[00:00:04] Speaker A: Hello and welcome everyone. I'm Peter Lehrman and this is Masters in Small Business M and A. This show is an ongoing exploration into the vast and undercovered world of small business M and A, where we interview both the proven and the emerging owners, operators, investors and advisors whose strategies and methods for transaction success have been put to the test. The show aims to surface the nuanced intricacies, the key ingredients, and the important factors that can improve your decision making in your own journey in the world of small business M and A. This podcast is produced by Axial, an online platform that makes it easier for business owners and their MA advisors to find, research and privately connect with a diverse mix of professional buyers of small businesses. In addition to learning more about Axial, you can find this podcast, show notes, edited transcripts and many other related resources, all for free at Axiol.
[00:01:02] Speaker B: Hey everybody, it's Peter Lehrman. Welcome back. This is Masters in Small Business M and A. It's been a multi week break. Excited to get back into the recording studio. I'm very happy to have Sam Rosati here today. Sam, thank you for giving us some time today. It's good to be with you.
[00:01:16] Speaker C: Thanks Peter. It's an honor.
[00:01:18] Speaker B: So we're going to go really hard and really fast at fencing businesses. Take me through acquisition number one for Perimeter Solutions Group, which is now a fencing business with some real scale to it. Just take us back to that first acquisition.
[00:01:33] Speaker C: It's been a fun ride and it started over four years ago which now feels incredibly fast and yet it's been a lot of activity. But I started with a partner who was an industry vet in fencing and he and I through having met each other here in Florida. He had been in the industry for a long, long time in the material sales side of the supply chain and we met and shot the breeze and realized that we both had some interest in a little area called commercial fencing. It's a contracting business that four years ago nobody was looking at and if they were, they assumed that it was backyard residential fence, which that is not for us for a bunch of reasons. Not to say it's a bad business. There's plenty of sponsors that are pursuing buying builds in resy fence, but for us we were looking at the commercial install side of the industry and it took us about a year. We got really fortunate. My former co sponsor, we're still partners but now that we've recapped with private equity we have a new partner. We got lucky frankly. We were looking for a platform like a lot of independent sponsors do. And part of our strategy is to stay focused in the Sunbelt, although that might expand and maybe we'll redefine that to be something like markets where you can install fence year round, a little broader. But we got lucky and found one right in our backyard in Tampa. That first acquisition, as you know, it's really important. If the first one works, it opens a lot of things up to you as a sponsor. And I think ultimately we acquired or recapped a really great business in West Florida, Defense. We got an exceptional team and I don't know at the time if we knew how great that team was when we partnered with them. Now, three and a half years ago.
[00:03:28] Speaker B: Can you tell me a little bit about just the thesis generation and how accidental versus deliberate it was? How did you home in on commercial fence to begin with? Do you remember those details? And how did you get to a place where you were like, I think this is what I'm interested in. I'm sure you were looking at a variety of things, but how did this one come onto your radar?
[00:03:49] Speaker C: We were, I mean, independent sponsors were always hunting for a thesis. And I would say four years ago too, I was more agnostic. I didn't have as much experience.
So today I feel really comfortable in the blue collar trades and blue collar services, business services.
Four years ago I did too, just less so. But Chris, at the time when we were trying to create the thesis, he was in fence. So it was his experience and he had a lot of visibility into who is buying and building in the fencing industry. And there had been a lot of consolidation even then in the materials sales side of the supply chain, our vendors. And that makes sense, right? They're manufacturing fence or supplying hardware or whatever it is. And that's easier to understand why a roll up of that side of the industry would make sense. It's at the time tougher to imagine that commercial installers could be consolidated. Mostly people think about them as geographically limited and very much being a local relationship business. So that's hard to consolidate over broader geographies. But Chris and I, over, I don't know, a year there, got a lot of conviction around the fact that construction general contractors and property owners who are our customers. Fence isn't the first thing they think about generally. But what's interesting about fence are the things that we liked. You're kind of the first person on a property site when temporary fence goes up. I'm guessing in New York where you're at, you don't have to go very far and you Find a construction site and surrounding it is that temporary fence. So it's like the first thing to start a construction project physically and then at the very end you're hanging gates and you're doing the automation and so you get to be on the construction project the entire time. You can service that customer in multiple areas. And then importantly, in a project based business where it's not easy to rely on repeating revenue, if you can get great customers, whether they're GCs or property owners, and follow them around the country, you can start winning work not just based on price, not just based on the low bid, but on reliability and service and relationship on all those factors. We thought this was more interesting than it could have been, especially if we stay in the Sunbelt and there wasn't a lot of M and A activity. This isn't like residential H vac, plumbing and electrical, right, where everybody's in it. So we thought that if we could be early, we could get our toe in the sand at a lower price and get started. And that's what happened.
