Jake Parsley

Time for a quick re-intro for the new followers (both of ya!): - I'm an attorney exclusively focused on M&A. I’m the small-deals guy at @smblawgroup, and I’ve been working SMB deals since 2011. You want to buy a business doing $170k earnings at 2.5x? I think that’s frickin’ awesome! Bigger deals are cool too.* - I’m obsessed with the SMB acquisition space. While my job is focused on legal, I’m also interested in deal sourcing, valuation, financing, and negotiating. I just really like seeing good deals happen. First time buyer? Love it! Veteran biz owner tucking a lil' baby biz into your pre-existing corporate rocketship? Baller! Boomer ready to cash out and sell to the next generation? I want to metaphorically grab your face with both hands and kiss you on the forehead, loudly! - My only rule about SMB deals is that there are (virtually) no rules that don’t have exceptions. Lots of exceptions. From where I sit, SMB is a world of nuance, tradeoffs, luck, serendipity, and hustle. I’m a big advocate of keeping an open mind (but not, like, TOO open, obviously). - While the potential for wealth in SMB is real, I don’t think it’s the biggest benefit to being your own boss. Autonomy and control of your own upward trajectory is worth more than money, in my humble opinion. But money is fun too! Go get you some! - I am a small business owner myself (since 2016) and a true believer that if you have SMB in your bones, you’re gonna SMB or you’re gonna be miserable – but it’s not for everyone. I earn a living off this SMB transactions ecosystem, so my incentives lie in discussing and promoting this crazy world of ETA, and I try to keep that in mind. But I’m not the one putting up a personal guarantee, and I’m not the one that’s going to cash out someday if your deal flies (or declare bankruptcy if it dies). You, the buyer/owner, have a lot more upside, and a lot more downside in any given business deal. If you think I’m losing sight of that, go ahead and remind me (or punch me, or whatever). - I like to keep a lot of different irons in the fire on the business front, and I’m driven a lot more by quality relationships and mental stimulation than money. I have a Minnesota real estate/business broker’s license so if you want to spitball some fun stuff in the deal space that’s not law-related, let’s talk it out! - On the personal front, I live with my wife and 3 kids in frosty Minnesota, which we love. The winters aren’t so bad when you get used to them and buy a decent coat. We homeschool the kids and I work from home, so it’s a lot of family time (is there such a thing as too much family time?)! I like to do Minnesota-y things like fishing and cheer for lousy sports teams that lose a lot. I get weirdly excited about cutting, splitting, and burning wood. - Deep Background: I’m a farm kid from South Dakota. I’m not particularly civilized and I get confused when there are multiple forks at supper. I don’t think the mere fact that I have a law degree should impress you in the slightest, and if you treat me with a little extra skepticism because I’m a lawyer, I respect that. Lawyers are the effin’ worst. - I’m long-winded, both in person and with keyboard. Sorry. - That’s all I got. For the three of you still reading - thanks! Let’s talk deals! *I’ll bang this drum until my arms fall off – earnings/multiples/prices are only part of a good business selection criteria. A necessary - but not sufficient - part of vetting a deal.

@housleyd I don't know man, a sasquatch? The Loch Ness Monster?

Name something harder to find than a reasonable attorney

My opinion: If you are trying to buy a very small (<$2MM EV) business, leave indemnity caps and baskets out of your first-draft LOI. You are likely working against yourself in multiple ways.

Registration link and additional info: carlsonschool.umn.edu/conferences/en…

Dusted off the ol' X account to promote the upcoming U of MN ETA conference. @smblawgroup is sponsoring, alongside other great sponsors like @Lawyer4Deals @Schornack @LiveOakBank @BoulayGroup @PIONEERCAPADV and more! There will be a solid lineup of speakers and most importantly, great networking. You should come!

@Lawyer4Deals How far west and/or north are we talking?

🚨Minnesota connections🚨 Client looking to lease new space (West Metro preferred). Here are his needs: • 25-35k SQFT Production (machine shop and assembly plus inventory) • 5-10k SQFT Office Space (cube area and offices) Email/DM me if you have space and want intro.

Are we using the legal definition of fraud here? Like, criminal charges? Or just what appears to be some really aggressive business expenses.

If you know a seller is low-key committing tax fraud, you automatically walking away or recognizing that people do sketchy stuff and if the QofE is tight, continuing on?

@stephenolmon BNI has so much potential but it cannot get out of it's own way, in my opinion. Was a big part of my early career business development though. Credit where due. But I'll never be in it again!

Visitors at BNI groups are asked to walk out multiple times per meeting for member-specific segments Ewww

@Lawyer4Deals Was this a local broker?

