Summary

Robert Kirila and Mark Whaling are partners of Black Powder Partners, a business that helps veterans buy and run businesses. The idea for Black Powder Partners came from their work with Your Grateful Nation, a nonprofit that helps special operators transition to the private sector. They realized that many special operators were successful in corporate jobs but wanted to be more entrepreneurial. Black Powder Partners focuses on buying small micro-cap companies in the Southeast and using special operator talent to run them. They have successfully acquired three companies so far. Black Powder Partners is a private equity firm that acquires and grows asset-light service-based businesses. Their unique approach involves placing highly capable and experienced veterans in leadership positions within the acquired companies. The value that Black Powder brings is not just financial capital, but also the leadership and growth culture that their veteran operators instill. They focus on niche businesses that have long-term success potential and are interested in growth. The company has a patient and flexible approach to investments, with a five to seven-year window for returns. Their investors are excited about the opportunity to be part of a veteran-owned firm that celebrates and employs veterans.

Takeaways

Black Powder Partners helps veterans buy and run businesses
The idea came from their work with Your Grateful Nation
They focus on buying small micro-cap companies in the Southeast
Special operator talent is used to run the acquired companies Black Powder Partners acquires and grows asset-light service-based businesses.
They place highly capable veterans in leadership positions within the acquired companies.
Their focus is on niche businesses with long-term success potential.
Black Powder has a patient and flexible approach to investments, with a five to seven-year window for returns.
Their investors are excited to be part of a veteran-owned firm that celebrates and employs veterans.

 

 Watch the Interview:

Transcript:

Jon (00:01.994)
Welcome to Top &A Entrepreneurs. Today I have a couple of guests, Robert Carrillo and Mark Whaling. They are both partners of Black Powder Partners, which is a cool veteran kind of centric business to help veterans buy businesses, put them in roles, all kinds of things. So welcome to the show guys.

Robert Kirila (00:25.807)
Great to be here, John.

Mark Whaling (00:27.715)
Yeah, thanks for having us. our pleasure.

Jon (00:30.678)
All right, so where did this idea come from? And who started it is like, okay, why not just get a job? I got out of the service, I was a special operator, let's just go get a job or let's,

Robert Kirila (00:42.021)
Sure, sure. I'll take a swing and Mark, I'm sure we'll add some color to the story. But essentially it started after I had left a, when I left the service, I took over a tech and innovation company and acted as the COO there and realized quickly that those were great Americans. They just weren't my people. And so I...

What I knew though was that running a business was very similar to running an organization and the same sorts of leadership and problem solving skills apply. But what happened after that was, and this is where I first met Mark is I was asked by Your Grateful Nation, the chairman and the vice chairman of Your Grateful Nation, which is

nonprofit that's now known as the Special Operators Transition Foundation. But I was asked to come on and sort of take over that foundation and really help special operators make the transition from service to the private sector. And very specifically, we were looking for special operators who wanted to participate

in the sort of live action entrepreneurial and high performance business sectors. And so that's what YGen was created for. As we grew that, Mark actually moved up into the vice chairman role and he is now the chairman of that entity, but we changed it to the Special Operators Transition Foundation and we've sort of helped over 600 people since that

But what we found is as we were going around the country and meeting with people that wanted to help, in other words, people that own companies, people that own large private equity entities, those sorts of people that wanted to come alongside these special operators, they asked us over and over again, what are you going to do next, Rob? after a little bit of not hearing the question correctly,

Robert Kirila (03:05.493)
I had the chance to meet someone in Detroit who sat me down and said, Rob, you're not listening. What these great Americans are asking you is if there is something that you have in mind that they could participate with you in. And so when he said that, he said, look, when you're flying home tomorrow, I want you to write a list of all those folks that were

that express an interest in what you're going to do next and then write them a note. And Mark was one of those guys. And so we kept working at it, kept working at it. And that's how we formed Black Powder Partners. And it's based on this notion that we could continue to contribute to the United States of America and its sort of strengths. But in this case, through its economic

And so the idea became that black powder partners, it's a take off of dry powder, right? The black powder partners notion would be to buy small micro cap companies that are located in the Southeast and then use our partners, our investor partners throughout the country.

to make those acquisitions and then to use special operator talent who'd been out in the private sector, sort of in the wild for four to five years where they'd learned things like financials and marketing and how to sort of work on on client relationships. And so we started that about almost four years ago now. And and Mark was one of my initial pound partners. The other one is Todd Coochie,

who's not here with us today, but another great American. And since that time, we have acquired three different companies. The first two we sort of acquired and put together. And then we hired a former Ranger to take over that company. And since then, he's hired a Special Forces Sergeant Major to be his COO. And he's hired a former

Robert Kirila (05:28.325)
Army Grunt, Mortar Man to be his CFO. And they have succeeded beyond our any estimations. They're growing about 36 % annually. So just been a huge success with them. And then last year, about a year ago, we bought another company and we put a Special Forces Colonel in charge there. And he

you know, at this time really getting his team right and going through the budgeting process for 25. I'll pause there. Mark can sort of jump in and add some color if that's okay.

