June 29, 2025 • 19 mins
The mystery of how businesses actually find serious buyers is revealed in this candid exploration of M&A strategy. Forget everything you thought you knew about selling a business - this isn't about listing it online and hoping for inquiries. Russell Cohen pulls back the curtain on the sophisticated methods M&A advisors use to connect sellers with qualified buyers who will pay premium valuations.
Discover the substantial investments advisors make in specialized research platforms - from Private Equity Info to Pitchbook, Source Scrub to Grata - each costing thousands annually but providing crucial access to buyer information. Cohen explains how these resources allow advisors to identify private equity groups, family offices, and strategic buyers that match a seller's specific industry, size, and objectives. Beyond the technology, learn how professional relationships developed through organizations like ACG and M&A Source create direct connections with decision-makers at acquisition-minded companies.
The conversation highlights a critical reality for business owners: attempting to sell without professional representation severely limits your options and leverage. When sellers rely solely on their immediate network of accountants and lawyers, they access less than 1% of potential buyers. As Cohen colorfully illustrates, negotiating against professional buyers without representation is "like a junior high football player trying to sack Tom Brady." The right advisor not only maximizes your valuation through competitive bidding but helps identify buyers who represent the best cultural fit and growth opportunity. Whether you're seeking a complete exit or a "second bite of the apple" with future equity participation, hearing these insider insights could be worth millions in your upcoming transaction.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Welcome to the South Florida M&A Advisors podcast,
your trusted M&A team.
Here's your host, Russell Cohen.
Speaker 2 (00:13):
Finding the right buyer for a business is not luck
, it's strategy.
Today we're talking about howM&A Advisors actually connect
with serious buyers, fromprivate equity to strategic
acquirers.
Russell, most people probablythink that when it comes time to
sell a business, you list itlike you would a property, maybe
(00:34):
on MLS, and hope that somebodybites.
And you and I know that really,it couldn't be further from the
truth.
So what does it really looklike behind the scenes when
you're trying to find the rightbuyer?
Speaker 3 (00:46):
You know that's a great question.
You know, if you're trying tosell a smaller business, that's
exactly what a business brokerwould do.
They would list it on manydifferent websites and the
buyers would flow to them.
You know, inquiring by email,that does not work for M&A.
That does not work for M&A.
In M&A you have to spend some.
(01:20):
You know, probably $30,000 to$50,000 a year in subscriptions
that you'll be able to searchand try to find the private
equity group or family office orstrategic buyer.
So that's kind of.
You know if you're going tohave your toe in the water, you
know you might.
You might spend for one service, but if you're really truly
going to be able to give yourclient the most competitive
multiple bidders, then buildingyour buyer list, you've got to
have a lot of differentsubscriptions to you know to get
(01:41):
, get as many buyers and get thebest price, of course, so how
early in this process do youstart building a buyer list?
Speaker 2 (01:48):
Is this something that well, I'd imagine you
probably you've been doing thisa while.
You have a giant resourcedirectory of these things, but
like, is that groundworktypically laid before the
business even goes to market, orhow does that typically work
with the buyer list?
Speaker 3 (02:02):
When you're meeting with a seller and if you want to
show some competitive advantage, you could start building that
list really early and share thelist in person.
You don't give the list to theseller they haven't signed up
with it but you could show themthe amount of private equity
groups or strategic buyers thatyou plan to reach out to and
that could help you get theengagement.
A lot of the times.
(02:23):
If we're not doing that andthat could help you get the
engagement A lot of the times ifwe're not doing that, we wait
for the seller to commit.
No need to spend so much timeresearching buyers if they
haven't committed to yourcompany.
So the buyer list typically isdone after the commitment,
because there's a lot of time inbetween getting the executive
(02:46):
summary together and going outthere and putting the list
together and then finallyreaching out to the private
equity group.
So there is probably a good 30days that you can really go out
there and search for buyers.
Speaker 2 (03:00):
So you referenced spending tens of thousands of
dollars in access to theseresources, so I want to dig in a
little bit into that.
What specific platforms ordatabases do you turn to when
you're sourcing private equityor strategic buyers?
Speaker 3 (03:27):
for M&A advisors is private equity info and what
that is is a database of privateequity groups that have made
platform investments where youcan do the research and you can
see what type of add-ons thatthey're looking to do and where
they're focusing their verticalson.
So it's very user friendly.
