Six Acquisitions in Three Years with Ryan Sullivan

0:00On today's episode, we interviewed Ryan Sullivan with North Park Group, and we talked a lot about what it's like to go off and really start a private equity company from scratch, right? How they found that first business, how they bought the business, raised the equity, and at the same time basically put the whole deal together, including the real estate. And then how do you go from there to then really going off and doing six acquisitions in a three, four-year span, which is respectable, right? And so really, we dove in a lot on just kind of what it looks like on each deal. What was attractive about deals? And how he structured them. So Ben, what were you seeing for your takeaways? You know, I think really the one thing that I thought was interesting on today's show was his kind of spin or his take on real estate, right? You know, I mean, a lot of us kind of get in his business, you know, and say, we're just here to buy the company. We don't really want the real estate, and I think he's taking a different spin and kind of his strategies around how he leverages that and how he gets a loan on that through the SBA. I thought was interesting. I think the other part of it that was really, really, you know, poignant, golden nugget that I liked from this one is kind of his deal structure, right? You know, and how he's going out and raising capital because I think, you know, once you

1:03kind of get past that putting 10% down on your first SBA loan, you're eventually going to have to learn how to raise money, you know, and some of those strategies and how he structures these deals with investors to get them excited about the deal and ultimately pay out those distributions. And on that same note too, he wasn't putting 10% down, right? So he was delivering his things, really looking at it because again, we're talking about he, all of his businesses have been manufacturing businesses, which is another thing that most people shy away from, right? There's a lot more complexity. And so his approach is very methodical, right? We do love her. We don't go in high leverage because, you know, manufacturing is manufacturing. There's other risks that can't be considered, right? And so really kind of doven on all those topics and really dissected deal by deal how he made those acquisitions. So this one's got a ton of information. Welcome to the M&A Launchpad podcast with your host, Casey and Ferris with Equity Launchpad. On this podcast, you will get insights on acquiring investing in and selling profitable businesses in the lower to middle market. Whether you're a business owner, investor, or a spa entrepreneur at Equity Launchpad, we will provide you with the knowledge, guidance, and capital to navigate the world of mergers

2:06and acquisitions. Hey there, this is Casey with the M&A Launchpad podcast. Want to let you know about October 25th, put it on your calendar, this is a do not miss one day event. There's going to be incredible headliners, but really at the end of the day, you're going to get a chance to talk to people that have made acquisitions, learn from some of the challenges that they've made because this is definitely a challenging process. But more importantly, there's going to be people there that can help you and support you along the way from great vendors, quality of earnings, how to run the do diligence process. And how do I get financed? How do I raise capital? How do I structure all of these things? October 25th in Chicago, we're going to be gathering. It's going to be hundreds of people that are all focused like minded people and man, everyone that's come has given us incredible feedback. So mark your calendar, October 25th in Chicago, we look forward to seeing you. Hey Ryan, welcome to show. Hey, thank you for having me. You bet, man. So far listeners, you want to share a little bit about what you're currently doing today.

3:07Yeah, sure. I formed a North Park group with my partner, Greg Topel in December 2021. Basically, it was us teaming up to go out and buy lower-middle market businesses to basically 500,000 to 2 million in EBITDA in the last three and a half years. We've acquired six businesses that we run as five different portfolio companies. Got it. And having a similar concept model, I mean, buying six and three years, that's respectable, right? Especially for deals that you guys are out there sourcing. And so maybe for the listeners, I guess, how did you start to get into this first, right? What were you doing prior? And then we had to go through how it's been? Yeah, sure. I was born an engineer. So I spent the first, some 51, so I spent the first, whatever, you know, 20, 30 years in corporate America. I was an engineer and then I moved, you know, I wasn't a very good engineer, so those who can't do teach, I moved into management, right, got into general management. What's about my whole career in manufacturing businesses, building products and industrial products, all things manufacturing?

4:09Later in my career, I got a chance to run a holding company that was a diversified holding company of manufacturing businesses did really well there. I got a chance to actually acquire some businesses with that job and then basically spun out of there and said, hey, I like this strategy of kind of lower, lower middle market manufacturing businesses. We're typically buying stuff to put people into retirement, right? I mean, we didn't know, I didn't know about the book, you know, buying build, I didn't know about ETA, I didn't know about any of that stuff. I just had bought some companies and I know how to run companies. So Greg and I set out, you know, buy a few companies largely with our own money and some money from outside investors. And here we are. Three and a half years later, we got six companies and, you know, five operating partners that are running them and partners inside a North Park group and we're looking for more. It's actually kind of comical how your story really similar to ours and I remember we got into it and then we didn't know ETA and then our partner KC message is like, hey, so

