Ep. 13 | Flipping the Script: From Strategic Buyer to Family Office Acquisition

Are you prepared for the moment your internal succession plan meets the reality of a “missing generation” in leadership?

In this episode of AEC Unscripted: M&A Edition, host Jeff Adams, Director of M&A at Stambaugh Ness, is joined by Frank Ternasky and Mike Asaro, former principals of the San Diego-based architecture firm Delawie. 

After years of operating as strategic buyers themselves, Frank and Mike share the transparent story of why they pivoted to an external sale. We dive deep into their decision to partner with Hennick & Company —a family office— and Leo A Daly, exploring why this unique model provided the cultural alignment and “long-run” stability that traditional private equity could not. 

Listen to learn: 

• How being an acquirer prepared them for their own immaculate due diligence (and why “there was no pea” to find).
• The Family Office difference and why a less “heavy-handed” investment model was the key to preserving a 60-year design legacy. 
• The strategic reasoning behind The Power of the Pause —hitting the “pause button” on a deal when business growth outpaces valuation. 
• Why the “beer test” and cultural fit remain the ultimate deal-breakers, regardless of the financial offer. 
• Insights from the first 100 days of integration and the value of a “best practice” conversation over a forced transition.

 Join us as we explore M&A, unlock growth potential, and achieve deal success. 

 🔔 Don't miss out! Subscribe to AEC Unscripted: M&A Edition on your favorite podcast platform. Let's explore the M&A landscape, unlock growth potential, and achieve deal success. Ready to dive deeper? Let's go! 🤝💰 

Transcript

Host: Jeff Adams Guests: Frank Ternasky and Mike Asaro

00:25 – [Jeff Adams]: Welcome to AEC Unscripted, M&A Edition. I'm your host, Jeff Adams, the Director of Mergers and Acquisitions at Stambaugh Ness. Today, we are going to be exploring M&A through the lens of a couple of architects who recently experienced a sell-side process. I'm delighted to have joining me for this episode Frank Ternasky and Mike Asaro, two former principals and executives at Delawie, an architecture firm based in San Diego.

01:10 – [Jeff Adams]: Delawie was recently acquired by Leo A Daly, a platform firm backed by Hennick Company, a family office that is partnered with some of the world's leading consulting advisory and professional services firms. Frank and Mike, thank you so much for joining me today.

01:25 – [Frank/Mike]: Appreciate the opportunity.

01:30 – [Jeff Adams]: Listen, before we get started, I want to give everyone a chance just to get to know you guys a little bit. So, how about introducing yourself a little bit? Give them your background and then tell them who you are.

01:45 – [Frank Ternasky]: Well, I'm Frank Ternasky, born and raised in Ohio, moved to San Diego pretty much right after I graduated college and started working out here. Worked for a couple different firms, but got to Delawie and that was kind of a place that I called home. People were good, the work was great, and I think it was just a place where I felt like I could make a change and build something great and had great partners to do it with. And it was a good time.

02:15 – [Jeff Adams]: And Frank, if you want to tell everyone where you went to college, I know that's an important aspect we always kind of have our banter about, so...

02:25 – [Frank Ternasky]: Yeah, I know. I didn't want to say that because of that banter, but Ohio State University. Yes, and beautiful Columbus, Ohio. But not the same as San Diego. So, but great time. Good college.

02:45 – [Jeff Adams]: All right, Mike.

02:50 – [Mike Asaro]: Yeah, good morning, everybody. Mike Asaro, Principal with Delawie prior to the Daly acquisition. For, I don't know, 20-25 years, something like that. Native San Diegan, so this is why it's always interesting to me. I get to hear about other places all the time. I may be the only native left, but born and raised in San Diego, went to school at Arizona State, and always knew I was going to come back home. And I did that. Similar to Frank, found a home at Delawie early in our career, and we were able to together help craft Delawie, which had been around since 1961. So, I've been here 30-something years. But what we're going to talk about today is what led us to go through this transition process after dedicating a career to a firm. So, happy to be here today.

03:50 – [Jeff Adams]: Yeah, thank you guys. Well, tell us a little bit about Delawie. Whoever wants to share a little bit about your history and what Delawie is about, that would be great.

