The Medical Alley Podcast, presented by MentorMate

From Tax to Cybersecurity with CLA

December 11, 2023 Medical Alley
The Medical Alley Podcast, presented by MentorMate
From Tax to Cybersecurity with CLA
Show Notes Transcript

CLA (CliftonLarsonAllen LLP) is a Medical Alley Starts sponsor and provides financial and tax consulting, as well as fractional CFO and outsourcing services. CLA offers a 25% discount to qualifying startups for the first year of working together.

On this week's Medical Alley Podcast, startup principal Filip Kostal is joined by five experienced practitioners at CLA, a professional services firm, to learn more about the company's offerings, ranging from tax structuring, cybersecurity, outsourced services, and more.

Guests from CLA include:

  • Randy Romes, Principal of Information Security Services
  • Jeff Sellner, Principal, Succession Concierge Services
  • Ryan Bjerke, Director of Strategic Initiatives, Partnerships, and Digital Transformation
  • Kelly Rousar, BizOps Controller
  • Craig Arends, Managing Principal, Private Equity & Portfolio companies

The information contained herein is general in nature and is not intended, and should not be construed as legal, accounting, investment, or tax advice or opinion provided by CLA (CliftonLarsonAllen LLP) to the listener. For more information, visit CLAconnect.com.

Follow Medical Alley on social media on LinkedIn, Facebook, Twitter and Instagram.

Intro  00:00

The Medical ally podcast is brought to you by mentor mate. Mentor mate empowers healthcare clients to deliver on their mission and transform the human experience through technology. for over 20 years, clients have trusted mentor me to guide their vision, design innovative products and build secure solutions while understanding the specific nuances of their industry. Mentor mates global team in the US, Eastern Europe and Latin America helps clients in all sectors of healthcare transform their organizations from Fortune 500 pharmaceutical companies and commercial payers, to hospital systems, medical device manufacturers and beyond. Learn more at mentor mate.com/healthcare.

 Filip Kostal  00:55

Hello, everyone, and welcome to another episode of the Medical Alley Podcast. My name is Filip Kostal. I'm the startup principal at Medical Alley, and in this episode I will be joined by the experienced practitioners at CliftonLarsonAllen, a professional services firm. Before we begin, I'd like to note that the comments shared in this podcast are intended as general information and do not constitute financial, accounting, tax or cybersecurity advice. First, I'm joined by Randy Romes, principal of information security services at CLA. We'll be talking about cybersecurity and cyber hygiene. Randy, if you wouldn't mind giving a brief background on your work at CLA. 

 Randy Romes  01:37

Thanks, Filip. I've been at CLA for about 25 years, I actually had the chance to start the cybersecurity practice with then boss now partner Mark. I was basically the firm's first good guy computer hacker. And so essentially, we help clients with kind of all things IT and cybersecurity risk assessment, audit and compliance, penetration testing, vulnerability assessments. We do incident response and forensics and, you know, what I'll call independent security consulting and design. We don't sell firewalls, but we help clients figure out, you know, what's the best firewall for them or help them evaluate how they should design the way something works to meet their security needs. So for the last couple years, I helped build the practice in all the industries the firm serves. The last couple of years the firm has asked me to lead those services in the healthcare industry. So that's where I spend over half of my time now.

 Filip Kostal  02:41

Thank you, Randy. Let's jump right into it. With more and more data leaks happening, cybersecurity has been a hot topic. Can you provide an overview of the current state of cybersecurity in the healthcare industry? 

