In this episode of the M&A Launchpad Podcast, hosts Ben Suttles and Feras Moussa sit down with Ryan Sullivan, Co-Founder of North Park Group, to unpack how he and his partner built a private equity firm from the ground up—acquiring six businesses in three years. Ryan shares practical insights on deal structuring, using real estate as a lever, leveraging SBA financing, and why a strong network and clear investor relations strategy matter at every stage of growth.
Key Topics Discussed:
- Starting a private equity firm and buying the first business
- Innovative real estate strategies and leveraging SBA loans
- Maintaining and growing a high-value network in M&A
- Practical approaches to deal structuring and investor relations
Connect with Ryan
Email: RyanS@northparkgroup.net
Website: https://northparkgroup.com
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Additional Resources:
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Transcript
00:01 On today’s episode, we interviewed Ryan Sullivan with North Park Group and we talked a lot about what it’s like to go
00:06 off and really start a private equity company from scratch, right? How they found that first business, how they
00:11 bought the business, raised the equity, and at the same time basically put the whole deal together, including the real estate, and then how do you go from
00:18 there to then really going off and doing six acquisitions in a, you know, 3, four year span, which is respectable, right?
00:24 And so really we dove in a lot on just kind of what it looks like on each deal, what was attractive about deals and what
00:30 how he structured them. So Ben, what were some of your takeaways? You know, I mean, I think really the the one thing I thought was interesting on today’s show was was his kind of spin or
00:38 his take on real estate, right? You know, I mean, a lot of us kind of get into this business, you know, and say, uh, we’re just here to buy the company.
00:43 We don’t really want the real estate. And I think he’s taken a different spin and kind of his strategies around how he leverages that and how he gets a gets a
00:50 loan on that through the SBA. I thought was interesting. I think the other part of it that that was a really really uh you know poignant golden nugget that I
00:57 liked from this one is kind of his deal structure right you know and how he’s going out and raising capital because I
01:03 think you know once you kind of get past that putting 10% down on your first SBA loan you’re eventually going to have to
01:09 learn how to raise money you know and some of those strategies and how he structures these deals with investors uh
01:14 to get them excited about the deal and and ultimately pay out those distributions and and on that same note too he wasn’t putting 10% down right so he was
01:20 delvering his things really looking at it because again we’re talking about he all of his businesses have been manufacturing businesses which is
01:26 another thing that most people shy away from right there’s a lot more complexity and so his approach is very methodical
01:32 right we lever we don’t go in high leverage because you know manufacturing is manufacturing there’s other risks and
01:37 things to consider and so really kind of dove in on all those topics and really dissected deal by deal how he made those
01:43 acquisitions so this one’s got a ton of information love it
01:49 welcome to the M&A launchpad podcast with your host Casey Ferris with Equity Launchpad. On this podcast, you will
01:55 gain insights on acquiring, investing in, and selling profitable businesses in the lower to middle market. Whether you’re a business owner, investor, or
02:01 spying entrepreneur, at Equity Launchpad, we will provide you with the knowledge, guidance, and capital to navigate the world of mergers and
02:06 acquisitions. Hey there, this is Casey with the M&A Launchpad podcast. Want to let you know
02:13 about October 25th. Put it on your calendar. This is a do not missed one day event. There’s going to be
02:19 incredible headliners, but really at the end of the day, you’re going to get a chance to talk to people that have made
02:25 acquisitions, learn from some of the challenges that they’ve made, because this is definitely a challenging
02:30 process, but more importantly, there’s going to be people there that can help you and support you along the way from
02:36 great vendors, quality of earnings, how to run the due diligence process, and how do I get financed, how do I raise
02:42 capital, how do I structure all of these things? October 25th in Chicago, we’re going to be gathering. It’s going to be
02:48 hundreds of people that are all focused, like-minded people, and man, everyone that’s come has given us incredible
02:55 feedback. So, mark your calendar. October 25th in Chicago. We look forward to seeing you.
03:00 Hey, Ryan, welcome to the show. Hey, thank you. Thanks for having me. You bet, man. So, for our listeners, you
03:05 want to share a little bit about what you’re currently doing today? Yeah, sure. I formed uh North Park Group
03:11 and my partner Greg Topel in December 2021. Basically, it was us teaming up to go out and buy lower middle market
03:18 businesses, typically 500,000 to 2 million in IBITa. And in the last three and a half years, we’ve acquired uh six
03:24 businesses that we run as uh five different portfolio companies. Got it. And having a similar concept
03:30 model, I mean, buying six in three years, that’s respectable, right? Especially for deals that you guys are out there sourcing. And so, maybe for
03:37 the listeners, I guess, how did you start to get into the space first, right? What were you doing prior? and
03:42 then we can kind of go through how it’s been. Yeah, sure. I was born an engineer, right? So, I spent the first I’m 51. So,
03:49 I spent the first uh whatever, you know, 20, 30 years in corporate America. I was
03:54 an engineer. Then I moved, you know, I wasn’t a very good engineer. So, those who can’t do teach I moved into
03:60 management, right? Got into general management, but spent my whole career in manufacturing businesses, bu building
04:06 products, industrial products, all things manufacturing. Uh later in my career, I got a chance to run a holding
04:12 company that was a diversified holding company of manufacturing businesses. Did really well there. Uh got a chance to
04:18 actually acquire some businesses with that job and then basically spun out of there and said, “Hey, I like this
04:23 strategy of kind of lower lower middle market uh manufacturing businesses. Uh
04:30 we’re typically buying stuff to put people into retirement, right? I mean, I we didn’t know I didn’t know about the
04:35 book, you know, uh buy and build. I didn’t know about ETA. I didn’t know about any of that stuff. I just had
04:40 bought some companies and I know how to run companies. Uh so Greg and I set out to, you know, buy a few companies
04:47 largely with our own money and some money from outside investors. And uh here we are three and a half years
04:53 later, we got six companies and u you know, five operating partners that are running them and partners inside of
04:59 North Park Group and we’re looking for more. It’s actually kind of comical how your
05:05 story really similar to ours and I remember we got into it and then we didn’t know ETA and then our partner Casey messaged us is like hey so I went
05:11 to this Harvard ETA thing there’s this whole ecosystem in ETA right you know we didn’t even know the term independent
05:17 sponsor right which is really what we kind of were right we could source it we could do and just kind of over time you
05:22 start to learn but ultimately at the bread and butter is very simple right you’re finding businesses you’re buying them
05:28 I mean Greg and I were like uh just faking it till we make it kind of thing Like we were talking to a lot of people,
05:33 networking with a lot of people, asking a lot of dumb questions and just kind of figuring it out. And then probably a
05:39 year ago, I’m talking to somebody and I explained to them North Park Group and they’re like, “Oh, like you’re ETA buying bill.” I’m like, “What are you
05:44 talking about?” Like I had no idea. And uh it’s made me feel better since I learned it, right? You feel a little
05:50 less isolated and there’s more people to talk to. So, um, it’s it’s been a it’s
05:55 been a great experience both in, uh, you know, getting to acquire companies, but, we’re buying companies to try to hold them for 20, 30, 40 years. I mean, I
06:03 tell everybody I’m a buyer, not a seller. And buying stressful, selling stressful. I only want to do half of it.
