[00:00:04] Speaker A: Hello and welcome everyone. I'm Peter Lehrman and this is Masters in Small Business M A. This show is an ongoing exploration into the vast and undercovered world of small business m 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 us 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 A. This podcast is produced by Axial, an online platform that makes it easier for business owners and their M A 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
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Peter Laraman is 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.
[00:01:21] Speaker B: Hi folks, this is Peter Lehrman. Happy new year to everybody. Looking forward to kicking things off in 2023 with a great guest. I have Taurus Richardson today. Taurus, great to see you. Thank you very much for making time. You were busy in 2022. I'm looking forward to diving into it.
[00:01:35] Speaker C: Awesome. Great to see you as well, Peter. Thanks for having me.
[00:01:38] Speaker B: Yeah, there's so many places that we could start. I'm really interested in starting with deals and with Lafada. Lafada is a business that just has a super interesting story, and obviously you had a big milestone in 2022 with Lafada. So I want to start with Lafada. In particular, what I want to do is unpack just the way you have navigated hyper high levels of customer concentration, both with Lafada and with other businesses. I think it's a really interesting contrarian area of capability and expertise that you guys have built. And I know it's something that scares off a lot of buyside folks from all walks of the buy side. I want to start there. Let's hear about Lafada and let's dive into it a little bit and I'll just ask you some questions along the way.
[00:02:20] Speaker C: Sure. So let's take two steps back and go through how we got to the investment thesis, how we found the deal, purchased it, and then just value creation and exit.
[00:02:28] Speaker B: That sounds great.
[00:02:29] Speaker C: And so we as a firm were founded in 2010. Over the years, we started out as a generalist and realized that to be a successful sort of lower middle market private equity firm, you just got to specialize. And so, over time, we were looking for industries that had sort of stable industries that didn't have as much variation during a downturn, and, quite frankly, would have one at their back because of their customers or the need for growth. And so we've landed on the utility sector and government contracting as being sectors where we thought there'd be underpinnings of demand, even in a downturn, because utilities need to improve their infrastructure, grow their grid, grow their capabilities for technology. And with government, they would need to always be investing in their infrastructure for it, capability for online capability, for cloud migration, et cetera. And so we have, over the course of the last twelve years, basically made eight control acquisitions in the government contracting and utility space. And our first acquisition in utilities was really Lavata. So we started canvassing utility investment bankers, going to conferences, and in 2017, got a call on a business called Lavata Contract Services, which was in Philadelphia, and had one customer, which was Pico, a Philadelphia electric company. And it was small, sort of 15 million ish of revenue, with roughly two of EBITDA. It had an entrepreneur that had previously worked on the system of Pico and 20 years earlier, decided to go off on his own and to become a dedicated contractor. And by the time we met them, he had grown a business from an idea to basically 90 people and $15 million, but knew that to match the demand and need of his customer, he needed to bring in an outside private equity partner. And we were quick to raise our hand in an environment where many, many private equity people passed because they saw the customer concentration. What we saw was a great niche business with tremendous subject matter expertise and technical expertise, and that probably 40, 50% of their employees were engineers and had worked on system at Pico for a long time, or retirees, et cetera. And we thought that moat was hard to replace. And so we got comfortable that we wouldn't get discontinued. We knew that PiCo and its parent company, Exelon, had a value system for diverse businesses. And so we were intentionally planning to diversify them or to certify that business as a minority owned business post close. And we knew that they had underinvested in infrastructure of salespeople, heads of recruiting project managers, and that we would be able to help them add more capital to basically build a better mousetrap. And so the acquisition was January 2018. We certified it as an MBE in April of 2018, we immediately hired a national head of recruiting. We hired a CFO for the business, and we started pushing to grow their contracting for single year contracts into multi year contracts with the customer. And then the most strategic thing we did was we decided to stay in the concentration. And so what that meant was we thought there was a whole lot more opportunity within Pico. If we built more people and a better mousetrap, we could