Mark Whaling (06:07.494)
Yes, I mean, was really my pleasure to be introduced to Rob. He did an amazing job of scaling the nonprofit and sort of making it a legitimate entity that could go on and impact over 600 special operations veterans. And what we were seeing was they were doing unbelievable in these corporate jobs they were going into. Two years out, the nonprofit placements, these were people screened pretty meticulously that had college degrees.

that had soft training and leadership and deployment expertise, knew how to in some very trying and harrowing conditions. But there was a risk from the corporate hiring partner that might not translate to the corporate world. We bet it would and it has. And what we found was 93 % of all placements were in the company two years later and very few of them were not at a higher level and they'd been incredibly successful.

So that made us feel good about the nonprofit and our mission. The same time Rob was getting feedback that there's people that would like to fund his next business, we were hearing from those placements in those nonprofit roles, profit roles, but through our nonprofit, that they were excited about what they had learned in that first two, three, four, five years, but they were itching. They're entrepreneurial by background, hence why they went into the special operations.

They didn't want to be just part of the military complex or serve. They wanted to make a difference. They wanted to be the tip of the spear. They wanted to help win the war. They wanted to help amplify our partner forces. So those same individuals that are succeeding in the corporate world, after a while, want to get to a point where it's not their first job. They've learned what they need. It's their next job. It's their best job. It's their last job. Somewhere they can lead a team, participate in the upside from an equity.

perspective and win together with their team. And that was the information we were getting from what we call our soda fellows. At the same time, Rob was getting the information from potential investors that would be future LPs. So that was the two sets of feedback that gave us confidence to step in. In addition to the veterans and we call them triple vetted at that point, they have the same academic degrees, always college.

Mark Whaling (08:33.885)
Many now have MBAs. They've done the soft work and deployment and have that unbelievable leadership capability. But now they've succeeded in the corporate world. So that's the triple vetted. Those are the people that were employing and giving equity to run black powder holding companies. Those are the people that we're talking about as far as black powder holdings or black powder search. So that's really

you know, the other side of the equation that gave us confidence. We knew we had interested parties that while they were successful, they wanted

Mark Whaling (09:19.073)
Yeah, I'm going to hear you.

Jon (09:33.112)
Can you hear me now? I don't know what happened there. So these people, these triple vetted, thank God for editing the backend. So these people that are triple vetted, I mean, where did you find them? Were they in this foundation group or they volunteer their name, they attend meetings or like, where are you finding them?

Mark Whaling (09:33.781)
You're back, yeah.

Robert Kirila (09:54.479)
Right. Well, John, I'll sort of take that one. Take a swing at that.

Robert Kirila (10:03.109)
It's important, I think, for your audience to understand. I'd spent almost a quarter century, actually more than a quarter century, 26 plus years in the special operations community. I'm a retired colonel. And so what that allows me to do is to reach back into that community. This triple vetted talent that Mark is talking about is really a subset

of the special operations veterans that are all over the country. And so if we say that, hey, these special operators are an elite population within the larger military context, the ones that we are interacting with are those that after they transition are still seeking to be top two percenters. So that allows us to really generate these

very high potential, high performance individuals that other business entities aren't even aware that they exist, much less know how to find them. But for us, it's quite...

our process is very efficient in identifying them. So number one, you've got our experience in SOTF, right? So again, I mentioned over 600 people have gone through that. It's almost a 10 year old foundation at this point. It's, that is a huge number. And we're not really targeting John, the guys that are getting out right now. So we're targeting the guys five years from

Right? So they've been out. Now they do understand cashflow. They do understand sales funnels. They do understand how to manage clients, manage projects, that sort of thing, and have a high degree of continued enthusiasm, ambition. And so, you know, we've got, and this really is going to take us, I think, to the next entity that we stood up just over a year

Jon (11:50.936)
Yeah, yeah.

Robert Kirila (12:18.581)
And it really resulted in the fact that we felt like, John, we had identified more talented individuals that were out there capable of running a company than we had deal flow. Okay. And so we had developed this bench and month after month, when people heard what we were doing, would express interest in being one of our operating partners. And this was

And when the number was, you know, 15, that was great because whenever we made an acquisition, we could, we could put that out there for 15 guys, but they grew to, it grew to 30 to 50 to 80. Now, you know, there are over a hundred guys that, and girls, former special operators who are interested in becoming our, our operating partners. And as you know, we're not due, we have no intent to do a hundred deals. and

Mark came up with the idea of helping those people find similar roles with other private equity entities. And then, and then as that has continued to mature, I'll turn it over to Mark. This is really what he's he's really great

Jon (13:37.708)
Let me ask Mark, like your complimentary skills, you meeting Robert at the foundation, like what's your background and how did you come about and go, hey, we got complimentary, we don't have overlapping, but let's build something

Mark Whaling (13:53.182)
I mean, I mentioned it prior to the pod cast starting, which was just in awe of Rob. mean, Rob is so humble. The entire community is humble. I mean, one of the things we do in the nonprofit, in the four phases of training is get them to actually talk about themselves so that in interviews they can talk about their skillset. I mean, I come from 25 years of finance where there is no lack of people promoting themselves and talking about their skillset. The question is then,

who's actually being honest and who's spinning, much different. Here is a group of people that have served, that are the top 2 % of the military that have been deployed since the global war terror began. My thinking was, I'm a very patriotic, proud American. I've been blessed to have a very nice life and to have personal success. As soon as I came across the nonprofits that were helping these elite veterans, I thought, if I can't use my big mouth and my big network to help these

unbelievably selfless, talented people achieve their goals. And if we can't fast track them back to the place they would be, if they hadn't have stepped out to risk all for our country, then I'm just full of it. And so I leaned in hard and just found so much satisfaction in engaging with the community of operators and guys like Rob that have become amazing friends of mine, whether it was the nonprofit or the for -profit, just, they're the best.

