Speaker 1 00:00:05 Hey there, thoughtful listener. Are you looking for introductions to partners, investors, influencers and clients? Well, I've had private conversations with over 2000 leaders asking them where their best business comes from. I've got a free video you can watch with no opt in required, where I'll share the exact steps necessary to be 100% inbound in your industry over the next 6 to 8 months, with no spam, no ads, and no sales. What I teach has worked for me for over 15 years and has helped me create eight figures in revenue for my own companies. Just head to up my influence comm and watch my free class on how to create endless high ticket sales appointments. Also, don't forget the thoughtful entrepreneur is always looking for great guests. Go to up my influence. Com and click on podcast. I'd love to have you. With us right now it's Scott weevil. Scott, you are an mergers and acquisition advisor, and you are the managing director of the Sierra Pacific Partners. You found on the web at Sierra Pacific partners.com.

Speaker 1 00:01:19 Scott, it's great to have you.

Speaker 2 00:01:21 Great to be here. Josh, thank you so much for having me. And I know Sierra Pacific Partners is a mouthful, so no worries there.

Speaker 1 00:01:28 Hey. Excellent, excellent. Well, well tell us a bit about your work and kind of the space you're in and what you do.

Speaker 2 00:01:33 Yeah for sure. So I'm a lower middle market investment banker was here at Pacific Partners. And we're mainly focused on sell side mergers and acquisitions or M&A advisory services. Basically I'm like a real estate agent, but I sell businesses. But rather than buildings, we sell businesses across the United States. And in most industries, we're largely focused on that lower middle market space, which is probably companies doing from around 1 to $15 million in EBITDA, something like 5 to $100 million in purchase price.

Speaker 1 00:02:04 Wow. So give us, since this is what you do, you know, and here we are listening. And and we may only hear occasional headlines here and there. What is been going on in the M&A world? What's hot? What's not hot right now.

Speaker 1 00:02:20 Give us just a state of the union.

Speaker 2 00:02:22 Yeah for sure. I mean, I think coming into 2024, folks had very, very high hopes for the first half, which maybe did not materialize, at least I think, from the first quarter. But I think what you have to realize is a lot of the stuff that you'll read or see about in the news is concerned with mega deals, Wall Street style, you know, Wall Street size public company transactions. And even higher up in the middle market, you know, 500 to $1 billion transactions or pretty large. I think what we've been seeing down market, in the lower middle market has been pretty robust. And in the Main Street market, too, I think there's been not a lot of hesitation there. I think there were interest rate concerns and things like that with individual purchasers last year. I think folks have largely gotten accustomed to the to the what are historically normal rates. But I think we're seeing robust activity. And anecdotally, I mean, it's it's early for that.

Speaker 2 00:03:14 But we started seeing a bunch of buyer and seller interest as soon as we got to July. And I don't necessarily think that that's any kind of economic thing. I think it's just folks thinking, hey, if I want to do something here in 2024, I better get started.

Speaker 1 00:03:30 Yeah. And so what types of deals do you typically oversee or, you know, and maybe how it's structured or I mean, these just kind of complete buyouts or tell me I'm, I'm speaking about my pay grade. I don't know what I'm talking about.

Speaker 2 00:03:44 No, no, no problem at all. If I start, if I start talking in jargon, just stop me. this is what I do every day. So sometimes I can use, terms that may make sense to me, but not you and your audience. That's definitely not my goal. But generally we are looking at buyout transactions. I am not a capital raiser, which means I don't try to go out and raise, you know, venture financing and things like that, or particularly minority recapitalization.

Speaker 2 00:04:08 Of course, sometimes we go out to do a 100% sale transaction, and instead we get a private equity firm that wants to buy 51%. Things like that. So we definitely do with the those deals. But by by and large, our goal is to sell the company as a whole.

Speaker 1 00:04:23 Yeah. any particular industries that you're, you're particularly strong in?

Speaker 2 00:04:28 No, we're generally industry agnostic. You know, I think right now we've sold a SaaS company this year. I've sold a group of restaurants this year. I've got a specialty contractor, construction contractor in the pipeline. We've got a health care technology company in the pipeline. So sort of all over the place, which, you know, it frankly, it keeps it more interesting for me, for us to have varied, very clients. But we also see things that happen in one industry and can sort of cross apply them to deals in another industry, sometimes as unique solutions. So that's a little bit of the benefit there.

