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“Beef up customer relationships so an acquirer can feel confident in the performance of the business post-sale.”

Chris Warden is the Co-Fuonder of Fox Powers. Fox Powers is an innovative M&A firm that helps small and medium-sized businesses sell to private equity groups. Traditional M&A firms have a poor model. They charge large up front retainers and rarely close deals. Fox Powers works with no retainer, on a limited 90 day timeframe. This means they only take on clients who they know they can sell, and sell quickly. After years working in the M&A space, they grew tired of seeing so few successful exits for owners. So Fox Powers fixed it.

Fox Powers

BusinessInterviews.com: Chris, Fox Powers works on a performance basis, not a retainer basis. This is unheard of in the M&A industry. Talk about why you operate this way?

Chris: We spent years working under the traditional model of charging retainers and not getting the support we needed from our previous firms. It was frustrating. Clients were reluctant to commit to spending $5-10k/month for an unknown outcome. Other firms live off retainers. They don’t close deals. We wanted to make it performance-based because it should be that way. If we don’t do a deal, why pay us? That’s our only function.

BusinessInterviews.com: Can you provide an example of a client you’ve assisted and provide some details on how the process works?

Chris: We had a local client in San Diego that we recently engaged, and the story fits our mantra perfectly. I already knew a strategic buyer in the space from some a previous engagement. The client saw an article we did, called us up and said he liked our short, 90 day commitment period. He had a good little business – nothing crazy, but consistent earnings – and it was in an industry where we knew we had an acquisitive buyer standing by. That’s a good story. The process is simply sitting down with the client, going over their business and their financials, and getting a mutual feeling that we’d like to work together. Then we put together a short 2-page pitchbook (industry standard is more like 30 pages), and we go to our buyers. 90 days and a deal needs to be done. And it was.

BusinessInterviews: Tell me about your background and how it positioned you to co-found Fox Powers.

Chris: My background is as an entrepreneur and an operator. I had a business in college that was reasonably successful, then spent the last 4 years with Growth Partner Capital, an equity firm focused on internet companies. During that time I was also CEO of Spread Effect, a portfolio company. The other partners at Fox Powers have a more traditional M&A background working for M&A firms and technology firms specifically serving M&A. It was a marriage of my experience running companies and understanding what it takes to grow and sell a small business, and the industry credibility and connections of my partners.

BusinessInterviews.com: What could small and medium businesses be doing to better position themselves to be acquired?

Chris: Clean up your financials. Replace yourself – meaning, remove yourself from day-to-day operations as much as possible. Beef up customer relationships so an acquirer can feel confident in the performance of the business post-sale. Start talking with your CPA or lawyers about the process of selling. Get comfortable with it. Pay attention to who is acquiring other companies in your industry. You’ll be much more prepared this way.

BusinessInterviews.com: What do business look for when seeking to acquire another company?

Chris: A lot of our buyers are private equity groups. They focus on returns on their capital, to simplify it a bit. “Business makes $1M a year and we are buying it for $4.5M? If it stays consistent we get our money back in 4.5 years.” They look at the numbers, and then what supports the likely continuance of those numbers. Who’s running the company? What’s the customer concentration? Are contracts in place? Is the business historically consistent, or lumpy? Why?

BusinessInterviews.com: What does the future hold for Fox Powers?

Chris: We want to engage good businesses and help them sell. We want to build a presence online, and in the M&A industry, as an approachable firm that simply gets deals done. No messing around. No fluff. We make money when you sell your business. That’s what we want business owners to hear and see. On the other side, hopefully the equity groups start to view us as a ‘go to’ place for good deals. Our model means we have to engage clients who the private equity groups want to buy. It should be self-selecting, and everyone should be happy. We’ll see! It’s still early but I like our team and our hustle. M&A doesn’t have much hustle in it these days, as hard as that is to believe.

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