Journey to an ESOP & Beyond

EP25 - Pink Panther - The Strangeness of ESOP Negotiation

Season 5 Episode 25

In this podcast episode we use a classic scene from the movie “Pink Panther” which highlights using the “American” French accent to illustrate the strangeness related to an ESOP negotiation.  In ESOP transactions it is important to understand that the purchase price or valuation of shares being sold hinge on the ultimate result of the negotiation with a trustee along with their independent buy-side team.  The strangeness can come from the back and forth with the seller offer/trustee counter offer/seller offer.   

[0:09] Hey everyone this is the journey to an ESOP and Beyond so happy you could join us today this is the podcast all about Employee Stock ownership plans pre-transaction post transaction and today we're going to be in the pre-transaction we'll start off with this.

[0:29] I would like to buy a hamburgerI would like to buy a hamburgerI would like to buy a hamburger.

[0:39] Hey I would like to buy am bagno no no let's break it down. II would would would.

[0:55] Would weirdwould.

[1:01] Good like like like liketo to to.

[1:21] Hamburger hamburger hamburger hamburger okay so far everyone to know that I have a French accent that I use every once in a while it's something that I love. To do this topic today like as I said before is going to be about something that is very important and then that's what I'm going to say the very first thing I would say is that it's about negotiation. Or in American negotiation now let me just say first as I jump into the Pink Panther clip that we had with Steve Martin.

[1:58] The 1 thing about this clip that I think is interesting first off if your French and your listening to this I'm sure you're going to be like that is terrible you guys don't even know how to be Americans who can speak with a French accent I understand it's not very nice but of course it is what it is but no the point is um.

[2:22] You would um look at this and say okay well look um why am I using this and to talk about negotiations because the negotiation is in an ESOP transaction arevery. Interpretive in a language in a sense like what how does a negotiation work because it works in a way that is very um. Appropriate for the trustee and the sell side and so there's a little bit of a Ridiculousness to it that's what I'm going to get into that's why I used this specific scene out of Pink Panther so that's what we're going to talk about and I hope it what what we're going to do today I hope what it does is it just prepares you, to understand what goes into um the actual final negotiated sales price of your company. With the trustee so that's what we're going to do um as we go through that I'm going to go into some of the basics of that and then I'm going to go into some nuances around negotiation.

[3:20] So as we move into the discussion around the new go of the transaction what I'm saying to you of course in my French accent iswe have to start at the beginning. The basics of course the basics are this the ESOP transaction is like an m&a transaction. It's like a merger and acquisition transaction and that there's a buyer and a seller the difference is that the buyer in this case is is purchasing the shares of stock. From the sellers.

[3:55] To be put into a trust that gets released to the employees and so that that right there means that it has to follow because it's a retirement plan has to follow and be in accordance with. The Department of Labor process agreementand so the trustee is the individual or institution as we start thinking about who the trust, trustee is because they are the buyer and we want to describe at the front end of this is there who they are and how they go about what they're doing and again comparing that to just a regular m&a transaction where in an m. M&a transaction there's a buyer and there's a seller and that the buyer. In a in a just a normal transaction is really more of a financial um standpoint they're just building a financial deal. And they're looking at it from how much can I pay and the seller's looking at it from how much do they wantand on the. ESOP Transaction what we're looking at are other things too that are important and what why this is so important is because it's going to dictate the way an ESOP transaction is going to be negotiated.

[5:03] And it's and it's far morecomplicated in a sense then just a straight up transaction and even though it might not feel as complicated and I think this is where people get thrown off esops because it's like oh this is way too complicated I don't want to do it because um I just don't understand it right so that's what that's what this podcast is all about is breaking this stuff down so it's not like overwhelming because it's not that big of a deal when you get into the to the the parts and pieces and fully understand it.

[5:32] So the trustee is either an individual. Or an institution now let me describe the trustees uh from an ESOP perspective these are going to be very very highly.

[5:46] Focused in their in their practice in their career on Employee Stock ownership plans you're typically not going to see a trustee who dabbles in this and I would say that that's kind of true for the whole esap industry or professionals so you're not going to see people dabble and hey I kind of do this on the side there's this is something that you either do a lot of or full-time are you really don't do.

