[00:00:00 - 00:02:56]

Will Smith: Buying a business solved an issue in the future life of today's guest and her husband. They were both MBAs at Kellogg Business School, so career would be important to both of them. But it was going to be difficult to find great jobs for both Ivona Butcher and her husband in the same place at the same time. Not to mention, Ivona is Czech and the couple expected to spend some years of their lives in the Czech Republic. The chances were low that they would both find work there to match their ambitions.

Buying and building a business together in the Czech Republic solved for all of this. Ivona and I spent time on working with U S based search investors to buy a Czech based business. Challenges and opportunities of buying a business in a small country where they were the first known search fund how to get press so that when people google you you seem legit. Renegotiating a bank loan, buying out a seller note at a huge discount, surviving Covid when revenue dropped to literally zero, then emerging from that existential crisis to double earnings which are today above 2 million euros. Please enjoy this conversation with Ivona Butcher, Co CEO at Bayre welcome to Acquiring Minds, a podcast about buying businesses.

My name is Will Smith. Acquiring an existing business is an awesome.

Opportunity for many entrepreneurs and on this podcast I talk to the people who do it.

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Ivona Butcher welcome to Acquiring Minds.

[00:02:56 - 00:02:57]

Ivona Butcher: Thank you Will.

[00:02:58 - 00:03:17]

Will Smith: Ivona, I saw you on stage at.

MIT at MIT's ETA conference.

I was impressed by you and your story which has many distinguishing features to it, among them that you bought your business in the Czech Republic, your home country.

So let's get right into it. Ivona, a little background on you please to start.

[00:03:19 - 00:04:15]

Ivona Butcher: So I come from the Czech Republic from a small town. I went through my studies there I had my first job as an economist in the Czech Republic, and I started my third year, finished my doctorate degree, and then I. I met my husband and we moved to the US to go to business school together. That's where I first heard of search funds.

But first we needed to have other career, pay off debt and things like that. So after business school, after Kellogg, I started working in New York for an investment firm. It was one of those big dreams come true. And I was designing investment strategies, and it was a really cool job, but entrepreneurship was like the ultimate goal in the end.

[00:04:16 - 00:04:44]

Will Smith: And.

And so say more about entrepreneurship being the ultimate goal and tie that in maybe to hearing about search funds in business school. You and your husband both liked the concept. You and your husband both wanted to be entrepreneurs. By the way, spoiler for the audience. You did this with your husband.

Another interesting feature of the story, but that's why I'm asking about your husband. So. So say more about your affinity for search and entrepreneurship broadly.

[00:04:45 - 00:05:13]

Ivona Butcher: Yeah. So for the first time I heard of search funds at Kellogg School of Management.

One of our good classmates, a good friend, acquired a business in the U.S. and I mean, to me immediately, the idea sounded amazing. So I don't need any amazing idea. I don't need my own money, and I can run a business. I mean, that sounds great, right?

[00:05:13 - 00:05:14]

Will Smith: Okay, yeah.

[00:05:16 - 00:06:10]

Ivona Butcher: But, like, first I had some. I needed to pay off a student loan. And also my husband, Corbin, he was right out of military, so he wanted to have some job in private sector as well first. So we spent several years working in finance in New York. That was, you know, big school, gaining a lot of experience very fast.

Those were, like, very busy years. And during that time, we attended the search fund conferences. And slowly, after a few years, we, like, started preparing to making the switch. We got to know the investors, and we decided to do it together.

[00:06:10 - 00:06:18]

Will Smith: And were you always going to.

You said entrepreneurship was the ultimate goal. So were you always wanting to run, own your own business?

[00:06:19 - 00:06:58]

Ivona Butcher: I think there were two. Two paths in. In my career, and I'm happy that I satisfied both.

First one was purely, let's do the things that look really cool. And I want to prove that I can do them. Firstly, that was becoming an economist in the Czech Republic, appearing on television, being one of those smart people that say something on tv, but very soon you find out that anybody can say anything on tv and it's actually not such a big deal. No. And then it was.

[00:06:58 - 00:07:01]

Will Smith: I still think those people are a big deal. They're not.

[00:07:02 - 00:09:30]

Ivona Butcher: They are not okay. And then it was okay, let's not talk about money, let's really invest and let's design the investment strategies. So that's why I wanted to make it to hedge fund world and like really be, really be the one who can design these investment strategies.

And I was always good at math and I wanted to make some use of that. But again, like once I was there, it was amazing experience. I liked my job in New York a lot. But after some time you, you find out that you are like moving money left and right, but you can't see 10 tangible impact of what you do. You can't feel that you really did something useful.

And studying economics I can justify, okay, based on economic theory, I'm contributing to more efficient use of capital. So I'm doing something useful. But you don't feel it every day. And that's what drew me, drew me to entrepreneurship. My dad used to run a business when, when I was a child.

He started his business right after revolution. After revolution, from communism or socialism, from centrally planned economy to to free market in 89. And my father was or is a very smart person. He could sync up very sophisticated machines, but he didn't have any idea how to actually do business. Nobody had such idea after revolution.

Nobody did. He ended up signing personal guarantees. And when the business hit some troubles, he completely bankrupted both the company and he personally. And it was a story that I saw as a child. And so I saw both the good and bad.

I saw the surreal and the excitement that comes with building your company, but also the huge risks.

[00:09:33 - 00:09:39]

Will Smith: Did your family suffer during his bankruptcy? Was this a financially traumatic moment for everybody?

[00:09:40 - 00:10:19]

Ivona Butcher: It wasn't only financially traumatic moment. We had strange people from Eastern Europe in black suits arriving at our door. It was really a safety issue.

And my dad ended up homeless and it was like very, very strange situation.

And I think like part of me wanted to try that as well in different way and make it wow, that's profound.

[00:10:19 - 00:10:39]

Will Smith: Thank you for sharing. What of doing this together with your partner, with Corbin, that's husband and wife teams or partnered teams are not so common. Although it does happen. What was that all about?

Or was it just natural? We're going to be partners in life so why not partners in business as well sort of thing?

[00:10:42 - 00:11:20]

Ivona Butcher: I think for us it was the only way. I mean when you have two ambitious individuals, it is so hard to find carrier that is fulfilling for both people that places them on the same spot. I mean if it wasn't for running, for running business together, probably you know, I would either stay in New York in finance or maybe I would try to run something on my own in Czech. Corbyn would be drawn to general management, either in the US or maybe in Africa. It would be so hard to find jobs where we can be in the same town.

[00:11:20 - 00:11:51]

Will Smith: Yes. Your enthusiasm for search funds, when you heard about them, was not just the prospect of, you know, buying a business, running it and being able to do that. It also solved this other problem that you were already aware of or foresaw that for two ambitious people it was going to be hard to. Somebody was probably going to be having to compromise on their career path. What, at any given point, what was that going to look like?

This presented a solution very much.

[00:11:51 - 00:12:30]

Ivona Butcher: And also marrying an American, I knew that our life will have to be between the countries. Maybe we spend some time in the U.S. sometime in Czech, and we need to be able to live in both countries. And if we are to live in the Czech Republic for some time, there must be something interesting for both of us to do. And I can't think of any other job than running a company.

I mean, maybe we could work for McKinsey or, you know, do consulting for a little bit, but that's, that's not like long term career that either of us.

[00:12:31 - 00:12:47]

Will Smith: And, and I assume you're most specifically not talking about Corbin for the years that you were going to spend in Czech Republic. What would he do? Maybe McKinsey. But he's likely to feel stifled professionally in the years that he's in the Czech Republic.

Is that what you meant? Or maybe you too?

[00:12:49 - 00:13:07]

Ivona Butcher: I'm talking about both of us because after you work for investment firm in New York, it is not easy to find equally challenging job in the Czech Republic. So it was definitely for both of us. I don't know what I would do otherwise.

