- How the Investment Committee works.
- What to expect from the Investment Committee.
- How the Investment Committee helped one Acquisition Entrepreneur close on a business in record time.
- Why it might make sense to present to the Committee before you think you’re ready.
Effective feedback is critical to success for most people – and Acquisition Entrepreneurs are no different.
There are always a lot of moving parts when buying a business. Whether you’re sourcing an on-market deal through brokers, collecting due diligence materials, or building a relationship with the seller, it’s a lot to stay on top of before you even get to the Letter Of Intent (LOI).
Having someone to provide insight into the deals you find as well as the materials you collect on those deals can be invaluable, and can affect whether you decided to even pursue the deal in the first place.
That’s why we created the Investment Committee.
The Investment Committee is a critical stage in the Accelerator Program. It’s often how we are able to identify which Acquisition Entrepreneurs (AEs) are serious about the business buying process.
Once an AE presents a deal that matches their investment thesis to the committee, a plethora of new opportunities are opened to that AE through our Accelerator Program.
|A Quick Note On Your Investment Thesis|
An investment thesis is an Acquisition Entrepreneur’s unique set of deal search parameters. Your thesis is individual to you and completely dependent on the location or industry where you want to look, your own risk tolerance level, how to assess whether the business is under- or over-priced, and other factors that will help you find deals and quickly disqualify ones that aren’t a good fit for you.
Ken Lavertu is an Acquisition Entrepreneur who closed on his business just four months after presenting to the Investment Committee – the shortest amount of time we’ve seen. Ken is now a few months into owning a granite business in Florida.
We talked with Ken to discuss how the Investment Committee helped in his acquisition process, his main takeaways from the process, and what advice he has for other Acquisition Entrepreneurs who may be getting closer to presenting their own deals. Here’s our conversation:
How The Investment Committee Works
The Investment Committee process is similar to Shark Tank, where Acquisition Entrepreneurs present a potential business and all of the research they’ve compiled on the company.
The Committee usually contains at least one person who understands issues around the deal (ie: financing), and another person who is more tuned into the operations side of the business. The Committee then spends time going over the details of the deal, looking for potential issues, before giving feedback.
At the end of the call, the AE will discuss the Committee’s findings with their success coach, whether to make any adjustments to their investment thesis, including increasing the geographical scope of your search, additional industries you might want to look at, and why.
Our select panel of experts will go over:
- What they like and dislike about the business
- Whether they would be interested in co-investing and if so, what the offer would need to look like
- How they would structure the offer around the risks, give an idea around the max price they would offer, and how they would suggest you open the offer
- Compare it to similar deals they have looked at over the years
- Any additional information or questions that the AE should dig deeper on before or after LOI and during the site visit.
Before approaching the Investment Committee, Ken was warned by his Success Coach that he needed to be ready. So he made sure he was.
“There was definitely a lot of preparation on my end,” he explains. “I actually spent a lot of time on it and worked into the wee hours of the morning just making sure all my data was right.”
Ken was given access to past presentations so he could get a feel for the process and how to prepare, as well as a structure to present the actual deal. Interestingly, the deal he presented wasn’t one he was particularly excited about.
“I wasn't even really interested in that particular business, but I was encouraged by my coach to go ahead and just treat it like something I was going to buy,” he says. “So digging into the numbers, digging into the total addressable market, digging into the state of Florida, digging into the industry, and then multipliers and risk, I got more and more excited about the actual business.”
He presented the total addressable market, what demand was like in the area, and who the competition was. He discussed company size and the pros and cons of that particular business. And then he talked about what he could bring to the table as far as his own individual experience.
“Thinking about buying a business holistically hadn't happened until that point,” Ken says. “I had to take a kind of self-inventory of my own skills, of what it meant to actually buy a business.”
Part of the Investment Committee process is to poke holes in the deals presented. While Ken knew this was one of the goals of the presentation, he was still surprised by some of the holes they found.
“I'm always trying to be on the offensive, [I wanted to say] ‘I've already thought through that and this is what I'm thinking,’” he says with a laugh. “But they come with a lot more experience than me. And so consequently, they found a lot more holes than I had pre-drilled, so to speak.”
Once the Committee has looked at your deal and given feedback, they will see how well it matches your investment thesis and how well your thesis holds up. This process will allow you to refine your investment thesis in order to ensure you find the best business possible for you.
Preparing For The Owner’s Chair
The pooled knowledge of the Investment Committee ended up solidifying Ken’s concept of what acquisition entrepreneurship is.
In fact, Ken says that some of the advice the Committee gave him during the presentation didn’t have much of an impact on him until he actually sat down in the owner’s chair. After all, Ken had no experience in the granite industry.
“There's just a lot of specific things that the Investment Committee was really good at opening my eyes to that I never would have known,” he explains. “There are really specific things about that particular business that I would need help with. [The Committee] cut my learning curve way down. So when I got here, I'm finding a lot of those things that they had told me at the front end, now I'm seeing are true.”
Advice: Don’t Wait For The Sweetheart Deal
As we said, Ken wasn’t even planning on buying the granite company he eventually closed on. His plan was to simply go through the process in order to better understand it. Because of that, he ended up finding a deal he liked even more.
I would say don't wait till you feel like you find a sweetheart deal.
“I would say don't wait till you feel like you find a sweetheart deal,” Ken offers as advice to other acquisition entrepreneurs. “It's not because I think ‘oh, that might be the right one I buy.’ But you just need to be prepared and learn first, before trying to find the perfect deal to run through the Investment Committee.”
Instead, Ken suggests simply finding something you can work with and that matches your investment thesis. This will help you familiarize yourself with the process, and when you do find a deal that is a great fit you’ll be able to get to the Investment Committee that much faster, hopefully leading to an LOI and eventual close on the business in a shorter period of time.
“So I would say practice on a few,” Ken offers. “[Acquira’s leadership team] actually told me that. So it's good to do.”
Acquira’s Investment Committee is a key feature of the Accelerator Program. Once an Acquisition Entrepreneur brings a deal to the Committee that matches the AE’s unique investment thesis, they receive an invitation to an in-person workshop and additional training.
The workshop is a chance for Acquisition Entrepreneurs to better get to know Acquira and vice versa, which is essential when seeking a long term relationship or partnership. There, AEs are able to ask our team of acquisition experts questions and get deeper insights into their own deals.
The additional training includes The Last Mile, which is built to take business buyers from pre-LOI all the way to closing on the business.
- Don’t wait for a “sweetheart deal” to present to the Investment Committee.
- Be prepared. Do your research.
- Poking holes in the deal is part of the process.
- The Investment Committee process will help you refine your investment thesis and identify business risks.
Acquira is a business acquisition in a box service. We help entrepreneurs buy businesses and we invest in them and their chosen businesses. We are here to help ensure that each business we work with is posed to make the biggest positive impact possible for its owners, employees, and community.