Scale platform from $3M EBITDA to $15M+

Buyers and Builders,

Thursday already, another great week! And I mean it doesn’t matter what you’re building… whether it is operating and growing a traditional $1-10M EBITDA niche business, hunting for the next platform, chasing proprietary deal flow, underwriting an opportunity, executing an add-on…

(Maybe you're in a totally different industry, but my point remains the same.)

What makes one’s journey more enjoyable and with a much better outcome... (We’re talking about a staggering difference in outcome, actually. Staggering.)

And I'm saying this only after having spent time with gentlemen who are growing their firms 30%+ YoY vs. the industry average 3%...

Folks who are able to scale their rollup platform from $3M EBITDA to $15M+ (not an accident, as this is just one of their platforms; they operate a few more)...

Aka seeing very closely how the total studs of their industries operate & how the sausage is made.

I’d say when talking to them, I’d bring out two things:

1.  They genuinely love their work, and...
2.  They’re obsessed with wanting to serve their customers.

If either is missing, the daily work is a slog and a chore, just hard, frustrating, and full of uncertainty. But as they’ve got both, then the work is mostly easy, fun and something they want to do - where improvement happens almost automatically.

Knowing a bit of their background and the work they've put in... I can see, the older they get, the more they just enjoy the process.

Again, that is my humble, but accurate, opinion.

That probably disappoints those who think complicated = smart

But more often than not, life works the exact opposite.

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Come hell or high water.

Sometimes there are intense sacrifices some of us have to make to get to where we want to go.

ETA, traditional search, indy sponsor, committed capital vehicle…

There is nothing new or unique here. Are you good at judging risk-reward, finding deals, finding talent? Being consistent?

Based on the conversations these days, even with folks with killer resumes, it comes down to are you good at finding deals? And most importantly, getting lucky?

Are you obsessed with this game?

I talked to Greg and his story on a two-year search… the fact that they were coming from Harvard Business School, with zero experience, they went aggressively looking for deals by doing cold emails, cold calls, eventually finding one by attending to after hours event, ending up acquiring a tour business, paying 5x EBITDA and having a seller willing to finance $14.5 million of the $29 million purchase price at 4% interest…

He said on the call:

“Seeing success as the only option. Failure is not on the table. We’re going to be successful, regardless. You can worry, you can entertain… But I believe the entrepreneurs view success as the only viable option.”

The idea that you will be okay even when coming up empty-handed… that should be a red flag.

Doing all this should be a feeling that you don’t want to do anything else other than that. If you don’t pursue that, you’re going to have that feeling, that chronic lingering feeling… So in order not to go crazy or be sad at the thought of not going after it… the only thing is for you to do it.

Does everyone have the same feeling like that? I don’t know…

At the same time, if a high-performing person from IB or PE believes that this is the natural next step, that’s not good either.

It’s very personal. Why do you do this? For whom are you doing this? For yourself or for others? If for yourself, great. What if it hasn’t worked out as you planned? Pivot, find, and I’d even say, create a way, create a door. The front door is always crowded… What has helped me is taking a moment to really stop… and deliberately writing down what I got wrong. Not journaling about my feelings, not gratitude lists… but what did I predict that didn’t happen? What did I believe yesterday that turned out to be off? Where did I waste effort because my assumption was wrong? The reason I’ve chosen this is that it attacks the single biggest bottleneck.

Now, if all this LMM, $1-10M, $1-15M EBITDA is for any other reason, not for yourself… I don’t have an answer for this.

At the same time, no need to make it more complicated than it is. This path, the journey, this particular environment… with the intelligence, work-ethic, horsepower, honestly, likability, is there to grab and really to take. There are so many ways to generate alpha.

(Not all of these are my original thoughts, but everything I’ve heard from talking to 3-5 folks who buy $500k to $15m EBITDA businesses per day for years. Being obsessed with this game, they’ve said.)

