How Palm Tree Advises Private Equity Clients To Create Value in Complex M&A Situations (Podcast)

We’re excited to share this conversation with Palm Tree’s Rouzheen Myrick (SVP) with you! She shares about Palm Tree’s practice areas, what type of candidate the firm is looking for, what it means to “stay frosty,” and so much more.

If you’re looking for a challenging consulting role serving the M&A industry, Palm Tree may be the perfect fit for you. You’ll develop a unique skill set, receive world-class training, and work with some really cool people (like Rouzheen).

This top M&A advisory firm is hiring now across its four U.S. offices – learn more and apply today.

Additional Links:

• See open roles and apply
• Follow Palm Tree on LinkedIn
• Break into consulting with MC’s Black Belt interview prep program

Transcription: How Palm Tree Advises Private Equity Clients

MC: Stephanie Knight

Rouzheen, welcome to Strategy Simplified! We are so excited to talk with you today.

Palm Tree: Rouzheen Myrick

Thank you for having me. Glad to be here.

MC: Stephanie Knight

You get to help us kick off an ongoing set of discussions where we get to learn a little bit more about Palm Tree and the work that you do. Could you kick us off here by giving us a brief bio on yourself?

Palm Tree: Rouzheen Myrick

Sure. I’m a graduate of the University of Texas at Austin, CPA by trade. I started my career with Ernst and Young (EY), jumped into public accounting immediately after school. I specifically was in the audit practice for several years, then transitioned to the transactions support group. I think it’s now called the deal group. Essentially, that’s how I got introduced to mergers and acquisitions. I was primarily focused on financial due diligence, pre-acquisition analysis.

Then I wanted to see the whole breadth of the transactions so I looked for a job outside of public accounting. That’s when I started working for a public Fortune 150 company called AECOM. They were based out of Los Angeles, which is what took me out to LA from Texas. They were very acquisitive, and had a lot of divestiture, so it continued my M&A practice there. Then I jumped back into the middle market where I found Palm Tree.

At the time, it was 2019, and we were about 30-ish people. Jumpstart to 2022 and we’ve been through a pandemic and we are pushing 100 employees. So, it’s been very exciting growth. I’m excited to be a part of it and bring in some of that background and expertise that I’ve developed and bring it into the group.

MC: Stephanie Knight

Absolutely. We’re excited to hear you talk more about the group. So give us a little bit of an intro about Palm Tree overall – the type of work that you do, who you work, with your industries and practice areas.

Palm Tree: Rouzheen Myrick

I think, in essence, you can always google a company to get the gist of it from their website, but at the end of the day, we’re a group of people that are a bunch of problem solvers. We see the the spaghetti bowl and try to find some kind of order in it to straighten it out, to clean it up, and to create value. That’s the 30,000 foot view of what we do.

Once you actually go into the website and understand where the business and the consulting actually happens, we have three branches, or three pillars. Internally, we have the financial due diligence practice, we have the TnT practice which is called transitions and transformations. And then we have the investment bank. So those are groups that become as structured or separated as we possibly can be.

But in practice, it meshes all together because it all bleeds into the life of the transaction or the transaction lifecycle. And that’s where we get our tagline: transactions, transitions transformations. It really does interlace as far as our services, because I can come in pre-transaction, do what I do, and gain a lot of knowledge and understand, ‘Oh, there’s some implementation and work that we can do post-close, and that’s where the TnT group comes in.

And then down the line, the bank could potentially help that company, either work on a sale or the transaction maybe started with the bank, and they were looking for the consulting side of the practice to come in to help with that business and prepare it for sale. So it is it’s a very intermingled service providing company, but essentially, that tagline of transactions, transitions, transformations encompasses what we do.

MC: Stephanie Knight

That absolutely helps bring it more to life. On the website, the language that exists just below that is ‘Palm Tree is an M&A consulting and advisory firm born out of Private Equity.’ So does that mean the work was once exclusively in Private Equity? And now is broader than that? Help me understand that a little bit better.

Palm Tree: Rouzheen Myrick

Yes is the simple answer, I think. I think you could say the work was born out of Private Equity, but you could also say the individuals were actually born out of Private Equity, not at the moment anymore, because we’ve grown and people have come in from different backgrounds. But that’s where it first started. Individuals that were sitting in the Private Equity desks and offices and really understanding what those particular companies were looking for.

