Host: I first met today's guest at the self funded Search Conference in Dallas in 2023. Ling von Diebel had flown all the way from London, a demonstration of how seriously she was taking this path of entrepreneurship through acquisition. As you'll hear, her husband Leo later joined her, and Ling and Leo both are today's guests. So buying a business as a couple is a key theme of the interview, as is buying outside the U.S. ling and Leo live in London. We hear how they structure their deal in a market where loans for business acquisition aren't as readily available as they are here in the us. On top of that, neither Ling nor Leo are British, adding to the search challenges. Finally, we hear about Ling's parallel journey with ivf. You may not know much about that process, but suffice it to say that that journey can be long, fraught, hugely time consuming and emotionally draining. Going through that while also trying to buy a business would be harrowing. Hopefully, Ling's story can be a resource to other women or couples considering ivf. Please pass it along if you know someone who should hear it. Okay, here are Ling and Leo von Diebel, owners of Infrastructure Design Solutions. 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. You know ENSO 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 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 Enzo Technologies.com in Z O or email Nick directly at nick@enzotechnologies.com Ling von Diebel Leo Von Diebel welcome to Acquiring Minds.

[3:15] Guest 2: Thank you for having us.

Host: The two of you are married, are self funded searchers, are based in the UK and bought a business tied to the AI buildout. So there is much to dive into in our conversation today. Let's begin with some Brief background on you both. Ling, if you'd go first and then Leo will go to you.

Guest 2: Thank you Will. So my name is Ling Van Dybo. I'm the co founder of Acacia Partners which is our search fund but also our long term holding family vehicle alongside my husband partner Leo who's also on the call today. I'm also co owner of Infrastructure Design Solutions which is our engineering consultancy business. I would say that I have an entrepreneurial itch from an early age because both my mother and grandmother are small business owners in Vietnam where I was born and raised. So growing up I always had the idea that one day I would be a business owner just like them. When I was 17 I moved to the US for college and studied finance. During that period investment banking was considered the most prestigious career path one could achieve in finance. So that's what I did. Spent three years in banking, one year in New York and two years in London and then transitioned to private equity for two years in London before I moved back to the US to pursue my MBA where I met Leo and I was quite deliberate to choose a major in entrepreneurship and innovation when I was at Wharton because I wanted to find a path to entrepreneurship. That unfortunately did not happen. I went into fintech startups in Europe after I graduated and became a subject matter expert in the field for a number of years. Fast forward to 2023. I grew quite frustrated with the whole startup VC ecosystem and that was when the fintech boom had busted. So I took a few months off to contemplate what to do next in the long term. I revisited the search the search fund model before kind of thinking about going back to the corporate world and finally decided to make the jump into search. So I set it out first as a solo self funded searcher and then partner up with with Leo to start out Asian partners.

Host: Now were you guys married before you became search fund partners or did you do become search fund partners and then get married?

Guest 3: Okay, okay.

Guest 2: Been married for a while before we

Host: actually took the Pl and Ling the the exploration of search fund after your years in fintech. So you were already familiar with the model from before. Say more about how you learned about this as a path.

[6:18] Guest 2: Yeah, so I knew about search and eta during my first semester at Wharton. An alum who graduated 10 years before we did reach out to me. He was a very successful investor at a sovereign wealth fund in Europe and so he sent me a long email, he attached the Stanford search fund study and told me that he'll be willing to back my search entirely if I were to raise a traditional search fund in Vietnam. So that's when I first heard about the asset class. That was 2018, but the idea of moving back to a tier 2, tier 3 CT in Vietnam wasn't compelling. And so I kind of rejected his offer. And so fast forward to kind of 2023. I was in between two job offers, one to go back to PE and the other to become CFO of a Series C startup here in the UK. I remember going back and after meeting the team and feeling completely demotivated, I just did not want to go back to the corporate world. And I knew that I still wanted to pursue my entrepreneurship dream, my childhood dream, but did not like the idea of starting something from scratch because obviously 90% of startups fail. So that was a light bulb moment where I realized that there's such fun and I could go down that path and revisit that path. So that's basically what I did. And in that summer 2023, funny enough, I stumbled upon this podcast called Acquiring Minds and listened to a lot of inspiring stories from searchers. Really helped me make the jump and explore different types of search funds out there.

Host: Well, of course we met in person at the self funded search conference in fall of 23 in Dallas. And you were in the UK at the time, so you were taking your search seriously. You'd come all the way over to Dallas from the UK to go to this conference. This one day two. I guess it was a one day conference.

Guest 2: Two days conference.

Host: It was a two day conference and

Guest 2: I was the only person from outside of the US and I guess the SIG guys were able to make that an international conference because of me,

Host: The token international person.

Guest 3: It's like the, you know, the airport

Host: that has one international flight so it can call itself an international airport. This your history of discovering search. This email from an investor out of the blue, a cold email. This gentleman says, if you go do a search in Vietnam, I'll fund you. This is what this is all about. That's quite an unusual proposition. I, I gather that this was a guy who is bullish on Vietnam.

[9:13] Guest 2: Exactly.

Host: And, and was like, let me find some Vietnamese students at prestigious business schools and have them go search in Vietnam. And he just cold emailed a bunch of you. That must have been what that was.

Guest 2: Must have been, yeah.

Host: I wonder if we got any takers. And by the way, Ling, why, why wouldn't it have had to be a second or third tier city in Vietnam and not, I guess, Ho Chi Minh City?

Guest 2: Well, if you think about the big two big two biggest cities in Vietnam, one is Hanoi and the other is Ho Chi Minh City. Hanoi is very much government kind of backed companies and then Ho Chi Minh is kind of the hub, the Silicon Valley of Vietnam. But unlikely to find kind of small, medium sized businesses in those two cities. You would have to kind of venture out to tier 2, tier 3, the suburban areas, to find small, medium sized businesses. So that's kind of a bit harder. Number one is to get to those places and number two is to attract talents and build the right management team in those tier 2, 3. Tier 3 cities can be quite, quite daunting. And I'm familiar with that market and I know it's not as, as easy or as well developed as the US

Host: or the uk specifically on the management talent.

Guest 2: Exactly.

Host: Yeah. Fascinating. Thank you. Ling, Leo, get in here. So tell us about a little bit about yourself.

Guest 3: Yes. So I'm I'm sort of born and raised German, but moved to the us did my undergrad in the US and then ended up my first job in consulting. And for me it was kind of an opportunity to see a lot, do a lot and get sort of broad exposure to business, which I hadn't really delved into. So was, was curious to get that. So I did BCG for five years, two of that first in the us, Then I moved to the Middle east, worked in the Middle east for two years and then moved out to China to work in China for a year and then reached a point where I wasn't keen to stay on in consulting and wanted to have more control over kind of what I was doing or what I was involved in. And so sort of the first immediate pivot was to think, okay, I'll move into private equity. And with that then was a decision to go to Wharton, where I met Ling, and then moved into private equity after work in Europe and was doing that for a couple of years before Search. For me, I didn't have sort of the same innate entrepreneurial itch that I always knew I wanted to go after. But for me, I was always kind of very high conviction in what I did and how I thought about decision making. And so entrepreneurship kind of fits into that because you're in control of what you do and what you decide. So you follow your convictions and you have the path to do that. So when Ling kind of introduced me to the. Well, I had known about Search before, but I hadn't really delved much into it. But she, you know, wrote this long white paper to, to Explain it to me and pitch it to me. That was kind of the first flavor I got then. And it really sort of became increasingly compelling. And I was at a point then in private equity where I wasn't super happy at the fund I was at. I had already started recruiting for a couple of months looking for another fund, but then I was joining Ling in management meetings and did sim review together with her. And then eventually I was in a place where I had an offer on the table from a fund that in theory, on paper was a great offer, a fund I liked, a team I liked, but somehow I wasn't really that excited about it. And I had been feeling very engaged in what we were doing together at that point on the search. And then the discussion was, why don't we actually just do this together full time? And we felt we had complementary skill sets and we were both really excited about it. And the idea was, well, why buy one business when the two of us, let's just buy two business and aim for that. And so that was in the decision that I would join Ling full time and haven't looked back since.