06:08 And when I’m dead, the guys can figure out how to sell off the portfolio if they want, but we’re going to hold them
06:14 forever. So, that’s great. And yeah, I mean, you know, we I can’t say there will always be like that, but we always we got in
06:20 this business like, hey, let’s let’s find some some evergreen companies, right, that we can just sit back, grow over time and and and enjoy kind of
06:28 that those dividends or those distributions that you kind of get from businesses themselves. So, yeah, a lot of similarities, but I was I
06:34 want to take a step back, right? You had you said that you were running that holding company. You know, how did you
06:40 get into that? What was that? And and was that the was that really the light bulb moment that you’re like, shoot, I
06:46 can do this on my own? Yeah, for for M&A, it definitely was. I mean, I got hired it was it started out a public company with a majority family
06:54 ownership. So, they kind of ran it like a private company, had five businesses in it. None of them were performing very
06:59 well. So, they kind of hired me to turn around the portfolio. And Gotcha. G give you an idea. We’re like 3 million
07:05 in IBIDA across the portfolio with like 55 million in liabilities. So not not a
07:11 not good math. It’s basically kind of worth zero when we started. Uh I sold one business unit that was five million
07:18 in IBIDA. So that tells you how the rest of the portfolio was doing. If you can sell one that’s five and overall you were three.
07:23 Yeah. Um and used that cash and I was like well I don’t have enough cash to like clean this thing up and end with
07:29 anything. So I got to go do something with this cash and I needed to put cash to work and get cash back quickly. So
07:36 that kind of leads you to lower middle market and businesses you can buy. They’re high cash generating, low
07:42 capital intensity. Um, and I knew manufacturing. So obviously I I stayed focused in
07:47 manufacturing. I’m too old to learn new things. So I, uh, started buying, you
07:53 know, little manufacturing businesses that were honestly great businesses. Some of them have been around for 80 to
07:58 100 years. And, you know, they’re making a million dollars in Evidan. We could buy them at an okay multiple. And so I think we
08:05 bought six under that company and then went in and kind of professionalized them and started growing them. I turned around the rest of the companies in the
08:11 portfolio and took the took the public company private for the family. And so
08:16 they’ve done very very well with it and then I uh I took my exit and moved on,
08:22 right? And uh my partner Greg was actually my uh buyside broker. So he was
08:28 out the he was the one out looking for companies and uh so when I left he said, “Hey, we could do this on our own.” And
08:33 I said, “Well, I was look, I had like two and a half million I was looking to put back to work, right?” And I was
08:38 like, “Well, I got some money. Like, I could buy a company or two, you know, with dad, blah, blah, blah.” I’m like, “But I don’t have enough by 10.” He
08:44 says, “Oh, we’ll get investors.” Like, it was no big deal, right? And I’m like, “Yeah, like who’s going to give me money?” And uh Greg had raised 10
08:52 million for a startup. And I was like, well, if you could do 10 million for a startup that doesn’t have a product and isn’t making money, I’m going to guess
08:58 we could go to people and tell them, hey, we’re going to buy a business that’s been around for 80 years and has always made money and we’re buying it
09:04 well and we we know how to run manufacturing businesses. Greg’s an engineer, too. And uh so he convinced me
09:10 and uh lo and behold, we were able to fund raise for our first two deals. And now we’ve got 40 plus investors that
09:18 follow us from deal to deal and we have a wait list of like 30 or 40 investors that are just waiting for there to be
09:23 space to get into a deal. Yeah. So walk us through those that first deal and that second deal, right? You know, how’d you find it? How’d you
09:30 structure it? I mean, what’s the deal? What does it do? What’d you buy it for? And then kind of maybe move on into what that second deal looked like.
