E169: Bakari Akil: Mastering the Art of Deal Sourcing and Structuring in Mergers and Acquisitions

[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit podcast. Today I'm here with Bakari Akil and he is the founder of Graves Hall Capitol. Did I get that right? 

[00:00:07] Bakari Akil: You said it right. 

[00:00:08] Ronald Skelton: All right, cool. You looked, you smiled, I was like, Oh no, did I butcher it after all that? I used to joke around all the time. I said the first six months, I don't care if your name was John Smith.

I butchered everybody's name. It was an ongoing theme. I would stutter, mispronounce them, whatever. Well, let's just start off right off the bat, man. You're a really cool guy, done a lot of stuff. You travel the world right now. We're going to get into that just for fun to get people that kind of know who you are. Let's start off with your origin story. How did you end up on a show about mergers and acquisitions?

[00:00:34] Bakari Akil: Yeah. So my background, um, so, um, currently is the founder of Gravesville Capital. I've, uh, bought several companies. I bought a burlap bag manufacturing company called NYP Corp earlier this year.

Bought an educational technology company. I completed that deal a couple of years ago. The year before that, excuse me. I did the first deal, the NYP Corp deal with a private equity firm. The deal before that, I did that with a family office. Um, I've worked in corporate development, buying companies on behalf of other corporations.

And I also teach, uh, M and A, um, or ETA, I should say, entrepreneurship through acquisition, teaching the MBA candidates at Cornell's business school how to buy companies. I've been doing this work for our M and A work and transaction work since probably around 2015, 2016. Um, that said, my introduction to this space is a lot different than what, um, the sort of standard.

My background, I didn't go to a business school. I didn't get an MBA. I actually didn't even finish my undergraduate degree. I went to Morehouse College, um, and dropped out because I wasn't able to afford the school. Around 2015, I was sitting around and asking myself, why am I not rich? Like what, what is going on?

I don't not have more money. I thought by the time I got to 25, I was going to be far more wealthier than I was. And I was struggling at the time. And, I started looking into like, what could I do to go from here to, uh, to success. And, uh, I came across this concept is leveraged by a concept by just reading a lot of personal finance books. And they would talk about what it took to save money in your 401k and all this type of things, um, which I was starting to do and starting to participate in.

But I started asking myself is I don't think that that's what Mark Zuckerberg did. That's not what the guys who have like enormous amounts of wealth. What did they do? That's different than than that. And I knew, starting a business made sense, but I didn't have like a really good startup idea. So what, what, what are the options?

And as I mentioned, I came across the concept of a leveraged buyout. And once I actually like understood and consolidated and understood, uh, what it meant to actually apply it, I was like, wow, this is it's the most amazing thing I've ever heard. I can go and borrow money from the bank for an existing business that's already up and running.

I don't have to go learn this business. It's already existed. I don't have to create it. I'm going to find the employees. I got to find the customers. It's all that stuff is all there and all I got to do is organize the money so I can get this done. Oh, sign me up. And so I just started looking and learning and getting deep into this subject and ultimately ended up taking a class.

I sat in a class at Columbia Business School. Basically I learned that they were teaching this subject at Harvard and at Stanford, um, and they were just now starting to open up and, and share the same content at Columbia. And I wasn't a student at Columbia business school, but I lived in Harlem, which is the same neighborhood that Columbia business school went.

And so one day when I realized that this class was being taught there, I just went to the business school and sat in the class. And, uh, that was how I ended up getting introduced to the space and ended up connecting and meeting with investors. But it all started with that, um, that work. And so, um, that's, there's a direct line from that activity all the way to where I am today.

[00:03:54] Ronald Skelton: That's awesome. That's awesome. One of the things you said during there which kind of caught me ofF guard there is, you didn't finish your bachelor's degree, but yet you're teaching at Cambridge. That's an impressive Um, a feat, right? There's, uh, not everybody. I've been, I have multiple college degrees, and I've been an adjunct professor.

Sometimes they bring me in to teach certain things and stuff, but I've always had to show my credentials, right? I have an MBA, I have undergrad degrees and stuff like that. If they want me to teach, it's just, you know, a course or something, it's because I meet the, all the check boxes. For you to teach a course at Cambridge, it means that you've got personal merits and personal achievements that they overruled any type of, educational checkboxes they needed for you, I think. So that, that in itself says something, it really does. 

[00:04:40] Bakari Akil: Thank you. Uh, just for point point of clarification. I teach at Cornell's business school.

By teach, I want to be very clear so that there's no, no confusion. Um, I'm not a professor. I'm a visiting lecturer. As you just said, my personal merits are what the students that they are hungry for people who, who have personal experience, who have tactile experience, and can speak to what it's actually like to be in the trenches as opposed to just sort of the academic, um, understanding around entrepreneurship. 

Which can be, it's, it's harder to find the solution to these types of problems of how to organize and find capital when you haven't actually done yourself gone out and done done the work. And so that's the reason why Cornell's invited me for several years now to come and speak to their students and teach this subject that they're very much interested in learning.

[00:05:32] Ronald Skelton: I just interviewed David Dodson. Do you know who that is? 

