How to Structure Smart M&A Deals in 2025 – Expert Legal Tips from John Koeppel

In this episode of the M&A Launchpad Podcast, host Feras Moussa sits down with seasoned M&A attorney John Koeppel, Partner at Lippes Mathias, to dive deep into the world of deal-making in the lower middle market. With decades of experience advising on both buy-side and sell-side transactions, John brings a firehose of insight for anyone interested in acquiring or selling a business in today’s market.

John shares what’s trending in 2025, the return of regional banks to the lending scene, and how buyers are getting creative with structuring deals amid changing interest rates. From real-world multiple comps to reps and warranties, and the nuances of independent sponsor strategies—this is a must-listen for aspiring dealmakers and active acquirers alike.

In this episode, we discuss: 

· What’s happening in the lower middle market right now

· How deal structures have evolved with rising interest rates

· Market multiples by deal size and industry

· Why recurring revenue drives valuation

· Reps & warranties: what they are and how to mitigate risk

· Mistakes buyers make—and how to avoid them

· The rise of the independent sponsor model

· How to bring value with the right operating partner

· Creative deal structuring and alignment with sellers

Connect with John Koeppel:

Email: jkoeppel@lippes.com Website: https://www.lippes.com/ LinkedIn: linkedin.com/in/john-koeppel-98b3a833

Additional Resources: 

Sponsored by O’Connell Advisory Group – Work with a trusted Quality of Earnings and Financial Diligence partner who focuses solely on business acquisitions. 
Visit: https://www.oconnelladvisorygroup.com 

Access our archive of video interviews on YouTube

Join our Community at the M&A Launchpad Conference – Premier event for entrepreneurs, investors, and dealmakers in the lower-middle market. 
https://www.malaunchpad.com 

M&A Launchpad Hosts Contact – Casey Minshew & Feras Moussa 
Email: info@equitylaunchpad.com 

Looking to buy or sell a business? Connect with the team at Equity Launchpad for expert guidance and hands-on support throughout your transaction. 
Visit: https://www.equity-launchpad.com 

🎧 Podcast on Spotify: https://open.spotify.com/episode/6gR1kTxTFIylA7niApXSBw?si=fa4c9cc997fd4b3e