Americans and I think any of us that work in finance or on the bi -coastal elite world, you forget just how humble and unbelievable people are across this country. And that was the best thing for me. What I love is we are dealing with owners and operators and founders who have built businesses that make things in America. And we are dealing with the most selfless elite veterans out there. So you can tell them passionate about it. I thought let's help them nonprofit. Let's help them for -profit.

let's figure out how many things we can do with these unbelievable individuals. And the more people we interact with, Rob talked about our first acquisition, there's now three veterans there. Black powder, there's Rob, who's the managing partner, special forces colonel, incredibly well decorated and well respected in the community. We have two partners, myself and Todd, that have financial backgrounds. But our COO is an ex -Navy SEAL MIT MBA who's very well representative.

Mark Whaling (16:15.486)
of that triple vetted talent, worked with me in my finance career. So anytime we have a chance to put a talented person in our own companies, we do it. At Black Powder, the entity, we do it. What we found was, let's continue this mission, not just getting people their first job, but that next job, that best job, that last job. And let's do it for profit just because it takes time, energy, money and a staff to do executive search type work. And that's what we're doing

And it's so much more rewarding than my prior career in that we win together. The veteran wins, the company wins, their family wins, and all can win together. And that's really what's exciting about Black Potter because the holdings is the same way. Veteran wins, the LPs win, the employees and the company win.

And on the search side, it's the same thing. It just happens to be that we don't own that entity, but it's a really great, rewarding thing to do every day, to wake up and figure out how can we help everybody win together.

Jon (17:24.29)
So let's go back to the part where you go, this is the idea we're gonna go with and we're gonna go buy companies and then gonna put, install these special operators. So you, I don't know if you had the experience before, but he goes, we need to raise some money to be able to buy a company and then we'll get debt. And that was your job, right? Like where was the conversation about how much money we need to raise? Is it a fund or is

commitments from people, what does that look like and what was your buy box for, was it mid -market, upper mid -market, size deal, what are we looking

Robert Kirila (18:03.491)
Yeah, so it's a great question. And it goes back to our investment strategy. And what I'll tell you is that we are really looking to capitalize on what we think is a gap. Right. And so we don't want to fight. We don't want to compete with someone who has greater resources, greater experience or greater market placement. We we really developed

our strategy based on Harvard's entrepreneurship through acquisition sort of ideologies. And I know your listeners know all about that. But we started there and we are looking for family and founder owned businesses. We are specifically looking in the sunbelt, right? Because what is unique about special operators, John, is that the vast majority of our bases are in the South for brag,

MacDill Air Force Base, Eglin Air Force Base, many of the Navy bases clearly in Virginia, the Ranger entities in Georgia, the Special Operations Aviators in Tennessee, it represents a concentration. But a lot of those guys will move into, and girls, will move into those areas.

from around the country and marry a girl who is from there. And the arrangement they say is essentially, darling, I am going to be all I can be. I'm going to represent our nation on the edge of empire. I'm going to deploy. I'm going to do great things. When I'm done.

We, you get to choose where we live. And so a lot of times what we'll see is they move to locations like Nashville, Atlanta, Dallas, Charlotte, Raleigh. And so one of the things that we learned, Mark and I both learned back in SOTIF was if we find a great opportunity, but it's in a place that a special operator or his family doesn't want to go, then it's therefore not a great opportunity.

Robert Kirila (20:20.473)
So we decided to focus our search in the markets that represent the greatest density of special operators. So that's how we got the Sun Belt. We like tax friendly states. We like states that support their veterans, i .e. Florida, i .e. Texas, and North Carolina, well, both of the Carolinas. Those are some great, Tennessee is another great place. And we started to focus in there.

And then we looked at a market cap of somewhere between one and $4 million of EBITDA because those companies were large enough that they could support an acquisition process. The cash flow would be large enough to support bringing in some of the special ops talent, but not too large that we sort of have to now start compete with some of

the more established private equity entities that were out there. And so when you look at the enterprise values, we are right at the top of the sort of SBA range, but we do all equity deals. So our operating partners don't have to worry about debt coverage and cashflow in a way that many other independent owner -operator

guys that are buying companies have to. And so they come in with the advantage of being triple bedded, right? They are complex problem solvers. They know how to deal with people and they have the education and sort of private sector experience to be successful. Then we sort of put them into these companies where they're not having to service cash or debt coverage.

And so they are able to husband their resources and really move into growth much more quickly than someone who has to service their debt, right?

Jon (22:26.328)
Yeah, that's scary, especially with SBA doing 90%. That's like, there's not enough cashflow to, you know, in case there's a, you know, 15 % drop or I want to spend on marketing or I want to buy another company. What the hell?

Robert Kirila (22:28.988)
Exactly right.