09:36 Yeah, sure. So we we we formed in December of 2021. We closed our first deal Electron in May of 22. So we found
09:42 it pretty quick. Uh it makes electrical components. It was based out of Witchaw, Kansas. You know, all of our deals we
09:49 pay right around kind of 4.0x ibida. Uh we buy the buildings, which for a seller
09:55 is really important because a lot of times these are people who have been running a business for 40 years and they
10:01 want full liquidity. They want to go to Florida or Phoenix and retire. They don’t want to be a landlord for 20
10:06 years. They don’t want an anchor back at the Yeah. And so a lot of people that were talking to him just wanted the business and maybe we’re probably going to move
10:12 it. It was probably strategic that was going to roll it up. It was private equity that was bolting it on to something. It wasn’t going to be good
10:18 for the employees that were left behind. And so then we come along and we’re like, we know how to run manufacturing businesses. We’ll buy your building.
10:24 We’re going to leave it here. We’re going to run it here. And uh so just great sellers. Um all of our deals end
10:30 up with kind of great partnerships with the sellers. They’re just really nice people and they just really want their companies taken care of. And um so we
10:38 fundraised. Um you know, we put a good bit of money in on the first deal cuz uh
10:44 I just again I couldn’t believe that people were going to give us money. Um so I probably own you know 30% of uh of
10:51 Electron, right? I put a lot of money to work on the first one. Uh we bought it. Greg went and ran it. Um, you know, we
10:58 had a two-bedroom apartment with mattresses on the ground and a folding table and two folding chairs. Like,
11:04 that’s what it was like living in Witchah. We uh rented a car from the sellers that was like 15 years old and
11:10 that’s what Greg drove around Witchita. So, I mean, we were bootstrapped because, you know, one small company,
11:15 especially with outside investors, you’re just pulling the salary for the job. I mean, there’s no there’s not much management fee coming off of it or any
11:22 of that kind of stuff. And, uh, it worked well. We structured the deal like a typical private equity deal. So we do 25% carry, 10% unadjusted
11:30 EBA management fee uh with a small closing incentive. And we did that because that was what our investors
11:36 understood. Most of our investors are invested in PE deals, so they understood that vocabulary and that deal structure.
11:43 Um and the SBA kind of understands it. The SBA gets more confused than investors, I think. Um but uh you know
11:50 we already had banking relationships from our previous job so we were able to work through the banking side pretty
11:55 well and Electron did well and we closed our second one Phoenix Electric. Sorry really quick. So that first one
12:01 though just uh so it was you bought it for roughly a 4x. What was the IBIDA? Uh about a million uh no 500 500,000
12:09 500,000 500,000 IBIDA you bought it for roughly 4x and it sounds like you guys for the financing side you did you did structure
12:14 it as an SBA loan that you and your partner kind of basically took on that liability. Yep. Yeah. I took the personal guarantee
12:21 on the first one. We did a 7A uh for the business loan and a 504 for the real estate loan.
12:27 Gotcha. And that’s always great. And then for the investors, you kind of talked about the structure and um and
12:32 maybe really quick, how’s that business doing today? So it was 500. Where’s it kind of got? It’s great. We bought it when it was
12:39 500. Uh it’s up to 650. Um but it’s a very different 650, right?
12:44 So at 500,000 VA, but that we bought there were two sellers in the business who did all the work and there was no
12:51 other managers, no structure. Um I don’t think there was anyone else with a
12:57 college degree in the building. And so now we’re 650,000. We’ve got a president. We’ve got a actual financial
13:04 controller. We’ve got a production manager. We’ve got a degreed engineer, you know, who’s doing stuff. We’ve
13:10 reinvested over a million dollars of capex, so new equipment into the business. Uh, and we’ve paid back, I
13:17 think, uh, somewhere over 30% of the initial investor money over three years.
13:24 And you said that the the carveout was what, 25% promote? Uh yeah, 25% carry.
13:31 Yep. Carry. Got it. Okay, cool. All right. And then so then and the and the in investors get an 8%
13:36 preferred return, which obviously it’s just it’s just the waterfall of the cash coming out. It’s not a guaranteed return. So first cash out goes to the
13:43 preferred return of which we’re equity holders. So we’re getting some of the preferred return as well. And then it goes to paying back
13:49 equity and then we’re into the carry. Got it. So I wanted to to hop in on the real estate side. I mean and and you know for
13:55 our listeners you know Ferris and I’s background is in commercial real estate too that’s kind of how we got our start
14:01 you know and it it’s funny as we got into the to the M&A or the private equity world you know we didn’t really want the real estate but you know I I I
14:08 understand your argument too and that was our struggle at least initially and now I think we’re we’re kind of going
14:13 back to maybe wanting to do the real estate. Um how did you did you structure it as two different offerings? I mean
14:18 you obviously have two different loans right? One for the operating company and one for the real estate. How did you do it from a from a capital raising
14:25 standpoint? Is it all kind of funnel into one thing or how much capital was raised?
14:31 Yeah, we did a holding company and underneath the holding company is the operating company and the real estate entity, two separate entities. All the
14:38 investors are in at the holding level. I wanted all the investors to be the same. I didn’t want to play games and have there be real estate investors and
14:44 company investors and then I’m up in the rent and then the people that are in one side are say, “Why is the rent going up so much?” Right? Like I didn’t want any
14:51 games. I’m a big believer in like simplicity and I don’t want my phone to ring, right? So, if everyone’s happy,
14:57 your phone never rings, they just unless they’re inviting you out for drinks or something, right? So, uh total equity
15:02 raise was what 1.8 million uh on the deal. The real estate was worth like a million and a quarter or something like
15:09 that. So, that can give you the total deal economics. Um we put a good bit of equity in uh to start. Um we always put
15:17 like $400, $500,000 of cash in the balance sheet. I’m a big believer in like cash is king. We also have a line
15:23 of credit. We just don’t want to tap it, right? Um I do a lot of things to reduce the risk. So I like buying the real
15:29 estate because it reduces the risk. My rent doesn’t go up every single every year. So I don’t have a small headwind
15:35 in my business. Um I get I don’t I don’t have any risk of getting kicked out. And
15:41 it’s a good asset, right? It is a good asset to put debt against. Uh it’s an appreciable asset. the mortgage or the
15:49 debt rates are great on real estate compared to operating businesses. Um, and it gives us a lot of optionality in
15:56 the future. We could do a sale lease back and generate liquidity for investors if we wanted. We can hold it for 30 years. We could sell it and move.
