Sebastian Amieva is the world's most sought-after expert on Mergers and Acquisitions.
He works exclusively with six- and seven-figure entrepreneurs and investors to drive growth through Mergers & Acquisitions.
Sebastian has spent the last 12...
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Ronald Skelton 0:06
Hello and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling
Hello, and welcome to how to exit today I'm here with Sebastian Amieva. He's the world's most sought after expert on mergers and acquisitions. He works closely with exclusively with six figure and seven figure entrepreneurs and investors to drive growth through mergers and acquisition. Sebastian has spent the last 12 years personally implementing mergers and acquisition strategies, investing into startups and traveling around the world. Welcome, Sebastian. Thank you for being on the show today.
Sebastian Amieva 0:59
All right, thank you very much for this interview. I'm very excited. So yeah, we're gonna have fun we're gonna speak about them on a topic that I love. So I'm ready for this. I'm ready for this.
Ronald Skelton 1:09
awesome awesome let's just jump right in let's let's let's start where you started, like what got you into? I guess the catchphrase these days is acquisition entrepreneurial ism. Right your your buying and selling businesses for a living? What got you started? How did you get going?
Sebastian Amieva 1:25
Yep. So I started a lot of business, you know, from E commerce to factories, you know, different kinds of business online and I discovered is way easier to buy a business instead of starting one from from day one, right? So this was the biggest reason why the score is very easy to use the company target asset as a collateral to bring in funds to put the downpayment and to get the deal. So you get client from day one, you get revenues from day one. This was the biggest reason I started into the m&a space. Today do we close it fortify deals with my global clients, right? I do some consulting m&a training some some masterclass. But yeah, we're gonna speak about today, how to get started into the m&a how to prepare yourself to become a qualified buyer and all these things. But yeah, I started because that way, but I discover as you can catch my accent, I'm not an English native I born in Argentina, Patagonia. And then I moved to the UK, I set up my family office there. Um, from there, I bought these in different locations, nauseous in the UK, I bought the biggest paddle courts in Madrid, I believe in a football club, called Raya Cantabria in the north of Spain. And then I bought the biggest led factory in Brazil with 700 employees 22 million euros in assets. From the UK, I realized this yet, I realized that from first world country is easier to get funds to get capitals, and to do these LBOs or managing management buyout acquisitions from Latin America is very hard to do this. But of course, I realized that if you have the holding company in the UK, or in the US from first world economy, then you can bring funds and put down the funds in the in the subsidiary in Latin American market, for example, or Southeast Asia, or African countries we think is good topic today for for speaking about this day about how to become a global deal maker, right? Because I've been approached by several entrepreneurs. And they say, Well, I'm not based in the US, I'm not based in UK, I'm not seen in Australia, how you can do it from Africa, Southeast Asia, Latin American markets. So I think it'd be good be nice to speak about this today.
Ronald Skelton 3:36
I like that. And then what a lot of people don't know is if you want to travel around the world, sometimes. I know like Australia and a few other countries, it's easier to live in a country from for, like, get your visas and stuff to stay more than, you know, a normal vacation timeframe. If you own a business in the country. So there's a there's that aspect of it. Right? So you said, Really, you said two really interesting things right there, you're not bound by the country you live in. And what I caught on the in the part of that conversation was you don't have to raise the money to buy the company in the in the country that you're trying to buy the country and I mean, the business and so for instance, when you were buying, you know, something in Brazil, you know, not having a foothold there, knowing everybody there like knowing the venture capitalists knowing you know, accredited investors, I guess I would say or the banking system, there might be difficult to buy a large company there. But because you have a holding company in another country, you raise money there and then take it and do the deal wherever the deal is. That's brilliant. So we're gonna talk about that.
Sebastian Amieva 4:45
Alright, this is how it works. If you want to be a global the maker always is good to setting up your holding company in a first world economy like setting up the whole lien in Delaware or Wyoming or Nevada for tax purposes in the US, or setting up in London, UK or Sydney, Australia, or Canada, Toronto, for example, right? Always setting up the legal entity, the SPV, or the, or the holding company in a first world economy, it helps to bring credibility also to the investors. So it makes them feel comfortable to invest into your first world entity. And from there, you can bring down the funds to Latin America, for acquisitions, and also for Southeast Asia or African markets. But I think it's a very, very good strategy, helping, you know, helping also Latin American companies exit, right, because it's difficult for a sample company from Brazil with $22 million asking price, they is difficult to find a potential buyer right. So a good way for exit to them would be he came in a subsidiary company with the holding company in in the US. So we use in a lot of these kind of strategies, holding subsidiary, which it really helps to, to acquire deals that you see leverage, right, using the leverage of the subsidiary company. And also bring in more legal, you know, security for the investors, they want to invest into an American companies, or at least through an an SPV, an American SPV Special Purpose maker, which can be a little antsy. So yeah, this is the
Ronald Skelton 6:16
sort of, yeah, so you're setting up an entity where probably closer to you're looking at if you're looking at the United States, it's probably Delaware, Nevada, Wyoming. And then you said, if you're, you know, in the UK, or something that's London, and you named a couple other cities there, you set up the entity there, you build your fun, you get your investors, you know, that gives credibility to to your, your project there. When you when you're going to say let's just do Brasil, for instance. And you're looking at companies there, is there any culture shock or anything like you have to get used to in the local market so that I know every market is different. I tried to buy many, many years ago before I even got into acquisitions, mergers, I tried to buy a business and wrote tamp. And it was a Airbnb type of not an Airbnb but a bed and breakfast a large with like a little resort. And the town is a little bit I don't know if it's still this is 1520 years ago, let's just say it's very common to, to pay gifts to the mayor and to the city. And it was just like, there was some, there's, there's some yeah, there's some bribery going on and stuff like that to make sure things go well. And I don't know if there are other countries like that when you get into the country do you need to learn what's normal?
