The Messy Reality of Post-Close Value Creation

Buyers and Builders,

I rarely write a separate email on my podcast guests…

It’s because many conversations I have are about acquiring small businesses and the focus on the front end…

• sourcing

• financing

• diligence

• and closing.

The conversation I had with Simon points to a more important truth: the acquisition is only the beginning and that the real work starts after the deal closes.

Simon is the co-founder of Arbor Permanent Owners, a long-term holding company built around patient ownership. To acquire East West Engineering, a 40-year-old Australian manufacturing business in materials handling, they raised $25 million from 44 investors and it was heavily oversubscribed.

All 44 were, like they’re called in Australia, “sophisticated investors”.

Prior to co-founding Arbor, Simon had already acquired and operated three founder-led SMEs. He comes to this subject not as a theorist, but as someone who has spent years operating real businesses.

His worldview is simple: small businesses are messy, fragile and emotional systems.

I want to provide an overview of his post close value creation…

As Simon said: “Get into the mess. Understand the business as it actually works. Then improve a small number of things well over a long period of time.”

A great acquisition is not just a good business. It’s a repeatable one.

One of the most useful ideas Simon shared had nothing to do with valuation. When he walks into a business, one of his first questions is…

Has the success of this company been intentional or has it been luck?

A founder-led company can look strong from the outside while still being difficult to own after the founder leaves. There could be:

• solid revenue

• healthy margins

• loyal customers

But…

If the company is successful mainly because the founder is a force of nature (of which there are many!), then you as a buyer may inherit something far less durable than it first appeared (read Key Man Risk).

Simon looks for signs that the business understands itself:

1. Are there routines and rhythms inside the company?

2. Is anyone accountable for key initiatives?

3. Does the company plan, review, and adjust in a repeatable way?

In short, is the company’s success embedded anywhere beyond the founder?

Especially important in the lower middle market, where many companies were built by highly capable technical founders. Simon described them as not MBA-trained, not polished managers, often more like engineers or product experts who spotted a problem decades ago and built a solution around it.

They know the sound of the engine. They know when something is off. And they can be extremely commercial without ever having formalized their thinking.

All that creates both opportunity and risk. The opportunity is that these businesses are often stronger than they look. The risk is that much of their strength can live in the founder’s head, but also in their activities (force of nature, remember?). The buyer always has a risk whether they are buying a business or buying a “personality”.

When looking for hidden signs of quality...look for safety

Simon has mostly been in manufacturing, so the observation is once he walks into a business and safety is poor, he sees that a company that does not care about protecting its people may also not care about standards, discipline, or customer outcomes.

“A sloppy environment often points to sloppy thinking.”

Now on the other hand, if the company takes safety seriously, there is a much higher chance it reflects a broader culture of respect, accountability, and professionalism.

That is a useful operator insight next time when visiting the shop floor.

Day one

You can spend months or years trying to buy a business, but once day one arrives, all of that effort disappears.

Talked to 100+ investors? Many more company owners?

Spend 6 figures on closing processes…all this does not matter. What matters now is the company you have inherited and how the people inside it feel.

Simon described employees being anxious, skeptical, confused, and sometimes angry…

• Some had only ever worked for the founder…

• Some assumed the new owners were private equity guy who would slash and restructure…

• Some resented that the founder got a payday while they did not…

There was even one sales manager in a prior business famously shouted, “Where’s my Ferrari?” after hearing the founder talk about what he planned to buy with the sale proceeds.

Acquisitions are emotionally disruptive.

How to be proactive instead of reactive?

Overcommunication.

In the first 90 days, Simon spends his time meeting the employees, talking to people individually, explaining who he is, what his intentions are, and how he plans to operate. He said he repeats himself constantly. Same message, again, and again. It’s like giving your elevator pitch, telling your story to everyone you meet. Repeat that 50x.

His goal is to lower anxiety. To preserve continuity. To make it clear that the new owner understands the weight of the transition.

