Frequently Asked Questions
How much capital do you have to invest?
We have up to $40 million in equity capital available to complete a transaction. Depending on the structure of the transaction, we may be able to acquire a business valued up to approximately $80 million. Our minimum equity cheque is $3 million.
What are the minimum financial parameters for an investment?
For most businesses, I am looking for a minimum of $1 million in EBITDA, or pre-tax profits, and a minimum of $5 million in revenue.
The one exception is software-as-a-service businesses with a subscription licensing model, where I am looking for between $2.5 million and $7 million in annual recurring revenue.
How do you look at valuation?
There are many factors that come into the valuation, including historical performance of the business, future outlook, and ease to transition it. In general, my offers/valuations would be in line with typical private equity or strategic acquirers. Depending on the situation, my offers would generally include between 75% and 100% of the purchase price paid upfront in cash.
Beyond the financial characteristics of the offer, what differentiates my proposal is that I would personally step in and operate the business, meaning you could transition out personally after as short as 3-12 months (depending on complexity of transition). Additionally, I would retain your current team and brand, and I would work to continue build the business as an independent company.
How do I know you can close the deal?
I have personally executed several M&A transactions with Imperial Capital, so am intimately familiar with the process. Additionally, most of my investors in Red Oak are serial backers of acquisitions of businesses in very similar circumstances by young entrepreneurs with strong professional track records. Most have invested in several such transactions in the last 12 months. Many of the transactions are listed on their websites, which you can click through from my investors page.
All the investors in the fund have paid initial capital into the fund to cover costs of searching for the target business and performing due diligence, with the intent of of then investing in the ultimate acquisition itself.
I'm happy to also provide more information and share specific recent transactions similar to your company and located in Canada. If we proceed past the NDA stage, I'm also happy to connect you directly with my investors or with the former owners of companies who recently sold to them through similar structures.
Where are Red Oak's investors from?
Why are you seeking to acquire a business?
I have always had entrepreneurial aspirations and have wanted to run a company. In my youth, I was involved in several businesses owned by my extended family including a private label shaving products business, a manufacturer of specialised electronic components, and a fire alarm services provider. I was also always inspired by the entrepreneurial success stories.
Although I ran a small business through University, making corporate websites and providing IT support services to small businesses, I got into the world of mid-market companies after graduating with my BBA by joining a strategy and operations consulting firm. I had the opportunity to work with a huge variety of mid-size and large businesses, and through it got a wealth of interesting ideas for companies to launch. More importantly though, I started to realise that so many successful entrepreneurs weren't the founders of their companies, but rather found a successful existing concept that had significant room to scale.
After being with the consulting firm, I joined Imperial Capital, a mid-market private equity fund manager, where I had the opportunity to support entrepreneurs building companies in a range of often obscure and overlooked niches. There again, many were the second owners of these companies, leading them through significant growth. I realised that this was my calling, and having then had over a decade of experience working with entrepreneurs building companies at this stage, I knew it was the path I wanted to take.
Are you really going to devote all of your time to my company?
Yes, I set up Red Oak Succession Capital to find one business to acquire, with the goal of operating it as CEO. I'm not trying to build a traditional private equity or venture capital firm.
Do you have the skills to operate my business?
In addition to my professional track record, I would point to the confidence of my investors in backing me and investing in the fund. Two of them are my former employers over the past decade, and most of the recent are serial investors in similar succession buyouts by young entrepreneurs. The seasoned serial investors have strong track records and significant experience determining which entrepreneurs they're willing to back.
You will certainly know more about your business and industry the day we do a transaction, but I do believe I will bring complementary skills from helping a range of different businesses. Through the transition plan we will jointly develop, we'll also ensure that knowledge and relationships are transferred effectively. Thereafter, through a combination of learning the business, bringing my experience, and bringing the experience of my investors, I believe I'll be able to accelerate the growth of your business (and if I don't believe I can do so, I won't do the deal).