Latest / The Turn: Blue Collar to Billions / He Sold His Parents' Paving Company in 30 Days, Then Called to Tell Them

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He Sold His Parents' Paving Company in 30 Days, Then Called to Tell Them · The Turn: Blue Collar to Billions

• 0:01
  SPEAKER_00: We always had uh my dad's girlfriend at the table.
• 0:04
  SPEAKER_00: She was called the company.
• 0:07
  SPEAKER_00: Using private equity to force my parents out.
• 0:10
  SPEAKER_00: What I like to call going from a family business to a full-grown big boy business.
• 0:14
  SPEAKER_01: Welcome to the turn.
• 0:16
  SPEAKER_01: I'm Corey Mitchell of Iconic Founders Group.
• 0:18
  SPEAKER_01: This week's episode features a Guggenai.
• 0:22
  SPEAKER_01: I never thought I'd interview blue-collar Guggenei.
• 0:25
  SPEAKER_01: And his story is very powerful because you can imagine a name like that.
• 0:31
  SPEAKER_01: There is a crushing weight of legacy.
• 0:35
  SPEAKER_01: As we'll find out through his story, it takes lots of twists and turns and lots of heartache and challenges of being in a family business.
• 0:45
  SPEAKER_01: But just like me, family businesses they resonate with so many of our listeners because the reality is most businesses that are out there in the construction industry they start as a family company.
• 0:57
  SPEAKER_01: And so we have a ton of lessons we can learn here.
• 1:00
  SPEAKER_01: So I'm excited for you to check it out.
• 1:02
  SPEAKER_01: So let's get into it.
• 1:04
  SPEAKER_01: Eric Guggenheim, welcome to the turn.
• 1:08
  SPEAKER_01: Hey Corey, thank you very much.
• 1:09
  SPEAKER_01: I really appreciate you guys having me on.
• 1:12
  SPEAKER_01: You got a uh a really cool story, and so many of our listeners, of course, people in the contracting industry and and so forth, grew up in family businesses.
• 1:22
  SPEAKER_01: And so I think we all have a lot to learn from you.
• 1:25
  SPEAKER_01: Um but maybe let's take us back to the beginning.
• 1:28
  SPEAKER_01: Um, I know you grew up, your dad had a had a company, but tell us a little bit about your upbringing.
• 1:37
  SPEAKER_00: So I grew up in a uh in a you know in a real unique and unique home because I've got uh half uh brother and sister from my mom, and then my dad was this uh young Thundercat from AM, uh goes and does all the cat education and everything else uh from a only child family here in MrLO.
• 1:58
  SPEAKER_00: My dad's family obviously has been in the business world a very long time.
• 2:03
  SPEAKER_00: And so then you have my mom's family were immigrants that came over, you know, the American dream off the railroad, landed in town, did construction.
• 2:12
  SPEAKER_00: And my my mom's uh parents were incredible uh home builders and just mean truly the you know started out put two by fours together and then ended up building, you know, very high-end homes and retiring all the things.
• 2:24
  SPEAKER_00: And so, in some ways, it's like very same but yet different how they ended up at the end.
• 2:30
  SPEAKER_00: But with that said, family was a major part of all those components because uh uh one, uh free child labor.
• 2:37
  SPEAKER_00: No.
• 2:38
  SPEAKER_01: Yeah, but it's uh believe me.
• 2:39
  SPEAKER_01: Uh I started at 13, 14 in the office, so I get it.
• 2:43
  SPEAKER_01: Yeah.
• 2:43
  SPEAKER_00: And so, you know, my dad's side was in the oil and gas and in the uh beefpacking engineering supply.
• 2:51
  SPEAKER_00: So uh, you know, my dad's an engineer, then an oil and gas engineer, and so his family, you know, here in Amarillo, Texas, the beef capital of the world.
• 2:59
  SPEAKER_00: So they got into Vesarco, to uh all those things.
• 3:02
  SPEAKER_00: So the business side was always a part of it.
• 3:06
  SPEAKER_00: So is the engineering, so is building.
• 3:08
  SPEAKER_00: So you put the two families together, and you know, here's the offspring of that.
