This issue of Deeper by How2Exit is sponsored by Snowball Build Your Snowball. Compound what matters.

Snowball is a private community of experienced entrepreneurial investors who get advice, share wins and tough lessons, talk strategy and deal flow, and so much more.

Your net worth will never be greater than your network:

Network and hang out with other Acquisition Entrepreneurs and professionals Twice a Month - Today Feb 20th 8am PST: Join Here 

This week on How2Exit:

The Art of Mergers, Acquisitions, and Sale-Lease-back Strategies with Brandon Knowlden

E190: Brandon Knowlden Shares His Acquisition Strategy and Recent Success

About the Guest(s):

Brandon Knowlden is an entrepreneur with a rich background in both the advertising industry and the world of manufacturing. He kicked off his career at the early age of 13, working in his father's manufacturing business in Detroit. Later, he transitioned to advertising, working with high-profile clients like Porsche and Panera Bread. Brandon's entrepreneurial journey eventually led him to found a woodworking business specialized in creating durable housewares. Having successfully exited his business in December 2023, Brandon is currently focused on acquisitions within the custom cabinetry and manufacturing industries, aiming to build significant roll-ups that generate generational wealth.

Episode Summary:

In this insightful episode of the How2Exit Podcast, host Ronald Skelton and guest Brandon Knowlden delve into the intriguing world of mergers and acquisitions, particularly Brandon's unique approach to business growth. Brandon shares his compelling journey from advertising maven to successful entrepreneur, highlighting the pivotal moments that led him to the realm of small to medium business acquisitions.

Brandon's recent venture into buying a custom cabinetry company showcases a novel strategy involving a sale leaseback — a powerful maneuver that financed the purchase of the business itself. Listeners will be captivated by the intricacies of the deal, how Brandon leveraged the property's value, and his visions for future roll-up acquisitions.

Key Takeaways:

• The "property split" or sale leaseback strategy can significantly finance business acquisitions.

• Building a quiver of private investors is crucial for executing sale leasebacks efficiently.

• Seller financing conversations can benefit from a personalized, human approach, aligning the seller's needs and the buyer's goals.

• There's potential for creating a more efficient system by identifying and remedying inefficient practices in acquired businesses.

• Establishing genuine relationships with both sellers and their key employees is vital for successful transactions.

Notable Quotes:

• "You might want to consider growing by acquisition, because then you can plan your growth."

• "It took me three or four months of looking and I was looking at different target profiles but it took me three or four months to find that business."

• "You just took a look at the situation with fresh eyes and I'm going to save us 6000, $8,000 this year alone on stuff that I just observed, like walking the floor."

• "Money is not always the most valuable thing to people. It's oftentimes their time or expertise."

Article:

Leveraging Seller Finance and Creative Deal Structure in M&A

Secondary Sponsor:

Your business Here - email [email protected]

If you are looking to exit above $5M up to $25M - This is the right solution: Together with ITX M&A Marketplace - click here to sell your MSP Company (Sponsor)

Growth & Acquisition - News Newsletter

Attention Business Brokers, Advisors, Acquisition Entrepreneurs, and SMB Owners!

Do you want to stay ahead of the game in the SMB M&A market? The Hub is the solution you need! This curated newsletter brings you the best highlights from blogs, podcasts, YouTube, and news sources, all in one place. Growth & Acquisitions

Founding Member Shout-Out (Still room here -$400 one time)

Shout out to our new founding member. With over 30 years in M&A, this company offers the lowest priced (way undervalued) course on helping you buy good businesses. Very underpriced - get it now before they finish upgrading the site and very likely up the pricing.

Thanks to Sweetview Partners, an Acquisitions company looking to buy Texas-based B2B companies in the $1MM - $30MM revenue range. Click on the logo to check them out.

E189: Austin King of Steel River Explores Long-Term Hold Strategy in Industrial Services Space

About the Guest(s):

Austin King is the co-founder of Steel River, a permanent holding company focused on acquiring and growing businesses within the industrial services sector, especially those supporting critical infrastructure such as the overhead crane space. With a background in bond hedge funds and management consulting, Austin transitioned into private equity before launching Steel River with his business partner, Eric Factor. Together, they aim to carry on the legacy of foundational American industries with a long-term growth strategy.

