Peter Lehrman, Founder & CEO of Axial, The Largest Online Marketplace to Buy & Sell SMBs
Nov 9, 2023
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The podcast discusses the founder of Axial, a platform for M&A transactions, challenges in sourcing lower middle market deals, revenue model evolution, technical due diligence importance, and navigating the transition to a transaction-based model.
Free due diligence by Oberle Risk assesses insurance programs for cost reductions, allowing focus on core business.
Axial Market connects buyers and sellers in SMB transactions, transitioning to deal-based revenue model.
Specialization and differentiation are crucial for acquisition entrepreneurs to stand out in the competitive market.
Deep dives
The Evolution of Oberle Risk Strategies and Its Dedicated Search Fund Practice
Oberle Risk Strategies, led by August Felker, offers free due diligence to assess target companies' insurance programs, highlighting potential coverage gaps, insurance pricing, and structural changes. Their approach has led to cost reductions or coverage improvements in 9 out of 10 client engagements, allowing searchers and CEOs to focus on other aspects while Oberle handles insurance matters.
Peter Larriman's Background and Axial Market's Role in M&A Transactions
Peter Larriman, CEO of Axial Market, discussed the platform connecting buyers and sellers of small to medium-sized businesses, facilitating over 10,000 transactions yearly worth $2.5 million to $250 million in revenue. Before Axial, Larriman was involved in private equity and founded GLG group. Axial serves as a two-sided platform for confidential business discussions, aiding acquirers and business owners in finding suitable opportunities.
Transition from Subscription-Based to Transaction-Based Revenue Model
Axial shifted from a subscription-based to a transaction-based revenue model based on customer feedback indicating a higher inclination to pay when successfully closing a deal. This change stemmed from poor customer alignment under the subscription model, scalability challenges, and the mismatch in customer value perception. While facing internal and board uncertainties, the transition aimed to better reflect the value Axial adds to deal transactions.
Impact of Private Equity Firms Going Down-Market in Lower Middle Market M&A
While private equity firms going down-market to acquire smaller businesses pose a competitive threat to acquisition entrepreneurs, the data suggests more concerns around programmatic strategic M&A in the sub $5 million EBITDA category. Private equity firms focusing on systematic M&A strategies might raise competitive challenges for entrepreneurs vying for smaller deals. Despite this, the operational complexities and capital deployment constraints faced by private equity in smaller deal landscapes can create opportunities for skilled entrepreneurs to navigate and succeed in the market.
Increased Competition in Business Brokerage and M&A Sphere
The podcast discusses the rising number of individuals transitioning from big tech and city life to explore various aspects of small and medium business, mergers and acquisitions, entrepreneurship, search funds, and more. The speaker notes the increasing competition in these areas, highlighting the growing challenges for business brokers and M&A advisors due to the overwhelming amount of outreach from potential buyers. This influx of interest has led to a surge in direct sourcing and the use of tech tools for sourcing, making it more difficult for sellers to navigate the diverse buyer landscape.
Specialization and Differentiation in Business Acquisitions
The episode emphasizes the importance of specialization and differentiation for acquisition entrepreneurs in a crowded market. It suggests that standing out among numerous buyers requires a focused approach, whether through industry specialization, geographic focus, or transaction type expertise. Specializing in a specific area or niche, such as targeting businesses with high customer concentration or focusing on businesses with growth potential in regulated industries, can help buyers differentiate themselves and be memorable to overwhelmed brokers.
This episode is brought to you by Oberle Risk Strategies, the leading insurance brokerage and insurance diligence provider for the search fund community. The company is led by August Felker (himself a 2-time successful searcher), and has been trusted by search investors, lenders, searchers and CEOs for over a decade now. Their due diligence offering (which is 100% free of charge) will assess the pros and cons of your target company’s insurance program, including any potential coverage gaps, the pro-forma insurance pricing, and the program structure changes needed for closing. At or shortly after closing, they then execute on all of those findings on your behalf. Oberle has serviced over 900 customers across a decade of operation, including countless searchers and CEOs within the ETA community
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This episode is brought to you by Symphony. Symphony not only performs technical due diligence engagements for search funds, Private Equity firms, and strategic acquirers, but they also partner with those buyers on an ongoing basis on all things product (outsourced development, team augmentation, new product prototyping, UI refreshes, QA professionalization, and so on). Symphony is offering a full 15% off of any of their services for listeners of In the Trenches. Just go to the Contact form on their website and tell them that you’re a listener of the podcast to receive this discount!
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Today I'm joined by Peter Lehrman, the Founder and CEO of Axial Market. For those of you who don’t know, Axial is the North America’s #1 online platform that connects buyers and sellers of small and medium sized businesses. Axial is used by over 20,000 investors, M&A advisors and CEOs, allowing them to connect on a confidential basis to explore M&A, debt, buyout, and growth equity transactions, to name just a few. Over 10,000 transactions are posted each year on Axial, covering companies that generate anywhere between $2.5M – $250M in revenue. Prior to Axial, Peter worked in private equity at SFW Capital Partners and was part of the founding team at Gerson Lehrman Group (or “GLG”, for short), a platform where investors and other users are able to connect on-demand with experts spanning a countless number of industries and disciplines.
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