• 3:11
  SPEAKER_00: Uh, and but uh we always my mom always talks about, we have uh we always had uh uh my dad's girlfriend at the table, she was called the company, yeah, and she was there at every event and everything, good or bad, the company, whatever it may be, was there.
• 3:27
  SPEAKER_00: And uh and sometimes she's referred to in third person, and yeah, and that's really how I grew up.
• 3:33
  SPEAKER_00: You know, sometimes it was a sibling, sometimes it was a friend, sometimes it was an enemy, but business was always there.
• 3:38
  SPEAKER_00: So, with that said, I don't know that I know what the world would look like not being in an entrepreneurial family business environment.
• 3:48
  SPEAKER_00: And my parents were very visible with how a company's run, with what it takes, and and we were required to participate because we had to go to dinner that night.
• 4:01
  SPEAKER_00: And so that was gonna be the topic of dinner.
• 4:04
  SPEAKER_01: Yeah, isn't that true?
• 4:05
  SPEAKER_01: It's like it's so complicated because you wanna you want to be able to smile at Thanksgiving dinner, right?
• 4:14
  SPEAKER_01: Uh and I totally relate to this idea, like the business is always there.
• 4:19
  SPEAKER_01: It's like this this mistress that that's always around.
• 4:23
  SPEAKER_00: It is, and well, and I've given this, I've given this uh saying a lot, whether it's through YPO groups I've spoken with or business schools, or just anytime I've been asked to speak, uh especially in family business.
• 4:34
  SPEAKER_00: Family business is what drove me to education, drove me a lot of things because I'm anti-family business.
• 4:40
  SPEAKER_00: Like a lot of us, I hate family business.
• 4:42
  SPEAKER_00: I still hate family business, even though it that's the lifeblood of what we do, and most people do it wrong.
• 4:48
  SPEAKER_00: And, you know, I've spent a career trying to re put the pieces back together that traditional companies don't have and trying to become somewhat of an expert on helping other people understand.
• 4:59
  SPEAKER_00: Well, this make this makes me feel so much more normal.
• 5:02
  SPEAKER_01: I want to like, before we dive into the family, like what family businesses do wrong, I'd love to just kind of walk through the arc of your of your career cycle.
• 5:12
  SPEAKER_01: So you know, you start out and you're working in this paving business.
• 5:15
  SPEAKER_01: Um, what what what role do you have in in the business?
• 5:20
  SPEAKER_00: So in the paving business, it started in our parents' my parents' garage, literally with a giant silco machine that blew up, and I think I was like six, and I'm pretty sure that that house still has asphalt somewhere in there.
• 5:34
  SPEAKER_00: We will never be out.
• 5:34
  SPEAKER_00: And so then, you know, uh all of us grew up in that business, and then uh I knew how to I've been running crews since I was in high school, playing asphalt, stuff like that.
• 5:45
  SPEAKER_00: While other kids were making whatever minimum wages back then,$275, I was getting like nine dollars.
• 5:50
  SPEAKER_00: So one thing about my parents, you know, you have that this position pays this.
• 5:54
  SPEAKER_00: If you can do this, not a problem.
• 5:56
  SPEAKER_00: The flip side of that coin is because I'm your kid, you're gonna work double overtime.
• 6:00
  SPEAKER_00: And when you come home, you're gonna work double overtime, and you're not gonna get paid for that.
• 6:04
  SPEAKER_00: But but while everybody else is making you know little bucks here and there, I was over here rolling full full guy pay in the summers, and so it was great.
• 6:12
  SPEAKER_00: And the other part, when you work 80 hours a week, yeah, you don't you don't spend anything of it.
• 6:16
  SPEAKER_00: And you're like, oh my God, I'm so excited to go back to school.
• 6:19
  SPEAKER_00: This is amazing.
• 6:20
  SPEAKER_00: Yep.
• 6:21
  SPEAKER_00: But with that, so then I, you know, I left and uh had a uh a career as a uh a fishing guide in Colorado and all those things, and uh never really wanted to do the the paving company.
• 6:33
  SPEAKER_00: But uh as my parents started the uh carbon fiber specialty construction company and moved to Houston, there was this, okay, we've got this company what we do.