 Randy Romes  02:54

Yeah, I think the healthcare industry has some challenges that are unique to the industry. There are elements of cybersecurity that are the same from one industry to the next. But iin healthcare, you know, we have a need for uptime availability of the systems and the data. And in the lack of that uptime, the lack of that availability can lead to serious issues with patient care and patient health. In very extreme instances, you know, it can result in in harm or even death. And so how does that translate to our cyber risk? The bad guys have figured that out. And in using their hacking capabilities, they both interfere with operations and they steal lots of data. The interference with operations is the critical uptime needed now, right? If you can't maintain your uptime, or you can't restore very quickly and efficiently from a ransomware attack, you're gonna be able to use your systems. And there are all kinds of news articles of hospitals and healthcare systems that got shut down for days or weeks or longer and the impacts that had. So that's the major thing is, you know, their hacking focus is to get in and interfere with operations. The more recent versions of that also include a data theft and threat of exposure, even if you don't pay to unlock the system. So we got in, we locked up your systems, pay us to give it back. Oh, by the way, if you can restore on your own, here's a sample of your data. We stole it all. If you don't pay us, we're gonna release it and disclose that we stole it and released it. So that's the biggest thing that kind of the the most concerning element that most of our healthcare entities are faced with in terms of what's the end result risks they got to deal with.

 Filip Kostal  04:58

In addition to data theft and lack of uptime, are there any other risks that you can see as the most prevalent in healthcare today? 

 Randy Romes  05:06

Sure. I actually like to maybe categorize it just a little bit differently. Those two things I described, they're the end result. There are several stages that occur to get there. I think that our healthcare industry tends to have more complex data and network systems than we see in other industries. That doesn't mean the other industries aren't complex. But it's because they have a variety of different systems from different vendors for different purposes, all with a different way to operate. That complexity is the bane of cybersecurity, right? If I've got, I've got one system for my electronic medical record system, I've got a different system for pharmacy, I've got a third system that we have to use to manage the monitoring of patients in the ER, which is different than the monitoring system we might have in the clinics. All of those different systems from different vendors have different ways to secure them, different ways to maintain them, different ways to update them. That complexity leads to exceptions, it leads to missing things. Those vendors all have different cycles for how to fix them. So the complexity is our first primary kind of threat. The second is our IT staff tends to be underfunded, under trained and under resourced. We all buy into this or many buy into the mythical magic of IT doing more and more and more for less and less and less. And so we see lots of places where organizations will make a big capital investiture, 'We bought a new solution. But, you know, we didn't, we didn't train our people. We didn't give enough headcount to manage it, we don't understand the total lifecycle costs.' And so that leads to that under trained, understaffed, under resourced. The complexity, the under trained, understaffed, under resourced leads to exposure in our different applications. A lot of times that exposure now is, you know, what you hear called supply chain software vulnerabilities. Microsoft Exchange has vulnerabilities that get hacked all the time. Well, we moved to the cloud, Microsoft will take care of everything. It's the wrong answer. We have tools like MOVEit, right, that had the huge data breaches, still learning about them. Embedded in our systems, we relied on an outfit like Chronos to manage our timekeeping. It was down for weeks on end. e see embedded software issues like Log4j, where it's built into everything. And so complexity, resourcing, vulnerabilities, those leads to an increased attack surface for the bad guys to go after, to get in with the end goal being what we described a few minutes ago. Right? Long winded answer apologize for that.

 Filip Kostal  08:10

No, no, no, this is perfect. I think it's really important to make people working in healthcare where of these threats. Now shifting to the other side, the, I guess, user and patient side. With digital health and telehealth solutions being used more and more, have you seen any change in how users and patients feel about using them? Do you feel that they feel more or less secure or more or less comfortable with using them? 

 Randy Romes  08:36

Yeah, I mean, you asked about two things there, patients and users. I think the patients, I'm a patient, you're a patient, we go to see a doctor or clinic. I think we've become more accustomed to, right, they present us with the HIPAA form, we just sign it. They use a variety of evolving technology to assess us and diagnose us I think people are more and more comfortable with that. You know, in a lot of cases, depending on the extremity of your need, the technology becomes absolutely necessary. I think most consumers, patients are also kind of numb to the data loss issue. There's so many across so many places, we're getting, you know, a letter every other week from somebody who had a data breach and our data was exposed, right? So, you know, I hate to say it this way, we're getting used to that. I think on the user side, if you go into a hospital, a clinic, a health care, right, they've got that first pressing issue we talked about earlier, it's just got to be up and running. If it's not up and running patient care is affected. And the layers of security we need to secure it at times can become barriers to delivering that care. So in healthcare, we see more pushback on some of those. I think some of the technology is getting better and better, right. We've got a client who's about to roll out a system where they use, I'm holding up a prox card, right? They can walk up to a workstation, the prox card reads it and they're auto, I call it automagically, they're automagically logged in, they walk away, six feet away, automagically logged out. They don't have to type a password every time. They don't have to remember a password every time. That's tremendous technology that eases and facilitates the care when it's implemented properly.