Sebastian Amieva 7:39
Yeah, I tried to say listen, we're gonna do the American way or the British way, we are now going to do one in bribery. We are here to do ethical business, we are going to sit in up the whole lean in a first world economy. In terms of the the cultures, the difference rights, always for the negotiation, you need to understand the culture and how they think the way the way they behave, how they negotiate is not the same as negotiating with American person. With the Latin American people, they have different ways of communicating, right. So for me, I will bring somebody from Brazil of somebody who speak Portuguese, at least because he's another language, and I will add them into my board just for credibility purpose, to help me to understand more their culture, to negotiate better with them, and to fully understand what they trying to say and why they want to sell for something that I will try to bring them on board. But before doing this, before doing this, hunting for these in Latin America, or Southeast Asia or Africa or becoming a global dealmaker for me, is important. So we came up qualify by and what does it mean for that, you know, what is what it means being a qualified buyer, you need to know what you looking for the finding an acquisition strategy, defining an acquisition criteria, helps to understand what you're looking for. And most importantly, everybody must understand what you're looking for. Right? So setting up the acquisition criteria, for example, defining the location, the asking price, the industries that you're targeting is important. Then they will open your lenders network before you go in and start with the deal hunting is good to have at least three lenders. When I'm talking about lenders, I'm not saying only the SBA in the US, I'm not saying traditional banks, I'm saying they start building your network with the alternative finance market, it could be invoice lenders, cash flow lenders, revenue lenders, all these kind of alternative finance market to help you fund the deals. So, once you have an acquisition criteria and acquisition strategy, your pitch deck done your SPV ready in a first world economy, your website done your corporate domain, your lenders Network, also you can maybe some joint ventures with family office and private equity theme, matching your investment criteria, then you and then only then you can start teaching you know the competitors or pitching somebody who wants to exit but not before because you will lose your credibility on day one, if you don't have all these things in place before you go out and reach out and try to do the deal.
Ronald Skelton 10:09
So when you're out there doing deal hunting, it sounds like you, you build your plan, right? You build your team. And then you build your platform, like your website and that type of stuff for people to come to, then you go start to talk to business owners, I guess that and you find your investor. So there's like, there's four, four steps, you got your plan, your your team, right? Guess your team could include the investors or whatever. But it also includes, like, who's doing your due diligence, who's doing, you know, can speak the language, understands the culture, right?
Sebastian Amieva 10:39
In terms of a team, I will bring Somali who understand culture I'm dealing with also I will bring a CPA accountant for accounting into a deletion, transaction attorney for legal liquidation, and also a technical person, or industry expert, if you're targeting, for example, manufacturing companies, and I have no clue about that sector, I could bring on board somebody who have 10 to five to 10 years of experience in the industry to bring credibility in the negotiation table, right. So this can be your deal to somebody who understand the market that you contain the sector, the industry, somebody who knows about accounting somebody about transaction, Sumatra transaction attorney, and yourself as an acquisitions, you're gonna. So once you have your team set up, then you can do the deal. Come here. For me, preparation is key on life negotiation in everything, you need to prepare yourself for the opportunity. Because most of the people that reach out to me, Sebastian, can you call me with this $10 million deal? Based in Florida? Are they doing? You know, five times a bit as a well? Do you have a joint venture with any any company in that sector? Do you have funds from investors? Do you have a team of CPA accountant? Do you have your lenders neighbor develop? Do you have a website corporate domain pitch deck presentation, when they have nothing about this, then I say well, you're not ready, you're not qualified by also when somebody asks you show me proof of funds, right, which is the big barrier for any decision, they're gonna, if they don't have a proof of funds, they don't have any track record, the background is zero, they don't they never close an acquisition before in that sector, then the brokers right, or the seller, they will blacklist you, you are not going to be, you know, ready for purchasing more companies. Right. So I don't want that to happen to any acquisition intrapreneur. For that, I recommend to be ready for the opportunity. You ready yeah?