• 6:42
  SPEAKER_00: Uh I wasn't necessarily wanting to leave the guiding world, but had some massive knee surgery replacements and Christa Butte and wheelchairs really hard in the uh in the in the in the wintertime.
• 6:53
  SPEAKER_00: So I was like, oh my gosh, I'm not gonna be a fishing ski bun the rest of my life because I can't.
• 6:58
  SPEAKER_00: What am I gonna?
• 6:58
  SPEAKER_00: And I actually started thinking about like I need to really think about what I'm gonna do.
• 7:02
  SPEAKER_00: And so came back to Amarillo's kind of the home base.
• 7:06
  SPEAKER_00: And um the the fun part about this story is my dad uh and again got all the education, got the new technology, all the news things, and I'm like, okay, what's your database?
• 7:15
  SPEAKER_00: Who's your CRM?
• 7:16
  SPEAKER_00: And he gave me a stack of cards, and those days a MAPSCO book uh and said, everybody you need to know in a phone book and said, everybody you need to know is right here.
• 7:26
  SPEAKER_00: And that was our database.
• 7:27
  SPEAKER_00: Yep, your CRM.
• 7:30
  SPEAKER_00: And so, you know, I ran that company for a little bit and uh saw the opportunity, and that's still my background is looking at you know, mergers, acquisitions, selling things.
• 7:39
  SPEAKER_00: Uh, and you know, I saw a need uh from a really large competitor that we knew well.
• 7:44
  SPEAKER_00: And I said, you know, kid the same age, what are y'all gonna do when they get here?
• 7:48
  SPEAKER_00: I'm taking over this.
• 7:48
  SPEAKER_00: Y'all aren't big enough to bring in, you know, and they just say, Well, what do we buy you?
• 7:53
  SPEAKER_00: And I said, I called my folks and said, I just sold your company.
• 7:57
  SPEAKER_00: And within about 30 days, we were done, transactioned out.
• 8:00
  SPEAKER_00: And then I went and did a uh moved to Fort Worth and did uh other corporate type jobs and did well and took a took some little exits on those.
• 8:10
  SPEAKER_00: And what do you do when you take an exit?
• 8:11
  SPEAKER_00: You're brilliant.
• 8:12
  SPEAKER_00: So you start your own consulting company.
• 8:13
  SPEAKER_00: That's what all people do, and then you're back to Amway, you're trying to sell stuff back to your uh back to your family, like you want some Tupperware.
• 8:20
  SPEAKER_00: And so uh I took them on as a client, if you will, uh, because to help them scale.
• 8:25
  SPEAKER_00: And uh my contract right now is like 26 years.
• 8:28
  SPEAKER_00: Well, it's been expired for about 26 years.
• 8:30
  SPEAKER_00: I can leave any time.
• 8:31
  SPEAKER_01: So you the this carbon fiber, tell uh, you know, I don't know what that is, right?
• 8:36
  SPEAKER_01: So tell tell us so it sounds it's it's intriguing because paving sounds really different from like invention and engineering and carbon fiber.
• 8:44
  SPEAKER_01: Your dad's, you know, this kind of I don't know, serial entrepreneur, yeah, serial entrepreneur, but also kind of an inventor.
• 8:52
  SPEAKER_01: It sounds like an academic.
• 8:55
  SPEAKER_01: So tell us about this product he comes up with and what what's the business actually do?
• 8:59
  SPEAKER_00: So what we do is we use carbon fiber to replace steel in buildings, especially existing buildings.
• 9:06
  SPEAKER_00: Uh there's a the guy, the chemist from DuPont uh created a um who created polyurethane uh and retired came with this idea of you know what if what if we took this this really strong carbon fiber air mid fiberglass material and put it in some of my resins and used it for earthquakes against bridges.
• 9:27
  SPEAKER_00: And so he was here in Amarello and somebody knew somebody who knew somebody and said, hey, you guys should really get together.
• 9:34
  SPEAKER_00: And uh uh my dad and Mr.
• 9:37
  SPEAKER_00: Fife uh came up with this technology with using carbon fiber because carbon uh is about 60 to 80 times stronger than steel.
• 9:45
  SPEAKER_01: Amazing.
• 9:46
  SPEAKER_01: So you can take an existing building and do you reinforce the steel or do you take the steel out?