[13:44] Host: The white paper. Say more about this white paper.

Guest 2: I took my, my search quite seriously. So I Talked to probably 70, 80 searchers, you know, a variety both successful and failure stories, and listened to as many podcast stories, as many of your podcast stories as possible. And I wrote this 20 page document that I call Search Fun Exploration to share with Leo. Back then, you know, I wanted to get my husband buy into what I want to do next, but also for me to kind of really understand the difference, the pros and cons between different types of search model versus a career in backing startup and, and in PE. So that's kind of what the paper, the 20 page document was about.

Host: Leo, did you know that she was writing it or did she present it to you one morning over coffee?

Guest 3: Well, I think we had had discussions before and probably maybe because I am a relatively skeptical or critical person, so when people talk, talk about, you know, startups or search funds, you tend to only hear or mostly hear kind of the, the best case scenario. And I'm very much kind of thinking about that can happen. But here are also all the other things that are probably going to happen instead. And so I think part of our conversations, Ling probably sensed a little bit of my, my, my questioning and, and it was to articulate to me, but also to herself really why we should make this commitment. And it was very, very much also in the mindset of this is not just something we're quickly jumping into and jumping out of. This is not sort of I'll try this job and then if it doesn't work out, I'll do something different in a year. This is very much okay. We're going to be searching. We're not, you know, Ling wouldn't be earning any money. We will have to invest significant sums of capital into fees that could, you know, it can just vanish. It's not kind of you get a return on your fees. It's just going to go away if the deal doesn't close and you don't have a business. And then once you have a business, it's going to be many years of being involved and fully engaged in that business. So it's not, not a decision we wanted to take lightly. And again for Ling in particular, articulating to me and to herself, here's really how I thought through it and all the options I considered the other things I could be doing and why I'm not doing them. That was, that was very helpful.

[16:21] Host: Was there a particular argument or three made in this white paper that finally convinced you or was it sort of like the, you know, the medium was the message. The fact that she had the paper itself and its existence was, was kind of enough to convince you?

Guest 3: It was probably mostly the latter, a little bit of the former. So for me it was seeing her commitment and her degree of engagement and how excited she was about it where sort of knowing her, I know that when she puts her mind to something and she really wants something, she will go and get it and she'll do a great job of it. And so seeing how, how she really thought about it and really wanted it, that was to me, okay, look, I'll support it in any way that that's no issue for me. I think she's going to be amazing at it from a sort of outside in academic analysis type of perspective. I would say two things that I liked were. So I was working in private equity, so I understood kind of all the deal math and all that stuff. But search in particular in Europe is still sort of an underpenetrated asset class where you don't have 12 PE funds bidding on every business. So there's still opportunity for finding good deals. Much more so than I would say sort of in mid market private equity or large cap private equity. So it was one piece. And then also the fact that these are profitable cash generating businesses, not with sort of moonshot valuations, that was very much for me also important. If she had come and said I really want to do a startup. It would have been a bit more challenging for me because of also her experience in fintech and kind of where valuations were sitting and what these businesses were then actually doing compared to where the valuation sat. So it was kind of a pragmatic, realistic type of investment combined with somebody who's super passionate for it.

[18:31] Host: What do the following Acquiring Minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the Acquisition Lab, the accelerator and community for people serious about buying a business. But they represent just a sliver of the Lab's success stories. The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The lab offers a month long, intensive, almost daily Q and A sessions with advisors, Live deal reviews with Walker, Deal team introductions and in an active community of serious searchers. Check out acquisition lab.com, link in the notes or email the Lab's co founder, Chelsea Wood. Chelsea buy, then build.com let's hear Ling about how you thought about the model that you were going to pursue this path because this further explores the kind of philosophical approach you had. So you considered the various paths. How did you choose? Self funded?

Guest 2: Yeah, so I kind of the went back to the drawing board and kind of try to understand this is a spend of a couple of months try to understand exactly what I want long term. So as I mentioned on my kind of in terms of professional, I want that freedom and autonomy to make my own decisions and that means know the traditional search fund does not make sense where you have a board controlling, having the majority voting rights. That does not make sense to me. It seems to me more like, you know, I'm still in startup managing a board of directors and you know, managing investors. So that rule out traditional search fund I was contemplating between self funded search and independent sponsor. My experience with my fintech startups was that the one I was at in 2020, at the peak of the fintech boom, we did a lot of acquisitions. In a span of a year and a half we did five acquisitions, some of which were value at a couple of hundred million pounds and over a dozen minority transactions. I was employee number 50 when I joined and a year and a half later I left as employee number 1500. So we did a lot of acquisitions and we learned, we found out the hard way that integration can be much more complicated than you ever expect. It can takes much longer and can be very costly. If you don't implement it correctly, it could really derail your entire value creation thesis. So from that painful experience, I learned the hard way that integration takes time and I want to be as hands on as possible in the businesses that we acquire because we think of that as our long term family investments. So the independent sponsor model did not really make sense to us. And so when I built out Acacia, we were very deliberate about kind of having that hands on operational experience with the companies that we acquire because we think that is a more sustainable path to growth. So we want to invest in kind of building out the foundations from the beginning, from building the right hr, sales and marketing operations, finance that most of these small businesses don't fully have or haven't really professionalized. So we think that once we build a strong foundation which can take, you know, one or a couple of years, then we would feel comfortable hiring somebody to become a general manager and help us kind of run the business. But it takes time to get to that point and we are very deliberate and slow with our approach when it comes to acquiring and integrating these businesses.

[22:51] Host: This long term vision that you have say more about what that is.

Guest 2: Yeah. So long term the idea is to build out Acacia Partners as a holding company because we think that there's a strong flywheel effect with the long term holding structure. The first acquisition is always the hardest. Building your brand from scratch. Our brand in private equity did not matter. Our deal experience in PE did not matter in the SME world. But once we have that first deal under the radar, we kind of create that foundation and that playbook to then do more deals. So we already have, now have a pipeline of thousands of brokers we can reach out to for access to deal flows. We have advisors in place that we can get support. We have lenders who we have established relationships with and we have investors who we know are ready to back us. So we, we, we think that we can repeat that, that playbook and do more deals down the line. So that's kind of the, the, the playbook, the long term playbook for Acacia to build out a holding company. But at the same time we, we understand that it is extremely uncommon to find businesses with the right structure that you can just take over from day one and run smoothly. A lot of these small medium sized businesses require a lot of hands on work from day one. Even though some say that they have the right management team in place, you still have to come in and train them. And then if you want to grow, you have to think about the right hiring structure and process. And then there comes the digital transformation. A lot of small, medium sized businesses here are quite old fashioned. Some use Excel only or some even use just kind of pen and paper. So that digital transformation takes time. And so that's kind of where we think we can come in and take the time to professionalize these businesses. On top of that, if you think about businesses of 10 to 20 employees, they are not really ready to take on debt financing because of the rigorous reporting requirements from lenders on the monthly basis means that these businesses would need at least one full time person to deal with the reporting and the requirements from lenders. And so we understand these constraints coming in very clear and that's why we choose to be quite slow and deliberate in our approach to acquire and grow businesses over time. But that's kind of our playbook for the next five, 10 years.

