Insights

Ben Brown | Benefits of a Buy & Hold Strategy
POSTED 11.30.22 M&A Masters Podcast

When you have an indefinite holding period, you’re buying for the long term…
What are the strategies of firms that operate in this way?
Ben Brown, founder of Alderman Enterprises, is here to share his perspective on M&A.

We discuss:
● Benefits of the buy & hold strategy
● Why his firm sticks to the lower middle market
● Ben’s take on reps & warranties insurance
● And more

Mentioned in this episode:
● http://www.aldermanenterprises.com
● https://www.linkedin.com/in/benpbrown/

Transcript

Patrick Stroth: Hello there. I’m Patrick Stroth, trusted authority in executive and transactional liability and founder of Rubicon M&A Insurance Services, now a proud member of the Liberty Company Insurance Broker Network. Welcome to M&A Masters where I speak with the leading experts in mergers and acquisitions. And we’re all about one thing here. That’s a clean exit for owners, founders and their investors.

Today, I’m joined by Ben Brown, founder of Alderman Enterprises, based in Chattanooga. Alderman’s strategy is evergreen, with an indefinite holding period. So they mean it with their motto when they say we buy and grow companies the right way, with the right people for the long term. And that’s a very long term. Ben, it’s great to have you here. Welcome to the podcast.

Ben Brown: Thanks for having me. This is gonna be fun.

Patrick: I certainly hope so. So before we get into Alderman Enterprises, let’s talk about you. What brought you to this point in your career?

Ben: Good question. And I could probably take it a variety of directions. And I don’t want to bore you with by meandering career path. So I guess I’d summarize it by saying, I’ve always had an interest in working for myself. Kind of bent towards entrepreneurship. And then functionally, I’ve kind of worked in the finance and M&A space for a while. And I’m a Chattanooga guy, and I love my hometown.

And so at some point, the confluence of those things, ultimately led me to create Aldermen. I wanted to do business here or to apply some of my skills, and I wanted to work for myself. This was a good way to do it. And then I have to also say, because I’m always pretty quick to give credit that I’m only here by the support and grace of my wife, who, you know, if anybody’s gone on the entrepreneurial path, you know, you don’t go it alone, and you’re not successful at it alone. And she’s been a steadfast supporter.

At times, you know, I’ve made a mess of our financials, and interrupting family vacations, taking calls and, and throughout all that, she’s been great. She’s been a big supporter. So truly, she’s probably the biggest reason that I’m sitting here today doing what I’m doing and having fun doing it.

Patrick: Well, that’s fantastic. And one of the things that happens a lot with the entrepreneurs out there is just once you get a taste of doing your gig, it’s really hard to be working for anybody else. And it takes it takes a special breed of person to do that.

Ben: Yeah, I hope I don’t ever have to go back because I don’t know if I could. I feel like I’m in too far now. So yeah, it’s, it’s got its unique challenges. It’s unique stresses, but it’s also really unique rewards and fulfillment. So and it’s different for different people, but I love it.

Patrick: Fantastic. Well, let’s get into Alderman Enterprises. And let’s start with the name real quick, because it’s not Ben Brown enterprises, okay, it’s Alderman. How did you come up with that?

Ben: Yeah. So actually, when we started the company I started it with a few partners. And our one of our common threads was we had all gone to the University of Virginia for undergrad. And we were trying to come up with names and doing all kinds of clever too clever stuff. And ultimately decided, hey, we need to have something that ties into the university.

And there’s a there’s a big library there. There’s a road there, named after the first president of the university. A guy named Edwin Alderman. So Alderman is, has a lot of association with UVA and, and then even if you look at our logo, we have a wahoo in it. So we have some some subtle and not so subtle references to UVA, where I went for undergrad with my initial co founders.

Patrick: Great. You catch that UVA spirit, which I think I think is fantastic. Actually, as a father, who’s now with our oldest going off to college, for the first time, we’re looking at the schools, that’s going to be a profound experience, you know, one of those milestones that she’ll have. So it’s great to see the you and your partners there have been able to carry that camaraderie forward. And so now with your direction, you’re looking at the lower middle market. Why lower middle market, you know, in that area, because you’ve been around for a few years, and you haven’t grown up market yet. So talk about your approach that way.

