Art Hamel - Buy a Multi Million Dollar Business

[Forza]

Has anyone here had any experience using Art Hamel's system? He teaches how to buy multi million dollar businesses with investor money.

At least one thing sounds fishy. Why would an investor give you 50% of the stock just for finding a profitable company, researching it, writing a business plan, and signing a purchase contract? He's saying you don't need any business experience or money.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Kung Fu Steve]

You may be able to work (ie scam) your way in to it. But without any business knowledge or experience you could be finding yourself drowning in a pool of debt bigger than you could ever imagine.

No intelligent business owner will give up a percentage of a business for just finding the deal for them. I'm sure they would pay a finder's fee but at that point why not just be a business broker?

Forza, I hate to call you out in public, but it sounds like you are looking for "get rich easy" programs. If you pay attention to the 'fastlane principals' here, you will realize that the people who buy these programs aren't the ones making money, it is the people who are selling them.

Rich dad once sell "sell tickets to the game, don't buy them"

 

[Forza]

I'm not looking for 'get rich easy', I just happened to come across something that maybe a 'get rich easy' programme.

 

[Kung Fu Steve]

Am I too intrusive if I ask you if you have a plan yet?

I don't ask to be a dick, I ask because it seems like you've posted quite a bit of stuff. Always asking great questions, but moving on to the next thing. I have a similar mindset so I am not preaching. When I first found this forum I explored every facet of investing I could. I learned a LOT, I'm excited about the knowledge I have, but I could have spent a lot more time making money with what I really wanted to do, but was just scared to do it.

I had to be told by a wise old man who has interesting tastes in sleep wear on vacation "If you have a message to get out there, you need to find a way to get it out there."

That put me on the right track. Let's get you there huh? (if that is indeed where you want to be)

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Forza]

I did have a product that I thought worked, but I don't know if it truly works. It may not, after some testing.

So if I don't have that, I don't have a product to sell. I don't know what else to do except some how develop/find the solution to something else, ask questions, and read.

 

[Forza]

Art Hamel chose to attack me in response to my email question the other day, so I guess he's either gone a bit demented in his old age or he has a guilty conscience. The man selling his product, Michael Senoff, seems perfectly fine with his response when he (Art) wrote,
"This will only make sense if you were able to pass your third grade arithmetic finals. You sound like a 'REAL SMART a$$".
"you should not worry about about this because you will never work with me. I do not work with ASSHOLES"
*"Please do not contact me again. I will never again work with anyone from your country. ( since these are your friends ) ( I am sure these friends of yours are none too bright siunce they work with someone like you )"

*I nor anyone I know has ever had any connection with him.

My email to Michael who forwarded it to Art:

Please forward this to Art. I have also sent him my original question throughaskarthamel.com, but he hasn't replied yet.

Art matches investors to buyers and gets 50% ownership for the buyer, correct? If I asked for 50% ownership just for getting a good business under contract, I'd be looked at like I'm crazy. Everyone around me is skeptical of this. I just want to know what makes this ownership percentage sound fair to investors? No one I know thinks finding a money making biz owner willing to sell, writing a business plan, and getting it under contract, is deserving enough for 50% ownership of a multi million dollar business.

Thanks very much

 

[Kung Fu Steve]

Wow. Obviously I don't need to say don't invest in his course! :smx4:

What interests you? Business? Investing? Product creation?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Forza]

Maybe I really am a smart a$$ a**hole? That's awesome :groove:

I seem to be interested to creating ways of doing things, like systems for franchises. I like certain things that are adaptable to change, like Google search results. Having something like that in a different business would be one of the coolest things. I also like polls, which is kind of related. It would be awesome to be able to ask my company for their opinion on decisions, but it takes a fair number of people to get a good result.

I've also had some interest in sales psychology, not that I would make a decent salesperson. I just think it's a very useful ability. Success ultimately coming down to one's beliefs (or lack of bad ones). I probably wouldn't actually like to be a salesperson for long though. Just get good at it and that would be it.

I like Warren Buffett's concept of durable competitive advantage. Not too many businesses appear to have this.

I have the opportunity to be involved in SFH developments, but I like steady cash flow with less risk and pressure. And I'm not into building real estate. Plus my dad is difficult to work with.

