E38: Top M&A Entrepreneurs - John Carvalho 17 acquisitions, $240mm in Rev, IPO

Thanks for joining us. This is the top M&A entrepreneurs. Today I have my guest is John Carvalho. He's, uh, let me just kind of go a little bit back. He, uh, he was vice president at Deloitte, co-founder at Wolverine Energy and Infrastructure, where they acquired, I think it says 16 businesses in the ONG industry. Yeah, 16 or 17. I, I lose count. He's also the founder of the Divestopedia, which helps people uh sell their businesses, and he's president of Stone Oak Capital and M&A advisory firm or for middle market companies. Welcome, John, to the show. Thanks for having me, John. I appreciate the invite. Yeah, so first of all, I have to get a hat tip to William's English, who referred me over to you. So how do you guys know each other? I know you're both in Canada, but uh Yeah, I just, uh, you know, I recently just met uh William online here. So, uh, you know, just the power of social media and LinkedIn, uh, you know, it is, I made, made some, some great connections and great introductions through uh that platform, and, uh, you know, that was one of them. So this is top M&A entrepreneurs, so I wanna kind of go back and hear your backstory about, uh, you know, working at Deloitte, you're doing the M&A for a lot of other companies at the time, and how did you decide I'm gonna leave Deloitte and then we're gonna do it on our own. Yeah, I mean, it was, uh, you know, not, not just kind of an overnight process or or decision, um, you know, it was kind of seeing the career tra trajectory and, and where I wanted to be within my, uh, you know, own career and, and what I wanted to accomplish. I think I always had a little bit of an entrepreneurial bug. Um, but, uh, you know, my, my origin story is my parents were Portuguese immigrants, uh, you know, came here super hardworking, kind of always instilled in me that, uh, you know, go find a really great job, uh, you know, and, and, and kind of build your career that way. But, but again, I always had that little entrepreneurial bug, um, that I think they weren't always, um, you know, super. Uh, not, not supportive of, but just didn't understand it. That wasn't what their mentality was. So, you know, I went down the path at at Deloitte in my, my career, uh, on the M&A side, but, but I wanted to explore, uh, being more of an entrepreneur. So, uh, I think it was 2010. Uh, I left there, I started my own advisory practice, uh, helping people, uh, do evaluations, do, uh, sell side, do buy side, and, and kind of ran into, uh, an individual. Uh, who was very aggressive. He was looking to buy, uh, a business. I really liked his style. We built some chemistry. Uh, so, rather than him buying the business by, by himself, I said, hey, why don't I roll some of my fees into this and we'll partner together. Uh, and he took me up on that. And then, you know, before I knew it, we were, we're acquiring our second business, our 3rd business, or 4th business. Uh, and within 7 years we acquired, uh, 16 or 17 businesses again, kind of lost count there. Um, but yeah, it was, it was a hell of a ride for sure. That's amazing. I mean, uh, 17 and they grew revenue to $240 million and took public on TSX Canadian Stock Exchange. That's pretty good. Are you still involved in it? I am. I'm still an investor in the business, but not involved, uh, day to day. So, you know, again, the business kind of outgrew me to, to where I, I expected it to be. So we found, uh, a much more capable, uh, management team to run the day to day than, than I could. I mean, I'm good. I'm really good at doing deals. Uh, you know, I'm good on, on, uh, on the acquisition side, but, but operationally, there's people that, that can have. We want to be on the org chart kind of deal. I get that. Yeah. Yeah. What, so that was in the ONG industry, I guess the question today is, like, would you go into the ONG industry today? Um, yeah, great, great question. You know, I, I still, um, you know, I see an opportunity right now. I think there's, um, you know, I think it's definitely uh painted with a negative brush with, you know, everybody moving to, uh, on the environmental side and everybody moving to more green renewable energy sources. Um, but we can't just break away from that, uh, you know, the oil and gas, uh, industry overnight. So I think there needs to be, you know, a longer transition for that. Uh, and still, you know, the world needs oil and gas, um, as much as we like to believe that, uh, you know, we want to get into more greener, uh, more renewable sources, but, but right now that transition is gonna take a while. So I think, I think there still is opportunity in oil and gas space, although it is difficult to, uh, you know, find, find investment, find capital, uh, for those types of businesses today. Yeah, there's a lot of politics in this. It's just, uh, you know, hey, the pitchforks, you're ONG, but there's not anything in our background or your background that's not made with oil. I mean, everything in that, the, the desk, the frame, picture, paint, everything was made with oil. Yeah, exactly. I think people really think of, you know, kind of oil and gas and, you know, the stuff that we put in our cars, but uh there are so many products and, and so many uses for that, um, that it's going to be hard to break away from. Yeah, yeah. So how did you, when you said I'll bring my fees and services, you know, and I'll, my negotiating skill and finding deals, whatever it is, how did you guys structure this to where, you know, you're just gonna go, OK, we got the financing or we're just gonna go out and purchase it and then find the financing. Yeah, great question. A lot of times it was, um, you, you know, a lot, a lot of times it was scrambling for us to, you know, we would put a deal together, uh, we try to convince an entrepreneur that we could acquire their business, but we didn't have the financing in place, so then we'd be scrambling to find the financing. Uh, so we got better at it over time. Uh, you know, our first few deals were, uh, you know, that nature, where it was kind of that scrambling, where again, we try to, we try to kind of secure the deal, uh, with an entrepreneur that was gonna sell us their business, and then we would go race out and find all the capital we needed to close it. Um, but, but over time, we build partnerships, um, with, uh, financing institutions, with our bank. They started to believe in us. They start to believe that we could actually