In this episode of The Transaction Abstract Podcast, Joe Hellman sits down with Dan Hennessey, the newly appointed CEO of Sam Schwartz Pedestrian Traffic Management Services, Inc.

Dan is a former M&A professional who successfully completed his own Entrepreneurship Through Acquisition (ETA) search. Drawing from years of deal experience on both the banking and private equity side, and now as an operator, Dan shares practical insights on everything from sourcing a business and building credibility to navigating financing and preparing yourself to step into ownership.

For Dan, the path didn't begin in the boardroom; it started years earlier with advice from his father and grandfather about the freedom and fulfillment that come from owning a business. After a decade in finance, investment banking, and private equity, Dan reached a crossroads: continue pursuing the traditional PE track, or take a more entrepreneurial route to build a career and a life on his own terms.

He found himself asking, "Do you continue to go down the finance path, where you try to rise the ranks of a pretty difficult world of private equity and investment banking? Or, do you go down the other route, where you have something more fulfilling? Maybe with a little less upside, but a higher likelihood of a positive outcome, controlling your own destiny with your personal life?"

Listen to the full episode of The Transaction Abstract Podcast to hear more of Dan Hennessey's firsthand experience, lessons learned, and advice for future ETA entrepreneurs.

In the latest episode of the Transaction Abstract podcast, host Joe Hellman, Transaction Advisory Services Practice Lead at Redpath and Company, sits down with Kim Lowe, a founding partner at Avisen Legal, to unravel the complexities of buying and selling businesses.

Drawing from nearly 30 years of experience, Kim shares frontline insights from both the legal buy-side and sell-side of transactions, exploring the challenges that arise when business owners or their advisors are unprepared for the intricate process of a business sale.

Joe and Kim discuss common issues that can slow down or derail deals, from complications in workforce transfer and due diligence disclosures to navigating family dynamics and minority shareholder disputes. The episode provides best practices for sellers to prepare early, highlights how expert legal and advisory guidance can streamline transactions, and underscores the importance of honest communication throughout the process.

Whether you're a serial acquirer, first-time seller, or trusted advisor, this conversation is packed with real-world examples and essential advice to help you anticipate and overcome the hurdles of business succession and ownership transfer.

In this episode of The Transaction Abstract Podcast, Joe Hellman speaks with Jake Parsley, a partner at SMB Law Group specializing in search fund transactions. They discuss the specific legal hurdles self-funded searchers face when acquiring Main Street businesses.

The Self-Funded Search Landscape

Self-funded search funds often involve first-time entrepreneurs acquiring businesses valued at less than $5 million. They use a combination of Small Business Association (SBA) financing, seller notes, or investor capital.

Unlike traditional search funds with institutional backing, self-funded searchers work with Main Street advisors and manage much tighter acquisition budgets.

As Parsley explains, "When you're doing a deal for $2, $3, $4 million, the acquisition budget probably just isn't there like we would like, like we'd like to see in a perfect world."

Searchers must choose carefully where to spend limited resources while still protecting themselves from major risks.

Critical Risk Mitigation Strategies

Three important elements protect buyers in these smaller transactions:

Financial diligence comes first. Start with the numbers. Financial diligence is non-negotiable for any deal size.This groundwork helps identify problems before they become expensive surprises after closing.

Seller notes give necessary protection. With SBA loans restricting earnouts and recent changes limiting rollover equity, seller notes have become the main tool for bridging valuation gaps.

"The biggest seller note that you can get, I'm an advocate for, because that's your first line of defense if something goes wrong," Parsley emphasizes. These notes, subordinated to SBA debt, align seller and buyer interests.

Right-sized legal documentation matters. Your purchase agreement should provide essential protection without being too complex. Parsley stresses "capturing the things that are fundamental to the business operations, working out a good, clear working capital clause where both sides know what's coming and we can have clarity on that before we close the deal."

Advice for Searchers

Timing your legal engagement can save a lot of money. Parsley recommends a specific sequence: "Get your LOI (Letter of Intent) done, get your financial diligence done, get your financing lined up, then engage legal." He explains that many Main Street deals fall apart, and "we hate to see you spending money on lawyers, even if we're the lawyers."

Flexibility is your best friend.

