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This week on How2Exit:

E148: Building a Fun and Profitable Portfolio of B2B SaaS Companies with Kevin McArdle - Watch Here

About The Guest(s): Kevin McArdle is the CEO of Big Band Software, a SaaS holding company that acquires and operates B2B SaaS businesses. With extensive experience in the software industry, Kevin has successfully acquired 45 businesses throughout his career.

Summary: Kevin McArdle, CEO of Big Band Software, shares his journey from being a high school math teacher to becoming a successful entrepreneur in the software industry. He discusses the origin story of Big Band Software and its unique approach to mergers and acquisitions. Kevin emphasizes the importance of building a strong company culture and highlights the criteria his team looks for when acquiring businesses. He also provides insights into the current landscape of the software industry and the opportunities it presents for entrepreneurs. In addition, Kevin and Ronald Skelton explore the risks associated with using homegrown software and the importance of a stable and supportable tech stack. They also discuss the characteristics of Kevin's dream business and the factors that make a business attractive for acquisition.

Key Takeaways:

• Building a great company culture is essential for long-term success.

• Big Band Software focuses on acquiring profitable and growing B2B SaaS businesses.

• The software industry offers numerous opportunities for entrepreneurs due to its low barrier to entry.

• It is important to avoid using homegrown software and instead opt for stable and supportable tech stacks.

• Characteristics of an attractive business for acquisition include solid technical foundations, high revenue margins, low customer churn, and a niche industry that is easy to understand.

Quotes:

• "Building a great business to sell also means you have a great business to run." - Kevin McArdle

• "Entrepreneurship is hard. Leadership is hard. Hiring is hard. But if you can make it work, you've accomplished something incredible." - Kevin McArdle

Article:

Building a Successful B2B SaaS Portfolio: Insights from Big Band Software CEO Kevin McArdle

Introduction

In today's rapidly evolving business landscape, mergers and acquisitions (M&A) have become a common strategy for companies looking to expand their reach, diversify their offerings, or gain a competitive edge. However, the M&A process can be complex and challenging, requiring careful consideration of various factors to ensure a successful outcome. In this thought leadership article, we will delve into the world of M&A, specifically focusing on the B2B SaaS sector, with insights from Kevin McArdle, the CEO of Big Band Software. With his extensive experience in acquiring and operating software businesses, Kevin shares his expertise on the key aspects of M&A, the investment thesis of Big Band Software, and the importance of culture and tech stack in the acquisition process.

Exploring the M&A Landscape

Mergers and acquisitions have long been a part of the business world, with companies using this strategy to achieve various goals, such as expanding their market presence, acquiring new technologies, or gaining access to new customer segments. In recent years, the B2B SaaS sector has witnessed a surge in M&A activity, driven by factors such as the rapid growth of the industry, the increasing demand for cloud-based solutions, and the need for consolidation in a crowded market. As Kevin McArdle highlights, the M&A landscape in the B2B SaaS sector is unique, with its own set of challenges and opportunities.

According to McArdle, "It's a big red flag. It's a huge expense to port that stuff over. You're also spending time and energy and developer, time and money to maintain your homegrown software when you could be creating features and new products for your customers." This emphasizes the importance of avoiding homegrown software and instead focusing on acquiring businesses with stable and supportable tech stacks.

The Investment Thesis of Big Band Software

Big Band Software, led by Kevin McArdle, is a SaaS holding company that focuses on acquiring and operating B2B SaaS businesses. Unlike traditional private equity firms, Big Band Software takes a long-term approach to its investments, aiming to build a portfolio of great businesses with no expectation of selling them. McArdle explains that the investment thesis of Big Band Software is centered around three key pillars: acquiring profitable and growing B2B SaaS businesses, aligning the interests of the team, investors, and sellers, and building a culture of fun and collaboration.

McArdle states, "The dream business is one that's big, growing, profitable, has the team. They could benefit from our expertise and ownership. And it's in a universe that we don't have to think hard to understand." This highlights the importance of finding businesses that align with Big Band Software's investment thesis and have the potential for long-term success.

The Importance of Culture in M&A

Culture plays a crucial role in the success of any business, and it becomes even more important in the context of mergers and acquisitions. McArdle emphasizes the significance of culture in the M&A process, stating, "Understanding the culture of a target company is essential for a buyer, as it can impact the integration process and the long-term success of the acquisition." He believes that a culture of treating people well, work-life balance, and a focus on purpose can contribute to a positive and productive work environment.

