The Transaction Abstract Podcast

The Transaction Abstract by Redpath and Company is hosted by Joe Hellman, Partner, CPA, and M&A Advisory Practice Lead and covers all things M&A—providing you with a comprehensive acumen and insightful conversations. Special guests include experts from the world of investment banking, private equity, family offices, search funds, angel investors, attorneys, corporate development officers, and other M&A advisors. Learn from the experts on all aspects of M&A—because buying or selling a business shouldn’t be trial by fire. From Redpath and Company, an accounting and advisory CPA firm based in Saint Paul, Minnesota.

ESOPs as a Business Exit Strategy: Key Insights from Tom Walker 03/31/2025

ESOPs as a Business Exit Strategy: Key Insights from Tom Walker In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with with over 35 years of ESOP experience, to explore Employee Stock Ownership Plans (ESOPs) as a business exit strategy. What is an ESOP? An ESOP is a qualified retirement plan similar to a 401(k), but with two key differences. First, the primary investment is company stock, and second, it is funded primarily through company contributions rather than employee contributions. As employees work at the company, they accumulate stock in their accounts, allowing them to benefit from the company's success over time. Walker explains that while an ESOP might not be suitable for every business, it provides a unique transition option for owners approaching retirement who value their company legacy and employee relationships. Ideal Candidates for an ESOP Walker suggests the following characteristics for businesses considering this path: Owners approaching retirement (within 5-6 years) who do not want an immediate exit Companies with 25+ employees (though exceptions exist) Business value exceeding $5 million to offset transaction costs Owners who prioritize legacy and employee welfare over maximizing sale price Companies with steady growth and positive cash flow A strong company culture where employees have contributed significantly to success While owners typically receive about 90% of what they might get from a , the ESOP offers other advantages, including a significantly higher transaction completion rate compared to traditional sales processes. Valuation and Governance Considerations One common misconception about ESOPs involves valuation. Walker emphasized that "The ESOP cannot pay more than fair market value," which is determined by a qualified independent appraiser engaged by the ESOP trust. This addresses Department of Labor concerns about potential overvaluation. For owners transitioning to an ESOP structure, a commitment period is typically required: Owners who are actively managing the business usually need to commit to 3-5 years post-sale Owners with established management teams might only need to stay 1-2 years to ensure a smooth transition Despite concerns about governance challenges, Walker noted that when ESOP companies later decide to sell, participant approval votes typically achieve 70-90% support when management makes a compelling case for the transaction. Tax Benefits and Current Trends A significant advantage of ESOP structures emerges when the ESOP owns 100% of an S corporation. In this scenario, the company pays no federal income taxes, freeing approximately 35% of earnings that would have gone to the government. This "found money" can help repay acquisition debt and increase company value for ESOP participants. Walker observes growing interest in ESOPs, particularly as interest rates decrease and baby boomer business owners continue moving toward retirement. While higher interest rates temporarily dampened enthusiasm due to financing challenges, the market appears to be rebounding. "I think it is a really good tool," Walker concludes. "People have heard all sorts of myths about ESOPs, but if you have a good advisor who can take you through this, that good advisor can help identify and screen out 90% of the not-so-good situations." Listen to more episodes of for additional insights on buying and selling businesses. /episode/index/show/955e3584-1a60-464f-8009-c5d9d104e002/id/35944725