Ronald Skelton 12:27
Awesome. So so you've got your team, you go out there? What's the search look like? You actually? Do you go through brokers? Or do you have your people go like, look at what's out there listed? Do you just make a list of everything in the industry and start, you know, tackling everybody that's in that industry is or like, I know what I do, I personally, I'm kind of going around the broker and looking for business owners that are 65 years old, you know, above and meet all the other criteria, right? Plus, you know, five or more million in revenue. I mean, I've got a list of criteria, and that's who I'm, I'm reaching out to, not that I won't work with brokers, but you know, I've kind of been trained that brokers kill deals most of the time. Right? So, you know, what,
Sebastian Amieva 13:10
how do I increase the deal? Flow? Right? I know how, how I find deals through brokers and without brokers, I don't mind finding deals through brokers, because I always find a way to, to provide a proof of funds or to provide you know, any background on myself, right. But if you're starting from scratch with no background, no money, no proof of funds, of course, it's easy to find off market deals. But to find off market deals is not easy. If you don't know how, right. So what I do for off market deals, I could explain what they do for brokers. Also, I could explain both ways to find off market deals, the best way is I reach out to accountants, lawyers and consultants in the industry that I'm targeting, let's say I want to buy again, dragging companies. If I want to buy tracking companies, I will find logistics and tracking experts, consultants in that industry, and also accountants and lawyers. So I will reach out to them and say, if any of your clients want to exit, right, I'm an acquisition entrepreneur. This is my acquisition criteria. And I'm targeting trucking companies in the US with an asking price from half a million to $5 million. Right? If you find any of them, I'm happy to pay you an introduction fee. Right? So you pay an introduction fee to any consultant, lawyers and accountants why this is my strategy because I put myself into the sellers shoes, right? If I am the seller, when I want to sell my company, I will tell to three people first to my wife, second to my lawyer and tell to my accountant, and then my consultant, then my consultant will know what's right. So those three people are key to to contact them through LinkedIn or Twitter or any social media and ask them ask them on pitching them with your pitch deck saying that you're looking at tend to lead to close a deal in the next quarter and showing your acquisition criteria. So, if they introduce your deal, you pay an introduction fee agreement, which can be a fixed price or you can give, sometime I get back with the one 2% of the deal, I can pay a fixed price 10 20,000 After, after I close the deal. So this is how I find off market deals. And also using a VA or using a VA she's working five hours per per day monday to friday sending the script, "Hey my name is Sebastian Amieva. I am a private equity investor. This is my acquisition criteria. If anybody Glen you want to exit, I'm more than happy to pay you an introduction fee or referral fee. Call me if you have any news. And I put my mail and then we send the 150, 200 message per day to all people into trucking industry for example, in the US. So this is my mind off market,
off market strategy. And for the finding these through brokers, as I have proof of funds, as I have acquisition criteria, as I have a background, what I do is I bought already all the data from the brokerage firms and small brokerage firms in the US seven country emails I have, and also from Canada, Australia, Europe, right, I got all these data from all the brokers. So what I do is I create I write a nice email introducing myself, and I and I paste paste my acquisition criteria, say a nice to connect this is my acquisition criteria. If you have any deals, please send it over. So all the brokers are sending deals to me because they they put me into the buyer list, right? So they send me deals every week matching my acquisition criteria. Now any random one, right? So it's important to build a broker broker list. So you can send your pitch deck and they will send you this is the two ways I'm getting this but I know that way is just because people know already Dima m&a expert I do in m&a for a living. So they know I'm an investor and they reach out to me for business opportunity. They send me deals say, Sebastian, I want to sell my company, are you interested? So you know, sometimes you need to expose yourself exposure yourself and getting out there and doing some, you know, different kinds of digital marketing strategies. Some people do paid advertising, for finding deals, some people do physical letters, I have a client who send out in Germany 1000 physical letter, he first bought all the data for the chemical companies in from 5 million to 10 million in Germany. And then he sent two physical letters saying this is my acquisition idea. If you're interested to exit, let's go have a conference call. The open rates such as rates are no high, but you at least gain, you know, three four leads with good clients who would potential seller, so we have different kinds of ways to increase the deal flow. But most most of the people, most of the acquisition entrepreneurs, they think that deal flow is the most important thing, how I can find a motivated seller, how can one find a good deal, Sebastian, I'd say I say listen, if you're not ready for the opportunity, you will watch opportunity pass by like a train so, and you cannot do anything, you will spend two, three years, five years trying to close a deal. But if you don't have all the foundation in place, then you know, it's hard to close the the very hard to be honest. And also, even if you are ready, you know to buy a deal. Even even even though it's hard for me even for myself, even from big private equity firms, you know, they analyze maybe 100 deals per year by they invest in 1123 deals, even for big businessman is hard to close the deal. So, preparation is key, right? Or having someone who can walk you through the entire process, at least for the first day, then you can replicate the system and do it by yourself on you know.
Ronald Skelton 18:53
I'm absolutely a big proponent of mentors and having people walk you through the deal. Tell me a little bit about the process. You would walk a, you know, an entrepreneur, somebody's got some entrepreneurial experience. And they have they have some resources, maybe not just money, but they have connections and the people they can they can build a team. Somebody like that comes to you and you know, they meet your criteria. What's the process you would walk them through to get them ready for their first deal?
Sebastian Amieva 19:22
Correct. So my methodology for working with clients or mentees for example, is, is I provide one on one service because I believe buying a company buying and Lelisa say you think well, he's not i This reason I'm not selling online courses. I'm not selling trainings, online info products or challenges online. I don't want one because I like to be long term relationship with my mentees with my clients. And my program is 12 month duration is not a short thing is not a magic pill. Right. I put 12 month because some people can close Ideally in three months, in two months, six months, 12 months, right? So we need to, we need to do a lot of things to reach the point where you sell a delicate thing. So I prepare them in two months, let's say 45 days, to two months, we have weekly goals one on one, this is now group calls is you and me only. So you want to have access also to my whatsapp number to my email, we are fully connected in case you have any doubt you can reach out to me at any time. So I believe more in having this kind of mentor this was that we like to have before right so I made a lot of mistakes, buying deals, I went bankrupt once I will tell you the story later this, but then, for me, it's very important having someone a personal connection, one on one, having full access, if you have any question you will reach out to your mentor to your coach. And then together we find a solution we together analyze deal, we together champion a conference call with the seller, with the broker with investors, but it's not like you're doing everything by yourself, you don't know where to start, you need somebody who will walk you through the entire process. Say listen. Now this week, you need to set up your website, your pitch deck your acquisition criteria next week, you need to start developing the lenders network, you need to develop the network with private equity firm family office. And not only that, I will give you my six personal lenders and working in the US to you their WhatsApp numbers, their email, I provide you with all the tools that you need to succeed. Of course, some people pretend I give the key list and I close the deal for you. Now you can start collecting dividends is not like that people sometimes misunderstand and is good to say right, you need to do the work, right? I can give you all the guidelines, I can stay for you at all times, we can analyze them together, we can stick with investors, we can promote ourselves, we can, you know, submit our letter of intent together, but they need to find the good deal. And, and also, you know, they need to follow all the steps until they are ready for the for the opportunity. What I do for them, because I know proof of funds is a big thing. I provide a $5 million commitment letter right. So I provide you as if you're my clients, I have a trusted lender who can issue a letter of commitment for $5 million. So at least you have something to show to bust the barrier for the on the broker asking for proof of funds or the seller right is a good thing I have in their into my