[25:53] Host: And was this vision all laid out in the white paper or did this evolve after the white paper?

Guest 2: No, the white paper was just kind of me doing a self funded search, acquiring a business and then when I had two solid businesses under loi, so I did the whole search on my own for eight to nine months. And then when I had two solid businesses under LOI that, you know, I think we could, we could close, obviously we had, you know, other LLIs that was not successful before. But at that point then Leo was kind of in between his decision to join the new PE fund and I was like, hey, why don't you join and we each run a business and see how it goes. So the idea was that we gonna close two deals and each runs a business. Unfortunately the other deal fell apart at the 11th hour. But you know, the idea, the idea was kind of there, not on the paper, but kind of along the process.

Host: So you recruited him, you recruited Leo away from, from, from other would be employers of him.

[27:03] Guest 2: He was very convinced with the paper, I guess.

Host: Well before we leave the paper because we haven't even gotten into the search and we have a lot of themes in your story yet to cover. But just real quick, two, as you put it, Leo getting rich with a holdco. Let's do here. To the extent that there was a financial analysis in the white paper, ling this path of a self funded search versus what a career in private equity or a career as an executive in startups, was there a, an analysis there that was, that was quantified analysis.

Guest 2: Yeah, I, I did my analysis obviously based on the salary, the, the shares that I, that I would get from startup as well as the carry that I would get in pe. And then I would look at kind of the acquiring like between 1 to 2 million pounds business and kind of with, with kind of the sort of standard EBITDA margin, you know, based on the search model and build that out for kind of over the five to seven years and, and you know, assume that I would own majority of the business and see how the economics kind of played out. I would say for startup it's you kind of assume, you know, that the salary is certain but the equity is cherry on top because you know, 90% of startups fail, your equity might be worth nothing. So you have to heavily discount the equity component. For private equity in Europe, kind of similar story. You really have to be there long term for your carry to materialize. And so if you happen to leave halfway or become a bad lever, then your carry might not materialize. And that was kind of one of the decisions that Leo made is that if he wants to do PE for a number of years and then come join me at Acacia once I build out one or two businesses, would that be possible? And the answer is he might lose out all his carry because he was living kind of in between. So that was a decision. It's more kind of long term the economics, how that works out and apply a certain probability to each scenario. For the setup scenario, I guess lower probability for, than private equity. And then for the search fund, high probability because I think of the 75% searchers who managed to acquire businesses, roughly 90% managed to generate some sort of returns to investors. And then the Stanford search fund break down kind of what the returns profile look like. And those who kind of generate 3.4x returns to investors are quite high for, so the odds for, for the outcome of the search fund model is quite high. And that's what I apply to my model.

[30:08] Host: And so even from an economic perspective, leaving aside all of the stuff that we talked about earlier, the qualitative features, the, the freedom, the captain of your own ship, the autonomy, strictly dollars and cents analysis also showed search as winning.

Guest 2: Search as winning. But you have to, to also take into account that is a binary process. Either you make it or you don't. Yes, that's why it was important for me to spend three months talking to 70, 80 different searchers, hearing their stories, understand whether I can do that. And the main concern for me back then was number one, I'm not from the UK international woman. So the idea of me blending in and getting along with a seller here was a big question mark. And number two was my ability to close a deal given that I'm not British citizen was the second biggest question mark. So I had to go do my homework to make sure that I can solve these two issues before I could really dive into the search. So once I feel comfortable that I can pass that hurdle that, you know, the idea of that, the idea that I can then successfully acquire business, then it was just execution from that point.

Host: If you ask owners in the ETA and search community which insurance broker provides highest quality work, great outcomes and has a practice dedicated to searchers and acquisition entrepreneurs, one name comes up again and again. Oberle. Oberle Risk Strategies has worked with hundreds of searchers over nearly a decade and is in fact led by a two time successful searcher, August Felker, which makes Oberle a specialty insurance brokerage for searchers by a former searcher. And if you've got a business under loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. An easy, no risk way to get to know August and the team at Oberle to take advantage. Check out oberly risk.com that's o b e r l e-risk.com link in the notes. I'm going to hop through key themes of the story in the interest of time. Ling, you mentioned that you are. One of your concerns was being a non British woman potentially buying, you know, and outside of London where you. London of course is a very multicultural international city but maybe outside of London the UK is less so as, as is the case in most countries, you leave the major cities and it's more homogeneous. What did your search feel like from that perspective?

[33:07] Guest 2: It's lots of ups and down. I've never, I've never received so many rejections in my life in such short period of time. So it was quite an experience in itself. I would say the first step before we get to the sellers would be to get through the brokers. And I remember having thousands of coffee chats, meetings with sellers and. Thousands, yeah, literally thousands. And a lot of them set me down and told me that I am considered. They consider me as a quote unquote soft figure and so I need to bring in an older white male into meetings with seller to make Acacia look more representable. So I really thought about, you know, putting on thick glasses and you know, dark lipsticks and putting my hair up so that I look Older, maybe for a couple of days. But it's kind of, they don't see a lot of, you know, Asian female potential buyers in this sort of market. So when they met me they were quite surprised. And so I guess I kind of got over that after a couple of days or week and realize that it's just a numbers game as long as you meet as many brokers as possible. And that's why I met with a lot of brokers. You get, you get enough deal flows. So that was the first hurdle, getting through the brokers and building out Acacia as a brand name, completely brand name. The second hurdle, meeting with the sellers is quite interesting because again they don't see, you know, people like myself often. And so what I did was I brought Leo into some important management meetings when he was still in pe. So I prepared all the meetings. I was the point of communications throughout the entire process. I ran the meeting, I did all the talking points. But when a decision had to be made in the room, everyone turned to Leo to make the decision. And it was quite an interesting dynamics to to observe. Luckily I I develop thick skin through my, from my days in in banking just kind of laugh about it but that's kind of my experience that I had to go through

Guest 3: just as context. Coffee chats are also digital coffee chats. So Ling didn't have to get over caffeinated for a year.

Host: And how did you guys contemplate structuring the deal and in terms of, you know, specifically debt and investors if you were going to need them.

[36:00] Guest 2: So in the UK we don't have the standardized loans like the SBA loan. We, we talked to a lot of lenders from the beginning because you here you have to go to private lenders and each lender has their own set of criteria and requirements, what they like, what they don't like. Especially when it comes to cash flow loans, asset backed loans, they are quite standardized but for cash flow loans they are not and there are not many lenders out there. So we know that our option to get debt financing would be quite limited. The maximum that we would get would be 50, 55% debt financing. So we then have to fill that gap with combination of our own equity, some outside equity and seller financing. And that's how we structure our deal kind of combination debt, equity and seller financing.

Host: We'll return to the structure of your actual deal to learn more there. Is there anything more to say about the mechanics of the search specifically? I also want to hear Ling, if you'll share about what was going on in your personal life as you, as you went down this path. But anything more about the mechanics of search that could be useful to the audience?