Market Trends and Transaction Insights with PGIM Private Capital 03/03/2025

Market Trends and Transaction Insights with PGIM Private Capital In this latest episode of The Transaction Abstract, Joe Hellman sits down with to discuss current market conditions and transaction trends. Introduction to PGIM Private Capital , part of Prudential Financial's investment management business, operates across various asset classes including public debt, real estate, and private equity. Their Minneapolis office covers five states—Minnesota, Iowa, Nebraska, and the Dakotas, providing senior debt financing, structured financing, and minority equity investments for businesses across the credit spectrum. Current Market Conditions and Deal Flow The current market is experiencing a convergence in transaction multiples, marking a positive shift from the valuation disconnects seen 24 months ago. While seller expectations have moderately adjusted, Stuart notes that deal flow remains selective. As Stuart observes, "If the only way you can make the deal work is by getting a rate cut, so you get the cost of financing, I can guarantee you this is not the right deal for you." Private businesses are currently more active in completing transactions compared to public companies, largely due to their ability to make decisive moves without extensive stakeholder consultation. Deal Characteristics and Financing Trends Successful transactions in the current market share several key characteristics: Direct sourcing through long-term relationships Strong cultural alignment between Integration and cost synergy potential Emphasis on higher-quality assets Increased utilization of junior capital as an alternative to traditional senior debt financing Quality remains paramount in today's market. "This is not a great market for storied credits. It is going to be higher quality assets, and in those situations, there is plenty of money available on the sidelines," Stuart notes. Looking Forward While optimism exists for increased deal activity in 2025, market participants await greater clarity on interest rates, tariffs, and U.S. policy. The financing market remains broad with ample capital available, though accessing it requires the right partnerships and connections. When discussing market outlook, Stuart states: "There is a trove of sellers on the sidelines waiting to do something, but the true unleashing requires resolution on both the economic and political fronts." To hear more about this informative discussion of market trends and transaction insights, listen to the full episode of The . /episode/index/show/955e3584-1a60-464f-8009-c5d9d104e002/id/35510805

Understanding Private Equity vs. Strategic Buyers: Insights from Borgman Capital 02/03/2025

Understanding Private Equity vs. Strategic Buyers: Insights from Borgman Capital In this latest episode of the , Joe Hellman explores the crucial differences between private equity and strategic buyers in mergers and acquisitions, providing valuable insights for business owners considering a sale. Joe is joined by , Managing Director at , bringing over 20 years of M&A experience. Drawing from his extensive background, Axelrod offers a unique perspective on how different buyer types approach acquisitions and what organizations should consider when evaluating their options. Understanding Strategic vs. Financial Buyers The M&A landscape features two primary types of buyers, each with distinct approaches: Strategic buyers typically operate within the same industry as their acquisition targets, focusing on operational synergies and long-term integration. Their goal is to create value through combined operations, with no predetermined exit timeline. Private equity firms represent backed by investors seeking returns on their capital. These firms focus on operational improvements, revenue growth, and margin optimization, typically planning for an exit within five to ten years. Axelrod also introduces "quasi-strategic" buyers: private equity-backed operating companies that bridge these approaches by combining industry expertise with financial backing. Breaking Private Equity Misconceptions Common misconceptions often stem from highly publicized negative cases, but the reality is different. Axelrod explains how private equity ownership frequently preserves existing operations and supports management teams, particularly in the lower middle market where Borgman Capital operates. Unlike strategic buyers, who might consolidate facilities due to operational overlap, private equity firms investing in standalone businesses often maintain existing infrastructure and workforces. This approach promotes sustainable growth rather than immediate cost reduction. The Private Equity Advantage Private equity firms can move quickly and adapt to different situations. While strategic buyers, especially larger corporations, might be constrained by board meeting schedules and rigid approval processes, private equity firms can often respond quicker to opportunities. Axelrod highlights how Borgman Capital balances this speed with thorough due diligence, ensuring both efficient execution and proper evaluation. The firm can deploy resources quickly while maintaining its commitment to careful analysis. Looking to the Future The approaching "" can be beneficial for M&A transactions. As baby boomer business owners prepare for transition, private equity firms are offering more sophisticated approaches that address both financial and operational considerations. Whether choosing a strategic or financial buyer, owners should find a partner whose approach aligns with the organization's objectives. To hear more insights from this informative discussion about the evolving landscape of private equity and strategic acquisitions, listen to the full episode of the Transaction Abstract Podcast. /episode/index/show/955e3584-1a60-464f-8009-c5d9d104e002/id/35128835