Ben: Yeah. From, I mean, from the get go, one of our when we started, we were trying to figure out where might there be some kind of supply demand imbalance? I’m a economics major. So I tend to think in my econ 101 terms. And my sense has always been that the the lowest end of the lower middle market is a fairly inefficient market. You still have quite a few companies, and as we hit the baby boomer retirement wave, those companies will, you know, turn into a pretty decent supply that needs to change hands.

But you just don’t have the organized demand at the lower end of the market that you do at the higher end of the market. And so the sense was, perhaps there’s an imbalance there, you know, if and our belief was if we could organize the capital and the expertise, that, you know, we can bring some more organized more professional demand to the lower end of the middle market. And because of that supply demand imbalance, hopefully find some value, where, for a long time now, it’s just been hard to find value anywhere in the market, because the market is really competitive, and there’s plenty of capital in the market.

So that’s one of the reasons we like it down here. One of the others is, from my background, and my initial partner’s backgrounds, we worked in a variety of operating companies. And that’s fun. I mean, we, I love the investment side of what we do. But I like the operation side just as much and being close to the companies and getting to know the teams and the strategies. And, and I’m no, I’m not an operator, I have no business running one of these companies.

But we wanted a model where we were going to be by design closer to that than maybe a traditional private equity firm may be. And these smaller companies just need more help. So it calls for somebody to be closer to them and more engaged. So we like that, and then believe and so far, we’ve seen that to the extent we we do dive in more deeply, that we can move the needle and we can add some incremental value to these companies as well.

Patrick: Well what’s interesting with you, you know, rolling up your sleeves and getting operational. So you’re not just doing financial reengineering on these companies. What are some of the things that you bring to the table for the for these organizations that you’re targeting?

Ben: Yeah, so me some of it is we’ve got some dedicated team members overhead at the holding company level. So our premise has been acquiring and working with companies of this size, they’re probably not in a place where they need and can justify a full-time HR person or full-time controller or a full-time marketing person. But they still need help in those areas.

And oftentimes, what we see is it’s the CEO doing some of that stuff, which our view is that that’s not the best use of the CEO’s time. So we’ve brought on some of that overhead at the

Alderman Enterprises holding company level and shared across the companies. And I think about like on the HR side, gosh, we have Amber Robert, she’s our HR director, and she works with our companies to make sure their handbooks are up to date.

And, you know, they’re, they’re staying compliant with OSHA, or whatever it may be. But really, these days, I mean, she’s recruiting and the value of that for these companies to have almost their own dedicated recruiter that knows the companies that knows what they’re looking for, knows their cultures, knows who’s a fit, and is really good at it, and they don’t have to pay recruiting fees. That’s really valuable. So that’s the kind of stuff that we try to figure out how, how can we help the companies, in addition to, you know, broadly, helping them on strategy.

Being their outsourced corporate development group, so if they do have an opportunity to make a good strategic add on acquisition, we’ll basically jump in and do that for them. Provide the financing, let let the company run the company, it will help in those areas. A lot of legal, dealing with the banks dealing with the accountants. We we try to take as much off of them as possible that can keep them focused on what they’re really good at, which is growing, running their company, selling their products, serving their market, taking good care of their customers.

Patrick: Yeah, I can imagine that’s the big challenge for entrepreneurs out there, even though both of us love being in those shoes, but you find yourself doing the things that you can’t stand doing. You leave your passion, because you’ve got the accounting to deal with. You’ve got HR, would scare me to death. I think that’s one of the biggest fear areas I have. nd all these things that just run a company and get the lights on and off, you know, each day.

When you go to these owners and founders, you just say point out one of the things or two of the things that you absolutely hate doing. And imagine taking that away from them. Oh, and you’re going to double, triple in size. I think that’s a real, real great value add that you offer out there.

Ben: Yeah. You know, so far, and while we certainly think it’s a great value, add, it’s still a change. And it’s still, you know, some folks tend to hold on to stuff closely and it can be hard to let it go. But when they generally when they see that, man, when I reallocate that time towards you know, more sales calls or, you know, more time on the shop floor, then the light bulb kind of goes off of man, I wish I’d passed this stuff off even sooner.