Robert Kirila (22:37.58)
Exactly right,

Robert Kirila (22:41.583)
That's right. Right. If, if, know, and our, one of our companies is going through this right now, he wants to gain greater leverage, within his company by understanding all of his data, which is spread over a million different databases and PowerPoint slides and everything else. So he has the cashflow necessary to bring in a data specialist to help him understand his data and therefore.

his customers, his pricing schedules and everything like that. Because he doesn't have a debt coverage requirement, he's able to do that. And that allows him, John, to really set himself up for a detailed growth plan in 2025. Does that make sense?

Jon (23:28.962)
Yeah, so I'm ask Mark, so what does that look like? Where'd that money come from? And how are you owning that company with somebody else putting up the money? What does that cap stack look

Mark Whaling (23:41.144)
Yeah. So just one point on the type of companies we're buying, and then I'll get into the capital raising, which is largely my bread and butter after 25 years in finance. That's sort of I bring to the table. We all lean into our networks, but that's my background. But the companies we're buying, this is important. As the son of an entrepreneur who had a very capital intensive business in which he had a lot of leverage and debt, and thankfully it worked

We recognize that we wanted to be in all these areas that Rob talked about, but we recognize what was a real differentiator was leadership, leaders of human capital. And we thought, let's not burden them with debt, but let's also not burden them with an incredibly complex asset heavy, expensive operation. Let's buy asset light service driven businesses in which the differentiator is people, people doing services for other

So we're putting them into a position where, yes, they have to get up to speed on the industry, but it's not incredibly complex industries. So then without having to deal with all the financial pressure, without having to deal with these wildly complex manufacturing facilities and things of that nature and all sorts of depreciating assets, they've got people that do services and they know how to motivate and reward those people, incentivize those people, recruit more people and get the most out. And then in addition, because of

Robert Kirila (24:57.925)
Great point,

Mark Whaling (25:04.81)
lack of leverage and because of the cash flow targets for the companies we're buying and the way we manage it and protect that, there's an ability even if you hit macro headwinds or if some of our thoughts were off or something changed, these are the best pivoters in the world, right? They get dropped in a valley in Afghanistan and the plan goes differently, not surprisingly. It's a hell of a lot easier to pivot.

a service company out of Texas than it is to pivot 100 soldiers in a valley in Afghanistan. So what we've set up is asset -like service -driven people, businesses in which leadership can really make the difference. And that's really important, and that's something our LPs are so excited about. The other thing is, how do we raise the money? There are a bunch of patriots that we've come across through our years in the nonprofit, through our years in the profit.

Robert Kirila (25:43.503)
Yep. Yep.

Mark Whaling (26:00.888)
More importantly, good people gravitate and network with good people. And good people who've been successful are really excited about investing in to a veteran -owned entity where Rob is the managing partner and has the largest stake in the company. We're also thrilled for Rob after 26 years of serving to be able to have that upside as we get this right. But their hurdles to invest are lower.

because they know our strategy is thoughtful and safe. More importantly, they know if the investment wins, the veteran wins, Rob wins, they win all together. So it's been some of the easier capital raises I've done in my career. And I was in financial sales and services and securities for 25 years at global investment banks, gravitated to smaller boutique investment banks where we did a lot of small

emerging growth capital raising. This is much easier than anything I've ever done in that. One, because it's smaller amounts of money. But two, because we're going to patriots that have been successful, want to use their success to give back and want to use their success to not only get a return on their investment, but to help elite veterans. So it's really a great cycle. And we have a ton of overlap from one deal to another based upon that community of people that have raised their hand saying, hey,

I wanna see every single deal. And we set up the entity where each deal is its own fund. So that gives our investors, many of which are financial professionals, the opportunity to be in or out. And they like that because they have a lot of experience. So they can say, hey, I love this, I invested in a business like this, or I love this, I almost invested and I should have, or hey, this looks good to me, but just in general, have too much exposure to this area in my actual large financial sponsor fund or some other entity there.

they have a stake in. And so that flexibility makes it a bit different. And I think they really like that. So it's a lot of one -to -one conversations. It's a lot of people doing it for a variety of reasons. And again, I don't want to keep saying it, but it's true. Everything we do, people winning together with the veterans being top of mind in that equation.

Jon (28:16.844)
Yeah, let's talk about that first deal that you did and the type of service business you went after and the offer and the all equity. What did that look like and what went wrong? mean, how many offers did you make on businesses before one was actually accepted? what kind of at bats?

Robert Kirila (28:33.925)
Sure, sure. I think that that's a, it's a good case study, John. I'll tell you, we went after, well, dang, we went after several companies that...

Mark Whaling (28:38.52)
Okay.

Robert Kirila (28:52.197)
our LOI was not accepted. They chose another one. Or in one case, we had a company in Florida and we were close. I mean, we were a month from close when the owner decided it had a change of heart. And the company in Dallas, let's talk about the company in Dallas. So we found this service company. They do mostly

manufacturers repair and maintenance. the customer are the major manufacturers and they essentially run the warranty claim process on their behalf.

Jon (29:36.152)
It's like an insurance policy that the buyer of the refrigerator or something.