Succession Planning and Wealth Management in M&A Transactions 12/12/2024

Succession Planning and Wealth Management in M&A Transactions In this latest episode of the Transaction Abstract Podcast, Joe Hellman dives into the intersection of wealth management and mergers and acquisitions. Joe is joined by Craig Kleis and Bob Dietz from to explore how succession planning and wealth strategies can impact post-transaction outcomes. From pre-transaction preparation to navigating life post-sale, Kleis and Dietz offer valuable insights for business owners looking to safeguard their personal and financial future. Why Succession Planning and Wealth Management Matter goes beyond readying a business for sale—it’s about securing the owner’s financial future. Kleis highlights the importance of personal financial planning, while Dietz emphasizes how tax and estate planning can maximize after-tax wealth, making succession planning an essential part of M&A. The Importance of Pre-Transaction Planning Preparation is key—even when a transaction isn’t imminent. Dietz stresses steps like determining lifestyle-based "core capital," optimizing tax structures, and aligning the business for sale to achieve better outcomes. Early planning offers clarity and confidence when it matters most. Managing the Transaction Process During a transaction, all parties must stay focused on the big picture. Kleis and Dietz share practical examples of how understanding deal structures and tax implications can make a significant difference in the M&A process. Life After the Sale Transitioning from business ownership to personal wealth management can be daunting. Kleis and Dietz provide strategies for risk management and aligning investments with long-term goals to help owners adjust to their new financial reality. Both guests agree: early engagement in wealth management provides flexibility and better outcomes, ensuring both the business and owner are . To hear more insights from this engaging discussion, listen to the full episode of the Transaction Abstract Podcast. /episode/index/show/955e3584-1a60-464f-8009-c5d9d104e002/id/34412535

Exploring Growth through Roll-Up Strategies and Operational Scaling 11/14/2024

Exploring Growth through Roll-Up Strategies and Operational Scaling In this episode of The Transaction Abstract podcast, Joe Hellman of Redpath and Company welcomes Kiel Larsen of to discuss how strategic acquisitions and operational improvements can drive growth in fragmented industries. The conversation highlights the potential of roll-up strategies for creating value, building a sustainable operational foundation, and fostering growth. Setting the Stage: The Power of Roll-up Strategies Bridgeway Partners, a middle-market investment firm, specializes in roll-up strategies, acquiring and uniting businesses within niche markets under a single platform. Their investment in exemplifies this approach. Clarity Salt started as a single distributor, Davis Wholesale Supply, and expanded into a cohesive network of salt distribution companies, demonstrating how consolidation can increase efficiency and market strength. Building a Scalable Foundation For Bridgeway Partners, building a scalable infrastructure was key to successful integration. Early investments in cloud-based ERP systems and additional management roles enabled Clarity Salt to operate more effectively and support future acquisitions. This structured foundation allowed Bridgeway to rapidly grow Clarity Salt's footprint across the Midwest and East Coast. Balancing Integration with Autonomy Bridgeway’s approach emphasizes balancing integration with the autonomy of each acquired company. Initially, Bridgeway closely supports each new addition to . Over time, they transition to a more advisory role, allowing each company to retain its unique strengths while benefiting from the resources and scale of the larger platform. Insights for Business Owners This episode highlights the advantages of consolidation for in fragmented markets. By partnering with firms that bring both capital and operational expertise, owners can achieve growth that might not be feasible independently. Bridgeway’s model showcases the importance of finding the right partner who aligns with the vision for growth and sustainability. /episode/index/show/955e3584-1a60-464f-8009-c5d9d104e002/id/33936092

Evaluating Software Companies in Mergers and Acquisitions (with Anders Olson of Hennepin Partners) 10/08/2024