execute on this roll-up strategy. Um, so it was more, um, you know, not 100% committed, but, but, um, committed enough that they knew our strategy. They knew that we were going to be acquisitive, that we were gonna do a number of acquisitions, uh, and that we were going to need, you know, a certain bucket of capital to go out and do that. So, um, you know, the first few ones were, were definitely a roller coaster ride, but then it It got a little bit more uh kind of organized, a little bit more sophisticated as, as our stakeholders, uh, you know, really started to believe in our ability to do that. Yeah, how did that first deal go? I mean, how big was that? Our initial acquisition 5 million revenue in the oil field services company. How did, uh, how'd that go? You guys, hey, we, I found a great deal. He's motivated seller, uh, let's get an LY in place and then find acquisitioning. What, what did that financing deal stack look like? Yeah, for sure, great question. So, uh, the first deal, uh, I think the owner was 75 years old. Um, you know, wasn't involved in the day to day, had, uh, a management team that kind of run operations. Um, you know, the thing that I really liked about that business, it was like heavily asset backed. Uh, you know, a lot, a lot of, uh, you know, you see private equity firms that say they don't like capital intensive businesses. This was the exact opposite. Uh, I think, you know, we bought it, we purchased the business for about $5.5 million and it had an appraised asset values within the business of $7.5 million. So the asset value is actually more than what the guy was selling it for. Um, and, and he was, uh, I mean, he was a, a very successful entrepreneur, and what he wanted was somebody that could transition the business. So he liked my partner's, um, you know, charisma. He, he was a young guy, had a lot of charisma. Uh, they kind of hit it off right off the bat, so we were able to kind of structure a deal that was at that price where it was $5.5 million. It was all cash. Um, but because there was that, uh, you know, big kind of chunk of assets behind it, we knew that we could get some senior debt financing, and then we also had some equity that we're gonna throw into the deal. So that that's kind of how we structured it. It was all 100% cash. There was no kind of seller financing on it. Uh, we were able to get a big portion of it financed because there was so much assets backing and securing the deal. Um, and, you know, we put some of our own equity in, so that, that, that's kind of, um, You know, I, I, I like that deal for that reason, because, you know, if anything ever went wrong and say, you know, worst case scenario, we had to liquidate the business, we had to shut it down and liquidate it, we knew that we could probably get enough to pay back the bank and then we would be out our, our equity portion. Uh, but we were willing to take that risk. There was immediate arbitrage on there, the difference between what he's selling for and the assets. valuation. So yeah, yeah, and we knew that we probably couldn't liquidate for that, that appraisal amount, but we knew that we could secure financing to get us a big piece of the, uh, the purchase price. Did he keep any of the equity and roll over, say, 2, 3rd, buy the apple with going public or or no, no, we, uh, you know, for that first acquisition, uh, again, I I knew it, my partner knew it that my partner really wanted to put his fingerprints on this. He knew he wanted to, to grow kind of a, an empire, I call, uh, you know, somebody like my partner, an empire builder. Um, so, you know, we didn't want that, uh, old vendor that would, I, I don't want to call him old. He was, he was older, but the, the, the previous vendor, um, we didn't want him to kind of interfere in our plans. Um, and he, you know, he, he was 75, right? So he, he had, uh, he just wanted to ride off into the sunset. So, you know, he wasn't willing to, to kind of, uh, you know, roll his equity and, and kind of participate in the risky ride that we were, uh, you know, venturing on. Uh, you know, a funny story with that is, is the day after we purchased the business. I remember this vividly, he literally came over, handed us the keys, got in his 19, uh, like, 95 Cadillac, drove off to the airport, uh, and went, went to, uh, you know, moved to Phoenix for the next 6 months. So, you know, miles down the road for me. Yeah, yeah, I know exactly. So, I mean, he, he, uh, you know, was available by phone to help us, but really, the transition period was, uh, immediate. Yeah. How did that feel getting that first deal done? I know you did a lot of other deals for other companies, but this was yours. How did that feel? Yeah, a lot different, um, you know, and, and just thinking through what I kind of wanted to communicate with, with you today. And, and that was one of the things I wanted to communicate is that, you know, advising on a deal is a lot different than, you know, having to actually sign the check into the deal, and then, you know, put your name on personal guarantees and stuff. You think at a deal. And the risks around, uh, an acquisition a lot differently than you might, um, you know, from just a pure advisor perspective. So, yeah, it was, it was definitely different, uh, really exciting. Again, kind of, um, scratched that, that, um, bug that I had, uh, uh, and that itch that I had on, on wanting to be an entrepreneur. So this kind of got me in the game. Um, and, and yeah, it was, it was, um, you know, it, it was, it was kind of the journey that I wanted to, to jump on and and move towards. Yeah, how's that changed you? I mean Um, you know, I think, I think, uh, assessing risk is, is definitely, uh, different. I definitely look at assessing risk now differently. Um, you know, not, not, I, I, I, I think I, I able to, I've always was good at identifying risks and, and, uh, you know, especially in transactions. Um, but the flip side of it is mitigating that risk. How do you mitigate that risk, um, you know, is just as important in, in a deal. So I've, I see right now that a lot of entrepreneurs that I work with that want to do acquisitions. We'll jump in and they'll, you know, identify, um, you know, oh, what if we lose these customers, uh, what, what if, uh, you know, our sales drop? What if we, um, you know, our, our salaries and expenses increase? Like there's a whole bunch of risks on doing deals. But the next and even more critical step is how do you mitigate those risks. Uh, right, and