[00:13:07 - 00:13:25]

Will Smith: Great, Ivona. Well, let's now start turning our attention to the search itself. You mentioned you're on the other side now of your busy years in New York. You've gotten this incredible education on the job education, this incredible experience. You're ready to search.

What shape does your search take?

[00:13:25 - 00:14:20]

Ivona Butcher: Well, so this is the time when we already know a lot of search investors and we are starting to form a group of investors that we would like to work with and we are starting to put together our thesis. And of course the natural question is, do we really want to do it in the Czech Republic? We were very much discouraged by investors from doing it in the Czech Republic and we were told several times that they are going to support us if we do it in the US and they are going to fund our search. But not in the Czech Republic.

It is a very small country, there are not that many targets and we didn't raise search fund in the end we had to do self funded because the investors just didn't believe that we would find anything.

[00:14:20 - 00:15:56]

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Let me fill in some gaps there. So first of all, you had built a network of investors, I assume part of that started all the way back during, during Kellogg. You, you went, you had this great business school, a business school where search funds are a thing and there are search investors active there. And then you started going to conferences later. And so you were networking your way through the traditional search fund investor community, right?

[00:15:57 - 00:16:14]

Ivona Butcher: Very much. We were networking through the traditional investors really like the original group. And back then search funds were not such a big thing. Now we are talking about 2016, 2017 and there was not ETA class at Kellogg at the time.

[00:16:15 - 00:17:03]

Will Smith: Great, great.

Okay. And so you're looking at doing a traditional search fund with these folks, even though none of it is as mature as it is today, of course, and the audience will know, but a traditional search fund means that they fund your search. So it's four or five hundred thousand dollars, I don't know what it was at the time that you can live off of and they can go to your, your search and deal expenses while you find this business and your investors say not in the Czech Republic. We're not, we're not going to sign up for that. We're not going to give you the money to fund your search if you do it there, but you proceed anyway.

Are you, are you discouraged by this, or are you expecting this, or how do you react and how do you decide to plow forward?

[00:17:03 - 00:20:06]

Ivona Butcher: Anyway, I'm convinced that a big part of being a successful entrepreneur is not to be discouraged and really go after what you want. Actually, now when I look at investing in searchers myself, this is very much what I'm looking for, that the person is really committed, even when he or she hears no, they will just go forward anyway. That's how much they wanted. That's how much they want to become business owners.

And this is exactly what was on our mind. Like, we really, really want to do this, and if we have to do it alone, we will do it alone.

And yeah, we had many discussions whether it is better to do it in the US but there were so many factors that made it better in the Czech Republic, and we believed we would be more successful in Czech because Corbyn could bring the Western element. And many Czech companies lack the ability to market themselves to Western clients. Like, very, very often Czech companies are great at engineering, but very weak in marketing and sales. So that's what we wanted to bring. And also my big motivation to do it in Czech was to bring back some of these values that I learned in Western Europe and in the U.S. i mean, when I was working in the U.S. i was amazed how people really believe in some values.

They really value when things are done right, you know, ethically, that you can do business in a clean way. When you shake hands, it really holds. And people in the Czech Republic are very skeptical. They lived under communism or socialism, to be precise, and that brought a lot of distrust in institutions and suspicion towards business motives.

There is a saying that if you don't steal from the state, you are stealing from your own family. So there is still mentality like that, or like remainders of this mentality. And I really wanted to fight that. I wanted to show that you can be fair, transparent, and you can still be successful. That was my big driver, and that's why I wanted to come back.

[00:20:07 - 00:21:06]

Will Smith: Ivona, sometimes I gather that people become corrupted in systems not because they are themselves easily morally corruptible or that they're weak morally, but because the system imposes that to, to, to act within a system, you just have to behave that way. It's not that you want to be corrupt. So I wonder if the same might be true because of the remnants of this distrust and so forth in the Czech Republic, that, that despite your best efforts there, there might just be certain structural realities that you can't escape in, in this environment in the, in the, in the, the business environment of the Czech Republic. I'm completely speculating. Obviously I know nothing about it.

I'm just reacting to what you said. How do you react to that?

[00:21:07 - 00:21:50]

Ivona Butcher: It is changing fast. I have big hopes in young generation it is changing.

What you said was true under the previous regime. Like corruption was just, you know, part of everyday life and it influences people decades afterwards. And you know, the more people try to fight it and the more you can lead by example and show that it is not necessary, the better and the faster the change.

So of course I would be happier if it was changing faster. But there is hope.

[00:21:50 - 00:22:06]

Will Smith: Have you found situations as you're in your position as a business owner in the Czech Republic now where you've had to make hard decisions about do you go the wrong way versus the right way? But choosing the right way comes with consequences, comes with hard costs, small things.

[00:22:06 - 00:22:50]

Ivona Butcher: But nothing too dramatic that would cost us a lot.

And that's because we deliberately chose a company to avoid any types of potential corruption. One of our criteria was that we don't deal with state at all, that our clients are at best Western Western institutions, Western companies, and we provide them check services and the, the buyer is from Western Europe or, or the U.S. and yeah, it works. We don't need to face these hard decisions.

[00:22:51 - 00:24:06]

Will Smith: Excellent. Thank you again for sharing.

Ivona, this is great and just very generous of you to be. To. To. You know, this is very personal stuff. Okay.

You move to the Czech Republic, you decide you're not going to take no for an answer. In fact, not taking no for an answer is a key, key criterion for, for being a successful. Um. Let's hear about the mechanics of the search specifically with respect to searching in a market where businesses are not bought and sold. Anytime I've had a guest outside of the US or, or kind of Western Europe ish.

The. There just isn't the awareness often by business owners that they can sell their business. There just isn't a liquid market or an active market of businesses, small businesses being bought and sold. Frankly, it's illiquid enough in the US so let alone other places.

Talk to us about just the difficulties or not and maybe maybe address your, your answer here to people thinking about doing it in smaller, less mature markets. The challenges or not of searching, the actual mechanics of searching in this environment.

[00:24:07 - 00:25:22]

Ivona Butcher: I would say that business owners in Czech are aware that they can sell. It's especially because of private equity companies that are very active and they target even small companies. So even as A searcher.

If you are, if you are looking at company that has 1 million EBITDA, you will be competing against PE companies.

So that's one thing. And the big advantage of checkmarket is that data is publicly available. Companies have to file and that makes very advantageous situation for a searcher when you can create databases. And with Corbin we created this tool programmed in Python that scraped several databases, put the data together and then filtered according to our criteria including age of owner, number of employees, revenues, industry and so on. So that was very, very nice tool.

[00:25:23 - 00:25:53]

Will Smith: Yeah, that's so it seems like this is a feature. Every European searcher I've talked to has this from Czech Republic to Spain to UK and, and, and everywhere in Norway, everywhere in between. What a. What a hack. I, I see it as a hack, but it's just a fact of life in, in Europe so.

Or it seems like in most European countries. So is that like an EU thing or is it just, or is it just a, a cultural standard in European government that this is a requirement from, from nation to nation.

[00:25:55 - 00:26:03]

Ivona Butcher: I'm not sure whether it's mandatory by EU or whether it's just country thing. In any case, it's very pleasant.

[00:26:04 - 00:26:41]

Will Smith: Yeah, exactly.

It's very pleasant. Press a button, fill your CRM. Sounds great. Okay, so back to this cultural point. Owners are not surprised.

Don't think that you're some sort of scammer when you approach them to buy their business. They're aware of what private equity is, they're aware of buying and selling businesses. Then are there any, is there anything more then to say about differences specifically that you think you, that you encountered in the Czech Republic from other markets or not really. Do you feel like your search looked and felt like a search would in the UK or the US Obviously the.

[00:26:41 - 00:28:17]

Ivona Butcher: Market is smaller so like we didn't have that many companies to go through.