[00:05:35] Bakari Akil: Yeah, absolutely. So, I mentioned that I sat in Tim Bovard's class, which he taught at Columbia. What I usually don't mention is that I also booked a flight and flew to Stanford, and I sat in Dave Dodson's class as well. So, I was committed to learning about this subject.

And I would have done the same thing at Harvard Business School, but at the time, that class had already, I'd already wrapped. And so, but yeah, I learned from both Tim and Dave Dodson. 

[00:06:06] Ronald Skelton: It's interesting that you said you're studying. Is that like, uh, auditing a class or is that, like you're getting a grade?

[00:06:12] Bakari Akil: I wasn't getting a grade. I wasn't, I'm a formal student. I was infiltrating the schools of higher learning. 

[00:06:23] Ronald Skelton: And I'm just curious, did you pay on this? Let's get clear here. Did you pay a fee in like a audit class? You just showed up to where the class was and went and said, man. I absolutely love that, right?

[00:06:38] Bakari Akil: The information of where the course was being taught was publicly accessible on the school's websites. And so once I, once I figured out who was teaching the course, the times and dates that that caught that course was available, I just went to the school and sat in the class. 

In fact, that was how I ended up becoming my, that was the first time I was invited to be a lecturer. And, uh, of course the professor there was so impressed by my willingness to go learn this subject and to go and sit in a class. Tim specifically, um, that, uh, in later years, he would invite me back to speak to the class about the fact that I did that and what it takes.

Beyond just doing that and the willingness to go this hard to find companies and to negotiate and complete transactions. It requires a sense of boldness, a sense of, you know, sort of coming, getting over the imposter syndrome that, you know, we, in our early twenties were experiencing. And to be willing to, you know, this is, this is very difficult, putting together multi a million dollars to buy a business that's been in somebody's families for sometimes generations.

And, you know, for instance, the company I bought NYP Corp truly has been in that family for generations. It was founded in 1946. It's almost, it's almost a hundred years old at this point. And so, you know, to be able to speak to a business owner and explain the value proposition, I mean, it requires that, that same thing that, that same place that I pulled, you know, my willingness to want to learn the subject from. I was willing to go to that extent to learn the topic. It takes that to 

[00:08:15] Ronald Skelton: I think the word I want to use is moxie. I think moxie, like, it just says something that you, you know, your passion to learn it overrode any logic that you would have had to discuss. To talk you out of doing what you did, right?

It takes something. It really does. It's one thing to pay for some money and go sit in a class, you know, try to figure it out. It's another thing to go, look, I'm going to go figure this out, whether I've got the money to do it or not. Right. And, uh, this career, I've done a lot of different things in my life. Bought in real estate, owned a real estate, uh, had software companies, worked in software companies.

Mergers and acquisitions is so dynamic and so changing. And so, every deal is different that if you don't have fortitude, if you don't have that moxie that you just inherently net, in my net and made nature seem to have, you're not going to get very many deals done, right? These things take, you know, six, eight, nine months on a minimum, 12 to 18 months on, not on hurdle, uh, sometimes longer.

Some of these deals, you know, these mergers and acquisitions, the big guys, they, they've done, they've taken years to do it, get them done. I love what you're doing, man. 

So, uh, anyway, let's go back to you. So you audited the, or not audited, you sat in these classes. I won't even use the word audit because there's a formal process for that.

You went and got the knowledge you needed. And then, what did it look like to start applying that knowledge to how did you get to talking to, you just kind of stepped right over the SBA game. And went, sounds like you just went right to like who's got the big money to do the big deals. But uh what I mean, 

[00:09:48] Bakari Akil: I would I, I don't want to give the impression that I came into this with the idea that I was going to just do big, big deals. What I I came into this to just do exactly what David Dodson and Tim Bovart taught. I wanted to do the exact small business. Use the SBA, raise a search fund.

I thought that was going to be my process. And, uh, what I experienced when I tried to do that was rejection from the search fund community and backing my search because I didn't have a lot of the qualifications. I had hustled a lot of the knowledge, but I hadn't gone and gotten a lot of the things that they thought were the prerequisites to be able to do this thing correctly.

I was a little surprised by that because the, the search fund community is, is predicated on hustle and, being willing to do things that are way outside of what's considered the norm. And so when I was receiving the pushback for going after the size deals I was going off, like I put up, um, an organized transactions that were $5 million and $7 million.

I'm using the SBA program, corralling investors in that, in that route and experienced failure, you know, consistently as I was navigating that. And so when I ultimately came across one of the larger businesses that I, um, worked on the, or the first large deal that I worked on, that closed the educational technology company. I reached out again to that community and was rejected, but was, was accepted by the independent sponsor community. The people who were in that space, who had been doing these types of deals for a long time and recognized that the structure and the deal that I had put together was exactly the type of deal that they wanted to do.

And so, um, ended up linking up with a, with a family office that had feet both in the independent sponsor world and in the search fund world. And so I had interacted with me and met me at, um, at conferences that were related to the ETA world. and we organized the financing for that deal and it ultimately closed. Shortly after that, I was in the middle of working on the, um, the NYP transaction and pulled and pulled in a private equity firm that also had a tie to the independent sponsor community and was interested in doing these types of deals.

And so that's ultimately why I was able to do larger transactions. It was actually the rejection that I got from the search fund community and, uh, or the search fund investors at that time. 

