Subscribe: Apple Podcasts · Spotify · YouTube · Amazon Music · iHeartRadio · Pandora · RSS
Episode Summary
You’re staring at a deal that almost works. The seller wants their number, the buyer can’t write a check that big, and the SBA loan stops short of closing the gap. Most owner-to-owner deals die right there in the Value Gap because everyone in the room only knows one or two tools. Matt Boettner spent his career building the rest of the toolkit. He raised $3M in the late 90s for a tech startup that failed and taught him everything, ran Sunbelt’s deal fund seeing hundreds of lower middle market transactions, headed up Winmark’s equipment finance startup, then bought AllSafe from his brother Joe in 2013 using a capital stack most owners have never seen: senior cash-flow debt, mezzanine, seller notes, warrants with a put option, rolled equity, and a minority equity partner. In 2018 he recapped the whole thing with a private equity firm to simplify the structure and free up dry powder for add-on acquisitions. We got into how the layers actually price risk, why family deals fail from fuzzy expectations dressed up as trust, and why if all you know is an SBA loan, all you have is a hammer.
Watch on YouTube
## Top 10 Takeaways- Price gaps don’t kill deals. Missing tools kill deals. Most owners only know SBA and earnouts.
- The capital stack is a layered cake, and each layer prices its risk differently.
- Senior debt is cheapest. Mezz costs more than senior, less than equity. Use it where senior debt stops.
- Cash-flow lenders will lend past your collateral, but only on businesses with repeatable cash flow.
- Your senior and mezz lenders need to play well together. The intercreditor agreement either works or blows up.
- Family deals don’t fail from lack of trust. They fail from fuzzy expectations dressed up as trust.
- Agree on the methodology before you agree on the price. The range first, the number last.
- Sellers can sit at the top and bottom of the stack at the same time: cash at close, note behind the debt.
- Layering debt frees up equity, but every dollar of debt service is a dollar you can’t reinvest. Build cushion.
- Recapping later isn’t a failure of the original structure. It’s the next move when the business outgrows it.
Sound Bites
“I was very comfortable with more complex financial structures coming into it because I had a lot of experience with that in the past. So I’m not necessarily advocating complexity. It just happened to work in our case. And there’s a lot of different tools in the toolkit to get these kinds of deals done.” (@TBD) — Matt Boettner
“Every business relationship, whether it’s with family or not, requires a high level of trust. And I think that level of trust is commensurate with the level of risk that people take.” (@TBD) — Matt Boettner
“They charge higher interest rates, interest rates that are much higher than senior lenders. But it’s not as expensive as giving up equity in the long run.” (@TBD) — Matt Boettner
“You think you own your business, right?” (@TBD) — Ryan Tansom
“If all you know is an SBA loan, then all you have is a hammer. Or you go into the different situations with the understanding that you’re going in as a carpenter with an entire enclosed trailer full of tools because you know what the outcome is that you want.” (@TBD) — Ryan Tansom
About This Episode
Matt Boettner is the CEO of AllSafe, a wholesale distributor and service provider in the compressed gas equipment industry. His career runs the deal side from end to end: he founded Kovacs Corporation in the 90s and raised $3M in angel financing for a semiconductor inspection startup, did corporate development at Applied API (acquired by Veeco Instruments), spent three and a half years at Sunbelt Business Brokers in the lower middle market seeing hundreds of transactions, and ran Winmark’s equipment finance startup through the 2007-2008 financial crisis. In 2009 he joined his brother Joe at AllSafe, bought the majority stake in 2013, and recapitalized with a private equity partner in 2018 to fund a national add-on acquisition strategy. This episode sits in the iBD canon as a teaching case on capital structure and the toolkit owner-operators rarely see.
Resources Mentioned
- AllSafe — Matt’s company; wholesale distributor and service provider in compressed gas equipment.
- Matt Boettner on LinkedIn — Find him at mboettner.
- Kovacs Corporation — Matt’s first tech startup in the semiconductor inspection industry.
- Sunbelt Business Brokers — Lower middle market brokerage where Matt cut his teeth on hundreds of deals.
- Winmark Corporation — Publicly traded franchise and finance company where Matt ran the equipment finance startup.
- Applied API / Veeco Instruments — Semiconductor equipment maker where Matt did corporate development.
- GEXP Collaborative — Sponsor of the episode.
Connections
Phase + Module:
- Module 2 — Expand Knowledge — Building the deal-structure toolkit before you need it at the closing table
Milestones:
- Milestone 6 — Transaction Value — The actual structure and capital stack that gets seller and buyer to a number they both sign
Concepts referenced:
- Value Gap — The space between the seller’s number and what conventional financing alone can close
- Enterprise Value vs. Equity Value — How the same deal looks different from each side of the table
- Normalized EBITDA — The cash flow basis cash-flow lenders underwrite against
- Free Cash Flow — What supports debt service across the layers of the stack
- The Multiple & WACC — Cost of capital priced by tranche, from senior debt to common equity