[6:09] Much of it and that's important because we want to make sure that the people we're talking about are experienced at this so when we're when we're focusing in. On the negotiation side within the buyer side you're going to you're going to see that these are experienced people now the trustees are going to be from all walks of of different professions and disciplines and some of them are attorneys, some of them are pin Pension Plan experts or retirement plan experts some of them are, um CPAs some of them are um Department of Labor people who have gone through the Department of Labor and they've they've come out of that and they're now working for themselves, they put their own shingle out so to speak and say hey we're we're trustee they're going to have insurance to protect themselves because they are a fiduciary and as you ask them the question like what are you doing how do you go about doing what you're doing on the transaction side really understand number 1 that they're they're going to be engaged, to do the transaction and then they're going to be engaged separately to do the ongoing trustee work and we're going to we're going to delineate separate those 2 things because it's really important they are separate. Their job as the transaction trustee is to.

[7:25] Negotiate first of its negotiating the fair market value of the stock. The word fair market value in the valuation World it really is is very straightforward and veryimportant because it's it's not, just it's not something that we just throw around like hey is fair market value you know that kind of thing it it's very important because in valuation Theory there there are, um standards that are put on the definition of what fair market value is now the trustees because they are fiduciaries and that means that they are responsible, for the employees retirement planif they do something really really.

[8:07] Not professional or in a way that that over values or does something that that jeopardizes the employees and they've crossed the line of fiduciary and then they become responsible so there there's a lot of liability when it comes to being a trustee. You know and so part of this as I profile a trustee is so you understand who who is it that you're negotiating with in the first place right and how do they go about that. In order for them to make sure that they've done their job correctly and you know what to expect as you go into these transactions and so the other side of it is is that there because they are, um specifically serving the role as the buyer they need to be represented by other folks, and you will see that that pretty much all of them are going to have to hire an independent valuation firm that accompanies them on their part of the process of negotiating and that's going to be important because they're number 1. Their independent number 2 whoever they hire are independent what does that mean for the valuation firm to be independent on the on the buy side well it means that they have not done any work.

[9:11] For the companyto establish the valuationbecause as soon as they have done any work. To establish the valuation for the client so let's just say this this company um is high has higher evaluation firm they've gotten evaluation for whatever purpose and reason they had before. If that same valuation firm is trying to do the work here for the trustee that that is not going to fly that's going to be I would say um, very risky for the cells for the selling shareholders and for the company and of course for the trustee you know the trustees willing to do that that's that's. Um now what do I bring bring that up well I kind of bring that up as a sidebar just to understand number 1 how important it is to understand the differences between the buyer and the seller, as we talk about the negotiations being a arms length negotiation. How important it is from a fiduciary standpoint and how important it is to keep in mind that that the negotiation has to follow a Department of Labor process agreement for the trustee to feel like they're they're in a good position fiduciary wise and and as and as much as that's important the selling shareholders need to feel like they're in a good fiduciary position as well.

[10:20] So that's important to kind of make sure that those roles and responsibilities are set up correctly. If the transaction um is is Arielle relatively small and in some cases the trustee would be willing to say hey I don't necessarily need an attorney on our side as long as they agree with the. The cell size attorney and say hey that attorney works we feel comfortable with how they're putting documents together, if the transaction is is is large enough then they're going to need on the buy side not only the the valuation firm but they're also going to need an ESOP attorney to represent them as well.

[10:55] Some trustees will not do any transactions without attorneys so that that's just kind of a non-starter for them and so just know that that's kind of as we talk about the negotiations we're going to really just as we set up the buy side we want to make sure we know who these people are. And so now you have you have the buy side set up and then the sell side of course is the sell side advisor the selling shareholders the ESOP attorney and so when we think about the negotiations we are going to say these are the 2 parties that are going to come together and then we're going to talk about the so that's the what we're going to talk about the how it works how does this work and why is this a little bit um, you know different than of course a regular m&a transaction and so the first part is that because.

[11:38] There is a lot of scrutiny to these transactions and where's the scrutiny come from where does scrutiny over an ESOP transaction come from it comes from the Department of Labor investigating situations that are problematic.

[11:52] And those situations could lead to situations like the um. Department of Labor investigates finds a problem makes a claim and then suddenly the selling shareholders had, have to kind of reimburse the company back for whatever the fiduciary trustees and trouble with the Department of Labor they get in trouble they get penalized all those kind of things so why does that happen why is that that possibility with the ESOP transaction and and why is it in in in a sense if you're doing this the right way this is the other side of it that it's not it's not a major issue, if it's doing being done the right way well it's because the um most of those cases I would say almost all of those cases that come about are because the company was overvalued and if the company is overvalued.