Guest 2: I would say the search process was probably the second hardest thing I've done in my life. After IVF receiving so many rejections I probably reviewed a thousand deals and you know, requested probably 200 Sims and kind of narrowed down that funnel. But it's just a numbers game at the end of the day. And we were quite deliberate in terms of what criteria we choose to look at the businesses which Leo can share a bit more. But part of what I took away from the self funded search conference with SIG is that broker deal can be can save you a lot more time if are a self funded searcher. So in the beginning I did 50, 50 proprietary and broker deals but after a couple of months I dedicate 90% of my time on broker deals. So hence kind of the outreach to as many brokers as possible to get as many deals from them.

Host: Leo, did you want to say anything about criteria? What were the parameters?

Guest 3: Yeah, I think, I mean in terms of how we looked at businesses there's obviously kind of the standard things of what business characteristics financially in the numbers help make a good business that you can put leverage on. So high cash conversion, not too much capex, ideally something that's relatively recurring or reoccurring those types of things. So I think that we would apply to all businesses. But beyond that kind of for us what was key was really a long term focus. So we wanted to look for businesses where we could craft a thesis of how we could really grow and transform the business. So it wasn't just kind of, it wasn't either kind of a quick, quick flip or something where we thought there's nothing really to do with this business. You can't really improve it much and it's, you know, you can maybe buy it or buy it well but there's nothing more to it beyond that. So for us it was always kind of do we have something where we have a thesis that we can craft and then beyond that we're pretty opportunistic. So we didn't intentionally didn't want to be thematic because our sense was the typical themes would be covered already very well and then you will just end up with expensive assets. And also the market is pretty fragmented. So really trying to be very thematic and targeting very specific things was seemed less practical to us. And more fundamentally we felt there are a lot of great businesses out there and they're maybe not kind of the cookie cutter type of search business that you would know is exciting. So it doesn't have to be H Vac. And so we wanted to be open that we don't miss something that could be great just because we are too restrictive on that. So it was pretty opportunistic sort of. And that's part of why we went. We looked at, I don't know, maybe a thousand teasers and quite, yeah, went through quite a lot of businesses just to do that.

[40:38] Guest 2: I would say the first couple of months of my search I was quite hung up on acquiring a software business given my background in technology software. But after, you know, countless of deals being rejected, even being ghosted by brokers just because we could not match the price of trade buyers or PE investors and the deal structure just did not make sense to us, I finally gave up on the idea of, you know, just acquiring software businesses and then we kind of broaden out our search, our industry focus.

Host: One challenge with brokers who are going to already, I guess, be skeptical of you. One way of overcoming broker skepticism is having a very specific list of parameters that you're looking for. It gives you it, you know, conveys sort of seriousness that you know what you're doing. So that was probably made it that much more challenging to go to brokers and essentially say, you know, we're, we're opportunistic, we'll, we're kind of industry agnostic. Do you, do you feel that that is. Was your experience?

Guest 3: I think we, it's definitely some of that one. I think even, even without being thematic, et cetera, it's already kind of a challenge to build credibility with brokers. Right. Probably increasingly. So the more, the more searchers come into the space, the more noise they hear, the more voices they hear. And it's then kind of, you know, if you have, you know, 30 people asking every week to try and have an introductory call, you really have to start reading through who, which of these are going to be able to buy a business, go through the diligence, raise the capital and all of that, rather than, you know, you have a lot of interested parties that, that won't go anywhere. So it's already pretty, pretty challenging and uphill battle, I would say, to, to get in front of a broker and have a good and fruitful conversation. The thematic piece. Yes and no. So yes, in the sense that obviously if you can be very explicit in what you're looking for and you say, look, I want to find a plumbing business, they will know if they have a Plumbing business that they can hand to you. On the other hand though, because a lot of brokers are not thematic themselves. So they just, you know, they have some random businesses that they're dealing with, the sellers in their town that have nothing to do with one another in that sense. It's also helpful for them where they say look, these are the businesses that, that I do have and maybe I don't have the specific type that you're looking for because, but I have a bunch of businesses. So it's kind of a little bit of a give and take where to some extent and also it's harder and in other ways it can open up interesting opportunities.

[43:31] Guest 2: Yeah. So in the early days after kind of giving up on the software thesis, we then focus on Healthcare and B2B services. And even with that thematic theme, we target small corporate finance accounting firms. So not like the big bigger ones. And even when we came to them with that, that theme, that, that focus, they, they did not send us any deals until four or five months later. So being thematic can, can, can, can really hurt you especially if you kind of look into the small ticket size type of deals because a lot of these brokers, they, they don't have a lot of to, to deal. They don't have great deal flows. So you just only harm yourself if you are too specific and too focused, at least from our experience.

Host: What a great point. Yeah, no, if you, if you say I'm looking for X and they don't have X, then they just stop the conversation. They, they don't think about you. When some other interesting opportunity comes along that isn't X, then they won't reach out to you. Great point. The other thing I would say, speaking out of, of both sides of my mouth here is that you know, long before search became popular, people bought businesses and they didn't have a theme often. So it's not highly unusual from, you know, pre search days that some, you know, enterprising person in their local community

[45:03] Guest 3: would reach out to a business broker

Host: and say, hey, I'm looking to buy a business. Don't know what kind of business, but what do you have? Like that's not, I don't think that that's pro, you know, so foreign to their ears. That's probably how things worked more often than not until.

Guest 3: Yeah.

Host: So.

Guest 3: Okay guys.

Host: Ling, you mentioned ivf. Would you share with us your, your parallel journey there? And of course Leo, it affects you too.

Guest 2: Yeah. This is something we've never shared publicly before. Even some of our friends we haven't shared, but I felt it's important to share because it hasn't been shared enough and there's not a lot of knowledge and sharing out there, at least when I've been through that journey. I would say looking back now, we've been on this journey for a number of years. In the beginning we were quite naive, thinking that it's a one and done kind of thing. You, you, it's easy to do on the side. You hear stories of so many women who got pregnant while they were searching. Women who got pregnant right after they closed a deal and managed to make it work. So I thought that I could also do it, you know, on the side. Little did I know that many women were not successful with their first transfer. It takes on average three to five times. Some women went on to do it for a dozen, two dozen transfers. So the plan did not work out of me doing it on the side. So the original plan was that Leo was going to run IDS and I went back to search for another business to acquire. But I've been consumed by doctor's appointment, ultrasound scans, blood tests, basically every day for months. That it was. It really blocked up my calendar and my ability to, to work full time. On top of that there is the daily injections of high dosage of hormones that I had no idea had such a massive impact on my body. I haven't really felt like myself for, for a while now because of the meds that I've been taking. So physically just being unable to work and function properly. And then the emotional part, which is not something that's been talked about enough, the high anticipation that after a transfer it will be successful and then it didn't work out and then you have to repeat that with the same kind of anticipation, all while not knowing exactly the reasons why it failed. So if I can compare to the surge, the IVF process is much more brutal because you feel like you have no control of the process and you have no idea why it doesn't work out. For search. If it doesn't work out, you know that maybe because you bid too high or maybe because you didn't engage the right lender, the deal structure doesn't work out. But with ivf we had no idea. We don't understand. It's basically shooting in the dark. And we've been doing that for a number of years, so it's been kind of draining. And so at the end I kind of had to make a decision, but we had to make a decision for me to shift to focus more on ivf. And that means stepping back from, from the business and the search. You cannot do both. You have to prioritize one or the other. So I had to really learn to adjust my pace and my, my schedule to really make time for myself and focus on, on the ivf.

