Summary

In this conversation, Malcolm Pease shares his journey from being a college tennis coach to becoming an entrepreneur focused on acquiring small businesses. He discusses the importance of mentorship, the challenges faced during negotiations, and the lessons learned from failed deals. Malcolm emphasizes the significance of communication and building partnerships in the business world, as well as the impact of COVID-19 on his career trajectory. He also highlights the process of scaling and systematizing business operations to enhance deal flow and efficiency. In this conversation, Malcolm Peace shares his insights on business acquisitions, focusing on the importance of understanding the motivations behind sellers, the process of acquiring a consulting company and a manufacturing business, and the emotional journey involved in closing deals. He emphasizes the significance of structuring deals creatively and maintaining strong relationships with investors and business owners.

Takeaways

Malcolm transitioned from a college tennis coach to an entrepreneur.
He learned the importance of mentorship from business owners.
Emotional attachment to deals can cloud judgment.
COVID-19 prompted a reevaluation of his career path.
Sourcing independent deals requires persistence and resilience.
Effective communication is crucial in negotiations.
Building partnerships can provide valuable learning opportunities.
Scaling business processes can enhance deal flow.
Understanding the financials is key to successful acquisitions.
Learning from failures is essential for growth. There's three different types of profiles we look at: death, divorce, and disinterest.
Engaging with divorce lawyers can lead to valuable leads.
My first acquisition was buying a consulting company from my partner.
The first deal was an earn-out structure.
We help small businesses get the owner out of the middle.
I bought a manufacturing company for $400,000 with significant cash flow.
Controlling the terms of a deal is crucial.
Building relationships with investors is key to raising capital.
The emotional journey of closing a deal can be intense.
It's important to maintain the legacy of the business after acquisition.

 

 Watch the Interview:

Transcript:

Jon Stoddard (00:01.724)
Welcome to the top M&A entrepreneurs. Today my guest is Malcolm Pease from Austin, Texas. Malcolm has made two acquisitions by himself. He's made some other acquisitions with other partners, but that's in the manufacturing and the food beverage hospitality business. So welcome to the show, Malcolm.

Malcolm Peace (00:19.402)
Hey John, thanks so much for having me. Honored to be here.

Jon Stoddard (00:21.996)
Yeah. Well, Malcolm, let's talk about where you started from and kind of your origin story. Like, hey, you were Luke Skywalker on this planet doing farming, doing nothing. So what were you doing?

Malcolm Peace (00:38.09)
Yeah, great question. You know, it's always a question to go, how far back do you go? But I think the beginning of that story, which would be really helpful for the audience. Because if you do a quick Google search of me, you'll see that I played college tennis and tennis was a big part of my background. And I saw through those experiences, players that I had on my teams, that their parents owned small businesses. I mean, big business to small all throughout the country.

I saw what they were capable of doing to be able to be involved in their kids' lives. And I kept saying to myself, man, how do I get from where I am today, which was traveling 30 weeks out of the year, recruiting and competing and all those types of things, how do I get to over there? And so I went to the University of Virginia to get my MBA program to help kind of in that transition process. And it wasn't...

I believe further than the second day into school that I heard this concept of buying a small business. And at that time, I was actually building a small business myself. We were doing some, basically managing traffic on university campuses to make informed decisions around security, safety, and big capex projects that they were doing. So I had this kind of tech company I was running. Both my parents are in software. I thought it was a natural fit.

though I have no computer science degree, I started looking at how do I get people on board to do that? And when I figured out that there are existing companies out there through professors and conversations I was having, there are businesses out there that were existing, that people could buy, and they had great teams, leadership teams that were in place and they could run, it opened up my whole world. And so I spent two years basically transitioning from college tennis coach to going and buying small businesses, either in partnerships.

or individually and so on and so forth. And so that's where I got started. I started doing work within small independent sponsor groups as intern and employment, and then moved on to a private equity firm that was getting started and eventually landed in 2018 with a group where we were buying hospitality business deals in and around the central Texas area. And so we would buy existing bed and breakfasts and then we would add more real estate onto them.

Malcolm Peace (02:55.606)
and add more facilities and opportunities for us to up-sale customers. And so a lot of B2C businesses. And again, really unique and it was neat to be able to kind of jump in as a partner with these guys. They had a lot of experience in the space as well as just structuring deals and putting that together. And coming from where I was to where I had been, I couldn't have imagined kind of an easier or a better opportunity to learn.

Jon Stoddard (03:18.784)
Yeah, let me ask you a question because you had some kind of insight or examined life where you were seeing some of your colleagues, your teammates with their parents, they'd show up at these matches were odd days of the week. It's because they own business. Did you ask them? This is a this is a concept I tell my students I got look, the deal of this you want to buy your time. You want to buy time? Yeah.

Malcolm Peace (03:35.767)
Yeah, so it was-

Malcolm Peace (03:44.475)
Yep. Yeah, so it was actually my player. So my last year coaching was at the University of Virginia and we had a very strong alumni base and a very involved parent group for some of our players. And in that time period, I also got to know the Dean of the Business School and we used to go play tennis at seven in the morning whenever we could. And I kept just asking him over and over again, so and so owns this business, they own that business, they own this other thing.

And it's so awesome that they can be at all the matches and so involved. Like I don't wanna be traveling 30 weeks out of the year. I wanna go move in a direction where we had a little one at the time, a one-year-old. And I was like, how do I get from here to there? And he's like, well, I have this business school. You could go learn a little bit about this. And it just so happened and coincided, second day in that there was a professor that mentioned this concept of buying a small business and running it as an entrepreneur after you graduated.

And I was like, wow, what would I need to do? What would I need to learn to be able to get from here to there was this eye-opening moment. And so I spent time engaging with those players' parents and them giving me mentorship, as well as the Dean of Business School, and also these faculty members that had said, you know, hey, why don't you go try doing this, you know, pro bono? Why don't you go help out this group? Why don't you go take this internship rather than working in a big corporate situation? Why don't you go do this? And the cards just kept falling in place, though I came from a very different background.

Jon Stoddard (05:07.13)
Yeah, a couple of questions. So those parents that you went to for mentorship, do you remember what kind of business they ran?

Malcolm Peace (05:13.726)
Yeah, one was a big trucking company or they own a bucket trucks in the area. I'll just leave it at that. It's a really, really big one. Appensee, Nathan, the Southeast. And yeah, you know, I would just try to understand. Oh, yeah, yeah. It's a big business. You would you would know it. And so, yeah, spending time with them and other folks that, you know, own these businesses and was able to be in the involved in their kids lives in a way that I had never seen.

Jon Stoddard (05:21.9)
Yeah.

Jon Stoddard (05:26.636)
Oh, we're still running then, huh?

Jon Stoddard (05:31.469)
Yeah.

Jon Stoddard (05:41.616)
Yeah.

Malcolm Peace (05:42.106)
I always thought of entrepreneurship as you basically sell your soul, it's the business that's like the third child of the family and you go just give it away. And I was like, wait a second, they're doing this differently. And it's a real slug for me to be able to go build this little business that I was trying to build at the time about managing traffic on university campuses. Then I was like, how do I make a jump here? And that's when I started putting the two and two together.

Jon Stoddard (06:09.356)
Yeah, I'm curious about that professor. Did he was he a professor all his life? Or did he own a business and come back and start teaching and have some real practical, empathetical experience?