16:03 I mean, who knows, right? So, I’m also a big believer in optionality. I don’t like having only one path. Like once you
16:09 don’t own the building, you don’t own the building, you know? And moving in a manufacturing business is expensive,
16:14 right? It’s not like it’s just distribution or some other stuff that’s a little bit more relocatable. Manufacturing tends to get pretty
16:21 pricey. Yeah, you I mean it’s it’s it might have been a custom buildout on the the the shop itself. I mean like it’s it makes
16:28 sense for those types of exactly what we have on our industrial chrome plating business. We have chrome bits, you know, you just luck selling that
16:35 property maybe, right? Yeah. like you could probably you could find a buyer obviously at at an institutional
16:41 level but you know the the mom and pop people aren’t going to buy that type of real estate right so that’s right talk to me about because you know I’ve
16:47 always heard of 504 talk to us about like what are the terms of that loan on real estate because I think a lot of our
16:53 listeners are probably struggling with the same thing that we struggled when we got into business is like okay I just really want to buy a business I don’t
16:58 know anything about real estate you know how does that work and and I mean and the SBA I mean there’s a
17:04 lot of paperwork you got to do. There’s a lot of hoops you got to jump through. So, it’s not easy debt to get, but it tends to be good debt. The 7A I love
17:11 because it’s a 10-year amortization. You go commercial debt. It’s much shorter. You tend to get lower interest rates, no
17:17 bank covenants, and you can pay distributions. Like for us, one of the big things we wanted in the portfolio is
17:23 we wanted distributions. I was putting half of my net worth to work. I wanted cash back for that. I didn’t want to
17:29 wait seven years or 10 years to sell a business or recap it. I wanted cash flow
17:34 every year, right? Um, and with a lot of commercial debt, they get a little tough
17:39 about doing distributions. So, um, on the 504 side, it’s even more complex
17:46 because you basically end up with a bank loan for 40% of it, the SBA loan for 50%
17:51 of it, and then you’ve got to put in at least 10 to 15% depending, right? Um the
17:58 you get a 25-y year amortization, typically 25-year term on the 504 portion, which is great. And then the
18:04 Bing portion, you get a 10-year term with a 25-y year amortization. So, you do have a portion that you’ve got to
18:10 refinance at at 10 years. Uh and typically like good interest rates. Like a lot of our property real estates are
18:17 down in the 6 and 12 to 7 12% range. So, all of our buildings kind of cash flow.
18:23 So, we tend to model them out at like a 9% cap rate and they cash flow well at that relative to our debt. And then
18:30 obviously if we were doing a sale lease back, we’d probably be getting, you know, 7 and 3/4 or something like that
18:36 on a on a sale lease back. So, there’s there’s value there that we could get through our there’s some stuff that you can that you
18:41 can leverage if if you ever decided to go down. Now, you needed you need some capital to to do this, you could always
18:47 go back and, you know, um and do the sale lease back. And for our listeners, you know, that’s obviously a strategy
18:53 that, you know, that that you can incorporate even on a buy, right? You know, if if you needed some cash to
18:58 actually close a transaction and the seller of that business has some real estate, that’s something that our listeners should look into.
19:04 Yeah. But yeah, never heard of anybody actually doing the 504 on, you know, on the sales.
19:11 And it does have to be kind of like owner occupied. So then that’s the other reason why we’re a holding company with
19:16 everyone in on the deal because otherwise if you got investor group A and investor group B, a lot of the banks are like, well, it’s not really owner
19:22 occupied even though you’ve got control of both. Then it’s awkward for you. You have two different fiduciary duties that are kind of conflicted. So
19:28 yeah, like I’m a I’m a big fan of like everyone’s in one buck. I mean, the biggest check we ever took from an investor was a million bucks. Smallest
19:35 check I think was like 10,000. And they’re all the same. Same terms, same subscription agreement, same deal. like
19:42 no one gets special terms. I’d rather just not take the money and not have the confusion. So,
19:47 Got it. And so then what about that second deal, right? How did that come about? How far into the the process did it and what did it look like? And
19:53 it’s it’s curious. I mean, you guys were sleeping on CS, you know, and and sleeping on mattresses on the ground and
19:58 I mean, how did you guys even have the time to look for that second acquisition? Yeah, we’re we were working a lot kind
20:03 of like bleeding from the eyeballs. Uh I mean, Greg Greg was running Electron, so I was mainly out trying to find the
20:09 second one. one wasn’t going to, you know, put food on the table for for the two of us and our families. So, we knew
20:15 we needed to get to like four to six companies to have enough scale in the portfolio. Um, so we were looking for
20:22 the second one. It’s actually an interesting story. They called us cuz we had approached them like three years
20:27 earlier when we were working at a different portfolio. And so they had Greg’s number and so when they finally
20:32 were ready to sell, it was one of those like, “Hey, you interested in selling?” “No, we’re not interested in selling.” Well, three years later they’re ready to
20:38 sell. They ring Greg’s cell phone. So Greg calls me and he’s like, “Hey, do you remember this company?” I’m like, “No.” We look at it. We’re like, “Yeah,
20:44 we’re interested.” It was in Chicago and a great little niche manufacturing business. Uh that one was probably 1.7
20:51 million in Ibida. Uh so larger. Uh we paid, you know, upper fours. Uh and then
20:59 we didn’t buy the real estate, but that’s because while it was seller owned, was right by Wrigley Field. And
21:05 so the value of that real estate was really not intended for a small manufacturing business, right? So the
21:12 the owners, we either they’d sell it to us for what it was worth, but you know that that’s
21:18 it’s a development play. It’s a real estate development play, not a manufacturing building. So we didn’t buy
21:23 it. We we got a good lease terms form for two to three years. Um, and then we
21:28 went out and bought a building, uh, which is part of our thesis, and moved the business, uh, which is again, it’s
21:34 expensive. Um, but we bought one that actually had a lower commute time for all the employees and still in Chicago.
