Weekly Recap

Bonus Guest Host Monday:

E212: Unveiling the Secrets of Main Street M&A: Insider Tips from M&A Veteran Carl Allen

About the Guest(s):

Carl Allen is a seasoned mergers and acquisitions (M&A) professional with over 30 years of experience. At the age of 21, he entered the realm of investment banking, starting his career with Bank of America and quickly delving into the M&A team. Carl has a storied background, including work with giants like GE and Hewlett Packard, and an impressive stint in private equity. He holds a first-class degree in civil and structural engineering from the University of Leeds and an MBA from the University of Chicago. Carl later transitioned from billion-dollar corporate deals to acquiring and selling smaller businesses, marking a shift towards Main Street M&A. He has bought and currently owns roughly 30 companies and has coached nearly 30,000 students worldwide. He actively invests in and funds student deals through his private equity fund.

Today's Guest Host:

David Green is a seasoned investor and entrepreneur dedicated to helping business owners scale and sell profitable companies. With a rich background in business investment, growth strategy, and exit planning, David brings a wealth of knowledge to his podcast. As the founder of Echo Eight Consulting, he has guided numerous entrepreneurs through successful exits and business growth journeys. David’s collaborative approach ensures that the legacy, culture, and values of his clients' businesses are maintained while maximizing value and minimizing stress during transitions. Visit Echo Eight for more information.

Episode Summary:

In this riveting episode of the How2Exit podcast, guest host David Green warmly welcomes M&A veteran Carl Allen to share his extensive expertise. Carl delves into his transformative journey from a structural engineer to an M&A titan, providing an authentic glimpse into the high-stakes world of business acquisitions. As the conversation unfolds, Carl candidly reveals the nuances that distinguish corporate deal-making from Main Street business sales, emphasizing the critical role of rapport and seller psychology.

Carl shares pivotal moments from his career, such as the spontaneous decision to purchase his first Main Street business, exemplifying his knack for seizing opportunities and thinking on his feet. He further discusses his approach to evaluating and structuring deals, including his innovative "annuity deal" strategy. With a treasure trove of practical insights and heartfelt reflections, this episode is laden with profound lessons and strategies for aspiring entrepreneurs and seasoned investors alike.

Key Takeaways:

• The transition from corporate to Main Street M&A involves a significant emphasis on seller psychology and building rapport with business owners.

• Creative deal structures, such as the "annuity deal," can be more attractive to retiring business owners seeking income rather than a large upfront sum.

• Seller psychology is key in determining a business's value, often superseding traditional financial metrics.

• Carl Allen argues for the importance of real-time deal-making experience to effectively coach others in M&A.

• A novel way of teaching M&A is through storytelling, which Carl explores through his upcoming book that fuses technique and narrative.

Notable Quotes:

• "When you're buying a $2 million business, it's a lot more about seller psychology than it is about the numbers."

• "One of the things that makes me unique and Jeremy Harbour as well, what makes us unique versus everybody else that tries to do this, is we're teaching what we're doing."

• "My wealth managers valued my business... Wealth managers are not trained in the art of business valuation."

• "I could never be a real coach if I wasn't still doing what I'm coaching because, you know, the M&A market changes a lot."

Article:

Navigating the Complex Landscape of M&A: Insights from Carl Allen

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E214: Guiding Entrepreneurs: David Barnett's Comprehensive Approach to Buying and Selling Businesses -

About the Guest(s):

David Barnett is a seasoned entrepreneur, consultant, author, and educator in the field of buying, selling, and financing small and medium-sized businesses. Starting from childhood enterprises to careers in sales and a formal education in business school, Barnett has accumulated a wealth of experience that led him to own a business broker office for several years before venturing into banking. Since 2015, he has been offering consultancy services, assisting clients with transaction analysis for buying or preparing to sell their businesses. His contributions extend to a YouTube channel dedicated to sharing knowledge on entrepreneurship and business transactions. Barnett is also an accomplished author with multiple books on topics related to investing in local businesses, franchising, and buy-sell strategies, with his latest book set to release in the fall.

Episode Summary:

In the latest installment of the How2Exit podcast, host Ronald Skelton welcomes back David Barnett, an expert in the realm of small and medium-sized business transactions. This conversation dives deep into the precarious practice of over-leveraging in business acquisitions and the perils it presents for entrepreneurs. With Barnett's enlightening discourse, listeners gain insights into mastering the art of business deals without falling into financial pitfalls.

