Pascal Levy-Garboua, CEO of Noosa Labs, bought his first business in the Summer of 2021 to learn. Then, he became a serial buyer. These are his tips!
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Pascal Levy-Garboua, CEO of Noosa Labs, bought his first business in the Summer of 2021 to learn. Then, he became a serial SaaS business buyer.
With two decades of experience in the tech industry, he went from founder, executive, and investor to acquisition entrepreneur.
Pascal's approach to selecting his first acquisition was circumstantial. While exploring various deals, a WhatsApp extension business caught his eye, and during the Covid crisis, he bought his first company cash after being the last man standing.
Out of the 5 companies he's acquired since then, he still operates three; he has sold one and shut down another. In an honest interview with Boopos, Pascal shared some tips and mistakes to avoid if you want to become a business buyer. Keep reading!
Looking back, Pascal knows exactly what he would’ve done differently, and his advice might be what you need if you are looking to acquire your first or next business.
He advocates for meticulous preparation, understanding seller motivations, and the strategic use of financing options. Here’s what he regrets and why:
“In my first three deals, I paid whatever amount I was promising the founders upfront, with a mix of cash, or cash and debt. Sometimes debt was zero, sometimes debt was high, but it was a mix. Everything, the price, the enterprise value was what I paid, was paid upon the exchange of keys.
“Now I use more seller financing because I think that you need to have a combination of cost structure. It allows leverage, and then seller financing allows cheaper leverage. It can provide also upside to a seller, especially when they're confident in us, and it creates more of a long-term relationship between the buyer and the seller.”
"When you're taking debts, especially debt with a high interest rate it forces you to be ruthless about how you assess the business you buy and how you assess a business you run.
"We had a business that we bought that between the moment we sent an LOI and the moment we finished due diligence, the business, the MRR (Monthly Recurring Revenue) of business went down by a significant amount, and because this was our second business, we were excited, I was naive, I didn't reprice the deal or walk away, and I should have.
"And I've learned a hard lesson, but if things go bad, you need to walk away or you need to be ready to walk away."
Pascal also shared three essential questions to ask yourself before buying a business, to assess if your purchase is a good fit. He recommended being honest with your answers and put excitement aside to make a smart decision.
“When you're buying a business you need to buy a business that you understand.
“Look at yourself in the mirror and look at what you can do and not what some Twitter influencer tells you.”
“The seller always sells for a reason, and so the only way to make money is to understand the reason why the seller is selling not from a personal standpoint but from a skill standpoint.
"Seeing and looking at yourself in the mirror and asking yourself: do I have skills that that seller doesn't have that could lead me to a better outcome at the problems that he's facing today?."
“I'm very meticulous about when I buy a business, I know exactly what I want to do, and I know exactly the experiments I want to run in order to improve it. And I think that initially our thought was we're going to buy it, we're going to test drive a car, and then after a while, we'll figure out what works and what doesn’t.
“When you're buying a house, a new house, it's much better in the long run to do the works before you move in because if you do the works before you move in, then once you're in, you're in.
“Today, when we make an acquisition, we put together a memo with opportunities where I describe: these are the clear opportunities that I see for a business, and we sometimes quantify the impact, sometimes we don't, but at least we know these opportunities.”
Pascal bought his first business after finding a deal in MicroAcquire, and for the next, he gave Boopos a chance after hearing about the new marketplace from a friend investor.
If you are in the market to buy a business, join our marketplace and start exploring. Like Pascal, you may find acquisitions are your calling.
