A Behind-the-Scenes Look at What a PE Firm Looks for in a B2B Company

About the Episode

What is it like to source M&A deals with a focus on B2B software technology companies? Mahmoud Hmouz answers this question and many more as he discusses what a PE firm looks for when sourcing companies to consider for acquisition. He offers insights into the metrics a PE firm first looks at, gives advice for entrepreneurs on preparing for a “first date” conversation with a potential investor, and the importance of being honest about what an owner wants and mapping that to what an investor has to offer.

“An owner has to have the mindset of experimentation to scale revenue. The worst thing you can do is be set in your ways, doing things the same way as 10 years ago, but expecting different results.”

Mahmoud Hmouz

What You’ll Learn

  • Success Stories: Discussion on how this PE firm impacts the companies they have acquired with examples of some of their platform and tuck-in acquisitions.
  • Enticing Numbers: Details on some of the key metrics private equity looks for in businesses, including growth, retention, and profitability.
  • Good First Impression: Tips on what common mistakes sellers make in initial conversations that can waste time or damage relationships and how to avoid them.
  • Growth and Evolution: The importance of experimentation, open-mindedness, and addressing inertia to continuously improve growth strategies.

Topics Covered

What is the definition of an operating investor? How does this model of investing differ from the approach of a typical private equity firm? [5:35]
What is the hardest part about sourcing potential acquisition companies? [10:35]
How is a “good” company defined for possible acquisition? [15:25]
Are there general characteristics that define the B2B space for M&A deals? [18:45]
How can a company fight inertia to grow beyond its standard thought processes? [27:45]
What are the most common mistakes that sellers make when they have initial conversations with a potential PE acquirer? [31:20] 
How can an owner build a relationship with a PE firm from the beginning? [35:45]
What is the primary piece of advice to offer for entrepreneurs? [48:20]

“Is there an opportunity for us, as a PE firm, to run this company better than it is being run today? That’s the question we are trying to answer in the initial qualification calls.”

Mahmoud Hmouz

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Meet Our Guest

Mahmoud Hmouz

Mahmoud Hmouz

Vice President Investment Development | San Francisco, California

At Turn/River Capital, Mahmoud sources, evaluates, and closes B2B software deals, applying a wealth of experiences to his work in M&A. Before joining the software industry, Mahmoud built a biodiesel company from the ground up, producing 10 thousand liters daily. In his next role, he implemented a multi-million dollar project across all core departments at Hikma Pharmaceuticals. At software firm zulu5, Mahmoud helped lead the company’s expansion into the Nordics, then went on to build the sales department as Head of Sales at GrowthGenius and doubled the size of Constellation Software Inc.’s smart manufacturing software portfolio.

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