Greg Geronomus, welcome to Acquiring Minds. >> Great to be here. Thanks so much for having me, Will. >> Greg, today you are a traditional search investor via your firm Footbridge Partners, but your journey into ETA began with your own search, a very successful one. And today we're going to hear that story. Let's start off with some background on you, Greg, going back before your search and how your path led you to buying a business. >> Sure. So, uh, I guess it starts way back, uh, growing up in in New York City. Uh I was the lucky enough to be a fly on the wall in my dad's cosmetic dermatology practice where he was quite entrepreneurial and I got to uh see him uh up close and uh help where I could u in in some cases just as a as a filer in some cases helping with insurance claims for the uh some of the work that he did um that was non-cossmetic and but just generally being a sounding board and and getting to observe him which was very meaningful. Um, I was also lucky enough to meet my my wife in in high school. Um, so that uh high school sweetheart look >> high school sweethearts. Uh um I went to Harvard undergrad u wonderful experience and I followed uh admittedly followed the herd to Goldman Sachs and worked in one of their private equity arms. uh wonderful experience in many respects, learned a tremendous amount but I also had this sense that you know even at the age of 23 24 that I wanted to do something entrepreneurial and uh I thought that business school would be a good time to figure out the next great startup idea. uh fortunate enough to go to HBS back to Boston and I had planned to use that time to come up with a great idea played around with a few concepts unsuccessfully and then uh for me magically learned of this search concept uh it wasn't a given even back in 2011 2012 that uh on HBS's campus you would learn even what a search fund was and I felt lucky to uh hear a little bit about it. Uh started exploring the concept with a good friend of mine, David Rosner, who became my business partner, is still my business partner. And uh it was for both of us, it was really uh love at first sight for the uh for the search fund path. It was a in many ways a more attractive riskreward for us than uh a pure startup idea. And it was a it drew upon uh both of our experience in private equity before before business school and we decided to to chart that course uh as as traditional searchers looking for a business to buy. >> Two follow-ups to that Greg. The first so 2011 2012 had Rick and Royce started their class yet and did you take it? >> Uh good good question. Uh they had not started their entrepreneurship through acquisition course. They had their financial management of small firms class in the first semester of second year and uh I actually didn't take that class because I I wasn't aware of it yet. Uh my business partner David did. uh in in the fall of of our second year, we started talking much more seriously about raising a a search and we approached Rick and Royce about doing an independent project second semester on the entire search fund ecosystem and helping us chart our course. Uh it turns out that what started as an idea for an independent project actually uh blossomed into a class uh that that came together very quickly with I think 35 or 40 students in uh our second year of of business school. Um in the second semester of second year I should say and uh and that was the first that was the first goaround of their uh now you know very well-known and successful entrepreneurship through acquisition course. Wait, wait a second, Greg. Maybe I misunderstood. So, you have the idea for an independent project. Go to Rick and Royce and then that catalyzes a course. >> A few a few a few other people started, you know, they they got wind of it and then word spread and and then a a course uh came to be that uh pretty much on the fly and they did a great job at putting it together, sort of building the plane as they were flying it and uh it was best course I took at at HBS for sure. Wow, Greg. Well, and that makes me feel like you're part of uh ETA history that you were uh you were kind of behind the scenes and influence on that first uh that first course because obviously um that course has been very and and then the book that came from it has been very very influential to a lot of people. >> Well, Rick Rick and Royce deserve uh all all the credit. They they've done a great job um for for over a decade now. >> Yeah, absolutely. Um, and then just to be clear what you were saying about your upbringing. So, fair to say that it was kind of a small business family, yours. It's a a medical family that became a small business family. So it started just as a as as my dad as the the sole physician practicing on it on on his own and it turned into a a 15 physician practice at its at its peak. Uh and he eventually did sell to sell to private equity and I was able to help him him with that. Uh that was much more recently but yeah certainly a medical family turned small business family. >> Yeah. Great. Thank you, Greg. Okay, so take us into the search itself. What uh what do you remember from it? What can we learn from the the search process that you and David embarked upon? So, there were there were a couple key tenants of our search uh you know, we we did raise traditional search capital. Uh but it was before the time where there were a lot of traditional search investors. So, uh, it was really a search capital cobbled together from old bosses, mentors, people hanging around the HBS, uh, campus. And so, it wasn't nearly as formal and institutionalized as it as it is today. Um, we did a geographically focused search. Uh, so we were based in New York and we were only looking at businesses in New York, New Jersey, Connecticut, and parts of Pennsylvania. And that was largely driven by our uh both of our significant others, Dave's wife, Lindsay, who had a job that she absolutely adored on on Wall Street. And um and my wife, who had just signed on to do a 4-year psychiatry residency at Mount Si Hospital. Uh so we were geographically bound. uh I'd say as a result of that fairly industry agnostic and uh very much uh high volume by design. So we were uh we were not picking and choosing who we reached out to. We were pumping uh as much as we possibly could into the top of the funnel. Uh so much so that I um unknowingly emailed my my cousin on I think on three occasions about buying his business that was based in Queens. Uh, and I think the first two times it was funny and the third time he was actually kind of annoyed. So, um, >> he's like, "Dude, you realize you're spamming us all." >> Yeah. Yeah. Exactly. Um, but you know, in addition to high volume email, which I just alluded to, we also, uh, did quite a bit outside of our office away from our computer. We really leaned into local networking. Uh I remember attending event after event hosted by accountants, lawyers, um lower middle market banks. Uh and it turns out that the event that uh or the the tactic that led to our finding the business that we ultimately acquired and operated and sold smart a company called Smart Tours was through a a networking event, a happy hour in Midtown Manhattan hosted by BDO and uh Exactly. >> That's their tagline, right? >> Exactly. Exactly. I didn't know but but still there. Yeah. Exactly. Um, so this is one of those stories which is such a pattern where you do all of this mass outreach. You you go through the the motions of uh just you know casting the wet the net far and wide and then um it's a single kind of conversation inerson conversation by chance that leads to the deal. Um, not not to say that there's anything flawed about doing the casting the net thing, but it does seem like people I've I've had so many guests who kind of smirk at the irony of doing so much work in their search and yet um, you know, the business was around the corner, a friend of a friend sort sort of thing. Uh, sounds like sounds like the case here as well. >> Absolutely. And I I preach that to searchers that we work with to this day that, you know, you you there's a certain sense of productivity from being at your at your desk making calls or sending emails, you can, you know, add to the tally of what you're putting into the top of the funnel. And I'm I'm still to this day a big believer in in high volume. And we we've seen that work extremely well, high volume, email, cold calling, etc. um but you're doing yourself a significant disservice from just sticking behind your computer screen. And uh it's it's really valuable to to get out there and and meet people. And you know, in in our case, I had a really wonderful conversation with a commercial banker. He was with Capital One at the time. And he said, "You've you've got to be meet my high school buddy." Uh I think it was his high school buddy from 50 years prior. Um but a high but a high school buddy nonetheless. And um I uh had the opportunity to meet the his high school buddy, this uh relatively sort of small uh ran a small accounting shop. Um and he explained to me that one of his clients uh who runs a company called Smart Tours had told him that he was interested in selling. And uh we had a we had a nice chat. And then before I before I could even uh really, you know, research the company or do any any um any real diligence, he he took out a piece of paper and he started sketching out what he thought would be an attractive deal structure um between us and and his client. Um, and that that deal structure actually formed the basis of the transaction that we that we ultimately closed. >> Wait, he's