• 9:52
  SPEAKER_01: You reinforce the concrete.
• 9:53
  SPEAKER_00: We can do steel.
• 9:54
  SPEAKER_00: Most of the time it's concrete.
• 9:55
  SPEAKER_00: So it's concrete.
• 9:56
  SPEAKER_00: Okay.
• 9:56
  SPEAKER_00: You're in uh whatever, whatever medical center, and you're in downtown Denver, and you say, My gosh, we need to make the ambulatory larger, we need to take our imaging equipment that's heavy.
• 10:06
  SPEAKER_00: We need to go to the second floor.
• 10:08
  SPEAKER_00: We go to the second floor, it's not able to carry that big magnet.
• 10:10
  SPEAKER_00: You could use steel, but then you got to pour concrete and a shielding.
• 10:13
  SPEAKER_00: It takes about three to five months, about a million and a half dollars in that of construction, but then now you have your loss of revenue from shutting down.
• 10:23
  SPEAKER_00: We come in there over a weekend and do the whole entire job while the operating room is still going.
• 10:27
  SPEAKER_00: We just take the ceiling grid down, glue the carbon fiber to the concrete, and then on Monday we're done, and now you've lost no revenue and you've done it for about$100,000 versus about a million six dollars.
• 10:39
  SPEAKER_01: Amazing.
• 10:39
  SPEAKER_01: So, so the business, your dad kind of breaks off, it's an engineering business.
• 10:44
  SPEAKER_01: And then when do you come into that business?
• 10:46
  SPEAKER_01: And what's your role there?
• 10:48
  SPEAKER_00: Yeah, I came in in 2002, and they were having a hard time scaling the company.
• 10:54
  SPEAKER_00: Um, so I come in there and I help, I take the company from single location to multi-locations to putting in sales training procedures, operational procedures, what I like to call going from a family business to a full-grown big boy business, and where it's process-led versus founder led.
• 11:14
  SPEAKER_00: And I know very large family businesses that are still that are still family led, that are not process-led.
• 11:22
  SPEAKER_00: And they're they're a time bomb waiting to erupt, even though they've already, even though they've internally already eaten themselves out.
• 11:28
  SPEAKER_00: They just don't know they're dead yet.
• 11:29
  SPEAKER_00: Yeah.
• 11:30
  SPEAKER_01: So you're at the time, so you come in, you're helping to scale.
• 11:33
  SPEAKER_01: Where does it ultimately go with you, your role, and your dad over time?
• 11:39
  SPEAKER_00: Yeah, so I watched the technology go, and uh uh, and the founder of the materials, those kind of guys had uh territory agreements.
• 11:46
  SPEAKER_00: We trained all these groups uh because it's a certified applicator process, similar to like a certified welder or whatever, but there was no carbon fiber installers of it.
• 11:54
  SPEAKER_00: So we were the training ground.
• 11:56
  SPEAKER_00: So I use that as kind of my basis for the business as well.
• 11:59
  SPEAKER_00: If if we can train other groups and we can scale ourselves, we always kept Paul, uh, my dad, on the we kept him on the sales side, uh, in the sense of industry-based, there's certain things he really liked.
• 12:10
  SPEAKER_00: He really enjoyed certain industries, uh uh lots of tinkering on the engineering side.
• 12:15
  SPEAKER_00: That was always his flavor.
• 12:17
  SPEAKER_00: And then my mom is majorly part of the business.
• 12:20
  SPEAKER_00: Uh, my mom is actually the scary one.
• 12:23
  SPEAKER_00: My dad's he's your typical zany scientist who would prefer a lab coat versus balance sheets and and and HR and also I think I think actually my dad and I both have been written about HR at some point at the company.
• 12:36
  SPEAKER_00: Uh like you guys cannot find like this in front of everybody.
• 12:41
  SPEAKER_00: That's right.
• 12:42
  SPEAKER_00: Yeah.
• 12:42
  SPEAKER_00: And so um, so what I did at that point was uh my my parents were smart in the sense they put in a they saw where my vision was, which was this large scale.
• 12:52
  SPEAKER_00: Now we need to take this and go very, very big with it.