[00:06:41] Speaker B: What was the basis for the partnership between you and Chris? It sounds like he was already somewhat in the world of fence. What did he want from you? What was your contribution to the partnership? How did you guys initially decide to work together and shake hands and become partners? What was the deal that was powering the partnership?
[00:07:00] Speaker C: Here was the basis of the relationship. Chris was phasing out of the company he ran for 20 years called nationwide Industries. He was the operator. So you can think about the hat he wore, was the operating partner. He had sort of the operational chops and the strategic vision. My experience as an independent sponsor and self funded searcher was as a deal guy. And so I had relationships and the ability to source opportunities that hopefully landed us something within a year or two. And that proved to be the case. So I was the deal guy, he was the ops guy. And that's as simple as it started.
[00:07:41] Speaker B: I wanted to make sure we just codified that because I do think that there's a lot of conversation in the world of tech startups about how you pick your co founder, but there's not as much of a conversation in the private equity and independent sponsor world about just the co founding relationship between operators and deal guys. And so I think it's an interesting area for other independent sponsors to hear about how you went about having an operating partner day one. That doesn't always happen. I think a lot of times independent sponsors stand up their search and stand up their entities and their effort without an Operating partner. It sounds like you had a different approach day one by working together with Chris.
[00:08:20] Speaker C: I'm not saying that there's a right or a wrong way. If you have some industry expertise as a sponsor, I think you might be able to get away without having an operating partner because you know the inside and out of that industry and the targets you're talking to and you don't ever really know what you're going to get in a CEO, so you better be prepared to have some operational expertise on day one. We got fortunate and got excellent operating partners in our CEO, but we didn't know that that would be the case. So I think we started in a better position and it worked out great.
[00:08:56] Speaker B: I was going to ask, it sounds like the business that you acquired had its own day one team. That was potentially like a big surprise to the upside in terms of competency and ability to scale with the business. What did that lead to for Chris as an operating partner? Were you guys thinking that Chris would lead the business or was he always going to be sort of in an operating partner role? And it was more or less the way you all drew it up.
[00:09:21] Speaker C: It wasn't set in stone. But I think we understood our relative strengths that if he needed to, he would be able to be helpful in the business. And that's definitely been the case. He is able to be more helpful on the day to day op side. I've been able to run small companies in the past through needing to do so as a self funded searcher. That was my upbringing into being a sponsor. But he had more comfort. But we got really lucky. The platform we bought came with a team. They're very young. Young meaning kind of our age, which is different because many blue collar services or B2B services don't come with young, aggressive, hungry, well aligned operators. They tend to come with folks kind of looking towards retirement and they're sleepy and their teams are sleepy and their mentality is sleepy. And that's not at all what happened. So the group that we recapped to start, all of the main folks are still with us and most of them have elevated with us as we have grown a ton. So what that allowed Chris and me to do is not have to be in the business so much. It allowed us to be able to think strategically, work with all the various parties you work with, whether it's capital, partners, lender. We were able to chase deals right away because the business was growing and doing well and that is a huge benefit. Some of this is fortune and that was Definitely one of the fortunes we had early on.
[00:10:56] Speaker B: Did you assess the team that way prior to closing? It sounds like some of it was fortune, but some of it may have been that you just assessed the team as being early in their careers. And that was pretty exciting. Part of the deal before you even wired the money and signed the documents.
[00:11:14] Speaker C: It was definitely a huge part of it. When you get into the sponsor business, you realize it's all about people in commercial fence. Most contractors around the country are run by folks that have been doing it a long, long time. So we knew right away when we saw a team that was as young and aggressive and educated, well aligned, we got very fortunate and pursued it hard because most of the folks we talked to aren't in that situation. They're older. Although what's funny is now looking back, most of our now partners who we've acquired are relatively young. We didn't expect that.