Ronald Skelton 22:22
it's kind of a checkbox thing they have once they see one that at least in my experience. Even in the real estate world, I bought a bunch of short sells and stuff and they're proof of funds is something on their checklist. If you don't have one, you don't pass or you don't get past it. But other than, you know, somebody saying yeah, if this deal goes through, I'll fund it. There's really not much to them. There used to be some websites out there that would generate proofs of funds for I wouldn't recommend going to just a proof of funds generating website big, especially in this space, right? Because here in the United States, we're really what's the word I'm looking for, we'd like to sue each other. And there's a failure proof, there's a chance that you could nail for failure to perform. So but you know, I, that's the only reason I even brought that up. As I mentioned, there are actually websites that will generate proof of funds for you and like you do. In the real estate world is very common, right, you're gonna buy $100,000 house, and these will be called, you know, a bank owned house. And they would say, well, we need a proof of funds, you could go to transact whatever.com and put in your criteria. Now, there was real lending companies behind these, but we rarely use their lending because they wanted like 22% or something crazy. But we use them to generate proof of funds letters, and we use our private lenders, the fund that actual deals. So you don't have to call your accredited investor every week and go, Hey, I need another proof of funds. You know, I get it that you submit. That's a really cool thing that you provide for them. But it gets you past it's a gatekeeper type of thing, right? It helps the broker weed out, like the nonsense like that, you know that people just can't get a deal done. So
Sebastian Amieva 23:57
Correct. Correct. So this is a good thing. I'm doing it. And so you can ask me any any more things I'm using to help people.
Ronald Skelton 24:06
Cool. The The other thing I'm curious about is like I have people all the time go, it's cool that you're in this you haven't master's degree, you got an MBA, and, you know, I've never, I've never like owned a business over six figures. And I think I really tell them, depending on what you buy, it really doesn't matter. Right? I think I don't think it matters. If you have an entrepreneurial heart, I think you could do this. And I want what I want your opinion on this. As long as you understand and let your ego go and put somebody if you don't know how to do something that's one of these businesses you're acquired. You put somebody in that spot that knows how to do it. Right.
Sebastian Amieva 24:40
So if you're like me when I was 24 years old, when I bought a trucking company with 200 employees, and I became the CEO and I want to do everything, I want to be the accountant, the CEO, the manager, the business buyer. Then after six months I bankrupt that company and 200 people were losing the job because was my interview. led to manage deals, right? So for me, it's very important to differentiate to divide, you need to become good at buying companies know managing companies, for managing companies, you could find an expert, or CEO who've been running the same kind of companies for the last 10 years or five years, you need to replace yourself and position yourself as an investor, not as a manager, you know, my system is very simple. We buy a company, we fully delegate the management and we collect dividends is three steps, right? So don't try to be all over the place, right? You just need to became good at buying companies, analyzing companies and buying and, you know, professional business by qualified by
Ronald Skelton 25:41
awesome, I could see for you sounds like you have a real world experience of buying something and trying to do it all and you know, chasing it into the ground, right? I've been there and I built something. And one of the things that people don't get is, it takes a different CEO or owner, or you call it the head head guy, it takes a different CEO, to create a company and take it to a couple 100 grand than it does to take it from a couple 100 grand to a couple of million, then often it doesn't take it from a couple of million to something substantial, you know, an IPO or something. Those are different individuals with different skill sets and different mentalities. I was great at like, coming up with an idea and getting the first dollar in the door and generating a little bit of income. But I wouldn't let it go. When it came to the point where okay, this is a bigger than me. And I probably should have somebody take it from here and move on. And inside of this, you know, acquisitions entrepreneurship, I'm looking at, like, do what you're saying, being a professional buyer, go out, find the deal, close the deal, put a great team in there, collect dividends and go find another deal. That's, that's brilliant. So jumping into the like, kind of the space of being an entrepreneurial, you know, acquisition entrepreneur, are there any misconceived notions out there anything that you know, people believe about this space or industry that just kind of bugs you and you wish people wouldn't believe that nonsense?
Sebastian Amieva 27:08
Yeah, so people, people still believe that, you know, it's a lot of going on with no money down these people, when they read some advertising, you can buy a disease with no money down. So for me no money down doesn't exist, right? So it's a it's a big, big marketing catch, right? So, no money down deals means that you are not using your own money to purchase a company, you are using investors money or joint venture or private equity finance money to put as a down payment. And then are you using your alternative finance market lenders, this means so these the big, big things around buying a company, people say how this can be possible, how you can buy a business, no money down, it means that you can use other people's money like investors or lenders when
Ronald Skelton 27:57
they should say no to your money down, but they don't, right. It's a marketing for $1. You know, $1 deals like you know, okay, well, the seller is not really getting $1. All right. They're, you know, one of the mentors, I hope to have you on here, I'm not going to name him by name, he comes he coined the phrase or uses the phrase deferred downpayment. So somebody says, well, I'll finance the deal to you, but I need, you know, 300k down, he's like, Okay, well, I'll give you $300,000 down as a deferred downpayment. And then he uses when we're talking about invoice financing, or I'm a big real estate guy, I like the property split thing I like I like businesses to own real estate. That's what I'm kind of looking for now. Yeah, I have REITs and investment trusts and other stuff looking for a commercial property. So the goal would be to buy a business that owns the property, sell the business off to them, lease it back and use that money to fund fund the deal as part of my, you know, funding strategy. And I've seen them done, I've actually came really close to to get one done. And it got drugged out at the last second. But that's the complexity of these things, right? You've got to be willing to get in there and work the deals, try to see them all the way through the end. Some of them are, you know, the two that I can think of off top my head that that I wanted most at the beginning, I'm the one that said no at the end, because there's just there was something wrong. Right? So in your space, how does that look? Do you get through deals go through due diligence and go? Yeah, we probably shouldn't touch this thing. Do you get those deals too?