Evaluating Software Companies in Mergers and Acquisitions (with Anders Olson of Hennepin Partners) Anders Olson, director at , joined The Transaction Abstract podcast host, Joe Hellman of , to explore the key aspects of technology mergers and acquisitions (M&A), particularly in the software sector. As they delve into the topic, they emphasize the growing relevance of software and the specific factors that make it a highly sought-after asset in today's market. Olson explains that software has become pervasive, powering everything from our phones to toothbrushes. A quote by venture capitalist Marc Andreessen is highlighted: "Software is eating the world," illustrating software's increasing ubiquity and mission-critical nature across industries. Hellman and Olson then shift the focus to software in M&A transactions, emphasizing that software businesses are often valued for their recurring revenue models rather than their profitability. Olson underscores that software is generally more resilient during economic downturns because businesses rely heavily on it for their day-to-day operations. This makes software assets particularly attractive to investors and companies looking to grow through acquisition. Olson goes on to detail the top metrics investors focus on when evaluating a software company. Among the key performance indicators (KPIs) are: Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR): These metrics are crucial for determining the predictability of future revenue. They highlight the subscription-based model of most software companies, which makes their income streams more stable. Retention Rates and Churn: Investors look closely at how well a software company retains its customers. Tracking both customer churn (logo retention) and dollar retention (the amount of money retained from existing customers) is vital in understanding the company's long-term revenue potential. Customer Acquisition Costs (CAC) and Lifetime Value (LTV): These KPIs reflect the cost of acquiring a customer and how much revenue that customer is expected to generate over their relationship with the company. A favorable ratio between CAC and LTV is critical for growth. Net Promoter Score (NPS): This qualitative measure reflects customer satisfaction and loyalty by surveying how likely customers are to recommend the product to others. A particularly important metric in software M&A is the Rule of 40, which combines revenue growth and profit margins (EBITDA). A company meets the Rule of 40 if its growth rate and profit margins add up to at least 40%. This metric has become a standard for evaluating the balance between growth and profitability in software businesses. Olson mentions that in recent years, buyers have shown a preference for companies that achieve a balance of at least 10% revenue growth and healthy profit margins, though higher growth rates were favored pre-COVID. The conversation also touches on the importance of preparing for a liquidity event, whether a company is aiming for a sale or seeking external funding. Olson advises business owners to start tracking KPIs early, even if they don't plan on selling immediately. Having strong organizational processes in place and a clear growth roadmap is essential for maximizing valuation when the time comes. In the latter part of the podcast, Olson discusses current trends in software valuations. Despite recent market fluctuations, software remains a resilient and highly valued sector. Premium software assets with strong recurring revenue streams can still command double-digit ARR multiples, although valuations have slightly moderated from the post-COVID surge. For businesses with lower growth but strong profitability, buyers might shift their focus from ARR to EBITDA multiples, underscoring the importance of a balanced financial profile. Overall, the episode offers a deep dive into the critical metrics and strategies that drive successful software M&A transactions, providing both business owners and advisors with actionable insights on preparing for and navigating this complex landscape. /episode/index/show/955e3584-1a60-464f-8009-c5d9d104e002/id/33366402

The Impact of an M&A Attorney in the Transaction Process (with Maggie Tatton, Ballard Spahr) 09/16/2024

Experiencing an M&A Transaction Process for the First Time (w/Spencer Gerberding) 08/20/2024

Betting on Yourself: The Self-Funded Transaction (with Kevin Bibelhausen of Fruition Capital) 07/23/2024

2024 M&A Market Trends Through the Eyes of an M&A Attorney [with Ryan Miske of Faegre Drinker] 06/17/2024

Lessons and Insights Learned from the Buy-Side Transaction Process (with Sam Van Hon of PACK Private Capital) 05/14/2024

Supply Chain Considerations When Preparing to Sell a Business [with Rob Kress of Waypost Advisors] 03/20/2024

M&A Middle Market Update: 2023 Year-in-Review and 2024 Outlook (with Mike Hirschberg of Northborne Partners) 02/21/2024

Using Data to Tell Your Company's Unique Story in a Transaction (with Aaron Yentz of Blue Ops Partners) 01/10/2024

