How to Invest in SMBs (Without Buying One Yourself)
* How to build an SMB investing strategy * Ways to generate deal flow * What to look for during diligence * What life
M&A
289 posts
Geographical multiple arbitrage
An interesting arbitrage: Buy a non-US company, move it to the US, and exit as a US company (higher
Seasonality of M&A
Seasonality of lower-middle market M&A (USA): Deal activity reflects people's personal calendars. Almost nobody works
PE vs. Franchisees
Didn't PE despise franchisees? I recollect 10yrs ago that nobody wanted to touch franchisees (no autonomy, top-line
CEO threatened to blow up deal
$112m exit, hugely successful deal: I was just chatting with one of the board members. As the big sale got
Inbound Dealflow = Holy Grail
Deal flow is the most important thing when you're a dealmaker. Getting inbounds is the holy grail. Generating
Send a test wire
Send a test wire. If you're wiring a significant sum for an investment or distribution, send $5.00
Always explain stock options
Stock options. Most SMB business owners or employees lack a college degree in financial instruments, so assume they know nothing
EQ is the most important trait
Soft skills are the most important for an independent sponsor, according to Kevin Wong at Lang Partners, a Dallas-based
"You never keep 100% of the EBITDA that you buy."
Alan and Dana bluntly state that you never keep 100% of the EBITDA that you buy. Execution always leaks value.
Family Offices + Independent Sponsors = Strong Match
James warns that when 1 LP represents 80-90% of the capital in a deal, the sponsor is no longer
Geography is no longer an edge or hidden opportunity
A former attorney, Mike Healy founded Gardner Standard in 2010. His initial focus was on overlooked geographies, such as western
Independent sponsors are disciplined on valuation
The latest Axial Independent Sponsor Report shows strong pricing discipline, with the vast majority of deals completed below 7x EBITDA,
Good legal hygiene
If you're in a legally sensitive situation: limit written communication. That's my # 1 advice for legal
Do a sell-side QoE when you exit
Do a sell-side QoE when you exit. Benefits: • Higher valuation (see chart below from GF Data). • You can include
Build board = Build value
The best way to add value in the straddle period between signing the LOI and closing the deal: build a
19,000 PE firms; you need to stand out
There are 19,000 private equity firms in America, all trying to buy businesses. I cannot overstate the value &
"Our buyer has spent $2.5m on DD so far."
"Our buyer has spent $2.5m on DD so far." If you're exiting, the buyer'
Be tactful in diligence
The “buyers have every right to dig deep” statement rings true, but lacks nuance. On large deals, institutional investors will
How to hire A+ players
How do you hire true A+ players, and not settle for “good enough”? When hiring, it’s common to fall
$50m Rollup vs. $2.5m LBO
Just met a first-time searcher with a $2.5m deal under LOI at below 4x. Option A: The Standard
Raise your prices, now
Happy New Year! 🎆 Start 2026 by raising your prices. Raising prices is the fastest way to increase your profits. Yet
When your partner dies
Kearney’s boss and senior partner died suddenly in an accident in 2018. At the time, the firm owned 4
Ensuring 5-year exit timeframe
How can LPs be sure that independent sponsors will actually exit in ~5 years? 1) debt maturity. Most deals have
