January 25, 2023

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

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

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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.

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.”

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

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.

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