E210: Strategic Real Estate: Mergers, Acquisitions, and Business Roll-Ups for Maximum Return

[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit Podcast. I'm here with Dan Taylor and we're going to talk about mergers, acquisitions, and all things business. Dan here is an expert in some real estate strategies that are different than what we talked about before. So I'm really looking forward to this conversation. Thank you for being here, Dan. 

[00:00:17] Dan Taylor: Ron, an absolute pleasure, buddy. Good to be here. I'm looking forward to our chat today.

[00:00:22] Ronald Skelton: Cool. Cool. We always start with kind of the origin story. I know you've been doing this for a while, but,the running joke is, you were born and then you ended up on a show about mergers and acquisitions. How in the hell did you end up on this show man? 

[00:00:33] Dan Taylor: That's a good question. I asked myself that. How did we end up here? But we started quite some time ago. As you can see from the gray hair. I'm not a spring chicken, 58, years young and, you know, still at it. And because I love the game and it's a beautiful game. Deal doing, marriages, acquisitions, real estate, buying businesses, own and trade from their own real estate is kind of what I love to do.

I love deals and learning and experiences with the family. And I get to combine all that into the one thing, which is pretty cool. So how I started is, um,this is quite a little while ago, but it's a real awakening call in terms of anyone that's listening. Never think you can't do this. I'm about to tell you a brief story of somebody and you, when I tell you the story, picture what's going on in that person's mind. His psychology, his emotional state of being, his awareness of different things in terms of business, real estate and that kind of thing.

So way back when, whenever it was, we grew up in Edinburgh in Scotland. And I started a donut kiosk. So, it, and, will be told, it was called Dan's Donuts. Not just that, it was on the busy street in Edinburgh. And it was six foot by four foot. Can you believe? Six foot by four foot. A mobile donut kiosk.

Now, this taught me a number of lessons. Number one, cash is good. Cash is king. Cash flow is even better. But, cash is king and cash business means you don't have any debtors. You don't have any creditors. It's all paid at source. But obviously, it is not a business. But, it's a start. And it got me into understanding a few things, that I don't mind working, but there's working and then there's smart working and there's dumb working. And this was certainly in the latter, and it was hard work. But we really started that co op and that, that kind of donut kiosk, my brother and I, not to just make money.

It was really how do we tour all the best live events in Scotland. And how do we get to these events? Not just for free, but how do we get paid for it to go to these events and get backstage? And this was our, this little donut kiosk was our ticket to backstage, to concerts, to have a great time. So we're kind of combining making some money and having great experiences traveling throughout Scotland in the summer season, which was fantastic.

So that's kind of how we started. And we went on from there and did a few other businesses to be honest. And we did our first kind of, what I call proper deal. We did things before this, but what I call proper deal, started about 1995. We did some kind of commercial to residential conversions before then, but the one that really kind of lit me up was in 1995. And it was a business that shut down and not just closed down.

So this was a distressed business. So, and it owned its own commercial real estate and we managed to pick this business up for 700, 000 pounds. Now, when we picked, no, I'm sorry, it was 117, 000 pounds. And it was only 700 square foot. So this was like the size of a one or two bed flat and it was a property just being closed down. And we went to see the bank, eventually got a deal for 117, 000 K,and then my first lesson.

Remember I told you about the donut kiosk, psychology, thoughts going through your head? Why do you set this up to have fun? And make some money on the side? Well, from then on, I kind of started realizing that,obviously I didn't know what I needed to know to get to my goal. So I then thought, who does know these kind of things?

So I eventually, got a mentor. First mentor was an American marketing kind of guru called, Jay Abraham. He was awesome. And, we picked up some incredible direct mail lessons from him. Strategies, techniques, and employed them, those strategies in this business. And it cost us 117, 000 and two years later, we sold it for three quarters of a million. Which is quite nice.

And in terms of a return on investment for Jay Abraham's 6, 000 pounds, which back in 1995, 96, 6, 000 pounds, it was a lot of money. So that was a great return on investment. And if we'd have known one more strategy, that 600, 000 pounds profit, remember 117 plus some refurb, sold for 750, 600k profit.

If we'd have known one other strategy at the time, that profit would have been 1. 1, 1. 2 million instead of 600. Which is quite incredible. So I'm always a believer in learning, being a student first, always. And if you want to learn something quicker, just pay someone to get there quicker. And, uh, we had, we had our second mentor, just after Jay, and he then taught us about acquisitions.

In 1996, it was, I think. And we went from there. We did our first kind of acquisition after that first one, which I don't really call an acquisition because it was closed by the time we bought it, but it was. We did our first acquisition July the 4th, 1997, and then we proceeded, this was in the gaming space.

And these were businesses that own and traded from their own commercial real estate. So they owned the business and the real estate. And, we then proceeded to buy 30 of these things, these businesses in the same sector. And the game plan is really, really simple. Buy the businesses and commercial real estate.

Add a multiple of profits. Separate the commercial from the business and then sell the business. And that's kind of what we will be doing since. To add to that strategy, we've done one other strategy. So two types of businesses we buy that on the real estate. One is very profitable.

