What a Buyer Looks for When Acquiring a Middle-Market Business

“There’s a lot of information that comes out through LOI conversations and a deal tends to die two or three times during this process. It can be a very exhausting emotional aspect for the owner that they may not have prepared for.” – Malcolm Peace

Guest Profile

Malcolm Peace is president of Tsetserra Growth Partners (pronounced sit-Sarah), an investment firm in Texas that works with well-established businesses that have owners just about to retire who still want to see their businesses thrive. They identify profitable small businesses with revenues from $3.5 million to $12 million in stable industries, such as food & beverage, hospitality, manufacturing, logistics & distribution, and more. Malcolm and his team help rewrite the operating playbook of a company while maintaining the owner’s culture with a strong succession plan.

Malcolm has a B.S. in Psychology from James Madison University and an M.B.A. from the University of Virginia Darden School of Business.

• Company:     Tsetserra Growth Partners
• Location:       Texas, USA
• Contact Info: LinkedIn | Email

Topics Covered

• What does Tsetserra Growth Partners do? [3:03]
• What makes a company interesting as a candidate for acquisition? [7:55] 
• What adjustments can be made to a business to help lower-middle market companies grow? [9:02]
• Are there challenges that exist for business owners who tend to work in the business rather than on the business? [14:11]
• How can an investment firm create alignment between owners and employees? [20:16]
• Is there a framework to help mitigate risk in an acquisition? [22:44]
• What is the number one mistake that business owners make? [29:58]
• How prepared are most business owners for due diligence? [32:03]
• What is the purpose of reps and warranties from the buyer’s perspective? [37:09]
• What criteria does Tsetserra Growth Partners look for when they are evaluating a business for possible acquisition? [40:35]
• How subjective are the opinions of appraisers? [45:57]
• What are the most important considerations when structuring a transaction? [47:25] 
• How long does it take to close a deal? [52:05]
• Why is it so hard to sell a business? [57:48]
• What is a piece of advice for middle-market business owners? [1:05:07]
• Tsetserra Growth Partners is hiring Operating Partners, and this is what qualifications they are looking for. [1:06:51]

Learn More

• Negotiating the Letter of Intent
• M&A Due Diligence Preparation
• M&A Reps & Warranties
• Reducing Concentrations of Risk Before Selling Your Business
• Earnouts When Selling or Buying a Business | Complete Guide
• M&A Seller Financing: A Complete Guide
• Non-Disclosure Agreement (NDA) | A Complete Guide for M&A
• Allocation of Purchase Price & Taxes When Selling a Business
• Preparing Emotionally for the Closing

Resources Mentioned

• The E Myth: Why Most Businesses Don’t Work and What to Do About It by Michael Gerber
• Work the System by Sam Carpenter
• The Lean Startup by Eric Ries
• Measure What Matters: OKRs: The Simple Idea that Drives 10x Growth by John Doerr

Listen to Other Episodes

• The Private Equity Toolkit
• Selling Your Company to a Private Equity Firm vs. a Family Office
• What Exactly is a Rollover and Why Should a Seller Care?

Acronyms or Terms Used in This Episode

• OKRs: objectives and key results
• 1031 Exchange: A way to postpone capital gains tax on selling a business or investment property by using the proceeds to buy a similar property.
• Commitment Letter: A formal document from a lender stating that the buyer has been approved for a loan.

To suggest guests, topics, or questions for future podcast episodes, contact Morgan & Westfield