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Take Five #041: Here’s what sellers are really thinking, and more

1. 16 months to acquisition: one man’s full time search timeline

A fantastic (and brutally realistic) month-by-month play-by-play of one searcher’s experience:

I quit my W-2 job on September 1, 2021 and I completed my acquisition on December 28, 2022 … 16 months from the start of my full time search to closing.
I acquired a franchised, seasonal pest control company that operates from April - October. I’m in the offseason now so I don’t have any Day 1 or operating lessons learned (yet). However I wanted to share the timeline of my search in case it’s helpful to any current or prospective searchers.
A little context about my search. I ran a geographic search with a 1 hour radius from my home in New Jersey. I exclusively looked at brokered deals and I did not do any proprietary outreach as I was industry agnostic. I’m a spouse funded searcher, so I’m reliant on my wife for income and benefits.
TL:DR my 16 month search was not linear by any means. There were long periods of low activity and doubting that I’d ever find a deal. I second guessed my decision to walk away from a steady paycheck and almost threw in the towel. But I’m glad I stuck it out and reminded myself of why I quit my job in the first place. It was worth the perseverance.

From “16 months to acquisition - my full time search timeline” on Searchfunder

2. Here’s what sellers are really thinking

tl;dr “Conclusion: Deals are *really* taxing on sellers. Making their life easier increases likelihood to close.”

Middle Market M&A Lawyer 🇺🇸 @Lawyer4Deals

If you want to buy a business, it’s helpful to know where the seller’s head is at during the deal. I do over $100MM of sell-side deals/yr—sometimes way more. Here’s what sellers are thinking:

3. Looking ahead: SaaS M&A in 2023

From FE International’s 2023 Market Report on the state of SaaS M&A:

In this report, we dive into the metrics driving M&A trends in the near- and long-term, covering key topics such as:
The current state of the SaaS M&A market
SaaS valuations in 2023
VC and PE fundraising
All signs point to a high volume of M&A activity in 2023. Capital earmarked for M&A remains near record highs and investors are increasingly active in their pursuit of value-oriented acquisitions.

4. A sample 90-day close timeline

Ben Tiggelaar 🟠 @bentigg

So you've signed an LOI to buy a business, how do you actually get to Close? The "BIG 3": 1️⃣ Core Diligence 2️⃣ Debt Raise 3️⃣ Equity Raise Start out general, then get more granular. Adjust the timeline to your unique deal & preferences Example of my 90-day close timeline:

5. Two 2022 annual letters: one from a holdco and one from a PE firm

Permanent Equity and 365 Holdings both recently published their 2022 annual letters, both of which are worth a read to see the behind-the-scenes commentary on how a private equity firm and a holdco operate.

“15 Years in the Trenches of SMB Acquisitions and Operations: 2022 Annual Letter” from Permanent Equity:

Our posture in 2020 and 2021 of patience, conservatism, emphasis on good decision-making, and long-term focus bore fruit in 2022 with a record year of investment, tremendous progress in building Permanent Equity for scale, and good financial results despite a tepid market and some tough situations. There’s often a disconnect between how things feel and how things are. Our relative returns were phenomenal this year, which goes to show that the real economy wasn’t as bad as financial markets would indicate.
In 2022, we invested $46M of equity from our second fund across two deals, bringing our total investment in that fund to $83M of $300M. Interestingly, this year’s investment total is nearly identical to the amount we invested out of our first fund and roughly 10X what we had invested prior to that. Scale is certainly non-linear.

“2022 Annual Letter: Liminal Space” from 365 Holdings:

There is a quote debatably attributed to John Maynard Keynes that says, “When the facts change, I change my mind — what do you do, sir?” I find that the facts as of late change quickly and with them so do my plans. I suspect 2023 will be a year of “Strong Opinions, Loosely Held.” Our organization will need to be agile and responsive. I will spend time this year refining our Vivid Vision and plan to include it in the 2023 Annual Letter.

Upcoming Events in the SMB & Business Acquisition Space

(A ✨new✨ section in our newsletter: we’ll be adding to this list weekly, so send over any events you think we’ve missed!)

Josh Schultz @joshuamschultz

I'm doing another SMB Brunch in Austin on Jan 28th My Home Amazing Brunch Spread Great Conversation Guest Speaker: Creating Inbound Deal Flow (from someone that has created a massive pipeline) Come for the community, learn something new, make new friends. Whose interested?

Matthias Smith, CEO - Pioneer Capital Advisory LLC @SBA_Matthias

On January 31st at 7 pm, The SMB Lounge (co-hosted with @joshdaneee) will feature @RegZeller @Jacxonic @chrisxmunn & @jakelywakely as operators and @thesmbadvisor & @ElliottEHolland as service providers. Please feel welcome to join if interested 👇 https://t.co/zz3NVo9xal

Pursuant Capital @PursuantCapital

Applications are OPEN for the first two Search Fund Bootcamps of '23: -February 8-10 -May 17-19 @PursuantCapital's Bootcamp is a 3-day, intensive, in-person training course with Pursuant, its Deal Team (SBA lender, QofE, Legal, Insurance, Tax), ETA investors & Searcher CEOs.

Sam Rosati @Sam_Rosati

Golfers of SMBTwit: My buddy @rondebarber and I are on the Board of the @ValsparChamp, the PGA Tour event in March in Tampa. We are hosting a SMBTwit meetup to watch the tournament, and a separate "Monday after the tournament" round of golf on the course the pros are playing...

SMBash @SMB_ash

🚨SMBash ‘23 Announcement🚨 We’re excited to share the theme for SMBash ’23! This year, we’re zeroing in on search with two days devoted to finding, acquiring, and investing in SMB/Micro-PE deals. Here’s a quick summary:👇

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Take Five #041: Here’s what sellers are…