If you are building a business to sell, having an exit plan should be a critical component of your overall strategy. Depending on the kind of business you are building, deciding whether to hire a business broker or an M&A advisor could make the difference between getting a few hundred thousand (or million?) dollars extra or not.
There are significant differences between a typical business broker and an M&A advisor. In today’s episode, I’m joined by Chris Shipferling and Jason Sommerville; two of the partners at an M&A advisory firm that specializes in selling digitally-based businesses.
In our discussion, we talk through the differences between the services one can expect from a typical business broker, and that of a firm like theirs. As you will hear when you listen, the contrasts could results in a significant difference in the value of your company when you sell.
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Trent: Everybody. Welcome back to another episode of the Bright Ideas Podcast. As always, I am your host Trent Dyrsmid and I’m here to help you discover what is working in the world of e-commerce by shining a light on the tools, the tactics, and the strategies in use by today’s most successful eCommerce entrepreneurs. Now back in episode number 292 you heard how Kevin Sanderson is helping Amazon sellers to expand their sales into international markets and today we’re going to do something a little different. I’m joined by Chris Shipferling and his partner who will introduce themselves in just a moment. For the past seven years, they’ve been focused exclusively on high level consulting for multimillion dollar omni-channel digital native and Amazon based private label and reseller brands. Chris is especially adept at finding client companies that are poised for sale, guiding them through the initial steps and preparing to make them the best possible first impression.
Trent: Chris’ joy working closely with with owners throughout the process of selling their business, getting to know them on a personal level so that they can better assist them in realizing their goals. We’ll get to those fellows in just a moment. But first rather at first rather, today’s episode is brought to you by My FBA Prep. Are you an Amazon seller? Tired of prepping your products at home or the headache of running your own warehouse? My FBA Prep is a network of commercial prep centers with locations in every region of the country. For Amazon sellers, just like you and me, they will save you time and money when you ship them, rather ship into them and you will be working with real people who have experience inside of seller central checkout Prep Topia, their proprietary order tracking platform so you know where your inventory is and when it’s been sent into an Amazon fulfillment center.
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Chris: Thank you. Appreciate it. So Chris, who’s the handsome gentleman to your right. Uh, this is, uh, uh, this is one of the, uh, one of the other three partners here at a Global Wired Advisers, Jason Somerville. So I’ll let him introduce himself.
Jason: Hey, thank you for having us. Definitely. Um, yeah, as Chris said, I’m one of the partners here along with Chris and there’s two others that, uh, really we’re all founders of the firm. I am a, uh, I’m an investment banker. Long time a deal guy. I started out with a Bank of America and um, that actually ran capital markets for a hedge funds in Florida for a number of years, left the finance world for a little while. So a actually start and purchase a number of companies that I ultimately sold and then came back to finance. With our parents from Providian advisors and ultimately created Global Wired Advisors with Chris and our other partners.
Trent: All right. So as we discussed in a, in welcome Jason tag. Nice. Good to have you here. As Chris and I discussed, uh, in our pre-interview when, uh, when we first got in touch, I said, you know, Hey, I just, I just produced an episode with Mark of Quiet Light. And I said, you know, like why should we do another one? How is this going to be any different? So I am now a little bit wiser as to the difference, but for the audience who wasn’t privy to that conversation, um, either of you, what is the difference between a business broker, which Quiet Light is, and I’m mergers and acquisitions or M & A advisor, which is what you guys are.
Chris: yeah, I’ll start that and I’ll probably toss it over to you to fill in some blanks. We talk about that a lot, you know, and you and I had that conversation on the phone and, and went into a lot of depth about what that really means. And you know, the, the biggest difference I would say is, you know, an M and A professional advisor spent their careers as Jason just outlined, um, in capital markets, really understanding how to take a business, how to take a business to market that is, you know, a larger enterprise type company. Working with you know, complex entities. Um, it really it really understanding of a much larger difference in how the process really works. And so for instance, a traditional business broker will list your business for sale through a series of different listing agencies and we’ll put as much work as they need to to get your business prepped for sale and then in fact effectively field calls or feel interest and pass along that interest to, to the seller of the business.