actually win more business with Pico. And we thought that rather than going to other utilities and trying to diversify the customer base, we would stay within the parent company of Exflon and Pico and just expand to other operating companies in the mid Atlantic. So we targeted initially BGE and then ultimately Pepco Ace, which is Atlantic City. And how we accomplished that was we said, hey, let's allocate a half a million or a million dollars and commit to opening up an office in Baltimore that only services BGE. Let's be prepared to spend $300 to $500,000 to get a general manager that had 20 or more years working on system in BGE. And let's be intentional. And over the course of two years, we basically grew the business from, call it $15 to $25 million of revenue, both by growing PiCo and growing BGE. And in doing that, we got comfortable that the model worked. And so we then hired another general manager for three to 500,000 at Pepco to give us more capacity there. And we also hired another general manager within the Pico system to give us more capacity there. When you look back at it, we grew a business by $30 million from 15 to 45 in four and a half years, employee base from 90 to call it 200 single year contracts to multi year contracts, where we won seven project manager contracts. And we just built a better mousetrap where 2 million became 9 million of EBITDA organically. And then when we went to sell it, we were rewarded by building a more valuable, dedicated customer to the Exelon operating companies. And we received multiple bids from billion dollar companies to purchase that one business that was great at that one customer in a way that everyone won.
[00:07:37] Speaker B: Was there any anxiety or hesitation by the strategics or the other bidders at the table regarding the fact that you had only stayed within the Exelon umbrella, or was it just purely viewed as a feature of the business?
[00:07:49] Speaker C: If we went out to 100 buyers, maybe eleven showed up, maybe seven showed up. So lots of people immediately checked out. And what you have to be comfortable with is you're not trying to build a business for, say, a journalist firm or for a private equity firm that doesn't know what they're doing. You're trying to build a business that almost like a monopoly. If you have boardwalk, you're looking for Park Place. And so we want someone that wants a contiguous piece that makes the overall business more valuable. And so we got bids from engineering services companies or EPC companies that were billion dollar companies, but didn't have either presence in admit Atlantic or within the utility sector. And they were looking for this missing piece that we had built.
[00:08:34] Speaker B: I want to go back to the diligence in 2018. Do you think it was something about your diligence of the business when you bought the business, that got you comfortable about it? Is there something that you're doing differently in terms of diligence that gets you to a different level of comfort with a business that has a single customer? Or is it something else? What creates the variant perception for you from, I'm sure, the others who got the phone call?
[00:08:59] Speaker C: Well, there's two answers. One is that it's a mindset. And so we are a small entrepreneurial private equity firm that we know we have to go where other people aren't at. Otherwise we won't be able to competitively compete for best properties. And so we are looking for an outlier deal point that we can get comfortable with. And customer concentration has been one of those deal points that quickly reduce buyer interest because people underwrite it to perceive it to be too much risk. We then have spent enough time in utilities, had talked to Exelon, about four or five different businesses, to where we had a sense of how important they valued subject matter expertise and people having worked on system, for us to believe that the risk of discontinuation was low enough for us to make a control investment. And so that knowing the customer value for working on the system, that decision up front to say that 100% customer concentration we won't walk away from just because was a starting point of how we got comfortable. And then in terms of all deals, it's price terms and structure. And so we were able to get the seller to roll over capital. We were able to lower the amount of debt financing that we would bring onto that business up front, so that we would have more flexibility in any event that the customer had some problems that we wouldn't immediately get knocked out the box. So you have to structure it differently and you have to underwrite. Is this a subject matter expertise business where the discontinuation risk is actually lower than what it might be perceived because of the concentration.
[00:10:40] Speaker B: The business, you said got certified as a certified MBE business in 2018. Was that a recertification process or was that a de novo process?
[00:10:49] Speaker C: It was de novo. So it was owned by gentleman named Mike Lafada, who was not diverse or minority. But post our acquisition, due to the way we purchased it and we invested in the business, we were able to make it a minority owned business post closing.