Robert Kirila (29:40.053)
Let me frame it a different way. So if let's say I manufacture doors, commercial and residential doors, and I have a five year warranty on this particular type of door. And so two years after we installed it, had a builder had it installed somewhere, the owner of the building, the property manager, the homeowner says, hey,

My door no longer works like it's supposed to. I look up for a sticker in the corner of the door and it says, hey, this is the manufacturer. I'm going to call the manufacturer and say, hey, I'm dissatisfied with the performance of my door. In some cases, they are calling our company directly because we perform that sort of business center function for

Mark Whaling (30:19.8)
you

Robert Kirila (30:34.903)
In other cases, they call the manufacturer. The manufacturer calls us and says, hey, send someone out to go confirm the status of this door. And, and then we'll go out and do confirm the status, take pictures, and then help them with putting the claim paperwork together. And then if they want someone to fix

They can either send one of their own sort of W -2 employees or they can call us and we will activate our national network to go have that door repaired, replaced, whatever is required to make that property manager, that homeowner happy with their door. Okay, so that's kind of what that service looks like. So we're performing not as an insurance

Mark Whaling (31:17.528)
you

Robert Kirila (31:27.009)
The insurers are not the customers. The actual manufacturers are the customers. But anyway, right, the deal. Yeah, the deal. We submitted an offer to them and they chose a higher offer. And it was two brothers and great Americans, Texans, right out of central casting, Texans.

Jon (31:34.522)
Where'd you find the deal? Where was it? Yeah.

Robert Kirila (31:56.013)
And we, Mark and I flew out there and had barbecue with them and spent some time and and made them an offer. And but they chose the higher they chose a higher offer. And what we found was after about three months, they called us back and said, hey, we we don't like this deal that we we're going to back out of the deal. We want to do it with you guys. And.

So we said, okay, and we fired the deal back up and sort of move forward with them. And I think from the very beginning, we felt like, Hey, we want to be true to ourselves. And we need to tell you, we want to bring in our special operator. We think we've got a great plan. We think we've got a great special operator to run this. And one of the brothers wanted to stay on and the other brother wanted to.

do as a Texan would do and that is to take care of his family and watch cows. And so we made them a deal that allowed him to do that and allowed the other brother to stay as a senior executive in the company. And I think that we just had our second annual meeting with them and they're thrilled. They're absolutely thrilled. They retained a minority equity share in the company

is growing every day. They're very happy about that. Matt is continuing to provide value to the company as we move forward. So I think it's a great success story. Clearly, transitioning a company that has been owned by two brothers for more than 15 years, transitioning to a special operator

Mark Whaling (33:42.4)
you

Robert Kirila (33:49.801)
who is, by the way, also a Texan, also a former football player, just a great American has, you know, there were some challenges in the first six months, but that's really about culture. And, we told you before that we want guys that have interpersonal skills and can solve complex problems and understand how to, to sort

Mark Whaling (34:07.999)
Yes.

Robert Kirila (34:19.189)
operate in a competitive private sector. And we got the right guy. And like I mentioned, he brought in a special forces sergeant major who'd been running an entire logistics area for Amazon. And that guy has also joined the team and been a value add from the jump. And then like I say, they brought in a former mortar man.

to be their CFO. And he'd been at, I think he's been out for over 10 years and has been a comptroller, has been a controller, has all of the financial capabilities that we need to continue to grow that thing. Because John, at the end of the day, Mark mentioned this, and it's really, really important, I think, to share with your listeners. The companies we buy are successful

because of the people that are running them. That is the highest value asset in the company. And so when these guys walk in, they are capable of helping that company grow when they are able to establish the type of growth culture that's necessary. And like Mark mentioned again, Mark said it actually better than I did.

That is the value that black powder brings to any company that we look at to acquire. There are always going to be people with more capital out there. There's going to be people with, you know, maybe even, you know, a Harvard MBA or something along those lines. But there isn't that many private equity entities out

that can bring in a guy who has been tested in combat, as Mark said, has lived and learned through combat, has also lived and learned as he sort of walked the academic hallways, right? Like Eric, our COO, his MBA is from MIT, just top of the chart there.

Mark Whaling (36:23.356)
Okay.

Robert Kirila (36:46.537)
Ultimately, it's a guy that can motivate people to want to grow the company in the same way that we want for our LPs.

Mark Whaling (36:53.147)
you

Jon (36:58.904)
It's kind of a, you're in a service -based business. That's kind of a tautology. You have to be great at service, right? Yeah, so where did you find that deal? Was it off market, on market, a whole bunch of mailings or

Robert Kirila (37:01.315)
That's right.

Robert Kirila (37:11.941)
Yep. So, it was on the market. and, it wasn't sort of broadly. It wasn't one that you could find easily. I'll say that. Right. And, and, and I know some of your listeners are looking at about 900 different sites every day. It was on one of those, right? It was on one of those. but that's not even how we found it. We found it, John, because.

there was a real nice gentleman out in Washington who had called me to ask if I would talk with one of his, someone that he met who was struggling with their transition, not a special operator, just a veteran who was struggling with their transition. And of course, right, I agreed to talk with that young man and,

I think we had a good conversation and last I checked he's doing just fine. But as a result of those conversations, he called me back about six months later and said, hey, I know what you're looking for. Have you heard about this particular deal? And I said, no, I hadn't seen that deal. And so he put us on it from

Jon (38:31.712)
Yeah. So when you guys, you put in an offer, they, all the sellers goes, well, we're going to make this most money as possible. So your offer came in asking lower. What did that look like, Mark? I lower than asking.