On the other hand we hit a point where first generation entrepreneurs after revolution were reaching retirement age. So the turnover was pretty good. And I think it's necessary everywhere that you need to build really close relationship with the seller. That's what we had to do. Of course we had to do a lot of explaining.

But where we are getting money for this, do we even have money to buy the company? So we did what probably every first search fund in the country does. We had like several newspaper articles so that when seller Googles us before our first meeting there is something that pops up. They can see that hopefully we are you know, legit people and there is like some explanation who we Are what we are doing. What is search fund?

We were not exactly using the word search fund. Nobody knows search funds here. We were the first search fund in the Czech Republic. But at least they could see that there is some like valid concept and that we have some like real investors behind us. You know, we created website.

Our investors were generous enough to let us put their you know, picture and bill on the website so the, the sellers could check that we are real people with real money behind us.

[00:28:18 - 00:28:28]

Will Smith: What a, what an interesting tactic. Newspaper articles. So say more about that. And, and how do you, how do you have a newspaper article written about yourself?

[00:28:31 - 00:29:03]

Ivona Butcher: Well, it was actually pretty hard because all journalists were interested in my Wall street story and that was like a big thing, like how, you know, how I made it to Wall street and so on. But nobody really wanted to write about search funds and us trying to find a company. So it was almost like, okay, you know, write my like Wall street story, but I want you to write about the search funds as well.

[00:29:03 - 00:29:17]

Will Smith: But did you have relationships with journalists from those days on tv? Like how does this even come about?

You had a Rolodex, you reached out and said hey, I'm back, come tell my story. Like what's your pitch? Or how did it come together?

[00:29:18 - 00:29:50]

Ivona Butcher: I used my network from university here in Czech. I, I had some friends there.

So that was First Avenue. But also for a couple of weeks we actually hired PR company. Okay. That helped us with that as well. And it was like very affordable thing to do.

And we had like old media, like including Forbes interested in our story. So it went pretty well in your story really?

[00:29:50 - 00:29:57]

Will Smith: Your story of getting to Wall Street. Small town girl becomes economist, goes to Wall street, comes home.

[00:29:58 - 00:30:00]

Ivona Butcher: Right, Exactly.

[00:30:01 - 00:30:44]

Will Smith: Great. Well good for you. That's that really I'm, I'm quite impressed by the tactic for I'm not sure.

Well, I'm just, I'm not sure it would be somebody could pull it off as easily here. Certainly PR companies are not, are, are, are expensive here. But anyway the, the larger point is not. The larger point for the audience is not exactly that, you know, you do follow what you guys did step by step, but that if you can have something online where there is some third party media credibility conferred, it's very helpful because indeed people, first thing people will do when they hear from you is Google you.

[00:30:45 - 00:31:21]

Ivona Butcher: Exactly.

And it's one of the points like everything is much more affordable in Czech than in the US or obviously including these services. And like when we moved from New York to Czech Republic, it was A huge drop in standard of living. We didn't have the backing during the search so we had to do everything in a very cheap, efficient way. So even hiring PR company for future few weeks, it wasn't anything expensive here.

[00:31:21 - 00:31:36]

Will Smith: So back to not having a funded search.

I did hear you say investors that your investors were generous enough to allow you to put their them on your website. So what, what do you mean here? That you had investors. But what we heard earlier.

[00:31:36 - 00:32:34]

Ivona Butcher: Yeah, right, that's.

That's confusing. It's actually our future investors at that point. So when we were meeting people at conferences and forming our future investor group, we came to like some investors more than the others. It's very natural and it was like mutual feeling. So naturally the group was selecting itself and we were more in touch with some of these people and you know, those were the people that were like, okay, feel free to use our name if you need it because if you find good target, we will support you.

So we had this like very soft at that point commitment that yeah, they didn't believe that we would find something, but if we do, they will likely.

[00:32:34 - 00:33:23]

Will Smith: Support us if they'd be investors in your deal. But according to to terms tbd because they're not funding your search. So it was like how that would all look very to be determined, but there was chemistry. They liked you, they respected you.

If you found something, they wanted a call, they'd look at it and they had enough confidence in you that they'd even let you call them your investors for the purposes of your search. Very interesting. And we're gonna. These investors are gonna make multiple appearances in this story. Okay, the before we hear about the business that you bought, I just quick sidetrack you.

There was an IT company that you looked at which I thought kind of had an interesting little. It was an interesting little side story. Tell us about that and why you didn't buy it.

[00:33:23 - 00:34:36]

Ivona Butcher: Yeah, it was the first company with which we signed loi. It was the company that we found through our proprietary tool scraping the databases scraper.

And we found it at the exact right time when the CEO and co owner was retiring. And they just started thinking about selling and we started doing the due diligence. We like the company, but our potential investors didn't. So you know, they said it was too much dependent on the ability to hire additional IT people and they just like wouldn't want to buy this company. So we didn't buy it.

But the deal was still nice. So we actually sold this deal to a local private equity company.

And few years afterwards it turned out to be one of the best deals that this private equity company did.

[00:34:37 - 00:34:39]

Will Smith: And so I wanted to go ahead.

[00:34:40 - 00:34:45]

Ivona Butcher: Yeah, the PE already sold this IT company and it was one of their best investments ever.

[00:34:46 - 00:35:22]

Will Smith: Great. And so I wanted to understand why, why I thought this was interesting is because your investors, smart people, this is not to, you know, act like, you know, to armchair quarterback their decision making.

But I'm just, it's always, it's always a valuable exercise to post mortem and investment, particularly when it does the opposite of what you think it's going to do. What do you think that they got wrong, your investors about the investment? That in fact that hiring people would was not going to be a bottleneck. What didn't they see?

[00:35:22 - 00:35:35]

Ivona Butcher: I think they overestimated the IT hiring issue.

It wasn't as bad in the end and they didn't predict Covid that helped IT companies in general.

[00:35:35 - 00:36:02]

Will Smith: Oh, okay, there it is. Okay, great. And just before we move off of this side story, tell us about the, tell us more about selling the deal. So you had the business under loi.

How far along was it? How did you price this finder's fee, I guess. And then how did you approach the PE company? Give us more on that. That's pretty interesting.

[00:36:02 - 00:37:09]

Ivona Butcher: So we were at stage when I and Corbin were doing the preliminary due diligence. We didn't hire any external company for due diligence.

We just didn't have money for it. For the due diligence we would already have to raise money. So that was completely out of question. And at this point, going through due diligence and trying to put together the final investment group, we realized we can't, we just can't find people to invest in this. And when we already have this nice company that wants to be sold and we knew about PE companies in the area and the one with which we had the best relationship, we just approached and we knew it like fits their criteria into it would be good addition to their portfolio.

So we approached them, we wrote. Actually, I don't even remember whether we sign a contract with them or not about the finder's fee. In any case, we got it.

[00:37:10 - 00:37:14]

Will Smith: And what was the finder's fee roughly? How is it, how is it priced?

[00:37:15 - 00:37:16]

Ivona Butcher: Too low.

[00:37:17 - 00:37:31]

Will Smith: Okay, because they did so well or because you now know what finders fees typically are, which I think is usually 1 to 2% of enterprise value upon successful.

[00:37:32 - 00:37:38]

Ivona Butcher: Yeah, yeah, we, we, we should have asked for more. And especially now when we know how successful investment it was.

[00:37:38 - 00:38:08]

Will Smith: Well, it's funny Ivana, you're my second interview in two days where this situation has come up.

Ruchik Gandhi that I, who I interviewed yesterday, but he was on the receiving end. So he was actually, he bought his deal from a searcher. Couple of searchers who decided they couldn't, wouldn't, couldn't close on their business.

Sold.

Assigned Loi in a deal that had been, that was really far along to him.

And so you guys are on the other side of that. But interesting to hear about these.

