A Searcher’s Second Act: Building a $25m Holdco

great well we'll we'll turn our attention to that um there's a lot of interest these days in what is the there's um kind of a short form vernacular for testing and inspection businesses that you the tick effector yes thank you yeah so we'll we'll get there um i just want to before we leave your search i want to say first of all how this iowa broker got lk industries by sending cold you know cold…

Actual letters, but also just just for the audience, you're not only competing with other searchers when you're doing cold outreach to sellers. You're also competing with the brokers themselves who are basically making a similar pitch. I'll help you find a buyer.

And so for me, kind of one of the things I learned from that is as a searcher, you got to tell your story to anyone who's listening. You never know where that deal will come from. Yeah.

Yeah, yeah. And that was the final point I wanted to make, which is that you just kind of did all the things, right? You were just basically, to use the cliche, creating a surface area of luck because you didn't know where the deal was going to come from.

So fair to say you just kind of did everything, talked to everybody, talked to accountants, told your story to everybody, hoping that at some point there would be some contact with some lead on a deal that you buy. Is that a fair characterization?

And I also say I had a little bit of the advantage of the search fund being relatively new. So as I was having those conversations, a lot of times people had not heard that term, which meant I got the benefit of kind of bringing to them a new concept to explain this is what we're doing. And I think, you know, now the models become more mature.

But at that time being, you know, possibly the only searcher in Houston and one of very few that was active in the market in 2013, it was a good way to be able to make an impression on folks.

Yeah. Yeah. No, that's a great point and great advantage because every owner now is getting five emails from search funds a day. So there's no intrigue there at all. Great. And can you tell us about the numbers of the business and also the structure of how you did this?

It was traditional search fund economics. So maybe that part first. What was the structure of your search with your investors, Rick and Royce or others?

Yeah, so Rick and Royce were our two equity providers solely. So it was kind of their funds that they put in. And we had kind of a standard like 20% kind of PE model that was a sweat equity component.

And so we had the chance to co-invest with Rick and Royce personal funds. And then we kind of had a 20%... equity ownership that we would get after hitting certain hurdle of a return.