40.3% IRR with the right partnership, 100+ acquisitions, and the rarest asset

Dear Friends, Company Builders and Fellow Capital Allocators,

I hope your week if off to a strong start.

Last week I was traveling to the Florida so I had time to dive deep into the stories of operators, acquirers, and builders.

Below are a few reflections and lessons that stood out.

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The Rarest Asset

I came across a gentleman who has acquired more than 150 companies over his career.

When asked what separates winners from the rest, he said something that stuck with me:

I look at this as no longer just knowing more, but doing more with what we already know.

You already have the information you need about the industries, companies, people in this space, the economy, and the current market.

Now it’s about finding the drive and motivation to move forward.

The only way to accomplish anything, again, by moving forward.

Trust the process of motion. Additional knowledge is also revealed through motion.

It’s important not to forget that momentum is a teacher, and that the true answers, deals, people, better returns, and opportunities arrive only for those who keep going.

Otherwise, it’s all only a theory anyway.

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Preserving What You’ve Built

Each week, I talk to 3-4 traditional business owners.

Many have done incredibly well in their main business, but they often ask the same question:

“Now that I’ve earned it… how do I keep it?”

One thing is their active income; the other is what to do with the hard-earned money/liquidity.

Capital preservation has become an interesting theme in my recent conversations with someone who has decades of experience in this.

I’ve also spent quite a lot of time reading and studying this myself.

Over time, the best philosophy that seems to work well centers on preserving capital and maintaining a balanced approach - those two buckets.

Inside that, a pormising three-strategy approach is emerging:

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The Real Retirement Goal (Building a legacy compound where family actually WANTS to live/visit)

Every time I visit my mom’s place, I see an old-school energy business owner in his late 70s.

He has won in life. Big time.

His son runs the family business now, while he spends his days building playgrounds for his grandkids on a big piece of land they own together.

Their houses are about 100 meters apart. Surrounded by a fence. And the grandkids ride small ATVs between them for Saturday-morning pancakes.

How do I know?

He’s always outside, working on something and every month, when I walk past his property and ask how’s everything with family and business, he laughs:

I guess there’s something timeless about that.

Very cool old man! And, most importantly… a life well lived.

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Solo vs. Partnered Searcher

Some fascinating data on search funds and their performance.

Should one start it solo or with co-founders?

• Solo searchers: 27.4% IRR

• Partnered searchers: 40.3% IRR

• ROI: 2.9x vs. 3.8x (as of 2022)

Historically, partnered searches have outperformed.

But the trend is shifting -- solo searchers are starting to deliver 5x and 10x outcomes more often than before.

After 2009, 52% of funds returning over 5x were run solo, compared to just 18% before.

The takeaway?

Partnerships still compound better on average… but if you’ve got conviction, stamina, and speed, going solo can yield asymmetric results.

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From $3.5M to $77M

Imaging taking a single company doing $3.5M to a portfolio of 15 companies doing $77M in just over five years.

When I asked what changed everything, he said:

EOS (Entrepreneurial Operating System) became his framework for scaling.

Today, he still owns the majority of his group (15 companies and $77M in sales), plays golf with his two kids, and is planning his next phase -- possibly selling a portion to private equity to grow even further.

Fascinating story.

We recorded the entire conversation.

You’ll hear it soon on HoldCo Builders.

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The Comeback Era?

I’m hearing more stories of entrepreneurs in their 50s selling their life’s work to private equity -- and then getting back in the game.

They sell their $2-5M EBITDA service business, secure financial freedom (two homes, a boat, kids through college), and then… start again.

100% understandable, isn’t it?

With the next venture, they do it smarter, they have:

• deep industry knowledge and expertise

• mix this with hungry young investment professionals in their early 30s,

• and they’ve got a great combo to scale this platform to $50M+ via M&A.

It’s beautiful model where wisdon meets hunger.

It makes a perfect sense, if you think about it. Kids are grown up… so what else do you do?

At the end of the day, it’s about keeping your mind and body sharp.

“The best years are still ahead.”

Doing this in your 50s, even 60s, together with younger folks who bring energy and financial expertise… imagine that team/partnership fully focused for 5–7 years.

So this next exit could potentially be a life-changing outcome for all sides. I’m sure we’ll see more and more such collaborations.

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Lessons From 100+ Acquisitions

In this week’s podcast, a 28-minute deep dive (feel free to listen 1.5-2x), I explore the philosophy of Joe Liemandt, the builder behind Trilogy Software and ESW Capital -- a man who has led over 100 acquisitions.

Three lessons stood out:

1.  Most companies’ biggest mistake is to not charge enough for what they do.

2.  A boss’ job is to raise their team’s quality bar, tell them exactly where they’re falling short, and elevate their conception of self. You should expect more from your team than they expect from themselves.

3.  Your job as a leader is to have the highest quality bar of anybody you work with. And in order to do it successfully, you have to set a high quality bar, define what quality looks like, and maintain that quality bar with iron determination in a world that’s constantly trying to lower it.

Listen here: Apple Podcasts, Spotify, YouTube.

Thanks for reading,

Mikk Markus / PrivateEquityGuy

If you enjoyed this week’s issue, forward it to a friend who loves long-term thinking, traditional businesses, and the art of compounding.

And if you have a story of an “old-school operator” in your town, reply -- I’d love to hear it.

Lastly, do me a favour and answer this one question: