$25mm in revenue, 25% EBITDA and 4x purchase price

A quick note before we dive in…

Hedge fund manager Paul Tudor Jones is reported to pay $1m per year to get coached by Tony Robbins.

One thing he has said in interviews is that Tony has asked him to take full responsibility for everything he does.

Even in situations where it seems like someone else's fault...

So even if you're playing at lower levels but still looking for a great company to acquire, raise capital, or face other challenges and things don't go your way, it's important to remember that you only have yourself to blame.

• It's not competitors,

• not the economy

• not banks

• not the government or whatever.

If you get in trouble, you have to learn and get better.

1000's of people are doing exactly what you want to do, so eventually it's still doable.

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Every 3rd and 4th finance guy dreams of starting his own private equity firm...

And in 5, 10, or 15 years time, have an office on 57th Street in New York City.

That said, I believe there are very few realistic options for setting up a private equity fund or a holding company in the first place…

(1)  Start a business, grow it, sell it. Start a fund

(2)  Work 9-5, save for decades? Start a fund

(3)  Have deep experience in a blue chip company, save $$$, leave and then start a fund

(4)  Find a way (savings, seller financing, bank debt) to acquire a $1-3mm EBITDA business, grow it, build it, sell it OR reinvest the earnings and build your fund that way.

All four are REALLY hard and require much more than guts, deep thinking, and long-term planning.

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Taking the road less traveled builds resilience and insight. Patience and discerning judgment are vital when navigating the rewarding yet challenging territory of acquisitions.

— Victaurs

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Something to think about:

Let's say you're building an investment company, holding company or private equity fund…

At what point do you start bringing the core business functions into the business - e.g. legal, corporate finance, financial modelling?

If there are one or two transactions a year, is it more cost effective to outsource?

What about three or more investments per year...

Has anyone done the math?

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Corporate culture wise, the earlier the better.

When you have a group of talented team members in your office who are highly motivated and focused on delivering a shared vision, it naturally starts to “compound”.

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Buy-and-build benefits compared to the private equity model of buying to sell.

Btw don’t take it from me but from a 9-fig holding company whose subsidiaries and externally managed companies employ approx 4,000 people.

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There isn't a story of a private equity, venture capital, hedge fund, or holding company founder who has gone from an idea to millions, if not hundreds of millions of billions in assets without moments when they felt like they couldn't do it.

There is so much pain involved and you can feel it when you talk, listen or read about people who have been through it all and finally made it.

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When talking to folks in their 50s, 60s and 70s who are looking to sell their businesses in the next 3-5 years.

The most important things for them:

• Money they make

• Will the buyer take good care of it

Doubling the size or getting to the next level is very rarely on the list.

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A group of gentlemen run a holding company that oversees $10 billion of private capital - operating assets in the financial services, healthcare, real estate, and technology industries.

Reading their website, the number one focus before the long-term view and adaptability:

'think like an immigrant'

Understandably so, as their founder is an immigrant. Rooted in this immigrant mentality, they believe in the value of hard work and the concept that anything is possible.

Such a strong message (and lesson) for all builders.

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There's really no right or wrong way to build a HUGE portfolio of traditional niche companies.

Spoke to the founders of 8-fig holdco where they’ve acquired over 10 businesses and each time they spend at least 90 days in the company.

Learn all the details about the industry, the people, the customers and the nuances of everything.

They started 5-6 years ago with the idea of ​​buying just one company. And today — as the strategy of REALLY getting into every business within the first 90 days post acquisition is working so well — they can see that they can grow the entire portfolio even bigger.

*Out of 14 acquisitions, they’ve sold two companies so far because they said managing these companies was too hard and they didn't like the industry.

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How has been the week in building my own small holding company?

Traditional businesses

There’s a small 20+ year old company that makes almost $650,000 in net profit per year.

• Very stable revenue

• Very stable profit

• Very asset light

• Team of 10 people

Owner works 8-11 hours a day, and did short 4-5 hours even on Christmas morning.

One big problem in case he ever wants to sell the business…

The key man risk would be way too high for any new buyer.

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Last Friday I had a meeting with the founders of the company ($12mm in revenue, $2mm EBITDA) where we do DD. I made my initial offer in terms of structure, financing, etc.

They will get back to me next week.

I keep you posted.

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This week’s podcast:

It’s hard to find a more transparent story of early days of building a portfolio of traditional businesses.

Jason, Simon and Rowan have done an exceptional job in their first year at Arbor Permanent Owners

Their structure, strategy, fundraising, and first acquisition are all unique—and we cover each

We need more people like Jason.

Enjoy!

Here are the links to Spotify, YouTube and Apple Podcast.

That’s all for today.

Thanks for reading and I will talk to you next week.

PrivatEquityGuy / Mikk Markus