04:05 – [Frank Ternasky]: Sure. So, as Mike mentioned, Delawie was founded by Homer Delawie back in 1961. He was like one of the early San Diego modernists, did case study type housing, worked for some other modernists here in town, Lloyd Ruocco, went out on his own. Built his own office building basically from the start. That's where Mike and I both started working here, was an office building in Old Town San Diego. And he grew the practice from doing single-family residences to multi-family. He was very involved in the planning commission at the city of San Diego, so he got some commissions at Balboa Park, which is the big central public park here in San Diego, and the San Diego Zoo, which a lot of people know about. So, he was in early with the kind of development and growth of the city. Then he started working for the federal government because of the military bases that are here. Just ended up doing a lot of work with them and taking them to the next step up of design. He got a lot of design awards for kind of modernist buildings for the Navy, which was stretching them a little bit. As he got into bigger and bigger commercial commissions, he started adding people in. I think when I started there were 25 people here. Mike was already here for a couple years. And then those led into the clients, some of which we still have today—Qualcomm, which is one of Mike's big clients. We just expanded and expanded into different markets, hospitality and gaming with the tribal gaming. So, it just grew. And the reason I came over was they were always known as a great firm from both the technical and the design aspect. And so I was an associate in another firm and that drove it home for me that they had the ability to do both of those things. So Homer instilled in all the people that worked for him here—and some of them are still here, we have a lady who's retiring, it's her 40th year here that worked with Homer for a long time—that you should think about those things. Think about design and technical and that they both can live together. He did a great job creating the foundation for this firm. Mike and I are actually third-generation owners. Homer sold to three other gentlemen internally, and then they sold to me and Mike and one other partner who's retired now internally. And then we started our process internally as well and then shifted to what we're going to talk about.

07:45 – [Jeff Adams]: Thanks for that, Frank. So, as you mentioned, you guys are third-generation owners and obviously had an internal plan already in place. Tell us about the process you underwent. What made it end there, you know, got you looking external? What was that process?

08:15 – [Mike Asaro]: Yeah, I think kind of in a nutshell, we were named principals and became shareholders in 2002. So quite a long time ago. There was three of us who were buying in at that time and we were supplanting four or five shareholders. The plan that was put in front of us literally was 17 years long until that last original partner was going to be bought out. No year went per plan. Every year was a little bit different based on economic conditions. What we quickly realized in year two: we needed to think about who was going to replace us. We saw how long this process was going to take. And in fact, it took a little bit longer than that, 17, 18, 19 years with the whole COVID interruption. But I think as anybody in our profession will attest to who's been in ownership, it's been very difficult to identify and develop future owners. Just very difficult for a host of reasons that we probably don't need to get into.

09:40 – [Frank Ternasky]: And I would just add at that time when we were in our transition of these folks, we were looking at that time for who is it that's behind us, like Mike said. And there's this odd gap that happens in the architectural profession every once in a while when you get a recession or something big that scares a bunch of people away from the practice and they end up doing something else. There's like a missing generation. So, one of the gentlemen that we identified that was starting to buy us out is in that generation, but otherwise, it's almost like you skipped one. And so that process couldn't get started 15 years ago because those people weren't around. We had to almost skip down to the next generation to look for those people.

10:45 – [Jeff Adams]: Yeah, I think that's a great point that you were bringing up there. You know, 2008 we saw the big glut in the industry there where everything tanked and people that were in college started choosing different careers other than engineering and architecture and it created almost a 15-year gap there for 15 years of experienced staff load. And then COVID hits. And that wiped out even more of the few that there already were. So I think there's a lot of people that can relate to what you're talking about there with the shortage and it kind of created an even more abnormal phenomenon where you're trying to fill that leadership and ownership gap and working through an internal transition.

11:55 – [Mike Asaro]: Yeah. So we had identified some people over the years, but they either moved on for one reason or another or decided they weren't interested in ownership. And just quite honestly, we were running out of daylight, right? Knowing that you can't do this kind of internal transition overnight. It takes a number of years. You don't want to certainly put somebody in a position they're not ready for yet. We do have younger staff now that are interested in ownership, but the gap was too great. So that was one of the key factors that led us to look outside. And it's important to note too, I think, that we acquired a firm only three years ago, a smaller firm. That was another avenue that we explored to kind of do a couple of things: one is expand some services and get into a new geography, but also look for new leadership outside the traditional firm. And I guess opportunity came knocking and that's why we changed course from being a buyer to a seller at the end of the day.

13:30 – [Jeff Adams]: Well guys, is there anything in hindsight, looking back at it now? Are there things that you say, "Man, I wish we would have done X, Y, or Z" to try to help facilitate the internal side, or anything you'd share with your colleagues out there?

