Intentional Growth #231: Why Buying and Selling Companies is a Barbaric Sport with Elliott Holland
Today's M&A game isn't played by timid people—it’s a dog-eat-dog world out there and you need to know what it takes to thrive. Enter Elliott Holland. On today's show, we talk strategy when competing in the barbaric sport of buying and selling businesses. Learn what makes different investors invest, what they’re looking for in deal terms and how to expertly share the risk during negotiations. This episode is an absolute must for any business owner looking for funding or considering becoming an investor or buyer themselves.
What You Will Learn In Today's Podcast Interview
- How buyers think about the risk of a company.
- The crucial role trust plays in closing a deal.
- The difference between a buyer-centric structure and a deal-centric structure.
- What happens after an LOI (letter of intent).
- Why being light and humble about predicting future cash flow can be a good thing.
- How buyers assess a seller’s determination to closing the deal.
- The biggest ‘gotchas’ sellers should look out for.
- How buyers handle risk through price and terms.
- The difference between deal breakers and surprises.
- Why Elliott calls the purchase price the ‘country club’ number and how you can overcome it.
- The three different types of concentrations to be aware of (vendor, employee and customer) that can reduce the value of a company.
- How working capital plays into closing the deal.
- The benefits of sharing risk with the person across the table, rather than making them your enemy.
Are You Growing The Value of Your Business
Take The 2-Minute Assessment To Get Your Intentional Growth Score™ And 1-Page Vision Board.
- Are your company's current initiatives intentionally designed to increase the value of the business?
- Do you know what you want from your business long term and why?
- Do you know what your company is worth?
- Do you know the differences between Management, Family Transitions, PE Firms, ESOPs and Strategic Buyers?
- Does the business have a written strategic plan on how to achieve the desired normalized EBITDA and valuation?
About the Guest:
Elliott Holland has more than 10 years of experience executing middle market deals as an entrepreneur, spending his own money on diligence. He fully understands the challenges in executing good deals and avoiding lemons. He trained at Harvard Business School and spent almost a decade as an independent sponsor and business buyer before starting Guardian Due Diligence.
The firms he has worked for have completed billions of dollars in transactions and have successfully bought and scaled over 57 private, primarily owner-operated businesses. Elliott has experience on both sides of the table—on the entrepreneurial side raising capital and the investor side spending it wisely. He is one of the few deal guys with deep experience doing both, which allows him to better think through complex buyer-seller issues.
Elliott also holds a Bachelor of Science in Mechanical Engineering from the Georgia Institute of Technology, a Bachelor of Science from Morehouse College, where he was Phi Beta Kappa, and an MBA from the Harvard Business School.
Quotes:
10:00 - “The biggest pots of money in the nation and world are the investors in private equity funds.” – Elliott Holland
20:44 - “Wall Street will convince you that the only thing that matters is the biggest thing you can do, and I think people are bucking the system on that.” – Elliott Holland
26:24 - “Because of the purpose of the acquisition, the actions post-close will go along with that.” – Elliott Holland
28:02 - “ Finance, particularly alternative investments, particularly direct deals, is a barbaric sport. Everyone has sharp elbows, whether they’re willing to show them to you or not.” – Elliott Holland
32:47 - “The pain the seller takes during diligence, is the additional cost they have to take in order to sell their business.” - Elliot Holland
33:57 - “For me, a big piece is how quickly I get data. It’s one of those muscle memories; when I get data slow, I know it’s bad.” – Elliott Holland
48:29 - “You sometimes need to be a little light and humble (in this process) to be smart because when we are talking about the financial forecast--let’s just be completely honest--we’re predicting the future.” – Elliott Holland
50:39 - “I’m an engineer. If there’s something mathematical you can’t explain to me, somebody’s lying.” – Elliott Holland
Links and Resources:
Buyout: The Insider's Guide to Buying Your Own Company by Rick Rickertson
LinkedIn: Elliott Holland
Mastering Your Cash Flow Digital Course
Reach out to me if you have questions about the boot camp!
You can also reach out to me via email at rtansom@arkona.io, or on my LinkedIn.