Buyers and Builders
00:45:00 · Felix Jander
[00:45:00] S1: So just to repeat, right, what we did is one of those, and we deliberately decided against the others. What I can share now is experiences from my investments from other cases that also pulled some other levers than pricing. What I can share for instance is I have one investment and there we're more focused on growth and there we're focusing a lot on lead generation. So we generate leads in that business with cold outreach, with online marketing and also mailing and CRM tools to get leads for the local salesmen and owners that we feed to them and then they close them because there we have some found some potential that we can always take it's project based work. The more projects you have the better you can select the projects with the best margin. So it's a twofold lever. So on the one hand you have growth because you have more projects and the second lever is if you have more projects that you are declining then you have better margins because you only select the projects with the best margins. That's the the lead gen part. Then I have another investment where they centralized sourcing. So procurement. Yeah. So they have a team that centralized. So for them, it's really important because they have some parts that they need for the business and they have some synergies when they buy it centrally. That's pretty clear. What else do we say? What we later did now with Arsipa is we have this software play. That's also a good example with Medigene. So what we're doing there is so before you know the process when you come to into this doctor's practice and you do your assessment for occupational health then it's often very paper based. So you need to fill in a formula for your animesis and together with a software it's all digital. We generate reports automatically and you have a process that is very structured so there is no difference in service level or quality between the practitioners at least in theory. And that's also something, but that's a lever that needs significantly more investment than for instance, the central procurement.
00:47:11 · Mikk
[00:47:11] S0: Now that the journey from start to exit lasted approximately thirty six months, which is unusually fast. Can we talk a little bit about can you share maybe a bit about the investment returns and transaction to Warburg Pincus? What can you share?
00:47:28 · Felix Jander
[00:47:28] S1: It's a very broad question. I mean, I mentioned the number of employees that already gives you a good feeling that the company by now again tripled in size in just forty eight months. Right? So we continuing this pace, so to say. Yeah. Which is very impressive also by the new management. Yeah what I can share is it always makes sense also when we invest with Eva now or when we look at investments privately Freddie and I, often tell the teams you need at least 10,000,000 EBITDA to be exit ready. And why is that? It often comes along with at least 10 to 15 deals. So when you calculate 1,000,000 EBITDA per deal, and it also comes along with being a mid market deal, which is good because then you are open to another landscape of buyers. You don't want to sell to small cap private equity funds often because they are a bit more price sensitive. With mid market and large cap funds you can build a growth journey together. This growth journey often comes along with a better exit multiple. That's also what we kind of did with Arsipa. We got close to that figure and then we had a growth journey together with Warburg Pincus and it also reflected some of our compensation that we received as previous shareholders that we went on that journey and I'm personally still invested as you mentioned. I'm still a shareholder in the company and maybe that I can share. That gives you a feeling. We were such a mid market deal That gives you a feeling for the region of EBITDA we were. For our previous investors, think it was a very good return. Think Freddie and I, we mentioned in some other podcasts that it was, I think, 80% IRR or so we mentioned. So that number is already public and I can share.
00:49:16 · Mikk
[00:49:16] S0: When things went wrong, can you maybe share what went wrong? Because maybe there are some, again, obvious things which people who are listening and what you do yourself as well on day to day basis when it comes to making those investment decisions, backing other independent searchers? Are some of the things you always bring out, like make sure you look at this or make sure you keep a way of doing this. What are some of the things you would like to bring out because based on your experience, again?
00:49:45 · Felix Jander
[00:49:45] S1: I can give you an even answer. So so the fund that I'm currently doing that is investing in roll ups. So when I talk to founders there, I often tell them try to iterate early with the market. So when you are in this ideation period, then you should start very early. Just take your phone in your hand and call the people in the market. Discuss with them openly be transparent be nice and it brings you to result way faster than doing like desk research and modeling for ten days or so yeah so pick up the phone do some cold calling and iterate fast in those first weeks and months. You should have a clear target, so don't make this ideation process too long. I've seen some teams that are ideating now for twelve months. Don't overdo it. Ideate, take your long list, but then also boil it down quickly, get two, three, four markets and then within ten, twelve weeks decide for one of those markets. Don't do it longer than that because at some point you just need to jump. Obviously you can always find something that could be better with another market or you can always find something that you should discuss still with aspiring partner but at some point you still need to jump and I think twelve weeks is a good time frame if you're doing it full term or full time. And after that when you start talking to investors I think many teams now underestimate the importance of pipeline so it's a different pitch also when you negotiate your terms with an investor. Let's take Avon. It's a very weak position if you tell them, Yeah we have one LOI, we spoke to some brokers and we might get a second one. But then there's no pipeline behind. What you want to show is, Look we reached out to 500 companies in the market, out of that 40% replied so far. Out of that we had so and so many on-site meetings and out of that we generated 20 companies where we have financials now. That's powerful because then you can tell your investor we can very clearly calculate with our conversions. This should result in 5 to 10,000,000 EBITDA within the next thirty six months. Yeah. And that's what you want to hear and what also gives you a strong position when it comes to negotiations. And many founders they have the feeling that yeah maybe one or two LOIs and I just call up some brokers and then I do fundraising and then I do my outreach. But I think that's the wrong order.
00:52:12 · Felix Jander, Mikk
Another advice is once you have funding the first month is purely M and A. So get lost in discussions where you talk about. I had one team that was talking about ERP system integration before we even had bought a company. Yeah? So I was like, look, guys. Can we please first buy five companies before we can... Before we integrate ERP systems? And and I I see where it's coming from. Yeah? Because everyone's talking about integration. So that's why I'm also emphasizing this point. Integration is important but the first six months is still M and A focused because you have to build that pipeline and you to build up momentum for the next years. For the first six months. And after that comes the integration part that we already discussed a lot a lot now. [00:52:58] S0: I have a long list of the title is on my on my notes lessons from Felix. And we don't gonna... We we are not gonna go through all of them. I just wanna cover them lessons [00:53:10] S1: from Mikk and Felix, otherwise a few. Number [00:53:14] S0: one is bring in experienced operators or advisers. Bring someone into the company who is in their forties or fifties. Can you talk more about this? [00:53:22] S1: Did I say that? Bring in someone who's 40 or 50? [00:53:25] S0: I think I took it from the maybe now this is a translation issue because I don't speak German, but I was listening as German version