Expert Insights on M&A and Private Equity in the Lower Middle Market With Scott Weavil

In this exciting episode of the DealQuest Podcast, Scott Weavil, founder of Sierra Pacific Partners, spills all the tea on his journey - from being a Wall Street M&A attorney to running his own investment banking firm. Scott's firm is a boutique M&A advisory firm that focuses on the lower middle market. He breaks down how to structure business deals that actually get you big results and shares some sneaky-good negotiation strategies.

With years of doing-the-thing under his belt, Scott dishes out some golden advice for entrepreneurs who want to close better deals, build solid partnerships, and create real, lasting value. Whether you’re looking to level up your deal-making skills or grow your business, this episode is packed with actionable tips you can actually use. Definitely worth a listen if you want to level up!

FIND YOUR SWEET SPOT

Scott Weavil started his career as a lawyer in 2008, working on M&A transactions and hedge fund formations. He eventually transitioned to a small law firm, and had a client who was looking to sell their business. Scott helped the client navigate the process, and realized that there was a gap in the market for M&A advisors who could serve the lower middle market.

The lower middle market refers to companies with valuations between $5 million and $200 million. This market is underserved by traditional investment banks and business brokers, who often focus on larger or smaller deals. Scott saw an opportunity to provide M&A advisory services to this market, which has a high demand for expertise.

Scott's firm uses a combination of technology and outsourcing to balance the needs of the lower middle market. They use tools such as database services, valuation software, and analyst services to provide high-quality advice to clients. By expanding and contracting their services as needed, Scott's firm can keep costs low and provide competitive pricing to clients.

CAREFULLY CONSIDERATE ROLLOVER EQUITY AND EARNOUTS REQUIRE

Scott Weavil emphasizes the importance of carefully considering rollover equity and earnouts in a deal. He notes that sellers should view rollover equity as a separate investment decision and consider whether they would make that investment as a standalone deal. He also discusses the challenges of conducting due diligence on rollover equity, particularly when dealing with larger organizations.

Scott Weavil discusses the challenges of negotiating earnouts, particularly when it comes to defining the efforts required to achieve the earnout. He notes that buyers may be reluctant to promise specific efforts, as this can create a hook for litigation. However, sellers may still want to ensure that the buyer is committed to achieving the earnout.

ACCEPT THE LOSS OF CONTROL

One of the most significant challenges sellers face is the loss of control over their business after the sale. Scott Weavil uses the analogy of someone buying a house, and getting to choose the paint color to illustrate this point. Just as the new homeowner gets to decide how to decorate and maintain their property, the buyer of a business gets to make decisions about the company's future, even if the seller wouldn't have made the same choices themselves.

Sellers must be prepared to accept that the buyer will make decisions about the business, even if they don't align with the seller's vision. This can be a difficult pill to swallow, especially for entrepreneurs who have poured their heart and soul into building their business. However, it's essential to understand that this is a natural part of the sales process.

DISTINGUISH BETWEEN DEAL BREAKERS AND PREFERENCES

Sellers often have a list of things they want to ensure happen after the sale, such as taking care of employees or maintaining the company's legacy. However, not all of these concerns are deal breakers. Sellers must distinguish between what is truly non-negotiable and what is a preference.

Deal breakers are issues that are so critical to the seller that they would be willing to walk away from the deal if they are not met. Preferences, on the other hand, are issues that are important to the seller but not essential. Sellers must be honest with themselves about what they are willing to compromise on and what they are not.

UNDERSTAND YOUR BOTTOM LINE

Scott and I discuss the concept of a "true bottom line," which refers to the point at which a seller is willing to walk away from a deal. This is a critical concept for sellers to understand, as it can help them navigate the negotiation process. Sellers often don't know their true bottom line until they are faced with the possibility of losing the deal. It's essential to take the time to reflect on what is truly important to you and what you are willing to compromise on. This will help you navigate the negotiation process with confidence and ensure that you get the best possible outcome.

THE ROLE OF EGO IN NEGOTIATIONS

Ego can be a major obstacle to reaching a deal. When people get their ego engaged in a particular issue, they can become unwilling to compromise. This can lead to a breakdown in negotiations and a failure to reach a mutually beneficial agreement. It's essential to separate one's ego from the negotiation process and focus on what's truly important.

Negotiations can be a complex and challenging process, but with the right approach, you can achieve your goals and gain the freedom you desire. By getting clarity on your objectives, separating your ego from the negotiation process, and seeing the big picture, you can navigate the negotiation process with confidence and success. Remember, freedom is not just about doing what you want, when you want, but also about having the ability to make choices and pursue your passions.


Tune into this episode to gain valuable insights from Scott Weavil on navigating the complexities of mergers and acquisitions. Whether you're an entrepreneur or business leader looking to buy or sell a business, this discussion offers a wealth of knowledge and experience to help you navigate the deal-making process.

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Listen to the Full DealQuest Podcast Episode Here

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FOR MORE ON SCOTT WEAVIL:
Scott Weavil's firm
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FOR MORE ON COREY KUPFER:
Corey Kupfer's LinkedIn
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DealDen

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

Get deal-ready with the DealQuest Podcast with Corey Kupfer, where like-minded entrepreneurs and business leaders converge, share insights and challenges, and success stories. Equip yourself with the tools, resources, and support necessary to navigate the complex yet rewarding world of dealmaking. Dive into the world of deal-driven growth today!