Acquisitions Anonymous - #1 for business buying, selling and operating - Inside an $11 M Elevator Services Deal: High Margin, Hard Growth

Episode Date: December 2, 2025

In this episode the hosts walk through evaluating a potential acquisition of a Houston‑area elevator services company, debating whether a 7.5× EBITDA asking price can pencil out given the financing constraints and growth challenges.Business Listing - https://www.bizbuysell.com/business-opportunity/strong-cash-flow-elevator-services-business-houston-texas/2439153/?J=bot&bn=114637964&bd=20251110&utm_source=bizbuysell&utm_medium=emailsite&utm_campaign=htmlbotWelcome to Acquisitions Anonymous – the #1 podcast for small business M&A. Every week, we break down businesses for sale and talk about buying, operating, and growing them.💰 Sponsored by:Go High Level – The all-in-one sales and marketing platform built for agencies and entrepreneurs. Automate, manage, and grow your business at https://www.gohighlevel.comAcquisition Lab – Your fast-track to business ownership. Get hands-on support, world-class resources, and join a top-tier community of acquisition entrepreneurs. Schedule your free consultation at https://www.acquisitionlab.com and mention Acquisitions Anonymous!This episode dives into a deal on an established elevator services business based in Houston (with a secondary branch in San Antonio), generating about $5.2 million in revenue and roughly $1.4 million in EBITDA — putting the asking price at roughly $11 million (≈ 7.5× EBITDA). The business offers elevator maintenance, modernization, repair, and installation to commercial, industrial, and institutional clients, with 23 technicians, a fleet of service vehicles, and long‑standing maintenance contracts, giving it recurring cash flow and limited customer concentration.Key Highlights:- Asking price: $11 M, with $5.2 M revenue → $1.4 M EBITDA (~27% margin)- Business: 22‑year established elevator services firm in Houston + San Antonio with 23‑employee workforce, service fleet, maintenance contracts, and recurring client base- Key strengths: Stable recurring revenue, high margin, regulatory/regional barriers to entry, limited customer concentration, clean financials- Main challenges: Growth seems limited, financing is tricky — too big for SBA standard threshold, too small for traditional debt; likely need large equity injection (~40–50%)- Industry context: Elevator service/maintenance is a niche with stable demand, but the value creation upside may rely on consolidation, scale, or roll-up strategy rather than organic growthSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Welcome to Acquisitions Anonymous, Michael here. Believe it or not, after 450-something episodes or so, we did a type of deal of a company we've never done before, and it's in Houston and also in my hometown of San Antonio, Texas. So stay tuned and see what you think about this one. Where we ended up was kind of surprising. Talk to you soon. Well, so that Acquisition Anonymous.

Hello, another episode of Acquisitions Anonymous. We don't have 100% years anymore. And thumbs downing on just the plus inventory line. Big thanks. the High Level for sponsoring this video and helping us pay for our editors. High Level is the all-in-one CRM that handles your emails, text, funnels, and more all in one place. Think of it like the Swiss Army Night for Small Businesses, and you can try it for free for 30 days at gohighlevel.com slash Michael Gurdley. Hey, how's it going? It's going great. It's, well, so there's no mills,

and we're going to do like a construction-centric deal today, but hopefully we've, enough of mills has rubbed off on us. This is going to be a good one. Yeah, so I found this one. I think it was sitting in the chat for a while when I, it was one of the two we could choose from and we did the dolphin one, which turned out to be weird, but it was. Forgive us for the dolphin one. This one should be better.

What's fascinating, it's an elevator business. And I don't know if you guys have ever looked into the business of elevators, but it's a fascinating one where you basically have these natural monopolies across different markets. and like Mitsubishi basically owns all of Japan, a lot of Asia in the EU. It's Schedler here. It's Otis. And there's like these weird dynamics where it's kind of like our healthcare system.

You have different payers. You have manufacturers and the consumers are not the buyers. So it's just this weird kind of thing. So let me show you this deal because I think it'll turn into some weird dives into elevator ink. So this business I saw on Buy Biz Sell, it's from Houston, Texas, and it's a strong cash flow elevator services business. They're asking a cool $11 million. That's just under two times revenues. So revenues $5.2 million. They're renting their location, $10,000 a month, and it's been around for 22 years. It was established in 2003. It does EBITDA of $1.4 million. So,

seven and a half times? Seven and a half times. Yeah. Yeah. All right. It's already pretty rich from my blood. Hey, you know, people are paying that much for this H-FAC stuff. So maybe this is an opportunity. All right, well, convince me to pay seven and a half times for this, Michael.

