A question that comes up a lot from our prospective partners is just how likely they are to succeed by going through Acquira’s programs.
Our stock answer has typically been “it depends on how much work you put in.” And this remains true, but we’d like to share some data with you to back up that statement.
Our Accelerator Program (which we sometimes refer to as the “Do It Yourself” option) requires hard work and dedication to see through, but in the end you will have closed on an instantly cash-flowing business within eight-and-a-half months
Our “Do It With You” option is a premium service that ensures you will find a deal. It requires less oversight on your part because the Acquira team sources and vets the business before presenting it to the Investment Committee on your behalf. You're only notified when an LOI that meets your Investment Thesis is ready.
Whichever route you take, we track our AEs' success through a series of milestones. These are:
- Accelerator-to-Investment Committee (IC) Presentation
- Investment Committee-to-LOI (Letter Of Intent)
- LOI-to-Final Investment Decision (FID)
- FID-to-Close
Accelerator-to-Investment Committee
Acquira’s Investment Committee – which we refer to as “the IC” – is a critical stage in the Accelerator Program. It’s often how we are able to identify which Acquisition Entrepreneurs are serious about the business buying process. It also presents one of the best practical learning opportunities AEs will encounter on their journey.
We have seen that people who reach our Investment Committee are more likely to issue an LOI. This is why we put so much importance on reaching the IC.
For reference, our Q3 2022 cohort had 12 members.
In the third quarter of 2022, a total of 15 Investment Committee presentations were made by 10 Acquisition Entrepreneurs in our Accelerator Program, seven of whom are in our most recent cohort.
Our target was that 50% of cohort members reach the Investment Committee within the quarter. We exceeded that by 8% for a total of 58%. This was facilitated, in part, by the new systems we put in place.
Overall, the biggest challenges that AEs face during this milestone are time management and actually finding a deal to present to the IC.
That's why we provide support at this stage in the form of a one-on-one call with an Acquira Success Coach. This happens well before your IC presentation and is designed to help you properly define your investment thesis.
An investment thesis is a set of rules that defines what you will and won’t invest in. It includes things like:
- Where is the business located?
- How large is the business?
- Is it management-run or ownership-run?
- Are there any risks to the business like customer concentration or key person risk?
- What are your own unfair advantages?
- How high is your own risk tolerance?
A properly defined thesis can help you evaluate potential investments and quickly disqualify bad deals, effectively removing emotion from the equation.
One issue we have seen repeatedly around this portion of the journey is that some Acquisition Entrepreneurs are trepidatious about bringing a deal to the IC if it isn’t what they consider a perfect deal. But practice makes perfect.
Quinn Huffman is one of the familiar faces from Acquira’s team who handles the Investment Committee calls. According to Quinn, “practice makes perfect” when it comes to the IC.
“The more deals you bring, the easier the process becomes each time,” he said. “You learn how to disqualify deals faster and it will ultimately help you find the perfect business for you.”
Those who attend the IC shouldn’t be too concerned if they’re told it’s not a deal worth pursuing. This is how they learn.
| The “Do It With You” Option Acquira provides an offering above our Accelerator program. We call it “Do It With You” because we will work with you through the process to guarantee that you get a deal done. With this premium service, an Acquira team member will source businesses for you and present them to the Investment Committee on your behalf. You simply have to finalize your investment thesis and wait for an LOI to be presented to you. Even if the deal gets abandoned post-LOI, the Do It With You service covers the search for another business. |
Associated Costs
The biggest cost associated with this stage is the price of the Accelerator, which costs $8,000 as of April 2023. If you’re doing it on your own without Acquira, this stage would hypothetically cost nothing.
If you opt to participate in Acquira's “Do It With You” program, there is an up-front cost of $50,000 to get you through the first two milestones of your business buying journey (From Accelerator to LOI). By the end of the journey, you end up paying a slight premium to ensure that you close on a deal, but still significantly less than if you were to go it alone.
With Acquira this process takes an average of 60 days. Without Acquira, this process will usually take closer to four months simply because you don’t have the structure that Acquira’s training provides, you don’t have any accountability, and you don’t have the support. Acquira has a team of Virtual Assistants (VAs) that can help with a lot of the steps in this part of the process.
You also don’t know how to deal with brokers and you don’t have Acquira’s name to lean on. Nearly every business broker in the United States is familiar with Acquira, so by working with us you’re now a “qualified buyer.”
Chance of Success
Accelerator: 58%
Reason: We help you craft your investment thesis, provide training, support, and most importantly, accountability.
Do It With You: 100%
Reason: Our team of acquisition experts will source multiple businesses on your behalf and present them to our Investment Committee.
