13 lessons after 15 acquisitions

A quick note before we jump in…

An UPDATE actually.

24 months ago, when I decided to start the journey of acquiring a niche company, I partnered with a local M&A manager at a Big4 company.

Building publicly on Twitter, interviewing 20+ people on HoldCo Builders podcast, and meeting 30-40 investors IRL – private equity people, investors, family office analysts, and business builders – I have learned a lot. And I feel and see that there is not so much obsession on his part.

When it comes to my professional life — building this investment firm has been, is and will be my life’s work!

Yes, I spend time with my gf and my 1.5 year old, but outside of that, I’m working non stop. And I enjoy doing it.

You do better in life when you do things with people who are on the same page as you.

It all comes down to effort and desire.

The older I get, the more I watch (only!!) what people do. A gentleman in Australia told me years ago that talk is cheap, and it is an action.

I can't say that about him...because he's on vacation 5 times a year and when he's not on vacation he keeps asking me how’s things doing. That is all.

It seems like he's waiting for me to execute everything. In conclusion, it is not my job to motivate a 54-year-old to start an investment company.

(I've been told by other people who’ve followed the journey that he's not a real M&A guy, just an accountant.)

Two years in, I will continue this journey alone while getting help and support from those PE and M&A people who have been in this world for years.

- - - -

Few weeks ago someone posted on twitter that sales is the most important skill in the world.

Either you agree or you don't.

If you can sell, you will get wealthy.

So, let's talk sales.

Yes, there is tons of research but I found a list of 7 things which I believe is everything you need to know about sales.

This is a Save & Print, and then Reread once a month type list.

Again, I found it on the internet and did not come up with it myself.

1. Sales is a lot like golf. You can make it so complicated as to be impossible or you can simply walk up and hit the call. I’ve been leading and building sales orgs for almost 20 years and my advice is to walk up and hit the ball.

2. Sales is about people and it’s about problem solving. It is not about solutions or technology or chemicals or lines of codes or artichokes. It’s about people and it’s about solving problems.

3. People buy 4 things and 4 things only. Ever. Those 4 things are time, money, sex, and approval/peace of mind. If you try selling something other than those 4 things you will fail.

4. People buy aspirin always. They buy vitamins only occasionally and at unpredictable times. Sell aspirin.

5. I say in every talk I give: “all things being equal buy from their friends. So make everything else equal then go make a lot of friends.”

6. Being valuable and useful is all you ever need to do to sell things. Help people out. Send interesting posts. Write birthday cards. Record videos sharing your ideas for growing their business. Introduce people who would benefit from knowing each other then get out of the way, expecting nothing in return. Do this consistently and authentically and people will find ways to give you money. I promise.

7. No one cares about your quota, your payroll, your opex, your burn rate, etc. No one. They care about the problem you are solving for them.

There is more than 100 trillion dollars in the global economy just waiting for you to breathe it in. Good luck.

- - - -

The more I talk to smart people, people who have created and manage hundreds of millions in business value, the more I see how important it is to avoid costly mistakes.

What is a costly mistake?

Well, there are probably hundreds of those, but a few I keep seeing again and again - overpaying for a company and more importantly buying a company with problems.

When it comes to problem:

You and your team have 24 hours a day in case you mess up with your acquisition — you end up spending all your waking hours solving problems.

Solving problems because there is no other way > growing companies, looking for new acquisitions, generating healthy returns for investors.

See what I mean?

>>>>>

“>” must be the other way around.

< Your attention should be focused on growing the portfolio company, looking for new acquisitions.

That being said, it’s much smarter to wait and only do deals which make sense, and do deals which will be “no-brainer” type deals.

The day you closed the deal, you already knew you were making money.

Here are some lessons from a man who has made nearly 15 acquisitions.

The privilege of peeking behind the curtain at 10,000+ businesses. Some observations:

1. All businesses are loosely functioning disasters.

2. Operating a small business feels like a daily knife fight where you get out of bed, try not to get stabbed, get back in bed, and do it all over again.

3. Small businesses don't stay small on purpose.

4. Most companies don't make much money.

5. What money they make is almost always reinvested back into the business.

6. Most owners unknowingly tolerate a tremendous amount of risk.

7. Most owners work long, stressful, odd hours.

8. Neither number of employees, nor revenue is a good proxy for the success of a business.

9. Fast growth is counterintuitively more perilous than declining revenue and can quickly destroy a company.

10. Culture is nothing more than what you reward and punish, not what you put in your mission, vision, values statement.

11. Most employees couldn't tell you why they do what they do, or how it contributes to the success of the business.

12. The most dangerous time for a business is when the owner first experiences some financial success or significant notoriety. Few survive it.

13. Occasionally, we see a business that breaks most of the above and it blows my mind how profitable it is, how happy their employees and customers are, and how well they serve their community. 

They're out there, but exceedingly rare.

- - - -

How has been the week in my small holdco world?

Traditional businesses

Talked to two owners this week – asked if they have thought about selling their company.

Both conversations were quite short as my "fears" came true; their price expectations are too high.

One thought of selling at 9 times EBITDA, another at 10 times EBITDA

Here our conversation ended.

GOOD NEWS!

TERM-SHEET update -> There is now a company whose term sheet I am working on.

We are putting together three companies. All at 3.7-3.9x EBITDA. (Now we're talking!!)

Agricultural market leader in Estonia + smaller competitor in Finland + E-commerce store.

Once the term sheet is signed, I go and talk to investors who have shown interest in my deals. (The current list has 59 names.)

The credit portfolio of consumer loan company keeps growing.

As of January 21st, we have funded $219,000 in loans. (The plan is to finance $300,000 to $330,000 in January.)

If you’d want to become of our investors (interest 12-14% per year), send me a message and I will share additional information.

It would be really great to have you on board, even if it's a $10,000 ticket.

Take care,

Mikk aka PrivatEquityGuy

Lastly,

Here's a recent podcast with Michael Cassau — Michael is the co-founder of Grover. Fascinating guy.

He has raised more than a billion in both equity and debt. He shared all the fundraising as well as business lessons with me on the pod.

(Links to Spotify Apple podcast, and YT can be found in the comment section below.)

Thanks a lot for following the journey.