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Transcript

00:00 all right on today’s episode we interviewed John Keell where we talked about really you know what it’s like to
00:05 be an M&A attorney and we really deep dived into a lot of information i mean this one was literally sipping from a
00:11 fire hose i highly recommend anyone that’s serious about buying a deal to actually go and listen to this episode
00:16 and we dived into what independent sponsors look like what are the market multiples that we’re seeing out there what are some of the mistakes people
00:22 make what are some of the reps and warranties you need to keep in mind what are reps and warranties so really looked
00:27 at a lot of different aspects of a deal and lots of information in this one and really you know John is a sharp guy he’s
00:34 been in the space he understands it and I really enjoyed talking with him i mean I’ve talked to a lot of different attorneys you kind of see the mixed bag
00:40 but John is the kind of guy you want on your team right m&a attorney is a person that is going to be there to help solve
00:46 your problems help you make the right decisions and they’re going to leverage their many many years and hundreds of
00:51 transactions of experience to help you find a solution that makes sense so anyone out there that’s serious about
00:56 buying a deal definitely listen to this one
01:02 welcome to the M&A Launchpad podcast with your host Casey and Ferris with Equity Launchpad on this podcast you
01:07 will gain insights on acquiring investing in and selling profitable businesses in the lower to middle market whether you’re a business owner investor
01:13 or spying entrepreneur at Equity Launchpad we will provide you with the knowledge guidance and capital to navigate the world of mergers and
01:19 acquisitions all right guys just take one second here real quick when you’re buying a business
01:24 ensuring the financial health of the company is critical and that’s where a quality of earnings partner comes in quality of earnings gives you confidence
01:30 in the financials of the company that you’re purchasing it aims to protect your investment and ensure that you’re stepping into a profitable business on
01:37 day one patrick of Okonnell Advisory Group is your dynamic quality of earnings partner he’s here to help you
01:42 buy the right business on your timeline patrick’s entire practice is focused on business acquisitions your niche is his
01:48 niche and over the past decade Patrick’s helped more than 200 buyers like yourself successfully purchase and
01:53 operate enduring profitable businesses in fact Patrick’s helped some listeners of this show so if you’re buying looking
01:60 for help with the quality of earnings financial due diligence network capital and more head to
02:05 okconelladvisor.com or just click the link in the show notes john welcome to the show great thanks Chris thanks for
02:10 having me you bet man so you know me and you were kind of discussing a little bit before the show right about what you’re
02:16 seeing in the industries and for those listeners that don’t know John is an M&A attorney right focused both on the sell
02:21 side and the buy side and so deep in the space has seen a lot done a lot and so maybe John to kick off you know what
02:27 would you say you’re seeing happening right now in the industry as a trend yeah so um great question i I think you
02:34 know so a lot of our deal flow is in the lower middle market which I would define as companies with enterprise value as
02:40 small as say 5 to 10 million up to 100 million maybe a little more um we’re still seeing a lot of activity in that
02:46 space right so every company obviously is unique in terms of there might be certain businesses affected maybe more
02:52 headwinds with tariffs or some other things but a lot of like really quality middle market businesses lower middle
02:58 market business still out there a lot of business owners either one of two things looking to transition out and and sort
03:04 of retire and wind down andor uh bring in a partner you know we see a lot of deals with business owners in their 40s
03:10 and 50s who don’t want to hang up the cleats but want to bring in uh an
03:15 investor or a group to help scale the business maybe they take a few chips off the table so um we’ve been really busy
03:21 this year um we’re not seeing any signs of slowdown if anything we’re seeing more IIS you know indications of
03:28 interest more LOI so um early in the year but we’re seeing you know really good activity got it so that’s that’s
03:34 good to hear right i know there’s kind of the there’s the lingering tariffs everybody seems to be talking about it nobody seems to be directly impacted by
03:40 it by just yet but I mean it is something people are thinking about and maybe that’s a good segue so I mean how
03:46 would you compare right now right which is really kind of we’re near in the middle of 2025 to kind of 2023 right
03:54 once interest rates started to move right in terms of activity yeah I think you know when when rates That’s a great
03:59 question when rates started obviously there was kind of that you know that height of activity during COVID and and then sort of you know rates started to
04:05 creep up and and we we a lot of the traditional groups who used to fund deals think of like you know regional
04:10 banks and lenders kind of pulled back a bit right so there was a little bit of a softness there I I think now people are
04:16 used to this sort of higher rate threshold so everyone knows if you want to do a deal you have a rough sense
04:22 whether you’re going with a traditional bank you’re going SBIC private debt right you you kind of know your cost of
04:28 capital right it hasn’t changed wildly in the last few months last year or so and so you know some semblance of okay
04:34 let me figure out what’s the enterprise value of this business right is the seller helping finance the deal you know
04:41 deferred consideration whether it’s rolled equity seller financing earnouts and how much right and that can vary
04:47 deal by deal based on a whole number of factors i just closed a deal recently where um the seller bore basically 90%
04:54 of the deal consideration and you’d be like “Wow John that’s crazy.” Well it was a business that had effectively one customer right so high risk not easy to
05:01 go to a traditional source right to finance a deal like that um but um no I think people have gotten used to this
05:07 sort of level of cost of capital and so and we’re now actually starting to seeing some of the players that
05:13 retrenched even some of the the lenders and traditional banks and especially the regional banks i’m starting to see more
05:18 activity you know more inbounds to me like “Hey John you got a good deal flow right we’re we’re we’re our credit
05:23 committee we’ve opened up the doors again you know that type of thing so um knock on wood you know uh if you have a
05:29 good deal you know relatively speaking you should be able to find the the the debt and equity capital to get it done no absolutely i mean we were kind of
05:36 talking about that beforehand and that’s our forte it’s really finding people out there have good opportunities and we’re happy to partner and figure something
05:41 out but if I was to summarize it sounds like you’re saying 23 you know early 23 things did slow down right you saw that
05:47 you felt that i’m guessing multiples expanded right sorry compressed actually went down right so you know went from a
05:52 five to four to three and right now it sounds like it’s you know all systems go
05:58 right you’re seeing increase in activities not even flatlining or dropping it’s you know it’s increasing
06:03 and I’m guessing we’ll probably start to see multiples continue to improve because of that too yeah and I think
06:09 everyone you know listen anytime there’s uncertainty and there’s certainly still some uncertainty now um buyers are being
06:16 still very very diligent right everyone’s doing as much financial tax
06:21 business legal etc diligence as they can right and and to really understand what’s making a business tick why is
06:28 this business owner selling is there something they know that that that I don’t know or I should know right and so
06:34 um you know to give you an example if we look at like a lot of the equity and debt groups who are financing a lot of
06:39 these deals generally speaking I always tell a lot of our buy side clients especially in event sponsors um if
06:46 someone has done a deal in the past an equity or debt group and and done well right they’re doubling down in the space
06:52 they know the space they know how that you make money in that space they know if there’s regatory headwinds right nobody I’m not seeing a whole lot of
06:58 groups stretch equity and debt groups kind hey let’s go into green field let’s let’s expand in areas we haven’t really
07:04 done before so everyone’s still sort of sticking to their knitting so to speak but but deals are getting funded i mean
07:10 deals are closing right and and to your point if it’s a really nice company with you know nice numbers you know nice
07:16 story nice growth trajectory those businesses are trading and and you know getting getting decent multiples yeah
07:22 and maybe speaking of multiples can you give people just some examples of multiples you’re seeing you know maybe give hey in this industry you’re seeing
07:28 things trade at 3x this industry you’re seeing 5x this industry you’re seeing 7x just to kind of help ground the a the
07:34 listeners to you know what you’re seeing today in the market for sure for sure and and I think the the one variable
07:40 that comes into play in any evaluation as you know is how much of the business has reoccurring revenue whether it’s
07:47 like you know service or maintenance or subscriptions that’s always going to increase the value of a business right to the extent that uh you know the razor
07:54 razor blade model right uh speaking of somebody who’s got to run to the store later saying buy some more razor blades but um So um yeah I’d say you know deals
08:02 sub say you know let’s just put industry aside for a minute you know deals sub you know 2 million of EV you know those
08:08 are always going to trade on the the lower end of the spectrum you know maybe a a four a five maybe a six right
08:15 depending upon industry and and what it does it’s just a smaller business and you know it doesn’t take much disruption
08:22 to really hurt and and slow down a business like that you don’t have much cushion at you know 2 million of EBA
08:27 right as you go up to the next level say that two to five okay now I’ve got a little more semblance of a business yeah
08:34 I could lose a customer who’s five or 10 percent it’s not a great thing but but I live to fight another day right um you
08:40 know those businesses may be in that five to seven range of in terms of multiple once you get north of five you
08:46 know and depending upon industry and and how well tuned the machine is you can easily get into high single digits if
08:52 not you know low double digits right so um a lot of our clients on the buy side
08:57 are you know focused on on a little more opportunistic companies that in many respects aren’t perfect need some
09:03 professionalization need some improvement um you know trying to find the right seller who wants to partner
09:09 with them maybe isn’t looking for like the last dollar right maybe wants to stay in the deal role have a second bite
09:14 that type of thing so budget dynamics come into play obviously on when it comes to valuation yeah i know i mean for equity launchpad one of our models
09:21 we like is basically taking from family owned to management le so yeah family owned means you’re having a lot
09:27 of you know a lot of sellers that you’re having to really educate get up to speed and they typically they they like us
09:34 they see that we’re not in it to go hey we’re we’re going to go terminate half the company and then flip the company
09:39 year i mean for us we’re looking for long-term holds we want to retain the staff that’s in place and really just start to mature it and put more systems
09:45 and you know mechanics in place and you know we recently actually bought a company at a 1x multiple and fantastic
09:52 seller and to your point he didn’t really for him it was not about price he had his five rules about changing the
09:58 name moving the location all the things that we couldn’t do and genuinely liked us and for him it was a little bit
10:03 smaller than what we typically want to do but again it’s a great multiple great structure and it allowed us to do the
10:09 deal and there’s always a I had a client last year that bought a $10 million EBA business for two times and you say “John