Chris: So really they’re just working as a facilitator or enlisting agent versus someone who an M and A professional advisor is going to do a lot of digging into your company, understanding your business better than you and going out and strategically also trying to find great matches and great fits versus just letting everybody come to you per se. I would say that the, the process specifically with us, um, is a lot different. It’s going to feel and look a lot more like an investment banking process. If Goldman Sachs decided to come down market and take your business to market and for sale, it’s going to look a lot like what they do, but for enterprise type companies. What else would you fill in Jason, as far as the differences?
Jason: Well, I think, I think the word strategic comes to mind. I think as being a real driver. When we look at the opportunity to help a client reach their strategic goals through exiting business, ultimately selling that asset, as Chris sort of described what I’ll call a rather quick process, fairly limited, you know, just kind of listed as though you would list a home for sale, kind of very similar type of approach. Whereas we’re going to take a much more strategic view which requires understanding the business at a much deeper level. It requires thinking through the right type of fit and specifically seeking out that type of potential acquirer. So it’s very proactive I’d say as well. go ahead.
Trent: So I really like to dumb things down. So I’m going to, I’m going to do that if I may. My understanding of what you guys do is there’s two types of buyers in the marketplace. There’s a financial buyer and there’s a strategic buyer. A financial buyer is someone who’s looking at that business. And I think maybe a lot of first time buyers might be a financial buyer. They’re looking at the business, they’re looking at the cashflow. And they’re thinking, Hey, is this art? Is the return on investment going to meet my goals? And a broker is probably very good at finding a financial buyer, a strategic buyer. On the other hand, there’s a whole lot more to the acquisition than just what they’re gonna the impact on the financial statements. So if I’m understanding what you’re explaining, right, if I want to find a strategic buyer for my company, like for example, at some point in time I’ll sell my software company fluster and maybe I would get a lot more money for that company if I could find just the right strategic buyer that by bolting my business and what I built into their business, one in one now equals four instead of one in one equal league, maybe three. Have I got it right?
Jason: Yeah. I would say clothes. The only difference I would, I would throw out there was maybe a little difference in vocabulary. When we say financial buyer, what we typically mean are firms like private equity firms and firms, family offices, larger, really entities that were created solely to effectively manage a pool of capital. Go out like wire, uh, different, you know, different companies in order to achieve a return on that capital. So I would actually put those types of financial buyers more in the category of what you described as a strategic buyer. I would put those really together. And then what I would say below that is I’m gonna use a hierarchy approach below that are what I would call either individual buyers or loosely formed pools of capital buyers. Or like I said, just operators, which are, are a little bit, little bit different and typically synonymous with smaller transactions, let’s say transactions that are under $5 million, that tends to be synonymous there.
Jason: Um, and so those individual kind of buyers as well as those loosely formed pools of capital search funds. Another, again, a name that we give those sometimes, sometimes those are a little more transactional in terms of the approach. It’s a little more of, Hey, I only pay a certain multiple. I’m only looking for a certain price. And I’m really not going to think about this very strategically. I’m really going to think about this solely as I’ve decided that I’m looking for a business that looks like X the most. I’m willing to pay as Y and I’m just going to go out there and I’m going to look at hundreds and hundreds of businesses until I run across one that meets those fairly narrow standards.
Trent: It does. So another follow on question to that. Let’s say that I am a fellow that I interviewed on my show a couple episodes ago, runs elements, brands, his name is Bill. And so Bill has been making individual acquisitions and building a portfolio of these companies at some point in time if Bill, so he’s been buying through brokers for the most part. But at some point in time, if he wanted to sell his entire business, which is now a portfolio of brands, I’m assuming he’d be probably much better off to deal with an M&A advisor on the exit than a broker.
