Brent Beshore's firm avoids debt entirely when acquiring companies, using only cash and equity. After their first deal used an SBA loan, they switched to all-equity transactions with no bank involvement, a strategy that sets them apart from most private equity firms.
What you were saying is that you guys don't do debt. You guys do no debt, or you, uh, use less debt than a typical private equity firm?
Yeah, so, so the SBA was on the first transaction I did.
You don't do SBA?
My own money. That we have no, we have no involvement with banks, uh, or the SBA or anything like that now.
You guys just do cash deals? You say, here's $10 million, We're done. And why don't you use debt?
Yeah, well, so debt's one way to take a good company, make it a fragile company. You know, the more debt you're layering on and the sort of the wider the variation of outcomes that you expect to happen. And obviously, pandemic risk is something that was not on a lot of people's radars, us included, until recently. But it's a, you know, it's a good example of why we think that not levering these companies, especially in the beginning when you're starting to get to know them. I mean, until you own these companies, you just don't know what you're getting really until you get, you know, underneath the hood. And there's always more risk there than you think there will be, right? So, you know, our mentality has been go in with all equity, no debt, try to keep them very, very robust on the balance sheet and make sure— and we're buying these with full balance sheets attached to them, right? So working capital is all included. So So the net worth of the company will be, you know, fairly robust going into the transaction. And then, of course, as we over time, as we build cash into these companies, then we can decide what to do with it. But working capital bucket is kind of like the— you got to fill up the bucket first before the owners can get anything out. Right. You got to keep the machinery lubricated.
