apparent that they're negotiating the terms that are going to ultimately become the final terms in the purchase agreement, I feel like they think it's really casual and it's really open to further negotiation.
00:25:13.039 --> 00:25:23.119
And so a lot of times, as you and I have seen, we'll get the letter of intent, it'll already be signed, and people will ask, Well, I'm not really a fan of X, or I'm not really a fan of Y.
00:25:23.279 --> 00:25:28.640
Or like, what if I get into the diligence and the financials don't come back as good as they say they are?
00:25:28.880 --> 00:25:30.960
Can I renegotiate the purchase price?
00:25:31.200 --> 00:25:37.039
And your story about going down to Mesa and finding out that it was above your purchase price, right?
00:25:37.359 --> 00:25:42.319
Above your budget, and then kind of just saying, well, like this is my budget, take it or leave it.
00:25:42.480 --> 00:25:49.279
I love the horse, but I'm not gonna go above my budget, I think is a good lesson for anyone who's going through the process.
00:25:49.359 --> 00:25:52.559
They found a business they love, and it can be so cutthroat too, right?
00:25:52.720 --> 00:25:57.839
Good businesses get tons of offers and they're quick to go off the market.