Jason: You’re correct. And I actually, I don’t know if you know, we know Bill,a Charlotte guy. So you know, it’s a, it’s a small world here even though it’s not a terribly small city. So we know bit, we know elements very well. Um, and let me, let me tell you a bit of a secret about, well not, it’s really not about them. It’s really about a lot of buyers in the market. One of the reasons that we didn’t really describe why we decided to create our firm and create our mission is that we felt like owners of businesses that are, we use, we use $50 million is kind of a rough enterprise value line. Owners of businesses worth everywhere from zero to $50 million have historically been very underserved in terms of their intermediary services that are available in the market by primarily business brokers. And so one of the byproducts of the market that this kind of smaller company market being very, we’ll call it heavy in the business broker type intermediary is that companies sell cheap. They sell for really less than what they’re really worth.
Trent: Bill tells me. Absolutely.
Jason: And so if your Bill, um, what you’re going to look for is companies that are under-priced. Now this is something else I’ll tell you about Bill. As you know, Bill’s a very smart guy. He understands the big picture. He’s not just going to go and purchase any company that’s under-priced. He’s going to go buy a company that he thinks is the right fit for what they do. It’s the right kind of fit for bigger picture where they’re trying to go. And granted he’d rather pay, he’d always rather pay less for it. But it’s up to guys like us to get them to pay more and to get, and the way we do that is by doing the work to show him and others like him how this really fits in terms of their kind of their mission, their goal, their portfolio, and why it would be worth to them, what we are asking them to pay.
Trent: So all of this sounds very big business in wall street. And for my audience, I want to make sure that this interview remains relevant as well as interesting. So what’s the minimum size of a company that your firm would normally would work with?
Chris: We typically, our threshold is about a million in enterprise value. Our sweet spot is five to 25 and enterprise value. And typically what we find just to dumb it down, um, what we find is that while we take a multiple of cashflow or seller discretionary earnings or adjusted EBITDA, we find that the valuation, just depending on the tip, depending on the type of business, obviously SAS as you know, as much different, but depending on the type of a category or consumer products company, the enterprise value tends to kind of live around where the revenue a little bit higher or a little bit lower. Now what we have discovered is that our sweet spot, we knew this going in our sweet spots, really that five to 25 plus enterprise value. We do really well because we’re able to then take your company to a much different type of buyer, a much different type of cool. And we do a really good job of explaining is just just what Jason said to that buyer network of sophisticated capital. This is why this fist, this is why this is a really good company and here’s how, here’s how this is going to grow and here’s what you can potentially do with it. We’re really good at that. So.
Trent: So what impact is that gonna have on the valuation multiple versus going down the business broker road and getting 2.8 to 3.2 or 3.5 whatever?
Chris: Oh a lot. You know, and Jason can fill in these blanks cause he’s one of our deal runner partners. But you know, again, when you’re in that under a million, even a million to 3 million, it can tend to be a little difficult to get that buyer network in that buyer pool to understand as Jason described the value of the business going forward. You know as you get up and you start to talk to sophisticated capital, you know, they’re there, they’re okay paying larger multiples as long as it fits criteria and they understand the longterm strategy. Now I’ll let you fill in the blanks on that.
Jason: Yeah, I think the short answer is there’s a lot of variables that will ultimately affect it, but if we just take size as being, let’s say one of the primary ones, the larger the deal, the more impactful the process. Uh, I would say so if you’re talking about on a million dollar deal, there’s one we just closed that was a million and a half and that actually business was taken out to market a year and a half or so ago. It was a little smaller then, but it was also run through a traditional broker process and bids came in, they were all around to seven to eight times cash flow and we just closed it at close to four.
Jason: And so that’s an example of kind of a little bit on the smaller end of what we would typically work for or work with upwards of. As soon as you start getting over that eight to $10 million number, that’s when you can start stretching into what I’ll call the low end of private equity multiples, which right now private equity, average multiples are in kind of the eight plus range cash flow. You can start stretching in and getting closer to that six, seven or so, you know, times, I’ll give you another example. We closed a deal a couple months ago that had about a million dollars of cash flow and we closed it at a seven and a half multiple.
