You asked. Nay, you demanded.

Three weeks ago, after Sean Frank’s record-breaking newsletter on the truth about private equity …

You wrecked my inbox with responses for a follow-up on how to prepare for an exit.

🤑 Matt Bertulli reveals everything he learned before, during & after selling his first company

🤯 Connor Rolain shares the dopest (beyond just) email-list-building tactic I’ve ever seen

🤩 Top five headlines from this week in consumer news, along with executive summaries

Connor Rolain HexClad, Head of Growth

Gamifying Retention + Aquisition: More Than Just an Email Address

Ryan Bartlett from True Classic is one of those relentlessly creative people I follow closely.

Something that caught my eye this week on X was a Pac-Man game they embedded into their storefront (using Rivo) to drive new email signups, repeat visits, and onsite engagement.

Here’s what makes this work … beyond being an incredibly cool email sign-up tool:

• Playing the game itself was totally ungated
• But to enter, you had to create an account
• Winning a top-ten spot gave you store credit
• That means more products to more people
• It’s also better for margins than other prizes

Plus, you only got one chance to win in the first 24 hours. But they left the game up so people could share it after the contest and keep coming back to play again.

It’s one thing to come up with this idea.

Totally different to pull it off with a partner.

We saw this same kind of creative support first-hand when we ran our Sweepstakes last year with Rivo.

Matt Bertulli CEO, Pela Case x Lomi

Everything I Learned Selling My Company

It is an incredibly rare event to sell a company successfully. I consider myself very fortunate to have done so.

In 2018, after 10 years of bootstrapping, the deal was done.

My first company was a classic service business. Some people like to call these agencies. We designed and built ecommerce platforms for large, multi-brand retailers. We did this at a time when Shopify was not yet the gold standard.

The original idea was to do system integrations between ERPs and ecommerce platforms.

I quickly realized that the opportunity was a lot bigger. So we started to pursue complete platform builds with a software at the time called Magento.

I had two major tailwinds that worked in my favor …

• The rise of Magento
• The rise of Shopify

I got lucky. I happened to be at the very beginning of both of these platforms gaining massive market share.

By the time we sold, we had over 100 employees — mostly software developers. In Canada, we were the dominant player in the space. We had government clients, large enterprise clients, and mid-sized ecommerce brands.

I’m sharing a bit of background so you understand the context as to how we ultimately sold + what I might do differently.

 Great Companies: Bought, Not Sold 

We were a perfect example of this. Our buyer approached us after meeting on a flight between New York and Toronto.

They were looking to acquire a Canadian company like ours, and we happened to be in the right place at the right time.

From the initial meeting to the deal being closed, it was under four months. The funny thing is, we actually ran a process a year earlier and came up empty-handed because the timing wasn’t right to find the kind of buyer we were looking for.

By the time I sold the company, I had already made the investment in Pela Case. Pela was growing like a rocket. My wife kindly reminded me that I was not Elon Musk and could not run two companies of this size.

Ironically, I now run multiple companies of this size. But she was right. At that time, I was not equipped to do this.

The best operators I know are always out in the market, having conversations with bankers and potential buyers.

Part of this is market research, but a big part of it is making sure that people know who you are and the kind of company you are.

I’ve seen deals get done because the founders were smart enough to build relationships early. More on this below.

 Strategics: The Best Outcome 

Strategics are buyers that have a reason beyond pure financials to acquire your company.

In our case, our acquirer really wanted a Canadian team. I believe a big part of this was simply the currency arbitrage. They could get American work done like they were already in their platform and simply have the Canadian office do it at a 30% discount on the labor of their American offices.

We also happen to have skill sets and customers that were important to them.

If you ever have a strategic come out of the woodwork to buy your business, it is usually worth entertaining.

Strategics typically overpay — or rather, pay a premium — compared to a pure financial buyer. The downside to strategics is they can take a long time to make a decision.

With the entrepreneurs I coach, I advise them to start building relationships with potential strategics early in the journey.

You never know where these relationships will take you.

Even today, with Pela Case and Lomi, we go out of our way to have conversations with potential acquirers to keep our pulse on the market and let them know who we are.

 Financial Buyers: Private Equity 

Most companies are sold to financial buyers — i.e., some form of private equity-backed group.

Sometimes it’s a PE fund that does full buyouts. Sometimes it’s an entrepreneur who has PE backing. The upside is that there are a lot of them. The downside is they’re effectively wholesalers.

Their job is to buy you at a lower price than they will flip you for in 3-5 years. Often to another large wholesaler.