[00:38:08 - 00:38:30]

Ivona Butcher: I think it's important like when you have something, especially when you are self funded but overall like when you have something, you, you try to do something and monetize it. Right. Like we, we put a lot of work into this IT company and it was just natural that we would try to, you know, get some value out of it.

[00:38:30 - 00:39:05]

Will Smith: Well, and I think that that's a very important point. Ruchik and I talked about this in his interview because I think it could be perceived trying to sell a deal under Loi as, I don't know, opportunistic or too grabby. I, I think it's, that's a naive perception, but I think that there could be people who, that it lands for whom it lands that way.

But of course a lot of it.

Is you're, you're not actually trying to profit, you're just trying to recoup your time and maybe, maybe actual hard expenses that you've poured into this deal.

[00:39:07 - 00:39:40]

Ivona Butcher: Yes. And of course it matters how you do it. So if you are, you know, very transparent with each party and we talked to, to the IT company's CEO, CEO, we, you know, told him what we knew about that, the other private company, private equity company and it was just like very open discussion. And with the PE company the agreement was, you know, if they close, if everything goes well, then we get finder's fee, you know.

[00:39:40 - 00:41:00]

Will Smith: Enzo Technologies as one of the leading IT managed service providers serving the search community.

Led by Nick Akers, an acquiring minds guest who bought the 35 year old business. The team at Enzo regularly works with searchers and their acquisitions. And one feature of acquired businesses that Enzo is seeing over and over is the need to implement cybersecurity promptly. During the transition. So many acquired small businesses either have glaring vulnerabilities, lack security best practices or both.

That step one to de risk the deal you just closed should be addressing these issues. INSO is your full service IT MSP for post close stability. They assess your target surface the biggest risks in plain English and give you a day one through 30 plan to cut exposure, prevent downtime and even find cost takeouts like bloated telecom bills. Check out enzotechnologies.com I N Z O or email Nick directly at nicknzotechnologies.com.

Okay Ivana, how did you find the business that you would go on to buy?

[00:41:00 - 00:41:13]

Ivona Butcher: Okay, so we talked about our sophisticated proprietary tool that we were very proud of and we found our company through a broker.

[00:41:15 - 00:41:16]

Will Smith: Right.

[00:41:17 - 00:42:57]

Ivona Butcher: Always disappointing when I have to say this, but it is true.

So we approached, of course we approached all the big accountants and big brokers. But to us the most helpful were the small local brokers. And I really want to emphasize this because at first we didn't believe that these people were going to be very helpful. They, you know, by business school standards they didn't know much about transactions and finances. So at first we were skeptical.

But then we realized that it wasn't their job to know about the transaction. Their job was to handhold the sellers through the process and they are very good at that. So I really want to emphasize this to all searchers, like don't discount these people that these local brokers that don't seem to have the knowledge that you do because their ability to build relationship with the seller is very, very valuable. So we found this local broker who was, as we found out later, he was very motivated. He was then telling us a story how at the closing dinner he promised to invite everybody but his fee didn't hit yet and he didn't have money to pay.

[00:43:01 - 00:43:04]

Will Smith: Wow. This deal was his last dollar here.

[00:43:04 - 00:46:03]

Ivona Butcher: Okay, exactly. So young, very motivated guy. He understood what we were looking for and he put us in touch with a couple.

It was a Czech and Dutch couple that owned actually two companies but very closely interconnected. And then the negotiations lasted about half a year. It was a company in a sector that we didn't even know about before. Like if you asked me, you know, few years back, I, I wouldn't know that exhibition services are actually its own business sector. And you know, there are so many companies involved in providing services for exhibitions and trade fairs.

But although this was a very new sector to us, we liked it immediately compared to many other industries we looked at before. To us this was very fast moving life sector where you meet new people. It's like outward facing, you meet a lot of clients from various industries. And it was in sharp contrast to some of the industries that we thought would be attractive because going into this we thought we would be looking at aerospace, like highly engineered parts. That's what Czech Republic is good at.

Like. Yeah, engineering medical devices. But when we actually looked in detail at those companies, we realized that personally we wouldn't enjoy running them, especially the medical devices, the, the community. There is very much about professors, doctors, some hierarchy, conferences, the same people over and over. That wasn't for us, we wouldn't enjoy it.

And then suddenly this exhibition services something we didn't know existed. And it looked amazing. The company fulfilled all the criteria that we, we set out. Margins were good. It wasn't as capital intensive clients, mostly from Western Europe.

So we had to play a little bit with a recurring revenue metric because obviously recurring revenue is a big part of search funds. A very, you know, very attractive criteria that you should fulfill.

[00:46:03 - 00:46:03]

Will Smith: Right.

[00:46:03 - 00:46:37]

Ivona Butcher: And this company, it is a project based, but the clients keep coming back. So it was like hard.

Okay. It's not, it's not like subscription service where it's like clearly recurring. This was like harder to quantify and to really wrap our head around how much reoccurring the revenues really are. But in the end we gained some comfort about this and decided that this is the company we want to run.

[00:46:38 - 00:47:25]

Will Smith: Because also of course events are always going to be going on.

No, no pandemic, no, no pandemics are going to stop, stop this, this train. So let's talk a little bit more about the, the, the strengths and weaknesses of the business. So, okay, doesn't have recurring revenue. So the quality of revenue in quotes is maybe not quite as, as sterling as we hope for, but strong reoccurring revenue. You.

So you saw historical demonstration of, of, of, of high quality revenue outward facing. Meaning, meaning not outside the Czech Republic or is it, is it mostly. Are the clients, mostly Czech companies? Who, who. Yeah, who's the client base?

[00:47:26 - 00:47:31]

Ivona Butcher: No, mostly outside because it was important to us that it's export oriented.

[00:47:32 - 00:48:00]

Will Smith: Exactly. Yeah. So it had that export orientation that you talked about earlier. Corbin is going to bring his, you know, sales and marketing prowess to that and it's a, a weak spot for Czech companies.

This interface, this marketing interface with the outside world. It doesn't, it doesn't do business with the government, which you also said was something to avoid in size. What were your criteria around size and what can you share there?

[00:48:01 - 00:48:35]

Ivona Butcher: Well, we couldn't be very picky. Private equity companies really look as slow as 1 million in EBITDA.

And this is about the size we, we acquired in the end actually the company was, it was two companies and we merged them together. So the two companies combined had like 4 million revenue.

€4 million in revenue. About 30% EBITDA margin.

[00:48:36 - 00:49:10]

Will Smith: Wow, 30% EBITDA margin. That's great. That's a sizable business.

The other thing, I would guess in a smaller market this has to be the case that there's just. Well, you already said, and your investors said it's a smaller market. So finding a business with over a million dollars of earnings, a million euros of earnings, they're just, that's a, that's a bigger business. Right? That's a bigger business than it would be here.

Like they're just, would be considered by, you know, in, in the marketplace to be a larger business than me seeing a million dollar business in the States.

[00:49:12 - 00:50:09]

Ivona Butcher: Exactly. Anything over 1 million euro in EBITDA is considered a bigger business here in Czech. And one big advantage that search funds have over private equity and how they can beat PE firms in, in this competition is that searchers are willing to untangle incredible operational difficulties. And this was exactly company like that private equity company.

I think they could hardly buy this business because it was so operationally complex and so dependent on their current owners that would, it would be really hard for PE company just to, you know, send external co out there and hope for the best.

[00:50:11 - 00:50:31]

Will Smith: This complexity though is, is searchers are, can tolerate it. Searchers are going to get in there and run it, you know, but, but it's still not a good thing. So I, so I guess that you would consider that a weakness of the business as you looked at it, just a weakness that you could tolerate that you were willing to go in there and deal with.

[00:50:34 - 00:51:30]

Ivona Butcher: We considered it a challenge. We didn't see it as a weakness.

