Chuck Yates Needs A Job

0:20 Stephen Zink is in the house, Keith Barron's, Evan Smith, Brad Nelson. Cool. You guys come in. Welcome to you. Thanks for having us. All

0:30 right. So this is crazy. Tell you Evan, because I still don't believe this happened. Keith calls me up and he said, I found a family office that'll actually invest in oil and gas. And that's

0:43 like the unicorn out there. Everybody says that. You know, that's all you hear on Twitter or all you hear about is, oh yeah, all these family offices wanted to do it. And I said, BS, there's

0:53 no way. Is this true? You all really have, have, have found family offices that'll do oil and gas deals? Yeah. So, you know, tell me about this. I think, um, I think the way this is kind of

1:06 a ball, you know, Stephen, so Stephen's his family owns. We've had all these family owned businesses kind of gravitate towards Stephen's over the years related to seller businesses. So we've done

1:16 a bunch with family offices, you know, Actually, I'm gonna kate you all. Tell some about the,

1:22 people always get blown away and just for a reference sake, I worked for Stevens from

1:29 '94 to 2001. My running joke was always wanted to do well, but not well enough to get promoted a little rock. Just kidding, Warren, but I was there and people always get blown away when you talk

1:40 about just the vast amount of holdings 'cause Jack Stevens was on the Forbes 400 for years Yeah, yeah, so they really went and Jack started the business in the 30s and they started, I don't know,

1:52 shortly after they formed, kind of making principal investments and they invested in oil and gas space in the 50s and the family still owns Stevens Natural Resources. But I think in our business,

2:07 we just saw these family owned businesses got comfortable with doing business with the Stevens and reach out and they'd sell their businesses and they became family offices. And some of those family

2:18 offices are looking to invest in oil and gas. And we took a deal out, I guess about four years ago, private equity deal, we took it out to all the typical PE funds, and we didn't get any kind of

2:31 reception. It was clear the market had changed. And so we stood up a family office coverage group about seven or eight years ago, really a financial sponsors coverage group covering family offices,

2:44 cover like 350 family offices and started working with that group to identify which of their families were interested in investing in oil and gas. And they started trickling in, and I think we're

2:54 probably at, off their list, probably like 50 to 70 names, something like that. And we closed two deals last year. So there is money coming into the space. And then Brad's gonna talk about a

3:07 deal that him and Evan are working on that is a really cool deal. So it's a continuation vehicle, but we're instead of going towards. to hedge funds or institutional groups for that capital or

3:20 going to family offices. And we think that's gonna result in a better valuation versus what you'd get from a hedge fund, but raising 500 million and it's going well. So I don't know, Brad, you

3:33 wanna talk a little bit about that? Yeah, sure. So it's an in that's opportunity

3:39 the upstream space. I'm trying to be a little bit vague about it now, 'cause it'd be a little bit coy, 'cause we're - I'm gonna guess it. We'll do that

3:48 I feel like we're harnessing the magician from Johnny Carson. No, the thing is, we're in probably the seventh inning of the process. It's been a pretty lengthy process. And so, yeah, the

3:58 company itself has got quite a few shareholders that are educational endowments that are generally on the left and the right coasts. And like a lot of these just don't want to continue to own

4:11 hydrocarbons or can't for a number of reasons. The company, they've been around for the last 35, 40 years. They've got kind of a new wave of management that has been running the show for the last

4:24 five or six years. And they're basically looking to recap the shareholder base with new partners that are looking to take the company to the next 20, 25 years. And so at the same time, because of

4:37 their shareholders, they've been a little bit restricted on growth. So not only do they want to take out the shareholders they're looking for growth capital as well. And so kind of piggybacking on

4:49 what he said, we've got a handful of families that are super intrigued in the asset base itself, kind of the various ways that the company wants to grow. They're intrigued by that. But no,

5:02 there's probably at least 15 to 20 families that are sizable that are looking to cut pretty good checks. Yeah, and one thing I left out, so the way Our family office coverage crew. kind of

5:14 qualifies families that they want to work with. They need to be able to cut at least a20 million check. I mean, this is rough numbers, but at least a20 million check per deal. So, you know, the

5:26 range on, you know, the investment size for these families is like 20 to 100 typically. And then we have some that can, you know, cut much bigger checks and one of the families and that deals

5:38 looking at a200 million check. Most of these families that we're working with are non-olan gas families, so they're a fairly clean slate, but, you know, they're for real. They've started

5:48 actively investing already, so we're not trying to convince them to invest in oil and gas. They've already decided to do it. And again, the list keeps growing and, you know, hopefully we get

5:58 this deal done, but there's, I think, several behind it starting to rub. Yeah, no, as Keith mentioned, I mean, we, so we're in year 15 here at Stevens. And look, I'd say that either on one

6:09 side of the fence the other. We probably closed 15 to 20. transactions that involved a family, you know, in one way or another. And so it's not, you know, all that new from from our perspective.