Tell me more about it. I don't know. We're going to try. Okay, proven profitability with established client base and scalable operations. This established elevator services company presents a compelling acquisition opportunity in Houston's resilient vertical transportation market. You know, they just can't call it an elevator market. They have to call it vertical transportation.

Heather, what's wrong with America, Heather? I don't know. We have to sound so. We try to make new words for everything. It's silly. It's ridiculous. Think about in banking. We do way too much of this in banking.

When you see a young banker trying to sound smart, they'll describe something. You'll just go, what? You know, what does this business do? We can't even understand. Oh, yeah. So vertical transportation. I love it. You service elevators, bro.

Just put that on the sheet. Okay. They have a strong reputation of serving commercial industrial and institutional clients with comprehensive elevator maintenance, monetization, repair, and installation services. The average revenue, we went through all this before, they operated a 27% EBITA margin, which is high for a small business. Got to love it. Consistent year-over-year growth from 21 to 24, strong cash flow generation with recurring revenue base

and clean financial records demonstrating operational discipline. They have no single customer dependency. They have a balanced revenue of high margin service work and long-term maintenance contracts, a team of 23 skilled employees across two Texas markets and a well-maintained fleet of service vehicles and equipment. The FF&E is worth $600,000. They have operational systems for scheduling,

parts management, and customer service, and they have a great industry reputation driving referral and repeat business. They operate in an essential services sector with stable demand and limited competition due to licensing requirements and specialized expertise. High bears entry, protect market position,

and a resilient business model independent of economic cycles. They have geographic expansion potential, service growth initiatives, and different things that can be done to grow it, including strategic partnerships with developers and facilities managers. They operate out of a 3,200-square-foot lease facility

at 10,500 a month. The lease expires in 13, 13 months. Yeah, end of 2026. Okay. Well, this isn't location dependent, so whatever. Inventory value to $200,000, including the asking price. An experienced management team and technicians are expected to remain. There's a comprehensive transition support, including training, client introductions, and licensing assistant. This turnkey operation offers immediate cash flow with significant upside potential making

an ideal for strategic buyers seeking entry into the vertical transportation sector or existing operators looking to expand their service footprint in the Houston market. And I don't think there's anything here in terms of the remainder of this listing that's important except for this thing here, which is a reason for selling is retiring and financing is to be determined. So go back up. It's actually two locations under facilities. It says it's headquartered in a fully equipped facility in the greater Houston area, which has the offices of parts warehouse and a service vehicle fleet. But they, that dispatches across greater Houston and South Texas. but additionally there is a San Antonio branch, Michael.

All tools, vehicles, and diagnostic equipment are maintained in excellent condition included in the sale. 23 people, fully operational team without owner need. So I have something to share. We actually have an elevator in our house. Did I tell you, did I ever tell you? Oh, you're planning to age in place, huh? Well, so we bought the house in 2018, and it was more house that I felt like we needed. and it was mid-2018 and my wife was like this is our forever house we're moving in you're paying

it this is what we're doing this is the house i want thank you and uh there's an elevator in it and it turned out the people who had it had renovated the house to have the elevator in it because they had a special needs daughter so there's reasons to have an elevator in your house even if you're not bougie so but yeah it's weird the thing breaks like if you have a special if go ahead bill well your wife has a special needs husband. So it does make sense that there's an old sentence in the house. That's true. It's interesting when you see, when you see service businesses like this where you have one headquarters that's really strong and then they have another office in like, you know, this kind of orphan market. I've had buddy after buddy run a services business like this where they have the headquarters in San Antonio and then they have like the weird Dallas orphan, right? Where it's just like, It just, they end up kind of running poorly or weirdly.

And I've seen it where, like, I've been a customer of a service business like this, where the headquarters is in Houston and it's run incredibly well thriving. And then they have their San Antonio branch and it's a disaster. Like, so anyway, I'm not saying that's what's going on here, but I've seen that pattern a lot, a lot. Is this like a, they'll get it listed for seven and a half times. It says it's mostly maintenance and kind of upkeep. And then they kind of mention, oh, also there's some installation at the end. because I got to imagine the maintenance contracts on these things are where all the money is, right?