then that's kind of what I learned, uh, you know, in, in doing these transactions, and my partner was also really great at that. He really had the ability to kind of compartmentalize the risks and, and, and, you know, put probability weightings on, on when these risks might occur. And then if they did. what we would do, you know, the, the 2 or 3 steps that we would do to try to mitigate them. Yeah, have you read that book by Annie Duke about, uh, you know, uh uh assigning risk to your card hands playing poker? Yeah, yeah, I have, yeah, for sure. Yeah, it's a good book because it looks very good book, yeah. Looks that looks like what you do there. How, how did the other 15 or 16 go at that point? What did, was there just momentum that happened and you're just like, oh my God, we got over the big hump, we're we're rolling. Uh, no, I think, I think Momentum started, um, much later on, probably like, um, you know, 4 or 5 years after that first acquisition. Um, the other ones were just grinding, right? Our second acquisition was in, um, you know, a different space, like it's still in the oil and gas services, but not connected to our first business. Um, so we were actually running the two businesses separately for a while, um, before we decided that on our third acquisition that, OK, now we can't just run 3 separate businesses, we should probably bring these together, uh, under, you know, one brand which was Wolverine, um, and, and start to, to, you know, kind of position it as, as kind of a consolidator in the space. Yeah. um, and, and, you know, even our strategy kind of changed as well. So our first two acquisitions were very, um, you know, we were buying these businesses, we were replacing the existing owners, we were, you know, kind of, uh, I think our our second acquisition, we didn't pay all cash, we paid a significant amount in cash with a little bit of a, a vendor financing or seller financing in it. Um, you know, and, and, and our third acquisition changed a bit because now we had a vision of bringing companies together. And, you know, this was gonna be bigger than just my partner and I. Uh, you know, we were going to need to kind of deepen our management team. So on our third acquisition and subsequent acquisitions, we were, we're really finding uh business owners that wanted to become partners with us, that would take, um, you know, kind of roll over some of their equity into our business and, and kind of sell them on the vision that we're building something significantly bigger that was gonna have, uh, kind of that second bite of the apple as you had mentioned before, with a liquidity event of going public. Um, so, you know, that, that was, um, you know, kind of the middle portion of our acquisitions. And then after we built, uh, those acquisition team that like that management team, then our last few acquisitions were actually, um, uh, carve-outs from larger publicly traded companies that we bought. Um, yeah, so it, it kind of, it went through those three, cycles where it was pure buyouts, 100%, next ones were partnership with management. Teams and then our last ones were buyouts of car boats from from publicly, uh, other publicly traded companies right before we went public. When you were guys were, you know, that, that gap in between, what were you trying to, what was happening, like, you know, like how do we integrate this? What's the synergies and were you buying direct or indirect, or would you buying, you know, like in the wheelhouse to support it, uh, you know, because, you know, there's a difference between, uh, Uh, uh, you know, oil energy services versus just, you know, wells. So, yeah, yeah, so we were all kind of energy services and like infrastructure construction type stuff. Um, so, uh, we had a couple of strategies there. So one strategy was the consolidation of, um, more of the, the back end or administrative side, so finance, HR. Um, you know, sales, so we brought that in and we consolidated that. So there were some synergies there. There was also just immediate synergies between like consolidating insurance, um, you know, consolidating vehicle leases. So some of the things like that were, um, you know, some immediate synergies that we found. Uh, and then our, our expansion strategy was more into like different locations. So there were a few kind of hotbeds within my region that were, um, you know, really good for the oil and gas services sector. Um, you know, up northern Alberta was one where we wanted to get into, um, a couple of locations in, in British Columbia. So we were finding, um, you know, geographic sectors that we wanted to get into with companies that had services that we were excited into. So, um, And then also kind of 2015, 2016, 2017. We're kind of in a little bit of a mini recession here in our region. So we also did some uh distressed opportunities as well as some distressed deals. Uh, where people, you know, the, their bank, uh, were kind of coming down on them a little bit more aggressively. So we came in and said, hey, we'll help you kind of restructure your bank. We'll take the equity, uh, from your business, which is really not a lot. Uh, and then we'll help you restructure kind of the debt that you have and, and take on kind of any equipment and assets that you have, uh, and services. So we did a couple of deals like that too that were pretty beneficial for both sides, for us and for the, uh, You know, the company that was, was kind of experiencing some difficulties. Did you already have those relationships, uh, uh, if you, you know, hey, it was a banker and say, hey, look, I've got this, uh, distressed asset. Did they reveal that? or did you already have relationships with the seller saying, you know, I'm kind of in a difficult situation, I need a solution. Yeah, I think, I think what happens is when you, when you go out and you start to consolidate, um, word just gets out there, uh, that, that, you know, hey, there's this consolidator in the market that could, uh, you know, do deals, is good at doing deals, as quick at kind of turning things around. Um, so we are finding a lot of those opportunities, uh, you know, that it was prevalent in the market at the time. Um, so, you know, a lot of those opportunities were just crossing our desk from various sources, from bankers, um, from restructuring professionals, and from the, the business owners themselves, right, saying, hey, I'm kind of in a, in a tough spot here. Could you, uh, you know, could you maybe see if you can