Malcolm Peace (06:22.186)
Yeah, no, good question. You know, one of the unique things about the University of Virginia is the proximity to DC. You know, it's an hour and a half to two hours away from DC. And so a lot of these professors engaged with a lot of startups and businesses in and around the Charlottesville area, but also in the DC area. So they're broad of their reach and engagement. I don't recall him owning a business himself necessarily, but he could always speak to this engagement and consulting I did, this opportunity that I helped this business grow in this way.

And to be candid, you know, looking back on the scenario, I remember where I was sitting in the little room with classmates and so on and so forth. It was just a passing conversation. And you're in that mode where you're just soaking up as much information as possible, where you're really saying, hey, I wanna go give this a real shot. That you write down all the things you can and you Google them later and you start saying, wow, there is a big broad world out there of people doing some unique things that this could be more of what I was looking for. Cause I didn't see myself going and working for a big corporate company.

Jon Stoddard (07:21.401)
Yeah.

Malcolm Peace (07:21.65)
Neither of my parents ever showed that and candidly, I'm probably one of the worst employees out there. So, that's just the truth of it. And so I knew that there was always gonna be some sort of entrepreneurship, but I never saw a vision of way we could do this, a little bit quicker by going and buying a business.

Jon Stoddard (07:26.701)
Yeah.

Jon Stoddard (07:35.972)
Yeah. Did you feel that your mentors, whether it was the family or professors or other colleagues out there were saying, Hey, here's the skills you need to acquire, like you need to know the language of business and that's accounting, definitely get that right. And then to go buy a business, or like to delegate and manage people, you need to learn that did you kind of you felt did you feel like there was buckets and course lessons they were giving you?

Malcolm Peace (08:02.922)
Yeah, a little bit. I think one of the natural skill sets that I had from either college coaching or just my upbringing or what have you, is I can look at a problem and dissect it into many parts and hopefully address the core issue. I think that's one skill set that I can do for the most part. And I'm gonna have biases in that just as anybody would. But that's one of the things I would do as a college tennis coach. I would look at how someone was performing on the court and I could say, hey, if you broke this down a little bit, let's focus on this for the next 30 minutes, this will improve so on and so forth. That I take that same approach.

So my first introduction to this candidly is I was working for an independent sponsor based here out of Austin, and they threw me in without any guidance candidly to work with one of their portfolio companies that was in the risk fall equipment. So they manufactured the devices that would allow people to clean the outside of buildings, windows and so on and so forth, and protect those people from falling essentially. And I was sent there to go introduce an ERP system. Now,

I didn't know the first thing about an ERP system, but what I could do is I could say, okay, here's your process. Let me go interview the right people and draw out a cadence and a map for what it looks like for you guys to go from raw material to ending and shipping out the product and draw what does it look like to implement a software into that. And so that was my first introduction into really small business in a lot of ways that was an established company that I could go create value for, where I was like, hey,

let's go take a problem that's dissected into parts and then let's go recognize how do we organize those parts in a way that it makes sense to everybody. So to answer your question, I knew how to do that I think, and I've grown in that skillset still to this day, but one of the things that I was able to do with the mentorships and kind of the formalities of just schooling and classes and things that I took, is I could take appropriate language now to be able to speak to those moments.

and I could take a complex situation and create the language that I thought was necessary to go communicate something to a broader audience that maybe is a little more consumable. And that was the end goal, right? As long as I have the skillset, there's practical aspects, understanding how to run a P&L and balance sheet and so on and so forth that I've built and learned over time. But to be able to take a problem and dissect it into its smaller parts, I think was something that was...

Malcolm Peace (10:18.75)
a great advantage that I had going into small businesses.

Jon Stoddard (10:21.1)
Yeah, so why did they think you would be a, you know, I'm trying to figure out that task of the you recommended an ERP system because, you know, they come in all flavors, you know, small stuff to mid market to Fortune 1000. How, why would they think that you would be able to provide them like a package of solutions that, you know, and was this a real customer? Or were they just giving you an assignment? Oh, yeah, we like this stuff.

Malcolm Peace (10:47.398)
No, no, this is a portfolio company here in Austin. They still own today. Yeah, no, it was an actual business that they had bought in the last two years that needed this process or maybe the last year, I can't recall the exact timeline at the time, but that they needed to do that. And so I sat with their head of operations and I sat with their CEO. He was more busy, so I spent more time with the operations guy, full disclosure, but I don't know. I mean, I think that one of the things that helped me in those circumstances,

is the ability to ask questions out of pure curiosity. You know, why do you do that? Or, hey, you know, this has been sitting here for a while. Hey, I see that inventory is there and it's getting some dust on it. Has that been sitting for a while? Do you guys do first in, first out? And that's kind of the language that I started getting through the business side where I could understand, okay, I'm in this company, what's the appropriate language that would resonate with these folks so I could ask the right questions to design this started coming together. And that's the truth of it,

I feel like I've always been a curious person. I think I've always wanted to ask more questions than not and to find out more and why things work. And maybe not so quite as like an engineer does sometimes, but close to that, right? Where it's like, hey, this is interesting. I'd like to learn here. And then being able to take language. And I think that that's the point that has happened over the last six or seven years kind of in this space where I can say to myself, hey, I know the language now.

Jon Stoddard (11:59.708)
Yeah, yeah.

Malcolm Peace (12:15.234)
that makes sense. And I've also been in a scenario where I'm working with a guy that doesn't have a formal business education and I need to communicate something, I can figure out language that resonates with him now. And I think that's a skill set that I'm grateful that I have. I don't know where it truly came from, but I feel very comfortable sitting in a room, learning language, learning how people are thinking about things, and then so on and so forth, going to implement that in a business.

Jon Stoddard (12:42.288)
Yeah, yeah. What kind of language when you do that? Do you like, you know, hey, you can take a good look at a steak, sticking your head up a butt's cow's ass, but wouldn't you rather take the butcher's recommendation?

Malcolm Peace (12:55.531)
I don't know if I'd use that analogy day to day, but I love it.

Jon Stoddard (12:58.546)
That was from a movie.

Malcolm Peace (13:02.915)
Here's one little anecdote and I think that in life there is a beautiful picture of the pieces start coming together if you're intentional about where you're trying to go. And what I mean by that is when I was a college tennis coach I wanted to be the best college tennis coach I possibly could. And one of the ways of doing that is I wanted to understand sports psychology. So because I wanted to be the best I could there I started taking graduate level psychology classes while I was still coaching.

And one of the classes I took in the evening was a counseling class. And so one of the objectives in the counseling class is we would sit in this very small room, as big as a little phone booth, like those old phone booths in London, and you would sit in there and you'd get recorded from two different angles and you would be counseling somebody. And it was real stories, real people's experiences. The tapes were to never be disclosed to other people. And you would basically get feedback from your class of a small 10 or 15 people.

to get feedback on how you performed as the counselor and what things you recognize based on your body language, your feedback and all this kind of stuff. And I started to really realize in those circumstances in small settings like that, the way you inflect your voice, the way you position yourself, the way you sit, the way you hold yourself, on top of all the languages that you use has a great impact on the outcome you're trying to achieve.

Jon Stoddard (14:20.536)
Yeah, I got to I used to play tennis in high school and I don't know if you've ever seen that YouTube video of Andra Agassi and Borg talking about I figured out his serve because every time yeah, because every time Borg would point basically point out to where he was going to serve he put his tongue out.