 Filip Kostal  10:34

Thank you so much, Randy, I really appreciate you taking the time to share your insights with us. 

 Randy Romes  10:39

Appreciate it. Have a great day. 

 Filip Kostal  10:41

For our next segment with CLA, I'm joined by Jeff Sellner, who's going to talk about tax structuring and entity formation. Thank you so much for spending a bit of time with us to talk about what is a really important topic. But I think not a topic that is first in the minds of companies. Can you briefly talk about the tax considerations when establishing a business? Is there anything specific that companies shouldn't be aware of?

 Jeff Sellner  11:11

Yeah, thanks for having me and appreciate the opportunity to talk a little bit about some of these tax structuring topics. And so as it relates to companies that are just being formed, call them startup companies, there's a handful of things that we talked to businesses about related to, you know, what type of entity and tax considerations. So one is just the entity selection. You know, we have the options of partnerships, you know, other flow through entities like S corporations. And then we also have the other option as a just a US corporation, or what's referred to as a C corporation, just as some of the initial discussions or areas to think about.

 Filip Kostal  11:52

What would you say is is the optimal form of business or optimal structure for an entity? 

 Jeff Sellner  12:00

Yeah, so I think my answer, it really depends on the type of business that we're forming. So for example, you know, partnerships, or S corporations, flow through entities tend to be really good for like sole proprietorships, or entities that you might have one or a small group of business owners. So those tend to be companies that aren't raising a lot of capital over a multiple, you know, period of time. You know, typically those, you know, certainly with S corporations, there's disqualified shareholders. So that's even more restrictive in terms of who can be an owner. And for partnerships, partnerships are great for organizations that need a lot of flexibility in terms of their structure and how they want to allocate profits and losses and things of that nature. But for most, you know, technology and life science companies, we tend to see corporations, C corporations, especially companies that have a lifecycle where they're raising capital, they're looking at raising maybe angel investment, venture capital, private equity. And those tend to be much better under a corporate structure than a pass through type structure, in my opinion.

 Filip Kostal  13:09

Right. When we think of startups, we often think about, you know, specifically Delaware C corps. What is it about Delaware that makes it so special and so desired for startups? 

 Jeff Sellner  13:22

Yeah, well, that is a more common location in terms of where corporations are established. Now it comes down to more of a legal question. So I'm not an attorney, but I'll give you my perspective, through working with companies that do this. Delaware tends to be a little bit more, at least from attorneys that I've talked to, a little bit more favorable towards corporations in terms of the types of requirements and structures and obligations they have towards their shareholders, and those particular in that particular state. So it tends to be a little bit easier to do business. Some states have different requirements. So for example, in Minnesota corporate structure, you have to follow different guidelines. Might be mostly the same as Delaware. But again, talk to your legal adviser, but again, it would be more of a more common place that's looked upon more favorably to be corporate, you know, beneficial in terms of how they're organized.

 Filip Kostal  14:16

Going back to different tax considerations, is there anything in the very, very early stages of running or even establishing a business that companies should be thinking of? 