[00:11:54] Speaker B: We talked before pushing record about five add on acquisitions that you made in the last four years above and beyond the original acquisition itself. You want to go through a couple of those. Sounds like one of them in particular was really important. I was interested in hearing about the acquisitions, especially in the context of the overall company being able to follow contractors around the country, which sounded like one of the hidden opportunities to build more margin into the business. Let's just hear about the acquisitions and pull that thread.
[00:12:26] Speaker C: I don't think any of this is magic, right? It goes to the point that at least one of my own learning lessons is operating and execution day to day are what really matter and what drive the ship. M and A is great, it can really move the needle, but if you don't execute day to day, that's meaningless. What you buy is meaningless. Some of our ideas were around being able to have a branch in some of the big Sunbelt cities, such that we could have crews that could service big customers wherever they go. Because in commercial fence you get a lot of big GCs and property owners and developers that need our work. But you know, if they're doing jobs in 50 different cities and they need 50 different fence subs, that is a lot of work and a lot of headache. And so it's an opportunity as their vendor. So we started relatively slow or conservatively. Our first add on was in Florida. It was on the other side of the state with again, somebody relatively young, although he had been in the business a long time and it was a modestly sized acquisition. But he was just like us, meaning very aggressive, very focused on serving the customer. The bigger the hairier, the harder the job, the better. That was a really great partnership. Maybe this was psychological and a limitation we shouldn't have had on ourselves, but the fact that it was nearby meant if our first add on didn't go well, we could go put our hands on it and we could drive the ship a little bit. I think we made a fortunate decision not to go all the way to Phoenix on our first deal, because you never know. And if you screw up that first add on and you're on the road three weeks, a month, then that's not the life we wanted. So the first one was in Florida. We got it right. It grew a lot right after we acquired it, and then we took a little time to digest and we moved on. Obviously, there's some big markets in the Sunbelt that we felt we needed to be in, like Atlanta, and that was our next one. That was a bit of a transformational deal that got us a great team and it got us into some product and service areas that we hadn't been in before that that are fun for us. It kind of goes to the strategy of if you're trying to serve the same customer over many geographies, but also call it from cradle to grave, beginning of a project to the end, it got us some capabilities to do those things.
[00:14:59] Speaker B: Is it generally true when you look at the consolidated P and L of the business now that you have substantially lower logo turnover than an outsider might appreciate? Are your big customers just consistently picking up the phone and pulling you guys into a project in a new area? And that's representing a larger and larger amount of the total revenue of the consolidated business? Just curious, sort of, how much is repeating now that you have this footprint versus in the early days?
[00:15:32] Speaker C: We're still in the early innings. We didn't acquire our first outside of Florida branch until earlier this year. So it's still the early innings of trying to service these big customers across the country under one umbrella, so to speak. And I think there's a lot of work to be done. The good news is I think we're starting to see it happen and now we can. Some of our newer partners in Phoenix, for example, hold relationships. The start of the relationship is there, for example. But those GC customers exist and do work in Florida and Georgia, in the Southeast and throughout the Sunbelt. Maybe it's not happening the way we thought it would, but nevertheless is happening.
[00:16:16] Speaker B: The first acquisition on the other side of the state in Florida, you said it grew really fast after you guys bought the business. What have you guys been doing with the acquisitions? What have you been changing? What have you been leaving? The same. How do you attribute rates of growth changing post transaction? What have been the areas that you've focused on changing versus the areas that you've just sort of left as is?
[00:16:38] Speaker C: We're pretty transparent about it. When we have an early call with a seller, we're pretty clear. And now we don't have to talk about what we plan to do. We have a track record of it and that helps a lot. We have a track record of not changing a ton. If we're going to change things, it's primarily either for the benefit of the team. Meaning in fence contracting benefits are not commonplace. Health insurance, dental, vision, 401, those kind of things are not super common. And so we tend to add those in and create a place, an environment, a culture, a compensation arrangement where we want to suck talent in. We want the best people to want to work with us and not have to deal with a bunch of employee churn, which is the norm in our line of work. So that would be one thing we change. But the other thing we're pretty transparent about is that we generally want a mentality of growth. If the business has been relatively flat for us, that's going to be something we want to change. And so we're going to want to push for revenue growth pretty early on. We have a bit of a playbook for that and we have a process for how to achieve that. But it starts with a conversation around mentality, which is we're going to be more aggressive around bidding, contracting relationships and chasing work so that we can get the snowball rolling. And maybe at a certain point we can be choosy about the work we get. But to start, we just want to see a lot of opportunities. And that's really important is when we find sellers and we have that early conversation that they align around that being the objective.
