Roll-ups are reshaping industries. Learn from Jordan Dubin how buyers evaluate businesses and drive value through consolidation.
Weekly Pilot Briefing
This week’s episode follows up on the episode with Carrie Kelsch (A+ Garage Doors) from a few weeks back, but this week John speaks with Jordan Durbin, who is part of the team at Guild that acquired Carrie’s company. This episode is worth a listen for a couple of reasons. First, as a business owner, it is essential to understand the appeal and value of your company in the eyes of a potential acquirer. It is also good to recognize why specific industries are consolidating and where the potential for “multiple arbitrage” exists.
Jordan does a great job of explaining how consolidation works for both the buyer and seller standpoint and stresses that a key phrase for his team is “if you want to go fast, go alone, but if you want to go far, go together.” The potential for multiple expansion, operational efficiency, and cost savings at scale are all great reasons to consider consolidation and potentially working with private equity. Listen to the full episode to learn more.
And, for those of you looking for investors now or in the future, you may also want to listen in at the 10:00 minute mark, when Jordan states that he believes that “there is too much money in the world and not enough good investment opportunities.” How do you gain access to it? Focus on these three things:
A thoughtful investor thesis.
A built-out pipeline.
A 30/60/90-day action plan.
He says if you build out this information and present these items to investors, it’s tough for them to say no!
About this Episode
Inside Private Equity’s Roll-Up Playbook. If you’re a business owner, chances are buyers are considering your industry for a roll-up. From veterinary clinics to auto body shops, pharmacies to advertising agencies—you name the industry, there’s probably a private equity firm looking to roll it up.
This week’s episode is part of our Inside the Mind of an Acquirer series, where we dive into the strategies and motivations of different types of buyers. Jordan Dubin, co-founder of Guild, shares how he raised $35 million to create a roll-up of garage door companies and reveals what he looks for in a potential acquisition.
You’ll learn how to:
Spot the hidden factor that makes your business irresistible to buyers.
Avoid the single biggest mistake owners make when negotiating with a roll-up acquirer.
Leverage a “second bite of the apple” to maximize your financial outcome.
Capitalize on the game of “multiple arbitrage” to maximize your value.
Expand your business without undermining your value by succumbing to the “conglomerate tax.”
Know if your business is a candidate for a roll-up—and what that means for you.
Gain insight into why roll-ups are dominating fragmented industries like yours.
If your industry is on the radar of acquirers—or might be soon—this episode gives you the inside track on how they think and what they value.
About Our Guest
Jordan Dubin
Jordan Dubin is the visionary co-founder and CEO of Guild Garage Group, a company dedicated to transforming the automotive repair industry by empowering independent garage owners.
With a focus on operational excellence and customer satisfaction, Jordan has built Guild Garage Group into a leading network of service providers, offering cutting-edge tools, resources, and support to help garages thrive in a competitive market.
Under his leadership, the company has become synonymouswith quality, innovation, and a commitment to elevating the standards of the industry.
Definitions
Due-Diligence: This is a comprehensive appraisal of a business or investment undertaken before a merger, acquisition, or investment. It seeks to validate the information provided and uncover any potential risks or liabilities.
Earn-out: This is a financing arrangement for the purchase of a business, where the seller must meet certain performance goals before receiving the full purchase price. It reduces the buyer’s risk and aligns the interests of both parties post-acquisition.
Roll Over Investor: A rollover investor, in the context of selling a business, refers to an individual or entity that rolls some of their proceeds from the sale with the buyer. This strategy allows the seller to defer capital gains taxes and potentially leverage their expertise or resources in a new venture.
Debt Coverage Ratio: The debt coverage ratio is like a financial health check for a small business applying for a loan from a bank. It shows whether the business earns enough money to comfortably cover its debt payments.
In simpler terms, it’s a way for the bank to see if the business can afford to pay back the loan. If the ratio is high, it means the business is making enough profit to easily handle its debts. But if it’s low, it could indicate that the business might struggle to make loan payments, which could make the bank hesitant to lend them money.
Let’s say there’s a small bakery called “Sweet Delights” that wants to expand its operations by taking out a loan from a bank to buy new equipment. The bank wants to make sure Sweet Delights can afford to repay the loan, so they calculate the debt coverage ratio.
Sweet Delights’ annual net income (profit) is $50,000, and they have annual loan payments of $20,000 for existing debts.
The debt coverage ratio formula is:
Debt Coverage Ratio = Net Operating Income / Total Debt Service
In this case: Net Operating Income = $50,000 (annual profit) Total Debt Service = $20,000 (annual loan payments)
So, the debt coverage ratio would be:
Debt Coverage Ratio = $50,000 / $20,000 = 2.5
This means that for every dollar of debt Sweet Delights has, they’re making $2.50 in profit. In simple terms, the higher the ratio, the better, because it shows that Sweet Delights is making enough money to comfortably cover its debt payments.
This would likely make the bank more confident in lending them the money for the new equipment.
Arbitrage: Arbitrage refers to the practice of exploiting price differences or inefficiencies in the market to generate profits. In the context of selling a business, arbitrage may involve identifying undervalued businesses or assets, acquiring them at a lower price, and then selling them at a higher price to realize a profit.
This could involve various strategies such as purchasing distressed businesses, improving their operations or market positioning, and subsequently selling them at a higher valuation.
Want to dive deeper into your exit planning?
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