Lecture Notes: Carlos Santelli on Business Acquisition

Introduction

• Carlos Santelli is a guest discussing his journey in acquiring a large business.
• Originally from New York/New Jersey, now resides in Florida.
• Background includes a period of living in Alaska, working for a nonprofit, and attending Columbia University after persistence in applying.

Early Life and Education

• Took three years off between high school and college, worked for a nonprofit, and lived in Alaska.
• Experience in door-to-door sales and fundraising shaped his investment thesis.
• Attended Columbia University after multiple applications, studied economics.

Career Path

• Started in investment banking, not fitting typical corporate roles due to out-of-the-box thinking.
• Worked in various financial roles, including at Bank of America and Stonehenge Capital.
• Gained interest in small business transactions through discovering low EBITDA multiples.

Discovering Business Acquisition

• December 2015: Realized potential in small business acquisitions due to lower multiples compared to large transactions.
• Worked in funds that participated in search and independent sponsor deals.
• Finally left corporate job in March 2023 to pursue acquisitions full-time.

Acquisition Approach

• Focused solely on proprietary deals, avoiding brokered transactions.
• Uses creative deal structures like sale leasebacks to fund acquisitions.
• Aims to acquire businesses at low multiples for significant economic advantages.

Case Study: Recent Acquisition

• Acquired Triem Industries and Stillwater Fasteners, manufacturers of custom metal components.
• Business details: $13 million in sales, $3.5 million EBITDA, 65 employees.
• Structured deal using a sale leaseback and asset-based loan, requiring no personal equity.

Deal Structure Insights

• Purchase price of $16 million with a sale leaseback for $10.75 million, $2 million seller note, and $3.25 million from asset-based loan.
• Emphasis on leveraging sale leasebacks to bid down purchase prices.
• Proprietary deals provide more negotiation leverage and better economics.

Operational Involvement and Strategy

• Initial hands-on involvement post-acquisition with a shift to a focus on inorganic growth through further acquisitions.
• Strategy revolves around acquiring additional businesses to achieve multiple expansion, rather than solely focusing on organic growth.

Reflections on the Acquisition Space

• Carlos views the current environment as optimal for acquiring intergenerational wealth through strategic acquisitions.
• Encourages prospective buyers to consider proprietary deals and the potential for sale leasebacks as a funding mechanism.

Conclusion

• The talk emphasizes the importance of creativity and strategic thinking in business acquisitions.
• Carlos is open to sharing his knowledge and can be reached via email or LinkedIn for further dialogue.

This lecture encapsulates Carlos Santelli's journey and methodology in acquiring businesses with a focus on leveraging unique deal structures for economic gain. The practical insights on deal structures and the emphasis on proprietary acquisitions present valuable learning for aspiring business acquirers.