[00:18:25] Speaker B: Maybe we could talk a little bit about the capitalization under the business over the last four years. I know you had a recapitalization quite recently that is public. Could you talk a little bit about just from a capitalization perspective, what was changing and what wasn't changing? Debt financing needs or debt requirements or additional equity capital that you were potentially bringing into the business. I'm just curious to trace the way the capitalization structure changed over the years with all these acquisitions. Sounds like one of them was quite big. Anything interesting there?
[00:18:58] Speaker C: We knew going into this that it's still the contracting business. While we think commercial fence isn't as cyclical as a lot of other construction or project based businesses. We didn't go into this thinking we were going to do some aggressive lbo, so we kept the leverage pretty modest early on. For a significant portion of our phase one of psg, the leverage was really modest. Compared to what I understand to be the normal two to three turns of leverage, we were pretty modest. And I think what that did is at least on our end, we felt like keeping the leverage low helped us think not about making our bank payments, but allowed us to think about growing the business and reinvesting early on. We were growing pretty significantly organically in those first few years. And so that's a magic potion for a sponsor is to have your revenue and EBITDA growing. You're delevering so you've got a bunch of excess cash and a great balance sheet. When you have that scenario, it lets you reinvest, it lets you grow. And then when it came time for us to get more aggressive on M and A, then we could do it without having to go either take on a bunch of leverage or raise a bunch more equity. But we like when partners roll over and so that's a nice source of financing for us. That also creates alignment. We have had a pretty loyal investor base since day one of folks as we were growing, willing to continue to invest as we grow, and we were pretty darn proud to reward them a couple months ago when we recapped what about sourcing?
[00:20:45] Speaker B: I'd love to just cover sourcing. I want to leave some time for us to cover what we talked about where you might be spending some time on your next platform in 2025. But before we get to that, just I'd love to hear about sourcing and sort of how sourcing has changed over the same period as well. It could be really interesting to just sort of hear what you see as the big points of change in terms of how you sourced your advantages once you have momentum through a platform. Just the methods and how those have changed. We've done business with you in pursuant, obviously, but I'm interested in just a holistic conversation on sourcing, how you feel like that's changed over the life of the investment period.
[00:21:26] Speaker C: When we first started, we were exclusively going through the Broker Advisor investment Banker channel because we had to cast a wide net. We were thinking southeastern US a minimum size of revenue and earnings to be able to finance it right and have a team that was big enough to build off of. So we were all over the place. But it was Broker banker M and a advisor vendor community. So you have to unfortunately have a lot of conversations and only occasionally see a commercial fence business. But it was great. It worked. We turned over a lot of stones. We chased a lot of broker deals that were learning experiences for us in fencing. And this was the case for me prior to PSG was primarily using the broker banker channel to source deals. And part of it is it just gets you a lot of opportunities quickly so you can learn prior defense. I would go through the broker banker channel all the time because I was opportunistic and there's no better way to see a bunch of actionable opportunities than to go through that channel. But then when we were thesis driven in commercial fence, we were still learning. We had to learn the hard way that not all fence deals are created equal. You might chase one and realize it's half residential, half commercial or a third resi, third commercial, a third material sales. So we learned a lot by going through the broker banker channel. And that's ultimately where we found our platform. It's ultimately actually where we found most of our add ons, axial included. But I'd say that's changed now in the last year probably because we've gotten more reputable, gotten a little bit more publicity. We now get a lot of inbound, ironically, a lot of LinkedIn DMs. And then we do outbound. We go direct.
[00:23:24] Speaker B: Let's pick those apart. Just real quick, is the inbound that you're referring to, is that inbound from the brokerage and banker channel?