We saw it as our competitive advantage. Thanks to this complexity, we developed good relationship with the sellers because they could see us as somebody gradually that they could trust, you know, handing over, you know, what they're built over the years and employees and everything. And they also started enjoying like teaching us about the business. And it made for a very smooth transition. You know, the Dutch lady was like naturally teaching Corbin how to run sales and the Czech guy was teaching me how he does operations.

And it was complex but he couldn't wait. We liked it.

[00:51:31 - 00:51:35]

Will Smith: Great. That's great. And what about number of employees and age of business?

[00:51:38 - 00:51:56]

Ivona Butcher: There were around 30, maybe 35 employees at the time when we bought it. And ho business doom in when it was established. Yeah, right after evolution. So actually last year or the year before, we celebrated 30 years of the business.

[00:51:56 - 00:51:59]

Will Smith: Oh, okay, great.

Maybe, maybe you said that, but I missed it.

[00:51:59 - 00:52:12]

Ivona Butcher: Yeah, yeah, it ran for a few years under just under the name of the founder and then later on it renamed itself, you know, to the company name. And recently we celebrate 30 years.

[00:52:14 - 00:53:13]

Will Smith: Congratulations to, to the business and to everyone and to you guys. Ivona, on this point about former Soviet businesses, this is something I've, I've heard a couple people, searchers in, in former Soviet countries say that there is this interesting phenomenon where the boomers now or, or those, you know, those who started their, their businesses in the, after the fall. So in the early 90s, that really, that's the first there, as you kind of already said about your own father, that was the first generation. This is the first generation. There were those retiring today are the first generation really of business owners.

And I don't know what more. Is there anything more to say about that other than just stating it? Is there, is there some psychological aspect that plays a role there? I just think it's so interesting that it's like, yeah, these are all the very first kind of capitalists for me.

[00:53:14 - 00:53:58]

Ivona Butcher: I have really high respect to these people.

Those were the very first risk takers in this country. Those that were not so influenced by the, you know, hopelessness and skepticism coming out of communism. I, I really respect what they built. I respect that they had the courage to, to get into it. You know, some of them still, still are in the companies, of course, some of them retired and it's a fascinating time.

Yeah, it doesn't happen very often that, you know, economy, system changes and this is really first transition.

[00:53:59 - 00:53:59]

Will Smith: Exactly.

[00:53:59 - 00:54:22]

Ivona Butcher: Our countries is going through when these companies are being sold for the first time. So maybe one cultural thing, I think it is everywhere, but maybe these people are even more connected to the business and treat it even more as their own child. Yeah, that might be possible.

[00:54:22 - 00:55:28]

Will Smith: Okay, Ivona, so you find this business. Oh, and I wanted to highlight one other thing that you have said now a couple of times, which I like to call the X factor. Just your enthusiasm. It, it just really awakened you and Corbin and we, we talk a lot about, of course, the merits of a business. We in search land, we talk about the merits of the business and we, and we interrogate its strength and weaknesses, its quality of revenue.

We talk about what skills or industry experience a searcher might bring and plug into that business and, and how there can be a nice pairing there and the importance of that if you can get it. But, but the X factor is just raw enthusiasm and that sort of. You like it because you like it. Like, yeah, you, you can articulate it. You did articulate why you liked it, but part of it is just kind of ineffable and it's about chemistry.

And you just felt that for this business and having that excitement so that you guys are, you know, ready to get out of the bed in the morning and go work on it rather than building medical devices. That is really valuable. And, and it, and it doesn't get as much play maybe as it should. Fair. Do you agree or disagree?

[00:55:29 - 00:55:41]

Ivona Butcher: Absolutely. And I look for it in searchers that we invest in at the moment. I think it's. It must be so hard to succeed without this.

[00:55:44 - 00:56:04]

Will Smith: Because it's hard enough with it.

So it's been that hard, huh? Well, we're about to hear so. Well, we still, we still can't even hear about your operations in Covid because let's hear about the structure of the deal before we get into your actual ownership. So how did you structure this? You have these tentative investors.

How do they react?

[00:56:04 - 00:57:24]

Ivona Butcher: So when we started doing like preliminary due diligence on this business, we you know, know informed our tentative investors and we could see that there would be sufficient interest in this company. So they made us confident. And we raised money for the first time for the due diligence when we hired external legal and accounting companies. So that's when we raised money from the now final investor group.

And then after the due diligence was done, you know, they had the right to proceed with the acquisition. It was just a couple of months. There was just a couple of months between these two moments. So that was on the investor side. On the bank side.

Big advantage of local market is that banks are used to lending to small businesses. So we could actually get a 60% bank loan, senior loan. So that was very nice. And then we got, we structured 25% seller note. So the, the equity equity was 15% in the end.

[00:57:24 - 00:57:50]

Will Smith: Okay. Okay. Few things there. Equity first. So your investors, you raised deal.

You raised some money that would go to deal expenses. You needed it to do the, to do the financial due diligence, the Q of E. But that. And then if ever you were to proceed with the deal then you would raise equity again for the actual deal itself for the cap table.

[00:57:50 - 00:57:51]

Ivona Butcher: Correct.

[00:57:52 - 00:58:28]

Will Smith: Great.

And did the. Okay. And then the. What you said about the banks and how it's actually easy because they're used to lending to small businesses. I, I feel like I haven't heard that in smaller markets that in fact it's that much harder to raise acquisition financing for first time buyers.

So I don't know If I'm wrong or if it's just, it's very market dependent. But interesting that you found it because in our pre call I said, wow, it must have been so hard to, you know, go out and get debt for this. And you were like, no, actually that part was easy.

[00:58:29 - 00:59:02]

Ivona Butcher: Yeah. I'm surprised myself that even in more mature, more developed markets, sometimes searcher come and they say, oh, I can get only, you know, 30%, 30% leverage.

So it must be function of local market. So Czech banks are used to this. And also the company had some property, so that helps. Like the company owned its own land and buildings, so the bank had some collateral.

[00:59:03 - 00:59:04]

Will Smith: Yeah, yeah.

[00:59:04 - 00:59:11]

Ivona Butcher: It, it would be far from like covering the, the loan, but there was something, yeah, great.

[00:59:11 - 01:00:11]

Will Smith: And now going back to the equity for a second and the investors. So as we recall, the investors said, no, thank you, we're not going to fund your search here because Czech Republic's a small market. But we'll entertain. If you find a deal, we'll entertain it.

You guys found a deal, they entertained it.

But they still have to.

So, so they, even if they like the business and they like you and all of that checks out, they still have to think about how they're going to get their, a return on the capital, how they're going to get their capital back and a return on that capital. And so they have to think about your exit of this business, of course, and being in a smaller market, that's that. So that challenge remains that, that how liquid is this investment going to be on the other end?

Now you've already told us that private equity is, is quite active in the Czech Republic. Maybe that's the answer. But how did they, you know, you, you. Just because you found a good deal doesn't mean you've escaped the sense of kind of a ceiling or a limitation to a small market.

[01:00:13 - 01:00:52]

Ivona Butcher: Yes.

Well, as for the exit, from the beginning we've been talking about two options. Either the investors sell their stake to another buyer, plenty of PE companies or family offices in the Czech Republic, or I and Corbyn will want to buy them out. So those were the two options. They are still on the table. So especially seeing how active family offices and PE are in the Czech Republic, we were comfortable that exit options will be there.

[01:00:53 - 01:01:16]

Will Smith: One last question on how you structure this, Ivana. I guess the terms that you got with investors, when you have a deal in hand, that usually strengthens your hand with respect to your investors, it's, it's no longer speculative. You actually have a deal that they can look at. Did that strengthen your hand? Did you get different terms than you would have otherwise had you just gone into this?

In a traditional search fund?