Sebastian Amieva 29:27
Yeah. So in terms of the deletion, you know, you need you need to have three key people on your team, right? The proper m&a transaction attorney right because there you have a lot of General General lawyers, but they don't have a clue about corporate world right. So you need to find a proper transaction attorney, a proper CPA accountant who done due diligence before and then are good, technical person. So you have three people accountant, CPA, Accountant, transaction attorney and a technical person who understand and can give you some technical reports about the company that you Purchasing, so it's really important to cover those three. And also another thing that is most of the entrepreneurs are missing, right? I'm very, I'm, like, you know, repeating all the time build a data room, right? What is a data room, say, Listen, if you don't have a data room, either way you are buying a company and you sell or you're selling a company, you need that proper data room. It means having all the information in one folder, it can be a Google Drive. For example. Once you have all the information of the deal, after you sign an NDA, you start gathering all the financials, tax return Profit and Loss balance sheets, write all the legal contracts, you need to build a proper data room with all the folders, and then you can share it to your lenders network and to your investors network. So for me communicating that way, first of all, you need to have a proper data of a built on data. And then you share all the informations with all the parties, with your lawyer with your accounts and with your technical person with your investors with your joint ventures like family office privately with a friend or with your partners. So what you should include into a data room I have here, you know, the marketing materials, right marketing materials that this presentation is a one patient presentation, all the other marketing things run I do untold. So for us all this stuff, then the financial and tax information is important to put it into a data room, all the legal documents, all the human resources, the private and confidential data also folder inventory of assets, the asset inventory, right, like winery, real estate, also the appraisal of each of them, general contracts, and can customer and vendor lease, right? All these things are important to build your data. Once you have all the information in one place organized, then you start sharing it with your with your lenders network. So they can tell you this device and I can give you 70% loan to value on these. Also you shared with your partners. So everybody understand the same but it all started with a proper with building a proper data room using Google Drive 90 is the easiest way.
Ronald Skelton 32:03
So what are the things here United States, it goes back and forth. The SBA always requires a personal guarantee. And if you own another business, one of the things I've seen with the last couple of deals we looked at, they tried to encumber your other business, you know, as part of the loan, they've essentially use the business as collateral, or the lenders you're looking at, is there a way to avoid that and just use the business itself as the thing? Or is there always going to be a personal guarantee inside of these lending? institutions to help you buy businesses?
Sebastian Amieva 32:33
Yeah, got it, I wouldn't, I wouldn't advise to anybody to put a personal guarantee, except here's the deal of your life, you're buying a $10 million deal, no money down and then you say, well, I need to take a risk, I will make a 1 million made per year on this, I will bet on on my capabilities to make it succeed this so sometimes even the deal of your life, of course, you need to you need to take a risk you are here, you want to become a business owner, you need to be a risk taker sometimes, but for the small deals for nonsense opportunities, they will then put their personal guarantee right? For me also, to analyze deals is good to have on your team, certified business broker, right, somebody who can do valuations, you need to understand how much you paying and why you paying what you're paying, right? So it's important to have a certified business broker or evaluation expert on your team. If you're not one, you can find anybody online or I can refer you one on my team, right? So it's important to do valuations properly, right?
Ronald Skelton 33:33
What is your favorite valuation model? If you look at all the top schools like the top MBA business schools, I think there's a total of like 140, I want to say 1.7, it's the numbers come into my head evaluation models to evaluate businesses, what is your favorite like, you know, I kind of use multiple of EBITA as a kind of a thumb in the air, I'm not even close to the ballpark. But when when it comes down to it, what
Sebastian Amieva 33:59
I would tell you my favorite one, but first of all, I will explain you the forest that we use in right we're using four methods, you know, Western shares, so shares people to try this for right ailments multiple is one, you know, address multiple, or using revenues multiple the second one, or you can do a discounted cash flow analysis. Or you can do a bit of multiple. So I recommend those forward earnings, multiple revenue, multiple EBITDA, multiple and do a discounted cash flow analysis. Those four are the main that we're using, but my favorite one is a bit that I realized is the the easiest for me. And then I it's easy for me to set up on a decision criteria using a bit of multiple, so I normally buy three times to four times multiple beta deals. If it's five times I'm not really interested and because it's expensive for me now for me for my lenders, I realized that the lenders in the US, UK, Australia and Canada, they like these up to four times multiple Right, because it's easier to pay to set up a proper debt repayment plan. So I'm buying up to four times EBITDA, multiple this reason is my favorite and also really understand well, how to calculated reading on the balance sheet and profit and loss. So, but always, always I request to do evaluation. Evaluation can cost money, of course, you can get, you can get the evaluation for $5,000 or for 30,000. Right? It depends on inside the industry. And also the evaluation as per they have different branches, different prices, right. But those fours are the ones that we use in our m&a training program. But my favorite is EBITDA. abita multigraph.
Ronald Skelton 35:42
So when you listed off some of the industries you've bought in the stuff, it was pretty broad spectrum, are there any industries you really just like, avoid? Like, you just don't recommend to get into?