Because, you know, they're compliance. They've got to be certified every so often. If it breaks, people die. Like I can imagine this is very heavily regulated. You've got to have your elevator tuned up dramatically. Like, Michael, do you have an elevator service contract for your elevator? No, but we haven't come by at least once a year. We just come inspect it.

Make sure it's okay. Home elevators, you don't have to do the same thing as public ones. We also rarely use it. It gets used like maybe once a month. We've told our kids you can't use it. Nobody uses it. But yeah, I mean, when it gets repaired, we pay for it because you don't want to die in your home elevator. I would suck.

That would suck. We'll pass on that. So I would imagine like every building with an elevator has a company like this that is maintaining their elevator. I mean, I would be curious if there are like how specialized the skill set is. Like if I have a 50-story elevator, is that different than a three-story elevator? And are my guys qualified to work on all the big elevators or not? But at the same time, maybe it doesn't matter at all. Like, maybe this is incredibly sticky.

You know, I imagine it's kind of long-term contracts. Like, you've got an elevator maintenance guy. Like, I do not see this as something that you're going to shop, right? Which I could see, like, this is probably why the stuff goes for, these businesses go for seven and a half times. Or at least that's why they're asking that. It's recurring revenue and it's super sticky. On the other hand, they keep talking about in this listing. There's so many ways to grow it, all the growth opportunities.

They mention upside opportunity at the bottom. And it's priced at seven and a half times where you're probably going to have to grow this business in order to make the returns work or you're going to have to have synergies as a strategic add-on. But this strikes me as something that is almost impossible to grow. Like, I don't know, unless it's new construction and you're putting in the elevator and getting the maintenance contract or somehow bidding, somehow the guy who installs the elevator isn't smart enough to take on the maintenance contract, I don't see how you displace any of your competitors who are already successfully servicing an elevator, right?

I mean, do you guys? No, that's the benefit. There's the benefit and the cost of a sticky business. You keep your customers and the problem is you can't get new customers away from your competitors, you know, because it's sticky over there too. So I think that is the problem with this deal. a lot to like, but when they talk about growth opportunities, I don't see this kind of company that way. I see this. If you're going to go geographic expansion, that's really heavy expense

on people and probably some CAPEX. And you're fighting against pulling customers away from existing service providers in that other geography. So I think that's super hard to do probably as a reason why they are where they are and they haven't done that themselves. So asking seven and a half times you kind of want to see some growth opportunities. I think what you're actually buying here is very stable cash flow, which is great. It's a really good thing, but seven and a half years worth of it you're paying. You're not going to be in the black until the eighth year, which if you don't grow, and I just feel like growth is just probably very, very difficult here. Yeah, well, you've got to use some leverage, right? Like there's certainly some financial engineering,

some debt pay down. You know, I think you could probably make the equity returns look pretty good on an on an IRR basis. Like if you put some debt on it, you know, it doesn't go sideways. It's shocking after my time in investment banking in private equity. It's shocking how stability and debt pay down can create really good returns. Yeah. That's what you're buying.

You're not buying growth. Yeah, that's what you're buying here. But like that, maybe that's fine. You know, it's tough if you're an individual buyer, right? But if you're a private equity, or really if you're an established business you're trying to add this on, it's probably a slam dunk. So let's talk about that because what makes this a slam dunk is financing, right? Debt financing, right?

This is a tweener. I call these tweeners because of the size. It's a little too big for SBA and it's a little too small for conventional. Conventional lenders for M&A, they would like minimum EBITDA of 2 to 3 million. This is 1.4. So, and I've had plenty of buyers shopping around for something kind of in this million and a half, million eight size, EBITDA size range. And it is very, very difficult to get any lenders. They just perceive the risk to be so much greater when the company is that small.