Without Acquira: Under 20%
Reason: There is a lot of busy work. Without structure, many people do not create a workable investment thesis and framework for evaluating the intrinsic value of businesses. They don't make it far into any deal and give up.
Timeline
With Acquira: 60 days
Without Acquira: 4 months
Investment Committee-to-LOI
The more successful an AE becomes at IC presentations, the more likely they are to reach an LOI. And the proof is in the presentations, so to speak. In the first quarter of 2023, we had a total of 12 LOIs issued from Acquisition Entrepreneurs.
Our target is that 50 percent of those who reach the IC have an LOI accepted within three months of the presentation. Of the seven people that got to IC from our example cohort above, five have LOIs, and two are still searching.
The biggest challenge in pursuit of this milestone is simply having your LOI rejected. This can be demoralizing for many AEs, but it is a normal part of the business buying journey.
| The “Do It With You” Option If you participate in the Do It With You option, the Acquira team will present deals to the Investment Committee on your behalf. You will be notified when an LOI is ready to be signed. |
Associated Costs
If you’re going through this phase without Acquira, you can expect to pay around $5,000 in legal costs as your lawyer helps you with the LOI. The actual cost of issuing an LOI is relatively low. However, lawyers for either side of the deal will use this as an opportunity to negotiate, driving up the cost.
Working with Acquira, expect to pay $5,000 to have Acquira help you with the LOI. However, we also help with negotiating the terms of the deal and provide support through this part of the process which is something an attorney won’t typically do unless you are paying them to do so. On average, because we’re involved in the process, we’re able to get better terms including more seller financing and lower rates. This $5,000 also covers multiple deals if need be.
Under the Do It With You option, the cost of this stage in the journey is covered under your initial payment.
It’s common for Acquira to negotiate an additional 5% of the purchase price to be paid through seller financing, and the interest on that is 3% lower than average because most people just go with the SBA rate. If we're looking at a $3 million company, at a discounted rate of around three percentage points and almost double the term length, that saves the buyer about $6,000 each year.
Chance of Success
Accelerator & Do It With You: 100%
Reason: The target success rate for people getting to an LOI is 100% for people that pay Acquira for coaching. The success rate for the original deal brought to investment committee is likely lower than 50%, however, Acquira has a 20-person search team that finds and analyzes deals for AEs that have already brought a deal to IC. This, combined with the fact that success coaching covers bringing a deal to LOI even if it takes more than one deal, means that you will get to LOI. The only question is timing.
Without Acquira: <30%
Reason: The LOIs aren’t negotiated properly. The likelihood of pursuing another deal is even less because the experience can be so deflating.
Note: This is why Acquira provides so much support around this part of the journey. Our partners attend workshops, speak with their Success Coach, and interact with a community of fellow AEs.
Timeline
With Acquira: 2-3 months
Without Acquira: 4-6 months
LOI-to-Final Investment Decision (FID)
Once the buyer has their LOI accepted, they will begin working towards their Final Investment Decision (FID).
Taking on ownership of a business is no easy task. There are so many moving parts that you need to consider, and your investment will benefit if you break it down as you would any project. Just because you've come this far in your deal, this doesn’t mean your commitment should be final. There is still time to consider.
The term “Final Investment Decision” is not generally used in business acquisition; it comes from the oil and gas exploration industry and is considered critical before a final investment decision is made. Nevertheless, at Acquira we decided something similar to this process should be an important component of the last mile. The FIDs made in the oil and gas industries can take years to assess and complete, whereas you have most likely spent three to six months looking at the pros and cons of your acquisition. You are not a Fortune 500 company weighing whether to spend billions on a huge project, but your decision is of great import to your own future finances, life experience and – quite possibly – near-term happiness.
After all, taking on ownership of a business is no easy task. There are so many moving parts that need to be considered. During this time, the buyer should conduct a final SWOT analysis to assess the company’s strengths, weaknesses, opportunities, and any threats it is facing.
The buyer will also need to form their acquiring entity, which can range from C-Corporations to Pass-Through Entities like S-Corporations. During this phase, it’s generally expected that buyers will start preliminary work on the people and culture systems that will sustain the company.
This is all in preparation for the buyer’s first site visit. Pre-LOI diligence can only reveal so much of a company’s overall health. When you’re this close to signing the closing documents, it's imperative to visit the location. Through this, you’ll be able to get a feel for the company culture, better judge how the business is performing, and truly assess how transparent the owner has been with their disclosure up to that point.