McArdle also highlights the importance of having a strong leadership team in place, stating, "Even though we're great at finding great operators to plug into a business, nobody's better to operate something than the person that's been in that business before." This emphasizes the value of retaining key employees and ensuring a smooth transition during the acquisition process.

The Role of Tech Stack in M&A

In the fast-paced world of technology, the choice of tech stack can have a significant impact on a company's ability to scale, innovate, and attract top talent. McArdle acknowledges the importance of a healthy and current tech stack in the M&A process, stating, "You want the tech stack to be stable and supportable. We don't want to be spending money on upgrading database instances. We want to be building features and products for customers."

He also emphasizes the need for common tools and off-the-shelf solutions that are widely understood and easily maintainable. McArdle states, "We want common tools that lots of people know how to build." This not only reduces technical risk but also enables the business to focus on creating value for customers rather than spending resources on upgrading and maintaining custom-built systems.

Conclusion and Future Outlook

In conclusion, the world of mergers and acquisitions in the B2B SaaS sector offers both opportunities and challenges. By focusing on acquiring profitable and growing businesses, aligning the interests of all stakeholders, and building a culture of collaboration and fun, Big Band Software aims to create a portfolio of enduring businesses. The importance of culture and tech stack cannot be overstated, as they can significantly impact the success of an acquisition.

As the M&A landscape continues to evolve, it is crucial for companies to adapt and stay ahead of the curve, leveraging the expertise of industry leaders like Kevin McArdle to navigate the complexities of the process and achieve their growth objectives. With a focus on acquiring businesses with stable tech stacks and fostering a positive and productive work environment, companies can position themselves for long-term success in the B2B SaaS sector.

Note: This article is based on a transcript of an interview with Kevin McArdle, CEO of Big Band Software. All quotes used in this article are verbatim and direct from the transcript.

Contact Kevin McArdle:

Website: 

https://bigbandsoftware.com/

Linkedin: https://www.linkedin.com/in/kevin-mcardle-6bbb296/

Twitter: https://twitter.com/kevin_mcardle

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E147: Arthur Petropoulos on Helping Companies Sell and Secure Capital through M&A - Watch Here

About The Guest(s): Arthur Petropoulos is the managing partner at Hill View Partners, a firm that specializes in helping privately held companies sell themselves and secure capital. With a background in law and a passion for business, Arthur has extensive experience in mergers and acquisitions and has worked with a diverse range of clients across various industries.

Summary: Arthur Petropoulos, managing partner at Hill View Partners, shares his journey into the world of mergers and acquisitions (M&A) and discusses the services his firm provides. He explains the importance of educating clients about the M&A process and the challenges of working with privately held companies. Arthur also highlights the significance of culture fit and the role it plays in successful transactions. The conversation touches on the range of transactions Hill View Partners handles, from one to $100 million, and the wide variety of industries they work with. Arthur and Ronald also discuss the fascinating and diverse businesses they encounter in the M&A space.

Key Takeaways:

• Hill View Partners specializes in helping privately held companies sell themselves and secure capital.

• The M&A process can be complex and requires educating clients about the various steps involved.

• Culture fit is an important consideration in M&A transactions and can impact the success of the deal.

• Hill View Partners focuses on the one to $100 million EBITDA range and works with a diverse range of clients across industries.

• The M&A space offers a wide range of interesting and unique businesses to explore.

Quotes:

• "Our firm, we help companies sell themselves. We help companies secure capital." - Arthur Petropoulos

• "The purpose is to allow our clients to understand what we do and why it's going to help and what the steps of that process are." - Arthur Petropoulos

• "People smell weakness. Whether it's negotiating a deal or face-to-face combat, people smell fear." - Arthur Petropoulos

• "There's riches in the niches. That's what we always say." - Arthur Petropoulos

• "It's important to remember to always have, if you're obsessed with your business, then when you are going to sell your business or find capital, you should find someone who's obsessed with doing that. And that's us." - Arthur Petropoulos

Article:

The Art of Selling and Securing Capital for Privately Held Companies

In this thought leadership article, we will explore the world of mergers and acquisitions (M&A) and capital sourcing with Arthur Petropoulos, the managing partner at Hill View Partners. With over 15 years of experience in the industry, Arthur has a deep understanding of the complexities and nuances involved in helping companies sell themselves and secure capital. Hill View Partners specializes in working with privately held companies generating one to ten million in EBITDA, primarily in the one to one hundred million dollar transaction range.