Trent: Yeah. And to give, to give some color to that, a friend of mine, a business friend of mine from Vancouver, my hometown, his name is Charles Chang and these days he runs a company called Lira Growth. He sold his startup for about 500 million, so he was pretty well capitalized after that, as you might imagine. And he started Lira Growth and he starts to, he’s been acquiring direct to consumer brands. And when I was early on after my interview with bill, I called Charles because I had a hard look at, well, you know, maybe I should build B building a portfolio as well, and ultimately decided I’d rather build a software company. But you know, when I was explaining to Charles what I could buy these businesses for, he was like at three, three X. He was floored. He said, try and he says, when I find a company, you know, doing five, six, 7 million a year and it, and it ticks the tick boxes that I think it can get to 100 million. He says, I’ll pay the three to five X revenue for that company. So he says, if you’re buying them, if you buy the right companies, you’re going to make 10 X. Just flipping it to me, assuming that it ticks all the tick boxes and I, and he thinks it could get to $100 million company, which is not every company, obviously.
Jason: Right. Yeah. So, you know, as you stretch upward the process tends to be more and more impactful. The distance between let’s say a broker process and something a little more robust. Like we, uh, we do, the Delta starts getting larger.
Chris: That’s right.
Trent: So how does your background as an M&A advisor, generally differ from that of a business broker and for people who are running, say a sub $3 million business, why should they care about that?
Chris: Great question. I’ll let you take that.
Jason: Yeah. Well I think, you know, typically an M&A advisor and that’s the, that’s the case with our firm. Uh, we’ll have had, you know, a number of years of, of what we would call real wall street level experience working with either of large investment bank or a large middle market bank. Uh, so, you know, a large investment bank, for example, I started my career with Bank of America. So all the clients we worked with were fortune 500 clients. All the transactions that we did were typically $1 billion or higher, um, basically the same effectively sized deals when I moved on and ran capital markets for the hedge fund funding in Miami. Um, usually they’re going to have kind of a great foundation that is, you know, has been built in large deal making large complex transactions. And what that does is that actually allows you to bring a level of sophistication, knowledge, creativity, etc to any deal process, whether that, you know, $2 million or $2 billion. Ironically, a lot of the parts of the transaction are very much the same. And the other thing about running deals is kind of what we use. You know, the phrase we use whenever you’re in kind of the merger and acquisition business, every transaction has bumps in the road and they, they’re always gonna and there’s always many bumps in the road.
Trent: That’s cause there’s people involved.
Jason: That’s right. Yeah. So if you have a lot of experience navigating very complex, very high stakes bumps in the road than that arms you with a great toolbox. Should you come, you know, up against bumps in the road, in this part of the market is right. It’s really, it’s a level of again, sophistication, complexity as well as against, let’s call them high stakes, billions and billions of dollars at stake for whether the deal closes or doesn’t close. It kind of creates and, and really hones your skills as a professional deal maker that you, that we bring to bear on, on transactions, um, that with all our clients. And when we started our firm, that was really the exact, kind of alluded to this earlier. Our mission was let’s, let’s take all of this great training that we have and all of this great experience and let’s bring it to bear on a part of the market that we feel is underserved.
Chris: That’s right.
Jason: And so that was, that was really the, the reason why we decided to do this.
Chris: And I would add to that real quick, you know, we’re all stakeholders in this firm and that’s also a big difference. We’re not 10 99 guys, right? So we’re all stakeholders. You’ve got four partners. And a support staff, you know, you don’t just have one person working on your deal, you have an entire team working on your deal. And that brings a lot of, it just brings a lot of knowledge and strategic thinking, really more creative thinking because again, when you’ve got every deal needs some problem solving, every single one. And I can’t tell you how many times we’ve sat around in our partners meetings and we’ve discussed how we’re going to approach every single, everybody’s involved in every deal. And so you just get a lot of experience, you get a lot of teamwork involved in running your deal. And I would say that’s a huge difference between an M&A advisor and an M&A advisor team and then also a broker.
Trent: So this all sounds very expensive. How do your fees compare to my broker?
