Joel McGuire of Army Ranger Capital Joins Lincoln Archibald of Fund Launch

to have you on today, Joel. How you doing, man?

Thanks, good seeing you. I'm here in San Diego beating the winter a little bit.

Yeah, well, there we go. Hey, why don't you start off by just introducing yourself to everyone and, you know, telling us a little bit about your background, and we'll segue into your business?

I think— yeah, I'm Joel McGuire. I've been part of the Black Card Group since almost since it started in about the fall of 2020. Um, I'm the Army Ranger, Army Ranger Capital. It's a defense aerospace private equity fund. I'm trying to raise money to perform different acquisitions in the private equity space for aviation and defense-related businesses. I have a— my management leadership background is as a military veteran. I was an officer in the Army. After that, I went to law school at Northwestern, and I spent 20 years as a contract lawyer and a contract litigator. And one of my clients towards the end of that, a couple years ago, asked me to help with the sale of his business as somebody made an offer to him. So I deep dove into that whole area and fell in love with it, and that's what I want to do now. So I'm raising money, buying, getting business partners and different industry experts in the defense and aviation and aerospace fields, and, um, doing deals. So awesome.

So wait, let me get this straight. So, uh, you were in the military, law school, set up your, your own law practice, right?

Yes, after being a partner in a large law firm, I went off and started my own practice.

Cool.

And then now you're, uh, launching your private equity fund?

Yes, I got some M&A certifications in the advisory fields. I'm a Certified Merger and Acquisitions Professional and a Certified Merger and Acquisitions Advisor. I also got a neat integration manager— Certified Acquisition Integration Manager training and certification. Which is very unique. There's just not very offered very much, and it's definitely an area that's overlooked in, in the M&A and private equity fields. So I love bringing all that to work here with Army Ranger Acquisitions, which is the acquisitions arm of Army Ranger Capital, and then the different corporate subsidiaries.

Cool.

Well, that's awesome. So you probably— it sparked your interest doing M&A law work, you know, getting into the, getting into the space. So Why don't you tell us a little bit about Army Ranger Capital? What's your, what's your buy box? You know, what type of businesses are you looking at and why?

Well, the most recent one is the Aerial Group LLC. We're trying to get 6 or 7 aviation transport businesses and different vertical complementary acquisitions in the aviation space. We're trying to raise, uh, we're gonna raise $30 to $40 million again to get those 6 or 7 charter aviation businesses and then get the complementary acquisitions with the different maintenance, fuel brokerages, as well as the hangar construction and leasing space, trying to capture as much of that industry as we can. I've got a great industry expert partner who's going to run the day-to-day, and then we're going to use the money from Army Ranger Capital to be part of the deal structure of all those different— it's going to be roughly a dozen acquisitions. Positions by the time everything's said and done. It's, uh, what I learned from helping my business client out, my legal client out, is that there's a whole world of people that— business owners that want out of their business. It's a quality business, but either due to boredom or age or wanting to retire or any number of other things, health, they want to pass on these quality businesses to somebody else. Uh, or they'll just shut them down. So we're tapping into that demand, which to be able to sustain that owner's legacy but also continue to provide the service that they do to their customers and the general public and sustain their staff. And that's definitely what we're finding in the aviation space.

So that's awesome. Well, let's, let's, let's hop into the weeds here a little bit. So what, what types of acquisitions are these? Are these, you know, majority buyouts? Are you, you know, is it a growth equity play? Um, you know, how are you basically compensating these, you know, retail business owners, um, or incentivizing them, you know, when you're taking over the business? Can we talk a little bit about that relationship?

Sure, absolutely. We have a— we're in the closing stages of an acquisition for a charter aviation company that has 4 planes, 16 employees. Um, you know, it's running roughly $7.5 million, which is a 2.5 multiple of its income. So we're giving them a multiple of that. I always insist on a deal structure that involves an owner accepting a portion of the payment over time, just because I think it's a good, accurate barometer of the health of the business that even the best of due diligence can't quite uncover. And that's what we have in this deal. They've accepted 30% of the, of the payments going to be paid over 42 months, and the rest we're going to bring a closing payment to them. That consists of private equity buy-in in exchange for cash, as well as an SBA loan in this particular deal. Since the cash flow was so strong, you can— a cash flow secured loan from the SBA is what's going to be used to pay the remainder of it.