Patrick: I can imagine and that’s why I really want to highlight Alderman Enterprises because there are so many owners and founders out there that they don’t know where to turn And if they don’t know about organizations like yours out there, they may reach this inflection point. And it’s not that they’re burnt out, they just, they want to get bigger. They’re just at that point where they’re, you know, they’re too small to be big, but are there, I think what’s important is that you’ve got a lot of these owners and founders out here, where that they’re at an inflection point where they’re too big to be small, they’re too small to be enterprise.

And they want to get over that bridge. And it could be some of these things that just, they don’t know where to turn. And so what ends up happening is they go by default to maybe a strategic, or they’ll go to an institution, and maybe those organizations don’t have their best interests, you know, looking out for them. And so it’s great to have organizations like Aldermen Enterprises out there for them to turn to. So I’m really pleased that we’re talking about this today. Now, Ben, you’re, in the intro, I talked about how you have an indefinite holding period. Explain that and how that’s working for you.

Ben: Yeah. I mean, that from the get go, that’s been one of the probably say, the most core pillar of Alderman is buy and hold. And it’s, it’s informed by a lot. But I mean, I go back to a particular experience I had working inside of a private equity-backed company. And, and there’s

nothing wrong with it, it’s just a different model that has a time bound to it. So there’s a particular time period where you’re investing, time period where you’re growing and a time period where you’re harvesting, and because of that, you make decisions along the way, according to that timeline.

And at least in that case, what I observed is what I felt like were suboptimal decisions made because of the timeline, and felt like, you know, if you were sitting here, under the premise that you own this company indefinitely, would you make a better decision? I think so. So that that’s been fundamental for us all along, is we want to operate, we want to think and we want to act as if we own these companies forever. So therefore, what decisions would we make.

And if we set up a structure that, you know, ensures that the various parties are rewarded accordingly be that the sponsor be that the investors be that the employees, the management teams, then you set that structure in place, and you don’t really have to worry about it, you just focus on what is the best decision for the company at every turn. And we have a very unique structure in the background that enables that that doesn’t force us to have to sell a company to provide liquidity to our investors.

But I mean, it’s also enabled by specifically going and seeking out investors who believe in this approach, believe in this strategy, and many of them have been successful business owners and see the merit of this kind of structure and this kind of strategy, as an alternative to probably what’s a little bit more common. So it’s not without some pain, our operating agreement for Alderman Enterprises is an absolute Frankenstein, I have to admit. But it’s, it’s there, it serves our purposes well, and it works for us.

And it’s the kind of the structure under which we prefer to operate. And, and it provides, you know, some competitive advantages as well. You know, there’s certain there’s certain owners who, when it’s time for them to sell, you know, their primary objective is to maximize value, and I don’t, I don’t begrudge anybody for whom that is their primary objective. But there are some owners who, you know, certainly want to realize fair value, but they may have, they may have family members inside the company, or just employees that have been there so long, they almost think of them like family members.

Customers, their legacy, and their name may be on the door to the company, and it matters to them who the buyer is. And for some of those folks, we find that they tend to resonate well with a group like us, that is evergreen that isn’t, doesn’t necessarily have the same structure that incentivizes faster growth, and then an exit to the next group. They like that, that our premise, and our structure gives potentially long term potential to everybody in the company, customers, suppliers, whoever it may be.

So in situations where it can be a competitive process, it’s actually been a differentiator that’s helped us win some deals. And it’s not for everybody. It’s not the priority for everybody. And we don’t do a whole lot of transactions accordingly we pick our spots pretty well and, and hold out for that situation that owner for whom we are the right fit.

Patrick: We could talk about right fit in a moment with regard to targets, but let’s talk about right fit with regard to I forgive my ignorance here. But with your investors, they’re not looking for some big homerun at a future date. So I guess I guess they’re getting the returns almost like a dividend program where there are periodic returns that they’d be getting.

Ben: Yeah, it’s a combination and I guess it’s an evolution. So and you know, in the starting time, and I guess we feel like we’re always in the starting time, because we’re continuing to buy new companies and see a lot more we can do, we’re in reinvestment mode. So we’ve kind of, you know, set that expectation with our investors that hey, in, in these years, as long as we see

good opportunity to reinvest in the companies be that, buy more equipment, invest in overhead, make add on acquisitions, that’s always going to be our bias, because that’s where we’re going to get the highest and best return on capital with that reinvestment.