6:21 But what I would say is that, you know, during the previous, you know, before Biden was in office, you know, that call it 16 to 20, you know, the average oil price was, you know, 50 to55

6:32 barrel and gas was fairly low in that time period as well. Getting family offices to divert their attention away from these other sectors that were on fire at the time was, was difficult. And so,

6:44 you know, really in the last three years, as Keith mentioned, we've had more and more families that are trying to get out of what they've previously been investing in and are showing a lot of

6:52 interest in upstream water. Yeah, such a good point because I tell people all the time, and I think this is very underappreciated is investing is a relative thing. It's not an absolute thing.

7:04 Because you hear all the time from energy people, it's like, well, I can buy PDP at PV 15. It's like, well, I can invest in the video and make 400.

7:16 20 minutes. I like the fact that you brought that up because I've just seen way too much of that

7:23 and people not realizing that.

7:27 The family office interest is this tech hit a little bump and they started looking around just being opportunistic, not covered by green type issues What can you even generalize? I think it's a good

7:42 question. I think

7:44 that a lot of the families like maybe looking at our own family office, we would show our family office, we've shown them opportunities ever since we've been there. But back in the shell boom, we

7:58 might show them opportunities and the way the valuations work, you had to put a lot of value on the upside. And if you kind of back that into like, you know, your effective kind of cashflow

8:08 multiple, you're investing it was off the

8:12 and we would bring those deals to the family office and they'd say there's no way i'm coming in at ten times even dar whatever it was right but i think a lot of it if you look at our family office are

8:23 like okay all this capital is leaving the space for kind of irrational reasons maybe in in their view and we know hydrocarbons are going to be around for a long time the energy transition is going to

8:34 take a long time and because that capital is leaving the space you know we can come in and invest it two to three and a half times cash flow and if I have if I can you know hold for a longer period of

8:47 time it's kind of a pretty easy investment thesis so we've seen families just gravitate towards that it's not only oil and gas I mean they're targeting some other similar sectors but definitely oil

8:58 and gas they see it and we've also had a lot of luck with European family offices so they are closer to you know kind of what's going on in Russia and getting cut off from gas supplies and

9:11 and they're looking at the US. And we've been over there a couple of times and we have a pretty good little stable of European family offices that are actively investing in US-only gas now. So it's

9:23 a real effort, and I'll say this too. Warren and John Stevens are actively involved. I mean, they're involved in the process that these guys are involved in. We have a symposium in May. Warren's

9:37 gonna participate. John, of course, is gonna participate John goes on these meetings to Europe with us. And, you know, he's able to send meetings up. And he's John. Oh, sorry, John Stevens.

9:46 Warren's son. Warren's son, okay. I think I met him when he was 12. He's grown up. He's grown up. Yeah. And he loves this and he, you know, it's funny. Like when some of these meetings,

9:59 Brad and I've tried to set up with these family offices and we don't, you know, a banker, to them, a banker's trying to set up a meeting. They don't necessarily kind of respond and John reaches

10:10 out, they respond. And, you know, these guys kind of run in packs and he's been really, really helpful. So anyway. But going back, I mean, I think a lot of it kind of goes back to furloughed

10:19 gas. It's, you know, real assets. And a lot of these families have kind of real estate backgrounds and there's some synergy there that, you know, they can underwrite oil and gas assets. You can

10:28 get an engineer to underwrite a decline curve. And, you know, there's a yield. And like you said, you can buy something for three or four times. I think there's a lot of, you know, correlation

10:40 to some of these families who have maybe real estate background or other cash flow asset background that they can, you know, relate to oil and gas and more easily, you know, underwrite deals like

10:50 that. Yep. So check what, do you follow up on that too? The, as you know, the institutional capital on the coast have largely left the conventional, you know, energy space. And so we used to

11:03 do a lot of marketing efforts, you know, on the East Coast and the West Coast And really, I don't think we've done much of that for the last call. four, five, six years. You've had that capital

11:13 pulling away. The other thing I would say that is impacting is just valuation. I think it gets back to economics as well. We've looked at, obviously, there's a lot of different niches within

11:25 conventional energy, but generally speaking, eight, nine, 10 years ago, these companies were trading at eight to 14, eight to 15 times cash flow EBITDA, and today they're trading at three to

