The Transaction Abstract by Redpath and Company is hosted by Joe Hellman, Partner, CPA, and M&A Advisory Practice Lead and covers all things M&A—providing you with a comprehensive acumen and insightful conversations. Special guests include experts from the world of investment banking, private equity, family offices, search funds, angel investors, attorneys, corporate development officers, and other M&A advisors. Learn from the experts on all aspects of M&A—because buying or selling a business shouldn’t be trial by fire. From Redpath and Company, an accounting and advisory CPA firm based in Saint Paul, Minnesota.
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Données mises à jour le 04/07/2026
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Why Smart Sellers Invest in Quality of Earnings Studies, with Emma Gergen
mardi 29 juillet 2025 • Durée 19:00
In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with Emma Gergen from Carlson Private Capital Partners to explore quality of earnings (QoE) studies and why they have become essential in M&A transactions.
Many business owners wonder if they even need a sell-side QoE if the buyer will already conduct one.
The answer, according to Gergen, is simple. She argues that you want to be armed with the same set of facts as the buyer, so that you’re comfortable with the agreed-upon valuation.
Understanding Quality of Earnings vs. Traditional Audits
A quality of earnings study is different from a standard audit. While an audit validates reported financial results, a QoE examines the normalized financial performance of your business. This process identifies and adjusts for:
One-time expenses or income that will not recur
Personal expenses run through the business
Timing differences in revenue recognition
Extraordinary items that distort your true earning capacity
Gergen notes that understanding these factors at a granular level—and presenting them to the buyer—helps the buyer better evaluate and value your business.
Three Benefits of Sell-Side Quality of Earnings
Information Symmetry: Without a sell-side QoE, you are "flying quite blind" during valuation discussions. Buyers will have detailed insights into your financial performance that you lack.
Deal Certainty: Deals can die when buyers discover discrepancies during their due diligence. A credible sell-side QoE study speeds up the buyer's confirmatory diligence process, reducing the risk of valuation disputes or deal failures.
Faster Timeline: Gergen notes that sellers who obtain QoE reports have the buy-side process be faster, take less effort, and shorten deal timing. When buyers review a professional sell-side QoE, their own analysis becomes confirmatory rather than exploratory.
What Buyers Actually Look For
Quality buyers do not use QoE studies as "gotcha" tools to reduce valuations, despite seller fears. "Never have I come into a QoE with a mindset that we are going to find something that we want to adjust the valuation for," Gergen emphasizes.
Instead, sophisticated buyers—whether private equity or strategic acquirers—use QoE studies for confirmatory M&A due diligence, to validate the financial profile, and to gain deeper operational insights that help them plan for post-acquisition growth.
The Bottom Line
Quality of earnings studies have become standard practice in middle-market transactions. They help sellers prove their asking price and show buyers the business is financially sound.
As Gergen concludes: "Finding your partners early, who can help you think through financial presentation to be able to produce statements that an investor can look at and understand, is a really valuable exercise."
Explore more insights on the Transaction Abstract podcast, where we cover all angles of buying and selling businesses.
Search Funds: Entrepreneurship Through Acquisition with Marshall Johnson
jeudi 19 juin 2025 • Durée 18:44
In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with Marshall Johnson from Northspring Partners to explore the search fund model and how it provides opportunities for aspiring entrepreneurs and business owners looking to exit their companies.
What is a Search Fund?
"A search fund is when an aspiring operator wants to go find and lead a great company, and they raise money," Johnson explains. Individual searchers typically raise $500,000, while teams raise around $900,000 to fund an 18-month search for the right acquisition target.
The model has strong academic backing, with Stanford University publishing comprehensive search fund studies every two years, analyzing 40 years of transaction data.
