In this video, Carl Allen explains how investors can maximize returns by performing bolt-on acquisitions alongside their initial business deal. Building on the previous discussion of forecasting returns for a standalone investment, Carl demonstrates that adding complementary businesses to the primary deal can increase cash-on-cash returns, as seen in a meat business example with potential 14x returns and a 69% CAGR.

Bolt-on acquisitions involve acquiring businesses that offer complementary products or services, allowing for cross-selling opportunities. Carl highlights two key benefits: cross-selling existing products to new customers and extracting financial synergies by eliminating duplicate costs, which results in higher profitability and valuation.

Using an example of combining a bottle shop with a meat business, Carl forecasts increased revenue and significant cost savings through cross-selling and cost reductions. He demonstrates that these synergies can elevate profit margins to over 45%, positioning the business as highly attractive for investors and yielding greater overall returns.

Carl also emphasizes the importance of continued growth, setting a 20% annual growth rate for the combined business. This growth compounds significantly, boosting the revenue forecast from $9.9 million to $16.9 million by 2028. As a result, the valuation of the combined entity rises, providing a lucrative return for investors.

Finally, Carl discusses the projected financials, noting that the investor can achieve a remarkable 30x cash-on-cash return and a 97% IRR over five years. He encourages viewers to use his model to test these strategies for their own deals, with the added benefits of investor funding support.

Full Transcript:

Guys, Carl Allen back with you for video number two. Just moving my very handsome British face out of the way here. Just just teasing. Still got the Invisalign in, so apologies for the lisping. But, in the first video, we walked through the forecast model just for one standalone deal, and we forecasted, almost fourteen x cash on cash returns for the investor in this deal and, almost a sixty nine percent compounded annual growth rate in that investment. So absolutely killer, returns for an investor.

But you can make those returns actually higher if you want by doing bolt on acquisitions. Right? So if you’re a real deal maker, you’re not gonna stop at just the first deal. You’re gonna do deal origination on market, off market.

You’re gonna get tons of deal flow. You’re gonna buy the best business first, and then you can always bolt other companies onto it. And you can use the cash flow that the business, one, generates to kind of fund that acquisition. So let’s assume that we, so this is like a big beef farm store.

There’s a lot of beef processing, sells a lot of beef. Great business, getting nearly four million dollars right now. We we put a model in to scale that up to about ten million dollars in revenues within five years. Very easy to do that, if you’re from that space.

Again, always stay in your lane, guys, by businesses in areas that you know or partner with people. Otherwise, you’re not gonna be able to prove how you can generate that explosive growth. So let’s say we we do the deal, and in twenty twenty four, we we execute on the original growth. So twenty percent growth, some margin improvements.

So we have a business doing nearly four point eight million revenue, and about one point seven million dollars, excuse me, in EBITDA. So great business. But then you might wanna bolt something on as well that’s complimentary. So when you’re doing a bolt on acquisition, you’ve always gotta look for two things.

Number one, does it have a product or a service that I can sell to my current customers and vice versa? Does it have a customer that I can sell my current product or service from business one into that? That’s called cross selling. I have a video on that on YouTube that you can watch in a bit more detail.

Then number two, we’re looking for financial synergies. Right? So we’re looking for bringing to two businesses together, and they’ve been able to take out a lot of kind of duplicate costs. Both of those two things, the cross selling and the extracting the cost synergies, that means more money drops down into the profitability, more profit, bigger multiple, bigger valuation, bigger exit, bigger returns for investors on this deal.

So this is really, really powerful. But let me walk you through how it works. So let’s say we went and found a generic a bottle shop, right, that’s close by, and we can take that bottle shop, and we can plug it in the existing facility. Right?

So we’re gonna save on rent and utilities and property tax and maintenance and like, all that crazy stuff.

And there’s gonna be a lot of cross selling opportunities. People are gonna come in. They’re gonna spend five hundred bucks on meat to smoke, and they’re gonna say, well, wow. Let’s buy a hundred bucks of wine or cheese or nuts or or whatever we want to kind of enjoy with with our meal.

So this is a great kind of bolt on acquisition. So what we can then do is we can forecast again everything in the blue cell. You gotta populate. That’s the variable.

Everything else calculates for you. Don’t touch your cell. If it’s not blue, please, you will break the model.

So let’s say with the the meat shop and the bottle shop, we could cross sell twenty percent. So over a course of a year, twenty percent of our meat customers will buy alcohol and stuff, and twenty percent of the alcohol people will come to buy their wine or whatever, and they’re gonna buy meat whilst they’re in the facility. So that’s cross selling. So the cross selling at twenty percent gives us about a one point three, one point four million dollars of additional revenues.