[00:23:31] Speaker C: Yes.
[00:23:32] Speaker B: You're on more buyer lists from them than you used to be.
[00:23:36] Speaker C: Exactly. Because we're in a handful of geographies. We're going direct now to targets that we know about. We want to build a relationship. We're going to be in this for a while. So why not take the time to build relationships with owners in markets we want to be in? That's the plan today.
[00:23:52] Speaker B: And so does that start effectively with identifying the geographic markets and then just using some form of database to arrive at a set of named logos and then figuring out how to get in the front door or the side door and meet the owners and the management team?
[00:24:12] Speaker C: You know this business as well as I do. There's no secret sauce to it. There's no wording in the heading of an email that's going to be guaranteed success in meeting an owner. It's just persistence and a willingness to pick up the phone, get on a plane, go to the conferences and just outwork the folks that don't want to do the uncomfortable things. That's the hard part about sourcing. And again, you know it more than any of us.
[00:24:39] Speaker B: Takes a lot of consistency. Is that how you're spending a lot of your time right now, Sam? Trying to position yourself to just get in front of owners in the right venues and in the right settings?
[00:24:49] Speaker C: Exactly.
Most of how I spend time is on the deal trail and it's my background anyway, so I love that. It's not just sourcing, but it's execution too. So have a lot of time spent doing that. At least in fence that is. We've got a good thing going and a lot of momentum, so it's fun. It's a lot harder when you're hunting a new platform because you're the idiot in the room and generally unknown. So starting fresh is tough.
[00:25:20] Speaker B: Do you have any wish list businesses where it seems like the duration that you have to wait is measured in potentially years or even decades? Can you think of an owner where you're like, I love this business, I love where it's positioned. I love the team. It's just not remotely for sale right now. Do you have one of those?
[00:25:41] Speaker C: No, I have about two dozen of those.
[00:25:44] Speaker B: What do you do with that list? How do you think about time spent there? Do you try and create a transaction? Do you just try and get a steak and a cherry Coke once a year with the owner in the local environment? What is your approach to those potentially hold forever owners or at least hold for really long time owners where you love the business? You just have a totally open ended timeline on when you might be able to transact.
[00:26:12] Speaker C: I subscribe to the philosophy or philosophies that one you can't push on a string. I don't think you can force somebody out of a business they love. Especially in Fence, the owners tend to work longer into their careers or later in life than I expected and they take things very personal and I guess that applies in a lot of businesses. So I don't think you can force people out unless you massively overpay. And so I think the in person conversation is incredibly valuable. I get you're building a tech platform at Axial that lets us all meet online.
[00:26:56] Speaker B: Notwithstanding. I want to hear the truth straight from the horse's mouth. So don't hold back on my account.
[00:27:01] Speaker C: Get on a plane and break bread. Without a doubt, it is the best way to get to know somebody. It makes it so less transactional. It makes it so much less about trading deal terms and we all just sound so differently on email and in text messages than we are in real life. Not for all of us is that a good thing. But for hopefully for some of us, that really works. It creates trust. That's hard. You know, deals. It's all about trust in people and the best way to do that is in person.
[00:27:32] Speaker B: You have all this momentum with the fence business. You said you wanted to start a new platform in 2025. That sounds like a really hard thing to go off and do. Why is that an exciting priority for you in 2025 to begin exploring the next platform? And how do you think it will be different this time for you or hope that it will be different this time for you than it was four years ago when you were getting out of the blocks with perimeter fencing group?
[00:27:56] Speaker C: I don't know if it'll be different. The fencing business is going to continue to grow and do deals and this will be fun. We will keep sourcing and closing partnerships and growing the fence business. I've also learned a lot in that run about how to build a business, how to execute a buy and build platform. Nothing will repeat exactly, but the things that worked really well, especially around team and that first platform that you acquire was really informative for me. I think it would be a shame not to take advantage of those lessons and that pattern recognition and try and repeat it again. The hard part is now you've got to go find something and actually get a deal done. So that might take a while, but it would be a shame not to try. So that we will do.
[00:28:47] Speaker B: Do you take away anything from the younger management team acquisition aspect of psg? That seems interesting that it wasn't like just a one off. It sounds like it's happened maybe more than just once or twice. Do you think you'll carry that over and opt for maybe slightly less experienced, maybe slightly hungrier teams as part of just your DNA when you're sourcing platforms and add ons?