The Typical Searcher Profile
Key characteristics of successful searchers:
5-10 years of operating experience in finance, accounting, marketing, sales, or consulting
Often pursuing career transitions through MBA programs
Looking for alternatives to traditional corporate paths
"Compared to when I did it 20-plus years ago, there are a lot of resources now online and through schooling," Johnson notes, highlighting how the ecosystem has matured.
Why Business Owners Should Consider Search Funds
Unique advantages for sellers:
Maximum flexibility in deal structure and transition terms
Buyers who genuinely want to continue the company's legacy
Ideal for owners without succession plans
"The biggest thing is flexibility," Johnson emphasizes. "We sit down with the owner and say, You built an amazing business. What's the ideal scenario?"
This contrasts with private equity, which Johnson describes as "pretty cookie-cutter in equity terms" and typically requires owners to "roll equity and run that company for three to five years."
What Makes a Strong Searcher Advice for New Search Fund CEOs Preparing for Any Transaction
Transaction Insurance: A Critical Tool in M&A Deals with Ross Hamann
lundi 5 mai 2025 • Durée 18:31
In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with Ross Hamann, Executive Vice President at CAC Specialty, to explore the crucial role insurance plays in mergers and acquisition transactions.
What is Transaction Insurance?
Transaction insurance encompasses several products designed to facilitate deals by addressing risks that might otherwise prevent a successful closing. Hamann explains that CAC Specialty offers a comprehensive suite of solutions that extends beyond standard coverage.
As Hamann puts it, "We never want... a risk out there, be it known or unknown, cause a deal to not go through, because people... put a lot of time and effort into these deals, and so it's our responsibility to find insurance products to help get a deal done where it makes sense."
Key Insurance Solutions for Transactions
Hamann outlined three primary categories of transaction insurance that buyers and sellers should understand:
Representation and Warranty Insurance - Covers unknown risks that might emerge post-transaction
Contingent Risk Insurance - Addresses known litigation risks that could impact deal value
Tax Insurance - Covers known tax risks where parties cannot get comfortable with the exposure
These specialized products can be valuable when traditional methods like escrows are insufficient. Instead of setting aside capital, insurance may provide a more cost-effective structure while offering protection against unforeseen liabilities.
Current Market Trends
The transaction insurance market has evolved significantly in recent years, with several notable developments:
Expanded Deal Size Range - Previously limited to deals above $20 million enterprise value, now available for transactions as small as $1 million EV (Enterprise Value)
More Competitive Pricing - Rates have decreased significantly, making coverage more affordable
Claims Activity - About 20% of policies experience claims, with high severity rather than high frequency
Timing Considerations The Value of Specialized Expertise
ESOPs as a Business Exit Strategy: Key Insights from Tom Walker
lundi 31 mars 2025 • Durée 18:33
In this episode of The Transaction Abstract Podcast, Joe Hellman sat down with Tom Walker, an attorney from Winthrop and Weinstein with over 35 years of ESOP experience, to explore Employee Stock Ownership Plans (ESOPs) as a business exit strategy.
What is an ESOP?
An ESOP is a qualified retirement plan similar to a 401(k), but with two key differences.
First, the primary investment is company stock, and second, it is funded primarily through company contributions rather than employee contributions. As employees work at the company, they accumulate stock in their accounts, allowing them to benefit from the company's success over time.
Walker explains that while an ESOP might not be suitable for every business, it provides a unique transition option for owners approaching retirement who value their company legacy and employee relationships.
Ideal Candidates for an ESOP
Walker suggests the following characteristics for businesses considering this succession planning path:
Owners approaching retirement (within 5-6 years) who do not want an immediate exit
Companies with 25+ employees (though exceptions exist)
Business value exceeding $5 million to offset transaction costs
Owners who prioritize legacy and employee welfare over maximizing sale price
Companies with steady growth and positive cash flow
A strong company culture where employees have contributed significantly to success
While owners typically receive about 90% of what they might get from a third-party sale, the ESOP offers other advantages, including a significantly higher transaction completion rate compared to traditional sales processes.
