DO NOT Launch an M&A Private Equity Fund (Until you fix THIS…) – Natu Myers of


So if you’re looking to create a private equity fund for your mergers and acquisitions deals, you really shouldn’t get it done and you really shouldn’t even touch doing that until you make sure. Until you make sure you get your first one done. Because what we a phenomenon that we’ve seen lately at races dot com, a company where we assist people in setting up their, you know their syndications and the private equity deals is you know mainly when people they want to get into mergers and acquisitions and then they’re very excited, almost grandiose, which is good and the investor ambition is excellent. But we just need to for this video, we just need to kind of set some reality and get people humble down and see reality. So the business plan that many people jump into, that we start to sense when some of the our financial analysts help some of our members set up their private equity deals is mainly when people jump into it. They don’t understand that they they see the origination side. So basically they call a seller of a company or to get some people to call sellers of a company and say, Hey, yeah, I want to buy you. And they get some people saying yes, and then they get excited or maybe they go to a broker and they say, Hey, I want to raise capital for this acquisition. I’m excited. So you have a lot of people doing that. (m&a private equity fund)



And what people start to see as they go through the process is people they get overwhelmed because when people start to go to the actual closing of the deal part, they start to see that their job becomes like six different jobs simultaneously within a four week to two week time frame. So essentially people are like, Yeah, okay, I want to buy you. Okay? And then after the next step, after sending a non-disclosure agreement, it’s really to send a letter of intent saying, I’m going to buy you in this period of time, assuming that my due diligence period checks out and I’ll find the financing, I’ll do the due diligence to make sure that I’m not being scammed. I’m going to also find the debts to be able to acquire it. And if I can find a debt and I need a down payment and the person says no, the seller finance, seller finance is basically when the company uses the profits to pay down the loan that the owner would use to acquire it. If they can’t find that, I will somehow find a way to raise equity with an equity partner. And due to all the paperwork to raise equity in a way that I won’t get sued while also owning it, closing the deal and making sure that I actually have the wherewithal to grow the company and not run it into the ground during the transitionary period. (m&a private equity fund)

And after that, I will then get multiple companies in the same niche and create a large either rollup or private equity fund for all these companies. That’s really what people are trying to do for somebody, and especially for people that haven’t raised a single sense in their careers or they haven’t even maybe they were working a 9 to 5 job, or maybe there are students and then they haven’t really touched this before. So we just need to set some reality straight. That’s a really great endeavor. But, you know, you have to make sure that you tranche out and you plan everything out, because generally in the real estate sector, what we see is that a real estate syndication and a mergers and acquisitions deal for on a one off basis are very similar. So somebody looking to acquire real estate via syndication or somebody looking to acquire real estate at all. And if you just look at somebody who’s working to acquire a business, the process is not that dissimilar. It’s a very similar process because real estate is really just another type of business entity and basically is just an asset that you’re looking to acquire. Same of a business. The only difference is some of the nuance. So basically, instead of trying to sell up the private equity fund, if you’re a mergers and if you’re in mergers and acquisitions, instead of saying that up, you just want to treat it like you’re doing a real estate syndication and remove all the real estate nuances, but put in your business buying nuances. (m&a private equity fund)

So the way that that can look like is obviously when people get into mergers and acquisitions without a track record, they have to build a board there. A lot of courses, a lot of programs on this, Dan and I and all these people. Basically you want to get the authority to get sellers to believe that you would be able to buy the assets. And the way that I can manifest is getting the board, getting the team members on the contingent basis where you’re not paying money out of pocket, but you’re doing everything on a contingent basis after the deal closes and you know, you make sure you get the reputation around you and you look authoritative so that people don’t ask you for proof of funds or letters of commitments as much if you can’t provide them. But if not, you can work with a company like raises, e-commerce and other investors that you know that can give you a letter of commitment so that the seller of the company can actually believe that you will buy them because many sellers don’t believe that you’ll be able to buy them. If you’re some random Joe blow off the street if you can, how can you buy a $10 million company if you work in 9 to 5, that’s, you know, some sort of Mickey Mouse type of institution. (m&a private equity fund)

So, yeah, the point is you want to get people to believe you. Then after that, you have to get the financing and you have to do the due diligence. So, you know, the way that we tell the syndicators and the way that you shouldn’t rush into it. And the second reason why I shouldn’t rush into it is not only because it’s like ten jobs in one, but it’s also because. It’s a track record because if you have to do all that work to build track record for one deal, imagine all the work you have to do to do ten deals. So that’s what we tell a lot of the syndicators, because even at another company, once I was helping a solar group, you know, like raise capital for their fund and they kept on hitting the objection that they just want to do one deal at a time because they don’t trust the fund managers to be able to deploy their capital better than the investors that they’re asking. Similarly, if you have a collection of companies and then you’re talking about acquiring them, why are you talking about acquiring ten companies at the same time when when you haven’t even acquired one yet? So the idea is really just to do one mergers and acquisitions deal and have the idea of your fund and you roll up in the back of your business plan. (m&a private equity fund)

But honestly, don’t really think about it until you just get the first one done because 99% of people can’t even get the first one done. And until then, you should just write down the long business plan that has like something in the back burner in your head. But you really shouldn’t talk about it until you get the first mergers and acquisitions done. So that’s pretty much the point of this video is just really to tell you that focus on getting the first deal done until you start talking about funds and roll ups and acquisitions and private equity funds. Just get your first mergers and acquisitions deal done. We had one of the members who we worked with at raises dot com. He managed to get the same objection, but in the real estate sector that, hey, I don’t want to touch you until you get either you get your first deals done because really you want to build a fund, but you haven’t done a deal in your life besides a deal that you’ve used your own money to raise capital in. And that’s another reason why we segments everything out into people that haven’t done their first deal and people that have done multiple deals and are looking to create a fund. People really shouldn’t be creating funds in a vast majority of situations until they can actually get financing for the fund. (m&a private equity fund)

And it’s really easy to get financing for the fund if you have a believable track record. And one of the best ways that believable track record can manifest is if you get the first deal done, raise equity or close a large debt transaction. At a small scale with one person, and after that, then it’ll be much easier for you to build the story that you can do this over and over again for your private equity fund. So that’s pretty much it. And the way that this can look like is, you know, simply making sure that people acquire the first deal and then after people acquire their first deal, you know, then they can they can get like their own company and then they can either do a name change or they can acquire 100% through 100% share purchase. And then after that, then they can create a limited partnership that branches out for, you know, that can also have units and all of the companies that they repeat this process for. Another way, another way that people think of funds is sometimes when you’re raising capital to buy a business, there’s no seller finance and there’s no debt portion. Right? That’s that’s big enough for that down payment. And then you have this 25% to 10% down payment that you have to make to acquire the company. (m&a private equity fund)

What a lot of people do, if they are unable to get seller finance or enough debts is they raise equity from an investor. And to do that you have to be careful because you can run a lot of risks. And the way that we like to talk about doing it, especially in the United States of America, has to do it 100% compliantly. But having a limited partnership for that equity gap and then people buy units in that limited partnership, so fill in that equity gap. So that’s the way when people think of fund, they can either talk about, you know, getting the equity gap filled in and make like making sure that it’s done for your limited partnership or, you know, they can they can go and, you know, do multiple acquisitions and then have a fund invest in multiple deals. So basically, either you’re getting the fund fund for one deal or for two deals. But really the best case scenario is to focus on just getting debts to acquire the company using seller finance. That’s the best case scenario. If you can’t get seller finance, just use debts and use junior debts. If you can’t like senior debt and junior debt, junior debt is more high interest than risky debt, which is more second position, meaning that it comes it comes like as a second lien for those who don’t know, which is like kind of the. (m&a private equity fund)

So if the company goes down the toilet, really they’re the second half the second priority to get the the remainder of the company. The first person that gets the first priority is a senior debt. And you know, because after the first lien to be able to acquire the assets if the company goes toast. So yeah, make sure you can do that way. And then if you can’t do it with junior debts or with senior debts or junior debt or with seller care, you can’t do any of that. Then just get senior debt and then fix in filling the equity gap by partnering with investors. If you partner with investors with an incorporation or just the purchase units in the incorporation without getting a specialized lawyer or without being careful, you can get really you can get really dangerous. So that’s why we just recommend people to use a limited partnership because it limits the liability that investors have in, although it may cause some pause for potential business buyers because they may not be may not be as intimate. But from an equity point of view, it’s the most recognized type of things to invest in. If you’re investing in limited partnership units, which is the most recognized way that get people the type of recognition that they want. So that’s pretty much it. So basically the points at the end of the day is, number one, make sure that if you want if you’re doing your first mergers and acquisitions deal, don’t start getting too excited about doing all of them at the same time, or creating a private equity fund for multiple mergers and acquisitions deals. (m&a private equity fund)

Just focus on doing one first. And it’s really hard to build a track record for many people for doing one. So why would you then waste your energy billing your track record for doing multiple when you haven’t even done one yet? So that’s really the point. Make sure you do one at a time. And number two, really, you want to get seller finance, you want to make sure that the seller is the one who’s buying who’s who’s using the profits after your own business to buy it. As long as you get an analyst to prove that it’s not going to destroy the business in the long run, you actually have a plan to add value to that business. And it’s something that the seller would even agree to because you have the amount of leverage that you need so that you can get this, you can get them to believe that you can do it. And you got a number. I guess the last thing is that if you’re unable to get seller finance, you know, try to get some some high interest debts if you can afford it, especially at the time of the recording. This video may be hard, but another way is to raise equity for that down payment. (m&a private equity fund)

The way that we usually recommend people to raise equity for that down payment is to make sure that they make sure that they use limited partnership units to sell to potential investors because of the limited liability that the investors have if things go wrong. However, it may be a bit nuanced because sometimes sellers like it. When investors are more intimate, it is the best way that we recognize in raising private equity is using a limited partnership, membership interests and selling those and making sure that you notify your local securities regulator if they require to be notified so that investors recognize this model the most. And with this, that’s pretty much it when it comes. To people that are just getting into M&A really is just a parallel process to what the real estate people do. Except you’re more focused on building track record and you’re more you’re working in a different niche. It’s not as you know, it’s not as popular. So with this, if you have if you could implement this yourself, get it done. If you need help with implementation, just have to races come and we will help you make this happen. And if if this video makes a little bit of sense, just hit that like and subscribe button below. And with this Heads of Raises icon book a call and we’ll take it to the next step. (m&a private equity fund)
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