Private equity info probablycould range from two grand to
five thousand dollars a monthvery easily and that's one of
(03:51):
the sources I use and we get atthe M&A Source, which is a
national organization.
If you join the M&A Source youget it for free.
So that's an incredible benefit.
So you don't have to spend thatmoney, you just have to join.
Pitchbook is very well known inthe M&A industry.
There are minimal requirements.
You got to buy three licensesand that will cost $30,000 plus.
(04:17):
So if you're just a one personM&A firm that you won't buy it
because you have to buy threelicenses and you're not going to
even use the license.
So usually the larger M&Aagencies' advisors are you know
it's multiple M&A advisors wouldbuy the pitch book.
(04:37):
Tagnify has recently come intothe marketplace and it's kind of
a competitor to private equityinfo and private company data
and they're only charging $500 amonth if you want to go month
by month.
So that's kind of a.
It's a very fair cost becauseyou don't have to commit
(04:57):
tremendous amount of dollars andif you pay for a year or a
friend, you'll be able to get aa little discount.
Um, on the on the privatecompany data, there are source
scrub and grata and I could tellyou for a fact source grub runs
about twenty thousand dollars ayear, which gets expensive,
right?
Uh, my firm is currently usingsource scrub, uh, grata.
(05:20):
Uh, these are all privatecompanies.
If you're trying to findstrategic buyers that are in the
space already and you know thatwould be, you know, instead of
private equity, let's say, ifyou're selling a printing
company, another printer wouldcome in and buy it.
So you've got to have theability to source around the
(05:40):
United States, maybe evenoutside the United States.
So Grada, easily $15,000 to $2020 grand if you're not part of
any buying group.
You also have Apollo IO, whichis another private company data
information that can run acouple of grand.
You got Zoom info and they allput limits on how much you could
download.
But one of the most positivesabout these private company data
(06:03):
companies is you know you couldtry to these private company
data companies is.
You know you could try to getthe company data for your buyers
, but you could also use it onreverse to market the sellers.
So so you know.
So it's just not a buyer search.
If you're focusing on, let'ssay, roofing companies, like
I've done in the past, I canpull up all the roofers, let's
say in the state of Florida.
(06:23):
I can, I could target market.
So those private company dataApollo, zoom, zoom, info Source,
grub Grata are you kind of canwork in both ways.
So yeah, so it can get reallyexpensive and you know a lot of
people don't have unlimitedbudgets.
Speaker 2 (06:40):
Yeah, obviously lots of resources out there, so like
there.
So I got the wheels churning inmy head about obviously, the
larger the firm, the more accessthey have to these resources,
right?
So is it safe to say that ifyou're a smaller business, it
would make I don't know how thecommission structure works for
the M&A advisor but is it safeto say that for a smaller
(07:02):
business they might pair betterwith a a smaller boutique type
firm, whereas if you're doing alarger deal, it would make sense
to do it with a larger business, or how does that typically
work?
What are some of the advantagesand disadvantages to working
with a larger entity versus amore, uh like, localized
boutique type shop?
Speaker 3 (07:17):
yeah, listen, I consider myself a boutique m a.
So yeah, um, you know, so I'mnot sitting with 20 different
advisors, but you still?
Speaker 2 (07:25):
have access to a lot of these.
Speaker 3 (07:27):
I got these subscriptions, I got the power
of a larger M&A agency.
Speaker 2 (07:33):
With the personal nature of dealing with somebody.
Speaker 3 (07:37):
The best of both worlds essentially.
You get the best of both worldsWith you, Russell.
Speaker 2 (07:41):
we always get the best of both worlds, that's
right.
Speaker 3 (07:43):
You're hiring me and you're getting a boutique-style
M&A firm and we have the sourcesthat a larger company would
have because we've made theinvestments in those.
In order to be an M&A advisor,you've got to have it.
You know you can't have yourtoe in the business like many
people are doing these days.
So it's very important.
And, just to mention, there's acouple of different ways,
(08:04):
creative ways to find buyers.
You could join ACG, which iskind of like a middle market
association, and they havesomething called DealMax, which
is kind of like a middle marketassociation, and they have
something called DealMax.
Every region of ACG network haskind of like a deal market
where they have like aconference once, twice a year
and they get all the privateequity groups to come down to
(08:24):
these conferences.
And I mentioned M&A Source.
We have a conference.
I'm on the board of governorsat M&A Source and we have two
conferences a year.
So I just came back fromOrlando back in May and we had a
deal market and we had over 40private equity groups sitting at
a table where I can carry on aconversation one on one, explain
(08:45):
what I have, what I have now,what I have coming and, most
important, we're building theserelationships with.
You know, when you first start,you didn't know any of these
private equity groups and theyall keep coming back.
And now you know, five to sevenyears later.
You know, I know these peopleby first name.
I, I know what they're lookingfor.
Uh, we are, we're buildingrelationships with these private
(09:06):
equity and they want thatbecause they want us to call
them when we get thatopportunity.
So, yeah, so as you dedicatemore time, you get to know the
private equity groups.
There's 8,000 of them.
You'll never get to know themall, but a handful of them.
You'll be able to know them byfirst name and understand what
they're looking for.
Speaker 2 (09:27):
Yeah, I mean that makes perfect sense.
Kind of leads me to the nextquestion I had, which was and
I'm just based upon what youjust said it seems pretty
obvious that having theserelationships with these private
equity groups it seems to be, Idon't want to say, more
important than the variousresources and tech you have to
find buyers.
But it seems like you have tostrike a nice balance between
(09:47):
these personalized relationshipswith these large groups and
also having access to all theseplatforms to get view and get
access to those that you don'thave relationships with, so you
can connect with them and thenbuild.
That's right?
Speaker 3 (09:58):
yeah, because I, if I know, 50 private equity groups
by their first name doesn't meanthat they're investing in the
space.
So you know, you know, once youjoin these type of associations
, we're getting emails byprivate equity groups, family
offices, on a daily basis.
So we're building our owndatabase of reach out on top of
the search that we do.
Speaker 2 (10:20):
Once you have this resource directory and you have
all these resources, obviouslythere's, like you said, now
there's people that are reachingout to you.
What's your approach tofiltering out, like time wasters
, those that really aren'tnecessarily qualified, and and
really zeroing in on the seriousbuyers?
Like how do you filter throughall this?
Speaker 3 (10:39):
yeah, I mean listen what we're carrying on these
conversations.
We want to know if they'refunded.
You know, if they're a fundedprivate equity group, that means
they already raised the moneyfrom their investors and and
they got a fund, uh, ready to go, uh, with dry powder and and
typically, uh, a private Equitygroup is only going to put 30
percent of whatever the downpayment in the, in the
(10:59):
acquisition.
They're only going to put 30percent and then they're going
to get leverage so they don't um, you know they don't use a
hundred percent of their downpayment money right from the
fund.
It's a leverage play, nodifferent if you're selling a
small business and a privateindividual is using SBA.
So that's the way it is.
Private equity groups do provideprobably a 70 to 80% cash out
(11:22):
position, but they're actuallynot using 100% of their own cash
to fund the down payment.
So you need to understand that.
If you don't understand that,you really don't know the basics
of private equity and beware ofthe advisor you hire.
You know.
So, yeah, that's the way it is.
You know, when I was new I didnot know that.
So you know, you learn bygetting educated and going
(11:44):
through a few deals and going toall these conferences and
getting educated, and so youcould be better for your, for
your seller, and gettingeducated.
Speaker 2 (11:52):
So you can be better for your seller, what would be
something that instantly turnsbuyers off?
Speaker 3 (12:01):
even if the business looks great on paper.
Yeah, I mean, you get a perfectexample an EBITDA of $2 to $5
million.
Problem is they'll be turnedoff automatically if it's in a
space that they're notinterested in, if they don't
want to buy a franchise chain,let's call it that way.
Not many private equity groupswant to be in the restaurant
business, so that's a turnoff,you know.
(12:22):
If they have a vertical inconstruction, well they're not
going to want to buy anindustrial manufacturing company
.
You know what I mean.
So those are turnoffs likeinstantaneous, a lot of times
when I totally not interested,like turn off, you know, and
they'll tell you what they'renot interested in.
(12:43):
And a lot of times theseprivate equity groups, you know
they have multiple platformsgoing up, so they're adding on
companies that match theplatform investment.
Speaker 2 (12:56):
Let's go to some real life examples here.
Can you share with us anexample of a situation with a
deal where you had to getcreative and go outside the
usual channels to get the dealdone?
Speaker 3 (13:08):
yeah, there was a time, many years back, where I
was selling an online companyand I couldn't get, couldn't get
through to the uh, the one ofthe buyers that I was really
targeting, uh, so I decided to,you know, walk in the door, you
know.
So, hey, let's, let's godirectly to them and and work my
(13:29):
way through, so that that's,that's a creative way of trying
to get to the buyer.
You, you know, typically we'rereaching out by email, sending,
sending the teaser uh, we are.
You know, sometimes there'ssome phone follow-up to you know
, to see that.
But, you know, the kind of likeget in front of someone that
way is pretty unique, you know.
But it would have, obviously,all these buyers could be around
(13:51):
the country, so that would bedifficult to do this.
This scenario was a local SouthFlorida company.
Speaker 2 (13:57):
So how common is it in your industry to have smaller
businesses, I guess like under10 million deals or even smaller
, maybe a million, $2 milliondeals where the owners aren't
using a broker right, they'regoing about it on their own.
And then for those types ofscenarios, what do business
owners typically get wrong about?
(14:19):
How buyers are actually found?
Speaker 3 (14:21):
Yeah, that's a great question.
You know they're probablytapping their network of
accountant and lawyers and whothey know and that's a very you
know less than you know lessthan 1% of the marketplace.
So they're really limitingthemselves.
I mean it may work, I mean youknow, but it chance or won't
(14:41):
work.
So if you're trying to get themost eyes on the prize and that
being your business, you knowyou get to an advisor.
You know advisor like myself.
Where we can, we can find youknow many private equity groups,
many strategic buyers dependingon your industry and just by
reaching out to your accountantand attorney because you don't
(15:04):
want to pay a commission, well,you know it will be made up
really well between youraccountant and your attorney
when they get involved in thedeal.
So, yeah, you're short sellingthe value of your company
because you haven't createdenough stir and competition to
the deal and you're eliminatingyour worldwide marketplace.
(15:27):
Just because your accountantand attorney are great people
doesn't mean they know everyone.
Speaker 2 (15:32):
Is that something that's common, though, for these
smaller businesses, or wouldyou say that a majority of them?
Speaker 3 (15:37):
if they're going to sell, they typically will get an
advisor on board yeah, I mean,if you're an m a deal, you
should have an advisor.
Speaker 2 (15:45):
Well, yeah, it seems fairly obvious, but I know
there's a lot of people that arelooking to cut corners and save
costs and think you know peoplethink they could do things on
their own.
Uh, obviously, from where I'msitting, you want an expert on
your team.
But how common is it forbusiness owners with smaller,
smaller businesses, um, maybewould say on the smaller
businesses, maybe you know under500,000, they might.
Speaker 3 (16:04):
They try to do it on their own.
You know, on an M&A world,you're dealing with professional
buyers.
You know these people who arepart of private equity.
You know they went to reallyincredible schools.
They started in private equity,they started from the bottom
and they're working their waythrough.
You know, almost you know a lotof them own these private
(16:25):
equity companies.
So they do this for a living.
Okay, it's like.
It's like.
Let me give you a football termsTom Brady is the professional
buyer and the junior highfootball defensive lineman is
the seller.
Okay, you have no chance.
Okay, you have no chance tosack Tom Brady.
(16:48):
Because because these guys, youknow these private equity
buyers know their business andand they they're professional,
but because they know theirbusiness, you can be taken
advantage of.
And, most, most important, thecompetitive nature of getting
the best price is important.
Uh, but not always the price isimportant.
That I learned.
Sometimes it's the right fit,culture-wise, with the private
(17:10):
equity group and and ownerstrusting each other with the
buyers, that they can see thegrowth of their company.
Um, most people want, want themoney, and some sellers want the
second bite of the apple,getting a good private equity
group in there and letting theircompany grow to levels they
never thought, and then sellingthe business seven to 10 years
(17:31):
and making more money.
So I learned very well thatit's just not about the money,
it's the individual person, whattheir goals are.
Speaker 2 (17:41):
Yeah, for sure.
What else Did I miss anythinghere?
What am I leaving out here?
Speaker 3 (17:49):
I think we covered it all.
A lot of these subscriptionsare important, but you got to do
a lot of networking.
I'm currently a member of ACGM&A Source.
I've taken a position on theBoard of Governors as the
membership chairperson.
So, yeah, you want someonethat's active in the space, that
is always getting educated anda real commitment to their
(18:12):
profession, and that's you know.
These are simple questions thatyou could ask any M&A advisor
that you're interviewing.
Speaker 2 (18:20):
All right, very cool, so we shall leave it at that.
Very good stuff.
As always, important to get atrusted professional to come in
there and help you with thesecomplicated, complex
transactions.
So everyone, thanks so much fortuning in and if you found this
useful, don't forget to like,subscribe all that fun stuff.
(18:40):
You know the drill.
Appreciate you joining us andwe will catch everyone next time
on the next episode of theSouth Florida M&A Advisors
Podcast.
Everyone, take care, have agreat day.
Speaker 1 (18:52):
Thanks for listening to the South Florida M&A
Advisors Podcast.
For more information, visitSouthFloridaMAcom or contact
954-646-7651.
Welcome to the South Florida M&A Advisors podcast,
your trusted M&A team.
Here's your host, Russell Cohen.
Speaker 2 (00:13):
Finding the right buyer for a business is not luck
, it's strategy.
Today we're talking about howM&A Advisors actually connect
with serious buyers, fromprivate equity to strategic
acquirers.
Russell, most people probablythink that when it comes time to
sell a business, you list itlike you would a property, maybe
(00:34):
on MLS, and hope that somebodybites.
And you and I know that really,it couldn't be further from the
truth.
So what does it really looklike behind the scenes when
you're trying to find the rightbuyer?
Speaker 3 (00:46):
You know that's a great question.
You know, if you're trying tosell a smaller business, that's
exactly what a business brokerwould do.
They would list it on manydifferent websites and the
buyers would flow to them.
You know, inquiring by email,that does not work for M&A.
That does not work for M&A.
In M&A you have to spend some.
(01:20):
You know, probably $30,000 to$50,000 a year in subscriptions
that you'll be able to searchand try to find the private
equity group or family office orstrategic buyer.
So that's kind of.
You know if you're going tohave your toe in the water, you
know you might.
You might spend for one service, but if you're really truly
going to be able to give yourclient the most competitive
multiple bidders, then buildingyour buyer list, you've got to
have a lot of differentsubscriptions to you know to get
(01:41):
, get as many buyers and get thebest price, of course, so how
early in this process do youstart building a buyer list?
Speaker 2 (01:48):
Is this something that well, I'd imagine you
probably you've been doing thisa while.
You have a giant resourcedirectory of these things, but
like, is that groundworktypically laid before the
business even goes to market, orhow does that typically work
with the buyer list?
Speaker 3 (02:02):
When you're meeting with a seller and if you want to
show some competitive advantage, you could start building that
list really early and share thelist in person.
You don't give the list to theseller they haven't signed up
with it but you could show themthe amount of private equity
groups or strategic buyers thatyou plan to reach out to and
that could help you get theengagement.
A lot of the times.
(02:23):
If we're not doing that andthat could help you get the
engagement A lot of the times ifwe're not doing that, we wait
for the seller to commit.
No need to spend so much timeresearching buyers if they
haven't committed to yourcompany.
So the buyer list typically isdone after the commitment,
because there's a lot of time inbetween getting the executive
(02:46):
summary together and going outthere and putting the list
together and then finallyreaching out to the private
equity group.
So there is probably a good 30days that you can really go out
there and search for buyers.
Speaker 2 (03:00):
So you referenced spending tens of thousands of
dollars in access to theseresources, so I want to dig in a
little bit into that.
What specific platforms ordatabases do you turn to when
you're sourcing private equityor strategic buyers?
Speaker 3 (03:27):
for M&A advisors is private equity info and what
that is is a database of privateequity groups that have made
platform investments where youcan do the research and you can
see what type of add-ons thatthey're looking to do and where
they're focusing their verticalson.
So it's very user friendly.
Private equity info probablycould range from two grand to
five thousand dollars a monthvery easily and that's one of
(03:51):
the sources I use and we get atthe M&A Source, which is a
national organization.
If you join the M&A Source youget it for free.
So that's an incredible benefit.
So you don't have to spend thatmoney, you just have to join.
Pitchbook is very well known inthe M&A industry.
There are minimal requirements.
You got to buy three licensesand that will cost $30,000 plus.
(04:17):
So if you're just a one personM&A firm that you won't buy it
because you have to buy threelicenses and you're not going to
even use the license.
So usually the larger M&Aagencies' advisors are you know
it's multiple M&A advisors wouldbuy the pitch book.
(04:37):
Tagnify has recently come intothe marketplace and it's kind of
a competitor to private equityinfo and private company data
and they're only charging $500 amonth if you want to go month
by month.
So that's kind of a.
It's a very fair cost becauseyou don't have to commit
(04:57):
tremendous amount of dollars andif you pay for a year or a
friend, you'll be able to get aa little discount.
Um, on the on the privatecompany data, there are source
scrub and grata and I could tellyou for a fact source grub runs
about twenty thousand dollars ayear, which gets expensive,
right?
Uh, my firm is currently usingsource scrub, uh, grata.
(05:20):
Uh, these are all privatecompanies.
If you're trying to findstrategic buyers that are in the
space already and you know thatwould be, you know, instead of
private equity, let's say, ifyou're selling a printing
company, another printer wouldcome in and buy it.
So you've got to have theability to source around the
(05:40):
United States, maybe evenoutside the United States.
So Grada, easily $15,000 to $2020 grand if you're not part of
any buying group.
You also have Apollo IO, whichis another private company data
information that can run acouple of grand.
You got Zoom info and they allput limits on how much you could
download.
But one of the most positivesabout these private company data
(06:03):
companies is you know you couldtry to these private company
data companies is.
You know you could try to getthe company data for your buyers
, but you could also use it onreverse to market the sellers.
So so you know.
So it's just not a buyer search.
If you're focusing on, let'ssay, roofing companies, like
I've done in the past, I canpull up all the roofers, let's
say in the state of Florida.
(06:23):
I can, I could target market.
So those private company dataApollo, zoom, zoom, info Source,
grub Grata are you kind of canwork in both ways.
So yeah, so it can get reallyexpensive and you know a lot of
people don't have unlimitedbudgets.
Speaker 2 (06:40):
Yeah, obviously lots of resources out there, so like
there.
So I got the wheels churning inmy head about obviously, the
larger the firm, the more accessthey have to these resources,
right?
So is it safe to say that ifyou're a smaller business, it
would make I don't know how thecommission structure works for
the M&A advisor but is it safeto say that for a smaller
(07:02):
business they might pair betterwith a a smaller boutique type
firm, whereas if you're doing alarger deal, it would make sense
to do it with a larger business, or how does that typically
work?
What are some of the advantagesand disadvantages to working
with a larger entity versus amore, uh like, localized
boutique type shop?
Speaker 3 (07:17):
yeah, listen, I consider myself a boutique m a.
So yeah, um, you know, so I'mnot sitting with 20 different
advisors, but you still?
Speaker 2 (07:25):
have access to a lot of these.
Speaker 3 (07:27):
I got these subscriptions, I got the power
of a larger M&A agency.
Speaker 2 (07:33):
With the personal nature of dealing with somebody.
Speaker 3 (07:37):
The best of both worlds essentially.
You get the best of both worldsWith you, Russell.
Speaker 2 (07:41):
we always get the best of both worlds, that's
right.
Speaker 3 (07:43):
You're hiring me and you're getting a boutique-style
M&A firm and we have the sourcesthat a larger company would
have because we've made theinvestments in those.
In order to be an M&A advisor,you've got to have it.
You know you can't have yourtoe in the business like many
people are doing these days.
So it's very important.
And, just to mention, there's acouple of different ways,
(08:04):
creative ways to find buyers.
You could join ACG, which iskind of like a middle market
association, and they havesomething called DealMax, which
is kind of like a middle marketassociation, and they have
something called DealMax.
Every region of ACG network haskind of like a deal market
where they have like aconference once, twice a year
and they get all the privateequity groups to come down to
(08:24):
these conferences.
And I mentioned M&A Source.
We have a conference.
I'm on the board of governorsat M&A Source and we have two
conferences a year.
So I just came back fromOrlando back in May and we had a
deal market and we had over 40private equity groups sitting at
a table where I can carry on aconversation one on one, explain
(08:45):
what I have, what I have now,what I have coming and, most
important, we're building theserelationships with.
You know, when you first start,you didn't know any of these
private equity groups and theyall keep coming back.
And now you know, five to sevenyears later.
You know, I know these peopleby first name.
I, I know what they're lookingfor.
Uh, we are, we're buildingrelationships with these private
(09:06):
equity and they want thatbecause they want us to call
them when we get thatopportunity.
So, yeah, so as you dedicatemore time, you get to know the
private equity groups.
There's 8,000 of them.
You'll never get to know themall, but a handful of them.
You'll be able to know them byfirst name and understand what
they're looking for.
Speaker 2 (09:27):
Yeah, I mean that makes perfect sense.
Kind of leads me to the nextquestion I had, which was and
I'm just based upon what youjust said it seems pretty
obvious that having theserelationships with these private
equity groups it seems to be, Idon't want to say, more
important than the variousresources and tech you have to
find buyers.
But it seems like you have tostrike a nice balance between
(09:47):
these personalized relationshipswith these large groups and
also having access to all theseplatforms to get view and get
access to those that you don'thave relationships with, so you
can connect with them and thenbuild.
That's right?
Speaker 3 (09:58):
yeah, because I, if I know, 50 private equity groups
by their first name doesn't meanthat they're investing in the
space.
So you know, you know, once youjoin these type of associations
, we're getting emails byprivate equity groups, family
offices, on a daily basis.
So we're building our owndatabase of reach out on top of
the search that we do.
Speaker 2 (10:20):
Once you have this resource directory and you have
all these resources, obviouslythere's, like you said, now
there's people that are reachingout to you.
What's your approach tofiltering out, like time wasters
, those that really aren'tnecessarily qualified, and and
really zeroing in on the seriousbuyers?
Like how do you filter throughall this?
Speaker 3 (10:39):
yeah, I mean listen what we're carrying on these
conversations.
We want to know if they'refunded.
You know, if they're a fundedprivate equity group, that means
they already raised the moneyfrom their investors and and
they got a fund, uh, ready to go, uh, with dry powder and and
typically, uh, a private Equitygroup is only going to put 30
percent of whatever the downpayment in the, in the
(10:59):
acquisition.
They're only going to put 30percent and then they're going
to get leverage so they don't um, you know they don't use a
hundred percent of their downpayment money right from the
fund.
It's a leverage play, nodifferent if you're selling a
small business and a privateindividual is using SBA.
So that's the way it is.
Private equity groups do provideprobably a 70 to 80% cash out
(11:22):
position, but they're actuallynot using 100% of their own cash
to fund the down payment.
So you need to understand that.
If you don't understand that,you really don't know the basics
of private equity and beware ofthe advisor you hire.
You know.
So, yeah, that's the way it is.
You know, when I was new I didnot know that.
So you know, you learn bygetting educated and going
(11:44):
through a few deals and going toall these conferences and
getting educated, and so youcould be better for your, for
your seller, and gettingeducated.
Speaker 2 (11:52):
So you can be better for your seller, what would be
something that instantly turnsbuyers off?
Speaker 3 (12:01):
even if the business looks great on paper.
Yeah, I mean, you get a perfectexample an EBITDA of $2 to $5
million.
Problem is they'll be turnedoff automatically if it's in a
space that they're notinterested in, if they don't
want to buy a franchise chain,let's call it that way.
Not many private equity groupswant to be in the restaurant
business, so that's a turnoff,you know.
(12:22):
If they have a vertical inconstruction, well they're not
going to want to buy anindustrial manufacturing company
.
You know what I mean.
So those are turnoffs likeinstantaneous, a lot of times
when I totally not interested,like turn off, you know, and
they'll tell you what they'renot interested in.
(12:43):
And a lot of times theseprivate equity groups, you know
they have multiple platformsgoing up, so they're adding on
companies that match theplatform investment.
Speaker 2 (12:56):
Let's go to some real life examples here.
Can you share with us anexample of a situation with a
deal where you had to getcreative and go outside the
usual channels to get the dealdone?
Speaker 3 (13:08):
yeah, there was a time, many years back, where I
was selling an online companyand I couldn't get, couldn't get
through to the uh, the one ofthe buyers that I was really
targeting, uh, so I decided to,you know, walk in the door, you
know.
So, hey, let's, let's godirectly to them and and work my
(13:29):
way through, so that that's,that's a creative way of trying
to get to the buyer.
You, you know, typically we'rereaching out by email, sending,
sending the teaser uh, we are.
You know, sometimes there'ssome phone follow-up to you know
, to see that.
But, you know, the kind of likeget in front of someone that
way is pretty unique, you know.
But it would have, obviously,all these buyers could be around
(13:51):
the country, so that would bedifficult to do this.
This scenario was a local SouthFlorida company.
Speaker 2 (13:57):
So how common is it in your industry to have smaller
businesses, I guess like under10 million deals or even smaller
, maybe a million, $2 milliondeals where the owners aren't
using a broker right, they'regoing about it on their own.
And then for those types ofscenarios, what do business
owners typically get wrong about?
(14:19):
How buyers are actually found?
Speaker 3 (14:21):
Yeah, that's a great question.
You know they're probablytapping their network of
accountant and lawyers and whothey know and that's a very you
know less than you know lessthan 1% of the marketplace.
So they're really limitingthemselves.
I mean it may work, I mean youknow, but it chance or won't
(14:41):
work.
So if you're trying to get themost eyes on the prize and that
being your business, you knowyou get to an advisor.
You know advisor like myself.
Where we can, we can find youknow many private equity groups,
many strategic buyers dependingon your industry and just by
reaching out to your accountantand attorney because you don't
(15:04):
want to pay a commission, well,you know it will be made up
really well between youraccountant and your attorney
when they get involved in thedeal.
So, yeah, you're short sellingthe value of your company
because you haven't createdenough stir and competition to
the deal and you're eliminatingyour worldwide marketplace.
(15:27):
Just because your accountantand attorney are great people
doesn't mean they know everyone.
Speaker 2 (15:32):
Is that something that's common, though, for these
smaller businesses, or wouldyou say that a majority of them?
Speaker 3 (15:37):
if they're going to sell, they typically will get an
advisor on board yeah, I mean,if you're an m a deal, you
should have an advisor.
Speaker 2 (15:45):
Well, yeah, it seems fairly obvious, but I know
there's a lot of people that arelooking to cut corners and save
costs and think you know peoplethink they could do things on
their own.
Uh, obviously, from where I'msitting, you want an expert on
your team.
But how common is it forbusiness owners with smaller,
smaller businesses, um, maybewould say on the smaller
businesses, maybe you know under500,000, they might.
Speaker 3 (16:04):
They try to do it on their own.
You know, on an M&A world,you're dealing with professional
buyers.
You know these people who arepart of private equity.
You know they went to reallyincredible schools.
They started in private equity,they started from the bottom
and they're working their waythrough.
You know, almost you know a lotof them own these private
(16:25):
equity companies.
So they do this for a living.
Okay, it's like.
It's like.
Let me give you a football termsTom Brady is the professional
buyer and the junior highfootball defensive lineman is
the seller.
Okay, you have no chance.
Okay, you have no chance tosack Tom Brady.
(16:48):
Because because these guys, youknow these private equity
buyers know their business andand they they're professional,
but because they know theirbusiness, you can be taken
advantage of.
And, most, most important, thecompetitive nature of getting
the best price is important.
Uh, but not always the price isimportant.
That I learned.
Sometimes it's the right fit,culture-wise, with the private
(17:10):
equity group and and ownerstrusting each other with the
buyers, that they can see thegrowth of their company.
Um, most people want, want themoney, and some sellers want the
second bite of the apple,getting a good private equity
group in there and letting theircompany grow to levels they
never thought, and then sellingthe business seven to 10 years
(17:31):
and making more money.
So I learned very well thatit's just not about the money,
it's the individual person, whattheir goals are.
Speaker 2 (17:41):
Yeah, for sure.
What else Did I miss anythinghere?
What am I leaving out here?
Speaker 3 (17:49):
I think we covered it all.
A lot of these subscriptionsare important, but you got to do
a lot of networking.
I'm currently a member of ACGM&A Source.
I've taken a position on theBoard of Governors as the
membership chairperson.
So, yeah, you want someonethat's active in the space, that
is always getting educated anda real commitment to their
(18:12):
profession, and that's you know.
These are simple questions thatyou could ask any M&A advisor
that you're interviewing.
Speaker 2 (18:20):
All right, very cool, so we shall leave it at that.
Very good stuff.
As always, important to get atrusted professional to come in
there and help you with thesecomplicated, complex
transactions.
So everyone, thanks so much fortuning in and if you found this
useful, don't forget to like,subscribe all that fun stuff.
(18:40):
You know the drill.
Appreciate you joining us andwe will catch everyone next time
on the next episode of theSouth Florida M&A Advisors
Podcast.
Everyone, take care, have agreat day.
Speaker 1 (18:52):
Thanks for listening to the South Florida M&A
Advisors Podcast.
For more information, visitSouthFloridaMAcom or contact
954-646-7651.
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