[12:40] Then the what's happening is that the buyer is paid too much money for the company right at the front end and if that's the case then who's in jeopardy, the employees that that are basically getting this plan um the Company's trying to pay out the overvalued valuation and all these kind of things that so that's just something that that we want to make sure we we're aware of and understand that that's going to, make sure that the guidance on the on the negotiation is done in in the way we're going to describe it as we go through it now.

[13:09] When we're when we're thinking about negotiations on the sell side and we we leave the trustee for a second and their group right the sell side should be like this and and this is what I would say is is depending on where you are in your in your transaction if you're at the very beginning or you're in the middle of it or you're kind of in the close um this is a little bit geared this whole podcast is going to be this episode is going to be geared towards more of the the ESOP process and the pre ESOP part of the timeline and so if you have on your cell side.

[13:42] Uh process of going through estimating what the negotiation is going to look like I would say that's going to be critical for the selling shareholder to make a decision to step into this place of saying hey I think I really do want to do this in in many cases. Um that might be uhthe very first step that's going to happen is the sell side advisor is going to lead the, shareholders through a process to estimate what is actually going to sell for now keep in mind that that can be done. I would say a lot of different ways but my opinion professionally is that it needs to be done centered on cash flow. And that means that cash flow itself, from evaluation perspective and specifically like discounted cash flow valuation which is the present value of future cash flows coming back to today's dollars needs to be kind of the major the major part of the modeling itself. In addition to understanding working capital because I I do see working capital as something that.

[14:44] You know could if it doesn't get nailed down at the front end could really. Um change the amount of of purchase price at the end of the day because the a lot of closely held companiesworking capital really vary some companies run everything kind of like vapor, just enough working capital to get through every month other companies it's like they have, just an incredible amount of working capital stuck in the company and it's more of a non-operating asset that gets added back as part of the, uh valuation so it can really swing the net number so those are going to be important the reason I I focus heavily on cash flow on the sell side is because cash flow, not only should establish the valuation but it also should be because it also is part of the way that the company's going to pay back the money that it's borrowing so it fits these 2 these 2 pieces fit together.

[15:35] 1 of the things about negotiation that I normally don't ever have any anxiety about and hopefully are you know as we go through this with clients they don't have anxiety about it because we're we're building models, at the front end that helped to kind of balance out all the parts and pieces of the deal in a negotiation, so that when we get to that we want to make sure that we've hit the the right number not. You know when we say the right number keep in mind I'm saying that as fair market value because that's what the Department of Labor process agreement is going to say they and that's what the fairness opinion is going to say and that's what the term sheets are going to say when we get to the term sheet is that the the trustee is not going to pay more. Then fair market value for the business.

[16:15] So the reason cash flow and not just some multiple of cash flow you know that got created by some Market approach is so important or discounted cash flow is because it's reasonable to think that the company's going to have enough money. To on a on an ongoing basis of creating cash flow to pay off the debt in a way that's sustainable for the ESOP. That means that the company continues to do what it's doing and it pays back the debt the selling shareholders who do take risk in an ESOP transaction are not going to be um risking like this incredible amount of money and hoping that the company. You know hits their targets in order to pay off their even their interest expense so anyway all that stuff fits together you know I think in a in a way that's very holistic and and important and responsible.

[17:02] So kind of saying all that what we're saying is is that you should be prepared for the negotiations at the front end and the dialogue that you have with the trustee and the valuation firm are going to be important now the the dialogue itself is going to be kind of a memorialized it before this the negotiation in a presentation that should happen through the site visit as well as all the information that's going to be, plugged into the data room that the trustee and evaluation firm are going to want to download and really have access to understand everything about the company, so that their work before negotiations is going to be complete and.

[17:41] Full fully vetted out in terms of any questions that might exist so that whole process of of building out that presentation is very important the site visits really important building out the due diligence files and making sure that that the cell site advisor with the shareholders have answered all the potential questions that of course the trustee their valuation firm are going to have as you go into this this next step of negotiationnow. 1 of the things about negotiation is that it is ha it has to bedocumented in an ESOP transaction and it has to be documented so that, that if the Department of Labor were to look at the way that the transaction went down there's a very clear and clean record. For the trustee and their team to show hey this is how it worked so what we're going to what we're going to walk through next is just the idea of of, the step-by-step process of how that works to get to a final number.