Sebastian Amieva 35:53
Correct Yeah, if you want to do your first single acquisition or if you want to get started, right? Always is good to start with acid heavy deals, right? You have two kinds of deals as supply deals like it marketing cybersecurity, everything with a software as a service or test as a service. And then it related is harder than acquired than, than acid heavy deeds. When I mean acid, heavy dealing, I mean, 50% of the balance sheet must be full of assets, like machinery, equipment, real estate, right? If your company, if the company Target has at least 50% of the balance sheet in acid, then is leverageable. But you can leverage. But if it's an IT company with only contracts and a bunch of computer, it's difficult to leverage this. Except I'm not saying this is impossible. I said it's harder, right? I have a client who bought almost 6 million pounds company cybersecurity in the UK, but that that company got a contract with the army with the government, right. So when you have a solid contract, you can use it as collateral to bring in funds for the down payment. So if you are if you want to do our supply deals like Service Security, it I will recommend to have in contract with clients who are very well known where they will not widely public companies. So I will recommend asset heavy deeds like manufacturing, healthcare, trucking logistics, I love traveling, because it's a very simple model, you have the tracks, sometimes the office real estate and the clients. Right, so you can use the tracks and the real estate as a as, you know, leverage. Similar to raise funds.
Ronald Skelton 37:31
Do you think there's a disruption coming inside of the trucking industry with self driving vehicles?
Sebastian Amieva 37:36
Yeah. But I mean, also, it's very problematic is, is complicated to find drivers here is a lot of drivers, we have this problem right now this issue with finding drivers, you know, we need to find recruiters to find drivers. For us, this is a problem. And also, you know, self driving also is going to be something disruptive in the near future.
Ronald Skelton 37:59
It almost sounds like almost every industry, I talked with a you know, an advisor on or even when we were we're working on a really big marketing roll up not too long ago. And every industry has this shortage. And as funny as like, almost every acquisition I look at it's like Okay, the next bolt on is I need a staffing company that specializes in finding great, you know, employees for this, you know, is that just, you know, to me, that seems like a great bolt on for almost any company that doesn't have a really good recruiting department. If you're big. And you need you know, if you need more than a few employees a month just to scale and grow and stay stay in business. You know, hiring or buying a company that that's what they do is fine those people seems logical.
Sebastian Amieva 38:47
Seems logical. Yeah. Some people for some people. They want to get started into the m&a buying single acquisition, which is the most reasonable thing if you're starting with but some people came to me and say, Sebastian, I have no clue about m&a. I never run a business before I don't have an NDA. It's not mandatory to have an NDA, but anybody can buy a business, but they want to do an IPO on a spec rocket right away. Right. So they want to do a roll up of fragmented industry and rolling after six companies, you know, doing more complex things, right? I think always is good. Starting with baby steps buying company from 500k to $5 million. Prove the system, then you want a few more confidence. And then you can do roll ups or measure or you can do different more complex acquisitions, or doing a holding subsidiary one, the one we were speaking in the, in the beginning, our more complex ones. Always says
Ronald Skelton 39:43
yeah, we were doing a marketing roll up and I'll tell you, the one thing that surprised us is the legal fees per company that we brought in to have the transaction attorneys negotiate getting the contract signed. You know, the first one was close to 50 to see 50,000 bucks to just get the contract defined, you know, negotiate through the first one. And they promised to get it down to about, you know, 25 to $30,000 per acquisition that we were looking at, you know, between 20 and 30, maybe 40. acquisitions. So the legal fees alone, were going to be substantial. So yeah, I would agree with you on there. If you're, if you're just getting started, and you're thinking, I'm going to do a roll up on day one, it's okay. If you got really deep project, prod, prod, like, even speak really deep prod pockets, you got money to work, or you have investors lined up to help you out that maybe have done that before. But if you're starting off with, you know, doing LBOs, bank loans, investors funding asset funding, stuff like that, the legal fees alone, could be very painful closing fees to close each one of those because everything you roll up and roll in, has some some expenses associated with it, right?
Sebastian Amieva 40:58
Yeah, this is big about expenses. Yeah, you're right, you're right, you you're on point. So lots of people say Sebastian, how to engage with, with a lawyer or with a CPA, right, they are very expensive, they want to charge me 30,000 For a division, they want to, you know, they want to charge a lot of money. So they want to make me sign a letter of engagement, right. So what they recommend is to find solo lawyer or small medium firms, right, so you want to contact them and saying you're an acquisition intrapreneur, this is my acquisition criteria, this is my board. And we looking forward to close a deal in the next quarter, for example, we are not in a position to pay out from fees, right, we want to pay or the, you know, after the completion, we pay whatever fee you charge, we pay you after the completion. So it's difficult to find this kind of person, or most, most of them, they want to charge you a contingency fee, what it means, if the deal fell through the need to pay a percentage of the main fee. So let's say $1,500, if the deal fell through, so if you fell through 100 times, you're gonna go bankrupt, right? Just analyzing deals, this there is a problem. So you need to be became good at analyzing deals, and then you want to spend time with your lawyer and with an accountant, because they will charge your money, right? So you need to be 90% Sure, you're gonna close that deal. So also, you don't waste their time, right, and you don't waste your money and your time also. So I will recommend to fully analyze the beginning good, that really exists.
