Re: Part time comm. RE investor - Posted by Chaz
Posted by Chaz on March 23, 2007 at 12:57:34:
David, I’ll try to be breif. I don’t want to discuss non RE topics on this forum. Just out of respect for the forum users. If you want to leave an email addy for more detailed info feel free. But you did ask a question and you deserve a response.
First off unless you are planning to work for a MnA firm or investment bank I would advise you to have well over $100,000 in cash reserves. If you want to establish your own firm(and this does not included any employees) it could take you up to 2 years to get just 1 client and another year to complete the deal,so you are looking at 3 years without cashflow!Also, most M&A(MnA) folks have other streams of income because the amount of time it takes to close a deal can be months. I am a business appraiser as well, so this keeps cash coming in monthly so I can keep the bills paid. Some MnA folks are Business Valuation experts or maybe a CPA. The bottom line is to have a cashflow stream coming in until you get enough deals flowing in to a point that you don’t need to do deals anymore. That process takes years to do.
1 - what is the nature of your business, eg. helping business looking for acquisition targets?
I am 100% involved in acquisitions. We M&A folks just say “MnA” because the words flow and people are accustomed to hearing it like that. Most mergers are not successful,beleive it or not. My day consists of finding sellers and matching them with highly qualified/motivated buyers(Private Equity,other businesses,etc…)It’s a extremly detailed and emotional process.It’s so much more involved,but this medium does not allow me to go into details
2 - do you concentrate in a certain industry, or you concentrate in certain size of companies?
$5mill to $150mill in yearly revenues is my “sweet spot”. It’s a good makrket for those that can do deals in that range(known as the middle market)
3 - what is the expected profit in this field…can you provide me some general idea?
I won’t answer this question. Althogh very rewarding,you don’t get into this to get rich.I am not saying this pertains to you,but a lot a of guys hear about all of the Billion dollar deals being done via TV or read some biz journal(CNBC for ex.) and think “WOW,this is were I need to be”, but the reality of it is M&A is not glamorous at all. Most M/A folks will never in their career do a multi-billion deal. Most of the large deals you hear about on TV are a extremly small % of the overall amount of deals being done. You may hear of 12 to 24 large deals(publicly traded companies) a year,but in reality there are thousands(privately held companies) you don’t hear about,and 1 out 3 deals actually close! This is a tough business and it’s not for the faint at heart. YOU MUST LOVE THIS BUSINESS TO BE SUCCESSFUL.So putting that to the side. Ask yourself, do I have a burning passion for the “Art of The Deal”? Without a doubt you must answer… YES! If you can’t, I highly explore other options for your career. It’s not enough to say " I always wanted to do this" this not a hobby!
4 - what background do I need to get into this field and establish my own company?
Industrial psychology/Finance/Accounting. Extremly high level of motivation and self confidence(can you sit in a room of CEO’s and board members and convince them to let you sell thier $100 million dollar company?, Most people don’t have that kind of confidence). SALES AND MARKETING skills are a must. You can be the best financial analyst but if you are lacking in sales( I am not talking about selling like some used car salesman,this is a very high level approach) and marketing,you will have a really difficult time. And also,starting an actuall full service MnA firm may be a strech. Not to say it can’t be done or that you can’t do it. But once you see the compliance issues involved, just that alone will cause you to want to remain a 1 or 2 person shop and work on really small deals (1 to $10mill in revs, which is are buy the way what most of your deals will be anyway). Also, if your working on deals over $53 million in revs a yr, you need to have a Series 7 license. It gets tricky after $53 million. The SEC. gets involved
5 - is CFA useful… or MBA?
CFA is helpful and even the MBA. But not needed. I only have a Bach. of Scince-Finance degree.But I have Wall St. experience going for me. A MBA(from an IVY) is great if you want to work at the big name Wall St. firms.
It was never my desire to spend my career working at the big corporate firms. I could better help you if I knew a little more about your background(work/education) There are ways to get into MnA, you just have to know where to look for open doors. I hope this helps. To be honest I know comm RE is not easy at all, but I think you may be more successful doing it if you are already involved with it,more so than MnA,especillay if you don’t have the background/training. I love what I do but I want to give the most realistic view. Your question is very common, I get it all the time. In MnA there is no “training period”. That being said CEO’s/owners are not going to let a “rookie” sell their multimillion dollar company without the savvy to do it. You get the Savvy by doing it. It’s a catch 22… . I would really think this through, Comm RE is actually a great place to develop the business skills needed. I hope this helps