You’ve probably received the email.
It starts with a compliment: “I love what you’ve built.” Then comes the ask: a quick call to learn more about your company.
Increasingly, those emails are coming from ETA buyers, entrepreneurs using “entrepreneurship through acquisition” as their path into business ownership. Instead of starting a company from scratch, they look to buy an existing business and run it themselves.
On balance, ETA buyers are good news for owners.
Many small and mid-sized companies will never attract a strategic buyer or a large private equity firm. For those owners, an ETA buyer can offer another path to exit.
But not all acquirers are created equal.
In this week’s episode of Built to Sell Radio, John Warrillow interviews Will Smith, host of Acquiring Minds, one of the leading podcasts covering ETA.
Smith explains the difference between a self-funded searcher and a funded searcher. A self-funded searcher may use an SBA loan and personally guarantee millions of dollars in debt. A funded searcher may have investors backing their search, but still needs to raise the money to close once they have a deal under letter of intent.
That distinction matters.
Once you sign an LOI, you may be asked to stop talking to other buyers. Meanwhile, the ETA buyer may still need to raise the capital to close. That means one of your first questions should be simple:
Can this buyer actually close?
Smith also explains why owners need to think beyond price. If you care about your employees, you need to decide whether the buyer has the emotional intelligence to lead the people who helped you build your company.
As Smith puts it:
“Tell them what you would do if you were 20 years younger.”
In other words, show the buyer the untapped growth in your business. The customers you stopped chasing. The hires you chose not to make. The markets you ignored because you were no longer in growth mode.
Those missed opportunities may become the “meat on the bone” that makes your company more attractive to the right acquirer.
In this episode, you’ll learn how to:
- Tell the difference between a funded and self-funded searcher.
- Understand how an ETA buyer funds a deal.
- Spot the risk in a seller note.
- Judge whether a buyer can lead your team.
- Ask better questions before signing an LOI.
- Decide whether the buyer in front of you is serious.
If you’ve ever received an email from someone saying they “love what you’ve built,” listen to this episode before you reply.
Watch the full episode below.
Quote of the week
Tell them what you would do if you were 20 years younger.
Will Smith, host of Acquiring Minds, explaining how owners can help an acquirer see the untapped growth opportunities in their business.
Deals
Tidewater Logistics, a company that moves materials like shale and energy products between barges, railcars, and trucks at facilities across Ohio, West Virginia, and Texas, was acquired by FTAI Infrastructure (NASDAQ: FIP), an infrastructure company that owns railroads, ports, and energy terminals, for $45 million. Tidewater is expected to generate $9 million in EBITDA over the next twelve months, implying a valuation of 5x forward EBITDA.