Ronald Skelton 42:22
I like your idea of building out your own deal room, even if you're like the buyer, you build out your deal room, you have your folder, you have everything there, your team goes through it says yes, this is a deal. And then you contact the attorneys, or your investors and say, Here, here's one I'm serious about being new before I even hired my first mentor, I gotta hit my hands on a $13 million a year concrete plant that had a lot of problems. And I won't say too much, because they're probably their local and they might, they might hear this at some point. So I won't beat him up too bad. But my team was I have a friend who you know, is finishing up law school, and he's brilliant in business, I brought him and I had a guy who's just an if he could sell, you know, he could sell snow desk, Eskimo, she's just really good in sales and stuff. So I had him on the team, I had a friend of mine, her name's cat. She's a retired forensic accountant. And we needed her because the books were a mess, right? So I built a team around this, and we use a lot of that team's time. And we never really got what I would call a deal room does matter of fact, the offer ended up being $1 down deal because they just didn't give us the financials. And you know, the on a $13 million concrete plant. The end I've said this on the show before some of my people have heard this before, the biggest pushback we got wasn't the fact that we offered them $1 deal and taken over like $4 million with their debt. And then you know, but the biggest problem they had is we actually had a 45 day unwind clause because we didn't have a whole deal room. We wanted to get in and clean up things, have the accountant go through the books do an MRI, and then in 45 days if we see an uglier skeletons that we'd already found, right? If we if we see uglier demons than the ones they've already showed us, we wanted to be able to hand it back to him and they had more pushback for the fact that I can hand it back to them at the end of 45 days and they did that I was offered them $1 down and it sounds like $1 down but we did $4 million worth of debt we were gonna assume it clean up but uh
Sebastian Amieva 44:23
I don't think another thing that yeah afford to do so people don't waste time with the wrong seller and you need to know how long they've been. They've been trying to sell their company and fully understand their why why are they selling Why did they always say I want to retire or I got somebody in my family but it's always good to get into the company do a physical viewing right doing the viewing of the company trying to hang out with the seller try to fully understand that why? Because most of them they are not ready they don't have a solid red flags for me when they don't have a valuation that when they don't have a proper data room in place right they don't have all the tax returns is a red flag for me, they are not ready for an exit, if they don't have an m&a advisor also is a red flag if they don't have a CPA, who is who is who knows all the process, right? When when they say Sebastian, please don't tell anybody I'm selling you know, of course, you need to be confidential because you can scare all employees right? But not when they tend to they, you know, they knock about a broker also can be a red flag. If you want to sell your company, I will hire an m&e expert, I will I will do evaluation, I will find a broker who helped me to do the listing. You know, I also another point is they don't know what to do after they sell the company. So a good closing for me is what do you want to do after you sell the company? To me? For example, this is the question I asked them. What do you want to do after you sell the company after I purchased this company? What is your plan? If they have no plan, also, it's a red flag, also is is some tax implication, right? So if they don't know what to do with the money after the after I purchased the company, then it's a red flag, I don't want to be wasting time with this guy. Maybe they don't know. But I will say listen, if you don't know, I will put you in touch with my tax planning, right? Who you can discuss the tax implication, you know, you can check out if it's better to do an asset or stock purchase, but it's better for you in terms of tax purpose. Also, if you have any state income tax implication, if we are in Delaware, or whichever state we are in the US, you need to know all these things about tax so always is good if you sell in a company, having an m&a advisor or broker and a CPA and a lawyer to help you to build a data rule and also a tax planner, you know, tax planning expert who can help you with all the tax implication. After you so this is the question is so what do you want to do after you after a bunch of this company? Then well, I'm gonna go on sailing around the world I'm gonna be traveling the world I want to buy my daughter, a house, you know, eat, you know, Alaskan a lot of question in the first meeting, right?
Ronald Skelton 47:00
And that helps build rapport. Right? A lot of people think that business owners are only interested in selling to get a big fat check. And in my experience, that's probably down fourth or fifth on their priority scale. Right? The fat check means something to them, but in a lot of cases, what's going to happen to the company, what's going to happen to the you know, the brand, you know, what's going to happen to their employees, those take a higher precedence in a lot of cases, especially in that smaller 1 million to $5 million business owner who's been doing it for say they built their business over the last 25 years and they want to retire. I found personally they're more interested in what's going to happen to their, your their friend, Bob, who's worked for him for 25 years, 26 years, he's been open, that guy's been beside him for 25 years, then they are getting an extra, you know, 50 grand, you know, on their business. And I asked a lot of people on the show who have sold businesses, did you take the highest and best offer? And I haven't got a yes yet. It's usually like they weren't there wasn't that much difference, you know, like it wasn't six figures difference between the two offers, but it was you know, significant a lot of times and the
Sebastian Amieva 48:11
the legacy that you keep the legacy after the purchase and don't start fighting everywhere everyone they worry about you keeping the legacy format is very important to sounds credible and knowledgeable right you need to know the industry that you you targeting right. Also a good thing I do for my clients is I say listen, if you want to target manufacturing companies, what I suggest to do his biomarker reports or market research to fully understand how much the manufacturing industry worth in the US for example, what are the top 10 players in this industry, right, who are the top 10 m&a advisory firms targeting this company who are the family office private equity fund, you know, who are operating in the manufacturing industries is very good to know all these indicators, all these people before you go and do the site visit right? The viewings. And so you start you when you started speaking with the seller, they will say okay, this guy really know my industry. He's not like a financial acquirer is a strategic acquirer, he knows my industry, he will keep the legacy right, he's not gonna do a dodgy thing, right? So he know. So this is a good thing to do before preparing yourself understanding the industry buying a market reports you can buy it on a studied.com or any of those websites, you can get a macro report on macro research, you can you know, do your search, you know, learn about the industry, are you targeting this is important. If you don't know it, also, you can bring an industry expert, but do both things, right. So it's very powerful, very powerful to build rapport on the first meeting with the seller.