[01:01:20 - 01:02:11]

Ivona Butcher: It is very common that as a self funded searcher you get better terms than a traditional searcher. But we didn't. We didn't. We are under var very traditional terms. And the reason is that we were very like particular about our investor groups.

Investor group. We wanted those investors who said that they would come into any deal only under traditional terms. So we basically exchanged potential for better terms for having really high quality investors. So that was trade off that we made and we are happy with it. I think it worked out very well.

[01:02:12 - 01:02:16]

Will Smith: When you buy the business and get in the business, is it the business you thought it was?

[01:02:20 - 01:02:58]

Ivona Butcher: The sellers were very upfront. We still have a very good relationship. So the. There were things that were not completely expected, but sellers were very open about them. And there were also some funny things like, you know, we would arrive at the company and we found out that there is a herd of sheep.

Like we literally have six sheep on the property. So like little things like that or storage halls are full of stuff. Although balance sheet is empty.

[01:02:59 - 01:03:00]

Will Smith: Okay.

[01:03:01 - 01:03:10]

Ivona Butcher: Things like that.

But nothing too major. Okay, Nothing major. So the, the transition was pretty, pretty smooth.

[01:03:10 - 01:03:39]

Will Smith: Okay. By the way, one thing that I didn't underline is that you bought this from a husband and wife.

You are a husband and wife. So it, there was this, I presume, a pretty natural division of labor. Were your future roles mapped on to. Well, I guess you already said the husband was teaching you how to do ops. The wife, the Dutch wife was teaching Corbin how to do sales.

So. So you guys just mapped your, your future roles onto how the division of labor already was.

[01:03:40 - 01:03:50]

Ivona Butcher: Exactly. Exactly. And also it helped because the employees were not very surprised or for them it was very natural to have another couple running the company.

[01:03:50 - 01:04:18]

Will Smith: Yeah, yeah, yeah. And by the way, another thing I wanted to ask about in terms of searching in a smaller market, in many countries, smaller countries, there's the capital. In of course, your case, it's Prague. And then almost the entire national economy, you know, half the national. The GDP could be, could be in that, in that city, maybe more in, in many nations cases.

So were you searching in Prague or were you searching elsewhere? Where is the business?

[01:04:21 - 01:05:53]

Ivona Butcher: We were searching throughout the whole country. And it's, it's interesting when we, in the very beginning when we still had hopes that we would raise search capital, we actually claimed that we would search in the Czech Republic, Slovakia, southern Germany, and maybe southern Poland.

Of course, that was, as we found out, like later. That would be complete nonsense. You only need to focus on like one. One country. And.

But we couldn't limit the country to, you know, only to capital or only to big cities. And Czech Republic is actually like, divided. There are some industries that are far from Prague. So we were searching across the whole country and our thinking was that we are getting out of New York. We are not city people.

We didn't enjoy living on Manhattan. So we are happy to move to some village close to a factory. But in the end, we are happy that we ended up pretty close to Prague. Like, being really in the middle of nowhere might have been too much. So we ended up around 40km from Prague.

So still easy access to the city of Prague. And we are in this village or small town just outside with herds of.

[01:05:53 - 01:05:56]

Will Smith: Sheep in the company parking lot. Sort of vibes.

[01:05:56 - 01:05:58]

Ivona Butcher: Exactly.

That grew since then.

[01:05:59 - 01:06:02]

Will Smith: That what? That has grown since then?

[01:06:02 - 01:06:11]

Ivona Butcher: Yeah, yeah, yeah, yeah, yeah. And from time to time, we have barbecue with.

With. With the employees and to decrease the hurt. Again.

[01:06:14 - 01:06:18]

Will Smith: Took me a second. Okay, watch your back sheet.

[01:06:18 - 01:06:28]

Ivona Butcher: It took a few years to some employees as well. Yeah. Some poor secretary was for several years under the impression that she was eating a pig.

[01:06:30 - 01:06:31]

Will Smith: Wait, are we serious now?

[01:06:32 - 01:06:40]

Ivona Butcher: I'm absolutely serious. The guy, the guys convinced her that this is a pig and that they didn't make sausages from the sheep that she was petting. Yes.

[01:06:40 - 01:06:59]

Will Smith: Oh, wow.

Oh, boy. To Covid. Then let's hear what this business that we haven't. We maybe we haven't been super clear about what the business does. Booth design and manufacture or fabrication for events.

[01:06:59 - 01:07:01]

Ivona Butcher: Right, Correct.

[01:07:01 - 01:07:02]

Will Smith: Okay, great.

[01:07:04 - 01:07:52]

Ivona Butcher: So we do everything from designing the booth, project management, producing the booth. We have a team of carpenters, electricians, men, metalsmith, and then we travel to the venue to assemble the booth. So mostly we travel to Western Europe, but also to the US or Middle East.

We assemble the booth and after the trade fair, we take it down and take it back to our premises, store parts of the booth that are going to be reused and wait for another exhibition. So this, this is how it works. And it's also why I mentioned that operations are so complex because we have so many different departments and teams within a company.

[01:07:52 - 01:08:23]

Will Smith: Right, right. And.

And just going back on quality of revenue a little bit, it would seem that this business is very cyclical because it's tied to marketing. Events are a marketing expense for businesses. And marketing is. Is kind of notoriously one of the first expenses to be Cut in a belt tightening moment in a, in a, in a. So in a soft economic environment.

So was, was there a cyclicality related to kind of overall health of economy with this business?

[01:08:24 - 01:09:28]

Ivona Butcher: Not at all. Oh, not at all. And for two reasons. Firstly, we are careful to select the clients in industries that are not cyclical.

So we have strong presence in defense chemicals. We are not doing flashy industries. We are not doing automotive, for example. Automotive would be very cyclical. We don't want to be exposed to that.

So first reason is selection of clients. And a second reason is that exhibition organizers designed it in such a way that if you don't attend one year, you lose your spot. So these companies have worked for years to get the premier spot in the exhibition hall. And just one year they will miss and their spot is gone. And then when they decide to come again, they will be in some dark corner in a small exhibition hall and they will not have the spot with the most traffic.

[01:09:29 - 01:09:37]

Will Smith: Very interesting. Okay, and so you guys will actually decline new business from industries that you don't want to participate in?

[01:09:37 - 01:09:45]

Ivona Butcher: Well, we wouldn't actively search such business. We, we are very selective. Like sales people have instructions what industries to target.

[01:09:46 - 01:09:50]

Will Smith: Okay, so what happens in, to a business like this in Covid?

[01:09:50 - 01:10:53]

Ivona Butcher: Yeah, so we bought it in 2018. We, we had very nice 2019 and early 2020.

We were actually on the way to Barcelona to a very big technology show and we were watching this virus spreading in Asia and hoping it wouldn't make it here. And obviously it did. Suddenly we had to turn several trucks on the way to Spain. They had to just like turn around because the exhibition was canceled. And then one after another, all exhibitions were canceled.

And within one week our revenues and like forecasted revenue dropped to zero. There was nothing, nothing, no events. Complete ban and like our complete pipeline just went out of the window.

[01:10:55 - 01:11:02]

Will Smith: Wow. And so what did you think?

What was your emotional state like in, in those moments? Did you think that that was the end?

[01:11:03 - 01:14:48]

Ivona Butcher: At first, in February 2020, we still hoped that Covid will not last that long, that maybe in a few months events can come back. But yeah, a couple of months afterwards it was clear that that wasn't going to happen. And by summer it was clear that for the whole year 2020 there would be no exhibitions.

So our, our reaction was to first of all, you want to do like what is right, like keep everybody safe and you know, make sure that people are cared for. And then you start thinking how not to bankrupt. And from both ends, revenues and costs. We had to act. So on the revenue side, we were looking for any potential revenue stream.

We were thinking through our capabilities. Okay, so what else can we do? We have carpenters. So, okay, let's produce kitchens for people. We have metalsmithers.

