Acquiring Minds – Episode Summary

Podcast: Acquiring Minds
Host: Will Smith
Date: October 17, 2021
Episode: Anatomy of a Search: 40 Interns, 25 Months, 20 Offers
Guest: Jessica Markowitz (President & COO, Paragon Legal)

Main Theme & Purpose

In this episode, Will Smith talks with Jessica Markowitz about her experience running a traditional search fund and ultimately acquiring Paragon Legal with business partner Trista Engel. The conversation delves deep into the mechanics, emotional journey, and operational realities of conducting an intensive 25-month search—supported by a rotating team of 40 interns—to make 20 offers before successfully closing on a company in the alternative legal services industry. The episode is designed to demystify the traditional search model and offer actionable insights for aspiring acquisition entrepreneurs.

Key Discussion Points & Insights

1. Introduction to Paragon Legal & Post-Acquisition Growth

• [01:50] Paragon Legal provides “corporate counsel on demand” for large in-house legal departments, supplying highly experienced interim attorneys (median experience: 18 years).
• [02:34] Since the 2018 acquisition, the business has seen significant growth and is positioned for further acceleration.

2. Origins of the Partnership

• Both Jessica and Trista began in finance/trading, later meeting at University of Chicago Booth.
• They learned about search funds from classmates and quickly became intrigued, recognizing it as a blend of entrepreneurship, problem-solving, and long-term accountability. [03:05]-[09:41]
• Spent 6 months carefully evaluating partnership compatibility, working through a “partnership charter,” scenario planning, and work style exercises—a thorough prelude rarely matched in other partnerships.
  • Quote [07:04] (Jessica): “We were really good friends and we didn't want to jeopardize that. We still are really good friends five years into doing the search fund and operating…we had to be honest with one another.”
  • Quote [08:05] (Jessica): “It is lonely as a searcher…It’s personality. I never wanted to do this by myself.”

3. Why Traditional Search?

• Opted for the traditional search model for several reasons:
  • Needed a business big enough to support two principals
  • Strategic, not just tactical, operational focus
  • Networking and board support from experienced investors
• Explained difference between self-funded and traditional search funds

4. Search Criteria & Search Process

• Targeted B2B services, fast-growing industries, >$2M EBITDA, >15% margins, recurring/repeat revenue. [12:37]-[12:58]

• Search process spanned 25 months, with a high-touch, industry-focused approach. Involved both proprietary and brokered outreach.

  • Outreach at a Glance:

    • 9,000 proprietary companies
    • 8,000 brokered opportunities
    • 500+ calls, 60 visits, 20 offers (split evenly between proprietary and brokered)
    • Final acquisition was through proprietary outreach [13:55]-[15:19]

  • Interns:

    • Over 40 interns participated. Peak at once was 9.
    • Average: 3-4 at a time, usually for 10-week stints via Northwestern’s Chicago Field Studies program.
    • Intern tasks: 75% list building & research, remaining time in outreach, financial modeling, diligence projects. Interns were given real ownership and frequent opportunities for skill development.
      • Quote [20:07] (Jessica): “We would brainstorm industry ideas every week…they would be responsible for building the list of appropriate target companies…they would join on calls, help build initial models…so we kind of had some ownership.”
    • Regular Friday training sessions for the interns (modeling, accounting, case prep, etc.).
      • Quote [23:53] (Jessica): “I think it inspired them to…broaden their horizons…got them excited about working for a smaller business and learning about organizations.”
    • Playbook and onboarding were largely self-built due to minimal investor guidance.
      • Quote [22:32] (Jessica): “We built the playbook, we built the intern onboarding and we built it all…I think a lot of search funds that are successful end up with something similar.”

5. Overcoming Challenges of Scale, Criteria, and Geography

• Acknowledged that the search was intensive and might sound intimidating for smaller/self-funded searchers.
  • “The smaller the business, probably the faster you can find a deal…Once you get sub-500,000 [EBITDA], I would imagine it's even faster.” [17:22]
• Willingness to move wherever necessary, but location ultimately still played a role in candidate evaluation.

6. Finding & Acquiring Paragon Legal

• Paragon identified through outreach after learning about it from a competitor in legal services.
• Unique niche: Very few “pure play” alternative legal service providers in the U.S.
• Owner initially uninterested in selling, but reconnected a year later ready to sell after struggling with time zone management from Taiwan.
  • Quote [27:40] (Jessica): “She had absolutely zero interest in selling… About a year later…she actually reached back out and said, okay, are you guys still around? I want. I'm ready, and I want to sell to you.”
• Value of keeping in touch and expanding one’s ‘surface area’ for serendipitous opportunities:
  • Quote [31:03] (Jessica): “The search is about getting lucky, and then when you get lucky, be really prepared.”