Chris: Um, I’d say it’s very similar on the, on the success fees, almost parody. We, depending on the type of transaction, we may or may not charge a small upfront fee. And we only do that for a couple of reasons. Um, you know, when you’re working with larger enterprise companies or larger businesses, even in lower middle market, paying consultancy fees is, is not a problem. You know, they don’t have any issue. Smaller businesses tend to have an issue because obviously they tend to be more cash constrained. But again, we work with everybody. It’s all a case by case basis. And you know, we don’t do the middle market thing, right. So in middle market investment banks, they will charge, a very large upfront fee and a smaller success fee, lion’s share of where we’re going to make our money is when you’re going to make your money. So that’s really where it’s Perry. So we may have come across as we sound very expensive. The yes we give you, we are premium, there’s no doubt about that. And we believe there’s reason to be premium because we extrapolate more value and we know that we’re indexing higher multiples because in the end you make more money. Um, but at the same time that no one has ever complained about us being wall street or even just expensive period.
Trent: So after my conversation with Bill, I considered selling one of my companies and I also started to have a look at what was available in the marketplace to buy. And a couple of things stood out. So first off on the buy side, most of the deal books put together by small independent brokers around the US are absolutely horrible amateur hour. Extraordinary. And then when I looked at, because I knew some folks at Quite Light, I went through the process with them and, and got very, very close to listing one of my companies. And I have to say that their process was extraordinarily detailed and thorough and really came together with a hell of a deal book vastly superior to anything that I saw. So let’s put Quiet Light, cause I have an affinity for them, but I’m not being paid to say this, but at the very top of the broker pile in the world that I live in, um, from your perspective, and you can compare yourselves to the average broker or the Quiet Light, whatever way you’d like to answer the question. But how does the process differ with working with you guys to get my business sold versus either, you know, average broker Bob or maybe premium broker Quiet Light?
Jason: Sure. Uh, sure. Well, I mean we can start with the book, since you kind of mentioned that. Um, and we agree with you, we think that the marketing materials that are traditionally produced in the broker world are pretty terrible honestly. And there’s really no reason to even produce what typically it gets produced. It actually, I think it does more harm than good. It’s usually that bad, but and as much as you like Quiet Light, we would certainly very much put them in that broker category. I think that, you know, what you’re going to find in a typical, even let’s say a premium broker book, is you’re going to have a fairly brief description of some different key parts of the business. A lot of times you’ll have an interview questionnaire where really the seller is kind of sell, you know, kind of really creating their own book, um, by just simply answering question.
Jason: Which is fine. I think that at the end of the day, a seller when is going to end up speaking to buyers at some point. Um, they’re going to have to answer a lot of those questions at some point. But we take a much different view on the marketing materials. First of all, again, you’ve got to consider our backgrounds where marketing materials that are typically produced for large transactions, they’re lengthy, they’re robust, they’re, they, they look good. They’re structured with a kind of thought in mind of I’m going to take as potential counterparty potential buyer on a journey through this book. So you’ve got to think about how does it lay out. You want it to almost be, well, you do want it to be strategic in terms of their reading about this information first and this information second and this information third. And it’s not just created that order wasn’t created haphazardly.
Jason: It was done for a reason, right? Because we wanted to effectively tell a story. And at the very end, when you close the book, the moral of the story is you should buy this company right now. Um, that’s how we design them and approach them. Now as far as, you know, our books are typically anywhere from 40 to 80 pages. Um, you know, very, uh, heavily graphically designed. There’s a lot of numerical as well as pros information. There we spend a lot of time digging into opportunities for growth. Um, as well as describing the nuts and bolts of the company. I think.
Trent: Let me interrupt there. If I make, um, Jason the opportunities for growth. So in my limited experience in working with Quiet Light, they predominantly asked me where I thought the opportunities for growth. We’re in the deal books if you’ll call them that, that I looked at from other more much more amateur brokers. There was, you know, limited to no wordsmithing or copy or whatever available to explain that. When you’re working with one of your clients, are you relying on them to feed to you? Where are the opportunities for growth are or is that when you’re really leaning on your background and your research skills and so forth?