So I feel like a lot of people don't understand that about buying businesses. Can you, can you talk a little bit about that, the SBA process of getting financing to acquire businesses?

Sure, there's a number of ways by which you can get an owner the money, adequate consideration for their business, which is super important. Again, one by way of which they pay them through future revenue, a portion of the purchase price. And then there should also usually— a business has some degree of cash flow and assets that can be used as collateral for loans. Like in the case of this aviation business, they have 4 planes that are worth free and clear, no, not, and no encumbrances. They're worth $3.8 million altogether. They also have parts, they have receivables, they have any number of things like that that many banks will issue a loan against that for a certain percentage of that secured by those assets and the cash flow in the case of the SBA. And the SBA, if you can show that it's a solid business with cash flow producing business, they will give you I believe up to $5 million per transaction on the 7 program. Now, there's a number of different SBA loan programs out there depending on what you're trying to do, but the 7 loan is probably the most popular one. There's a lot of terms and conditions to it, but either you can go through the SBA, but you also do it through traditional loan funding as well, through regular banks. There's also mezzanine lenders, there's debt funds. There's any number of quality, you know, capital providers that can— you can tap into to get a quality return for them while also getting that business owner the consideration they deserve for years of building up this business and also get you in the driver's seat of an established business that is much less risky than it would be to just start a business like that. So yeah, everybody wins.

You do it right.

Awesome.

And what's a typical loan-to-value that you're able to get, you know, through that financing? Through those financing structures?

They usually want at least 1.5. You know, um, it depends on the type of asset that's being securing it. Like, for instance, if the business has real estate, you can often get, um, a loan for 80%, uh, of the value of the real estate. With accounts receivable, it's usually like 70-75% depending on the bank. For inventory, um, And, um, inventory could be anywhere from half, just depending on the type of inventory. Can't be obviously perishable. Uh, now the cash flow, you can get a very, you know, very favorable loan-to-value rating on the cash flow depending on how historically secure it is and reliable.

Well, that's awesome. Well, that's great. Well, thanks for— you know, some people don't understand that whole process of, you know, into the weeds of, you know, going out and acquiring a business. So thanks for Thanks for walking us through that. Um, so why don't you walk us through a little bit more in detail of, you know, your— some of your acquisition criteria, um, and how you really think about going out and buying these businesses?

Well, for the air— like, for instance, for the Aerial Group LLC, it's for an aviation transport conglomerate that we're building. Um, it's basically like truck driving, just using airplanes. You know, there's The reason why there's such a demand in the market right now is because of the logistical backlog that we've had and bottlenecks that we've had related to COVID. A lot of people— these are— we search for businesses that do ad hoc, on-demand transport of different types of cargo, whether it's postal contracts, sensitive documents. We even do organ transport with Learjets that are involved in the planes. So We have a 5-5-5-135 acquisition criteria as the base. It's— we want to sum a business that's been in business at least 5 years, has at least $5 million a year in gross revenue, has at least 5 employees, and has an FAA Regulation Charter 135 certificate, which is the certificate that allows transport work to be done. It's got a nice moat just because it's got relatively decent barriers to entry. You have to be be a trained and certified pilot. You have to earn one of these certifications. And again, these planes are, they're not as expensive as a Gulfstream 700. But again, it's, it's not like just buying a truck and putting buckets in the back and doing landscaping. You know, there's a high barrier to entry. So those 5 things, we also want to make sure— I always keep integration in mind because that's a neglected area of mergers and acquisitions. Most people never think about what happens after closing. Everybody just thinks you're gonna— everything's just gonna go great, see you at the Christmas party. It takes a lot to actually get 2 different businesses to work together. So we want to make sure the culture of the acquired business is relatively consistent with the ones that we're using as the platform company. We also want to— in the aviation transport field, we're trying to get, uh, we're looking for companies that have routes in areas of the country we currently do not. you know, because eventually the goal of all of these— this aviation conglomerate is to get it exit-ready and implement a series of value drivers that have been determined to be the most, um, consistent way by which businesses sell for the highest multiple. They'll be looking for one of the means by which somebody will want to buy us is if we have routes in areas of the country they do not. So that's kind of like this, the, the 5th criteria is again just having— not having overlapping routes. So again, quality culture and overlapping routes, 5 years in business, $5 million plus in revenue, 5 employees, and already have their 135 certificates.

