Nathan Sykes

April 6, 2021

Filling Your PE Pipeline Using Acquisition Marketplaces

For private equity firms that actively take on new investors as a part of an ongoing fund, a large part of convincing limited partners (folks who supply the money that PE firms use to buy companies) to park their money with this particular firm is by having as much proprietary deal flow as possible. Proprietary deal flow is basically getting access to opportunities nobody else has, so you can offer a better price from the get-go. If every single deal in a private equity fund is being bid on by 20 other firms, you'll pay more for the transaction because you'll have to outbid other competitors.

There are some significant differences between LMM PE/Megafunds (the big guys, handling millions and billions of dollars) and what we're up to in the micro private equity scene, but this is a scenario where it doesn't differ among sub-disciplines. Getting the opportunity to look at companies exclusively saves you money, and provides better returns for your firm. So today, I'm going to talk about the polar opposite of that. Sorry for getting you all hyped up about proprietary deal flow, but we're going to talk about something even better.

Acquisition marketplaces! The melting pot of e-commerce stores, marketing agencies, display advertising projects, small SaaS side hustles, and dozens of other companies that make 6-7 figures in revenue & profit per year (very rarely exceeding these figures). If you're walking into the company-buying scene with no experience or rolodex, it's unreasonable to expect those proprietary deals to be served up on a silver platter.

That's where acquisition marketplaces come in - they're public directories of companies that are available for sale. They allow anyone who has the cash to start their own micro PE firm, leveling the playing field. When I had to shift towards private equity this past March as my marketing agency was crumbling before my eyes, an acquisition marketplace was the first place I went. Thankfully, as I started putting my feet into the ground and making a name for myself, we started getting more organic inquiries. I'm lucky to have a steady drip of those leads coming in that is more than enough to sustain us for the short-term, but I'll always have a special fondness for acquisition marketplaces - they truly allow anyone to run a firm like mine.


So who are the main players in acquisition marketplaces, you may ask? Luckily for you, I have the 'inside scoop' (which is codeword for 'I've made these mistakes so you don't have to'). Here's who you should pay close attention to as you're scouting your first, or your tenth, micro-company to buy:

For the ultra-beginners - Flippa. This site is basically "baby's first digital company acquisition", and I'm happy to say that I'm a proud member of this club. Flippa is built for acquisition entrepreneurs who are looking to stake their claim in some digital real estate (micro-companies, in our case!). Because it's the first experience that a lot of folks have walking into the world of micro private equity, you'll find a lot of inexperienced people, both on the buyer's and the seller's side. This can be good news, like if a founder lists their company for 1x EBITDA and it's an obvious steal, or bad news, like when someone pulls out at the last minute because of "sentimental value" or some stupid nonsense that makes the potential deal crash and burn.

For the brick and mortars - Tresle. Howdy Interactive doesn't specialize in brick and mortar businesses, but if we did (and we didn't have any proprietary deal flow), we'd start looking for potential acquisitions on Tresle. It services the entire United States, with listings in lots of major markets. While physical businesses are outside of our circle of competence, plugging some of the numbers of their listings into our financial models shows that companies are being listed for a more-or-less fair price. If you're dealing with a seven, eight, or nine figure acquisition opportunity, then you can take advantage of Tresle Plus, which gets you their M&A experience for those larger transactions. Everything about this site is not in our wheelhouse, but our colleagues have heard great things.

For the next generation of tech - MicroAcquire. Startups are all the rage nowadays, and MicroAcquire allows you to stake your claim in whatever Software-as-a-Service company you're looking to buy. While it's fairly new, it's become a fan-favorite among startup side hustles doing between six and seven figures in annual revenue. You'll find some smaller, and a few exceptions on the larger end, but there are plenty of opportunities right there in the middle. Heads up, though - most of the juicy deals require a subscription to MicroAcquire Premium, which can run you about $270-300 per year. Capitalism, am I right? Just kidding.