• 12:56
  SPEAKER_00: Um however, uh I was very young, and so they uh they put in a fiduciary board of directors with some really really powerful experienced guys who they say, look, we know this young guy's got all the all the all the goods, but at some level, even when you're young, it's the it's the essence behind YPO, it's lonely at the top.
• 13:19
  SPEAKER_00: In a family-run business, it's important that you don't overpromote even the best, even the best horse in the stable of stallions.
• 13:28
  SPEAKER_00: As my dad would say, we have to rein you back all the time because you don't know the race you're about to run.
• 13:34
  SPEAKER_00: But it's better than us having to sh to pop you to get you to run.
• 13:38
  SPEAKER_00: Right.
• 13:38
  SPEAKER_00: And there's a and that happens in family businesses a lot, especially with siblings.
• 13:43
  SPEAKER_00: One of them wants to go full speed, the other one does, and parents are trying to do this with them, make them the same, and they're not the same.
• 13:50
  SPEAKER_00: And that's just that's really hard for parents to accept, is not each kid, even in the business, is the same.
• 13:56
  SPEAKER_00: And the flip side is the kids may not care the same.
• 13:59
  SPEAKER_00: But few people sit down and say that hard thing of, is this what you want to do?
• 14:04
  SPEAKER_00: So on my side, I took this and scaled this thing, uh, and then went and started taking over other territories, other areas, to the point whenever the the manufacturer was sold to a public company, and I tried to buy the manufacturer, my mom and I did.
• 14:21
  SPEAKER_00: Dad did not.
• 14:22
  SPEAKER_00: This is our first time we had our first vision in the company, uh, to which led to the end, if you will, at some point over time.
• 14:28
  SPEAKER_00: I ended up moving with the uh public company, which working for public company is a lot different than working in a family business when you were entirely process-led with the family business dynamic, which moved into I took the company and bought that out of into private equity, using private equity to force my parents out, uh which was not a fun, fun process.
• 14:50
  SPEAKER_01: I got on peel some some uh the onion here a little bit.
• 14:54
  SPEAKER_01: So the business gets sold to a public company.
• 14:59
  SPEAKER_01: You merge on with the public they merge, okay merge with this public company, you stay on.
• 15:06
  SPEAKER_01: Now you're in this big public company, which is a really different thing than an entrepreneurial family business.
• 15:12
  SPEAKER_01: Yes.
• 15:12
  SPEAKER_01: And then you bring in a private equity backer and you buy the whole thing with a private, with a private equity sponsor, and that buys out the public business and your parents, or do they stay involved in some way?
• 15:27
  SPEAKER_00: Public public company actually closes all the division, gives me the opportunity.
• 15:32
  SPEAKER_00: Public company, a bunch of companies, the whole that gets rid of that whole entire deal, gives me the opportunity to suck out that uh like a carve out.
• 15:41
  SPEAKER_00: Yeah, like a carve out.
• 15:42
  SPEAKER_00: And it got to hire got to keep the offices in Nashville and the offices in Houston, California.
• 15:48
  SPEAKER_00: So good news is, you know, we're gonna take this debt that was, you know, the debt that was used by us, we're not gonna pay you back.
• 15:53
  SPEAKER_00: I'm gonna use private equity to take you that part out.
• 15:55
  SPEAKER_00: So we're made whole, everyone's made whole.
• 15:57
  SPEAKER_00: With that said, uh, let's use this as an as a as a this is an opportunity to get everybody out uh of this deal, uh, which was not their idea, but I use it since I couldn't get them to move on this, I used private equity and debt uh restructuring to do basically like a call.
• 16:17
  SPEAKER_00: So sometimes you have to just somebody has to make the hard decision, and that was you know, that was me.
• 16:23
  SPEAKER_00: And it was uh it was not fun.
• 16:25
  SPEAKER_00: It was it was the opposite of fun.
• 16:28
  SPEAKER_00: I believe that.
• 16:29
  SPEAKER_01: We are always looking for more amazing stories about founders in the construction industry, the trades, or anyone adjacent.
• 16:37
  SPEAKER_01: So if you've sold your company and gone through it and you want to talk about it on our show, shoot us a note.
• 16:43
  SPEAKER_01: Or if you've got a friend that you think would make a good guest on the turn, introduce us.