13:50 – [Frank Ternasky]: I think my position is I think we tried everything we could. We were as accommodating as we could be and knowing to try to pass down the knowledge too. I mean, there's the financial piece of it, right? It's just like being able to—as the firm is funding a lot of this, right, as it's going on because architects aren't independently wealthy people—how you're just going to get a loan for money and make a transfer. So there's the financial piece, and then there's the knowledge piece, right? It's and not just the knowledge of how you run great projects, but how you run a firm. Like Mike said, we had a long runway to do that. And as we identified those people and tried to start doing that and say, "Okay, here I want you to start taking over this piece or that piece," or "Here's how we come up with these" or "How we do all these different things," they either moved on because that's not really what they ended up wanting when they saw it, or for whatever reason they left the area. So we tried everything. We had some younger people that we brought in that were on the edge of being ready, but they were interested. And I think that's where we ended up even now. We have a deep bench of people that are here that want to do it. They just have to get to that level of knowledge in all those areas of running the company before you can walk away and know that the legacy that Homer built that we continued can continue on, right?

16:05 – [Jeff Adams]: Yeah. Speaking of that, Homer Delawie started this firm, died in internal transition plan going, you guys third generation started on the fourth generation. But then obviously when you go to sell your firm, you're breaking that trend. I mean, how did that feel from your perspective? What was that emotional hurdle you had to overcome?

16:35 – [Mike Asaro]: Yeah, that was not a small thing for us personally. I know Frank and I both felt that way and delayed even our decision-making for a couple years because of that. But also to the staff, right? It's something we preached and continue to preach. And this will feed into what we're going to talk about in choosing a partner going forward. It was one of our distinguishing attributes as a firm, we thought. And that's really leading up to the development and sustainment of our culture under the name and a reputation around town and regionally that we didn't want to change. We didn't want it to go away. That was one of the risks, if you will.

17:45 – [Jeff Adams]: Yeah. So you go through this process, you're like, "Okay, we've tried the internal, done everything we possibly can." You realized the writing's on the wall, right? It's just not going to work that way. Now what?

18:10 – [Frank Ternasky]: Yeah, I mean, the options that you have are internal sell, external sell, or shut the doors, right? We reviewed all of those things and obviously, we looked harder at the internal sell initially. Never really even considered closing the doors, that just never really was something that either of us wanted to do. And then I think as Mike noted, we were already working with Stambaugh Ness when we bought the other smaller firm, right? So we engaged you guys to help us with the acquisition of the other firms. We continued to look at that obviously those other firms. And then once we decided that going out to market on our own was the way to go, that's when we started talking to you guys about flipping the script a little bit from buyers to sellers.

19:35 – [Jeff Adams]: Well, Frank, I was going to point out, you guys did a great job selecting a good M&A advisor to go with. Little pat on the back right there. But kidding aside, that's a big process in and of itself, trying to determine that. How did you go about your decision-making on that? What is it that made you say, "Hey, Stambaugh Ness or any advisor is the right advisor for me?" What's that process like?

20:15 – [Frank Ternasky]: Lowest fee. I think is what we did. Is that what it was? No, Mike, I'll let you take this one. It was not lowest fee, put it that way. Not that it was a high fee.

20:35 – [Mike Asaro]: I know we did some benchmarking, jeez, it was so long ago now. That was one of the criteria for sure, but of course we reached out to a few different of your competitors. We had introductory calls with each of them and came down to a feel, I think at the end of the day. The fee thing we checked, everybody was right about even. I think your bench of services that you provide, not that we utilized all of it, but we knew the resources were there. That was important to us too. I just think you guys operated as a well-oiled machine and I think we noticed that. Even though you're on the opposite end of the country. Didn't matter. Keeping you up late at night with the phone calls.

21:40 – [Jeff Adams]: Well, we were able to give you an advisor that's right there in your neck of the woods, so that worked out well from that standpoint. He kept things going during the daylight hours.

21:55 – [Frank Ternasky]: Yeah. No, I think it had a lot to do similarly to what we looked at when we were either buying or looking to be purchased is the culture and the attitude of the people that you're working with. And even though we're in different conferences, we seemed to get along okay and there was a lot of banter and it was fun. It was someone that you felt like they were giving you their straight opinion, that nobody was pulling any punches. If you thought we were doing something wrong, you would tell us, and if we felt like something wasn't right, we would tell you. That's that comfort level of having an advisor you don't have to pull punches with.