[00:11:04] Speaker B: And what is the just raw commercial value of that?
[00:11:07] Speaker C: Yeah. So in the utility space, every person that pays electric or a gas bill is a customer of that utility. And in the case of a Pennsylvania or in any case of any market, the more you diversify the supply chain base, you hire people that are diverse. You basically are giving more people within your core markets an opportunity to create wealth in a more democratized way where it's good for business, for the utility. So in the case of Exelon, which is one of the best in the country at this, they have a value system that says we want to have a diversified workforce and we want to push to have a diversified supply chain that's representative of the markets of which we operate in. So we knew they cared about it, we thought the MBA would help, but at the end of the day, you have to buy a high quality business up front like Lafada, you have to keep doubling down on building best practices. In terms of people, we happen to go from 6% diverse to 23% diverse and from 9% to 27% woman diversity on our workforce, and happened to probably use the wrong word. We intentionally made sure in every hiring process there was diversity. And post ownership, 50% of all hires were either women or diverse hires. And you have to be intentional about that. And when that customer saw our intentionality, as well as the quality of the business we were building, we became a part of their solution to working with their utility commission and working with their community groups and their customer bases to show that they were reflective of the customers that they were doing business with. And so it's a win win when you can build a diverse business alongside a customer that values telling their marketplace that they are trying to be best of class to their overall constituents.
[00:13:00] Speaker B: Lafada is not the only example in your history of prioritizing diversity, making it and making real impact there and real progress there. I'd love to hear you just take me through your framework for diversity, your philosophy behind it, the reasons why it matters to you, the reasons why you operationalize it. I'd love to just hear how you think about it as a topic and all the different reasons why you've had so much success, as well as so much intentionality around it across the portfolio. It's not just Lafada. Yeah.
[00:13:34] Speaker C: So we start by saying on all of our literature, diversity is an asset. And we fundamentally believe that whether it be big, tall, short, small, whether it be women, whether it be international, whether it be by race. Right. We simply believe that the world is better if more ideas are taken into consideration. It may make you go slower up front, but it helps you grow faster over time. So that's the mindset. And then even with that mindset, our values start with partnership and people first having an entrepreneurial approach, but then diversity and inclusion require intentionality. So you can't just say it. You have to have di plans, both at your management company and within your companies that say, here's where we start. And like yoga, it's a practice, like, over time, here's how we improve and get better at making sure everything we do has a diversity and an inclusion mindset that ensures that we don't accidentally exclude people or don't welcome people and meet them where they're at. So that's the mindset. And in the case of some of our businesses, it may create a diversity revenue advantage because some customers are checking for companies that are. And therefore you may have an advantage in contracting, but in others, like government contracting, where we don't use a diversity advantage at all. Having diverse workforce and diversity mindset simply means we're going to be better able to recruit, retain employee base, and to find other customers that believe in what we believe, because we're looking forward and playing for an ecosystem in a way that is just going to be easier to be partners with us. So it's just coming from being a person that got into this business. I started being interested in Wall street at 17. I was the first person from Purdue to work on Wall street as an analyst from HBS. I'm one of the earlier black people to go directly into a senior associate role at a billion dollar private equity firm. And I've been a part of these feeder systems like the twio foundation in a way that I know that there's an opportunity to get talent into the system, but I know that we have to both tell people about why this is such a great industry and to deliver results of being a great employee or owner so that more people can be attracted to what I think is one of the most incredible industries in the world.
[00:15:55] Speaker B: When you think about 2023 and the next few years, do you have any new themes to how you're thinking about where to deploy capital? Do you love the government contractor sector, the work that you've done there, the expertise you've built? How are you thinking about just themes and the development of themes based upon now? Well, more than a decade of really, really good outcomes for IMB. I mean, what's changing and what's staying the same?