doing napkin deal structure at this. Sorry, what was the event? At the BDO at the event? No. No. Later. >> No. No. So, so met the commercial banker from Capital One at the BDO event. He said, "You've got to be my buddy, my high school buddy, the accountant." >> So, a few days later, I had coffee with this accountant. And the accountant uh it wasn't quite a napkin, it was a piece of paper um which he had in his briefcase uh because he was still a briefcase guy. And uh and he starts sketching out you know around five times IDA with a 60% seller node uh priced at you know 4% interest and um you know I had to restrain myself. I I uh not not let on that. I I found that to be quite attractive. And uh >> well, and let me pause you on that, Greg, because we we want to spend some time on that point of the story. Um but just before we do, the size of business that you were targeting uh was similar to what a traditional searcher would target today. What what size of ibida were you and Dave looking for? Yeah, we were looking for businesses in the two to five million view range. So, uh, fairly similar to what a partner traditional search would be looking for today. We Yeah, we certainly had a bias towards the upper end of that range. And, um, so not Yeah. Not too different from what you see today. >> Yeah. Okay, great. And then I have just noticed how few New York-based searchers I've had on. I can only think of one. I'm probably for Oh, no. too. Um, but I'm probably forgetting somebody. But given the population of the area, you certainly don't hear about stories of people buying businesses in New York City proper, any of the burrows. I haven't. Um, but even in the even in the tri-state area, you don't see much. I don't know why that is. Maybe everything's overpriced there, but you'd still think that given the population density and the quantity of businesses there and the the the people coming out of finance wanting to buy their own business, you just see a lot more businesses coming uh a lot more search stories coming out of the tri-state area. Is that also been your experience, your observation or no? you know, we we've we've seen we've seen a number. No, it's certainly um it's really not as many as you would think based on the the fact pattern that you you laid out. I can think of a few other search businesses that were Manhattanbased uh in particular or uh certainly tri-state area based. Um you know, they're they're definitely there a couple factors at play. one it can yeah it's not the easiest state in which to uh or New York at least is not the easiest state to run a business in um it's also you know many search businesses are services businesses very people intensive and um you know the wage requirements and expectations are quite high >> um and there's a general sophistication I think of the of the business owners and sellers and uh you know they're more inclined on the margin to hire an adviser or you know >> push for top dollar >> maybe before we hear about this deal this proposed deal structure and not only the structure itself but the kind of interesting psychology of that and what now has led you to kind of how you coach searchers tell us the bullet points of the business in question smart tours >> so it was not a business not an industry that we were particularly interested in um it's A that's a classic sort of old school tour operator. And by that I mean a company that sends travelers from the United States in their case to mostly exotic destinations around the world on old-fashion group trips. Uh, so if you've ever been in a foreign destination and you've seen, you know, a bunch of people, typically older folks hop off a bus with a uh following the lead of a of a group leader that's got a sign and a um and a flag. Uh, you know, that very well could have been a smart tours trip. Uh, so in travel and travel is an exciting category. There are many different sort of sexy and interesting travel tech businesses. Uh, Smart Tours uh, and the broader tour operator industry certainly is not that. It's a sort of old-fashioned um, you know, arranging group trips and, uh, you know, uh, driving for healthy utilization on those buses. And, um, you know, despite it not being on our radar, it had a lot of really interesting characteristics that got us excited. It's a uh it sits in a large fragmented and growing industry. The cash flow characteristics are exceptional. You collect money upfront from your customers and you pay that out much much later at or or even after the time of departure. Uh there were lots of opportunities for improvement. Um, some of which actually proved out, some of which were were just, you know, fictional for us. Um, and you know, we we also um we had seen a long history of private equity firms paying pretty healthy multiples for these types of businesses. So we had a lot of conviction that if we could if we could grow the business and professionalize it that we would be setting ourselves up for the opportunity at least to exit for a pretty healthy multiple on the back end. >> Mhm. And give us a sense of the size of the business or any financial bullet points you could. >> Sure. So the business when we acquired it was around 30 million of revenue uh around five million a little bit north of IBIDA uh with a a very large asterisk because uh it was a team of seven people includ including the seller. So pretty remarkable revenue per employee stats that rival tech companies frankly pretty remarkable IBIDA per employee stats. Um but also you know given the size of the team uh that was you know lean for some good reasons but just you know way too lean unsustainably lean. the um you know the the real IBIDA was was certainly quite a bit lower than than what was advertised on the P&L just given how many bodies how many heads were required to you know add the business not only to grow it but just to just to sustain operations. So >> but but Greg with five million of EBITDA that buys a lot of people I mean I feel like you could come down to 4.5 million of EBITDA and hire what three or four people and and you've grown your employee base by 50%. Like you know I mean you just got so much IBIDA there. >> I'm just I'm just saying you know if you wanted if you took a there was you know there was the P&L IBIDA and then there was you know an intellectually honest IBIDA and and >> we could we could afford to add people but it was but it was uh it was inflated. That's that's my point. >> Yeah. Sure. So, but but wow, if I didn't make my reaction clear, that is a um a really good sized business. Well, for for traditional searchers, they buy bigger businesses. Um so, as as you gave us the range, 2 to 5 million of EBA. So, this is at the top of the range that that you were looking for, top of the range that a traditional searcher would look for. So, that's big and good news, but also way bigger than probably most of us would expect a tour operator could ever get to. So was this kind of a where did it sit in the industry? Was it a leader or are there lots of these or were there lots of these businesses around as you got to understand the industry? >> Yeah, so it's a it's certainly a you know in the top desile uh in terms of size of tour operators but uh it's by no means the largest and not and not even close. So there are uh a few poor operators that have eclipsed a billion dollars of sales, several in the hundreds of millions of sales. Uh it's this sort of sneakily fascinating, you know, very lucrative uh very attractive category um that we continue to participate in through companies that we've back searchers to acquire and happy to get into that later. But um it's uh despite it being cyclical and direct to consumer which have both have uh challenges. It's a it's a really fascinating category. >> Yeah. And specifically tour operators. >> Specifically tour operators. Uh uh yeah. It's our it's our by far our favorite sort of sub subcategory and and often misunderstood subcategory of travel. >> Absolutely. Well, so I've had uh I guess you're the fourth um interview with somebody who's bought a travel business and every time we talk about start by talking about how travel has a bad reputation, namely for the two reasons you just gave cyclicality and and uh and consumer um and not just consumer but high ticket consumer often you know you know lot of discretionary although I guess those are all that's tied to the cyclicality once you know In a down economy, people tighten the strings and trips is one of the first things to go. And from the four of you, three of you bought tour operators. Uh so it it does seem that if you're going to play and travel that this is the place to play. The other was a tour was a was a travel agency for destination weddings, Jared Benoff. Um but it's interesting now 12 years after your acquisition. You acquired in 2012, was it? >> In 2013. So we launched our service in 2012. Acquired a year later in 2013. 