 Jeff Sellner  14:27

Yeah, absolutely. One of the things that comes up most often is what's called qualified small business stock. And if you're not familiar with it, people in in our world in the CPA world refer to it as 1202. That's the code section under the IRS tax code, but think of it as qualified small business stock. And what's beneficial about that is if you meet the requirements, there's an opportunity to exclude a certain portion of your gain on the eventual sale of your business from taxable income down the road. But there's a lot of requirements that you should review and look at. For example, it has to be in a C Corporation structure. There are certain entities or types of businesses that are disqualified. Like, for example, investment management or accounting firms, things like that are disqualified. You have to hold the stock for more than five years. So you think about it. So companies that are, are looking at raising capital and growing with a large exit planned over the five plus years, these tend to be good structures, and something that I think a lot of people don't think about. I think when they're starting a business, sometimes I think about what's just the easiest to establish. Typically, partnerships, or LLCs, come to mind first. But I think, you know, what I'd ask people is to think about the longer term plan. What is your not just multi year forecast? But what, you know, are you going to be able to fund the business through your own capital, or you're going to be raising capital from external parties? What does that exit look like? You know, you're looking at selling to a strategic buyer, you're looking at selling it to a private equity group or a majority ownership. Or if it's a lifestyle business, then maybe maybe an alternative structure is a little bit more beneficial, too. So sometimes it's a little bit of give and take in terms of having a discussion with an entrepreneur, to better understand what their longer term plan is, versus what I think a lot of people look at as a short term.

 Filip Kostal  16:23

When thinking about those tax implications, is there such a thing as engaging someone like CLA too early? Or how early should companies think about those?

 Jeff Sellner  16:35

Well, I think you definitely want to engage with someone who has worked with businesses like the one you're looking at starting up. You know, we we engage and other firms engage with businesses and business owners at a very, very early stage. And we do that in a way to make sure that we're helping these companies on the front end make the right decisions, think about the right considerations, so they don't regret it down the road. And it doesn't mean they would regret it. But sometimes it leaves with less options. Like if you make a decision to be, you know, a partnership or an S corporation upfront, versus a C Corp and you, know, we've had this where we've had clients that didn't realize this qualified small business opportunity existed. There's ways to legally restructure down the road, but you start your five year period over again, and in some cases, it actually is dis advantageous to do that. So there's a number of things we just want to make sure upfront. So my advice is work with someone who, whether it's an attorney, accounting firm, other advisors that you're looking at getting involved with, work with someone who has worked with businesses of your type at the stage that you're at.

 Filip Kostal  17:44

Thank you so much, Jeff, I really appreciate you taking the time to talk to us about some of the most important things when considering starting a business. 

 Jeff Sellner  17:53

Perfect. Thanks for having me. 

 Filip Kostal  17:55

For another segment, I'm joined by Ryan Bjerke to talk about digital service transformation. Thank you so much for joining us. Would you mind just introducing yourself quickly and telling us a bit more about your role at CLA?

 Ryan Bjerke  18:06

Yeah, thank you, Fillip, for having me here. today. I really look forward to our conversation. I'm Ryan Bjerke. I been here at CLA after spending most of my career in healthcare. My role is Director of Strategic Initiatives, Partnerships, and Digital Transformation. And the digital transformation is the component that we'll be talking mostly about today.

 Filip Kostal  18:29

Thank you so much. For my first question, when we're talking to our members, a lot of what comes up when companies are thinking of innovation is thinking of innovation in terms of improving their operational efficiency. Could you talk a bit more about how can adopting digital or IT solutions help with that? And what are some of the key considerations when implementing a new system in a company? 