Episode Summary:

In this insightful episode of the How2Exit podcast, host Ronald Skelton welcomes Austin King, the industrious co-founder of Steel River. The conversation is a deep dive into the world of industrial services acquisitions and the journey of building a company that focuses on preserving the backbone of America's infrastructure.

Austin shares the story of his transition from private equity to co-founding Steel River, emphasizing the company's mission to create a long-term home for businesses they acquire. The episode outlines Steel River's growth, which boasts an impressive portfolio of 11 acquisitions, predominantly in the overhead crane industry, expanding their footprint in manufacturing support services.

Listen as Austin discusses the vital lessons learned in merging cultures post-acquisition, valuing employee equity stakes as a means of long-term incentive, and the strategic approach to organic growth in their chosen industries. He wraps up with a keen focus on the importance of team-building, preserving an owner's legacy, and generating long-term value for both the acquired companies and their investors.

Key Takeaways:

• Build a Strong Team: Prioritize hiring exceptional talent at all levels, and compensate them well to encourage long-term investment in the company's success.

• Long-Term Thinking: Adopt a strategy that balances immediate decision-making with long-term growth to protect the company's future and legacy.

• Maintain Legacy: Show consistent respect and due diligence when acquiring businesses, focusing on the legacy and community impact.

• Employee Equity: Offering equity to branch managers and employees drives investment in the company's success and helps retain top talent.

• Cultural Fit: After acquisition, ensuring cultural integration is critical to a smooth transition and sustained growth.

Notable Quotes:

• "Team first. Build great team, like, know your shortcomings and just be open and honest about them and go hire the best people you possibly can, even if that means what you think is overpaying." – Austin King

• "Think longer term. We think that thinking long term, even if you're not playing a true long game, if you think long term, it actually should improve short term decision making." – Austin King

• "We try to offer that full turnkey suite. And one of the things we invested in early was the safety and training program, where it is a dangerous trade." – Austin King

• "We love the deals in that five to 10 million of revenue range where we can get to know the owners, we can get to know every single employee during the process, and it really is a sweet spot for us." – Austin King

• "We're building relationships. That that acquisition might not have come to fruition for five or ten years. But if we have a relationship and we continue to get to know each other, when that day finally comes, hopefully we're there and we're in the position to do the deal." – Austin King

Article:

Navigating the Industrial Services Acquisition Landscape: Insights from Austin King

Seeking contributors, if you are an advisor or willing to do deep research on a topic for some recognition, please email [email protected] with the subject: “I’d like to contribute to DEEPER”

FROM THE Editor:

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.  

** indicates an affiliate commission will be paid if you buy something.

Deeper: Tenacity a Key to Success in Acquisitions: The Blueprint for Small Business Growth

In the ever-evolving landscape of small business growth, the strategy of expansion through acquisition stands out as a pathway not just to scale, but to fundamentally transform a business's competitive edge and market position. Yet, navigating the complex waters of acquisitions requires more than just strategic insight and financial acumen; it demands a quality often overlooked in the boardrooms and negotiation tables: tenacity.

Tenacity, the relentless pursuit of an objective against all odds, becomes the cornerstone of success in the high-stakes world of business acquisitions. It's a trait that enables entrepreneurs and business leaders to push through the myriad challenges and uncertainties that such endeavors inevitably present. In this context, the words of Zig Ziglar, a luminary in the world of motivational speaking and personal development, resonate with particular poignancy:

"Repetition is the mother of learning, the father of action, which makes it the architect of accomplishment." - Zig Ziglar

This quote encapsulates the essence of what it takes to succeed in the rigorous process of acquiring businesses: a continuous cycle of learning, action, and, above all, perseverance.