Valuation and Governance Considerations
One common misconception about ESOPs involves valuation. Walker emphasized that "The ESOP cannot pay more than fair market value," which is determined by a qualified independent appraiser engaged by the ESOP trust. This addresses Department of Labor concerns about potential overvaluation.
Tax Benefits and Current Trends
Market Trends and Transaction Insights with PGIM Private Capital
lundi 3 mars 2025 • Durée 18:10
In this latest episode of The Transaction Abstract, Joe Hellman sits down with Alex Stuart from PGIM Private Capital to discuss current market conditions and transaction trends.
Introduction to PGIM Private Capital
PGIM Private Capital, part of Prudential Financial's investment management business, operates across various asset classes including public debt, real estate, and private equity. Their Minneapolis office covers five states—Minnesota, Iowa, Nebraska, and the Dakotas, providing senior debt financing, structured financing, and minority equity investments for businesses across the credit spectrum.
Current Market Conditions and Deal Flow
The current market is experiencing a convergence in transaction multiples, marking a positive shift from the valuation disconnects seen 24 months ago. While seller expectations have moderately adjusted, Stuart notes that deal flow remains selective.
As Stuart observes, "If the only way you can make the deal work is by getting a rate cut, so you get the cost of financing, I can guarantee you this is not the right deal for you." Private businesses are currently more active in completing transactions compared to public companies, largely due to their ability to make decisive moves without extensive stakeholder consultation.
Deal Characteristics and Financing Trends
Successful transactions in the current market share several key characteristics:
Increased utilization of junior capital as an alternative to traditional senior debt financing
Quality remains paramount in today's market. "This is not a great market for storied credits. It is going to be higher quality assets, and in those situations, there is plenty of money available on the sidelines," Stuart notes.
Looking Forward
Understanding Private Equity vs. Strategic Buyers: Insights from Borgman Capital
lundi 3 février 2025 • Durée 21:06
In this latest episode of the Transaction Abstract Podcast, Joe Hellman explores the crucial differences between private equity and strategic buyers in mergers and acquisitions, providing valuable insights for business owners considering a sale.
Joe is joined by Ben Axelrod, Managing Director at Borgman Capital, bringing over 20 years of M&A experience. Drawing from his extensive background, Axelrod offers a unique perspective on how different buyer types approach acquisitions and what organizations should consider when evaluating their options.
Understanding Strategic vs. Financial Buyers
The M&A landscape features two primary types of buyers, each with distinct approaches:
Strategic buyers typically operate within the same industry as their acquisition targets, focusing on operational synergies and long-term integration. Their goal is to create value through combined operations, with no predetermined exit timeline.
Private equity firms represent financial buyers backed by investors seeking returns on their capital. These firms focus on operational improvements, revenue growth, and margin optimization, typically planning for an exit within five to ten years.
Axelrod also introduces "quasi-strategic" buyers: private equity-backed operating companies that bridge these approaches by combining industry expertise with financial backing.
Breaking Private Equity Misconceptions
Common private equity misconceptions often stem from highly publicized negative cases, but the reality is different. Axelrod explains how private equity ownership frequently preserves existing operations and supports management teams, particularly in the lower middle market where Borgman Capital operates.
The Private Equity Advantage Looking to the Future
Succession Planning and Wealth Management in M&A Transactions
jeudi 12 décembre 2024 • Durée 20:53
In this latest episode of the Transaction Abstract Podcast, Joe Hellman dives into the intersection of wealth management and mergers and acquisitions.
Joe is joined by Craig Kleis and Bob Dietz from Bernstein Private Wealth Management to explore how succession planning and wealth strategies can impact post-transaction outcomes. From pre-transaction preparation to navigating life post-sale, Kleis and Dietz offer valuable insights for business owners looking to safeguard their personal and financial future.
