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Tips on How to Search During a Downturn - Shared screen with speaker view
Will Bressman
44:41
Hi everyone -In case you arrived late, if you have questions please post them in the chat. As we work our way through the prepared questions, I'll help moderate any of your Q&A
Jason Pananos
55:12
Ya'll are quiet. Don't be afraid to start throwing out questions...…..
Nate Abebe
55:19
If not already mentioned already, can we talk about valuation expectations in the near term for both sellers and investors
Nick Seger
56:53
When we do start reaching back out to owners with cold emails, what type of messaging resonated best with sellers? Especially when not trying to come off as a shark in bloody waters.
Daniel Hertz
57:23
Any advice on communicating and managing seller expectations on later stage deals that have been put on hold due to the macro environment / financing environment? How do you maintain those relationships?
Isaac
57:24
Lucas/Ryan - I'm curious if you had to make any terms changes as you transitioned from debt/equity mix to equity only. How did investors respond?
DannyPayne
58:16
Question for Jay and Jason - Did you already have an M&A pipeline/strategy going into the deal, or did that strategy develop post-acquisition ?
olifield-johnson
59:05
Just to expand on Nate’s question: we’ve spoken a bit already about the lag in multiple discounting in private businesses vs public, however can you talk more about the EBITDA basis on which valuations are done. Are LTM financials still relevant or should we now move to doing some valuations based on forecasts?
Justin Gilson
01:01:04
Are you aware of any aspects of the CARES Act that could benefit searchers as it relates to conservation of search capital (e.g. wage/rent subsidization through SBA loan, unemployment benefits, etc.)?
Jonathan Schatz
01:01:46
What do you think of raising additional working capital for a deal to increase margin of safety during this period, especially if there's investor appetite?
Connor's iPhone
01:02:10
If private market sellers don’t adjust prices down as quickly, does the opportunity to buy at a lower multiple actually exist?
Clayton Sachs
01:02:44
Love the idea of becoming an expert on SBA 7a program as an excuse to follow up with sellers. "Hi CEO, Following up to the email I sent a month or so back. While I know now probably isn't the best time to talk about potentially selling your business I have been doing some research on the 7a program and could relay what I've learned. Otherwise I'll plan to just follow up in a few months..."
John
01:08:10
What is your advise for searchers in their final 6-10 months of search? Should we also consider raising additional capital from our investors?
Jason Pananos
01:10:51
To answer Danny's question - we did not have a consolidation thesis going into our deal. It formed over a period of time. Took us 2 years to do our first tuck in, probably 4.5 years before we really stepped on the gas pedal with regards to M&A.
Andrew Ellerhorst
01:11:00
For someone with a deal in diligence or under LOI, how much balance should be given between getting the deal done and continuing outreach. Especially given the potential for liquidity to change the capital/debt market.
DannyPayne
01:13:32
Thanks, Jason very helpful
Ryan
01:16:06
Schatz - I would definitely consider that. Cash is king, queen, jack, and jester. It's expensive, but you're right to reconsider how much working capital you'll need and make sure you don't put yourself in a position where you're banking on raising additional capital to fund operations. As Coley mentioned, liquidity is currently still there in a way that it wasn't in 2009. But that could change.
Paulo Molinari
01:18:54
Any different or additional recommendations you all would have for searchers outside of the US?
Dan Doud
01:19:59
if liquidity remains as available and willing as it has been, what is going to bring the multiples down?
Jason Pananos
01:20:44
To answer Andrew - it is always to the case that you should continue sourcing as much as possible when you are under LOI. That is especially true in the current environment. Broken deal % will go up. So keep sourcing. It's hard, but must be done in my opinion. GOOD DECISIONS COME FROM GOOD OPTIONS.
Chris Reese
01:21:05
How do we differentiate between businesses facing short-term stress and a downward spiral?
Lucas Braun
01:22:14
Dan, I would expect earnings and earnings growth to slow
Chris Power
01:22:54
Availability of debt in general is relatively correlated with multiple contraction as far as I understand it
Vik Bakshi
01:24:09
If you have a deal approaching LOI, is it better to hold off? I'm concerned about the logistics around initiating a due diligence. In a practical sense, neither me nor professional services can travel to visit a business/owner in order to actually perform the diligence.Additionally, if you are working on LOIs based on financials from 12/31/2019, does it make sense just to stall deals until you see how they play out over the next few months?
Jackie
01:28:15
Great question Vik
Chris Reese
01:28:18
Don't think my sound is working
Chris Reese
01:28:28
Can you smell desperation from sellers also
Chris Reese
01:28:38
Not just numbers
jeffrey conn
01:29:56
Is anyone in the investor community open to funding distressed opps right now - obviously thinking more about busted cap structure scenarios where the businesses are fundamentally solid
Bill Igou
01:33:30
We've talked about the importance of search runway. We've also noted that some industries (e.g., software) will be less affected. For industry-focused searches in recession-resilient industries, do you think it's as important to maximize runway as it is in other searches? Or do you think the deal pace in the recession-resilient industries will only slow down moderately, if at all?
