Typical IB guy wanting to be the client after working in client services for a few years but humor me, please.
I've been working in sell-side M&A for a few years now and getting serious about next steps for me/my career but have always had more of an entrepreneurial bent. I don't work for a name brand IB but truly do like working in the lower middle market due to the extremely lean deal teams and type of clients we work with - usually family owned and often times not terribly sophisticated. Most deals I work on are in the $20-75MM range (some smaller, some bigger) but a few have involved active, smaller roll-ups as part of the deal so I have some exposure to smaller transactions in the $1MM range.
In my next job I am primarily searching for something with a heavier focus on operations, operationally focused PE/micro PE, maybe a start-up, etc. Somewhat flexible. I am in my mid/late 20s now though so would like to pivot to something more entrepreneurial before I turn 30 (just to throw a target out there and working backwards) and during my next job I'd also like to start turning over rocks for a small business to acquire.
The $500k - $2MM is full purchase price using financing, not the equity check I'd be writing. Willing to do SBA, personal guarantee is not ideal of course but it doesn't completely terrify me and if not now, when? I am also willing to make a minority investment and help scale a business, might be more realistic with a small check size and limited operating experience.
Some main industry buckets I am looking at includes:
- Service businesses. Maybe not ideal for scaling but one of the "easier" businesses to get into from a barrier to entry point of view and for me to learn the ropes as an operator so to speak. HVAC, lawncare, cleaning company, etc. I have limited M&A experience in this (HVAC/plumbing deal that did not close due to seller walking away from offers…but I was a little surprised at the multiples we were getting) but have talked independently with a few entrepreneurs in the space. I was on the "Sweaty Startup" bandwagon before he really blew up on social media.
- Chemical products. Worked on a deal in the space, loved the company, margins great, plenty of end markets to target, etc. I do not have a science background through so having someone with technical chops would be necessary.
- Food products. This would be the "dream" for me – combining my experience (decent amount of my closed deals are F&B) and something I could get passionate about, healthy food moderately priced/trying to fight obesity in America. Pretty competitive space – maybe better for a second venture after I have more entrepreneurial reps but this is an easy space for me to talk with current business owners due my deal experience.
- "Roll-up candidates". Covers a few different industries and I have some deal experience in the space. Something like dental clinics/DSO, auto repair shops, maybe funeral homes. Other industries would work but maybe tough to do with my check size (and rollups are tougher to implement in practice vs. these whiteboard exercises I am doing). Would need to have co-investors, additional capital to properly execute...or generous seller financing.
- Other industrial. I guess just a catchall for those random, "boring" business that make machined components (as an example) or other manufacturing scattered throughout the midwest. Not an engineer so will need to work around that somewhat.
This category is my Midwest IB experience screaming through, haha!
Those are my high-level buckets I have been thinking about – good business models that would fit my capital constraints and factoring that I am not an engineer/that technical (so not the next Zuck but also not trying to buy a restaurant on Biz Buy Sell dot com for $180k, ha).
What industries/business should I also be thinking about? Open to consider almost anything at this early stage of my search before narrowing down…figure WSO might be a good place to brainstorm, even if Wall Street is stereotyped at being terrible at idea generation.
Also open to critiques of the above industries and my plan in general. I guess I am essentially trying to start my own search fund or do a "real world MBA" (I think coined by Tim Ferriss?).