 Ryan Bjerke  18:53

Yeah, that's a great question, Filip. I mean, why are organizations looking at digital as a as a solution? There's a lot of different reasons. But first, just want to cover digital means a lot of things to a lot of different people, right? It's quite ambiguous when we look at it. And within CLA, of course, we're a accounting firm and professional services firm and digital as a major component or becoming a more and more major component of what we're offering to support our clients. And the way we think about digital is really in three buckets. And those three buckets are first, software integration. So almost every organization has software. And we'll circle back on that a minute. The second bucket is data modernization. And you know, we all do, all organizations and businesses depend on the data to guide us both looking back and forward and in the moment. The last bucket and then the third bucket is really a pretty cool bucket, and that's the automation development and adding automation to key processes and allowing businesses to scale more efficiently. So with software, one of the key challenges for organizations is that software is really set up for certain components. So if you have an HR system, there's a system that works for HR. There's a finance component, there's in healthcare, electronic medical record. Well, within that there's a lot of data. However, to make business decisions, a lot of that data needs to be combined to make the strategic decision, or even the just in time decision that day. And that's complicated. So what ends up happening is a lot of manual work, a lot of headaches and trying to make that decision. So working backwards, which systems do I need to pull this information from to create insights to make a business decision? So what we're doing with software integration is really pulling the central data pieces from each one of those software components, and putting in a platform that is reportable to different stakeholders. So that's that stakeholder group could be the board, could be executive dashboard, could be, you know, the receptionist. What's important to drive the businesses today, and pulling those key pieces of information and making it applicable to each individual within the organization so we're all pulling in the same direction together. So I combined a few things in there with software integration, but it's also using the data well, the data modernization, the second bucket, and then all of that work that has normally been manual of pulling that data can also be automated as well. So while we're sleeping at night, our systems can be reporting in and feeding information. So when we wake up in the morning, we go into the office, and we're having a cup of coffee, the first screen that pops up is our key indicators on a dashboard. How are we doing today? How did we do yesterday? And based on our strategic direction of our organization, how are we doing?

 Filip Kostal  21:57

What have been some of the trends lately when it comes to companies turning to you for help? Is there anything that has come up that you could talk about?

 Ryan Bjerke  22:07

Yeah, I think almost everybody's struggling with staffing, right? So I'm going to go to that third bucket again, automation. We're seeing a lot of opportunity in for example, we call it auto extract. And that's a tool that is built using AI and machine learning. There's several applications to it. I'd say the most common that people can relate to is pulling information that comes in some format: an email, an invoice, and pulling that information and automating the population of those systems, the software systems we're talking about versus rekeying. So let's use AP automationa s example, accounts payable. You get the invoices at the end, normally, it takes someone time. And they have to be very accurate to find the right place in their their software system, enter the right information. And then it's got a flow and file. What we've done is automate that whole process. So one example we had a client who had several thousand per month invoices come in through the AP automation process. We took that 40 hours a week that she was doing that work, and we convert it into 45 minutes. So it's a, we're seeing a lot of organizations look to automation. Number one, because well, let's call her Ann didn't like doing her AP job the way it was set up. So chances of retaining her were not great. Also, it's a very expensive piece of the business to do if there's a better way to do it faster. And this is just one example. We can take medical records and you know, extract information and move things to the right places. So it's there's a lot of things we can do with automation. 

 Filip Kostal  24:04

This is something that has come up in our conversations as well, you know, taking the, you know, daily tasks that have very low value added if a person's doing them and having a computer or a machine do them is something that we have seen companies do quite a bit. But with this, when you think about companies that have been doing things one way for so long, it's very important to be able to manage this change. So change management is crucial for digital transformation. What are some of the best practices or strategies that companies are adopting to navigate this transformation well? 

 Ryan Bjerke  24:45

I think it needs to be purposeful, right? So as we think of making change, especially in this digital world, there's number one needs to be a strategy, but to inform that strategy, there almost has to be a further assessment of where are you at today? What's your end goal? And how do you bridge that gap in the middle? So that that gap in the middle is really made up as we call the three P's. It's the people, the process and the platform. So that's the software, the infrastructure, the technologies, the platform, the the processes, how does it all fit together? Both from a technical component, but also how does the people process fit into that? So what is the current state look like? What changes need to happen in the process and what the people have to do? And all too many times I think we are having people adapt to the platform, versus the platform working with the people. And I think that's where a lot of customization comes in. And that's where we've been focusing at at CLA is that customization. There's some plug and play out there. And the plug and play platforms are okay, it'll get you there. But there is some customization because we've seen one business, you've seen one business a lot of times, and there's some really good reasons why that business is set up a certain way. So that process is really important to understand. So in many ways before we start the digital transformation journey, and it is a journey, it's not an event, we come in and do an assessment. And we call that a digital assessment. And we look at those the three P's, the people, the process and the platform. We draw out a map of what that all looks like in a current state. And then we project that forward into what a future state could look like. And we evaluate, do you have the right infrastructure in place to not only do what you want to do today with your business, but where you want to take it in the future. If you're on a growth mode, we want to make sure that you're set up in a way that you can, looking at the the process or the process of the processes makes sense, especially when you're adding this technology, because you're not going to get the efficiencies unless you adapt with it. And then the people. Do you have the right people in house? Or do you need to reach out to a CLA or somebody else to maybe come in for a short period of time to do some education of the staff or maybe there's a recruitment or retraining or training up to help the organization get the most out of that transformation.