11:37 four times EBITDA. So these families are seeing that. And you're paying me cash along the way, too. And you're getting a yield, and you're getting a dividend, and that's different, too. So

11:46 anyway, all that's kind of played into it. So one of the funniest Stephen's stories I have is if you want to make the parallel to the shale revolution and trading at crazy multiples, I was there in

11:60 the late '90s, and

12:02 the family was actually a very aggressive investor, and that was the tech bubble, right? I mean, the internet bubble. and I was in a meeting where someone suggested to John Jacoby, who used to

12:14 be Jack Stevens's right hand man, that we should be willing to pay X dollars per eyeball that was looking at a website. And John Jacoby said something to the effect of, Hey boy, your eyeballs

12:27 ain't that pretty. It was great, but okay, so level set, you're, let's go back to kind of the heyday of the private equity guys You had a company, you're raising cash, you come see Chuck Yates

12:42 at Cane, we have a meeting, we have an engineers dig in, we propose term sheets, we control the board, all those kind of crazy things. How does the process look like with a family office?

12:59 What's kind of similarities? What's differences? And generalize if you have to, but at least might take on family offices each one's kind of unique and has a lot of it. different spent on. Yeah.

13:09 And I'll start and let you kind of finish with, you know, kind of your actual process you're working on. But, you know, if you look at it in the heyday, we probably had 30 to 40 PE funds that we

13:21 followed, you know, Kane Anderson being one of them, all in Dallas, Houston, New York. Now we have like 50 to 70 family offices that, you know, we're spending a lot of time with that we cover.

13:33 And there, there's a lot in Texas, but they're kind of all over the place, right? And generally, they're probably from a, just a capital, you know, you know, kind of capital that they're

13:45 looking to spend on a yearly basis. It's probably, you know, they're not, they're not a7 billion phone like in-cap was, but so one of the families has about a billion dollar budget per year. So

13:57 some of them are pretty large, right? But they're generally cut, you know, probably cutting big smaller checks than like a, you know, in-cap or NGP way back in the heyday. And so because of

14:07 that, our equity raises are about the same size as they were before. So this deals 500 million real consistent with kind of the size deals we did before, but it's not gonna be in the past that we'd

14:21 get a blackstone and they would take all of it. This will be spread out amongst several family offices, but we kind of lead by trying to find that anchor and credible anchor that other groups will

14:35 follow And then kind of fill out the syndicate from there. So it might take a little longer because of that. Instead of going to one group, you're rounding up several. So there's a little bit of a

14:46 difference there. They do a lot of the same work. They aren't gonna have as big of a staff as some of these PE phones have, but they do have people that they can rely on. Some of them kind of

14:57 leverage our own staff. We have a bunch of engineers and they'll kind of utilize their efforts, but maybe talk a little bit about your deal Yeah, you hit on what I was gonna, was gonna. going to

15:08 say, which is when we would go to cane or pick your other shop, they typically have 30, 40, 50 people on staff that are kind of ready to look at the deal, do the diligence, whether it's

15:21 engineering or financial or all those things. To Keith's point, if you go to a big family office, number one, most of the time they're a generalist, the next thing I would say is they usually

15:34 have a staff of three to six, three to seven people, and so they just don't have the bandwidth, you know, even though they may have a lot of capital and can say they can do a bunch of deals or put

15:45 a lot of money to work, they can, but really it boils down to how much can the staff do at any one point in time. So I'd say the biggest difference between institutional capital raises and families

15:57 is really the time it takes to get it done And so will a family office have an engineer on staff, will they make you go get a Netherlands tool or writer Scott?

16:10 Yeah, generally, they'll have like an outsourced, you know, engineer they use kind of almost on an exclusive basis. And I think they'll, I mean, you guys can disagree, but I think they'll do

16:22 the required third party reserve report. Probably a lot of the same boxes need to be checked as if it was just a PE fund.

16:31 You know, but again, I mean, it's not, they'll have like maybe one technical guy if they have that So it's not, so it is, and it is, you know, kind of generally these families, they'll get

16:42 bogged down kind of one deal at a time. So the ones we're closest to, we're trying to kind of own them. So no one else can come in and you know, kind of still deal flow away from us, but because

16:53 they really can only, you know, a lot of cases process, you know, one deal at a time. Look, I'd also say the answer varies pretty widely, but if they are, you know, showing a long-term

17:03 commitment to energy. They probably hired somebody from a king. or Blackstone or end caps. They probably hired a person that says, okay, we know how to run a process or look at a deal like this.