Malcolm Peace (14:30.877)
Yeah, yeah, I think so.

Malcolm Peace (14:38.126)
Exactly. Yep. You start taking cues. Yeah, you start taking cues and you start recognizing different things. And I think there's an opportunity. Yeah, I don't want to call it EQ or what have you. But I think that there's an opportunity to be a differentiator with that to be able to understand how do you take complex situations, dissect them into smaller pieces, focus on the core thing, address everybody onto that core thing. And then hopefully, you know.

we get some momentum from there.

Jon Stoddard (15:08.259)
Yeah, yeah. So you got some great experience from that. What was your next venture that brought you skills and experience?

Malcolm Peace (15:15.658)
Yeah, I started with two partners in a group in Austin. I stumbled upon a conversation actually around tennis with one of the managing partners. He happened to be wearing a Wimbledon shirt. We started chatting and he ended up Googling me a little bit later and said, hey, we should meet sometime. And so we started the conversation very simple at the time and it just manifested itself into a role where I came in as a minority partner to be able to start doing these deals. And we got started really quick.

They were in the food and beverage hospital. Yeah, so I owned 15% of our position. And in that, I got an opportunity to really at a risk-free position because I wasn't a guarantor on the debt, get to learn and to sit there and understand. And because I was in a soak up mode, because I was just, let me learn as much as I possibly can. And I really started building a passion for small business at that time.

Jon Stoddard (15:45.986)
Yeah. What's a minority partner? Like 20%?

Okay.

Malcolm Peace (16:13.666)
that it was an opportunity for me to be able to ask more questions time and time again, to say, you know, hey, yeah, so I ran operations and strategy. So we would go out and look for businesses to acquire. So backstory, I had a little gap in between there where I was working with a firm that was getting started out of DC. We were raising $190 million to be able to go buy cybersecurity and defense contracting companies. So that was Hard Yard's capital. That was a business that was getting started.

Jon Stoddard (16:18.148)
What were they expecting you to do, though?

Malcolm Peace (16:41.698)
Candidly, I started working there for free for the last two months of my grad school days, and I wasn't sure what was gonna come of it, and I was able to come on and work with them after I graduated. And so I worked with them for a period of time, and that's what I spent most of our time doing, building out our thesis as they were raising the remaining capital and going and finding deals that were prospects for us. I spent a lot of time on the West Coast. There was some big stuff happening in Las Vegas at the time. This is pre-

Jon Stoddard (16:51.416)
Yeah, yeah, yeah.

Malcolm Peace (17:07.946)
you know, 3.0 and Internet 3.0 and AI and all this kind of stuff. This was an opportunity for me to kind of dive into private equity and see how deals were structured. But more importantly, it was actually an opportunity for me to see we have a thesis. What does it look like to go implement that thesis and actually source deals that could be prospects for this opportunity? And so

Jon Stoddard (17:27.088)
Yeah, so you got a sense of what it takes to create deal flow. Yeah.

Malcolm Peace (17:30.178)
Correct. And so when I jumped in a media with these guys as minority partner, I was helping with the existing portfolio. That was freedom beverage at the time. And jumping into additional deal flow was really the.

Jon Stoddard (17:41.72)
Yeah. And how long did you stay there?

Malcolm Peace (17:44.826)
a little over two years or so before I started going out on my own. COVID was a big projector of that, if that makes sense. And I was just kind of pre-COVID days for about two and a half years or so, kind of in COVID. And then COVID started kind of kicking off like me realization of, man, what am I gonna do here? My wife was working in the travel industry. We had these deals that were hot and there were some things that were going on between the dynamics of the partners.

And I just looked at it and said, what is my long-term strategy here? What's the end?

Jon Stoddard (18:16.964)
Yeah. When you say something going on with the partners, are you talking about conflicts? Like, you know, when I was trying to get that is when COVID comes along and there is a reality coming up, it's going to kill our industry for a little while. What do we do? And you can either argue or you could figure out and head a different direction.

Malcolm Peace (18:24.383)
Yeah, we just differed a-

Malcolm Peace (18:36.855)
Yeah.

Malcolm Peace (18:42.038)
Yeah, and we were an independent sponsor, and so we had no fund, and so we were raising capital as we did deals. We had some free cashflow coming out of those deals through fees and other things that we had going on. And then that just dried up. I mean, it just honestly dried up. And I looked at it, and one of my partners was a corporate attorney. So he went out and started consulting a bunch of people that were dealing with a bunch of stuff to continue to maintain his lifestyle. And another one of my partners, if you recall, oil...

Oil basically dropped out, I think it was April 4th, I could be wrong about that date, but oil just dropped off the face of the planet price-wise and he had a bunch of exposure from previous partnerships that he had in the oil and gas space, that he was very much a passive partner in at the time as we were focused on this moving forward, and he had to become an active partner because life was just falling apart. And so when my kids are sent home from school, my wife is working in the travel industry and this is like April or so that year.

I'm looking at it and saying, well, hold on a second, what am I gonna do? And so that was a big realization for me of, we had two deals at the time. One was a food distribution company, one was a meat processing company in the San Antonio area, another one in the Austin area that I had sourced, put together, we started raising capital, found out operators. There was a whole bunch of pieces I was doing. And I looked at it and said, well, these guys disappeared, what am I gonna do now? What else can we do here? So that was the beginning of the

Jon Stoddard (20:04.262)
Yeah.

Malcolm Peace (20:06.334)
Hey, let's look broader than just what I'm currently doing.

Jon Stoddard (20:08.82)
Yeah, so they kind of cast you off, just not intentionally. So what did you do after that? Oh, you were totally running and they weren't focused on it.

Malcolm Peace (20:13.302)
No, I was running it. That's the point. I was running what we had. We had a deal that we had a bed and breakfast that we had bought and we were adding all this real estate onto it. I was out there working through all the details and working through all the last little bits. We had raised all the capital and we were kind of putting the final details together on all the building that we were gonna do and expansion we were gonna do. And they just, they got busy. I mean, no disrespect to them. Life was, for everybody, was a unique situation at that time.

Jon Stoddard (20:38.104)
Yeah, yeah, it's under fanable.

Malcolm Peace (20:42.198)
and they got busy and I kind of looked in the mirror and said, again, my wife was in the travel industry, they were doing layoffs every two weeks, and I kind of looked at it, my kids are at home, and I'm like, well, hold on a second, time to pull up your long johns and let's get going here, what are we gonna do? So, that's what it came down to.

Jon Stoddard (20:57.077)
Yeah, well, you looked at LinkedIn during that time. There was a lot of people that had different profiles, but they were selling gloves and masks and stuff like that.

Malcolm Peace (21:04.554)
Yep, yeah, yeah. Oh, I remember my buddy calling me and saying, he does plaques and a bunch of stuff manufacturing in Virginia, and he called me and said, hey, I'm gonna get into the hand sanitizer business. I figured it out, we're gonna do this, we're gonna do that. I remember him scheming and rhyming, it was great. But no, yeah. Yeah, yeah, all credit to him. But it was, it was.

Jon Stoddard (21:21.412)
That's an entrepreneur, man. That's whatever. Yeah. So what was next after that? You? What did you figure out about yourself and where you wanted to go?

