Ok, let’s jump in…
One of the fastest growing groups of acquirers is the self funded searcher. One person, often recently out of an MBA program, who puts ten to twenty percent down from personal savings, borrows the rest from a bank, and frequently asks the owner to finance part of the purchase price.
They are easy to like. They may agree to your asking price, and they will tell you your employees are safe with them. But there are three risks worth understanding before you sign anything:
- Grant a no shop clause to someone who cannot close and you have given away your negotiating leverage and months of momentum for nothing.
- Sell to the wrong one and the business you spent years building, along with the people in it, may not survive the transition.
- Finance part of the price yourself and you sit second in line behind the bank on a loan secured by a company you no longer control.
Dan Burnside was one of these buyers, and he is the rare one willing to tell you how it actually went. He cashed out his 401(k), sold his house, and spent seven months hunting. Two owners signed a letter of intent with him and neither deal closed. The third was Parker Mechanical, an HVAC company in rural Colorado doing $2.1 million in revenue and close to $900,000 in seller’s discretionary earnings. Burnside paid $2.1 million with ten percent down. Two years later he filed for personal bankruptcy.
This week’s episode is a surprisingly candid view behind the curtain of a search: the good, bad and the ugly.
Watch the full episode below.
Quote of the Week
I don’t know if you’ve ever been in a car crash, but when it becomes unavoidable, you clench. That’s like where I was at.
Dan Burnside
Curious what an acquirer might think of your business? Let’s take a look.
Deals
Cleanwater1, a company that makes on-site water disinfection and treatment equipment used by municipal water utilities and industrial facilities, was acquired by Veralto (NYSE: VLTO), a global water and product quality solutions company, for $465M. Cleanwater1 generated approximately $27M in EBITDA on $135M in revenue, implying a valuation of 17x EBITDA.
