IN THIS ISSUE:
www.masource.org
NO.07
ISSUE
FALL 2024
© M&A Source. All Rights Reserved. | The insights and opinions expressed herein are those of the authors and do not represent professional counsel nor an endorsement by M&A Source.
The Bridge
U P D AT E S & I N S I G H T S
F O R T H E L O W E R M I D D L E M A R K E T
A QUARTERLY PUBLICATION
OF THE M&A SOURCE
Chair’s Letter
An Interview with
M&A Source Member,
Gary Rayberg
The True Economic
Earnings Power of
Your Business
M&A Source Fall
Conference 2024
The Importance of Sell-Side
Quality of Earnings
Hurdles in Customer
Concentration
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2 | T h e B r i d g e F a l l 2 0 2 4
Updates + Insights
for the Lower Middle Market
T h e B r i d g e | F a l l 2 0 2 4 | 3
Content.
NO.07
ISSUE
FALL 2024
The Bridge
A QUARTERLY PUBLICATION
OF THE M&A SOURCE
Reflect on the latest initiatives and
value of M&A Source for lower
middle market professionals.
LETTER FROM THE CHAIR
04
Learn more about what you can expect
at the Conference & Deal Market later
this October.
DISCOVER THE FUTURE OF M&A
AT OUR 2024 FALL CONFERENCE
IN LAS VEGAS
06
Discover how to calculate earnings
power for privately held companies.
UNDERSTANDING ADD-BACKS:
REVEALING THE TRUE ECONOMIC
EARNINGS POWER OF YOUR
BUSINESS
14
Read personal insights into a career in
M&A with our latest member interview.
AN INTERVIEW WITH M&A
SOURCE MEMBER, GARY RAYBERG
08
Dive into why the sell-side QoE is critical
when preparing for a sale.
THE IMPORTANCE OF
SELL-SIDE QUALITY OF
EARNINGS
10
Gain an understanding of the different
perspectives on customer concentration.
HURDLES IN CUSTOMER
CONCENTRATION
20
4 | T h e B r i d g e F a l l 2 0 2 4
Chair’s Letter
As the Chairman of M&A Source, I want to
take this opportunity to reflect on the value
of being a part of this incredible community,
and to share how membership has profoundly
impacted my professional journey. Like many
in the investor community, I joined M&A
Source to connect with M&A advisors, gain
access to industry-leading resources, and
most importantly, to see deals. But what I have
gotten back through my involvement in the
organization was much more than just access
to deals; I found a source of collaboration
and lasting relationships that have been
instrumental in my success as a lower middle
market (LMM) M&A professional.
A Personal Re�ection
on M&A Source’s Value
Over the years, attending the M&A Source’s
two annual conferences has been one of the
most rewarding aspects of my membership.
These events are not just gatherings; they
are oppor tunities to immerse ourselves in
the collective knowledge and experience
of our peers. The connections I’ve made at
these conferences with industry-leading
M&A advisors have been invaluable. In fact,
many of these relationships have evolved
into trusted par tnerships and friendships
that continue to enhance my career. The
oppor tunity to meet face-to-face, engage in
meaningful discussions, and share insights
with like-minded professionals is something I
look forward to year after year.
Our upcoming Fall Conference & Deal Market
at Caesars Palace in Las Vegas on October
22-23 promises to be another exceptional
event. For those who have attended our
conferences in the past, you know the energy
and value these events bring. If you haven’t
yet experienced one of our conferences, I
strongly encourage you to join us. This is
your chance to connect with the very best in
our industry, explore new deal oppor tunities,
and deepen your understanding of the trends
shaping the lower middle market.
I’m par ticularly excited about the two days of
courses preceding the conference, scheduled
for October 20-21. These in-person courses are
now designed to provide more advanced-level
instruction, and most of them are completely
new subjects based upon member feedback
and evolving industry dynamics.
These advanced courses represent the third
phase of our revitalized educational programs
which now provide a clear professional
development path:
#1:
M&A Foundations (online/on demand)
#2:
Core #1 and Core #2 Educational Series
(live, virtual)
#3:
Advanced Courses (live at conferences)
Released earlier this summer, the M&A
Foundations course offers 22 modules of
introductory education delivered by some of
the top per formers in our industry. This course
was over a year in the making, and it fills a
critical knowledge gap for those star ting their
journey in LMM deals. Core 1 and Core 2 go
deeper into key subjects in a shor t-style vir tual
program that will each be offered twice a year
moving forward. Combined, these programs
represent our commitment to strengthening our
community by helping emerging advisors learn
how to excel in this profession quickly, and
with professionalism and integrity. By providing
access to high-quality education, we are
investing in the future of our industry while also
helping tenured offices train their new advisors.
