About this episode
This week, we continue our series called Inside the Mind of an Acquirer. We started this special series of interviews with acquirers because we want you to understand the perspective of the person across from you in a negotiation to buy your business. This week, we sat down with Bakari Akil, who has acquired two $30 million businesses and now teaches Cornell MBA candidates about entrepreneurship through acquisition. You’ll learn how:
• To accelerate your growth through acquisition.
• Harvard, Stanford, and Columbia are teaching their students to build wealth.
• To structure the acquisition of a company.
• To attract sophisticated investors.
• To avoid personally guaranteeing the debt an acquirer uses to buy your business.
• To distinguish between an “acquisition entrepreneur” vs. an “independent sponsor.”
Show Notes & Links
Curious about what your company might be worth? Start with a Built to Sell Valuation.
Information on Small Business Administration Loans
For People in the United Kingdom:
• Start Up Loans: Start Up Loans is a government-backed program that provides loans of up to £25,000 to new and existing businesses. Loans can be used for a variety of purposes, including acquiring an existing business.
• The Recovery Loan Scheme (RLS): RLS is a government-backed loan scheme designed to support businesses that are looking to grow and develop. Loans of up to £10 million are available, and the government guarantees 80% of the loan amount.
For People in Canada:
• Canada Small Business Financing Program (CSBFP): CSBFP is a government-backed program that helps small businesses get loans from banks and credit unions. Loans can be used for a variety of purposes, including acquiring an existing business.
• Business Development Bank of Canada (BDC): BDC is a government-owned financial institution that provides loans and financing to small and medium-sized businesses. BDC loans can be used for a variety of purposes, including acquiring an existing business.
• Regional Development Agencies (RDAs): RDAs are government-owned organizations that provide financial assistance to businesses in specific regions of Canada. Some RDAs offer loans to businesses that are looking to acquire existing businesses.
For People in Australia:
• Small Business Loans: The Australian government offers a variety of small business loans, including loans to acquire existing businesses. Loans are available through a variety of lenders, including banks, credit unions, and non-bank lenders.
• The Small Business Guarantee Scheme (SBGS): SBGS is a government-backed loan scheme that helps small businesses get loans from banks. Loans of up to $1 million are available, and the government guarantees 50% of the loan amount.
• The Regional Investment Corporation (RIC): RIC is a government-owned financial institution that provides loans and financing to businesses in regional Australia. RIC loans can be used for a variety of purposes, including acquiring an existing business.
Internal Rate of Return (IRR): Think of IRR as a way to measure the “interest rate” or “annual return” of an investment over time. If you put money into a project or investment, the IRR tells you the yearly growth rate you’d need for that investment to break even or be considered successful.
Senior Debt: Imagine if you and your friends lent money to someone. If you all agreed that you’d be the first person to be paid back, before any of your friends, then your loan is like “senior debt.” It’s a priority and gets paid back before other debts.
Loan to Value (LTV): Consider LTV as a metric in an acquisition deal. It’s like evaluating the size of a loan in relation to the entire valuation of a company being acquired. For instance, if a company is valued at $10 million, and a loan of $8 million is secured to facilitate the purchase, the LTV stands at 80%. This ratio gives acquirers and financiers an insight into the risk associated with the deal.
Preferred Shareholders: Imagine a company being acquired where certain investors get priority treatment. In the M&A landscape, “preferred shareholders” are akin to these priority investors. They enjoy specific privileges, such as having the first claim on dividends or assets, which standard shareholders might not possess.
Small Business Investment Corporation (SBIC): A Small Business Investment Company (SBIC) is a privately-owned investment firm licensed by the Small Business Administration (SBA). They’re like middlemen that help smaller companies grow with the backing of government resources.
Independent Sponsor: Imagine a person who finds and sets up M&A deals or projects but doesn’t use their own money. Instead, they gather funds from other people and then manage the project on behalf of these investors. This person is like an “independent sponsor” in the business world.
Letter of Intent (LOI): This document outlines the basic terms and conditions of a deal before a formal agreement is drawn up. It serves as a mutual commitment between the buyer and the seller to move forward with the transaction on the agreed-upon terms.
About Our Guest
As Director of Corporate Development for TriMech Solutions, Bakari Akil oversees the acquisition of companies, specifically targeting lower middle-market engineering software businesses. His endeavors are supported by Sentinel Capital Partners & The Halifax Group.
Additionally, Bakari Akil makes acquisitions through his personal family office. In 2023, his portfolio expanded with the acquisition of a $30M burlap bag manufacturing company, where he also serves on the board of directors.