Finance Towards Profitability: Investment Banking With Chris Mudd

Updated: Oct 12

TCSP 25 | Investment Banking

Do you understand how investment banks can help chemicals companies grow? Chris Mudd, the Managing Director at Chiron Financial LLC, shares why as he joins host Victoria Meyer in this episode. Chris uncovers the mystery of investment banking and shows the many things they offer to help those in the industry. From raising capital to M&A support to advisory services, he tells us the key distinctions that separate investment banks from the rest. Follow along to this conversation to understand more about investment banking and how you can grow to your full potential.


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Finance Towards Profitability: Investment Banking With Chris Mudd

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I am talking with Chris Mudd, who is Managing Director at Chiron Financial, an investment bank. The M&A market in chemicals has heated up. We're going to get some insights on that and investment banking from Chris. Chris has a pretty unique path into investment banking. Prior to joining Chiron, Chris spent many years in senior roles in the chemical industry, including at Desco polymers, which is a Dow and Exxon joint venture, and as CEO of a private equity portfolio company. Chris brings that unique and deep chemical industry experience into his role at Chiron. Welcome to the show, Chris.

Thanks, Victoria. I’m happy to be here.

I'm delighted to have you here. Tell us a little bit about Chiron.

Chiron is a middle-market investment bank, a little bit unique. We serve the middle market, which is defined as companies that are in the $20 million to $300 million revenue range. We provide a full suite of services. We are headquartered in Houston, but we've got offices around the US. We've got offices in Europe and Latin America.

TCSP 25 | Investment Banking
Investment Banking: Investment banks don't own companies. They don't have money to invest. They do three things: help companies raise capital, help in M&A support, and provide service advice. 

Chiron's been around for many years. They have done hundreds of transactions. It's an investment bank that is able to provide a full suite of services but focusing on some of the smaller clients that are interesting to serve. I've been with a number of these companies that are in that middle-market range. That's my sweet spot as well.

Tell us a bit more about what does Chiron does. Investment banking is a bit of a mystery to many people. What role do Chiron and other firms play in the industry?

I joined Chiron after having worked in the chemical industry my entire career in more operating roles. I've always worked for companies or led companies that made and sold products, chemicals, polymers, lubricants or whatever. The whole world of investment banking was a little bit mysterious to me. I became intrigued by it when some of the businesses that I was with went through various M&A transactions and utilized investment bankers. I think the key distinction is that investment banks don't own companies. We don't have portfolio businesses. We don't have money to invest.

What we do is three things. We help companies raise capital. That could be a combination of debt or equity or both. We also help companies with M&A support. If a company is either going to be selling or looking to make an acquisition or maybe even sell part of the company, we do a lot of that. The third thing we do is advisory services. We do a lot of financial advisory or strategic advisory to these companies. A lot of times, we do 2 or all 3 of these services with the same client.

What are some of the trends that you see going on in financial markets? Particularly, as it relates maybe to chemical companies and these mid-market companies that you serve?

TCSP 25 | Investment Banking
Investment Banking: As an investment banker, you're helping a company tell its story. You've got to put together a growth story or a thesis that you can then share with prospective investors.

It's been a rollercoaster, as we all know. Valuations are at a peak. It is incredible when you see some of the multiples of EBITDA of some of the transactions in the chemical industry and in industries in general. The stock market is at an all-time high. The public markets are going well in driving valuations and driving price-to-earnings ratios to an all-time high. That then translates into the private markets.

For the most part, what investment banks do is deal with non-regulated entities. The people that we work with are private equity funds. We work with a lot of family offices. We work with non-regulated private banks and sources of capital. They have to keep up. If the public markets are at these high multiples and high valuations, then the private investors are looking for places to put their money to work. As everybody knows, there is a huge amount of money looking to be put to work in a variety of industries. There's a lot of money out there that people are looking to invest.

That’s what I’ve heard. There's been just a lot of money waiting to be invested.

It's been an interesting evolution. At the beginning of my career, private equity was not as prevalent in general. In the chemical industry, it was pretty rare to see private equity companies getting involved in chemicals. This is probably a phenomenon that started many years ago. It became pretty active and you've seen a lot of private equity firms focusing on chemicals.

These private equity firms raise billions of dollars of capital. They've got all this dry powder that they're looking to invest in. The second most common question that I get is investors that are looking for interesting investment opportunities. There's a lot of money that needs to be put to work. There are not enough good ideas on where to invest that. That's a service that we provide. We were able to present to the investors interesting opportunities to either put that or equity into a business or maybe acquire an interesting business that's for sale. That gives them places that they could potentially invest their capital.

