5+ acquisitions and $537M portfolio

Buyer and Builder,

I spent this past weekend with a group of folks in the mountains of Switzerland.

All top people in their fields: a senior position in investment banking, CFO of a bank, serial acquirers, PE investors, private credit, etc.

Some of the obvious observations:

1. Everyone’s busy, grinding, working hard to get things done, and to take care of their family.

2. Almost all the guys work long hours, be it Friday, Saturday, or Sunday; most folks had their phones on, getting some work done at any given time.

3. Everyone’s a normal person - it really comes down to having abnormal goals, desires, and the willingness to do what is necessary to accomplish all that.

When you hear folks in their 30s, 40s, and 50s building and operating roll-up companies that are doing hundreds of millions in EBITDA, in niches you do not even know exist, it’s pretty special. It shows you the importance of focus and mastering your craft.

The weekend was great proof that more events like this need to happen. Going from online to offline, getting out from the day-to-day.

Having various short and long conversations with people in different industries... be it while on the lift coming up from the slope, during a coffee break, dinner, after dinner, 2-3 hour conversations, long walks, and overall brainstorming. Again, very special.

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Last week, I had a conversation with the co-founder of CapitalPad, Travis Jamison. After building and exiting multiple companies, he and his team decided to create a platform for profitable $2-15M EBITDA “boring” businesses.

Travis believes that the lower middle market is one of the most attractive asset classes that exists.

They've done 10 acquisitions and are currently working on two live deals, both with a projected IRR of 25% or higher.

The great news is you can invest alongside them (if you're an accredited investor).

Yes, the current live deals have projected IRRs of 25% or higher, but again, there are no guarantees in the game of investing.

Here is the link, so you can go and look for yourself: CapitalPad dot com

(Lastly, they are the sponsor of this newsletter, so this is not investment advice, and you should do your own due diligence.)

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A great one-page overview detailing the KKR founders’ initial capital contributions and the investors they raised from to finance their first leveraged buyouts.

Which book, you may ask?

Btw, how do your weekends look?

Take George R. Roberts, the co-founder of KKR.

> Sit by the pool

> Read annual reports

> Look for deals in the high-debt world

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I had a meeting with a gentleman who, together with his two co-founders, absolutely nailed product-market fit with insane industry tailwinds…

From start to a $1B exit to Apollo in 15 years.

Sector: environmentally friendly energy, specifically wooden pellets

They eventually covered the entire supply chain, from owning forests to 13 modern pellet plants, all the way to the acquisition of boiler houses in smaller towns across Europe.

They controlled it all.

Again, all this had so much growth potential that Apollo ended up acquiring 80% of the business for a total price of $1 billion.

Three co-founders each made $100 to $400m after 15+ years of work.

The name of the company is Graanul Invest.

(H/t to RollUpEurope for a sharp breakdown of Graanul Invest. I’m using their framework and key points below. (If you like this kind of teardown, their newsletter is worth subscribing to.))

I will shortly explain their strategy for growing their portfolio revenue to over $537 million, and 3 lessons on how they did it:

1) their disciplined M&A: right place, right time;

2) staying under the radar, keeping 100% of the equity;

3) having long-term contracts with blue-chip customers.

1.From the outset, Graanul sought to accumulate production capacity in the belief that demand for biomass would keep surging. That bet has paid off. Between 2010 and 2020, Europe’s (incl. the UK) pellet consumption had more than tripled.

Along the way, Graanul focused on not just locking up supply from key producing regions (particularly Northeastern Europe and the Southeastern US), but also on vertical integration, including:

-Building combined heat power (CHP) plants next to production facilities to reduce energy costs

-Securing feedstock supply, i.e., forests

-Securing distribution, i.e., ports and cargo ships

Crucially, Graanul’s founder, Rail Kirjanen is highly skilled at opportunistic M&A.

He took advantage of the global financial crisis to consolidate his position by buying the stake held by a local private equity firm that went under.

In 2015, Graanul acquired a Latvian pelleting plant from a Swedish conglomerate that was looking to reduce its exposure to the region. Graanul paid 7x EBITDA. Not bad for an asset producing €15M EBITDA!

2.With consistent (and growing) profitability, Graanul’s three shareholders managed to retain full equity until the sale. After the sale, they held onto a 20% stake, as well as 100% of Graanul’s substantial forest and biochemical portfolio, valued at €105M.

3.The majority of Graanul’s sales are through long-term (4-5 years), take-or-pay contracts with European utilities, such as Drax, RWE, and Orsted. All 3 have been Graanul’s clients for more than a decade. While Graanul’s contracts tend to be on the shorter side compared to its competitors, such as Enviva (13+ years), this allows for more frequent pricing renegotiation.

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Are you attending this year’s Serial Acquirer event next week? In one room, you can find people who’ve acquired 1, 7, 27, all the way to as many as 140 companies. (48 companies on the panel)

Valuations of the holding companies range from a few million all the way to $8.5 billion.

Here is the link to the event, where you can see all the attending companies as well as the schedule of the event:

When it comes to the event, I’m setting up a small podcast studio to shoot 20-to-30 minute interviews with some of the attendees.

Let me know if you’re a business buyer and would like to have a conversation or if you could provide an intro to someone who would be willing to share their story.

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My podcast episode went viral last week. Just on X, it has over 270,000 impressions.

It’s an episode with Vic Keller, who has built, bought, and scaled 17 companies, completed 9 exits (3 of them to Berkshire Hathaway).

He also scaled the largest manufacturer in the car wash industry.

Today, he manages it all with just 9 people on the team.

I hope you enjoy listening and learn a lot.

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

One last thing: as I’m always reading and learning, I want to make sure you keep receiving these emails (Edwin from Road To Carry newsletter wrote this great short tutorial on how to make sure you won’t miss the newsletter I’m sending).

When you’re reading on Gmail mobile, could you click the three dots (…) at the top right corner, then “Move,” then “Primary”?

And when you’re reading on Gmail desktop, go back to your inbox and move this email to the “Primary” tab.

That’s all for today, and I’ll talk to you again next week.

Take care,

PrivateEquityGuy / Mike Markus