5:10I went to this Harvard ETA thing, there's this whole ecosystem of ETA, right? Oh, yeah. We didn't even know the term independent sponsor, right? Which is really what we kind of were, right? We can source it. We can do it in this kind of over time. You start to learn, but ultimately at the bread and butter is very simple, right? You're finding businesses, you're buying them. I mean, Greg and I were like just faking it till we make it kind of thing. Like we're talking to a lot of people and networking a lot of people, I ask in a lot of dumb questions. We're just kind of figuring it out and then probably a year ago, I'm talking to somebody and explain to them North Park group and they're like, oh, like you're ETA buying bill. I'm like, what are you talking about? I had no idea. And it's made me feel better since I learned it, right? You feel a little less isolated and there's more people to talk to, so it's been a great experience both in getting to acquire companies, but we're buying companies to try to hold them for 20, 30, 40 years. I mean, I tell everybody I'm a buyer, not a seller and buying stressful, selling stressful. I only want to do half of it. And when I'm dead, the guys can figure out how to sell off the portfolio if they want,

6:12but we're going to hold them forever. So that's great. And yeah, I mean, you know, I can't say there will always be like that, but we always, we got in this business like, hey, let's, let's find some, some evergreen companies, right? That we can just sit back, grow over time and enjoy kind of those dividends or those distributions as you kind of get from businesses themselves. So yeah, a lot of similarities, but I was going to take a step back, right? You said that you were running that holding company. So how did you get into that? What was that? And was that the, was that really the light bulb moment that you're like, shoot, I can do this on my own? Yeah, for a framerate, it definitely was. I mean, I got hired. It was, it started out a public company with a majority family ownership, so they kind of ran it like a private company, had five businesses in it, none of them are performing very well. So they kind of hired me to turn around the portfolio and get, give you an idea, we're like three million in EBITDA across the portfolio with like 55 million in liabilities. So not, not, not good math is basically kind of where zero when we started, I sold one

7:15business unit that was five million in EBITDA, so that tells you how the rest of the portfolio was doing. If you can sell one that's five and overall you were three, yeah. And use that cash and I was like, well, I don't have enough cash to like clean this thing up and end with anything. So I got to go do something with this cash. And I needed to put cash to work and get cash back quickly. So that kind of leads you to lower middle market and businesses you can buy, they're high cash generating, low capital intensity. And I knew manufacturing. So obviously I stayed focused in manufacturing, I'm too old to learn new things. So I started buying, you know, little manufacturing businesses that were, honestly, great businesses. Some of them have been around for 80 to 100 years and you know, they're making a million dollars in EBITDA and we could buy them in an OK multiple. And so I think we bought six under that company and then went in and kind of professionalized them and started growing them. I turned around the rest of the companies in the portfolio and took the public company private for the family. And so they've done very, very well with it.

8:17And then I took my exit and moved on. And my partner, Greg, was actually my biceye brokers, he was out, he was the one out looking for companies. And so when I left, he said, hey, we could do this on our own. And I said, well, I was like, I had like two and a half million, I was looking to put back to work. Right. And I was like, well, I got some money. Like I could buy a company or two, you know, with dad, blah, blah, I'm like, but I don't have enough bike. 10. He says, oh, we'll get investors. Like it was no big deal. Right. And I'm like, yeah, who's going to give me money? And Greg had raised 10 million for a startup. And I was like, well, if you can do 10 million for a startup that doesn't have a product and isn't making money, I mean, I guess we could go to people and tell them, hey, we're going to buy a business that's been around for 80 years and has always made money and we're buying it well. And we know how to run manufacturing businesses, Greg's an engineer too. And so he convinced me and lo and behold, we were able to fundraise for our first two deals. And now we've got 40 plus investors that follow us from deal to deal.

9:19And we have a wait list of like 30 or 40 investors that are just waiting for there to be space to get into a deal. Yeah. So walk us through those that first deal and that second deal, right? How do you find it? How do you structure it? I mean, what's the deal? What does it do? Would you buy it for? And then we kind of maybe move on into what that second deal looked like. Yeah. Sure. So we formed in December of 2021. We closed our first deal electron in May of 22. So we found it pretty quick. It makes electrical components. It was based out of which truck hands us. All of our deals we pay right around kind of 4.0 X EBITDA. We buy the buildings. Which for a seller is really important because a lot of times these are people who have been running a business for 40 years and they want full liquidity. They want to go to Florida or Phoenix and retire. They don't want to be a landlord for 21 and back in time. Yeah. And so a lot of people that we're talking to, I'm just one of the business and maybe we're probably going to move it. It was probably a strategic. It was going to roll it up. It was private equity that was bolting it on to something. It wasn't going to be good for the employees that were left behind.

10:20And so then we come along. We're like, we now to run manufacturing businesses will buy your building. We're going to leave it here. We're going to run it here. And so just great sellers. All of our deals end up with kind of great partnerships with the sellers. They're just really nice people and they just really want their companies taken care of. And so then we fundraised. We put a good bit of money in on the first deal because I just, again, I couldn't believe that people were going to give us money. So I probably own 30% of a lot of money to work on the first one. We bought it Greg White and ran it. You know, we had a two-bedroom apartment with the mattresses on the ground and a folding table and two folding chairs. Like that's what it was like living in Wichita. We rented a car from the sellers that was like 15 years old. And that's what Greg drove around Wichita. So I mean, we were bootstrapped because, you know, one small company, especially without side investors, you're just pulling the salary for the job. I mean, there's not much management fee coming off of it or any of that kind of stuff.

11:23And it worked well. We structured the deal like a typical private equity deal. So we do 25% carry, 10% on adjusted EBITDA management fee with a small closing incentive. And we did that because that was what our investors understood. Most of our investors are invested in P deals. So they understood that vocabulary and that deal structure. And the SBA kind of understands that the SBA gets more confused than investors, I think. But, you know, we already had banking relationships from our previous job. So we were able to work through the banking side pretty well. And Electron did well and we closed our second one Phoenix electric car. Sorry, really quick. So that first one though, just so it was you bought it for roughly a four X. What was the EBITDA? About a million. No, 500, 500,000, 500,000. 500,000 EBITDA you bought it for roughly a four X. And it sounds like you guys for the finance side, you did structured as an SBA loan that you and your partner kind of basically took on that liability. Yeah, I took the personal guarantee on the first one. We did a seven A for the business loan and a 504 for the real estate loan.

12:26Gotcha. And that's always great. And then for the investors, you kind of talked about the structure. And maybe really quick, how's that business doing today? So it was 500, where's the kind of thing? Yeah, that's great. Well, we bought it when it was 500. It's up to 650, but it's a very different 650, right? So at 500,000 EBITDA we bought there were two sellers in the business who did all the work. And there was no other managers, no structure. I don't think there was anyone else with a college degree in the building. And so now we're 650,000 and we've got a president. We've got an actual financial controller. We've got a production manager. We've got a degree engineer who's doing stuff. We've reinvested over a million dollars of CAPEX. So a new equipment into the business. And we've paid back, I think, somewhere over 30 percent of the initial investor money over three years. The carve out was what, 25% promote?

13:28Yeah, 25% caring. Yeah, caring. Got it. Okay, cool. All right. And then the investors get an 8% preferred return, which obviously it's just the waterfall of the cash coming out. It's not a guaranteed return. So first cash out goes of the preferred return of which were equity holders. So we're getting some of the preferred return as well. And then it goes to paying back equity. And then we're into the carry. Got it. So I wanted to hop in on the real estate side. I mean, and for our listeners, you know, Ferris and Nives backgrounds and commercial real estate too. That's kind of how we got our start. You know, and it's funny as we got into the, to the M&A or the private equity world, you know, we didn't really want the real estate. But, you know, I understand your argument too. And that was our struggle at least initially. And now I think we're kind of going back to maybe wanting to do the real estate. Yeah. How did you, did you structure it as two different offerings? I mean, you obviously have two different loans, right? One for the operating company and one for the real estate. How did you do it from a, from a capitalizing standpoint? Is it all kind of funnel into one thing? Yeah, and on the same thing, how much cash was raised?

14:30Yeah. We did a holding company underneath the holding company as the operating company and the real estate entity. Two separate entities. All the investors are in at the holding level. I wanted all the investors to be the same. I didn't want to play games and have there be real estate investors and the company investors. And then I'm up in the rent and then the people that are in one side or so was. The rent going up so much, right? It like, I didn't want any games. I'm a big believer in like simplicity and I don't want my phone to ring, right? So if everyone's happy, your phone never rings, they just unless they're inviting you out for drinks or something, right? So total equity raise was about 1.8 million on the deal. The real estate was worth a million in a quarter or something like that. So I can give you the total deal economics. We put a good bit of equity in to start. We always put like $400, $500,000 a cash in the balance sheet. I'm a big believer in like cash is king. We also have a line of credit. We just don't want to tap it, right? I do a lot of things to reduce the risk. So I like buying the real estate because it reduces the risk. My rent doesn't go up every single every year.