10:16 that’s crazy how do you how do you get that?” Well one is maybe it’s not in the the sexiest of industries right it’s an
10:22 industry that is going more digital so you’re you’re a little bit of a are you grabbing a falling knife and then second
10:27 it was a a quasi distress situation where the the prior owner put too much debt on it and the lenders are like “We
10:33 want to be done like we got to get this off our books you like we’re not it wasn’t a traditional seller who like a
10:39 business owner who’s holding out for highest value it was like a the quicker and cleaner you can make this yeah I’ll take yeah I’m probably taking less for
10:45 market value but I just want to be done i just want to be done right so every now and then you find those situations where there’s some unique fact pattern
10:52 whether it’s customer concentration whether it’s industry or whatever and as long I’m a big believer in um you know
10:58 if you can protect yourself as a buyer with how the the consideration is structured how the indemnity you know do
11:04 you have there’s a product which I’m sure you’re familiar with called rep and warranty insurance so there’s a bunch of things you can do in a deal through
11:11 through structure uh through risk mitigation right which albeit you know really bring down your your risk because
11:17 obviously you’re turning around to your lender and or equity group saying “Hey here’s why we think this is a really
11:22 good business.” Like we think we can scale this to your point take it take it from 1.0 to 2.0 and I think it’s a great
11:28 segue right for those listeners looking to get free legal advice so maybe dive into those right like what is reps and
11:33 warranties what does that mean for listeners they can understand and what are the biggest gotchas you can make right because obviously like we bought
11:38 an industrial manufacturing business so reps and warranties are critical in that scenario right for someone buying a
11:44 digital business typically not as much and so you know what is it and how should people think about it and maybe
11:50 I’ll I’ll add one last part too what are the most common mistakes people make with it no for sure for sure and I think
11:56 um you know easy I often will analogize things for for someone who hasn’t bought or sold a business before i think the
12:02 thing most people do understand is buying or selling a house right almost everyone’s done that right and so you
12:08 know just like when you buy a house you get certain reps from the seller about hey the roof doesn’t leak you know the the electrical system works you know all
12:14 that good stuff right it’s the same thing with a business right where you’re going to have basic you know reps around title to stock title to asset the
12:21 business owner paid his taxes right the financial statements are are true in all material respects right wraps around you
12:28 know inventory and contracts and customers right um and then like any deal the reps will be customized for the
12:34 industry so in a business that’s in the healthcare space you’re obviously going to have significantly more regulatory healthcare reps you know a non-regulated
12:41 business you know you might have a general compliance with law or permits rep but you’re not going to have like three pages of of of regulatory reps
12:47 right so usually what we’re doing if if we’re council say to a buyer right where you’re often drafting we’re looking at
12:54 the industry what does the business do um we’re actually pushing out a purchase agreement this weekend on a target
13:00 business that um like a $25 million deal and has some unique fact patterns where
13:06 other family members either own a key customer or own a key supplier now we’ve got good visibility on that but we want
13:11 to make sure things like related party reps affiliated transactions are fully disclosed we just need to really
13:17 understand again no problem that a key customer key supplier is owned by a family member a seller but how does that
13:23 impact do we need long-term pricing agreements is everything above board you know that type of thing right so that’s
13:29 kind of how we look at it and the segue of that is so okay great we you know you sell me a business for us and and and I
13:35 buy it and rep some warranties and it turns out after the fact something you told me wasn’t true i’ll give you an
13:41 example let’s say you rep that the machinery is all in good you know good standing yeah and you get in there the
13:46 day after closing and you’re like “Half of it is junk right?” And so uh as a buyer you have the ability to put in so
13:53 assuming there’s no insurance no rep warranty insurance you have the ability to put in a claim against the seller there may be something called like an
13:58 ask for hold back you know a portion of the proceeds that were sort of set aside to cover claims right where I can make
14:04 an indemnity claim as the buyer and say hey you told me all the equipment was you know perfect or an amazing working
14:10 order and it’s not and I’ve got to go replace half a million bucks of equipment or whatever the fact pattern is right um the the the similar dynamic
14:17 is with reps and warranty insuranceances rather than me as the buyer uh pursue a claim against you the seller uh there’s
14:24 now a pretty robust market out there um AON locked in a bunch of brokers who um
14:30 serve as brokers in the space where the parties um usually the buyer will will lead the process can effectively go
14:36 purchase an insurance policy where instead of the seller backstopping those reps the insurance company will right
14:43 obviously there’s a premium associated with that they have to look at sort of deal size and the cost of that and is the buyer paying you know the parties
14:49 splitting and that type of thing but that’s a great product we’re seeing it in in almost half of our deals these
14:54 days one of the things I think everyone likes most about the product is let’s say I’m buying your business for us and
14:60 and you’re going to roll you’re going to stay as a 20% and and maybe you’re running the business for me boy deal
15:06 closes and let’s go back to that equipment rep right do I really want to put a claim against you like you’re
15:12 you’re building the future you’re running my business i’m like yeah that’s probably a bad idea you know what I mean