And someone who I talked to very recently. Both obsessed with the game, and with great track records. Greg and David.

- They raised $550K in search capital
- built a database of 30,000 companies
- spent nearly two years searching for the right deal
- they signed one LOI
- a NYC based business that checked none of the boxes
- an old-fashioned B2C tour operator sending baby boomers on group trips around the world
- they bought it for $29 million at under 5x with a $14.5 million seller note at 4%
- did “nothing” the first year other than being journalists - learning, taking notes
- they improved the business, scaled EBITDA to $7.5 million 
- four years later, they sold to a private equity
- nearly 50% annualized returns
- almost 5x net to investors

Links to the episode with Greg. Spotify / Apple podcasts / YouTube.

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Last week Tuesday I posted on X:

There is no way I’m surprised, but there are a lot of fascinating individuals who reach out. The calls are still ongoing… There were eight yesterday.. We keep them for 20-30 minutes.

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Last but not least.

I read something fascinating.

Private equity has come a long way. But many of the ideas that now sound obvious - you take operational value creation, management ownership, disciplined underwriting and bringing operators into deals - were once pretty extreme and not so common…

I mean, you have Warren Hellman saying that, for years and years, you didn’t need any capital to do deals because you were sold the underwriting before you ever bought them.

Imagine Hellman & Friedman is considering buying a company for $500 million. Normally, the PE firm might expect to finance it with something like $200M of equity and $300M of debt.

But in a very aggressive credit market, investment banks would compete to finance the acquisition. A bank might effectively approach H&F and say:

“If you buy this company for $500M, we'll underwrite $450M of the financing.”

There was so much cheap money chasing LBO debt…

And that is what makes The Masters of Private Equity and Venture Capital by Robert Finkel so interesting. Rather than teaching private equity through formulas, Finkel studies and interviews the people who helped build the industry.

The best part is going back in time: you can read how they thought and acted when they first got started - the jobs they had, the opportunities they saw and acted on. Everything that led to what we see today.

Why read the history of private equity? Well, things tend to repeat themselves. Just give this a read, and you’ll see what I mean… (it’s year 1959)

You see what I see? (That happened in 1959… and Warren saying in 2010 “My company seeks to invest in companies that possess these traits.”)

Many such lessons on these pages…

Anyway, I read the book and created an episode that focuses on Joe Rice of Clayton, Dubilier & Rice and Warren Hellman of Hellman & Friedman.

Why these two?

Rice spent more than four decades in buyouts and helped pioneer something almost every PE firm talks about today: operational value creation.

CD&R's philosophy was to put experienced operators beside financial investors and make the companies better. That philosophy eventually scaled from roughly $10B under management when the book was written to around $87B in the figures discussed in the episode.

Then there is Warren Hellman. He co-founded Hellman & Friedman with Tully Friedman in 1984. The firm had roughly $25B in AUM when the book was written; by March 2025, that had grown to $107 billion.

Hellman's philosophy is to assume every investment is guilty until proven innocent. Something that was repeated ten times in the 26 pages describing his life. That is why I believe studying these investors matters today.

The tools of private equity have changed. Funds are dramatically larger. Competition is greater. Financing markets move faster. But the fundamental questions haven't changed: Are you buying a genuinely great business? Do you understand it beyond the spreadsheet? Are the right people running it? Are incentives aligned? And can you actually make the company better after you buy it?

Perhaps the most surprising part is that these masters also got deals catastrophically wrong. I mean deals going to zero. Then, the next moment, you’ll see their ability to study failure, change their systems and become better investors.

Despite these gentlemen buying and building businesses pre-2000s, the operating principles haven’t changed.

Considering the market dynamics today - higher interest rates, more competition for deals and talent… Those principles are even more useful for today's buyers and builders than they were 40 years ago.

Links to the full episode: Apple podcasts, Spotify, YouTube.

That’s all for today.

Take care,
Mikk Markus / PrivateEquityGuy