Malcolm Peace (21:31.85)
Yeah, so I actually started, yeah, great question. So that summer of 2020, I sourced my first independent deal entirely by myself. We were, it was a wood processing company. It was in the middle of nowhere, Texas, and I spent six, seven months working on that deal, either by sourcing it, due diligence, and candidly, they got an exclusive contractor with a big, exclusive contract with a big company, and wanted to renegotiate pretty significantly.

And so that deal fell apart kind of in the 11th hour, unfortunately, and that was a really hard lesson. I remember sitting in the back porch with my wife telling her, you know, this is gonna get done, this deal's great, all that kind of stuff. And it was a hard punch in the teeth. Thankful for it now in a lot of ways, but hard punch in the teeth for me to kind of recognize what was gonna happen here to be able to close this deal. Oh yeah, we were very close.

Jon Stoddard (22:19.104)
And you had you had an LOI on the company and they agreed the terms and everything, right? You very close like how close like asset purchase agreement close or

Malcolm Peace (22:27.469)
Yeah.

We had started negotiating those, yes. Yeah, yeah.

Jon Stoddard (22:32.268)
Yeah, OK. And it just, he killed the deal. Did Seller kill the deal, or what happened?

Malcolm Peace (22:39.45)
The seller, we wanted to renegotiated the deal and we could not get there. And there was a broker involved or a small boutique investment bank involved. And the, to fold, you know, just to keep them, you know, to keep it honest for them, but also at the same while not disclose too much. The broker called me and just said, I don't know what to do here, Malcolm. He's just not off this thing. And I was like, hey, we got to get this done. Let's try to get this done. And it just wasn't.

We just couldn't get past this point. Yeah, we just couldn't. Yeah, and you know the biggest

Jon Stoddard (23:07.584)
Obviously, he wants to negotiate higher price. What? Because that happens to every one of us on both sides. It's happened to me. The guy wants more. We're looking at a company in Netherlands. It's a clothing company. And all of a sudden, he wants more. And I go, well, I just tell David, let's not grow any emotional attachment to this because there's some things don't make sense. He's pulling out a ton of money. If he just kept the company for two years, he'd make that money. What he's asking for.

My guess is he's probably gonna ask more for it real quick. Somebody's gonna say, what are you stupid? Ask more. And that's gonna come in and we're gonna get the call.

Malcolm Peace (23:47.29)
You know, it's such a gift now, and I so appreciate you saying that and sharing your story. It's such a gift now that circumstance happened because I was incredibly emotionally attached to the deal because I had done it, I had done the drives, I had gone there, I had done all the site work. You know, this was gonna close. And this was me creating some stability in a very unstable time for my family.

Jon Stoddard (23:58.78)
Yeah.

Malcolm Peace (24:13.078)
And when it fell apart, it was a very hard lesson and hard opportunity for me to recognize that. But I'm grateful for it now, right? I'm looking at it and saying, that business would have been hard. There was a lot of challenges. And candidly, I don't know if I would have been comfortable living under his shadow. It was in a small town in Texas and he was the big fish in a little pond. And there was a lot of attachment there. I remember we went out to lunch one time while I was visiting and he was, you know,

very kindly saying that he owned basically the whole downtown, the real estate of it. And, you know, it's a, I understood after a little while, the stature that this guy held himself in and what he was respected wise in the city and the town and so and so. And so all that to be said, I'm grateful for the moment. I'm grateful that it kind of catapulted me into a kind of a different mindset.

Jon Stoddard (25:04.468)
Yeah. So what was the big lesson? Don't grow emotionally attached to deals or what?

Malcolm Peace (25:08.906)
Yeah, don't grow emotionally attached to deals and be prepared that there's a negotiation up until the last day. And I thought, you know, no, I wasn't because they weren't, they were purchased. I'm not even sure they were purchase orders really at the time. They were, they were a commitment from that company to expand and they sold into another, they were a wood manufacturing company that sold into other distributions and that distribution company.

Jon Stoddard (25:15.256)
Yeah. Were you prepared to give him his price?

Jon Stoddard (25:36.73)
Yeah.

Malcolm Peace (25:38.67)
promised them that they were expanding more in the United States. And they had not received purchase orders, but he was like, it's guaranteed. So I need to be paid on them now for future this. And we started the whole structure of a, you know, the working capital and what the purchase orders and the AR and all this kind of stuff started unraveling very quickly. And it just, we couldn't, the train just didn't stop. And it became very apparent. He couldn't get it out of his mind. So.

Jon Stoddard (25:58.862)
Yeah.

Jon Stoddard (26:06.784)
Yeah. Would I be safe to say that your experience with the private equity group helped you create something like a real quality of earnings report? They weren't purchase orders, they were commitments and that is, you know, going to get a failing grade on a quality of earnings.

Malcolm Peace (26:07.166)
I think he's still on to today.

Malcolm Peace (26:23.954)
Yeah, no, you're right. And when you try to have that conversation with someone that thinks the way he thought about himself, it was a very difficult, hard conversation to have. So, he lives his life how he wanted to live his life and it was just a hard time to communicate and negotiate. And eventually, I don't think that deal even sold and I think he still runs it today and I hope he's happy. And that's all the experiences I could ask for is.

Jon Stoddard (26:32.116)
Ego or narcissist or ego, whatever.

Malcolm Peace (26:51.294)
At the time I was trying to stabilize what was unstable and I thought I could do it and when it didn't happen, it was a hard punch in the teeth and we learned from it. That's okay.

Jon Stoddard (26:59.909)
I think it's just natural. There's no way you can be so detached if you put eight months into something that you're not going to be some kind of disappointed in that. So I mean, that's being human. So what was next?

Malcolm Peace (27:08.714)
Yeah, yeah, yeah. So yeah, after that, I started looking at other deals. I started looking at something a little bit closer to home, honestly. Now we look at businesses all throughout Texas, but I started looking just closer in Texas, within 100 miles of Texas, something where, just lifestyle I could start developing and so on and so forth, what I was wanting to develop.

And so we looked at HVAC companies. I went under LI with an HVAC company. Great experience. We went out to, I'll never forget it, went out to a Brazilian lunch with the owner and his real estate agent, because the real estate agent was a relationship of a relationship I started building, and he wanted to sell the real estate and the business at the time. And so it was gonna be that kind of relationship.

Long story short, after I got under LOI, started looking through his books, a third of his income was not reported and that it was sitting in cash. So he wanted a stock transaction. This is when I learned how I could put myself in a bad situation. He wanted a stock transaction, but he didn't wanna report his income to the IRS. So I had to walk away from that one, unfortunately, after many, many.

Jon Stoddard (28:14.744)
Hahaha!

Malcolm Peace (28:27.158)
moments of what I thought was going to get a closed deal.

Jon Stoddard (28:30.072)
Yeah, this is like this coin lot operated laundries and that's like you can't tell what they're really making. And I go, how do you want me to how do you want me to pay you? Well, maybe based upon what's in my closet under my bed, and what I report the IRS. I'm not gonna do that.

Malcolm Peace (28:35.821)
Yeah.

Malcolm Peace (28:43.414)
Yeah. So those are just some notable stories. But between all of that, there was a bunch of other engagements that I had, different deals that we looked at, that maybe we looked at possibly putting an LOI or didn't. But what was really key at that point is there was gonna be no, what I thought was going to be a deal that was even better because there was no broker involved, didn't really change the outcome. And I thought the outcome would change of, I built this through a relationship.