[00:29:13] Speaker C: Yeah, without a doubt. And it's an interesting dichotomy. I think where we feel comfortable is in B2B services or blue collar services, where it's in my experience less common to find young and aggressive operating talent. And yet it's in particular in those arenas where young and aggressive operating teams can be that much more valuable. So I think we will try to repeat that playbook. I guess we're young, but we're not that young anymore. And people in our generation are coming into the primes of their career and so now's the time when they want to Make a lot of hay and build something that's significant in size or value or whatever it is. It's easier to get along with folks from your own cohort. So a lot of those lessons I think I want to try and replay.
[00:30:07] Speaker B: Do you think some of the inventory of businesses that have been bought over the last, I don't know, 5 to 10 years by independent sponsors in their first generation or search funds or self funded searchers, does that represent a large enough cohort of new owners that that could be a hunting ground for you? Or do you think that the acquisition will come from more of a founder owned, family owned target base? Interested in how this cohort of search fund acquired and independent sponsor acquired businesses, how it matures over the next few years and who ends up sourcing those businesses next?
[00:30:46] Speaker C: That's really interesting. I didn't think about that. Meaning there is a population of businesses that were bought by searchers the last five, ten years and over the next five years those folks will have been in the seat for a long enough period of time where they could be reliable. Platform CEO. Yeah, that's a great idea. I had never thought about that.
[00:31:09] Speaker B: I think that that's probably one of the biggest areas of change in terms of ownership in the lower middle market over the last five years is that these businesses now have a different set of owners. They're not private equity owned necessarily, so to speak, they're search fund back. They're maybe SBA PG businesses. But there is this younger generation of talent which has gone in and acquired and operated these businesses. And some of those cases they could be three to seven years into the holding period. And I think that maybe the default assumption is a lot of them exit to private equity. But I could see it being a little bit more of a nuanced story.
[00:31:47] Speaker C: Than that at that point, with that much longevity, they will have likely grown the business to be at a point where it's big enough to be a platform and they have enough experience to be able to speak as if they were the founder, even though they themselves bought the business.
[00:32:06] Speaker B: And they're young still.
[00:32:08] Speaker C: And they're still young.
[00:32:08] Speaker B: Yeah, they're still quite young.
[00:32:10] Speaker C: It's a great idea. I never thought about that.
[00:32:13] Speaker B: A lot of those funds have some form of liquidity pressure because the new owner operator has built some real equity in the business and is probably going through a pretty high burn portion of their life and late 20s, 30s, family, school, buying a house. But they're not retiring, they're not at retirement age for somebody who's targeting young management teams inside this category. It seems like the probability that you would back a searcher or a first time independent sponsor this time around is probably higher than it was four or five years ago.
[00:32:50] Speaker C: Maybe the last piece is I might value industry expertise more than I used to when I started five, eight years ago, whatever. And if a searcher has been in the business 5, 6, 7, 8 years, they might not be a 30 year veteran of the industry. But you're going to know exactly what you're talking about. You're going to have a bunch of relationships and you're going to be young and so that's pretty valuable.
[00:33:16] Speaker B: What about big influences on you? What can you tell the audience about just who you've learned the most from? Who have been the big influences on the way you make decisions, the way you think about your business priorities and the way you try and change the businesses that you buy and the way you keep them the same? Just who have been the big influences on you? Either people directly in your lives or people that are more mentors that you've never met. I'm curious if there's anybody who you feel like has had a big impact on you.
[00:33:45] Speaker C: I personally made a career transition eight years ago or so. I used to be a practicing big law attorney. It took a lot of strong personalities and influencing to give me the guts to quit that. Because for a long time I was on that path to being a big law M and A attorney. To then realize that wasn't the career I wanted to follow. For a long time I had one mentor in particular. He'll go unnamed but he knows who he is who helped me get the guts to say don't worry about all that time and money you invested in your prior career. You just need to get started. I appreciate very much the kick in the pants to make that move, but today I'd say I probably learn a lot from my partners. You know, I have a lot of partners in various companies and each of them has their own style. I love to learn from all of my partners and the great ways that they do business. I used to be a big reader before I had three kids.
