Josh:

With us right now is Scott Weavil. Scott, you are a Mergers and Acquisition Advisor and the Managing Director of Sierra Pacific Partners, found on the web at sierrapacificpartners.com. It’s great to have you here.

Scott:

Great to be here, Josh. Thank you so much for having me. I know "Sierra Pacific Partners" is a bit of a mouthful, so no worries there!

Josh:

Tell us a bit about your work, the space you operate in, and what you do.

Scott:

Yeah, for sure. I’m a lower middle-market investment banker with Sierra Pacific Partners. We mainly focus on sell-side mergers and acquisitions, or M&A advisory services. Essentially, I’m like a real estate agent, but I sell businesses instead of buildings. We work with businesses across the U.S., in most industries, and are largely focused on companies doing around $1 to $15 million in EBITDA, or $5 to $100 million in purchase price.

Josh:

Since this is what you do every day, give us a state of the union for M&A. What’s hot right now? What’s not? What’s been happening in the M&A world?

Scott:

Yeah, for sure. Coming into 2024, people had high hopes for the first half, which didn’t fully materialize, at least in the first quarter. However, a lot of what you hear in the news is about mega deals—big Wall Street-style, public company transactions, or even middle-market deals in the $500 million to $1 billion range. But in the lower middle-market, things have been pretty robust, and even in the main street market, there hasn’t been much hesitation.

Interest rate concerns were a factor last year for individual buyers, but now folks have largely adjusted to historically normal rates. We’re seeing robust activity, and anecdotally, once July hit, we noticed a surge in buyer and seller interest. It’s likely due to people realizing if they want to do something in 2024, they need to get started.

Josh:

What types of deals are you overseeing? Are these full buyouts, or is there more complexity to them?

Scott:

Great question. Generally, we handle buyout transactions. I’m not a capital raiser, so I don’t focus on venture financing or minority recapitalizations. Sometimes, we aim for a full sale and end up with a private equity firm buying 51%, for example. But, by and large, our goal is to sell the company as a whole.

Josh:

Are there particular industries you specialize in?

Scott:

No, we’re pretty industry-agnostic. This year, we’ve sold a SaaS company, a group of restaurants, and have a specialty construction contractor and a healthcare technology company in the pipeline. Having varied clients keeps things interesting for us, and it allows us to apply strategies from one industry to another.

Josh:

For business owners looking to exit in the next three to five years, what would you recommend to increase their overall valuation?

Scott:

Generally, valuation is a function of a multiple of EBITDA. A $10 million EBITDA company will be seen as less risky and command a higher multiple than a $1 million EBITDA company. However, where the real action happens is within that range of multiples.

For example, if your company is doing $10 million in EBITDA, the multiple range might be from 4.2 to 6.8. So, where do you fall in that range? That’s influenced by qualitative factors—how clean are your financials? How dependent is the business on you, the owner? The less risk perceived by the buyer, the higher the multiple.

Growing revenue and EBITDA can also help, but that’s harder to achieve in a short window.

Josh:

I’ve heard that growth through acquisition is a great way to scale. What’s your take on that?

Scott:

Absolutely. Inorganic revenue growth through acquisitions is a key strategy we see all the time. Many of our sellers in the lower middle market are add-on acquisitions. For example, a landscaping company in South Florida might be acquired by another from North Florida looking to expand. By acquiring multiple businesses, you can grow EBITDA and command a much higher multiple.

Josh:

Tell me about Sierra Pacific Partners. What sets you apart in this space?

Scott:

We specialize in businesses doing $5 million to around $150 million in revenue, which is a bit of a no man's land. It’s too big for business brokers and often too small for traditional investment bankers. We focus on that gap. I’ve been in M&A my entire career, starting as an M&A lawyer on Wall Street.

What sets us apart is that we only charge success fees—no monthly retainers or marketing fees. We take on a few engagements at a time to give our clients full attention. Additionally, I have a FINRA securities license, so we can handle transactions anywhere in the country, including partial sales, which some business brokers may not cover.

Josh:

When should business owners start talking to you if they’re thinking about an exit?

Scott:

The earlier, the better. Even if you’re five years away from a sale, I’m happy to educate you on the process. However, for long-term planning, I often refer owners to an exit coach who will help maximize their valuation over time. Then, three to five years down the line, we can circle back for the transaction.

Josh:

Any trends in the M&A space to watch for over the next 12-24 months?

Scott:

People have been waiting for the economy to stabilize, and for the most part, it has. We’re still seeing strength in the stock market, despite occasional drops. The big trend I want to highlight is private equity’s role in fueling lower middle-market transactions. These businesses are often too big for individual buyers but too small for large strategics, and private equity has filled that gap.

Josh:

Final question—how can deals avoid falling apart?

Scott:

Deals fall apart all the time. To prevent this, iron out key issues early on. Understanding the must-have terms upfront can save time and money. Speed is also crucial. Delays in due diligence can lead to deal fatigue on both sides, so sellers need to stay responsive.

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