"Not everything is going to go the way that the Harvard Business Guy Just Buying a Small Business says it's going to," Parsley advises. "Keep an open mind and be ready to pivot a little bit. That flexible open mind will not only serve you well through the buying process, it's gonna help you once you're operating too."

Key Takeaways

• Financial diligence and seller notes are the two most important risk mitigation tools

• Find attorneys familiar with SBA transactions who understand both protection and practicality

• Engage legal counsel after securing the LOI, completing diligence, and obtaining financing

• Flexibility throughout the acquisition process improves success rates

Listen to more episodes of The Transaction Abstract Podcast on buying and selling businesses.

In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with Emma Gergen from Carlson Private Capital Partners to explore quality of earnings (QoE) studies and why they have become essential in M&A transactions.

Many business owners wonder if they even need a sell-side QoE if the buyer will already conduct one.

The answer, according to Gergen, is simple. She argues that you want to be armed with the same set of facts as the buyer, so that you're comfortable with the agreed-upon valuation.

Understanding Quality of Earnings vs. Traditional Audits

A quality of earnings study is different from a standard audit. While an audit validates reported financial results, a QoE examines the normalized financial performance of your business. This process identifies and adjusts for:

• One-time expenses or income that will not recur

• Personal expenses run through the business

• Timing differences in revenue recognition

• Extraordinary items that distort your true earning capacity

Gergen notes that understanding these factors at a granular level—and presenting them to the buyer—helps the buyer better evaluate and value your business.

Three Benefits of Sell-Side Quality of Earnings

1. Information Symmetry: Without a sell-side QoE, you are "flying quite blind" during valuation discussions. Buyers will have detailed insights into your financial performance that you lack.

2. Deal Certainty: Deals can die when buyers discover discrepancies during their due diligence. A credible sell-side QoE study speeds up the buyer's confirmatory diligence process, reducing the risk of valuation disputes or deal failures.

3. Faster Timeline: Gergen notes that sellers who obtain QoE reports have the buy-side process be faster, take less effort, and shorten deal timing. When buyers review a professional sell-side QoE, their own analysis becomes confirmatory rather than exploratory.

What Buyers Actually Look For

Quality buyers do not use QoE studies as "gotcha" tools to reduce valuations, despite seller fears. "Never have I come into a QoE with a mindset that we are going to find something that we want to adjust the valuation for," Gergen emphasizes.

Instead, sophisticated buyers—whether private equity or strategic acquirers—use QoE studies for confirmatory M&A due diligence, to validate the financial profile, and to gain deeper operational insights that help them plan for post-acquisition growth.

The Bottom Line

Quality of earnings studies have become standard practice in middle-market transactions. They help sellers prove their asking price and show buyers the business is financially sound.

As Gergen concludes: "Finding your partners early, who can help you think through financial presentation to be able to produce statements that an investor can look at and understand, is a really valuable exercise."

Explore more insights on the Transaction Abstract podcast, where we cover all angles of buying and selling businesses.

In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with Marshall Johnson from Northspring Partners to explore the search fund model and how it provides opportunities for aspiring entrepreneurs and business owners looking to exit their companies.

What is a Search Fund?

"A search fund is when an aspiring operator wants to go find and lead a great company, and they raise money," Johnson explains. Individual searchers typically raise $500,000, while teams raise around $900,000 to fund an 18-month search for the right acquisition target.

The model has strong academic backing, with Stanford University publishing comprehensive search fund studies every two years, analyzing 40 years of transaction data.

The Typical Searcher Profile

Key characteristics of successful searchers:

• 5-10 years of operating experience in finance, accounting, marketing, sales, or consulting

• Often pursuing career transitions through MBA programs

• Looking for alternatives to traditional corporate paths

"Compared to when I did it 20-plus years ago, there are a lot of resources now online and through schooling," Johnson notes, highlighting how the ecosystem has matured.

Why Business Owners Should Consider Search Funds

Unique advantages for sellers:

• Maximum flexibility in deal structure and transition terms

• Buyers who genuinely want to continue the company's legacy

• Ideal for owners without succession plans

"The biggest thing is flexibility," Johnson emphasizes. "We sit down with the owner and say, You built an amazing business. What's the ideal scenario?"