Speaker 1 00:04:59 Yeah. well Scott, let's let's kind of advocate now for our friend that's listening.

Speaker 1 00:05:05 And they might be on one or the other side of the equation. so I always love getting this advice. So for existing business owners and leaders, and maybe they'd like an exit in the next 3 to 5 years or so. What are some of those really important things that you would recommend right now to increase overall valuation?

Speaker 2 00:05:29 Yeah, for sure. I mean, generally speaking, valuation tends to be a function of a multiple times EBITDA. That's grossly simplifying it. But let's say that that's the case usually that multiple though it depends upon the size of your company. You know, a $10 million EBITDA company is going to be perceived as less risky than a $1 million EBITDA in command, a higher multiple. But really where a lot of the action happens is within the range. So maybe you have a $10 million company and we pull up comparable transactions and see that that range is 4.2 to 6.8, eight, right? That's a huge range. So where are you located in that range? And that's where a lot of qualitative factors come into play.

Speaker 2 00:06:10 So things like your financials how clean are they. How much risk does the seller perceive in your financials. If they think that your financials are, you know, somewhat can't fully be trusted. They're going to price lower on that range. Similarly, how dependent is the business upon you as the owner? The more it's dependent upon you? If you're not staying involved post-closing, the more risk they're going to perceive. So with those qualitative factors, you can really start to influence that range. Now obviously on the other side, if you can grow, you know, your revenue and your profit, your EBITDA passed certain thresholds to that can obviously influence the multiple, but that tends to be a little bit more difficult to do, particularly within a short window.

Speaker 1 00:06:49 Yeah. and on the other side, you know, I've talked with some, guests who have talked about, you know, if your goal is growth, acquisitions can be such a great way to achieve some of that, some of those goals. I know having gone to the Inc. 5000 conference a few times, there are a lot of growth through acquisition companies there.

Speaker 2 00:07:15 For sure. I mean, that's one of the main theses that you see for M&A, right, is an organic revenue growth. And we see that all the time. And basically a lot of our sellers, because of where they are in the market, they're going to be add on acquisition. So in other words, you have a landscaping company in South Florida that does 5 million in revenue or something like that. You're likely going to be bought by another landscaping company, maybe from North Florida, that wants to expand into the Miami area. So we see a ton of that and what they're really trying to do. Like I said, the more EBITDA you can drive, the bigger the bigger your multiple. So if you can put together five businesses, each doing 5 million in EBITDA into one business that does 25, even without extra growth, you're multiples going to be much, much higher. So that's the play that we're seeing a lot in Multiple arbitrage.

Speaker 1 00:08:05 Yeah. and so tell me a little bit about, Sierra Pacific, yourself.

Speaker 1 00:08:11 So, you know, in this space, I think it can be sometimes daunting or confusing. you know, you know, you know, in terms of, like, who to work with. So I guess, what would be the strength of partnering with Sierra Pacific if you're looking to make an exit eventually?

Speaker 2 00:08:30 Yeah. Like you said, we generally focuses on businesses with above 5 million in revenue, five to, you know, whatever, 150, something like that. So our specialty is sort of past the business broker market for Main Street transactions. But we're below where true investment bankers, act and that sort of a little bit of a no man's land. If you've got a deal depending on the bank, that's between 500 and, maybe on the low end 50 million, you can get investment bankers interested. And then most business brokers sort of top out around 5 million. So our goal is was to is to fill that gap. where we're pretty experienced in this. I've been in M&A in some capacity for my whole career.

Speaker 2 00:09:10 I started as an M&A lawyer on Wall Street, and got into this from that. we're a little bit unique in the middle market of the space and that we only charge success fee based pricing. That's pretty typical for business brokers. But once you move up market, most bankers will charge monthly retainers, marketing fees, startup fees and stuff like that. We tend we tend not to do that if our sellers are committed to selling, we take just a few engagements on at a time so we can give our sellers a lot of focus. I think that's a little bit different. and then I think one thing that that is interesting is I do have, Finra securities license so we can do any transaction anywhere in the country, which is not the case for most business brokers. You know, you and I were talking about partial sales earlier, you know, somewhat questionable whether, the business broker license may cover that. So that's something we can absolutely do with the investment banking license.

Speaker 1 00:10:02 Yeah. and then Scott, at what stage of, kind of the business, life cycle, should someone begin having a conversation with you or, if they say, look, I'm nowhere being ready yet, but I have a goal.