[48:58] Host: And that was happening then through, through the search into ownership.

Guest 2: Yeah, exactly. Well, we thought that, you know, it'll be quick, easy to get through, but here we are years later, still in that journey.

Guest 3: I think some of it is just kind of expectations of what it would take. There's an element, obviously, I think maybe underestimating the physiological impact and how you're tired and all these things, and then just kind of making the decision to commit time to it and sort of focus and energy and I mean, Ling still kept working on the side, so I think she's maybe underestimating how much work she was still doing. But it's still. You have to be very purposeful and make the choice to say, I am going to take time for myself to rest after a certain time of the day because I know I'm going to be exhausted because I need to do, you know, get to take hormone shots and whatnot. So it is kind of being very deliberate about taking the time to do that. And that's in some sense, again, that's part of the great thing about searches. At the end of the day, we're accountable to ourselves, right? We're owners of what we do. And so if we decide, okay, after 5pm I'm gonna go for a walk and take some time, we decide to do that and there's nobody to tell us, no, no, you have to stay in the office till three in the morning and keep working. It's very much in our hands. So that's kind of the benefit of, again, of being in the search, that you have that control. But obviously the onus is also on you to make the sacrifice because there's nobody paying your salary because they have a maternity leave policy or whatever it might be. It's very much I'm going to sacrifice this time, which I could spend doing more search, looking through more sims or doing this in the business in order to do this. So it's very deliberate, very purposeful. And it took us a while, I think, to realize that we had to make that deliberate decision, that we couldn't just try and juggle everything at the same time and have our cake and eat it too.

[51:21] Host: Well, the amount people entrepreneurs often work can be counterintuitive because you think, oh, you have no boss anymore. So you work less. And often entrepreneurs find out that they, they work more because they feel they need to, because they want to, because they're so much more engaged, because they're working for them, they're building something for themselves, what have you. But you know, it's this kind of abstract idea that we were talking about of autonomy and freedom. You then immediately had a real concrete example of how it would be affect your lives that you could take the time laying if you would just let yourself stop working, but that you could, you didn't have a boss telling you you had to be there. You, you got, had this immediate evidence that this path of search, of becoming an entrepreneur would in fact give you latitude and freedom with your schedule that you so needed.

Guest 2: Yeah, I would say I'm very grateful that we are where we are with Acacia, because I can't imagine how I would do it if I was still in a corporate job. Because you, you have to choose. You either have to take the time off to do IVF or you continue working. And in fact, I did not realize this until I've been in the process, but many women had to quit their job for their jobs for a number of years when they were trying to get pregnant because the stress plays a very important factor in the whole IVF journey. And when you are on 50 times hormone level, you don't function as a normal human being. You feel like quite the opposite. So it's very important that you have to take the time off in order to make it work. And IVF is expensive on its own, so you want to make sure that it works. And, and so you just have to separate out work and ivf. So a lot of women that have to spend a couple of years off to do it.

Host: Ling, you contrasted search in IVF that when it doesn't go the way you want it to in search, you feel like you still have some control or you can kind of, you know, scrutinize what happened and learn from it. Whereas IVF is a black box and it just feels random. There are eerie similarities though too, between your journey in IVF and your journey in search. In both cases, you're working, working or committed to this path and, and working at it, giving it time, giving it attention. You're very invested emotionally in the outcome. There's an incredible amount of anticipation, all leading up to a binary outcome. And then when that binary outcome doesn't go the way you want it to, it's incredibly disappointing, frustrating, worse emotionally. So otherwise known as a roller coaster. Right. This is what we call. This is what we call a roller coaster. And it's bad enough the, the that emotional roller coaster doing a search, as regular listeners will know, but to add an IVF roller coaster in parallel, you know, I can only imagine that must have been quite, quite difficult. So thank you for sharing.

[54:30] Guest 2: I would say, yeah, we were quite naive in thinking IVF is a quick and easy process. It turned out not the case and we still on that journey years later. So I, I feel for other women listeners who, who would have to go through the same process. Just kind of manage your expectation and make sure you have the right support system in place. It's so important. Not many people out there know or understand the whole IVF journey. So having the right support system in place and make sure your partner understand your search and kind of how emotional it is on top of whatever you are doing on the side personally is very, very important.

Host: Thank you again for sharing. Ling. So important. We haven't even talked about the business that you bought and we are bumping up against time. So what I want to do is hear about the business, hear how you structured the deal. It's always so important because as an American, I'm so US focused. SBA is always such a common feature for my non US listeners. It's very important that they hear stories about how to structure a deal outside the SBA context. So let's do that and then let's close by hearing what your plans are for this business. So first tell us about the business that you discovered and if there's any backstory about how you did find it.

Guest 3: Yeah, happy to share that. So again, this is one that it was, for us, opportunistically identified. It wasn't something that we were explicitly looking for, but it sort of came across our desk and we dug in and we looked through it and it seemed sort of increasingly interesting. What IDS or Infrastructure Design Solutions, is a specialist engineering design consultancy that works on big infrastructure projects across emea. So Europe, Middle East, Africa. When we found it was 25 employees and north of a million and a half US dollar EBITDA. And what we really liked about it were a couple of things that really stood out to us. One, the fact that it was kind of specialist in a really interesting market. And what was interesting it was it was a growing market which growing at double digits, which in the search space is rather uncommon, that you have sort of good growth dynamics in the underlying market, unless you're paying, again, a very substantial multiple for some software or Tech business or something like that. And we thought that the growth was also supported by good sort of macro tailwinds. And that specifically is then data infrastructure build out in Europe where one on the one hand you have obviously sort of whatever demand is driven by AI and whatever might come there or autonomous vehicles. But even without that when you look at a sort of capacity per capita level at Europe, it's still very behind the US and so there's a long way to go of having to build out infrastructure or over the next many years. And they were well primed within that market to, to, to do well because they had all the right clients and were already in the, in the right space. So that was sort of from a outside in perspective was really attractive. And then as we sort of got to know the business and the team, the rest also sort of fell in place. And what was very important for us in particular also with this kind of business was we felt we had a really good rapport with the sellers and we could really tell they cared about their legacy and the business that they had built. They really cared about their employees that we were going to be taking care of. And we really had a sense that there was a clear commitment after the sale and that relationship. And that view was really important for us to be able to get to conviction. And Ling will then talk a little about structuring and how we brought that in. But we spend a lot of time with them during due diligence. You know, we did a full day strategy session with them, management meeting. And so we spend a lot of time getting to know them and building a personal relationship to get a sense of, you know, how will this continue post sale. And then for us sort of from a platform perspective again what we cared for and were looking for was this element of sort of value creation and growth and transformation of what we could do with the business longer term. And we saw good things to do there that we felt we were in a good place to do. So sort of professionalizing the back office, putting in place a proper marketing and sales engine and sort of then growing and de risking the business through more diversification. So we felt like there was, there was a good, good thesis there that we could grab a hold of. And we had a good rapport with, with, with the sellers. It all kind of fell in place and again wasn't on our radar before. So it wasn't like we were out there looking for businesses that would somehow fit into some kind of AI or anything theme. It, it, it was really kind of the Happenstance of, of taking a look at teaser from, from a broker that we, we didn't, hadn't really engaged much with before.

