Teamshares CEO Michael Brown on Why Going Public Is Just the First Inning

Teamshares goes public to buy retiring owners' businesses

Teamshares is trying to solve the coming wave of small business owner retirements by buying those companies and making employees equity partners. It has acquired 92 businesses since 2020 and is now listing publicly to get cheaper, faster debt and stock to keep buying. The bet is that a lean parent with a focus on business models over industries can turn a fragmented, unglamorous market into a large public acquirer.

Takeaways

• Teamshares buys retiring owners' businesses at scale. Since 2020 it has acquired 92 companies, with about $500m of consolidated revenue and $60m of operating EBITDA. It targets traditional, generally non-tech businesses with $500,000 to $5m of EBITDA, and brings employees in as equity partners.
• Going public funds cheaper, faster acquisitions. Michael Brown calls the listing the first inning, not an exit. Public status gives Teamshares access to debt in weeks instead of two to three quarters, plus stock to pay for acquisitions. Its venture phase lasted six years.
• Millions of small businesses will lack buyers. About 6m US companies have employees, and 4.5m are owned by baby boomers or Gen X. Most will never find a buyer. Teamshares' software has seen 475,000 businesses since 2020, with 15,000 size-qualified a year.
• Replacing a founder takes multiple people. Teamshares learned it takes more than one person to replace a founder, so it brings in a president in two of three deals and works that cost into its math. It passed on a profitable crime-scene cleanup business it could not staff.
• Teamshares organizes around business models, not industries. Michael Brown says the world focuses on industry and SIC codes, of which there are 4,000 or more. Teamshares thinks in terms of business models, of which there may be only a couple of dozen, when evaluating companies.
• Parent company stays small on purpose. Teamshares caps headcount at 150 at the parent company following the Dunbar principle, down from a larger peak to 90 today. Two investment associates process 1,500 companies a year, keeping the center lean while acquisitions scale.

Terms of the listing

• Teamshares filed its S-4 and partnered with Live Oak. It expects to trade under the ticker TMS in the second quarter.
• It held an Investor Day on March 31 with a 90-page deck and a 90-minute presentation.
• Founders proposed a four-year lockup on their equity, released sooner if the stock reaches $25 against a $10 starting price.
• The five-person executive team invested $1m of its own cash.

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