617: Finding Your Seat at the M&A Table | Dennis McGrath, CFO, PAVmed

Listen to the Episode Below (00:37:51)

Dennis McGrath was only recently married and a new home owner when he was invited to a Phillies game by the CFO of AC Manufacturing.

At the time, McGrath was working for Andersen as an auditor of a roster of growing companies, among which AC—a maker of industrial air-conditioning units—was perhaps not the most glamorous.

“At the end of the night, the CFO told me that he wanted to hire me and would pay me a lot more than I was then making,” recalls McGrath, who doesn’t hesitate to reveal what allowed AC’s offer to trump all other opportunities.

Says McGrath: “I went for the money.”

However, what distinguished McGrath’s AC career chapter was neither compensation nor, for that matter, a lengthy tenure (McGrath was controller for 22 months).

Adds McGrath: “It was not too long before the owner decided that he was going to sell the company and had a private equity group come in.”  

Still in his mid-20s, McGrath took a seat across the table from a seasoned group of private equity executives. “For me, my career has just kind of been perpetuated from there in terms of deal-making,” explains McGrath, who has arguably occupied “the seat” from that day forward, guaranteeing  a CFO career chock full of M&A deal-making.  –Jack Sweeney

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Guest: Dennis McGrath

Company: PAVmed

Contact: www.pavmed.com

Headquarters: New York, NY

Along the Finance Career Journey …

CFOTL: What are the numbers you’re looking at to make certain your achieving all of what you need to achieve at this place in time?

McGrath: Well, that changes by the phase of the company you’re in, right? So if you’re in full scale sales phase, you’re probably waking up looking at yesterday’s advertisement success. And if you’ve got direct response, what of your revenues and profits were generated by the expense of marketing yesterday? We are essentially pre-revenue at this point with just launching these products. So all of those timeframes are measured by cashflow. It’s what has my past been, where I stand today? What are my needs going forward? And do I have the tools to make sure the cash on hand meets those demands? And we have had an evolving sophistication of our financing activities from the early days of just the IPO and some preferred offerings with some unique warrants. We’ve had a rights offering, we’ve resorted recently to using convertible debt financing and that has been extremely good for us and extremely good for the investor, which is what you’re always aiming to try and achieve in a balance. It involves a nominal discount to us, significant profit to the investor. Having the money when needed to continue to finance our business.

CFOTL: Was there a hesitation on your part to move in that direction?

McGrath: You always carefully tread in areas that are either new to you or new to the business. And we closed that first tranche in December, 2018. We probably started those negotiations in that summertime. So everybody thinks deals can get done overnight. And that possibility exists. But I like to say most of them take anywhere from four to six months. I’ve got enough experience and generally they fall in there.

Because at some point in the negotiation, as you’re still trying to figure out each side’s motivation and make sure they’re pure, you’re dealing with some uncertainties. And that just takes time to get comfortable. After we did that first transaction, the next transaction was pretty easy because both parties trusted each side. Both parties understood the components that would make it aligned for success for all the constituents. And so all of that turf didn’t have to be retreaded in terms of those givens. And we found a real strong investment partner that helped finance us through these early phases of the business over the last 18 months.