But at this point, we’ve taken that knowledge and expanded it. I like to think about the way Palm Tree is now as we’ve all come in with our specific puzzle pieces and our jagged little edges have fit in perfectly all together. Everything just meshes and fits together. It turns into a circle or a cycle of M&A consulting because ultimately, what Palm Tree likes to do, is come in, identify where the holes are in the big picture of the quilt of the company that needs us, and we fit in where those holes are and help them create a perfect and complete view.

MC: Stephanie Knight

Much of our listener base is interested in consulting. They’re thinking about generalist pathways in strategy or operations consulting, or maybe going a slightly more specialized route from an industry or functional perspective. How does the M&A consulting that Palm Tree does fit in terms of the overall consulting landscape?

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Palm Tree: Rouzheen Myrick

I think our niche is that middle market. As I mentioned to you before, my background is in public accounting, and then I had some actual public company experience. Both of those jobs were very consulting-based, even the in-house M&A side of a public company, because you’re constantly going project by project and trying to understand what the problems are and trying to fix them as you go.

With Palm Tree, the specificity or the view that we have is in that middle market space. And, to be a little presumptuous and think that your listeners are looking to me for advice, I’m gonna jump and assume that. If I had this crystal ball when I left college, I would have jumped into the middle market so much sooner. I’m very grateful for the path that led me here and the experiences that I did have, but I am somewhat envious of our analysts that come in and get to experience that middle market experience firsthand because it’s so hands on.

There is no seven layers of review and then ultimately you’re exposed to the client or then you’re exposed to the target. You’re right there, you’re hand in hand with the person who sweat, blood, and tears began the business or you’re there with your client who’s really trying to evaluate the business and how to either get a better deal or make sure they’re not buying a lemon.

You are in the weeds and you’re in the trenches with your client. You sort of get that experience I think when you’re in the bigger consulting firms. I think it’s at a different level and a different pace. With the middle market and where we play, there’s no play your small role and then maybe take a step up. It’s get in there, roll up your sleeves, get your hands dirty, and learn as you go quickly.

MC: Stephanie Knight

You’ve mentioned middle market a couple of times. One standard definition might be a business in the range of 10 million to a billion dollars. Is that the way that you define middle market at Palm Tree?

Palm Tree: Rouzheen Myrick

Yes, generally, either top line or an EBITDA bottom line type of view. A 10 million top line company would probably not be in the middle market. but we wouldn’t turn them away. But absolutely. We tend to stay in the high 10s to the 500, 800 million top line revenue. That seems to be what comes into our sweet spot. But we’ve definitely had ranges on both sides, depending on the size of the clients and the targets they are taking a look at.

MC: Stephanie Knight

I understand, Rouzheen, that your primary focus area is financial due diligence. Could you tell us a little bit more about that, and Palm Tree’s approach in this area?

Palm Tree: Rouzheen Myrick

Sure. I recently spoke to the women in finance group at Stanford, and I was working with a colleague who is renowned for his analogies, and I feel like this one works the best. So if you’re thinking about financial due diligence, and for anyone who’s looking for a home in this crazy market, this will ring very close to home. If you’re looking to buy a home, you’re essentially the Private Equity company looking to buy a company.

When you’re going into that, you’re gonna go take a look at the house, you’re going to go potentially put in an offer, and you bring in an inspector to take a look at the home, to make sure that the pipes are good, the foundation is good, etc. I am that inspector for the business. I come in with my quote unquote, checklist, which is all accounting based. I take a look at the financials and make sure that we don’t have a dud, we don’t have any hidden holes in the ground and the foundation is off, or they haven’t been accounting for something properly.

Because ultimately, what happens is, our clients, at least on the FDD side, have gone either to a lender or some insurance company or even their own investors, and said, ‘Look, we’re underwriting this as an investment. And here’s our validation for this being a good investment.’ And that’s where we come in and help them with that underwriting process.