That's a roll up. Yup. And it's multiple arbitrage on the business. And also multiple arbitrage on the real estate as well. And you kind of get two bumps on the real estate, sometimes three, but usually two. And we can come back to that in a second. The other type of business we buy are businesses in decline that own and trade from their own commercial real estate.

And what do we do there? We repurpose them. We repurpose them into investments. Depending on the local demand. So one, we turned a bowling alley into a parade of, what do you call a retail parade? You know, big million pound brands on very long term leases. And another one,

[00:06:32] Ronald Skelton: Strip malls. Yeah. 

[00:06:33] Dan Taylor: Yeah, strip malls, sir..

And another one is going to be demolished and it's right next door to the university. So that's going to be 150 brand new student studios for the university. And that's not really the kind of thing we do, but it was just the demand was obvious in that location. So really two businesses. One is rollups, very profitable businesses.

One are businesses in decline where we repurpose to something else, I suppose. And that's kind of, in a nutshell, what we do, but we only do it for two things. Number one thing, thing one, capital events. Always as everyone else does. But thing two is really my most favored route. And that is always to end up with real estate on very long term secure, hassle free, leases.

So it's kind of hassle free income. And for me,the kind of beautiful game, is buying business and real estate, selling the business eventually, repurposing the business into investment, and then stacking these multiple secure long income streams on top of each other. So that you've got diversification in income streams, hassle free income streams, all paid for by billion pound brands that adds a lot of value to the commercial real estate to begin with.

[00:07:44] Ronald Skelton: It's funny, you and I have a lot of similarities. First, one of my first businesses that I did out of the military was, for just for the sheer love of getting into events. I was, I would consider it a failed motorcycle racer.I tried to race dirt bikes. It really wasn't that good. Never picked up any great sponsors, but I love going to the races.

So I bought a bunch of photography equipment. Got all my press passes and a friend of mine actually owned a dirt mag. They literally called the dirt mag. It didn't succeed after very long, but for a long time, I got free, he paid me 500, but he'd give me tickets to the events. Pay me 500 bucks to go shoot photos for him.

And I got, a lot of times I got to be in the middle of this race because they had a photo booth, like a tower in the middle where we could sit in there with all the camera equipment and shoot. So not only did I get to go to the race, I was in the damn middle of the whole racetrack taking pictures of all the jumps and stuff.

And you didn't have to be a great photographer either because those cameras would shoot four and a half frames a second. Use wet film back then. Right, regular film. So you just take a picture of somebody doing a jump and go And they like when you look at the photos like no, no, no. Yep. You know? So you just sort like you have this huge stack of horrible photos But you get one or two or three good ones that were magazine quality on that with those high end, high speed cameraS. 

So let's talk about your real estate strategy. Cause on our calls and on this, on the podcast, we've talked about some real estate strategies that first time business buyers use. And when I mentioned it to you before the show, you're like, Oh, that's child's play. That's a bad, that's a bad move. And what I'm referring to is, some guys who lack funds and, or don't have a lot of capital laying around, we do a method called a sales lease back. Which is similar to what you're doing.

Only thing is you own the REIT, right? You own the real estate investment trust or the, or in the investment vehicle, vehicle holding that 30 year lease. To where we're selling it to a third party that owns that REIT to get some capital to usually way over what we would pay for the real estate. So, owner wants a million. The REIT will give us 1. 5. We give the million, to the owner, cause that's what he wanted. Now we've got 500, 000 to help as operating capital and growth capital. And when I said that to you beforehand, you had an interesting reaction. 

[00:09:52] Dan Taylor: Well, let's back it up a bit. I mean, whenever it was Andrew Carnegie, what, what, at some point he was from Dunfermline, Scotland, actually. What, the richest man in the world at one point. And he famously said that over 90 percent of the world's millionaires, not billionaires, but millionaires are made through real estate.

The problem with real estate is that it's, you can easily get comparable evidence. So every man and his dog can go on the internet and get comparable evidence and be a quasi expert really, really quickly. So therefore, it's hard to get that edge over somebody else. And what Warren Buffett said is, at one of his shareholder meetings recently, somebody asked him, Warren, if you started again without your billions and started with nothing, just a few handful of investors, what would you do?

And he said, I would buy businesses. Smaller businesses because he's working with smaller sums of money. But he said, I was buying businesses and one of the biggest reasons for business is obviously it's income producing. It's a active income producing investment. And it's inflation friendly.

Sales go up. Obviously costs go up as well, but the bottom line goes up, in a line with inflation. But he also said, when you're dealing with small businesses, there's no, yes, there's a multiple of EBITDA kind of thing, but there's no scientific method. And it depends a lot on age, depends on motivation.

I. e. what you're going to pay depends on, like, take about the call we had today. Chap's say 70 years old, unfortunately had cancer, he's in remission, and he's got the bank chewing down his door. And it's ridiculous what the bank's doing, it's immoral. And I know I'm a little bit off topic here, but I'm just saying, in terms of valuing a business, his motivation is different to somebody else's.

And, so therefore the price is kind of going like this. So in real estate on the market, what's on the market is easily to achieve or trying to ascertain what the value will be. In businesses, it can be all over the place. You know business values are depending on multiple different things. A lot of them come down toemotion, psychology and also just vendor behavior, vendor psychology. Where they are in their life? Have they have had a life event? Health issues, that kind of thing.

