How I Bought 58 Businesses & Built a $1B Empire

to seeing some familiar faces out there so hello folks um so for those of you who don't know me um my name is Adam Coffey um if I think about my life and

background you know I I think about experiences that collectively kind of build build to take us on our journey uh I'm a veteran US army military taught me

something about discipline teamwork leadership uh engineer made me uh a meticulous planner um I'm a pilot Pilots don't take off unless we know where

we're going and then we deconstruct the journey very useful skill later on in life and in private Equity as a matter of fact um I then spent 10 years working

for Jack Welch at GE um this is pre-tech so Tech doesn't exist yet ge's Fortune number one on the Fortune 500 list

Jack's the world's most admired CEO and for a a mid-30s upand coming executive uh a great play to learn how to run a

business I then spent 21 years as a CEO building three different National companies for nine different private Equity firms uh I'm a turnaround guy I'm

a buy and build guy so bought 58 companies put them together to build my my three Empires uh a lot of m&a experience uh and then I got bored I I

just I got bored after 21 years of being a CEO I I needed a new challenge so I I hung up my CEO cleats I started a

Consulting business um I work with private Equity when I work with PE firms I help them identify risk in things that they're buying and help them determine whether they should buy it or not and

how much they should pay for it I work with 68 Founders uh when I'm working with Founders I help them eliminate risk so that guys like me working for the PE

firms don't find risk and they pay up for the the multiples you know they pay pay a higher price and I write books I've got three three number one best

sellers out there uh fourth book coming out in in August uh this month August 27th as a matter of fact and then I

teach seminars uh globally so I I work more hours today than I did when I was a CEO so it wasn't retir it was about having fun and doing something different

I just turned 60 and so decided that for my last 10 years of my career I was going to teach entrepreneurs how to make money using the tools that I've used you

know over the years and so I think I think that's that covers it pretty much yes yes so so there are three 58 58

Acquisitions in three rollups three rollups and uh 2.4 billion in exits nice so I know I heard you speak about um one of the rollups where there were five

exits I'd love to if you could go from the beginning and then tell us just kind of like the anatomy of that rollup yeah so that one was a very sexy company It

was a commercial laundry company so okay you know the the the essentially we owned 70,000 launder mats across North

America um but it wasn't just launder mats in the traditional sense of which we owned hundreds it also included um 50,000

apartment complexes that had common area laundry rooms so you own the building there's no units in the W you know washers and dryers in the units themselves and so you have a common area

laundry room we would lease the space do some kind of a revenue split you know typically a seven to 10 year lease and then we would would maintain the

equipment so when I started with that company it was a familyowned and operated business started in the 1940s by a a husband and a wife uh and at the

time it was called Web Service Company and I could do a whole thing about branding just around that company so

1940s web means William E Bloomfield and the company was was was uh was called Web Service Company you know thus the confusion you know when I come in to

take over first person out outside of the family to run that business and uh you know it's called Web Service Company everybody invariably I'm I'm out on Wall Street I'm raising Capital I'm doing my

thing people are asking me what the hell is this you know it's a it's an internet laundry company how does that work so it was uh you know it was a company kind of

lost in time first five years I was there I uh modernized what I call a World War II battleship so I started

with a national company that had about 27 million in ebitda and I broke it up I sold it off in pieces went from National

to a three-state regional company and then spent $17 million investing in technology to modernize This World War II battleship and you know long story

short by the end of the first fiveyear period I had three exits and I uh the company that I I ended with at that time

three state company out earned the company I started with and eida was at about 57 million of of ebah when I I

sold the last piece um then sold it to traditional private equity and uh started a buy and build I bought 34

companies then over the next two hold periods multiple exits um sold it for over a billion dollars to a company

called eqt uh out of Stockholm Sweden and and then left the indust history hold on hold on I want to understand that there's like a lot in there so the

first the first five years so it was a national company and it did 20 some uh million in iida and then you shrunk it

to a three-state what what what drove that decision to shrink um so I serve shareholders right so I had mom and dad

who founded it in 1947 this is Circa early 2000s now and first generation literally dying second

generation getting to retirement age no third generation active in the business so first time I met dad was when he passed away I met him at his funeral so

they didn't want to freak him out by knowing that someone from outside the family was actually running the company so I never met him that they hid me from him until his funeral which is when I I

I met him so during that time frame I encountered a company that had no debt paid cash for everything and the East

Coast operations were underperforming and it was a density thing so an example uh in 13 states on

the East Coast they had 42,000 machines installed you know in in apartment complexes um I sold that because it's a

route based service business and there was not enough density to be profitable and so West Coast was subsidizing the cost of East Coast so I sold it so the

first transaction I sold that piece family gets 42 million something like that for those machines and you know and liked it you know it's like cocaine

here's your first rock you know hey that's that's fun I like that 42 million what about the central us 10800 th000 machines sold for about 108 million back

at the time 110 million a little over a thousand a machine is kind of the the price that stuff was selling for back in those days and that's how they thought

about value so it worked good the first time let's do it again you know and again my theory was assets are

underperforming not enough density and I've got a family in transition so second transaction 108 million you know so hey you know we've now put

150 million something like that in the bank love it we now have a three-state company that out earns what I started

with and then I spent 17 million investing in technology to modernize operations and and I then merged with my

largest competitor in Los Angeles of 50 years who also had 42,000 machines so you know Drive 13 states on the East

