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Investment Criteria

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INDUSTRY:

B2B Services (Open to other ones opportunistically)

Sizable and growing

Fragmented

Non-cyclical

Minimal regulatory risk

FINANCIAL:

$2-10M in Annual Revenue

$500k-$2M Annual EBITDA

20%+ Margins

COMPANY:

Founder Owned

No Investors

5-50 employees

Recurring revenues & consistent profitability

History of growth

Low ongoing CapEx

Diligence Checklist

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Technology

Will customer information need protection?

Is online payment processing accepted?

Are there existing infrastructure systems (CRM, accounting software) that I need to be familiar with when taking over the business?

Is the current website secure from cyber attacks and hacking attempts?

Is the checkout process on the website user-friendly and efficient?

Are there any backups or redundancies in place in case of a system failure or data breach?

Does this business use any cloud services or online storage solutions for its operations?

Has an IT professional been keeping up with tech maintenance (patch updates, etc.) regularly?

Legal

Are there any pending legal actions against the company?

Are there any pending lawsuits against customers or suppliers?

Does this business require specialized licenses or certifications (such as food handling certificates)?

Have all licenses necessary for operation been obtained and maintained properly up until now?

Is my new role as owner going to require me to obtain special licensing or certifications prior to running operations effectively (such as food handling certificates)?

Does this business have contracts with other businesses (customers and/or suppliers) that may need to be renegotiated when ownership changes hands?

Are there any government regulations that must be adhered to when operating this type of business in my area (zoning laws, environmental regulations, etc.)?

Does this business have patents, trademarks, or copyrights registered under its name which will transfer over with ownership change hands (if applicable)?

Growth

Can sales commission be earned through referrals?

What digital marketing efforts are already established?

Can SEO efforts increase organic search results?

Does website design meet industry standards?

Should social media presence increase?

Team

How much do employees earn on average & how often are they paid (weekly, bi-weekly)?

What kind of insurance does this business currently carry (liability, property & casualty, worker’s compensation)?

Are all employees covered by worker’s compensation insurance in case of injury or illness on the job?

With my coaching and guidance would any of the current employees make a good Operations Manager?

Who are the 3 most important people on the team & why?

If you had to let go of 1 employee, who would it be & why?

How compliant are employees with laws and regulations?

Business Operations

What are the core processes required to run the business?

Who is in charge of each process?

Are those processes documented?

Do clients pay regular invoices?

How long does customer service typically take?

How often does web content need updating?

Is email marketing being used?

Customer Retention & Feedback

Has reputation management taken place?

What feedback has come from customers?

Do customer reviews appear regularly?

Are customer loyalty programs offered?

Where do most of your current clients come from?

What is the average customer LTV?

What percentage of clients are return customers?

What percentage of your business do your top 5 clients account for?

Financials

What was the gross revenue over the past 3 years?

How much has the margin been?

What is the average profit for each product or service?

What is the current cash flow situation?

Have all local, state, and federal taxes been paid in full?

Is there any debt that needs paid off immediately after closing?

Any debts that will have to be assumed as part of the sale?

Do any loans need refinancing upon ownership transfer?

Is there an emergency fund set up specifically for unexpected expenses related to owning this business?

Can I get copies of financial records such as income statements, balance sheets, etc.?

Can I get copies of tax returns for both personal and corporate income taxes for three previous years prior to purchase?

Has a valuation report been done recently so I know what price range is fair when negotiating a sale price (if applicable)?

Have all accounts receivable been collected up until now?

Is there an audit trail showing accurate financials?

Assets, Inventory, & Equipment

Do you have a list of all of the assets and inventory?

Are all the assets and inventory included in the asking price?

Are there any assets that need to be replaced soon after closing?

Does all inventory have proper documentation such as expiration dates?

Do you have maintenance records for all equipment?

If you could add one new piece of equipment or asset to grow the business what would your next purchase be?

Transition Plan

Will I receive training from existing owners prior to taking over operations so I can learn first-hand how things work in practice and not just in theory?

Is there an employee manual that outlines policies and procedures?

Who is responsible for filing taxes for the current year?

Who will handle accounting duties once I take over operations?

Are all employees on a contract or are they 'at will'?

What is the average length of employee tenure at this business?

How many employees? FT? PT? Contractors?

Are they aware of a potential sale? Would they be willing to stay on?

Who handles new hire onboarding processes?

Has any legal advice been sought in regard to intellectual property, customer information protection, etc.?

Resources

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Brief Memo Template - Five Elms Capital.docx

52.9 kB

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One Pager / Tearsheet Template⁠

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https://www.mbbi.org/Information-Resources⁠

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Sourcing

Cold Emailing

Email Templates

Version 1

Hi {first_name}!

I recently came across {company} and was super impressed - I'd love to learn more about what you're up to.

I'm with GreyPine Holdings, a firm that invests in and acquires outstanding companies. We typically invest in businesses with $1mm to $10mm in revenue. We're not just a source of capital, though - we help expand your reach, optimize your business's core value, and scale your operations.

Do you have availability for a call next week?

Best,

{sender_first_name}

Version 2

Naming Conventions for Sequences

Best practices for naming conventions, especially for cold email sequences where you're testing different copy, should be systematic, descriptive, and easily understandable at a glance. Here’s how you might approach it:

Purpose: Start with the purpose or the goal of the sequence. For instance, "LeadGen" for lead generation, "Engage" for re-engaging past leads, or "Intro" for introductory emails.