But, so how can you get real estate without being prone to the market? So everybody knows what the values are. And the way to do that, or one of the ways you can do it, there's many ways. But one of the ways you can do that is buy businesses that already own their real estate. And say you're buying it at four times multiple, that means you're buying the business at four times multiple, and you're also getting the real estate at four times.

And like you've just said, the sale lease back, the sensible thing there, let's call it a million pound of EBITDA. So you're buying at four million or something and forget, let's leave to the side deferred consideration, working capital and all that kind of stuff. We're just paying four million pounds, because a million pound of EBITDA.

The minute you take 200, 000 pound of rent to the side, you're probably getting 12 times on that. And then you've got immediate multiple arbitrage on the real estate and that can happen on the day of completion. But why would you give that to somebody else? Because if you're buying businesses that are profitable, then surely the game plan would be to buy three, four, five, or six businesses that are profitable. And then sell those businesses without the real estate. Hopefully to private equity that don't like real estate, unless it's a private equity company that just does real estate.

So, if you're buying one business and doing, let's say, a lease back, you might be selling at a 12 times multiple. Which is an 8 percent yield on the real estate, yeah? And you've still got, you've bought your business at 4. So you've made a nice little margin there. But imagine if you're repeating that process and doing it multiple times, you've got half a dozen businesses.

Then you're not selling at 4 times multiple, you're maybe selling at 6 to 8 times multiple. So you're, obviously everybody understands that, that's the game. But the second compression in the real estate, the second bump in the real estate values, comes from, selling the business first to a private equity. PLC, big balance sheet.

Why? Because your 12 multiple over here, an 8 cap goes from 12 to potentially 16. To potentially 18. So you're losing 50 percent of the value by selling at day one. Just because you haven't figured out the financing aspect. 

[00:14:17] Ronald Skelton: Yeah, I get that. The, um, I'll be honest, most of the people that are looking at doing the sale lease back, it's, it's to fund the deal. They don't either have the mechanisms or, you know, maybe, maybe they're not so bankable, Like, to go to a bank and get,a lot of people that there needs small businesses, these, you know, one to $5 million acquisitions that you, in the U S it happens all the time because the SBA will fund those.

If it's got real estate associated to it or tied to it, it's a way to, extend the SBA loan, which is a cool, they'll give you a longer alert, loan and,and make, you know, make a, up to 50 percent of the business value can be the real estate. And the grand scheme of things I think the reason most of the guys are doing it is, it's a way to get into the deal without having to have, you know, a hundred, 200, $300, 000 laying around. You can give that seller some cash at close. And then the long term play, I could see where it could be detrimental, right? It could be, you could have made a lot more money the other way around.

[00:15:14] Dan Taylor: One day we did a sale back. We bought 30 businesses. And,the thing was worth about 21 million at the time and a small business. So 3 million EBITDA, and we did a sale lease back in preparation for a sale of the business. And then that took the value to 30 million.

So 21 to 30 in one, in one day. That was before we saw PLC. As soon as we get the, the PLC on the hook, we go to 35. Yeah. So it depends on your own game plan. I mean, a lot of people, you know, don't need to do that. They just, you gotta start with what's your own goal. What do you need to, to actually furnish that goal or fuel that goal as in the minimum, not the maximum.

Just what do you need to really get to your exit goal? And then work that back. And that's kind of what you need. And if that means you do a sale lease back, nothing wrong with that day one. As long as you understand that you're leaving a lot of money on the table for someone else. And that's cool if that's your, your gig.

But if you want to do a roll up, then you're missing half the compression on the real estate. Which can add up to quite a lot of money.

[00:16:17] Ronald Skelton: I met one guy, we had him on here on the show. And he said he, he, he did the sales lease back to fund his deal. And his deal was kind of cool that he paid the entire, he bought the entire business and paid the owner off for what he got out of the real estate on the sales lease back. So the entire purchase of the real estate and the business together, was a million dollars. 

Right around like 1.1, 1.2. So right around a million bucks. He's sold the real estate on the sales lease back for enough to where he paid the owner off day one at closing for the, the entire value. And he walked away with $800, 000 cash. Cause he got one point, he got enough, there was 800, 000 over the closing price.

So you get, they operate off of, you know, cap tables and stuff like that. I think he got like an eight cap on the commercial property. And it was undervalued by the, the previous owner. The previous owner, you know, wanted a certain price for it and he agreed to it and he knew that on the sales lease back. There's a difference, if you're new and you're listening to this what the reason that you can get a premium on real estate that the seller, the original seller can't get, is the investor will pay a premium because they have a long term tenant in it, right?

So a seller can't sell a business on day one and say, I've got a 15 year lease, right? Because they don't know what the new owner is going to do. They can't commit that new owner or at least they don't commit that new owner to a 15 year lease. 

[00:17:41] Dan Taylor: I think that's a mindset thing. Where if I was, say I've got a business and I'm setting the business up for sale, then it would be a planned exit where I would be selling the business first with already a long term commercial lease in place. It's landlord friendly. 

And after I sold the business, then I would sell the property, if I was going to sell it, if it wasn't a long term whole kind of thing. So, you, you just get, and then you would want to pick who the buyer of the business is. Because that's going to affect the commercial real estate values massively. You know, hugely. So I would never do around unless you know taking 800 grand off at completion is fantastic.