PE buyers are looking to make a roughly 25% annual return on their investment. Because this kind of buyer is financially motivated, they are much faster to say no. They don’t have some large, strategic reason to buy you.

They’re simply buying you because they think they can make money owning you.

Another weird nuanced thing about PE is they often use debt to acquire companies. This might not sound like a problem to you, except when it comes time to structure your deal.

The basic gist of it is this.

When they acquire your company — no matter the percentage they acquire — part of their playbook is to put debt on your company. They use that debt to pull out some of or all of the capital that they use to buy you.

Their goal is to get their cash back as fast as possible. This becomes critical when we talk about deal structure.

In my deal, 90% of the value of the company was paid out in cash on day one. I also had no earn-out. I had to roll 10% of the acquisition price into an investment in the company afterwards. This is an uncommon scenario.

A piece of advice I got early on was that you get to pick one of two things as the most important to you …

I chose the terms. Which means the buyer got to choose the price. This is a negotiation, but hopefully you get the idea.

When you sell to PE, most founders are stuck operating the company post-acquisition. It is rare that they are sitting on operators who are just going to come and take over for you.

This is where debt can become a problem.

If your earn-out or the deal structure is tied to performance, and the company has a boat anchor of a debt facility on it, that could actually impact your ability to hit targets.

Which is where this next piece of advice comes in.

Whatever you get paid on day one is what you should assume is the only money you are ever going to get.

Do not mentally cash the earn-out check. That should simply be a surprise upside. That 10% I invested in the company, I wrote it off the day that I made the investment.

I was pleasantly surprised three years later when they sold the company again, and I made a 700% return on that 10%.

I’m spending more time on this private equity piece because there are so many of them that this is likely who you are going to sell your company to.

 The Power of the Data Room 

No matter whether you’re selling to strategics or private equity, know this rule …

When they ask you for something during diligence and you don’t have it, that starts the clock on your deal dying. This is why it is so important to be prepared properly.

I like to tell my coaching clients that they should update their data room quarterly.

It doesn’t need to be an insane amount of effort either. Things like basic financials, models, budgets vs. forecasts, any kind of IP that you have — anything that is meaningful and you would send to an investor, you should put into a data room.

Building the discipline and muscle to do this early will help you when it comes time to sell.

Not only will you have answers in the form of documentation to all of their questions, but you will not be making them wait for those answers. This shows them that you’re a seasoned, disciplined operator.

When you hear of companies being bought for strong multiples, it’s because the buyer believes that the business is both predictable and durable.

If you don’t have proper documentation for every function, you signal that you don’t have your ducks in a row.

Basically, the opposite of predictable and durable.

The other benefit to doing this regularly is it shows buyers that you do what you say you will do. If you say you’re going to do $20M in revenue this year, you want to show a history of that budget vs. the actuals.

Selling your company is a game of confidence-building.

All buyers, no matter the type, employ people whose job is to say no. They literally want to say no.

Your job is not to give them a reason.

Another tip when building a data room is to record Loom videos or walkthroughs of each major function in the business. If you have a leadership team, I would recommend that they do their own area. Don’t make this the “founder show.”

You want to demonstrate to the buyer that you have a proper management team and that this business is not reliant on you. I promise, this will result in better terms.

 Bankers and Brokers 

We can’t talk about acquisitions without talking about bankers and brokers.

When I sold my company, I did not use a banker. However, I have raised over $50M for Pela Case and Lomi.

We’ve had two failed banking engagements in that time. I won’t tell you who the banks are. Just know that we were not successful with their processes, and all of our money raised was due to our own efforts and network.

Bankers are kind of inevitable when you start to have larger deal sizes. If your company is doing less than $50M a year in revenue, you likely aren’t engaging a full-sized investment bank. At least, not in consumer.

Under $50M, you’ll probably use what’s called a broker. That is, if you intend to put your company on the market for sale.

I’ll do my best to outline everything that I’ve experienced with bankers + everything I’ve learned from friends of mine.

Let’s start with some of the good things.

The CIM. Your banker will have a lot of experience in putting these together and can at least create the outline of what the market is going to expect to be in this type of document.

However, know that your team is likely going to be responsible for putting in quality information. And if you care about design, your team will have to design this thing too.

Outreach and Funnel Management. This is a big one where a lot of bankers and brokers actually do have systems for this. They’ll likely know or figure out who all of the right people are to go and reach out to at every potential acquirer.

Don’t get distracted by this busy grunt work. One thing I’ve learned from experience is to really make sure that their outreach isn’t just spray and pray.

You want them to be very targeted and very intentional with the people that they are going to contact. You also want a weekly touch point with reports on response rates and stages of communication with each prospective buyer.