[00:16:23] Speaker C: Yeah. So step one is we have to believe in continuous improvement. Right. And for us that means a couple of things. When we got into business in 2010, the dream was to build a billion dollar business through acquisitions. And in November, we basically exceeded a billion dollars for the first time with the acquisition of Far west, which consisted of basically eight acquisitions in one startup over the last ten or so years. And now we're trying to say, okay, where are we going to head over the next five years and ten years? And the dream is to get to $3 billion through both our holding company assets and through some version of a controlled or institutional buyout fund. And what do we have to believe? Number one, is that we continuously hire better, faster and more efficient people. So we've gone from ten people to 17 people. We've hired a COO, a chief legal officer, managing director, director. We're building our team and we're building it in front of the growth, as opposed to after we get the growth. Two, we have to just recheck our assumptions on sectors. Right. We love the utility and government contracting sector. We don't see a slowdown in activity. Even though debt markets are off, interest rates are up, labor is hard to find. All of these impediments are true, but we have underlying customers that have a need to migrate to the cloud, a need to make sure their online services are working for the customers and government. We're in the military food business. There's a ton of military activity right now across the globe, unfortunately, in a way that they have a need to make sure that they have a secure, dedicated supply of food that we provide to them. In the utility sector, the $1.2 trillion infrastructure bill, there's a need to upgrade across the network grids and highways and solar in a way that our underlying companies are selling into customers that need to believe their vendors and contractors are hiring more people, delivering more service to meet the demands of those customers. So we like our sectors. We think there will be m a activity. We think leverage will be harder to find. And so we're trying to increase the amount of equity capital in our deals to give us more ability to have control in buying companies in what I consider to be a challenging market. And we have to be more intentional when the industry is choppy. You have to know your business. And so this sort of subject matter expertise that we continue to grow and become better at, enables us to get comfortable in businesses that have a little bit of a choppiness in revenue line, but a fundamental overall healthy outlook over time.
[00:19:03] Speaker B: What drives the choppiness, usually that you see and that you're referring to.
[00:19:07] Speaker C: So we still are coming out of supply chain issues where when you look backwards, a company may have suffered a 50% decline in revenue or cash flow because they couldn't get the products or supplies in 2020. And so now you're looking at a business that's going from something to a whole lot, and you're trying to figure out, is that really recurring cash flow? Is it really a one year cash flow or a forward push of demand and revenue in one year that isn't really annualized? So you have to have more judgment on things that have up and downs in a historical pattern. You have disruption from COVID and in terms of people, you have the inability to raise capital that's causing some balance sheets to not be able to get funded. And so all of that creates noise which says that the more you stay in lanes where you know what it feels like and what happens over a three to ten year period, the less you have to be so anxious about what's happening in the shorter term of one to three years. If you really believe in the business and know how it operates, I'm curious.
[00:20:12] Speaker B: You're at this unbelievable milestone. You had this dream of a billion dollar holdco opportunity when you got started. How long ago did that dream come into your mind?
[00:20:20] Speaker C: So for me, it was when I was 17, I clipped an article on a guy named Reginald Lewis, who had bought a billion dollar company in November of 1987. And I looked at my mom and was like, wow, this looks like a good job. And so we had purchased two smaller businesses, a bar and a popcorn company. But I had never seen anybody purchase larger companies. And so my entire career, from Solomon Brothers merger Group to Joseph Little, John and Levy and private equity to co founding ICV, and now IMB has always been on this path to figuring out how to buy and build lower middle market businesses. And ultimately to figure out, can you do it at what I consider to be world class levels. And the billion dollars was always the childhood dream.
[00:21:04] Speaker B: How do you think about scale from here and the tension between scale and going from a billion dollar holdco to a $3 billion holdco. When do you feel like you begin to walk away from the lower middle market as you take aim at bigger and bigger numbers and bigger and bigger orders of magnitude? I've seen it a million times now from my perch at axial. We have clients who join the platform. They are looking for true lower middle market assets. Maybe one to 5 million of EBITDA, two to six, two to 7 million of EBITDA five years later. They've worked super hard. They've gotten probably they've made some of their own luck, and they've also done great work, and they go out and they raise a huge fund, and now their minimum EBITDA has tripled. And I think before long, they find themselves not really in the lower middle market anymore. Are you worrying about that yet? Are you thinking about that? How do you think about that?