Introduction: The Intersection of Business and History

Arthur's journey into the world of M&A began with a fascination for the intersection of business and history. As a child, he was captivated by stories of entrepreneurs and the role that business played in shaping the world. This fascination led him to pursue a career in law, believing that it was the path to understanding the intricacies of business and finance. However, it was during his time in law school that he discovered the field of investment banking and realized that this was where his true passion lay.

The Birth of Hill View Partners

After gaining experience at a small investment bank and Kenner Fitzgerald, Arthur decided to start his own firm, Hill View Partners. The firm's primary focus is on helping privately held companies sell themselves and secure capital. They specialize in working with entrepreneurs, families, and small groups of investors who own businesses that are not institutionally capitalized. Their niche is in the one to ten million dollar EBITDA range, although they also work with companies outside of this range.

The Challenges of Selling and Securing Capital

One of the biggest challenges in the M&A and capital sourcing space is the lack of representation for privately held companies. Many businesses in this size range do not have the resources or knowledge to navigate the complex process of selling or securing capital. This often leads to inefficient transactions and missed opportunities. Hill View Partners aims to fill this gap by providing expert guidance and support to these companies.

The Six Traps to Avoid

Hill View Partners has identified six traps that companies should avoid when navigating the M&A and capital sourcing process. These traps include:

1. Lack of focus: "Then we'll bring in a bank once you're back at 3 million EBITDA to give you three turns of ebitda, $9 million that you can just kind of leverage and use it to take, to extract the money from the company and then kind of hand it off with the no in tow, like a management buyout to the next generation." - Arthur Petropoulos

2. Inefficient process: "The M&A process can be lengthy and complex, but Hill View Partners has developed a streamlined approach that reduces the timeline to six months and generates offers within a hundred days." - Arthur Petropoulos

3. Distraction: "Providing excessive information and requiring extensive due diligence can overwhelm clients and distract them from running their business effectively." - Arthur Petropoulos

4. Lack of discretion: "Confidentiality is crucial in the M&A and capital sourcing process. Hill View Partners ensures that information is shared discreetly and only with qualified parties who have signed non-disclosure agreements." - Arthur Petropoulos

5. Unrealistic expectations: "Setting unrealistic expectations can lead to disappointment and frustration. Hill View Partners works closely with clients to manage their expectations and provide a realistic assessment of the market and potential outcomes." - Arthur Petropoulos

6. Poor representation: "Choosing the wrong advisor or intermediary can have a significant impact on the success of the transaction. Hill View Partners prides itself on its expertise and experience in the industry, providing clients with the highest level of representation and guidance." - Arthur Petropoulos

The Importance of Culture and Fit

In addition to the six traps to avoid, Hill View Partners recognizes the importance of culture and fit in the M&A and capital sourcing process. Matching the right buyer or investor with the client's business is crucial for a successful transaction. This includes considering factors such as the seller's intent, legacy, and the impact on employees and stakeholders. By understanding the client's needs and goals, Hill View Partners can identify potential buyers or investors who align with their values and vision.

Capital Sourcing and Structuring

Hill View Partners also offers capital sourcing and structuring services to help clients raise capital for various purposes. Whether it's funding an acquisition, expanding operations, or refinancing existing debt, they have the expertise to find the right capital solution. By leveraging their extensive network and knowledge of the capital markets, Hill View Partners can help clients secure the funding they need to achieve their goals.

Conclusion: Navigating the Complexities of M&A and Capital Sourcing

In the world of mergers and acquisitions and capital sourcing, there are many challenges and complexities to navigate. Hill View Partners has developed a unique approach that focuses on the specific needs of privately held companies in the one to ten million dollar EBITDA range. By avoiding common traps, understanding the importance of culture and fit, and offering comprehensive capital sourcing and structuring services, Hill View Partners provides clients with the guidance and support they need to achieve their goals. With their expertise and experience, they are able to navigate the intricacies of the M&A and capital markets, ensuring the best possible outcomes for their clients.

To get in touch with Hill View Partners, visit their website at hillviewps.com or connect with Arthur Petropoulos on LinkedIn. They are always happy to have conversations and provide guidance, whether someone is a current or potential client.

Contact Info:

Company Homepage: 

https://hillviewps.com/

Linkedin Company Page: https://www.linkedin.com/company/hillviewpartners/

Youtube Channel: https://www.youtube.com/@HillViewPartners

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This week’s “DEEPER” Dive: The "Acquisition to Retire" Strategy: Your Golden Ticket to a Fulfilling Semi-Retirement

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Disclaimer: This newsletter is provided for informational & educational purposes only, and should not be relied upon as legal, business, investment, or tax advice. We are not attorneys, tax, or financial advisors and not qualified to give any such advice. 

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