Why Succession Planning and Wealth Management Matter
Succession planning goes beyond readying a business for sale—it’s about securing the owner’s financial future. Kleis highlights the importance of personal financial planning, while Dietz emphasizes how tax and estate planning can maximize after-tax wealth, making succession planning an essential part of M&A.
The Importance of Pre-Transaction Planning
Preparation is key—even when a transaction isn’t imminent. Dietz stresses steps like determining lifestyle-based "core capital," optimizing tax structures, and aligning the business for sale to achieve better outcomes. Early planning offers clarity and confidence when it matters most.
Managing the Transaction Process
During a transaction, all parties must stay focused on the big picture. Kleis and Dietz share practical examples of how understanding deal structures and tax implications can make a significant difference in the M&A process.
Life After the Sale
Transitioning from business ownership to personal wealth management can be daunting. Kleis and Dietz provide strategies for risk management and aligning investments with long-term goals to help owners adjust to their new financial reality.
Both guests agree: early engagement in wealth management provides flexibility and better outcomes, ensuring both the business and owner are prepared for the future.
Exploring Growth through Roll-Up Strategies and Operational Scaling
jeudi 14 novembre 2024 • Durée 20:15
In this episode of The Transaction Abstract podcast, Joe Hellman of Redpath and Company welcomes Kiel Larsen of Bridgeway Partners to discuss how strategic acquisitions and operational improvements can drive growth in fragmented industries.
The conversation highlights the potential of roll-up strategies for creating value, building a sustainable operational foundation, and fostering growth.
Setting the Stage: The Power of Roll-up Strategies
Bridgeway Partners, a middle-market investment firm, specializes in roll-up strategies, acquiring and uniting businesses within niche markets under a single platform. Their investment in Clarity Salt exemplifies this approach. Clarity Salt started as a single distributor, Davis Wholesale Supply, and expanded into a cohesive network of salt distribution companies, demonstrating how consolidation can increase efficiency and market strength.
Building a Scalable Foundation
For Bridgeway Partners, building a scalable infrastructure was key to successful integration. Early investments in cloud-based ERP systems and additional management roles enabled Clarity Salt to operate more effectively and support future acquisitions. This structured foundation allowed Bridgeway to rapidly grow Clarity Salt's footprint across the Midwest and East Coast.
Balancing Integration with Autonomy
Bridgeway’s approach emphasizes balancing integration with the autonomy of each acquired company. Initially, Bridgeway closely supports each new addition to ensure smooth integration. Over time, they transition to a more advisory role, allowing each company to retain its unique strengths while benefiting from the resources and scale of the larger platform.
Insights for Business Owners
This episode highlights the advantages of consolidation for owners of smaller businesses in fragmented markets. By partnering with firms that bring both capital and operational expertise, owners can achieve growth that might not be feasible independently. Bridgeway’s model showcases the importance of finding the right partner who aligns with the vision for growth and sustainability.
Evaluating Software Companies in Mergers and Acquisitions (with Anders Olson of Hennepin Partners)
mardi 8 octobre 2024 • Durée 20:29
Anders Olson, director at Hennepin Partners, joined The Transaction Abstract podcast host, Joe Hellman of Redpath and Company, to explore the key aspects of technology mergers and acquisitions (M&A), particularly in the software sector. As they delve into the topic, they emphasize the growing relevance of software and the specific factors that make it a highly sought-after asset in today's market.
Olson explains that software has become pervasive, powering everything from our phones to toothbrushes. A quote by venture capitalist Marc Andreessen is highlighted: "Software is eating the world," illustrating software's increasing ubiquity and mission-critical nature across industries. Hellman and Olson then shift the focus to software in M&A transactions, emphasizing that software businesses are often valued for their recurring revenue models rather than their profitability. Olson underscores that software is generally more resilient during economic downturns because businesses rely heavily on it for their day-to-day operations. This makes software assets particularly attractive to investors and companies looking to grow through acquisition.
