Bristlecone Trail Partners, LLC

Our Jason Haar recently sat down with Alec Stevanovski of Homepros to talk about the state of M&A activity in #homeservices and #hvac. Thanks for the spotlight Homepros team.

▶ To us, hiring an investment banker (a "banker") is a NO brainer. HOWEVER, most of our client coverage universe hasn't spent the past couple decades investing in and selling companies. 👉 Our clients' transaction with us is often their first (and last) involving the family-owned, closely-held business AND a sophisticated, institutionally-backed buyer. ❓ Whether your transaction is $10 million or $250 million. Shouldn't you be 💯% confident you are getting the best valuation, terms, and outcome? 💡 Investment bankers will always hire a banker to sell their investment bank. 💡 Private equity investors will always hire a banker to sell their portfolio companies. 💡 Publicly-traded businesses (the board of directors) will always engage a banker in a sale transaction. 🔦 Hiring a banker is a PROACTIVE approach to selling a company, which helps ENSURE the BEST outcome for shareholders. 👨💻 We'll do future posts on why sophisticated private equity investors, boards, and management teams rely on bankers when they go to sell. 📧 In the meantime, reach out at Contact@Bristleconetrail.com to continue the discussion. Bristlecone Trail Partners, LLC #investmentbanking #investmentbankers #boardofdirectors #privateequity #equitycapitalmarkets #leveragedbuyout #LBO #homeservices #contractors #hvac #plumbing #electrical #roofing #garagedoors #landscape #pestcontrol #physicianpracticemanagement #animalhealth #entrepreneureducation #sellereducation

⚠ Adding new trades to your existing business may complicate your story for investors, limit the buyer universe, and make it harder to complete a transaction. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ▶ You own a home services business providing HVAC, plumbing, and electrical services. Three trades commonly packaged together with a very well-defined investor universe. So, here’s the question we love to debate with clients. ❓ Does it make sense for you to add roofing, garage doors, landscaping, pool maintenance, and/or pest services to grow your existing business? 💡 We believe the answer is NO. Why? There are two questions to consider. 1️⃣ Does it make strategic sense? 2️⃣ How do investors view it? 🌎 Strategically does it make sense- 📈 From the beginning of time, corporations have been focused on maximizing shareholder value. They do this by investing in the core business and thoughtfully entering adjacencies to spur growth. The expectation is to leverage EXISTING assets and capabilities to create something that is greater, combined, than the sum of the parts. ❓ Will having a bundle of services (ie., HVAC, plumbing, electrical, garage door, pool routes, roofing, et al) be more valuable together than each would be valued separately? 💡 We don’t believe so. ❓Can you leverage your existing assets and capabilities into this new service offering? 💡 Probably not in a way that makes strategic sense. Existing assets and capabilities that may be leveraged into new service verticals could include ops experience / a playbook, customer base, call centre, back-office support. Otherwise, the front-office, technicians and skillsets, business model, customer behavior and purchasing patterns, vendors, pricing, etc. are different. 🌎 Next, how does the investor universe look at it- 🎯 While this could change over time, TODAY, investors have well-developed investment theses into each of these different service verticals. As such, many PE investors have established platforms hyper FOCUSED on specific service verticals, like (1) HVAC, plumbing, electrical, (2) Roofing, (3) Garage, (4) Landscaping, (5) Pest, (6) Pool Repair and Maintenance and so on. Focus is the key word. 🔦 A PE firm may have a portfolio company with, say, both residential Roofing and HVAC, Plumbing, Electrical – BUT they are typically separate and distinct businesses. ⛔ In the end, adding new trades may complicate your story for investors, limiting the potential universe of buyers, in turn, making it harder to complete a transaction and achieve a premium valuation. 📧 Reach out at Contact@Bristleconetrail.com to continue the debate. #homeservices #sumoftheparts #sumofthepartsanalysis #SOTP #strategy #mergersandacquisitions #serviceverticals #contractors #entrepreneurs #roofing #hvac #garagedoor #electrical #plumber #poolmaintenance #pestcontrol #investmentbanking #privateequity #bristleconetrailpartners