 Filip Kostal  27:25

Thank you so much, Ryan, I really appreciate you being with us today. 

 Ryan Bjerke  27:28

Thank you, Filip. It was a pleasure.

 Filip Kostal  27:30

To talk about outsourced accounting and back office. I'm joined by Kelly Rousar. Kelly, would you mind telling us a bit about yourself and your role at TLA? 

 Kelly Rousar  27:39

Yeah, thank you. So as you said, my name is Kelly Rousar. I serve as a biz ops controller at CLA. I started with CLA about four years ago, and I also serve as the healthcare and life sciences industry lead here in the Minneapolis office in the biz ops group.

 Filip Kostal  27:56

Thank you. And thank you for joining us. What's CLA's approach for outsourced services in general?

 Kelly Rousar  28:02

Yeah, so at CLA we have two different groups within our outsourcing service line. We have the biz ops group, and we also have the CAST group. The CAST stands for consulting and accounting solutions team. Our biz ops team is made up of about 130 different professionals here in the Minneapolis office. And we split those individuals between those who serve not for profit organizations and those who serve for profit organizations. We have about 1500 individuals that work in biz ops across the nation. So within our biz ops group, we have experience ranging from staff accountants all the way to CFOs. We serve the organizations more in a fractional or part time capacity, primarily assisting with their financial reporting role within the organization. Our CAST group on the other side is more full time consulting project based work. They do things like implement accounting pronouncements, or fill in for, you know, resources that are on extended leaves. They do a wide range of things, more of a full time and consulting capacity. There's a lot more information about the CAST group on our CLA website. But as far as our approach to outsourcing at CLA, it is really centered around industry specialization. We feel that by specializing in industries, we can match the right person to the right client, and really be able to help them through those nuances that we find within each industry. We also support this idea at CLA around seamless services. So we create these industry groups within CLA across all of our service lines. So tax, audit, outsourcing. Within those industry communities, we work together to provide all of her fashional needs for the organization and really specialize to get those professional needs met at the industry level. So that's the overall approach to outsourcing at CLA. It really is driven by industry specialization and giving that seamless experience that we take pride in here at CLA.

 Filip Kostal  30:18

Thank you, Kelly. I'm sure you work with different companies that are at different stages. Could you talk a little bit about, you know, maybe the pros and cons of keeping your accounting and back office in house versus outsourcing it to a third party?

 Kelly Rousar  30:35

Yeah, yeah, that's a great question. And really the cost benefit of determining whether a full time resource is better versus a part time fractional resource really comes down to cost. You know, at some point in the organization's growth cycle, it makes more sense to hire full time because the workload starts to increase. And paying someone to do that at an hourly rate becomes more expensive than just hiring full time. So I'd say cost is probably the biggest determiner whether it makes sense to do have a full time resource or have a fractional resource. But we help organizations get to that point where it makes more sense to hire full time. So we start with the organization and more of the infancy of their growth pattern. And then we move them through all the way to when we work ourselves out of the job. And we really like to see that is we're helping, which means that we're doing our job, we're helping that organization continue to grow, give them their financial reporting and resources as they need to make decisions. And then at some point, we work ourselves out of the job, they hire a full time let's say controller, but that's what we'd like to see at CLA.

 Filip Kostal  31:55

Thank you. It sounds like even when they hired that full time internal resource, you're still able to help them with maybe some more complex projects through your CAST service line.