12 12 years later um actually an interview that will run two ahead of you. So by the time people are listening to this it will have already run with uh with Katherine Butler Dyn and and Rahul Desai her husband they bought a tour operator u a million dollars in revenue less than a million dollars in revenue. Um but it sounds like the category first of all all the characteristics that you said of course remain the working the the working capital is probably maybe among the most attractive things. about it. Um there's a much more reoccurring revenue than than we all think. If you can deliver a good experience there and you know build a something of a brand in your niche then people will come back. You'll you'll have a lot of repeat business. >> Incredibly incredibly sticky. Um you uh it it has a lot of characterist despite being cons direct to consumer has a lot of characteristics of what you would see in in B2B services frankly from a stickiness perspective. Of course, there's no contractual recurring component or anything anything like that, but if you can deliver a good good experience, uh you've you've got that customer for really as long as they are uh able to and inclined to travel. >> Yeah. Yeah. So, >> and the cyclicality the cyclicality piece is is obviously very important and you got to be very mindful of. But if you look at every cycle, you see an incredible snap back in travel following coming out of that cycle. So you saw that in um you know after 911, you saw that after the great financial crisis. Uh you certainly saw that uh out of coming out of COVID where there everyone is talking about revenge travel. Um, so there's the there's a cycle, but it's but the the trend line is is compelling, you know, up and to the right. And so the the implications of that are, you know, don't overlever, don't overpay, but if you buy well, put in a sensible capital structure, you're fine. >> Mhm. Well, in Katherine and Rahul's case, so they they bought this million-dollar revenue uh tour operator, and their aim is to acquire more to to bolt-on um probably retaining the brand of each of these bolt-ons. And the the observation that all travel to all tour operators taste like chicken. So, they built some tech on the back end where the the front what faces the front the the brand is what change changes. But if you can standardize and streamline the back end with tech, you can really get economies of scale by doing doing a strategy like this. Um and and it just seems like it's uh as healthy as ever less we think that technology or young people or or you know a new generation or 10 years later that um you know a different generation are are are traveling less than they were back in 2013. It doesn't seem like they are. So um yeah, tour operators for the win. I guess is my point. >> There you go. >> Okay, Greg. So, um, one more call out just on the size of this business or the ibeta of this business. So, $5 million in ibeta, a sevenperson company. What was the founder story? I mean, that's that's quite a life this person has built for himself. >> Brilliant guy. Um he uh is Israeli uh by birth and uh served um served in the military there and I think just had a very keen sense of of how to you know operate something really efficiently. Um not get distracted by shiny objects. Just you know he knew what needed to get done. Cut to the chase. Um he had founded the business in in 1996. Um certainly did very well for himself just through the cash flow uh of generative nature of the business during his ownership period without any outside equity or debt. Um and then I think he got to the point pretty classic search story where he was ready to to move on and was a bit a bit tired. Um perhaps in part because he hadn't built out the team quite as much. He he had his hands in in everything. A wonderful team >> um underneath him, but he was involved in, >> you know, soup to nuts, absolutely everything. And, you know, I think that I think that ran its course after a certain after a certain point and and he was ready to move on. >> Well, it sounds like you guys, you know, 30 years younger though you were burned out even earlier than he did. >> We We'll get there. >> Exactly. Uh >> cliche. So, back to the accountant penciling this deal out or what it could look like. Take us back into that please and and start from the top. >> Sure. So, uh you know, a few days after the um fateful event at Midtown Manhattan hosted by BDO, I met the commercial banker's uh friend, this accountant, his name Robert Cohen. uh an accountant uh that had a a small practice in New York, New Jersey area. Uh had a really nice chat with him. He told me about a few of his clients, but but really wanted to focus on uh his his main client, Smart Tours, uh this this tour operator that I uh ultimately got to know very well. Um he you know he told me that his uh that the founder and and CEO of that of that business Smart Tours was was looking to sell and that he had been deputized to help him out a bit. uh not officially as a as an adviser or a or a banker or intermediary, but just help him out because it was the first time that uh that the Smart Tours founder had been through any sort of sale process. And so the accountant tells me about the business. Frankly, I didn't know much about the tour operator world at all. I didn't appreciate the distinction between a tour operator and a travel agent. Um, I like to travel, but but that was about it. Um, and then he proceeds to to take out this sheet of paper and start sketching out what he thought a reasonable deal and deal structure would look like. So he, you know, he lists out the, you know, IBIDA around 5 million says, you know, we'll, you know, I think around a five times IDA multiple is fair. um he had this notion that a that a a sizable seller note uh would be in order. So he penciled out a 60% seller note uh which was larger than I ever could have imagined uh at a pretty favorable interest rate at 4%. And so I had to, you know, use my best poker face not to not to react too positively. Um, but I was, you know, I I was uh excited, a bit taken aback. I had never had that kind of exchange. It um really was like a, you know, somebody sketching a deal out on the back of a napkin like you you read about in books or see in movies, but um it was a sheet of paper, not a napkin, but nevertheless, sort of same idea. So, um, left that left that sit down, um, with a sheet of paper with his chicken scratch and, um, and I proceeded to just look up, you know, what the heck does this business do? Um, and, uh, so it was a little bit backwards. Normally a lot of searchers are coming up with a thesis and they get excited about a category and they're they dive in and they want to know everything about an industry and then they start reaching out to business owners. In this case uh really flipped that on its head. I I had a almost a deal in hand uh if you will and then I was you know started googling uh you know smart tours tour operator um you know what does this business do and uh so a little bit a little bit backwards u but but that was that was the beginning of the the dance you say it's backwards but in fact um many if not I'd say the majority of searchers end up doing it that way finding a business and then filling in their industry knowledge as opposed to a well- constructed industry thesis. Um may maybe you know your your own perch in in search land is traditional search folks coming out of business school and so maybe there's a little bit more of that thesis discipline from that cohort. Um but when I look across all searchers that I talk to I think most are driven by the deal and then backfill the industry knowledge and if they want to go after it. >> That's right. I do I do think you hit Yeah, there's definitely a distinction between traditional and self-funded search, but but but I your point is well taken. >> Yeah. Um so, Greg, just to so for those in the audience who um aren't grasping that that's just an incredible deal and incredible well, it's 5x for $5 million of Ebida DA is a very strong price. It's not incredible, but it's a very good price. Um and then the and then on top of that these incredible terms 60% uh seller note is really remarkable. Um so but if you would like to help us um put that in context what do you think that market terms would have would have been for that business? >> You know it's interesting roughly roughly. Yeah, it's a it's a it's a great question and I I've thought about this for over over a decade now. Uh because on the one hand uh there's no there's no doubt that this was an an an attractive sort of initial structure. Uh and to be clear, the the structure evolved a little bit. The purchase price came up just a tad and the seller note went down from 60% to 50%. the seller felt like, you know, he had a win relative to the initial sort of anchoring uh from his accountant and we were still, you know, perfectly content with the deal structure. But this question of what's market, what's fair, there's really not much of a market for a business with seven people, one of whom is a is is the, you know, has his hands in everything and is looking to retire and extricate himself from that business. So the the key person risk was through the roof. And so while on paper on that that wonderful sheet of paper it looked really attractive the it's hard to quantify what the key person risk was. So um you know if you go through the thought experiment of the seller the founder and seller smart tours hiring a banker broker intermediary and running a process. It's not obvious to me that he would have ended up in a substantially different spot. Now, the 50% seller note where we ended up landing, that probably wouldn't have been in there, but there would have been considerable ongoing skin in the game for him. There there had to be the key person risk was was too significant. So the the deal as I reflect on it was I think you know much more frankly fair and reasonable than it than it sounds u on the on the surface when you when you really think about how much embedded risk there was in the in the business that that we bought. And now that was an opportunity where part of the trade or the arbitrage was buying a business with those terms and if we could basic if we could