💡 Buyers like it because it helps align the buyer’s and seller’s interests. 💡 Sellers like it because they monetize part of their firm, retain upside, and receive a tax deferral. ____________________________________________________________________________ ▶ Selling your business doesn’t have to mean selling out. The equity rollover or “rolling equity” is accepting some portion of the purchase price in the form of the buyer’s stock. 📈 The upside can be CONSIDERABLE, but downside, including loss of equity exists as well. To frame the upside, most investors target a 3-5x return in 3-5 years. Some do better, some worse. 🍷 The return opportunity will depend on a few factors: vintage, size, and ability to grow and create value. Everything else constant, it’s likely easier to move the needle with a $50 million-revenue platform recently established vs. a billion-dollar-plus-revenue platform established many years ago. ⚠ There is an element of “jockey picking” with rolling equity. It is critical to find the “right” partner and complete reverse due diligence on the buyer. In effect, you become a shareholder. Imagine you elect to roll $10 million from your purchase price. You should view that with similar scrutiny as making a $10 million investment. 📧 Want to discuss considerations around rolling equity and why it underscores the importance of working with an experienced investment banker? Reach out at Contact@Bristleconetrail.com to schedule a complimentary discussion. #equityrollover #privateequity #investmentbanking #maeducation #sellereducation #homeservices #healthcareservices #HVAC #Plumbing #Electrical #GarageDoors #Roofingcontractors #Landscaping #PhysicianPracticeManagement #Dermatology #ophthalmology #Radiology #Dental #animalhealth #medspa #valuecreation #maadvisory #sellside

▶ Information advantage – it’s oftentimes what successful investors have. 👉 But when selling your business, YOU have an information advantage – you know the good, the bad, and the ugly. 🤺 Your goal, when selling, should be to transfer that knowledge to potential buyers so they can appreciate the risks, understand the opportunity, and have a high degree of confidence in what they are getting. 👍 Confidence translates into a better valuation, and higher certainty of your transaction closing. 👎 Overly restrictive sharing of info will translate into less confidence, less understanding, which will result in a lower valuation (or no deal at all) to account for the unknowns. Bear in mind, it may be appropriate to be more restrictive if your transaction involves local or key competitors. 📧 To keep the conversation going around information sharing in due diligence and M&A transactions, reach out at Contact@Bristleconetrail.com. Let’s together make you a smarter deal maker. #duediligence #mergersandacquisitions hashtag #investmentbanking hashtag #privateequity hashtag #maeducation hashtag #sellereducation hashtag #healthcareservices hashtag #homeservices hashtag #HVAC hashtag #plumbing hashtag #electrical hashtag #garagedoors hashtag #pestcontrol hashtag #roofingcontractors hashtag #landscaping hashtag #physicianpracticemanagement hashtag #dermatology hashtag #ophthalmology hashtag #radiology hashtag #dentistry hashtag #veterinary hashtag #plasticsurgery hashtag #medspa hashtag #valuecreation hashtag #maadvisory hashtag #sellside hashtag #virtualdataroom hashtag

We are excited to join the Mechanical Trade Contractors of Arizona (MTCAZ) and Antoine Coffer. We look forward to engaging more closely with local contractor entrepreneurs and other industry leaders ! 🚀 #hvac #hvaccontractors #homeservices #investmentbanking #contractors #arizonaentrepreneurs #MTCAZ #mechanicaltradecontractorsofarizona

