“What the fuck’s a Super Puma?” asks the panicked voice on the other line as I answer the call. It’s the associate in lev fin who’s working on the deal with us.
I scan through the data room that one of Ephraim’s minions set up for the deal. The data room is a secured folder set up for every deal and considered a “data dump” for obvious reasons. Companies will upload everything from their historical financials, to legal documents, to granular detail bordering on the absurd—including dietary restrictions of independent contractors. It’s up to the bankers to sift through and figure out what’s important. I open the file detailing the company’s assets, which takes into account a number of helicopters, including a model called AS332 Super Puma. I remember spending an hour Googling the different models.
“Assume you’re asking because of those metrics we show excluding the Super Pumas?” I say.
“Bingo.”
“Pretty sure they’re the horseshit choppers they can’t lease, so on our call Tuesday we decided to exclude them from the asset base,” I say.
“I guess that makes sense, but we’re showing the capital structure develop over time, so would those assets be less horseshit in future?”
“No clue. Let’s assume they’re horseshit indefinitely,” I say. “And footnote it.”
“Works for me. Also, I know you guys have the latest version of the model. Before you send us the updated iteration, can you make sure to change the names of those final two sheets on the far right—the ones with final analyses?” he says.
I scan the Excel document. The final two sheets are titled “cash anal” and “total anal.”
“Just spell out ‘analysis’ for both, please. I spend all day on the phone with my analyst, and it’s like, ‘total anal looks good, man.’ I’m getting weird looks from the MD who sits in the office by me. And earlier today I heard him threaten to throw someone out the window, so trying not to be that guy.”
“No problem. V-twenty-seven of the model is updated.”
“Thanks. Later.” We hang up.
Having spent the better part of the last two days sifting through the thousands of files in the data room, I’ve pinpointed the fundamental flaw facing the company—it’s a shit business. It’s also a shit industry and the first indicators are in the annual reports of the comparable public companies.
Any annual report littered with colorful charts, glossy graphics, and pictures of management team members wearing hardhats with crossed arms surrounded by operations employees outside a pre-school in Guadalajara with a caption expounding their dedication to social responsibility is cause for heightened concern. Like the pitch books bankers create, the fancier the pages, the worse the fundamentals. Companies with fancy annual reports are typically in trouble. You show me an annual report that’s only black-and-white text, I’ll show you a good company.
For our client and many of its public peers, the majority of the assets they lease are to companies who have unhedged exposure to commodity markets. This is great when those commodities are trading at premium prices, but it is devastating in the current macro environment of suppressed commodity prices with no sign of turning. Between the structure of their contracts and the niche applications of their assets, it is only a matter of time before things blow up.
My phone rings. “Ernie?” I say into my headset as I press the button on my desk phone to accept the call.
“Hello, may I speak with Mister William Keenan?” says the female voice.
“Speaking.”
“My name is Tanya, and I’m contacting you on behalf of your dedicated American Express Corp—”
I hang up, remove my headset, and walk to Rhonda’s desk, where Ethan is standing behind her.
“So how do I renew my passport?” says Ethan.
“You’ll have to go to the website I sent—” begins Rhonda.
“Can you just do it for me if I give you the old one?” says Ethan as he places a weathered-looking blue passport with frayed edges on her desk.
“I can try—may need some more information, but lemme see what I can do.”
Ethan turns around. “Lookee, lookee,” he says. “Just the guy I was looking for.” He removes his iPhone from his pocket. “Can I get some juice? Just need like thirty minutes.”
“Sure.” Ethan taps me on the shoulder as he walks to my cube to charge his phone.
“Hey, Rhonda,” I say.
“Don’t’ tell me AmEx again,” she says. I nod. “Let me look into it after I get this passport situation figured out.”
“Thanks,” I say to Rhonda before returning to my cube, where a worried-looking Ernie stands, a hand massaging his forehead.
“Did you see Dick’s email?” asks Ernie.
“Oh boy, what happened?” I sit and open my inbox.
“He’s still hung up on how we got that updated LTV of eighty percent.” Ernie points to the haphazard email Dick wrote to us.
“Pain in the ass when they refuse to look at the numbers,” I say.
“Keep reading,” says Ernie. “He wants to see the calculation, but it’s clearly not just the division he wants, since that’s on the page. Assume he wants the full math, which is on a few different tabs.”
“So we send him the model,” I say as I read the rest of his email.
“That would make sense, but remember last time I tried to send him a spreadsheet with a calc and he got worked up and told us—”
“I don’t do Excel,” we say in unison, Ernie providing air quotes. Finally, I arrive at Ernie’s conundrum and the explanation behind his panic-stricken expression.
“We PDF it,” I say with authority.
“PDF the model?”
“Yep, PDF the fucker.”
“Okay,” he says slowly. “So I guess I could PDF the output tab, debt assumptions tab, debt sched—”
“All of ’em,” I declare. “PDF all the thirty-three tabs. If he wants the calculation but refuses to open Excel, then we flood him with everything, and he can figure it out.”
“You got it,” says Ernie with a smile as he spins on a dime and returns to his cube.
It’s the same story on every deal. It starts with an innocent-sounding client request at the tail-end of the call. “Just some rough math, back-of-the-envelope stuff, to see how it looks…just a page or two.” Thirty-six tabs and twenty-seven versions later, some number in the model irks the MD, since he never looked at the numbers in the first place. Analyst and associate must improvise—today it’s PDFing. Most days, it’s not that easy.
Most days, I try to remember why I’m here in the first place.
* * *
“Got the markup from Dick,” says Ernie as he approaches my cube. “And when I was in his office, Dick got a text from Wilson Winston, or Winston Wilson. Yeah, I think Winston is his first name.”
“Is he on the deal?”
“No. He’s the governor of Indiana,” says Ernie.
“How do you know?”
“Dick told me.”
“This guy have a hot daughter or something? What’s the point?”
“Dick just showed me the text and said the governor of Indiana asked him when they were going to play golf next.”
“So, unsolicited, Dick shows you a text from a guy just to impress you?”
“I guess,” says Ernie. “Anyway, looks like most of this deck focuses on acquisition targets, which I think we already have a bunch of stuff on.”
The next few weeks, we explore potential acquisitions for Project Litmus, but there are too few viable targets, and financing proves too expensive. We abandon that route and run a sale process with Goldman as a co-advisor. The CIM is drafted, and after turning comments for a couple months on Project Litmus_CIMv106, we’re halfway to vFFFFFF6.28 NDAs are signed. Management holds presentations for prospective buyers, some interested in acquiring the company and others simply interested in free food at high-end hotels. There is handholding during site visits and yelling ’cause we fuck up the hotel room booking and black-car pickups. There are letters of intent and first-round bids, then second-round bids. There are fake bids we ignore and low-ball bids we dismiss initially, then seriously consider a week later. There is mass skepticism around growth rates, but nothing that can’t be solved by paying LEK six figures to generate a third-party report corroborating the double-digit growth rates we market. A fairness opinion is issued and is as fair as you would expect, given it comes from another investment bank. There are late nights, early mornings, and productive calls—but mainly unnecessary ones. There are tears and sighs and yawns and even some laughs, but mainly the tears.
And then. Finally. There is a sale—nine times pro forma post-transformation adjusted after-synergy consolidated EBITDA from continuing operations. A financial buyer, a PE firm. The same PE firm who sold the company four years earlier for a higher multiple.