22:45 – [Mike Asaro]: Yeah. Over the years we'd worked with different advisors, mostly for valuations. Long before we were ever talking about M&A, we had tried to reinvent the internal transition plan at least three times. At least three times. Working with different advisors. Oftentimes in doing that, we knew the lay of the land and who's out there. We weren't coming in cold to the process from that perspective.

23:25 – [Jeff Adams]: Sure. Well, I won't dig on that question anymore because that might seem self-serving. I think it's definitely one of those things that people face, right? It's one of the challenging aspects of this, figuring out who the right advisor is for you. And there's a lot of good advisors out there. Not... yeah, I'm biased, but there are some good advisors out there that are AEC focused. And I think the most important part I would tell people is make sure you get one. Especially when you're on the sell side. It makes no sense to practice on your baby, right? I mean, most sellers get to do this one time in their life. Trying to practice and do it on your own seems like a good idea, you feel like, "Hey, I'm saving cost and all that," but from what we've seen in the long run, you lose out on a net when the dust settles. I definitely think firms end up upside down when they don't have somebody in their corner that understands how to navigate the process.

24:45 – [Frank Ternasky]: I think you're fighting there, Jeff, a little bit of the architect's brain, right? Especially when it's architects more than engineers is we do so much in our daily job that we think we can do everything. We get exposure to every part of the project and it's like, "Oh, I can do business development, marketing, graphics, interior design, whatever comes up," we think we can do it. And sometimes that's right and most of the times it's not.

25:35 – [Jeff Adams]: You know, I had a guy ask me one day, Frank, "Tell me succinctly, why do I need you versus me just doing it myself?" I just met the guy and I'm like, "What line of business are you in?" and he kind of told me what he focused on, what his markets were, and I said, "Well, I want you to let me do your next engagement with your top client." And he kind of looked at me, turned his head like, "What?" I said, "I want you to hire me to do your next engagement." And he said, "No." I said, "Why not?" and he said, "You don't know anything about what we do." I said, "Well, do you know anything about M&A?" and the guy fist-bumped me right there, he's like, "Okay, you walked me into that one." But I mean, we're all that way. It's just human nature to think if you can do it yourself, why pay somebody else to do it, right? But we don't know what we don't know. But enough of that, let's move on and talk more about you guys and what your experience was going through this process. Obviously, there's a lot of different buyers out there. How did you go about the process of thinking who was right for Delawie and what factors did you consider in that?

27:10 – [Frank Ternasky]: Yeah. So, I think obviously with your help, we started a list and I think we didn't want to do the shotgun approach, right? We wanted to be a little bit more targeted. We understood that here. We did the cultural survey that you guys helped us with actually for when we were doing the buy side too. And we realized that was important. That was one of the early things that you said to us, Jeff, about, you know, "If the cultures don't fit, then it's not going to work. No matter how the finances look and all the other stuff is, if the cultures don't work, it's just not going to fit."

28:05 – [Jeff Adams]: I tell people all the time, Frank, there's no compensating for a cultural misfit. Don't kid yourselves as a buyer, don't try it. And as a seller, don't fall for it.

28:20 – [Frank Ternasky]: We took that to heart. You guys came up with a list, we came up with a list, we reviewed it, we tried to narrow it down. I know originally we said no on any PEs, right? That was kind of our thing that we felt was protecting us from getting into that situation where we're not going to be in a culture that fits. And you guys convinced us to put a couple on there just so we could see, right? And again, we don't know what we don't know. We'll put a couple in there that we think are reasonable ones to have in the mix. I don't know where we ended up with that list, but 50, 60 firms maybe that were targeted reach out. And I think that felt good to us. I think that felt like the right way to do it, to look at common companies from what you were doing and the companies that we know from what we were doing, some of the ones we had engagement with before so we knew their leadership, we knew how they worked. So I think that was how we came up with that list. Mikey, you have anything else to add to that piece?

29:50 – [Mike Asaro]: Yeah, I think that's generally right. In addition to the PE thing, we were also leery of—we didn't want to be part of a big E firm. We wanted to make sure it was big A. E is okay, we don't even have any engineering. Before, we just thought that would go more to the cultural side. So, that was probably it.