7. Industry Knowledge & Transition

• Neither Jessica nor Trista are lawyers, but skills in consulting & business operations allowed them to add value in recruitment, marketing, and systems—not legal work itself.
  • Quote [31:55] (Jessica): “The opportunities that Paragon had…needed to be solved by someone who can build out a really scalable recruiting function…who can build out scalable systems and processes.”
• Nearly zero client/attorney churn through the transition, partly thanks to structured support from the former owner.
  • Quote [37:52] (Jessica): “It was great and just showed me how important it is to build trust and build a real relationship with anyone you buy a business from.”

8. Why Not Start a Competitor from Scratch?

• Chicken-and-egg challenge of dual-sided markets: need best clients to attract best attorneys, and vice versa.
  • Quote [39:29] (Jessica): “The prestige of our clients, the prestige of the Paragon brand in the legal world…it’s hard to attract the best talent when you don’t have the best clients.”
• Paragon’s brand/market position and reputation provided a huge strategic moat.

9. Legal Industry Trends & Timing

• Legal industry is shifting to more businesslike operations, strict budgeting, and increasing adoption of alternative legal services—trends the team correctly anticipated and COVID accelerated.
  • Quote [40:55] (Jessica): “Legal is changing…focus on budgets and running legal departments more like a business…tech is growing crazy…all of these things. More work, less budget, more focus on the budget…”

10. Risks, Surprises, and Lessons Learned

• Main fears: Overdependence on the owner (“key woman risk”), lean management team, risk in client concentration.
  • Both concerns proved less dire: company ran well despite the owner's distance, and corporate team departures and even client bankruptcy didn’t derail the business.
  • Quote [45:15] (Jessica): “Our biggest fear was that the former owner was the business…there was also only four people beyond her on the corporate management team…But…the business was not one person.”
• Unexpected early challenges included a critical early employee leaving and a major client going bankrupt, but these became moments proving business resilience.

Notable Quotes & Memorable Moments

• On partnership rigor:
  [07:04] (Jessica): “We were really good friends and we didn't want to jeopardize that…So we had to be honest with one another.”
• On loneliness of the search:
  [08:05] (Jessica): “It is lonely as a searcher…It's lonely as an operator with a partner.”
• On search process:
  [13:32] (Jessica): “It was 25 months, but felt like 25 years.”
• On outreach scale:
  [15:02] (Jessica): “All in all, I think we reached out to something crazy like 9,000 individual companies and 8,000 brokers.”
• **On getting 'lucky':
  [31:03] (Jessica): “The search is about getting lucky, and then when you get lucky, be really prepared.”
• On market credibility:
  [39:29] (Jessica): “The prestige factor matters…hard to attract the best talent when you don’t have the best clients.”
• On industry shifts:
  [40:55] (Jessica): “Legal is changing…I think it's probably changing as fast as it ever has, which is still really slow, but as fast as it ever has.”

Selected Timestamps for Key Segments

• 00:10 – Will Smith introduces topic and guest
• 01:21 – Jessica introduces Paragon Legal
• 03:05 – Backgrounds of Jessica & Trista, partnership origins
• 07:04 – On honest pre-partnership conversations
• 12:37 – Target criteria and initial approach
• 13:32 – 25-month search process summary
• 15:02 – Outreach statistics explained
• 16:12 – Intern structure and use
• 19:44 – Intern task breakdown and training philosophy
• 25:11 – Discovering Paragon Legal
• 27:35 – Persistence and seller’s change of heart
• 31:03 – “Getting lucky” in search
• 31:46 – Challenges of acquiring a legal company without being attorneys
• 38:45 – Why starting from scratch would have been too difficult
• 40:55 – Legal industry shifts
• 45:15 – Key risks and early surprises post-acquisition

Episode Takeaways

• Traditional search is a marathon, not a sprint: The process can be lengthy and requires remarkable organization, persistence, and teamwork.
• Preparation and partnership matter: Success is grounded in honest partnership, a rigorous work ethic, and the willingness to build structure and process from scratch.
• Value of soft skills: Trust, reputation, and relationships—both with sellers and clients—are as crucial as quantitative analysis.
• Understanding niche markets: In dual-sided or specialist industries, brand and reputation carry significant strategic weight.
• Changing legal landscape: Opportunities abound for savvy operators as legal service models and corporate legal spending undergo rapid change.

For more episodes and summaries, visit acquiringminds.co or the YouTube channel.