[00:22:00] Speaker C: I'll break it into two answers. One is I think about it more about how I think about purpose and purpose for me personally and personally, and also purpose as it relates to my business or firm. I started out at Solomon doing large cap m and a. I went to Joseph Lou John Levy. We did $50 to $250,000,000 EBITDA transactions. I didn't like it because when you get to larger middle market or better EBITDA companies, there's 40 MBA people around the table, there's experts everywhere, and it's just moving paper.
[00:22:35] Speaker B: To me.
[00:22:35] Speaker C: I had come from an entrepreneurial background and decided that I've wanted to be in the small business lower middle market, working with founders who have businesses they tremendously care about. And when they sell, they're not selling just for price. They're selling for a partner that can be a good steward of taking their business to the next level. I like that. I want to be here. Second, it's not lost to me. There's not a lot of diversity, whether it be women or minorities, at the table. And I'd rather figure out how to help entrepreneurs buy and build businesses through acquisitions. I'd like the fact that whether it be at ICV or IMB, I am training a generation of diverse people in the space that can either maintain and build our business or go off and build their own private equity businesses. And so, yes, we may grow revenue and we may grow assets, but we're going to do it in the lower middle market, and we're going to expand the number of people and voices that are in this space in a way that I feel like purpose driven wise. We're building an ecosystem of diversity and creating opportunities that are different. It's less about wealth creation for me, and it's more about can we have an impact on the narrative and the number of voices that play in a lower middle market.
[00:23:50] Speaker B: I'm sure you're getting asked this every once in a while, but I'm curious what you would say. There's a lot of folks that are getting quite. There's plenty of folks that are very interested in the holding company approach to buying and building businesses. And many of them start out just as modestly as you did Taurus. They're not buying big, fancy, well banked businesses. They're buying small home services businesses. They're buying pest control businesses, HVAC services companies.
You're a couple of decades into your career now.
What is the advice you give to somebody who is setting off on that journey today? How do you talk to them? What questions do you ask them? What do you advise?
[00:24:33] Speaker C: Yeah, I think the thing I learned is that when you have an investment strategy, a lot of people start out being a generalist and thinking that the more things you're willing to consider, the more opportunities you'll look at and you'll find one that makes sense. My revised thinking on that is that the more you can intentionally pick any one of those silos, you use HVAC, you use pest unit, you can do home services, best management, utilities. Once you pick one thing, it helps you then become more clear who you need to go talk to, how you need to think about what deal structure works in that sector. And when the seller of that business, the founder of the businesses, meet you and you can say to them, I've been looking for you. I know that there's a lot of things I can do, but I want to be in home services because of these three reasons, and I want to partner with you. You differentiate yourself from other buyers by just having a dedicated focus on that sector. And so the most valuable thing I could say is to have people take more time up front to throw a few things on the wall and pick one and try to really become a great qualified buyer in a niche or one sector as opposed to being a generalist. The other thing is that unlike when you raise a fund and you got to have this proven track record, a second partner, what's attractive about the independent sponsor model or the Holco model is you're just buying one company and you don't have to have all these qualms. You really have to have a company that founders agreed to sell you their business and to put you under Loi to buy it. And the only other thing you have to do is you have to be at scale. So many people tend to be willing to buy half a million million dollar, one and a half $2 million EBITDA businesses. And I would say that the threshold for true private equity investment should be $2 million or better because you can't get bank financing on these smaller loans in a way that really gives you the scale. You often don't have enough human capital resources to fund an operating team at these small businesses that are sub 2 million. And so it just becomes hard. So if you could just have a threshold of two to 6,000,002 to 5 million, it'll increase the ability for you to raise two to three times leverage on a deal that reduces the amount of capital you have to put up. If you can get the seller to roll over some, then it reduces your number to one to one and a half times the EBITDA needed at close. And it'll give you the ability to have a more scaled business. So focus on a sector. Ensure that you do things that are 2 million or greater in EBITDA would be the two most helpful things out the box and always require sellers to roll over. Do not assume you know more than the sellers. Keep them around in partnership with you for a second by the apple, and it will reduce your learning curve and increases your chances of success in that business.