If that's your gig, you know, carry on do it, do it again. But for me, you know, there's a lot of levers to use in these transactions. Especially when you have businesses, profitable businesses and the real estate, then you've got both sides of the same coin. And only doing one side with no real estate means you're losing all the alchemy or the, financial alchemy, whatever you want to call, arbitrage, multiple arbitrage on the real estate side.

So I kind of, I kind of like this, this space is a, um, another reason why we do it is to protect investors. So when we buy something, if you picture a holding company at the top and then three circles below it, so the three circles are wholly owned subsidiaries, yeah? And, let's just use numbers of a transaction that looks quite good.

The real estate's worth half a million pounds. And I need to raise, 250, 000 from investors. So I, basically,the whole things in one company. Just now, I move the real estate into a different company. Create a lease. Investors at probably 33 percent leverage. Why? Because it was 500, 000 in value, but as soon as I create the lease, it's worth at least 750.

So I raised 250k at 33%. They've got a first joint charge. They are the bank. So I call them the bankers. They've got a first charge security. It's their pension money. So I'm going to protect that. So I'm going to ring fence that asset into its own SPV, so the corporate veil cannot be pierced. Now the vendor deferred consideration.

I'd also put all the plant and equipment and lease that to the trading company. So the trading company is leasing the property for the investors, so they're protected. And they lease, we lease the plant and equipment at a separate company to the trading company. And that's first joint charge to the vendor to give them security, comfort, trust that his deferred consideration is going to be paid.

[00:20:15] Ronald Skelton: He must've listened to you. Cause the guy had on here, that's what he's, I asked him, well, how many times are you going to do that? Cause he, you got an $800, 000 check. He goes, I'm not doing it again. I said, what do you mean? He goes, we're setting up a REIT, right? A real estate investment trust. I'm going to seed the money into, part of that's going to seed my real estate investment trust.

I'm gonna raise money from other people. And now when I buy other, you know, businesses in my roll up, where the investor going to do the lease back. So our company will own that lease. The REIT will own it. And I, he explained kind of what you explain, but it just didn't land. Right now I understand,a bigger picture of what you're doing.

You're now be able to give debt backed, instead of an equity backed capital raise, you can do a debt backed capital raise on, on a business. Cause you have some form of hard asset collateralized against it. And because if you set, if you structure it right and you set it in some type of REIT or something like that, you could even do pooling where you have, where it's cross collateralized. You have, a larger pool of assets than just what they need. 

[00:21:14] Dan Taylor: So there's really, there's two, real assets. The property that's a ring fenced and provides security for the investors. And then here we've got the plant and equipment that's ring fenced at least to the trading business. And that provides security, comfort, and trust to the vendor for the deferred consideration.

So they know they're going to get the money or, they don't allow us access to the equipment. So it's as simple as that. Now what that provides is then the trading business unencumbered.

[00:21:43] Ronald Skelton: So I'm currently working with a group of people who are doing a roll up or buying up, cabinetry, kitchen and bathroom manufacturing companies. Companies that manufacture cabinets and stuff. And one of the things happening in that industry is, a lot of these current manufacturers can't compete with the regional or global manufacturers.

So they end up really needing it to be just installation, do installations and showrooms and order the boxes and the boxes are the main parts of the cabinets, the heavy part. Just order those that are, from another place. And then, what they're doing is customizing the door, doors and knobs and all that type of stuff.

That said, there's a brilliant play in there. Cause a lot of these facilities are huge on prime commercial real estate. The town, and their old companies, the towns grew up around them. There are three within 50 miles of me that I've seen that are on millions of dollars worth of real estate, but they're old 10 buildings and stuff like that.

So there's a play where you buy the company. You move, you build a showroom out somewhere on a, on a different piece of property or on a corner of the property. And then you sell that real estate off later to be quite frankly raise, you'll raise those metal, old barn looking buildings out and turn it into something more profitable for the area. Didn't even think about that. 

[00:23:02] Dan Taylor: One of them were in negotiations just now. It's, um, they've got a lot of acres. And part of it's going to be self storage. Business on land they're not using, which is pretty cool. Another one we did, uh, it was on the market for over, over two years. And we offered them, we, you know, we bought it for a third of what they're wanting offers over.

And we took a lease, which a lease option is, you're taking a lease on the property and you have a fixed price option with a determined period of time. With the lease option, I then facilitated management buyout as a short term fix so that I don't have any hassle and the management are now on the lease.

And then I then took up the option because I took a premium from the management. Yeah, but I put everything in place for them. I made the business profitable, which is pretty easy, while I worked on the longer term game plan. And the longer term game plan is a 20. 5 million pound development for student housing. And that's everyone went there, 

[00:23:59] Ronald Skelton: The thing inside of, sorry about that. I was gonna say, there's a thing inside of real estate called, highest and best use. Which isn't, isn't used most, in most other industries. I haven't heard of that anywhere else. When I was in the residential space, we would even look at like in residential properties, there's a highest and best use of the property.

For instance, if our property happened to be near a hospital, the highest and best use for that wasn't to rent it out to a single family house, as a single family rental. The highest and best use was it to furnish it really nice. Not even turn it into an Airbnb, but turn it into a corporate housing for traveling nurses.