And so as a result, it's a quote unquote proprietary type deal. This is going to be a better situation for me. Didn't turn out that way. And that's okay. But I basically spent the next, call it six months building out a more proprietary process. And so in, I believe it was in August, I got a random cold call from this outbound generation person who could help me stitch together low code, no code software.

to be able to start building out a CRM and a process and all this kind of stuff. Because again, we were doing that, but I had partners and it was great and I couldn't figure out if I was gonna go out on my own and hiring interns and virtual assistants and all this kind of stuff, how do I build out a model that was scalable for really me being the main managing partner or main operating partner? And so I needed that support. And so when I got that phone call,

it genuinely was a cold call, cold call phone call of a group that was out of North Carolina that I still work with today. We started building out systems and they started helping me see what was the potential of letting us scale a little bit more. And that led into many, many more conversations.

Jon Stoddard (30:26.372)
demeaning scale, meaning putting more opportunities on top of your deal fall.

Malcolm Peace (30:31.182)
Correct, yeah, the opportunity, the top line funnel came bigger, and honestly, because of it, the bottom line funnel was, the bottom, the positions that came out at the bottom were a lot better too. So it all around changed kind of the outlook I had on how we could scale this appropriately. I had done...

Jon Stoddard (30:47.6)
So tell me about how many deals were you looking at per week before and then when these guys came on. How many were you looking at?

Malcolm Peace (30:56.554)
Yeah, I would say we were looking at five, really looking that fit our criteria, maybe five deals at best. And when we started doing proprietary deals, I was self-selecting to some extent. So we were pretty upfront and explicit, and we had scoped out and checked out what the deals were based on different databases and demographic aspects and all this kind of stuff, what these deals potentially could yield.

that we jumped, I would say closer to like 25 to 30 a week. And that allowed to have real conversations with the business owners to say, you know, hey, I may not be ready right now, but we do fit your criteria. Let's talk again in three months. And I can start putting together the pieces to be able to see how does this all work? How does this communication all happen? And all that kind of stuff.

Jon Stoddard (31:38.213)
Yeah.

Jon Stoddard (31:47.208)
Yeah. Let me ask you about this. What did that look like? Are you looking for somebody that has a propensity to want to retire and give up their business like 65 and older age or the business is old? What was that looking like?

Malcolm Peace (32:02.826)
Yeah, I would say that was, it was age of business and we would check ownership transitions. If there was, basically we would check historically of the business, how long it had been open, and then we were checking on basically a state secretary website to be able to see if that is the same entity today. It would be an indication of either they went through bankruptcy and they had to change entities or something of that nature, or they transitioned and they sold, or they transitioned X, Y, and Z. So we were kind of using that.

Jon Stoddard (32:20.688)
Yeah.

Malcolm Peace (32:31.622)
And that was my first exposure through this group to really hiring people internationally to go help do some of this legwork. So we were hiring people in the Philippines and Pakistan and other places. And I still work with a lot of them today to be able to go freelance and drum up a lot of this information in a not just database dump, although we did use that at times, but I still to this day have two people that work for me in Pakistan that do manual process on checking all these deals. Less outcome from a volume perspective.

but way higher quality deals, or at least opportunities for that matter.

Jon Stoddard (33:02.916)
because they have a propensity to want to get to the position where they, yeah, identify us.

Malcolm Peace (33:07.15)
Correct, correct, correct. And that was always my thesis, right? I always think that there's three, and this is just the way that I quantify it, there's three different types of profiles that we look at. People that are thinking about death, honestly, we call them the three Ds. Thinking about death, thinking about divorce, and are disinterested in their business.

Jon Stoddard (33:26.795)
How do you know that unless you get them on the phone and ask them?

Malcolm Peace (33:29.578)
Yeah, sometimes it just comes on the phone and honestly contacting divorce lawyers. I mean that conversation, most divorce lawyers don't know a thing, well maybe they do. I shouldn't speak too broadly. By and large, their focus is different than it is on a business transaction or business transitioning. And so if they can point to, hey, this is somebody that I've met or I've talked to, you might wanna be interested in talking to them, this is a really stressful time, they might be able to speak to it.

you'd be surprised how many leads you've gotten from that. And so not to give away all the secrets, but that's been helpful to be able to think of people. And I always cluster people in that second D in the divorce side as people that are going through transitions in life. And sometimes, you know, it's not just death or disinterest that cause people to think about things different. There's obviously moments in life and events that cause people to think differently. And we started spending time with those folks as best we could.

Jon Stoddard (34:24.49)
Yeah, yeah. So how long was it before you found your first acquisition in the manufacturing company? What did that look like?

Malcolm Peace (34:33.03)
Yeah, so my first actual acquisition, so to stabilize my life a little bit, I started running as part-time a consulting company with somebody that was already established here in Austin. And so my first acquisition, though all smaller than the one that I bought second, was buying his consulting company out from him. So that was my first transaction that I had with him. He was doing small business consulting. We had a bunch of reoccurring revenue that was going on, servicing these different companies in and around Texas.

and a little bit outside. And he was just over. The business had been around since 2011. I had come in to help him kind of stabilize some of the consulting side because I needed cash when COVID and some of the free cash flow for some of these deals was getting a little thin and we weren't raising capital for a new deal and all this kind of stuff that I started running more and helping him. And again, I kind of looked at my partner at the time who was doing...

corporate attorney, he was doing some legal hours there. I said, well, hang on, let me go charge as many as I can per hour to kind of leverage my time. I started doing this under his umbrella and then I got towards the end of 2022 or 2021, sorry, and said, let me go buy this out from you. And so I ended up buying that company from him and I still run it today called Ideal Ads Consulting and we've scaled and changed the model a little bit to be a little more sustainable now. But all that to be said,

Jon Stoddard (35:44.717)
Yeah.

Jon Stoddard (35:58.116)
First step, first step.

Malcolm Peace (35:58.194)
individual completely done by myself.

Jon Stoddard (36:01.24)
What kind of deal was that? Was that a cash deal or like earn out or selling financing or what?

Malcolm Peace (36:05.014)
Yeah, it was an earn out deal. So we bought it with some cash and earn out. It was a combination of the two.

Jon Stoddard (36:09.516)
Yeah. And what did the consulting do? How do you, what area did you help a small business?

Malcolm Peace (36:16.254)
Yeah, honestly, it's the same philosophy I have now. And we would spend a lot of our time, we would take a business that was doing a million to a two million dollars in revenue, possibly a little less than that, and we would help to get the owner out of the middle of the business. That was our main thing. I called them a centralized business and we got to get you to do a decentralized business and start creating what are the roles that take this business to the next phase, what takes the business to be able to take that next step along the way.

and how can we help you kind of grow the team and expand. And previously they would do that kind of work, but what would happen is they would have a team member or somebody that would end up kind of needing to jump in because they would maybe work with somebody that was a little earlier or smaller and jump in, it won't be full time to be able to help this business. And then that person would turn into an employee or a partner or whatever of that company that they were previously consulting and they would just lose left and right. So we've changed the model a little bit.

to be a little more scalable. We have some other people that play areas of expertise that come in and so on and so forth. But the biggest thing there is I started to learn the skillset I feel like to communicate what does it look like to get you out of the middle of the business and stuff that people say all the time now, and I'm not recreating it in any way, but how to work on the business or how to work in the business was a skillset I didn't quite understand. And this gave me an opportunity to do that by the clients that they already had in place.

Jon Stoddard (37:40.808)
Yeah. So were you teaching and work above the business in the event that they want to sell at some point or just get by more?