But at some point, we certainly intend to flip the switch, and start to enjoy the fruits of that reinvestment in the form of dividends and cashflow. And then, as I told my wife, and we were starting this thing, I was like, look, we are trying to build, you know, a big old sustainable cash flow machine. That is what we’re trying to do, and that’s, that’s where we’re headed. But so in these early years, you know, we want to be in reinvestment mode, but then, you know, along the way, kind of switch to dividend cash flow mode. And we offer our investors periodic opportunities for liquidity.

So if you’re in, you know, you don’t have to be locked up forever, you do have the opportunity periodically to raise your hand and get bought out. And so, you know, investors can kind of self-select into, hey, I want to be here for a real long time. And we’ve got some investors that say, hey, Ben, I want to be there, as long as you’re there. I want to be one of the last men standing on, you know, as part of this cash flow machine. And we have others that say, hey, I’d love to ride with you for five or 10 years, and then probably move on.

Patrick: And in the absence of, you know, an artificial deadline, it’s got to be liberating for you.

Ben: It is. Yeah, I mean, that’s exactly one of the words that I use to characterize it is, there’s just a lot of a lot of freedom, and you don’t have to lose sleep over oh geez, you know, the market turned on us and multiples go down, so it’s not going to be a good time to sell. So now we gotta, you know, ride this thing out through another cycle. We can kind of just tune some of that out and just say this, this is our strategy, now and forever.

Keep our heads down and just execute on that strategy. Maybe one day, we’d become such a pain to some large competitor, they, you know, they’re willing to do something crazy, and we’re still capitalists at heart, we’ll hear him out. But we’re not walking around looking for that we’re not, you know, knocking on doors asking for that. We kind of just keep our heads down, execute our strategy. And like I said, there is a lot of freedom, liberation in doing that.

Patrick: Yeah, let’s focus on the fit for the targets. I’m assuming with this, correct me if I’m wrong, you’re looking for a management team that wants to transition over? Or are you finding a lot of owners and founders that want an exit immediately?

Ben: We’ve done it both ways. It has been more often than not, it seems that at least the companies that we find in the profile, the owners that we work with, their mindset tends to be I either own 100% of this thing, or I own zero. Which you can understand, if it’s something they found it or their family found it and they’ve had a lot of autonomy, maybe haven’t had a board or somebody to report to previously, and a lot of them don’t have debts. They’re not even beholden to a bank.

And the thought of you know, rolling some equity or staying on board and working for somebody else is kind of a hard thought to digest. And we’re up for it, we you know that that premise is certainly fine by us and having that continuity and that continuing incentive. But we have seen more often than not, they say, hey, I’ll give you X you know, months transition period. But otherwise, I kind of want to sell this thing and move on. And generally speaking, this stage of life that we’re talking to most people is this is the path to retirement.

Patrick: Yeah, absolutely. Well talk about your ideal target, what are you looking for?

Ben: So, I’ll characterize it a few ways. We do like things that are geographically reasonably

close by. So we’re based in Chattanooga, the beauty of Chattanooga is in a couple hour drive, we can be in Atlanta, Nashville, Birmingham, Knoxville, some decent markets. But if we’re going to do this model, and work with these small companies, we know we’re going to have to be pretty hands on. We’re gonna have to be physically present at the companies. And it’s just not you know, sitting in Chattanooga, it’s not real feasible be flying all over the country.

So you know, something that’s an easy day trip to Chattanooga kind of two or three hour drive is is preferable. We like the situation of a company that is good at what they do. They have, you know, a known regarded successful high-margin product or service, but the company is at a stage where it’s become a lifestyle business. And again, there’s nothing wrong with that for the owner. They may be at a stage of life where the house is paid off or the kids are through college and maximizing their income just may not be the priority anymore.

Protection of income may be the priority or you know, more time fishing or with the grandkids or whatever. So we like to find those companies where the core of what they do is good. It’s not a turnaround, it’s not broken by any means. It’s just how do you how do you restart? In most cases, it’s how do you restart the sales and marketing flywheel on something that’s, that’s been let to sit somewhat stagnant for a little while, which, you know, is sounds easy.