Coast for 42,000 or get rid of this stuff merge with 42,000 machines in one

city Los Angeles wow extreme density so I had 8,000 apartment complexes in Long Beach California great example we were

literally servicing 8,000 apartment complexes my technicians could drive and park and walk to service calls all day long that's that's how extreme the

density was very efficient and then with the modernization you know I I had a 42% increase in employee

productivity and you know great classic example is uh you know when I got there um service technicians and collectors

people going out to get money from all these locations we're using like a Dewy Decimal index card system so they had a card from a card catalog literally on

their of their truck with little 3x5 index cards and when we sign a new location they would decide where to put it when we lost a location they take it out and so a human was trying to decide

what was the most efficient way to collect you know 50,000 locations in Los Angeles and I put satellite tracking on

vehicles I used geocoding for all the customer locations we then used algorithms and and computer systems to decide what was was the most efficient

way to route you know these technicians in the collection and the performance of of service you know invested in systems Etc we did such a great job I was on

Microsoft TV commercials um back in in the day um SATA Adella used to drag around a washing machine and a dryer and talk about all the sexy things that we

were doing um I I brought in data scientists and we created polinomial regression models to determine at what was the optimal Vin price for each of

our apartment complex you know mini launder mats and our laundr mats and so we were uh we were using technology to drive profitability so the first five

years was about asset diversification for the family and then modernization and then the family said hey this has been so much fun Adam if

you can sell the last piece for X dollar we'll leave entirely h and so I had a number I went out you know on Wall Street you know went and went and

brought in a hired an investment banker we ran a process and you know hit the number and so sold the company fames now fully out in the first five years so

they they made in total somewhere around 625 650 million over those three transactions and then I went from you

know um from private Equity comes in now and so I had modernized this thing but now it's a different owner so then I

grew it back out not just nationally but then internationally I invaded Canada you know and uh I I bought um there were essentially like five main players in

Canada I I bought four of them and I I put them together their antitrust rules are a little bit different up there and so I went from zero% market share in

Canada to 90% market share of apartment laundry and laundry at in Canada in about a two-year period so grew it back out nationally then so again different

shareholders growth oriented now that it's dialed in and working no reason not to expand back out you know and it's all through

acquisition um 34 companies purchased then in that that last 10year period or you know eight years and four months you know so first five years family and then

the next eight years two different private Equity firms and how did you buy how did you build that m&a engine in that first company yeah so every company

that I I came in you know I I walked into the industry never having been in the industry the companies had never

been focused on doing m&a before and so I had to build that team you I kind of joke with people and I I tell him I'm like John the Baptist I'm one voice crying out in the wilderness you know

it's like we're going to turn this company around we're going to build a strong culture we're going to take the hill and grow like we've never grown before you know and you know then once I build that strong culture you know we're

we're going to turn to also not just having strong organic growth uh and margin Improvement price increases you know things like that but then we're also going to focus on on doing m& and

so I I I usually do two things when I walk into any company first is I hire a buyid advisor a buyid advisor's job is

to build my funnel um you know laundry is not as as uh as fragmented as it once was I'm doing three buia um I'm doing three rollups right now in uh in

accounting bookkeeping payroll service type companies and there's 1.8 million of them in the United States and so to build a funnel you know I need to know

where am I hunting and what does good look like you know so I'll build usually I'll call it you I call it my avatar I'll build my avatar of what the perfect little acquisition looks like my last

company uh I bought 23 companies they were I was building an HVAC company and you know on average I was paying five times for two million of ebah I did 23

transactions that average 10 million a piece so I borrowed 230 million from the banks the cash flow of the companies I bought service the debt that I needed to

buy them I then turn around and sell the combined companies for 14 times multiple of IA and so every dollar of IA I bought

and paid $5 for I then turned around and sold for 14 I made nine9 of profit so round numbers I bought 46 million of ebit do paid five times that's 230

million I borrowed 100% of it from the banks I then put them together sell it for 14 times EIT do 644 million turn it around and pay off the 230 million to

the bank put 4 14 million in my pocket in my shareholders Pockets so that's a classic buy and build in laundry I did that I bought 34 and and so you know

it's it's I start with hiring a buy side advisor I need someone to build a funnel um I then hire a VP of Business Development and put them inside the

company so I start with one person whose sole job is to do m&a to help me because I'm not going to be the guy who's going to be out hunting and and convincing

people they called me Mariano Rivera I'm the closer they bring me out of the bullpen when we have an opportunity that's teed up you know that needs to understand what a buy and build looks

like and why selling your company more than one time might be a good thing to do and so I come out help them close over time about a five-year period I

build up a team of people in housee so I walk into my LA or into my hbac company nobody's there hire buy side advisor hire VP of Business Development within

five years I have eight professionals doing nothing but m&a inside that company and the first uh three years I

bought eight companies the next two years I bought 15 so it's like priming a pump on a well it's like you're out on a farm it's like you pump until you're blue in the face and no water comes out

and then eventually the water in Texas comes up 700 feet you know and finally gets to the head of the well and then the water just starts coming out you know and it keeps on coming so building

it building an m&a machine is is uh you know takes a little time yeah takes a little time to build up the momentum but once the deal flow starts it it accelerates o over

