Sequoya Borgman: 11:10
I like the biographies of kind of some of the best, business minds out there. I’m sure I’ve read most of them. I was just talking about Titan, last night. That’s, that’s a great one on, on Rockefeller, House of Morgan. I mean, those types of just classic business things, I can, I can read, read those. I mean, any of the, the Shoe Dog, you name it. I’m sure most of the readers of the listeners have listened to those types of books. I read the dryer ones too. The, the ones that you’re trying to get more information out. But I really enjoy those life stories and how people did really extraordinary things.
Dr. Jeremy Weisz: 11:49
House of Morgan, Titan, Shoe Dog. Any others that are your favorites? I just listened to the Ray Kroc one recently that was really interesting too.
Sequoya Borgman: 11:58
Yeah, that one’s great. he, he was definitely an interesting individual, the, the Howard Schultz one is, is great, I mean, the Elon Musk book is, is pretty interesting. There’s a lot of them out there. You get something out of each one of them.
Dr. Jeremy Weisz: 12:18
Yeah. Grinding it out. It’s just, it’s fascinating, right? It’s, it’s never, up into the right situation. Like people think there’s a lot of stuff that goes on in between, you know, with the inception of Borgman Capital. You know, at one point you take the leap. Right? And you were pretty, I thought calculated about the leap. You’re like, okay, I’m not going to leave. You can correct me if I’m wrong on this until I have a I’m close to getting a deal or I had an LOI signed, but talk about what happened with that first one, right? Because stuff doesn’t happen the way we think.
Sequoya Borgman: 12:59
Yeah, I’m, I’m at the end of the day, I’m still an accountant and I’m pretty conservative, my investment style is very reserved, and so before I took the leap, I mean, I did all the legal and put together the, all, everything I needed to do to, to launch the firm probably two years before I actually launched the firm. And one thing that I had seen just talking to other private equity firms and individuals I knew in the industry is you really have to have a deal, either you raise a fund first or you find a deal. And I wanted to find a deal before I, I left kind of a nice, steady, cushy career, and I was able to find a company here locally that wanted to sell. I got it under LOI and then I stepped away from public accounting to launch the firm officially. And, and it takes about 90 days from getting a company under LOI to closing. And, I felt great that whole time.
And then about a week before closing on that first deal, the owner just decided he didn’t, he didn’t want to sell. He, he talked to his son. His son said he’d rather just continue to run the business. And he backed out of the transaction. And, as you can imagine, that was a gut punch after after going through all that and, and taking the, the leap to find out that, what, what you were expecting to happen did not happen. It’s just, it was extremely difficult and disappointing, but there wasn’t, there wasn’t anything I could do. So I just had to move on, I had to go home and tell my wife that we weren’t going to make any, any money for, for much longer than I had originally expected. That was a fun conversation and, and fortunately, I mean, I, I kept at it. I reached out to every contact I had. I found another because.
Dr. Jeremy Weisz: 14:51
Because that takes time. I mean, building trust with someone saying, yes, they’re being the right timing takes time. So you had gotten to that point and it’s like a tough, tough conversation, both on the personal front and then with the person like, yeah, we’re not going to do this anymore.
Sequoya Borgman: 15:07
Yeah.
Dr. Jeremy Weisz: 15:08
So what was the, what was the actual first deal then like, okay, that doesn’t happen. What was the first deal then you, what was the timing like of the next one?
Sequoya Borgman: 15:17
I think about maybe 3 or 4 months later, I got introduced to a deal through a commercial banker friend. I had that, that I was able to get that one under LOI and then close that about three months later. So that was probably nine months.
Dr. Jeremy Weisz: 15:36
Nine months. Okay.
Sequoya Borgman: 15:37
Yeah. So not nine months after I left. So, but yeah, that turned out to be a home run investment and great, great first investment, probably better than that first deal that fell apart.
Dr. Jeremy Weisz: 15:47
So sometimes for a reason, I guess. Right.
Sequoya Borgman: 15:49
Yeah. It was a larger transaction, and it really set us up for success having that deal. So it all worked out for the best. But that first nine months, because a lot of people that I know start firms or, or go out on their own and they’re not able to find something for a year or two years.
And, and you end up running out of money, I mean, to live on and, and everything. And then you go back and get, go back to your career. And I was fortunate that, yeah, not nine months or so in, I was able to get that first transaction off the ground.
Dr. Jeremy Weisz: 16:24
What type of business was the first one that fell through? And the one type of business was the one that actually went through.
Sequoya Borgman: 16:31
They actually were both in the same industry. They’re both material handling, businesses and, the, the one was, was the closed was a manufacturer and a distributor. The, the original one was just a manufacturer, but, yeah, they’re both in the same industry and, we held that business for five years and, and sold it to a much larger private equity firm and did, did really, really well on that transaction.
Dr. Jeremy Weisz: 17:01
Does the owner in that situation stay on or do they do you have to hire new leadership in that first one.