Olson goes on to detail the top metrics investors focus on when evaluating a software company. Among the key performance indicators (KPIs) are:
Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR): These metrics are crucial for determining the predictability of future revenue. They highlight the subscription-based model of most software companies, which makes their income streams more stable.
Retention Rates and Churn: Investors look closely at how well a software company retains its customers. Tracking both customer churn (logo retention) and dollar retention (the amount of money retained from existing customers) is vital in understanding the company's long-term revenue potential.
Customer Acquisition Costs (CAC) and Lifetime Value (LTV): These KPIs reflect the cost of acquiring a customer and how much revenue that customer is expected to generate over their relationship with the company. A favorable ratio between CAC and LTV is critical for growth.
The Impact of an M&A Attorney in the Transaction Process (with Maggie Tatton, Ballard Spahr)
lundi 16 septembre 2024 • Durée 16:56
Maggie Tatton, partner in Ballard Spahr’s Mergers and Acquisitions practice group and leader of the firm’s Private Equity M&A practice, joined Joe Hellman, Redpath and Company partner and host of The Transaction Abstract, to discuss the many hats an M&A attorney might wear in the deal process—and how their specialized insights can impact the transaction process and outcome.
Maggie and Joe discuss:
The importance of involving an M&A attorney early in the transaction process.
The difference between general counsel and M&A attorneys.
The multiple roles and responsibilities of an M&A attorney.
The wide breadth of knowledge the M&A attorney must possess including, but not limited to:
Employment law.
Real estate law.
Estate planning.
Data privacy.
Collaboration and project management with other advisors, such as investment bankers.
Working relationships with opposing counsel.
What issues and challenges cause a deal to slow down or kill the deal all-together.
Staying on top of trends and courts cases that greatly impact transactions.
Johnson notes that investors evaluate candidates on:
Grit - Ability to handle challenging business endeavors
“Superpowers” - Distinct strengths in sales, marketing, finance, or people management
Model knowledge - Understanding the long-term commitment required
Coachability - Willingness to accept advice from investors
Drive to win - Treating this as a defining career opportunity
Johnson's guidance is straightforward: "First-time CEOs ask me all the time, 'I don't know what to do at first.’ I say, don't do anything. You're buying a good business. Let it run."
His recommended approach:
Learn from the founder how the company operates
Visit with all employees and customers
Identify where you can help before making changes
For business owners considering exits, Johnson stresses preparation: "I can't tell you how important it is to have your financial house in order if you're considering a transaction—an audit, all the key financial KPIs, sales pipelines. It'll save you time and money."
Hamann notes that for quality deals, "we can get up to 20 options at any given time," which continues to drive competitive rates in the current market.
While transaction insurance shouldn't slow down deal processes, proper implementation requires adequate planning. According to Hamann:
Simple representation and warranty coverage can be arranged in about a week
More complex solutions require additional time for proper diligence
Early insurance involvement could help identify potential issues that may derail transactions
Hamann emphasizes that "the more time that we have, the more diligence we can have to really identify and uncover potential... go forward insurance issues that could cause the... transactional part to get delayed."
CAC Specialty differentiates itself by building a team with diverse professional backgrounds, including former M&A attorneys who understand transactions from multiple perspectives. This approach enables them to structure creative solutions for challenging situations.
What sets them apart, in Hamann's words, is "having the professionals that have sat in your shoes... they see deals differently than most of the people that we compete against are trained in the insurance market, and it just creates a massively different outcome."
Hamann concludes by explaining their philosophy of problem-solving: "At the end of the day, that's why we get hired. We want them to think of us, ‘what are all the things we can do to get the deal done, versus what are the things that are going to kill the deal.’"
For owners transitioning to an ESOP structure, a commitment period is typically required:
Owners who are actively managing the business usually need to commit to 3-5 years post-sale
Owners with established management teams might only need to stay 1-2 years to ensure a smooth transition
Despite concerns about governance challenges, Walker noted that when ESOP companies later decide to sell, participant approval votes typically achieve 70-90% support when management makes a compelling case for the transaction.
