A deal signed with a 50 day close (5.7M Ebitda; 3.5x purchase price)

A quick note and encouragement (and thank you) before we dive in…

2.5 years, 50k followers and one investment later.

I started this account to share my journey for four simple (but selfish) reasons:

1. to learn and master the basics of acquiring and investing in profitable traditional businesses

2. to attract like-minded people on the same journey

3. deal flow

4. investors

It’s important to mention that I’m a simple guy in my 30s.

I don’t work in a corner office on the 27th floor on 52nd Street in NYC.

English is not my native language.

I don’t come from an Ivy League school.

I don't have a second home in the Hamptons and I don't go on ski trips to Aspen, Colorado.

I come from a background of a lifelong sales person, having also founded and sold two very small businesses while living in Australia (where I also learned to speak English).

The twitter handle Private Equity Guy was a way to attract like-minded people – I haven’t worked in private equity or investment banking – but I’ve always wanted to be surrounded by these smart people, again, to learn from them.

Being open and transparent, sharing 2-3 tweets a day for the past 2.5 years has brought many such business builders and investors into my life.

(Choosing this name was my little asymmetrical bet that went very well.)

One thing though...

And I won't lie to you... after learning, talking and meeting with almost 1,000 business owners, investors... I have become very cautious.

There are very few exceptional investment opportunities.

(I live by the mantra that if you mess up your first deal, it's your last.)

That said, independent search is very difficult. In terms of time. In terms of capital. Doing the math, I've spent almost $60k on dead deal fees.)

But the journey continues, luckily I have been very frugal and the money I earned from these first two small businesses in Australia is keeping me alive.

My gf and 2 kids are happy too – they are not overweight, but they are happy (kidding. but seriously, everything is fine).

Long story short, as a result of chasing these exceptional deals, I have so far only made one investment.

(We got an offer to sell the company, but we didn't, it would have been my first 10 bagger for my initial $50k minority investment.)

Working towards the second transaction, this is already a bit bigger, generating more than $2M in EBITDA.

Long-term games with long-term people. Thanks for following along on the journey.

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A deal signed with a 50 day close:

I talk to business owners and people wanting to acquire companies every single week – I have good news.

Regional leader in Germany in a niche Logistics and Transportation segment – owners are in their 60s, kids are not interested so they want to sell it.

Revenue 26M EUR, EBITDA 5.7M EUR with 4.9M EUR free cash flow.

Price 20M EUR (3.5X EBITDA) with 15M EUR today and 5M earnout.

A gentleman with private equity investment experience invests 2M EUR of his own money. (He has a 10M EUR debt from the Polish Credit Fund).

If you would like more information, maybe even sign an NDA to view the deal. Please fill out this form or contact me by replying to this email.

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Never underestimate the early struggles. Stick to it.

There's a gentleman coming to the podcast who started the company back in 2014. Got the first paid customers in 2017. First $1m revenue in 2019. Today, it they do more than $200m in sales

The power of grit, persistence, and M&A

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Don’t just sit there and go find someone with 2 million.

My response to a person who commented on the podcast episode with a couple who have bought more than 25 businesses while still being in their early 30s.

Yes, they got seed capital from their parents. It was all they had and they still trusted their children.

They are now rich and happy, while the guy on the comment section is still finding reasons why he couldn't be the one buying the companies.

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“When there is no wind, row.”

(An important reminder when times are tough.)

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The OG Swedish serial acquirer said that it is easier to grow margins from 20% to 30% than from 10% to 20%…

A company that already has 20% must already have a great product or some kind of moat.

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As of this week, I know another VERY intelligent and experienced M&A person who decided to give up the journey of acquiring his first profitable traditional businesses.

"Couldn't find capital. Couldn’t put it all together"

Nothing new and very common excuses I've heard many times over the years.

The biggest problem??

He gave himself a little less than 18 months…

 I guess this is not enough.

After this weekend... he will go back to work.

For the rest of us, those who did NOT give up, it's a great time to keep building.

Imo that's the beauty of being in the game of investing and small business acquisition.

The longer you go on, the less competition there is. So many people just give up.

Yes, it’s very difficult for all... No matter the background, resume, age, experience… It's damn hard.

All this means one thing:

There are huge and very rewarding opportunities to pursue…

But ONLY for those who choose to keep moving forward and just not give up.

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How has been the week in the small holding company world?

Traditional business

The $12M heavy equipment seller is in an interesting situation—one owner is ready to exit and sell his shares, while the other wants to stay involved but isn’t willing to hold a minority stake. This week I made another offer, and changed the payment terms. I’ll keep you posted on how things develop.

Fintech/Consumer loan company

David Frankel from Founder Collective have said:

“Be slow to delegate, and when you do, choose your delegates carefully”

That said, we're 100% bootstrapped, one full year profitable.

This week we hired our VERY first CFO from a local large bank.

From day one, we have believed that revenue from paying customers is the best source of capital. He settles in quietly.

Update on equity investment: We have a commitment for 800,000 euros; we’re trying to close by the end of March.

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This week’s podcast:

The most good ideas per 30 minutes I’ve seen in a long time…

A true original thinker.

Insights on capital allocation, holding companies, and finding asymmetric opportunities.

Plus, understanding human behavior better than other 30-something year olds.

I hope you enjoy it.

These are 9 of my favorite highlights from Jeremy Giffon:

(I’m VERY glad I found Jeremy at 31, and not when I’m 51)

1.  Best companies are getting paid an absurd amount of money for their words alone. No inventory, no logistics, no capital expenditures—just wisdom that people will pay millions for.

2.   I want to buy from forced sellers, not willing sellers.

3.  Coordination problems are where the money is.

4.  The best assets in the world are unloved, orphaned, and misunderstood.

5.  If you’re doing deals just to stay busy, you’re going to underperform someone who waits for the fat pitch.

6.  Think beyond numbers. We once offered $25 million and a Ferrari 488

7.  Leverage isn’t just financial. It can be social as well.

8.  $4 coffees don’t buy meetings with influential people.

9.  You don’t need to be a genius to win in investing. You just need to see the game differently than everyone else.

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

That’s all for today.

Thanks for reading and talk to you again next week.

Take care,

PrivateEquityGuy / Mikk Markus