Malcolm Peace (37:48.002)
Yeah, certainly. And there's still people that we work with today that are in that path. And yeah, that was certainly part of it. There was a few people that were either trying to sell or bring in a strategic once they had gotten to a certain level, raise capital, all this kind of stuff that we were helping them kind of, again, take that jump, which I think the one or the zero to $1 million range is a huge feat. And I always give people so much credit for being able to do that. We were trying to help them. What does it look like for the next phase? What does it look like for us to help you grow?

What does it look like for you? I'll be a scale up from there. And again, the goal here was to build a tool set and a skill set around that was just a critical aspect. And my partner at the time was ready, the guy that I should call my partner because I bought him minority and then, no, sorry, minority. I bought in as a equal partner to him and then I phased him out and paid him out in tranches to basically become full owner of it. So that was my first full individual acquisition. Yep.

Jon Stoddard (38:28.488)
Yeah.

Jon Stoddard (38:42.073)
Yeah.

The first one. All right, so what was the second one? This manufacturing company.

Malcolm Peace (38:49.526)
Yep. So we bought a manufacturing company in last year in 2022. It had been around for 72 years and yeah, it's a neat business. Mitch, it's in South Texas. I've been looking at businesses all around throughout 2022 between Houston, Dallas, San Antonio, even tertiary, secondary markets in Texas. And this deal just came up. It came up at the beginning of 2022, through a relationship that I had.

Jon Stoddard (38:57.645)
Mmm.

Malcolm Peace (39:19.362)
price wasn't right. A month later, I got contacted again and said, she needs to sell, can you be on a plane tomorrow? It was off market, yeah. And, she had, yeah, to keep her privacy, I mean, she had some family stuff that came up that was pretty intense and, yeah, to say that, to keep it simple, I ran due diligence basically starting in May after we kind of gotten it all figured out. We had first engaged and,

Jon Stoddard (39:25.0)
Off market or on market?

Okay, and she needed to sell because of one of the top five reasons

Malcolm Peace (39:49.046)
February, March, and then a month later or so, I got contacted again, then I jumped on a plane, and we got under LOI, went through that whole process, and spent.

Jon Stoddard (39:57.816)
Well, how fast did you do in the LOI?

Malcolm Peace (40:01.372)
I had it to her in two days, I think. Yeah.

Jon Stoddard (40:02.704)
Two days. So you asked for the financials, the financial report cards. You liked what you saw, and then you sent the LOI in two days.

Malcolm Peace (40:12.19)
I did not even have those numbers. I don't recall having them ahead of time in too much detail. I think I had a general sense of what the business was at the original price point. I didn't like it. And then the new price point came and I said, this could work. And I said, I could be on a plane tomorrow. And I think I left that evening or maybe the morning. Yeah. Correct.

Jon Stoddard (40:30.436)
they gave you some kind of like bullet point numbers. Hey, it's doing 2 million and it's 500,000.

Malcolm Peace (40:38.046)
Yeah, yep, yep. I knew what the free cash flow was the previous year from the revenue and the margins were really good that either they're totally making this up and it's worth, or it's totally right and it's worth a flight down there either way.

Jon Stoddard (40:49.74)
Yeah, so when you wrote the LOI, you said, hey, a contingent upon due diligence and verifying the numbers. Yeah. And how did you purchase that? What kind of cap stack did you look for?

Malcolm Peace (40:54.038)
Yeah. Yep. Yep, yep, absolutely. Yep, yep.

Malcolm Peace (41:03.362)
So we raised all the capital. It was a really unique structure. So here's what happened. To spill it all out there and keep it as brief as possible at the same time. She wanted a million five for the whole thing. She wanted a piece of the real estate. She wanted the real estate sold. She wanted the business sold. That was her final price. That was like her, she had wanted way more than that. She needed to get out. It was a very, again, keeping her privacy there. It was a very intense moment for her.

and she needed to sell. And when that price point, basically a fire sale came, I said, yeah, let me go jump on. She wanted her price and I wanted my terms. And I think that that's really critical to communicate to everybody that I believe there are two different, I think many others would agree, there's two different things you can negotiate on. You can negotiate on the final price at the end or you can negotiate how that final price gets paid and the terms and the reps and warranties that you have in place. And she wanted that price. And at the time, like,

it wasn't a crazy price, but it was a good enough one based on the free cashflow that I knew the business could generate, that I was like, fine, take your price, I'm gonna take the terms. And one of the data points that was really critical, if everybody remembers, is that real estate in 2022 and 2021 was highly overvalued. I think that things are changing to some extent now, but it was highly overvalued. So there was a tax appraisal that was done on the real estate that appraised it for $1.1 million. Full disclosure.

No one, they had contested the price the year before. She was in a tough position. She wasn't ready to contest it. I think they had even in due diligence, I found out that they had missed the deadline to contest it, all this kind of stuff that I said, fine. She wanted the $1.1 million allocation of the real estate. She wasn't willing to negotiate that. I said, fine, then I'm gonna allocate the value of the business at $400,000. And that's where we left it.

And so again, a small business, but it was generating $980,000 free cashflow and I bought it for $400,000.

Jon Stoddard (43:12.632)
Yeah, that's pretty good deal there, mister.

Malcolm Peace (43:15.722)
Yeah, so it was a...

Jon Stoddard (43:17.708)
900,000 in free cash flow. What kind of business was it?

Malcolm Peace (43:24.686)
We manufacture the devices that sort the sizes of shrimp and we ship them all over the world.

Jon Stoddard (43:30.237)
Oh, interesting.

Malcolm Peace (43:33.39)
So when that came, I realized she needed cash fast, she needed to close fast. I'll be honest, she didn't help me close fast. I think I signed four different NDAs because she had hired a family attorney that had helped her with some family issues that were going on at the same time to also draft her or to write back and give her feedback on the purchase agreements and all this kind of stuff.

It made it very difficult, but I signed, I could be mistaken, maybe it was three, but it was more than two different versions of NDAs to get the deal done. And I would show up and be expecting to get access to QuickBooks and get access to all sorts of different things. And I would just be told by the employees, no, we've been told not to give you access. And I'd be like, why am I standing here right now? So that was my, call it.

Jon Stoddard (44:27.417)
Hahaha!

Malcolm Peace (44:30.506)
June, July, August life where I would show up every week or two and expect to have conversations and be there for three, four days and then just be totally like stonewalled and shut down every single time I tried to proceed forward. And so the deal never died, obviously we closed, but it was a milestone that we closed in the time that we did. And once she said, once everybody started going up getting in a line, duck wise,

Jon Stoddard (44:45.429)
All right.

Malcolm Peace (45:00.446)
we closed very fast. I mean, by the time she was like, we're on page, we're good. One of the things that was really important and the reason I emphasize the $400,000 is in the time of me doing due diligence, I found out because she was not present and this is maybe me taking advantage of the opportunity, I spent the time to really dive into the real estate because I was not convinced it was worth $1.1 million. So I had broker's price appraisals done, I had...

Jon Stoddard (45:01.305)
Yeah.

Malcolm Peace (45:27.986)
I had environmental studies done, I had all this process done. Come to find out the business is worth, sorry, the real estate was worth probably half of that, realistically. And although it was a space they had been in for a long time and it's established and I could own it right then, we chose not to. And so we ended up leasing it with a very favorable, again, she got her price, I got my terms, a very favorable lease that I feel really good sleeping at night right now.