[1:00:03] Host: Leo, you said how the double digit growth rates. That's it's rare to see a search business in a market with that sort of tailwind or you're going to pay for it, you're going to pay something more for it than a searcher could probably pencil. So presumably this business was not, didn't have such overweight valuation. What do you think was the story there?

Guest 3: Again, I think it's more about the types of businesses that you typically end up looking at. So if you're where you would see growth is typically a software business, let's say. Right. And then if you're talking to somebody who's selling a software business, they will have already spoken to 20 people that think they should be getting 10 times for that business because it's a software business, you know, because you have all the nice structures with recurring revenue, et cetera. So it's just the ingoing expectation is different. Obviously this business, you do have underlying market growth but the business model is not a software business model. So it's supportive that you have growth, but it doesn't come with all the other things that you might see in a software business. And then sort of you, you see other kinks and bruises and, and again it's, it's not growth. Market growth isn't the, the, the only thing that will feed into, into evaluation. Sure. So that way we got to a place where we felt comfortable that it was kind of, you know, financeable without sort of being outlandish.

Host: Great, thank you. And to be clear about what the business actually does, engineering consulting for data centers or when you say data infrastructure, can you be more specific?

Guest 3: Yeah. So there it's kind of a niche portion of sort of a discipline within or one of the disciplines of a big infrastructure project. So we look at sort of telecoms, ICT design alongside our partners who would do something like the mechanical, electrical, architectural, etc. So we're part of a big team that would work on big infrastructure projects. And that's anything, it's not just data infrastructure. So we will work on big office headquarters production environments. So that could be something like a bank trading floor or a film studio. And also of course, data centers. And so data centers obviously is a big part of the business and it's a growing part of the business, but it's not the only part of the business. So it's one piece of the puzzle.

Host: And so in the way that a building has ductwork that brings air in and out and circulates air through the building, or pipes that bring water in and out, there are also cables that bring data in and out. And your firm would be ones that would. Would design the system.

[1:03:07] Guest 3: That system. Exactly, exactly.

Host: Okay, and so how so of course, one feature of search is that we buy businesses and industries that we don't necessarily have experience. And we know that in the kind of classic blue collar case, it can be challenging to walk in as a, you know, a Wharton MBA to a room full of plumbers and say, hey, I'm the new owner. The same dynamic could occur in both blue collar and white collar. So this sounds extremely technical. How did you think about buying a consulting, an engineering consulting business in your own lack of experience with the actual service?

Guest 2: Yeah, that was probably the biggest hurdle we have to jump with this deal is the fact that we don't come from the same industry, don't have the same knowledge as a team, but when we kind of dial onto the business, at its core, it is a consulting business, which Leo is familiar with because he spent five years in consulting. He knows the business model quite well. And the clients that they serve are, you know, corporate clients that we either have worked with or worked for in our professional capacity. So to us, that is not kind of a million miles away. And then when it comes to the technical parts, if you buy an H vac business, you don't go out and repair the ac. You rely on the engineers to deal with that. So this is exactly the same. We rely on our engineering consultants to deal with the technical issues on our behalf. What we've done is that we spend a lot of time trying to understand the business, the industry, the competitive landscape, as much as we can. And the main idea for us is that in the first six months, we build enough knowledge to be able to provide project quotes. And that's what we were able to achieve. And also we lean on the sellers who have been very amazing in kind of helping us get up to speed. They explain all the industry acronyms with us so that we can speak the same language with them in client meetings as well as in internal meetings. And they still stay on to help us run the business, which is one of the main thesis of this deal. And then what we can bring on, as Leo mentioned previously, is kind of the value creation, you know, building out, professionalizing the back office. And that's something that we are really good at.

Host: When did you all close?

Guest 2: We closed 10 months ago. Nine months ago.

[1:06:01] Guest 3: Okay. In March.

Guest 2: Yeah.

Host: The experience that you all had as banking. First Ling, then in, in a fintech startup, but one that was doing a lot of acquisitions. Leo, you consulting, then pe, Both Wharton grads. So, you know, I'm always careful for the listener that they not feel like they have to have gone to one of the world's most prestigious business schools to do this. To what extent did all of that experience that you all have, has it been applicable into this business? Maybe you'll tell me. It's very applicable and if you didn't have all that experience, you wouldn't have bought the business.

Guest 3: But please, no, I mean the way we've, the businesses we've looked at, it's not that we've only looked at businesses that we were familiar with in some way, shape or form. We did consider, to be fair, whether we would, whether we thought we would be engaged if we were running the business day to day, or was it sort of so far outside of our realm that we would have felt bit out of place. But fundamentally for us it's really again, delivery technical things. If, if that's not running without you. There is, there is an issue in the business that you don't want to be buying yet. So the business does have to work on a basic service delivery level if you're acquiring it. Otherwise you have a, an issue in the business on all the other things. It's very much, there's an element around structuring and thinking about, okay, how do we put together, like how do we market the business, where do we market the business and getting that set up. Right, like starting to market on social media or something like that. Right. Sales and trying to professionalize that, making sure you're always hitting, you know, your list of contacts and driving a pipeline and all of that. So there's structural elements that we can introduce. There is obviously sort of the financial knowledge and being more structured about budgeting and planning and forecasting and, and tracking how you're sort of how and where you're making money, which are things that small businesses I think often don't do to that level. Because again, your business founders come from a delivery point of view. They grow up the business driving delivery, high quality service, etc. They don't come to the business from a management accounting, et cetera perspective. So that that focal lens is new and anybody can introduce that if they kind of spend the time to want to do it. And I think very, very importantly, and this is a bit maybe abstract, but I think fundamentally A lot of these businesses, what you can bring is energy and direction where some of what's needed is a focus of these are the things that we want to accomplish this year and we need to push to get towards there. And you're going to help mobilize the business. You're going to go outside, get the help that you need and you push the business forward. And it's not necessarily that it's because you have all the knowledge and all the answers, but it's because you have the drive to push the business along and especially in search. I think oftentimes you're in a place where you're talking to sellers who aren't as engaged anymore in the business as maybe they used to be 10 years ago. And so the fact that you come with this new energy and this new drive is extremely valuable to the business because you, you push for things to get done and you put new sort of stones in place and all of that. So I think that's, that's a fundamental value creation lever that has nothing to do with what, what you know or have done in the past. It's just kind of your, your mindset that you bring.

[1:09:44] Host: Excellent point.

Guest 3: Very well put.

Host: Lyn, you were going to tell us about how you structured the deal to acquire this business. Let's, let's hear what you can share, please.

Guest 2: Yeah, so as I mentioned, kind of we structure it with roughly 50% debt, kind of the maximum we can, we can get from private lender in the UK and then the rest with equity. And that's a combination of some of our own capital as well as some outside investors and then seller financing, which is a combination of both earn out as well as equity rollover. The main thesis for this deal is that, you know, that trust and that relationship with sellers. So we wanted to make sure that there's alignment of interest and that they still very vested in the long term success of the company. So to us the equity rollover is not, you know, it's not just a way to finance the deal, but it's kind of a requirement for the deal to happen. And then the earn out also kind of, you know, with a long term earn out so that they, they still very much vested longer term in the business.

Host: So they had equity rollover earn out and seller financing.

Guest 2: So seller financing is a combination of those two earnouts and equity rollover.

Host: Okay, but they didn't lend you any of the purchase price that you're paying back.

Guest 2: No.

Guest 3: Yep.

Host: Can you share what your final, the two of your final Share represents of the business what your ownership looks like.