So great, I love it. So there's, there's kind of traditionally, for those that don't know, there's, there's 3 main portions, uh, you know, to a private equity fund, right? Lifecycle. There's your acquisition, your value-add, And your disposition. So we talked a little bit on your, on your acquisition process. Let's talk about, you know, really where you see your value-add coming in and where, you know, Army Ranger Capital and, you know, its affiliates provide values to its underlying portfolio companies.

Sure. Where the leverage given to the investors in the capital fund is by virtue of the fact—

Did you change your audio? It's, it's, uh, sounding a little different for me on my end.

No, I'm sorry. I'm at a hotel before the— I'm in Los— I'm in San Diego at the Hyatt Park Aviara for a mastermind conference. Can you hear me better now?

It's fuzzy on my end. I can speak softly.

That can be a problem too.

Let's see. Garen, can you, can you hear okay? No, it sounds funky on my end too. Yeah, um, let's see here. Uh, Joel, it might be— for, for those that are on live, I apologize. Uh, it might be better if you, you know, readjust your audio, hop off, hop back in, or, or something. But it's, uh, it's, it's, it's a little funky. So as, as he's figuring that out, um, I'll kind of just talk a little bit. So I've known Joel for years. Uh, he's, uh, someone asked if he was a loan brokerage or direct lender. He's not. So he runs a— he has his own private law firm. Uh, let's see, Joel, it might be better if you, if you hop out of Restream. Let's see, go ahead and talk.

Is it better now?

No, you're gonna have to hop back out and hop back in, I think. Um, so go ahead and exit. Um, but the, uh, so he runs a law firm, uh, with, uh, uh, you know, business for business acquisitions, M&A law. Uh, he has a private equity firm that he's, you know, stood up, up and running. And, uh, he's been a fantastic, uh, member of our Black Card community of standing up multiple funds. And it sounds like now he's on an aviation, you know, private equity roll-up. Um, so, uh, you know, it's really great to, you know, always just see we have so many different clients that are doing so many different cool things. I mean, I don't know anything about aviation, right? Like, I couldn't tell you anything, but it's, it's always fun to hear people's strategies of, uh, you know, what their, what their acquisition criteria are, uh, you know, what their, their value-add, uh, you know, priorities are with their, with their PE strategy and focus. And we often call it a buy box, right? You're gonna have certain criteria of companies and then, you know, different exit strategies. So let's see, Joel, are you back?

Yes. Any better?

Hey, we're in business.

Okay, cool.

Yeah, somehow we lost you there. So as we were saying, yeah, why don't you tell us about your value-add approach in this process?