Jason: Well, I’ll start and then I’ll let Chris jump in because there’s a big part of that that Chris actually personally runs for our firm. So the short answer to your question is both, first of all, we obviously want a tremendous amount of input and opinion from the client. They know the business very well. They have a lot of very, um, you know, most of our clients have a lot of very specific ideas around ways you could grow the company. That usually is kind of where we would start. Um, normally I’d say it’s probably 30%, maybe 40% from the client and the rest would be from our activities. Now there’s two key parts to us kind of driving growth opportunity. Um, call it a discovery. First of the, especially for digitally native businesses, which is really kind of what we’re talking about here with Global Wire. We’re going to do a lot of technical diagnostic work on the business and I’ll let Chris go into that more detailed cause he runs that part of our firm and that diagnostic kind of getting under hood and digging into the nuts and bolts. The end result of that process is really opportunities from a tactical perspective to grow the business. It’s very tactical and very technical in terms of that part of the opportunity analysis.
Chris: Yeah, I would say, you know, one of the parts of our process before we take a business to market is um, you know, as Jason said, you know, we’re going to take all the input of what they’ve told us and what we’ve discovered, what we learned. And once we get under the hood, we’re having eyeballs that are highly experienced in both Amazon or digital marketing. Um, we have some creative resources as well. Branding resources. We deploy a lot of resources to effectively create a three year business plan for this company. Because if you’re going to get someone to believe what’s happening, it’s best to look at the windshield than the rear view.
Chris: Right. And so you got to get them to bite on where is this company going? And you want them to also pay for growth effectively. In order to achieve that, you’ve got to do a lot of leg work to really understand the business. And Oh, by the way, if someone’s calling that is, you know, whether a whole range, whether that’s personal capital or a very large private equity group, they’re going to start M-16 a bunch of questions your way. You want to be able to answer very intelligently without always having to default to the seller. And so that’s part of our process too, which is really understood when I, when I mentioned earlier understanding the business better than the owner. That’s part of what I meant, which is really taking that through your business plan and applying it to, you know, a financial plan, a marketing plan, a sales plan, and effectively it’s kind of like taking the yang and applying the yang, right?
Chris: It’s like, okay, you got this, but you’ve got to real, I need you to really focus here because that’s where the business is headed. So we look at the business holistically, we look at every single facet, whether they’re omni-channel and they’re selling and wholesale, you know, we understand wholesale very, very well. We also understand digital marketing extremely well and we understand Amazon very well to eBay, Walmart, et cetera. They’re a bit more, I call them stationary. Amazon got more of all of the moving parts because you have a lot more control. Their digital marketing, you have all the control because it’s run through your website, et cetera. So that’s a, that’s a good glimpse into our, our book and our process when we’re really talking about opportunity.
Jason: And the last thing I’ll add there, um, you know, just so I don’t want to go on and on on the topic, but I think it’s important. You know, when we’re marketing a company for a, for sale, our job is to, you know, sell the company, market the company, do the leg work while the client continues to focus on running the company and operating the business. So what we don’t want and what we don’t do is have everyone who shows interest in the business get on the phone with our clients. That’s another very key difference between what we do and what a typical broker will do because they don’t spend the time to really understand the business. They can’t answer most questions, certainly not tell it. And so they default to anyone who shows any real interest, Hey, let’s get, you know, let’s get the client on the phone, let him do all the work. And what happens is we hear this complaint over and over again from people that have worked with brokers. They’re like, I spent all my time on the phone with anybody who showed the least amount of interest. All of my, all my time is spent on the phone and my business starts to sell. So I think that’s another thing where when we talk about kind of a premium sort of process and service, we’re only going to get you involved if you’re the client owner. If we have spent a lot of time already with this potential buyer and it’s truly the appropriate time to now get them and you know, on the phone or potentially even in person with the client, it’s very important that, um, that that’s the way it goes in our view that otherwise they’re just, they’re doing the clients going our job for us and that’s not why they’re paying.