[00:27:36] Speaker B: You're non negotiable on that one.
[00:27:38] Speaker C: Non negotiable. I don't know anything other than how to support people in building and helping them get to the next level versus I'm smarter than you, you leave, let me come, bring in these new smart people, and they're going to take it there on their own. In the world of small business, the things that a founder knows and they have forgotten is more than what any new person can come and do. It's different. When you get to 2030, 50 million of EBITDA. Those businesses are professionalized and they can bring in professional management. The lower middle market needs a founder to be around and that team to stay. And you gradually improve the team as you grow it. As opposed to this change management thing.
[00:28:22] Speaker B: How do you think about really interesting businesses where the founder wants to retire? Is retirement therefore a deal breaker for you? Or is there a version of retirement that, provided they're rolling over from an economic perspective and a couple of other things, still makes that an asset that Taurus is willing to take aim at?
[00:28:45] Speaker C: No founder should be selling their business and then doing the same thing. Otherwise, why are they taking on a boss? Right? They don't want to do that. Maybe they need capital, but I don't think a founder should sell control if they want to continue to run the business 100%. Right? So by definition, a founder is saying, hey, I want to take some chips off the table. I want to move out of the day to day work and into more strategic work, and I want to do things that really move the needle. And so whether it be five to 10 hours a week, five to 10 hours a month, I'm no longer looking for that founder to work 100% of the time. I am just looking to have them be in the room and to have an economic interest in how the outcome of this business is over the next three to five years, as we basically hire and succession that person out over time. It usually takes two to four hires to take off the day to day workload of a founder that they didn't even know what they were doing. They were doing accounting on weekends. They're doing labor relations and customer management. And you can't hire one person that knows how to do all those things. So it takes a little bit of a gradual sort of succession out of it, but I want them to be there. Should we buy this company? Should we hire someone at twice the amount you've ever hired someone from? Hey, you got a great salesperson, but they're jerk and they're affecting the culture. Should we take out a really good person even though they're good for business, but they're bad for culture? Those are the type of discussions I want to be having with founders.
[00:30:16] Speaker B: It may be a little bit out of sequence with the conversation that we've had, but we had a great conversation before we pushed record on just the topic of Q of E and Q of E, and the breakage of Lois. And I just want to cover that a little bit, even though it might be a little bit out of order, because there's so much unsophistication in the way that small businesses and lower middle market businesses manage their books and records, their financial books and records day to day. And there's so much legacy errors associated with the way they do it, whether it's cash versus accrual or revrec or just ad backs, just you name it. And I'm not saying that to be pejorative towards those founders. It's just when you can't get everything done perfectly, you cut corners, and you don't necessarily do things in a gap compliant way. But when it comes time to transact. That obviously creates a bunch of transactional friction. So I'd love to just have you go through a little bit about how you think about Q of E, how you think about doing it from a sell side versus a buy side perspective. Just lessons learned, because we're seeing a lot of our members on axial commissioning the Q of E and then having some surprises that derail deals. So love to just dive in and sort of get the pearls of wisdom from your own work in the lower middle market on the Q of E and just the financial diligence side.