Investment banks don't deal with big, regulated banks; they deal with non-regulated entities.

Chris, we don't typically see chemical executives going into investment banking. We do see people going into private equity because it makes a more logical extension to become an operating executive, for instance. What led you on this path into investment banking?

I still consider myself an operating executive. I do enjoy dealing with customers, quality issues, supply chain issues, and all the stuff that goes into working for a real operating company. A lot of times at this point in their career, a lot of operating executives will make a move either into private equity or into some other services industry.

What led me into investment banking was a few years ago, I was involved in a transaction. You mentioned earlier that I had led the Dow-Exxon joint venture. At some point, as I was in that role, Dow and Exxon decided that we were going to sell that business. We hired an investment bank out of New York City. They came in and they prepared the company for sale. They coached the management team. We put together all of the materials that we could share with prospective buyers and investors and ran a whole thorough process.

Ultimately, we sold the company to an Asian strategic buyer. That was my first taste of an M&A transaction. After I left there, I went with a company in Dallas that was very inquisitive. I was involved in quite a few acquisitions and mergers. We IPO-ed that company. The more I got involved in deals, the more interesting I found it. There are common threads. What you're doing is you're helping the company to tell their story. You've got to put together some kind of a thesis or growth story that you can share with prospective investors.

I get a kick out of that. I enjoy helping these businesses. I've had the benefit of being able to be part of quite a few transactions in my career. It's just a lot of fun to work in an investment banking environment and help these businesses raise capital. Every day, I am approached by prospective clients that are looking to raise capital for growth or for acquisition. Maybe they just need to restructure their existing debt and bring in new lenders. It's interesting to listen to these business cases.

TCSP 25 | Investment Banking

It's not all chemicals. I do get involved in some non-chemical deals as well. There are some common elements. I enjoy helping these companies. I enjoy helping people tell their stories. It's gratifying to see them get the capital they need to be able to grow their business. Having said that, I still consider myself an operating executive.

I'm surrounded by seasoned, talented investment bankers. Most of them are career bankers. I'm sort of the token chemical industry guy here. That makes a powerful team. Having somebody with industry knowledge and experience paired up with people with deep banking experience is a pretty powerful combination.

What do you typically see when people start engaging with an investment bank? You guys provide a variety of his services, including the advisory, do you see that as typically a strategic activity or does it tend to be a bit more reactive? Do they recognize that they need to make a change at their company strategically? Or is there something else that's driving that engagement?

I'm going to answer that specifically for the middle market space. As I mentioned earlier, these are the companies that are less than $500 million enterprise value. When you get chemical companies that are in the multibillion-dollar range, they know that they need an investment bank to help them run a process. They're going to go out and hire the major consulting firms to do strategic management consulting.

It's the smaller businesses that may not realize that they need help. They're out and they're frustrated because they're trying to raise money to expand their business, make an expansion, and for additional working capital to grow revenue. They're frustrated because the commercial bank that they're dealing with will not extend additional credit to them. They may not know how to go out and find these non-regulated lenders or equity providers. They may not know the best way to go out and restructure their finances for their business. That's where we come in.

TCSP 25 | Investment Banking

In many cases, we're providing advisory services. A lot of times, in the beginning, the client doesn't think he needs help. We have to overcome that. Just recognize that by bringing in a professional investment bank like Chiron in running a process, we're going to create competitive demand. We will bring in multiple parties that want to work with that client to help them raise capital. There's a lot of power in that. They're going to end up having a more successful transaction. They're going to get the best possible financing for their project by working with a professional investment bank that can provide those services.

It’s interesting, to your point, that they don't necessarily recognize that they need that support. I also find in my consulting engagements that it can be a blind spot for companies. They recognize that they're trying to execute something, trying to grow, and trying to gain market share. There's a perception that they already have all the tools in their toolbox. It's a bit of a blind spot to recognize that they may not have those tools because they've been successful up to that point with their toolbox. What you're doing with Chiron, myself with Progressio Global, my consulting business, is offering up some new tools that they may not know that they need, not know how to access.

There are certain industries that are no-brainers in terms of there's so much growth, promise, and potential that the commercial banks are going to line up to provide capital to grow your business. In the chemical industry, either you're in a space that's growing at GDP or GDP plus, but it's not huge technology-driven play that's going to blow up in the next three years. It's slow growth, traditional chemical type of business. It's not as easy to get these regulated commercial banks excited about providing capital to grow that business.