A significant advantage of ESOP structures emerges when the ESOP owns 100% of an S corporation. In this scenario, the company pays no federal income taxes, freeing approximately 35% of earnings that would have gone to the government. This "found money" can help repay acquisition debt and increase company value for ESOP participants.
Walker observes growing interest in ESOPs, particularly as interest rates decrease and baby boomer business owners continue moving toward retirement. While higher interest rates temporarily dampened enthusiasm due to financing challenges, the market appears to be rebounding.
"I think it is a really good tool," Walker concludes. "People have heard all sorts of myths about ESOPs, but if you have a good advisor who can take you through this, that good advisor can help identify and screen out 90% of the not-so-good situations."
While optimism exists for increased deal activity in 2025, market participants await greater clarity on interest rates, tariffs, and U.S. policy. The financing market remains broad with ample capital available, though accessing it requires the right partnerships and connections.
When discussing market outlook, Stuart states: "There is a trove of sellers on the sidelines waiting to do something, but the true unleashing requires resolution on both the economic and political fronts."
To hear more about this informative discussion of market trends and transaction insights, listen to the full episode of The Transaction Abstract Podcast.
Unlike strategic buyers, who might consolidate facilities due to operational overlap, private equity firms investing in standalone businesses often maintain existing infrastructure and workforces. This approach promotes sustainable growth rather than immediate cost reduction.
Private equity firms can move quickly and adapt to different situations. While strategic buyers, especially larger corporations, might be constrained by board meeting schedules and rigid approval processes, private equity firms can often respond quicker to opportunities.
Axelrod highlights how Borgman Capital balances this speed with thorough due diligence, ensuring both efficient execution and proper evaluation. The firm can deploy resources quickly while maintaining its commitment to careful analysis.
The approaching "Great Wealth Transfer" can be beneficial for M&A transactions. As baby boomer business owners prepare for transition, private equity firms are offering more sophisticated approaches that address both financial and operational considerations.
Whether choosing a strategic or financial buyer, owners should find a forward-looking partner whose approach aligns with the organization's objectives. To hear more insights from this informative discussion about the evolving landscape of private equity and strategic acquisitions, listen to the full episode of the Transaction Abstract Podcast.
To hear more insights from this engaging discussion, listen to the full episode of the Transaction Abstract Podcast.
Net Promoter Score (NPS): This qualitative measure reflects customer satisfaction and loyalty by surveying how likely customers are to recommend the product to others.
A particularly important metric in software M&A is the Rule of 40, which combines revenue growth and profit margins (EBITDA). A company meets the Rule of 40 if its growth rate and profit margins add up to at least 40%. This metric has become a standard for evaluating the balance between growth and profitability in software businesses. Olson mentions that in recent years, buyers have shown a preference for companies that achieve a balance of at least 10% revenue growth and healthy profit margins, though higher growth rates were favored pre-COVID.
The conversation also touches on the importance of preparing for a liquidity event, whether a company is aiming for a sale or seeking external funding. Olson advises business owners to start tracking KPIs early, even if they don't plan on selling immediately. Having strong organizational processes in place and a clear growth roadmap is essential for maximizing valuation when the time comes.
In the latter part of the podcast, Olson discusses current trends in software valuations. Despite recent market fluctuations, software remains a resilient and highly valued sector. Premium software assets with strong recurring revenue streams can still command double-digit ARR multiples, although valuations have slightly moderated from the post-COVID surge. For businesses with lower growth but strong profitability, buyers might shift their focus from ARR to EBITDA multiples, underscoring the importance of a balanced financial profile.
Overall, the episode offers a deep dive into the critical metrics and strategies that drive successful software M&A transactions, providing both business owners and advisors with actionable insights on preparing for and navigating this complex landscape.
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