So it’s really incumbent on us to ensure that the financials that have been presented are either accurate, or we are adjusting them to as accurate as they could be. And we’re also evaluating what that run rate will be so that they can have an idea of, ‘what were those one time items that we’ll probably not continue going forward?’ And removing that noise to really understand what that cash flow for that business would be.

MC: Stephanie Knight

As you go through this work and process, do you normally end up on the end of the spectrum of just verification and validation of what was already there? Or do you often find things that need to be brought into a new perspective, the numbers change, and that helps lead to different decision making.

Palm Tree: Rouzheen Myrick

Sure. The ‘trust but verify’ phrase is a big one. It really depends on how the business prepared itself for sale. If they thought ahead and brought in maybe a Palm Tree, maybe an investment bank, maybe someone else to help them build up their financials and really present it in the best foot forward, that makes our job a lot easier. We can leverage the work that has already been done. It’s a lot more verification than it is us actually digging in the weeds and trying to normalize.

But if it’s a company that just up and decided, ‘I’m done, I want to retire. I’m gonna sell this business and I haven’t done anything with my financials as far as a cleanup or a look back.’ They have no audit, they have no review, they have no compilation – that one would take a lot more time and it’s not just validation, but ‘Oh, you are not recognizing your revenue properly,’ and recasting that whole P&L essentially, and taking a look at what that business would have been like had they implemented the right accounting policies.

MC: Stephanie Knight

Which I imagine is going to be quite an eye opening process to the leadership of that company as well, right?

Palm Tree: Rouzheen Myrick

Absolutely! All those pitfalls are what we try to address with both sides of the Palm Tree cycle. You’d mentioned who we’re working with, and I primarily am looking at Private Equity as my clients – it’s 80% Private Equity, 20% companies – on the investment bank side, it’s flipped. It’s almost 80% small businesses – people that have sweat, blood, and tears into their actual business – and 20% other financial firms.

Depending on where in that cycle you are really determines how to implement the Palm Tree way to create value. But because we see all sides of that circle, it really makes us prepared and understand where the pitfalls could be, so we can kind of position our client, whoever it is, in the best way forward.

MC: Stephanie Knight

You mentioned that Palm Tree has been growing significantly. As you think about bringing new people in now, are they automatically aligned to one of the three areas of the business? Or do you work across areas? Do any of your colleagues work across those areas?

Palm Tree: Rouzheen Myrick

Yeah, we’d love the idea of a generalist, because I think at certain levels, so at the analyst and senior analyst, maybe even Associate level, we’d like for them – that’s actually our tagline of trying to promote people – we want you to experience all the facets of Palm Tree. No one wants to be pigeonholed early on in their career.

I think the folks that go into their universities and absolutely know what they want to do and that’s what they do, I mean, there’s probably a few of those. But you’re crazy. Either that or you’re just only pigeonholing yourself and not experiencing something else.

So, at least with what we can provide, we want individuals to be able to get that FDD background and then see what it’s like in the TnT practice and really implement the asks of an office of a CFO and then potentially go into an investment bank. You don’t necessarily have to be sleeping under your desk on a pillow in New York to get the investment banking experience. You can actually have a normal experience but still be in the weeds and in the trenches with some really smart people and understand how it works.

MC: Stephanie Knight

That last piece is probably breaking news to some people, just really shaking their understanding. And also blending the lines between investment banking and consulting. There’s a huge segment of prospective consultants or perspective investment bankers who go through that decision making process and may not have considered a sweet spot with a company like Palm Tree where they get the chance to interact in both types of roles.

Palm Tree: Rouzheen Myrick

Right. Like I said, and it may have just been we were getting recruited by Big 4 at the time, and everybody was waving that fancy Big 4 flag and wining and dining us and going into that big industry and having the big clients just had so much flair to it. And it was great experience.

I think there’s something to be said about building your career in that caliber, and really understanding how things work. But, boy, the middle market was the best kept secret of the finance and accounting world. So it’s not for everybody. There are some people who really thrive in that intense ‘sleep under your desk’ type of environment. More power to you if that’s what you want to do.

MC: Stephanie Knight

Let’s make it practical and tangible a little bit. You talked to how you work in the middle market and that allows you to be close to the action. It allows people that you bring on to onboard and on your teams to really have direct impact in terms of their relationship with a client and the impact of the work.

