Hello Friends!
In this week’s issue of What I Learned Last Week:
📰 Articles
🧵 Online Highlights
🗓️ Events
⚒️ Tools & Resources
💡 How I Can Help
This issue of The Business Inquirer is brought to you by:
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📰 Articles
I summarize, so you capitalize.
Expanding EBITDA Margins in an ETA Business?
The latest case study from the Yale School of Management analyzes the challenge of expanding EBITDA margins in ETA businesses, based on a dataset of 44 search fund-acquired firms. It reveals that while CEOs often forecast increasing margins post-acquisition, actual margins tend to decline. Instead of relying on margin expansion, successful ETA CEOs create value through improved asset turnover, non-debt leverage, and EBITDA multiple expansion at exit.
Key insights include:
CEOs frequently overestimate their ability to improve margins, often driven by optimism and overconfidence.
Actual EBITDA margins typically decline post-acquisition, contradicting projections made in investment materials.
Value is created not through margin improvement but via operational strategies that enhance asset efficiency and capital structure.
Asset turnover improves by ~35% post-acquisition, reflecting better utilization of company assets to drive revenue.
Non-debt leverage increases by over 30%, indicating more efficient capital usage from stakeholders like suppliers and employees.
Despite lower margins, the combined gains in turnover and leverage result in improved return on invested capital (ROIC).
Multiple expansion at exit—where exit EBITDA multiples are often more than double the entry multiples—plays a crucial role in value realization.
CEOs should focus on scalable growth, professionalization, and strategic financial management rather than solely aiming to expand EBITDA margins.
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How to Price, Structure, and Diligence Around Customer Concentration
The article from Mineola Search Partners offers an in-depth examination of how buyers should evaluate, price, and structure acquisitions when facing customer concentration risk—where a significant portion of revenue comes from one or a few customers. While common in small business acquisitions, this concentration introduces vulnerabilities that can impact valuation and deal structure. The post details practical approaches for adjusting price, structuring deals to mitigate risk, and performing due diligence to assess the likelihood and impact of customer defection.
Key insights include:
Customer concentration becomes risky beyond ~30% of revenue from a single customer, requiring adjustments in deal terms or pricing.
Lower entry multiples make high concentration more acceptable by providing buffer for profitability loss if a major customer leaves.
Contingent payments or earn-outs can offset risk, such as structuring deferred payments based on customer retention.
Reps and warranties offer legal safeguards but are less effective if customer loss occurs after closing.
Due diligence should analyze profitability, relationship depth, switching costs, and the customer’s growth trajectory—especially in outsourced services where in-housing becomes more attractive over time.
Business models like outsourced IT or bookkeeping are especially prone to losing large customers as they scale.
This guidance helps buyers weigh and manage the inherent risks of concentration with more nuanced strategies rather than avoiding such deals entirely.
🧵 Online Highlights
I scroll, so you don’t have to.
The data’s clear: sub-$10M deals deliver outsized returns without needing deep pockets…
Most sellers want all-cash but this creative structure closed fast and 4x’d profits…
How to get working capital right in your SBA loan and avoid running out of cash post-close…
Scaling a roofing business to $50M takes systems, not just sales or sweat…
The searcher’s edge? Moving fast, asking smart questions, and walking when needed…
🗓️ Events
Stanford Search Fund CEO Conference (Sept 3-4) - Stanford, CA
Southeast ETA Conference (Sept 5-6) - Charlottesville, VA
iGlobal Independent Sponsors Summit (Sept 29-30) - New York, NY
McGuire Woods Independent Sponsor Conference (Oct 14-15) - Dallas, TX
Main Street Summit (Nov 4-6) - Columbia, MO
M&A Source 2025 Fall Conference (Nov 9-12) - Phoenix, AZ
Booth-Kellogg ETA Conference (Nov 19) - Chicago, IL
iGlobal Independent Sponsors & Capital Providers (Dec 9) - New York, NY
🎵 Listening: “Welcome To The People“ by Jaded 🎵
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 tedious and time-consuming job of deal sourcing so you can spend more time on DD and closing.
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.
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.
Deal Sourcing Guide (2025) - Discover 100+ platforms to supercharge your deal flow and find your perfect acquisition target—from flagship marketplaces to AI-powered deal sourcing tools, all updated for 2025.
💡 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
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