 

[eloise]

omgosh, do not let this affect your forward focus. It is so hard to put this kind of stuff behind us, but you need to. Pick yourself up and dust yourself off and keep on moving forward. Walk away, and let people like this receive their own judgement. When people act rude and crude and are selfish and greedy, eventually they will fall flat on their faces all by themselves. So forget about this episode, you know who you are and you know where you are headed so please don't let it affect you negatively.

 

[Kung Fu Steve]

Maybe I really am a smart a$$ a**hole? That's awesome :groove:

I seem to be interested to creating ways of doing things, like systems for franchises. I like certain things that are adaptable to change, like Google search results. Having something like that in a different business would be one of the coolest things. I also like polls, which is kind of related. It would be awesome to be able to ask my company for their opinion on decisions, but it takes a fair number of people to get a good result.

I've also had some interest in sales psychology, not that I would make a decent salesperson. I just think it's a very useful ability. Success ultimately coming down to one's beliefs (or lack of bad ones). I probably wouldn't actually like to be a salesperson for long though. Just get good at it and that would be it.

I like Warren Buffett's concept of durable competitive advantage. Not too many businesses appear to have this.

I have the opportunity to be involved in SFH developments, but I like steady cash flow with less risk and pressure. And I'm not into building real estate. Plus my dad is difficult to work with.

Cool, well finding a route is pretty simple then. Find a problem within those markets and solve it with a solution! Don't chase money, chase changing the world! The money follows if you solve problems.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[eloise]

Boy did I need to hear that today!! Don't chase money, chase changing the world!! You are so right and we all should take a step back and look at our motivations.

 

[unpinkpanther]

@Forza:

Just curious: how far have you gone in actually following the Art Hamel plan?

Maybe I could be of help. Feel free to contact me.


Edited: Forza can PM you if he want's details. Please read the forum policies and post an introduction. Welcome to the Fastlane.

Sparlin (Mod.)

 

[MJ DeMarco]

Wow, what tasty nuggets have I missed in here?

Please do not contact me again. I will never again work with anyone from your country.

For someone to totally "off" an entire country because of your contact is frankly, shocking. Class and character cannot be bought and it doesn't care how many zeroes your bank account shows.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[mkzhang]

Sounds like a scam for the un educated seller and buyers.

Its basically just private equity firms, I have never heard of PE giving 50% equity stake to a finder. Unless the investor is an idiot.

Investment banks does it, and the guy who usually matches both party only end up with about 2% of the total deal value, in cash and not equity.

 

[J-Rams]

Only one making money is at the top.

 

[ywq44]

Forza,

I have to agree with you. :iagree: I contacted Art to get his help in raising capital like he claims he can do. Day 1 he was already counting all the money he was going to make from his fee. Day 2, I asked him a few questions to clarify what he'd written. He unceremoniously told me to take a hike. I think the guy is all talk and no action. Maybe he's too old to do anything anymore and doesn't want to admit it.

If he had done everything he claims he did, he'd be known as a major industrialist and would be on the Forbes list. He's not. I think his course is a waste of money.

Does anyone have any advice on how and where to find investors to help me buy a company?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Forza]

I don't know about finding investors, except hang out where they hang out, get all chummy, and have the expertise they want, but here is some information from Keith Cunningham on how to buy a business:

http://www.thefastlanetomillions.com/business-building-traditional-b-m/25361-how-buy-business.html

 

[365]

Well, this system works although 50% of equity seems like far too much. And to pull off your personal LBO (leveraged buyout) with no business or finance experience and no track record will be very, very tough.

Basically it works like this: you find a company owner willing to sell. You lock the company up through a binding letter of intent (to buy the company). For a period of several months you will be the only person the seller can sell to. Now you hustle and bustle to get the financing. The main problem is you need an equity partner to put in some 70-100% of the equity value (depending on whether the owner will keep equity in the NewCo). If its a good deal you will find plenty of PE firms who would like to be part of the deal (they are all sitting on enormous cash and good deals are scarce). However, they want to do it on their terms.