You also mentioned how you overall take a strategy to help fill in the gaps where those gaps are needed for your clients. The combination of these things, what’s the impact on the way that you structure your engagements and staff your teams? You can speak in generalities or you can pick out a specific project or two, but what does that look like? How do you structure your projects and staff your teams?

Palm Tree: Rouzheen Myrick

I’ll focus more on the financial due diligence side because obviously, that’s where I live. My engagements will generally be three individuals. Me overseeing the engagement, an Associate or a senior Associate that’s leading the day to day, and then an analyst that’s actually building out the financial workbook.

We live in Excel, love our numbers, love our shortcut keys. It’s always a badge of honor to not use your mouse. (laughs) And the analysts are the ones that then get the trial balance level information and really work through building our data book. If you’re in the M&A practice, or you’ve done any type of consulting work related to Private Equity or acquisitions, you know what a Q of E is – a Quality of Earnings. That is what our ultimate output is.

It can come into an Excel format, it can be a PDF report, but what it essentially is three columns, and it usually represents an annual period of the P&L. It starts with EBITDA as reported. Your Earnings Before Interest, Taxes, Depreciation, and Amortization, and goes down to EBITAA on a diligence adjusted or pro forma basis. So what that tells you is, ‘look, here is the bottom line of the business, what your run rate is of what you need to run this business, and all of the adjustments above are the things that we identified during the due diligence process.’

So that Q of E, or Quality of Earnings, is what our clients would ultimately take to lenders to say, ‘hey, look, we brought in a third party to validate – the inspector for the house – they take it to any reps and warranty insurance companies to say, ‘look, we’ve done our due diligence, and here it is.’ And then for any type of post-close, making sure that they’re aligning with all their debt covenants, they take our work and kind of roll it forward with their modeling and things like that.

MC: Stephanie Knight

On average, how long does it take for you to do the analysis to come up with the Q of V perspective?

Palm Tree: Rouzheen Myrick

On a super high end turnaround quickly, no report, we can probably get something around in two weeks where it’s just a preliminary view. Really tight, have gone through enough discussions with management to make sure that we didn’t miss anything, I’d say on the four week side.

That range will obviously be shifted around based on how quickly we get the data. So we mentioned how sophisticated the sellers could potentially be. Now, if they’ve had someone helping them and they’ve got numbers ready to go, that obviously goes a little faster. The folks who haven’t closed their books in six months, and aren’t really sure what an accounts receivable aging is, that might take a little longer.

MC: Stephanie Knight

Is it traditional that for your analysts and Associates, they would be aligned to one engagement at a time or multiple?

Palm Tree: Rouzheen Myrick

Ideally, we don’t want the analysts to be straddling too many. If it’s one engagement, it’s an engagement that really has been utilized fully. If it’s a couple of engagements, they are generally in the same industry or client or they’re kind of staggered appropriately so that they do a little extra work on this engagement and then move on to the next while they’re waiting for the data to flow in. But on the analyst level, we don’t really want them working on more than two deals, because we’d like to them to stay focused.

That number tends to expand as you move up and generally works that way because you have more capacity to be able to get into more of a review process and take on more deals. While we have had the luxury of experiencing some really enormous M&A activity from this time last year to now, probably the most deals I’ve ever had in my career at one time. I don’t think I’ve ever had as many deals as I’ve had now, which is really exciting.

The struggle and also what keeps us up at night is always making sure the quality is still there. We are making sure that our reputation is still the most important thing because we can’t change that, right? Our clients rely on us to say, ‘look, we’ve used Palm Tree to give us a view of our financials.’ If that shakes in any way because we got too busy, and that shook our quality, that’s never a place we want to be. So that’s a really important balance. So anytime we get so busy where we feel like we’re knocking on that door, we reel it back and make sure that the quality is still there. That’s really important to us.

MC: Stephanie Knight

You came from a career pathway as a specialist, right? You’re a CPA, you spent time at a big four firm. But I anticipate that at the analyst and Associate level at Palm Tree you may not only be looking for those specialists as well, correct?