basically mitigate or get rid of this key person risk that's that was a big part of of the ultimate magic of of what we did. >> Absolutely. >> Um but but I think it was fair. Uh I really do. It's such a it's such a good point when we think about um kind of creating value in an acquisition, the the kind of our minds all go to growth, which of course is the obvious one, but there's also just d-risking the business. Um so, you know, if if you just derisk a business, you create value if um and then I don't think anybody would want to d-risk and then promptly sell it. Um but arguably you could just just w with no IBIDA growth with no revenue growth but a much more robust infrastructure it's a much more valuable business. Um when you say he would have had to have some sort of skin in the game no matter what with whatever structure would have come up with what what just for quick education to the audience what are the flavors of skin in the game? Yeah. So three principally. One uh would be the seller note which he had. Um although a seller note of you know 50% of a of a deal for a for a business of this size is is more or less unheard of. It's what's it's more common at the for considerably smaller businesses uh where terms are a bit all over the map. Um next would be equity rollover. Um and the last would be an earnout. Um, and you know, sellers have different different opinions on on those three different forms of consideration. Um, often allergic to all three and most allergic to the idea of an earnout. But seller notes are quite common in the search context where uh sellers are looking to transition towards retirement and and not stay particularly involved in the business uh post close. Uh we talk about forgiv forgivable se sell seller notes a lot in SBA self-funded land is same in traditional land for bigger deals that there just is that that is used that that uh >> forgivable seller not mechanism >> yeah for forgivable seller notes are are rare I'd say >> oh >> earnouts are are more common u although forgivable seller notes and and earnouts are sort of you know different sides of the same coin It's they're not they're they're you know very similar in um in substance just a little bit you know positioned slightly differently. So um no but but forgivable seller notes you'll see them but but they're not that common. >> Yeah. Um and just to add to that for forgivable seller notes are more about protecting downside whereas earnouts are more about incentivizing upside. There's that difference and also earnouts are not allowed by the SBA. So, I just realized now that's why we see forgivability so much in SBA land is cuz it's the only only way to do >> to have any either one is that's the only one you can have in an SBA deal. >> You told us where the terms ended which was uh you said the multiple went up a little bit, the seller note came down a little bit. Anything more to close out the transaction? >> We we So, um the purchase price at at the end of the day was uh about 29 million. uh half of that was in the form of the seller note. Uh and then of the remaining 14.5, it actually ended up being 15 if you because you factor in fees for lawyers and accountants and so on and so forth. But of the of the $15 million balance, we raised we actually raised an additional $5 million of debt. We worked with SBIC lender that came in senior to the seller note. Uh and then we had uh 10 million of equity >> from a mix of investors many of whom were in the search capital and some came in through the form of an equity gap. >> Great. What's an SBIC lender? >> Small business investment company. they um basically they're able to uh they have favorable terms with the with the SB SBA where they're able to get leverage from the from the from the government to juice their returns in lending to smaller businesses. Uh it's a way that the government is incentivizes lenders to go down go down market by sweetening the pot effectively. Uh we worked with a firm called Tamix. they became OFS. Uh those guys spun out. They now run a firm called RF Partners. Um and they they do a lot investing in the and lending to the search ecosystem to this day. I think this I think we were their first go around, but they're they're pretty active in 2025. >> Great. And so in uh traditional search deals, are is the debt often coming from SBIC's? >> It's a mix. You've got uh conventional lenders, just commercial banks, and SPIC's. Those are the the two main buckets. SBIC's tend to be a little bit more flexible, creative, can go deeper into the capital structure. Um they're maybe more permissive of equity distributions being paid out before the loan uh is fully fully paid down. Um but they also tend to be more expensive. So there's a sort of a price and flexibility and sort of quantum of of leverage >> tradeoff. >> Well, they're very common in independent sponsor land. Many sponsors get SBIC debt. Um, and one of the other features of SBIC's is that many of to the point about flexibility, many of them also take some equity or or have an equity component to the to the capital they provide. this dynamic where in the coffee shop, you know, he showed you his first. Uh, of course, in any negotiation, we want um the other party to go first. Um, you got that. Is there any way to engineer that? Yeah, I I we we uh encourage the engineering of that all the time uh with the searchers that we work with and we've had a lot of uh they've had a lot of success doing that uh following that advice and really it some of it's just a you know a matter of discipline and and not not not being the one to lead. Um, and some of it is is just sort of how you ask a question. And you know, often it's a well, you know, you must have thought about what your business is worth or um, you got to have it, you know, you got to have a number in mind. Everybody does. Uh, want to make sure that I'm being, you know, we're being respectful of your time. Let's just see if we're in the same in this if we if we think we can get to your your number. So, probing like that. Um, and you know, I'd say, you know, maybe half the time you'll extract some information and half the time the sellers will will stay tight lipped, but uh it it's it's well worth it for the 50% of the time that um that you get them to share something with you, even if what they share is higher than you would uh than you would otherwise be prepared to to offer. um that's still valuable information and can save you time if they're not anchored in something realistic or or favorable. And but the real magic is when a seller or one of their representatives shares something with you that is even more favorable than you could have imagined or in many cases more favorable than you would have been comfort comfortable offering. So there's no no way I would have ever put out the idea of a 50% or 60% seller note. I would have been too concerned about offending the seller because that's, you know, grossly offmarket. And so, you know, I I I would have done myself a significant disservice if I had uh if I had gone first. >> Exactly. So, so, and I think that last point is is is the is is the point which is just because the seller goes first, if you can get them to go first, doesn't mean it's going to miraculously end in a lower price for you. It's just in that, you know, the chance of a chance that they're that they have a relatively low number, in fact, one so low that you wouldn't have even offered it in mind. You want to at least give them the opportunity to put that out there. >> Sure. >> Uh uh it's probably not going to happen. don't get your hopes up. But but if not, I mean otherwise, like in your case, you you just you don't want to lowball anybody. Um so you don't and then you never get the opportunity for them to kind of lowball themselves. So really interesting. >> Better better if it's their idea. And um you know I I would say it's we've we've had several situations with searchers, businesses that we've that we've bought with searchers where uh the the sellers start they go first, they start low um and you know the the value creeps up or the structure evolves after they've anchored. Perhaps they get advice from a lawyer or a friend who's a banker or private equity guy or gal. Um but still that that first utterance coming from them uh really that anchors the conversation and yeah >> and and goes a long way all the way through close. >> Yeah, absolutely. Well, thank you for all the transparency, Greg, and and walking us through the through the entire structure as well. So, you get into smart tours. What do you find other than a twolean staff? What else do you find? >> We we found that we had no idea what we were doing. Um we uh we were both uh both just uh finance guys. Um I had worked in private equity for a couple years. Dave had worked in uh investment banking and then private equity. And um you know, we really didn't know how to operate a business. We really didn't know how to spend our time, what to be focused on, uh what was noise versus what was substance. Uh it was >> it was a substantial learning curve. We were also, you know, pretty young. Uh I was >> gosh uh I think I just turned 26 when we when I I jumped in. Dave was was two years my senior but just 28. So we were on the on the younger side of search. Um and so there was a lot of life experience that we had yet to have. There was uh certainly a lot of there was all the operating in the experience in the world that we had that we didn't have. Um, so there was that was a that was a big theme, but there was also, you know, I think an acknowledgment of, you know, we had