This contrasts with private equity, which Johnson describes as "pretty cookie-cutter in equity terms" and typically requires owners to "roll equity and run that company for three to five years."

What Makes a Strong Searcher

Johnson notes that investors evaluate candidates on:

• Grit - Ability to handle challenging business endeavors

• "Superpowers" - Distinct strengths in sales, marketing, finance, or people management

• Model knowledge - Understanding the long-term commitment required

• Coachability - Willingness to accept advice from investors

• Drive to win - Treating this as a defining career opportunity

Advice for New Search Fund CEOs

Johnson's guidance is straightforward: "First-time CEOs ask me all the time, 'I don't know what to do at first.' I say, don't do anything. You're buying a good business. Let it run."

His recommended approach:

• Learn from the founder how the company operates

• Visit with all employees and customers

• Identify where you can help before making changes

Preparing for Any Transaction

For business owners considering exits, Johnson stresses preparation: "I can't tell you how important it is to have your financial house in order if you're considering a transaction—an audit, all the key financial KPIs, sales pipelines. It'll save you time and money."

Listen to more episodes of The Transaction Abstract Podcast for additional insights on buying and selling businesses.

In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with Ross Hamann, Executive Vice President at CAC Specialty, to explore the crucial role insurance plays in mergers and acquisition transactions.

What is Transaction Insurance?

Transaction insurance encompasses several products designed to facilitate deals by addressing risks that might otherwise prevent a successful closing. Hamann explains that CAC Specialty offers a comprehensive suite of solutions that extends beyond standard coverage.

As Hamann puts it, "We never want... a risk out there, be it known or unknown, cause a deal to not go through, because people... put a lot of time and effort into these deals, and so it's our responsibility to find insurance products to help get a deal done where it makes sense."

Key Insurance Solutions for Transactions

Hamann outlined three primary categories of transaction insurance that buyers and sellers should understand:

• Representation and Warranty Insurance - Covers unknown risks that might emerge post-transaction

• Contingent Risk Insurance - Addresses known litigation risks that could impact deal value

• Tax Insurance - Covers known tax risks where parties cannot get comfortable with the exposure

These specialized products can be valuable when traditional methods like escrows are insufficient. Instead of setting aside capital, insurance may provide a more cost-effective structure while offering protection against unforeseen liabilities.

Current Market Trends

The transaction insurance market has evolved significantly in recent years, with several notable developments:

• Expanded Deal Size Range - Previously limited to deals above $20 million enterprise value, now available for transactions as small as $1 million EV (Enterprise Value)

• More Competitive Pricing - Rates have decreased significantly, making coverage more affordable

• Claims Activity - About 20% of policies experience claims, with high severity rather than high frequency

• Market Competition - Multiple carriers now offering solutions creates competitive pricing

Hamann notes that for quality deals, "we can get up to 20 options at any given time," which continues to drive competitive rates in the current market.

Timing Considerations

While transaction insurance shouldn't slow down deal processes, proper implementation requires adequate planning. According to Hamann:

• Simple representation and warranty coverage can be arranged in about a week

• More complex solutions require additional time for proper diligence

• Early insurance involvement could help identify potential issues that may derail transactions

Hamann emphasizes that "the more time that we have, the more diligence we can have to really identify and uncover potential... go forward insurance issues that could cause the... transactional part to get delayed."

The Value of Specialized Expertise

CAC Specialty differentiates itself by building a team with diverse professional backgrounds, including former M&A attorneys who understand transactions from multiple perspectives. This approach enables them to structure creative solutions for challenging situations.

What sets them apart, in Hamann's words, is "having the professionals that have sat in your shoes... they see deals differently than most of the people that we compete against are trained in the insurance market, and it just creates a massively different outcome."

Hamann concludes by explaining their philosophy of problem-solving: "At the end of the day, that's why we get hired. We want them to think of us, 'what are all the things we can do to get the deal done, versus what are the things that are going to kill the deal.'"

Listen to more episodes of The Transaction Abstract Podcast for additional insights on buying and selling businesses.

In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with Tom Walker, an attorney from Winthrop and Weinstein with over 35 years of ESOP experience, to explore Employee Stock Ownership Plans (ESOPs) as a business exit strategy.

What is an ESOP?