Speaker 1 00:10:20 And that goal is, you know, such and such date when I turn 55, you know, whatever. You know, it's like, whatever their goal may be, when should they start having conversations with you? And. And what does this preliminary conversation sound like?

Speaker 2 00:10:34 Yeah, I think as early as possible. And I talk to a lot of owners about that. And I want to be clear that I am and I don't mean this in a bad sense, but I'm a transactional person. I like doing deals. That's my professional focus. So if you call me five years early, I am more than happy to educate you about the process and what you can anticipate and what the current levels are sort of in your industry that you can pull on to get to that valuation you want to get. But most likely I'm going to refer you out to somebody called an exit coach who's actually going to go much, much deeper into that and hold you accountable for actually maximizing whatever those factors are that we, you know, that we identify.

Speaker 2 00:11:15 And then, you know, 3 to 5 years from that point or six months, however long you have, then we'll circle back up and we'll talk about a transaction.

Speaker 1 00:11:23 Yeah, yeah. any trends? over the next, you know, 6 to 12 months, 18, 24 months that, you know, the folks might want to keep an eye on in your world.

Speaker 2 00:11:35 I think overall, it feels like for the last couple of years, folks have been waiting for the economy to, quote unquote, stabilize. Yeah. and I think I think that happened. And folks were generally, generally thinking that the economy was stable. But now, you know, we had a stock market drop yesterday, here at the time we're talking and we've got the elections coming up, which are always a wild card. So we're sort of back in that period of instability. But I would say, generally speaking, I mean even yesterday's stock market drop, we're still the stock market is still very, very strong on absolute terms.

Speaker 2 00:12:10 So I think the market is going to continue to be strong. I don't want to sound like, you know, a broken record. You heard us all saying this at the end of last year. But the truth is these private equity players, they have so much overhang, so much committed capital that they have not deployed. They're going to have to start doing deals. And one thing I definitely want to mention is in the lower middle market, private equity is what fuels transactions. Historically, where we've been, these companies are too big for individuals, but too small for really big strategic players to be interested in. And private equity has really stepped in and fill that void. And I think that's going to continue even more and more as we see that those somewhat larger deals are harder to get done. We have a lot of PE influence in the lower middle market these days.

Speaker 1 00:12:58 last question I wanted to ask you, I'm sure you have seen deals that have fallen apart. How can one approach a deal? so that it doesn't fall apart?

Speaker 2 00:13:10 Yeah.

Speaker 2 00:13:10 I mean, we see deals fall apart all the time. Candidly, that's just part of the process. Nobody likes it. But dead deals are part of the game. I think the more you can iron out up front, the better. I think identifying, key goal or No-Go issues early on versus spending time and money, you know, money on lawyers, money on financial due diligence is very, very helpful. The more you have an understanding upfront, the better. And then the next thing I would say is speed. And and speed is on both ends. I've definitely had sellers get fatigued by never ending buyer diligence, which we do see happening. If there's not competition for a deal, buyers will take a long time to get to closing in some instances. But similarly on the sell side, you got to realize as a seller, you know, I'll take the reins, but this is going to be a pretty full time job for you is the CEO, CFO, and we got to get those diligence responses back very, very quickly because we don't want the buyer to get deal fatigue.

Speaker 1 00:14:08 Yeah. All right. Scott. Your website is Sierra Pacific Partners. Com. You have a really good, knowledge center here. Do you mind maybe sharing some resources that you have available for folks and then kind of what next steps might look like?

Speaker 2 00:14:24 Yeah. For sure. So, you know, one of the things that we talk about in those early conversations, as you mentioned, is what the process looks like and what the timing is. And we for sure have in our knowledge center on the website, a whole series of videos. I think there are 12 that basically breaks down the typical limited auction, as we call it M&A sales process. We also have lots of information on valuing your business and timing to get to sale, things like that that can really give an owner, you know, a few years in advance or even right now, if they're looking to make a sale, some visibility into what the process looks like.

Speaker 1 00:14:57 Excellent. The website Sierra Pacific partners.com. You can click on the white box that says let's talk.

Speaker 1 00:15:04 There's also you can click on Knowledge Center and there's a lot of really good resources there as well. So Scott managing director has been great having you Scott Weevil again, M&A advisor as well. Scott, thank you so much for the conversation.

Speaker 2 00:15:18 Yeah. Josh, absolutely glad to be here.

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