This interview is with Domenic Rinaldi, Managing Partner, Sun Acquisitions.
As Managing Partner, how do you describe your focus in acquisitions and brokerage for privately held companies?
We help companies with annual revenues between $3 and $50 million acquire or sell businesses across a broad range of industries throughout North America.
What pivotal experiences led you to the Managing Partner seat in M&A?
I acquired this business over 20 years ago after a corporate career that spanned Fortune 500 companies to venture-capital-backed startups.
When sourcing deals with founder-led businesses, what repeatable approach has helped you build trust and open proprietary conversations?
Our track record of success, which includes over 500 closed transactions across a broad range of industries, has given us valuable insights into just about every issue an owner will face when acquiring or selling a business.
At the first screen, what signal or metric most reliably tells you a target deserves deeper diligence?
When margin or revenue growth doesn’t align with historical performance, or when the management narrative diverges from the actual performance of the business.
With founder-owners, how do you align on valuation and terms while preserving the relationship through closing?
The work of valuation and terms is done very early in the process. If the value and terms do not match a client’s expectations, we will work with them to understand how they can improve those metrics to meet their goals. Sometimes, that means a prospective transaction has to wait while the owner builds value.
This is why we propose that owners get a value snapshot of their business at least every three years so they know if they are tracking for a future exit. An exit may come at a date and time that was not of the owner’s choosing due to many factors, including:
- Illness
- Divorce
- Partnership breakup
- Macroeconomic trends
- Lack of capital
What deal structure have you used most effectively to bridge valuation gaps in lower-middle-market transactions?
Earnouts and/or contingent notes are the most frequently used tools to bridge valuation gaps. That said, it is critical that your M&A advisor and attorney are well-versed in these instruments because they are fraught with pitfalls that can easily lead to post-transaction litigation issues.
What due diligence pitfall have you learned to catch early in closely held acquisitions?
Non-GAAP financial discrepancies can easily kill a deal, along with improper new working capital calculations.
For brokers representing seller clients, what one practice most earns your confidence and accelerates your process?
After 500+ deals, we can pretty accurately anticipate what will happen during a transaction. When we communicate with our clients and set proper expectations, the trust level in the advisor and the firm is unbreakable.
Post-close, what first-100-days move has most consistently protected or unlocked value in your acquisitions?
Communication, people, and clients.
Our clients who carefully plan for the post-transaction activities and over-communicate always have a much smoother transition. In addition, when they put the employees and clients first, they earn the trust necessary to propel the company to the next level.
Thanks for sharing your knowledge and expertise. Is there anything else you'd like to add?
The numbers and process are the easiest pieces of a transaction. What really makes for a successful transaction is having a team of experienced advisors who can anticipate the speedbumps and the knowledge to help you get past what might otherwise kill deals.