An ESOP is a qualified retirement plan similar to a 401(k), but with two key differences.

First, the primary investment is company stock, and second, it is funded primarily through company contributions rather than employee contributions. As employees work at the company, they accumulate stock in their accounts, allowing them to benefit from the company's success over time.

Walker explains that while an ESOP might not be suitable for every business, it provides a unique transition option for owners approaching retirement who value their company legacy and employee relationships.

Ideal Candidates for an ESOP

Walker suggests the following characteristics for businesses considering this succession planning path:

• Owners approaching retirement (within 5-6 years) who do not want an immediate exit

• Companies with 25+ employees (though exceptions exist)

• Business value exceeding $5 million to offset transaction costs

• Owners who prioritize legacy and employee welfare over maximizing sale price

• Companies with steady growth and positive cash flow

• A strong company culture where employees have contributed significantly to success

While owners typically receive about 90% of what they might get from a third-party sale, the ESOP offers other advantages, including a significantly higher transaction completion rate compared to traditional sales processes.

Valuation and Governance Considerations

One common misconception about ESOPs involves valuation. Walker emphasized that "The ESOP cannot pay more than fair market value," which is determined by a qualified independent appraiser engaged by the ESOP trust. This addresses Department of Labor concerns about potential overvaluation.

For owners transitioning to an ESOP structure, a commitment period is typically required:

• Owners who are actively managing the business usually need to commit to 3-5 years post-sale

• Owners with established management teams might only need to stay 1-2 years to ensure a smooth transition

Despite concerns about governance challenges, Walker noted that when ESOP companies later decide to sell, participant approval votes typically achieve 70-90% support when management makes a compelling case for the transaction.

Tax Benefits and Current Trends

A significant advantage of ESOP structures emerges when the ESOP owns 100% of an S corporation. In this scenario, the company pays no federal income taxes, freeing approximately 35% of earnings that would have gone to the government. This "found money" can help repay acquisition debt and increase company value for ESOP participants.

Walker observes growing interest in ESOPs, particularly as interest rates decrease and baby boomer business owners continue moving toward retirement. While higher interest rates temporarily dampened enthusiasm due to financing challenges, the market appears to be rebounding.

"I think it is a really good tool," Walker concludes. "People have heard all sorts of myths about ESOPs, but if you have a good advisor who can take you through this, that good advisor can help identify and screen out 90% of the not-so-good situations."

Listen to more episodes of The Transaction Abstract Podcast for additional insights on buying and selling businesses.

In this latest episode of The Transaction Abstract, Joe Hellman sits down with Alex Stuart from PGIM Private Capital to discuss current market conditions and transaction trends.

Introduction to PGIM Private Capital

PGIM Private Capital, part of Prudential Financial's investment management business, operates across various asset classes including public debt, real estate, and private equity. Their Minneapolis office covers five states—Minnesota, Iowa, Nebraska, and the Dakotas, providing senior debt financing, structured financing, and minority equity investments for businesses across the credit spectrum.

Current Market Conditions and Deal Flow

The current market is experiencing a convergence in transaction multiples, marking a positive shift from the valuation disconnects seen 24 months ago. While seller expectations have moderately adjusted, Stuart notes that deal flow remains selective.

As Stuart observes, "If the only way you can make the deal work is by getting a rate cut, so you get the cost of financing, I can guarantee you this is not the right deal for you." Private businesses are currently more active in completing transactions compared to public companies, largely due to their ability to make decisive moves without extensive stakeholder consultation.

Deal Characteristics and Financing Trends

Successful transactions in the current market share several key characteristics:

• Direct sourcing through long-term relationships

• Strong cultural alignment between buyers and sellers

• Integration and cost synergy potential

• Emphasis on higher-quality assets

• Increased utilization of junior capital as an alternative to traditional senior debt financing

Quality remains paramount in today's market. "This is not a great market for storied credits. It is going to be higher quality assets, and in those situations, there is plenty of money available on the sidelines," Stuart notes.

Looking Forward

While optimism exists for increased deal activity in 2025, market participants await greater clarity on interest rates, tariffs, and U.S. policy. The financing market remains broad with ample capital available, though accessing it requires the right partnerships and connections.