help me out somehow. So, 1517 deals, what was kind of the toughest, or what did you learn about doing each of these deals? Was there kind of an overlaying type of lesson from each one of those, or? Uh, the, the risk mitigation piece was, was super important. Um, you know, in, in hindsight, uh, and this is something I'm, I'm helping entrepreneurs now with, um, you know, in hindsight, uh, you know, I wish we would have kind of made the process a little bit more systematic, uh, along the way, like, you, you know, the deal sourcing, uh, the deal offering, like we got really good. Deal sourcing, finding opportunities. We got really good at putting offers out, um, on, on deals. Like we were able to structure the deals, uh, and got get offers out, uh, probably within two weeks of receiving all the information that we thought we needed to, to kind of analyze the, the business. We got really good at that. Um, you know, our, our due diligence process, um, was pretty succinct and, and pretty efficient. Um, and then, you know, the, the capital was always, um, It was, was always fun, you know, it was, it was always kind of a challenge of finding the capital because we didn't want to go down the private equity road, um, you know, I, my, my partner I knew wasn't, uh, It wasn't built for for partnership with the private equity. A lot of times private equity sometimes comes with strings. Uh, I, I watched your interview, um, you know, I think, I think they just like ask for control. A lot of times they want to come in in a majority position. Um, they might have a, a vision on where the business wants to go, um, versus kind of the entrepreneur. So I, I think private equity are made for, um, you know, a certain type of entrepreneur, but, but I didn't feel like it was, uh, right for my partner and I, just cause, you know, again I, my, my partner wanted majority uh in the business. Uh, he wanted to really dictate the kind of the direction of where we were taking the business, uh, and he wanted to have kind of the final say on if we're doing a deal or not do a deal. So, you know, we, we were always, um, I don't want to say scrambling, but, you know, that there, there needs to be at some point some equity that's injected into these opportunities. It can't all be, uh, you know, debt financing. So, you know, our, uh, our, our capital source or or or capital partner. Um, which was a, a financing institution that, that, that I want to say was, was really instrumental for us to help achieve this. Like, they came to the table. It wasn't, again, 100% committed, but it was like, hey, if you want to do this, we'll have kind of a bucket of $50 million available for you, uh, to do it. And then we actually blew through that, and then they came back to the table and said, OK, well, we'll have $100 million of capital available for you. Um. But they also wanted us to, uh, you know, find, um, some equity to go alongside that. They didn't want to be the only one throwing uh cash into the deal. So a lot of times we're finding, you know, some high net worth guys that would kind of participate with us along the way, uh, until eventually we decided that going public is the way that we find kind of that bucket of equity that we need, uh, to continue the growth. So going back, you know, where you were looking at. Where you were at, you know, 10 years ago when you started this 2012, what you had, what your desire, what you wanted to accomplish. Did you, did you accomplish everything you want, exceeded, blow it, anywhere near it, uh. Yeah, you know, uh, I, I always tell my partner this, but this, this was, um, Uh, I mean, this was me helping him with his journey. Um, you know, I, uh, like when I first got into this, I, I, you know, I just, I wanted to do deals, right? And, and he was the guy that was doing deals, so I just, you know, I latched on to him and I'm super grateful and thankful, uh, for that. So, I mean, you know, I, I, I, I think I was, I was really good at helping him accomplish this, and I, you know, I, I benefited from as well. I can't say that I haven't, right? Like, uh, you know, my, my, uh, you know, I built some wealth around it. I, I got um some pretty amazing experience in doing acquisitions, um. And and, you know, being an owner on the acquisitions, again, not just the adviser on it. So, you know, I, I think, I think I, I accomplished what we set out for him. Uh, and now, you know, in my next phase of, of what I want to accomplish is I want to, uh, almost replicate this for other entrepreneurs. So like, you know, I, I really see that there's a need for the education out there, uh, on helping people execute on something very similar to what we did. Um, and I want to be, again, that guy that helps facilitate it and helps other entrepreneurs, um, you know, really, even, even more efficiently and effectively than we did execute through that process of, of, you know, it doesn't have to be 17 acquisitions in, in 7 years, but, but, you know, it could be transformative for business owners to go out and buy 3 businesses in 5 years, right? That, that could more than double, uh, their existing business. So I want, I want be able to replicate this for other entrepreneurs. I think, I think that's, um, you know, where my journey, um, has, has gotten me to this point today and where it's going to take me for the next 10 years. I, I always have to ask this, what kind of like internal struggles did you have with that? I mean, did, you know, some people say, I, I wanted to be the number one guy, but then you realize I can get really wealthy and get everything I want by helping him get what he wants and be the #2 person. Do you have any internal struggles like that? Mm. Not really, if I'm being honest, like, uh, you know, I, I've always uh Yeah, I like Star Trek, and, and I always saw, like, you know, Spock and uh Riker was, was, uh, the second in command on in Star Trek, right? And they were always instrumental to helping people achieve the, the goal. And so I, I, I see myself as a good, uh, 2 IC or a second in command, uh, to these entrepreneurs. And, and the other, you know, the skill set that I realized, uh, over this journey that, that, um, I don't have is is kind of the operational one. I think there are people that are probably way better than I am operationally, um, and, you know, that's a skill set that's needed to execute on this. Um, but my skill set is also needed. So I think there's a real, uh, synergy between, you know, those business owners that have the