15:33So I don't have a small headwind in my business. I get, I don't have any risk getting kicked out. And it's a good asset, right? It is a good asset to put debt against. It's an appreciable asset. The mortgage during the debt rates are great on real estate, compared to operating businesses. And it gives us a lot of optionality in the future. We could do a sale lease back and generate liquidity for investors if we wanted. We can hold it for 30 years. We could sell it and move. I mean, who knows, right? So I'm also a big believer in optionality. I don't like having only one path. Like once you don't own the building, you don't own the building, you know? It's not moving in a manufacturing business is expensive, right? It's not like it's just distribution or some other stuff. That's a little bit more relocatable. Manufacturing tends to get pretty pricing. Yeah, I mean, it's it might have been a custom build out on the the shop itself. I mean, like it's, it makes sense for those types of business. Exactly. We have our industrial chrome plating business. Yeah, chrome bits, you know. You just say, you can create like sell on that property, maybe, right?

16:35Yeah, like, you could probably you could find a buyer. Obviously an institutional level, but, you know, the mom and pop people aren't going to buy that type of real estate, right? So talk to me about, because you know, I've always heard of 504. Talk to us about like, what are the terms with that loan on real estate? Because I think a lot of our listeners are probably struggling with the same thing that we struggle when we got into business like. Okay, I just really want to buy a business. I don't know anything about real estate. You know, how does that work? And I mean, and the SBA, I mean, there's a lot of paperwork you got to do. There's a lot of hoops. You got to jump through. So it's not easy debt to get, but it tends to be good debt. The seven had love because it's a 10 year amortization. You go commercial debt. It's much shorter. You tend to get lower interest rates, no bank covenants, and you can pay distributions. Like for us, one of the big things we wanted in the portfolio is we wanted distributions. I was putting half of my net worth the work. I wanted cash back for that. I didn't want to wait seven years or 10 years to sell a business or recap it. I wanted cash flow every year, right?

17:36And with a lot of commercial debt, they get a little tough about doing distributions. So on the 504 side, it's even more complex because you basically end up with a bank loan for 40% of it, the SBA loan for 50% of it, and then you've got to put in at least 10 to 15% depending, right? You get a 25 year amortization typically, a 25 year term on the 504 portion, which is great. And then the bank portion, you get a 10 year term with a 25 year amortization. So you do have a portion that you've got to refinance at 10 years. And typically, good interest rates. A lot of our property real estate are down in the six and a half to seven and a half percent range. So all of our buildings kind of cash flow. We tend to model them out at like a 9% cap rate. And they cash flow well at that relative to our debt. And then obviously, if we were doing a sale lease back, we'd probably be getting seven and three quarters or something like that on a sale lease back.

18:36So there's value there that we could get through our withdraw. There's some stuff that you can leverage. If you ever decided to go down, now you need to do some capital to do this. You can always go back and do the sale lease back. And for our listeners, that's obviously a strategy that you can incorporate even on a buy. If you needed some cash to actually close the transaction. And the seller of that business has some real estate that's something that our listeners should look into. But yeah, never heard of anybody actually doing the 504 on the sale. And it does have to be kind of like owner occupied. So then that's the other reason why we're holding company with everyone in on the deal. Because otherwise, if you got an investor group A and investor group B, a lot of the banks are like, well, it's not really owner occupied, even though you've got control of both. And it's awkward for you. You have two different fiduciary duties that are kind of conflicting. Yeah, so yeah, like I'm a big fan of like everyone's in one buck. I mean, the biggest check we ever took from an investor was a million bucks. Smallest check I think was like 10,000 and they're all the same.

19:37Same terms, same subscription agreement, same deal. Like no one gets special terms. I'd rather just not take the money and not have the confusion. Got it. And so then what about that second deal? All right, how did that come about? How far into the process did it? And what did it look like? It's curious, you guys are sleeping on cots, you know, and mattresses on the ground. And I mean, how did you guys even have the time to look for that second acquisition? Yeah, we're working a lot, kind of like bleeding from the eyeballs. I mean, Greg was running an electron. So I was mainly out trying to find the second one. One wasn't going to put food on the table for the two of us and our families. So we knew we needed to get like four to six companies to have enough scale in the portfolio. So we were looking for the second one. It's actually an interesting story. They called us because we had approached them like three years earlier when we were working at a different portfolio. And so they had Greg's number. And so when they finally were ready to sell, it was one of those like, hey, you're interested in selling? No, we're not interested in selling. Well, three years later, they're ready to sell.