[18:41] Now when we say a final number of course we're alluding to the final purchase price number and what that is but we also are also going to talk about final terms and conditions as well. And so in a negotiation what happens is there's a very it's very important that the um sell side obviously puts together a roadmap. And 1 of the things I always I always try to like prepare people for is. How because because if we just literally got on the phone and made an offer to the trustee and they came back with an offer we probably could reasonably get there pretty quickly but what we have to do is we got to show the Optics to the transaction so because of that our negotiation is going to be as a sell-side advisor is going to be really the kickoff and that's going to be the the initial lead off or offer that we're going to have as sellers, and or the selling shareholders are going to havethat.

[19:38] It's going to be memorialized in a term sheet that would be a a pretty legal document that would be constructed by the Southside advisor along with the ESOP attorney. And along with input from the cell selling shareholders of course. Really because it's their company nobody should do anything without the selling shareholders understanding everything in that term sheet secondly nobody should be doing anything and releasing anything to the. A trustee without the selling shareholders approval of what that looks like.

[20:12] So as we think about that what we're what we're going to do is we're going to walk through some of the negotiation points in general and then say okay then how does that actually translate translate to the. Trustee and the trustees counter offer. So categorically there's a couple areas that we're just going to cover from a higher level standpoint but don't need to kind of put this into a framework that can make sense to get through that process and get to the uh the final part of of how that really works from a negotiation standpoint, the first part would be of course all the descriptor the descriptions of the transaction including who the shareholders are the company um the trustee naming all the different parties that's going to be always important. And as we do that the the first part of what we would want to do is really nail down the initial offer on Enterprise Value Enterprise Value being the cash flow value. Of the company which is probably the easiest way to explain that is is that the the valuation if we turned everything into a, in multiple of IBA that would be what we believe the multiple of IBA would be on the on the cash flow so EBA standing for earnings before interest taxes depreciation and amortization. So the multiple of Libra would would kind of predict some level of of Enterprise Value now that number is going to be in a negotiation is going to be. You know of course higher than what we initially modeled because we are wanting to make sure.

[21:39] That the trustee has room because the trustee is going to come in with their number on the on the Enterprise Value and that's going to be significantly lower. And this is where it would get a little bit a little bit screwy for people because they're like oh wow we're way off you guys are way off because you came in with something too high and so just just know that that is part of. The language of negotiation in that it is definitely about um anticipating that they're going to be low we're going to be high and so. Then what happens is we start looking at some of the other pizzas of that so now if I connect the Enterprise Value to the other parts of the total Equity value the other thing that we have to do is we have to think about, the working capital at this point so there's going to be not only an offer for the. Purchase price Enterprise Value but there's going to be an offer for the amount of working capital that needs to be on the books at the time of closing.

[22:34] So higher high purchase price low working capital right because if I net these 2 together that means I have a higher Equity value as I go. The trustee is going to come in at a lower Enterprise Value and a higher working capital so that's how those kind of work together and again all of that should be kind of modeled out so that it's really easy to track, through the um anticipated counter offers that are going to happen.

[22:59] In addition to that what happens to is then we're starting to look at the structure of the ESOP so part of the part of the term sheet would be hey this is how the ESOP closing is going to go we're going to establish. The uh seller notes we're going to establish the inside note um we're going to and create the create the trust, then that's going to move into this the inside notes going to move the stock over so there's going to be some kind of sequence in the term sheet of about how the actual transactions going to go and be conducted. Now as part of that we're going to be referencing in the negotiation what the seller notes are going to look like and that would be once we know and this is going to be just part of a normal deal once we know what the bank. Has decided to lend we're we know that the remainder portion of that is going to be dedicated to the seller notesnow in a typical S corporation. What's going to happen is you're going to have the.

[23:55] AAA or the tax basis be carved out of the of the total seller note so that's going to be whatever is left over at the time of closing in your tax basis for an S corporation is going to be um put together in a in a AAA which stands for accumulated adjustment account promissory note, now that note's going to have its own interests and its own amortizationif you decide before the closing to to distribute a lot of the excess.

[24:23] Um basis or working capital that technically is is similar to that so if you if you decide to distribute that that's going to reduce basis and then you're going to have a lower amount of AAA. Most times you're not going to have literally zero AAA depending on, how much basis the company has been keeping in the company has been keeping in so so this is just a small little aspect it's not as much about negotiation as it is to recognize that that's going to be part of the structure of the deal. That AAA note along with the seller note is going to have a representative interest rate that will be applied to it the interest rate can be in at this point is going to be either, without warrants just being a straight up interest rate or it's going to include warrants and so if it does include warrants what's going to happen is that that interest rate, with the seller note is going to have a an also a warrant negotiation which is going to be negotiating the internal rate of return percentage. On the total amount of the seller notes comp the shareholders compensation for holding the seller note.