[00:12:10] Ronald Skelton: I love it. Until you know, and you're like, yeah, show me. You know, what do you mean I can't do that. Watch this. Um, I liked it.

It's that moxie, man. It's the entrepreneur, the true heart of the entrepreneur spirit. You're going to, I'm going to figure this out with or without you. I'd love you to join the ride. And, uh, if you don't, I'm going to go to the next boss or the next, you know, limo or whatever will, will pick me up and we're going to do this thing.

I appreciate that. It's a, that's a, a unique trait and, not very many people have it. I'm raising two kids right now. I have a daughter at seven and a, uh, and a son that's 12. And my daughter is this fireball of a red hair, blue eyed, self determined, you know, person. And I'm trying to play this balance of she's got that fire, that spirit to determine what she wants to do.

And nobody's changing her mind. So I don't want to just like, as a parent, part of you wants to crack that. So they just mind, right? But the other part, he says, I put, I spent my adult life trying to put adults back together and give them back that fire. I'm not allowing anything to take that from her.

But, uh, like there's part of me that's like, if you break that spirit young, it's still hard to give it back to when they really need it in life, right? Then when they, when they need it to be determined and nobody can tell them no.

And they need to stick with something that's just a trait that I think a lot of kids have that people kind of, train them away from, or what do you call it, break that. It's like, it reminds me, I grew up on a farm, like, you know, uh, like break the horse, like the horse had a little bit of spirit, you break it so it's easy to ride. People break children all the time. Make them easy to, you know, easy to listen to in mind. So long as she's not hurting herself or doing anything that was really bad, I'm going to let her, let her stick to her guns.

[00:13:52] Bakari Akil: Yeah. There's an interview that, uh, that sort of echoes the same sentiment that you're sharing, with the, the father of Serena and Venus, uh, and Venus Williams. I don't know if you've ever seen any of the stories around his life. Uh, that just like, I think last year, Will Smith did a, released a biopic detailing his life.

But there's a, a fascinating moment when, an interviewer is talking to one of the Williams sisters and asks them. Do they think they're going to win? And they're like, absolutely. There's no question whether or not we're going to win. And they, they respond with such confidence. And the, um, the interviewer says, why do you have this confidence?

Like, where do you get this confidence from? Like, why do you believe like in the face of all this that you would have that confidence. And their father jumps in the middle of the interview and he says, did you hear what she just said? He said she's gonna do this. Why would you, why would you question that?

Why would you try to put like thoughts of doubt in this young woman's mind? Like, accept the fact that she's that confident that she's going to win. And leave it at that. There's so many things around that are trying to like push that feeling down in people, in children and women. Um, let that feeling thrive.

'cause that's where you get the success from. And so like Yeah, I can understand where you're coming from. 

[00:15:14] Ronald Skelton: Let's go to these two acquisitions because you didn't, you didn't go to the SBA or the, small business administration and get a $5 million.

You know, you bought one of the largest, was it burlap. I grew up on a farm. The only thing I think that still uses burlap is like feed sacks, right?

[00:15:30] Bakari Akil: That's exactly right. So we, we sell firm, uh, we sell burlap bags, the farms to, uh, food, um, producers. We sell them at sandbags, uh, for particularly for emergency response when there's like floods and stuff like that.

So yeah, there are a lot of surprising and, and you know, there's a, there's a fashion thing that's starting to come out with burlap where people are using bags for, personal shopping and, uh, those types of things. So there are a lot of uses for, for the bag. The goal, the goal with burlap is, or what burlap represents is a natural fiber that can replace plastic when, when necessary.

And so it's a good alternative, both in the growing process and in the consumer process. 

[00:16:17] Ronald Skelton: There's some interesting stories back in the Great Depression. When the burlap companies figured out that people were having to make clothes out of them. They started making bags that were more decorative and had patterns on them.

And, uh, it's, interesting story, if you ever dig it up and read up on, like they would make burlap bags for like flower and other stuff. And then, uh, you know, the families were making dresses for their daughters and stuff out of them. So they started making them more decorative and making them nicer so that, you know, it didn't cost them much more, right.

But it turned into something better on the other end for the, for the customers.

[00:16:50] Bakari Akil: Don't be surprised, uh, based on this, uh, comment that you're sharing, if, in two or three years, you don't hear that there's a, a fashion portion of our business that exists. I hadn't, I hadn't heard about this story. So, 

[00:17:03] Ronald Skelton: Yeah, Google around. It was, it's, it's pretty amazing. It was done back then. It's just one of those, you know, the world, there, there are good people in the world, no matter how bad you, you read how some of the industry titans really were, right? There, they're still good in the world. Yeah. Even, even in the worst of times.

So, that company has been around for a long time. Uh, I can't imagine there's a lot of innovation in what needs to change, as far as, a lot of companies you can buy and go, well, they need a modern website and they need a modern this and they need a, you know. I don't know what you could change on a, how do you do something different or make improvements?

We just move out of the way and let it run. 