And so the best, probably best way to get this financed is with an SBA Perry Passeau, where you get the 5 million SBA and you get the extra two. or three million conventional loan from the same bank. And there's only a few banks that even do those. We help our clients with those on occasion. And this is probably a good candidate for that. If, but then to get that kind of debt, the personal guarantor, you first of all going to have to have one at least. And number two, that person needs to have decent net worth and resume. So if you had all those factors, yeah, I would say that kind of financing would make this, you know, just on amortizing the debt and paying it down a good investment. But if you don't have that and you've got to go conventional, you've got to put a lot more equity in and those returns get a little

skinnier. So question, Heather, when doing Perry, how widespread are these Perry Pursue loans? Because you hear about them. Like, I know Live Oak did them, you know, for a while. But like, are they the only game in town? Like, they try to make it sound like that it's like their patented product, the Perry Pesu loan. But, I mean, other banks will do it. But is it hard to find? Or, you know, if I'm a buyer, should I pencil into my model, oh, I'm just going to get a Perry Pesu loan? Or is it kind of a hard long pot? Yeah, you shouldn't just pencil it in. Don't just assume you can get one.

Live Oak is not the only bank in town that does them. I account for reliable lenders that do them right now. And there used to be five, and one of them decided they don't want to do them anymore. So, you know, they come and go in and out of that kind of group. Live Oak still does them, but they're tough to get. So even within those four banks, their standards go way up when you ask for the over $5 million. And it's things like not just the deal has to be nice. I mean, this is a pretty nice company.

It has a lot of positive attributes. But they're going to want more equity. They're going to want that resume. And they're going to want their personal guarantor to have some net worth. This is not like a searcher out of, fresh out of MBA, you know, buying this with a low net worth. this has got to be someone a little more substantial to qualify for that Perry Pissue loan. They're not easy. One thing that could happen with this one is potentially, it looks like the person that owned this

since they founded it 22 years ago. They're retiring. They own 100% of it with no debt. Potentially there's rollover, earnouts, seller note. It's all kind of makes sense here that maybe that could help with some of the financing instruction you guys are talking about. Yeah, you could get like a million dollar seller note. I mean, you're going to need to max out your $5 million of SBA and then get a million dollar note.

But like once you're maxing out $5 million of SBA and paying seven and a half times, Heather, your debt service coverage is not there. Right. Right. Right. I mean, your leverage has to be 3.75 times EBITDA maximum to get your debt, to get your debt coverage ratio in line with what banks want. So, yeah, no matter how you slice it, I guess in this case, you've got to have more equity than 10%. if you go SBA. So that's the modeling you'd have to do is, you know, at 20% equity does this still work? You know, do the investment returns work, assuming no growth or, you know, kind of what equity

percentage does this still work? Well, I think you're closer to 50% equity, right? Because it's 1.4 million of EBITDA. And let's say I can't, I can get not quite four turns of debt. So that's like four million of debt. And I got to pay seven and a half million for it. So I'm bringing three and a half of equity here. So you're 40% equity on this deal to get it done with an SBA loan, you know, under kind of conventional terms. Yeah. You can't get more leverage than that conventionally because they actually go a little bit lower on leverage usually. So than SBA would because their term is shorter. So yeah, you're right. That is the math. That's the best case. Yeah. Okay. So it is in like SBA strike zone. You just have to bring more equity. So it's not

that SBA won't finance this deal, right? You can put three and a half to four turns of SBA debt on this thing. Yep. You've just also got to bring three million bucks of equity. Yep. On top of that. Yeah, exactly. So that would be the math is, does that make enough money for you to do that? So I pull this up and it's a report on the, on the PE involvement in this space. And there, as you can imagine, it's recurring revenue. So PE has set up platforms and a number of them been around for a long time. this one from Jupiter Partners, Oracle Elevator has been around since 2004, and it's on its third

PE ownership as of the time of writing here. Why isn't this getting, why isn't this deal been picked up by one of these platforms? Texas is one of the few growth population markets in the United States. Like, Houston is a great market to be in. San Antonio, even better. Like, why haven't any of these?

That's my big question. Like, why is this one by business by sale? and why haven't corporate development from any one of these platforms called? That is weird to me, I agree. Is it, Michael, you have the listing up. Is it for sale by owner or is it for sale by broker? Let's see.