Palm Tree: Rouzheen Myrick

That’s correct. I certainly love the story of pulling people out of the public accounting world and telling them ‘there’s light at the end of the tunnel.’ But this is for people who are really ready to shift and make that change, because I will fully say that there’s just nothing comparable to getting that experience of going down that Big 4 path. It’s just not the only path.

So we have had the pleasure of having individuals come straight out of undergrad with zero public accounting experience, even very minimal accounting experience, I think we had one individual who’s a computer science engineer. But just because he had that – and we should trademark this – but he had that “frostiness” and because of that sense of ability to roll up the sleeves and be a problem solver, and be able to be such a good team player, he really picked it up quickly.

Bless him. He didn’t know what a debit and credit was but he figured it out and to be able to go into an FDD role and to figure it out as you go, requires a specific individual with a personality that’s, ‘I’m gonna sink or swim and I’m going to do my damnedest to swim,’ and he did a great job.

MC: Stephanie Knight

Those qualities of being willing to roll up your sleeves and dive in, certainly, I’m sure, intellectual curiosity about the work and the space. You mentioned Palm Tree being a group of problem solvers. It may be in one of those veins or something else, but what keeps you at Palm Tree? Why do you like working there?

Palm Tree: Rouzheen Myrick

The work is really challenging and great. It’s definitely refreshing and never the same robotic type of process. I think also finding a corporation or environment or, I’ll just say it, a work family that aligns with your values and perspective, or at least just respects that other people have a different perspective is what keeps me at Palm Tree.

The leadership, and I say this vaguely because I think it trickles down to all facets of the business and the company, but if it wasn’t for the leadership, I think the other people wouldn’t have that same culture. It’s the whole tone at the top thing as I think my generation came to understand. It was very important because we came about in the times of Enron and WorldCom, and understood what tone at the top meant and how badly you could get infected and the disease could go down.

In that same breath, when you’re healthy at the top and very aware of what your shortcomings are and open and honest about that, it provides 1) an environment where people are not afraid to provide feedback. It provides an environment where people are not afraid to say, ‘I don’t understand it, please help me. Explain this to me.’ And 2) if you’re asking those types of questions, then your client isn’t asking those questions. So it’s just adding value to our work product because no one’s afraid to speak up and to collaborate and listen to each other.

MC: Stephanie Knight

You’ve already started to speak to this a little bit, but add on there in terms of why should people think about coming to work with you at Palm Tree.

Palm Tree: Rouzheen Myrick

If you’re frosty, you have to apply! It’s the frostiness. I will give the credit to our dear MD, Dave Wolinsky, who just started one day saying “stay frosty” at the end of a meeting. I think it’s evolved on what that truly means. I still don’t really know what the full definition is because ‘being frosty’ is one thing, but ‘staying frosty’ is also something else.

So I think being frosty has that connotation of rolling up your sleeves and getting in there and really problem solving. But staying frosty means you need to take care of yourself. You need to take a step back and make sure that you’re ensuring that you have time to work on your mental health, your physical health, that you’re eating well or doing whatever it is that’s a priority in your life that will maintain your staying of frosty so that then you can be frosty.

It touches a lot of different factors and that phrase has become a cultural integration of our business and actually has become one of our core values. So it’s a really important part. So when we recruit and when we interview, there is no direct question you can ask, but those are the types of facets you’re looking for when you’re interviewing someone.

So if you do feel like that’s an environment you thrive in, I would say by all means, apply. If you feel like you need to have the same thing over and over again, and that structure feels good to you, and that’s the safe space for you, by all means, find that. It’s just probably not going to be at Palm Tree.

MC: Stephanie Knight

Fair enough. Lots of growth, lots of change, and you’re still growing, you’re still recruiting. What can you speak to, at this moment, about the type of people that you’re looking to bring into the firm?

Palm Tree: Rouzheen Myrick

The frostiness is important. I would say the accounting background is really, really helpful. It just gives you that leg up to be able to speak the language of a business. It’s not a deal breaker. But it certainly helps you speak the language on all fronts. On the banking side, on the TnT side and the FDD side. Having that accounting and finance understanding and just being able to speak the language is super helpful.