we felt like we had time and we felt like and we also felt like we didn't have to be heroic uh during the during the operating phase. Uh, we knew that we bought the business well despite the key person risk, especially if we could over time derisk that piece. the key person risk and professionalize the business and put in systems and you know have a real team. We knew that if we could simply do that and it's not that simple. It's hard but if we could do that um you know over a number of years we would we'd be in a position to have a nice outcome without you know having the the world's greatest you know run as as as co-CEOs. Um and I also think we were very mindful and and I think self-aware that neither of us are were you know big big risktakers. Um you know despite being entrepreneurs um we certainly are on the risk averse side of of entre of the entrepreneurial spectrum and um you know I think that also influenced sort of how how we approach things. We were not bet the farm kind of guys and and we really never contemplated going, you know, deep into what we call the the J curve of taking a big step backwards in terms of profitability to meaningfully invest in the business to then to then really accelerate things. We were um we spent a lot of time thinking about cash flow generation, debt payown, um you know, generating dividends, equity distributions to our to our investors. um you know over time we obviously you know u not obviously but over time we were able to you know get our hands around the business and and and grow it a decent amount. Um but you know all the while I think we we knew that we had we were sitting on something good um and and that we had a really nice opportunity at our hands just by by virtue of how we had acquired the business. >> Yeah. Okay. And so just to be clear that you're so you're kind of your your approach when you say you're you're a little bit more riskaverse that you weren't doing a big bet the farm big JC curve play. Your point is that your attention was very much on deisking because the the business was already working just make it a higher quality business in a d-risk business. That was the play as opposed to some grand growth strategy. That's >> look I mean that that's absolutely right. I mean, look, we we were also trying to grow the business, but we weren't willing to we weren't willing to jeopardize the, you know, just how darn profitable the business was. We weren't willing to risk the great things that we had um because we knew that even if we didn't grow that much, we would be in a really good position. So, yeah. um still trying to grow the business, making bets. Um but were we willing to go backwards or put anything in jeopardy? Absolutely not. So it was it was it was a playing it relatively safe approach to >> uh you know business ownership for us. >> And and when you say that because you the fact that you bought it well enabled this approach, what does that mean? because you didn't have very heavy because you bought it for a lower good multiple lower interest rate on the seller note. So basically you didn't have big debt payments. Is that what that means? Or or the lower multiple also meant that to get multiple arbitrage was going to be with you know easier because you you're starting from a lower multiple. What what what Yeah. So we I think we felt that yeah the low entry multiple um the and the nature of the business this heavily cash flow generative generative business we there's no capex um negative working capital collect money upfront pay it out later there was the the you couldn't construct a better cash flow profile than than this business or tour operators for that matter and um so we were we were we knew that you know even without significant growth we or really any growth for that matter we would be able to to massively delever over a relatively short period of time uh creating equity value every year. So um you know we were able to to pay pay down several million dollars of debt uh approaching you know around $5 million of debt each year during our ownership period. Um, and that put us in a position where we, you know, if you if you take a $10 million equity check and you and you pay down $45 or $5 million of debt per year, you're generating a 40 to 50% >> return on equity every single year, even in a scenario where the business is flat, even in a scenario with no multiple expansion. >> Yeah. Great. Wow. Yeah. More of that, please. That's >> sounds good. >> Okay, Greg, where was the business? It was in New York. Where >> in New York? New York. Uh couldn't get more central. Uh it was on 42nd and Fifth, right across from the New York New York Public Library. Didn't didn't make a lot of sense. Uh but it was a beautiful beautiful place to go to work. Got to have lunch every once in a while at uh Bryant Park right down the street. So, uh yeah, couldn't complain. Oh wow, what a location. Great. Okay, so uh seller was doing everything. So you needed to derisk and build out some infrastructure, some human capital infrastructure. >> Sure. >> We'll assume that it probably also wasn't tech or process forward. So building tech and process was going to be part of the play here. >> Absolutely. >> So what and how did that go? >> It it went well. I mean, you know, f first off, the you know, year one was was all about transitioning from the seller and um you know, getting the human capital pieces in play um and learning the business. Um we I I would say that, you know, we we didn't, you know, talk about earlier talking about not going not being willing to go deep into the J curve or really into the J curve at all. Uh we we didn't add we didn't add to the team massively. uh we did it more steadily, but we um with the addition of me and David and some a couple other hires, we were able to, you know, significantly mitigate and the the key person risk that we inherited when we bought the company. And then from a technology perspective, that was really a year two initiative where we we found a a real software system to transfer transition away from a lot of paper and pen and clipboards. Uh a little bit a touch of Excel u but it was more paper and pen than Excel even in 20 >> 2013 2014. >> Um that was a really important step for being able to professionalize the business and then subsequently scale. um you know had a couple twists and turns along the way. We got had to navigate the uh war in the war in Ukraine or Russia's invasion of Ukraine in 2014. We had to take a bunch of a bunch of people that were scheduled a couple hundred people that were scheduled to go on river cruises uh in Ukraine uh and try to redirect them to other parts of the world. Uh Ebola came into the mix. That was that was no fun. Uh our largest single destination was uh where we sent travelers was South Africa. Uh you might wonder what Ebola has to do with South Africa. Um it really it really didn't um because it was thousands and thousands of miles away from South Africa, but uh that uh that nuance wasn't quite appreciated by the the US consumer or traveler. So >> just cuz South Africa has the word Africa in it. >> Correct. um no way I'm going to you know getting these calls or no way I'm going to that country. Um >> we had to some um we were able to educate to some extent but but not enough. So you know our largest destination took a significant hit but we were able to to to navigate and and still you know put up a decent year nonetheless. um and you know put it had that foundational year two of of really putting in you know a solid system that that we could then use to scale. >> So just going back to tour operators um do the are they as a category more subject to kind of black swans or or random macroeconomic events? I guess it has everything to do with how diversified your destinations are really. It's it's so key ingredient for any tour operator acquisition. If you're out there thinking about buying a tour operator yourself, you should be very mindful of the geographic or destination mix. Um if we were a South Africa specialist, uh where that was 95 100% of our revenue, uh that would have been a real problem in 2015. It was 20% of our revenue. Um, so it it wasn't it wasn't pleasant, but but we were we were fine. Uh, it was a a headache, but um maybe some days it felt like a migraine, but it but it wasn't uh it wasn't anything that we couldn't handle. Um are they you know certainly if you fast forward to what happened with COVID that all these tour operator businesses went to literally went to zero topline for a period of time. Uh but if you but if you put that aside, it really is much more of a function of of uh destination diversification. >> But the these so leaving aside just the performance of the business, these crises that you then have to like work around was really taxing on you guys energetically. >> No question. Um, you know, I I could it was it was not just Ebola and the Russia's invasion of Ukraine, uh, the previous one, uh, not the most recent one. Uh, it was Zika. It was, you know, uh, terrorism in Europe, uh, you know, uh, issues in, uh, in in Egypt, um, other, you know, other challenges in the Middle East. It um it it was it was uh it was ex it was exhausting. It didn't it didn't have a tremendous u business impact if you look at the numbers. Uh it did maybe stifle growth and was a contributing factor to stifling growth a bit in in year two and maybe to some extent in year three. But um but it did it absolutely took a toll. um a lot to a lot to navigate as as leaders of the company. And Greg, why can't all of that be in some in some sense delegated away? You