operational skill set and the ones that have, um, you know, the finance, the capital, the acquisition skill set that I bring to the table. So I, you know, I, I, I kind of see it as, as, uh, really kind of symbiotic between, uh, you know, me and the entrepreneurs. So, you know, I don't see myself as, uh, having to be the guy. Yeah, I mean, I, I love the analogy, cause I've used a lot too. I have always thought that Gene Roddenberry was a genius because of, you know, he's the cabin clerks up there. I'm gonna ask the emotional guy, uh, the doctor, and he's gonna get all emotional about it, why he should do it. And then a logical guy, I'll ask Spock. Yeah, you get your best answer out of the combination of the 3 or 4, yeah. Yeah, and I'm, I'm, uh, I think that's what I brought to the table, a little bit of, um, you know, kind of that spark like, um, you know, logical assessment of deals. Um, you know, the, the, uh, I've told my partner this, so it's not a secret, me, me sharing it with you, but I always, uh, like, we, we probably had like 5 deals on the go at any one time, um, you know, because he, he was a consummate entrepreneur. He wanted to do every deal, right? And I knew that we couldn't do every deal. So the way I would manage it is I would just really kind of bear down on the deal that I knew had a higher probability of closing, uh, and work on that and the other ones I I just let them kind of fall apart. Um, so, so, you know, it was, it was, that was kind of my way of, of managing the opportunities is by really kind of, uh, doing that probability assessment and saying, OK, which one can we find the financing for, uh, which one, you know, is, is the owner the most motivated to do a deal, um, you know, which one, is kind of best priced? Uh, if, if I'm being honest, like which one kind of, you know, has the best metrics for us, and then I'd really bear down on that deal. Uh, and I'd let my partner kind of still continue pushing the other deals ahead, but I wouldn't put as much effort and energy into them. Um, you know, I, I would just focus on. The one that I knew uh was most, uh, you know, had the highest probability of closing with, with kind of the best success rate for us. Yeah. Yeah, your, your parents came from Portugal and uh what did they feel like you now you're out there, part of a public company, um. How did that change and that story change with them? Like, hey, you know, uh, the reason I brought that up is I've listened to, uh, uh, Chimo, Polly Hapatia. He's also from Canada. He's the Facebook guy. He'll tell you this story. He goes, same thing, I'm an immigrant, came here, entrepreneur, you know, made a billion dollars, and, and, uh, it's a great story. Yeah, you know, I, I think, I think if um if I'm being honest, I'm not sure that they really know exactly what I do. You know, I, I think they, uh, you know, they, they see me with kind of my hands in, in a bunch of different things and, and you know obviously. Uh, they're super proud of me, and, and, uh, you know, I'm, I'm super grateful for the work ethic that they've instilled in me. And, and, you know, I always think of the challenges that they had, right? Coming, not even knowing the language and just kind of picking up, uh, and coming to a different country, how hard, uh, that would. would have been for them. So for me, uh, you know, anything that I'm doing and any challenges that, that I'm kind of, uh, you know, thinking that I'm encountering pales in comparison to what they had to go through, you know, at the onset of, of building, you know, a really, uh, a high quality life for, for, uh, you know, myself and my, my sister. So, um, you know, again, you know, we, we, we don't talk a lot of, a lot of shop, but I get, I don't know if they would, uh, fully kind of, um, You know, really know exactly what I do right now, but, but they're, they're proud. Yeah, and what's the, what's the work that work ethic they instilled into you? I mean, what did that look like in you? Yeah, you know, I think, I think, um, You know, it's, it's, um, I, I love working, right? And, and I think a lot of people talk about, uh, you know, work-life balance, right? And, and I don't see it that way. I, I, I, um, you know, I, I see, I see work as, as being life and life being work, right? Like I, I just see it all kind of melding together. Uh, and the more that you can, you can kind of intertwine those two and not see it as, uh, a really hard segregation. Uh, you know, for me, the happier I am, like, you know, I, I hate to tell, uh, anybody I work with this, but, but I, I would do acquisitions for free. I love doing it so much, right? So, um, You know, for me, it, uh, you know, Warren Buffett always talks about tap dancing to work. I mean, I tap dance to work every, uh, every day, so, uh, you know, that, that's kind of what they taught me the most is that it's, it's important to, uh, to work hard, um, and, and to kind of, you know, always show up for what you're doing. Um, but, but over time I, I learned that that it becomes a lot easier if you love what you do. It's just, it doesn't even feel like we're most of the time. So you're doing this now, not with stone Oak Capital. So what kind of businesses do you look, uh, are you? Diagnostic on the type of business you would look for, or should they have $10 million in revenue, $25 million in revenue, and then they will go, you know, we'll buy, I've seen a couple of your videos online. Well they add, you know, $1 million or $4 million revenue or 5 or something. Yeah, so, you know, it was, uh, when was it? So it was like, actually July of 2020 last year, when, when we found a replacement for me within the business, um, and I pulled out and became strictly an investor in in Wolverine. Uh, and I took some time to reflect on what the market really needed, um, around the, the acquisitions, you know, um, again, through Stone Oak, I was doing, uh, sell side and buy side, but, but I felt like really, again, my, my expertise falls more on the buy side, on the acquisition, uh, side, uh, and then also seeing this opportunity that's in the marketplace to go out and acquire these smaller mid-size businesses, exactly what we did in Wolverine, right? Um, private equity firms are probably focused on, you know, businesses that are 10 million plus, I would say, and, and you speak to a lot of private equity firms and a lot of other, uh, M&A professionals, you'd have a good, good, uh, take on, on what size of businesses they're looking for. They're moving down