Target Audience: Indicate who the emails are targeting. For example, "SMBs" for small and medium businesses, "Enterprises" for large companies, or a specific industry like "Healthcare."

Sequence Number or Version: To track the sequence and the version, use a simple numbering system. For instance, "v1," "v2," "v3" for versioning, or if it’s a series, "Part1," "Part2," etc.

Key Variant: If you're testing different variables, name the key feature that's different. For example, "DiscountOffer" for a discount-related email, "FeatureHighlight" for focusing on a specific product feature, or "StoryDriven" for narrative-focused emails.

Date or Month of Deployment: Including the date can help you keep track of when the campaign was run, for easy reference. For example, "Apr2024" for a sequence sent out in April 2024.

Status or Test Stage: Indicate whether the sequence is active, in testing, or concluded. For example, "Active," "Test," or "Complete."

Combining these elements, a well-structured name for a cold email sequence might be:

LeadGen-SMBs-v1-DiscountOffer-Apr2024-Test

This name tells you at a glance that the email sequence is the first version of a lead generation campaign targeted at small and medium businesses, it contains a discount offer, was started in April 2024, and is currently in the testing phase.

Make sure that whatever convention you choose is consistently applied across all your campaigns for ease of understanding and organization.

Data Sources

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Grata⁠

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Via Beacon⁠

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Offdeal.io⁠

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ZoomInfo⁠

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Searchfunder⁠

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Datarade⁠

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laundromat_scrape.xlsx

70.7 kB

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scrape_laundromat_services.xlsx

661.8 kB

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GreyPine Holdings - List.csv

4.4 MB

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GreyPine Holdings - List 2.csv

3.1 MB

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Acquisition Targets - TEBS NEW.xlsx

874.8 kB

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TEBS - AI Consuting Firms.csv

109.8 kB

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Trade Associations

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https://amaaonline.com/⁠

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https://masource.org/⁠

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https://www.mbbi.org/⁠

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https://privateequitylist.com/pe-vc-assotiations⁠

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Operational Mantras

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Hire and Fire FAST

If you’re just organically growing the business, don’t change ANYTHING in the first year (not anything big at least). Not applicable if you’re doing a rollup

10 Steps of Deal Making

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Know what’s a good deal for you (criteria)

Know how to sell yourself

Know how to source / originate the deal

Know how to value the deal

Know how to negotiate the deal

Know how to finance the deal

Know how to perform due diligence on the deal

Know how to close the deal (terms, structure…etc.)

Form a deal team (attorney, accountant)

Know your 90 day plan (post acquisition)

Financial Modeling

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https://www.mosaic.pe/⁠

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How to Model out an add-on Acquisition

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https://chat.openai.com/g/g-77sbrTb5k-private-equity-guru⁠

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To model out an add-on acquisition in an LBO model without a balance sheet, you can follow these simplified steps. This approach assumes you have already completed the LBO model through the returns analysis and now want to incorporate the effects of an add-on acquisition:

Identify Acquisition Details: Determine the cost of the add-on acquisition, the timing of the acquisition, and how it will be financed (e.g., cash, debt, equity, or a combination).

Adjust Financing Structure:

If the acquisition is financed with additional debt, increase the debt in the model and calculate the additional interest expense.

If financed with equity, adjust the equity contribution and consider the dilutive effect on existing equity holders.

Adjust Revenue and EBITDA:

Increase the revenue and EBITDA forecasts to reflect the acquired company's contributions. This could involve a simple addition or a more complex integration based on synergies.

Consider the timing of the acquisition and pro-rate the acquired company's financials accordingly.

Synergies and Cost Savings:

Estimate cost synergies (if any) from the acquisition and adjust the operating expenses accordingly.

Adjust EBITDA further if revenue synergies are expected.

CapEx and Working Capital Adjustments:

Adjust capital expenditures and working capital assumptions as necessary to reflect the needs of the combined entity.

Recompute Free Cash Flow: Update the free cash flow calculations to account for the revised EBITDA, interest expenses, CapEx, and any changes in working capital.

Debt Repayment Schedule:

Update the debt repayment schedule to reflect any additional debt taken on to finance the acquisition.

Adjust for changes in cash flow availability for debt repayment, considering the acquisition's impact.

Returns Analysis:

Update the returns analysis (IRR, MOIC) to reflect the acquisition's impact on the exit value and equity value.

Consider the effect of acquisition timing, synergies, and financing method on the overall returns.

Sensitivity Analysis:

Perform a sensitivity analysis considering variables such as acquisition cost, financing structure, and synergies to understand their impact on returns.

Review and Adjust

Review the model to ensure all inputs and adjustments are consistent and logical.

Make any necessary adjustments to reflect a realistic view of the combined entity's financials post-acquisition.

This approach provides a framework for integrating an add-on acquisition into an LBO model. The complexity of the actual modeling will depend on the specifics of the acquisition and the level of detail available.

Tools

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https://www.pestack.com/⁠

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Target Industries

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Specialty pump businesses

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https://mangroveequity.com/mangrove-announces-investment-in-normco-pump-power/⁠

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