Cause they paid a premium and they took care of the property. We'd make way more rent on them than, you know, as being fully furnished and, had cleaners to go over, clean up mower, lawn people to take care of the lawn. It was a, it was a full, full service type of thing. To where, if it was by the fairgrounds or event center, Airbnb was the highest and best use.

And then, if, if we didn't buy any of these, but if it happened to be near our college and you had multiple bedrooms and stuff, student housing and doing kind of boarding house rent would be the highest and best use. So, taking that highest and best use mentality, I think is brilliant inside of this space because sometimes what they've used that business for and that real estate for, for the last 30 years, isn't the highest and best use of that real estate currently. 

[00:25:19] Dan Taylor: No, when you go into these kind of businesses, a lot of them like the one this morning, it's been around for 64 years. So the grandfather set up. Like last week, uh, 80 years old. The great grandfather set it up before, before this is before the great war. It's incredible. So they've been the same business ever since.

You know, housing is developed up around about them. Other industries have developed around about them. And a lot of the times you've got to go in there with a new set of glasses on and ask yourself, what could be? What is the demand? And a lot of the businesses, this is incredible, a lot of the businesses can't afford to be in the property they're in. And that's a real, 

[00:25:58] Ronald Skelton: That's a big problem here. Yeah.

[00:26:00] Dan Taylor: And that's an incredible thing. So you look at the Timpen Bowling Alley. Doing 200, 000 profit, and 13, 000 square feet, and it's only doing 220, 000 pound rent now. But it costs one and a quarter, and it's now worth three and a half mil. And there's no hassle.

So it's turning it frommultiple valuation, trading valuation to an investment valuation. One's based on multiples of EBITDA, one's based on cap yields. Cap yields, or caps as you call them over there. 

You know, when you blend the two things together, it's a fascinating world. You can do incredible things.

[00:26:36] Ronald Skelton: So one of the problems we have here is in a lot of areas, the real estate value has shot up considerably, right? Especially here in California. And, I looked about, I don't know, it's been a month or two now. Guy had a fairly profitable company that did, it had a, it was, it was mostly land. The, the real estate anyway. I think they're on less than five acres, but it was a couple acres of land in a decent area in California, in a commercial area. They sold trailers like, cargo trailers and stuff like that, flatbed trailers. Things you pull behind your truck. They even had like a, cattle trailers and horse trailers and stuff.

It's kind of a rule up here, in the vineyard area. So there's, they had all that kind of stuff. And the problem they had is he didn't know in the real estate, his high school buddy did. And when we started looking at the business, I had to call and negotiate a lease with the, the high school buddy. And he's like, Oh no,the rent's going up, it's going to be $12, 000 a month.

And I'm like, that's more than this business makes currently profit wise. He goes, not my problem. And I said, what do you mean? I said, I told him, said, you're making it to where your buddy can't sell his business. He goes, sure you can. They're just going to have to move it. I said, well, with that type of business location is everything, right.

The people that buy his trailers from him, they've been buying them for years. They know exactly where to go. They probably don't even remember his business name or his phone number. They just know where to drive to, to go get a part for the trailer or to upgrade their trailer. Anyway, it happens a lot here.

Companies, and it, it made me realize that, often if you buy a business with real estate, you're undervaluing the real estate because technically if that real estate was owned by anybody else, that business could not afford to be there. 

[00:28:18] Dan Taylor: We see it all the time. Old businesses. You know, imagine 80 years ago, where you live just now. Wherever anybody lives just now, unless you're in the desert. In an 80 year period, A lot has happened. A lot has changed. We have these 18 year real estate cycles that have been going on for 200 years now.

That are, you know, that just kind of repeat and repeat and repeat. Now, that is the cycle of land. The basically economic rent of land. The 18th year real estate cycle. So we get booms and busts. Uh, we get 14 year upcycle with a mid rangehit. And then a four year down. And that's what's happened for the last 200 years.

So, and it's because of, people settle. They then increase the value of land. Then they have new technology. You can build more apartments or whatever in the same bit of land. So it increases the land value again. And at some point it goes too far. And it obviously resets and it starts again. Now, over 80 years old, which is four cycles, there's been a hell of a lot of development. Which means that a lot of things have increased in value exponentially compared to what it was 80 years ago. And that business is still churning out the same old, same old, same old. Therefore, there's a massive opportunity. Well, for me, I prefer the businesses that actually remain where they are.

They can afford to be where they are. And we just buy multiple businesses and sell off the business, keep the real estate. But some businesses need to be relocated because they just aren't doing enough profit to warrant the value of the land. Like an engineering business we like to look at. This engineering business, they wanted 20 million.

And the business was going great. I mean, absolutely fantastic. It was doing about 2 million in EBITDA. Probably a little bit over priced, but his equipment, the investment that the owners have made was a labor of love. They bought everything. Everything was automated. It was incredible. And what I could see was the gold mine, was hole of land to the roundabout.

And there was nothing on it. It was scrap. It was there, it was their elephant's graveyard. And I looked at that and I thought, Oh my goodness, I'm losing my mind here. This is incredible. And I just seen,drive throughs, four drive throughs there. And then a strip mall at the back of them. And, you know, we never got the deal unfortunately, but it just goes to show, when you're in your own industry, your own sector, that's all you know. 