Using Data to Tell Your Company's Unique Story in a Transaction (with Aaron Yentz of Blue Ops Partners) Every company has a story that details how their innovative product or service idea came to be. That story typically includes how they were founded, how they grew and expanded, and how they matured into the organization they are today. That story may encompass a journey that started over one hundred years ago—or it could be the newest startup that began with a fledgling idea less than a few years prior. But what type of story does your company’s data tell? Do you even have the data? If so, do you have access to it? And what role does that data play in today’s M&A market? The story your company’s data tells is almost more important than the historical record that you might have documented in a book, a brochure, or perhaps in a digital document on your laptop. So how do you leverage it as part of an M&A transaction? Aaron Yentz, Vice President at , joined Joe Hellman, partner at y, to discuss the role that data analytics plays in helping deal teams, management teams, private equity, and investment bankers make the most of data during the sale process and to maximize value for their clients. Assessing Data Quality: “Garbage In, Garbage Out!” The quality of your company’s data relies on a myriad of factors including what systems you’re leveraging, how the data gets entered, and how often it gets updated. But what’s certain is that the quality of data is greatly affected by whether or not you have well-established processes and systems for collecting and entering the data you do gather. Factors the contribute to less-than-optimal data quality include: Data that’s entered manually or multiple times in multiple systems Non-user friendly systems that do not get used which results in missing or incomplete data Lack of access to an older/previous ERP system and/or a system transition (could be a case that results from the company engaging in a recent add-on acquisition) What About “Unusable” Data or “Missing” Data? It’s not often that a company’s data is truly unusable or missing. In many instances, “missing” data might be due to assumptions that it does not exist because there are no KPI’s established that would leverage specific data sets. Typically, this assumption exists because the data was never looked for in the first place or pulled out and used as a measurement tool—and therefore leadership assumes the data is nonexistent. Even data considered “unusable” may just need a little more work to mine the information that is there. Even incomplete data can help tell a story and highlight what’s going on in the business. It might just take a little more work to extract those specific nuggets that management can speak to in the transaction process. How Do Companies Get at KPIs Within the Data Set? If management doesn’t have the time, resources, or data to invest in integration or dashboard creation, the organization helping mine the data will focus on the “nice to have” KPIs. This includes leveraging the input of other transaction advisors (such as bankers) to understand what buyers are paying the most attention to and to get at KPIs that matter most for the business or industry. Sometimes the process includes taking data from different systems and marrying them together to normalize the data set. But no system is perfect and there are typically always gaps in data. The goal when extracting data is to add structure to the data and provide explanations to ensure the analytics are still meaningful. Be Ready for the Data Request It’s getting more and more common for more granular data to be requested, especially on the buy-side. Teams should be prepared for those requests by addressing them effectively and in a timely manner—which can help give more comfort to the buyer. Final Thoughts From Aaron Yentz: Understand the value that data can have on the sell side. Tools and technology to leverage data will become more efficient and cost-effective and they will continue to make their way to the lower end of the middle market. Leadership teams will no longer have a reason to not be prepared to leverage data and analytics to tell their company’s story in a transaction. /episode/index/show/955e3584-1a60-464f-8009-c5d9d104e002/id/29426783

The Impact of Supply Chain in a Potential Transaction (with Rob Kress of Waypost Advisors) 12/07/2023

The Impact of Supply Chain in a Potential Transaction (with Rob Kress of Waypost Advisors) There are a myriad of factors that ultimately influence the sale price of a business in a transaction. By properly addressing those factors prior to going to market, sellers can eliminate surprises and work toward commanding a more favorable purchase price. For manufacturers and distributors, one area that may be overlooked prior to engaging in a transaction might be their supply chain—including raw materials and/or product inventory. By addressing supply chain challenges early, along with any inventory issues that may negatively impact cash flow and/or revenue, sellers have a better opportunity to correct any issues and communicate the best story regarding the state of their business to interested buyers. Rob Kress, CEO of Waypost Advisors, joined Joe Hellman, partner at Redpath and Company, to discuss the impact of a company’s supply chain on revenue and cash flow—and what business leaders can do to improve their current state prior to a transaction. Rob advises clients to consider three key areas or concepts to address supply chain and inventory challenges in order to be better prepared to go to market with their businesses. You need to have an effective planning and communication process from sales to operations to procurement. Alleviate the tension and difficult conversations between these functional areas of the business by improving communication channels and planning processes. Effective tools in place to measure KPIs and perform supply chain and inventory analyses—starting with your ERP system. This includes training your team regarding what to look for in the data and metrics. Capture efficiencies through the proper use of your systems—or get the right systems in place (i.e., software vs. Excel spreadsheets). Be in a constant state of improvement to get yourself out of your supply chain issues to improve cash flow. Companies have not “de-risked” their supply chains post-pandemic. One of the ways to do this is to diversify their supply chain by looking at where materials and products are sourced. But they need to also balance de-risking their supply chain with the potential cost impacts of doing so. Rob encourages businesses to see what else is out there for suppliers and ways to make supply chain improvements. Don’t be satisfied with the status quo. Your competition is most likely already doing these things and you need to ensure you can keep up—and surpass them. Waypost Advisors is an end-to-end supply chain consulting firm serving middle-market clients. Visit for more information. /episode/index/show/955e3584-1a60-464f-8009-c5d9d104e002/id/28979018