• 16:48
  SPEAKER_01: You can shoot us a note at infoiconicfounders.com.
• 16:51
  SPEAKER_01: Okay, now you buy this thing with private equity.
• 16:54
  SPEAKER_01: Now what happens?
• 16:55
  SPEAKER_01: Now you got a private equity partner, which is also a different thing than being on your own as a family business.
• 17:01
  SPEAKER_00: That that was uh fun, not fun.
• 17:04
  SPEAKER_00: So um the private equity bought into the same idea as everything else.
• 17:09
  SPEAKER_00: And here's the problem with some of the private equities.
• 17:12
  SPEAKER_00: We're an emerging technology where all the things sexy that private equity companies love when they look at these invisible horizons, but we're also an engineering firm, we're also a lot of other facets.
• 17:23
  SPEAKER_00: And so we have this really awesome looking trailing 12 and 24 that everybody loves, high margins, high all the stuff, all the things.
• 17:30
  SPEAKER_00: And and they love this this forward-looking runway, but many private equity companies miss in specialty in specialty business, especially, especially family-owned, is how we look at the forward runway.
• 17:42
  SPEAKER_00: Uh, because there's a lot of stuff that's intuitive.
• 17:45
  SPEAKER_00: There's a lot of stuff that's relational based.
• 17:47
  SPEAKER_00: There's a lot of stuff that, you know, yeah, you're for a 41-year-old company, you look like this backwards, because all private equity companies look backwards.
• 17:55
  SPEAKER_00: Banks love looking backwards.
• 17:57
  SPEAKER_00: And we're in the kind of business where we're beautiful backwards.
• 18:00
  SPEAKER_00: Concrete has a shelf life of about 50 years.
• 18:04
  SPEAKER_00: So we're in this place now where you're sharing all you're hearing on the news, all these bridges falling.
• 18:08
  SPEAKER_00: So horizon speaking, that's great.
• 18:11
  SPEAKER_00: The go-to-market strategy for private equity is hard because while we have this awesome looking forward pepture, when we take on a contract, we have to pay for it.
• 18:20
  SPEAKER_00: And so uh I'm somewhat gone at this point, more on the corporate board level, and they're obviously smarter, better, and faster.
• 18:28
  SPEAKER_00: 100%.
• 18:29
  SPEAKER_00: And I agree with them.
• 18:30
  SPEAKER_00: Except for the part they missed, which was oh my gosh, we have you know 50, 60 million dollars at a time in contracts.
• 18:38
  SPEAKER_00: We have to upfront 15, 20 million dollars.
• 18:42
  SPEAKER_00: And then their board of directors goes, We're now putting more company money into this company than its basis.
• 18:49
  SPEAKER_00: And and it looks like it's all upside down.
• 18:52
  SPEAKER_00: And it's like, well, in 90 days, you get it back.
• 18:54
  SPEAKER_00: But they didn't understand the project financing, and so it caused a lot of triggers.
• 18:58
  SPEAKER_00: You know, it was easy for me to come there and be like, Uncle, are we tired?
• 19:02
  SPEAKER_00: Uncle, we call it good.
• 19:04
  SPEAKER_00: And this is I'm really only 27 right now.
• 19:07
  SPEAKER_00: The gray was low from like two weeks of bad, but it's yeah, and it's true.
• 19:10
  SPEAKER_00: It's it's so most it is very stressful when you're a self-financed large construction company.
• 19:17
  SPEAKER_00: Banks don't understand it, private equity companies understand it because they evaluated you as a technology piece, not a brick and stick, massively capital intensive short-term loan type businesses.
• 19:29
  SPEAKER_00: And then, yeah, as we all know, it in a lot of private equity firms, when they start seeing that, oh my gosh, we're three times deeper than the valuation, they're always thinking of an exit.
• 19:39
  SPEAKER_00: Most most private equity companies are always looking at some sort of exit forward.
• 19:42
  SPEAKER_00: So, what if this doesn't come back?
• 19:44
  SPEAKER_00: What if this goes wrong?
• 19:45
  SPEAKER_00: It's like, yeah, now y'all get to see why we why we brought you in.
• 19:50
  SPEAKER_00: That's why you're here.