So you can't, you know, you've got your blinkers on for your sector, you can't go like that. You're just in your zone. And they're amazing. These owners were incredible, amazing at what they do. If anything, they've over invested to be honest, because their investment didn't match the EBITDA growth, but they just love what they do. And they've got the cash and they've got no debt. So, who's to blame them?

[00:31:06] Ronald Skelton: Right. One of the problems we're having here in the United States, and I'm sure it's there too is, if and when the owner realizes the true value of their real estate, often it's worth so much more than the business is. The only logical thing they see on their radar is sell their real estate and shut the business down, right?

They don't have, they either don't have the time or energy or wherewithal to go, okay, I need to relocate this to a different location that it can survive. Then I can sell the real estate at its peak value and then sell the business at its peak value. Also a year or two later. But by the time somebody is ready to sell often here in the United States, they are 70 or something.

They're mentally and physically done with it and they don't have another, okay, I'm going to move this cause everything, you know, you know as well as I do, when you move a company, it's more than just moving stuff. Some people will travel and go. Some people won't. You'll lose some key employees, you'll lose some key customers.

It is a major disruption. You have to plan for managing it over. So it's not just a three week adventure where we're going to hire some moving trucks and move it and then it's back to where it was. Not most of the time anyway. 

[00:32:14] Dan Taylor: Well, one of the biggest things we've come up against, and we've kind of narrowed our KPIs. What we look for, scrape data, before we get in touch personally. And it's all off market deals. As, um, you know, we, we try to do a few deals in the engineering space, but the owners were too young to be honest.

They didn't have the motivation. They had another, you know, the, yes, they survived a couple of storms, but they can take another store. Where now we focus on 65 to 75 years old business owners, baby boomers, basically.And that's all we do that we do not contact anyone unless they're 65 to 75 plus another eight KPIs.

That's our gig. You know, and one of them is no debt. 

[00:32:56] Ronald Skelton: I'm a marketing nerd by previous trade. That's what my master's degree is in. So I love a good tight target market. Here in the U S actually, I have to be honest, I have a hard time finding, we don't have company's house like you do. And we don't have some of the data sources you guys have.

I think you're in a location where, is it called company's house? 

[00:33:13] Dan Taylor: Well, companies house is the backbone, but that's not the key that, we don't search on there. We use kind of, our own kind of internal searching systems that we kind of used to find,or match our nine KPIs. And then after we do that, we then siphon the data into three different buckets. No debt, low debt, lots of debt. And they're all relevant, just relevant at different times of the cycle.

And then after that, we then go and hang them on social media or see their websites and all this kind of stuff. So we've got our kind of own bespoke kind of systemized system that we use to kind of find businesses that probably, you know, tick all our boxes. And they're probably right for selling. But not all of them are, but you know, right now we're helping a couple of people do the same thing.

And one of them actually, he, he had COVID again. And, just as he's about to start or tell, you know, helping him do what he needs to do for the searching, and he got COVID. So we just said, look, we'll do the first bit for you. It's not part of the gig, but we'll, we'll help you out.

Cause he, he really needed help. So we did that. And on that one, we sent 50 letters. Now we've got a multiple approach kind of thing, but we sent 50 direct mail, handwritten letters. His thing to do, it's laborious. But every single one of them gets opened.We got a call with one business that is in complete and utter distress, and he shouldn't be. It's because of his age, his health, and the bank's been a big bad bully. 

We spoke to him this morning, and all the accounts are through already. Accounts, cash flow, valuations,customer list, supplier list, all that kind of stuff that we ask for. And it's easy to fix his situation. But he can't see it because, he's in his own forest.

[00:35:00] Ronald Skelton: It's interesting. What I was going to say in thatabout sourcing deals and stuff is I have yet in three years, I've been in this space, been able to identify a really good, accurate source of CEOs age. So, uh, I used to tell everybody I'm a direct mail guy and, I've been in seminars with Jay Abraham.

I've been trained by Dan Kennedy. You know, I've been through the different mentors and stuff. But I used to tell, I used to, my, my running joke for a long time in the direct mail space is like, look, if you wanted a list of pet owners that own one armed monkeys, somebody owns that list, right? I can find somebody owns a list of one armed monkey owners and we can send them direct mail.

And I say that in the last three years. I've yet to find someplace that has an accurate list, Data Axle, all those, they don't have age demographics on CEOs, right? Cause I want that list. I want a list of 65 plus CEOs. I found ways to abstract it, like figure it out a little bit through multiple data sources, but, it's not as simple as just go buy a list from somebody like it is in a lot of industries, at least, at least here. And so if somebody's listening out there and you know where to get age demographics in the U. S., I'd love to hear it. So do you have a source there that has that, they collect that data there or? 

[00:36:10] Dan Taylor: Well, there's multiple softwares we use, but it's a question of don't rely on one system and create your own system. There's people that you know works and, and that's kind of what we do. And it's a bit, yeah, it is laborious, to be honest. But we've done the mass marketing thing where we just send out loads and the responses,everyone's seen it before.