It’s, it’s not always easy. It comes with sometimes investment in people sometimes investment in equipment, but oftentimes, investment in mindset change. And, you know, the right kind of people are up for that. Obviously, we find sometimes not everybody’s up for that. And that’s unfortunate. But generally speaking, the right people will be excited about that. Will like the idea of, and we see it often, you know, folks that have worked under an owner, and they’ve had great ideas, they’ll take it to the owner, and the owner will say that’s a fantastic idea, we’re not going to do that.

And they grow a little frustrated. So we actually kind of like, when we’re in there. And we sense some of that pent-up frustration that hopefully we can release and say, hey, the handcuffs are off, you know, these ideas that you’ve had these things you’ve wanted to do, ler’s go do it. You know, sky’s now the limit. And so that’s kind of the situation we like.

We tend to, like, we say old economy companies, manufacturing, distribution, business services. We like kind of boring, kind of stable, profitable, you know, core products and services, that kind of drive the American economy, but you know, not things that you’re often going to read about on the front page in the news, or Wall Street Journal, or whatever it may be. We, we don’t really play in tech, healthcare, consumer products.

We like b2b businesses, that provide you know, in a lot of cases, fairly mission-critical products or services that therefore command pretty premium EBITDA margins, and will forego market size for you know, attractive EBITDA margins. That’s a good signal that you’ve got some kind of moat around your business. And obviously, we want to dig that moat deeper and wider and protect it while we try to find tactical ways to grow as well.

Patrick: When you mentioned in there mindset, which is great. I mean, as a Californian, we’re real big in that mindset area. And so I’m just curious, when you’re having your initial meetings with the target company, do you pick up that mindset from the employees or from the staff that there there’s like a diamond in the rough there?

Ben: Yes, yeah, you can. The challenge generally, is the, you know, how much access can you get to them before you close the transaction. But you know, at least you know, generally there’s, there’s a key person or a few key people that are, that are positioned is really important, and will insist at least on meeting them. And it’s not, it’s not perfect, and it’s not a science.

And I don’t know that we have the killer set of questions to ask to tease out those mindsets and who’s up for change and who’s not. And it’s, it can also be interesting, because if the owner is sitting in that room, which we try to not have them be, we like to talk to these people on their own. But obviously, if that owner is sitting in the room, you might not get full candor from somebody who wants to say, hey, this owner’s leaving opportunity on the table, or, you know, he’s missing this.

And so, it’s, again, it’s not a science, but yeah, you can tease some of that out of hey, who’s who’s maybe frustrated in a good way? Who is maybe kind of got their heels dug in, or they got a good thing going and, you know, change is maybe not going to be received real well. You can at least get some signals on that.

Patrick: Well, I appreciate your segue into this, because as you talked about, you can’t know everything when you’re going through the process. And some things may unfortunately be learned after, you know, good, bad or indifferent in those regards. And what’s happening, you know, the mergers and acquisitions space, which has been great with the insurance industry is the removal of a lot of the risk involved in these transactions. And that risk really can contribute to buyers and sellers, you know, going at odds during the transaction.

Particularly when the buyer is experienced, they’ve done multiple transactions, okay? They don’t take it personally. With the seller is not unsophisticated, they’re just not experienced. They only go on through this maybe for the first time and they take it very seriously and very personally. And so you can have a lot of friction in there. What’s been great as the insurance industry has come in with a product called reps and warranties insurance, and what it does is essentially, it insures both parties.

The buyer is insured in the event the buyer suffers a financial loss as a result of the seller reps being inaccurate, and rather than clawing back money from the seller, or taking away in escrow the buyer goes and you know, gets revenue from an insurance policy. And the sellers, you know, this benefits them because they get a clean exit. They can’t possibly remember everything that’s out there. And so, you know, this is a way that you have innocent omissions and things that just nobody thought of.

That could be a very deep disagreement, post-closing. And so there’s there’s a great solution for that. It’s an elegant solution. And we’re very happy because particularly because now we came to know you is we put together one of those types of policies for a target company not too long ago. And I’m just curious, Ben, just, you know, don’t take my word for what rep and warranty can do. Good, bad or indifferent, what’s been Alderman’s experience with rep and warranty insurance?