21:40 So now we own the building again. We’ve done two renovations on it. Uh, we got a tiff grant for some of the renovations.
21:46 So, we went into a good neighborhood from a economics perspective, and it was an old manufacturing building that was
21:53 vacant. So, we actually brought it back to life, which people in the neighborhood love because now it’s not this big empty building sitting there.
21:59 And uh and Phoenix is doing great. So, it’s um it’s it’s really nice to see. And we and we kept 100% of the employees
22:06 in that move, which I’ve never done before. I’ve never been able to move a business and keep 100% of the people.
22:12 That’s just What do they manufacture? They they make the uh parts inside of a DC motor that holds the carbon brush. I
22:19 mean, you want to talk about niche manufacturing, like that’s what they make. They’re the only ones in the US making them. Uh we actually export to
22:26 China. So we’re shipping these things to China to get put into motors to come back to the United States. Um great
22:32 little business. I mean it’s only you know 5 million in revenue and it was clearing kind of 1.7 million in IBIT. So
22:39 very high EBIT margins which is a different business to buy, right? Because there’s there’s less we can do to really improve it. They’ve got very
22:46 very high market share in what they do. It spits off a lot of cash. um great people inside the business. And so with
22:53 that business, we’ve started trying to add new product lines, do new things both in like the set molding and now
22:59 we’re also making wiring harnesses for our customers. So probably 20% of our
23:05 revenue now is new product line since when we bought the business three years ago. Got it. And so you you bought it, it was
23:10 1.8 uh IBIDA, right? And you said upper four, so roughly, you know, you bought in the 8 to10 million range,
23:17 right? It’s a little bit outside of uh SBA sizing, right? So, how’d you guys structure that both on the debt and your
23:23 investors? Like kind of what again would you offer the investors? You go to the same investors first? Did you, you know, market more broadly? What did
23:29 that look like? Yeah, good question. So, we always go to our our previous investors first. I give them a week to commit to the new deal.
23:36 Then, if we’re not full, we send it out to other investors. That one we raised 5.3 million, so a much bigger raise than
23:42 than our first one. So, it took us a little bit longer, especially because that was only our second acquisition. Uh we still did SBA loan 7A. We got uh 5
23:50 million 7A loan plus par parapu loan on top with the exact same terms. So
23:56 mirrored terms not not different terms. Uh and then we brought uh the investor equity uh along. We’re we we tend to
24:03 underlever businesses. Um meaning like we’re I kind of target 50% for debt to
24:10 equity including the building. And so you figure buildings are at like, you know, 80 85% and so the businesses are
24:16 underlevered. I do it all just for risk reduction. Like we take personal guarantees. I don’t want somebody taking
24:23 my house, my car, my kids, you know, maybe my kids, but not not my house and my car. Um, you know, and so a personal
24:30 guarantee is only scary if the deal is scary. If the deal is not scary, the personal guarantee is not scary. And so
24:36 we structure our deals to not be scary. I mean, while we give up a few points of return, our investors don’t care either
24:43 because what our investors want is a good return. So, it’s just the risk versus reward getting that balance right
24:48 and keeping everybody happy. So, curious, you know, I mean, you you just kind of on on the show today,
24:54 you’ve you’ve talked about some creative real estate strategies. Do you guys did you guys have experience in the real
24:60 estate side or so? You’re just kind of just figuring this way through. I mean, I love that. Yeah, I think make it till
25:06 you make it. The I mean, the one thing that we have is we have a big network of people, right? I mean, I’m 51. I’ve been
25:11 in manufacturing. I’ve bought manufacturing businesses before. I’ve moved businesses in corporate America and not like ones that I owned. I’ve
25:18 opened up new buildings. I’ve built plants. So, like we we understood how to do this stuff, but sure, I was never the
25:26 one like negotiating the the deal to buy the real estate and signing all the loan doc. So, there was a lot of stuff that
25:31 was new, but we have a ton of advisors that we use um especially on the real
25:36 estate side. So, there’s lots of people we could talk to and help us do a search for a building and make sure that we had
25:42 our model right before buying the company, right? Because the big question is, well, you’re buying it, what’s it going to cost you to move it? And what’s
25:48 your new building cost you? If you get that wrong, you got yourself a bad deal. If you get that right, you got you got a
25:53 good deal. I think that’s where you unlock a lot of value, too, right? you know, knowing that part of the the especially if
25:58 you’re in that manufacturing or or anything that has some kind of a facility that you have to, you know,
26:04 that that would come along with the deal. I think that’s where a lot of people, like I alluded to earlier in the show, you they’re just like, I’m not
26:09 going to touch that. But I think, you know, you’re you’re losing or you’re using it as almost leverage, too, or a
26:15 way to, you know, really uh, you know, make the deal even better. I mean, how to structure it properly.