[25:28] What does that mean that means that the the seller is going to get compensated for both the but for this risk of the seller know from the company for both um in both forms in interest that they're going to get, either on an a monthly quarterly annual basis based on the principal portion of the interest note which is, seller note which is usually going to be subordinated to the senior debt. And then over time what's going to happen once that seller note pays off then the amount of Warrant shares that are issued at the time of closing to the seller, are going to then mature in the future and then the seller is going to basically participate in the another part of their compensation for the risk of that seller note.

[26:10] That is all going to be calculated at the time of closing and then issued as part of the agreement for the seller note.

[26:18] So what's negotiated here of course is the warrant percentage on the internal rate of return. And so the sellers are going to want to hire a number the the trustees are going to own a lower number now keep in mind this is also in combination with negotiating the SARS the stock appreciation rights if they have them the SARS are a nether form like warrants or synthetic Equity they're another form of synthetic Equity that have a different purpose the purpose of the SARS are to reward, an incentivize and retain the key, individual people that the company management decides typically always almost after the transaction but usually having some idea of who those key people are going into the transaction. The SARS are going to be negotiated based on the percentage of equity that they represent. So if it's a 10% Equity then they're going to take 10% of the total equity and synthetic Equity put that to the side and say hey these are these are SAR shares available to.

[27:20] The key people and so those are Shares are going to be monetized on a. On a cycle typically like 5 years that meaning meaning that in 5 years they're going to pay out they have nothing to do with the seller note they have everything to do with how the individual key people earn those SARS which are going to be vested, both on retention SARS and also performance SARS so all of that is going to be also negotiated so the percentage of SARS is negotiated and the actual um performance versus retention and gets negotiated and so in some cases just just say in general in most cases you're going to have more performance-based SARS than you are going to retention SARS.

[28:03] Now everybody likes that in the sense because it helps the key people get something where they don't have to invest any of their own capitalit helps the trustee feel like hey there's a good working team key group of team members to help. Um fulfill the the companies um IBA targets that they had in the discounted cash flowand that's the IBA targets as we talked about that are going to be part of, um the negotiation as well because that's going to be on the performance side what SARS are going to be used to um. Or how to how they're going to be vested if the company hits those SAR or those IBA targets then they should be vesting now. The even a targets that are going to be used are also going to be just grossed up a little bit over the 100% mark and so that's also negotiable as well so all of that is going to be negotiated um, and again the same premise with this is that we're going to this the sell side is going to take in as as much as they can at the front end they're going to wait for the counter it's going to be lower on that on both of those sides.

[29:05] The um next part of the whole the whole negotiation really is about like as we get we talked about working capital so we have that already established. Then it would be the um looking at the the governance and who's going to be running the company so it'll be depending on the control sale versus a non-control sale whether or not the board of directors includes an independent director or multiple independent directors. So if it's a control sale there's there's going to be a requirement for some type of independent director to be on the board of directors. If it's not a control sale then then the then doesn't necessarily need that but there will be a board of directors that run the company either way and that's going to be part of the negotiations as well.

[29:45] Now some of the nuances of the negotiation include things like, um whether or not the companies to upgrade their financial statements um there is usually a mandatory requirement for a fiduciary insurance policy that gets in as the beneficiary being the trustee gets put in place and negotiated. There's going to be um obviously some some normal m&a types of reps and warranties and dentac that are going to exist in that term sheet as well. All of those things are going to be somewhat negotiable you know in the sense of. You know what does that really do how does the trustee really protect themselves in terms of what they purchased there's going to be a survival period and that how long those identifications last there's going to be a um, an amount of of total maximum claims that they can come back in the event that there was a a situation with fraud.

[30:34] And all of that's going to be um kind of populated here again. In a negotiation what we're going to do is is try to get the best situation for the sellers the trustees are going to try to get the best situation for them and so going back and forth on this what happens is is those that term sheet gets gets fully populated. And then vetted out by the by the sell side team with the sellers they prove it then that kind of moves over to the trustee then they come back with with their counter now. All that being said 1 of the things that that ispossible is that and this is something that just. Become something you need to think abouttiming of the transaction can be um important as well as we as we start thinking about this next part next point. Um as as the negotiation kind of goes back and forth what's important is what's being represented in the existing numbers that were put together. And part of that is is if the company is on let's just say generally on track to hit their forecast.

