I launched my search in May 2022 and closed the acquisition of SEYSES exactly 12 months later.
As this community was very helpful to me when I started considering Entrepreneurship through Acquisition iin mid 2021, I wanted to share some of my learnings during this journey, being well aware that the jury on the success of my overall project is still out, as the hardest and most important part of it is still ahead. Here they are:
- The model works. Overall, I could confirm all the assumptions of the recipe. There is enough equity out there for searchers with the right profile. There are enough target companies in need of a succession solution. The process to generate leads works. Enough owners are interested in a buyer like me. You can close at the standard terms. I have now been running my new company for three months.
- Some things were a bit different than expected. In Spain, I found it much more effective to find good companies via brokers than through the proprietary "direct marketing" approach. I tried both, with a 12.5% positive response rate to my mailings, but the path from meeting an owner who may not have thought about selling to getting them to actually do it was too long in my case. Spain is a relationship-based country and economy, and broker networks seem better. The ROI of having interns and training them in order to run the proprietary search was not there in Spain. If I had to do it all again, I would just work via brokers.
- Being older and more experienced is an advantage, not a disadvantage. At 50, I am probably one of the oldest searchers in Spain. Not once did I get a negative reaction, and several times the brokers or owners were relieved to be talking to someone more like them, who had been around the block a few times.
- There was no rollercoaster. I enjoyed the whole process, from setting up my SPV, via preparing and pitching the PPM, building my models and process flows, getting started, speaking with lots of interesting owners and learning about their origin stories and business models, visiting them in their industrial parks, to finding the one project you love and actually close. Having an inquisitive mind and enjoying the steeper bits of any learning curve as well as the opportunity to get to know different kinds of people, this is a wonderful journey.
- Closing takes forever. It took me 8 months from LOI (with term sheet and exclusivity) to actually closing. the Due Diligence of an SME with limited data quality is a drawn-out process (in my case, it was more complex because the target consisted of 7 legal entities in 6 countries). What really took much more than expected, though, was to negotiate the SHA with 15 investors on my cap table, and then get them to sign, notarize, get an apostille and courier the PoAs over to me, and then to transfer the right amount to the right bank account. Spain is not easy to navigate with foreign investors, so if I had to do it again, I would set up one SPV in an administratively simple environment (Belgium?), have all the investors invest there, and then have the Belgian SPV as the only investor in my Spanish SPV . I originally asked for 4 months' exclusivity. That was too short. I should have stood my ground firm on 6 months. And it is important to manage the owner's and their broker's expectation that this will be a slow process.
- Building trust with the owners is key. All through the process, I was working with them as if the transaction had already taken place, spending time developing the strategy and a plan for the future, defining how we would work together, etc. Months before closing we were already deciding critical hiring decisions together. We now keep working together very well and are enjoying this phase.
- Oversubscribe. I had a significant equity gap which I then closed within six weeks, and when I was doing that I went for a "waiting list" approach and in some cases asked investors to invest less than they would have liked, in order to have some reserve equity in case I needed it - or for follow-on acquisitions. This gives a lot of peace of mind as you are nearing the closing, and some FOMO helps to sharpen minds.
- Get good partners. In my case, I joined the Novastone Entrepreneurship through Acquisition program, as I had management experience but no transaction experience. I preferred to have them with me, and their M&A team and company leadership is first-class. Also, I decided to go with Luis Carvajal as my lawyer - a highly experienced transaction and corporate lawyer who works very closely to me until now, and who would not delegate the work to some more junior staff, as larger Firms may do. I went through the traditional model of having investors back my search in order for us to get to know each other, and especially Matthias Knaur from Pepper Oaks Capital and Juan Luis Manaute from ATIUD Capital Center became very close throughout the search phase and are now on my Board of Directors. I have a good network of other searchers in different phases of their projects, and we help each other. My interns were first class. I paid them a decent salary and selected the best, and it paid off. Thank you all for supporting me!
- Behave like an owner, not like an employee. Even if you may feel that you are asking for a lot of money from other people with more experience, be aware that you are the critical resource in this asset class. There are plenty of opportunities, there is plenty of equity and even debt, but there are simply not enough qualified entrepreneurs who can bring them together successfully. So while you need to be respectful to the owners who built a great company, and while you need to listen carefully to the advice of your investors, who are mostly more experienced than you, you are still the one person who will make it happen. Listen to different points of view, then decide yourself, communicate your decision and the rationale clearly, and execute. If you start behaving like an employee in a multinational company who will ask its investment committee for permission for everything, it will show and people will lose confidence. You are in charge and you need to be determined to pull through - not just the acquisition, but especially the value creation that comes afterwards.
Wishing you all the best of luck as you progress on your own journeys. I hope to report back to this platform upon exit in a few years.