Like one of our things that we learned from Jay Abraham and in fact, when we come back from Spain this time, we're starting a very specific direct mail piece. And it's going to be a box of Ferrero Rocher. Who's, who's not going to open that? Back in the gaming industry days, we used to send out envelopes with Kit Kats. And a long form sales letter that nobody read, but they were just that excited that they came in and spent a ton of money.

And it used to say, you know, headline, you know, stick the kettle on, kick back and let me tell you a story. Something like that. And then, then we sent another one with a teabag attached to the end of the letter as well. And then there was one we sent one that was a bit crazy. It was a box with a banana inside. And this promotion is going to make you go eat. Or something, something stupid like that. And all it was, it was attention, grab their attention and make them actually do something. And it's all the same.

Last week, I got two letters into the house that we've got packages, you know, for the girls. As in buying stuff, boxes from, delivery people's DPD and all this kind of stuff. But I actually had two letters. That's it. Everyone's trying to sell, send mass emails where to get someone's attention at either the place of work. If it's marked in the correct manner or at their home, um, especially if you give them a gift. It's just getting opened.

And if you've targeted KPIs to the right kind of people anyway, then,you've got to, you just got a better chance. You're upping your open rates and that's, that's all it is, you know. Plus you're standing out, you're being memorable. Who gets a box of Ferrero Rocher in the post?

We've got a kind of follow up system because, as everyone, hopefully everybody knows, the gold is in the follow up. Out of 100 percent of the people that you will buy their business, 3 percent are ready right now. They're hot prospects. You might not even have them on your list just now. You know, so yes, you get deals right now, but the 97 percent are not quite ready today.

Maybe they're going to have a health scare at Christmas, in January, in February, probably in the winter, or somebody near and dear is going to have a health scare. And it's at those life moments, is when, like after a holiday, after the holiday season, in the summer, in the winter, after a long extended winter, and somebody has caught a COVID or something again.

It's at those inflection points, it's when people make decisions. To move, to even investigate, maybe not do, but investigate. And it's at those times you need to have like a, a three year system of follow up because, somebody recently,I, I cannot believe this myself. And I love follow up, but I can't believe this.

He, um, he said, I got your letter four years ago. I said, what? I says,talk about procrastination. And then he told me what happened. Again, again, it's it was a health issue.

[00:39:23] Ronald Skelton: Yeah, I sent so much direct mail in the, in the real estate space that, uh, it wasn't until, I was probably about six months ago. I get a phone call on a number I don't use anymore. Like it still rings, it's still directed to my phone, but it's like a Google number or whatever. And I was like, that's my old real estate number.

What, you know, what does somebody call me on that for? I haven't done real estate since 2017, right. So I call him, he goes, Hey, I have this letter here you sent. And in my head I'm thinking, I haven't sent any mail out since 2016. Cause I sold that business to my business partner in 2017. So he sent some, but it wouldn't rang to this number.

So I just listened to the guy and I said, how long did you keep my letter? He goes, Oh, well, it's been on my refrigerator. We pulled out, we bought houses out of foreclosure. And he says, we pulled it out and now we're facing it again. We refinanced it. I used money to start a business. The business went under and, uh, now we're basically losing our house again.

And I need to see if I can get your help. And I was thinking he kept that on his, that letter I sent him on his refrigerator underneath a magnet for what is it now, seven years, right? Eight years? 

And he's, he's calling us. And it happens. Like I'm, in the industry we were used to getting six month old calls and maybe 12 month old calls, but you know, some people hold onto that and it'll be on their desk for a long time. 

[00:40:39] Dan Taylor: What's tragic about that? And I think, I find that devastatingly tragic in terms of psychology. In the morning, when you're more close to your alpha theta kind of vibrate, you know, frequencies. Which means you're more attuned to the kind of universe, and whatever. Or the ability to attract things in, you know, synchronicities. Then to have that on your refrigerator is one of the first things you go to in the morning and visualize that, it's kind of like you're, you're programming yourself for that to happen on the fridge. That's pretty nuts. Um, that's a shame actually, you know. 

[00:41:15] Ronald Skelton: So tell me, if somebody was looking for a great deal where the real estate and, to do what you're doing. Kind of give us, you don't have to give us your secret sauce or anything, but what are some of those KPIs and like, your search criteria. So that somebody can go, you know what, I really liked what he said here.

I want to build some type of search criteria. Where would they start to develop the skills they would need in the search criteria they need to be able to do,to double dip like you're talking about. To buy the real estate, to buy the business, to buy the real estate, and to exit with them later on, or hold on. 

[00:41:48] Dan Taylor: You know, what I do requires investors and, we have a private investors club.And that, that helps. But, you know, and these investors, they're friends. So I look after their money more than I look after my own money. I protect them first. And so you have to kind of come with that mindset of you're, you're kind of serving them first and you're secondary.

So if you can do that, if you can then create relationship with investors, if you can get around the compliance of that, the regulation of that, which is not straightforward in America or the UK. Which shouldn't be taken on lightly to be honest. There is a lot of regulation around that and in the UK you can go to jail, which is not cool.

So you have to really kind of put, you know, you got to say that first and that is, is a, take that on board. Then for me, we only target 65 to 75 year old people or, plus 65, that's number one. Number two, they have, they has to own real estate. So we investigate. Yeah. Number three is it has to be a need, not a want.