To put in all the equity (and thus take the risk) they are going to look for a majority of the equity (and rightfully so). Since you have the company locked up you have some leverage and may end up with a good share of equity in the newco. But it might be more like 10% or 20% rather than 50%.
However, if you buy a $5MM company and end up with 15% equity and a board seat that looks like a pretty good deal to me. Provided that the Co' doesnt crash and burn, the PE firm will most likely sell it within 4-6 years. You could end up with 750k, experience and a good starting point for your next deal. But that's all theory.. Successfully pulling off that very first LBO will probably the toughest barrier of entry into that 'world'.

This scenario changes dramatically as soon as you have substantial equity yourself (or control such equity as 'other people's money').

 

[unpinkpanther]

@365

Thank you.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[valuegiver]

Too bad, I have his products. Now I just have to throw them away. Luckily I have not invested any of my time into it.

 

[unpinkpanther]

@valuegiver:

Don't throw them away; just change your attitude. You can make some of the info work.

 

[ocean]

Well, this system works although 50% of equity seems like far too much. And to pull off your personal LBO (leveraged buyout) with no business or finance experience and no track record will be very, very tough.

Basically it works like this: you find a company owner willing to sell. You lock the company up through a binding letter of intent (to buy the company). For a period of several months you will be the only person the seller can sell to. Now you hustle and bustle to get the financing. The main problem is you need an equity partner to put in some 70-100% of the equity value (depending on whether the owner will keep equity in the NewCo). If its a good deal you will find plenty of PE firms who would like to be part of the deal (they are all sitting on enormous cash and good deals are scarce). However, they want to do it on their terms.

To put in all the equity (and thus take the risk) they are going to look for a majority of the equity (and rightfully so). Since you have the company locked up you have some leverage and may end up with a good share of equity in the newco. But it might be more like 10% or 20% rather than 50%.
However, if you buy a $5MM company and end up with 15% equity and a board seat that looks like a pretty good deal to me. Provided that the Co' doesnt crash and burn, the PE firm will most likely sell it within 4-6 years. You could end up with 750k, experience and a good starting point for your next deal. But that's all theory.. Successfully pulling off that very first LBO will probably the toughest barrier of entry into that 'world'.

This scenario changes dramatically as soon as you have substantial equity yourself (or control such equity as 'other people's money').

Couple of questions because this is very interesting to me:

When you say equity, I'm understanding it as you are also including control with it. Is it possible in this type of arrangement for the investor to have a majority of the equity, but not the control, e.g. as a limited partner or preferred stock? And what about buy-out arrangements, where as you make the business perform, you are allowed to buy out some or all of the investor's shares? I suppose it's whatever you and your investor/partner agree to, yea?


And about your last point, having substantial equity yourself... what about other things? Like expertise, influence, or capability? It's not just money that you have to bring to the table, right?

Say for example you have something unique or valuable (like a software you wrote or have rights to) that will benefit the business greatly and you offer that as part of your contribution?

Another scenario:

What if you form a team that specifically does this? You and your team have the specialties, influence, and capabilities to go in and transform or boost a business and you work with investors to buy them, creating a portfolio of businesses. This obviously requires experience and reputation, which you could get with smaller businesses first. What do you all think?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[365]

When you say equity, I'm understanding it as you are also including control with it. Is it possible in this type of arrangement for the investor to have a majority of the equity, but not the control, e.g. as a limited partner or preferred stock? And what about buy-out arrangements, where as you make the business perform, you are allowed to buy out some or all of the investor's shares? I suppose it's whatever you and your investor/partner agree to, yea?

I would say that vastly depends on the type of deals and investors. If you buy a 5m company with some private investors' backing you are probably going to have a simple capital structure. If you shell out a billion to take a public company private and apply massive leverage you will end up with several layers of debt, perhaps mezzanine debt, warrants or preferred shares etc.

Generally speaking you have limited partners (your investors) and general partners. The general partners manage the partnership (the PE fund), they usually get a management fee, a performance fee and of course they will often put in a considerable amount of money themselves.
File:Leveraged Buyout Diagram.png - Wikipedia, the free encyclopedia
Filerivate Equity Fund Diagram.png - Wikipedia, the free encyclopedia

Now as soon as you deviate from this model it depends on you and your partners as to how the transaction and new ownership structure will be shaped.
I highly doubt that your equity investors will be happy with non-voting shares and an option for you to buy out their shares. Think about it: they take equity risk and thus they want to participate in the upside. Contrary to the lenders their money will go down the drain if its a bad investment.