Preparedness. We talked about the power of the data room above, but this is also an area where bankers can be helpful. They usually have pre-built diligence lists that the buyers in your category are going to be looking for.

These are all the things that you will need to prepare ahead of any advanced discussions with potential buyers.

Competition. In my opinion, this is the area where bankers are most valuable. If you have a good deal, their job is to create competition. Competition in the process will mean that you get a better price and better terms.

It’s great to have a banker do this because they can play a bad guy while keeping you shielded from all the bullshit.

Now, let’s talk about what to watch for.

Conflict of interest. This is the big one. Why? Because most bankers will work both buy-side and sell-side. Even bankers who say that they only represent companies like yours looking to sell will likely have some amount of conflict of interest.

There are only so many buyers out in the market. It is in a banker’s best long-term interest to keep those buyers engaged and happy so they get deals in the future.

Think of bankers and brokers like real estate agents. Their main incentive is to get a deal done, not to get you the best deal.

This is an important distinction. An extra $5M or $10M matters a lot to you. To the banker? They would rather get the deal for less money than no deal for more money.

Their incentive is the transaction. Your incentive is the scope of the transaction. This can create a massive amount of conflict between you and your banker.

I have experienced this first-hand, and it’s shitty.

 Partner Alignment 

In my first company, I had two business partners. One of whom was my brother, our CFO.

When we first got the offer to sell, I was pretty interested in taking it, but my co-founder was less interested.

The reality was that I simply owned far more of the company than he did and would make a lot more money off the transaction. As he looked at the deal, I’m sure he thought, “Why not hold on for a little while longer and make more money in the future?”

The other dynamic was that he didn’t have any interest in Pela Case. I had this external force kind of nagging at me and pulling me to get a deal done + cash out.

My brother was a smaller shareholder in the company and ultimately responsible for doing most of the due diligence and legwork to get the deal done.

I’m sharing this because — while we got our deal done — it did create conflict between us as partners.

Today, I have co-founders, investors, and employees who are shareholders. In other words, I have a lot of partners.

With my co-founders, we aligned on what a win would look like early on. Even as recently as last week, we had a discussion on what a win would look like if we sold.

It’s very important to have these difficult conversations.

I have a guy that I’ve been coaching for two years who is in a partnership with a great co-founder where there is a tricky dynamic. One co-founder is independently wealthy; the other has never made any real money.

The founder with independent wealth is willing to take more risk and go for a larger win. Whereas the founder who has never had a win wants a smaller win just to get one.

This is a point of conflict for them. There are ways around it, but it still creates a problem that needs to be solved.

The other dynamic you have to watch for is around earn-outs.

When I sold my first company, my co-founder did not have to stick around, neither did I … but my brother did.

He was the transition guy. You can see how there are situations where one co-founder is more important than another in the eyes of the buyer, and that creates an unequal set of earn-out circumstances.

A lot of people have co-founders and business partners. It’s really, really important to be aligned on the key pieces of a deal before you get into the meat of the process.

The last thing you want to do is be five days from signing the paperwork only to uncover that you are not aligned, and that the whole thing can fall apart in the 11th hour.

This is particularly true when dealing with outside investors, as they have an entirely different set of incentives.

The messy part of business is always the human part. There is no place where this becomes more true than selling the company.

 Post-Transaction 

What happens after the deal is closed?

It’s a pretty cool feeling when you open up your bank account and see a massive amount of money wired in.

After it’s all said and done, you’re going to feel a lot of different things. Some founders get really depressed because this is a huge part of their identity that is no longer in their lives.

I kind of avoided this because I was immediately thrust into being the CEO of Pela Case. I had no downtime.

I was also fortunate enough to have a great coach at the time and a lot of mentors who walked me through all of the potential pitfalls of those post-transaction emotions.

I built my company for a decade. I bootstrapped it from nothing.

There is no question that a big part of me and a big part of who other people thought I was, was tied up in that business.

Honestly, the thing that gave me the most angst was a set of terms around clawbacks if something in the deal (as I disclosed it) wasn’t actually true. I think the technical term for this is reps and warranties.

Basically, if they believed something to be true that ultimately wasn’t for the first 6-12 months post-deal, they could claw back funds to cover those unforeseen costs.

For me, a big one was any legal liabilities that I just didn’t know were going to happen — i.e., “Am I going to get sued?”

The even bigger one was any key accounts or clients that we had that left as a result of the transaction that we weren’t expecting.

You might have a lot of money in your bank, but that doesn’t mean you are totally free and clear of the actual company.