A site visit will give you an idea of the physical state of the assets including the business’s fleet if it has one. If you are planning an expansion, here is where you’ll be able to see whether the current premises can accommodate it.
It will also provide an opportunity to conduct one-on-ones with current key staff. While many business owners are hesitant to offer this, we will coach you on how to make it happen as it is a necessity.
At that point, you will also carry out a Quality of Earnings (QoE) analysis. It is particularly important to evaluate QoE if you are purchasing a small owner-operated business, because the owner may not have used an accounting professional.
QoE is used to determine whether the historical financial statements used to determine the business valuation are reasonably representative of the current financial situation of the business.
The biggest challenge during this phase will usually be getting a true feel for the company’s culture. This can be done through one-on-ones, but only if the business seller is agreeable. Though, if you take the “Do It With You” route, an Acquira Integrator will accompany you on a site visit in order to help you assess the company's culture and operations.
| The “Do It With You” Option During this stage of the journey, you and an Acquira Success Coach will review the financial results of the due diligence process. Then an Acquira Integrator will visit the business with you. A Success Coach will also guide you through the non-financial diligence portion of the search – things like operations, culture, and marketing. At the end of the diligence process, you will make a Final Investment Decision on whether you want to proceed with the deal or not. |
Associated Costs
The cost of working with Acquira during this stage will be associated with QoE analysis and success coaching fees. If you’re using our services, this will cost $15,000 for QoE and $10,000 for the Success Coach. We will actually visit the business with you to make sure the company will make a good acquisition and ensure that it meets your investment criteria. This totals $30,000 out of pocket. Again though, if it takes two tries we will cover the cost for you – you simply pay us back when your deal closes out of your closing cost fees. Under the Do It With You model, all of your costs will be included in a single $25,000 payment.
Without Acquira you will incur the cost of the site visit. You're also going to want a professional opinion before making a multi-million dollar investment, and this would be in the form of an M&A Advisor. Expect to pay an M&A Advisor $500 to $1000 an hour or 1-2% of the purchase price as a success fee (or some combination of the above). A conservative estimate would be $25,000 in M&A advisory fees in this phase.
The chance of success and cost for LOI-to-FID will partially depend on luck. Sometimes the QoE and site visit uncover things that will kill the deal. This happens fairly often. With Acquira your out-of-pocket costs don't go up when that happens. This makes doing deal number two much more likely. Deal number one might actually be less likely to happen with Acquira, but that is a good thing. Since we actually go to the business we can see issues that you may know exist and advise you not to close the deal.
Chances of Success
Accelerator: 68%
Reason: We can guarantee you have better counsel, which increases your odds.
Do It With You: 100%
Reason: If at any point a deal falls through, the Do It With You program will begin the search again at no extra cost.
Without Acquira: 60%
Reason: Your counsel likely isn’t as good at working through this section. If you find something during the diligence phase that impacts your offer, you’ll need to renegotiate the price. If the seller doesn’t accept this new offer and your counsel isn’t adept enough to deal with them, the deal can fall through.
Timeline
With Acquira: 45 days
Without Acquira: 45 days
FID-to-Close
Here your main costs are an M&A advisor and legal fees. This is when you will finalize your funding sources. For most business buyers this will include an SBA loan but may also include seller financing, an equity investment, or a loan from a commercial bank.
| The “Do It With You” Option If you take the Do It With You path, you will pay a fee of $25,000 to Acquira which will cover all of your advisor and legal fees. Your Success Coach will provide support in order to identify potential financing alternatives, including strategies to negotiate and secure financing, and reviewing business plans and financial models for lenders and investors. Your Success Coach will also review all all key documents between you and the seller. |
After you’ve talked to the lenders, the lawyers, and the CPAs and collected all of the information and data, you’ll have to make a final decision on what lender you will use. Once you’ve decided on what lender you’ll go with, you’ll need to ensure that you’re pre-approved for a loan.
At that point, your legal counsel will begin drawing up the Asset Purchase Agreement, bill of sale, employment agreements, seller financing agreements, and other closing documents.
Once the APA is signed, you are now the owner of the business and it’s time to look toward growth!
There are many challenges during this stage, especially those trying times when you need to pore over important legal and financial documents. Your time will also be doubled if you’re doing this on your own. With Acquira it can take about three months to work your way from FID to Close. Without Acquira, expect it to take about six months, usually because it can take multiple lenders and an additional $375,000 in interest because you got worse rates.
Associated Costs
Without Acquira, in this phase you should expect to pay around $5,000 in banking fees, $25,000 for legal fees, $25,000 for M&A advisory fees, and an additional $375,000 in interest because you got worse rates. Of course, that last fee will be spread out over the term of the loan. So if it's a ten-year loan, that increases your total costs in the first year by $37,500.
