What Private Equity Buyers Really Want in a Business

**Eric Wicklund** (0:00)
It's the fun part, though. Like, it may not be sexy, but it's like my favorite part of my job. It's like the part of my job I would do for free. It's a corporate orphan. We have nine businesses that look like a duck, and this other one that looks like a swan, right? So the swan doesn't fit or whatever. What we've found over the years is that if you're trying to transform the company, you fix it, and you have high leverage ratios and therefore high debt service. It's like fighting a war on two fronts, and fighting a war on two fronts is never good strategically.

**Jacob Oros** (0:42)
Welcome to M&A Talk, the number one podcast on Selling a Business brought to you by Morgan & Westfield, a boutique M&A firm specializing in the sale of small to mid-sized companies. I'm your host and president of Morgan & Westfield, Jacob Oros. If you're considering selling your business and you'd like to work with me throughout the process, you can schedule a free consultation at morganandwestfield.com. Or if you'd like my team and I to perform a valuation of your company for a one-time fee of $1,500, visit morganandwestfield.com or see the link in the show notes.

**Jacob Oros** (1:17)
And today we're going to talk with Eric Wicklund. He is the partner at Space Side Equity and we're going to take a behind-the-scenes look at their investment strategy. They acquire companies with $1 to $500 million in revenue in the manufacturing space.

**Jacob Oros** (1:34)
And Eric, welcome to the show.

**Eric Wicklund** (1:36)
Jacob, thanks so much for having me today. Really appreciate it.

**Jacob Oros** (1:39)
So tell us about your company.

**Eric Wicklund** (1:42)
Yeah, I work at Space Side Equity. I've been working here for 15 years. We're a private equity firm. We like to buy middle market manufacturing businesses and control structures and then execute a fix and build strategy with those companies. So we tend to buy things that are in misaligned ownership structures that have some opportunity for improvement. And we use our PortCo value creation system to execute first phase one, which is the fix phase, improve them to industry level standards, and then phase two, which is the build or grow phase, which is grow them via bolt-on acquisition or organic activities.

**Jacob Oros** (2:23)
How do you spell the name of your firm?

**Eric Wicklund** (2:25)
Yeah, Speyside is S-P-E-Y, S-I-D-E, and then Equity. It's named after the River Spey in Scotland, which is a Scotch whiskey producing area of Scotland. And our original founder, Kevin Doherty, some of his family is from Scotland. And the firm has some interesting origin stories in Munich, Germany over a couple rounds of Scotch that helped lubricate the first deal that got it all kicked off. And therefore, Speyside is a bit of an insider homage to the first deal that started Speyside 20 years ago.

**Jacob Oros** (3:02)
20 years ago. What fund are you on now?

**Eric Wicklund** (3:05)
We are on our-

**Jacob Oros** (3:06)
Seven?

**Eric Wicklund** (3:07)
Yeah. Well, no, actually, we were an independent sponsor for the first like 12 years. And we're on our third institutional fund, even though it's called Speyside Equity Fund 2, because we had Speyside Equity Opportunity Fund between Speyside Equity Fund 1 and Speyside Equity Fund 2

**Jacob Oros** (3:25)
How is the IS independent sponsor world?

**Eric Wicklund** (3:28)
You know, I think there are like really good things about being an independent sponsor, and then there are some challenging things about being an independent sponsor. The good things are you don't have LPs to answer to. The bad thing is you don't have LPs to help you carry the load. But by and large, I think it's a little bit easier to do our sort of investing as a fund versus as an independent sponsor.

**Jacob Oros** (3:54)
Are you getting a management fee as an independent sponsor or no?

**Eric Wicklund** (3:57)
It depended. Most of the deals that we did, we generally did not do it that way. We would just do some sort of, you know, use of our own money such that we didn't need to. But kind of like one of the like phrases, you know, that we are one of our mantras at SpaceSide is return capital early and often. And, you know, we do that even now as, you know, an institutional fund. But we would do that a lot as an independent sponsor to make sure that, you know, we were getting ourselves paid. And that was part of the way like we were thinking about deals were, which was like, what kind of deals can we do where we can, you know, get this company going the right way quickly and then do some sort of a dividend or thing like that, which it's a good way to make sure you're thinking that way because when you're managing other people's money as well, it's really important to get them a return.