unsolicited advice for where to make a lot of money
there are so many shitco software / hardware tech companies with so many random ass problems with sales, GTM, product, architecture scalability, etc. it's insane. These are companies that go +/- 10% flat EBITDA and just need someone to clean house and get a lot of attention from a recruiter and PE firm. With a little TLC you can buy these babies for like low single digits revenue and then flip them on 30% margin and let somebody else worry about the painstaking bullshit of eking out that list bit. Seriously it's like shooting fish in a barrel. Growthy, but needs to clean house, not too messy of a cap table, they're literally everywhere and the number is only growing. I share this because I got out of this specific strategy but guys go nuts here if you're VP level just go make your career flipping these
Finance bros and thinking they can do operations, name a more iconic duo.
Not operations, doing basic analysis to identify value levers, bringing in good operators, and bringing in good consultants, and driving the management team hard with healthy equity
investors don’t do operations, you want to do operations, go hire a handful of capstone guys
Where do you get these 'good' operators and 'good' consultants and do you know how much they cost? Billion dollar funds struggle to find good management, just look at the CEO carousel at 80% of software PE PortCo.
Sure the job of the investor is to identify opportunities not execute on them but how can you be credible at all w/r/t your ability to identify opportunities when you have no idea the actual work that goes into building product, GTM, or hiring? My MDs rely on operating partners all the time to provide input on our value creation plan on every deal and these are people who have spent 20+ years in software investing.
Have been / am doing this strategy. Lol it's not that easy, a lot of execution risk you've just glossed over.
Where are good / reliable places to find software tech companies like these to purchase? Do you have some recs beyond places like bizbuysell?
Local business brokers who have strong contacts to owners who may consider a sale. I do think OP is oversimplifying the process and making it sound easy but does have a point with a lot of crappy run companies would be very attractive assets to acquire and eventually flip. A lot of these deals will be off-market and if you know strong business brokers - you might be able to convince one of them to sell their company. Would be a lot like a search fund and may take a few years to close a deal. However, good luck on getting the current owner agreeing to a reasonable sale price especially given the interest rate enviroment if the purchase is funded with debt.
As someone else mentioned, there's lots of execution risk. Speaking from a tech corp dev side, such investments can go wrong. I know it's a slightly different scenario, but even in the tech space there are large orgs that will acquire such small tech companies to integrate their products etc but more often than not such acquisitions don't go perfectly well at the integration stage. I wouldn't call them a distaster, but definitely underperform compared with financial models. And it's the common knowldge, the same would appy to a PE scenario.
Having been at a company that did this and saw the valuation tank after the acquisitions, this is very true. Also unfortunately even after a series of a few acquisitions, some of these new business unit were still very siloed from other parts of the businesses. As a result, the company had a lot of layoffs due to a ton of bloated operational costs.
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