He firmly believes that the first quarter after an acquisition is not the time to prove how smart you are. It is the time to make the business feel safe enough to keep functioning.

The first year

His first-year structure:

Q1: Listen, communicate, and settle

Q2: Deep dive and build the sales platform

Q3: Sell, review, improve

Q4: Invest and scale

After buying a business we may want to accelerate immediately…

Simon has a different view on this, he believes you must first build a framework around earning the right to move faster.

What makes this framework so useful is that it respects the nature of small businesses.

1. You cannot force scale before understanding.

2. You cannot ask people to sprint before they trust you.

Simplicity beats sophistication

Simon is deeply skeptical of overcomplicated strategy in small businesses. He talked about seeing searchers and MBA-trained buyers build huge decks for businesses that simply do not need them. His own business plan for East West Engineering was five pages.

That says a lot.

The plan covered a few basics:

1. what the company aspired to

2. where it would focus

3. what capabilities mattered

4. how it would win

5. and what the key initiatives were

The same applies to goals. Simon prefers a few simple buckets and a few measurable outcomes beneath them. At East West, those buckets included customer service, sales team optimization, and safety. The goals are clear, visible, and always shared with the whole team.

He made another good point here: transparency equals accountability. When everyone can see the goals and the progress, the business becomes easier to manage.

What I personally took from this conversation, was to keep things simple – in small businesses, complexity often looks impressive but weakens execution. Your employees don’t need a 50-page deck. They need to know what matters, why it matters, and how success is measured.

Sales is the hardest lever in the business

“Sales is the hardest part of a small business.”

Harder than operations?

Harder than technical execution? Harder than strategy?

Simon: “Yes. Because sales depend on other human beings. It is emotional, inconsistent, hard to control, and always messy.”

Three of the four main ways to increase the value of a company are sales-related:

• sell more to existing customers,

• win new customers,

• or raise transaction value.

The fourth is cutting costs. That means commercial thinking has to sit near the center of the operating agenda.

He believes the sales function should usually be pushed slightly ahead of where operations are comfortable. That creates tension, but his view is that growth requires productive friction.

“If you wait until everything feels perfectly ready, you are probably moving too slowly.”

“Just implement AI” is not a strategy

Traditional businesses and AI implementation…

There was a moment on the podcast when Simon talked about people saying they will buy a boring business and “just implement AI.”

His reaction… It makes him sick to his stomach.

The point is not that technology cannot help. It’s that in most small businesses, especially in year one, the value lies in understanding the real operating and commercial engine of the company, not in layering on “fashionable” tools.

At East West, commercial activity is still rooted in physical catalogues, procurement relationships, and face-to-face sales. Technology can support all such activities over time. But it is not the first answer.

Pricing

A practical point about pricing. Many founder-led SMEs underprice their products or services for years. They do not raise prices because they are busy, conflict-averse, aging, or simply content with “good enough.”

A fresh owner often sees this more clearly…

At East West, products like spreader bars may look simple, but they are mission-critical. If the customer does not have them, the job stops. If they fail and something happens with it, the consequences are serious. That kind of product often has more pricing power than the founder realizes.

Raising prices is not about squeezing customers. It is about charging fairly for the value you create. And once a business realizes nothing breaks and no one leaves after a price increase, they become more confident.

My real lesson from Simon

It is the mindset, and the patience to wait for changes, improvements.

The best operators are often the ones who can enter a founder-led business, quickly identify what must be protected and what needs to change, stabilize the organization, align the team, strengthen sales, refine pricing, and only then scale with conviction.

That is much harder than “buy and build” makes it sound. But it is also more real. Simon’s approach works because it respects the texture of actual businesses. He is not trying to impose theory on them. He is trying to understand them well enough to help them grow.

And in the lower middle market, that may be the most important edge of all.

Links to the episode with Simon: Apple Podcasts, Spotify and YouTube.

That’s all for today.

Best,
Mikk Markus / PrivateEquityGuy