🧐 What I Learned Last Week
Week ending Friday, July 22, 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!
This issue of The Business Inquirer is brought to you by DueDilio.
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📰 Articles
Business Insider (Premium) published an article on the difficult operating environment for Amazon aggregators. Let me know if you can’t access it and I’ll send you a PDF.
Amazon aggregators were once white-hot investment targets, raking in billions in venture capital.
Facing lower e-commerce volumes and an uncertain macro environment, aggregators are adapting.
Here are the four biggest changes industry insiders anticipate for the former pandemic darlings: Consolidation, Financing Adjustments, Smaller is Better, Pivot Business Model
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Yahoo Finance writes about the private equity feeding frenzy in the franchise space. Something I had no idea about.
If you follow what is happening in the franchise world, it will come as no surprise to you that there is a virtual feeding frenzy going on in the marketplace, with private equity (PE) firms and others buying franchise companies at a record pace. Not only are deals getting done at a frenetic pace, but the valuations that PE companies are paying in today's market are nothing short of stratospheric. More and more PE firms are interested in the rapid growth of franchise companies and they are sitting on mountains of cash that they have to put to work or else face the wrath of their big money investors.
Is Now the Right Time to Sell Your Franchise to a Private Equity Firm?
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3PLs had the best growth and M&A year on record.
According to Armstrong & Associates, Inc. (A&A’s) newest report, “A Roaring 2021: Demand Drives 3PLs to the Best Growth and M&A Year on Record – Latest Third-Party Logistics Market Results and Predictions for 2022” strong consumer demand, continued supply chain bottlenecks, and tight carrier capacity sent air, ground, and ocean transportation rates soaring to historic levels in 2021 as shippers leaned on Third-Party Logistics Providers (3PLs) to bolster inventories and avoid product stock outs.
Demand drives 3PLs to the best growth, M&A year on record
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GP Bullhound released their 2Q 2022 sector insights. These reports are where they share the data and insights they’ve collected from deals, meetings, and events that they engage in daily. It includes insights on Digital Media, Digital Commerce, Fintech, Digital Services, and Software.
GP Bullhound 2Q 2022 Sector Updates
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I am a fan and client of Mercury. They’re an online bank focused on startups and entrepreneurs. They just launched an online magazine called Meridian. I and a few other participants in the M&A space were honored to be interviewed for an article in their inaugural issue.
How to sell a business for under $1M
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Colin Keeley published a summary of business lessons learned from John Malone. It’s actually key takeaways from two books that have been written about him. It’s a great read.
John Malone is the billionaire former CEO of Tele-Communications Inc. (TCI), a cable and media conglomerate from 1973 to 1996. Malone built TCI into a powerhouse through acquisitions of cable and media companies with exotic structures and financial engineering. At its peak, they were buying one business a day.
Today Malone is the largest private landowner in the United States with 2.2+ million acres, more than twice the size of Rhode Island.
John Malone Operating Manual (Cable Cowboy Book Summary & Takeaways)
🧵 Twitter
Great summary of the latest Search Fund Study…
Important to do your legal due diligence…
Great tips on obtaining an SBA loan…
Highlighting the importance of a QoE…
Some surprising insights into the search process…
Everything you need to acquire a business…
🤔 Thoughts, Events, Other
Pre-LOI Due Diligence
Ted Leverette of Business Buyer Advocate is hosting a free Q&A on the topic of pre-LOI due diligence. The free webinar will take place on July 28th, at 11am ET.
Defective Pre-LOI Due Diligence Enables Dumb Deals. It’s why so many searchers can’t make a deal, or they buy the wrong businesses, or they buy the right businesses the wrong ways. Sign up now for this free one-time, small group, Zoom meeting. Registrants can submit questions or comments before the event to assure coverage.
Register here: Q&A - Let’s Demystify Pre-LOI Due Diligence
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Raising Acquisition Capital
Jon Stoddard interviewed Dominic Wells of Onfolio on raising acquisition capital for e-commerce.
YouTube: How to Raise Capital for Ecommerce Acquisitions, E:66 Dominic Wells CEO Onfolio
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Seller Mistakes
Quiet Light Brokerage interviewed Matt Remuzzi of CapForge on the biggest mistakes that business sellers make. Matt and his firm are part of DueDilio and have helped several clients with e-commerce acquisitions.
YouTube: The Biggest Financial Mistakes Sellers Make with Ian Drogin & Matt Remuzzi
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Finance & Accounting for SMBs
Mineola Search Partners has a great podcast for those interested in search and EtA. Their most recent episode talks about all things finance & accounting.
- How CEOs should manage cash & other sources of liquidity amid all of the current macroeconomic uncertainty
- Impacts of the current inflationary environment
-.Employee financial literacy, including the how transparent CEOs should be with company financials
- Capital allocation, including how CEOs should think about how to best spend the cash that they generate
- Several questions related to hiring, specifically focusing on how CEOs should think about hiring a senior finance & accounting leader for the first time.
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Macro
A bit off topic but I think it’s important to keep a pulse on what’s going on in the markets and economy. OakTree released a good report on what they are seeing in the economy and credit markets.
So how is the broad U.S. economy faring? Many indicators have been flashing red in recent months:
Industrial production declined by 0.2% in June. Manufacturing output (a component of industrial production) fell for the second-consecutive month.2
Retail sales indicate that inflation-adjusted consumption is slowing: In June, retail sales rose by 1.0% month-over-month. However, this increase was largely driven by rising gasoline prices in early June, as retail sales aren’t adjusted for inflation. Retail sales rose by 7.7% year-over-year, slower than the 9.1% inflation rate over the same period. Retail sales in May declined by 0.1% versus the prior month.3
Buying conditions for cars, houses, and large durable goods fell to multi-decade lows in June, meaning the vast majority of respondents to the University of Michigan consumer survey believe it’s a bad time to buy the above. (See Figure 2.)
Average hourly wages increased by 5.1% in the 12 months through June, well below the 9.1% increase in prices during that period.4
35% of households are having trouble paying their bills, an increase of 10 percentage points versus the figure last year, according to the U.S. Census Bureau’s Household Pulse Survey.
Consumer sentiment about the economy has dropped to a 40-year low, according to the University of Michigan survey. (However, it’s worth noting that while the overall trend in sentiment is clearly negative, the magnitude of the decline may be skewed by political biases. For context, in June 1980, the difference between sentiment figures for self-identified Democrats and Republicans was 4.1 points. The gap is currently 31.5 points. This is another reminder of how people can interpret the same fundamentals very differently.)
Performing Credit Quarterly 2Q2022
🛠 Tools & Resources
I want to share some tools & resources that I have found helpful. Please note that some of these may contain affiliate links. This means that I may receive compensation if you sign-up and use them.
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. Local Boston company and I consider the founder (Adam Ray) a friend.
PrivSource - Deal aggregator for lower and middle-market listings.
Kumo - Find every deal in one complete platform. Spend less time sourcing deals and more time closing them. Kumo aggregates 180K+ business listings into one easy-to-use platform.
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 VoIP phone solution that I have found. I use this for DueDilio. You get a $20 credit if you sign-up.
Eloquens - Knowledge marketplace. I’ve purchased a few templates from them.
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.