bu you build out your team and they manage a portfolio and not saying you just collect checks and don't worry about it, but it sounds like it's all on your shoulders where as it doesn't seem like it should necessarily be. Yeah, it's a great question and maybe that was a maybe there was a leadership flaw for us, but you know, I think when you're talking about, you know, extracting, >> you know, hundred mostly senior citizens from a a country that, you know, is on the verge of war, uh, or, you know, has some natural disaster or public health outbreak. Uh I don't I don't think that's something that you you really should delegate. Uh sure >> you you know tough decisions, you know. Um sometimes you're you're dealing with people's uh you know lives and livelihoods or their their their health. Um, so I um, >> you know, I I think there are certain certain topics that >> whether you're running a small business, medium size, even even a you know, a considerably larger business that that, you know, you've got to make you've got to make the call and and have your hands in. Um, even if you know, to your to your point, maybe it doesn't seem like it should be on the surface. >> Yeah. Well, certainly too, like um some of these crises you're dealing with are extracting people who are already on the ground versus something's happened and now customers who haven't yet left need to be sent some sent somewhere else. There's different degrees of >> certain certainly. Um >> yeah, >> but there even in the cases where you know we had to cancel trips because of some foreign conflict. Uh you know that was I think it was just it was it was stressful because it felt like it was you know derailing some of the you know some of the growth efforts that we that we had put in place. um you know that we we felt like we were doing everything right and you know and doing a lot of good things in our second year and yet we were flat um in in some part due to you know >> in no small part due to due to Ebola. So it I I think it was more of a there was a frustration element there too. Mhm. Mhm. Well, and this touches on one of the the reasons not you know one of the negatives of this category that we didn't touch on earlier is the um you know the the expectations of your customer that this is a big spend for them. This is maybe a once in a-lifetime trip for them. Um you know it's like being in the wedding business. People are only going to have one wedding hopefully. And so I if you're if you're you know in that business everyone all your customers expect perfection every you so it's it's a command performance by you all every time every time. And there's a lot that's outside of your control. I mean you can it can rain on the day that you go to the Taj Mahal. I can um you know your the incredible tour director that that you hire to lead the group around Australia could have a family emergency and you've got to backfill them with somebody who's not as experienced and you know maybe 25% as charismatic as the you know as the as the all-star. So these are there's a lot that's that's out. It could be airline delays which certain you know certainly uh a tour operator has no control over. Um and so you know you own it all as the um as the company that that cashes the check and and you know owns the experience and and that's that's that's that's part of the that's part of it. Um, now you can mitigate a lot of those uh those issues by by how you respond and providing good service in response to um unanticipated events or events that are, you know, fairly clearly out of out of your control. But nevertheless, it's it's high stakes and you don't get you you get blamed unless the experience is is 10 out of 10. >> Yeah. And that would that would be uh drain you after a while that that pressure. >> Yeah, certainly no no no question. >> Crises or not. I mean, you know, Ebola or not, just the day-to-day is could be draining in that way. >> For sure. >> Um we talked about the reoccurring uh revenue that the quality of revenue here is higher than it might seem at first because you do do a good if you deliver uh uh a good experience, they'll come back. um what does in general customer acquisition look like? What did it look like? >> So um you know the the biggest source of customer acquisition was word of mouth referrals. So that's another beautiful feature of travel uh if uh if you if somebody goes on a trip, they have a great experience, they're going to put it up on Facebook. They're going to they're going to >> print photos and show them to their friends. They're going to put out a little a booklet and put it on their coffee table and they have friends over. Uh they'll they'll brag about the time that they had in Thailand or China or Cuba or where you know or what have you. And there's just a there's that natural built-in word of mouth referral engine. Now, there are some things that you can do to even to supercharge that, but um but often it's best just to let that let that sort of marinate and happen organically. So, there's nothing that you can that you can do to compete with just the beautiful engine of of word of mouth and referrals. Um you know, when we came into the business, I thought, gosh, we're going to we're going to grow this thing like a weed through digital marketing, paid social, paid search. um you know >> which wasn't happening at all. >> It wasn't happening at all. There was no there was no not a Facebook page. Um the website looked like it had been created in in uh the year the business was founded in 1996. Um and and not refreshed. It was it had a very poor digital storefront. H and we looked at each other, Dave and I, and we said this is this is going to be so easy. Um, famous last words. Uh, we did, uh, we did a lot to enhance the digital presence. We invested a lot of money, uh, not bet the farm amount of money, but a lot of money nonetheless in paid search, paid social, other digital acquisition channels, and the results were pretty underwhelming. Um, and >> why now? Why do you think that is? Because this is the lever that people pull. I mean, I'm salivating listening to it >> and and in fact, in many in many stories of my guests, it does work. It works just like it should. But so why didn't in your case because the older demographic? >> I think in part the demographic uh you nailed it. But but also if you think about the nature of this purchase, it's it's a high ticket item. It's a extremely high trust item. So, uh, you know, and it's a and it's a often you're selling a once in a-lifetime trip. So, they you really have to have a lot of confidence, conviction in the company that you're going to part you're going to go with, you're going to partner with on your vacation. Um, not to mention that you're going to pay them often a year, sometimes more than a year in advance. >> Yeah. >> To reserve your trip. >> So, so high trust. Um, and so you think about acquiring those customers through a, you know, a Google ad, that's a bit of a tough bridge. Uh, we were also a, um, more valueoriented provider. Uh, so we were positioned more to be a bit more accessible kind of angling to democratize travel uh, to these amazing destinations to some extent. And we had decent margins, but you know, our dollar margins were were gross profit margins were were okay, but not great. Um, so we didn't have we didn't have a ton to work with. Um, and it just, you know, it could only support customer acquisition costs that were that were so high. So there are some tour operators that are more val more more premium in nature have you know much more gross profit dollars to play around with. uh and I think they can have they have a smaller addressable market too but with good targeting they can have success on the paid search paid social side but it was a it was a really tough dynamic for us and uh makes a little bit more sense now in hindsight but at the time it was surprising shocking for really um you know I I I couldn't believe it uh for a couple years. >> Yeah. And then but you did eventually land on a marketing channel that worked. >> We sure did. So we there were really two main levers of of of growth. Um the marketing channel that worked was not um new age digital. It was going back in time and your classic direct mail. So, um, we're about 2 years into our ownership period and frustrated by the lack of success in growing the business through the this sort of marketing digital marketing transformation that we thought we would bring to bear. Uh, and we had a uh some conversations with an industry expert. She had recently retired. Uh, she had led marketing for a company called Colette, uh, which is a much larger tour operator. they're one of the tour operators in the several hundred millions of of sales. And she said, "What? Why aren't you guys doing direct mail?" Um, that's the that's the silver bullet. And so um you know, she >> Wow. >> she pointed us in that direction. and she got us connected to uh a couple um experts who could uh you know third party consultants who could lead us uh down the direct mail path and and that was a a big game changer uh that at that juncture it it started to you know instead of having these couple of first couple years which were flat where we were still growing IBIDA by the way flat on the top line growing IBIDA by improving our cost of goods sold um and creating meaningful equity value by delevering but still you know stubbornly flat on the top line. Our direct mail efforts really accelerated the the top line of the business. And then the other other sort of key growth lever that we that we put in place was