[31:40] I think that the pretty I would just say pretty much if that's the case the forecast and the discounted cash flow all that's going to be pretty straightforward and clear, then I think there's going to be a deal that has just literally some straightforwardness to it there's no there's no future adjustments to anything it's just going to be pretty easy put it to bed and move on, however let's say the scenario is that the company is.

[32:04] Timing wise they've got some stuff that isn't hitting hitting their quarterly information yet or their monthly information so it's going to be pushing towards the end of the year. Um the more of a gap that we have in the 12 trailing months of information from what's being represented at the time of negotiation to where the company is projected to get at the end of the year the more there's a gap there the more possibilities for um different deal structure possibility so this is going to bring into negotiation the idea of like if I'm the trustee and I'm and I'm building my models on, um his you know cash flow right and it's going to be historical versus forecasted cash flow and I cannot show with my valuation firm a a consistent, growth pattern between the historicals and forecast, then I'm going to say on my side is buyer I'm not super comfortable taking on the risk that if the company doesn't hit these targets. We've we are in a position like we have overpaid for the the stock.

[33:09] So 1 of the things I we try to do is just be mindful of that you know and and the timing is never going to be completely perfect sometimes you just nail it it's like wow we're killing the forecast we're just like way ahead of things, other times we're we're behind it, and 1 of the things that might happen is is you may end up even re re-upping the forecast in this process if if something really were to happen let's just say you're in the middle of a deal and the company just lost a big company a customer right that can happen.

[33:36] And I think that the best and only way to do that is to is just to disclose everything hey we've we've gone through this adjustment here's our new forecasts and then just adjust the purchase price. Now that could happen where the companies like look I think that's true however we are really confident that we're going to get this other piece of work that's in the pipeline, um we were told we got it we just don't have the actual contract so if the customer if the shareholders and the and the management are like look we really are still very confident in the forecast. Then the the next thing that can happen is we can either include a clawback provision, or a a earnout provision those would be good ways to to basically. Help I guess in a sense help protect the trustee from overvaluing the company but at the same time giving credit for, the future cash flows that are that are coming down the pike so if the company shareholders and key managers have a lot of confidence that the company's going to hit those things, then those targets then I think it's very appropriate to build a claw back in there where they can get to the purchase price that they've they fully believe is real.

[34:43] And then let everything adjust accordingly and then the trustee is okay because they have not put themselves In Harm's Way and or of course the retirement um plan. Which is designed and geared around the employees so they haven't put the employees In Harm's Way um the call back and earn now are 2 different approaches 1 is you're going to earn up if you do hit that number there's going to be a positive purchase price adjustment and the clawback there's more of a just a negative purchase price adjustment in the event so you're going to start off with a bit of a higher purchase price at the front end and then claw back that usually what we're seeing are like 3 year time period so you're going to go through a 3 year Horizon and then.

[35:22] You know go from there to um adjust accordingly now. I like that structure on the claw back a little bit better than they are now only because um I would say that as a business owner, we're more confident that we're going to hit those numbers than not it gives everybody a really strong Target to shoot for and I think when people have that and a company I think it makes it makes a solid. Um Target plan for everybody to work through and back into hey quarterly where are we at monthly where are we at how are we doing according to to those targets and it's got, something obviously connected in in meaningful to everybody so so anyway those are those are important nuances to understanding that the way that those kind of deals can get kind of negotiated, um of course there's a little negotiations around the bank and the other aspects of this as we think about it but this was really primarily to to deal with the negotiation with.

[36:15] The buyer and the seller and what I've described to you. Goes off with a counter and the seller counters and it goes back and forth until there's a final negotiated deal those documents are going to be um held as part of the the package of the trustee has in order to show that this truly was an arms like negotiation. So hopefully that helps you today I understand negotiation a little bit better if that was kind of um brand new to you then it's definitely something that you should look deeper into um but but if all of that is done accordingly the. Selling shareholders and the trustee everybody involved I believe would be completely protected.

[36:54] And so and anything it can happen from there but that that really is the way it works so with all that thank you guys for listening today and um if you do have any questions please reach out to us on our website at journey to an ESOP cam. Please rate US um as a 5-star rating if you know how to do that and then um we will see you on our next step on this journey to an Isa.


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