Trent: So how would you describe the differences between your network of buyers and a business brokers network of buyers?
Chris: That’s a great question.
Jason: Sure. I’ll start. I mean, typically a business broker is going to have a list of people that have, um, really kind of proactively worked with them in the past. So they’ve either got, you know, a link on their website or, or a fill in box on their website where they say, if you’re interested in buying a business, you’d give us your email address or had shown interest in previous deals, that sort of thing. Um, that, and that’s pretty much it as far as a, a business broker. Um, they’re just going to blast out any deal to that list and hope they, uh, that a few of them become interested. I think our, our network is really that pull us a whole lot more. The plus a whole lot more comes into the proactive and strategic approach. So not only have we worked with, you know, literally tens of thousands of counter parties, we also will reach out to counter parties we’ve never worked with before proactively.
Jason: If we believe that they’re a strong fit for a deal. And you say, well, how do you know? Well, it comes to two quick, easy reasons. Number one, good old fashioned research and number two, having the ability to recognize a potential fit when you see it. And that comes from experience. So let’s say that we have a new client that happened to be in a certain industry and let’s say that we have some counter parties that we’ve worked with in that industry before, but no, not all of them. Um, we’re going to, I mean, as part of every deal and preparing for marketing, we engage in a lot of research to go and identify all the, whether it’s financial as we kinda got into before or strategic that would be a good fit for the deal. And we’re going to target them very, very intentionally when we start tomorrow.
Chris: That’s right. And I wouldn’t, I would just couple that with, you know, we even have, um, uh, several deals that, you know, don’t even go, they don’t go. None of our deals go on our website. Um, and we have several deals that don’t go to any listing, uh, websites either. We just know that there’s just not a good fit there. But we know that this deal in particular because of its industry cause cause it’s size because we understand who it needs to get in front of. We know exactly who to market it to and we know the type of buyers that would bite at this particular deal. We actually have, we have a fairly large, uh, SAS company, um, that is going to market this week. And you won’t see it anywhere unless you are a strategic private equity or, um, you know, strategic SAS company looking for a roll up.
Trent: Got it. So when you say large SAS company these days, because so many of them are new, what’s the ARR without, you don’t have to name their name. Just curious.
Chris: Oh, the top of my head. I cannot, I cannot remember. So I did all the diagnostic work when I got out, you know, this was about four or five weeks ago, so I can get back to you on that. But there, you know, it’s typical SAS, everything’s just hockey sticking, right? Everything’s growing like a weed.
Trent: And for my own curiosity, um, what multiple revenue or SAS companies being sold for these days to strategic buyers?
Chris: Uh, well we, and that was, that was a lot, a lot of our research phase that we did. Um, actually starting earlier this year, um, it, I think, I think middle of the road median is like four or five, I believe. And then the really hot ones are getting about six or seven, uh, revenue.
Jason: Well, and some, certainly the larger as you get up to something kind of really larger, it’s going to go high and it’s going to go much better.
Trent: Yeah. And I looked up the, uh, we’ve been considering raising money at some point in the next maybe four or five months for my SAS. And just out of sheer curiosity, cause I’ve been funding it out of cashflow so far, I’m still sure out of sheer curiosity, I Googled, uh, SAS investor evaluation, some, some kind of phrase, I forgot exactly what it was to see. And I was amazed for companies that are in the seed phase, which is zero to 200 grand of ARR, which is where we’re at. Uh, the valuation range, pre money was four to 11 million.
Jason: Well, the other thing too, and, and I, we can do a whole podcast on, on this another time, but valuation in a growth or funding round is very different than valuation in a buyout.
Trent: Oh, I’m sure. I would imagine that the funding round, well, from what I’ve seen in what you’re saying, the valuation of the fund your ground, which strikes me as backwards, it seems higher than the valuation in the exit round.
