- Why these home services businesses can be bought so cheaply.
- Why private equity still isn’t interested in these companies.
- How to build a company that grows under its own weight.
- How to sell these companies for higher multiples.
When acquisition entrepreneurs begin their business buying journey, they usually focus primarily on sourcing and closing deals. That makes sense simply because acquiring a business requires so much work. But it's really just the first step in the process.
At Acquira, we don't consider the job complete until the acquisition entrepreneur can exit the business for more than what they paid for it.
There are several paths toward an exit, but they all involve growing the business first. We’ve discussed systematization, roll-ups, and private equity buyers in our series, How To Grow A Business For The Best Possible Exit. Still, we wanted to provide more insight into what Exit Paths are available to Acquisition Entrepreneurs and how Acquira can help you get there.
To that end, Acquira’s Ty Trumbull sat down with the company’s CEO, Hayden Miyamoto to discuss Exit Paths.
Exit Through a Roll-Up
There are many reasons that entrepreneurs would choose to implement a roll-up strategy. Whether it’s to stimulate growth, expand their offerings, or acquire new talent, businesses of all sizes have used the approach for decades to build value.
A roll-up – sometimes called a “tuck-in” – is when a business buys another company in the same market and merges it into its own operations. These mergers combine multiple small companies into one large entity that can take advantage of its larger size.
For Acquisition Entrepreneurs, roll-up acquisitions offer the potential to exit the business at a much higher multiple than what they paid.
For Acquisition Entrepreneurs, roll-up acquisitions can potentially exit the business at a much higher multiple than what they paid.
One of our primary goals with Acquira is to create roll-ups and then take those roll-ups public. Many Acquisition Entrepreneurs want to acquire a business once and exit for a few million dollars.
“In that case, Acquira or one of our roll-up [partners] will likely end up being a buyer for that person at a higher multiple,” explains Hayden. “And then other people have the ambition and the experience and really want to grow something bigger right away. And again, that's something that we definitely want to help with.”
Exit To Private Equity
Many private equity companies would vastly prefer to put their capital into growing, systematized businesses at a higher multiple over owner-run companies at low multiples.
As we mentioned in our three-part series, How To Grow A Business For The Best Possible Exit, “for private equity, it takes the same amount of work to analyze a company's financials and re-do its operations for a company that is making $10 million per year in profit as it does to do the same work for a company that is making $1 million per year in profit.
“A $1 million-per-year company is usually valued at 3x because it requires a lot of expertise to run – expertise that big buyers like private equity firms and other institutional investors don’t have and don’t want to spend time (and money) developing.”
That means that, to attract these private equity buyers, you need to make improvements, says Hayden.
“So you, as an acquisition entrepreneur, if you want to make a roll-up or if you want to build a business to sell it to a private equity company, you need to create an enticing target for them,” he says.
An ACE Up Your Sleeve
For Acquisition Entrepreneurs interested in growing their company and exiting through a roll-up or by selling it to private equity, we have built a change management system called the ACE Framework.
ACE stands for Acquira Certified Enterprise, and the Framework is the perfect tool for post-acquisition growth. The ACE Integration process takes one year to complete and members receive in-depth, on-site coaching from ACE Certified Integrators. It includes four in-depth workshops, as well as six additional “Solutions Visits” from our Integrator to help address any specific issues.
“Our framework is really about identifying a leadership team, ideally within the organization,” says Hayden. “That means really investing in them, training them, and creating and implementing many of the procedures we've already created for the home services space.”
Members also receive access to our community of business owners and the breadth of our training materials, including our 100+ page training manual.
It’s easy to get stuck in the deal-sourcing phase of the business buying journey and forget about what comes after. But the journey isn’t complete until you get off the road, which means making a graceful exit from the business.
Every path that leads to an exit involves growing the business first, whether that’s through creating a roll-up or selling it to a private equity buyer. At Acquira, we can help you grow your business to the point where any buyer would be interested, allowing you to sell for more than you paid.
To learn more about the ACE Framework or how we can help you find your own Exit Path, schedule a call with us today.
- There are several exit paths for AEs, including roll-ups and selling to private equity.
- Buyers aren’t interested in companies that aren’t well-systematized and growing under their own steam.
- Acquira’s training can help you grow your business.
Acquira specializes in seamless business succession and acquisition. We guide entrepreneurs in acquiring businesses and investing in their growth and success. Our focus is on creating a lasting, positive impact for owners, employees, and the community through each transition.