Jon Stoddard (45:54.916)
Yeah.

Malcolm Peace (45:55.899)
And that was okay, it gives us options. I knew it wasn't a long-term situation. I knew there was gonna be some remediation issues that were gonna come up if we owned it. And I was not prepared to go down that path based on the current condition of the building.

Jon Stoddard (46:09.764)
Yeah, so what did you need to raise?

Malcolm Peace (46:14.242)
So that's a great question. So my long-term goal is to buy and own and operate businesses in Texas and build them with a long-term perspective. And so I raised, originally, I was gonna come in for a fourth of the capital. I was gonna come in to between 50 and $100,000 personally to come in and put the money. That was the original plan. In doing so, correct, correct. And that was the original plan. And...

Jon Stoddard (46:34.596)
because you appraised it at $400,000.

Malcolm Peace (46:41.466)
in conversation with relationships that I had already maintained through these other deals that had gotten close to closing, I had continued to communicate with my investors, here's what's going to come down the pipeline, here's what's coming down the pipeline, that it took five phone calls over the course of maybe five days, I don't know, no exaggeration. The deal was a great deal, and they got a really favorable situation, and candidly,

I got asked many times, why don't you just go get an SBA loan and just go close it yourself and go do that. But I wanted to build a real good win on the belt independently to be able to go build off of. That was my goal. And every single one of my investors that I have today understands what my philosophy is and understands that I'm in communication with them about other deals we're looking at now that they understood that there was a pathway here and there was a plan and you know.

I'm grateful for them to be a part of that because of that reason.

Jon Stoddard (47:40.692)
So it was like your investor network as indication, he say, hey, I got a great deal. Minimum commitment is, did you have to put a PPM together and everything or no?

Malcolm Peace (47:49.874)
No, so it was relationships I already had. I had built over the last few years, friendships and things of that nature that are high net worth individuals I played tennis with, or I'd go fishing with, or I'd spend time with. Some were very close, some are ones that I had only in the last couple of years. And so, call it friends and family race is really what it came down to. And so we put a small little package together, but I could validate the numbers, and one of my investors actually came down, and we did a very quick.

Q and E just ourselves and the numbers checked out. And once we checked out, he invested $100,000. So let's put it that way. So it was a very easy.

Jon Stoddard (48:26.256)
So he invested, did you guys buy it out of cash with three other investors or? Yeah. Okay. Yeah.

Malcolm Peace (48:32.066)
Yep, so we bought it with all cash, three other investors. Yep, and so I end up owning majority position. They got a nice step up on their dollar and long term, they understand that another deal's gonna come and I'll communicate to them when we're getting to that point, hopefully here soon, where we go do it again. And...

Jon Stoddard (48:50.7)
Yeah, what is that? Did they get a dividend and is a five year payoff?

Malcolm Peace (48:53.782)
Yep, yeah, we pay quarterly. So we hold back for the first year and then we pay quarterly. So we're coming up on that year and we'll start issuing a dividend, but they get a quarterly report and they have my phone on SpeedDial and some I talk to weekly, some I talk to once or twice a month, it just depends, but we have quarterly calls.

Jon Stoddard (48:58.053)
Yeah.

Jon Stoddard (49:10.04)
Do they expect those like updates?

Malcolm Peace (49:13.45)
Yeah, I explicitly said that's how I want to run and give fiduciary responsibility to

Jon Stoddard (49:17.764)
Yeah. Oh, that's awesome. And you bought a $900,000 free cash flow business for $400,000. Yeah. Well, that's a great deal, off-market deal. Ha ha ha.

Malcolm Peace (49:29.578)
Yeah, it was a neat experience. Grateful for it, to say the least. And it may not come again, but I think that's the thing that opened my eyes is, I can't say this is all the time, but I like knowing the terms and I like controlling the terms. And a lot of business owners really wanna have their price. And so I spent a lot of time when I'm engaging with the business owners, particularly off market, spend some time saying, you know, hey,

Here's your price, you want five million bucks for the business, here's what the terms will be. Ah, I don't really like those terms. Okay, well how much you wanna sell the business for now? And you know, the price changes. And so I think that was the huge lesson in this one is have a good attorney to understand how to protect yourself and think through this the right way and so on and so forth. Move quickly and then finally, be creative on what the structure could look like.

Jon Stoddard (50:06.448)
Good night.

Malcolm Peace (50:23.798)
Because nine times out of 10, from my experience, the business owner really wants a price at the end of the day. And when you can get creative on the structure, and one that we're looking at right now, they've got a situation where the owner, he wants to be able to basically have a trust put in place for his kids to be able to benefit. He's made a lot of money in his life from the deal. In that saying, we're looking at how do we structure in such a way that they get a nice payout over time, and we don't have to come up with all this cash and put all this risk at front. So.

Jon Stoddard (50:51.192)
Yeah, well, you got a lot of free cash flow, excess cash flow coming off of that business. What are you doing with it?

Malcolm Peace (50:59.146)
Yeah, we're actively looking for other deals.

Jon Stoddard (51:01.932)
Yeah. And you don't bigger deals because you don't really need those $100,000 investors anymore.

Malcolm Peace (51:10.506)
Yeah, it's a great question. I still communicate that's the check size minimum that we ask for is $100,000. And honestly, it's not even just that. One, it keeps us grounded on who we're interacting with. Two, it's the profile of people. They often are small business owners themselves, or they previously were, and that's a big component for us. I wanna be able to call you and be like, hey, this is the challenge I'm going through. Can you speak to it? And if they can't speak to it, they have a friend that they spent time with that they can speak to it. You know.

Jon Stoddard (51:34.329)
Yeah.

Malcolm Peace (51:38.506)
And so that's a big part of it. I think that goes a long way to the people that I'm surrounding myself with and surrounding the team with and how we're building out this team and so on and so forth. So, to your point, my intention is us to own, call it five to 10 different businesses over the next five to 10 years. I look at there's Chen Marks of the world and other groups like that as the example. And I say, how do I go where they're going? What are the people that I need to bring around me on the hold co side and the portfolio company side and how do we scale it from there? So,

Jon Stoddard (52:07.534)
Yeah.

Malcolm Peace (52:07.862)
That's where I've spent a lot of the time as we're sourcing is also how do we scale this from a holding company per side as well.

Jon Stoddard (52:13.04)
Did that manufacturer have a general manager in place?

Malcolm Peace (52:16.406)
They did, yeah, and we have super senior visors that are highly capable, and we changed some people around. We didn't have really a quality assurance role, and so that built somebody into that role, but that's the trick. I've been coming in as owner operator for the last little while, and the goal is to transition out, and we're figuring out kind of who that is. And initially it was gonna be internally, and it looks like we'll probably bring in somebody externally.

Jon Stoddard (52:35.856)
Yeah.

Jon Stoddard (52:40.376)
Yeah. Remember remembering how you felt on that first deal losing that and how you felt on this one. I mean, how did you feel.

Malcolm Peace (52:51.318)
You know, bless my wife's heart, she probably thought like it would never close based on what we went through last time. I kept saying to her like, this came up, the owner said this, this is what happened. I had to argue this today, you know, and she's like, is this thing gonna really happen? You know, and, you know, in a lot of ways, I had a lot of friends and people in the community that were cheering me on. And one of my investors, you know, had bought a business in the last year prior to that. And I had a lot of respect for him. And so.

