Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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On the flight back last night, I was fiddling with my notes from the Capital Camp conference - a gathering of (mostly) emerging investors in Columbia, Missouri. Capital Camp was founded in 2019 by Brent Beshore of Permanent Equity and Patrick O’Shaughnessy (Invest Like The Best / Colossus). Brent is a role model for me in how he has leveraged his media platform  to build deal flow for his fund, and later to launch a wildly successful event business. This year, Capital Camp coincided with the larger Main Street Summit - the self-styled “small business tour de force”. 

I'm not done with conferences for the year. On 25 November in London, we will be gathering 200 acquisition entrepreneurs and investors for our biggest and most impactful Serial Acquirers Summit yet. We anticipate selling out of tickets in the next week or so. Grab yours here and spread the word!

I was restless. So many conversations. So many insights. What should I include in the writeup? Should I keep the macro stuff out - and stay strictly serial acquirer focused? 

In the end, I decided on a compromise. I will share with you 4 high-level observations from the conference and 3 snippets from M&A focused sessions.   

Within the former category, the 4 things that struck me were:

1) Diversity of attendees. In a session on turnarounds, I sat next to a date farmer from Saudi Arabia. My morning run companion was a co-founder of a North Carolina based logistics rollup. On the bus back from the final dinner I struck up a conversation with a Ukrainian chap with a high-end RV manufacturing business in Missouri. Such diversity of backgrounds may seem random and borderline counterproductive to effective networking, but in fact it was the SMB owners I enjoyed talking to the most. 

2) The “autarkic vibe” - the extent to which the conferences (and, by extrapolation, the US Main Street) felt US centric. Similarly to Michael Girdley’s HoldCo Conf that I attended back in the spring (full writeup here), the “rest of the world” featured only en passant, in a trade / tariff context. Which isn't to say that US investors are turning away from Europe etc., but the bar is high considering the knockout performance of the domestic economy.      

3) A lot of discussion on what makes businesses endure for centuries. Some insights: monopolies do not persist, fiscal resilience is crucial, choose stable industries.     

4) and lastly, the contrast between the material affluence and the mounting emotional discomfort. No fewer than 3 flagship speeches referenced “arrival fallacy” - the false belief that achieving a specific goal, often career related, will lead to lasting happiness. The notion that happiness is the sum of multiple factors and not only money is of course a truism mercilessly exploited by influencers…but for me, there’s a second meaning. I left my corporate career to build RollUpEurope and Baltic Family Capital for some of the same reasons why many of you read this blog. I love my job because it gives me a sense of purpose. I get to define what the job is and I get to work with my family every day.          

What to make of these observations? I'm not entirely sure. I love travelling to the US for the energy and the inspirations these trips give me. Conferences like Capital Camp help me understand where this energy comes from.  

With the big picture out of the way, let’s get to the rollup content:

1. Sator Grove on why the conventional fund model inhibits the Power Law

2. Kinza Azmat’s “easy” SMB acquisition that blew up - and how she turned it around

3. Jon Staenberg, Michael Curry, and Keith Burns on winning deals, what makes a great SMB operator - and what you need to have to win their backing as a searcher

Before we tuck in, a shoutout to our sponsor Reef Pass Investors: THE serial acquisition investors. If you are seeking HoldCo or rollup funding in North America or Europe, you should talk to Reef Pass Investors. If you are interested, apply directly on RPI’s website or simply hit reply with a description of your idea + pitch deck.  

1. Sator Grove on why the conventional fund model inhibits the Power Law

5 years ago, Rick Buhrman, Paul Buser and Greg Dugard came out of the University of Notre Dame endowment to establish Sator Grove - a long term investor. Since then, Sator Grove has invested in 14 platforms, of which the largest by far (just under 30% of total) is Chapters Group: a DACH focused software serial acquirer that went from obscure micro-cap to a $1B market cap M&A powerhouse within a few years. 

If you are not familiar with Chapters, we highly recommend our recent writeup: Chapters Group: how to build a billion-dollar search fund investor

The session I attended focused on longer-dated investment vehicles. Despite the growing popularity, such vehicles remain on the fringe of the institutional investing community. Shame - because, according to Sator Grove, conventional funds have two major shortcomings: 

1. Fund managers being compelled to take money off the table too early

2. Fund managers being compelled to sell winners because of concentration rules

To bring the first point to life, think of Sequoia distributing Google stock to their LPs back in 1999. Another, even more striking example, is the Trinity Ventures’ investment in Starbucks. Paul shared his conversation with the Trinity team involved with the investment:

“Trinity was very early in Starbucks. They essentially disposed of the security around or shortly after the IPO. Ironically, for the next 20 years as a public company Starbucks compounded at higher rates vs. when it was private. The biggest regret is not even the foregone profits. It is the opportunity to have been in the room for an extra 20 years. The learnings that come from that experience, and the relationships that would have continued to compound, leading to new great ideas. Trinity lost all of that because it felt compelled to sell at a point in time”.  

In other words, building great businesses takes time. 

Shortcoming #2: concentration. Why is this a problem? Empirically, the Power Law holds not just for venture but for public market investments too. According to research by Hendrik Bessembinder, a professor at Arizona State University, more than half (58%) of the US firms that were listed between 1926 and 2019 reduced shareholder wealth, while <1% of the firms account for half of the lifetime stock market shareholder wealth creation in the public US stock markets. 

What applies to stock picking applies to stock pickers themselves. Apparently at Notre Dame endowment, just two managers - Sequoia and Hill House Investment - drove 80% of all returns. 

Add the two together, and you can see how LPs are being forced to make suboptimal decisions by trading in and out of their best positions. Not because they want to, but because of the pressure around short-term performance, fund life and concentration rules.    

Sator Grove’s willingness to break with convention extends to their own economics. Instead of charging a flat management fee, it sets an annual budget - currently 65 bps of AuM “and we expect it to go down over time”. As for the upside component, the team is eligible for incremental equity every 5 years: “we have a hurdle, and if we beat it, we can go up. If we don't, we get nothing”. 

Good luck, guys! We are rooting for you, as we are for all LTH aligned investors! 

2. Kinza Azmat’s “easy” SMB acquisition that blew up - and how she turned it around

Who doesn't love a search fund deal that made money and headlines - like Asurion in the US or Repli in Spain (which we covered here). But what about the ones that tanked? 

Kinza Azmat fills in the blanks. 

Kinza has a distinguished resume that includes engineering and operations at an airline; consulting for Private Equity portfolio companies; and a business broker gig.  

A perfect background for buying an “easy” business in a hot market, isn’t it? In 2019, Kinza acquired WTA Realty (now Perch), an apartment locating service in Texas. $9M revenue and $1.2M EBITDA. 200 estate agents working out of 10 locations.  

During diligence, Kinza had put together a comprehensive post-acquisition plan that included all the obvious things like rebranding; team right-sizing; strategic partnerships and so on. Unfortunately instead of calmly implementing these things, as soon as the deal closed, Kinza found herself quite literally locked in a battle for survival:

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