Ronald Skelton 49:48
So that's a great idea building rapport by knowing the industry inside and out and having them fill it they're like there's actually a like, just what's the word of like for a safe pair of hands, they want to know that they're handing in that business off to a safe pair of hands, and even if you're not going to be an operator, meaning you're going to be a acquisitions, entrepreneur, somebody else is going to run it, you're the one talking to that business owner. And if you can't instill that safe pair of hands, like you have enough industry knowledge to do that, it can be a real problem. I can see that 100 100% It was a big hurdle on that on the concrete plant, one of the biggest hurdles that we had with them is, we've never we didn't know anything about concrete. We've never been around it. And that's all they did. Right? Like they, they were a manufacturer of like grease traps, storm shelters, culverts and that type of stuff. But the what really got past that is I was like, Look, you have a general manager in place already. Who knows this inside and out? I'm probably going to have him run it or bring somebody in to help him run it. I'm not, you know, this isn't what we do. Right? We're not, we're not going to step in and tell people what to do on this. That would, that would be absurd, right?
Sebastian Amieva 50:59
I think you need to think you need to explain how is how is going to be this process done. Right, you need to explain the process, you need to create an idea on their mind. So say this, after we purchased the business, we want to give the legacy. And then we want to move this ex employee to became the new CEO, or we want to keep you as a couch as a coach for the next six months. So you can train the new CEO, we are going to be recruiting a new CEO with 10 years of experience in manufacturing company, for example. And if you stay on board with a base salary for the next three to six months, it will be very helpful for for doing a smooth transition. So always is good explaining what is going to happen because they will have a lot of emotional things going on psychologically. And also they have a lot of question, right? What is going to happen with the company after they leave, they're worried about all these things. So it's always good. Always good showing transparency, showing all the other hand, say listen, I signed the NDA, I got the the information. If I am ugly, I will submit a letter of intent. And after that, I will send my guys my accountant, my lawyer, my technical person to do our due diligence, if everything looks like we what you said before, we want to start drafting the share purchase agreement. If we agree on the terms of the share purchase agreement or stock purchase agreement, then we sign it and we celebrate together after from day one, I have a 100 days plan. After that we want to delegate the management or you can you can stay as a CEO if you want to stay if you want to fully retire, we can you can sushis somebody from inside the company to move on, move up and became the new CEO or we can bring a new CEO with 10 years of experience, you always show in the process what is going to happen from the beginning to them. So then it makes it make people feel safe, right? This guy really know what he's doing. When he been closing these for the last 12 years. He now how is the entire process from the beginning to then from before acquisition to post acquisition, you need to fully explain what is going to happen. So everybody feels safe, the accountant feel safe. The lawyer, their lawyer feels safe. All the shareholders the safe the employees feel feel safe, safety, you know, offering safety and transparency showing the process.
Ronald Skelton 53:16
All right. Well, Sebastian, we're at 53 minutes. Now we're getting close to an hour, I want to make sure people know how to get a hold of you. So I'm going to put up your your contact information there. For those of you guys who are listening, it'll be in the show notes. If you're on if you're watching one of the videos, it's on the screen, and we'll be in the description. It's his name.com. So it's Sebastian SEBASTI A N. And the last name is a LM IEV a.com. But again, it'll be in the show notes. And it should be on the screen if you're watching it on YouTube or one of the social media channels. And then I'm going to show you how to get ahold of him on LinkedIn. Sebastian, your name is pretty unique, they can probably just search for you on there. But there's the URL for that it also will be in the show notes. And reach out to him say hi, tell him what kind of deals you're working on. And, and, you know, really kind of spend some time I recommend everybody kind of interviewed you interview your mentor, too. If you choose to work with him, make sure you guys can work together, he's gonna do the same thing he's gonna vet you but same way it goes back when you're like, I talked to three or four different people before I hired the guy that I hired. And out of respect, I won't say who that is because I want you guys to reach out to Sebastian when I have him longer. I might admit it. But uh, I do look forward to you know, I'm going to work my way through the different mentors as I do different deals. And just to get the experience and knowledge of each of you guys so don't be surprised if I circle back around at some point you go, Hey, I've got one for you. Let's work this together. But I'm going I'm taking a different approach that I took with a real estate. Jokingly I always use her and I have about 140 or $150,000 bookshelf over here from all the material Those programs I bought when I did real estate. So now that I'm in this space, I'm going to pick one guy do their their type of deal, get it done, and then go to the next guy and learn from them. And then work my way around. But again, Sebastian, thank you for being on the show. Is there like, is there anything we missed? I always I always ask this question. We talked about a lot of topics, we cover different angles. Is there anything in the back of your head going, man, we probably should have talked about this a little bit?
Sebastian Amieva 55:26
Yeah, I think I could, I could stay talking with you for ages. Right? You askingvery nice question. And of course, I love this topic. Right? So the most important thing, you were talking about mentors for me, it's very important when you find a mentor, when you engage with somebody to do due diligence, right? Don't Don't let yourself get, you know, cheat by the marketing staff or them, you know, all these tricks like a by No Money Down deal, and all these kind of tricks, right? So do your due diligence. Does this guy close any deal in his life? How long has this guy been, you know, training people check the testimonials, the real one or the one you pay for, you know, to check the real testimonials. So do your due diligence is very important. The same with the when the company targets when you do in addition, is the same for hiring a mentor. And if anybody have a question for me, you know, because we're running out of time, they can reach out to me on LinkedIn, or they can google my name and check out another post that I did or interviews, you know, all the referrals or people talking about my work and what I did in the past, right, so Yeah, what'd they say? No, thank you very much. Thank you, Ryan, for this great interview. feel very grateful. Thank you very much. I really had fun. Yeah.
Ronald Skelton 56:40
Yeah. Awesome. Stay on, stay on the line for just a second after in the stream. And I do appreciate you. Thank you. And that was that's the show today, guys. Thank you for our listening. The investors and entrepreneurs professional mastermind. The investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind introduced first in Napoleon Hill's famous book Thinking Grow Rich, with accountability partnering, where your peers help you ensure that you set goals take actions and get results. If you want to scale blow past roadblocks and achieve success faster than you might think is possible. I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind