Making a Career of Buying Businesses

(upbeat music) - Welcome to "Aquiring Minds," a podcast about buying businesses. My name is Will Smith. "Aquiring and Existing Business" is an awesome opportunity for many entrepreneurs. And on this podcast, I talk to the people who do it. Today's guest, Pete Seligman, has been an acquisition entrepreneur for almost 10 years and has acquired five companies in that time. He's based in Sydney and in 2012, when he first started looking for a company to buy the terms acquisition entrepreneur and ETA or entrepreneurship through acquisition, he hadn't heard those terms and wasn't aware that this was even a thing. It was more like he and his business partner said to themselves, "Hey, instead of staying on this corporate track until we retire, let's have an adventure, let's buy a company." And they did, they bought their first in 2013, an instrumentation supplier to mining companies. And that first acquisition set him on this path that has been really fruitful. And now he's raising awareness of acquisition entrepreneurship in his native Australia. He's got tons of insights and stories from his 10 years buying companies, really enjoyed my conversation with Pete. And by the way, if you're searching for a company to buy, even if you're not Australian, reach out to him. He's an open guy and eager to help. Here he is, Pete Seligman. Pete Seligman, thank you for joining me today on acquiring mines. - Thanks Will, it's a pleasure to be here and to have the opportunity to chat to you. - You are an experienced acquisition entrepreneur, you're based in Sydney. You've acquired five companies starting in 2013. So you've been at this for nine years, which in the world of search and acquisition entrepreneurship makes you an old hand at this stuff. And obviously you've not done it five times. And you've also gone through the complete cycle, acquiring something, serving as its CEO, finding an operator to come in under you, stepping out, serving on the board. So you've seen this from many different angles. We're gonna get into a couple of your stories. We don't have time for all five. But why don't we start with your corporate guy before? So tell us how you did this transition from long time corporate guy to striking out on your own to buy a company. - Sure. So I'm a qualified engineer, a civil engineer. So I dig holes and then I also got a finance degree as well. So I have both of those qualifications and over about a 15 year period, I did a range of roles and I've been saying to people recently, I just proved that I've got a short attention span. So I did everything from engineering design to construction, to project management, infrastructure, investment banking, property, all sorts of things. Big companies, big global organizations down to very, very small businesses as well. And I got to a point in 2012 when I kind of realized that I could see what the corporate track looked like for me over the subsequent 15 or 20 years. I could map that out quite easily and it just didn't have the autonomy or the accountability that I was really looking for. And when it comes to accountability, it's what I was really looking for strangely was, I wanted it to hurt when I fell over. So I felt like in that big corporate environment, you know, things can go well and other things can go wrong, but ultimately you kind of relatively safe. I wanted to feel it a bit more. I use the analogy quite often of selling a boat. If you're on a really big boat, you've got a particular job and you can do that job well. If it goes a bit bad, the boat still pretty much performs as it would have. If you're on a very, very small boat and you make an error, you're probably going to get wet. And I want to feel a bit more of that. So me and a mate of mine, a good friend that I'd known for a long time, he had good experience in the space as well. So he'd been working for one of the big consulting firms for a long time in the M&A space. I had been in investment banking and other things as well. And we decided, let's have a go. Maybe the way to do this is to find a business to buy. And pick why that and not start your own. I think it was a bit of a self-awareness thing really. I think we realized that neither of us had a brand new idea. None of us, neither of us were a starter, but we knew that we could scale and we knew that we could buy because we'd done that for other companies a lot. I mean, a lot bigger. So we'd done global billion dollar deals for investment banks before. So this was going to be a bit different. But we decided that neither of us were founders from a startup perspective, but we'd love to have the opportunity to scale something that already had a little bit of track record. So yeah, so then basically I remember it was about September, October, 2012, we'd just been chatting about various things. And we thought, well, let's just start looking. Let's just start that search process. Neither of us knew what ETA was. Neither of us knew what a search fund was. So it wasn't really inspired by any of that. It was more just us saying, we've bought companies for other people before. Let's go and buy one for ourselves. And we did. Can I ask, did you at the time recognize that you could finance an acquisition? Because for me, that was a giant epiphany. Like the difference between seeing a million-dollar business and thinking I have to have a million dollars versus thinking I only have to have some much smaller percentage of that kind of broke up in this space for me. Were you already savvier than that? So I think we understood transaction structuring because of the history of work that we had had and the kind of business that we'd been in before. But I think recognizing how to translate that into a very, very small end of the market was a little bit of a learning for us. But ultimately, both of us had done reasonably well in our corporate careers over the 10 years prior. And so we had a little bit of money saved up. But it was only the way I described it to people when I'm explaining it to friends is it's the equivalent of if me and a mate went and bought an investment property that we could rent out. It's that kind of scale of money. We're not talking about millions and millions of dollars. We're talking about hundreds of thousands of dollars combined with hundreds of thousands of debt to have enough money to acquire a relatively small business. So we knew that with our track record at that point, we potentially could have gone and raised a fund. We wouldn't have called it a search fund because we didn't know what that was at the time. But we could have raised a fund. But we decided quite deliberately that we wanted to do it by ourselves just to actually frankly prove we could do it before we started putting other people's money at risk. So yeah, so that's kind of how we got to it. We just started looking mainly going through brokerage. And there was enough businesses to look at estimated by saying we probably skimmed through 200 businesses that spoke to 50 met with 15 issued offers on five and then bought one over about a six month period. OK. And just by the way, is that the same sort of funnel that you, when you're helping people with search today that they should expect? Or was that were you either really lucky or really unlucky? And how many deals you had to look at? So I think that we were so Sydney, as a greater Sydney, has a population of let's call it around four or five million people, four million people. We wanted to buy something that was in Sydney. A lot of the searches that are searching nationally in Australia and also in the US, as I understand it, go for a national search and they're happy to relocate and all those kinds of things. But both of us had young families and wives who had corporate careers. So we had to stay where we were. So that definitely puts a ring fence around the addressable market. But I think that that's probably about the number that you look for in this marketplace. In other markets, you might have different numbers. But probably those ratios are about right. And they're not impossible to navigate either. It's not too much to look at. If you've got some good parameters around how you're going to filter those opportunities as they come up. Sure, sure. And so you all obviously, you had those parameters pretty well. You were already, you were already pretty sophisticated. You were new to search, but you'd done M&A at a billion dollar level. So so you knew you at least, you know, you knew your numbers. Yeah, we had an idea. Yeah, I mean, my business partner was a chartered accountant. I mean, still is a chartered accountant. And so he definitely understood the numbers very, very well. And effectively, like when we were both living in London back in 2007, 2008, me and my wife had relic at it there. And he and his wife had relic at it there. He was working for Pricewaterhouse Coopers. And I was working from Macquarie Bank as an investment banker. And interestingly, PWC was advising Macquarie on the acquisition of large businesses in the UK. And I was working from Macquarie, he was working with PWC. So we'd even worked on the same deal teams on those large acquisitions before as well. So yeah, we knew that part of the equation. I think in terms of those parameters, we also, it's also like when you're going to buy a house, you kind of know how much money you've got to spend. And that provides another pretty quick filter. You know, you can either afford it or you can't. Right. You're not going to go looking somewhere where you know the houses are just going to be too expensive. So that kind of helps to keep things as targeted as possible. Sure. OK, great. Well, now tell us about, I think this first acquisition was among your best. So maybe why don't you tell us the story of what you can of that one? Sure. So I think this first one, the reason why I like this one the most is I think it is relatively-- let's call it relatively traditional. It follows a lot of the parameters that you'd normally find in a search type acquisition. We did it as a self-funded search. So we funded the search. We funded the acquisitions and no external funds. It was a very, very small business. I'd say probably at the very small end of what you would typically find a search you would buy. So earnings less than a million. OK. It was founded by a mining instrumentation technician back in 1988. And he and his wife had been running it with about three or four technicians for about 25 years. And effectively, if you imagine on a mind site, you've got conveyor belts running all over the place carrying various materials to and fro. There are instruments underneath those belts that measure the tons per hour that are running across the belt. And this business designs manufacturers and then maintains and calibrates those measurement instruments. And so-- It's the manufacturer as well of those instruments, did you say? Yeah, manufacturer and solution provider. So some components are OEM that we bring into the solution. And other parts we manufacture ourselves. So the particular instrument has quite a few moving parts to it. But yes. I'm surprised that a manufacturer of something like that was such a small company. Yes, so interesting. Yeah, interestingly, there are probably two or three really big players. And then lots and lots of small players. Because what the smaller players do, which is what we used to do more often, now we do less of, is you're more of a solution provider. So you're combining the products of major OEMs into combinations to solve particular problems on site. So with each conveyor installation, you've got different scenarios going on, belt wits and angles and all sorts of things. And so you need to-- there's a bespoke element to it. So yeah, so that was the business that we brought. At the time, had a handful of employees to whom were the sellers. And I dropped in as the CEO from day one, sitting on a second hand student desk in the corner of a tiny warehouse office in Southern Sydney. So very, very different to six months prior, when I was sitting on the 45th floor of a CBD office. Did you have a, what the heck am I doing moment? Or multiple moments? Yeah, I definitely think one of the things that when I speak to people that are considering search, I tell exactly that story. Because I think it's important for people to recognize that this does require you to be comfortable in those different environments. You're not going to be walking into the city and grabbing your coffee and heading up in the lift and getting your daily calendar from your personal assistant and having a team of how many-- it's not going to be like that necessarily. And you need to be ready for the gritty aside of that equation. But I was saying to some of the other day, it's a bit like climbing a mountain. Like when you get to the end, there's a great view. And it's the same from a search perspective. When you make your way through this journey, it's fantastic. Now, if you're the kind of person that also enjoys the rough and tumble of the climb up the mountain, then it's great. But if you're only kind of just dealing with the climb for the benefit of the view, you're probably not going to make it. Because you have to actually enjoy the struggle. You have to enjoy the kind of dirty parts of that process. Because then you'll be successful, I think. So yeah, I mean, I really liked it. I dropped in there and was there full time taking over from the existing owner. It was an interesting transition because he was still on the tools. Whilst he was the owner of the business, he would still go out and fix the instruments and do that sort of thing. And obviously, that was not something I could do. So as part of the transition, I have to then start recruiting relatively quickly to keep the capacity up. And now that business, just to jump to the end before we can kind of answer some questions you've got. Now that business, a few years on, is around about 35 people. We've got three offices across Australia. And the turnover is approaching over 10 million when we bought it or was less than two. And the CEO that's in there now is actually a guy who had previously done his own search. And we invited him onto the share register and into that CEO role as part of taking it through its next phase of growth. So congratulations. That's a great outcome. Yeah, I think it's really good. It's the kind of-- I think it sits right in the middle of what you'd expect for a search type outcome. If we wanted to sell now, which is about when a search it would sell if they had external funding, we could sell and achieve all of the kind of hurdles that a search fund would normally have. But because it's only really made my business partner and a couple of the guys in the management team, we want to keep it for another five or six years and keep growing it. So we're not going to sell. But if you wanted to tie it by around it now, it would do everything you'd need it to do. And did you have the perspective of when you acquired it, it would be a permanent equity style acquisition, which it sounds like it kind of is. Like it sounds like you just set. I mean, you have no plans to sell it although you might in a few years. But I could also see you holding onto it indefinitely. So when we first, when we were talking back in 2012, when men, business partner were talking about this as a pathway, our original idea was we'd buy a few businesses and just hold them, you know, and hold them for a long time. So absolutely. And this was one of those ones that we always thought, you know, we could just continue to hold and grow. I mean, we're in a position now where both of us sit on the board as non-exact directors and it's fully under management. So we enjoy being a part of the team, but we're not critical to the data to our operations. So it's exactly where you'd want it to be. And I think over the years as we bought more of these businesses, there were some occasions when, you know, we just got approached by third party who said we'd love to co-invest or we'd love to buy that from you. And, you know, everything is ultimately in business, everything's for sale if the price is right and the terms are right. And so we ended up exiting a few on that basis. - So it's not that your idea of permanent equity has shifted really. It's just simply that if an offer comes along, you'll entertain it. And if the offer is sweet enough, you'll take it. - Yeah, exactly. I mean, I think for SRO, which is the first business we bought, it's interesting because there is a certain, which you always tell owners not to do, right? But there is a certain emotional element there. Like I do think we really do actually love that business. So I need to be, I did a talk to the search funder.com guys a few months ago. And I was kind of saying you go through these phases in a search and in the last period, you need to go cold on your investment. You need to become, you know, really objective because you need to get to that point where you're ready to sell it. And so you need to bring that kind of cold reality in. And I think that for that investment in particular, I think even when we get to that point, it will be tough. But yes, I mean, with one of the other investments that we made in 2015, by the time we got to 2017 or 18, we're approached by private equity who wanted to buy it. Now we only sold down a portion of our state to allow them into the majority position, but they made a great offer. And so we sold a majority of the business to them. So we still sit on the board of that one and we still have an investment in that one. But now that's definitely something that's in that private equity room. Speaking of private equity, Pete, when you and your partner were considering this path, why did you not consider doing private equity instead of acquisition entrepreneurships and sit, you know, it's kind of an intermediate step between between being a searcher and being a Hoi Di-Toi investment banker. Yeah, yeah, I think it's because I really wanted to get my hands properly dirty. And I think I felt you wanted to climb up the mountain. Yeah, I feel like if we'd gone to the private equity structure, it would have been far more about being a fund manager, investment manager rather than being a business operator. Yeah. And I wanted to be a business owner and an operator. I didn't want to be a fund manager and investor. I feel like, understandably, when you're running private equity, you spend at least as much potentially even more time thinking about your investors than thinking about the business. And I wanted to spend as much time as possible thinking about the business. Right, right. And back to SRO, what about this business? Did you like so much? I assume it was that you saw this growth potential. Yeah, so we had a few, as we was talking about before, we had a few relatively simple parameters. We wanted something in engineering services, industrial products, manufacturing that kind of realm, I think, Ian, who's my business partner in Alpen, he whilst he'd been working at PricewaterhouseCoopers, had been focusing quite a lot on small to mid market industrial businesses. So he already had some experience in that space. And obviously, my background as an engineer meant that I kind of had a fundamental understanding of those types of businesses. So definitely, we looked in that kind of space rather than like consumer goods, retail, SaaS technology, like we looked for industrial products and services, which again, not that I knew anything about search, but quite typically searches end up looking in that kind of services and engineering space as well. I think also because it's a little bit unloved, it's becoming less so now, interestingly, in Australia in particular, a lot of these industrial and manufacturing businesses are getting more and more sought after, not least of which, because of the pandemic events of the last 12 months and local supply chains and things like that. So we wanted that kind of business. We wanted a business that had obviously, we'd track record, positive cash flow, or those kind of financial elements. We also wanted a business that was selling directly to proper end users, hopefully blue chip end users. So for example, once we found out we're in the mining sector, we wanted our business to be selling directly to the mine, like the BHPs, the Rio Tinto's, those kinds of companies, rather than selling into a supply chain of multiple layers of contractors, because the close you are to the end user and the miner in this case, the more certain you are, that really you're solving a problem for them and therefore you can be a bit more reliant on that revenue stream. So we wanted the purchase orders that were creating the revenue to be coming directly from those people. So that was another thing that we had. And we also wanted the business to have something unique and when I say unique, it doesn't mean that it needs to be competition-free, but if you think about a conveyor belt, there are lots of things that happen around a conveyor belt on a mine site. And for example, there's lots of electrical services that happen around all of that machinery, but we wanted to be that subset of the electrical services that was the instrumentation. So there's lots of competition in the instrumentation space, but it's more specialized than just the general electrical contracting. So in every single industry, there would be similar parallels regardless of which industry you go into, you might find. So for example, in the construction industry, it might be the waterproofing guy, right? So you're not just the painting guy, you're the waterproofing guy. So it's still painting in a sense, but it's got a specialist aspect to it and it's got just that higher level of value to the end user or the customer. If something goes wrong with it, it's a little bit worse than some other services that might be provided. So if you then boil that down, it means that we charge our guys out at 50% more per hour than what electrical contractor would. And our guys get flown around the country to go and visit sites, whereas for other services, you might just get whoever happens to be local. - So yeah, so that's the description of a few of the elements that we kind of were looking for and hope to find in that business. - It sounded like it had quite a bit of key man risk with the owner actually going out to sites and servicing some of these installations himself. You knew that going into it. So I assume you had a plan. What was that plan? I guess it was, he was gonna leave, so you're just gonna have to replace him quickly and make sure that the business was cash flowing enough to afford that, that essentially. - Yeah, it's a little bit like that. The other thing that I'd say, which again is a comment that I'll make to quite a few searches when they're in this space is more often than not, you will find that the owner, even if they say that they don't get involved, they're still pretty involved in the business. - Sure. - And so the real important thing is that next layer down, like who is just below the owner? Who are those two, three, four, maybe even five people that are just below the owner? That's where you really get your confidence around your ability to then take over when the owner's gonna leave. And in this case, there were two key guys who were both senior technicians that were delivering the same type of services what the owner was on those sites. And those two guys are still with us today. And so it was a matter of spending enough time with those guys, even during the due diligence process, spending enough time with those guys and not even with them without the owner, this is to make sure that you're fully confident that on transition, you are gonna have that continuity. But being really confident that that next layer down has enough sustainability in it to carry that transition is really, really important. And then yeah, as you say, just working out how to then relatively quickly get good at recruiting. And recruiting is such a, you know, I built teams in corporate environments before, but it's very, very different when you're building a team in a small business because, you know, if I was working from a quarry bank or Stockholm, which is a big property company here in Australia, and I went out to recruit into my team, the brand did most of the work. - Yeah. - Like I was just the guy that happened to be on the other side of the phone when, you know, whereas the brand did most of the work, whereas when you're in a small business, like the brand, like maybe now, and hopefully I'd like to think that now, SRO's brand does a fair bit of the work. Now, I think we've started to get to a point now where people that we're recruiting actually know a bit about us and what we mean from a cultural perspective. But back then, the brand really didn't do any of the heavy lifting when it comes to the recruiting. So it really meant that that process was something we had to get pretty good at. - Let's move on to another one of your acquisitions that didn't go quite as well as SRO tell us the wholesale travel agent agencies for us. - Yeah, so I think the good thing about search, which is what I'll call this even though it wasn't at the time, but you know what I mean? Like the good thing about buying existing businesses that have like a track record and existing operations and existing customer relationships and all those sorts of things, is that it's very hard to kill them. Like so, usually, which is the same as in this case, when things don't go the way you want them to go, you actually still get out with your shirt on. Like it's not like investing millions of dollars into a startup and then it all coming to zero. So I think the good thing about working in this market is that you can have some things that don't go the way you want them to go and you don't end up syncing a whole bunch of money into that process. - Peter, are you saying that there's all upside and no downside in this world? - Is that what I'm hearing? - I think that's good to be true. - Thank you, well, I think what I would say is that when you're jumping on to a ship that's been sailing for quite a long time and it's relatively robust. If you can't manage to sail that ship to the destination you were hoping, it's more than likely that you can find someone to hand the ship onto rather than crashing it into the rocks. Like I just, I think that definitely there will be case studies where people have made a real mess of things and have bought a business pumped a whole bunch of it, the retained earnings or