[00:17:39] Bakari Akil: SO there are a lot of things that we're doing at NYP corp that, uh, that are updating the processes and the infrastructure of the business, uh, for modern times. To include like rebuilding the website, um, we're creating some, just, there's a, there's, there's things I'm trying to be sensitive to, like, to our strategy that we haven't yet shared to the public, but there are a lot of things that we're, we're getting ready to announce that, that I think are going to be very unique and different from the different growers in our, in our space who, uh, import burlap and, and sell.

And so I'm excited to, to see where we, where we take this. 

[00:18:20] Ronald Skelton: I'm excited too, because you pick something that we're kind of moving back towards, right? We're trying to move away from plastic, trying to move back to something natural, organic, uh, sustainable. Everything I just mentioned there, burlap is the direct image of that, right?

Cool. So you still, did you have an exit from the previous one or you still have that on your family office? The, uh, the educational software company. 

[00:18:43] Bakari Akil: The family office deal I structured in, uh, in a way where the majority of the fine of the, majority of the value for the business came to me very much early.

And so for the most part, I'm out of that transaction. And so it was good. It created the, the, the largest windfall that I experienced in my, in my career to date. Which also supported me and, and made it possible for me to complete the, the NYP transaction. And so, um, I was very happy with how that transaction played out and, uh, and continued doing it.

[00:19:14] Ronald Skelton: Did you play more of a deal finder role for them? Like you found out what they were looking for, you negotiated a deal, put together, and they kind of bought you out of the position too? Or do you still own it? Sort Don't share anything you get yourself in trouble for. I know. 

[00:19:24] Bakari Akil: Yeah, I'm trying to be, yeah, I'm trying to be sensitive to the fact that to that.

So what I'd say is, um, what ultimately happened with me and that transaction is, um, and one of the reasons I still define myself as a person who's in the search fund world, is that my goal, since I started this process was to find one company to buy and run full time as CEO. And I still have that ambition.

And so, the fact that I'm not the C. E. O. N. Y. P. Corp and I didn't become the C. E. O. of educational technology company. I still would like in the future to ultimately end up sitting that role. And so when it became clear that I wasn't going to sit in that role for, for the educational technology company.

I restructured the deal with me and the investors I put together. And so that's ultimately why it ended up playing out where I didn't end up being the CEO, but the transaction closed. And so, um, that's a way of me describing what happened without being as, um, NDA breaking as I could. 

[00:20:24] Ronald Skelton: Yeah, I get it. There's certain things we can't talk about and stuff on these deals. So that was a decent windfall. Do you mind, uh, I know I'm not going to ask for a direct number, but it was a, like, you know, In the six figure range or is it better than that? I mean, it set you up way. 

[00:20:38] Bakari Akil: Yeah, it was, it was, well over six figures, but it was, it was, um, yeah, it changed everything for me. 

[00:20:45] Ronald Skelton: I imagine that's a, that's a hell of a windfall. Especially for somebody who, uh, you know, may or may not have had the, you had the fortitude to go get any education you want, but part of me says there might've been some financial concerns too as to why you just didn't go pay an audit for a class or something. It was like, I'm going to, yoU know. 

[00:21:03] Bakari Akil: There were definitely the financial concerns, but what it really did was it created the working capital for me to go and do bigger and more successful transactions, which is NYP Corp is just the beginning of what I think is going to be the future of this, uh, this, this firm, Graveswell Capital.

And so that's how I see it. It wasn't just for like covering bills or something like that. This is really the capital that I'm using to accelerate the business. 

[00:21:27] Ronald Skelton: Now, um, I'm going to take a step back here cause I'm really curious. You went out to, now did you go to the broker route or did, how did you, like, how did you source?

I'm going to walk through the one or both of the deals real quick, not at a high level. How did you find the deal? Like, what was your sourcing mechanism with a brokerage listed or that? And we'll go from there. 

[00:21:47] Bakari Akil: Yeah, deal sourcing is a big part of my approach. Like I, I find my, my deal sourcing to be really the critical piece.

Like what, what else should I be spending most of my time on other than making sure that the pipeline is as full as possible. And I have basically three approaches to deal sourcing. The first is, you know, the brokerage approach. And so, from the jump when I started back in 2015, when I was taking the class and all that. The other thing I was doing was I was pulling lists of business brokers from the net.

I mean, adding them to my own private Excel sheet where I would have access to that data. So first name, last name, email address, phone numbers, the whole nine. And I would go on, I would go on Google and type in business broker in New York, business broker, Connecticut, and all the people who would show up.

I would just add them to my list. Ultimately, once I started having a little bit more, free capital, I would go to like the, the association websites. The ACG, the IBBA, and at the time, it's funny thinking back to 2015. It's not like that today, but at the time, the membership lists for a lot of these associations were publicly accessible. 

They just put your names, the email address and everything right there. And so I would hire people using Fiverr to, to download those, um, to basically go on a website and do data entry. So they would just type in first name, last name, email address, phone number, and just add, add a list. So from my meager start where I would have maybe like a hundred or 200 names on my list from just people I was able to source from the, from the net.

Once I had an IBBA and all the other associations, um, the AMAA, Association for Mergers and Acquisitions Advisors. Once I added all of those people into my list, now I am sitting on like a list of like a thousand, two thousand people who are on my list. And then I added in the investment bankers, who did deals directly with financial sponsors, private equity firms, et cetera.