Sure. A combination of organic growth improvements as well as complementary acquisitions As well as exit-ready improvements. Simply putting professional management in place that's independent. A lot of times these businesses that are $20 million or less in annual revenue, they're owner-operated, which— and entirely dependent on the owner. And it's a sad irony that the more your business relies on you, the less valuable your business is. So just installing professional management takes the multiple that your small and businesses receive from 2.5 to 4.5. So there's an instant multiples arbitrage from that, but as well as implementing operating systems and scorecards and all the different KPIs, that's part of the professionalization of the business as well. There's about 190— I'm, I'm here for the Roland Frazier Epic Board Mastermind because I learned most of my organic growth strategies from his organization. So implementing those as well, the goal being to increase revenues by organic efforts by 20%. But also simply from acquiring as part of the roll-up other aviation transport businesses has inherent cross-selling opportunities to increase revenues. Again, since we have routes in different parts of the country, there's also cost-saving synergies that can occur since we have higher purchasing power since instead of just one business buying insurance and needing an accountant and needing lawyers, we have 8 that altogether are able to get a lower per-unit cost. So we're able to reduce costs that way as well, in addition to the organic efforts. And again, a lot of it is the exit-ready process, which begins on day one. Again, you talk about in the private equity fund process, the first— I have like a 5-year range. The first year is a dependent on raising funds and doing the acquisitions. Years 2 through 4 will be spent doing the organic growth and combination, integrating all those businesses together so that the conglomerate product produces anywhere between $60 to $75 million in annual EBITDA. And then the last year will be primarily focused on the sell-side process, which is part of my M&A advisory background. Again, getting the business not only it's, it's exit ready, but creating the auction environment with the upper middle market private equity groups and, you know, largest private capital market or corporations that would be interested in the conglomerate that we're building.

So let me stop you there before we get to exit strategies, because I want to get there. I want to focus here on your, on your value-add process. So you are coming in, these owners Right. Are you, uh, having them, you know, stay in and operate the business for a number of years, um, or are you buying them out, giving them a check and totally putting in new management, sending them on their way? Or, you know, what's, what's that? Because I feel like that's usually some of the most sensitive dialogue in business acquisitions. Uh, you know, how do you navigate that with, uh, you know, these business owners?

Well, again, we're gonna have— I have my partner, it's Mark Morgan. He's a 36-year aviation industry veteran that involves experience as an aviation CEO as well as a consultant aviation CEO. So he is going to be my day-to-day operator of the conglomerate. Now, in the case of Co-op Candy, most of the time the owners are going to exit after they receive their closing payments. They'll have non-competes. But by and large, you know, because there's 4 things that happen in terms of who runs a business after closing. It can— you could hire the owner to run business, but then you have potentially some problems in terms of the kind of improvements you'd like to make since that's not anything that happened before. You can promote from within. Maybe he has a lieutenant that's, you know, got management potential written all over it, knows the business, knows the customers. That's a potential opportunity. Um, a lot of times the acquirers take over the business, and I won't be doing that because I don't have an aviation background, and I want Mark operating at the 25,000-foot level.

Yeah.

But then the third option is again to hire an outside expert with experience doing that to take over. So Mark initially will be the operational CEO, but eventually want to pass over the director of operations position to an outside person. We want to— part of the exit-ready process is that the employees, the vendors, and the customers don't really know who the the owners are, such that when the owners go away, there'll be no, uh, there'll be no hindrance to the operations and the performance of the business. So in our case, I have my partner, and that's who I depend on. I'm an expert at the legal background and management leadership background, as well as the M&A process, you know, working with, you know, getting funding for deals, learn how to structure those deals, finding the deals, and then implementing exit-ready strategies and growth strategies as soon as the deal closes. I depend on industry experts to be my actual day-to-day operators, and that's who I'm using for this, uh, the Aero Group LLC.

Well, that's, that's fantastic. I love that, uh, approach, right? It's, it's hard for, you know, you can't be an expert at everything, and a lot of people have a hard time acknowledging that. And, you know, I've seen a lot of early-stage, uh, you know, people, you know, trying to start funds try and be the expert at everything, and Reality, you just can't, right? You need to partner and rely on good partners, whether that be internal or third parties. So I love that you bring that up. So in private equity, there's this common narrative that as you build up a portfolio, you reach higher revenues, higher EBITDAs, there's a natural escalation in exit multiples, right? As you get bigger and bigger businesses. Well, other than that, you know, natural catalyst for growing this portfolio, um, you know, you mentioned earlier, like, what ways, uh, you know, do you plan on adding enterprise value to your underlying, you know, portfolio businesses?