20:38They ring Greg's cell phone. So Greg calls me and he's like, hey, do you remember this company? I'm like, no, we look at it and we're like, yeah, we're interested. It was in Chicago and a great little niche manufacturing business. That one was probably 1.7 million in EBITDA. So larger, we paid, you know, upper fours. And then we didn't buy the real estate. But that's because while it was still our own, it was right by Wrigley Field. And so the value of that real estate was really not intended for a small manufacturing business, right? So the owners, they'd sell it to us for what it was worth. But, you know, that's a development play. It's a real estate development play, not a manufacturing building. So we didn't buy it. We got a good lease terms forum for two to three years. And then we went out and bought a building, which is part of our thesis and moved the business, which is again, it's expensive. But we bought one that actually had a lower commute time for all the employees and still in Chicago.

21:39So now we own the building again. We've done two renovations on it. We got a TIF grant for some of the renovations. So we went into a good neighborhood from an economics perspective. And it was an old manufacturing building that was vacant. So we actually brought it back to life, which people in the neighborhood love, because now it's not this big empty building sitting there. And Phoenix is doing great. So it's really nice to see. And we kept 100% of the employees in that move, which I've never done before. I've never been able to move a business and keep 100% of the people. I mean, that's just... What did they manufacture? They make the parts inside of a DC motor that holds the carbon brush. I mean, you want to talk about niche manufacturing, like that's what they make. They're the only ones in the US making. We actually export to China. So we're shipping these things to China to get put into motors to come back to the United States. Great little business. I mean, it's only 5 million in revenue. And it was clear in kind of 1.7 million in EBITDA, so very high EBITDA margins,

22:40which is a different business to buy, right? Because there's less we can do to really improve it. They've got very, very high market share in what they do. It spits off a lot of cash. Great people inside the business. And so with that business, we've started trying to add new product lines, do new things, both in like thermoset molding. And now we're also making wiring harnesses for our customers. So probably 20% of our revenue now is a new product line since when we bought the business three years ago. Got it. And so you bought it. It was 1.8 EBITDA, right? And you said it up or four. So roughly, you know, you bought it at 8 to 10 million dollar range, right? It's a little bit outside of SBA sizing, right? So how'd you guys structure that both on the debt and your investors? Like kind of what again, would you offer the investors? You go to the same investors first. Did you, you know, market more broadly? What did that look like? Good question. So we always go to our previous investors first. I give them a week to commit to the new deal. And then if we're not full, we send it out to other investors. That one we raised 5.3 million. So much bigger raise than our first loan.

23:42So it took us a little bit longer, especially because there was only our second acquisition. We still did SBA loan 7a. We got 5 million 7a loan plus a pair of Pesu loan on top with the exact same terms. So mirrored terms, not different terms. And then we brought the investor equity along work. We tend to under lever businesses. Meaning like we're, I kind of target 50% for debt equity, including the building. And so you figure buildings are at like, you know, 85%. And so the businesses are under levered. I do it all just for risk reduction. Like we take personal guarantees. I don't want somebody taking my house, my car, my kids, you know, maybe my kids, but not my house and my car. You know, and so a personal guarantee is only scary if the deal is scary. If the deal is not scary, the personal guarantee is not scary. And so we structure our deals to not be scary. And while we give up a few points of return, our investors don't carry it because our investors

24:43want us a good return. So it's just the risk versus reward, getting that balance right and keeping everybody happy. So curious. You know, I mean, you just kind of on the show today, you've talked about some creative real estate strategies. Did you guys have experience in the real estate side? So you're just kind of figuring this way through. I mean, I love that. I think that's really the one thing that we have is we have a big network of people, right? I mean, I'm 51. I've been in manufacturing. I've bought manufacturing businesses before. I've moved businesses in corporate America and not like ones that I own. I've opened up new buildings. I've built plants. So like we understood how to do this stuff. But sure, I was never the one like negotiating the deal to buy the real estate and sign it all alone, so there was a lot of stuff that was new. But we have a ton of advisors that we use, especially on the real estate side. So there's lots of people we could talk to and help us do a search for a building and make sure that we had our model right before buying the company, right?

25:43Because the big question is, well, you're buying it. What's it going to cost you to move it and then what's your new building cost you? If you get that wrong, you got yourself a bad deal. If you get that right, you got to go ahead. I think that's where you're right. You unlock a lot of value, too, right? You know, knowing that part of the, especially if you're in that manufacturing or anything that has some kind of a facility that you have to, you know, that would come along with the deal. I think that's where a lot of people like I alluded to earlier in the show, you know, just like, I'm not going to touch that. But I think, you know, you're losing, or you're using it as almost leverage, too, or a way to, you know, really make the deal even better. Oh, for sure. I mean, structure it properly. In most of our deals, we go to the seller and we offer him one number. We don't go and say, we're going to buy your business for X, we're going to buy your building for Y. I say, listen, I'm going to give you full liquidity. You're cashed out. You're going to work for us for six months afterwards and here's your number. And a lot of them really like that. It's a simpler deal for them. They don't have to figure it out. But on our side, it comes with a big burden because you've got to get your real estate number right.

