“How am I complicit in creating the conditions I say I don’t want?”
– Jerry Colonna
Some founders complain about the period of time just after they sell, when they are helping the acquirer of their business monetize what they have bought. Whether it’s in the form of an earn-out, as a minority shareholder in the acquiring company, or just as an employee, some founders appear surprised—even hurt—by the tactics acquirers use to improve the value of the asset they’ve just bought.
But the playbook of most professional acquirers is on full display, so it shouldn’t be a surprise when a buyer starts to follow it.
For example, earlier this month, Adam Coffey revealed the private equity playbook to improve your business through cross-selling new services and products to your existing customers and raising prices on them.
Last month Joe Khoubbieh revealed that in almost 100% of cases, they raise prices on the customers of the software companies they buy.
Jason Swenk explained the demands Republix puts on the leaders of the agencies they acquire and why some don’t cut it.
Unprofessional Money
if you’re turned off by the playbook of the professional money guys, it might be worth finding an individual investor to acquire your business. This week we dropped an interview with Carl Allen, a former HP executive who was responsible for acquiring companies for the tech giant before he bought and sold his first business, which is how we first came to interview Carl back in 2018.
Since then, Carl has been teaching individual investors how to buy their first business, so we asked him about the playbook of the typical individual investor. Spoiler alert: Individual buyers usually pay less than the professional money (i.e., corporate buyers or private equity), use a truckload of debt, and ask you to carry some of the paper.
But you also get to sell to a human.
You can look into their eyes and evaluate whether they are going to treat your customers right. You can find out if they care about your culture and plan to honor your legacy.
During the episode, Carl lays out the individual investor’s typical playbook so you can evaluate if they are the right partner for you.
Watch the episode Listen to the episode Read the show notes
Quote of the Week
“They don’t want to sell to financial buyers who have capital; they want to sell to individuals that can continue the culture and the legacy of the company and will protect the employees in the business and really just be that safe pair of hands that’s going to take the business to the next level.”
– Carl Allen describes why some founders prefer to sell to individual investors.
Clip of the Week
In this clip, Carl Allen talks about how to protect your culture and employees when you sell your company.
Deals
- Attune Medical, known for its development of an esophageal cooling device for protection during cardiac procedures, will be acquired by Haemonetics Corporation, a medical technology firm, for $160 million. In 2023 Attune Medical reported revenue of approximately $22 million, indicating that Haemonetics acquired the business for just over seven times revenue.
- SpringWell Water Filtration Systems, a provider of residential water filtration and softening solutions, has been acquired by Fortune Brands Innovations, Inc. for $92 million. This purchase price represents approximately 8.5 times SpringWell’s 2023 adjusted EBITDA.
- Carlstar Group LLC, a company in the manufacturing sector, has been acquired by Titan International, Inc., a producer of off-highway vehicle components, for approximately $296 million. The deal values Carlstar at about four times its 2023 adjusted EBITDA of $73 million. This acquisition is poised to be immediately accretive for Titan International.