And so at some point, I mean, to this day, I was sitting on a list of like 4, 000 advisors who were doing Jill transactions. And so on a almost a quarterly basis, I would reach out to every single one of my criteria. Letting them know that I'm interested in doing a, doing a deal and I want to do do more.

And so ultimately would come around, come across deals from that. One of the first deals that I was working on that I've got very close to closing, but ultimately didn't. I had reached out to the one of the brokers who was or investment bankers who was at Wells Fargo. Now, Wells Fargo, gigantic firm, investment bank.

What would they have available to me at the size that I was looking for. Funny enough, he had just had this experience where he was talking to somebody who knew who was looking to sell their company and said, listen, I, my bank is too big for this transaction. You guys are doing, you know, are going to sell for about $10 million.

We usually do like a hundred to $200 million, but I had emailed him just at that same day. And he was like, I actually know some guy who just reached out to me. And it looks like, based on your website and everything that you're looking for a business of about this size, would you like me to connect you to? 

YeAh. And that was the first deal that I was actually able to pull together the financing. I got the commitment from the bank, the whole nine, um, and, and got very close to closing that transaction before it ultimately failed. But, um, that was how I started building it out and just reaching out to business brokers, investment bankers.

So, as I said, I had three sources. The second source was, I would reach out, um, going online, finding lists of business owners, um, and just reach out to them directly. And again, on a quarterly basis, I'm reaching out to business owners. And so how I came across my first transaction was I, um, was able to find a list of Connecticut business owners and the education technology company happened to be on that, on that list.

So I reached out to that list and that's, um, the CEO followed up with me and we ultimately met in person. He got a sense for my authenticity and got a sense that he could actually trust me to move this transaction forward. And so we executed a letter of intent and then I used that letter of intent for me to go outreach to the family offices, which ultimately did the transaction with.

And then lastly, my, um, I have, uh, a weekly event that I hosted up until very recently in New York. Where I would bring entrepreneurs and investors together, and we would talk about deals that were available to invest in in New York. And in this form, we had people who would bring startup deals, real estate deals, and private equity deals.

And I would invite people very wide and broad. You know, 40, 50, 80 people at a time and we would talk about deals. And in that space, I would let people know that I was looking to buy a company. And then from that, people would tap me on my shoulder. Hey, and my dad is selling a construction business.

And I don't know if that's something that's be interesting to you. Let me know that I could connect you if you want. Oh, you know, I know this guy is selling another business. I work as a broker, I'll introduce you to them, um, pretty soon. And so that was, you know, sort of like the, the social approach, then the blast email approach, to both business owners and to brokers, and then, hopping on the phone. Calling people directly, particularly when I saw a business that looked like it was interesting.

So that was my approach and it remains my approach today. 

[00:27:10] Ronald Skelton: That's impressive. The, uh, it's like you didn't count on one thing. You didn't do just direct mail and send out 10, 000 letters in hopes that people respond. And you did a really thorough marketing campaign. Um, and that's my background. I have a master's degree, my MBA is in marketing and, I've been trained in a couple of different marketing systems since my MBA.

So I didn't think I'd get out of the college with my MBA and realize that all the stuff they taught me in my master's degree really don't work out in the field unless I'm working for Coca Cola and trying to create a brand. So went out and got trained by Jay Conrad and Levinson's crew to be a girl in marketing coach and understand low cost, high impact marketing strategies.

And then realized I needed better writing skills. And when got trained by Dan Kennedy and those guys on how to write copy for myself and those two things have made a big difference in my world. But, um, you've put together a pretty dynamic approach. Like even for me, when I'm in a search, I don't do all three, right?

I should, I get busy with this pod. I get busy doing other stuff. I have some, some stuff going out, but like, I don't send any letters at this moment that are not digital. Um, and I'm a direct mail guy. I mean, I made most of my money in real estate, sending out letters. Let's talk about what did you learn in those ETA programs, sitting in those classes that enabled you to structure a deal at the yellow ice age at some point that was so appealing that you would get the big guys, the family offices.

I mean, cause you had to know what they were looking for and how they structured deals in order to put something in front of them. I used to say in real estate, Hey, if it deals good enough, the money's going to come, right? If you're not getting money for real estate deals, you're not negotiating great deals.

You figured that out. You know, some moral elements, I almost said early in the game, but I don't know your pain. Or I don't know how many times you fell before you figured it out. Uh, but you figured it out and now you've got a system down where like, if, if you don't have the funds or the ability to stroke that check, you know how, you need to structure it, that deal.

And so that somebody that does have that ability can pull that together. So what is that?

[00:29:15] Bakari Akil: I mean, a shout out to David Dodson. I've actually never said this publicly before. But one of the things that I experienced when I reached out to him very early and, looking to raise money for a company is he gave me a piece of advice that I, that I stuck to. Which is to not pursue a transaction that's under a million dollars in EBITDA.

Cause it just doesn't, there's just not enough cash there on an EBITDA size to attract investors. And, uh, at the time I had, I was reaching out to him about a business that had like around four, $400, 000 in EBITDA. He was like, it's just too small. You need to go after something larger. And I thought at the time, 400, 000 sounded like, ridiculous amount of money. And so,

[00:30:01] Ronald Skelton: I take another 400 K right now, I mean.

