Value creation

Most of the return is made after closing, not at it.

Buying well matters. But across seven realized exits, the largest part of the return came from three things: putting a professional operator in the chair, acquiring smaller competitors, and building the reporting a founder-owned business never needed. None of that is glamorous and all of it is repeatable.

Leadership

We install a chief executive, and we do it early

This is the part of our model owners find hardest, so it is worth being exact about how it works rather than leaving it to be discovered.

Who

Either one of our operating partners, or an external chief executive identified during diligence and hired before closing. In eleven of our platforms the operating partner took the role directly.

When

Introduced to the organization in the week of closing. A gap between closing and new leadership is where good people start updating their CVs.

The chair

Held by the deal partner. Monthly board meetings for the first year, quarterly after that, with the seller present as a director where he has rolled equity.

The outgoing owner

A paid consulting agreement, typically twelve to twenty-four months, covering customer relationships and institutional knowledge. Defined scope, defined end date, agreed before closing.

The existing team

Second-layer managers usually stay and are frequently promoted. We have no interest in buying a company and losing the four people who know how it actually runs.

The first hundred days

What we do before we change anything

The instinct after closing is to act. In our experience the first sixty days are better spent finding out what is actually true, because a founder-owned business rarely measures the things a buyer assumed it did.

Days 1–10

People first

The new chief executive meets every employee in groups of fifteen or fewer. No slide deck, no strategy. The purpose is that everyone hears what happened from a person rather than a rumour.

Led byNew CEO and deal partner

Days 1–30

Customers called

The twenty largest customers are called personally, with the outgoing owner on the line. A quiet ownership change is how accounts get lost.

Led byNew CEO with the seller

Days 15–60

Reporting built

Monthly close inside ten days, gross margin by customer and by job, and a working capital view. Most companies at this size have never had any of it, and it changes what management can see.

Led byErik Haugen, Operating Partner, Finance

Days 30–90

Pricing examined

Once margin by customer is visible, the loss-making accounts usually become obvious. In four of our platforms this alone moved EBITDA by more than a point before anything else was done.

Led byNew CEO and the finance team

Days 60–100

Add-on pipeline opened

The list of local competitors is usually already in the seller's head. We write it down and start the conversations, most of which take two to three years to mature.

Led byMarcus Okafor, Origination

Add-on acquisitions

Buying the competitor down the road

Sixteen of our twenty-three acquisitions have been add-ons to an existing platform. It is the most reliable value creation available in fragmented markets, and it is slow, unglamorous work.

Smaller and faster

Typically $1M to $4M of EBITDA and six weeks from letter of intent to closing, because the diligence sits inside a business that already knows the market.

Bought at lower multiples

A smaller competitor prices below a platform. The arithmetic of acquiring at a lower multiple into a business valued at a higher one is the least exciting and most dependable part of this model.

Integrated deliberately

One system, one back office, one brand where it helps. Angela Reyes leads integration and has done it fourteen times before joining us.

Sourced locally

The best add-on targets are known to the people already working in the business. The owner we bought from is often the one who makes the introduction.