15:18 you’re you’re you’re at the helm of the ship right so the insurance kind of take hey just so you know something came up
15:24 we’re going to put a claim with the insurer like again it it happens right no and that’s funny you know we’re in
15:29 that exact predicament right we didn’t do the reps of warranty insurance but there is a claim to be had and we’re kind of massaging and timing it with the
15:36 seller and keeping it you know cordial right right and so you have to work through it and and so you know in our situation great seller you know it’s
15:42 it’s working out he’s genuine person but not all sellers are that way right some people take personal offense to it to it
15:48 as well and so that that reps and warranty insurance is something that’s now on our kind of checklist to typically you know at the deal sizes
15:54 we’re looking at like we want to buy that because it’s I think it if I remember correctly it was like a 30 $40,000 policy that would have probably
15:60 paid out a million dollars in our situation yeah it it very it kind of ties to sort of deal size right but but
16:06 it and and they I think the biggest misnome and I was hesitant you know maybe 10 or so years ago when they
16:11 started to come on the market and like any insurance product everyone was a little is it actually going to pay out right and we’re seeing now that say one
16:18 out of four one out of five policies are paying out and we just helped a client uh settle a pretty significant claim for
16:24 for a um sort of a breach of key customer rep and they had a policy and they were certainly glad they had it
16:30 okay cool so then maybe shifting gears a little bit right what are some of the
16:35 the biggest mistakes you’re seeing buyers do today right and maybe on that same vein when is the right time to you
16:42 know pull in a John into a transaction yeah um you know we always joke never
16:49 too early right and I think we can mitigate on on cost on the front end in terms of you know the initial on the
16:54 legal side you know when someone gets a deal signed up the first 30 days tends to be more focused on the QV the quality
17:00 of earnings sort of financial diligence and the legal work tends not to kind of ramp up too much after that but we do
17:06 like to be around the hoop relatively early including before a letter of intent gets signed to say “Hey is there
17:11 anything unique you know we would say to our client about this particular business like a key contract a key
17:17 license you really need so and so to stick around to transition customers like let’s try to build as much of that
17:22 into the the LOI as we can right?” Um so that’s that’s a key dynamic what was I’m sorry repeat your question i want make
17:29 sure I cover all aspects of it you know just kind of one of the biggest mistakes people people make you’re seeing people
17:34 make currently i I think um you know listen like anything um we’ve seen some spaces you know HVAC is is maybe one
17:42 where it got a little too frothy right and everyone’s sort of running around HVAC car washes multiples going up i’m
17:48 going to go I’m going to you you never want to be on the tail end of anything right i I’m the 42nd group that’s going
17:54 to go do an HVAC roll up it’s like okay not the 42 yeah exactly you know
18:00 what I mean so things like that and and I I think one thing you know most of our clients you try really hard to do this
18:06 but but I feel like you can almost never be too good at this is either having the right person on your team who knows that
18:12 industry or bringing an operating partner or strategy adviser to the table who knows that space who’s lived and
18:18 breathed that industry maybe scaled a company and or been involved in an exit in the space i mean nothing more
18:23 valuable than having someone who’s been there who goes I know exactly the headaches that this business is going to
18:29 have it’s logistics it’s customer pricing it’s you know finding the right texts to serve like whatever it is right
18:35 having someone who’s walked in those shoes before and is willing to partner with you as the buyer on your
18:41 team you know huge value in that and not only value in in diligencing and finding out the risk of the business but then
18:48 when you pivot and look to your equity and debt partners and say “Here’s here’s the team oh by the way we have this
18:54 operating partner who a couple years ago had a 12x exit in the space.” I mean how much do equity and debt groups love that
19:00 right i mean of course they do right yeah no absolutely i mean it’s you know at these scales it’s all about the
19:06 people you bring on right it’s not about just doing it yourself i mean as a leader your job is to really go find other leaders not to have to do
19:12 everything yourself or not to create followers and so I’m something I love and on that point I think one trend
19:18 we’re seeing especially the the independent sponsor space um and there’s an accounting firm that puts out a
19:23 survey on this every year is we’re seeing more and more and you were talking you and I were talking about this a little bit before our podcast
19:29 more and more groups partner right where maybe I have the opportunity and um the
19:35 operating partner but I don’t have the capital or access to the capital network so I’m going to partner with another group for that or I have the opportunity
19:41 but this other group knows the space right they’ve done a deal in the space they’ve had an exit right so we’re
19:47 seeing groups come together you know figuring out how to split the nickels right and almost come with like a united
19:53 front and each bringing something unique to the table that the other one doesn’t have you know the classic you know 1
19:58 plus 1 equals 3 or 1 plus 1 equals 5 so we’re seeing that more and more these days i’d say almost 20 to 25% of the
20:05 deals we work on have a dynamic where sort of two groups are coming together each kind of covering the other person’s
20:11 sort of weakness or blind spot and then and proceeding as a team to close the deal yeah no and that’s our thesis
20:16 around equity launchpad right like we just think that’s where the market is going and that’s why we named it equity launchpad it’s kind of a launchpad to
20:22 help people get deals done grow together and you know move forward so it’s kind of a love it so then maybe you know you
