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

Yeah. They matched the PG too, didn't they? Of course.

For the good and for the bad. Okay. Very interesting. Thank you, Eric. Okay. So now let's turn back to LK Industries itself. If you could give us the numbers around the business and kind of what you liked about it, what you maybe didn't like about it.

recalling this, it was like, I think a little over three times that we were able to get the entry multiple at three and a half times. So it was a pretty good entry multiple there. Let me point out, this is part of buying a business that has cycles.

And so that entry multiple is based on kind of where it is now, anticipating it might move in the future. Important point. Thank you. And so for us, I think the business, kind of when we bought it, one of the things that was, you know, really Looking back, I personally wish we had understood a little better.

One of the things that we saw early on was it looked like the business had a lot of recurring revenue. And they had the same kind of set of customers that were buying this kind of fixed sum of product every year. And you could just kind of see that perfectly all the way through the last few years of the financials.

And what we learned kind of once we got our arms around that is that a lot of this was more project based than we thought. And so some of these projects were multi-year projects. And so they would buy 100 of this unit over five years.

And so when you kind of look at that, it's easy to look at and say, oh, they must need 20 of these units every year kind of going forward. It's like actually once the project finishes. It may or may not need more.

And so I think we kind of learned an important difference between, I guess, maybe like revenue that repeats versus true recurring need. And I think that was something for us that we learned and navigated through. I think another area of focus for us was understanding that in these businesses.

you know it managing inventory is very important and so because it was a manufacturing business and so coming in and kind of understanding like historic inventory levels versus kind of more like just in time sort of manufacturing and kind of what you wanted to hold going forward actually was an opportunity for us to really improve the working capital in the business to try to really right size…

um so that was kind of another uh opportunity to reflect on and and kind of get right and something i've seen over and over just you know how much kind of inventory analytics you can apply to some of these small businesses i think is usually an opportunity as you come in to buy one of these companies so what is the owner you know quote doing wrong that you can you as searcher can come in and…

That's a fair way to put it, although I don't think it's completely irrational on their end. You know, they've kind of lived an existence where, you know, they don't want to run out of inventory. Sometimes they buy large quantities that they can get a discount on, multi-years worth of inventory, and they stock it.