Ben: Yeah. Well, this will sound like you put me up to a shameless plug, which I assure anybody listening, he did not. So, our prior, we closed the transaction about a month ago. Prior to that, I mean, frankly, we’d kind of asked about it, but the folks that we knew that were in and around the space, said, oh, man, at y’all’s transaction size, it’s cost prohibitive. Like, yeah, it’s a great product, but it’ll never make sense for you.

So kind of just written it off as, hey, we’re too small for this to make sense. When we started to engage on the deal we closed most recently, the seller’s broker, I guess, had worked with you, Patrick on a prior transaction. And he, you know, he insisted, no, there, there is a product, and it is price competitive at our transaction size. And I said, sure, whatever you say, man, I’m still going to buckle up for the bare-knuckle brawl over the rep and warranty section of the APA. And I mean, lo and behold, it was exactly as billed.

He had given an idea of, hey, we did another deal on the you know, here’s the premium, here’s

the coverage. And it’s like, man, I just, I’ve never seen it, never heard of it. I’m still skeptical. But you know, when we saw what it could be, in the case of our deal, it was exactly what he said it could be. And it was, I mean, this was such the exception to every other deal we’ve done. You know, we will have a good fight with the sellers when it comes time to LOI and some of the language in there and non-competes and non-solicits and how long those go for and what’s their comp and is it an asset or stock deal.

I mean, generally, once we get an LOI done, there’s not too much standing in the way of getting closed, assuming diligence gets done, with the exception of the rep and warranty stuff. These sellers have never seen this stuff before, they’ll never encounter it again. And it just in almost every case, it just flies in their face. They can’t believe that somebody would ask them to sign this stuff. And so you’re right.

I mean, they’re not unsophisticated, but it’s new to them. And I also will say, in several cases, their legal counsel is not heavily sophisticated in this area. And so it even flies in their face, because they don’t know that some of this is just market or kind of what it is. So I mean, it’s just always been a fight. And it’s never killed a deal, but it has put several deals on the verge.

And so, so that’s my, that’s my walking around expectation of what every deal is going to be like and then to go do this, and frankly, have it be a big, nothing. We just sailed right on through rep and warranty discussion. Didn’t have to have a big fight about escrow and now long hold back escrow. And this was just, my first experience was really good and eye opening in a positive way. And, and so refreshing to know that we can use this even in our size, which I just written off as not possible.

Patrick: Yeah, I think that’s the important thing that I really wanted to make sure I convey to the audience is that your traditional buy-side rep and warranty policies are very large products, they are dealt, they’re intended for very sizable deals, we’re talking deals of $50 million enterprise value and up. And that’s downmarket. Couple years ago, you couldn’t get rep and warranty for anything under $100 million purchase price. Although it’s come down and they made really great strides, there’s still that sub $30 million enterprise value where traditional buy-side rep and warranty just financially doesn’t make sense.

You need extensive third party diligence, there’s a huge underwriting fee and the rates I think the rates are you know, manageable but not you know with all the other costs to get there. There is now a new product out there that is for sellers. It is a sell-side policy. It’s triggered when the buyer suffers a loss, notifies the seller of the breach and the seller just notifies the carrier and the carrier goes right to the buyer and negotiates the deal.

It’s priced at a fraction of what buy-side rep and warranty policies are. And they are making transaction you know, as little as under a million dollars now possible to be insured. And you know, in the in the area that we work, we were in that, you know, in between there. And it’s nice having an option, so that, like I said rep and warranty is a real elegant solution. But not for deals that are under 30 million until now. So it’s great. And I think that’s where we expect to see a lot of organizations in with add ons, that this is now a viable solution when the traditional buys I rep and warranty isn’t.

And so I’m glad that we were able to meet. And you know, now as we’re looking into this year, we’re I mean, I blinked and we’re almost in 2023. Ben, I mean, at this time of the year everybody’s looking for projections out there. What trends do you see, as we get into 2023, either in terms of M&A in general, or Alderman Enterprises in particular?

Ben: I don’t know. It’s an interesting one. Kind of like we talked about earlier, you know, we tend to just stick our heads down, you know, grind away, do our thing. And, and, you know, I

generally will keep CNBC on in my office. But luckily, I have it on mute most of the time, because I don’t know, if you like if I listened to it, I just sit on my hands potentially for the next 12 months. So I don’t know. I mean, we economically I mean, I’ve got no better crystal ball than anybody else.