Robert Kirila (38:43.085)
Lower, yep, we were lower.

Yeah. Well, and as you know, there's a the asking price is just the start of negotiations, right. And

Jon (38:57.142)
Yeah, that's where they peg and start.

Robert Kirila (38:59.745)
Right. I think that one of the things that they told Mark and I was no one else flew out to have lunch with

Robert Kirila (39:10.733)
I want to sort of stress that no one else flew out to have lunch with them and spend time just getting to know them. And, you know, I think that that was a that was a significant point for them, a differentiator, as it were.

Mark Whaling (39:28.104)
I think when you think about the Southeast Target and the individuals that Rob was talking about, and he phrased it as those that are supportive of their veterans, they really are excited to be talking with a Special Forces Colonel of Rob's stature, somebody who's done so much for the country. They're really excited to be able to sell the bulk of their firm but retain a stake.

and to be a part of something as differentiated as Black Power Partners, to be able to tell their family and friends that they not only sold their company and had a nice liquidity event, a great outcome for any business owner, but that they're still involved. And then instead of selling it to just the deepest pocketed, sort of, you know, most aggressive New York person out there on Wall Street, they sold it to a firm that's managed and owned by.

former Special Forces Colonel that is a veteran owned firm that is a firm that employs and celebrates veterans and that they're sticking around with a stake in that entity to take it to the next level. And we've seen that play out very, very well with our acquisition in Texas. But I think that's really a differentiated strategy and something that specifically and the market we're going into as far as the regions, the type of businesses, the type of people, and then the size of those entities.

Jon (40:51.96)
Yeah. I'm just curious what that looks like to the investor. You know, in the SMB market, a lot of private equity guys are moving down and providing capital for down payments, but they're very sophisticated. There's a lot of trade guys that want to buy an HVAC firm. And then when they hear that, well, yeah, I'll loan you, I'll give you the $500 ,000 for down payment, but you know, I want to participate in preferred. I want a 1 .5 up step

Mark Whaling (41:19.438)
Thank you.

Jon (41:21.354)
I want a coupon, et cetera. It's really messy for a trade guy that's been in HVAC, installing HVACs all their life. Like what does that look like for the investors that are coming in to help you buy this? What you can talk about, you

Robert Kirila (41:36.047)
right? Well,

Yeah, we'll use some generalities and clearly Mark has a really good profile. What I will tell you though is this, in my old community, we used to say, don't bring a knife to a gunfight. And we're trying to do the same thing here, John. HVAC and landscaping, there are several of these sort

entity or business types that we know more capable, more capitalized entities are out there buying those up. So we're not going to come. I do not want to compete with them. Right. We, that is how you lose is, is trying to compete with. Exactly. Right.

Jon (42:33.826)
Somebody with a lot of dry

Robert Kirila (42:38.435)
So we don't do that. What we want to compete with, we want to find really niche entities that honestly goodness, nobody even knew was a business. So that when you say, we bought this company and someone says, well, what do they do? And you tell them and they say, I didn't even know that was a business. That's what we're looking for. so that we can, we can sort of compete,

in a way that our capabilities and our people can really shine in without having to compete with the 800 -pound gorillas that are out

Mark Whaling (43:14.355)
Good.

Jon (43:20.792)
So you're, let me ask this way. You're not really looking for the roll up in a niche to go up the private equity pyramid and get the multiple expansion or the vertical integration. You're looking, your impact is to put the veterans, know, triple vetted veterans in a specific role. Is there an exit strategy or do they get to buy them back after five years or

Robert Kirila (43:47.517)
yeah, make no mistake. This is a for -profit plan. I think you're probably familiar with the fellow that runs Shore Capital. And he buys hundreds of the type of companies that we buy. So again, I don't want to compete with him, but I would say that we are trying to at least cognitively or conceptually

do similar things that he does. I think his name is Jason Ishbia. And he's done some great podcasts where he talks about finding operating partners that are young and ambitious and capable. And so he buys a company that he thinks he can grow seven or eight times. And if he does that, then he gets to participate in

the multiple expansion, things like that, the arbitrage piece. We think we can do the same thing on a much smaller scale. Again, I don't want to compete with him, but we think we can do similar things on a much smaller scale and create that type of an opportunity. and, you know, for our LPs that were involved with our first deal, we're, you know, we're just over two years into it and

We're well on our way, man. mean, you know, God bless, God has blessed us, we are, we're moving in with that same direction. And now the company that we bought last year, you know, we absolutely anticipate something similar, but we're only a year into it. so it's not, we haven't sort of seen the same types of numbers, but to go back to your question,

The, when we brief our potential LPs, we talked to them about a five to seven year window. And so they're patient. they're, you know, they're not the ones that are calling me in the middle of the night and saying, Hey, you know, when is, when, when are you looking to sell again? Or, you know, I I'm really concerned about, you know, a note in your, last quarterly newsletter.

Robert Kirila (46:12.579)
These are our investors understand, we tell them about our process, we tell them about what we think we are going to be sort of at seeing in terms of return on these companies. And they've just been fantastic. mean, family offices, individuals, investment LLCs, those are our investors. We don't, we're

We're not at a place where we're dealing with entities that say, hey, we've got to have this whole deal or we're not doing it. Those are not our investors, Mark.