20:30 mentioned independent sponsors right and maybe my question is what are you starting to see in that space right I
20:37 think historically and this is maybe my interpretation is historically people you know get into the mode of okay doing a deal right and then right maybe
20:44 naturally they do the deal they figure it out they spend a couple years building it up and okay I need to go do a second deal to start to acquire and
20:50 you know those are all really like singlepurpose single acquisition single syndication kind of models versus you
20:57 know what I’m seeing is the independent sponsor model is attractive a lot more people are starting to look at it and so my question to you John is maybe a what
21:04 do you define as an independent sponsor first and foremost because I do feel like it’s a little bit of a vague term for people so it’ be good to have
21:10 listeners hear your interpretation of it and then what are you seeing happening in that space yeah I I I would typically
21:17 define it as I almost look at it as private equity but maybe without the committed fund so and and what you know
21:24 we help a lot of firsttime independent sponsors get launched and get formed and we see them come from one of two worlds
21:31 we see them come from the private equity world you know sort of private equity investment banking where either at their
21:38 shop they were at there weren’t as many growth opportunities or they didn’t like that their firm was continuing to move up market and missing opportunities in
21:45 the lower middle market because obviously if you’re at a half billion or a billion dollar fund you need to do some pretty decentsized deals to move
21:51 the needle right and and so they almost like they’re like “Hey we’re we’re focused on the wrong thing.” So I see a
21:57 fair amount of that and and people spinning out to start groups right the other dynamic is sort of the the
22:04 executive operating partner model somebody who really really knows an industry or niche maybe was part of a
22:10 portfolio company or private back company that had a successful rollup right and and you know I’ve got a client
22:17 who uh did that in the urgent care space and was very successful was a senior executive and decided you know what I I
22:23 made a couple dollars but I really want to go do this on my own right i I I see some opportunities to kind of build a
22:28 team and go disrupt so one of those two areas is kind of where I see it i always counsel if the true true firsttime
22:36 individual or two or three folks come together I’m like you need a two-year runway you need to have a couple years
22:42 set aside for salary and overhead whether you’re funding yourself or you’re bringing on a backer because it’s
22:48 going to take a while to find those deals to get them you know it’s the usual funnel right i got to look at 100 opportunities to spend time on 20 to put
22:55 in five or 10 LOIs to hope you know two get signed hope one actually closes right so I mean that’s a grind you just
23:02 need to be prepared for that um so at a high level that’s kind of what I think of when I get an event sponsor right and
23:08 pretty heavy focus in that two to five ebida space but but more and more seeing five to 10 if not occasionally over that
23:14 you know some bigger deals depending upon the pedigree and and track record of the sponsor and your second part of
23:20 your question in terms of activity in the space I mean just just off the chart right I mean just just literally off the
23:26 chart I mean no one knows I’ve heard stories of there’s 5,000 or more I don’t know right um I mean obviously there’s
23:32 not a huge barrier of entry to becoming one I mean you and I could start a firm this afternoon if we Right but um you
23:39 know I I think we’re seeing better quality people who are more thoughtful you know we’ll spend a lot of time with
23:44 people compliment on the front end to say hey is this is this right for you should you be doing this maybe you stay
23:50 at your current firm or your current group or partner with another group for a few years to kind of get your sea legs under you right um and we’re seeing more
23:57 and more conferences groups like I global small business investor alliance right so we’re seeing more networking
24:02 opportunities where they can meet other capital and debt providers so we’re seeing tremendous growth i mean quite frankly at our law firm it’s you know
24:08 it’s one of our fastest growing practice areas right and I just added two new members to my team the last month to
24:15 support all the deal flow we’re seeing so um it’s a great space right it’s a great space but and and lots of activity
24:21 no for our conference summit we had one of the tracks we had was the independent sponsor track and it’s interesting our
24:27 our attendees a lot of them didn’t know what independent sponsor was once they did then they’re like okay actually
24:33 that’s really what I want to be right we tend to see a lot of people that are more the search model and to your point I mean they’re similar concepts the
24:39 really difference is like you don’t have pre-committed funds right so you’re basically betting that you can go raise the money once you have the deal versus
24:45 raising the money to go back into the deal um yeah when I when I think you know it’s a great point I think about search fun I think maybe smaller deal
24:51 say sub 10 million of EV maybe someone get an SBA loan maybe somebody who’s I don’t want to say buying a job but is
24:58 just going to run it and and that they’re going to you know five years 10 years whatever maybe not looking for add-ons that type of thing as opposed to
25:04 I sponsor i’m thinking again literally almost like a small private equity fund but without the committed capital with
25:10 plans to do several platforms and then when they close on a platform with plans to do add-ons right and and expand their
25:16 team so really take away the committed fund piece and we look at some of our clients we’re like what’s the difference
25:22 between that independent sponsor who owns three companies has a fourperson team and this group over here oh this
25:28 group has a committed fund this one doesn’t right i mean not not a whole ton of distinction otherwise so yeah no I
25:34 totally agree completely agree um and then maybe last but not least right before we kind of wrap up you know how