Guest 2: We owned a majority of the business so I guess roughly between 60 to 70% of the business and the rest kind of between the sellers as well as some outside investors.

Host: And your raise, were they UK based? What is there anything to share about the investor?

Guest 2: So we, we were quite deliberate about our fundraise approach. We had some investors willing to back the entire ticket size but we decided to spread that across eight or nine investors. Even though the process is probably the same. Getting a smaller ticket size is the same as a bigger ticket size. But we decided to mitigate the risk, the concentration risk. If the investor decided to walk out at the last minute, the deal wouldn't die. So we engage with a number of investors. Some are US based probably some are on your acquiring mind as a guest. Some are in across kind of Europe, Middle east and Asia. It's a good combination of people who have experience doing something similar so B2B services, but also people who have done kind of the search fund and understand self funded search fund to be exact to understand what we are going through. And some people have some industry and can introduce us to clients in geographies that we're planning to expand to.

[1:13:05] Guest 3: I think the investor search that was one of also our big learnings along the journey is that's a huge time commitment and will take much, much longer than you expected to. You think, oh, I have a business, I have it structured, I'm going to get funding right away. It takes time and you have to speak to a lot of people. And again, like Ling said, every person that you speak to takes the same amount of time no matter if they want to fund the whole thing or they want to fund, you know, $10,000. So that's something we became very mindful of as, as we kind of went through the journey.

Host: Was the Number of investors 8 or 9? Was there something special about that number? Because to, to, to diversify away from investor concentration. You could have done three or four.

Guest 2: Yeah. So I guess a number of them's friends and family who wanted to, to join. We could really get away with three or four. But we ended up getting more people just because we want some cheerleaders in,

Guest 3: in the round we had, we had a couple that were very small tickets and then we had the rest that were larger. I think the calculation was you want to feel like worst case somebody pulls out the rest can increase their ticket. And it's not that, you know, if you go from three to two, the other two have to substantially increase their ticket size, which they may not be comfortable with. But if you're going from, let's say, let's say you have like three, four cheerleaders and you go from, from six to five, that's, that's easier to spread around. So again, and that can happen and also happen to us, somebody pulled out, you know, a week before because they just changed their mind and then you're, you're a week from signing and you have to run to your existing investors because you're not going to find a new investor within a week to quickly onboard, you know, pitch to etc. And say look, we're just going to cover the additional increment and it's fine.

[1:15:07] Host: So the deal structure, 50% bank debt, conventional bank debt, earn out rolled equity by the sellers and your eight or nine investors and you all ended up with, I think you said 60 to 70% ownership. And is it your impression we're not going to get into the super specifics on each of those points, but is it your impression that that would, the way you structured it is a good template for others in at least the UK market to follow?

Guest 2: I would say it's not easy template to follow. A lot of investors, UK or European based investors that we spoke to prefer the traditional search fund model even for self funded deals, meaning they don't like searchers to have majority stake in the business. It took us a lot of work to get to the deal structure and the ownership that we wanted. We had a lot of rejections, a lot of no from European based investors. It's not an easy model to replicate but, but it took a lot of persistence I guess and knocking on doors to get to what we actually want, which is, you know, majority stake in

Guest 3: our business, I would add to that. And we don't have a template also for ourselves. It's again, it's very deal by deal. It's just kind of what do we think when we look at the business? What's a reasonable base case for what we're doing with the business? And then we do look at typical returns, what we want to get to the investors. And so then it's, it's crafting a thesis, it's communicating with investors, it's, it's presenting yourself as credible at doing this and finding a way through that. If, if you just want to raise money very quickly, you can, you can, that's kind of the, you go with the standard traditional search structure and then you'll, you'll be able to raise capital very quickly. But if you want to do something differently, you need to really have a thesis, know what you want to do with the business, why it's going to work, why you're credible, who else is in the boat with you, et cetera, to get there. So that took us some time. And also again, why we're very deliberate about how we're thinking about our search and what businesses we end up wanting to buy.

Guest 2: Sorry, I forgot to mention that we aim to, to get our investors on the base case, 30 to 35% IRR, similar to kind of that search fund benchmark. And in the downside case, kind of 15% IRR two times mom. And so that's kind of our pitch to investors. And some investors are keen to go on board. But what we found with UK and European investors is that regardless of the economics, whether it's 35% IRR or even 50% IRR, they still pretty much hung up on the idea of investors owning majority stake in the business versus searchers owning majority stake in the business.

[1:18:20] Host: Why do you think that is? Just because it's what they're used to or is it a governance and control thing?

Guest 2: It's pretty much, I would say it's more conservative market. They tend to focus more on capital preservation than kind of the upside.

Guest 3: I will say we've found that fundamentally, speaking to individuals who worked in venture capital is easier than speaking to those that worked in private equity. So in terms of like if you're doing outreach to wealthy individuals, you can go to people who themselves are entrepreneurs or who themselves did a search there, you would find, I think those who did a search themselves tend to veer to the model that they did. So somebody who did a traditional search just wants to invest in traditional searchers and vice versa. Or maybe somebody who did self funded might be open to both. But on sort of others in the finance industry, private equity is very, very hung up on sort of 20, 20, 30% ownership because it's how they think about the world. And yeah, heavy control in governance, lots of reporting requirements, et cetera, et cetera. Venture capital is more, well, you know, it's a portfolio approach. I'm going to do, you know, 20 of these search bets and some of them will work out great and maybe some are duds, but it's a slightly different mindset in the type of person. So being mindful of who are you speaking to. It's also very important when you're going out to talk to investors.

Host: It's a great point that people seem to have a bias toward the way they made money, they were successful and they want to reinvest into the same asset class that treated them so well. I had never thought about that, but I, as I quickly go through investors that I know that does seem like a correlation. And by the way, one investor in your deal, Ling Tron, who was on who you were just referring to Ling, who's been on this podcast just a few weeks ago, very successful, self funded searcher like you guys. So. So he, he saw a former version of himself in you, maybe Great guys. Well, we are over, so. But there are two questions I still want to ask. The first is surviving a Black Swan, as you put it. What did you mean by that?

Guest 3: Yeah, again, I think this goes also back to what I said about everything is nice on paper, everything is going to be great and then you hit the ground and things are much tougher. So what we experienced post acquisition were sort of two black swans very shortly after the acquisition. The first is a bit more straightforward, I guess, or a bit more typical where our biggest customer put all their projects on pause, sort of without notice of when it might resume and where it would continue. And that caused obviously a lot of stress and scrambling of okay, now you know you can't just fill up a pipeline from today to tomorrow. But for us, it was then also impetus in pushing along a lot of the things that we had anyway planned on doing with the business around, pushing sales and marketing and trying to professionalize this sort of pipeline management. So we took it in stride in that sense and said, look, thankfully we planned for a good cash cushion when we took over the business. So we weren't trying to sort of be overly efficient in the deal, structuring that we didn't have any cash left. And so we had some Runway to go from a cash perspective. And then it was really, let's just use this time now that the team isn't busy, also that we push on these things and try to build up a sales pipeline, get into new customers and all of that. So we kind of took that positively. The other Black Swan event was a bit more unusual in that shortly after the acquisition, the UK Home office informed us that they were going to be inquiring whether us acquiring this business was a national security threat. So a bit surprising for us and extremely anxiety inducing.

[1:22:38] Host: Because you're not British either.