additional capital into it to try and pivot or grow or whatever and then ended up essentially swallowing itself through that process. There would be definitely case studies like that, but I think even if you look at the Stanford reports that come out on a biannual basis, most of them say that the downside scenarios are money back or close to because usually if things are going wrong, if you identify a quick enough, you can find someone new to pass it on to that can take it on. So I think, I mean, I think the thing that I'd say about, the lessons that we learned from that process are probably two main lessons that I'd pull out from that process. One would be quite often I say to people that are looking for businesses and trying to work out industries, I say don't spend too much time on the macro because you don't need huge tailwinds to make this model work, particularly if you're buying a small business, if you're buying a small business in a relatively large market, as long as the market is hovering around flat, maybe a bit of growth, most of your growth is going to come from what you do internally within the business and how you grow it rather than what's happening to the market as a whole. But one thing we learned about this is that we brought into an industry that was suffering massive disruption from a digital perspective. - Tell us the 30 seconds on this business in this industry. - So wholesale travel so it had relationships with effectively product owners, which are like hotel operators throughout Europe and Italy and selling those packages to travel retailers in Australia for Australians to travel to Europe. - Right. - Now the strength of that business was its relationships with those hoteliers and owners in Europe, and it's the ability to get the packages and the first rots were refusal and the allocations through peak periods, which had served it very well over a long period of time. And obviously the disruption in travel that was happening at the time was all around online, hotel beds, Airbnb, you name your website, all that sort of stuff going directly to the hoteliers and providing that service directly to the travelers. And that I think was a headwind that we underestimated. We had plans to try and pivot in that direction and also plans to try and increase the quality of the service to make it more bespoke. So therefore you could fight against the commoditization of those processes. And I just think ultimately it just then just becomes a race. How quickly is the headwind blowing and how quickly can you race against it? And it was very, very difficult. - So that was one lesson is I think point number one, you don't need to worry too much about the macro. Point number two, until the macro becomes so strong that you need to worry about it, right? So yeah, I'm so keeping on that. But the other thing that I'd say is, as I said when we're looking for SRO, we kind of inherently knew where our strengths were, around that engineering services, industrial products, manufacturing, those kinds of businesses, not only because we understood them financially, but we understood them operationally and also their products and the services they were providing. I guess with this situation we thought that we would be able to bring our fundamental business understanding to a new market, but it just turned out it was just too many steps to the right. So I think that again, it's similar to my first point really. More often than not, I tell researchers to keep a very, very open mind on the type of business that they might look for, because you never know what might show up and what might fit you and what might suit you. But you do need to be wary when you've gone too many steps away from what you really know is your core capability. You don't need to, like I wasn't an expert in bulk materials handling and measurement instrumentation for mind sites, like a long way from it. But I kind of understand engineering concepts, I understand construction sites, I understand manufacturing, I understand those kinds of things, I kind of piece it together, put my skillset up against wholesale travel and marketing for Italian holiday makers. You're probably a little bit too far away. Was that acquisition, which one was it, your second, third, fourth, fifth? So to be honest, I can't remember the sequence of events, but in 2015, we bought three businesses in the same year. Oh, and it was one of those, one of those. Well, I wonder, and the two others were two of the best that we've done. And that one, unfortunately, it just didn't work out the way that we were hoping. Well, what I was going to say is I wonder if you got overconfident because SRO, probably at that point, was starting to show its success, given that you were back out in the market looking for more acquisitions. Indeed, you made three in one year. Because when I think about, like for myself as a searcher, and this question of how narrow or wide to go in terms of industry or business model that I might acquire, I kind of feel like my gut can tell me pretty well. Like there are just some industries or types of businesses where I'd just be like, I have no, there's just nothing about it excites me. It just seems, I could just intuitively know that it ain't for me. And then others, even though they might feel foreign and they're a little intimidating or whatever, I can imagine myself in the chair. That's exactly it. And so I wonder, but I wonder, is that do I just have a good intuition or is intuition enough to trust or what? Because you guys, even already having the success of SRO at your back still took a misstep. Yeah, so I think you're right. I think what happened was we started to think that maybe we didn't need to stay as close to our core as what we should. And I reckon if you were to go back in time to that 2015 period and sit us both down and say, do you really think you know how to do this? We'd probably say, no, but it'll be okay. I probably think, I probably think that underneath our intuition probably was telling us that this isn't really our sweet spot. And so one other thing, I was speaking to a researcher yesterday who has three opportunities in front of them right now. And they're three quite different opportunities. And we went through all of the numbers and the opportunity and the everything that objectively you could assess about those three opportunities and all of them stack up. And so ultimately, I just said to him, it's really just, you've just got to project yourself into that role, project yourself into that business and see if you can be passionate about. Like is it something that you can imagine yourself doing? People say quite