When discussing market outlook, Stuart states: "There is a trove of sellers on the sidelines waiting to do something, but the true unleashing requires resolution on both the economic and political fronts."

To hear more about this informative discussion of market trends and transaction insights, listen to the full episode of The Transaction Abstract Podcast.

In this latest episode of the Transaction Abstract Podcast, Joe Hellman explores the crucial differences between private equity and strategic buyers in mergers and acquisitions, providing valuable insights for business owners considering a sale.

Joe is joined by Ben Axelrod, Managing Director at Borgman Capital, bringing over 20 years of M&A experience. Drawing from his extensive background, Axelrod offers a unique perspective on how different buyer types approach acquisitions and what organizations should consider when evaluating their options.

Understanding Strategic vs. Financial Buyers

The M&A landscape features two primary types of buyers, each with distinct approaches:

• Strategic buyers typically operate within the same industry as their acquisition targets, focusing on operational synergies and long-term integration. Their goal is to create value through combined operations, with no predetermined exit timeline.

• Private equity firms represent financial buyers backed by investors seeking returns on their capital. These firms focus on operational improvements, revenue growth, and margin optimization, typically planning for an exit within five to ten years.

• Axelrod also introduces "quasi-strategic" buyers: private equity-backed operating companies that bridge these approaches by combining industry expertise with financial backing.

Breaking Private Equity Misconceptions

Common private equity misconceptions often stem from highly publicized negative cases, but the reality is different. Axelrod explains how private equity ownership frequently preserves existing operations and supports management teams, particularly in the lower middle market where Borgman Capital operates.

Unlike strategic buyers, who might consolidate facilities due to operational overlap, private equity firms investing in standalone businesses often maintain existing infrastructure and workforces. This approach promotes sustainable growth rather than immediate cost reduction.

The Private Equity Advantage

Private equity firms can move quickly and adapt to different situations. While strategic buyers, especially larger corporations, might be constrained by board meeting schedules and rigid approval processes, private equity firms can often respond quicker to opportunities.

Axelrod highlights how Borgman Capital balances this speed with thorough due diligence, ensuring both efficient execution and proper evaluation. The firm can deploy resources quickly while maintaining its commitment to careful analysis.

Looking to the Future

The approaching "Great Wealth Transfer" can be beneficial for M&A transactions. As baby boomer business owners prepare for transition, private equity firms are offering more sophisticated approaches that address both financial and operational considerations.

Whether choosing a strategic or financial buyer, owners should find a forward-looking partner whose approach aligns with the organization's objectives. To hear more insights from this informative discussion about the evolving landscape of private equity and strategic acquisitions, listen to the full episode of the Transaction Abstract Podcast.

In this latest episode of the Transaction Abstract Podcast, Joe Hellman dives into the intersection of wealth management and mergers and acquisitions.

Joe is joined by Craig Kleis and Bob Dietz from Bernstein Private Wealth Management to explore how succession planning and wealth strategies can impact post-transaction outcomes. From pre-transaction preparation to navigating life post-sale, Kleis and Dietz offer valuable insights for business owners looking to safeguard their personal and financial future.

Why Succession Planning and Wealth Management Matter

Succession planning goes beyond readying a business for sale—it's about securing the owner's financial future. Kleis highlights the importance of personal financial planning, while Dietz emphasizes how tax and estate planning can maximize after-tax wealth, making succession planning an essential part of M&A.

The Importance of Pre-Transaction Planning

Preparation is key—even when a transaction isn't imminent. Dietz stresses steps like determining lifestyle-based "core capital," optimizing tax structures, and aligning the business for sale to achieve better outcomes. Early planning offers clarity and confidence when it matters most.

Managing the Transaction Process

During a transaction, all parties must stay focused on the big picture. Kleis and Dietz share practical examples of how understanding deal structures and tax implications can make a significant difference in the M&A process.

Life After the Sale

Transitioning from business ownership to personal wealth management can be daunting. Kleis and Dietz provide strategies for risk management and aligning investments with long-term goals to help owners adjust to their new financial reality.

Both guests agree: early engagement in wealth management provides flexibility and better outcomes, ensuring both the business and owner are prepared for the future.

To hear more insights from this engaging discussion, listen to the full episode of the Transaction Abstract Podcast.