26:22 In in most of our deals, we go to the seller and we offer them one number. We don’t go and say, “We’re going to buy your business for X. We’re going to buy
26:28 your building for Y.” I say, “Listen, I’m going to give you full liquidity. You’re cashed out. You’re going to work for us for six months afterwards, and
26:34 here’s your number.” And a lot of them really like that. It’s a simpler deal for them. They don’t have to figure it
26:39 out. But on our side, it comes with a big burden because you’ve got to get your real estate number right. You’ve
26:45 got to get your adjustments for real estate right. Just like networking capital, man. I think a ton of people
26:51 miss how important networking capital is, especially in a manufacturing business. Yeah. Uh and and they forget the real estate
26:58 period just how much capital you’re
27:03 right. Yeah. I mean, I was talking to an independent sponsor uh this week and he’s like, “Oh, this is great, man. It’s
27:09 a 2 million eBay business. I want to buy it, blah blah.” I’m like, “Hey, like you know the thing hasn’t generated any cash
27:14 in like four years, right?” He’s like, “What do you mean?” I’m like, “Well, for some reason, like they’re pumping back like a million a half dollars back into
27:20 this business every year in capex. Like, like why?” And he’s like, “I don’t know.” I was like, “Well, like that’d be
27:26 the first thing I’d want to know cuz like what you had and and the business I sold when I was running the holding
27:32 company, 5 million in Ebida, zero cash generation. We had to put 5 million of capex back into that business every year
27:37 to keep it running, to keep it afloat, not make it better, not capacity, just to keep this thing going.” And so it
27:45 it’s not a it’s not a great business if you’re looking for a cash generating business. It’s a good business on paper.
27:52 We sold it for 40 million. It’s worth a lot to somebody, right? But as far as us running a portfolio, it wasn’t
27:58 generating any cash. So um yeah, c generation of a deal and not just IBIDA.
28:05 And then some of these things that are not in the headline number are really important both for sellers and and for
28:11 buyers, you know. Absolutely. I mean that capex thing is critical. we’ve made that mistake, right? And just really understanding how much goes there. Uh
28:18 question for you though. So the 5.4 that you raised that was inclusive of buying the real estate.
28:24 And so even before you bought the business, you had actually already identified the real estate you were going to buy. You from day one, you had
28:29 that plan. It wasn’t, hey, we’ll buy it sometime in the next year. We’ll go find it and do it. Or how did that go? No, we we we looked we had enough
28:36 options. Like we did a search and we’re like, okay, this buildings would work. This is what it’s going to cost. Blah blah blah. We took all the cash up front
28:43 from investors and put the cash on the balance sheet so we knew we could make the down payment on the building and
28:48 move. Uh and then after we closed, we went and found the specific building and did an LOI and bought it and did all
28:54 that work. Um but yeah, we we didn’t have to go back to investors and do a capital call. Like I’ll never do a
29:00 capital call ever, right? Like like I get the point of them, but our that’s just not what our investors want. Our
29:07 investors want to give us money and then have us send them checks, not for us to call them and say, “We need you to reup
29:12 type of thing, right? Even if it’s a great opportunity, they just don’t want it.” Um, and so we had the money for the
29:18 down payment. So, it was cash flow from the business for the first year and a half plus the cash we took up front is
29:25 what paid for the move and paid for the building and paid for the renovations. Got it. Okay. And then maybe quick,
29:31 let’s touch on the third one just I could I could do this all day. one of and and actually really quick on number two, has that grown or have you guys
29:37 just been kind of steady Eddie? Uh it’s kind of steady Eddie. It’s starting to take off this year finally. I mean obviously we went through the
29:42 move, we went through the renovation that’s pretty disruptive and now we’re getting to the point where 20% of our revenue is something new. Uh and then
29:50 that that business since we’re high market share, it is not cyclical, but there’s a lot of ups and downs in that
29:56 market. It goes it aligns with motor manufacturing which like took off right after COVID and now has been in a lull
30:02 and it’s finally starting to come back. Okay. Um but the business spits off a lot of cash because one we don’t have a lot of
30:07 debt on it and it’s really high EBIT margins. So um the it’s an interesting
30:14 story. We did two deals in 2022. We get into 2023 we didn’t do a single deal and I was I was I probably put in 30 LOI. I
30:21 just kept losing and some deals I lost by like $50,000. the broker called me be like, “Hey, you weren’t the highest.”
30:27 I’m like, “What was the highest?” He’s like, “You’re off by 50,000.” I’m like, “Oh my god.” Right. And and uh so
30:33 the ones that hurt the most. Oh yeah. I mean, Greg and I started to panic, right? Because I’m like, “Hey, like you know, running these two small
30:39 companies isn’t really what we wanted to do for the next 10 years. We wanted to get to a portfolio and get some scale.”
30:45 And um and then so then you get in right at the end of 2023, I signed two LOIs in
30:51 the same week. And I’m like, “Uhoh, now we have another problem. We got two companies we got to run and we got two deals we got to close basically right on
30:57 top of each other. Uh and one of those was in Mississippi which was NeverLink and the other one was Dicki
31:03 Manufacturing which was here in Illinois. Dicki Manufacturing total proprietary deal. I met somebody they
31:09 introduced me to the sellers. Took me nine months to build a relationship and get them to trust me and me to trust
31:15 them and work through an LOI. And uh the one in Mississippi was on the market. Uh
31:20 it’s kind of funny. I passed on it because it’s it was Mississippi and I didn’t map it. So, I just saw Mississippi. I’m like middle of nowhere.