Lamar Stanley
M&A Source 2024 Chair of the Board
T h e B r i d g e | F a l l 2 0 2 4 | 5
Our goal is to ensure that all members—whether new to
the field or seasoned veterans—have the resources and
support they need to thrive.
Being a member of M&A Source has not only provided
me with unparalleled educational oppor tunities and
access to industry insights, but it has also allowed
me to be par t of a community that truly understands
the unique challenges and rewards of working in the
lower middle market. Our association is built on the
principles of collaboration, education, and growth,
and every member contributes to the collective
success of our network.
Looking ahead, I am filled with optimism about the
future of M&A Source. Our education Foundations
courses are yet another example of how we are
constantly evolving to meet the needs of our
members, and I am confident that our upcoming Fall
Conference & Deal Market will be another milestone in
our journey. This event is more than just a gathering;
it’s a chance to celebrate our achievements, learn
from one another, and set the stage for future
successes.
I encourage each of you to take full advantage of your
M&A Source membership. Attend the conferences,
par ticipate in the courses, and engage with your
fellow members. The value of M&A Source is not just
in what you receive, but also in what you contribute.
By sharing your experiences, insights, and exper tise,
you help to elevate the entire community.
As we approach the Fall Conference, I look forward
to reconnecting with many of you in Las Vegas.
Let’s make the most of this oppor tunity to learn,
network, and grow together. Whether you are an
experienced advisor or new to the M&A Source family,
your presence and par ticipation are what make this
organization truly special.
Thank you for being par t of M&A Source and for your
continued commitment to excellence in the M&A
profession. I hope to see you at Caesars Palace in
October!
Warm Regards,
Lamar Stanley
M&A Source 2024 Chair of the Board
Our goal is to ensure that all members—whether new
to the field or seasoned veterans—have the resources
and support they need to thrive.
Register for Core #2
Educational series
Elevate Your M&A Expertise
Learn More & Register
Live, Online
6 | T h e B r i d g e F a l l 2 0 2 4
Discover the Future of M&A at Our
2024 Fall Conference in Las Vegas
JOIN US IN LAS VEGAS FROM OCTOBER 20-23 FOR OUR HIGHLY ANTICIPATED FALL CONFERENCE, WHERE
THE DEAL MARKET CONTINUES TO BE A CENTRAL FEATURE. AS ALWAYS, THE DEAL MARKET STANDS AT
THE HEART OF THE EVENT, SERVING AS THE CRUCIAL NEXUS WHERE ADVISORS, PRIVATE EQUITY FIRMS,
FAMILY OFFICES, AND SEARCH FUNDS COME TOGETHER. IT’S THE FOCAL POINT OF OPPORTUNITY IN THE
LOWER MIDDLE MARKET, MAKING IT AN INTEGRAL PART OF YOUR CONFERENCE EXPERIENCE.
Why The Deal Market is Essential
The Deal Market is more than just a segment of the
conference; it’s the vital hub where key players in the
M&A field connect and collaborate. Here’s why The
Deal Market remains a cornerstone of our event:
•
Strategic Networking:
Meet and interact directly with influential private
equity firms, family offices, and search funds. This
is your chance to forge valuable relationships and
discuss opportunities in a dedicated environment.
•
Opportunity Showcase:
Present your deals to an engaged audience looking
for new ventures. The Deal Market facilitates high-
impact interactions that can lead to significant
partnerships.
•
Dynamic Dealmaking:
Engage in real-time discussions and negotiations
that can shape future business opportunities.
The Deal Market provides an interactive setting
where immediate opportunities are explored and
acted upon.
Courses to Elevate Your Expertise
Alongside The Deal Market, our conference offers a
diverse array of courses and workshops designed to
enhance your M&A knowledge and skills:
•
MAS Course 494:
Brokering Technology Transactions
Dive into the complexities of technology transactions
with hands-on Case Studies and practical insights.
•
MAS Course 510:
Developing a Cash Flow Analysis
for Income Appraisals
Explore advanced business valuation techniques and
practical tools to improve your valuation capabilities.
•
MAS Course 572:
M&A Deal Management & Negotiation
Tactics (Advanced)
Refine your deal management and negotiation skills
for more effective deal closings.