30:25 – [Jeff Adams]: So you go through this process, you start having conversations with buyers and there's different types. Frank had mentioned initially you didn't want any private equity, but we had some conversations with private equity, had conversations with a family office, which is who you ultimately ended up going with. Spoiler alert! But talk about that a little bit, what you recall from that process as you were getting to know these different buyer types and trying to think about how that meshes against Delawie's culture.

31:10 – [Mike Asaro]: The one I recall most directly, a PE, was pretty straightforward about what the goal was, right? It was assemble and flip. And that was just a hard stop for us. It was like, "Okay, that's what we were afraid of." I think in the middle of that process or downstream, those guys actually—I don't know how it happened, but stayed to the second round. I think we were interested, right? See what the money side of that would be. See if that was enough to make a difference. And that firm, who shall remain nameless, was probably the highest initial indication on the dollars, but it would not have gone over well. That's the one that I remember the most, kind of to answer your question, right? The ones that were successful were the ones where we had conversations like this, where we could talk about how we do business, a lot of what makes our business successful, what differentiates us from our competition, and those kinds of conversations. Those are the ones that subsequent calls happened from there. So those are the two things I remember in that phase of the process.

32:55 – [Frank Ternasky]: No, I think he got all the same for what I can remember. There were varying degrees of what's going to happen when we come in, right? That was like how's this process work for you, not Delawie but the firm coming in. We got them to describe, "Well, this is how we do it," and some of them are very straightforward, which was good that they said it upfront so we could eliminate them if that's not what we saw. Some people were like, "Yeah, we're going to change the name day one." We're like, "Well, you obviously don't know what you're buying. With a firm with our standing in the local community and what it's worth, there has to be some transition so that everybody understands we're still the same people and delivering the same service just under a different umbrella." So yeah, it allowed us to get a little peek into the mind of the buyer and that helped us narrow it down pretty quickly.

34:10 – [Jeff Adams]: So Leo A Daly, Hennick Group there—what was it that made them stand out to you when you first had your initial conversations with them? You recall anything that just piqued your interest and got you thinking about them a little more?

34:40 – [Frank Ternasky]: Well, again, Hennick being a variation of a PE, it was a family office, right? So that was a new one to us initially when we looked at them. We kind of had this hesitation because we had this, "Oh, they're a private equity," right? Then when we started talking to them, Mike and the team that he brought from Hennick just seemed very straightforward, reasonable people, had been through this before, owned some other larger architectural firms, some in town, some names you would never have imagined unless you were part of that and followed it that you would know that they owned. So it was very much that conversation that we were talking about where we just started talking about how we operate, what we do, so their interest was a little bit deeper than "What do your financials look like?"

35:55 – [Frank Ternasky]: At the beginning it was just Hennick, and then they said, "Well, we have this other deal in motion that we think you guys would match up really good with, but we can't say anything to you right now because it's not public, it's not a done deal, but when it is we'll let you know and we think that's really where you guys are going to be brought into because it's part of that firm's strategy." That's when Leo A Daly was mentioned. Initially they definitely separated themselves from the other private equity-ish people based on just the way they approached it.

36:55 – [Jeff Adams]: Well, I think not to get too much into your personal business, but I think we had a unique aspect to this process that we went through. The process was very long. It got stretched out. You guys had a certain level of financial performance, operating performance, that you had going on, and while we're in the midst of solicitation your business is just taking off the ground immensely, let's just say, such that your valuation was increasing significantly every week that went by. I know reached a point where after we had already started soliciting and talking to firms and engaging interest, realized, "Wow, your financial performance, you guys are on a different trajectory than what history had shown." Talk about that a little bit, whatever you'd want to share there, what that process was like and how we ultimately ended up saying, "Let's just hit the pause button for a little bit."

38:15 – [Mike Asaro]: Yeah. Kind of lost in the fog of it at this point, right? That we did hit the pause button and we went dormant for almost a year. But what had happened is we did name some principals a few years back right around the time we did the acquisition of the other firm. So we had new leadership, but not necessarily young leadership that was going to take us forward and quite honestly take Frank and I out of our ownership position in a reasonable amount of time. It helped with managing the firm, it helped with managing our growth, but it also fed the growth of our firm. I think it was from those two things, the acquisition and the additional principals that we brought on, made them shareholders, and just fortuitous timing because we got extremely busy. The valuations were not keeping up with what we projected if we just stayed the course. So we had to again hit the pause button and reassess. "What if we just stay in it?" And so we were committed to doing that, we talked about going back out to market maybe after a year. And then Hennick kept knocking on the door, just checking in with you and asking about us. I don't know if they were asking about anybody else, but you let us know they're asking about us. And it was the unsolicited offer that showed up, right? They said, "Do you want to talk?" We're like, "No, we're not ready to talk yet." "Well, what if we just tell you what we think now?" and we said, "Well, we'll look at it," and we did and that's what reignited the conversation.