often, you know, do I need to do it? And it's interesting, I was talking to Jake Nuperson about it the other day. Do you need to be passionate about the business? Again, everything, everything's on a spectrum, right? Like yes and no, I think you need to be passionate enough. Like maybe the other test is you're at a barbecue with a group of friends on a Sunday. And they're saying, also, what are you working on at the moment? You need to get excited about telling them the story of what you're about to do or what you're doing. If any part of you like pauses and kind of says, oh, yeah, I'm just about to buy, you know, X Y Z and you're kind of nervous, then it's probably good indicator that maybe you shouldn't be doing it. Like you don't need to be passionate about actually doing whatever the business does or whatever, but you need to be excited to be involved in that project. Yeah, yeah. And that's something that it shouldn't be that hard to test. You should just be able to kind of like ask yourself or role play like you just said, like telling your friends at the barbecue or the cocktail party. And like, do you do that with, does your voice, do you start to speed up as you talk or do you kind of have to drag it out of yourself, the explanation? Yeah. Just before we move on to a couple of the last questions here, Pete. So just to him on the wholesale travel agency and to tie that to an earlier point, you know, where you talk about how business, if you're acquiring a business that's already going, you know, a lot of the risk is kind of, it is mitigated because this is a ship that's already moving in a certain direction. And you said that like, yeah, there are probably case studies where people totally botch it because they invest a ton of money with the designs on a big pivot or something like that. And then I hear the wholesale travel agency and it sounds like what you guys had in mind wasn't just, like you saw these headwinds and you were like, yeah, but we're gonna navigate these headwinds doing this and this, like you had kind of a scheme, a grand plan to do something different than the business had historically done. Whereas with SRO, you were kind of like doing more of the same just more of it. Is that a fair characterization of the two stories? Yeah, absolutely, and it's interesting. I think what we did well with wholesale travel is we attempted to navigate that change whilst keeping an eye on that point of no return. So we didn't end up in a situation where we kind of continued down the wrong path and over invested in the wrong thing. I think it's an interesting way of thinking about different opportunities for search, though, too, is quite often, the parameters of a likely search target is a business that requires you to do more of what it's already doing in a better way rather than do something completely different. So definitely, there's always operational leverage. Let's just do what they're currently doing, but better, and therefore we'll do more of it and more profitably. And then there's just, let's do more of what we're doing. And the really simple lever to pull on that is regional expansion. We currently operate out of this city. Now let's go and expand to another city doing exactly the same thing. So regional expansion, operational leverage, probably the first two line items of strategic growth for any search. And if you've got those two levers to pull and you know how to do them, it gives you real confidence that kind of underwrites your investment because then in addition to that, which is kind of what we're doing with SRO now, you can then start to think about things like product line expansion, bolt-on acquisitions, and other things because those two first levers have been pulled to create that accelerated growth. So now we're in a situation where we've got those first two levers well underway in terms of operational leverage and regional growth. But now we're starting to think about OK. Now how do we increase share of wallet by increasing the product range? Do we do that organically or by acquisition? You can start to think more strategically in that sense because you've underwritten with those first two levers. So I'm trying to draw a lesson away from this. And I think it is this. If I look at business listings and I'll get excited about them and the potential, I'll get creative or clever. And I'll be like, oh, you could take this business and do this thing and this thing and the other thing with it, which are slight diversions or from what the business is already doing. It's not simply, oh, I'll make it more efficient and I'll sell more. It's two plus two equals five and bring this in and do that and do the other. And it sounds like that's actually hazardous. That yes, maybe later, but that shouldn't be your grand plan when you acquire a business. Your grand plan should be either more sales and or better operations. And then yeah, maybe later once you've been in the business and you've done those things, then you can start being creative. But don't think, don't have that be item number one on your to-do list when you set about deciding if you're going to acquire this company or not. Yeah, I think that's really well put. I think that I would design your base case around those first fundamental growth levers and I'd underout your investment on that base case. So that that sales growth, that regional growth and that operational leverage. The thing about those pivots and those big changes that you're talking about, that requires growth capital. So it requires an investment in the business rather than a payment to the vendor, right? So and as soon as you need to invest in the business, you need to get that capital from somewhere. And you can get that capital by reinvesting the profits of the business in those new initiatives. But the only way you're going to do that is by doing your fundamental growth initiatives first. So that's, it's almost like you don't need to discount, you know, when you said, like let's do all these other things and, you know, two plus whatever equals five and that kind of thing, keep those in mind. But they could be your second horizon. What you need to do is you need to say, well, the only pathway I've got to that is by firstly getting this business to a point where it can internally fund those other things. Because the only other way of doing that is doing another capital raise later on to fund those things. But yeah, I think it's not this or that, it's just that you usually need those fundamental growth things first to provide the internal capital for the other growth initiatives. - Okay, great. Cool, let's move on a little bit here, Pete. We're