Since launching in May, we've focused on building our team and meeting business owners. We on-boarded ten team members, selected from a pool of 200+ candidates, from 20+ universities. Each one of our team members were handpicked, and we are honored to have the support of such an exceptional group of individuals. With the team up and running, Ryan and I have had the time to meet with fellow business owners to discuss their ambitions and exit plans.
Ryan and I built K Squared to offer fellow entrepreneurs a way to transition their company to operators who understand how to build a sustainable business. We met with firms, ranging from startups to companies that have survived for multiple generations. The individuals we spoke with included owners who plan to sell their business, and those who don’t.
The leaders we spoke to consider their business as a primary asset, and consider selling the business is an integral part of retirement. Many want to time their exit for when the economy peaks, yet over half planned to sell before the last market correction in 2008. Those we spoke to have been so focused on the business, that selling and preparing for retirement have lost priority. One owner said it best, and acknowledged that her company have been stuck in limbo, and have been “selling” since 2008.
Preparing to sell your business is like selling your home, and should compensate you for years of hard work. We all want to time the sale of our homes and our business for an economic peak. The value of our companies, our assets, and our investments all move in roughly the same direction and are effected by external factors like the health of the national economy and availability of credit. In recent years, we’ve enjoyed market growth and low interest rates. valuations for companies with an enterprise value of less than $50M are trading at 5.0x to 6.0x EV/EBITDA in 2016, levels not seen since 2013. Despite these trends, we expect a future market correction.
Apparently, we're not alone. Here are seven billionaires worried about a market correction, including the man himself, Warren Buffett. As growth slows and interest rates increase, buyers leave the market and financing is more expensive, which leaves few buyers and less money available.
With strong valuations and affordable capital, we suggest owners strongly evaluate their options within twelve months and take advantage of this window of opportunity. Contact us if you’re considering an exit or selling your business interest. We understand the concerns of business owners, and our passion is to work alongside business owners: serving, advising, providing insight, and improving businesses. We’d be happy to help you evaluate your options, pursue the sale of your company or chat with a fellow business owner.
Thank You. We would like to extend a special thank you to those below. We are very lucky to have your support and look forward to an opportunity to reciprocate!
- Glenn Tolchin of the Visiting Nurse Service of New York
- Jesse Speltz and Ben Sady of Dixon Hughes Goodman
- Koshy Matthew of Advanced Infusion Solutions
- Michael King of Brownstein Hyatt Farber Schreck, LLP
- Michael Kenefick of Kenex Holdings
- Michael Ory and Gordon Phillips of Raymond James
- Tim Dailey of Peakview Partners
Helping Our Friends. Deal flow is building, thanks to our Partners. Following are a selection of anonymous opportunities that did not fit our investment criteria. If you or anyone you know are interested, email firstname.lastname@example.org and we will connect you with the appropriate party. We are not a broker dealer and receive no compensation for referrals. Our aim is to help the same folks who are helping us.
- Baywatch - Marine product manufacturer
- Comanche - Rail services company potentially looking for growth equity
- Data - Supply chain software and services
- Green - Indian Solar Plant in search of equity or debt project financing
- Lookout - manufacturer of integrated security hardware, software, solutions and services
- Orange - Technology Consulting and Contract Management
- Oz - Travel Nurse Staffing Company looking for subordinated debt
- Rent - Niche private home rental platform, specializing in properties near major events (e.g. concerts, sporting events, etc.) in underserved markets
- Stella - Digital strategy and social media consulting firm
- Turf - Artificial turf surface designer and installer
- What about Bob? - An online psychiatric medical education provider
- Vulcan - Medical practice management service provider
Team Spotlight. It’s with a heavy heart that we say goodbye to Alvaro. Fortunately, Chris is staying on part time, through the school year. Following is a little background about a couple members of our team.
Alvaro Arizcun, MBA Candidate, MIT, Class of 2018. Originally an engineer, Alvaro is now a seasoned Private Equity professional and Vice President of the MIT Private Equity Club. Following graduation, Alvaro has expressed an interest in Private Equity roles in Madrid, New York or London. Ryan and I both endorse Alvaro fully and would be honored to work with him again.
Chris Odeh, MBA Candidate, University of Chicago, Class of 2019. In his previous life, Chris worked in Capital Markets research at the Federal Reserve Bank of New York, where he authored a piece on equity valuations and flows following the French Election for the Federal Open Market Committee. Chris is looking for a role in Private Equity or Investment Banking in Chicago, New York or San Francisco. Chris brings an energy and thoughtfulness that raised the bar for our team. We recommend Chris highly.
Open Internships. School Year and Summer Associate, Analyst and Marketing positions are now open. Please direct any interested and qualified candidates to our Open Positions.
Please contact us should you have any questions or suggestions. Thank you for your continued support!
What we are Reading
Tools of Titans, by Tim Ferris of the Four Hour Workweek. A collection of tactics and routines from an eclectic and interesting group folks like Marc Andreesen (Netscape), Reid Hoffman (LinkedIn), Malcolm Gladwell (Tipping Point) and Laird Hamilton (pro Surfer)
Hacking Growth by Sean Ellis and Morgan Brown. A selection of strategies to create value and employed by companies like; Facebook, Uber, Dropbox, Pinterest, AirBnB and many more.
I Am the CEO … So Why Am I Confused About How I Should Spend My Time? by Mike Smerklo. We’re all busy and Mike offers set of simple techniques to help prioritize and manage our time.
K Squared Fund LLC (“K2”), do not provide tax or legal advice. Consult a tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning, charitable giving, philanthropic planning and other legal matters.
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