Having Excel skills, whether that’s a couple of formulas, shortcut keys, just really being able to navigate Excel. I would say, in hindsight, one of the best things that worked for me was just being able to trace how things were done. And you can kind of teach yourself, what’s the best practices going forward, or Palm Tree can help you there.

But if you don’t know how an Excel sheet works, or how to build one and just kind of open it up and work with formulas and set something up, that’s something you can Google, you can look on YouTube, it’s just kind of like self care when it comes to what finance consulting would require.

MC: Stephanie Knight

And someone who’s looking to go into your recruitment process, what’s one piece of advice you’d give them?

Palm Tree: Rouzheen Myrick

Be honest. There’s no need to hide things. I will say that when I was looking for the next move in my career, and I updated my resume, and I hadn’t done that a long time, I decided to put that I was a mom at the very bottom. Probably not something that a lot of people put. But then in hindsight, thinking about it, I don’t think I wanted to be a part of a company that saw that and thought, ‘Oh, we don’t want her.’

So that was a really good way for me to filter out companies and maybe it was a good way for companies to filter me out. But Palm Tree leaned in. They immediately asked about who the kid was and really invested in it. And it wasn’t just background of FDD or background of whatever I’ve done in the M&A field, but really getting to know me as a person.

So, personally when I look at resumes and I’m interviewing someone, I love the bottom section where I get the little tidbits of what you do outside of your day to day. So being honest about who you are and what you want to do and where you see yourself and how you can add value because you’ve done your research and you’ve done a little bit of due diligence about the business and the company, that goes a long way.

MC: Stephanie Knight

Rouzheen, that is a fantastic transition. We really appreciate you taking the time to talk about your work and your firm. We always like to get to know our guests on a personal level as well. So we’ll just close out here with a couple of additional personal questions.

Could you share one thing about what you like about living in Texas? We’ve already heard how you’ve gotten to live a few different places. Of course, right now you’re in Texas. What do you like about it?

Palm Tree: Rouzheen Myrick

That’s right, I have had the honor of being in a lot of different states and cities, but nothing beats my Texas tacos. I’m a very big fan. Everything’s bigger in Texas, especially our tortillas. We do tortillas well here, and also, I went to the University of Texas, so a lot of college friends still live here. So I’ve gotten to basically come back and reconnect with college buddies who are all now moms and dads, and all of our kids play. So it’s a really valuable time in my life. I’m really excited to be back.

MC: Stephanie Knight

What is a favorite memory of that part of your life? From your time at Texas McCombs?

Palm Tree: Rouzheen Myrick

For all the sports fans out there, I was at the University of Texas from 2003 to 2008. So I hit a pretty exciting National Championship at the time. But it wasn’t the national championship that was my favorite memory. It was the couple of games before, early on in the season, where everyone started saying, ‘Oh, maybe Texas can take this.’

We beat Ohio State in Ohio, and I have never seen Austin like this. People just came out of their apartments and dorms and the entire city just got overwhelmed with all these people. It was just this massive party and my now husband asked for my phone number that night. (laughs) So it worked out really well.

MC: Stephanie Knight

Multiple great reasons why that would be a favorite memory! You you are a leader now at Palm Tree, you’ve gotten to accomplish a lot professionally, you’re a mom. What’s still something that you’re looking for in the future? What’s something on your bucket list that you’re hoping to do?

Palm Tree: Rouzheen Myrick

It’s a really good question and this is gonna sound super pretentious. But I would like to say that I have hit all the things that I really liked and I’m really content with where I am. But I will share that I’m hoping for my 40th that I will be on a boat somewhere off of, I’m not sure which island, but that’s where I want to be for at least a week without the kids.

MC: Stephanie Knight

A week off of work and without the kids! I wish you the best in coordinating that. We just want to thank you again for spending the time today. It’s been a pleasure to get to know you and get to know more about the firm.

Palm Tree: Rouzheen Myrick

Likewise! Thank you so much for having me, really appreciate it.

Conclusion

Thanks for joining us today. Click here for more information about Palm Tree, who they’re hiring, and how to apply. As Rouzheen shared, an accounting background is strongly preferred. But at its core, Palm Tree is looking for problem solvers who are interested and curious to apply themselves to this type of work, and those who will stay frosty.