Maybe we can do this. Metal pergolas. We have designers and we have project managers. So we learn how to do virtual products. We started doing virtual showrooms.

And some of these jobs were not profitable much. Some of these jobs hardly covered salaries of people doing them. But they were very important to keep the morale up. People had to feel useful. It wasn't possible to just send people home.

And that just wouldn't be good for Psyche. And on the cost side, we did negotiations with, I mean, completely everybody from suppliers, accounting company that did accounting for us and all the rent.

And the biggest fear that we had was, was what the bank was going to do because we were highly leveraged at that point.

And this is where investors prove to be very, very helpful. I'm really grateful for this time because the investors didn't force us to do some big layoffs. They didn't push some, like, dramatic downsizing of the company. And they helped us think through negotiation with the bank. And those are things that, as a young entrepreneur that never went through crisis like that.

You don't think of these things because with Corbyn, we feared interaction with the bank. The bank can literally bankrupt us if they chose to. We knew we were not going to comply with the covenants. We knew that if the bank pushes the loan agreement, we are out of business. So we thought that we would be in a really disadvantaged position coming to these talks with the bank.

[01:14:49 - 01:14:50]

Will Smith: Yeah.

[01:14:50 - 01:15:57]

Ivona Butcher: But then our investors, they talk to us and they helped us think through it. And it would never occur to us to arrive at a meeting with a banker and basically put gun to their head and tell them that, okay, if you don't agree to our modified terms, you are going to lose your loan completely because we are walking away. So it was thanks to investors that we had the courage to be so aggressive in negotiations, which ultimately saved us. We put together much darker predictions that we would have otherwise.

And we were so aggressive in negotiations with the bank that in the end the bank was okay, of course, no installments. We are, you know, happy if you pay interest, if you can. And. And like, we could completely stop worrying about the bank payments for some time. So, wow.

[01:15:59 - 01:16:10]

Will Smith: That was really some coaching they gave you.

What about the. The seller note renegotiation of the seller note?

[01:16:11 - 01:18:44]

Ivona Butcher: Yes. So Covid was much longer than we thought than we hoped for. And then when it was very hard for me and Corbyn because we could see our effort and our commitment coming to waste.

So we have this company that, you know, is hardly making any money. I, I think we, we managed to stay like at zero in the end. We were not in, you know, any big loss, but, but still, like you are, you know, wasting your energy and time on something that you don't know whether it will make money again. And then we thought, actually it was Corbin's idea. I have to give him credit that.

Yeah, we have to. We need to be committed. Of course, not only because of employees and because this is our responsibility to take care of the company, but also we have to decide, okay, so are we really like 100% in? Do we believe that exhibitions will come back? And we had to answer yes to this because fundamentally we believe that human contact is real, natural human need.

And if you want to do business, you want to shake somebody's hand before you close a big deal. And we really did believe that exhibitions were, will come back. And if you believe that, then, okay, let's go 100% in. Let's approach the former owners and ask them to buy back the seller note. And we approach them at the time when it was still not clear whether Covid will go away and whether exhibitions will ever come back.

So it was still at a time when it was not sure whether we will make it or. We were bankrupt. And thanks to this huge uncertainty, we were able to negotiate huge discount and we bought back the seller note for such a big discount that it effectively decreased the purchase price of the company by a term.

[01:18:45 - 01:18:45]

Will Smith: By a third.

[01:18:46 - 01:18:47]

Ivona Butcher: By a turn.

[01:18:47 - 01:18:52]

Will Smith: By a turn. By a turn. Yeah, because the seller note had been what percentage?

[01:18:52 - 01:18:53]

Ivona Butcher: 25%.

[01:18:53 - 01:18:56]

Will Smith: 25%, yeah.

[01:18:56 - 01:19:23]

Ivona Butcher: And we bought back this seller note in exact proportion proportions to the equity ownership so that there were no conflicting incentives, so that the like debt, like new debt holders, had the same, you know, percentage ownership as the equity investors. So the percentages were right.

[01:19:23 - 01:19:33]

Will Smith: So you guys, you bought, you as an entity bought it, bought this debt. No, the investors bought it, the investors bought it. So you still had a debt and.

[01:19:33 - 01:19:45]

Ivona Butcher: And me and Corbin. So the company still had the debt, but the debt was to be paid out to the investor group, not to the former owners.

[01:19:46 - 01:20:27]

Will Smith: Right. In the investor group, everybody on the cap table included you guys personally, and you bought this seller note and that value is allocated according to the cap table, so proportionate with the cap table. And you bought it at a significant Discount such that the, the new loan, the new interest payments or payments, servicing of this loan by the business was going to be dramatically reduced.

As you said, it. It effectively reduced the purchase price of the business by a turn. And did you tell us how many turns you bought the business for? How many, what multiple you bought the business for?

[01:20:29 - 01:20:33]

Ivona Butcher: Well, we bought it for what you would expect for a company of this size.

[01:20:33 - 01:20:41]

Will Smith: Okay. Okay. So anywhere from, call it 3 to 5. So reducing that by a turn is very significant.

[01:20:44 - 01:21:46]

Ivona Butcher: And our investors were also helpful at putting this into perspective because if you imagine this is, you know, during COVID the outlook is still very dark. It's, you know, very, very emotionally draining experience. And we are, after years of, you know, trying to keep the morale up, trying to keep the company together, trying to keep the employees engaged and trying to transfer to them the energy that we don't have ourselves. And it's, it was a very hard time. So it really helped when, like, investors put it in perspective.

Like, oh, okay, so if we actually, if you guys succeed in completing this seller node buyback, it is as if Covid never happened. Like, the financial impact is such that we don't need to be worried about COVID It's, you know. And.

[01:21:48 - 01:21:57]

Will Smith: You mean because whatever valuation discount on the business that Covid would cause is now what you effectively paid for the business?

[01:21:59 - 01:22:13]

Ivona Butcher: Yeah, it's because we basically decrease the purchase price and like, what. It's, it's as if we made up for the lost EBITDA during COVID Oh, of course.

[01:22:13 - 01:22:27]

Will Smith: Because when you said it would basically amounted to a turn. A turn is a year, A year of ebitda.

And if Covid is a complete wash for a year, you've just made up that money in, in the turn that you recaptured by the discount from the.

[01:22:27 - 01:22:27]

Ivona Butcher: Exactly.

[01:22:27 - 01:22:28]

Will Smith: So. Okay.

[01:22:28 - 01:22:36]

Ivona Butcher: Exactly.

And so it helped just, you know, put it to put it in perspective and not be so depressed.

[01:22:37 - 01:22:44]

Will Smith: Yeah, yeah, of course. I imagine that the damage from COVID lasted longer than a single year. Or not.

[01:22:44 - 01:22:46]

Ivona Butcher: Or not.

It's. It, it did. Yeah, yeah, yeah.

[01:22:46 - 01:24:05]

Will Smith: But no, but it's still a great perspective. And by the way, Corbin's prompting of, of this kind of fork in the road and not.

And, and so not kind of middling your way more, muddling your way through with kind of a middling enthusiasm. It's like, let's either, let's either cut bait, quit and. Because we don't believe this, this industry is ever going to come back, so let's cut our losses and move on, or we do believe it's going to come back. In which case let's act as if, let's actually turn this from crisis to opportunity. Maybe.

I'm not sure he said that. Those are my words. But it's like if you decide that human contact events are always going to be a feature of business life and that events will eventually come back, this actually does turn, turn into an opportunity, a moment of opportunism, if you can survive, because it's a, you know, as a, I think it's Warren Buffett says, a blood in the streets moment, right, where you buy when everyone's scared and you sell when everyone's confident sort of thing. And, and there, there was sadly literal death and destruction during COVID But you, if you can survive and even make moves and be aggressive during this time, you can emerge on the other side in a very, very strong position with the rest. With respect to the rest of your industry fair.

