Off the Beaten Path
After 14 years running a company as CFO and then CEO, I returned to investment banking on one condition, I wanted to spend more time “off the beaten path.” Smaller markets with great companies but with less competition. The idea came to me in an early conversation with a Seattle-based private equity investor, when he said, “I love smaller markets, the companies have less competition, lower employee turn-over and stronger, more-focused leaders. In larger markets, entrepreneurs can become distracted by every opportunity/product line/new market that comes across their desks.” Having grown up in Montana, gone to college at Gonzaga in Spokane and having a home on the Montana/Idaho border, I thought I would go explore and see what I would find.
I spent two months in the summer of 2019, visiting every major city in Eastern Washington, Idaho and Montana. I leveraged my network to meet with business leaders, politicians and local chambers of commerce. I explained our role as advocates for the entrepreneur community, helping plan and execute the full-sale or partial sale of companies. With 7 million private companies in the US with owners over the age of 55, most will need to transition to another owner in order to remain viable tax payors and employers in these communities. Often the entrepreneur waits too long and lacks a plan for this transition which can lead to a huge negative financial impact for his/her family and community.
We have spent time with the chambers of commerce, YPO chapters, bankers, lawyers, wealth managers and we have learned that indeed, folks need help to execute plans to monetize their life’s work. At the same time, private equity and family offices are “on the hunt” for companies with strong repeatable revenue streams and healthy profit margins, wherever they reside. Specifically, we have worked on two Montana recapitalizations (where an owner wants to sell part but not all of the company) where we have attracted capital sources from across the US. In one instance, we had 12 offers of varying types (strategic and financial-driven buyers.) In another Idaho example we were able to raise debt capital to fund a management buy-out of a founder. In this instance, we had offers from capital sources in Los Angeles, Philadelphia, San Francisco and Seattle.
In summary, there is a ton of opportunity “off the beaten path.” However, be prepared to show up regularly and be authentic. A city-slicker can be seen from a mile away.