time that team is all internal right inh housee yes and so is inh housee my my eight people you know at my last company I had two deal teams each one consisted

of two people one one Sen kind of the deal maker and then one Junior kind of the spreadsheet jockey and so four finance professionals I had

counsel co-counsel you know and then I also had integration managers and so I build that team over a fiveyear period and and the reason is you know if you go back to like

bookkeeping there's 1.8 million companies you know if I buy 23 in 5 years there's still 1.79 78 or 7 and seven companies left to

buy it's like if you're going to do anything in life long term you know then you want to own that process internally

so in any company I go into it's a fragmented industry I'm going to be doing m&a forever it's never going to end and so I want to own that capacity I want to get good at it I want it to

become the intellectual property of the business I'm building uh if I'm if I'm a small entrepreneur and I'm just looking for one looking for two or three you know I can I can teach people how to

hunt I can teach people how to you know build and and Define the Avatar of what the perfect acquisition looks like you know can help them get financed you know when when uh when I left and started my Consulting business so I'm coming up on

my three-year Mark so my first client that I started working with he had less than two million in iida he had 1.7 something million of IA he's in the

managed services provider MSP interet you know kind of service provider space and you know he was worth probably I don't know $14 million so in the last

three years I helped him hire a VP of Business Development I helped him hire a buide adviser I helped him get 40 million in financing we've closed six deals he now has $14.5 million of EA

we've hired an investment Bank we'll sell for about 225 million so in under three years doing buy and build no private Equity money at the table you

know this single entrepreneur has gone from call it net worth company 14 million to net worth company 225 and under three years using other other

people's money and so he's my uh we're we're in the market now after that deal is closed he'll be my first full cycle

from scaling growth m&a build a team exit you know I uh i y so y h how so how

do you go from a company that doesn't that's not acquisitive um you know culturally into a company now that's growing that fast how do you kind of you

know and it's a big earthquake um to the culture so so how do you transition that company from non- acquisitive to acquisitive so if you if

you just think about the the the the companies that I'd go to into in general um these were turnarounds so I'm a turnaround guy and you know a buy and

build guy so if the companies were performing well they would have never needed a CEO they would have never brought me in so it you know my GE DNA

is I'm a turnaround guy so they would give me a crap company that's not growing that's not working you know well

and they they'd hire me and so my first goal and objective is build you know a company build a Growth Company fix it so

let me I want to share my my screen real real quick I if I can yeah oh you know what I don't know if I'm going to be able to pull this off let's see yes's see

can yeah but I'm on Chrome because that's what this that's what Google likes oh we lost him I hope to be

that fluent and rolling up companies somay right in no time no time he's back okay I had to turn a setting on and

it made me quit and come back so yeah in order to do that so I want to share this just want to give you an

example so here is the last company that I built this was a nationwide HVAC and Refrigeration

Service Company was actually owned by you know Edison Electric so it was owned by a public utility wow as a part of D had been in business for 40 years as a

part of deregulation they spun it out and you know they they sold it and for the next 16 years it was owned by two different private Equity firms and it

was growing and they managed to get at about 10% growth and then here at this red line is where Adam was hired and then you see the next three years of

growth and so I call this bending the growth curve Jim Collins calls this the flywheel effect and you know ultimately when I come to a company it's

underperforming it's just not doing well and the expectation is is that I can do something with it and and so turn around

start with you again I'm I'm one voice you know one one person I come into a company that's on performing I start with culture I build into people service

businesses are about people you know period you can't store service in a box put it on a shelf Therefore your product as people so I start by building a really strong culture and I build a

place where people like to come to work in the morning I get them to work harder than they've ever worked before and overachieve I do this partially by investing in them you know painting and articulating the vision of where it is

that we're going to go you know and it starts with just kind of Brute Force you know and then we start to pick up momentum and then somewhere in here you know as I now have a company that's

performing you know I start the m&a process but growth has to be balanced we we we have to have um we have to have organic growth we have to have margin

Improvement and then m&a is totally acceptable but we can't be a onetick pony we can't be all m&a it's just not you know it's it's it's it's not a a uh it's not going to be valued as as much

by the the buyer Universe if I'm a onetick pony that's just growing through m&a they want to see integrate they want to see a collection of companies they want to see an integrated you know an integrated platform with a story you

know and that story has to have multiple components of growth nice so when you do those buyouts are the buyouts 100% buyout or are you

buying partial or merging um competitors so they can they can also do an exit with you yeah I'm always buying 100% of the company always but

what I've done is I create a holding company and the holding company is acquiring the assets of all of these different companies that I'm buying and

you know depending on the industry I will make or let the former owners become rollover investors so think about

making that decision based on risk everything in life you do is about risk so at the laundry company I was signing seven to 10 year contracts with my

customers as was my competitors and you know call it a real property lease for the laundry room can't be cancelled so if any of you have owned apartment buildings out there you've lived the dream of trying to kick coin MAAC you

know or or somebody a laundry company out you find out that you can't you know it's impossible and so because I have no risk of losing the revenue that I'm buying I don't need the owners I don't

want the owners so out of 34 companies acquired I only let one stay and it was when I bought my first chain of launder mats you know I'm like I'm doing laundries in apartments why the hell

don't I own laundr mats you know and so I I I went out and bought a division you know guy with like a you know 70 80 stores whatever it was you know and and I kept him and I'm like I let him roll

over you know become an investor in the mothership help me build this division this division of WMS and so he stay I

rotate forward I go to to HVAC although I had contracts with clients you know usually they were threeyear service agreements industrial service contracts regardless of Industry all have 30-day

cancellation Clauses you're not doing a good job I can end the contract in 30 days 30 days notice well if I'm paying a multiple of earnings to buy you know

this this stream of income and my customers can cancel it in 30 days after I buy it I could be paying a bunch of money for something that disappears you

know in 30 days and so I made the former owners become rollover investors so I didn't let them leave entirely I

required a 10 to 30% rollover investment in my holding company the Mother Ship so they're all down here they own a piece and then they roll over 10 to 30% into

the Mother Ship Mother Ship keeps on buying more companies and then when I sell they get to ride my cails and get a second payday that doesn't just include

the growth of their company it includes a piece of that Arbitrage that I was talking about when I buy their company at five times and then I sell the

combined company at 14 times they're getting a piece of that $9 you know in in upside that I'm making and so there

is uh an ability if you're a an owner to get multiple paydays where each payday is subsequently bigger than the last one that you got so a lot of owners think of

selling a company is a oneandone event I'm going to sell a company I want my wheelbarrow full of cash I'm riding off into the sunset God bless you if you owned a laundry company I wouldn't have

said a word yes please leave because I want to keep all the Arbitrage but in back you know I needed you to stay I required you to stay so I used rollover

to make life interestingly enough for them to to be good actors you know not be bad actors and and so they they had a vested interest in wanting to see the

the totality of the company succeed um and and so I made them roll over and then I would talk to them about hey look selling your company don't think of it as a oneandone event think of it as the

first rest stop in the wealth creation Highway and my last empire I sold five times that's five btes of the Apple that's five multi-million dollar paydays

for for for me for shareholders and you know you can make a ton of money doing this and so I had to educate them on the value of rooll over investing and teach

them that it's it was okay to be a minority shareholder and a buy and build yeah how do you keep them uh motivated

and not checked out so money does has an interest impact on uh you know I'm gonna I'm G to go back and pull up another

slide give me just a second to find it here I'm going to give you a real life example from my last

company okay I want to show you a case study so here is entrepreneur owned this first company

this was the first of the 23 HCK companies that I bought he sold me his business for 16.4 million and he was the kind of guy who was like

y if I'm not in control by God I don't want to own Jack you know I I I want it all you know all or nothing and I'm like dude Elon

Musk Jeff Bezos two richest men in the world own less than 133% of their companies you can be a minority shareholder and still

make money besides I'm not going to let you leave I'm not buying your damn company unless you roll over you know 30% so the guy rolls over 4.4 million

okay Adam I'll roll it over God I just hope I get my money back right three years later you know after buying seven

more companies okay this says 13x was 13.5 you know so this this one I went down 13 I was telling you 14 so in less than three years it was actually 27

months later I sell the company for the first time investors got a Forex multiple of invested capital and so his first payday 16.4 million down here

minus his rollover because I don't want to double count his own money twice so 16.4 First payday minus rollover Time 4 equals 17.6

second payday bigger than First payday in total in 27 months the guy got paid 29.6 million for a company he would have

been willing to sell for 16.4 and walk away so now he loves me Adam God bless you I love rollover investing he went

off and bought a winery in Napa he's not there anymore I'm not there anymore he rolled over five million more I rolled

over 13.5 million you know and now we're both you know call it passive investors in a company that we used to own you know or be owners of minority

shareholders of and when it sells next year you know another chapter will be written you know and so he rolled over five if he got four times then five

would be 20 20 is bigger than 17 17's bigger than 16 and in total the guy will have made around 50 million in eight years across three paydays so this is

the power of of rollover investing and the only thing that makes it possible is arbitrage which is naturally occurring

in life and and so I don't need to buy fixer ERS I only buy good companies run by good people that fit my culture you know I pay fair market value for them I

don't have to worry about underpaying overpaying because Arbitrage is going to take care of my needs and all I have to do is just do what the market needs me

to do buy good companies pay fair market value roll them together climb the PE pyramid I call it create a bigger company which is rare you know and just

let me give you just a statistic to to illustrate the point so oh what the hell I've got a slide I'll just why don't I just put up the slide long as I'm not boring you guys no no you're great but a

quick question on that first one that you just mentioned um the first exit was for for Mo based on going from a a five

um a multiple on on entry and a 13.5 or 14 yeah I'm collecting companies that I'm buying at five times I'm using 100% debt to buy them and so I don't even

have Equity to service I just have to pay back you know debt in the interest when I sell it because I'm a bigger company it'll make better sense when I

show this particular slide okay so I got to go into presentation mode if it will let me I don't know if it will you're good we see the slide now yeah but

you're seeing the blue box oh yeah I don't know if I can do presentation mode while I'm inside here probably not I wonder if I can when I do

it this way okay are the blue boxes gone yeah okay they're gone okay in this pyramid

there is $6 trillion dollar in capital 6 trillion now on the right hand side I've got 8,000 private Equity firms at the top I've got companies like KKR Apollo

Carlile Blackstone companies you've heard of their funds are massive they're on average between 10 and3 billion dollar in size and then I got a whole bunch of PE firms up and down with

smaller funds you know at the bottom bigger funds at the top they all do the same exact things same identical they

all have funds that last 10 years they all invest 6 to 8% of their fund size in one company never more than 12% this is about asset diversification they build

it into their Charter they have to buy companies in the first five to six years that's how long their Charter allows them to call Capital from their limited partner investors so they can buy stuff

for the first five to six years on average they hold the company for five years and then no later than the end of the 10year period they have to return all of the money back to their investors

and so as a result of the fact that they all are buying 68% or putting 6 to 8% of their money to work in one company the natural reaction is there's five steps

to the PE pyramid and big PE firms buy big companies little PE firms by little companies you know there's not enough time in a 10-year ownership of a fund

period to put $30 billion do to work buying small companies it just doesn't work you know so big compan by big firms with big funds by big companies so if

you're still with me there yeah in the United States in the bottom of the pyramid there's 34 million just in the US small companies in the bottom two

runs of the pyramid if you go to sba.gov they Define small business as 500 employees or less which means you can be pretty damn big and still be called small by the government so 34 million

small companies represent 99.9% of all companies in the US and they employe 50% of the country's Workforce 34 million just in our country

down at the bottom but at the top of the pyramid there's only 3,000 companies on the planet that have a billion dollars in Revenue 2,000 of them are private

1,000 are public I'm sorry 2,000 are public 1,000 are private so you go from 34 million at the bottom which is pretty

damn clogged so only 3,000 globally at the top so what does that mean it means as I get bigger I become rare very fast

and when I become bigger I'm rewarded with a higher multiple so I call this my velcro patch and I can pop it off and throw it in a shoe box and I can pop up

a new velcro patch and I can slap it on the wall for a given industry so could be Property Management could be title companies Pest Control pick an industry

it's got a patch I slap it up there and what you need to know about the patch is that small companies trade for small multiples because they're plentiful there's so many of them there's not

enough buyers the prices don't go up I'm doing bookkeeping I told you there's 1.8 million bookkeeping firms in the US and like the vast majority of them are in the bottom two runs of the pyramid and

so if I'm buying small companies I pay small prices so I buy 23 hbac companies pay on average five times I climb the pyramid I get bigger now I'm up here in

this level I'm above the 34 million I'm rare it lets bigger funds put more money to work and they pay 14 times for my

company and I keep the Arbitrage this is what creates the wealth the majority of the wealth that private Equity firms

generate comes from buy and build it comes from you know the the just the naturally occurring effect of when I buy small companies I pay cheap

prices when I get bigger I'm rare people have to pay higher prices because there's not as many of me to buy at that size they pay up I pay off debt I keep

the difference that singular issue is how the majority of private Equity returns are generated but the companies still have to grow organically they still have to demonstrate that as they

get bigger their costs will go down and they'll create operating Leverage when I do all three of these things focus on organic growth focus on reducing cost to

serve revenue and then add mergers and Acquisitions on top of it that's how I get maximum value what is your um uh percentage of growth that that you

consider healthy for a company like this this organic organic group yeah so so let's just say period we need 30 plus per growth in

a company every year forever remember that bending the growth curve that I showed that represents a company going from 10% growth over 16-year period you know it's growing it's getting bigger

it's not setting the world on fire but it's growing to me bending the growth curve and getting to a 34% compound annual growth rate you know so Jack Wells taught me if you can grow a

business at 30% and maintain it forever that company doubles in size in 2.8 years it triples in size in 4.2 years it quadruples in size in just over five

years that's how fast the world's largest company was growing in the 10 years I was at General Electric stock was splitting the company was doubling

in size every 2.8 years you know and and so this is earnings growth because it's earnings growth which is all we care about you know then that means that I'm

growing Top Line I'm improving margins I'm getting operating leverages I'm getting bigger you know and I'm getting you know call it then Marin margin Improvement you know so margin improvement from a bigger company

servicing you know hey when I have 1,00 trucks and I'm replacing 8% of my fleet a year I get a lot better deal when I'm buying hundreds of trucks versus a small

contractor buying one you know or two so as we get bigger we improve our margins as we get you know grow organically you know then I'm getting bigger and then as

I'm doing m&a I'm also getting bigger and so you know if I'm a cook in a kitchen I'm going to walk into my kitchen I've got three components of growth organic

margin Improvement and m& to grow earnings I want to grow it 30% or better on average I'm probably dialing up to

teens you know mid teens for organic growth that's price volume creating strategic pivots and cross cells you know and and then I'm getting three or

four points of margin Improvement and then I'm sprinkling the magic pixie dust which is m&a you know on top so that my my concoction in the kitchen's yielding

30 plus perc growth so if I'm in an industry that's slower growth organically I'm gonna need more m&a I'm gonna need more margin Improvement you

know so I maximize all three in order to produce the best tasting cake in my kitchen but it needs to be 30 plus% or

higher nice okay so that makes sense so Blended between all three that's why going to ask you you know and that's why I'm not focused on just Revenue yeah you know what I'm talking about here is

we're going to grow earnings by 30% a year I need more Revenue to generate earnings I need margin Improvement to generate better flow through of Revenue

and I'm going to use m&a and incidentally when I buy companies I then get a second bucket of organic growth because I get organic growth on the

companies I buy during the time period that I'm I'm building the Empire you know and and let me let me tell you that I use science you know when it comes to to m&a I don't just go buy you know

I buy good stuff but there's science behind it so as an example um when I started doing the buy and build in grocery I wanted you know I wanted to figure out where was the best places to

go and grow you know inorganically so I hired a a team an NBA team from UCLA to come take a look at look at my existing

C customer base track myund top logos I want you to identify all of the msas or areas of the country where I am not

today but where there's the highest percentage of my current customers logos and locations and then I want you to put economic data behind it because I only

want to go into msas that are growth msas so you know people are moving to Texas people are moving to Florida you know certain Metropolitan markets are growing at a faster Pace some are are

negative people are leaving some you know and it's in Decay I want I want the Tailwinds to push my growth show me where people are moving that has the

highest concentration of my current clients and then I set up a cross cell so hey Target I'm coming into this new region of the country hadn't been there

before you've got X number of stores in this region if you're not happy with your service provider you can add them to my pilot stores then I'm looking at my Target and I'm looking at who are the

logos they service and they're a small footprint company and who who do they service that I don't service let's set up a cross sell opportunity hey customer

why don't you let me do some of these stores and locations you've got back in my big territory that this company couldn't serve and so I'm setting up all

of these cross sell opportunities and on average when I buy a company it grows by 20 5% organically in the first 12 months because I make it a part of my

integration plan on day one who is my sales team going to call to tell my existing clients about my new territory who on day one in the acquired company is going to call their customer to

introduce my sales team to talk about our ability to service their problems on a bigger scale and so I'm looking for cross cell opportunities um you know where I can

accelerate organic growth and so now I've got the best of all worlds maybe I make a strategic pivot so what the hell is a strategic pivot so when I got to grocery store you know refrigeration

service company keeps grocery stores cold 90% of its revenues coming from there that's commoditized my largest customer is Walmart if Walmart's your largest customer you're the lowest

bidder that's not a good way to make a profit of you know build a profitable business so I make two strategic pivots I started buying engineering service companies that designed grocery stores

and and helped my existing clients design stuff they're paid like Consultants not contractors and they have about a 55% gross profit margin

whereas my service company has a 30 you know and so higher margin higher profitability more of a consultative type sell even at places like Walmart make another strategic pivot and I say

okay my guys know how to keep stuff cold you know who else would value that that's not in grocery where I'm commoditized and it's erased to the

bottom hey I discovered Pharmaceuticals I discovered data centers cellular tele you know telecommunication centers give you an example typical CVS or a

Walgreens has 2.5 million do in refrigerated Pharmaceuticals and if their stuff doesn't work in four hours they have to throw out their entire

stores inventory and restock and that's not an insured loss they don't care how much I charge they just want me there in under four hours fixing their problem so

pharmaceutical research facilities data centers Cellular Communications hey out in Montana when Verizon loses a cell power they have a 20 mile Gap in

coverage so put in an iot device detect the slightest increase in temperature and get your ass out here and fix it before I break down you know and and

keep my cell coverage you know up and and running so you discover areas you know so call it red ocean versus blue blue ocean red ocean bloody from

competition that was my grocery store you know kind of refrigeration we didn't leave we've been doing that for 40 years so we keep growing that yeah but I focus

on creating strategic pivots where my profit you know profit margin picture is different I start buying companies and I'm sprinkling them across three divisions now I'm cross- selling

customers all my new capabilities and and result is you know Rising tide lifts all boats I become more profitable and I'm growing faster that's awesome when you add that

engineering or that element that extra element that's high margin doesn't that dilute the the focus of the company or it adds value to the company three separate divisions run by three

different division leaders they don't ever know anything but their own wheelhouse and so it actually raises I buy 23 companies that on average had EPA

margins more than twice that of my base company and so my base company you know that I started with when I bolted on 23 companies they were 23 higher margin

companies net result is I have a a bigger business with higher eiton margins collectively you know that one division still has high margins when you

look at it as a standalone division matter of fact that division generated the majority of the company's eidon profit but it was doing work for my core customers so now my core customers you

know I'm servicing grocery stores I'm building grocery stores I'm remodeling grocery stores by doing their engineering I now have a three you know two to three year leg up on my com you

know my competitors I used to find out about a remodel when a a a bid was issued looking for someone to remodel a grocery store well if I do the engineering now I know Upstream a year

or two before the the remodel actually happens where my customers are going to spend money and if I did the engineering it gives me a leg up to do the you know the build you know or the remodel and if

I've done that it gives me a leg up to do the service and so it's all about you know the hardest thing for any of us to get is a customer yeah once we get them what else can we sell them you know how

can I create an ecosystem around my customer there's two ways to do that one is I literally sell the same customer new stuff or I determine what my core

competency is like keeping things cold and I take my core competency to a new customer set so either sell more to the existing client that I've got a

relationship with or take my core competency to a new customer base that's what I'm looking to do ultimately Mo you had a

question no just enjoying Adam hey Mo good to see you good to see you brother that's that's awesome so so in so if we

go into the integration uh phase what are some of the you know like the elements that are very important to you in the integration and then what are

kind of like the phases of the change management are you are you like you know focus on putting everybody on the same brand putting everybody on the same

tools Erp CRM all that or you have stages for that so what's your what's your philosophy on that so I'm going to talk about two concepts integration