Guest 3: Because we're not British. Exactly. Because we're not British. And even if we have been British, just because it was an acquisition of a business that is involved in sort of critical infrastructure, there Was a. Also in the context of the war, of course where underseas cables had been damaged and whatnot, there was a concern if somebody gets into or information on or involved with critical infrastructure, in particular data infrastructure, that could be a risk. And so then we, we were contacted and for us of course if the deal gets unwound, which was the ultimate potential risk of what of the negative outcome, then again we would have lost a lot of money and wasted a lot of time.

Guest 2: And this is kind of after we had paid.

Guest 3: This is post close.

Guest 2: Yeah, post close they said that during the investigation process the deal was considered to be to not go through. And so that was a period of 2, 3 months of uncertainties where we actually had closed the deal. But the government told us that we actually the deal did not go through

Guest 3: technically until they had blessed it. It would not have been considered sort of transacted. And so it was then, you know, dealing, dealing again with lawyers, but a different breed of lawyers and engaging with the government which is a whole separate experience in and of itself. But again that's. That went back to this point of it will all be much more challenging and much more involved and time consuming than what you expect going in. And so being very, very ready mentally for that is very important. And it was very taxing for us emotionally and just time consuming to deal with both these things and a great learning experience and thankfully we've survived it both of these things. But yeah, it was great learning.

[1:24:44] Host: Well, both of those black swans are stories unto themselves which we don't have time for now. But to be clear on the loss of the, of the big customer that wasn't completely devastating because you weren't over levered is. Do I understand that correctly?

Guest 3: So two things. It wasn't a loss, it was just the, the projects that we were working on were, were all put on. On hold and it was kind of in. We can't tell you when things are coming off hold, when they're continuing. So the customer didn't go away. It was just that we had a pause in the, in the revenue coming from that customer. And part of we, we. We planned for wanting to have a cash cushion in the business, a cash reserve in the business when we came in because we just knew, we didn't know everything and we wanted to be ready just in case something went south near term. And so we planned on having a healthy cash balance in the business post, post close and planning for that was the right thing in the end and

Host: effectively that was when you were structuring the deal that was kind of a working capital infusion essentially and effectively raised the purchase price by that amount.

Guest 3: Yeah, yeah, yeah.

Host: Can you share how much that was,

Guest 3: how much networking capital we left?

Host: Yeah. Or, or as you talked, as you describe it, kind of your cash cushion, which is kind of a different psychological thing than working capital, but yes, this sum.

Guest 3: Yeah, I mean we, we did a, an additional cash injection which was, call it maybe 20% of the equity, the first equity that we put in. So we, Is that right? A little bit less. So 10 to 20% of the equity was just the cash injection of the fresh equity. So that was kind of how we

Guest 2: set it up and we were willing to give up kind of our equity stake a bit to have that cash cushion in the beginning so that we can sleep at night the first few months and you know, have easier conversations with lenders. We could have taken more equity and you know, we could have raised less money and retain more equity, but we decided to be on the safer end and luckily we did because this happened.

[1:27:11] Guest 3: Yeah. Yep.

Host: No, it's a, it's a great lesson in not being too greedy on, on percentage ownership. So as much as we kind of celebrate ownership and self funded search and, and being the true owners of the business as opposed to some of the other models, the difference between you as searcher owning 90% versus 80% is not that much. It's a little bit more than a 10% difference. But from the investor's perspective, it's doubling their equity in the business and may, it may enable things like cash infusions that are, that set the business up for a rainy, a rainy day. So in my mind it's kind of like, you know, there should be a threshold number of some significant majority, but between 80 and 90% or 70 and 80, better that you have a successful outcome in your business than you squeeze to get to 80%, let's say.

Guest 2: Yeah, exactly.

Guest 3: Especially from a long term hold perspective. You know, you want to sit with the business for, for many years, that that difference is, is not gonna, shouldn't make or break your decision.

Host: And by the way, on that point, how did you explain that to investors, the long term hold aspect? You, you offered them a 30, 35% IRR in a hypothetical exit situation at five years or what did that look like?

Guest 3: Yeah, I mean there's, there's obviously ways to buy out equity even if we don't exit. Right. So we said worst case scenario, if we want to stay and hold the business, we'll do refinancing and because, you know, the equity portion, because we were holding, call it 60 plus percent, buying out the remaining 30, 40% is feasible with the refinancing. And if, you know, maybe it'll take an extra year or two or whatever, it might, but we could at the very least buy out the majority of, or a big, the vast majority of the equity they hold.

Host: Close us out. Ling and Leo on the point of doing this as a couple.

Guest 2: Great question, Will. I would say when I first started my search, another female searcher approached me and she was like, why don't you do this with your husband? And I said, no way, I would do it with him. And then a couple months later he joined the search. Now looking back, I would say there's nobody else I trust more to be on this venture with other than Leo and I'm really glad that he, we get to experience this amazing experience together. Regardless of the outcome. They're obviously good and bad. When it comes to doing a partner search with your spouse. I would say the good is that you have very deep understanding of what each other is going through. You understand and you can share that experience together. All the ups and downs. So that's a good part. The bad part, I would say is that you share all the same stress, all the same concerns, and you constantly talk about it. There was no clear line between professional and personal life and it was very difficult for us to switch off. So sometimes at midnight we would talk about, oh, hey, this lender, you know, item. Have you, you know, done it or have you planned this item? Which is kind of unhealthy in a way. And we're trying to create some boundaries. But yeah, this is also new to us. We kind of encourage the startup model to adapt and evolve as we go along. But so far it's been a great journey.

[1:31:15] Guest 3: Yeah, I would second all of that. Again, I think great thing, you go through the same things, you understand each other. If you're trying to explain to somebody who's not involved why they're so upset about a right of first refusal in a business that you're trying to acquire, they will look at you like you're crazy. But we fully understand all of what each other is going through. Which on the flip side then means we're, we're stressed about the same things at the same time, which we're both on edge at the same time, which, which can be tricky and it's very non stressful. Stop. Which is hard to put boundaries around. You know, you say let's go for a walk at 8pm but let's not talk about work. But of course we end up talking about work. So that's, that's, that's tricky. But yeah, it's been, it's been, it's been great. And also seeing a whole new side of Ling for me was, was really, was really great. Like, you know, you, you always assume your partner is great at what they do and, and you know, you always think the best, but when you really see somebody thriving, live in the moment and seeing them do really well, you feel very proud and it's really cool to see.

Host: Yeah, that's beautiful. Ling, your family in Vietnam, what businesses were they in?

Guest 2: So one is kind of automobile repair and the other is textile. Very different.

Host: What do they, what do they say about your chosen path?

Guest 2: They always knew that I, if I put my mind into something, I would do it well. So they, they're proud that I finally made the plunge from, from the corporate world, the quote unquote prestigious jobs to, to do this. And at the end of the day they were happy to see that I finally made the decision and that I, I feel like every day I'm making some impact because when I was growing up, you know, my mom's staff kind of, kind of the extended family members, we always hang out together and so that dynamic to me feels very familiar. And so now we just had our first company wide get together last week and having that feeling that, you know, they're all kind of just our extended family members and everyone just so nice and friendly and just enjoy each other was a great experience.

[1:33:45] Host: Great note to end on. Thank you for sharing, you guys. Thank you for sharing your story of search, the very personal aspects of it as well. There was a lot to this one, so I kept you way over. Appreciate the extra time. Ling and Leo Von Diebel, thank you very much and congratulations.

Guest 2: Thank you very much.

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