26:44You've got to get your adjustments for real estate right. Just like networking capital, man. I think a ton of people miss how important networking capital is, especially in a manufacturing business. Yeah. And they forget the real estate. You're just so much. Yeah. That's the whole line. But you're cashed out. Well, I'm really, but then why? Right. Yeah, I mean, I was talking to an independent sponsor this week. And he's like, oh, this is great, man. It's a two million EBITDA business. I want to buy it. Blow a blow. I'm like, hey, like, you know, the thing that hasn't generated any cash in like four years, right? It's like, what do you mean? I'm like, well, for some reason, like they're pumping back like a million and a half dollars back into this business every year in CapEx. Like why? And he's like, oh, I don't know. I was like, well, like that'd be the first thing I'd want to know because like what you had. And the business I sold when I was running the holding company, five million EBITDA zero cash generation. We had to put five million of CapEx back into that business every year to keep it running, to keep it afloat, not make it better, not capacity just to keep this thing going.

27:44And so it's not a, it's not a great business if you're looking for a cash generating business. It's a good business on paper. We sold it for 40 million. It's worth a lot to somebody, right? But as far as us running a portfolio, it wasn't generating any cash. So yeah, cash generation of a deal, and not just EBITDA, and then some of these things that are not in the headline number are really important, both for sellers and for buyers. You know, I mean, that CapEx thing is critical. We've made that mistake, right? And just really understanding how much goes there. A question for you this. So the 5.4 that you raised, now was inclusive of buying the real estate. Yep. Before you bought the business, you had actually already identified the rules that you were going to buy. From day one, you had that plan. It wasn't, hey, we'll buy it sometime in the next year. We'll go find it and do it, or how did that go out? No, we looked, we had enough options like we did a search and we're like, okay, it's going to work. This is what it's going to cost, blah, blah. But we took all the cash up front from investors and put the cash on the balance sheet.

28:45So we knew we could make the down payment on the building and move. And then after we closed, we went and found the specific building and did an L.O.I and bought it and did all that work. But yeah, we didn't have to go back to investors and do a capital call. Like I'll never do a capital call ever, right? Like I get the point of them, but that's just not what our investors want. Our investors want to give us money and then I have us send them checks, not for us to call them and say, we need you to re-up type of thing, right? Even if it's a great opportunity, they just don't want it. And so we had the money for the down payment. So it was cash flow from the business for the first year and a half plus the cash we took up front is what paid for the move and paid for the building and paid for the renovations. Yeah, that's okay. And then maybe really quick, let's touch on the third one, just I can do this all day. What if, and actually really quick, on number two, has that grown or have you guys just been kind of steady-eddy? It's kind of steady-eddy. It's starting to take off this year finally. I mean, obviously we went through the move, we went through the renovation. It's pretty disruptive. And now we're getting to the point

29:46where 20% of our revenue is something new. And then that business, where high market share is not cyclical, but there's a lot of ups and downs in that market. It aligns with motor manufacturing, which took off right after COVID and now it's been in a lull and it's finally starting to come back. But the business fits off a lot of cash because the one we don't have a lot of debt on it and it's really high EBITDA margins. So it's an interesting story. We did two deals in 2022. We get in 2023, we didn't do a single deal. And I probably put in 30 LOIs. I just kept losing. And some deals I lost by like $50,000 straight on the broker column. We'd be like, hey, you want the highest? I'm like, what was the highest? He's like, you're off by $50,000, like, oh my God, right? And so the ones that are the most. Oh yeah, I mean, Greg and I started to panic, right? Because I'm like, hey, like, you know, running these two small companies isn't really what we wanted to do for the next 10 years. We wanted to get to Portfolio and get some scale. And then so then we get in right at the end of 2023.

30:49I signed two LOIs in the same week. And I'm like, oh, now we have another problem. We got two companies. We got to run and we got two deals. We got to close, basically, right on top of each other. And one of those was in Mississippi, which was never leak. And the other one was Dickey Manufacturing, which was here in Illinois. Dickey Manufacturing, total proprietary deal. I met somebody that introduced me to the sellers, took me nine months to build a relationship and get them to trust me and me to trust them and work through an LOI. And the one in Mississippi was on the market. It's kind of funny. I passed on it because it was Mississippi. And I didn't map it. So I just saw Mississippi in like middle of nowhere. Totally judging by the way, right? But like, this is a lot of nice places in Mississippi, but I was like, pass. And the business only had 10 employees. Normally, I looked for a business that's got like 30, 40 employees. So there's enough mass outside the seller. And kind of an independent sponsor. That was working with me to try to find a business to buy. He's like, well, I like it. I'm going to go see it. I'm like, OK, he goes and sees it. Turns out like all the manufacturing lines

