🧐 What I Learned Last Week
Week ending Friday April 1st, 2022
What I Learned Last Week curates the most interesting content relating to business acquisitions, operations, entrepreneurship, finance, and more. WILLW is a publication of The Business Inquirer.
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Hello Friends!
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📰 Articles
Pitchbook recently released its 2021 Annual US PE Middle Market Report.
Key takeaways
Inflation is top of mind for middle-market firms, as Consumer Price Index gains have surpassed 7% in 2022 and financial fallout continues from Russia’s invasion of Ukraine.
Middle-market fundraising showed signs of a slower recovery compared with broader PE fundraising landscape, with capital raised and fund count both falling just shy of 2020’s totals.
Exit count spiked above 1,000 for the first time on record, as rising multiples pushed many portfolio companies to price targets well ahead of schedule.
On a similar topic - here’s another look at 2021 M&A data from Southard Financial.
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It’s been 90-days since Patrick Dichter closed on his acquisition of Appletree - bookkeeping, payroll, and tax services provider for SMBs. He writes about his reflections so far.
Challenges the first 90 days?
Closing right before the busy season. It’s meant increased stress and less time to ask questions or change anything.
Information overload trying to wrap my head around all our systems and services.
We’re understaffed by 2-3 people.
I need to slow down and get buy in on every decision
Selling ideal clients. The firm has a very tight filter on which clients we’ll accept
Childcare while being back in an office 3 days/week. Sick kids, full daycares, etc. (Thank you grandparents!)
I know Patrick personally. If you’re exploring a new accounting services provider, I’d recommend taking a look at Appletree.
Reflections 90 Days Post Close
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BMI Mergers & Acquisitions recently published their report on the software market.
Reeling from the widespread impact of the COVID-19 pandemic, software M&A has proven resilient in the face of a renascent pandemic, market volatility, rising inflation, and continued disruption to global supply chains. After a record-breaking year for software M&A in 2021, optimism for another supercharged year remains, despite potential market headwinds and geopolitical turmoil.
🧵 Twitter
A lot of great lessons in this long thread…
This is why you want to get in the game…
Interest in software from the searcher community is increasing (as it should)…
You didn’t need to know about the internet in 1995 in order to be successful. By 2005 it was a requirement. Now’s a good time to start learning…
What was that Mike Tyson quote about having a plan?
Not all business buyers are equal. Here are some tips on buyer vetting…
This is too good. A simple framework for business idea validation…
🤔 Thoughts, Events, Other
Quality of Earnings (QoE)
A QoE is one of the most requested types of financial due diligence that we see at DueDilio. What we’ve found is that many business buyers actually don’t understand what a QoE is and when it’s required. To add to the confusion, a QoE Report is going to look very different if produced by a Big 4 accounting firm or if you hire an independent professional or boutique firm. The reality is that unless you have lenders or investors that specifically require a Quality of Earnings Report - you probably don’t need one.
I want to share a couple of recent podcasts and conversations about Quality of Earnings.
Podcast: Quality of Earnings Analysis: What You Need to Know Before Buying a Business
Video: Due Diligence Roundup With Elliott Holland
Read: Ten considerations in a quality of earnings study
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Industry Reports & Market Research
There are many reasons for needing market research or industry report in M&A. At DueDilio, we get many requests from business buyers who want to understand industry KPIs, competitive landscape, and future growth drivers of a particular sector. We actually just onboarded several excellent and cost-effective market research providers to help facilitate these types of projects.
I recently came across an excellent collection of free industry reports from Peakstone - a middle-market investment bank.
March, 2022. Peakstone’s industry reports can be accessed through the links below. We deliver sector knowledge, experience, and relationships to every client. Please contact us for additional information about our services.
There are a total of ten free industry reports that you can access on Packaging, Industrials, Healthcare, ECommerce, and more.
Peakstone Publishes Industry Reports
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Twitter
If you operate a business, get on Twitter. Run, don’t walk.
I am constantly amazed by how many new projects DueDilio receives via Twitter. And this is for something super niche like M&A due diligence. I would have laughed if someone told me that a service so niche would be generating demand on this platform. If I can do it, you can too. Simply start sharing your story, product/service, case studies, educational content, etc. Twice a week is fine. Just be consistent.
I invite you to follow DueDilio on Twitter.
🛠 Tools & Resources
These are tools & resources that I personally use or have used. They may contain affiliate links so I’ll get a few pesos if you sign-up.
Cerebro Capital - Cerebro has a network of 1,500+ lenders who can provide debt financing for your acquisition, refi, etc. $500k minimum.
X5 Deals - Proprietary deal sourcing. They do the outreach and send you relevant, actionable deals directly into your inbox.
Curators - Proprietary deal sourcing. You need targets that fit your investment criteria, and Curators delivers week after week - we even update your personalized database on a daily basis with new information on best-fit targets.
BizNexus - Proprietary deal flow, deal aggregator, and exit prep.
PrivSource - Deal aggregator for lower and middle-market listings.
ProjectionHub - Access to 50+ CPA-developed financial projection templates. 25% discount using code “DUEDILIO” at checkout.
Logology - Best automated logo & brand identity tool I’ve come across.
DeepBench - Access a cutting-edge expert network. $200 discount.
OpenPhone - The best business phone solution that I have found. $20 credit.
Eloquens - Knowledge marketplace. I’ve bought a few guides and templates here.
Deal Flow Scout - Peer-to-peer deal flow exchange. Free, open, transparent.
Deal Sourcing Guide - A directory I put together of online marketplaces, brokers, DFY deal flow, and more.
That’s all for this issue of What I Learned Last Week!
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Important Disclaimer: This newsletter is provided for informational & educational purposes only, and should not be relied upon as legal, business, investment, or tax advice. This newsletter may link to other websites and certain information contained herein has been obtained from third-party sources. While taken from sources believed to be reliable, it has not been independently verified. The Business Inquirer makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. References to any companies, securities, listings, investments, or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any business, tax, or investment decisions. Content in this newsletter speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.