light and integration heavy yeah or full integration so golden rule number one if you're buying companies don't screw them up you're buying you know a revenue and

income stream and you're paying a multiple for that you know and so the worst thing you can do is destroy value you know when you're trying to do

integration so with that as a backdrop you know what I look at is what's easy so there are buy and builds you know people who build companies that's just a loose a iation or collection of

companies and you can build a billion dollar business doing that and you'll be rewarded for Arbitrage on some level but next step is what I call integration

light so at my at my HVAC company I didn't have great systems we were going to take years to develop those systems but I'm not going to wait you know doing

a buy and build is like remodeling a 57 Chevy why it's going down the road and you're hanging out the window doing body work while you're you're driving the car you know it's difficult you know but

it's like if you don't have good systems doing full integration will kill value in the companies that you're buying so integration light is kind of a halfway

point and so there I started by integration light I'm going to integrate accounting back office you know HR payroll accounting you know and and

finance type functions and that's an easier list and so I'm at least going to get the synergies out of that but if each of these companies is doing something

different or they have different systems or processes and procedures in place if I don't have a scalable infrastructure I'm going to kill and destroy value in the companies that I'm buying so I

decided because I was still building infrastructure at my last company we were going to do integration light not integration heavy and we were building that platform that we could fully

integrate on and so you know my laundry company remember I told you first five years I spent $17 million improving Systems and Technology I had a fully

scalable platform I bought 34 companies I kept one entrepreneur I gave the other three 33 a one-year Consulting agreement you know and then off you roll and I

fully integrated because their systems and processes looked very similar to mine and so I could I could easily integrate fully and Capt all of the

synergies keep the worker bees jettison 34 back offices you know and leverage my back office and so very you know uh

accretive to earnings when you can do full Integrations but if you don't have the systems in place you're not a best-in-class company you're not scalable then don't try because you're going to take a perfectly goodw workking

little company that you just bought and kill it by trying to integrate it into something that doesn't work so simplify it keep it simple and and only integrate

that which is easy and if you just suck everywhere and can't integrate anything well then I guess you're collecting companies while you're trying to build systems and

platforms yeah absolutely and so how do you um how do you see the same uh rollups that you've done in the past whether it is the um the laundromat or

the HVAC how would you do them differently today if you were going back and do that same roll up again what what are some of the things that you would do differently you know I had some really

good outcomes so I probably would not have done anything differently but I will tell you that integration so when you're starting out doing m&a even if you're doing on a small scale um

everybody in your company today has a day job and integration doesn't happen by accident it takes thoughtful planning think about every Department you've got

think about a giant Gant chart you know what are the things that need to happen and when well if I'm doing an asset purchase of a company then guess what on

day one I have to hire all the employees that are coming over to work for me because wasn't a stock deal and they don't have a job I got to do new higher paperwork on day one well guess what I damn well better have bank accounts with

money in them because on Friday they need to get paid and so you know it's like you can look at it in terms of I take every Department every function and

then I I ask myself what must be accomplished on day one because that integration H happens to have needs to happen pre-close and then on other things you know I can build a one-year

plan so I've got pre-acquisition getting set up so that on day one I have employees and they're going to get paid and then I've got time you know to do

some of these other things and so Department by Department Gant chart who needs what needs to have you know happen and if and if m&a is something that you're going to do regularly like I do

then integration needs to be a full-time job for somebody you know and so I hire eventually integration managers and in the company I may find that I've got good project management capabilities you

know people that work around it you know or work just in business you know in business in the general but they have really good broad understanding of business process procedures you know I

may convert some of them to my first integration managers you know and we get better you know the first integration is not going to be smooth matter of fact I'll tell you when you're doing a buy

and build it is not need and orderly it is complete chaos even when I'm buying good companies it's chaos and the train will barely stay on the tracks and if it's going to fall off the tracks then I

got to throttle back just a little bit and let the company digest you know what I bought I I I keep things separate though hunting and buying companies is

separate from integration yeah once I get this pump primed I don't want to turn it off because these guys are behind so if I've got the pump flowing I'll buy companies and do what I call

put them on the Shelf buy them put them on the Shelf don't touch them but now I own them it's Clay for my potter's wheel and I'll leave it in lumps up on the Shelf until my team catches up and then

I'll start integrating and so I'm not afraid to operate independently a company but I don't want to slow down or throttle back m&a waiting for m&a you know for integration to catch up if I do

that then all of a sudden I got a six-month a bubble yeah you know in my snake where you know I throttled back and now I have no momentum and and momentum kills deals time kills deals so

then I've got to get kind of reprime the the acquisition pump so I think of the front end of acquiring companies separately from integrating and I'm going to need to add resources on either

side when one of those sides is creating a bottleneck that prevents me from you know from accelerating and doing the volume that I want wanted do Dirk you

had a question I I what did Dirk say he said how often go ahead Dirk yeah I was just wondering like on these companies you're buying especially like the Haack type stuff like how often are the key

leaders staying in place versus you're having to turn these leaders within like six months to a year and bringing outside people in yeah so again remember it's all about risk so do I have risk in

the revenue leaving and before I start looking I build an avatar of what does good look like you know and what is my profile and that

includes entrepreneurs age where they're at in life you know whether I'm going to make him a rollover investor or not you know it it it's pretty detailed you know

so before I go look at 1.8 million accounting firms I create an avatar of what the perfect acquisition looks like and then I'm very disciplined from a buy side perspective so because I had no

risk in losing Revenue my strategy at laundry was acquire company give a one-year consultant agreement transition the business shut down their back office

and infrastructure and get it on mine and then you know jettison entrepreneur HVAC different need them to stay you know and or at least be like that you

know on in a commercial building that handle on the wallet says break glass and pull in case of fire I need them around my ecosystem I do that through the rollover investing so someone who's