And about your last point, having substantial equity yourself... what about other things? Like expertise, influence, or capability? It's not just money that you have to bring to the table, right?

Say for example you have something unique or valuable (like a software you wrote or have rights to) that will benefit the business greatly and you offer that as part of your contribution?

Sure. If you can demonstrate that you will enhance a target company's value in a sustainable way by x% through your network, your restructuring skills, proprietary technology that is of value to the investors.

I would also like to note that you don't have to have substantial equity to make a deal. In fact, the PE firms try to use as much other people's money as possible (limited partners and debt). Just don't expect to end up with a controlling equity interest if you dont put the money down. In the end it doesnt matter because you manage the fund, you get the board seats etc. You have control over the company and you and your investors combined own the equity.

What if you form a team that specifically does this? You and your team have the specialties, influence, and capabilities to go in and transform or boost a business and you work with investors to buy them, creating a portfolio of businesses. This obviously requires experience and reputation, which you could get with smaller businesses first. What do you all think?

I would say that's pretty much the definition of operations-oriented private equity firms.

Check out firms/investors like: Platinum Equity (in LA), Wilbur Ross (as an example of a distressed investor), or even the big ones like Bain Capital, HIG. Just search for Private Equity firms with an operational focus.

I would also recommend to read up on basically all the large PE houses (KKR, Blackstone, Permira, Carlyle, Apollo). Just be aware that a lot of what they do - and thus their returns - is based on financial engineering (read: leverage).

In that regard, I recommend reading Buffett:
“Leverage,†he said, “is the only way a smart guy can go broke … You do smart things, you eventually get very rich. If you do smart things and use leverage and you do one wrong thing along the way, it could wipe you out, because anything times zero is zero. But it’s reinforcing when the people around you are doing it successfully, you’re doing it successfully, and it’s a lot like Cinderella at the ball. The guys look better all the time, the music sounds better, it’s more and more fun, you think, ‘Why the hell should I leave at a quarter to 12? I’ll leave at two minutes to 12.’ But the trouble is, there are no clocks on the wall. And everybody thinks they’re going to leave at two minutes to 12.â€


That being said there are plenty of ways private equity/active ownership can contribute value.

 

[valuegiver]

I got it for free. So I don't mind throwing it off. Besides, from the thread.. it looks like his shit is a scam. There's this thing called opportunity cost. *wink*

@valuegiver:

Don't throw them away; just change your attitude. You can make some of the info work.

 

[investor]

I got it for free. So I don't mind throwing it off. Besides, from the thread.. it looks like his shit is a scam. There's this thing called opportunity cost. *wink*

i realise this is a pretty old thread... anyway my 2c on Art Hamel..

I have had a fair bit of experience working with Art Hamel and I can say that the information is genuine and does provide a solid framework for buying a business. However, I found the information light when it came to actually getting the business funded by investors. And considering that without funding you can't put a deal together, this is in my opinion its major flaw.

But the concept of buying a business seems like a sound idea provided you can get it funded. If anyone has been able to use his course or someone elses and successfully put a deal together, would love to hear about it or feel free to pm me!!

Also i will agree with others comments that Hamel was difficult to work with (massive understatement) and his offer to assist with funding went nowhere - although his consulting fee was still paid........

cheers

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Rabby]

Sorry for resurrecting this, but I had to comment. Getting investor financing for acquisitions is definitely real (perhaps that is obvious). Those investors ceding control and some amount of equity to the manager is also real, because the investors want their money working. They just have to trust the manager with millions of dollars, and have enough confidence in his/her ability and expertise to see the deal as a net gain. When you understand what people want, it's not as hard to understand why they would structure a deal this way.

What does not seem real, or at least not usual, is starting by acquiring mega-million businesses when you're unproven. If you're 20-something with little management experience and no M&A experience, what's wrong with starting with a smaller business? In that scenario, would you want responsibility for 100 million of someone else's money, even if they did put it in your care?