17:14 And to Keith's point, yeah, they may outsource the engineering effort to someone or have someone just kind of on a, you know, it'll look like an employee, if you will, but it'll just be a

17:25 consultant. And so, and then as Keith mentioned, they'll also sometimes use our staff as well. And so, one, I'm very sad that all these family offices are hiring experts and I've gotten zero

17:37 phone calls, but nevermind, put that aside for a second. What do documentationgovernance

17:45 look like? I mean, my documents at Cane said, I'm the 900 pound gorilla, you have to do whatever I say. Please report in before you get a bathroom break. You know, that type of stuff. I would,

17:58 with a group of investors, with a syndicate or is management able to have a little bit more control than historically or. Look, I would, generally speaking, yes. And it also, as you know, each

18:11 situation is so different. So if you've got a company that's been around for a long time, successful, big asset base, things of that nature, then I would say, governance is gonna be probably

18:24 more relaxed than what you've typically seen. Now, if it's a smaller company, we're aware of a couple of deals that they're a little bit earlier stage, if you will, probably requires more

18:35 oversight I would say in situations like that, the governance is gonna be pretty similar to what you're seeing from your pretty shop. So, it really does kinda depend on the size and history of the

18:47 company. I mean, there's a bunch of different structures these groups are looking at, so I mean, control, obviously in the control equity investment, it probably looks pretty similar to a

18:55 private equity deal, but we've looked at minority deals, asset level deals, drill code deals, they can be more flexible than a lot of private equity firms can, kind of play into the governance

19:09 and so forth. Yeah, they maybe hit, you know, all the deals, but sorry, I'm jumping around a little bit, but you know, just talking about family offices, putting money to work. There's been

19:19 like four or five deals done now that are sizable. The Jonah deal, I'm not sure how big it was, but I think it was sizable. It was a family office from I'll leave it out. Yeah. Oh, Inios.

19:30 Cockroll and Andros just did it. Yeah, Cockroll and then - Oh, short deal from Mexico deal Inios was over a billion and that was three, that's three family offices in London and in Europe. And so

19:42 that's kind of a lot of decent amount of capital and good size deals. So anyway, just kind of a random point there. No, that is. And you know, in addition to kind of like governance and the way

19:53 documents did, generally speaking, our incentive structures were some variation of a backend after payout, right? I mean, let us get our money back and then we start splitting the pie. Um, it's

20:07 been interesting coming over digital oddcatters. Now I'm in tech land. Some kind of sell myself a hip, cool tech guy, my hoodies finally, finally, uh, found my jam. But, you know, tech world,

20:19 you in effect, uh, incentivize management by the valuation of the company and you're kind of almost given management and upfront. Promote on that. I think that's why a lot of energy, energy tech

20:30 deals just don't get done Cause the, the people just view the world differently. How do family offices look at that? Yeah, I think it's really similar. I mean, the generic deal will look very

20:44 similar to a private equity deal. It'll be a, a back end after a preferred hurdle. Um, you know, I think depending on the deal, we, for whatever reason, we've seen a lot of families look at

20:54 cashflow yielding longterm hold, you know, no exit in mind type of deal So on that type of investment, you kind of have to think about different ways to incentivize management. Maybe they share in

21:06 the yield, you know, earlier on, if you're having to distribute proceeds to get to your, you know, realize your investment, maybe they're able to share in a yield above a certain amount, you

21:17 set a yield based on the initial evaluation, things like that where you can incentivize people, you know, for getting cash yield versus waiting for an exit. But generally speaking, I think the

21:29 typical deal is pretty similar to a private equity deal where you get it back in.

21:35 So you've told me that, you know, as I'm sitting here with the YatesCo, why none of my

21:46 previous ancestors found their way through Eastern New Mexico is beside me, I'd have been a really great, rich guy. But, you know, we're sitting here with YatesCo, you've told me that I need to

21:58 have kind of a longer timeframe in mind to get this thing closed going to have to send a kid probably more hurting of some cats type. type issues. You said it's not going to look to different

22:09 valuation-wise in terms of back-end type structures and stuff. My documents kind of look the same as my old Carnelian documents I had, or my NGP documents that I had. You brought up something that

22:25 was kind of cool. You just said there might be longer hold, because don't necessarily have to have the 27-minute flip in my mind when start. What else are kind of differences andor similarities

22:41 that I need to be thinking about? You know, one difference, more flexibility and structure. Specifically, you know, these family offices will come in at the asset level. So we've seen a lot of

22:56 them interested in kind of non-op, you know, just bond non-op. They're also,

23:03 you know, under right. Is that tax driven stuff? is that just? No, I think it's just a lot to be said about. I want to be close to the asset, so shit goes down. I think one of the deals we

23:14 were working on was just kind of, frankly, is what was offered up. But I think it's also a little simpler because they don't need to get into the corporate governance stuff and they can just kind

23:24 of work through a JOA. But so there's no like set restrictions. They can kind of do whatever they want, any kind of structures, again longer term hauls.