40:25 – [Frank Ternasky]: I think even before that pause and reconsideration of where we were in our business, we did meet the Leo A Daly people, they were introduced to us at that point, it wasn't just Hennick. It was the Leo A Daly team and the team they brought out was a fit with us. The culture we knew was there. So that's why it was an easier kind of restart with them because we'd already gone down a certain path, checked the cultures, the people that came out—as the CEO of Leo A Daly always says his "beer test," did they pass the beer test? Like yeah, we can go and sit and have a beer and at least get through one if not two talking about things. They don't have to be specifically about the ownership transition or the acquisition or whatever it is, it's just someone you can sit and have a discussion with and talk about all things, right? So we knew that was there. So when we restarted back up with the second offer it was an easier go. More about the details at that point.

42:00 – [Frank Ternasky]: It wasn't easy to hit that pause button, right? Because to your point, we had checked all the other boxes, it was just about the valuation and the trajectory that we saw Delawie being on and getting the value for that. It was difficult to hit the pause button because the end was there, our path was there. It was everything but that last box. But it all worked out in the end.

42:40 – [Jeff Adams]: Well, I think so many times firms want to focus on the financial aspect of it and when they do that—money has a funny way of blinding you. You get focused on that and it becomes the priority. You guys took the time to get to know that the strategic synergies were there and the cultural fit was there. I tell people all the time that if you can get those two right, the money will take care of itself. I think you guys are a perfect example of how that all worked out. And it's because buyer and seller are both seeing each other for what they are. You see the value in the partnership and what the future can look like where one plus one really is more than two. Talk through a little bit about the due diligence process and what that was like. You get an LOI signed and now you're going through the due diligence working your way to closing. What sticks out in your mind there?

43:55 – [Mike Asaro]: Thoroughness. They took a very deep dive. No surprises, I don't think. But every aspect of our business was investigated. And the reverse due diligence—us on the Daly practice and also Hennick. We met with some of the ownership of Hennick and got a feel for what that family office difference really means. It wasn't a bait and switch in any way. These guys have a different plan. Obviously, we don't have a lot of experience in this to compare, but we felt confident that they were in it for the long run, which was important to the culture of the firm. Our due diligence was based on that—how we do business and how we take care of clients and things that will continue to resonate long after we're gone, we hope, right? That's what we were worried about. But pretty quick. They were well prepared. Frank said they've done it before, so they knew what they were doing. I kept telling them, "You're trying to find where we're hiding the pea, but we're not hiding the pea." Everything was really done professionally, never got into any disagreements about interpretations of anything. It was pretty black and white. And again, thorough.

45:45 – [Frank Ternasky]: I'll add because Mike's trying to be modest, I guess. Him and Lori, obviously his wife that runs all of our financial side with him as the CFO, got it all together before we started the process. I think we realized that when we were on the buyer side of some of the firms that we looked at to purchase, about how much of a disaster a lot of people's books are. And how there's no way you can illustrate to someone that isn't in your business day-to-day what you're worth and how you operate if your books are a mess. So Lori started that when she came in, I don't know how many years ago, 10-12 years, getting us—getting it together. And then knowing that this is the process that we wanted to go down, we're like, "These are the things they're going to be looking for, so let's make sure we have all of our I's dotted and T's crossed on our side, so that when we do say we're ready to go and pull that trigger, that it will go smoothly," as it did. A lot of that is Mike and Lori's doing, getting our financial act together so that when a big accounting outside firm comes in they can't find the pea because there is no pea.

47:45 – [Jeff Adams]: And that's a very important aspect. Firms that don't have clean books, they face repricing issues during due diligence and sometimes buyers even walk away when they realize it's all a facade, it's not really what it appeared to be on the surface. But you guys had done a great job of having your financials in order and detailed support supporting it and being able to explain your numbers. That all helps facilitate that process as you go through it. Talk a little bit about—now that you guys have been integrating for about three months now, three or four months now into the process—what's that been like? What's been the surprises? What's gone well? What have you learned from it?