Patrick Ortiz. With a phone number. I will Google Patrick Ortiz and see what comes back. It's a good point, Michael, because for all of our listeners out there who already own a business, if you own a small business, especially if it is in an area where private equity is rolling up,

you are getting inundated with emails. Like, hey, do you want to sell your business? Hey, do you want a new beach house, et cetera, et cetera, et cetera. And you would be insane to not realize that people want to buy your business. So it seems kind of weird to me that after being, and if private equity is very active in the space, they have got whole full-time corp dev guys canvassing, searching, who have certainly called this guy.

So it is puzzling why he hasn't replied to any of them and why he would just list it on biz by sell unless he, I think you find it less puzzling if there's a broker where he probably hired a broker and it's part of broker's ordinary course. I got to put it on biz by sell. I need to generate some additional interest to keep my private equity guys honest so I can say, hey, we've got other interests. We're running a process. We've got 20 people who've signed the NDA. You know, you've got to build a market multiple. I want to make it very clear you don't have a proprietary look at this. That's the only rationale for this being here. Yeah, that could be it. Are you ready to take a leap into business ownership but you don't know where to start? Well, look no further than Acquisition Lab, the premier resource for entrepreneurs seeking to buy their dream business. Founded by Harvard MBA, an acquisition expert, Walker Dibble, the lab is your fast-tracked success in the search diligence and acquisition process. With hands-on support, well-class resources, and a community of like-minded entrepreneurs, Acquisition Lab gives you the tools and confidence to navigate every step of the journey.

And we're proud to call Walker and Chelsea, the lab's director, longtime friends of the podcast. They're passionate about helping entrepreneurs like you take the next big step. So don't wait to make your business ownership dream or reality. Visit AcquisitionLab.com today to learn more and schedule your free consultation. And when you do, be sure to tell them the Acquisitions Anonymous podcast sent you. I think it's something we advise buyers all the time. There are some, you know, areas where you're competing against. better buyers, basically.

That's not where you want to be if you want to get a good deal for yourself as like a first time buyer using an SBA loan. So, yeah, it is kind of curious why it's here and why hasn't been snapped up already. So, Michael, you had something about the growth of this market over time, which I saw you put on the screen briefly. Yeah, let me pull that back up here. It looked like you're kind of classic up into the right curve, which everybody loves. Yeah, it turns out.

Yeah, it's a great way to sell reporting. reports, right? You just like, people want to buy reports that tell them what they want to hear a lot of times. So is this, this market is growing substantially, right? What do you got here, Mark? This is a $7.3 billion market in 23. In 2030. It's supposed to go, yeah, 9% per year, 8% per year? This is the Cagger. 11% per year overall market? That's because we're building more elevators or because we're charging more for the maintenance. What drives? A lot of its price increases. Yeah. The way it looks.

But it's interesting. This next graph, where was this graph? Elevator market split by value. 48% is spent on maintenance, which is interesting. 75% of the profit comes for maintenance. Oh, wow. Yeah. And I have to think back because I read one of the business school case studies about

elevators, just like five or six years ago, maybe longer. They talked about all the factors that have created these natural monotonies. And I have it here on the slide. These guys, Otis, Cohn, Schindler, like, there's reasons all this happens. And a lot of these guys, there was like a trend happening where they were starting to do like the airplane manufacturers do and like really hammer people on the cost of replacement parts and put all these kind of pressure on the independent folks. So I don't know. I got to find that case study. I mean, it does strike me like once you have an elevator in your building, it's super regulated.

you know, you're not going to close the elevator. I mean, often you're not allowed to take the elevator out because you have ADA. And we're going to come back to ADA in a minute. But like there's a lot of pricing power here. Each individual firm, you've got to be careful not to push it. Otherwise, maybe they will bid you out. But the industry as a whole feels like it has a whole bunch of pricing power. And now let's talk about ADA. So we were, our our warehouse building when we still had it was kind of at a 40 foot clear warehouse in the back. and then it had office, a two-story office building that was kind of attached to it. So like, you know, 12 or 15-foot ceilings on each of the floors and then a 40-foot clear warehouse in the back. We were, had our offices on the first floor. The upper, like, office floor was not finished out yet. So we were going to put up some drywall, put in a bathroom, and, you know, kind of finish it out and expand up there.

We get the architects in and then they go, yeah, we got to pull permits. and then they go, well, there's no elevator in this building. So to bring it up to code, if we have to pull permits, we are going to have to put in an elevator. And I'm like to up to the second floor from the first floor to the second floor. And it was like egregious. It was many six figures. It was hundreds of thousands of dollars.