25:40 are you seeing deals get structured today both in terms of just structuring with sellers and how are they financing
25:47 those deals right from what you’re seeing in the market today yeah no happy to chat about that and probably one of
25:53 my uh favorite uh topics we spent a lot of time that with clients so I think um you know on structure a bunch of things
25:59 come into play right so sort of you know once we agree on sort of EV you know enterprise value the question is okay
26:04 great is what’s the mix of sort of cash up close versus you know what I I’ll put in that bucket I mentioned earlier
26:10 deferred consideration which can be any of rollover equity you know seller financing earnouts that type of thing
26:16 right um I’m a big proponent of rollover equity right I mean that’s that’s that’s a probably the most pure form of
26:23 alignment of interest in any transaction right so you’re going to sell me your business for 20 million bucks you’re
26:28 going to stay in the deal for say 20% right now I feel pretty good like yeah you’re taking some chips off the table
26:34 but you want to stay in you’re excited about that second bite it can usually structured in a very taxefficient way
26:40 typically there’s no tax on on the rollover equity piece of the deal and there’s something which you may be
26:46 familiar with and your audience may call QPS qualified small business stock on a 5-year hole no capital gains right so
26:52 some pretty attractive features you know federal and and most states have opted in so we spent a lot of time on the on
26:58 the front end sort of thinking about sort of deal structure what are the right metrics what’s the risk you know I
27:03 mentioned earlier a business where the seller financed almost the entire transaction well we basically had a
27:08 target with a single customer now they just reop and it’d be hard for that customer to leave but that’s not a deal
27:14 you go get traditional debt or equity for right so a lot of kind of what I would say the mix of deal consideration
27:20 and how much is equity and how much is debt and how much is the seller helping is really a function of like that
27:26 particular business and and its size and scale what can it support and are there
27:31 enough factors that the buyer can say yeah I feel aligned whether it’s the role equity or earning or something
27:36 there’s enough strings to continue to motivate the seller or the key principle to help sort of help sort of guide the
27:42 business along the way yeah and you know an important point on that too is um you know around like with structuring like
27:49 my favorite part of this all is basically you can buy any business in the world if you structure it correctly that it works for you and works for the
27:55 seller and a lot of what we do up front is educating sellers and you can
28:01 typically get a better deal for yourself if you get a better deal for the seller
28:06 and what I mean by that you kind of hit it on the head tax obligations if you go to the seller say “Hey I know you want $20 million for this business but hey
28:12 how about we structure it this way?” Or you’re rolling over five million you’re put you’re getting five 15 million off
28:17 the table but you’re saving this much you know on $5 million you’re saving $2 million of cash right there and hey Mr
28:24 seller here’s the confidence that you have that you’re going to get that in the long run anyways but again you’re as
28:30 a buyer I could maybe negotiate down $2 million if I can prove to him that he’s saving more than that right so you can
28:35 get creative and it’s as a good buyer if you’re not spending a lot of time educating sellers up front especially in
28:42 this lower middle market space you’re doing yourself a disservice right it should not be a transactional email back
28:48 and forth you know the other thing too you know one thing we like to do we always go bellyto belly with a seller like we’re the kind of people hey once
28:53 we get a seller we’re talking to we’re like we’ll be on a flight next week be out there be on a flight tomorrow kind of go meet right whereas a lot of people
28:59 that are getting the space they they you know they’re that younger generation that think it has to be done over Zoom and unfortunately a lot of the sellers
29:06 that we’re talking to are baby boomers yes they can figure out how to hop on a Zoom or a Teams if they need to but
29:11 that’s very different than instilling confidence and really building that rapport with the sellers right and if
29:17 you’re the only guy that shows up face to face like that means something we had multiple sellers tell us like “Hey I’m shocked that you you came by you you’re
29:23 the only person that came met me face to face that’s why I’m spending the time with you.” spend the whole day touring their facilities looking at their
29:29 business etc so super valuable and something I think a lot of people don’t do that they should be doing and I 100%
29:36 agree and I think that that that transparency and that relationship building right you you mentioned you
29:42 know sort of tax a lot of times you know you as the buyer and or your adviserss have seen more things have some ideas
29:48 and albeit we may we’re not representing the seller but but it can be win-win
29:53 like if you say to the seller like hey if you do this gifting or transferring of shares or if we structure the deal this way like you’re going to save like
30:00 a few million dollars in tax like we’re okay or you know there’s different things I’m sure you’ve seen it too with
30:05 um you know step ups depending on how you structure a deal you could sometimes write up the assets and then maybe there’s an incremental cost to the
30:11 seller and there’s a true up there but usually the buyer’s benefit is more there’s there’s all sorts of like win-win completely legal completely
30:18 transparent things you can do in a deal and it’s really a matter of sitting down looking at the numbers looking at the
30:24 nature of the business is a flow through business we should continue to run as a flow through is it should be a corp for quality ified small business stock right
30:30 how much is the rolled equity how do we structure that to mitigate tax seller what about the management team do they currently have we’re working in a deal
30:37 now where the seller owns 100% and and he’s going to go off in the sunset soon well we got to figure out a way his key