So I'll give you a name here whose books sit on my desk. I would guess you've never heard of him, but have you heard of the guy named Derek Sivers?
[00:34:57] Speaker B: I have not.
[00:34:58] Speaker C: He's an author. He's a former entrepreneur and built and sold a business and he thinks outside the box, so I'll leave that one. He's got great books and writings on business and life. So that's a good one.
[00:35:13] Speaker B: That's a great new one. If people want to get a hold of you, Sam, what's the right way for them to track you down and get your attention? What are you interested in hearing from people about other than fencing businesses?
[00:35:26] Speaker C: I think all of us who are in the sponsor business, M and A love hearing about opportunities and what people are pursuing, especially when they're more entrepreneurial in nature. The self funded or traditional search or independent sponsors. I just love talking about deals with them and we all the time are trying to organize events to get together face to face with those folks. But the usual places, LinkedIn, Twitter. I'm addicted to my email unfortunately, so you can catch me there as well.
[00:35:57] Speaker B: What about LP relationships? How are you thinking about LP relationships for the next handful of years in your own career with the fencing business? Sounds like you have a really significant singular capital partner there now. How are you thinking about LP and developing LP relationships for the future?
[00:36:16] Speaker C: So I started using kind of a diversified equity base approach. So the first business I bought we raised from primarily family and friends and it was modest checks from a lot of folks. The good news is having done that now a handful of times, the list of past partners is getting longer and thankfully that list we've been able to return successfully to those folks. I would hope to be able to call them back and continue to repay their trust in me over time and doing future deals. That being the case, I think now that we've done this a handful of times and especially over the last three years in the fence business, having a single equity partner who's very well aligned, who has relationships, expertise, a lot of times having that single institutional LP gives you credibility that you can't buy another way going forward. While we'll probably round out LPs from the same friends and family group that's been loyal for a long time, I think we're certainly going to start really taking advantage of the institutions that support independent sponsors now because it's incredible how far they can take you without having a committed fund behind you.
[00:37:43] Speaker B: What is that set of institutions in your mind? Are those sbics that are providing both debt and equity, or is that family offices that just have a very flexible capital orientation? Or is there anything new to talk about there or is it more or less the usual suspects? In terms of answer, I say on.
[00:38:00] Speaker C: The equity side, which is where I probably spend more time thinking, somebody who has a very flexible mandate and is trying to build a business for the long term, a family office is where I will continue to hunt for partners. The debt side seems to be ever changing.
When we put the fence business together, the senior bank market was pretty wide open. We had a lot of luck there and now it seems like the private credit market has taken over. Sbics have taken over. Some of them will do debt plus some equity co invest, but not a lot of them will be a single check writer. Personal opinion is some of those single checks are maybe not the best alignment. So I think going forward something like private credit or SBIC on the debt side combined with a single family multifamily office on the equity side is a great combo.
[00:38:57] Speaker B: Sam, this has been great. Thank you so much for blocking out 45 minutes and just sharing the story. I'm excited to follow it from here. It sounds like it's getting more exciting, not less exciting. Congratulations on all the achievements and I appreciate you just sharing everything so freely. It's been great to be with you.
[00:39:15] Speaker C: Thanks Peter. Enjoy watching you build Axial and one of these days we should flip the microphone around.
[00:39:20] Speaker B: Look forward to that.
[00:39:23] Speaker A: If you enjoyed this episode, check out axial.com there you'll find every episode of this podcast as well as our recorded Axial member roundtables, some downloadable tools for deal makers, Axiol's quarterly league Table rankings of top small business acquirers and investment banks, and lots of other useful content that we've created over the course of time. If you're interested in joining Axial as either an acquirer, an owner considering an exit, or as a sell side m and a advisor, you can get started for
[email protected] as well. Lastly, if you have ideas for podcast show guests, feel free to reach out to me
[email protected] I promise I will respond.
[00:40:01] Speaker B: Thanks for listening.
[00:40:12] Speaker D: Peter Lehrman is the the CEO of Axial. All opinions expressed by Peter and podcast guests do not reflect the views or opinions of Axial. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Podcast guests may have ongoing client relationships with Axial.