As we delve into the complexities of growing small businesses through the avenue of acquisitions, we will explore how the tenacity to repeatedly engage with the process, to learn from each interaction, negotiation, and integration, becomes the bedrock upon which successful deals are built. This article aims to illuminate the pathway for small business owners and entrepreneurs, showcasing that the architecture of significant accomplishment in the business world is often drafted in the resilience of tenacity. Through the lens of Ziglar's wisdom, we invite readers on a journey to understand how repetition and action, fueled by unwavering tenacity, can transform the ambitious goal of business acquisition into a tangible reality, paving the way for unparalleled growth and success.

Overview of the Current Landscape for Small Business Acquisitions

The landscape for small business acquisitions is both vibrant and challenging. In recent years, the trend of acquiring small businesses has gained momentum among entrepreneurs and established companies alike. This surge is driven by the desire to access new markets, acquire talented teams, and integrate innovative technologies or processes that these smaller entities possess. The digital transformation and the globalization of markets have further amplified the opportunities for acquisitions, making it possible to identify and pursue potential targets worldwide.

The Strategic Importance of Acquisitions in Growth Strategies

Acquisitions play a crucial role in strategic growth plans for several reasons. First, they allow for rapid scale-up, bypassing the time and resources required to build similar capacities from scratch. Second, they provide immediate access to new customer bases, distribution channels, and intellectual property, which can be leveraged to create competitive advantages. Third, acquisitions can be a proactive defense strategy, preventing competitors from gaining ground or entering new markets. Thus, the strategic importance of acquisitions cannot be overstated; they are not just about growth but also about positioning and securing a company’s future in a fast-evolving business landscape.

Challenges and Opportunities in Acquiring Small Businesses

While the acquisition of small businesses presents a promising avenue for growth, it comes with its set of challenges. These include due diligence complexities, cultural integration issues, and the potential for overvaluation, which can lead to disappointing returns on investment. Furthermore, navigating regulatory approvals and managing post-acquisition integration processes can be daunting tasks that require meticulous planning and execution.

However, within these challenges lie significant opportunities. Successfully overcoming the hurdles of acquisition can lead to operational synergies, enhanced innovation, and improved market reach. Small businesses often possess unique strengths such as agility, innovative products or services, and deep community or niche market relationships. When these strengths are integrated into a larger entity’s resources and strategic framework, they can catalyze growth and revitalization, providing a competitive edge that is difficult to replicate organically.

In navigating the landscape of small business acquisitions, tenacity emerges as the guiding principle. It is the tenacity that drives an acquirer to meticulously evaluate potential targets, persevere through the complexities of deal-making, and steadfastly work towards the seamless integration of acquired entities. As we delve deeper into the role of tenacity in successful acquisitions, it becomes clear that this trait, coupled with strategic insight, can transform the challenges of today into the growth milestones of tomorrow.

Defining Tenacity in the Context of Business Acquisitions

In the high-stakes world of business acquisitions, tenacity is the steadfastness that entrepreneurs and corporate leaders must embody to navigate the tumultuous journey from initial interest to deal closure and beyond. It's the relentless pursuit of a vision, the refusal to be deterred by setbacks, and the resilience to push through resistance. In acquisitions, this translates to perseverance in due diligence, creativity in negotiation, and dedication in integration efforts. Tenacity is not just about persistence but also about adaptability—being willing to adjust strategies as new information and challenges emerge.

How Tenacity Affects Negotiation, Due Diligence, and Integration Processes

Negotiation: Tenacity in negotiation means not just holding firm on price or terms but also being creative and flexible in structuring deals that benefit all parties. It involves thorough preparation, understanding the seller's motivations, and being ready to walk away if the deal doesn't align with strategic objectives.

Due Diligence: The due diligence process is fraught with potential deal-breakers, from undisclosed liabilities to overvalued assets. Tenacity here means digging deep, asking the hard questions, and being prepared to renegotiate terms based on findings. It's about not letting the desire for a deal to overshadow the need for a sound investment.

Integration: Perhaps the most challenging phase of an acquisition is integration, where tenacity is crucial in aligning cultures, systems, and operations. It requires a steadfast commitment to the vision that motivated the acquisition, despite the inevitable obstacles and resistance to change.