[00:30:03] Bakari Akil: And so for him to say, listen, it's just too small. It's funny when I, when I talk to people in the real world and I say, you know, a company has a million dollars. They're like, Oh my God, that's massive. And then I talk to people in our world, and we say a company has a million dollars.

And we're like, Oh, okay, that's a small business. It's such a fascinating disconnect between the way we see the world that M& A professionals and most people as they navigate the world. But. Uh, that million dollar cut off made it possible for me to eliminate a lot of businesses that would have made it through the cut, that shouldn't have been and wouldn't, I wouldn't have been able to go to people like Dodson and others, um, and have an intelligent conversation about a company I'd be interested in buying.

And so, uh, that was the first piece of advice. When it came to structuring, structuring for me started very simple, which was the SBA has certain guidelines that will make it possible for them to commit to doing a transaction. And let me make sure I don't violate those guidelines. And if I can, structure the deal against those guidelines, more likely than not, I'll be able to get the SBA.

But once I started jumping over the SBA guidelines, um, to kind of do these transactions, the same criteria that the SBA was using were still successful. There were still good transactions to do. As long as I followed that structure. It just would be one or two, additional things that the seller would want or that I could provide, that the SBA at that time would not be willing to, um, accept. Although ex, you know, excluding the fact that the size of the transactions would just be too large for the SBA to absorb.

But things like at the time, the SBA was not willing to let you do equity rollover for a seller. And so if I was going to do a transaction and included that, that clause, that forced me to have to go outside of the SBA. And there are other clauses like that, that you have to be aware of when you're navigating the SBA.

You can't have the seller stick around in a management role for the transaction for some period of time. And so these are things that the SBA would not allow. And so when I, what if I was working on a transaction where the seller wants to stick around as CEO, that means I'm not gonna be able to go after the SBA as a, as a capital source.

And so by getting as close to and understanding the SBA guidelines, it gave me a rubric. And then using that rubric is how, and ignoring certain things that may not be appealing for the SBA, allowed me to just structure my deal against that and use that to, uh, to attract the capital that I needed on the equity side.

[00:32:48] Ronald Skelton: That's amazing. That's really cool. Let's go back to the deals real quick because I have a question. I'm sure other people are thinking. The first deal you did. How much of any of your money did you put in to to get the deal done? Did you, were you working on the side and you funneled in a big down payment into this thing?

Or was it all money raised by private investors and funds and family offices? 

[00:33:11] Bakari Akil: So far, um, I have not had to myself put in any capital into any of the transactions that I've done. I've been able to structure my transactions where, and, and this is something that I learned was, um, far more common. And so practically, or I see myself as a part of the ETA world.

The entrepreneurs, the acquisitions, the search fund people, that's the world that I see myself in. But from a practical standpoint, I actually operate as an independent sponsor. And the rules of the game for independent sponsors are different than for search fund entrepreneurs.

First one guys, generally speaking, have to put up some capital for the transaction. And if they don't put up some transit, some capital for the transaction that's coming out of them in other ways. Meaning they have raised the money using the search fund. And so they have to pay back all the money that they raised for the search fund plus a premium for taking that capital on risk basis. 

And so they, so if they raise $400, 000, they may have to return as much as $600, 000 once the transaction, um, once the transaction has an exit, um, to pay back the investors for giving them the $400, 000 upfront so that they can finance their search, right? In the independent sponsor world, there are multiple forms of compensation, but one of them includes a closing fee, and that closing fee can sometimes pay back a lot of the diligence costs that the, that the sponsor put up to complete the transaction.

Or sometimes it can just be a cash that's paid to the sponsor, 'cause essentially saying thank you for putting the transaction together and for it to look the way that it does, um, and paying them for the work of putting that, putting that deal together. And so that's just one form of compensation that is not accessible to search fund and ETA people.

And so when I put together my transactions, when I'm talking to my friends and they asked me about what I do with this, they say, well, how much money do you have to put up? And I say, I actually don't put up a lot of money. I actually get paid when I buy a company. Which is uh, unusual for people who are in the E. T. A. world to hear. 

It's a different way of speaking about it. Where, in our, in the E. T. A. world, more often than not, not only are you doing all the hard work of structuring the deal, but you're once the deal closes, it's just your money and and now you have a business, but you haven't gotten actually a windfall of cash that comes alongside, um, the business that you own, that you and I operate. 

[00:35:38] Ronald Skelton: So what about the other aspects, right? Like, uh, happen to have a perfect credit score and happen to have like, like educational background. The SBA says you have to kind of have either educational background or industry, industrial background. You seem to have bypassed those two in the way you've set it up, right? 

[00:35:55] Bakari Akil: Yeah. I mean, this, this goes to, you know, using capital sources that are more amenable to, to different pieces. So with, uh, with the SBA, yes, there is that educational component that can sometimes play a role. But as I mentioned, the earlier transaction, the one that failed didn't fail because the lenders didn't want to back me, the lenders did back me. Knowing all of the educational stuff and et cetera.

So,the education thing can be overcome. The industry concern and industry expertise concern can sometimes be resolved by key managers staying in place and committing that they'll stick around in the business for as long as the loan is inside the company And so that's how I solved that whenever I would deal with the SBA. But once once you leave the constraints of the SBA, it's really the deal structure that you put together that defines how things are going to look.