Well, boy, beyond what I just talked about, usually all of those businesses aren't doing something that other businesses in the group are. That leads to the cross-selling opportunities that exist when 8 of these charter aviation businesses are operational. For instance, you know, the 3rd and 4th business we acquire might not be doing organ transport, whereas the 1st and 2nd are doing Caribbean and South American transport. If we get each other to start doing, you know, we start giving other opportunities that we have to turn down to businesses within our conglomerate, and that helps increase the overall value. Again, it's a combination of combining those EBITDAs, uh, to reach the larger figure, which is the multiples arbitrage. But again, the goal is to grow revenues by 20%, cut costs by 10%, and doing that alone with professional management, operating systems, and exit-ready strategies is enormous. I mean, again, my philosophy— is I want to know something about everything and everything about something. And the everything about something for me is acquisitions for growth and exit-ready strategies. I'm hiring people to do all the rest. Mark is taking care of the part where I talked about in terms of increasing revenues by 20%, cutting costs by 10%. I'll also be hiring outside experts to implement the rest of the growth formula as well. So, but again, the instant just the multiples arbitrage, we're buying these businesses for 2.5 to 3 times multiples in an industry where the standard is 7.7x. And then if you get the EBITDA to another level, as you know, it's an inverse scale. If we get that EBITDA to $50 million or $75 million, it turns into a 23 times multiple. So the, the— it's just astronomical.

Yeah, no, it's— but the key is— sorry to keep pressuring you on that or pushing you on that. It's just great. You know, it's such good information to try and, you know, have you put your thoughts out on all of it. So we've talked about acquisition, talked about value-add. Now talk us through kind of your disposition strategy. Uh, you know, who do you— you know, so you've rolled these portfolio companies together into it, you know, a single conglomerate. You know, who are you bringing these to to buy? And are you like, you know, premeditating these, these buyers? Are you talking to them years in advance? Do you already have a list? Like, Can you give us some color here on— because what if you don't have a secured buyer that wants to buy the portfolio? Can you talk us through some of your insights there?

Well, sure. Generally, I'm a certified value builder. What he determined, John Wierlo's Value Builder Organization, is the likely acquirer is somebody who is 5 to 20 times bigger than who they're acquiring. Any less than 5, and it's probably more of a merger than an acquisition. Any more than 20 in the acquired, acquired entity doesn't have enough puff on the cigarette, doesn't affect the growth goals of the larger entity. So 5 to 20 times. I'm kind of stalking those businesses through PitchBook, you know, looking at the private equity groups and the larger corporations that typically acquire in this field. And I'm actively searching for their investment criteria, their acquisition criteria. That's an instant part from day 1 of our strategies for the growth through organic efforts, through complementary acquisitions. You know, we're gonna— whatever the customer wants is what we're gonna start to form from day 1 of the 5-year cycle. So we aren't gonna get to year 4 and then, and then start looking around. You know, we're actually gonna have— I'd like to have 5 to 10, you know, kind of target companies in mind and then actually start the process because you get the best results on the sell side if you have multiple suitors bidding against each other for your, for your business. And again, typically they tend to be 5 to 20 times. So I've got a ballpark figure between that and the PitchBook data, which is incredible. I've got a pretty good idea of just who are the players in this.

And I'm going to hit it right back from peg one.

Joel, I think we just, uh, we might have just lost your audio again.

Oh no, this hotel.

You might have to, you might have to hop back. Sorry for those that are on live, you can just hop back out and hop back in, then we'll, we'll wrap up our conversation here. Um, but, uh, yeah, so what he's talking about, right, Joel just really took us through, you know, the 3 main cycles of, uh, you know, a private equity buyout, and largely for venture capital or real estate, all really closed-ended private funds have similar life cycles. And the way it works is as soon as you're done with the acquisition phase, ideally you're fundraising for fund 2 or your next fund. And so when you're done with that acquisition phase, you're moving on to the next product. So you always have a fund running. And you're always raising money, you're always selling, and it's just this, this awesome business. So Joel, before you, uh, before we, we close up for today, um, what pieces of advice do you have for emerging managers or people getting into this space? Like, just what's your advice to, you know, people in this industry?

