9.5x EBITDA for a Distributor (PE Offered 5x) with Brandon Wade

Brandon Wade was 25 and three years into a career at PricewaterhouseCoopers when his father called to ask if he would come home and help him run the family’s propane company in southern Illinois. The business had five employees and was still handwriting checks. Over the next 19 years, Brandon bought his way from 15% of the equity to 51%, grew to 7,000 customers and $10 million in revenue, and built the largest independent propane distributor in the state. 

Propane is about as close to a pure commodity as it gets, and the private equity firms circling the industry priced it that way, at roughly five times EBITDA. In 2022, Brandon sold the operating business to four members of the GrowMark network of farm co-ops for 9.5 times, keeping the real estate for himself. In this episode, you discover how to: 

• Get your customers out of a commodity mindset so they stop comparing you on price 

• Own the “razor” so your customers’ recurring purchases are captive rather than transient 

• Pay your frontline team a variable wage that drives efficiency without creating resentment 

• Add a counter-seasonal product line so you never have to lay anyone off 

• Sell to an acquirer who pays for synergies instead of one who prices you off a spreadsheet 

• Negotiate for the after-tax number rather than the headline price 

• Avoid the “mental contracts” that form when family members join a business without equity 

Show Notes & Links

Connect with Brandon on LinkedIn

Learn more about today’s sponsor, TAB.

Definitions

Shotgun Clause: A “shotgun clause” is a type of buy-sell agreement often included in the partnership or shareholder agreements of a privately-held company. This clause is designed to resolve situations where partners or shareholders want to separate from each other due to disagreements or other issues.

How it Works:

• Triggering Event: One partner/shareholder (the “Offeror”) initiates the shotgun clause, typically when there is a deadlock or disagreement that can’t be resolved.
• Buy or Sell Offer: The Offeror proposes a price per share to buy the other partner’s/shareholder’s (the “Offeree”) shares or sell their own shares to the Offeree.
• Decision Time: The Offeree must decide whether to sell their shares at the proposed price or buy the Offeror’s shares at the same price.
• Binding Decision: Once the Offeree makes a decision, both parties are bound by it, meaning the Offeree must either sell their shares or buy the Offeror’s shares at the stipulated price.

Accretive: By definition, in corporate finance, accretive acquisitions of assets or businesses must ultimately add more value to a company, than the expenditures associated with the acquisition. This can be due to the fact that the newly-acquired assets in question are purchased at a discount to their perceived current market value, or if the assets are expected to grow, as a direct result of the transaction.

Covenant: A promise to do (or not do) something. Typical covenants you may need to sign are a covenant not to compete directly with your acquirer and/or not hire your current staff in another capacity for a period of time.

Due-Diligence: This is a comprehensive appraisal of a business or investment undertaken before a merger, acquisition, or investment. It seeks to validate the information provided and uncover any potential risks or liabilities.

About Our Guest

Brandon J. Wade

Brandon Wade became President of his family’s company, Wade Sales and Service, at 25. He’s a CPA and started his career at PwC. He grew the company organically and through acquisition, launched two new divisions, and increased revenue and net worth fivefold before selling the business to the Growmark network.

Today Brandon runs Wade Consulting, where he does strategic planning with small and family businesses, and Wade Capital Partners, a Midwest private capital firm that backs owner-operators with capital and hands-on support. He’s also finishing doctoral research at DePaul University on how entrepreneurs recover from the stress of running a company.