David Barnett shares his extensive knowledge on proper business leverage, the impact of government interventions such as the SBA on small business financing, and the realistic challenges faced by entrepreneurs seeking to buy a business with minimal down payment. He elucidates on the market dynamics, contrasting the more natural debt-equity structures of large companies with the often artificially stimulated small business sector. Barnett compellingly argues for prudence, long-term planning, and understanding cash flow management as pivotal factors in making a successful business purchase.

Key Takeaways:

• Typical leverage for large public companies is between 50-60% debt; anything higher is considered risky.

• Zero-down deals are often more achievable by experienced individuals with substantial resources, not beginners with limited capital.

• Relationships, trust, and a strong personal network are crucial when seeking investments in your business endeavors.

• Minority equity holders in small businesses may face significant risks without majority control.

• Prudent financial management and an understanding of potential business hazards are essential before taking on leverage.

Notable Quotes:

• "The more you leverage up a business, the more expensive it gets." - David Barnett

• "Buying a business is not something you do out of an act of desperation. It's not a solution to your financial problems. It's a leveling up." - David Barnett

• "People who raise $100 million in series C financing... these are very different kinds of investors than the ones who might kick in 15 or $25,000 towards your $100,000 equity raise to buy like an ice cream shop." - David Barnett

• "Business is done with and with the help of people. It's all inter human relationships." - David Barnett

• "In the world of small business, the number one factor people take into account when they make an investment is who is the entrepreneur?" - David Barnett

Article:

Navigating the Perils of Business Acquisition: Expert Insights on Leveraging and Relationship Building

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.  

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E213: Ujwal Velagapudi: Buying Unique Businesses and Building a Diverse Portfolio

About the Guest(s):

Ujwal Velagapudi is a seasoned entrepreneur with a rich background in mergers and acquisitions, real estate investments, and a vast array of business ventures across multiple industries. Hailing from Detroit, Ujwal began his investment journey with a striking purchase in the city's real estate market and gradually expanded his portfolio to include a diverse collection of businesses, from a sports bar to a virtual assistant agency. With a hands-on approach and a keen eye for unique and thriving opportunities, Ujwal has amassed experience in buying businesses, navigating off-market deals, and growing them successfully with a spirit of innovation.

Episode Summary:

In this episode of the podcast, host Ronald Skelton welcomes Ujwal Velagapudi, an adept merger and acquisition expert with a passion for turning investment opportunities into thriving business enterprises. The conversation gives listeners an insightful look into Ujwal's unconventional path from real estate to acquiring businesses and the methodology he employs when looking for new ventures.

Ujwal shares his story of the first game-changing investment in Detroit, detailing his astute negotiation tactics and the progression from purchasing real estate to acquiring various businesses. The dialogue reveals his strategic approach to investing, including focusing on businesses with attractive free cash flow, management structures, and the potential for growth. In their discussion, Ujwal touches upon his criteria for selecting businesses, preferring those with a weird and cool factor or those shielded from certain industry risks.

Key Takeaways:

• Trusting one's instincts and conducting thorough vetting are paramount when considering business acquisitions, particularly when dealing with sellers.

• It's essential for businesses to have a solid operational foundation, including management teams in place, for investors like Ujwal to consider them promising opportunities.

• The significance of recurring revenue models and industry longevity are emphasized as prime factors when evaluating the potential of a business.

• Ujwal highlights the importance of deal flow, seeking enough opportunities to discern truly exceptional deals.

• He also advises aspiring entrepreneurs and investors to jump into the field, start making contacts, and learn through hands-on experiences.

Notable Quotes:

1. "It's just getting out there and starting to pick up the phone doing it. I think we overcomplicate this process. It's not very difficult; it's just you need the reps."

2. "I'm very trusting in general. And if I bet you and I bring you on my team or I want to do business with you, I'm believing that you're good, you're, we're going to be in it together."

3. "Each company has someone that runs it, and then I am basically the back office staff. So I'm the administrative staff. I'm the part-time M&A, as well as the back-office HR and the back-office part-time CEO."

4. "This year I'm more back in the saddle, really enjoying being more immersed in my companies and really trying to spend time on building the relationships for off-market opportunities to buy the next company."

5. "So even if I had a small little fund that I created, I want the opportunities to be so overwhelming that I get the pickings of the absolute highest tier of quality."

Article:

Thriving in M&A: Ujwal Velagapudi's Roadmap to Success