Today’s episode is a rerun with past guest Ross Brendel, a co-founder and the managing partner of Westerly Group alongside cofounder Rich Littlehale. Westerly Group invests in acquisition entrepreneurs with committed, permanent capital to pursue a specific industry thesis over an indefinite time horizon. They are investors in several of our podcast guests such as Justin Vogt and Ed Redden, Eric Factor, and Austin King, among others.
I wanted to bring this episode back to your attention as permanent capital and longer time horizons are becoming more talked about today and I think it’s important to discuss the nuances of this approach, as Ross does in this episode.
In this conversation, Ross shares Westerly’s permanent capital thesis and model, whether buying a business has become harder or easier, how to think about a purchase price with a longer-term view, and the nuanced advantages of committed capital in pursuing acquisitions.
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Links:
Topics:
(3:32) – Ross’ background & career
(6:39) – Why do you think interest in longer-term hold vehicles has increased in the past few years?
(9:33) – Should entrepreneurs be less price-sensitive when looking to buy a business?
(11:36) – How do you find entrepreneurs with the right mindset when buying a business?
(13:42) – Do you think buying a business has gotten harder over the past 5-10 years?
(18:46) – What are some of the unique ways you’ve seen Searchers find companies to buy?
(20:25) – Can you tell us about some of the teams you’ve backed?
(23:19) – Can you talk through some of the advantages of committed capital structures?
(28:06) – Was it intentional to take a generalist approach to your work?
(31:53)- What happens if an entrepreneur you back loses desire for the industry they initially start Searching in?
(33:51) – Does your Zero Horizon Investor idea give you more flexibility in terms of the business models you go after?
(37:18) – Are there any other models in Search that are interesting to you?
(39:36) – How do you think you’ll continue to find entrepreneurs and teams? Do you have a formulaic approach?
(42:10) – What college class would you teach if it could be about anything?
(44:12) – What’s a strongly held belief you’ve changed your mind on?
(45:33) – What’s the best business you’ve ever seen?
Think Like an Owner Sponsors:
Live Oak Bank — Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle-market companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.
Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected]
Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at oberle-risk.com. Or reach out to August directly at [email protected].
Oakbourne Advisors– Oakbourne is an independent retirement plan consulting firm that helps small companies design and implement great retirement plans for their teams. Whether you already have a 401(k) in place or are looking to start one for your team, please reach out to learn more about how Oakbourne can set your people up for success in retirement at oakbourne.com/think.