23:37 There's also

23:39 more flexibility, I think, on private equity is always like, okay, you're going to focus right here. Everything's under one umbrella.

23:49 These family offices are a little more opportunistic. So if you find a deal in a different area and it looks good and if they want to make sure you have expertise and you can put the right team on

23:60 the field, they'll let you do it. So I think just a little more flexibility in you know, in terms of that,

24:08 that aspect. Any kind of line of credit type structures out there, 'cause you know, back in the day, we'd sign up a management team. We'd start paying GA and go find something but - Zero. Yeah.

24:20 Yeah, pretty much. We have, in fact, we can speak to it. We have, I think, four management teams that normally would have gotten that deal and they can't get it now. And so what we're doing is

24:33 just trying to, just having these calls with family offices, just getting them on their radar. And then we're hoping they'll go find a deal and then they'll have an actual, you know, the family

24:44 office have a deal to underwrite around. Yeah, I mean, like most, they're pretty deal oriented. They want to underwrite around a deal, make sure that they can work. I'd say one thing different

24:53 from, well, not different. There's more of a courting process, I guess. They want to make sure they're getting in bed with the right team, right, you know. Who's they and their family offices.

25:04 Yeah, I know that's there with private equity, but I think there's a lot of good with anyone. I think it's more like, hey, let's, you know, we're playing golf, we're going to dinner, we want

25:14 to make sure we understand who these people are. So if we're going in a foxhole with them, you know, we can live together. So we're doing a fair amount of just introductions to who we think are

25:25 good companies and good management teams that we're just introducing them to the family offices with really no deal or opportunity in mind. Yeah, it's just kind of planning to see, you know,

25:36 piggybacking off what Evan said. These people are really big on knowing who they're partnering with and you hear the word partnership come up a lot, a lot more maybe so than conventional PE. So

25:48 we're trying to short circuit that part of the process a little bit. I always thought that was the greatest part of my job is I go in and talk with these management teams about how I'm a white hat

25:58 investor. I'm your friend, I'm your partner sign these documents that say, I can fire you. I mean, I want to. Right. Yeah. I did love that. Ah, we get old days. So one other point I would

26:10 mention is with, so going back to your days, you know, at Kane or wherever else, usually we kept hearing kind of three to five year holds plus or minus. Here we're hearing somewhere between seven

26:24 and 15, seven and 20 year holds plus or minus. And so what we're seeing is a lot of these family offices are more looking at return from a MOEC standpoint as opposed to an IRR. So we think that,

26:35 and we know that, at least our family, the Stevens family, I think looks at MOEC pretty heavily as well. Now it doesn't mean that just because the only person that may listen to this podcast is my

26:46 mother. She's smarter than it. So just the multiple of invested cash. So it's just your kind of cash on cash return is what people as opposed to an IRR. And so now the yield is still important,

26:58 but I think people are still looking at multiple over a five, six, eight-year period.

27:04 Do you get anything from these family offices in terms of like portfolio construction, and they have a view on inflation and oils, my head, stuff like this, or is this literally kind of what we

27:20 started talking about earlier, just low multiples value investing? I think

27:27 it's more that, you know, I don't hear, I don't know, I've heard of any kind of, you know, here's how we want our portfolio to look like,

27:37 you know, maybe a little bit of an inflation hedge, I don't know, but it's more just fundamentals, you know, what does the deal look like? I'm buying low, and I can hold for a long time, and

27:48 hotter carbons aren't going to go away in the meantime, and you know, gas prices are going to go up. I will say too, probably more interesting in gas right now, I would say, just I think there's

28:00 just seems to be, you know, where gas prices are, it just seems to be a good time to buy, at least that's what these families think. And so there might be, from a commodity perspective, there

28:10 might be more interest in gas, but not some of the, not anything beyond that. I think it's just more driven by deal fundamentals is kind of, you know, what's driving their interest. Yeah, no,

28:21 I agree with that. I think that the big generalist investors, they may have, the families anyway have, I don't know, tend to 40 portfolio companies, whatever it is. And I think they're just,

28:32 you know, reading the news and trying to be opportunistic and they're understanding what's going on in the oil and gas sector and, you know, thinking about relative value, you know, across all

28:41 the, you know, industries that they invest in. So I think it's just, you know, over the last two to three years, it's just become very evident how low the valuations are in our industry,

28:52 especially compared to some of these other. So to me, it's just mainly - So you never come across some who have a view on gas or, you know. bearish or bullish that, Hey, I'm only looking for oil

29:02 deals, or I'm only looking for gas deals or vice versa, but like you said, I think a lot of it is opportunity-specific and

29:12 less about trying to make sure I have a buck and asset and an oil asset and a gas asset. So we've seen more opportunities across the world. Probably we've seen more interest in the secondary areas

29:24 You know,

29:26 we worked on a scoop stack deal earlier or last year.

29:32 The deals that I walked through, Rocky's deals, I think that maybe part of that is the cash level. Say the Maverick Basin and I'm just saying, amen.

29:45 Yeah, and maybe part of that's just they know they can buy in at lower valuations in these areas So we have seen more, probably more interest in those areas versus like the Permian, for

29:59 different than what you'd expect versus maybe how, you know, private equity funds look at it. And do we get into differences between minerals, non-op, that sort of stuff, or is it just

30:13 opportunity driven?

30:16 I think so. I mean, I think, uh, look, I think these groups also learn over time what they like and don't like too. I, you know, probably three, four, five years ago, they may have said,

30:28 Hey, let's go into energy somehow. But, you know, people like us and certainly other groups are showing them opportunities. And I would say that, you know, over the years, you've had a couple,

30:39 you know, groups kind of dip their toe into the water, so to speak, and they kind of figure out what they like and don't like, but they, that answer varies too. Some are very specific about to

30:49 Evan's point, what they like, what basin, what commodity, what commodity mix, uh, what kind of risk do they want within their portfolio? To your point,

30:59 a big, you know, mineral company that's been around for a while or maybe some people want to take drilling risk. I mean, we kind of just frankly kind of build that database, if you will, on kind

31:09 of who wants what. And I do think that over the last three or four years, these groups have, as they've invested more and more, they definitely have specific ideas as to how they want to put their

31:19 money to work. Interesting. The, anything, a million questions, keep popping in my head, so sorry for my ADD But any of the, it's really interesting about the European thing, because we did

31:34 very limited fundraising in Europe. I think I went to London once. And you know, you've got the FERP to issue in that, and to summarize that down, and y'all correct me where I'm wrong, is

31:49 basically owning an oil and gas asset is a real property interest in the US. government. If you sell a real property interest, keeps 25 of the profit and then doesn't give it back to you. So you

32:02 have to have US income to offset those taxes with. So if you're a tax payer in Europe, and I guess maybe a family office would be, well, you're going to pay taxes anyway, and depending on your

32:13 country of origin, you may have the offset to that, but we were a flow through entity We would own the assets in a flow through entity, and we would deal with non-profits, which would be 25 of the

32:27 profit. That's not good. You've got to go away. So any of those issues pop up and all this stuff? So most

32:35 of the, they definitely come up, most of the, of the European family offices have been kind of actively investing in the US. for a while. Maybe it's, and one of the ones we're closest to has a

32:47 big real estate portfolio So somehow, like, if there's your, if there's your income to all of a sudden, they have the potential over here and. You know, we had, I think on the last tour we went,

32:60 we went on all the family offices, I think with the exception of one had that figured out. And then one brought it up and like, oh, we need to look into that. But, and then, you know, we kind

33:13 of just, you know, figured they weren't going to be a competitive. But, but it does come up, but most of the family offices have it all figured out, are they already have US. investments that

33:23 provide that income to, you know, kind of address the tax issue. 'Cause the work around we would have with non-US. type investors, is that, let's say, a large Canadian pension fund was going to

33:39 commit 100 million to your fund. Well, what they would do is, in effect, invest 50 million of equity, and then loan 50 million of debt And so the debt plus interest would come back. held because

33:56 it was a loan. It was not ownership. But then the profits on the 50 that came back, that's where the 25 would get popped. And so the whole key was your lawyer, your tax consultant, how

34:11 comfortable with they are on the amount of the loan. Because obviously, for financial reasons, you do 99 loan, 1 equity, but the government would come in and say, I don't really think that's

34:22 credit worthy for 99. And so I think the last fundraise I did, we had a group that was comfortable enough pushing it out, kind of 65 loan and 35. What we kind of found is it would basically kill

34:36 about 250 basis points at yield. That

34:39 was how that would work. If you were a 20 rate of return fund, it'd be 17 and a half to these guys. But interesting. So give me, this is, this is. This has been interesting because I didn't

34:54 think this stuff actually existed. What's kind of crazy outside the box, something I would never think of, whether it's dealing with these folks, deal structure, just any of the above that's kind

35:12 of outside the box.