taking what was at close at at acquisition 100% direct to consumer business and hiring some salespeople to to um to build out a B2B TTOC sales effort and by that I mean selling trips through universities uh religious organizations retirement communities um ch local chambers of commerce, even companies that wanted us to take their their team members, their salespeople on trips. And so um we were selling the same exact products, these same tour products uh just through this sort of B2B to C distribution channel. Uh and uh and that was that was quite fruitful fruitful for us too. that worked because that seems like one where I would say sounds good in theory, but I I don't I can't put my finger on why, but my my gut would also just be like I bet it's way easier said than done. I don't know. >> You know, it's doing the B2B to C play. >> Yeah. I mean, look, I think execution is everything. We hired some good people. One great salesperson, Suzanne Anderson James in particular, she was an absolute all-star. She deserves a ton of credit. But it was it was an easier market to penetrate and grow than than on the strict B toC side. Um if you could build a relationship with that, you know, somebody at a community center or church or synagogue or university who and gain their trust. >> Yeah. then they're able to leverage their audience and and they they come back a few months later and said we have 40 people signed up for your trip. Okay, Greg. Um so just before we turn to your decision to exit, did you how long did you hold as you start contemplating exit, what year were you in and had and where had you gotten topline two at that point? So we um we ended up you know from start to finish we held for four years. Um at the at the beginning of our fourth year so end of third year beginning of the fourth year we received a couple unsolicited offers for the business. Um and at that point uh we had even though we were just entering our fourth year of operation because of the nature of the uh of how people book people booked far in advance we knew that 2017 was going to be a very strong year and we'd be you know just shy of 50 million of sales. Um, so wow. You know, and we're able to, >> you know, not not not doubling or tripling, but but not, you know, but a um but pretty healthy growth from, you know, 30 or so when we bought the business. >> Um, and we're able to, uh, you know, we were looking at EBIDA around 7 and a half million. Um, >> despite having added a tremendous amount of, uh, of opex to the business relative to when we bought it. So you know uh from six to 20ome employees with a lot of more software and marketing spend and so you know very different opex profile and really that spoke to the you know de-risking uh away from the founder and professionalization point. Um so uh but even still you know despite the fact that we had grown the business really nicely in the in sort of the back half of um that 4-year period I we still you know we still felt like we had a lot more work to do that we could continue scaling the B2B TOC business line that you know we were just scratching the surface on the direct mail side. Um and then we received a couple unsolicited offers from uh turns out they were both independent sponsors but they were uh they were at values that that seemed really compelling to us and were sort of surprisingly compelling to us. Um so we decided to first talk to our our board um and just get their reaction and remember having a conversation with a board member investor and and mentor of mine and Davids a guy named Michael Klene uh who searched way back when before I think it was even called search and uh now has had a great career and run in private equity and runs a firm called Little John. Wonderful guy. Um and he explained to us that he has never experienced sellers remorse. Uh despite despite having sold lots and lots of companies, he's never never regretted selling. Uh and uh I think we took that to heart. Um I think we were also quite aware that we were running an inherently cyclical business. Um, this was 2017, beginning of 2017 when we're having these discussions with our board and we were already eight or nine years after the great financial crisis. Um, you know, we had we had gotten through Zika and Ebola and the European migrant crisis and, you know, there was no big issues with any of our um our destinations that were sort of derailing things. and we were on this really nice TR trajectory. Didn't want to take that for granted. Um and so we decided to interview a few bankers. We um we got three three opinions, you know, three opinions on value and sort of pitch pitches. Um and we ended up going with a group called Fitus Partners led by uh John Ross. They're Charlotte and New York based and uh they're they just ran a phenomenal process. Uh reached out to dozens and dozens of buyers. It was a pretty fair fairly robust um and broad broad auction um if you will. And and I think they they represented our interest really really well. They they knew that we were not only looking to maximize value for our investors um but also that we had a desire to ultimately transition out of the business that we weren't necessarily looking to you know work for a private equitybacked business as the as the operators for an extended period of time and um they created a ton of interest. I think we had 78 firms sign NDAs. We had 37 indications of interest. Uh we had 12 management meetings which you know these half ha 12 half-day meetings were put through the ringer um by private equity firms and then uh we had uh quite a number of of pretty firm LOIs and narrowed the group down to three and then ultimately uh selected a firm called Summit Park that that was the the winning bidder in the process. Uh, Greg, do you think the fact that you and Dave didn't want to continue on uh in the business as the leaders of the business for a time that you were penalized for that on the price? >> That wasn't, you know, that was a concern, but I think, you know, to to Fight's credit and, you know, John Ross and his team did a did a great job. I think they were able to, you know, somehow address that and um, you know, and get, frankly, get buyers excited about the opportunity to bring in one of their own people. Um, or somebody who had >> taken a business from, you know, 50 to 200 million of revenue or 500 million of revenue. And um you know as as much success and and as many good things that as David and I did, you know, we were still you know finding our our way as as business operators. And so I think they were able to to tell that story which which I think was fair, you know, reasonable reasonable argument to make. I think they were able to do that quite well. Well, and the narrative would also probably have been like these two guys, Greg and Dave, have spent the last four years building human capital infrastructure and building process. So, so you know, they've they they have found the business in with all kinds of keyman risk and now they leave the business as a business that can take in new leadership. That was kind of what you spent the last four years doing. >> 100%. And you know, I think we we probably could have done a better job in in hindsight at um you know, making ourselves less important. You know, we were still at the time of the at the exit um as much as we had transitioned away from the key person risk that we inherited, uh we we created some key person risk with our ourselves, um not nearly to the same degree. I mean, it was night night and day. Um but yes, we we did we did build a business that that could live on healthfully and profitably without us. >> One point about cyclicality, Greg, and and you had said uh I'm not sure you said it here, but I think in our pre-call that um despite the cyclicality of travel, um long-term trends in travel are great. That it's a good kager. the travel category when you when you zoom out and look at it decade over decade, it just continues to grow, which we all kind of understand intuitively. We're all traveling more than our parents did, who traveled more than their parents before them. Um, so if you kind of wanted to hold for a long long term, you could get comfortable with the cyclicality that way. But one um thing that people need to keep in mind about cyclicality is not just that you'll be dinged on it cuz nobody likes it. But it also um may force your hand you on once you're owner and you think about exit it may force your hand a little bit which is kind of what h I don't want to say your hand was forced. It seems like you guys were I think felt good about selling but there was like you basically said you felt like you were at the top of a cycle and you didn't want to push your luck. So, if you find yourself in a down cycle uh in in a cyclical industry, in a business that you're the owner of, it may mean that you have to wait that out uh until an upcycle. And that's, you know, that's not a great thing. >> Just a it's not the end of the world either because be, you know, you're it just it extends your hold period. but um and might not fundamentally change the you know the return on investment that you're able to generate for your investors. It it might have certainly might have irrations. Um but you know keep in mind that um you know Dave and I are were humans too. I mean we were both at the point in 2017 where we're you know about to start uh starting families. Um, uh, we both had I had our our daughter, uh, our first of three, our daughter Sarah in 2017. Um, Dave had his his first of two boys in 2017 as well. And so, you know, the idea of extending potential