Ep. 193 — Ilan Jacobson: The Pandemic Didn't Break the System. It Exposed It.

5 min read

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Episode Summary

You watched the longest bull run in history and something felt off. Multiples kept stretching. PE firms kept writing bigger checks. A vet clinic owner came up to me at a keynote and told me he just got an LOI for 14x EBITDA, and he wasn’t even a platform deal. The squeaks were there before COVID hit. The lubrication was gone. And then a pandemic threw a wrench into the whole machine. I had Ilan Jacobson back on for his second visit, and we got into what the actual flaws in the system were, why corporate buybacks left Delta with no cash exactly when they needed it, how a third of leveraged buyouts could default in 30 to 60 days, and where deal volume actually lands through 2021. We also pulled the optimism thread: which businesses come out stronger, why the lower middle market policed its own multiples while big PE didn’t, and how to build a good business when growth-at-all-costs finally stops being the only religion. Real numbers, real predictions, recorded in the first weeks of lockdown.

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## Top 10 Takeaways
  1. The pandemic didn’t break the system. It exposed the leverage and shortsightedness that were already there.
  2. If your model needs cheap capital and zero demand shock to work, you don’t have a business.
  3. There’s no one hitting plan right now. Owners are either crushing it or being crushed.
  4. Fund managers get paid to deploy capital, so they deploy it. Returns assumptions soften to justify the deal.
  5. Corporate buybacks aren’t innovation. Cash going to your stock price instead of resilience leaves you exposed.
  6. Cash flow timing matters more than dollar amount. A six-week subsidy delay kills a technically solvent business.
  7. 94% of US private companies sit under $5M in revenue and juggle payroll-to-payroll. Build reserves before you need them.
  8. Use COVID as your stress test. If your business holds through social distancing, the model is probably sound.
  9. Diversify your supply chain. One supplier is one point of failure, and resilience is cheaper than a shutdown.
  10. The machine won’t fix itself. Personal responsibility and capital discipline separate the owners who survive.

Sound Bites

“I did not expect it to take a pandemic for me to look smart. But it cycles. If it wasn’t this, it was something else.” (@00:00:25) — Ilan Jacobson

“The pandemic threw a wrench into the system in a real hard way. But the lack of lubrication was being seen. The squeaks were seen before this.” (@00:01:46) — Ilan Jacobson

“If you raise a $100 million fund and you’re charging 2% for your operating expense, you’re charging someone $2 million a year and you haven’t spent any of their money.” (@00:05:46) — Ryan Tansom

“There’s no one hitting plan. They’re crushing it or they’re being crushed.” (@00:08:30) — Ilan Jacobson

“China’s winning because they don’t have to give a shit about four-year terms. They got a hundred-year plan.” (@00:36:15) — Ilan Jacobson

About This Episode

Ilan Jacobson is the founder and CEO of FirePower Capital, a Canadian merchant bank and M&A advisory firm. This is his second appearance on the show. He hosts the Dealmaker DNA podcast and brings the perspective of an active dealmaker watching the leverage cycle break in real time. The episode was recorded in early April 2020, in the first weeks of COVID lockdowns, with Ryan and Ilan calling the shifts in deal volume, valuation, and capital flows as they happened.

Resources Mentioned

  • FirePower Capital — Ilan’s firm.
  • Dealmaker DNA Podcast — Ilan’s show on entrepreneurship and dealmaking through the lens of nature vs. nurture.
  • Ilan Jacobson on LinkedIn — Best way to find him.
  • Conscious Capitalism — Referenced as one of Ryan’s business bibles on taking owners, employees, and partners into account for the long term.
  • Misbehaving by Richard Thaler — On behavioral economics and short-term human decision making.
  • Ray Dalio’s “The Changing World Order” — LinkedIn article referenced on long-term debt cycles, populism, and global power shifts.
  • Facebook Portal — Immersive video device Ilan uses for family dinners during lockdown.

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