sometimes, you'll find that they're, they move down because the deal looks. You know, there's not a lot of deals out there, they can't, they're not competing on, and they somehow moved down. This is just my experience with an IT firm we were looking at. Yeah, for sure, yeah, they are moving down market. Um, but, but I think, I think a corporate buyer is almost more well positioned to go out and acquire some of these businesses. A, they have the operational expertise within, uh, whatever business target that they're looking at. Um, and I think banks are more willing to back, uh, you know, a strategic buyer that, that, you know, has the operational expertise, um, is looking to expand either into a different region or different kind of adjacent product or service line. Um, so, so, you know, I think, I think there's a real opportunity, um, and, and, you know, added on top of that, there are just so many business owners that are needing to transition here. So, you know, the, what I'm trying to get out to the marketplace is that if I can help these business owners that are already, um, you know, have great businesses in, you know, mid-size businesses, they can grow, uh, exponentially very similar to what we did at Wolverine by acquiring these sub $10 million dollar businesses. So I, I've put together an educational program that, that helps business owners walk through deal sourcing, you know, valuation, deal structures, offering. Um, how to offer a business, how to put an LOI together, things to think about through due diligence, you know, integration piece. So trying to, trying to build, um, uh, a community around these entrepreneurs that really want to execute, uh, on an acquisition strategy. So that, that's kind of what I'm really focused on right now. Yeah, what, what's the kind of timeline you say we will build it? I know for the Wolverine, it took about 8 years to, to get to 240 million in revenue and take public. Uh, what, what do you tell these, you know, let's say an HVAC company with 20 million in revenue says, gosh, I need to, uh, there, there's a sense of I need to get my ebita, you know, just a little bit higher to make it attractive for a private equity when he starts playing uh double digits. Yeah, yeah, you know, so I always work backwards, um, you know, so say that you said $20 million $20 million yeah, so 20, let's say they want to get to $50 right? So you, there's a $30 million delta there. Um, so could they do, uh, one. Acquisition a year for the next 3 years to get to the $50 million. And that's kind of a $10 million revenue acquisition. Call it $10 million enterprise value acquisition too. So they would do 3 $10 million acquisitions over that three-year period to get to them $50 million. So that, that's kind of the, um, You know, that that's kind of the journey that, that, you know, I, I, I hope that some people will be willing to embark on, which I think is achievable. One acquisition a year, uh, for 3 years to, you know, I guess more than, uh, more than double your business. Yeah. What's the challenge you see with that is, I mean, obviously your partner Jesse Douglas, I mean, he was like, this is what we're gonna do. But if a guy's been running a HVAC company for 15 years and he's at 20 million, and he's never done an acquisition, what's the, you know, the Type of thinking he has to change to be able to to accept that and do it. Um, I think a little bit of the risk taking for sure. Um, you know, most of the people that I run into that want to do this, um, are are kind of at the onset of their journey, right? They, they have some risk appetite, um, and maybe they've already kind of tried to look at acquisitions. They just haven't, um, kind of really landed on the process that gets some success through it. Um, so, yeah, I, I think, I think changing that risk appetite a bit, uh, you know, there's a lot of things that could go wrong, uh, in an acquisition, but there's also a lot of things that could go right, right? So that, that's one, finding the capital is always tough, so how am I going to structure the deal? Where am I gonna find the capital? So again, there's, there's a willingness to, uh, maybe if you have a uh a $20 million HVAC company. Um, you know, that, that's, that, that isn't really, um, you know, have a lot of leverage on it, to, to now be able to say, OK, I'm going to reinvest in the business, I'm gonna take on some more leverage to be able to really kind of, you know, double or triple this business. So I I think that's that, it's just changing your perspective on risk a little bit and then also having the Um, appetite to, to take on some leverage to do this. Yeah, have you ever said to anybody, look, you're not ready for it because you just don't have your processes in place? I mean, it's still, let's say it's like an autobahn versus a, you know, one lane highway, uh, and say look if we brought on a $4 million business, I mean it would probably kill your business cause you just don't have any systems or process in place. Yeah, you know, it, it depends on the acquisition, right? Like, um, you know, a lot of times people want to think about, you know, how am I integrating this business, even before they have an LOI in place. Um, but it's, you, you gotta think through, um, and, and the strategy is such an important piece at the onset. You got to think through how am I gonna run this business, um, you know, after I've acquired it. So in some cases, Um, you know, if, if you're keeping the management team in place after you've done the acquisition, maybe you don't have to integrate it in place, and, and maybe there aren't, you don't need as strong a processes when you're going to acquire, because, you know, that business is going to um be self-sufficient, it's going to, you're not gonna change a whole lot of it. So it really depends on the type of acquisitions that you want to do. Um, but back to your, your earlier question, yeah, there are lots of times, um, and, and the, the purpose of me putting this program together so they could build the processes in place beforehand, um, to really understand all the things that they need, um, to, to, to, to be ready to execute on when they're looking at doing this, this acquisition. Strategy. Yeah. Do you also assist in acquisitions, not just indirect or direct competitors, but let's say media, maybe the company, all they needed was, you know, more eyeballs, and it's a, you know, $500,000 acquisition, or they needed distribution for more margin or something. That, is