48:55 – [Frank Ternasky]: It's still ongoing. It's a longer process, but I think that a piece that Daly is managing, even though this is their first acquisition in a long time, I think they looked at it from—there had to be a change management approach. You can't come in and drop everything on somebody the first day out of the gate. I think what helped is that they do have a lot of their senior leadership over there did come from AECOM. And that was a company that was buying up and maybe is still buying up and absorbing a lot of companies. They saw what didn't work in the way that they did it there because it was more of a heavy hand when they came in—"Well, we will be doing it this way, you will be doing it like this, it's going to change day one." They passed along that they saw a lot of great firms that they purchased just get destroyed because you gutted them. As much as you're buying a firm and a name and a financial performance, you're buying the people. If you lose all of the people, then what you bought is just worthless. So I think they figured that out living it on the other side and coming in and saying, "We know that doesn't work, so we can't do that." It's seeming probably for Mike and I and some of the other leadership people here like it's going to take longer, but I think ultimately it lessens the effect on the employees that it's not this massive amount of change all at once. They kind of left us alone. Like the first month was like, "Just do what you're doing. Don't even think about what we're going to be doing with the financial software and the IT and everything else." We've been rolling in—we have a lot of meetings to make sure that it is smooth. I was on one this morning. Still doing them. "What are we going to change next? What little thing are we going to add in?" I think it's been a good process because of that. It's just like managing the change, not just imposing it on us.

51:40 – [Mike Asaro]: Yeah. Part of it is what we wanted as well, becoming part of a larger firm. Kind of back to the beginning of why we did this—access to more resources. In wanting that, it's going to take some time for us to understand how they operate, how to integrate those resources into how we would otherwise have done it. Some of that is internal now. It's across the spectrum, from the financial side to the practice side, producing good design, good documentation, project management. It's kind of all getting looked at again. And it's a best practice conversation as well. It's not that we're being kicked to the curb. It's conversations that happen so we both benefit, both sides benefit. And we're already contributing—Delawie's contributed to the greater firm on some things and will continue to do so. It is still early. We should do this in a year and ask the same questions. But so far everything as advertised in terms of a positive has been a positive.

53:15 – [Jeff Adams]: Yeah, that's great. Well, guys, before we wrap up, anything you want to share just around why would an AE firm out there that's considering transition, why would they want to consider Leo A Daly and Hennick?

53:35 – [Frank Ternasky]: Well, I think one, your culture has to fit, right? If your culture fits with them, then you know it's going to have a better chance of everybody being happy at the end of the day. So I do believe that if you have the right culture and it is the culture that matches the Leo A Daly and Hennick team, then I think you're in a good spot. I think what we talked about with change management, I think what Mike mentioned about best practices—I mean, they're willing to listen. They're not coming in thinking because they've been around for over 100 years that they have it all figured out. Just like Delawie was around for more than 60 years, we didn't have it all figured out either, right? They understand that it's evolution. Nothing stays the same. You have best practices and you move forward, and as things change you have to be nimble enough to change. And they've said that multiple times that as we did to describe our firm, we're nimble, right? We get to move as the economy changes, as the culture of the employees change, we have to be able to maneuver and adjust. They've shown that they've done that and have been able to do it. So I think it's a good place for people that look at themselves that way. I think they're looking to grow, so they're looking for people that fit in that as well.

55:30 – [Mike Asaro]: Yeah, I was going to add to that, Frank, exactly. There is a desire to keep growing. And the mantra is "We're going to grow, but not for growth's sake," right? Strategic. Needs to be a fit. If there was a reason why, I mean, they came back to us because they saw the fit. So, I think that's as important as anything. Why them versus anybody else? I think we got lucky. Not totally lucky, we went through a process, but we were fortunate to end up with a great fit.

56:15 – [Frank Ternasky]: It's like your golf game, Mike. It's a little bit of luck and a little bit of skill and maybe a point and a half decent round, right?

56:30 – [Jeff Adams]: Absolutely. Well guys, I appreciate your joining us for today's podcast.

56:40 – [Frank/Mike]: Thanks for having us. Glad we could share some of experiences and hope it helped somebody.

56:45 – [Jeff Adams]: Absolutely. Well, thanks everyone for tuning in to AEC Unscripted, the Mergers and Acquisitions Edition. I'm Jeff Adams, and it's been a pleasure guiding you through M&A from the perspective of a couple of AEC principals who recently underwent a successful sell-side process. Please remember to leave us a review wherever you get your podcast. And until next time, keep pushing forward.

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