70 can retire that's fine I got to make sure they've got a good strong number two in place to keep running the business you know Andor I got to have a bench of people that I could drop in and

so of the 23 companies that I bought in HVAC something like 20 of them are still there today I'm not but 20 of them are you know and and so they're still there

engaged because they're a rollover investor you know and they're they're focused on getting the next bite of the Apple so where there's risk I mitigate

risk through how I cont contract and what I require and that might shape my avatar a little bit differently for what the perfect acquisition looks

like so give an example I buy the first company and I'm pass it I'm not going to be the CEO I'm just buying my first company and I need so that Avatar is I need someone who's in their 30s 40s

early 50s because they're going to have to stay while I'm buying a bunch of others and I need somebody to represent the company to the universe of buyers when it's time for exit so that I can be the passive guy with the wheelbarrow

full of cash and sneak out the back but the Avatar once I buy the first company that has the CEO in place you know that the guy with legs my avatar now shifts I

want to buy companies from 60 to 70 year olds who are looking to exit I'm probably going to get it below market value and all I need from them is just to help me transition because I've got

my young you know stud or studette who's sticking around and it's going to keep on growing you know so I've got that person to run the combined entities so my avatar for the first company may be

different than second and subsequent companies depending upon whether I'm staying in or I'm passive yeah Paul you had a question I

know Tom's tland first of all hi Adam hey there so I know we don't might we may not have time to touch on it but Adam has awesome material on the 302010

where it talks about 30% growth 20% kind of like the margins and then 10% profit I think that was just a golden rule to use for businesses and I think that's

some of your books and just some blogs that I've seen online um and he hasn't G to talk much about it I'll give a Shameless PL just I am part of his uh coaching program I joined recently I actually said to myself I'm not joining

any more coaching but I met with Adam one1 uh in Texas had lunch with him not not too long ago and fantastic guy knows his stuff obviously so I know mo just

mentioned something too but uh yeah so thanks for just appreciate you it's glad to have you you know in my group you know so you know

again I think one of the biggest problem small entrepreneurs you know when I say small I'm talking sub billion dollars you know all right so we're talking you know people who are upand coming building their Empires the biggest

problem I see entrepreneurs make is they don't do enough diligence and they don't know what good looks like and they they suffer from what I call a shiny penny syndrome you decide you're going to buy

something you get so focused on wanting to do a successful acquisition that you overlook all of the obvious flaws you know you turn on the lights and this girl ain't pretty you know but you're

just for sure G to make something happen so you overlook everything you know and it's it's like we we need to do better diligence we need to have more competent counsel we need to be thoughtful about

integration you can get in trouble in m&a um but if you know what you're doing massive profit to be to be made Paul Paul what you talking about is

really just it's a part of the profile what constitutes a good business and too many entrepreneurs go for fixer uppers and again you're going to make money on Arbitrage not by fixing it you know if

you wind up buying a fixer uper you know I I bought a Bad Company Once Upon a Time and for less than 5% of my Revenue it created 80% of my headaches for the

next three years life is too short it's hard enough to get 23 entrepreneurs to sing by around the fire they've never had a boss I made them all rich by buying their companies and now I got to

get them all to work hard for me that's hard enough I don't need to at the same time buy 23 fixer uppers that are dogs with fleas hoping that I can fix them

you know it's like don't buy crappy companies Arbitrage is created by buying good companies naturally and so we we we need to only buy good companies and when

you see a Bad Company know what bad looks like and that's the 302010 rule and when you when you recognize that a Bad Company's bad run like hell you know so it's like you know I even find good

companies from time to time we like in HVAC I wanted to pay five times now the cheapest one I bought was just under four most expensive was just under seven but on average I'm paying five times

Well when I find a good company that meets all my criteria it's the perfect Avatar and the guy says I want nine times well God bless you good luck I'm sure there's an idiot out there who's just dying to pay you nine times but it

ain't me because I'm a disciplined buyer your company's worth 5x and that's what I'm paying so if that's not the good number you know bless you good luck you

know if you don't find it come back and then I got 40,000 others to look at it's like I'm not concerned about losing a good company because I don't want to

stretch and pay a bad price I buy good companies at fair market value how do I know fair market value I use tools there's data bases I can subscribe to for any industry that show what

companies trade for you know and here's 300 transactions in this industry in the past five years and here's the averages they sell for at different sizes you

know and uh and and so I I you know I I paid fair market value someone says my company's worth nine times no it's not you know the average company in your

industry you know here's 66 examples at this size sells for this well my friend said he sold it for nine times this well nine times what you know and it's like

there's so many War Stories you know that you hear at Rotary you know or at your mixers you know about I sold this company for 20 times Well 20 times what

you know and and what did you sell and it's like there's databases where this crap is recorded you know that I can go look because appraisers and Banks need

to know what a house is worth when they're going to fight Finance it and so there's databases I can subscribe to