How to Build a Business that will Attract a Private Equity Buyer

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My Guest

Rich Manders Co-Founded and led iAutomation, a Massachusetts-based machine control and automation company, and grew the business from $0 to $90M in sales with 180 employees. After selling that business to The Riverside Company (a leading global Private Equity firm), Rich stayed on with the business, and alongside his partners at Riverside, grew the company by a factor of 6x, resulting in a 50%+ IRR to his original investors after its next sale to Saw Mill Capital.

Alongside Riverside, Rich has played a key role in seven completed acquisitions and has evaluated dozens of others from the perspective of both a buyer and a seller. Rich has Board experience across several different private companies, and alongside his original business partner from iAutomation, now runs Freescale Coaching, where he coaches and mentors Entrepreneurs and CEOs in their pursuit of growth and freedom.

Rich’s entrepreneurial success story is the subject of a Harvard Business School case study, where he has since taught several courses and seminars, among other leading business schools. He relies on his decades of experience as an Entrepreneur, CEO and Investor to inform his structured, systematic, repeatable, and process-oriented approach to growing world-class private companies.

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Questions Asked

Company Operations

  • What did you learn through your experience as an investor that you wish you had better understood when you were an Operator?
  • What are some of the basic tenets of the “playbook” that your Private Equity partner helped you implement within your own business?
  • What do most CEOs not understand about managing a high-growth company?
  • What are some best practices that CEOs should implement to ensure that organizational communication doesn’t get worse as the company scales?
  • How should CEOs think about whether to use options/equity as an attraction/retention tool? In your experience, did these tools have their desired effects?
  • How much financial information should CEOs share with their employees?
  • What lessons have you learned about dealing with a Board of Directors effectively?

Managing and Allocating Capital

  • How did you think about how much cash to keep on your Balance sheet at any given time?
  • How much time did you explicitly spend on issues of capital allocation as a CEO? Would you do anything differently if given an opportunity to do this again?

Buying and Selling Businesses

  • You’ve been part of many successful inorganic growth strategies as both a buyer and seller. What separates successful inorganic growth strategies from unsuccessful ones?
  • Are mistakes typically made in the purchase process, or in the post-merger integration process?
  • After acquiring a SMB, what have you learned about how to best deal with the selling owner/CEO?
  • What do most CEOs not understand about selling their business?
  • What is life like on the other side of a successful exit? Was it what you thought it would be?

Managing Yourself

  • What have you learned about “managing yourself”, so that you were able to stay motivated, engaged, and mentally healthy on your entrepreneurial journey?
  • What have you learned about how to best manage and allocate your time as a CEO? How do you ensure that you’re optimizing your time and working on the right things?

Conclusion

  • If you were to have a “Mount Rushmore” of books that every SMB CEOs absolutely had to read, what books would be featured?
  • If you could scream one thing from the proverbial mountaintops, and every SMB CEO would hear and fully digest what you said, what would you say and why?

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Links to All Resources Discussed

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