31:28 Uh totally judgy by the way, right? But like there’s a lot of nice places in Mississippi. But I was like pass. And
31:33 the business only had 10 employees. Normally I look for a business that’s got like 30 40 employees. So there’s enough mass outside the seller. And uh
31:42 kind of an independent sponsor that was working with me to try to find a business to buy. He’s like, “Well, I like it. I’m going to go see it.” I’m
31:47 like, “Okay.” He goes and sees it. Turns out like all the manufacturing lines are just highly automated. That’s why there’s only 10 people in the business.
31:53 And it’s a great little business. And it’s a whopping like 15 minutes from the Memphis airport. So yes, it’s in
31:59 Mississippi, but it’s basically in a large metropolitan area. So like I passed and it was just I was 100% wrong.
32:06 So Scott goes and sees it. He calls me. He’s like, “You’re going to love this business.” I’m like, “Okay.” And uh
32:11 great sellers. Again, all they wanted was the business to stay. They wanted full liquidity. Uh they cared about what
32:18 happened to the people. So, we bought that business in April of 24. Bought the
32:24 building. Um, went in day one. The employees that were there didn’t have health insurance, didn’t have a 401k
32:30 because it was a small business. So, they ran it like a small business. A lot of exclusions. We went in day one, put
32:35 in health insurance plan, put a 401k in plan, and all that was built into our model. And, uh, never really been been
32:42 doing really well. So, yeah. And I think it’s those that you you touched on something that I think our listeners need to understand is when
32:48 you’re buying a business, you know, don’t don’t be that penny pinching big private equity. Like take care of those
32:54 employees and those small businesses and they will go to war for you. And and stuff like health insurance is so
33:00 impactful for people and their families. Oh yeah. I mean, they’re just going to love you to death. And and and now you’ve now
33:06 you’ve now you’ve cultivated that, you know, and got them on your side versus kind of the skepticism that you’re the
33:12 new guy and what is he going to try? he’s going to fire off or lie lay everybody off and instead you’re doing total opposite you’re investing in them
33:19 and in the same vein thing too plan for that investment right like that’s what we call the J curve right you know someone selling a business usually
33:25 running it as lean as they can run it right trying to get that NOI up or that IDA looking higher and so whenever you
33:32 buy a business assume you’re going to probably do pay increases for people you’re going to be rolling out additional benefit you’re going to be
33:37 doing things that the person wasn’t so that’s actually going to eat into your IBIDA that’s where you kind of go through the bottom of that Jay before
33:43 you start to then, you know, see the net gains from that. The the J curve is a real thing. That’s part of why we don’t put a ton of
33:49 business debt on because businesses will go, I mean, the market slows down, the market goes up, market goes down,
33:55 businesses definitely go through J curves uh during times of big change and we don’t want to be stressed over, you
34:02 know, covering our our debt load. So, we we try to operate them with a lot of free cash flow and um yeah, I mean,
34:09 we’re this is this is like a passion project for a lot of us, right? Like so you know when I spun out of my last firm
34:15 I I could have just sold it all and gone to the beach and you know my wife probably would have killed me and uh I
34:20 probably would have been bored in like you know two and a half weeks and so we care a lot about manufacturing
34:26 businesses. We care about a lot a lot of the people in them and we want to run them a certain way right like and and
34:31 that’s not just purely about profit optimization. It’s about keeping these small businesses where they are and
34:38 keeping the people and scaling them and making sure they’re going to be successful. are going to be here 50 years from now. And so it’s also about
34:44 leading the business the right way and invest reinvesting in the business in the right way. Um so and and every
34:51 everybody in the portfolio is very much that way. I mean this is uh it’s a passion project for for a lot of us.
34:57 Got it. Awesome. Ryan, well you know before we wrap maybe you know you’ve done several acquisitions. What are some of the what’s the biggest mistake you
35:04 made? And then maybe in that same vein what’s just the biggest advice you have for people? Oo. Um,
35:12 I don’t know. I mean, the the biggest mistake I made is um even though we
35:17 talked to a lot of people, I probably still haven’t talked andworked to enough people um to really understand
35:23 everything or to leverage our network as as much as we could. Um, it hasn’t hurt
35:29 us financially or, you know, we haven’t had a bad acquisition. Um, but I I think I probably would have
35:36 slept a lot better over the last, you know, three and a half years and not feeling so isolated or as much on an
35:41 island. Um, you know, it’s it’s all worked out. I mean, our investors are getting a 25% kind of annualized return.
35:49 Um, you know, by like kindergarten math, which is which is the way I like it. It’s not complex math, you know. Um, and
35:57 uh, all of our companies are doing well. We’ve been able to retain employees and we’re putting money back into them. You
36:03 know, that’s kind of what excites me and gets me out of bed in the morning. So, awesome. Yeah. Love it.
36:08 Well, so we’re flipping over to our rocket round, which are the three questions that we ask all of our guests, you know, so I’ll go ahead and get right
36:15 into this. So, what do you like to do in your free time, man? Outside, I mean, obviously you’re you’re running around
36:20 the country buying up businesses. Do you have any free time first off? And if so, what you do? No, no, no, I do. I I do. I like to
36:27 travel. I’ve been to all seven continents. Uh so my wife and I travel a good bit. I travel a lot for work, which
36:33 I actually enjoy. I travel a lot outside of work. Uh and I’m a big biker. I ride my bike a
36:38 lot. I did uh years ago I did a race from uh California to Baltimore on a bike, which is called the race.