35:17 Good question. It's a dumb band. Yeah, I'll be watching you take that one I just think in some, you know, in some family offices that are smaller, like, you know, you might just have, there

35:32 can be emotional, right? So like they might one day just decide, Hey, I don't want to do this deal anymore. And you would never get that in traditional or institutional, private equity. Well,

35:42 you can get it, but it's less - Oh, we could be. 12th hour, 12th hour, if you've got a patriarchy, changes his mind and - raise the Wall Street Journal and breath and speak to, you know, oh.

35:53 we always want to be oversubscribed. Yeah,

35:56 it was too, yeah. He's bringing up a, so there was a deal that we closed about a year ago now. I'll leave the details out, but we were basically little over two to two and a half times

36:10 oversubscribed 48 hours before we were set to close. And at the wire, we had basically enough capital on the dot to close. So we lost, as we were going through the process, which was, again,

36:23 with it being a fairly lengthy, typical family office process. We had, call it, 14, 15 families that were gonna be in the consortium to get the deal done. And

36:36 we'd call them every week just to make sure, okay, are things still good? Are you getting the information you need? Are you still excited about the deal? And the answer was generally yes. And

36:45 then as we got to the wire, lost about half the capital in a 36 hour period Like I said, having just enough to close, but I would think there would be some group think on this too. I'm searching

36:58 such as out. I'm out. Why are you? Right. Yeah. Because they're out. So I think like part of it too is, you know, we want like going back to the anchor, you know, very, and a lot of times

37:10 to the anchor, either we'll maybe bring in some co investors that they've invested with, you know, when Pure West was that type of situation that anchor brought in a bunch of capital behind it So

37:22 if you have like this, you know, group that's invested together before it kind of takes some of that risk away, not all of it, though. And so that helps, you know, just getting the right group

37:32 together. But that being said, you know, we, we do want to keep working all these groups to the very end, just in case we have to sub in one for another for some reason like that. Yeah, and

37:42 there was nothing fundamentally, you know, wrong with the deal. It wasn't like there was, you know, commodity prices. You could see them coming off substantially I mean, there was nothing

37:50 looming that. that caused the problem. It was just last minute. You got to think that behind the scenes, maybe some of these families have got other investments that they either want to make, or

38:00 maybe they just want to keep cash more liquid or what have you. You really don't know at times, but you get the call that, Hey, we're not in, and you just have to be able to respond pretty

38:11 quickly. That's great. That's funny. Give me the official Stevens commercial on the bank, because for the thing I always found working there, and I mean, gosh, that was, I mean, I left in

38:26 2001, so call it 25 years ago almost. I was always amazed how under the radar screen Stevens was, and it's still, I mean, you guys have done a great job of promotion, but it still feels under

38:38 the radar screen. Yeah, we can tag team it, but one of the biggest, you know, you know, kind of strengths, I guess, is just that, you know, and it's kind of like first page of our, of our

38:50 know, company deck is just think like a principal. But specifically what, you know, what that looks like in our group, you know, whenever we take a private equity deal to committees, so we have

39:02 to go through a committee and get, you know, get the deal of proof so we can get engaged. Warren's on all those committee calls, right? And so, Warren, you know, mega, hey, should I invest

39:14 in this deal? And the answer has to be yes, right? And so, you know what, Warren asked me a question one time when I walked in with something? How big is your check, Chuck?

39:26 Right. Well, if he's investing, you know, we're all investing too. So, I know that sounds a little bit silzy, but it's true, you know, so every private equity deal, really every deal we take

39:38 on, you know, we need to think that we're going to, we need to feel like we're going to make an investment in that deal, whether we do or not. And then the other thing too is I mean there's a

39:48 real big client focus so You look at our deal list, you know, there's a lot of clients we've done a number of deals with and the last thing you want to do at Stevens is get tied up with some kind of,

39:59 you know, some kind of client you just don't want to do business with, right? They don't want, you know, their reputation to be heard. But I think, you know, it was actually killed at

40:10 investment committee being a co-manager on the slick, willy IPO, the pool hall, just not our vibe, man. But now I think it's, you know, stable platform. We've been there 15 years. Everyone's

40:24 been there 11 or 12 years. Our group, all the guys in the group for the most part have been there for a while. We, you know, we keep building and adding people, but you see that across the board.

40:35 I mean, there's a lot of Stevens people that have been there for a long time And the reason is, yeah, it's not because they can't get jobs anywhere else because it's a good stable platform.