getting up on time and still have a lot of things I want to ask you. Let's just step back and look at your own path. Since 2013, in your first acquisition, bought a company five times. Well, with different degrees of success, but roughly, buy a company, improve it, put service CEO in many cases, as you improve it, step out, step out, hire a CEO or operator under you, retain ownership, and then rinse and repeat. Like, this is what the gurus, and I know you're, I'm not putting you in that category, but this is what the gurus sell. Hey, go out buy this company, get somebody to operate it and go buy that company, get that person to operate it, but you've really done it. So I want to ask you if how unlikely your path is or how accessible is it to the rest of it? It's to the rest of us, is it? Not just doing it once, but doing it multiple times. - So I think one thing that is probably a few things to that, it's always difficult because you want to make sure that you don't make it sound too easy. And so I try and think of analogies that help, and one will come to mind for me soon, but it's not easy, but it's possible, absolutely. And I think it's possible for a lot of people, it's not possible for everyone, both because not everyone, frankly, has the capacity or the capability or just the tenacity for it. I think that if you were to look at my lifestyle three years into that process, around that 2015 mark, like it wouldn't have looked very glamorous. Like you're looking at that small desk in the corner at SRF. - Yeah, like, and I didn't really have much if any of a salary, like it didn't, there were lots of other people that were part of my friendship and professional network that looked like they had a much more glamorous lifestyle than I did at that point. So I don't think it definitely doesn't look glamorous as you're going through that process. So I think, but I definitely think it's possible. I think one of the things that always stands out and again, if you look at the research that a lot of the universities do, there is a benefit to having the right kind of people around you. You know, I was partnered with a good mate of mine and I think being able to do it in a partnership helps. You know, he was providing a lot of that, well, not only confidence, so when you jump over Cliff, you're at least kind of jumping off with someone. But, you know, we would tag team and a lot of stuff quite well. I think that helps and that's where the search fund model works quite well because if you don't have an operating partner, you can surround yourself with investors who can provide similar levels of support or there are accelerators that are also at the provide similar kind of frameworks. That's, I think that's useful. But I think it's about, the other thing that comes to mind for me is having the right expectations. I think a lot of people rush. Like, I don't think, you know, it's almost 10 years that I've been doing this to get to this point. Like, that's quite a long time, really. And it's really only been in the last, you know, 18 months that I've gotten to a point where I'm fully relieved of my executive duties and have really started to get to the point where it's, where it's humming. So it's a long journey. You know, it's not three years or five years. I mean, a lot of people, even these days, when they're moving around corporate careers, we'll think of kind of two to four or five type of kind of stints in various roles. I mean, five years in the same role that a corporate would feel like in lifetime, right? So I think it's a bit of patience as well. You need to be persistently patient, I think. You know, the other curve that I talk about a lot is the fact that growth is always exponential. So you end up with this curve of growth. And what that means is for the first two thirds of that journey, not very much is happening. You're investing a bunch, a whole bunch of time energy and money for not really much gain. And that's really only in the last third of the journey that you see a lot of those gains. So I think if you're persistent and you celebrate the small wins like back, back in the first 12 months after buying SRO, I remember driving with one of the technicians up to a mindset in northern New South Wales. And we got a phone call from, no, actually, we didn't get a phone call. I called up one of the other mind sites that we'd quoted for a new wayer, new one of these instruments. It was like $15,000, like a $15,000 order. This is not a big deal, right? And he hadn't responded. I called back we're in the car. And he said, I've actually just decided to give it to the other guys like, you're not going to make it. And I said, no, no, this, you can't do that. Let me work out what we can do to make this happen because I'm sure that we can get you the right outcome here. Anyway, back and forward on the phone for the next couple of hours while we're on this long drive. And by the end of it, we secured the purchase order for the $15,000 instrument. And back then, that was like, let's go and have a big lunch and celebrate, you know, $15,000 or just order. But I think you need to be celebrating the fact that what that is indicated, you've won another site. You've got another customer on board. That's the first order of hopefully many like, you need to be patiently persistent with all of that. And that's what can make it possible. - Well, that was the small boat that you wanted for yourself. You were knocked around by the waves in the wind at that point. - Yeah, that's it, and if you enjoy that process, then you can continue to build on it. So no, I do think it's possible. It's not easy, but the benefit is I think for anyone that's looking to do it probably back then. But definitely now is there's lots of people around to help. There's lots of really highly engaged and experienced people that love helping other people navigate each process and providing their 2 cents on a particular opportunity or being a sounding board when they're having problems with employees or whatever. So it's hard work, but it's worth it. Another little story I'll tell you is I remember. I went to the X Games in Aspen years and years ago. So we're watching the mega pipe and the skiers come down the pipe and it was just phenomenal. I don't know if you've ever seen anything like that close up, but we got to stand halfway up the pipe. And whenever you watch things like skateboarding or extreme skiing or anything like that and you watch it from a distance, it looks really, they look like dancers, right? So they look like they're just flying through the air and it looks all graceful and smooth. - Yeah, graceful and smooth, right? I