36:44 Motor bike or bicycle? No, bicycle like pedal bicycle. Got it. I just got back from a I did a catted canyon lands in Moab, Utah. So
36:50 three days out carrying everything. So I just got back from that a few weeks ago. Yeah. Perfect. Perfect. Well, next question. been a most
36:57 memorable moment in your business journey? Uh for me it’s been all the downturns. Uh it’s probably what shaped my career
37:03 the most. So I was I was in telecom during the telecom bust which I’m old enough a lot of people don’t remember
37:09 that. And then I literally left telecoms went into building products and I was in building products during the housing market crash, right? Housing market goes
37:15 to whatever 40% of whatever it was a few months earlier. Uh, and so I I’ve lived
37:20 through a ton of downturns in industries where you watch good companies have bad
37:26 things happen to them and good people have bad things happen to them. And so that’s shaped a lot of my view of of
37:32 running a business, being responsible for the people in a business and how you structure a business, right? like 10%
37:38 down, 90% debt from the SBA sounds great until COVID happens or interest rates
37:45 spike or any of the other uh you know unprecedented things that people say
37:51 that just tend to happen every four years with like a different name, right? And so that that shaped my career one,
37:58 it gave me a lot of job opportunities that you know downturns give you a lot of opportunities just like uh good ups
38:03 do. Um, but it’s resulted in me pretty being pretty conservative in business.
38:09 Um, but you can get really good results while still being conservative. You don’t have to necessarily take a lot of
38:16 really out there risk, you know? Yeah, I completely agree. And so, last last question here, man.
38:22 So, what is your favorite tool or resource? Yeah, I was thinking about that one
38:27 since we started. Um, podcast, of course, man. No, like honestly, like I’m a little
38:33 embarrassed now. That’s kind of what I was going to say. I I uh one of my partners made me do a podcast like I think a year year and a half ago. Uh and
38:40 I was like this is bad. Like I should never be taped uh in on the internet, right? Like I’ll just get cancelled very
38:46 very quickly, right? As it is, everyone in Mississippi is upset with me because I kind of threw Mississippi some shade
38:51 on this one. Um but it’s actually been a great tool. I mean, one, everyone I do, I meet somebody cool. I learn something.
38:59 And then I get a lot of outreach from it from uh people looking to buy a business, sellers, investors. I never
39:05 thought that we’d get kind of the response rate we’ve gotten on some of the podcasts we participated in. Uh and
39:11 so now now I do conferences or you know you do roundt discussions at conferences like that level of networking I had
39:17 never done in 30 years in my career. Uh and it’s actually been a really powerful way to meet people. Uh, and then when
39:25 you get to meet those people, you end up learning a lot. Like even though a lot of times they’re coming to me to ask questions, I always end up learning a
39:31 ton. And uh, if I can learn two to three things every day, then it’s a good day.
39:37 Oh, that’s the powerful thing of going out and getting out there. And you know, if it makes you feel better, a, you did a good job on this podcast, and B, we do
39:43 the same problem with Mississippi cuz, you know, we’ve also looked at apartments that are just outside of that
39:48 Memphis area, not realizing that essentially, you know, the the suburbs of Memphis are technically a me a
39:55 Mississippi address. Actually, pretty it’s a nicer part of uh Memphis. So, well, hey, since since we gave you the
40:01 answer to that last question, I’m going to ask you another one. Right. Okay. So, you’re six acquisitions in,
40:07 right? you know, what is what does your dayto-day look? Are you looking for that next acquisition? Are you guys just
40:14 maintaining and building out kind of that infrastructure to to to enable those acquisitions now? Like, what does
40:19 that look like for you? Yeah, we’re we’re definitely looking. I mean, I tell everybody, I’ll buy every good business I find where it feels like
40:26 a good partnership with a seller, right? And it’s hard because you got to look at a hundred of them to find a good one. I
40:32 probably spend 50% of my time looking for the next deal and 50% of my time bouncing around the companies inside the
40:39 portfolio trying to help them run and deal with problems. Um, and then you know we the nice part about North Park
40:45 Group is we’re all partners. So, uh, Scott who’s running NeverLink in
40:50 Mississippi is a partner inside of North Park Group. So, he’s sharing in the whole portfolio, not just his company.
40:57 So he shares in the management fee, he’s sharing in the incentive equity for the whole portfolio. So Scott’s also out
41:02 there looking for deals. And Brian in Ohio is also out there looking for deals, both bolt-ons and just a new
41:08 deal. So as we’re building scale, we’re getting more people that are out there kind of searching, uh, which gives us
41:14 the ability to hopefully, you know, bring continue to bring in two to three acquisitions a year.
41:20 Love it. Love it. Awesome. Ryan, been a been a great show. We appreciate it. And how can people get a hold of you, Ryan? Uh yeah, you can hit me on my
41:27 email. Uh it’s ryan snn northparkgroup.net. Um and then you can hit websites
41:33 northparkgroup.com and uh I pretty much respond to everybody that reaches out. So perfect. And we’ll put those in the show
41:39 notes. Thank you very much, Ryan. Wealth of information on this one. Yeah, thank you. Thanks for having me.
41:44 We appreciate it. Thank you. That was fun. Thank you. Thank you for listening to the M&A Launchpad podcast. If you’ve enjoyed
41:50 today’s podcast and would like to support us, please leave us a rating and a review after you listen. If you’re looking for guidance on your next
41:56 business acquisition or sale, capital to support your next business transaction, or to invest in a private equity
42:02 opportunity, visit equity launchpad.com to learn more and to connect with our team. If you know of an individual who
42:08 would be a great guest for the show, head over to equityaunchpad.com/nominate
42:13 where you’ll have the chance to refer yourself or someone else to be a guest on our show. I’m Casey Mchu and I look forward to talking with you next week.
