Welcome to the Before You Buy or Sell the Business podcast, where we help buyers and sellers learn more about the acquisition process, discuss recent transactions, and stay up to date on the latest news in the market. I’m your host, Jared Johnson, and today we have a special episode in store for you. We will be diving into a deal that didn’t end up closing and exploring the reasons behind it. Joining me today is Jarryd Osborne, a past client who has a unique perspective on the acquisition process. Jarryd will share his experience and insights, shedding light on the challenges and opportunities that arise when buying or selling a business.
Background and Search Process
Jarryd grew up in Austin, Texas, and had a diverse professional background before venturing into the world of business acquisition. He played tennis competitively in his youth and went on to play at a junior college. After college, he worked in various corporate roles, including mortgage banking, tech, and insurance. However, he always had an entrepreneurial spirit, coming from a family of business owners. Jarryd decided to give the corporate world a try before pursuing his own business venture.
Jarryd began his search for a business in 2018 and 2019, but it wasn’t until 2020 that he found a potential opportunity. He came across a concierge relocation and home organizing company and started negotiations. However, during the due diligence process, Jarryd discovered some discrepancies and red flags that led to the deal falling through.
The Deal That Didn’t Close
Jarryd’s experience with the deal that didn’t close provides valuable insights into the challenges and complexities of the acquisition process. He initially found the business through a traditional online marketplace and began negotiations. However, he decided to reach out to the company’s competitors to explore other options. This proactive approach led him to discover a potential opportunity with a competitor.
According to Jarryd, “They can just go directly to these deals. So that’s their appetite, right? That’s what they’re seeing.”
The negotiations with the competitor went well initially, and Jarryd was excited about the potential acquisition. However, as the due diligence process progressed, issues arose. One major sticking point was the seller’s refusal to admit that they were following generally accepted accounting principles (GAAP). This lack of transparency and unwillingness to provide accurate financial information raised concerns for Jarryd and his attorney.
Jarryd explains, “I had actually had an operator in place and so I had an operator in place. We had a contract agreement and everything. We found out the financials weren’t on par of course, but um, so that, that the business we were going to buy ended up hiring the person that I found as the CEO to run that company.”
Additionally, there were disagreements over certain clauses in the purchase agreement, such as indemnification limits and representations and warranties. The attorneys on both sides began arguing, further straining the relationship between Jarryd and the seller. Eventually, the deal fell through, leaving Jarryd disappointed after months of hard work and anticipation.
Lessons Learned and Moving Forward
Despite the disappointment of the failed deal, Jarryd learned valuable lessons throughout the process. He realized that he enjoyed the art of the deal and the fundraising aspect of business acquisition. He also discovered his talent for advising others and helping them navigate the complexities of buying or selling a business.
Jarryd made the decision to transition from full-time searching for a business to becoming an advisor. He joined Riviera Capital, a company founded by Luke Ellis, who has extensive experience in brokerage. As a minority partner in the firm, Jarryd now helps individuals and businesses buy and sell businesses.
The Role of an Advisor
When clients approach Jarryd for assistance with buying or selling a business, he begins by understanding their criteria and timeline. Riviera Capital offers two types of services: retained clients and contingent clients. Retained clients pay a monthly fee for Riviera Capital to handle the entire buying process or assist with the search. Contingent clients handle their own search but engage Riviera Capital to facilitate the transaction.
According to Jarryd, “We’re going in we just got an executed ally with with a 10% rollover, so we’re going to need to address that.”
Riviera Capital has built a network and database of investors who are interested in cash-flowing businesses. These investors are looking for opportunities in the SMB (small and medium-sized business) world, which offer higher cash distributions and potential for growth. They see these investments as a real estate play with better upside.
Conclusion and Future Outlook
Jarryd Osborne’s experience highlights the challenges and complexities of the acquisition process. His journey from searching for a business to becoming an advisor showcases the opportunities that arise when buying or selling a business. As an advisor at Riviera Capital, Jarryd helps individuals and businesses achieve their goals in buying or selling a business.
Looking ahead, the SMB market continues to evolve, with private equity firms showing interest in smaller businesses and pushing up valuations. However, it is crucial for buyers and sellers to carefully evaluate deals and consider the long-term implications. With the right approach and support, success in the acquisition process is within reach.
As the market continues to grow and change, Jarryd and Riviera Capital are well-positioned to assist clients in achieving their goals and navigating the complexities of buying or selling a business.
Jarryd concludes, “I think that’s what I’d really do. So one of the deals that we didn’t talk about that failed, we were post low. I had actually had an operator in place and so I had an operator in place. We had a contract agreement and everything. We found out the financials weren’t on par of course, but um, so that, that the business we were going to buy ended up hiring the person that I found as the CEO to run that company.”
The acquisition process can be complex and challenging, but with the right guidance and support, buyers and sellers can navigate the journey successfully. Jarryd Osborne’s experience and insights provide valuable guidance to clients, ensuring they make informed decisions and maximize their opportunities.
To connect with Jarryd Osborne, you can find him on Twitter at SMBKapital or on LinkedIn as Jarryd Osborne.
If you have questions for Jared, visit JaredWJohnson.com
DISCLAIMER: The views and opinions expressed in this program are my own and/or those of my guests. They do not necessarily reflect the views or positions of my employer.