It has to be, non discretionary business. So discretionary businesses are, a recession hits, wages get cut. And you're worried about your job. And you cut everything in the household expenditure. That's not a need. Everything else is at work. You never want to buy a business in a long space. Yeah. Discretionary space.

Why? Because it's the first to go. In a recession. In a downturn. In a cut back. So that's kind of some of my kind of, KPIs is there's nine in total. And, you know, I kind of like to keep a lot to myself. I share some, not the whole thing, you know. What we do in detail and actually,there's a couple of people I help.

We used to help people do commercial real estate. We did some training in that. But I kind of, stopped that after a while, but I still help a couple of people. And, you know, it's not a big thing I want to do. But we are going to be helping maybe a couple more. What I see in terms of kind of giving back, or the kind of thing I, the thing I want to create is, have a board. Like a boardroom or a war room.

10 people in a room in Marbella, in London, in the vineyards in France, that kind of thing. We meet once a quarter and, we help them through deals. Because that, that to me is, it's just fun.I don't know, but, um, I like to combine deal doing with new experiences with my family.

And so that's skiing, vineyards, being in Marbella in Spain and, you know, things like that. So that's kind of what I want, I want to do. So I'm going to go towards that. I don't know when I'm going to start that, at some point this year. But two people inadvertently is kind of became part of that already.

But in terms of KPI, so share them exactly what I do. And I like one chat today, I said he had COVID. So we actually sent the letters. We then took the calls. We've had a first meeting today. It looks great. I've now got all this. This is not supposed to be part of it. I've got all the accounts. I'm going to analyze the stuff, put the kind of deal structure together and, and get back to the chat tomorrow.

So, that's not the normal thing, because that's like him being a passenger and me being the driver. It's not meant to be. But when a hot thing comes along, in a deal, when something hot comes along, you just drop everything and you just go with it. That's my philosophy, you know.

[00:45:15] Ronald Skelton: Have you done this outside of the, the European, uh, theater? Like have you done it in the United States or Australia or anywhere else? 

[00:45:21] Dan Taylor: No, never done it anywhere else. Just the UK just now. But I definitely want to be party to some deals in America, to be honest. And why is that? Because of what I said before, I love deals and I love experiences. With my family. Anywhere I can combine that together is,kind of happy, happy place for me.

So that includes California, Florida, you know, potentially. And also the big space in between. But, you know, somewhere where, I've just been in Florida in February there. Had a great time in Miami and, uh, love, just love the sunshine state, love the Caribbean, love the West coast. So yeah, I want to spend some time there. So, I'm kind of, my, the next phase of my life is designing, you know, picture what your life, the perfect life would be, the perfect day that you could live day in, day out.

And then reverse engineer that. So how much money do you need? Therefore, how, how many deals do you need? And, part of my perfect day is a month in perhaps California, a month in Florida, or, you know, a month in America. A month in the Caribbean. And a month skiing. And six months in Spain, which doesn't leave very much time for the UK. 

[00:46:33] Ronald Skelton: It's interesting, uh, if you're looking for warm, the January, I think you say January through March frame, it's not here in California, at least up where I'm at in Northern California, right? We have a cool thing where the water up here actually comes from the North. So even during the middle of the summer they sees these pictures I post all the time this beautiful California Coast and I live right on that area where you see in movies where they're driving down the windy road and there's cliffs and the Waves are hitting the water over the cliffs and stuff.

I drive that road every day. It's highway, highway one and it's it's you know, quite literally that 12 miles from here, so. When I get off here today I might even go over there and go to Bodega Bay and watch the Coast Guard cutters go in and out and do some work via email and stuff. That said, that water is, during the hottest part of summer that water is 48 to 50 degrees, which cools the whole area down. 

[00:47:21] Dan Taylor: On one of our, the land on one of the deals we're looking at just now, we've got quite a lot of acreage. And, you know, part of it they use and they've used for 80 years and the other part they, they just, there's nothing happening on it. So we're going to do a self storage and lease that out.

So we're, we're not getting involved, but as part of it have a shed, uh, to potentially, build some vans as a, as a little hustle, a hobby. And the reason for that is in America you have incredible vans. I've been watching all the custom ones and they look phenomenal. In the UK, there's none of that. Yes, some people do them, but all they're doing is taking stock items and put them in the van. You know, it's, it's, it's not very good at all. But anyway, it's, it's more of a hobby kind of thing. Yeah. 

[00:48:06] Ronald Skelton: Well, I want to appreciate, I want to tell you that I appreciate having you here today. I learn some stuff. I've got these, I'm going to like, when we get off here, this doesn't happen very often, but when we get off here, I'm going to draw out a business model off. I have built in my head of what you told me about, because I think it applies to the current project we're on. And it might give us a way to expand and,you know, have a second exit inside of that.

So I love what you taught me here today. I appreciate it. And if you ever need anything, reach out to me, I'll connect you with anybody I know, and, uh,help you move your game forward anytime you need. Anytime you need anything whatsoever that I can help you move your game forward let me know and I'll, I'll make that connection for you. 

[00:48:41] Dan Taylor: Yeah, cool. Ron, it's been an absolute pleasure. Thanks very much, buddy.

[00:48:44] Ronald Skelton: Cool. Hang out for just a few seconds. We'll call that a show.