Isaac
01:35:46
Coley or Others - Can you share a couple examples of businesses that have been surprising in how they have not been resilient? Either related to this crisis or other macros issues
Tony P
01:36:53
Probably not going on a cruise but
Lucas Braun
01:37:24
totally agree Tony...
Will Bressman
01:37:26
I was going to make the joke Tony, but feel like I used of my quota with the beer
Chris Power
01:37:30
lol
Ryan
01:37:46
Neil - WHY ARE YOU NOT SOCIAL DISTANCING?!?! Go home.
Neal Jacobs
01:43:01
Ryan, it is called a virtual background, a tech feature of Zoom.
Coley Andrews
01:44:14
Isaac - A couple examples: a B2B contractual recurring revenue logistics business, but, it’s end customer base is 55% retail and totally shut-down. Dental businesses are totally shut-down as well (consumer so no surprise, but this was an unexpected risk for the dental thesis…ie total economic shut-down). Alarm monitoring businesses you would also think are super durable, and they can be, but again if the end customer base can’t pay, then they won’t pay and cash gets tight fast given the use of leverage to grow those businesses. Hope that helps.
Isaac
01:44:59
Thanks Coley!
Paulo Molinari
01:45:23
Any different recomemndations for international searchers?
Paulo Molinari
01:45:26
*recommendations
GJ King
01:48:28
Get ready to eat that glass!
Jackie
01:48:36
Ryan, thanks - I was thinking about what to make for dinner... glass.
Ryan Lechner
01:52:38
What’s your battle armor, Ryan?
Will Bressman
01:53:16
I'll start helping when I wipe the tears out of my eyes!
robaguirre
01:54:01
SO GOOD!
Jackie
01:54:34
Thank you - great session!
Vitten
01:54:40
THANK YOU!!!!!!!!
Bryson Smith
01:54:43
Thanks to all the operators, investors and panelists, this was great!
Chris Power
01:54:47
hell yeah do it again
Daniel Hertz
01:54:48
Thank you all!
reagan smith
01:54:50
YES
Ryan Lechner
01:54:50
Yes! Thank you guys. Awesome stuff.
Vitten
01:54:52
YES - super helpful!!!!!
jake
01:54:55
Definitely more
Arjun Singh
01:54:55
Yes
Jackie
01:54:56
Yea
MP Spierer
01:54:57
Very helpful, thank you!
Alyssa Denning
01:54:57
Thanks everyone! Would love a follow up
Vineet Rajan
01:54:58
Thanks. This was awesome
Adam Aisen
01:54:58
would love a follow session. this was great. thanks!!
Richard
01:54:59
Thanks everyone, really useful.
Chris Reese
01:54:59
Definitely
LucasDolabela - Horizonte Capital
01:55:01
Yes
John
01:55:01
yes please
RyanC
01:55:01
Yes very helpful
Isaac
01:55:03
Yes
Rodrigo Arellano Sada
01:55:04
Very useful!
franklin
01:55:04
Yes!
Bill Igou
01:55:05
Fantastic! Thank you!
peter b
01:55:05
This has been very helpful, yes I'd definitely like to see a follow up
Eddy Zakes
01:55:06
Yes
Vineet Rajan
01:55:07
When’s the next one??
Paulo Molinari
01:55:07
yes
Mark
01:55:08
Yes
JP Gauthier
01:55:08
yes!
Oca Capital
01:55:10
Yes
Nico Gimenez
01:55:11
Si
narayanraj
01:55:12
Thank you all!
John Shoaf
01:55:12
Hell yeah
robaguirre
01:55:14
ya
brian
01:55:14
Yes, please
Dan Freeman
01:55:15
yes absolutely—this has been great!
jameel
01:55:16
Yes
B.J. Jacobs
01:55:17
Super helpful
Winston Smith
01:55:21
thanks all
Rodrigo Arellano Sada
01:55:30
This was great!
Nima Safabakhsh
01:55:31
thank you for organizing!
Asad Abdulla
01:55:34
Definitely!
Jay Davis
01:55:38
Ryan, two bourbons before the next pep talk!!!
Kirk
01:55:47
Yes. We appreciate the leadership here. Thanks for making the time. Please keep it up.
diana
01:57:56
Yes please! : )
Ryan
01:58:11
Thank you GJ and Will! We appreciate you putting this together. You guys are the best.
Nicholas M. Browner
01:58:14
thank you, this was very helpful
John Conard
01:58:20
Thanks you all!