• 19:51
  SPEAKER_01: Private equity is a hot topic right now.
• 19:54
  SPEAKER_01: Because what we hear is that everyone's trying to diversify away from things that AI could replace.
• 20:03
  SPEAKER_01: And where are people looking?
• 20:05
  SPEAKER_01: Of course, construction industry.
• 20:08
  SPEAKER_01: You can't replace your lawnmower service, you can't replace your tree guy, your HVAC technician.
• 20:15
  SPEAKER_01: And so private equity's all over.
• 20:16
  SPEAKER_01: They're calling so many of the companies that watch this show and the clients I work with.
• 20:21
  SPEAKER_01: And what we hear is it's a mixed bag.
• 20:25
  SPEAKER_01: I don't think private equity is one size fits all.
• 20:29
  SPEAKER_01: They come in all shapes and sizes, and we have horror stories and we have amazing results.
• 20:36
  SPEAKER_01: Eric's story, he called it fun, not fun.
• 20:40
  SPEAKER_01: Sounds like they didn't understand what they were buying.
• 20:43
  SPEAKER_00: But I I've I've seen very few private equity companies do it correctly in construction, to be honest with you.
• 20:49
  SPEAKER_00: And I've seen hundreds of transactions.
• 20:51
  SPEAKER_00: They usually do some sort of lowered EBITDA multiple with some sort of buyout of future contracts.
• 20:58
  SPEAKER_00: And it's a very but that's the problem is you got mom and dad's families who have these big construction companies who don't know how to exit because they can't, because they're so tied up in retained earnings, they're so tied up in in cash flow management, they're so tied up in all these other things because most of them are so funded.
• 21:15
  SPEAKER_00: So then the minute you pull out the dad and mom and cousin who know how to manage the books, fields, all this other stuff, and put into corporate stuff, it starts falling apart pretty quick.
• 21:24
  SPEAKER_01: Oh, yeah.
• 21:25
  SPEAKER_01: No, it's I mean, look, I see this every day.
• 21:28
  SPEAKER_01: Uh, and of course, my own journey, and I sold a business that had a lot of people and was project-based.
• 21:35
  SPEAKER_01: And my dad always used to say, We're six weeks from broke, right?
• 21:40
  SPEAKER_01: We didn't, there was there's no, there's no, we didn't have you know any kind of forecast because we bid a job, two weeks later we did the job, and the story goes on, and guess what?
• 21:52
  SPEAKER_01: We're always up and to the right, but I have no idea where it's coming from in the week seven and eight.
• 21:57
  SPEAKER_01: And so you sell a business to a private equity fund and they say, well, uh, you know, give us your 24-month forecast.
• 22:03
  SPEAKER_01: I see this friction uh all the time with specialty firms because that's all I deal with as specialty contractors, and it's so true.
• 22:12
  SPEAKER_01: And then you talk about a situation where you've got to put actually more capital in.
• 22:15
  SPEAKER_01: And of course, private equity wants to put in a little bit of equity at the beginning and a lot of debt over the next three, four, five years and exit.
• 22:21
  SPEAKER_01: The idea of putting in more cash is anathema, and they're gonna think about it as actually equity, which is dilutive, and it's just it's so it's it's so funny.
• 22:33
  SPEAKER_01: Um, because you're right.
• 22:35
  SPEAKER_01: I've seen it a hundred times, and you know, the private equity guys watching, and a bunch of them watch this, should take note of this that we've got to start thinking in a different way about contracting.
• 22:46
  SPEAKER_01: Um, if they want to, everyone's saying right now, I got to diversify away from AI, got to get into blue-collar space.
• 22:52
  SPEAKER_01: But if you want to do that, you have to understand what you're buying.
• 22:55
  SPEAKER_01: Thanks for joining us on This Week of the Turn.
• 22:57
  SPEAKER_01: Our conversation with Eric was so interesting that we broke the episode in two.
• 23:01
  SPEAKER_01: So make sure you join us next time.
• 23:03
  SPEAKER_01: And if you know somebody that would enjoy this show, forward it to them.
• 23:07
  SPEAKER_01: And in the meantime, make sure you subscribe.
• 23:10
  SPEAKER_01: Until next time, let's win.