•
MAS Course 640:
Overcoming Legal Hurdles in Deal-Making: Turning
Setbacks into Success
Learn strategies to navigate and resolve legal
challenges that can affect deal success.
•
MAS Course 726:
Unveiling WIP: Essential Insights for M&A
Professionals
Master the assessment and management of Work
in Progress (WIP) across various industries.
•
MAS Course 419:
Introduction to Capital Stack & Deal Structuring
in Lower Middle Market
Understand key M&A concepts and learn to advise
on complex transactions in the lower middle
market.
•
MAS Course 455:
Marketing Mastery for the M&A Professional
Enhance your marketing skills to drive transaction
success and build strong client relationships.
T h e B r i d g e | F a l l 2 0 2 4 | 7
Engage with Industry Leaders and Enhance Your Skills
Our conference also features a range of workshops and
keynote sessions, including:
•
Opening Keynote by Dr. Tom Deans:
Gain insights on safeguarding family wealth and
strategic succession planning.
•
Upholding Professional Ethics in M&A Practices:
Learn about maintaining ethical standards with Bob
McCormack and Jim Cumbee.
•
Tales From the Battlefield of Dealmaking:
Participate in case study sessions moderated by
experts like Lamar Stanley and Scott Mashuda.
•
From Signed LOI to Closing:
Discover best practices for due diligence and
handling buyer/seller traps with Matt Bradbury and
Ginger Dean.
•
Mastering Deal Sourcing:
Learn effective client engagement.
•
Turbocharge Your Dealmaking with AI Technology:
Explore AI-driven enhancements for deal sourcing.
Why Attend?
•
Expand Your Knowledge:
Gain advanced skills in specialized M&A areas.
•
Network with Experts:
Connect with seasoned professionals and industry
leaders.
•
Enhance Your Practice:
Apply new techniques and insights to elevate your
advisory services.
•
Leverage The Deal Market:
Utilize the opportunity to make valuable connections
and explore new ventures in this central component
of the conference.
Join us in Las Vegas from October 20-23 to experience
the energy and opportunity of The Deal Market and
participate in transformative sessions and workshops.
Don’t miss this chance to advance your career, expand
your network, and stay ahead in the competitive M&A
landscape. Register today!
•
The Lions of Dealmaking Mastermind:
Engage in a dynamic Q&A with top M&A advisors and
PEGs.
8 | T h e B r i d g e F a l l 2 0 2 4
Member Interview
Tell us about your pre-M&A career and how it
led you to doing this work?
I started, or bought and then sold several
companies from the age of 22. The companies
were in the commercial cleaning, moving and
storage, employee relocation management and
office coffee service industries. This experience
helped me better understand the process and
the concerns of my clients later.
What personal characteristics and strengths
have supported your success in this industry?
A positive, don’t give up, stick to the plan
attitude. In my younger days I was a long
distance runner. I am now a long distance
bicyclist. I compare getting a deal to closing
to the obstacles on a 100 mile bike ride or a
marathon. You need to persevere and never
give up.
What is your greatest M&A accomplishment?
Building a regional M&A practice with multiple
brokers in multiple states. I have been lucky
enough to be able to introduce and support
some great M&A brokers (and business brokers,
too) entering the profession, helping them grow
to be successful. I now work for one of the best
intermediaries I have ever met. He bought ROI
Corporation after working with me at the firm
for a decade. Seeing him and the other brokers
at my firm succeed is my most important
accomplishment in the profession. On an even
level with that is, of course, the honor of helping
many clients over the years sell their most
valuable asset and enter successfully into the
next stage of their lives.
With regard to the majority of your
engagements, do you work as a team or do you
handle things on your own?
I personally now work the majority of my
engagements on my own with the support of
a marketing person and an excellent admin. At
ROI, we do function as teams on many projects.
This happens with newer brokers or if a broker
wants to enlist the help of another broker who is
a specialist in an industry. Depends what is best
for our client to get a deal done.
Do you just do M&A or do you provide other
services – valuations, consulting, etc.?
About 75% of what I do is represent seller
clients. 25% is Opinions of Value for multiple
purposes, and consulting for known party
ownership transition to key employees and/or
family members.
What is the biggest mistake you have made
when working on a deal?
Many years ago, I learned about the controlled,
informal auction process at an M&A Source
conference. Since then, we almost never go to
market with an asking price on an M&A deal.