was standing a meter from the lip of this mega pipe and the sound of the skiers hitting each other, hitting the snow, the grunting from the guys as they're slipping in the air. It was noisy, it was messy, it was rough, energetic. Like close up, it was dirty work. Like probably from a distance, it looked really graceful, but it just reminded me that like those guys, like they're working hard and it's messy and unclean and not perfect, but from a distance, it looks really, really nice. And I think it's a nice analogy for what this is, right? Like from a distance, it probably looks, you know, look at that arc, you know, it looks really nice and successful, you know, up close, you know, it can be pretty messy. - We talk a little bit. - You enjoy the mess, it's okay. - Right, right. Well, not only is it okay, it also kind of sounds like it's key, like it's a bit of a necessity. We talk the other day about the profile of somebody who this isn't for and sometimes you talk to a lot of searchers or would be searchers and you will uncover in them, it tells that maybe this isn't the rate path for them, give us, what are some of those tells? - So I think, so quite often at the very early stages of the process, people will say, okay, I'm interested in doing a search I'd like to think about, you know, doing these kinds of industries or this kind of process or whatever. And so one of the things that usually I'll do is I'll say, why don't you go away and just work, listen to some podcasts, do some research, read the Stanford stuff, speak to a few brokers, get a few examples as the kind of thing they might do. And then I'll send them away with that homework and a few weeks later they'll arrange a call with me and I'll say, how did you go? And they haven't done a lot of the homework. So I think you can pretty quickly pick up whether or not they want something kind of laid out on a platter or whether or not they're willing to go through that gritty process of really understanding it for themselves. I think that's an important thing. I think in their history they need to have some good examples of you don't like a lot of people struggle in a corporate environment to get true P&L accountability. It's always a challenge in a career path. I don't think they necessarily need to have had that, but I think they need to have demonstrated their desire to want to really change things. So, you know, maybe they've been involved in a role where they noticed that something wasn't the way it should have been and they really did the hard work. Not only the hard work to make the change or design a change, but the hard work convincing those people around them that they needed to make that change. I think change is really important. And then I think the other thing, this is ultimately an entrepreneurial endeavor and any of those entrepreneurial endeavors come with risk. And I think that one of the good things about the search fund model is that provides a certain level of income to the searcher while they're searching. I also think the good thing about that model is that it doesn't provide the same level of income that that person could get elsewhere. There is an opportunity cost. And so what you need to do is you need to recognize that that person is willing to take on that opportunity cost. And quite often, searches will get really close to the brink of actually doing it and then realize that actually they prefer just to take the job at the corporate or the consulting firm that's gonna give them the certainty of income that they'd prefer. So I think it is a midway point. It's not a start-up, it's not VC. But equally, it's not a job. There is your halfway between, there is a certain level of entrepreneurial risk you're taking on and you need to be able to see that they're willing to do that. - Yeah, great. To close out, Pete, so you're in Sydney and you, what you're working on now is trying to bring search, acquisition entrepreneurship, more to have like grow the scene in Australia where it's maybe not quite as mature. So tell us what you're working on now and what people can do to follow along and how they can find you or reach out to you and participate in this. - Absolutely, so what we're doing at the moment, I'm really keen, I'm highly biased to the fact that I'm keen on this as a career path because I've enjoyed it myself. So I think that there are a lot of people that could suit it that just don't know that it's an option. So I'm doing my best to try and talk about it with as many people as I can to promote it as an option. I also think that it's a really good investment for investors who are keen to be more involved than they would otherwise be if they went through a private equity fund or some other form of investment, investors that get involved with search are much more engaged and have the opportunity to be much more engaged. So as an investor, if you want to be engaged, it's a really good model. And I'm also keen for all of the other parts of the puzzle, the bankers, the lawyers, the accountants in this region to learn more about it so they can support searches when they come to market. So for that reason, I'm talking to as many people as I can about it. I've got a podcast that I've started where I'm trying to interview people that have done it either here or offshore just to try and provide a bit of a resource for the guys in this market to learn about the different elements of search but also just frankly demonstrate the fact that it is a real thing. As you said earlier in the conversation, quite a few people say this is too good to be true but if I manage to speak to enough people that have done it, then I can demonstrate that there are real examples that have happened. So yeah, I'm on LinkedIn. Anyone can reach out to me on LinkedIn. I love speaking to people globally. I'd speak to a lot of people in America, South America, Europe, through Asia and love hearing about the stories of people that are doing search in those other markets. So I happen to talk to anyone from anywhere really. But also if there's anyone that has any kind of of their own personal stories from a search perspective that they'd be happy to share, I'd love to have a chat to them and help share those stories in this market so that we can get more Australians into search. - What's the URL of your website, Pete? - So the website is www.peatselicman.com.au - That a year, great. - This was great, Pete. Really, really great thoughts, really cool to talk to somebody who's kind of at the forefront of this in another country. So thanks for coming on. - Yeah, not a problem. It was great to chat and happy to catch up anytime. (upbeat music)