Newsletter #86: How have Your May Month Been?

Mac
May 18
3 min read

Hi,

How are you?

May has been a month of Maybes for me. An interesting month filled with unpredictable developments. Lol.

Very often, in my line of work, I come across many different types of business acquirers. An increasingly common type of business acquirers in Singapore are those in the ETA (Entrepreneurship Through Acquisition) space. They tend to be corporate executives who want to transit into entrepreneurship, via the acquisition of a SME. In my opinion, I think this is a healthy development for Singapore society and economy, given that many SME owners are baby boomers who are of retirement age.

That said, I think there are still significant challenges ahead for this category of acquirers. If I am to breakdown the job scope of an ETA acquirers, broadly speaking, it would consist of 2 main segments:

Corporate Finance
Business Operator

For Corporate Finance part, it would entail the following scope:

Deal Origination - Having the skill to know where and how to look for businesses when the owners wants to sell.
Deal Qualification - How to identify good quality deals that make sense to you, and engaging the business owners.
Fundraising - How to raise funds from investors or debtors, and doing it successfully.
Deal Closure - Negotiate and come up with a win-win agreement with the business owners. Pre and Post due diligence stage.

While on the surface, these steps may seem straightforward. To execute it well often requires the following: Commercial acumen, Strong network of investors and advisors, Good communication skills, Financial skills, Likeable personality and Courage. (Without any of these qualities, one is unlikely to be successful in acquiring a business)

To develop the following qualities, one often requires at least 10 years of experience. Most of the ETA acquirers I met are lacking in at least one component, which explains why 80% of them are not successful in acquiring a suitable business in a span of 2 years.

The 2nd part is the Business Operator skills, which can be broken down into the following parts:

Sales / Marketing / Business Development Skill - This set of skills are essential for driving revenue and growth.
Financial Skill - This is essential for achieving profitability and ensuring business sustainability.
Organizational Skill - This skill allows one to work on the business, rather than in the business. (A.K.A bird eye view) The ability to scale and gain market leadership rest on this particular skill set. Often time, many SME owners struggle with this. Senior executives from MNCs tend to have an edge in this skillset.
Character - Over time, the quality of one character would be exposed. This will have a direct impact on the runway of the business, for the better or worse. The ability of the entrepreneur to attract and retain talents within the company, the relationship he/she has with the industry peers, suppliers and customers would be tell-tale signs.
As you can see, these 2 segments (Corporate Finance and Business Operator) are kinda related but distinctive. To find an individual who can excel in these 2 parts are exceedingly rare. What do you think?

https://www.youtube.com/watch?v=gMzWj1VRL_s

In this particular YouTube video, we have 4 SME owners sharing their views on a wide range of business issues in Singapore. This can be helpful for entrepreneurs seeking a perspective on tackling their biggest pain point or concerns. Thank you to the following participants for their meaningful contribution!

Ler Wee Meng from Securevision

Michelle Ten from ET Management

Ian Ong from Roots Digital

Rosemary Kwa from Petale Tea