From $38m in EBITDA to $110m EBITDA

A quick note before we jump in…

I believe every company needs a person who comes to the office every day with enthusiasm and tells people about all the positive things that are going to happen.

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“You can tweet your way onto a yacht”

The same way you can tweet your way to $75m aum (if done correctly).

The main reason to share your thoughts and journey online is to attract the right people.

• People to hire

• People to learn from

• People to partner with

• People to get deals from

• People to raise capital from

So eventually, you could get to spend time with people who you admire being around.

Tweets, posts and podcasts are just the very first step…

They help you gain attention and build a bit of trust upfront.

Because tell me, how else can a guy living and doing business in Europe connect with, say, a gentleman in New York or Singapore?

Sharing your thoughts and journey openly and honestly is the only way.

Then, of course, real trust can be built when you go from online to offline – meeting these folks in real life.

Be it lunch, dinner, a walk in the park or a long hike in the mountains.

But again, it all has to start somewhere.

And going back to step one – it all comes down to attracting the right people by sharing your thoughts and journey on twitter.

This should be the goal, the one goal only.

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The unheard story of saying no to a job at a private equity firm, raising that capital and doing the deals myself instead.

(Reality: this has been 1,000x more difficult & time consuming than I thought)

Spent the last 2 years talking & meeting local business owners in their 50s and 60s (niche industries $1-5M in revenue; long history; profitable).

Few things I can confirm:

1. They have a strong history and a great customer base (although key-man-risk is often the biggest risk)

2. Many of them have personal expenses on the balance sheet because they never planned to sell; and they are still very profitable.

3. These are still many cases where they are interested in selling the majority and continue to work with the buyer (incl. seller financing)

4.Opportunity to grow these businesses as many owners have not been interested in expanding into foreign markets such as Finland, Sweden, Norway, etc.

(Why? They have no desire because they've been living a good life making $250-$600k a year)

5. There is almost NO competition in deals. Lots of opportunities when it comes to 3-4x EBITDA acquisition multiples.

6. Lots of consolidation opportunities as they are very small businesses.

Countless DDs, numerous failed deals… The journey continues.

The goal is to add $1 million+ EBITDA companies with management in place.

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My recent "aha" moment when it comes to acquiring a business or raising capital:

If both parties are interested, everything is FAST

Emails are answered FAST

The appointment will be booked FAST

Documents are completed FAST

Finally, the calls are answered (big one!).

Things are moving FAST, so to speak.

—

But even if one side has no interest, it's the EXACT opposite.

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The very best investment ideas take effort to really understand.

Once you get it, you can’t think of anything else, and there is no need to.

Spent 4 hours last Friday re-reading the annual letters of highly profitable HoldCos.

A few notes I made:

1) You start acquiring a small group of niche businesses — that doesn’t mean you can’t build something very big.

2) The goal is to acquire high-quality, sustainable, niche companies with continuous profit growth. Preferably led by an entrepreneur or a family.

3) When acquiring a company – local management remains or becomes shareholders in their companies – local ownership average 20-25%

4) The diversified portfolio of European companies creates a very resilient business model – becoming increasingly attractive even to global equity investors.

5) Always have a lot of relationship building going on – the goal is to have super talented entrepreneurs thinking of selling their life’s work to you.

6) Cash flow is the most important muscle which gives you freedom of movement to make a considered decision to create more value.

The goal is to never be satisfied but always happy.

This is the opportunity we’re going after when acquiring small profitable niche manufacturing companies.

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The best 0.001% private equity investors started their careers with 10-bagger type investments.

Not messing up the first investment is very important.

Achieving high returns even more so.

Take David Moore, the CEO of Knightvest Capital - his first deal was buying 28 units for just $12,000.

(That's $430 per unit!!!)

Since then they have gone on to purchase 55,000 units.

Another one:

Tom Gores, private equity specialist who between years 1996 and 2001 led 32 acquisitions and I've read these together were even 100-bagger type investments.

Later in life...

In 2006, he led a deal to acquire PNA Steel, ultimately selling it to Reliance Steel & Aluminum Co. in 2008 for a net profit of $512 million

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Building a business sucks and without a great partner/wife it’s very hard to succeed.

Period.

Friend of mine raised $2.5M+ to build a hardware business.

Lives in Europe, 99% of customers are in the US.

For the past six months, his schedule has been as follows:

• February at home in Europe 

• March in US

• April at home in Europe

• Till the end of May in US

He's married with a 1.5 year old and they’re expecting a second baby already in June.

His lovely wife does everything, from cooking and cleaning all the way to shoveling snow during winter.

Women are strong and only because of them, men can build great companies!

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You won't believe it.

The more biographies I read, the more I believe the following to be true:

Successful people arrived at their niche in life through exposure and experimentation in areas that interested them.

Take Charles Schwab as an example.

He had an interest in the stock market and ran an investment newsletter for a while.

That venture did not give him the success he was after, but helped him formulate an idea that would help popularize stock investing among masses.

Charles Schwab Corp. today is the biggest discount brokerage firm in the world.

He who experiments the most, wins. (More true than ever before.)

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How has been the week in the small private equity world?

Traditional companies

Working with one acquisition, preparing documents and talking to the bank.

The deal size is approximately $4,000,000

When it's ready, I'll give you an overview.

Consumer loan company

This is an overview of the April numbers.

We just finished the spring bond issue round — we hit our target of $650,000

Enough to fund our portfolio for the next few months.

Take care,

Mikk Markus / PrivatEquityGuy

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This week’s podcast:

Imagine being in your early 30s, starting a private equity fund and raising $450 million as your first fund.

All this with no prior track record and without your rich father or uncle.

Years later, you own 90 companies, have $147 billion in AUM, your EBITDA is growing at 15% year-over-year, and only Thoma Bravo has outperformed you…

1. "Stock and bonds are boring, so we went into private equity."

2. "The concept of thematic research helps us find the best companies with the strongest tailwinds (returns could be 6-7 times invested capital)."

3. "Step-by-step on we took a $38M EBITDA business to $110M in EBITDA in 4 years."

Here is my full research on a true king of private equity Mr. Urs Wietlisbach:

Links to Spotify, Apple Podcast and YouTube.

Thanks a lot for following the journey.