My friend called it an easy two hour hike outside Quito.
It took almost seven.
Clear skies on the way up. Big views. Then the peak took three and a half hours instead of two, and the clouds rolled in. Visibility went to almost nothing.
On the way down I saw a sign pointing left. I was tired and wanted off that mountain, so I took it.
Wrong trail.
I found out from a local man walking two pack horses. In my broken Spanish I asked where the path went. Not where I needed to go.
The only fix was to turn around and climb back up into the fog. My legs were gone. I was scared, and I will admit it. So I asked if I could hold onto one of his horses.
He looked at me and said, "Grab the tail."
So I did. Thick fog, numb legs, a horse pulling me uphill. And that horse kept passing gas right in my face.
Halfway up, the whole thing hit me and I started laughing. I was thanking that horse out loud, one hand on my nose and the other on the tail.
At the junction I dropped to the ground and could not move. Then I got the right directions, stood up, and made it down safe.
Why I'm telling you this
Every deal I have done since 1999 started like that hike.
Clear skies. The model works. The broker says two hours.
Then execution starts.
The fog is diligence. Liabilities nobody mentioned. Customer concentration that looked fine at 30,000 feet. A market that shifts mid close.
The wrong trail is the surprise. Revenue that does not scale the way the CIM promised. A team that runs on the founder's cell phone.
The climb back is the restructure. New terms, an earnout, a seller note, or the courage to walk.
Three things the mountain taught me
1. Respect the fear.
On that trail I thought about my mom. She is 86 and worries about my safety more than anyone. Fear in a deal is data. The buyer who says he is never nervous is usually the one who skipped the quality of earnings.
2. Your limit is not your limit.
Most people quit at a false horizon, the spot where they think they are done. In deals that is the stalled negotiation or the ugly first month of integration. Most buyers settle or walk right there. The value gets made past that line...
3. Grab the tail.
Ego loses more money than bad markets. Sometimes the move is the uncomfortable one. The advice from the guy with the horses. The lender you did not want. The structure that bruises your pride but protects the deal. Laugh at it and hold on.
The Fog Protocol
Four rules I use when a deal stops looking like the model.
If the timeline doubles, then underwrite it again. Do not rationalize the old numbers.
If a turn feels wrong, then stop and ask the locals. Customers, employees, vendors. They know the trail better than the data room.
If the numbers move, then the structure moves. Price is one lever. Terms give you five more.
If you are past your limit, then bring in someone who has walked that trail before. Grab the tail.
The takeaway
The mountain does not care about your projections. Neither does the market.
When the fog rolls in, drop the ego, check the path, and keep moving forward...
If you are in the fog on a deal right now, hit reply. I read every one.
Forward motion,
Fadi
This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities, financial instruments, or investment products. FM Enterprises and Fadi Malouf do not provide legal, tax, investment, or financial advice. Any business, acquisition, or capital related discussion is subject to further review, appropriate due diligence, and applicable professional guidance.