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Episode Summary
You’ve been told to “sell to private equity” like it’s one option. It isn’t. There are roughly 6,000 PE firms, a growing field of family offices, independent sponsor groups, search funds, and strategics, and each one wants a different shape of deal and leaves you with a different life on the other side of the closing table. I sat down with Paul Moffatt of Encore One, a Twin Cities family office that’s the sister company to Opus Group, the 65-year-old construction company built by the Rauenhorst family. Paul started his career in commercial lending, spent years staring at owners with no transition plan, and now sits on the buy side writing one check from a generation-skipping trust with no fund timeline behind it. We got into the real mechanics: why a typical PE deal asks you to roll 20% you’ll only see again on the second sale, why family office deals tend to be 100% buyouts with management long-term incentives, why your management team is the binary “is there even a deal” question (not a multiple question), and why owners who’ve been playing the income game end up with a much smaller buyer pool than they think.
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## Top 10 Takeaways- If you’ve met one private equity firm, one independent sponsor, or one family office, you’ve met exactly one of each. Generalizing the buyer pool will cost you.
- The 20% rollover in a typical PE deal isn’t free money. It’s a second bite of the apple you only get when the business sells again.
- A long-dated equity buyer changes what “life after the sale” actually looks like for you and your team.
- Your buyer’s source of capital dictates their timeline, and their timeline dictates how they’ll run your company after closing.
- Owners who run an income game (not a value game) treat audits, handbooks, and bench depth as wasted cost. Buyers read that as risk and discount accordingly.
- A management team isn’t a multiple boost. It’s a binary yes/no on whether there’s a deal at all.
- Growing revenue on the back of two customers isn’t growth. It’s concentration risk dressed up as a good year.
- Hiring a $250K president a year or two before the sale doesn’t dent your lifetime distributions. It determines whether the company is sellable to anyone other than a strategic.
- A strategic can pay your price and live with the risks a financial buyer won’t. The cost is usually the legacy, the name, and the team.
- Before you pick a buyer, talk to the management teams of their other portfolio companies. The honest version of life after the sale lives there.
Sound Bites
“You’re the proud owner, proud minority owner of a company with a bunch of debt on it where you don’t have any control and you’ve got some different folks potentially to answer to.” (@TBD) — Paul Moffatt
“Are they doing things or making decisions to create value in the business, or are they trying to create income for themselves? There’s a real difference there.” (@TBD) — Paul Moffatt
“Whether or not you even have a deal is more binary than that. The expectation is that if we’re going to make an offer, there is a management team.” (@TBD) — Paul Moffatt
“I didn’t want to work any harder or I didn’t want to invest in the team. That’s understandable if you’re enjoying a nice family business, but it does raise some level of skepticism.” (@TBD) — Paul Moffatt
About This Episode
Paul Moffatt is part of Encore One, a Twin Cities-based family office set up 20 years ago as the sister company to Opus Group, the 65-year-old national construction company founded by Jerry Rauenhorst. Encore One was built to diversify the Rauenhorst family wealth away from cyclical real estate and construction by making direct investments in lower-middle-market operating companies, held inside generation-skipping trusts with no fund timeline. Paul started his career in middle-market commercial lending in Chicago before moving to the Twin Cities and eventually crossing to the buy side. He brings a uniquely informed view of how banks, PE funds, independent sponsors, and family offices each see the same business differently.
Resources Mentioned
- Encore One — Paul’s family office. No web presence; contact directly.
- Opus Group — 65-year-old national construction company; Encore One’s sister company under the Rauenhorst Family Trust.
- Paul Moffatt — Reach him at paul.moffatt@encore1inc.com or 952-656-4539, also on LinkedIn.
Connections
Phase + Module:
- Module 2 — Expand Knowledge — Understanding the buyer pool before you pick one
- Module 1 — Ownership Goals — Drivers and trade-offs that determine which buyer is the right fit
Milestones:
- Milestone 5 — Market Value — How different buyer types price the same business differently
- Milestone 6 — Transaction Value — Net to seller after rollover, earnouts, and structure
- Milestone 2 — Cash Flow Targets & Sources — Liquidity needs at closing drive which structure works
Concepts referenced:
- Enterprise Value vs. Equity Value — Rollover equity, debt assumed, and what actually hits the wire
- The Multiple & WACC — Why strategics pay more and financial buyers discount risk
- Value Gap — The space between income-game owners and value-game buyers
- The Owner-Operator Trap™ — Why a one-person business has a smaller buyer pool