Matt Kopp, Managing Partner at Enduring Investment Partners, started by acquiring a supplier to schools and now leads a portfolio of education businesses. He shares insights on navigating the Australian business buying market, including innovative outreach strategies and the impact of COVID-19 on growth. Kopp discusses challenges in transitioning ownership, improving operations with technology, and competing with private equity for acquisitions. His journey highlights the significance of building relationships and recruiting top talent to drive success in the education sector.
The education market presents consistent demand for products and services, making it a strategic target for acquisitions.
Navigating the acquisition landscape in Australia required a proactive outreach approach due to a lack of search culture.
Operational efficiency was enhanced through tough staffing decisions and modern systems, significantly improving profitability.
Structuring operations into a holdco model enabled resource pooling and better management across acquired educational businesses.
Deep dives
Exploring the Education Market
The guest in the episode identified the education market as a prime target for acquiring businesses, specifically due to the consistent and reliable demand for educational products and services. This realization stemmed from the understanding that schools continuously fill classrooms with students, indicating a steady need for supplies. Their first acquisition was a company that provided organic samples for science classrooms, which turned out to be a profitable venture, generating around $350,000 in cash flow yearly. The success of this initial investment catalyzed further acquisitions in related fields, expanding the guest's portfolio in the education sector.
The Journey of a First-Time Acquirer
The journey began with the guest’s aim to raise a traditional search fund in Australia but quickly pivoted to finding suitable businesses without the backing, leading him to focus directly on acquisitions. The first acquisition process in 2019 was characterized by challenges due to the lack of established search culture in Australia, making sourcing businesses more cumbersome. Despite these difficulties, the guest utilized a proactive approach in outreach and cold emails to potential sellers, successfully acquiring businesses that fit his strategic vision. This self-starter mentality significantly contributed to his rapid success.
Navigating Operational Challenges
After acquiring the first business, the guest focused on operational efficiency and staff optimization, demonstrating a willingness to make tough decisions regarding personnel. By addressing overstaffing and inefficiencies, he managed to streamline operations and significantly cut costs, leading to improved profitability. Implementing modern systems, such as inventory management software, further enhanced operational effectiveness. The guest emphasized that making these changes was crucial, albeit challenging, as it required balancing staff morale while driving productivity.
The Impact of COVID-19
The onset of COVID-19 presented unexpected challenges, effectively disrupting traditional business operations as lockdowns ensued. However, the guest's strategic positioning within the education sector proved beneficial, as schools ultimately continued to allocate their budgets for necessary supplies, even during tough economic times. The lockdown experience also allowed the guest more time to focus on long-term strategies without the usual daily distractions. By leveraging the situation, he successfully introduced new products and identified growth opportunities within the market.
Acquisitions as a Growth Strategy
Capitalizing on the post-COVID market dynamics, the guest pursued additional acquisitions to expand his education business portfolio, including a science education service and a music school provider. Each acquisition was strategically considered, focusing on purchasing businesses that complemented existing operations while also optimizing costs across the newly merged entities. This time of uncertainty opened the door for acquisitions at favorable prices, further solidifying his position in the education sector. As a result, his overall business valuation significantly increased after acquiring and integrating these diverse educational offerings.
Creating a Sustainable Holdco
Having successfully navigated several acquisitions, the guest began to structure his operations into a holdco model, pooling resources and capital for better efficiency and growth potential. This strategic decision enabled him to manage multiple brands under a unified umbrella while maximizing cross-selling opportunities between them. Investors encouraged this structural shift by allowing the guest to retain more equity stake in the combined verticals, enhancing both operational control and profit potential. Establishing a holdco eventually positioned the guest to step into more of an executive role, focusing on oversight while delegating day-to-day operations.
The Importance of Human Capital
Throughout his entrepreneurial journey, the guest learned the significance of having the right people in place to support business growth. He noted that cultivating a capable team at all levels was paramount to driving success within the various businesses acquired. Whether it was managing casual staff or hiring a full-time management team, aligning organizational capabilities with strategic goals was key in achieving desired outcomes. The guest's experiences illustrate that investing in human capital can dramatically affect operational performance and business sustainability.
Future Aspirations and Initiatives
The guest aims to continue scaling his business model by seeking additional acquisitions and nurturing fresh talent within the sector. His vision involves creating an incubator-like fund targeting aspiring entrepreneurs, providing them with a structured environment to identify and pursue acquisition opportunities leveraging the existing platform he has built. By marrying capital with mentorship, the guest hopes to foster a new generation of acquisition entrepreneurs in Australia, expanding the reach and impact of ETA strategies throughout the continent. This forward-thinking approach highlights his commitment to evolving the search fund model, refining it for future success.