With Acquira, the cost of your financing will be lower because of our relationship with banks. Our training also encourages you to shop around for different lenders. This will likely result in you putting 25-30% less of your cash down and result in 1.5 points less in interest. A significant saving.
With Acquira's Do It With You option, your fee of $25,000 will cover all of your advisor and legal fees.
Chances of Success
Accelerator: 100%
Reason: We have never had a deal fall through after the Final Investment Decision was reached. This can take slightly longer than it would under the Do It With You option.
Do It With You: 100%
Reason: The Do It With You option is designed to find and close a deal for you that matches your unique investment thesis, faster and easier than any other option on the market.
Without Acquira: 50%
Reason: The SBA acceptance rate is only 25% at large banks and 49% at small banks.
Note: Acquira’s SBA acceptance rate is 100%.
Timeline
With Acquira: 3 months
Without Acquira: 6 months
The Final Tally
While calculating an exact tally of costs is impossible, these numbers have proven to be more or less accurate and are largely indicative of what an average business acquisition looks like.
Other Advantages
Working with Acquira, you also likely have a larger deal in which cash flows double and the interest rates are decreased by approximately $53,000.
Our Do It With You option costs more than our Accelerator (or Do It Yourself) option, but it is still significantly cheaper than if you were to go it alone.
If you are working with our equity fund, the fund can cover a portion of the fees in addition to up to 80% of the equity.
Conclusion
With Acquira, you pay $8,000 in order to have, statistically speaking, a 58% chance of bringing a deal to the IC. This is entirely dependent on your own effort. If you feel you can't put in the approximately 20 hours of learning and analysis it takes to get to an IC, this is likely not the path for you.
You then have the option to pay $5,000 to help bring that deal, or another deal, all the way to LOI. Because this $5,000 covers any number of deals, and our search team prioritizes searches for AEs that have brought a deal to the IC, the percentage chance is 100% as long as you still put in the time (roughly 5-10 hours for each IC after the first).
Once a deal is under LOI, you have the option to pay $30,000 to truly determine if this is a deal you want to purchase. This fee covers a detailed dive into the financials of the business by a QoE professional, as well as a physical site visit and interview of the seller and staff by yourself and an Acquira integrator. In approximately 30% of cases, this process reveals something that encourages the AE to pull out and abandon the non-binding LOI. Acquira helps cover this risk by covering the up-front cost of a second QoE and M&A advisory, and integrator visit for the next deal (just pay us out of the businesses' profits once it closes).
Your final closing costs will be legal fees and coaching around the financing. This totals $30,000 with Acquira.
| The “Do It With You” Option If you decide to work more closely with Acquira's team and pursue the “Do It With You” option, the total cost is $100k, paid in three installments. The “Do It With You” finds a deal for you and allows you the freedom to concentrate on your other affairs and prepare for your future as a business owner. Because Acquira's team does the hard work of finding, vetting, and presenting the deal to the Investment Committee, you save hundreds of hours of work (and the associated costs) that you can instead put toward planning for the business's future. |
The Final Math
The average business we help purchase with AEs is making $1 million in EBITDA and sells for $3.5 million, including working capital. The average down payment is 10% or $350,000. So for $418,000, you would own 100% of a business that is clearing $600,000 of free cash flow per year after debt service. In addition, the business is paying your salary as its General Manager. You can pay a premium for our Do It With You service to ensure you close a deal faster and with less work required from you so you can concentrate on your plans for helping the business grow and succeed.
If you choose to work with our equity fund, your down payment could be as low as 2% of the purchase price (the equity fund can cover up to 80% of the downpayment), or $70,000. The total supporting cost goes toward equity in the business, so you are ostensibly paying $70,000 for the business. Your upfront costs are then refunded through the terms of the loan or from the business after close.
If you choose not to work with Acquira’s equity fund, those upfront costs are refunded after the deal closes. This can be done either by working them into the terms of the loan, or the company can refund it out of the profits as a business expense, and therefore a full tax write-off.
If you’re interested in hearing more about how Acquira can help in your acquisition journey, simply fill out the form below in order to schedule a call with one of our representatives. Our next cohort is filling up fast and space is limited. We look forward to hearing from you!
Key Takeaways
- Working with Acquira you are 20-times more likely to close a deal in approximately half the time (9 months vs 16.5 months) and for less money
- Working with Acquira can provide better seller financing terms.
- We provide accountability and support throughout the acquisition process, ensuring you complete the journey faster than you would if you were doing it on your own.
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