liquidity for, you know, if you hit a cycle in 18 or 19 and then you can't sell until 21 or 22, you know, it wouldn't have been the end of the world, but I think we were we were looking to derisk and diversify ourselves um and and get some liquidity sort of going into this next phase of life. >> Yeah, absolutely. and you knew COVID was coming so you had to get out before >> CO% 100%. >> Um, if you putting all all this makes a lot of sense, but let's pretend for the thought exercise here. If you had just wanted to hold on to it, you have this now this business now doing $7.5 million of IBITA. As you told us, you've been paying down a lot of the debt. So, you know, you're you you have a line of sight on $7.5 million of of cash coming out of this business. Um, if you had just wanted to hold on to that and and either as a lifestyle business actually uh or to keep growing it, could you have and I'm I'm making a larger point about traditional search. Does this traditional search vehicle allow for that? >> Yeah, it certainly allows from that for that. And you know we would have been able to start participating in the in the distributions. Uh once we had you know if you think through the you know how the traditional search terms are set up once we had paid down debt and and returned all the capital to investors we would have started to participate meaningfully in the equity distributions and you know over and above the the salary and and bonus structure that we had as coco of the business. It was certainly doable. It was certainly um certainly at our at our at our discretion. I think it's it's highly unusual because there's uh again there's often a desire to sort of achieve more significant liquidity. Uh there there's also very favorable tax treatment um from capital gains as opposed to equity distributions from an operating company. Uh so you know there are a number of things that are at play and >> um you know as we touched on earlier it's you know it's uh it's tra the tour operator is it's a fun business to run but it's um >> you know it can it can be stressful it can be tiring and uh I don't you know I don't necessarily think that we we wanted to be doing it you know forever. >> Yeah. And can you share with us what the final sale price was and what all that looked like? >> Sure. Um so uh we had about 7.5 million of EBITDA when we sold uh we sold it for nine times EBIDA um uh which was uh 67.5 uh million we we had uh about a million dollars of excess cash on the balance sheet and we had uh delevered from $19.5 million of debt to uh around four uh million uh Uh and um you know net of some transaction fees we the proceeds to in aggregate to the investor group were um 62.5 million. Um we had also we had also paid some distributions along the way. Uh just under $4 million of distribution. So uh >> yeah very very happy with the outcome for everybody involved. when you reflect back on this on this outcome, what's the lesson? >> So, I think some of the lessons are uh you can you can create a lot of value on on the way in uh with how you buy the business, what you pay for it, how you structure it. >> Uh you can you can play it safe uh and still generate an excellent return. You don't need to bet the farm to generate an outsized return in this part of the market. um given where you know some entry multiples tend to be uh you you can take a you know a relatively low risk way path to an outsized return. Um you know I think there's there's definitely a lesson around you know not getting too not getting too greedy. Um we we had a what we consider to be a fair more than fair um in fact really compelling offer made for the business and rather than sitting there saying well you know we'll definitely do better than that um you know we um you know we we'll we'll get twice as much in a couple years. I think we really did some soularching around um you know what that outcome would would mean for ourselves for our families for our investors and um I think with some humility you know we we knew that the type of accelerated growth that we were starting to experience wasn't something that we could necessarily take for granted and that um you know that we would we would be well served to to go to market and and hire a banker and see what we could see what we could achieve. We've already talked about the fact that COVID uh then hit um so but but also the firm that the PE firm that acquired it actually has subsequently shut it down. So you did to to the point about not taking for granted success they weren't able to take not only were they not able to make it successful in fact it's it's no longer exists smart tours what's the kota to the story >> yeah no it's um it's a you know sad personally for us but um the chronology of events is um the firm that bought the business good people good plan uh got hit by a Mac truck during COVID uh revenue went to zero and it just was it was uh it was too tough um you know of a hole for them to to climb out of uh with a leveraged capital structure and revenue going to zero. Um it was it was tough and uh the business was able to hang on for a number of years following you know coming out of COVID after after going through a chapter 11 restructuring um in 2021. uh the private equity firm stayed in. the lenders stayed in um I think in 22 or 23 the lenders took control of the business uh and continued to support the company um as it was trying to get its way out of COVID and um we actually had some conversations with them about potentially stepping in and and buying the business back but um weren't able to come to terms and and sadly the business the business shut down and just a few months ago actually in earlier 2025. Oh >> wow. Wow. and said, "Let's wrap up here, Greg, why don't you just give us a little bit more about, uh, Footbridge and what you do today to support traditional searchers." >> Yeah. So, uh, you know, coming out of our our Smart Tours exit where we had a two-year transition period, Dave and I, we were we were actually pretty drawn to the idea of, um, fatigue aside, doing something and, uh, something similar again and and buying another business. But we started um as many searchers do that have an exit. We started investing uh more passively behind searchers and um we just were really drawn to the idea of of and this opportunity to support the next generation of ETA entrepreneurs and and we decided to repurpose Footbridge Partners. Um uh foot bridge was the name we used for original search fund bring it back and uh this time uh raise a fund to buy several businesses instead of just one. So we partner with searchers um mostly traditional but also we work with committed capital vehicles and hold codes and we love working with experienced operators that are looking to buy businesses or in industries that they know well. Um, we've dabbled a little bit in self-funded, although not much. Um, but I think really what distinguishes Footbridge is that we are, um, in my humble opinion, the most hands-on, roll up their sleeves type investors in search. Uh, largely, if not exclusively, because we just, we're really focused in uh, working with a small number of searchers each year. We'll back two or three maybe four search teams per year instead of 20 30 40 50 like uh some of our counterparts and we maintain about 10 11 12 companies at a time. So really focused uh really pride ourselves on being value added and um and still not done with the travel space. We've done a a number of deals um four four deals that are either uh that are travel related. two of which are are pure play tour operators. Um and it's been fun to get back in the in that industry. Um maybe even more fun from a board perspective than an operating perspective. But um um we actually we sourced two of those deals. So we we yeah we've been able to I think you know bring a lot of value from the experience that we had and um in general but particularly in this uh this tour operator world. So, so, okay. So, as I said, you're the third tour operator acquirer I've talked to. You are invested in two others. I know of another searcher who almost bought a tour operator. So, there I mean, this is really a category that lends itself to search, it sounds like. I mean, that's more than a that's six people, six or seven people. That's more than a coincidence. That's a trend. Um, but, you know, yeah, I mean, I I I think not to beat this to death, but the characteristics are um very appealing. So simple as that I guess. >> Uh >> great Greg. Well, thank you for sharing the story with us. Thank you for so much transparency go about the entire structure both going in and coming out of of your acquisition and then of course what happened in the in between. Um and of course congratulations on on just a great uh great search story with Smart Tours uh and what you're up to now with Footbridge Partners. We'll put a link to your LinkedIn in the show notes and people can get in touch with that way. Greg Donmus, thank you very much. Thanks, Will. Really appreciate it. Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every episode with an introduction to the interview, a link to the video version on YouTube, and soon key takeaways, numbers, and more essentials from the interview for those of you who don't have time to listen or watch it. Subscribe at acquiringminds.co. You'll also find all our webinars there on the website, both those we have coming up and recordings of past webinars. At this point, there are over 30 webinar recordings, a wealth of information on all the technical nitty-gritty of buying a business. acquiringminds.co See you.