Eric Van Dam
speaker
94 appearances
1 recordings
1 series
first heard Nov 2024
last heard Nov 2024
Eric Van Dam’s voice in public audio — every appearance, attributed to the second.
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Appearances
We may get 30 first round bids. We need to figure out who are the top five to 10 investors or buyers for that business to come in to meet the management team. So as investment bankers and advisors, we're really narrowing the funnel of who are the most qualified and best partners to meet the management team at the next level of the process.
Exactly.
You know, it's interesting. Back in 2015, when we did our first residential HVAC deal, you know, there was a number of private equity firms that, you know, kind of had a knock on residential HVAC. It's not scalable. It's too unsophisticated. It's too blue collar. Really, that was the opportunity. But I think in a lot of respects, Service Titan kind of revolutionized the industry.
by giving companies data to make more data-driven decisions throughout the organization, really looking at your KPIs to really drive the business. So whatever ERP or CRM system that you are on, being able to have the data to make data-driven decisions on how are you going to optimize the performance of the business.
So if you're not getting the amount of leads and kind of filling the capacity that you need for the day, Do you give your sales reps a little bit more flexibility to offer more discounts to make sure that they can fill the board? Or if you're not getting the leads, do you need to put your foot on the accelerator and spend more marketing dollars to drive some of those leads?
But being able to make real-time data-driven decisions is absolutely critical throughout your organization.
The other thing that I would say too is, and not all private equity firms are created equal. There are others that can add more value than certain firms. But Tommy, one of the things I respect about you a lot is you're humble enough to say, I don't have all the answers, right?
And you always want to surround yourself with who's the best marketing person, who's the best HR person, who's the best technology person. Well, private equity firms have a huge network of resources. And so if you can partner with the right private equity firms and create they can surround you and your management team with the right resources to take the business to the next level.
I mean, that can be enormously powerful in helping you build tremendous equity value, helping your business just become more valuable in the valuation multiple that you may get, because maybe you decide, hey, I'm going to become more tech enabled, and that's going to drive a higher valuation multiple based on what type of technology you implement into the business or how you're going to build the business going forward.
There's ways that private equity firms who all they do is buy businesses and grow them and exit them. You may have a challenge that you're going to run into that you haven't had to deal with before. But guess what? The private equity firms, if they've been doing this a long time, they've probably had to help out other businesses out as well.
And so they can be a tremendous partner to you and just helping you navigate some of those strategic initiatives.
I think the first thing we do is we always ask our clients, what are your goals and objectives overall in the process? And then we will design the process to really achieve those goals and objectives. So, for example, we may have a business owner who is 65 years old and is just ready to retire and wants to exit the business.
In that type of scenario, that's probably a better fit for a strategic buyer. just because private equity firms really want to see business owners roll equity, continue on with the business. And so if somebody wants to exit, they may be better positioned for a strategic buyer.
But if somebody is young, hungry, wants to roll equity, wants to be a platform, wants to pursue an add-on acquisition strategy, that could be a better fit for a private equity firm. And so we really try to understand those goals and objectives, and we will design a process to achieve those goals.
I want to be a platform.
Yeah, Rob's exactly right on those comments. The other thing, too, is those groups, they have enormous buying power. So overnight, they're able to, given their size and scale, whatever company that they would kind of tuck into their organization, without a doubt, they have to be buying better than what that organization is on their own.
And in a lot of circumstances, Rob and I will see larger platforms that are able to buy 30 to 40% better in pricing than where maybe a 5, 10, 15, $20 million EBITDA business is able to buy on their own. And so There are efficiencies that can be gained, but there is a much higher bar in today's market for level of integration, as well as what is your value creation playbook?
Are you just financial engineering and kind of throwing a bunch of companies together? Or do you have a real value creation playbook on how to buy a good business and make it great by helping it improve revenue and improve EBITDA? And if so, that is what the private equity firms are really paying premium valuations for.
Yeah, that's exactly right. And Tommy, as you may recall, in your process, what we did is we created a KPI data book for the private equity firms to really unpack how is the revenue growth being driven? Is it by pricing growth? Is it by volume growth? Or is it by mix? And one of the things is different investors were looking at the average ticket growth.
We really had to unpack that so that different private equity firms really understood that wasn't just purely inflation. In fact, when you really unpack the data in a lot of detail, you guys did a great job driving the mix shift up in the business. And so there was a couple of different things that A1 was doing. Three to five years ago, you guys used to just sell the garage door.
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