Citizen of 🤡 🌎

🚨 Did the SBA just slam the door on investor equity in self-funded search? They seem to be applying a “one strike and you’re out" rule to minority investors. WHAT HAPPENED: Historically, anyone who personally guaranteed an SBA loan and became delinquent or in default was barred from getting another SBA loan. This makes sense. But now, it seems like the SBA has expanded that rule to ALSO cover minority investors (who are not signing the personal guarantee and do not have any operational control). This is not a change the SBA has publicly announced. We found out about it the hard way on a recent deal when the SBA told the bank that 100% of beneficial owners cannot be people who participated in past SBA-backed deals that have gone into delinquency or default. We had to remove two small investors from our fund to get the deal done. This is apparently related to an ETRAN update, in which the system no longer distinguishes between the majority owner/operator/guarantor and minority investors when applying the eligibility rules. The rule appears to be: If you invest $1 into an SBA-backed acquisition, and that deal goes bad, you can never participate in an SBA transaction again. Ever. This is true even if you're an LP in a fund investing in SBA deals, and one of their SBA investments goes belly up. (Needless to say: Entrepreneurial Capital LPs, we are pausing SBA investments while we work to get more clarity here; fortunately our non-SBA pipeline is robust) WHAT IT MEANS IF THIS IS TRUE: Minority investing in SBA deals becomes much more difficult. The risk for an investor is dramatically higher than before. And even those investors willing to take the risk are apparently banned for life once a single deal goes bad. The SBA deals with the most outside equity are the larger transactions, businesses with $1m+ of EBITDA. If this is true, competition for those businesses will likely decrease, because SBA debt will effectively only be usable by people with enough money to do the entire equity injection themselves. That means a smaller buyer pool, and lower multiples. (Favoring well-capitalized buyers at the expense of those with less personal capital) MY QUESTION: Is this what others are seeing, or is there a bigger picture here?

Private Equity-backed HVAC platform American Residential Services (ARS) is exploring a sale $3.5 billion expected EV, per Reuters ~17.5x 2026E EBITDA of $200 million ~20.0x 2025 EBITDA of $175 million Here’s why ARS might not get $3.5B: ARS started fireside chats so they’re early in the sale process ~$175 million Adj. EBITDA in 2025 and now mgmt is estimating $200 million for 2026E, or ~14%+ y/y growth That’s a lot, particularly if it’s all organic growth ARS would need a number of deals under LOI and try to get full credit for the pro forma adjusted EBITDA And ARS effectively stopped M&A two years ago, so it’s unlikely Second, ARS trading at a similar multiple as Sila (17x) Redwood (17x) and now Champions (18.5x) could be a stretch given their “big box” exposure Home Depot & Lowe’s are great for volume but its lower margin work and introduces concentration risks That’s another headwind to value Finally, estimated $1.5 billion 2026 revenue would only represent ~3.2% CAGR in top line revenue since 2022 ~13% EBITDA margins on a platform growing ~3% a year is not exactly a super compelling story Here’s an expected valuation range: $2.7B (15.5x @ $175M EBITDA) - Bear Case $3.4B (17x @ $200M EBITDA) - Bull Case

JUST IN: AI cow collar startup Halter raises at $2,000,000,000.00 valuation, uses proprietary “cowgorithm” to herd cattle.

🚨 NEW DEAL ALERT! Boise, ID- Specialty Trade Construction Company 7 employees $2.2M Revenue $1M Adj. EBITDA Minimum Offer $2.7M - 20 year track record. - Incredible margins. Low overhead. Owner runs it from a home office and equipment stays on job sites. - Dominant in their niche in the Boise area with little competition. - Great systems, equipment included, and dialed in team and processes. - SBA eligible. - Ideal Buyer will be in Boise or be willing to move there. Currently available for Dealonomy Premium Members ($99/mo membership) to view only after signing NDA, and will be available for Non-Premium Members to view on March 26th. So sign up for a Premium trial today to view, or wait 10 days, your choice! Great opportunity to make an awesome living working from home and wearing jeans out on work sites in beautiful Idaho. Link to NDA and next steps below. 👇

Word on the street is that Jared Smith is out as the CEO of Alterra.

1/ “There’s dozens of athletes who are American but represent other countries, and so what’s the big deal about her?” asked San Francisco State University sociologist Russell Jeung, a fifth-generation Chinese American and cofounder of Stop AAPI Hate. . . ."I think what we need to do is go beyond this exclusive allegiance to America in this sort of xenophobic patriotism.” As a believer in patriotic assimilation, a quote like this is a huge blackpill.