Did you all ever see it that way?

[01:24:06 - 01:24:59]

Ivona Butcher: That's right. And we absolutely profited from our competitors being less confident in the industry because we managed to keep our employees during COVID and we started ramping up much sooner than the others. So when exhibitions did come back, we were ready and we succeeded in capturing much bigger market share. So it's only now that we see bigger competition and more companies on the market.

But the first year after Covid, we were in a great position, we were gaining many clients and other companies were pretty much asleep.

[01:24:59 - 01:26:24]

Will Smith: Yeah. Yeah, exactly. You know, Ivona, you, you had said earlier that you weren't even aware of this industry as an industry. The idea that there are companies devoted just to, to designing, building, deploying booths for conferences.

You're actually not my first guest to have bought a business like this, actually in, in two podcasts in Mind's Capital, our sister podcast, an independent sponsor bought a kind of a similar business. So three searchers slash sponsors who have bought these types of businesses. But Adam Rao on the Acquiring Minds interview from just a few months ago, same thing. Their, their business just revenue fell to absolute zero. But they, I don't recall the details, but I think it was, they were, they held on and they just positioned themselves well to when things started coming back.

Whereas, I mean the competition, the playing field has been cleared, weaker players have gone out of business or have decided to just shut down. You know, employees have gone on to other, other businesses, other, other jobs, taken other jobs. So it does have this culling effect. And if you can, if you can remain, if you can survive in the, in the industry, the competition is a lot thinner on the other side, so something too much.

[01:26:24 - 01:26:38]

Ivona Butcher: And also even the companies that did survive Covid, some of them, especially in Western Europe, they survived because very early on they received a lot of state subsidies.

[01:26:38 - 01:26:38]

Will Smith: Yeah.

[01:26:39 - 01:26:49]

Ivona Butcher: So yeah, they were fine, but they lost the, like the, the hustle mentality or they, they, they got a little bit lazy.

[01:26:52 - 01:26:54]

Will Smith: Yeah, you guys were putting up pergolas to stay alive.

[01:26:55 - 01:26:55]

Ivona Butcher: Exactly.

[01:26:56 - 01:27:14]

Will Smith: Great. Well, Ivona, we're wrapping up. Why don't we hear what has happened since.

I know that it's been now three year worth, you know, three more years since COVID I guess really sort of came to an end in your industry. Although maybe not maybe it's still. There's still a tale of COVID effects. But tell us what has happened since.

[01:27:17 - 01:27:29]

Ivona Butcher: So after Covid, we started growing, we returned to the growth and right now we are at. We almost tripled revenues and we doubled EBITDA.

[01:27:31 - 01:27:33]

Will Smith: From when you bought it? From pre Covid.

[01:27:33 - 01:27:34]

Ivona Butcher: From when we bought it. Yes, yes.

[01:27:35 - 01:27:37]

Will Smith: Not from zero.

During COVID Exactly.

[01:27:41 - 01:28:42]

Ivona Butcher: Yeah. And now we say every problem we face right now, it's a good problem. Like really compared to Covid. Now anything happens, we always smile and yeah, this is good problem to have. This is great that we can even have these problems and solve them.

Compared to Covid, like any issues, if it's even when something goes wrong with operations or everyday problems, they are all good problems to have. And now we can really think about strategic growth and how do we grow more? Do we want to grow more organically? Do we buy another company or do we outsource more or do we build another factory of ours? So now we are faced with these decisions and it's a delight to have decisions.

[01:28:42 - 01:29:18]

Will Smith: Exactly. Yeah. Good problems versus bad problems. Bad problems, existential problems, survival. That would qualify as a bad problem.

And now you have good problems, by the way. So if you've tripled revenue and doubled ebitda, you didn't tell us exactly what your EBITDA was, but quick math, north of a million euros. So today you'd be north of 2 million euros. We talked about how being above a million would make you a much bigger company in the Czech Republic than say in the US and you said, yeah, it's pretty big company. So now you're an even bigger company.

I mean, you're, you're quite a big operation for the Czech Republic in particular.

[01:29:18 - 01:29:29]

Ivona Butcher: Yes, yes. I mean there are like maybe few thousand companies that are bigger than, than ours. It's. Oh, the market is, is really small.

[01:29:29 - 01:29:46]

Will Smith: Yeah, yeah, yeah. Great. Anything to say about doing this with your husband speak directly to that dynamic? We've, we've talked about it in the plot, but not, you know, the, the realities and the, the emotional, maybe relationship, relational dynamics there anything to say about it?

[01:29:47 - 01:31:18]

Ivona Butcher: Well, I, I wouldn't be able to do this alone.

I think it's important to do it with somebody you trust with somebody you can discuss in the evenings. I mean being a CEO is pretty like lonely job, so it's very helpful when you have somebody to discuss and complain to.

So I think for us it worked out very well. We actually, people always ask like, isn't it, oh, don't you see each other too much? But you know, we have like separate offices. Corbyn is in charge of marketing and sales, I'm in charge of operations. It's.

The responsibilities are split and there is big advantage of we are working for the same goal. So you know, if I have to stay late, if Corbin has to stay late, we understand why there is never, you know, oh, where are you? We were supposed to, you know, do this with the family. Like I'm not like, no, like stay there and solve this. It is important that you solve this.

So we really have very like aligned incentives in, in our like all life, like both family and work. And I think that's very much contributes to happy marriage.

[01:31:18 - 01:31:40]

Will Smith: Yeah. Yeah, great. Yeah.

Because of course family time and work time are often intention for ambitious people. And you all have an alignment that the rest of us, the rest of us don't. It's always a zero sum game between an hour with the, with our family versus an hour at work.

[01:31:42 - 01:31:50]

Ivona Butcher: So, and people always ask us like how we divide the time, like whether we talk about work all the time.

[01:31:50 - 01:31:51]

Will Smith: Right.

[01:31:51 - 01:32:22]

Ivona Butcher: And it started like that, that like we would really talk about work at home almost non stop. And now like we developed a habit of, oh, and like are you in mood talking about this? And like we, we just like ask each other, like, okay, can we discuss work now? You know, over dinner or something? And, and the other one is free to say like, no, right now I want to focus on kids.

Like, let's not talk about work. So it, it works very well.

[01:32:22 - 01:32:31]

Will Smith: And how do you think, what do you think your kids as an audience to all of this, how are they, what are they seeing? What do you think they'll take away from, from, from being witness to all this?

[01:32:32 - 01:33:33]

Ivona Butcher: Above all, they see happy parents, happy parents that have good relationship with each other.

I think that's, that's the most important thing for the kids.

I believe that it's crucial that kids observe like marriage as a like happy interaction, happy relationship. It's in my mind more important than devoting time to kids themselves. I think it's very important that they observe the relationship between mother and father and maybe it will also inspire them in terms of what they want to do, what they want to achieve. And yeah, we will see. It's very soon to tell what they will want to do.

I hope that they will get some inspiration from this.

[01:33:34 - 01:33:37]

Will Smith: Excellent. Anything we didn't hit on Ivona that you wanted to say?

[01:33:37 - 01:33:50]

Ivona Butcher: I would like to encourage all searchers because it's been incredible for my life and it's very hard, but it is worth it.

[01:33:50 - 01:34:23]

Will Smith: Great, great note to end on.

Congratulations to you and Corbin for many things along the journey for for, you know, not taking no and find finding a business in Czech Republic, surviving Covid of course, and then on the other side of it, growing beautifully, keeping all those people employed, showing your kids a happy marriage, figuring out how to navigate owning a business together. There's just a lot of resilience and success here. So congratulations to you both and thanks for sharing it with us.

[01:34:23 - 01:34:24]

Ivona Butcher: Thank you Will.

[01:34:25 - 01:35:09]

Will Smith: Hope you enjoyed that interview.

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