E190: Brandon Knowlden Shares His Acquisition Strategy and Recent Success - Watch Here

About the Guest(s):

Brandon Knowlden is an entrepreneur with a rich background in both the advertising industry and the world of manufacturing. He kicked off his career at the early age of 13, working in his father's manufacturing business in Detroit. Later, he transitioned to advertising, working with high-profile clients like Porsche and Panera Bread. Brandon's entrepreneurial journey eventually led him to found a woodworking business specialized in creating durable housewares. Having successfully exited his business in December 2023, Brandon is currently focused on acquisitions within the custom cabinetry and manufacturing industries, aiming to build significant roll-ups that generate generational wealth.

Episode Summary:

In this insightful episode of the How2Exit Podcast, host Ronald Skelton and guest Brandon Knowlden delve into the intriguing world of mergers and acquisitions, particularly Brandon's unique approach to business growth. Brandon shares his compelling journey from advertising maven to successful entrepreneur, highlighting the pivotal moments that led him to the realm of small to medium business acquisitions.

Brandon's recent venture into buying a custom cabinetry company showcases a novel strategy involving a sale leaseback — a powerful maneuver that financed the purchase of the business itself. Listeners will be captivated by the intricacies of the deal, how Brandon leveraged the property's value, and his visions for future roll-up acquisitions.

Key Takeaways:

• The "property split" or sale leaseback strategy can significantly finance business acquisitions.
• Building a quiver of private investors is crucial for executing sale leasebacks efficiently.
• Seller financing conversations can benefit from a personalized, human approach, aligning the seller's needs and the buyer's goals.
• There's potential for creating a more efficient system by identifying and remedying inefficient practices in acquired businesses.
• Establishing genuine relationships with both sellers and their key employees is vital for successful transactions.

Notable Quotes:

• "You might want to consider growing by acquisition, because then you can plan your growth."
• "It took me three or four months of looking and I was looking at different target profiles but it took me three or four months to find that business."
• "You just took a look at the situation with fresh eyes and I'm going to save us 6000, $8,000 this year alone on stuff that I just observed, like walking the floor."
• "Money is not always the most valuable thing to people. It's oftentimes their time or expertise."

Article:

Leveraging Seller Finance and Creative Deal Structure in M&A

Acquisitions and mergers are more than just financial transactions; they're about strategic growth, human connections, and seizing opportunities in times of change. In this in-depth conversation with Ronald Skelton on the How to Exit Podcast, Brandon Knowlden delves into his recent acquisition of a woodworking business, discussing his journey from entrepreneur to M&A strategist. Knowlden shares his insights on buying businesses, utilizing seller finance creatively, and constructing advantageous deal structures that benefit all parties involved.

Key Takeaways:

• Growth Through Acquisition: Shedding light on the implicit potential of acquisitions for substantial growth as opposed to organic expansion.
• Seller Financing Strategies: Exploring bespoke seller finance structures that align the seller's and buyer's interests, fostering a cooperative transaction environment.
• The Human Element of M&A: Emphasizing the importance of rapport and understanding the seller’s perspective for successful acquisitions.

Understanding the Real Value in Business Acquisitions

Brandon Knowlden's story begins with roots deeply entrenched in entrepreneurship and the materialization of ideas. Transitioning from designing short-lived ad campaigns to creating enduring woodwork, Knowlden's introspective journey led him to the world of business acquisitions. The switch was ignited by seeing established companies distinctly grow by absorbing other entities.

Discussing the initial spark, Knowlden states, "I just got sick of making things that cost a million bucks but lasted 30 seconds." He positioned himself to craft pieces that held lasting value and eventually realized that the fastest avenue for growth was to buy it, not build it from scratch.

At its core, M&A is about integrating existing value into a broader vision. It's about discerning opportunities where others just see established entities. To Knowlden, the pursuit of acquisitions is compared to "fishing from the middle of the river," alluding to the unpredictability of organic growth versus the structured progress acquisition provides.

Seller Financing: Engineering Trust and Aligning Interests

When Knowlden talks of creative seller financing, what comes across vividly is his emphasis on crafting tailor-made deals that resonate with the seller's life situation and financial prognosis. He speaks not only from an M&A strategist's perspective but also as someone empathetic to the plight of the business owner looking to exit.

"...money is not always the most valuable thing to people..." he remarks, before detailing a strategy surrounding seller financing hinged on the appeal of contributing more to a seller's retirement plan rather than yielding to taxation.

The example Knowlden provides involves reassessing the deal structure so that it includes maxing out 401(k) contributions and exploring backdoor Roth options. He juggles tax benefits with demonstrated respect for the sellers' hard-earned wealth, ensuring they see the merit in a well-structured seller note.

Offering direct quotes from the transcript, another highlight is when Knowlden posits, "Why would I give that money to the bank when I can put it in your pocket?" It embodies the principle that the best deals create wins for everyone involved — a foundation solidified by genuine conversations and an earnest understanding of each other's financial goals.

The Human Drama of M&A: Beyond the Numbers

M&A is not just about valuations, synergies, and the bottom line; it's fundamentally human. The sellers are not mere vendors, but are individuals with stories, challenges, and aspirations. Knowlden's approach is intimate, often serving as a confessor of sorts to owners who need to verbalize the burdens they carry.

"The highs are incredibly high, and the lows are so lonely," Knowlden reflects, acknowledging the isolation that leadership can entail. This acknowledgment has been instrumental in his ability to broker deals empathetically, reinforced by the rapport he builds with sellers and business leadership.

Buyers in the M&A space must recognize the human element as a crucial aspect of the negotiation process. It's about more than securing a transaction; it's about facilitating a transition that warrants a legacy's perseverance.

Recapping the Art of M&A with a Human Touch

Successful M&A strategies hinge not only on financial ingenuity but also on a profound recognition of the human element behind every business transaction. Brandon Knowlden's journey from an entrepreneur in the woodworking business to an M&A strategist reveals the importance of considering the seller's perspective, financial goals, and the broader life context in which the deal occurs. His approach to seller financing exemplifies the considerable benefits to be gained from negotiating structures that align the interests of both parties.

At the heart of business acquisitions and mergers, we find a confluence of freewheeling creativity, strategy, and an unmistakable human core — a tapestry where numbers meet narratives, and where trust and understanding pave the way for prosperous, mutually rewarding outcomes.

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