What I Learned Last Week 10.4.2024
Curating the best M&A, SMB, and EtA-related content since 2020.
Hello Friends!
In this week’s issue of What I Learned Last Week:
📰 Articles
🧵 Best of X (Twitter)
🤔 Other - Is It Always a Seller’s Market?
🗓️ Events
⚒️ Tools & Resources
💡 How I Can Help
This issue of The Business Inquirer is sponsored by:
Close Your Deal Quickly and Efficiently: M&A Legal Solutions Integrating Automation and Project Management
At Sterrett Law, we’ve developed a streamlined process using cutting-edge automation and project management techniques to maximize speed and efficiency. Using templates and a client-centered collaborative process we’ll keep your deal on track and on time.
Ready to make your next move? Schedule your free consultation today!
📰 Articles
I summarize, so you capitalize.
Working Capital in Small Business Acquisitions: Insights from Industry Experts
The article explores the role of working capital (WC) in small business acquisitions, emphasizing its importance in deals under $5 million. It covers different strategies and approaches for managing WC, highlighting how buyers often need to bring their own capital to ensure smooth post-acquisition operations. The piece also provides insights from M&A professionals on best practices for setting WC pegs, using monthly true-ups, and avoiding common pitfalls.
Key insights include:
Importance of setting accurate WC pegs.
Value of monthly true-ups post-closing.
Role of clear communication in WC expectations.
Potential pitfalls like underestimating WC needs.
🧵 Best of X (Twitter)
I scroll, so you don’t have to.
Success in sub $1-5M EBITDA deals comes from relentless effort — meet owners, learn, and keep making offers to unlock better deals and networks…
Deals often fail when second-generation leaders resist change and seek lifetime job security…
When over 50% of EBITDA comes from add-backs, lenders balk — solution: a seller's note on standby with potential future payouts…
Franchising is gaining attention in the EtA space. I know someone who bought into a Rolling Suds franchise and is doing quite well. Good episode…
🤔 Other
Is it Always a Seller’s Market in M&A?
A Reddit user asked whether the M&A world operates like real estate, fluctuating between buyer’s and seller’s markets depending on economic conditions. In response, contributors emphasized that M&A cycles do exist, but high-quality businesses tend to create a perpetual seller's market.
Here are the key takeaways:
High-quality businesses always attract demand. Buyers, particularly private equity firms, compete fiercely for businesses with well-documented financials and easy transferability.
Access to cheap capital has inflated valuations over the years, widening the bid/ask spread and making it hard to close deals at attractive prices.
Capital (or "dry powder") remains abundant, despite economic fluctuations. This leads to more capital chasing fewer high-quality deals, increasing competition for top-tier businesses.
SBA access, home equity, and employment uncertainty have driven more individual buyers into the small business market, especially as real estate investments become less appealing in a high-interest environment.
For smaller or less desirable businesses, the market is tougher, and finding buyers can be challenging.
Middle-market M&A remains highly competitive, with private equity firms seeking to bolt on smaller businesses to their larger platforms.
In conclusion, it’s usually a seller’s market, but mainly for desirable businesses. Less attractive businesses may struggle to find buyers even in favorable economic conditions.
🗓️ Events
Main Street Summit (Oct 9-10) - Columbia, MO
Annual M&A Institute (Oct 10-11) - Dallas, TX
Rice EtA Conference (Oct 13-14) - Houston, TX
McGuireWoods Independent Sponsor (Oct 15-16) - Dallas, TX
Texas & The South M&A and Business Symposium (Oct 16-18) - Dallas, TX
HBS ETA Conference (Oct 19) - Cambridge, MA
National Summit for Middle Market Funds (Oct 27-29) - Palm Beach, FL
Booth-Kellogg EtA Conference (Nov 4) - Chicago, IL
HoldCo Conference (Mar 31-Apr 3 2025) - Sundance, UT
🎵 Listening: “Paradise“ by Kaz James, Nick Morgan🎵
How did you like this issue of the newsletter?
⚒️Tools & Resources
I want to share some tools & resources that I have found helpful. Please note that some of these are paid sponsors or affiliates of the newsletter.
PrivSource - PrivSource helps you source deals and connect with transaction partners without ever paying a success fee.
X5 Deals - Proprietary deal sourcing for a great price. They do the outreach and send you relevant, actionable deals directly into your inbox.
Rejigg - Platform that connects searchers/investors directly with owners of off-market small businesses ($200k - $3M EBITDA) considering exits. All deals are sourced by the Rejigg team. Their team adds 15 to 20 new deals each week.
Kumo - 100,000+ deals sourced from thousands of brokers and marketplaces. Plus, AI-powered listings, robust data & analytics, and more.
DealFlowXchange - The premier private capital funding community for raising and deploying capital. Use discount code DUEDILIO for 20% off your lifetime membership.
Sterrett Law - At Sterrett Law, we offer Manhattan and Boston experience at Vermont prices. Specializing in deals under $10 million, we're your go-to partner for navigating the complexities of mergers and acquisitions without the hefty price tag
BizNexus - Marketplace + off-market origination in one platform. The marketplace averages about 10k active listings & pre-CIM opportunities, and the off-market origination focuses on data & multi-channel.
Secret - Say goodbye to overspending on SaaS. With Secret, you get access to up to $1,000,000+ in savings on the best software to run your search, operate, and scale your business.
Search Fund Coalition - community for the Entrepreneurship Through Acquisition ecosystem. Monthly events and meetups for acquisition entrepreneurs.
Deal Sourcing Guide - a comprehensive list of business marketplaces, brokers, deal origination firms, and more.
💡 How I Can Help
Whenever you’re ready, here are a few ways for us to work together…
Schedule 1:1 consulting on deal sourcing, due diligence, M&A ecosystem, newsletters, entrepreneurship, or anything else you’d like to discuss
Promote your brand to business buyers, investors, SMB owners, and other M&A participants by sponsoring this newsletter
Assemble your M&A deal team with DueDilio
If you enjoyed reading this newsletter, why not share it?