[00:36:46] Ronald Skelton: I'm really impressed here. Probably out of 190 something interviews, nobody i've interviewed, at least admitted to me doing what you've done, right? You've carved off a niche inside of this that's above the SBA alone, kind of in the ETA world, but you're presenting yourself as an independent sponsor. You're doing what a lot of people say is impossible. Which is that, a lot of people are saying there's no such thing as these zero down deals, quit pitching that and quit selling that.

You're doing them, right? You've got low down, zero down. Uh, you got, I'm sure you have expenses. I have expenses, uh, with search and, and, support and help and that type of stuff, assistance and stuff. 

[00:37:23] Bakari Akil: But I don't want to, I don't want to give the impression on, uh, to anyone listening that, that you should come into the search fund space or come into really any investing space, attempting to pull off zero cost transactions where, you know, you don't put up anything and, and you're, you get everything.

The first thing on my side is, there's a lot of time. A lot of time and a lot of grind and a lot of waiting and a lot of patience that goes into doing this. And so if you're like, I'm going to buy a company and it's not going to cost any money and Bakari did it, so therefore I can do it. But I'm going to try to get it done in three months.

I'm going to be the first person, the NYP transactions started, I started working on that deal in, in the spring of 2021. It did not close until the spring of 2023 or a winter of 2023 or the January, February. That's almost two years of working on that transaction. So there's opportunity costs, you know, there's a bunch of stuff that, that you're, uh, bypassing while you're waiting two years to complete a transaction.

Um, and so there's, there's no free lunch. There's no, uh, I'm getting it for free. It's going to cost something. And so be willing to go through that toughness and that grind and, and not expect to be able to get some great business for no money. I don't have to do it. I would echo the people who say it's impossible.

It's also impossible. But there are times, rare moments in the fissure of the world where like something can happen, but it's usually when you're dedicating an enormous amount of time and have committed to dedicating more time in the future. 

[00:39:11] Ronald Skelton: And I actually, I've written full articles, like, look, there's some dangers. And like, for a lot of people who want to own a hundred percent of a company and they're trying to do it no money down, I was like, you got to understand that you got to switch your whole shift, shift your whole search.

You have to hunt down something that has insane profit margins because if you're going to do a hundred percent financing, whether it's from the seller financing and, or multiple sources. Now you're paying interest over time. You've ridden a company that's never had debt with debt. And like all businesses have cycles.

Like, you got to make sure that you can cover your debt, you know, your debt coverage or you can cover your expenses, via cashflow. Not now, not this moment when everything seems to be going good. He's selling the company because it's on the incline. But what happens when it goes through a down cycle?

When's the last down cycle? What caused it? And can you still support your debt structure, you know throughout the next down cycle and people don't get that. I've written all articles like look, you know, I think that there's a, there's a finesse or sexiness of zero down deals, but understand if you 100 percent finance something like, you know, you want zero down, you know, own a business for two years and then have to lay off 50 people and ruin 50 families lives because you didn't understand that, that had cycles and it can't support the debt through the, to the down cycle.

A lot of people don't get that. What you're doing is a little different because it isn't a zero down deal. It's the investment banks, the Family offices, the private equity funds, they're funding the transaction. You, you've structured something they want and you're getting paid at close. And I imagine you're retaining some form of equity position in the company so that you get distributions over time and get a, get a second check later on if it sells again.

[00:40:55] Bakari Akil: That's right. And incentive to try to grow the business, um, during the time that we own the business. So I can get access to that additional equity. 

[00:41:04] Ronald Skelton: I'd be interested in a hypothetical, what's the range that you could continue to own? Is it, you know, five, 10 percent or is it more? Or on the equity positions of these things? Cause they're funding the whole deal. 

[00:41:18] Bakari Akil: Yeah, we can talk about that. Um, and then the search fund reward is very similar. Which is that you get some portion of your equity up front when a deal closes, you get another portion of your equity, based on a time scale. So, you know, one year, three year, fifth year, um, sort of, uh, additional buy-ins. And then lastly, there's a performance aspect that's, um, associated with your equity.

And that's where the, where the kicker is. And, uh, if you do, uh, if the business returns X amount of capital, most of the investors and, uh, to the investors, and also pays off the debt, um, over that, um, over whatever those hurdles are, um, that those hurdles trigger certain portions of your equity, promote.

And so that's, uh a very similar structure to most independent sponsors, and I'm not too different from that as well. 

[00:42:05] Ronald Skelton: Awesome. That's cool. That's great. So what does somebody, other than trying to, now the word's out, you know, David and those guys are going to be watching their classrooms a little closer so that we all don't go crashing their courses.

Probably can't pull that off as easily today as we may be good. Maybe one of us could, but not, you know, not, not, don't everybody go out to do that because they'll, they'll put a security guard at the door. Other than that, where's a great place for somebody to figure out because what you're doing, like, the game that you're in.

Um, I don't know that there's a, like, I've taken some of the courses from different people. I don't know anybody that's doing what you're doing, um, which is good. 

[00:42:43] Bakari Akil: Yeah, um, so, an entire world of independent sponsors who structure deals that look very similar to my deals. And, some of them have been in the game.