 Kelly Rousar  32:06

Exactly. CAST or even biz ops. A lot of times we also see where it makes more sense where they perhaps will hire a staff accountant. There's the transactional role makes sense for a full time employee, but they may not necessarily need a CFO or controller. So we come in and we supplement at the controller or CFO level that staff accountant, review their work, make sure that the financial statements are prepared accurately. But then that staff accountant is still cheaper than doing a fractional resource.

 Filip Kostal  32:37

Right. Would you mind sharing some of the more recent clients successes, anything that comes to mind?

 Kelly Rousar  32:43

Yeah, for a specific example, I had a client I served who signed a letter of intent with one of the big fish in the industry who wanted to purchase it. So as part of due diligence, the buyer wanted GAAP financial statements. And so that's where we at CLA came in. The client hired us to be able to provide GAAP financial statements for the buyer. We got into the financial records, and it was pretty clear that they were not prepared in accordance with GAAP. I'm not really sure what basis of accounting they were using, but they weren't GAAP. So we were able to prepare three years worth of GAAP financial statements from scratch. So a lot of hours and elbow grease later, the big fish purchased our client for multi-millions and I really feel that our ability to provide accurate quality GAAP financial statements was really integral to the success of that of that acquisition.

 Filip Kostal  33:51

Thank you for sharing that story. Kelly, and thank you for joining us today. 

 Kelly Rousar  33:54

Thank you. 

 Filip Kostal  33:56

For the last segment of today's podcast. I'm joined by Craig Arends, Managing Principal of CLA's private equity practice to talk about M&A and transaction support. Craig, if you wouldn't mind introducing yourself? 

 Craig Arends  34:09

Yes, thank you. My name is Craig Arends. I work at Clifton Larson Allen or what we fondly refer to as CLA. I'm the Managing Principal of our private equity practice. 

 Filip Kostal  34:20

Thank you so much. Let's start out with our first question. When working with different companies, what is CLA's approach and navigating companies through negotiations with different types of investors? How do you typically work with companies through an acquisition or sale? 

 Craig Arends  34:36

Great question. Well, at CLA we play a critical role in negotiating investment terms and deal structures on behalf of the company. We leverage our specialization in valuation, market dynamics and investor expectations to secure favorable terms and conditions for the company. We act as a strategic advisor, balancing the company's interest with the investors requirements to achieve a mutual beneficial outcome.

 Filip Kostal  35:06

You know, thinking back one or two years, the funding environment has been kind of tough for companies, especially at the early stages. How can you help your clients get connected with investors or potential acquirers?

 Craig Arends  35:20

 Really as a strategic advisor, you know, we help the companies prepare for investor due diligence by ensuring all the necessary documents, financial statements, legal compliance requirements are in order. We help match our companies with potential investors by making sure we understand the needs of the company and the investment preferences of the investors,

 Filip Kostal  35:47

Before companies approach investors or potential acquisition partners, what are some of the key considerations that they should keep in mind when they're approaching them?

 Craig Arends  35:59

Yeah, no, that's a great question. I think really, what you're going to want to be able to prepare yourself for is kind of, again, understanding what the investors are looking for, making sure you have an investor presentation put together, that you have financial models, a business plan that can effectively communicate the company's growth prospects in the investment merits. The preparation helps instill confidence in the potential investor and streamline the due diligence process.

 Filip Kostal  36:32

Are the considerations any different for, you know, angel investors, for VC firms for private equity firms or potentially even strategics?

 Craig Arends  36:41

Yeah, no, that's a great question. We get that asked quite a lot. And yes, there's a difference between venture capital or angel investors and private equity investors. For example, if you're dealing with venture capital, the things that you're going to want to keep in mind are, what's your investment fit and focus, scalability and market potential? And do you have a strong team so that you can execute your plan properly? Remember, venture capital groups receive numerous pitches, so it's essential to stand out by showcasing a compelling investment fit, highlighting market potential. And by demonstrating a capable team, you can win over the venture capital groups.

 Filip Kostal  37:29

Thank you so much, Craig. I really appreciate the insight. Thank you for spending time with us and best of luck. 

 Craig Arends  37:35

Thank you very much. 

 Filip Kostal  37:36

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