31:49are just highly automated. That's why there's only 10 people in the business. And it's a great little business. And it's a whopping like 15 minutes from the Memphis airport. So yes, it's in Mississippi, but it's basically in a large metropolitan area. So like I passed. And it was just, I was 100% wrong. So Scott goes and sees it. He calls me, he's like, you're going to love this business. I'm like, OK, and great sellers. Again, all they wanted was the business to stay. They wanted full liquidity. They cared about what happened to the people. So we bought that business in April of 24 about the building. Winning day one, the employees that were there didn't have health insurance. Didn't have a 401k because it was a small business. So they ran it like a small business. A lot of exclusions. We went in day one, put in health insurance plan, put a 401k in plan, and all that was built into our model. And never really spent doing really well. Yeah, and I think it's those, that you touch on something that I think our listeners, you don't understand is, when you're buying a business, don't be that penny-pinching,

32:50big private equity, like take care of those employees in those small businesses, and they will go to war for you. And stuff like health insurance is so impactful for people of their families. Oh, yeah. I mean, they're just going to love you to death. And now you've cultivated that and got them on your side versus kind of the skepticism that you're the new guy, and what is he going to try? He's going to fire off or lay everybody off, and instead of doing the total opposite, you're investing in them. And in the same thing, too, plan for that investment, right? Like that's what we call the J-curve, right? You know, someone selling a business, if you're running it as lean as they can run it, right? He's trying to get that NLI up for that. They have a bit of looking higher. And so whenever you buy a business, assume you're going to probably do pay increases for people. You're going to be rolling out additional benefit. You're going to be doing things if the person wasn't. So that's actually going to eat into your ribeta. That's where you kind of go to the bottom of that J before you start to then see the net gains from that. The J-curve is a real thing. That's part of why we don't put a ton of business debt on, because businesses will go, I mean,

33:51the market slows down, the market goes out, market goes down. Businesses definitely go through J-curves during times of big change. And we don't want to be stressed over, you know, covering our debt load. So we try to operate them with a lot of free cash flow. And, yeah, I mean, this is like a passion project for a lot of us, right? So, you know, I spun out of my last firm, I could have just sold it all and gone to the beach. And, you know, my wife probably would have killed me. And I probably would have been bored in like, you know, two and a half weeks. And so we care a lot about manufacturing businesses. We care a lot about a lot of the people in them. And we want to run them a certain way, right? Like, and that's not just purely about profit optimization. It's about keeping these small businesses where they are and keeping the people and scale them. And making sure they're going to be successful, they're going to be here 50 years from now. And so it's also about leading the business, the right way and investing in the business in the right way. So, and everybody in the portfolio is very much that way.

34:53I mean, this is a passion project for a lot of us. I don't know, awesome, Ryan. Well, you know, before we wrap, maybe you've done several acquisitions, what are some of the, what's the biggest mistake you made? And then maybe in that same vein, what's just the biggest advice you have for people? Ooh. I don't know the, I mean, the biggest mistake I made is even though we talked to a lot of people, I probably still haven't talked in networks to enough people to really understand everything or the leverage on network as much as we could. It hasn't hurt us financially or, you know, we haven't had a bad acquisition. But I think I'd probably want to slept a lot better over the last, you know, three and a half years and not feeling so isolated or as much on an island. You know, it's, it's all worked out. I mean, our investors are getting a 25% kind of annualized return, you know, by like kindergarten math, which is, which is the way I like it. It's not complex math, you know?

35:56And all of our companies are doing well. We've been able to retain employees or put money back into them. You know, that's kind of what excites me and gets me out of bed in the morning. So awesome. Yeah. Love it. So we're flipping over to our rocket round, which are the three questions that we ask all of our guests. You know, so I'll go ahead and get right into this. So what do you like to do in your free time, man? Outside, I mean, obviously you're, you're running around the country buying up businesses. Do you have any free time first off? And if so, what do you do? No, no, I do, I do, I like to travel. I've been to all seven continents. So my wife and I travel a good bit. I travel out for work, which I actually enjoy. I travel a lot outside of work. And I'm a big biker. I ride my bike a lot. I did years ago, I did a race from California to Baltimore on a bike, which is called the race track. Motorbike or bicycle. Nope, bicycle, like pedal bicycle. Got it. I just got back from a, I did a Cated Canyon lands in Moab, Utah. So three days out, carrying everything. So I just got back from that few weeks ago. Yeah, perfect. Perfect. Next question, most memorable moment in your business journey.