Let’s keep the cost of sales and the margins the same for now. But then we’re also gonna have twenty percent at least in cost synergies, probably more like forty percent, but let’s keep it at twenty percent just to be conservative. So as we bring the bottle shop into the meat shop, we’re gonna save on all these things. Let’s say we save twenty percent of our total, our total costs.

Right? So we’re gonna save twenty percent on our cost of sales. So that’ll generate an extra six hundred and seventeen thousand dollars in cash flow. Then we’re gonna save twenty percent of our SG and A.

So twenty percent of the existing business that we own, the new business that we bought, plus the cross selling, twenty percent of all that saving is gonna be four hundred and ninety four thousand. So that’s gonna make an extra one point one million dollars of cash flow of profit despite combining these two businesses together and doing that integration.

So then at the end of twenty twenty four, we’re gonna have about eight point one million of revenue. We have the four point seven eight from our first business, two million from the bottle shop, plus the one point three five from the cross selling. And then we’re gonna have about three point seven million dollars of EBITDA because we’re gonna have our existing EBITDA plus the EBITDA from the bottle shop that we bought, plus the cross selling EBITDA, plus the EBITDA from the cost savings of bringing the two pairs together. So the model adds all those up.

So we now got a business doing eight point one million and making three point seven almost of EBITDA. So what’s great about cross selling and what’s great about doing bolt ons and and taking all the cheaper costs out is your profit margins go a lot higher. So we have a business already doing thirty five percent margin. That was from the original forecast.

We bought a business doing twenty five percent margins.

By combining everything together and doing what I’ve just explained, we’re now cranking best in class margins for this type of business over forty five percent profit margin. So that’s gonna make it very, very attractive for an investor to get involved in your deal. And then all we do, exactly the same as in the first video, is we just continue to grow at twenty percent. Right?

So we’re growing at twenty percent every year with all of our marketing and all of our new things that we’re gonna be doing. Again, you’ve gotta justify what they are. You’ll know what they are based on your deal and based on your skill set and your experiences in that industry. But if we take the eight point one and we compound that growth twenty percent per year, by twenty twenty eight, we’re not at nine point nine million anymore.

We’re at sixteen point nine million because that bolt on acquisition has given us a big boost. It’s allowed us to put the active burns on. And let’s, let’s keep the gross margin, at the same. So we’re at about seventy percent.

Let’s just flow that through. You might get an extra point a year if you want by further economies of scale, but then the, the adjusted EBITDA calculates everything itself. And then we get those, we we get those stronger, margins because, again, our SG and A, our overhead’s gonna come down overall as a cost of, as a cost of fulfillment.

So then what we’re doing is evaluating, the second company that that deal’s gonna cost us.

I won’t go through what I did on the last video. Go watch it if you didn’t see it. So the video calculates this business be worth about one point two seven five. The model factors this in to the entire, roll up, and then it calculates then the returns. So, again, if I’m committed your investor, I’m buying fifteen percent of this deal.

I’m getting six point eight million dollars, of EBITDA at the end of the term. That’s gonna be worth at least a ten x multiple. Again, bigger profit, bigger multiple. We were at eight times three point four. For the first example, we’re at ten times six point eight in the second example. So this business was sixty eight mil. Add the real estate again, take off all the debt that we’re gonna be taking on as part of this acquisition.

So we’ve now got a business. The equity’s debt free cash free worth about sixty one million. I earn fifty percent of that, so I’m gonna get nine point two million and change back. So I’m putting two hundred and forty two thousand dollars in to partner view on this deal, and then I’m getting nine point two million dollars back.

Thank you very much. Like, why on earth would I not do this deal? I’m making thirty point two times my money, cash on cash, and I’m making I’m doubling my money every year. I’m making a ninety seven percent internal rate of return compounded annual growth rate over five years.

I’ll leave my money in my private bank. I’m getting one percent. I invest it in your deal. You do a roll up.

I’m I’m doubling my money every year. I’m getting thirty point two times my money over a five year period. An absolutely amazing deal. And, again, this is a real deal.

This is an exact deal. We haven’t found the bottle shop yet to plug in, but the meat shop, it’s under LOI. We’ve got all the financing kind of laid out for this. This is an absolutely phenomenal deal.

So hope you enjoyed that guys. Don’t forget to do three things for me. Number one, hit like number two, hit subscribe so that you can get all my videos sent to you in real time. As I upload them.

I’m gonna be going crazy with content over the next few months. I wanna make sure that you see it all. And then don’t forget as well to click the link underneath this video so that you can download this model, and then you can plug your own numbers in it, playing with the blue cells, and effectively get, the returns to your investors so that we’ll fund you deals. Again, hope you enjoyed this.

See you on the next video. Until then, bye for now.