Like I know one of the people who actually coined the phrase independent sponsor. So there are people who have been in this game for far longer. I don't think there's a book. I don't think there is a, um, yeah, I don't think there's a book. I don't think there's a existing piece of written material about specifically the independent sponsor game.

Then the search fund world though, is as close to the knowledge that you would need to structure these types of deals. And so, anything that's connected to the search fund world and entrepreneurship acquisition, buy then build, the HBR guide to buying a company. There's a bunch of other books like that.

Um, those are all be acceptable midpoints between what they do and what I do. There's a ton of YouTube resources, videos, and all that that exists. And then there are books about people who have done this process. And the one that I like the most is the story of, or the autobiography of Reginald Lewis.

I don't know if you've heard of that name, but Reginald Lewis was,

[00:44:00] Ronald Skelton: I've seen a video you did, uh, you were in some big house, you were pointing at a picture of him. 

[00:44:05] Bakari Akil: Yes, that's exactly right. Yeah. Yeah, so that's actually the Harvard Club I was inside of. And when you walk into the Harvard Club, as soon as you walk in, there's a gigantic Big picture of Reginald Lewis.

He was one of the largest, um, single, donors to Harvard, the Harvard Law School, um, which is where he, where he attended. So he never had a business degree either. That said, um, what's exceptional about him is that, um, in the 80s, he bought a A $30 million company with none of his own money, or $22 million, excuse me, $22 million company with none of his own money. Which he sold around three years later for $90 million.

And then shortly after that, he bought, I think it was actually the same year, he bought a $985 million company and became the first black person to own a billion dollar corporation. And then he wrote a book about it called, why should white guys have all the fun? And so it's one of my favorite books where he just details his independent sponsor, um, journey.

As I mentioned, the coin that the phrase has been coined independent sponsor very recently. Um, and so he was doing these types of transactions in the eighties. And so he talks about how he structures the deals, how he sourced the capital, how he found the businesses. And he went through an enormous amount of time where he wasn't doing transactions.

Meaning he was pursuing deals and transactions would fall apart, pursue a deal. Transaction would fall apart. And so, you know, knowing his story really gave me a lot of inspiration and a lot of people will look like me, the inspiration to try to pull off this thing that we became, became aware that it was possible to, uh, the inspiration from that.

[00:45:38] Ronald Skelton: So it's interesting is, uh, I'll read that book because it sounds very fascinating. And I always joke around and tell everybody I'm the whitest guy in my family. Uh, I'm our family. I've got a, my wallet is around here. I'm a card carrying a Native American, but I look like my mom. So if I show up to family, people are looking like, who brought the white guy?

Cause everybody else was Indian, you know, Indian, uh, Native American. I'm always rooting for the underdog. I love when a woman's in this space. I love that you're in the space doing what you're doing. Thank you. 'Cause it is predominantly dominated by old, rich, white guys. And, uh, while I, while I look the part, my heart and soul is for all the underdogs out there.

So, kudos to you for what you've done. Um, I, I love who you are and what you're up to. I look forward to reading a book about what you've done in the future. 'Cause I, I see you on that path. Thank you for your time. 

[00:46:23] Bakari Akil: You're not far off. In 2008, a journalist wrote an article about me and the struggles that I was dealing with in my life.

At the time,my family, I grew up on donated food, and I was struggling to pay for college. And, uh, she published this article in the New York Times talking about that part of my story. She and I have just recently reconnected and we're talking through a memoir who might look alike and pitching it to some journalists.

I'm not a journalist. To the publishers, excuse me. Who published these types of stories. And so yeah, it may be much sooner, than even I expected the outcome for a book. 

[00:47:07] Ronald Skelton: I do appreciate you here. Uh, let's, uh, before, before we go, uh, is there anything that myself and that, or my clients or customers or, listeners out there in the space, anybody that happens to be listening to the show, is there anything that we can do for you? Is there a, or something we can help you with?

[00:47:24] Bakari Akil: Let's see, stay in touch with me. My email address, I'm sure is in the notes. I'm perfectly willing to talk and connect with anybody. I'm there. My website, Graves Hall Capital or GravesHallCap. com, which is where you can find some background on me. LinkedIn, I'm connected there. And so if you want to stay in touch.

I'm traveling around the world right now. So I was in Cape Town two months ago. I was in Athens last month. I'm in Spain right now. Tomorrow I'm flying out to go to Turkey. And I'll be there for the month. Um, I'm traveling with this program, the 12 month program called Remote Year for people who travel and work remote.

And so detailing a lot of my experiences with, uh, on this, on this platform I created called Nomad Noir, just highlighting my experience as being a digital nomad traveling. And so if you want to see what it's like to live outside the world, then also work, you know, you can follow me there as well.

And so that was it experiences that and places you can connect with me. I would love to stay in touch. 

[00:48:22] Ronald Skelton: Awesome. Well, I appreciate having you here today. This has been a, one of the funner shows I've done in a while. I love, I love anybody who's got moxie to do what you're done, done and truly designing a life you want to live and going out there and living it, man.

There's something to be said for that. So we'll call that a show and thank You. 

[00:48:38] Bakari Akil: Thank you very much. 

[00:48:39] Ronald Skelton: Hang out for just a minute.