40:44 They've been extremely supportive of our business. really whatever we wanted to do, we added a restructuring practice, we built up our AD practice, way back when we built up our research practice,

40:57 and they've been real supportive. So if you start, if you're doing well for them, they take care of you. But I think the other part is just, it's family home, been around for a long time, and

41:11 they've been around for a long time because they kind of do things the right way, but you probably, y'all both probably have some stuff I think part of it being owned by, you know, one person is

41:21 that we can kind of think differently. And, you know, we try to, the big thing, the investment banks have grown a ton in the last 10 years. We've probably doubled in size. And so when other

41:32 firms are firing or laying off people, particularly in energy, we're looking to hire people, right? So, you know, you've seen a lot of that recently with a couple big investment banks blown up

41:42 and we've added a ton of people, junior and senior, And that's kind of the alternate. view of thinking, just trying to always think long term, think, you know, when other people are leaving or

41:53 entering and growing. Yeah. They very much were that way when I was there. So what are metrics like, how many corporate finance people, how many sales people, research people? So there's in the,

42:05 I think we're at about 280 investment bankers. Correct. What industries? So we have like nine industries, all the kind of major industry groups. You're going to think this is crazy Back when I

42:18 started at Stevens, we used to go to a company in an industry and say, we will only work for you. And you literally, you literally had one client in each industry to work with. And then the world

42:35 kind of shifted and people wanted you working for everybody so they could get more industry expertise and knowledge and stuff. But I think like we have nine, you know, the ones that that Power

42:48 Alley, as I'll say, is our group and depository is the commercial banks, you know, kind of coincidentally, Steven's own the commercial bank, as you know, they own, they still own oil and gas

43:02 company. So, been in those businesses forever. They don't own a commercial bank anymore. And then spec then is kind of the other big one. And then there's media telecom industrials And I think

43:14 we're at like 280 and that includes capital markets

43:21 and product bankers and MA and not cells, right? Correct. Yeah, I think that's sales. And I don't think that includes, we have probably 4050 of our colleagues over in Europe as well. So, we

43:35 have an office in Germany and we have an office in London. So, I've got about 50 people, I think, over there All right, I'm gonna tell my story give y'all a chance to think I want You're all time

43:46 greatest Stevens story. I'm going to start with mine. So I think it was

43:53 1972, CBS calls Jack Stevens and says, Hey, Jack, we bought the New York Yankeesfive years ago for12 million. We don't know anything about baseball. This is just kicking our butt. We don't

44:07 understand it. Quite frankly, we hate it. We bought it for content on the network. That's not going to workWe're just done. If you'll give us12 million, we'll sell you the Yankees. And

44:21 Jack Stevens was reported as saying, Can I move them down here to Little Rock?

44:27 CBS said, Well, Jack, I don't think you want to do that. I think they need to stay in New York. And he said, Well, I appreciate the call, but I'm not interested. So I don't think I've ever

44:36 told this story on the podcast and it's going to be a stretch to ever tell this story, but we're close enough, we're in range. I'm going to go ahead and do it I was playing golf with your dad. one

44:46 time. So Evan's dad had been at one of our portfolio companies, Grenadier, and we're having a board meeting at Castle Pines in Denver. I am singularly the worst golfer on the planet. I am

45:00 horrible, but we're on number five. I rear back,

45:06 flew the ball, hole in one, nothing but net. It didn't hit the green roll in. I mean, it just dumped it. I don't just clank.

45:16 And we got up there and we thought that it had hit the pen and shot off, you know, and I'm looking around the sand trap. The guy out there was like, no, no, no, in the hole. I want to go check

45:26 it out. So I hit this hole in one, high-fiving. I'm not a member. So our host that day was David Miller of NCAP. So Miller has to buy everybody drinks Oh, that's a little better. And Miller can

45:37 be a little surly at times. Let's just say that. So we got and we play the next morning. Me, David Miller and your dad. I, again, you know, I shot a 108 the day before and I cheated. I mean,

45:52 I was like moving the ball with the hole in one. That's with the hole. Wow. A 107 other stretch. Yeah, my buddy finished was like that 107 on 17. So crazy. But anyway, we go out, we go out

46:04 the next morning. We play again. Number five, whack. Hit the ball up on the green. It rolls to three inches from the hole. And David Miller looked at me and said, if that ball had gone in,

46:16 you're never playing here in my guest ever again. That's great, that's why. So how do people get a hold of y'all? Steven's website. Yeah. Are y'all LinkedIn people, emails, whatever you want

46:29 to, whatever you want. Yeah, all of the above, all of the above, yeah. LinkedIn or the website, we're all on the website. Yeah. Cool, I appreciate you coming in, 'cause I did not believe

46:40 this story when you told me that, but I'm arguably convinced that Chuck Yates oil and gas company could have family money now. Absolutely. That was a shot.