Lindsay Lion from Australia is an accomplished business executive.
His lucrative business career IT culminated with him becoming CEO of Mobilarm, the publicly-listed Australian manufacturer of marine safety devices (MSDs).
This is a BIG industry, driven by safety legislation in the commercial sector.
MSDs are installed on anything that goes in the ocean, including beacons and man-overboard alarms. The user has a device that triggers an alarm and notifies both the vessel and the coastguard when someone falls in the water (it happens!)
While at Mobilarm, Lindsay acquired a U.K. business that made MSDs for the leisure and sailing industries.
It made him think. If he was doing this for his employer and making them tons of money, why didn’t he do it for himself?
So that’s exactly what he did. He found a truly amazing business called Sharkshield…
And stayed in his lane.
That’s one of my biggest recommendations in dealmaking — buy a business in a sector that you know, understand and can add massive value to.
Sharkshield is an MSD business… with a twist.
It manufactures a shark deterrent device. If you were to come into contact with a shark, it would emit high frequency radio waves to repel it.
The product presented a massive opportunity in the surfing market…
Which just so happened to be Lindsay’s biggest passion.
You see, he lived near Perth, Australia in Freemantle, a surfing haven. This was the absolute dream deal for him — a bullseye on his passion lever and firmly in his area of expertise.
Plus, Sharkshield met the criteria for the third leg of the perfect deal triad: it had a distressed seller.
The business owner who founded the business had gotten some good traction and knew there was massive growth opportunity. But ultimately, he wanted to retire and hand the business to someone else.
As a sales and marketing expert, Lindsay knew he could massively scale the business.
At the time of purchase, Sharkshield was only serving the local Australian market. But the other big surfing areas of the world — especially the U.S. — were NOT yet exposed to this product.
The business was generating seven figures in revenue even though the Australian-based manufacturing process was expensive and not well optimized.
But the low margins were holding the business back.
On the other hand, all of Mobilarm’s products were manufactured offshore in Asia where the quality is still strong but the cost labor is 80% cheaper… and the cost of raw materials is up to 40% cheaper.
Lindsay knew he could park the manufacturing in Asia and rapidly increase margins.
With profits around the $100K per year mark, he would be paying only around $300K to acquire the business.
The issue was that the balance sheet wasn’t strong. There weren’t enough assets to raise a closing payment.
Lindsay’s plan was to secure a cash flow loan, typically 2X–3X profit to be paid back (with interest) over five years.
But because Lindsay had plans to quickly increase the profits, the business would require that capital to scale.
So the only realistic financing option was to buy the business with 100% seller financing.
This requires having a solid relationship with the seller. So Lindsay built a friendship and cultivated the KLT factor. In doing so, he figured out exactly what the seller REALLY wanted…
A safe, trusted pair of hands.
Someone who knew and was passionate about the industry…
Someone who had the skills in sales and marketing to grow it…
And someone who had the professional network to add value to the business…
The seller agreed to Lindsay’s 100% seller financing deal structure. He wanted the business to go global, be more profitable and become a solid player in the marine safety market. He didn’t want to do it himself but knew Lindsay had the right chops.
The concession Lindsay made was to include an earn-out so that when the opportunity blew up, the seller would benefit from the growth.
Financing was raised to scale the business, and the rest is history. Today, Sharkshield is highly successful and a dominant player in the U.S. market.
What are the lessons here?
If you only do these two things as a dealmaker you will be successful.
I’ll highlight more impressive student “deals from the vault” in future Confessions.
Until then, bye for now.