Mark Whaling (46:54.234)
Yeah, I think it's important to understand that, you I was in the institutional

securities business for years dealing with large major funds, endowments and pension funds and others that have a lot of pressure. this is people that are leaning in again, the mission matters. They wanna make a return, but they're gonna be pretty flexible. As long as things are going in the right direction, they're in no rush. It gives us a great flexibility. We can exit if it makes the most sense or we can grow the business

Robert Kirila (47:25.541)
cash flow.

Jon (47:26.818)
Keep it and throw off cash flow to make other acquisitions.

Mark Whaling (47:27.841)
cashflow distribution, they're saying, let's go. And they're all saying, if there's an opportunity for us to distribute cashflow, saying, I obviously would love to have my money start coming back and start driving returns, but if you can do something better with it, like love what I'm seeing. They look at this as a really diversified investment for them because it isn't tied to the major financial markets and some of the larger situations they're involved in because of the nature of these businesses, the niche.

industries, the size of them and the lack of really complex and major intensive competitors, we have an opportunity if we execute the way we can to outperform in any sort of environment based upon the fact that it's much easier to grow a small number than a large number. In a disparate industry that's a niche industry, that's human capital, service driven, we really

It's a nice opportunity. And again, not in an arrogant way. It's not about us. It's about the people putting in charge of the business, getting the maximum amount of people that have already built a nice business and a lack of major competitors. There's just a lot of opportunity to have success in that less competitive area. And that's what our investors are excited about, which is hence they're not looking for

this investment to be shut down and closed out. They're like, I want more of these because I look at this as like a new little asset class. And if I can just have distributions coming in every year, that's great because it's totally unrelated to my other investments.

Jon (49:10.156)
Yeah, is that distributions from the holding company or distributions from each individual LLC?

Robert Kirila (49:17.091)
So without showing you completely under our skirt, Mark had mentioned this, each one of our investments is done as a standalone. So there's no co -mingling of funds between investment A, B or C. And so with each investment,

We meet at the end of the year and we talk about what are we going to do with excess cash that's been generated over the course of the year. And we will have discussions as a board, as a partnership, but we also have discussions with our LPs. what they have said almost universally since we started was, hey, I don't need a distribution this year. Keep putting the money back into the company.

keep growing the company, I'll be fine. And so when we, think that this year, the excess cash is of such scale that we are going to start doing our distributions this year because it exceeds our capacity to make bolt -on acquisitions.

Jon (50:38.22)
Yeah. Let me go to the second one. A little bit of detail narrative about that. How long did that take to find where, kind of business was it? You get it at a good price or fair offer on market, off market. That's a really good.

Robert Kirila (50:54.201)
Yep. yep. So another, another on market opportunity. we found it. I had actually had a conversation several years ago with a Navy seal who, when he got out, he bought two gyms. realized pretty quickly that, that that was a lot of work and not a lot of return.

Mark Whaling (51:02.887)
you

Robert Kirila (51:21.933)
So sold those things and bought a similar company to this one. And this particular company does draw inspections on behalf and the customers of the financial institutions. So it's essentially a third party entity that verifies progress for builders and financial institutions.

And so very much another niche market.

Jon (51:54.776)
Didn't know what is a business. Market business. Yeah.

Robert Kirila (51:58.135)
Right. Right. And, and, so, but it's easy to understand, right? The customers, I understand what the customer wants. I understand how, the profits are generated, right? They have several lines of business, but it's not a, you know, highly technical, business. It's one that, you know, Charlie Munger would say, represents something that we can understand.

And that as Mark has alluded to over and over again, a capable problem solver who understands cashflow and how to manage people and how to manage projects can be successful. And so that's why we pulled the trigger on that. took

Robert Kirila (52:48.165)
You know, John, I hear from other people all the time that this is a great market. There's all these great deals out there. And, you know, there's certainly a lot of deals out there, but if they don't, you know, I've got one of our advisors on our board who's been doing this for 30 years, supremely successful. And he'll say to me, Hey, if you get, if you can't get a good deal on the front side, it makes, generating a return that much harder.

So don't be afraid to be the low bidder. That is okay. There will be, again, there will be other people that will outbid you every time. You've got to be able to communicate a strategy that the ownership will feel good about. so that's what we tried to do. And with this company, they have got

do the basics of business. And that's really what we're helping them do, generate more customers, understand adjacent services that current customers could use, and identify new customers that need the same service. That's what we're doing, and just real proud of those guys down there.

Jon (54:12.076)
Yeah, how's that business doing since you purchased

Robert Kirila (54:15.171)
Well, so there we did. We've gone through a process, John, where we had to change the culture. And and and we had to identify the people that could relate to going from a family owned founder owned company to an investor owned company. And and so we've we've we went through that with our first set and we're going through that right now.

I think that I feel very encouraged about where we're at now with identifying the sort of dynamic leaders in the company that said, hey, I want to, I like where we're going and I want to be responsible and accountable and I'd like to lead. And so that's kind of where we're at right now. We've got this new leadership team of dynamic men and women that want to be a part of the growth culture that we're looking

Jon (55:14.38)
Yeah. Did you have to let people go that were there already or was it the special operator? that's, you know, they're W -2's until they own

Robert Kirila (55:25.305)
Right. Yeah. so our LPs, the way what are not LPs, but our operating partners, you know, they get a normal salary, competitive salary, they get whatever the bonuses are that are associated with performance. And then we award them equity incentive units as they sort of move through time and move through sort of performance achievements. So that's kind of how it works out for them.