Jon Stoddard (52:57.014)
I'm sorry.

Malcolm Peace (53:20.91)
You know, I had a lot of people cheer me on and so to close that last one In a way that I thought, you know, there's no way we're gonna get this done the way we got it done It was a huge relief but also kind of like a pinch me moment, but it was amazing Well, not amazing is the best word. It was the greatest moment because Literally on the day or maybe the day after closing I Flew we were supposed to close on the Friday. Let's put it this way. We're supposed to close on the Friday. I flew down

My parents relocated in the last year close by, so they're in about 30 to 40 minutes away. So I'm staying at their house thinking we were gonna close on Friday. We don't close on Friday, and we end up closing on the Monday, but I find out when I go into the office on the Monday, on the day I thought I was gonna be the owner, new owner, that everybody on the team senior-wise is going to Ecuador.

on that Friday and I had no idea. She had never disclosed to me that we had this warranty issue and a conference and all this kind of stuff, all these plans to go to Ecuador on that Friday. So I said I can't be there on Friday because my brother was getting married on the Saturday and so I booked a flight for the Sunday afternoon and flew out to Ecuador five days after we closed the deal. So it was a whirlwind experience to be able to kind of jump internationally, be with my customers, be with my team.

Jon Stoddard (54:15.697)
the

Malcolm Peace (54:43.03)
within five days of after we close this deal essentially.

Jon Stoddard (54:46.436)
Yeah, yeah. Was there ever a point you're concerned that they'd realize a $900,000 free cash flow business was actually worth more than $500,000, $400,000?

Malcolm Peace (55:01.27)
Yeah, so she, bless her heart. I mean, she was really going through a tough situation, but I'd be lying to you if the Zoom call, she had relocated the last month or so, maybe more of due diligence. That was one of the other challenges. Actually, it wasn't even the last month. It was probably the last two and a half months. She had moved to a different state for the care for her family and what she needed to do for her family, understandably. And so I had a Zoom call to close the deal. And when we had the Zoom call, we had attorneys on there and everybody. And...

The attorney literally said, her attorney at the said, are you so and so sure that you wanna do this? And she said, yeah. And I was like, this is the moment where she seconds guesses and we don't close right now. We were supposed to close on Friday, we didn't. Now we're on Monday, we're supposed to. I'm like sitting there in the afternoon after I'd basically been CEO for the day, because everybody was anticipating a close date on the Friday. And so anyways, all that to be said.

Jon Stoddard (55:43.238)
Yeah.

Malcolm Peace (56:00.01)
Yes, there was that moment among many others through the experience that I did not think we were going to close, and I'm grateful for this day that we did.

Jon Stoddard (56:08.0)
Yeah. And what do you do with yourself when there's this big gap, something happens, don't happen, do you go work out, spend time with your family, or what do you do to kind of settle the anxiety?

Malcolm Peace (56:23.038)
Yeah, well, that's a real great question. I appreciate asking that. So I run triathlons, that's my outlet. I tell people my hobbies are my, is being done in like a two-fold where I have to work out and I get to go do something that I enjoy. So I play pickleball, I played tennis in college, and I play pickleball more regularly and I go work out. And so I spent a lot of time doing that. And honestly, like there was a couple different moments ahead of that where she threatened to basically cancel the deal.

and I got into a total tizzy. And I just, I wouldn't be lying to you if it wasn't my attorney, and possibly her attorney a little bit too, just saying, you know, we gotta put our heads down and let's get this thing closed that we just kind of pushed it through. That that's where I was like, all right, it's still gonna possibly fall apart, but I've got at least a set of outside, quasi-neutral, quasi-partner in this to get this deal done.

That helped, right? So yeah, anyways.

Jon Stoddard (57:21.804)
Yeah. Do you think you formed a personal relationship with her?

Malcolm Peace (57:30.238)
I would say that we don't have a relationship now. I think it was an exhausting, I think initially it would have been. I think what she went through personally and just the process and the potential close and the time it took for due diligence and all this kind of stuff was very exhausting for her that to this date we have some email correspondence but it's not what I anticipated to be honest with you.

Jon Stoddard (57:50.885)
Yeah.

Jon Stoddard (57:57.264)
Yeah.

Malcolm Peace (57:58.254)
I did not know she was gonna relocate to another state. Full disclosure, I was there for due diligence in July of 2022, and I had met her on the Monday. She had left early. I had planned to meet her again early on the Tuesday, and I got a call that she was on the road driving, and I never saw her again until that Zoom call after the fact. Everything went through attorneys after that.

Jon Stoddard (58:23.322)
Yeah. So she's going some kind of family health problems. But, you know, like Chris Moss says, it's split the differences. Like you can, you can empathize with somebody. It doesn't mean you have to agree with them, but you can empathize with what they're going.

Malcolm Peace (58:26.936)
Yeah.

Malcolm Peace (58:37.91)
Yeah, and I think the big thing is, and I think that was the challenge that I always worried about, is she got her price. I mean, it wasn't her original price that she wanted. She had a number initially, and then she had to go down, and this was the fire sale price that she was happy just to walk away with, that she got that in her mind, and I wanted to control the terms. So I still have the right to this day to buy the real estate. I don't know if we will. We'll let time play itself out.

We've got a very nice lease in place. I'm comfortable with where we're at today. But full disclosure, I wanted to make sure I could control the terms and I'm glad I did. We had some challenges the first quarter or so when we bought the business and had to kind of manage and work through that.

Jon Stoddard (59:23.64)
Yeah, well, kind of technically, if the real estate was overvalued, the new value on it and the real value compared to the cash flow of the business, you probably did come out, you know, even.

Malcolm Peace (59:37.43)
Yep, yeah, it would have worked out. And I think that, you know, in hindsight, I wish it wouldn't have come down to that. I've always wondered, you know, could I have communicated differently or anything like that? But it's just how it worked out and it's just how it played itself out. And so I know she's happy. I know that for a fact, happy where she is, and she's satisfied with the way that things worked out. And you know, candidly, like she's...

Jon Stoddard (59:49.869)
Yeah.

Malcolm Peace (01:00:02.49)
the business got taken over and nobody got fired and everybody's still there and the business is still running and she can lay her hat on that, right? And I think that's the part, it was part of a family business. Her dad died during COVID and she took it over and it was an opportunity for someone to continue the legacy and I think that she can be proud of that and I hope that she is still today.

Jon Stoddard (01:00:22.956)
Yeah, I do too. Yeah. So Malcolm, we're on an hour. So I want to thank you so much for all the time.

Malcolm Peace (01:00:30.602)
Yeah, no, my pleasure. And I really appreciate you bringing me on. Like I said earlier, we're always looking for, obviously great businesses in Texas that we can run and operate. I always say that I try to find the solution as being the niece, nephew, son, or daughter that the business owners always wanted to sell to. I will roll up my sleeves. I love getting involved. I love being able to help and move the ball forward for the new chapter of the legacy of that business. And I'm also looking for operators. I'm always looking for people that wanna be in Texas, wanna be in a...

major market, maybe even a smaller market, and operate these deals. And so we're always looking for folks like that. I think we do it generously, and I think that our goal here in the end is to communicate that we just love running businesses that have a great legacy in Texas and continue them.

Jon Stoddard (01:01:15.832)
Yeah, thanks Malcolm.

Malcolm Peace (01:01:18.286)
Cool, thanks so much.