36:59For me, it's been all the downturns. It's probably what shaped my career the most. So I was in telecom during the telecom bust, which I'm old enough. A lot of people don't remember that. And then I literally left telecoms went into building products. And I was in building products during the housing market crash, right? Housing market goes to whatever, 40% of whatever it was a few months earlier. And so I've lived through a ton of downturns in industries where you watch good companies have bad things happen to them and good people have bad things happen to them. And so that's shaped a lot of my view of running a business, being responsible for the people in a business, in how you structure a business, right? Like 10% down, 90% debt from the SBA sounds great until COVID happens or interest rates spike or any of the other unprecedented things that people say that just tend to happen every four years with like a different name, right? And so that shaped my career. I want to give me a lot of job opportunities,

38:00downturns, give you a lot of opportunities, just like good ups do. But it's a result, and I mean, pretty conservative in business. But you can get really good results while still being conservative. You don't have to necessarily take a lot of really out there risk, you know? Yeah, I'm pretty agree. So last question here, man. So what is your favorite tool or resource? Yeah, I was thinking about that one since we started a podcast, of course, man. No, honestly, I'm a little embarrassed. No, that's kind of what I was going to say. One of my partners made me do a podcast like I think a year, year and a half ago. And I was like, this is bad. Like I should never be taped on the internet, right? Like I'll just get canceled very, very quickly, right? As it is, everyone in Mississippi is upset with me because I kind of threw Mississippi some shade on this one. But it's actually been a great tool. I mean, one, everyone I do, I meet somebody cool, I learn something. And then I get a lot outreach from it

39:00from people looking to buy business, sellers, investors. I never thought that we'd get kind of the response rate we've gotten on some of the podcasts we participated in. And so now I do conferences or, you know, do round table discussions at conferences like that level of networking. I had never done in 30 years in my career. And it's actually been a really powerful way to meet people. And then when you get to meet those people, you end up learning a lot. Like even though a lot of times they're coming to me to ask questions, I always end up learning a ton. And if I can learn two to three things every day, then it's a good day. That's the powerful thing of going out and getting out there. And you know, if it makes you feel better, A, you did a good job on this podcast and B, we do the same problem with Mississippi because we've also looked at apartments that are just outside of that Memphis area, not realizing that essentially, you know, the suburbs of Memphis are technically a Mississippi address. They're actually pretty good. It's a nice part of Memphis. Well, hey, since we gave you the answer to that last question,

40:02I'm going to ask you another one, right? Okay. So you're six acquisitions in, right? You know, what is your day to day look? Are you looking for that next acquisition? Are you guys just maintaining and building out kind of that infrastructure to enable those acquisitions now? Like, what does that look like for you? Yeah, we're definitely looking. I mean, I tell everybody, I'll buy every good business I find where it feels like a good partnership with a seller, right? And it's hard because you got to look at 100 of them to find a good one. I probably spend 50% of my time looking for the next deal and 50% of my time bouncing around the companies inside the portfolio, trying to help them run and deal with problems. And then, you know, the nice part about North Park Group is we're all partners. So Scott, who's running Neverleek in Mississippi is a partner inside of North Park Group. So he's sharing in the whole portfolio, not just his company. So he shares in the management fee, he's sharing in the incentive equity for the whole portfolio. So Scott's also out there looking for deals

41:03and Brian and Ohio is also out there looking for deals, both Boltons and just a new deal. So as we're building scale, we're getting more people that are out there kind of searching, which gives us the ability to hopefully, you know, bring continue to bring in two to three acquisitions a year. Love it. Awesome. I've been a great show. We appreciate it. And how can people get ahold of you, Ryan? Yeah, you can hit me on my email. It's Ryan asked at northparkgroup.net. And then you can hit websites northparkgroup.com. And I pretty much respond to everybody that reaches out. So we'll put those in the show notes. Thank you very much, Ryan. We'll have an information on this one. Yeah, thank you. Thanks for having me. I appreciate it. Thank you. It was fun. Thank you. Thank you for listening to the MNA Launchpad podcast. If you've enjoyed today's podcast, and would like to support us, please leave us a rating and a review after you listen. If you're looking for guidance on your next business acquisition or sale, capital to support your next business transaction, or to invest in a private equity opportunity, visit equitylaunchpad.com to learn more

42:05and to connect with our team. If you know of an individual, you would be a great guest for the show. Head over to equitylaunchpad.com or slash nominate, where you'll have the chance to refer yourself or someone else to be a guest on our show. I'm Casey Menshue, and I look forward to talking with you next week.