Jason: Well, it depends on where you are in the psych. So like the earlier stage, you are the actually comparatively, the funding round oftentimes looks like a much higher valuation compared to what’s your revenue. So what happens is you can’t look at it purely as a multiple of revenue, apples to apples, um, for a funding round, especially in early a seed or a series, a type round to a full actual buyout. That’s where the compare. A lot of times people will compare those two things as though they’re apples to apples and they’re a little different.
Trent: Okay. And one other totally self-serving question, but maybe it will also assist and they want to anyone else who’s listening? I’m actually not interested in traditional venture capital for my business for a whole host of reasons. Um, I just don’t want sharks swimming around in my own swimming pool. And, uh, one of the fellows I interviewed on my SAS podcasted raise 5 million from family offices and he’s very very happy with the terms that he received. Is your organization at all assisting, uh, companies like me who are looking to raise money for family offices?
Jason: We are, we absolutely do. So we do, we do growth rounds. We do series a rounds. We do all of that. Now I would say the majority of our deal activity is buyouts. I’d say we’re probably about 2015, 20% would be in a race. Um, but we’re closing a $30 million raise next week. A series a, so it’s not, we’re a SAS company, but.
Trent: We’ll talk about that more off camera then. All right guys. Well thank you so much for coming and being on the show. For folks who want to know more information about your firm. It’ll be in the show notes, but if somebody is listening and they just can’t wait, what’s the URL? Company website.
Chris: Yep. So it’s a globalwiredadvisers.com or if you, for most of your audience, go to Google, um, it just type in global wired advisers will pop up and for the 4% we use being, they can do the same.
Trent: I can’t believe that people still use Bing.
Chris: I think you just buy a Chromebook and it comes with it. So by default you’ve got a lot of, maybe it’s a lot of geriatric users that are using it. I don’t know how to change the order. Google.
Trent: There you go. That makes sense. All right, gentlemen, thank you so much for being on the show.
Chris: Thank you.
Jason: Thank you.
Questions Asked During the Interview
[04:10] What is the difference between a business broker and an M&A advisor?
[06:30] What is the difference between a financial buyers and a strategic buyer?
[11:00] What market segment do you deal with?
[13:25] What is the minimum size of a company that you generally work with and why?
[14:50] How does your view of exit valuation compare to that of a business broker?
[18:50] How does the background of an M&A advisor generally differ from that of a business broker, and why should the seller of a sub $3M business care?
[22:39] How do the fees differ between working with an M&A advisor and a business broker?
[25:23] What is your process vs a broker process to sell a business?
[28:38] Who defines the portion of the deal book that speaks to opportunities for growth?
[34:00] How does your buyer network differ from that of a business broker?
Chris spent the first part of his career in various executive and C-Suite roles, having successfully led several Sales and Marketing teams for companies between $20-500 million. Now, he leverages his expertise to engage Client Companies and identify opportunities for growth. As the first point of contact for our clients, Chris also serves as the Head of Business Development for Global Wired Advisors, leveraging his background in sales and digital marketing to grow our brand. For the past seven years, he has focused exclusively on high-level consulting for multi-million-dollar omnichannel, digitally native, and Amazon-based private label and re-seller brands. Chris is especially adept at finding Client Companies that are poised for sale, guiding them through the initial steps, and preparing them to make the best possible first impression. Chris enjoys working closely with owners throughout the process of selling their business, getting to know them on a personal level so that we can better assist them in realizing their goals.
Jason is a serial entrepreneur, having owned and operated several successful businesses before founding Global Wired Advisors with Joe Hogg, Chris Bodnar, and Chris Shipferling. In addition to his success growing and selling small to mid-sized businesses, Jason has almost 20 years of experience in institutional investment banking working in Bank of America’s M&A team and as a Managing Director at Bayview Asset Holdings. He spent the early years of his career executing capital markets trades for Fortune 500 and Fortune 1000 companies, honing skills that would later help him buy and sell both traditional and digitally native businesses at a profit. Now, Jason applies his expertise to our Client Companies, looking for unique opportunities for buyers to make a return on their investment, maximizing the value for our clients.