that the kind of criteria you build out for them? Yeah, you, you always got to ask the question, why? Why am I doing these acquisitions, right? Um, you know, are you, are you looking to expand, um, you know, I, I think the overall theme of doing acquisitions and what we saw with, uh, Wolverine was that we were trying to diversify risk. I bring up risk a lot in our conversation here, but it's, you know, it was a major reason that we were doing the acquisitions. We were diversifying risk by being in different locations, by uh offering different products and services. So if one, you know, uh, service that we were offering, uh, you know, the market just wasn't there, uh, then we had other products and services that kind of, you know, um, took up some of the capacity that we had within our business. Um, we were diversifying risk for our shareholders and our stakeholders within the business. So, you know, I, I, I think one of the big reasons that you want to do acquisitions is diversify risk. As you get bigger, you're also less risky, right? Um, um, and, and so. You know, that that was a big piece for us was just around the, the risk diversification and, and, uh, you know, just, just being a bigger entity with, um, you know, more leverage to pull if things ever slowed down. What about the unprofitable businesses? How do you assess risk with the nonprofit? And the reason I bring this guy, I got a buddy who's purchased 100 companies. I mean, there's some are small, some are larger, but he's got a platform company of digital marketing. He could purchase an unprofitable company. And make it profitable in 12 years just by bringing his, you know, skills and his people to them, yeah. How does that mean that if, if you have that skill set in place where you could look at a, uh, an unprofitable company, you're probably gonna, uh, not pay kind of a, a really top dollar for it, uh, if it's unprofitable, you're gonna be able to negotiate a much, a much lower purchase price, uh, for it, um, and, you know, not give up the payment for any of the synergies that you bring to the table from that. Um, you know, we, we knew where our synergies were, again, it was kind of consolidating the back end. Um, we, we knew that that was one place that we could cut costs. We didn't overestimate, we were very conservative. Um, with our ability to do that. So really, you know, we didn't put a lot of weight in, in the purchase price that we paid on our ability to really cut costs. So, um, but, but if, if somebody has that opportunity to do that, that's, uh, you know, a super powerful tool, uh, in the tool tool tool belt to use on the acquisition side. Yeah. Now this, uh, I actually signed up for this training, it's called acquisitions playbook.com. Yeah, that's right. Yeah, and what is that training gonna do offer? Uh, so it's gonna be a, uh, you know, coaching with me, uh, over a two month period. We're gonna, uh, help people implement. There's companies that sometimes have difficulties on the deal sourcing side. So, uh, you know, if that's the challenge, we'll, we'll put in processes on how you can go out and find. Uh, deals, um, you know, and, and where you can find really great targets to do acquisitions. Some companies come to me and they say, hey, like John, I, I'm able to find deals. I just don't know how to structure them or value, um, you know, or, or put kind of the deal together. So we offer training on that side of things. And then, you know, after you put the LOI in place, uh, you know, what do you do with this business? There's so many things that you need to do on the financing, uh, purchase and sale agreements, due diligence side. So we provide coaching over a two month period on really establishing the processes from start to finish on getting an acquisition done. Yeah. How long you've been doing this? This is, uh, I mean, Since 2010, so you kind of run this concurrently with uh Yeah, the Stone Oak side, I definitely ran concurrently with, uh, you know, with Wolverine, and, and again it was kind of, it was funny cause I, I never imagined that Wolverine would have gotten to the size it was. You know, when we, me and, and Jesse first did that deal, you know, I really just thought I was coming along as, uh, alongside as an investor. Um, but we just kept on doing more and more and more deals. Uh, and then obviously, as the company was, was going public, um, you know, I had some pretty good expertise that, that I brought to the table. So, uh, I felt like, you know, me being involved in that process was important. Um, and now, you know, I'm, I'm kind of, um, you know, that, that was definitely an awesome, uh, journey, and awesome experience. Um, and now I'm, I'm back to building kind of this acquisition playbook. Uh, I call it that, that, you know, I want to do it again. I want to replicate that same fuel again with other entrepreneurs that want to grow through acquisitions. Yeah, now do you just teach people how to do it, or do you actually say, oh, I just, I, you know, some people say, how do you find the deals? Do you teach them how to do it or you do it with them, or? Yeah, you know, I think, I think the important thing is, um, you know, to build the, the capable, the, the, the competency and the capabilities in-house, right? Yeah, if you're, if we're, uh, you know, Jesse and I were to outsource all of that, it would have been a very costly, and, and truth. I don't know if there's anybody in the market that really provides a holistic offering of like, you know, sourcing, valuation, um, putting the offers together, due diligence. So there's there that I found that there was nothing and there is nothing really comprehensive in the marketplace from a done. Uh, for you perspective, uh, and then coupled with the, the, the real belief that it needs to be capabilities and competencies that need to be built in-house, if you want to execute on the strategy. So I, I'm trying to teach people um how to fish rather than fish for them. Yeah. And would that be adding a person onto their staff, like an M&A person, or you're trying to teach the CEO or COO to how to do that? Yeah, a little bit of both, I think, and the the the CEO, like this is a C-suite. Um, you know, capability and, and competency that needs to be built. Like if you really want to execute, uh, on an acquisition strategy, I, I think it, it needs the, the attention of the CEO, uh, and the attention of, like, you know, a finance person, the CFO maybe, or like a business development person that's