Mark Whaling (55:42.374)
Well, thanks.

Robert Kirila (55:55.301)
and look, I think that, so, you know, when, when you change an organization, there were, there will be people that, that, that don't want to be a part of the new culture. And the best thing you can do for them is not to rub their nose in it, but just to encourage them. Right. Find a good, you know, it really goes down to this, find a place where you feel.

Jon (56:10.178)
Yeah.

Jon (56:15.02)
Tell him the truth.

Robert Kirila (56:23.065)
validated and valuable. And so, and if you don't feel those things, then, you know, go find it. It's, that's where we feel like if we can set people up for success and they enjoy the people around them, then things will go well for

Jon (56:43.81)
Yeah, let's talk about kind of wrap this up, because I only have about four minutes. You guys, now you hit your third acquisition, your balance sheet's much bigger, your thesis isn't a thesis anymore, it's proving exactly what you did. How do you guys feel about this? Like, where are you gonna go?

Robert Kirila (57:03.513)
Yeah, so we are continuing to look for new opportunities and look for family owned and founder owned businesses that do the asset light business services that we think we can be successful with. so finding them is a challenge, right? That is our biggest challenge, as we mentioned with Black Powder Search.

We've got this huge bench of guys ready to, you know, they're asking to, you know, put me in coach. But right now being able to find these really interesting, long -term successful companies that are interested in moving back to growth and with founders who are looking to do, to, you know, maybe take a second bite at the apple down the road.

That's what we're looking for. are constantly directing our activities to finding them. But as Brian said, we've got to find a deal that's good for

Mark Whaling (58:16.357)
I mean, my excitement is we're under no pressure because of the nature of how we structured this. We didn't raise a bunch of capital on a fund and then the fund is going to expire. We haven't put enough money to work and we're getting constant pressure from LPs about, I've allocated money. What are you doing? I'm not getting a return on it. The way in which we set this up allows patience, allows discipline on the acquisition

Jon (58:16.62)
Yeah,

Mark Whaling (58:43.793)
But that doesn't mean we're sitting there and just saying no, no, no. Each and every day we're continuing to build that bench or what we prefer to call it a community of triple vetted operators that want to work with us. And ideally we get the best of the best for our entities. However, what's the day to day job is constantly going out on their behalf and talking to other owner and operators and corporates that are looking for leaders. So that gives

One, daily activity. Two, a reason to be in the market constantly enhancing, expanding and building our community. And then three, just from a P &L perspective, as far as the partnership is concerned, generating revenue and income from the search side of the business. Again, winning together and helping veterans. But that cash flow enables us to continue to invest and expand and improve the staff. We also, through the community that we're building of operators that could work with Black Powder Holdings or Black Powder Search,

We're deputizing all of them saying, listen, you're in these small towns, in these markets, go find us a story like this, an asset like business, and then you're gonna be in the lead seat to get that operating role. So that's really rewarding. What I love about it is we're not just looking at deals day in, day out. Rob spends more time on the deals, I spend more time on trying to find corporate hiring and financial sponsor hiring partners, and

Eric, our COO, spends the time building out that community. So there's a lot to stay active on, even though at this point it's just three companies we've acquired. I think that keeps us disciplined and that keeps us vigilant on not stretching for a deal just to get a deal done. That's important.

Jon (01:00:29.164)
Yeah, that's great, guys. That's a great mission. Yeah. So we're on up on the hour. got one last question, Robert. You talked earlier about this guy in Detroit. I met a guy in Detroit that's kind of been one of my heroes is Joseph B. Anderson. We talking about the same guy or is that different? We are talking about Joseph B. Anderson, yeah.

Robert Kirila (01:00:50.724)
We are.

Robert Kirila (01:00:54.329)
Yep. Great American. He took the time to, and I'll never forget it. It was, it was at Christmas time and I walked in and he was sitting by, he was at the Detroit Athletic Club and he was sitting by a big, the big Christmas tree in the downstairs sort of foyer. And he essentially said, Hey Rob, sit down. I've got something I want to share with you. And

Mark Whaling (01:00:55.194)
you

Robert Kirila (01:01:23.945)
And it was a, you know, it was a big time discussion. you know, at first I thought to myself, John, thought, well, you know, I've been in the army. I've had my ass chewed before. I'll just take it and be a big boy. But, he was very much a mentor and he told me his story and, and, and then he paused and said, Hey, can't you do something like what I

And it was a catalyst

Jon (01:01:57.388)
Yeah, yeah. That's actually my best performing podcast with Joseph E. Anderson. It is, yeah. Guys, thank you so much. I really appreciate that, yeah.

Robert Kirila (01:02:02.669)
Is that right? Just a great American.

Mark Whaling (01:02:09.99)
Thanks, John. I appreciate it.

Robert Kirila (01:02:11.343)
All right, appreciate it, John. Sounds good.

Jon (01:02:13.292)
It'll go out next week.

Mark Whaling (01:02:14.71)
Great. Thank

Jon (01:02:16.524)
Alright, hold on one second. need to, I'm going to hit the stop and this records locally.

Robert Kirila (01:02:19.879)
Okay.