And, you know, we were the tenant. So that was clearly not happening. But it was not only the couple hundred grand to put it in. It was then you're signing up for all of the maintenance, all of the inspections, you know, all of this stuff. But that was mandated by ADA, the Americans for Disabilities Act, which is like in 1980,

1980s or is it a Bush or a Reagan? I think it was, I think it was the 90s. I think it was Bush. I think it was W. Bush. Or H.W. Bush. Yeah. I think so.

But it mandates, you know, all of this stuff. And one of those is elevators. So every building that is now built or brought up to code is get in elevators. So I got to imagine this is the best legislation ever for the elevator market. So I spent a couple minutes looking at trying to find Patrick Ortiz and the phone number. They have a 2-10 phone number, which is a San Antonio area code. And there is basically nobody, either in Houston or San Antonio, related to elevators or business brokerage named Patrick Ortiz.

So just kind of a bizarre listing that it's like, well, there's no footprint whatsoever. just really weird. Huh, that is weird. Well, maybe he is a for sale by owner. I don't know. Yeah. Yeah, but even if I giggle, Patrick Ortiz, San Antonio,

or elevator or Houston elevator, like doesn't come up with anything. He's a ghost. I mean, isn't that what we all should strive for to own a business in wakes $1.4 million a year of EBITDA and you're just invisible on the internet? Oh, now you tell me I'm supposed to be a nobody on the internet. How am I supposed to delete all this stuff?

How am I supposed to delete all this stuff? Bill. Yeah, I was talking to Eric Pacific. How do you say Eric's last name? How do you say it? Pasoichi. I was talking to Eric Paspeachia at Main Street Summit. I'm wearing the Main Street Summer jacket today, actually. Two weeks ago. And he was saying that he knew somebody who had sold his law firm and like disappeared and was like, I don't know what's wrong with you. You should delete all that stuff on the internet. And Eric was like, It's going to be kind of hard at this point, man. You know, I'm all over.

That's a one-way door, I think. All of us, too. Today on Twitter, there was a whole discussion about, oh, you should not build a personal brand. It's really dumb. Don't share on the internet. I was like, whoa. I was like, oh, oh.

Yeah, don't build a personal brand. We don't need any more competition. Yeah, right. You know, I did really like, I was reading Patrick Dichter, who has bought, is rolling up several accounting firms and was one of like at this point he bought his first business in 2020 so he's like one of the ogs of entrepreneur or superior acquisition and he wrote a really good piece about what had changed in ETA over the last five years. And one of the things that he called out was that there's just

been this explosion of information. And he said and in the paragraph he goes, when I was getting started, there was only acquisitions anonymous and he listed like one other thing. And I was like, we're the OGs of ETA info. I mean, now. 450 episodes later, which makes me feel old. But this is still the, we're still doing new businesses. Like, I don't think we've ever done an elevator services, you know, business, which is why small business America is so cool. There's so many crazy little ways to make money.

Well, at least it's not a dolphin habitat. So, all right. So what are you guys thinking about this deal? So I think I like it. I mean, I have to run the model and see if you can put three or four million of equity into this thing and have it work. I'm a little worried about, uh, it's said that. there's like a certification requirement, like a skilled labor. So I'd be a little bit worried about

kind of availability, the depth of the market on skilled labor that is certified to do elevators. Assuming I could get over that and kind of the model makes sense, I do really like it. My fear is that you're wasting your time. You're going to get blown out by private equity or a roll-up, private equity back roll-up. I mean, this, I don't know why this on biz by sell. this should sell to one of the roll-ups and probably for more than seven and a half times, be honest. I agree with everything you said, Bill, but my bigger concern is if I get it under LOI, how am I going to finance it?

Because it's not that easy. It's a nice company, but it's a little small for conventional debt, and it's a little big for SBA. And so you've got to maybe try to figure that out early on if you've really got lenders on board with the structure that you're thinking of. And you'd have to assume, you know, 40%, 50% equity. That's kind of table stakes here. Yeah, you've got to be realistic about the amount of equity.

