The Transaction Abstract Podcast – Details, episodes & analysis

In this episode of The Transaction Abstract Podcast, Joe Hellman sits down with Ashlyn Gray, a Tax Senior Manager in Redpath's Transaction Advisory Services practice, to discuss Qualified Small Business Stock (QSBS) and why it can play an important role in transaction planning.

QSBS, governed by Section 1202 of the tax code, can allow certain founders and investors to exclude a significant portion of capital gains when selling qualifying stock. While valuation and deal structure often dominate M&A conversations, tax strategy can also have a meaningful impact on the final outcome.

Ashlyn explains how QSBS works, the key requirements to qualify, and why early planning around entity structure and ownership can create opportunities for both buyers and sellers.

In this episode, you'll hear insights on:

• What Qualified Small Business Stock (QSBS) is and how it works

• Key requirements businesses must meet to qualify under Section 1202

• How entity structure can influence future tax outcomes

• How QSBS planning can affect both buyers and sellers in a transaction

• The importance of considering tax strategy early in the deal lifecycle

Listen to the full episode to learn how thoughtful tax planning can help founders, investors, and operators protect more of the value created in a business.

In this episode of The Transaction Abstract Podcast, Redpath's Joe Hellman sat down with Rob Cherun, founder and managing partner of Legate Partners, to talk about what ownership really requires and how the search journey shapes better operators and investors.

Drawing from his experience building and scaling a business to nearly 2,000 employees before exiting and returning as an investor, Rob shares how grit, accountability, and hands-on leadership define long-term success far more than credentials or deal structure.

In this episode, you'll hear insights on:

• Why ownership is a long-term commitment, not a shortcut
• What investors really look for beyond resumes and industry experience
• How grit and emotional durability separate strong operators from the rest
• Why the entrepreneur matters as much as the asset in any deal
• How alignment and trust shape better partnerships between operators and investors

Listen to the full episode of The Transaction Abstract Podcast to hear Rob's real-world perspective on search, ownership, investing, and what it truly takes to succeed.

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.

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.

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.

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.

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."

Listen to more episodes of The Transaction Abstract Podcast for additional insights on buying and selling businesses.

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.

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.

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.

Successful transactions in the current market share several key characteristics:

• Direct sourcing through long-term relationships

• Strong cultural alignment between buyers and sellers

• Integration and cost synergy potential

• Emphasis on higher-quality assets

• 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.

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. 

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.

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.

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.

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.

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.

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.

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.

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.

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.

To hear more insights from this engaging discussion, listen to the full episode of the Transaction Abstract Podcast.

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.

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.

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.

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.

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.

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:

1. 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.
2. 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.
3. 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.
4. 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.

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.

Spencer Gerberding joined Joe Hellman, host of The Transaction Abstract and partner at Redpath and Company, to talk about his personal experience—and what he learned—going through an M&A transaction process with his extended family and their business. 

Like many individuals going through a transaction for the first time, Spencer had limited knowledge of the process and what it would demand from him—from estate planning considerations to assembling a team of advisors to navigating family dynamics over the course of 3-4 months. 

In Spencer's case, there was an offer to buy on the table prior to his involvement, and working with an investment bank was not an option that he and his family entertained at the time due to the transparency of the process from both the buyers and sellers. Fortunately for all parties, the transaction terms remained consistent throughout the deal process—which is not always the case. However, they still had to move fast to due to unforeseen circumstances and ultimately had to make many decisions on the fly.

Find out what they learned from the process, what they would have done differently, and how they overcame the challenges of bringing the transaction to a successful close.