Most deals have earn-outs. They have transition periods. You might be newly rich, but that doesn’t mean you’re still not engaged and working.

After a deal is done, rarely is the deal actually done.

This is why I advise people to really focus on deal terms and a little less on deal price. The headline number of an acquisition doesn’t matter nearly as much as the main terms. The terms are what stay with you post-transaction.

The only thing I did with the money was buy a couple of new mountain bikes. I waited almost five years before I even bought myself a nice car. Maybe that’s a bit excessive. I probably could have spent some money earlier.

Getting to a sale often means it’s a founder’s first time with real money. In my case, I ran a really profitable company for almost a decade. We pulled millions out in profit distributions.

Still, I can easily see how coming into a lot of money all at once after years of scarcity can be disruptive. It’s kind of like all those lottery winners that wind up blowing it because they were never equipped to handle the wealth in the first place.

The one piece of advice that I got that I followed was “no major purchases” for at least 18 months.

The best thing you can do is surround yourself with people who’ve already gone through this. They’ll help navigate all the little nuances and all the emotions and all the family dynamics and whatever else comes your way.

 Need Help? I’m Here! 

Okay, I think that’s it. That might seem like a lot, but honestly, this is probably just scratching the surface.

I imagine I’ll think of more things later. Maybe I’ll do a second part to this email.

If you’re contemplating a sale, I hope this is helpful.

If you’re anywhere near getting ready to exit, please don’t hesitate to reach out. I do work one-on-one with founders to help them prepare and navigate the waters of selling.

THE FEED

​£500M Exit: Behind The Curtain With Petfolk Founder Mike Wystrach​

​Meta Shifts, Margins & Smarter Growth with Taylor Holiday​

​Outsource Your Sales Tax Nightmares + FIGS, Building Your Own Factory & More​

The Trends

Curated by the editor of CPG Wire, this week’s five biggest headlines in consumer news.

Curated by the editor of CPG Wire, the five best stories in commerce with an executive summary for the newsletter.

1. Church & Dwight Swings For The Fences: Retail Dive​

Church & Dwight is acquiring Touchland, an innovative player in the hand sanitizer category, for up to $880 million. The deal includes $700 million in cash + stock, along with a potential earnout of $180 million.

Andrea Lisbona and her husband, Ruggero Grammatico, originally launched the brand in 2014 and brought it to the US in 2018. The couple took a historically banal product, hand sanitizer, and made it sexier via sleek packaging and improved formulations.

2. Jack Link’s Partners With MrBeast: Twitter (X)​

Jack Link’s has partnered with MrBeast to launch a co-branded line of meat snacks. Jack Link’s is undoubtedly a category incumbent — its convenience channel sales alone nearly exceeded $1B in 2021. But it’s under immense pressure from fast-growing upstarts like Chomps and Archer.

Partnering with MrBeast ought to make Jack Link’s more appealing to younger consumers … at least, in theory.

3. Chobani Expands Better-For-You Portfolio: Modern Retail​

Chobani announced that it’s acquiring Daily Harvest, a purveyor of organic shakes, snacks, meals, and nutritional supplements. Daily Harvest was founded in 2015 by Rachel Drori, who started the business by selling direct-to-consumer smoothies.

For Chobani, this is their second acquisition after purchasing La Colombe for $900M in 2023. Chobani’s goal is seemingly to own the morning routines of mindful consumers. Yogurt + coffee for breakfast, and perhaps a smoothie as a late morning snack.

4. Dairy Giant Acquires Kate Farms: GlobeNewswire​

French dairy giant Danone acquired a majority stake in Kate Farms, a producer of specialized nutrition products. Kate Farms, which launched in 2011, sells a variety of nutritional shakes in the retail channel and at more than 1,400 hospitals across the U.S. Richard Laver, who recently launched Lucky Energy, launched Kate Farms with his wife, Michelle.

5. Kette & Fire Opens Manufacturing Facility: Food Processing​

Kettle & Fire, a category leader in bone broth, just opened a state-of-the-art manufacturing facility in Lancaster, PA. The 167,000-square-foot facility is expected to create nearly 150 new jobs for Lancaster County. Kettle & Fire is now poised to unlock manufacturing and logistics efficiencies by owning its manufacturing instead of outsourcing.

 Don’t Tell Anyone 

I’ll be down in LA this week for my first in-person Operators event. And while I’m there …

If you’re willing to give me feedback — and swear not to share it before we do — write me back, and I’ll drop you a link.

With thanks and anticipation,
Aaron Orendorff 🤓 Executive Editor

Disclaimer: Special thanks to Rivo for sponsoring the newsletter.

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