But I can say I’ve been pleasantly surprised so far, looking across our six companies, we keep asking, hey, are you guys seeing signs of softness, are customers pulling back? Or, you know, jobs getting postponed? And the answer is no, that generally speaking, things are still kind of rockin and rollin and some of what our companies do, I would characterize as decent leading indicators for the economy.

So you know, all the talk of looming recession, maybe it’ll happen quickly. And maybe our six companies aren’t a great sample size, but so far, they’re, they’re moving along just fine. And so especially for us, A, being long term oriented, but B, we don’t use maximum leverage when we’re doing a transaction. So we don’t have to sweat too much. Okay, if things get tough, like when COVID hit it was a hard time, and a lot of adaptation that our companies had to go through. But nobody was significantly financially constrained, especially because of leverage.

And that’s, that’s a function of kind of staying down this lower end of the market where you can find value, and you don’t have to employ a ton of leverage to make your numbers work. So that’s one of the reasons we like being down here. Helps me sleep a little bit better at night, not having too much debt on the companies. So and I certainly don’t have any better crystal ball than anybody else. Couldn’t share anything more novel as far as trends. So I think we’ll just keep noses to the grindstone, and as good opportunities come up, you know, selectively go get those done, and then get back to nose to the grindstone.

Patrick: Yeah, I completely agree. I mean, that’s why I just feel so blessed because we’re not dealing in the large, large mega market. And so a lot of these macro issues and headwinds aren’t really affecting, you know, the area that we are. I mean, if we were, you know, dealing exclusively with IPOs, you know, your fortunes rise and fall without that market perception is. Again, this, there’s mindset, again. With this, I just think that time’s marching on, you’ve got a lot of owners and founders that just no matter what cycle you’re in, they’re not getting any younger.

And there are still commercial needs out there, supply chain, business to business, all those things, those won’t go away. And I think that it what’s great, is there’s a lot of innovation out there still to be had, as we go forward in manufacturing, or any other business services where things can get a little bit smoother, a little bit better. And I think that’s to everybody’s benefit.

Ben: Yeah. One of things I do think about, as all this talk of recession comes up, and you go back to the Great Recession, and obviously, you know, there, there’s plenty of stories, and everybody knows companies that that were under great stress, or maybe even folded.

But what’s been interesting doing this is and talking to a lot of business owners looking at a lot of financials, and we always try to go back as far as we can, and at least have the conversation sometimes see the financials in the great recession. And, you know, through everyone that was stressed and failed, you know, there’s plenty of others who went into it with, you know, good balance, modest leverage, were able to kind of keep their heads down, and eventually pick up market share and come out on the other side stronger.

So that’s, that’s a consistent encouragement to us that, you know, sometimes this stuff can be a useful correction of excess in the market, especially when money’s been nearly free for a long time. And you know, if you go in prepared and you’ve got some durability, you can actually it could be an opportunity, a chance to come out even stronger. So that’s, you know, certainly what we hope for. We’ll see if that’s how it plays out.

Patrick: We like when there’s a light at the end of the tunnel as opposed to storm clouds out there. So that’s great to hear. Well, thank you very much, Ben, from one optimist, hopefully to another. Ben, how can our audience members find you?

Ben: I’m fairly low tech. I guess I’d say I am fairly active on LinkedIn, that’s probably the best way to track me down there is look me up on LinkedIn. And I love being in this world. One of the things that I appreciate about it is just met a lot of peers doing similar things where there’s an independent sponsor or building a holding company, or a search funder, and it’s a really collegial community, so.

Patrick: And for LinkedIn, just because your name, your last name is Brown, and I’m sure you’re not the only Ben Brown out there on LinkedIn. Is there a particular spelling of the name or how do you how do you present so we can find you quickly?

Ben: That’s a great question. I think I might be Ben. I think I’m just Ben Brown on LinkedIn.

Patrick: But put in Alderman Enterprises Ben Brown, Alderman.

Ben: Yeah, you can’t, can’t miss me.

Patrick: That’d be great. Well, Ben Brown from Alderman Enterprises, real pleasure and great talking to you and I wish you best of luck as we go into 2023. Hopefully we can see a few more opportunities together.

Ben: Absolutely. Thank you, Patrick. Best to you as well.