[00:31:35] Speaker C: Sure. So the answers aren't perfect. It's art, not science. But fundamentally, a small business doesn't require an audit, and most don't do it. And so when you go to sell the business and the investment bankers or someone makes an offer, they tend to say, well, here's my profits. And they use this word EBITDA, or, here's my EBITDA, and it's going to be worth five times or seven times EBITDA. And most founders have not operated in a world of EBITDA and again, have not had audited financials. And yet they come to believe that their business is worth, let's make it up, 5 million of EBITDA. Five times is worth $25 million. And when they then go to market and they find a buyer who gives them a valuation of 25 on that 5 million, they then become skeptical. They assume that that buyer's job is to find a way to lower the EBITDA to a point where they can lower the price. And so when the Q of E starts out, you have a seller who is skeptical that I know they're going to jam me and change my number. And you have a buyer skeptical that, hey, this business hasn't gone through the rigors of a gap related audit, so it's likely to be lower. One way that I have found it helpful is to have buyers and sellers agree to a shared compensation. Each one of you spend 50% of the Q of E so that the risk of it going down to a point where the deal doesn't transact is shared by both parties. The other is to have sellers do some version of a sell side Q of E first, so that the management of the seller and the expectations of the Q of E are well established and that gap financials are in place so that everyone can be on the same page going into the sell process with buyers.
[00:33:28] Speaker B: Right.
[00:33:29] Speaker C: So you can split the cost of it. You can do a sell side Q of V before you go to market. Or you can slow play it and just say, hey, before we start spending all this money on accounting and all these other things, why don't we make the first 15 to 30 days only be around a q of E and make sure that your numbers are consistent with what the seller and buyer are believing before we waste all this time with all these additional questions and additional due diligence that burn up cost when a deal may not be possible if the seller is unwilling to transact at a lower EBItda. Those are the things I've learned. It doesn't mean I don't get busted deal fees. It just means that the faster we can get to a shared agreement on what the EBITDA per gap is through a q of e, the higher likelihood we can get bank financing, and the higher likely we can close a transaction.
[00:34:21] Speaker B: Charles, there anything else you would like to cover today? I mean, we've moved around a little bit, but we've covered a ton of mean. It's been great to catch up. Obviously, we could go deeper in lots of areas, but anything on your mind that you wanted to cover?
[00:34:33] Speaker C: First of all, Peter, I think what you're doing at Axio is incredible. I think the platform that you guys have creates more access to independent sponsors, to individual buyers in a way that is super helpful, as well as to sellers who have unique, great businesses and are not just looking for the highest price, but looking for, quite frankly, the right person or firm to buy their business. So want to compliment you for what you are building and have built. And we have bought businesses from your platform. And so we're very grateful. Two, for the entrepreneurs and independent sponsors of the world. I just encourage you to keep pushing. Right? Because my first transaction I bought with a seller, note, I did not have the money on the day I closed, the seller literally lent me money to do our first transaction in 2014. And once we got our feet underneath us and we were able to build out that business, it came easier to buy the second business in 2016 and then even easier to buy the business in 2018. But the first 1 may be hard. There's many of us in the private equity space that invest in independent sponsored deals, either personally or through our businesses. But that bootstrapping in the household that you exert, I just hope you keep doing it and that you use networks like Axial, which is an easier way to find transactions in a way that I think is really, really valuable. So I'm grateful. I'm excited about 2023. We think there's a lot of people and a lot of dislocation, and our experience has been there's more money to be made, more deals to be done in sort of kind of markets that are dislocated than there are in frothy markets because valuations are more reasonable and therefore the value creation going forward can oftentimes be much greater.
[00:36:23] Speaker B: Yeah, you can see it there. Even if the debt financing is maybe a little bit more expensive, there's a real path to improving the business. Daris, it's so good to see you and catch up like this. Thank you for spending time. Thank you for obviously supporting the work that we've done at Axial. But more importantly, just pleasure to know you. Pleasure to be able to do a little bit of business with you, and thank you for giving us time. At the kickoff to 2023, look forward to following your story, continuing to follow your story, and see your star keep rising. Congrats on your first huge milestone at a billion. That's really exciting. Thanks for sharing that with the audience and look forward to seeing you later this year.
[00:36:58] Speaker C: Awesome man. Thanks for everything, Peter. Have a great year.
[00:37:06] 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 dealmakers, Axial'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 sellside M 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 directly at
[email protected] I promise I will respond.
[00:37:44] Speaker B: Thanks for listening.
