Why I’m Starting Relay Strategy Partners
4 min read
In 2019, the founders of a 700-person professional services firm were trying desperately to sell their ownership to the next generation of management. I was their lender, and they were a meaningful client of mine.
But everything went wrong.
After decades running the company, the founders all wanted to retire. To do so, they cobbled together a group of the usual advisory experts: investment banker, attorney, and lender (me). The investment banker and I both offered time into the deal negotiations freely on the premise that we would both earn 7-figure success fees at closing.
The company had a thorny and inefficient ownership structure. Instead of profits paid out along equity shares, all the firm’s earnings were committed each year to the staff as bonuses. The owners only received enough to cover their taxes. Anyone trying to buy out the founders would lose money on their investment from day 1.
This was just the beginning. As we worked together with management, we identified issue after issue, threatening the core premise of the deal itself. The company initially agreed that the current executives would buy out the exiting founders, but that was where the agreements stopped.
How much was the company worth? How would each business segment’s revenue impact buyer share distribution? How would decisions be made going forward? Could outside investors buy-in later, or would the business remain management-owned?
These questions arose and ricocheted among all parties involved.
The investment banker and I quickly realized the odds of our “success” fee were getting slimmer with each disagreeable conversation. As capitalists with fee targets to reach, our attentions drifted away to more salable clients. During the times we did engage, we were only helpful in the windows of strategy that aligned to our product offerings.
So, when the company decided “no outside equity”, the investment banker dropped from the email thread. When the credit risk profile ultimately became untenable, I couldn’t justify my time any longer.
The process grinded on.
After 2 years of active internal negotiations, the company halted the management buyout completely. They described the exercise as an immense waste of their most senior talent’s time, distracting from revenue production and the critical activities of leadership.
Ultimately, there was only one party who won in this protracted failure: the attorneys.
Counsel drafted, redrafted, and amended agreements that were never signed. Ownership structures were prototyped like modeling clay but never installed.
In total, the company paid more than $3,000,000 in legal fees. For nothing.
I’ve thought many times over about why this transaction failed. After much reflection, the words of Charlie Munger seemed to provide the most satisfying answer:
“It is not usually the conscious malfeasance of your narrow professional adviser that does you in. Instead, your troubles come from his subconscious bias. His cognition will often be impaired, for your purposes, by financial incentives different from yours.”
This client didn’t need an investment banker or a lender. At least not yet. First, they needed someone to understand their situation and help navigate their options.
I believe there were many options available to the company, but no one to patiently help make them achievable. We were prepared to close the deal in the 9th inning, but the company wasn’t even in the stadium yet. Nor did they know how to play baseball.
Even the most altruistic advisor cannot invest time to solve these problems if their financial incentives do not align.
I wish this story were an isolated event, but I’ve seen it happen again and again. This fundamental misalignment is everywhere. Successful owner-operated businesses are awash with eager support from investors and M&A advisors. But these resources typically have success pre-defined.
All the while, the patient, important work of helping owners write their own definition for achievable success is woefully shorthanded.
Today, I am launching Relay Strategy Partners to be a different kind of advisor.
Relay is fastidiously built to align our obligations with owners’ interests. We bring institutional-grade thinking and capital strategy into reach for founder-led businesses through a deliberately outcome-agnostic approach.
No pressure-driven outcomes. No foregone conclusions.
Our mission is to give owners clarity, optionality, and trusted partnership—so they can move forward on their terms and with confidence.
I’d be honored if you follow along or reach out to share your own story.
Note: Relay Strategy Partners is a good steward of confidential data. Case studies are a composite of multiple clients and identifying details have been masked to protect confidentiality.
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