Printing money vs. not printing money

A quick note before we jump in…

I learned this lesson at one of my summer jobs.

Imagine this situation.

Taping windows with telescoping loader while it’s 15-20 meters a second wind.

And you're the one on the 6th floor.

At the same time, being afraid of heights.

Not good!

My stepfather made me do it.

I hated it so much!

And I’ve taken it with me for the rest of my life.

The time between which you decide to do something.

And when you actually do it, is 90% of the battle.

I saw a problem (lack of money + hated my job).

I wanted to help solve this problem….

I didn’t sit around thinking about it.

I went all in learning the game of online poker.

Started with $50 I got from pokerstrategy dot com after taking a quiz; and within 2-3 months I had a bankroll of $2,000

The lesson.

ACTION trumps all.

It’s movement, not meditation.

The difficult conversation that needs having, have it.

The sales call you dread making, make it.

The person you need to fire, do it.

The diet you need to start, start it.

Not next week.

Not tomorrow.

NOW!

Most people sit and wish.

- - - -

Do your thing.

There are people who tell you all kinds of different things.

Find those few people who are really willing to invest their time and money in your ideas.

Is it teaching… Sharing their experiences... Or just ideas on how to do it in the best possible way.

That being said, when it comes to building our business, I’ve had people telling me I should right away target those $1-3M EBITA businesses, instead of the smaller $250k-400k EBITA business we do at the moment.

Then there are people who agree with us saying it’s better if you learn to walk before you start running.

• In my small world growing a $1-3M EBITA is more like running (too much for me, at least at this stage)

• But growing a $250k-400k EBITA business is walking (and I prefer to walk first)

That doesn’t mean that within 2-3 years we can’t actually acquire a business doing lets say $2M EBITA. (At least that’s the goal.)

So why am I going for the smaller ones? It’s because we know how to add value to such businesses. It’s in our circle of competence.

We have a plan to grow those businesses from $300k EBITA to $600-$800k+. Organically and through M&A.

Competition for such deals is very low as the larger PE firms at this region target $800k+ EBITA companies.

That means we can have better multiples. (I know in my presentation and in previous newsletters I’ve said we target 7-8x EBITA. Well, I've already learned my lesson that there are BETTER multiples out there:)

*Lessons learned from very smart people who are happy to provide guidance to ensure I don't make any big mistakes early in my PE career. Good people!

- - - -

Here’s a tweet version of me sharing the lessons of this investor meeting earlier this week.

Almost 825 people have bookmarket this tweet so far.

On Monday and Tuesday of this week, I visited as many as 7 small businesses.

I did this together with a gentleman whose recent deal was a $30 million investment in a company with $170 million in revenue.

A person who constantly travels between London-New York-Middle East and Israel. He is an independent investor who co-invests with various PE firms as well as very large family offices ($3-6 billion aum)

And he's definitely someone who in the future will put together deals worth 100's of millions of dollars.

Here are the 22 notes I made while spending two days with him in person: 

“People are lazy, how many people have traveled here to visit you and your companies? Me: "Well, you're first."

Works with people who supposed to take their company public for $2 billion, but it didn't happen because of the war in Ukraine. He is also a shareholder. Two founders who he works with should have made $500 million each, my question about how you and they feel now that the deal didn't go through? "Nothing has changed, we're just enjoying the game. And more importantly, only worry about things you can control.”

“Mikk, what are your strengths, what is the 0.00001% thing you are the very best at? Focus on that.” ”Raising money is f*cking hard. Closing a deal is f*cking hard. Anyone who says otherwise is either lying or selling you something.” Remember people's birthdays. Under a person's contact on the iphone, in each person's notes section, he has lots of notes about what they've talked about or done together. Also the names of their family members and even their pets. Once he congratulated an old friend and the response he received: "How the f**** did you remember my birthday."

Speaks 4 languages.

“Mikk, you’re a hustler. Which is good! But you need to learn and understand the numbers, you gotta understand the numbers Opex, Capex, ROE, ROA, ROI, ROIC, ROCE, etc... and there is much more. It’s not just that you buy a traditional “boring” company and keep growing it.”

I had a friend who bought a business that did $1 million in revenue and $110,000 in profit…at least the seller thought it was $110k. In reality, the profit was $350,000. So the seller thought he made 8x multiple, although in reality it was 3x. Such deals do exist.”

“Absolutely the biggest lesson I wish I had learned 10 years ago - there are a lot of great deals out there. Patience is a virtue."

Their bar is very high. Interestingly, and not even surprisingly, they are looking for no-brainer deals. A company with a moat, or a brand, or strong competitive advantage, or some type of IP. A high return on invested capital on a very very very attractive price. "There are deals like that out there."

• SPENDS A LOT OF TIME WITH FAMILY.

• Even in between meetings, he had calls with his wife and children.

• Personal trainer 2x a week.

• Eats healthy. Little wine here and there.

• Always takes notes.

• On the meeting, asks a questions, and then stays quiet for a very long time.

• Takes long pauses.

“MIKK THERE ARE PLENTY OF GREAT DEALS OUT THERE.”

"I have people who call me today and say they have a deal. I don't ask for anything and I transfer money to them. I have this type of relationship and trust with few people.”

“Your first deal has to be very good! Once you can make that happen, the rest is much easier. When people have trust and confidence in you- one person invests, others follow.”

"I'm only one guy. And that's just my opinion, I could be completely wrong."

Very polite and professional. Always on time.

What a 48 hours it was! Like an MBA.

Take care,

Mikk aka PrivatEquityGuy

P.S. I shared a tweet yesterday about the consumer lending business we are building.

People asked me about the team and growth, and very few even about the investment opportunity.

That being said, we will raise another round of bonds in October. The interest is 12%-14% per year, with quarterly payments.

For additional information, we are building this business in Estonia and when it comes to investment risks, I have great news:

*Investment capital is secured and controlled by 3rd party vendors LHV Bank and LEXTAL.

So, if you are an accredited investor and this seems like a great opportunity - minimum ticket is $1,000 - I can send you the official Investment Prospect for our secured notes.

Just send me an email.

P.S. Great news: Serial Acquirer Networking Event in Stockholm, I will be there as well (more information). Already next week!

Lastly,

I have interviewed seven people on the HoldCo Builders podcast. People have said they loved the show. Which is pretty cool.

Here's a recent one with Dom:

As always, thanks a lot for following the journey!