The Impact of Tenacity on Acquisition Outcomes

The impact of tenacity on the success of acquisitions cannot be overstated. Tenacity drives the acquirer to persist in the face of adversity, turning challenges into opportunities for growth and learning. It ensures that the acquisition process is not merely about taking over another business but about creating value that is greater than the sum of its parts. Tenacity, therefore, is a catalyst for not just completing deals but for ensuring they succeed in the long term.

In essence, the role of tenacity in business acquisitions is multifaceted, influencing every phase of the acquisition process. It is the driving force behind identifying the right opportunities, securing them on favorable terms, and successfully integrating them into the existing business framework. As we explore further the nuances of mastering the art of acquisitions through repetition and action, it becomes clear that tenacity is not just beneficial but essential for achieving the architect of accomplishment in the world of business growth through acquisitions.

The Power of Repetition in Learning the Acquisition Process

Zig Ziglar’s wisdom, "Repetition is the mother of learning, the father of action, which makes it the architect of accomplishment," is profoundly applicable in the context of acquisitions. Mastery of the acquisition process is achieved not through a single transaction but through the repetitive practice of identifying, evaluating, negotiating, and integrating businesses. This repetition allows acquirers to refine their strategies, improve their judgment, and become more adept at recognizing and seizing the right opportunities.

Each acquisition brings with it a unique set of lessons—about market trends, valuation techniques, negotiation tactics, and post-acquisition integration. The repetition of the process helps in internalizing these lessons, turning theoretical knowledge into practical wisdom. This is crucial for developing an intuitive understanding of when to pursue a deal and when to walk away, how to identify synergies that others might miss, and how to overcome integration challenges.

The Role of Action in Driving Acquisition Success

Action is the bridge between the potential of an acquisition and its realization. It's one thing to identify a target and quite another to successfully integrate it into an existing business. Action—guided by the lessons learned through repetition—transforms the vision of growth through acquisition into reality.

In the acquisition process, action takes many forms: thorough due diligence, strategic negotiation, meticulous planning for integration, and decisive leadership to combine cultures and operations. Each step requires not just the intent to act but the execution of those actions in a manner that aligns with the overarching growth objectives of the acquiring company.

Taking action also means being proactive about potential challenges, whether they're related to financial discrepancies uncovered during due diligence or cultural clashes that emerge during integration. The tenacity to act decisively in the face of these challenges is what ultimately determines the success of an acquisition.

Cultivating a Culture of Learning and Action

For businesses that aspire to grow through acquisitions, cultivating a culture that values learning and action is essential. This involves creating an environment where repetition is seen as an opportunity for growth, mistakes are viewed as learning experiences, and action is encouraged—even when it involves risk.

Such a culture supports the development of a tenacious approach to acquisitions, where team members are committed to continuously improving their skills and are empowered to take the necessary steps to turn acquisition opportunities into successes.

Tenacity as the Architect of Accomplishment in Acquisitions

The journey of acquiring and integrating small businesses into a larger entity is fraught with challenges but also ripe with opportunities for growth. As we have explored, tenacity plays a critical role in navigating this complex process, from the initial identification of potential targets to the final steps of integration.

Tenacity, fueled by the repetition of action and the commitment to learning, becomes the architect of accomplishment in the realm of business acquisitions. It's the quality that enables businesses to transform the inherent risks and uncertainties of acquisitions into strategic advantages and growth.

For leaders looking to expand their companies through acquisitions, the message is clear: cultivate tenacity within yourself and your team. Embrace the lessons learned through repetition, be prepared to act with conviction, and foster a culture that values the relentless pursuit of growth. By doing so, you not only increase your chances of success in individual acquisitions but also build a foundation for sustained growth and innovation.

In the end, the acquisition is not just a business strategy but a test of resolve and vision. The stories of successful acquisitions are testament to the power of tenacity, reinforcing Zig Ziglar's insight about the transformative potential of learning and action. As businesses continue to navigate the ever-changing landscape of industry and competition, it is this tenacious approach to acquisitions that will define the architects of accomplishment in the modern business era.