out there finding deals. Um, but there are a lot of Strategies that I teach within the program, uh, on how to use, um, you know, external contractors, um, and resources to go out and like find, you know, research lists of target companies or research lists of intermediators that you can get out to, um, you know, or there's tools where you can automate the outreach, um, on the deal sourcing side, um, or you, you know, the, the financial analysis, maybe you can outsource, uh, you know, a lot of the heavy lifting around that. So I try to educate on ways that we did it at Wolverine. Um, to kind of build the team using, uh, external contractors, but you have to know how to manage those contractors, uh, to be able to execute this. Yeah. Do they, do they lean on you for, say, hey, oh great, you know, I could find a source of deals. I know who I want to acquire, and you know, and how to get in touch with them, but I just knew how to financing. Obviously you've got a very strong financial background with seeking capital for all these other acquisitions. Yeah, and, and, you know, that that's what we do over the two months. I really coach them. I say, OK, like, here are all the tools, here are the, the financial analysis. This is how I would work through it. Uh, you know, I want you to do it. I want you to understand kind of the, the process and the thought, uh, pattern that I used when I was doing acquisitions because You know, you, again, if you want to execute on this, you need to be the leader. Like, you know, even though I was the finance uh guy and in sourcing the capital, Jesse was involved and he was very good at, you know, negotiating the deals, building a rapport with the, you know, the, the acquisition target, um, you know, vendors that we were, uh, we. Recording, right? So, yeah, it was, it was very symbiotic between Jesse and I, um, in, in doing this. And again, I think, I think it needs to have that leadership from, you know, uh the C-suite executives, CEO, CFO, um, you know, need to be involved in the process. Yeah, how, how long young was Jesse? So you said he was kind of young. Yeah, we, when he, uh, when I started, he was 32, so, um. Yeah, he was 32 and always had an entrepreneurial background and, and really, you know, was uh, I, I could tell right at the onset that that he was a little bit different than than other entrepreneurs I, I had come across. So, uh, I was excited to to partner with him and, and, you know, lucky that we had a really good chemistry, um, that, you know, how did that develop your relationship? I mean, did you meet him? Did he, where did that start? Uh, it was, it was a, uh, so it was a referral from uh a colleague at Deloitte actually. So, um, you know, they, they knew Jesse and, and couldn't really help on the deal that he was looking at, um, so they introduced him to me. He and I kind of looked at, he was initially looking at this one opportunity. That was a $50 million acquisition. And I thought, uh, you know, I, I, I kind of laughed and said, wow, this 32 year old, uh, you know, young gentleman, uh, pretty aggressive looking at a $50 million deal to buy by himself. Uh, you know, did he have any assets behind him? What did he what did he have behind him to do it, or was he gonna do at LBO? Yeah, he, he was, uh, I mean, he was a successful executive in a pretty large, uh, company before that. Um, but, you know, similar to me, he wanted to be, you know, he wanted to build his own thing. He wants to be an entrepreneur. So, um, you know, he had some capital backing him, probably, um, you know, not, not enough to do a $50 million deal. So that's why I kind of, I chuckled when, when he said he wanted to do a $50 million deal, but I was there. I was like, let's do this. Let's try to do it. Uh, we tried to do it, didn't work out. Um, so, you know, a couple of weeks after that one fell apart, I introduced him to this other opportunity that luckily we were able to close on. Yeah, that was that first ONG game. Yeah, how is this from your Deloitte days to meeting Jesse, how's this transformed you as an individual, your confidence, your, I know that you said that the way you look at stuff with risk risk assessment, uh, how else is it transformed you? Um, you know, I, I always say that the, uh, you know, moving to to be an entrepreneur, the, the, the biggest thing that you could do is kind of breaking away from that paycheck, that, that, you know, monthly paycheck where you know that, OK, I'm, I'm getting this salary every month. Breaking away from that and, and not being nervous about it and really recognizing that, hey, there's other ways that I can make money, and even more money than what I was making. Before, I think that just gives, uh, gave me a, a real sense of, of, of freedom, right? Of, of, uh, being able to, to now, uh, you know, take, take the time to explore what, what I love to do, but also make a difference. Like, you know, and that, that's what I feel like I'm doing with, uh, you know, Divestopedia, um, with the acquisition playbook is. Like, I'm trying to make a difference for entrepreneurs that, uh, either want to, to understand how to sell their business effectively, or want to build an empire similar to Jesse, um, and, and go out and, and acquire a number of businesses. So, you know, that, that's kind of what drives me is that passion to, to really help others. Um, and, you know, that, that's, I guess what I've learned the most is that, you know, similar to what I was saying before. Uh, you know, when you find out what you'd really love to do, it's, you never worked a day in your life. It's tap dancing to work. I love those guys. Warren Buffett, Charles Munger, those, yeah. That's great. I mean, so how would somebody get in touch with you aside from LinkedIn, uh, and uh acquisition-playbook.com? Uh, what else? You got Stone Stone Oak Capital. Yeah, so, yeah, so, uh, if somebody wanted to reach out to me by email, they could. It's JCarvello at stoneoakcapital.com, all one word. Um, yeah, happy to, to connect there. LinkedIn is always really easy. Uh, I'm easy to find on LinkedIn, so you can find me on there and, and, uh, connect with me and, and DM me and, uh, if, if, uh, it makes sense, we can hop on a call and discuss. Beautiful. Hey, John, I appreciate you sharing your story here. I, you know, we're almost to the hour, so thank you so much for being on the uh top M&A entrepreneurs. Yeah, thanks, John. I really appreciate it. Thank you. All right. Take care, sir. You too. All right.