Exactly. And that's the model that you have to run, right? Does that work or not? And if it does, yeah, I like it too. Heather, can I get there with like a sizable seller role? Like, if I convince him to roll 25%, you know, that's part of my, there is a big chunk of my equity slog right there. I'm glad you asked, but yes, but the SBA changed the rules on roll over equity.

on June 1st, and the new rules are very onerous. Most sellers will not agree to them anymore, which they require the seller that rolled over equity to personally guarantee your loan for two years. And if you bring in investors, every new investor, even though they're below 20%, this is only for rollover, has to personally guarantee your loan for the life of the loan, and you have to do a stock sale, all three. Whoa. I know. That's terrible. It's a terrible rule. Yeah. I'm not really sure why they think that was all necessary or what they're trying to prevent. But I'd heard that the SBA said the folks at the SBA think that sellers who roll over equity are going to make all this big money on the second, you know, on the exit later on. And if they're making money and they got paid, they should be guaranteeing the loan.

That makes it all happen. So anyways. I could see it as like, you know, they don't want people wiggling out of a PG. Imagine you have an SBA loan and you're trying to. wiggle out of your PG and you're going to do a sale of the business and roll your equity and kind of try to transfer the PG from party A to party B, you know, as part of the transaction. You know, like you're, you have, if you have a material continuing economic interest, I can see how they want your guarantee to persist. And that's probably why they let you roll off

after two years, like, because after two years is kind of clear it wasn't like a sham transaction. It wasn't a sham. Yeah, exactly. didn't pull apart. So maybe it's that too. A little bit. It could be that. But we had rollover equity allowed for such a short period of time. I can't believe that they uncovered sham rollovers that fast.

I don't think that happened. But who knows, but that has made that whole structure very unpalatable in most cases for now. All right. So I can't do seller roll. I can't do seller note because I probably won't agree to it because I can't afford to pay him any current cash pay because I have to max out my SBA.

So I'm basically, I'm bringing three and a half to four million of my and my investors' equity to this thing. And it still has to pencil with that. Yep. And that's what I mean. You have to make sure the loan works because this is all about financial kind of math as to whether this is a good buy or not. So that's kind of foremost. You've got to figure it out. And that's why I think private equity will win it.

Because their pencils will be sharper on that. and they will have seen the same deal 20 times, and they'll know what the assumptions are. And especially if they're bolting it on to existing platform, they're going to have synergies. Because this is going to be a little thin. So synergies will make it really work or only kind of work. So like a buyer with synergies and experience the space is going to outbid you eight years a week.

I think so. I didn't mention in that PE report, but it said the publicly traded platforms in this space are trading at 15 to 25 times EBDA. So, yeah, they're getting, they're getting a natural, like, multiple expansion that you're not going to get as a financial buyer or as a, or as a searcher. Yeah. Now, that being said, if you somehow have a line on this thing and by some miracle, you are the only bidder or, you know, one of the few bidders and somehow these roll-ups, the public guys and the roll-ups have not figured it out, there is very much a business model here, like, to make sure it kind of fits the shape that the public roll-ups want to buy, right? And buy the thing, or maybe it's 90% of the way there and you can sand off some of the rough edges and kind of get it to fit. the buy box of your large acquires, like if there's that kind of multiple arbitrage there and somehow you've got, you can get this thing tied up,

you know, you can buy it, own it for two years and flip it for two X, you know, for double your money, uh, maybe not quite double because they're going to need to see some expansion too. But,

you know, that could be a strategy here if somehow you're, you know, the other guys don't find it. Well, if anybody calls Patrick and ends up buying this or finding out what's going on, let us know because it, he's got a two one number.

It's right here. on the list. If you run into them at the one grocery store in San Antonio, you can ask him. Oh, or at the one stoplight, yeah. Yeah. Yeah. Yeah. All right. Anything else on this one? Bill's, Bill likes it. Is that what I heard? I like it. Yeah, I'm, I need a, I need a, I need a spreadsheet to know if I like it. Yeah. But like it doesn't have any huge problems on the, on the face of it. It's a great business to be in. That's where I'm at. Yeah, I like it. All right.

Anything else? Otherwise, we'll let everybody go here. Hey, we've been getting a lot of really good feedback about our newsletter. So our open rate is shocking. It's like 75% or something. Wow, really? Thank you to all those people. Our newsletter.

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