30:44 managers who are really strong who we want to keep around are really going to run the business for us how do we get some equity to them in a tax efficient
30:50 way whether it’s stock options or profits and oh by the way we structured a unique situation with the seller where
30:56 they are going to roll like 10 15 20% and we have a plan over the next five years where that equity ultimately gets
31:02 transitioned out of that owner to that key management right so as long as they stay right just because again think
31:08 who’s driving the business where’s the line of interest you know tax efficiency the second bite at the apple right so
31:15 I’m a huge believer in listen if it’s a horrible business and it’s losing money right we can’t we can only do so unless
31:22 somebody’s going to give it to you for a dollar with no risk right but within reason 100% agree we can use structure
31:28 to to mitigate risk and create more win-win i completely agree it’s a wealth of information on this one so we can go
31:35 ahead and move on to our rocket round John so this is this is the part where we ask the the the interviewer the same
31:41 three questions so yeah first question what do you like to do in your free time um well I’ve got two uh two daughters
31:47 one who is uh 24 living in Boston grad school one who’s uh 21 who just moved from uh Sarasota Florida to Ohio uh so
31:55 spending time with them as they kind of grow my wife and I watch them how they through school through jobs through you
32:02 know boyfriends through you know we’re now grandparents with puppies with dogs i called my brother today i’m like
32:07 “Hannah if you heard you know my wife and I are like Grant like who who had a kid?” I’m like “Oh no they’re puppies
32:12 they’re little you know.” So but uh so really just in spending time with the family right and and it’s funny i used
32:18 to think when you become an empty neester you’re bored you stay at home but if anything you know the kids are
32:23 busier we’re busier we have to go to that if we want to see them like “Hey what’s going on in Boston this weekend what’s going on in Ohio let’s go do
32:29 something fun.” You spend time with you so probably spending time with the the family is is is high if not number one
32:34 on my list i grow up i’m also the father of two daughters too so an 8-year-old and a 5-year-old they keep me busy yeah
32:39 more fun ahead more fun ahead yeah sorry so next question most memorable moment in your business journey um probably my
32:47 transition i had a great uh experience at at a larger firm for the first 16 17 years and decided to move over to the
32:52 firm at now in 2016 lipus um it’s been a tremendous move the the firm is doing
32:58 awesome and we’re we’re growing uh has been very supportive of all my efforts to try to build out this area of our
33:03 practice in the lower middle market M&A private equity and sponsor so probably the decision to to make that leap
33:09 probably one of my uh one of my better ones other than obviously uh finding a marrying my wife which of course is is number one so yeah no I think it’s a
33:16 great space to be in so it’s exciting um last question favorite tool resource uh
33:21 for me it’s the iPad uh so I’ve got traditional laptop i’ve got a phone like everybody but my iPad is that perfect
33:28 some people like what what do you need what do you need an iPad for like it’s that perfect in between device when you’re you’re scrunched in your plane
33:34 seat or you’re at the coffee shop and you want to wait five minutes for your uh IBM Dell ThinkPad to fire up right
33:41 and pop open you know like uh this meeting here I was just finishing up our call at 12:29 ran in the den you know
33:47 popped open my uh iPad and within a minute you know you and I are up and and chatting so uh if you took away my iPad
33:53 I I would be a very very uh very sad person all right it’s funny you know I used to work at Microsoft and I take offense to that i mean come on the
33:59 computers boot up faster now all right that’s like 15 years ago so four minutes instead of five minutes maybe I just have like my computer is up and running
34:06 in about five 10 seconds so but not the iPad i’ll give you that so okay okay maybe it’s all the security protocols
34:13 with the law firm it’s 87 login i’ve got a remote you know for code it’s probably
34:18 that’s probably driving a lot of the my delay so yeah awesome well John I mean you know wealth of knowledge i think
34:24 this episode’s been sent from Fire Host um how can people get a hold of you right if they’re interested in in leveraging you or having questions yeah
34:30 just go to uh you can shoot me an email so uh the letter J and my last name is Keell
34:36 Kpus.com or you can go to our website uh lipus.com and just uh look up my name
34:41 John Keell um all my contact details is on there our email phone number and all that good stuff so um work with a lot of
34:49 groups who are buying companies work with a lot of business owners who are sellers always happy to do kind of free
34:54 brainstorming like this hey what John what are you seeing in the space do you know any investors for a deal like this that type of thing so um yeah happy to
35:01 connect with you know folks in your audience that’d be great awesome and we’ll put that in the show notes for the listeners so you can find it easily
35:06 there so well John thank you very much really appreciate it i mean lots of information and for those listeners out
35:12 there definitely reach out to John and he can help you kind of transact your deals awesome thanks so much for Thanks everybody no problem appreciate it bye
35:19 thank you for listening to the M&A Launchpad podcast if you’ve enjoyed today’s podcast and would like to support us please leave us a rating and
35:25 a review after you listen if you’re looking for guidance on your next business acquisition or sale capital to
35:31 support your next business transaction or to invest in a private equity opportunity visit equityaunchpad.com to
35:37 learn more and to connect with our team if you know of an individual who would be a great guest for the show head over
35:42 to equitylaunchpad.com/nominate where you’ll have the chance to refer yourself
35:47 or someone else to be a guest on our show i’m Casey Mchu and I look forward to talking with you next week

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