Executed LOI: “Purchase Price includes a normalized level of working capital defined as...” Broker to my client under LOI today: “We always start from the premise that the asking price does not include working capital.”

@carrynointerest I, too, am ready for your next acquisition...

Ramp will be studied by MBAs for years to come Fun fact: I complained one time that they didn’t have infrastructure to properly handle M&A transactions that are asset purchases. AKA I buy a company, new llc, but can prove revenue about to start hitting accounts They took that to heart and to this day I get emails from some guy asking when my next acquisition will be because THEY ARE READY FOR IT

@Laura_W_Gieseke Don't do this.

@steveressler Caution in ETA should be a mandatory session at every conference! Great idea!

And we are live at Southeast ETA

@housleyd @Chris_Schuering @bradford_hardin @KHendersonCo @SMB_Attorney The one who doesn't know anything about FinCen stuff...

@housleyd @Chris_Schuering @bradford_hardin @KHendersonCo @SMB_Attorney Me hanging out with the other dudes Dave included on this list:

You find a business you like. Biz Broker won't take an LOI, demands a PA (prior to full diligence). For purposes of our example, let's say this is for a small deal (<$750k) do you:

Hey Zach, love the idea that a Biz Broker fee is contingent on when Seller is paid, I think it's awesome if you're doing this. I've never knowingly been a part of a brokered deal where this was how the commission was handled, I've always seen it 100% paid at Close. I think your second point, about referrals and (maybe more broadly) doing right by your client out of principle and strength of character is also valid, albeit my (again, anecdotal) experience is that these concerns generally take a back seat to getting paid as quickly as possible in the Biz Broker world. Now, if I'm being fair, lawyers also have a tendency to put their own priorities ahead of the client, I'm not here to hold up my profession as some harbinger of value or virtue. We desperately need more competent, skilled, high-character, and nice biz brokers (and lawyers)!!

No, we’re absolutely incentivized to care about the parties after closing. Sometimes directly when a portion of the fee is only paid when sellers receive the consideration. Sometimes indirectly: our referrals have come from sellers, buyers on the other side of the table, and attorneys from both sides. Pushing a buyer to make a bad decision benefits no one. I don’t always do it perfectly but it’s certainly something I’m thinking about.

For the same reasons, I recommend SMB buyers to NOT use the lender the *seller's* broker pushes them toward. It's a conflict of interest, and there are many abuses of it. Your lender (or loan broker) should only be focused on your interests, not the seller's, not the seller's broker.

You're saying that HALF of the deals where you don't know the Buyer's lender die specifically because of a lending issue that isn't related to the underlying business? Yowza. I probably don't see the deal flow you do, but my own anecdotal experience is that unknown lenders can certainly make the process of Closing more difficult due to lack of experience/processes, but I am not seeing nearly as many deals lost to lender incompetence as you. Delay and frustration? Sure. Deals dying because of lender issues? Actually quite rare. Seems like the critical point here for prospective Buyers is to take into consideration how a Biz Broker may view you as a less favorable Buyer based on your choice of lender, and proceed accordingly in the context of a deal. Not saying that's good/bad/indifferent (heck, at the end of the day, Clint, we probably agree on lenders a lot more than we disagree) but it's the reality of the brokered business marketplace. Play the game accordingly, right?

In the last few years, Buyers that "already have an SBA lender" we haven't worked with before have about a 50% chance of losing the deal because that SBA lender sucks and backs out or tries an egregious retrade of the deal whereas ones that go with our recommended ones will never lose the deal because of banker shenanigans. That's why we take the Buyer's lender with a GIGANTIC grain of salt and heavily favor Buyers that will go with our people (and getting a referral fee is very low on the priority list for us behind reliably and quickly closing without changing anything from the initial term sheet).

@Lawyer4Deals I like it!

@ParsleyETA I know it was an example to make a bigger point, but what we do is footnote it in the APA “Note subordinate to subordination agreement (expected to be SBA From 155)”. Lessened the bellyaching.

When Seller's lawyer strikes my sentence stating the Seller Note will be subordinated to the SBA debt...buckle in.

@SAOliver_Atty We do what we have to do, don't we Scott?

"The seller wasn't aware." Checks notes.... ... Draft subordination provided ... Due diligence references ... Checklist references ... 12 or so email references ... Logged calls with counsel ... 12ft writing on the wall outside of their bedroom window that says SELLER FINANCING MUST BE SUBORDINATED TO SBA DEBT Alright, one of these might be a stretch....

@bankerbrady Insert coins is right. Seller's counsel doesn't understand SBA deals, Seller better get out the checkbook!

@ParsleyETA They clearly don’t understand the rules of the game.