💡 Why does it take so long to prepare your business to take to market? 🎓 Spoiler: optimal preparation drives ultimate outcomes. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1️⃣ Due Diligence 🔦 We perform comprehensive due diligence ahead of time. 🔦 It helps us to understand our business better and get out in front of potential investor concerns. 2️⃣ Virtual Data Room (VDR) 💻 We establish a virtual data room to house diligence information. 💻 It’s efficient, accelerates the review, and sharpens decision making by prospective buyers. 3️⃣ Marketing Materials 🔍 We prepare comprehensive marketing materials that summarize “the opportunity” for investors. 🔍 It offers leverage for the sellers and gets investors info to assess interest and think about valuation. 4️⃣ Growth Plans and Strategy 🌎 We support you in outlining and memorializing your plans to grow the business and create value. 🌎 It grounds investors in your vision, promotes higher-level strategic discussions, and fulfills an investor expectation when writing a large check. 📧 Want to continue the discussion about how we prep our clients for successful M&A transactions? Reach out at Contact@Bristleconetrail.com. 🤝 #mergersandacquisitions #investmentbanking #privateequity #maeducation #sellereducation #healthcareservices #homeservices #HVAC #plumbing #electrical #garagedoors #pestcontrol #roofingcontractors #landscaping #physicianpracticemanagement #dermatology #ophthalmology #radiology #dentistry #veterinary #plasticsurgery #medspa #talkoftuesday #trending #valuecreation #maadvisory #sellside #virtualdataroom #duediligence

Sometimes less is more. 💃🕺 Maybe it’s true with dad jokes, your ice bath, seasoning on your favorite Ribeye, and with lemonade consumption. But less isn’t always more. 👩💻 And when negotiating a letter of intent (LOI) for the sale of your business, MORE is actually MORE. ✍ The more we negotiate, pin down, specify, and clarify, at this stage, the less open-ended questions, unknowns, and unexpecteds we’re likely to encounter later on. It creates more certainty. 🤝 Reach out at Contact@Bristleconetrail.com to continue this discussion. #mergersandacquisitions #investmentbanking #privateequity #letterofintent #maeducation #sellereducation #healthcareservices #homeservices #HVAC #plumbing #electrical #garagedoors #pestcontrol #roofingcontractors #landscaping #physicianpracticemanagement #dermatology #ophthalmology #radiology #dentistry #veterinary #plasticsurgery #medspa #talkoftuesday #trending #valuecreation #maadvisory #sellside

Your phone ☎ rings, and your email 📧 chimes. 👨💼 “Hi, we are interested in buying your business or we represent a buyer that wants to meet you. Have you ever considered selling?” If you’re a home services entrepreneur, you know this all too well. ⁉ So, what do you do? Do you take the call? Do you reply to the email? Most home service entrepreneurs don’t and won’t. And it’s a MAJOR mistake. 🚀 These inbounds are a PRIME opportunity to gather information and LEARN. Besides, taking an intro call doesn’t bound you to sell your business. 💡 So, here’s our advice... TAKE the call and focus on what YOU can get out of it. 🔍 Here are FIVE questions you MUST ask: 1️⃣ Why are you interested in my business and market? 2️⃣ How do you think about valuing a business like mine? [ask them to be specific] 3️⃣ How do you integrate acquisitions like mine? 4️⃣ How do think about value creation for you/your investors? 5️⃣ Tell us about your business: when did you launch, what is your vision, how big are you revenue wise, what is your revenue mix by service vertical (e.g., HVAC, plumbing, electrical) and customer segments (e.g., residential, commercial), what % gross margins do you earn, what % EBITDA margins do you enjoy, what markets are you in, what challenges do you face in the business, how have your acquisitions performed post transaction, and what do you believe differentiates you from the other groups out there? 🗒 Remember to take notes and save them. With these conversations on your scorecard, you’ll be better informed and more comfortable engaging with sophisticated investors when you do go to sell. 📧 We hope you find this post useful. We’re happy to take these calls together with you or on your behalf. Please reach out to Contact@Bristleconetrail.com to learn more. #homeservices #mergersandacquisitions #investmentbanking #privateequity #HVAC #plumbing #electrical #pestcontrol #garagedoorrepair #roofingcontractors #landscaping #acca2024 #openminded #educationequity #wednesdaywisdom