SELF FUNDED ACQUISITION: A FEW THINGS I LEARNED
In September, Blacktail Capital made its first acquisition. It was a wild ride and I’ll share some details plus what I have learned in my first few weeks as owner in the hopes that this is beneficial to other people searching. I did a self funded search that was geographically focused in the Seattle area and found my deal through a broker. I launched my search in March while finishing the second year of my MBA at Tepper. The previous owner and I signed the LOI in May and closed on the acquisition in September. Due diligence was a hectic time due to a European vacation we booked way in advance (I had no idea I would be under LOI at the time) and the fact that I had to drive all my crap 2,500 miles across the country to our new home in Seattle. However, it all worked out. Whether it was calls discussing statements of cash flows from a tent in the Badlands or going over SBA loan structures with Lisa Forrest from Live Oak on the highway somewhere in Montana or Idaho, I had a good team around me helping me get this across the finish line. Some of the lessons I have learned are below. If people want more of the search story just let me know. I would be happy to put it up at some point.
1. You need a team even if you are a self funded solo searcher. Even if you are a very independent person like myself you will need a team to pull this off well. Find the people you like working with for banking, accounting and legal. Get your insurance reviewed. Even if you are capable of handling all of this (and very few are) it will take too much time away from the things you have to handle during the acquisition and due diligence phase. There are so many moving pieces that you need people on different aspects of the deal. Find those key people that can quarterback these different aspects as well as make introductions or referrals where needed.
a. I worked with Lisa Forrest and Live Oak for my banking. This was one of the best decisions I made in my search. I got her involved at the beginning of my search process (before any deals) so I was ready to roll with her team as soon as I had my LOI. This made sure that funding did not hold up the deal in any way.
b. Keil Larson was my attorney and handled the legal aspects of the deal. He was absolutely crucial to the close and handled everything perfectly. He understood what I needed for the size and scope of my deal and coached me through the process while answering all of my questions in a manner that was easy to grasp. He also did this all within my budget. I could not ask for a better legal lead and will use him for anything I have going forward.
c. August Felker and Oberle did my insurance review and helped me place my property and casualty insurance for my new company. This is a great team top to bottom. He is really solid and has surrounded himself with solid people as well.
2. Mentors. Talk to people who have done this. I was fortunate that I had 2 professors from my MBA program who were successful searchers that acted as my mentors throughout the whole process. In the few days leading up to the deal they were very helpful in calming my nerves. (Everybody gets nervous close to close and that is ok!) We also prepped and talked over my introduction to the employees which made me much more comfortable the next morning when I went to meet everyone.
3. You will have Oh $&*# moments. That four letter word is interchangeable depending on the level of surprise. These will happen. It’s normal. It is a pain in the ass but it is normal. In the two weeks leading up to close I had a couple moments where something came through wrong or got delayed and I thought closing may be pushed back. It worked out due to reliance on my team where I could and a calm head when it was something I had to do. But it still made my stomach drop. You just have to be prepared for these things to happen.
4. Resilience is crucial. I personally believe it is one of the most important characteristics of a searching no matter which search route you choose. Things will go wrong and you have to pick yourself up. Deals will fall through. Companies you fall in love with will have some flaw that you find later. Somebody will be an asshole to you. Each time you just pick up and keep going. You find your ways to relieve the stress in a HEALTHY way. Disconnect when you are off hours so that you can reset and get ready to hit it again the next morning. Because when you get to the end it is all worth it.
5. Your Significant Other. If you don’t have one, store this away for future. If you do, always communicate what’s going on with them and try to prepare them for the ups and downs of this process. There are days where search sucks and it pisses you off. There are days you feel like a rockstar. I talked about this with my fiance extensively beforehand and she helped me keep on the level, especially in the hectic weeks before close and exhausting first few days/weeks as owner.
6. There is a lot you didn’t learn in school. Most MBA programs are focused on the larger companies that many MBAs go to work for after they graduate. There is a massive difference between the workings of a 30 person company and a 3,000 or 30,000 person company. Keep your ears open and learn what you can. You don’t know all of it. Learn from the previous owner as they have been at it for a long time most likely. Hopefully you have a good relationship with them and can ask them questions where needed and get to understand the little things that can have a huge impact on your particular small business. There has already been many little things that I would have missed that can affect the bottom line had I not learned them from the previous owner.
7. Do it. If you feel that this is the right path for you, go for it. It is hard to find the perfect time for anything and many that wait never get to it. My advice is to go for it. When I launched my actual search phase I was finishing my last year of my MBA, selling a house, settling my mother’s estate and commuting back and forth every weekend 6 hours each way to see my fiance. All while searching from the other side of the country. During due diligence and closing we were planning a wedding and moving cross country. There were weeks where it felt like too much but the end result has been absolutely worth it.
I hope this is beneficial to anyone who is considering searching or currently in the process.