Early on, I advised a helicopter engine rebuilder
that his company was worth a 4 multiple of
EBITDA based on data I researched and that our
asking price should be in that range. Another
broker sold him on no asking price, so he signed
with them. He received an 8 multiple of EBITDA
for his company. I am glad he went with the
An Interview with
M&A Source Member,
Gary Rayberg
Gary Rayberg
M&AMI, CBI, ROI Advisors Inc
T h e B r i d g e | F a l l 2 0 2 4 | 9
other broker, as I would not have done as good a job
at that point. With that said, it was an expensive lesson
for me.
What are the three most important qualities that you
think a good M&A advisor needs to have?
Beyond the math and the technical knowledge, you need
to be able to...
#1:
Read people. You need to size up buyers and sellers to
know if you want to work with them or not. You only have
so many opportunities to get paid, and wasting months on
the wrong one can be costly.
#2:
You need to see failure as an opportunity to learn and
improve every time, so you do not make the same mistake
twice.
#3:
Be open to and seek education from courses and other
successful Intermediaries. My career was made by
attending conferences at NEBBA, IBBA and M&A Source. I
learned so much, not just by taking the courses but from
the discussions with other brokers. I remember being
welcomed at my first IBBA conference and getting to sit at
breakfast and lunch with the leaders in the profession and
listening to their advice, which was priceless.
What is your most interesting deal that you are working
on today?
A $28,000,000 revenue company which is a supplier to
the heat pump industry. I believe this industry is about to
explode with growth.
How long have you been an M&A Source member and
what do you get out of your membership?
I joined IBBA in 2005 and M&A Source around 2010. As I
mentioned earlier, knowledge from conferences and most
importantly, networking with other professionals has
been so beneficial to me!
As a seasoned M&A advisor, what changes and trends
do you see on the horizon that will impact on M&A?
With the codification of the CBI No Action letter, we are
free to pursue larger deals that were previously only
available to SEC licensed Investment Bankers. I see my
firm and others like it aggressively pursuing larger deals
as more and more owners age out.
What advice would you give to new people entering the
profession?
•
Research the industry by joining IBBA, M&A Source,
and your local IBBA affiliate
•
Have enough money in the bank to comfortably live
for 12 to 18 months
•
Be prepared to enjoy continuous learning as you
never know it all
•
Seriously consider joining an established firm with an
internal training and mentoring program. This should
shorten the time it takes to start making money in
your new profession
•
My experience in hiring tells me that sales skills,
people skills, and perseverance are qualities that are
more important than having a degree in finance or
accounting. You can learn that!
Please tell us something about yourself that has
nothing to do with your M&A career?
I am currently working while traveling the country with
my wife in a motor coach. Since September, we have
been on the move seeing this amazing country from
north to south and east to west. We are currently living
next to the beach on the Oregon coast. If anything good
came out of Covid, it is that my clients are happy to work
with me remotely, except for an occasional flight to meet
with a new client.
1 0 | T h e B r i d g e F a l l 2 0 2 4
The Importance of Sell-Side
Quality of Earnings
IN THE CONTEXT OF MERGERS AND ACQUISITIONS, BEING PREPARED IS NOT JUST AN
ADVANTAGE — IT’S ESSENTIAL. SELLERS WHO BEGIN NEGOTIATIONS ARMED WITH CLARITY,
CONFIDENCE, AND A THOROUGH UNDERSTANDING OF THEIR FINANCIAL STANDING ARE MORE
LIKELY TO REACH THE CLOSING TABLE AND HAVE A FAVORABLE OUTCOME. HOWEVER, THE
ROAD TO A SUCCESSFUL SALE IS OFTEN CHALLENGING, AND MANY SELLERS FIND THEMSELVES
UNPREPARED TO NAVIGATE THE COMPLEXITIES OF THE PROCESS.
MUCH LIKE STAGING A HOME FOR SALE, PREPARING A BUSINESS FOR SALE REQUIRES PLANNING
AND METICULOUS ATTENTION TO DETAIL. YET, DESPITE ITS IMPORTANCE, MANY SELLERS
OVERLOOK A FUNDAMENTAL ASPECT OF THE PREPARATION PROCESS: THE SELL-SIDE QUALITY
OF EARNINGS (QOE). THIS TOOL SERVES AS PROTECTION FOR SELLERS FROM POTENTIAL
PITFALLS AND EMPOWERS THEM TO TAKE CONTROL OF THE NEGOTIATION PROCESS.
By Evan Ottaviano
Bennett Thrasher