Oh, rich opportunities. Not only— everybody usually focuses on finding the deals. Um, the deals are out there. Again, there's what, 10,000 baby boomers retiring every day, 19% of which own a business. A lot of people know that. What they don't realize is that not only are those business owners likely just going to shut down their businesses with no consideration given, there's also a whole world of people out there that would love to have the opportunity that are industry experts, but they just don't have the capital or the know-how to acquire a business, but they would be fantastic operators and daily CEOs. They either are a CEO already, or then they want to be owners of the business that they have, that they're running, or they're ready for that next step up. And so there's a— nobody in the acquisitions training world talks about the planning to how to find the right partners. Everything I do in terms of acquisitions for growth and exit strategies, it can— it's industry agnostic. If I have the right industry expert, This formula with the M&A roll-up and packaging and sale with the multiples arbitrage is something that can be done in just about any industry. So I would not only keep your ear to the ground for quality companies that are offered at a reasonable price, but also keep your ear to the ground and network to just try to find those, you know, those industry experts and really experienced people that know their field and know their craft that just are looking for an opportunity. It's a, it's a valuable way by which to get business owners valuable consideration for the business they've built. It's also a chance to give people who deserve an opportunity to run a business and actually own part of it an opportunity too. And it's also— and doing this is not only fun, it's a way to give your investors a great return. So it's a really rewarding field.

It's—

I'm so glad I got into it.

I love it. A couple rapid-fire questions for you here before we close. Any daily habits that you live and abide by that you feel like contribute to your success?

Oh God, starting my day off good is the key thing. You know, I like to— on an empty stomach, I like to have— I like to walk for 45 minutes to an hour with Tony Robbins' Hour of Power is a favorite. So I kind of think through my day as if it's already happened. And then, um, boy, I spend most of the time just developing relationships with my operators, looking for, trying to talk to, and that establish rapport with business owners. You know, I'm constantly trying to learn. You know, your materials is, is heavily, um, informative. You know, you're constantly putting out new stuff. So I spend most of my day either learning, uh, networking, and trying building relationships, and then And of course, basic exercise and diet just to keep the energy levels high.

Love it.

What's something you wish you knew earlier in your career that you know now, you know, that you just wish you could have learned earlier in your life?

Oh boy.

That's a good question. Um, I catch you on the spot here. Nobody ever really talked to me about owning a business. You know, where I grew up in kind of a working middle-class environment, we were just taught to work hard. Uh, and like you alluded to earlier, it's the key to success is just working hard and knowing everything. It's not knowing everything. It's about getting with people that know more than you. Uh, I've always, from an early age, I preferred being around people that are better than me and know more than me. And that's kind of, um, my greatest periods of growth is when I I was around people that were better than me. I went to a top 10 law school. I went to Northwestern. I got my best grades in that school, a school that curved grades based on performance. And I went to Harvard and Yale people, and they inspired me to do better and better. And that's how my business experiences too. So that's something I learned probably midlife. Yes, I wish I would have had that at first, is constantly look for people and surround myself with people better than me. don't lift me up.

Yeah.

Oh, that couldn't have said it better. Well, um, Joel, where can people find you, right? If they want to talk to you, if they want to connect with you or Army Ranger Capital, where's the best place to, to find you?

Sure, I'm on Slack. I'm part of the Black Card group, and you can also reach me at joelm@armyrangercapital.com. I'd love to talk to them, love to talk to people, love working on deals.

Love it, love it. Well, thank you so much for coming on today while— even while you're at a conference And, uh, you know, sharing some, some awesome knowledge for those in the private equity space or, you know, alternative assets for, for that matter. But I really appreciate you. It's always great. And we'll see you out in Utah here in a couple— are you coming to our event here in Salt Lake?

Absolutely, yes.

Awesome. So we'll see you here in a few weeks. That'll be, that'll be great. So thanks so much, Joel. Appreciate your time.

Thanks, Lincoln. See you soon.

Yep. Bye-bye.