Ep 522 The difference between 4x vs.8x EBITDA, Customer Concentration Discounts, PE Re-trades with Eric Wiklendt on this special edition of Inside the Mind of an Acquirer

Welcome back to Built to Sell Radio, the show that helps you negotiate like a heavyweight when it’s time to exit; today’s Inside the Mind of an Acquirer has John sitting down with Eric Wiklendt of Speyside Equity, an operator-led PE firm that buys complex lower–middle market manufacturers and pays based on how they see risk, growth, and the work required to fix what’s broken.

Eric, give us the quick snapshot on Speyside and what you hunt for.

We buy smaller manufacturing companies that are messy or carved out, then grow and tune them through hands-on operational change, whether that’s improving plants and supply chains or helping owners exit cleanly.

So you lean into fixer-uppers and complexity?

We do, because structuring tough deals is a strength for us and it sets up the transformation we plan to deliver after close.

Manufacturing is hot; how do you win deals against the crowd?

We’re operators first—our team’s run plants, done corporate development, and closed a lot of transactions—so we compete by showing exactly how the business will run better under our ownership rather than relying on financial engineering.

Many owners mean mixed agendas; how do you navigate that?

You often have three to five stakeholders with different priorities, so we align goals early; we even sourced one deal direct from three founders in their seventies and, without a banker, patiently got everyone to yes over about a year.

Walk me through how you value these companies.

We start with a market multiple on adjusted EBITDA to get enterprise value, then cross-check with a cash flow model to make sure it holds up.

What moves a business toward four times versus eight times EBITDA?

It’s mostly risk and the platform’s ability to grow; better systems, processes, and management that can support organic and add-on growth push you higher, while weaker fundamentals pull you down.

And the low end—what drags value down?

Thin margins, small scale with poor systems, riskier sectors, and especially customer concentration; if one customer drives twenty percent or more of EBITDA, expect the multiple to drop roughly one to one and a half turns.

If the big customer is a diversified giant, is that one account or many?

It depends on who decides; decentralized plant or merchandising decisions feel safer than a single centralized buyer, which is why a steel producer with many furnaces is less scary than a corporate office that can flip a switch and move the work.

How do you typically structure a deal and rollover?

We’re flexible on rollover but want control, and we cap leverage around three times EBITDA because heavy debt service makes change painful and distracts management from fixing the business.

Is the debt underwritten by the target’s assets, or do you backstop it?

We use collateralized debt—term loans against real estate and equipment, plus asset-based lines against receivables and inventory—managed with a borrowing base and straightforward covenants.

If a company can borrow like that, why sell instead of recap and keep going?

Owners often want to monetize, retire, or solve succession, and while dividend recaps are an option, many prefer a clean exit after getting advice on the trade-offs.

What surprised you when you sold for the first time?

Explaining a business you live every day is harder than you think, so you have to slow down, simplify, and meet the buyer where they are.

There’s also emotion—owners remember the struggle and want credit for it—while buyers look with cold eyes, so it helps to keep perspective.

How do you manage that emotional gap?

A skilled banker is part educator and part marriage counselor, setting expectations and keeping both sides together through diligence; when there isn’t one, we try to do that upfront ourselves.

How much price erosion should sellers expect between LOI and closing?

With full information, it should be none, but if diligence reveals real issues, the reduction should match the problem; some firms bid high and retrade twenty five to thirty percent by design, while we aim to keep changes closer to five percent and only for genuine findings.

For example, we found an undisclosed buried fuel tank and cut about one million from a forty-five million dollar price to fund remediation, which any rational buyer would have priced in at the start.

Why proceed after a miss like that?

We verify the rest, gauge intent, and if it looks like a miss rather than a pattern of hiding the ball, we adjust and move forward; if it feels evasive, we walk.

Do you prefer auctions or proprietary deals?

We can play in auctions, but we often win where structuring and transformation are hard—legacy liabilities, tax sensitivities, carve-out baggage, or family considerations—because few firms want that overlap of complexity and roll-up-your-sleeves work.

Explain how PE makes money, and where you land on that.

Funds charge about two percent to operate and earn carry on profits, but too many have delivered around two times over seven to ten years, which nets like index-level returns after fees; we target nearer three times so LPs see mid-teens outcomes, and we avoid chasing fee growth with oversized funds.

Are you hitting that three times mark in underwriting?

That’s our target, and we pursue it by doubling EBITDA through operating improvements rather than piling on debt, for example going from ten to twenty in a few years.

How much of your own wealth is in your funds?

North of seventy five percent, and I live pretty simply so I can focus on the work and give back to causes I care about.

When you take over, where do you find the fastest operational wins?

We align and incent management, clean up the revenue mix by fixing costing, pricing, and unprofitable customers or products, and right-size the manufacturing and supply footprint, and we do it in a consultative way that sometimes sparks improvements before we even close.

What if a manager resists because your plan challenges past choices?

We listen, bring data and context, explain clearly, and then act; I once raised prices on a money-losing key account the rep refused to touch, and the customer accepted it while the softball team still kept its catcher.

Where can listeners connect with you?

My LinkedIn and our website list my cell and email, and the fastest way to reach me is a text or an email.

We’ll link Eric’s unique last name and Speyside on the episode page at builttosell dot com; thanks for doing this, Eric.

That’s a wrap on John’s conversation with Eric; subscribe for more, grab the show notes and links at builttosell dot com, and if you know a great guest, nominate them at builttosell dot com slash nominate or email me at colin at builttosell dot com—thanks to Dennis Levitaglia on audio and to our community of Certified Value Builders, and I’ll talk to you next week.