Sequoya Borgman: 17:10
That the owner transitioned? He stayed on for about six months. He was in his 70s already. And the whole plan was for him to transition out. And then we, we hired a new president that came in, they had some overlap. And then he stepped out. I still talk to the owner today, almost ten years later, a great guy, probably the best sales person ever. And he was very difficult to replace. And all these investments, it’s really about the people running the businesses and the management teams and these owners, these entrepreneurs, they’re, they’re a rare breed. And, he sold so much business that we had to hire three salespeople just to replace what he was selling. It was just, he was pretty, pretty, pretty extraordinary.
Dr. Jeremy Weisz: 17:59
When you are hiring a leader for this now, are you looking internally? Are you hiring externally? What do you what does that search look like?
Sequoya Borgman: 18:08
We prefer internally to try and keep all the employees. But a lot of times these owners, if they had somebody internally that could run the business, they would have done it themselves and already promoted that person to run it. So more often than not, we’ll have to bring in kind of a professional President or CEO to run the business. And, and it’s hard. It’s hard to, to pick the right person, culturally, you want somebody that will fit with that business and somebody that can really replace that entrepreneur, that owner. And, and it’s, it’s tough, tough shoes to fill.
Dr. Jeremy Weisz: 18:40
You don’t have to give me the exact numbers. I’m just curious, you know, for the owner of that first deal, what is kind of the percentage of, okay, this is what you’re getting? I’m close because like you want them to be invested in the success of the business, right? Is there a percentage there rolling into the deal here or is it like, you know, what does that breakdown look like for the for the owner?.
Sequoya Borgman: 19:03
We’re very flexible. So we prefer for owners to roll over and, and they can participate in our upside and they keep some skin in the game and maybe they stay on the board. That’s probably our preferred transaction. But we don’t always. It’s not required that first owner, he he took all his chips off the table. He was ready to retire and diversify his investments.
I think he regretted doing that. If he had rolled over some.
Dr. Jeremy Weisz: 19:27
You’re like, just wait five years, right?
Sequoya Borgman: 19:28
Yeah, he would have done a lot better than he did in the first transaction. But, it’s really what, what that owner, it’s all about trust and, and the owners, I mean, there a lot of times there, it’s hard for them to see that somebody else can, can run their company. I mean, everybody, if you’ve ever been in a job and you, nobody ever feels like their replacement can do as good a job as them. So there’s always that kind of hesitancy and fear. but the owners that trust us and roll over equity and stay involved with the business, those transactions tend to do much, much better.
Dr. Jeremy Weisz: 20:05
Yeah. So you kind of discuss the goals of the person. In that case. It’s like, listen, I’m, I’m getting older, I’m ready to retire. I’m just taking the chips off the table. Sometimes they’ll stay on and take some chips and roll equity in and any combination of those, it sounds like.
Sequoya Borgman: 20:23
Yeah, yeah. I mean, we can we can do full buyouts or we can do rollovers, or sometimes there’s earnouts or seller notes, some some type something that that gives the, the seller kind of aligns their interests with our interest.
Dr. Jeremy Weisz: 20:37
You know, it’s got to be good ego boost if you get replaced by three salespeople, like you were doing so much work that we had to replace you like four different people, like a CEO and three salespeople. I’m curious, what are some you’ve seen a lot of deals, right? I mean, we’re talking you doing over 20 deals, you’ve probably seen thousands and thousands of deals that you’ve turned down and or didn’t happen. I’m curious some of the reasons deals have fallen through. Like you just mentioned one, the first one, you’re like, oh, they sold to a family member. And that wasn’t even kind of maybe front and center in the conversation. What are some other reasons or things that have happened that caused deals to fall through? And I’m talking about deals that you’re like, this is a deal we want to make happen.
Sequoya Borgman: 21:25
Yeah, it’s actually very rare that once we get something and we look at about 1500 companies a year. So I mean, that’s, that’s a lot of companies to, to buy two, three, four, four companies. We’re pretty selective. and really the, the deals that don’t close that we’ve gone after is because their numbers kind of fall apart during that, that process or something comes up in diligence that really was, it’s just too, too hairy for us to, to get comfortable with like what.
Dr. Jeremy Weisz: 21:56
What would be something that comes up in diligence that you’re like, yeah, we can’t move forward with this.
Sequoya Borgman: 22:01
Some, some environmental, liability or something that we just weren’t aware of going in or something that we can’t structure around. A lot of times we can restructure a transaction to get comfortable with some, some types of risk or put that risk on the seller. So those transactions actually still get done. It’s the ones where you expect some numbers, once you again do your diligence. You find out that their numbers are actually lower than that. And, that impacts your financing and everything. The banks don’t want to finance something on a lower number, and sometimes we can re-negotiate that transaction to a kind of a lower valuation, but that doesn’t always work.
I mean, sometimes a seller just wants to hold on longer until a company comes back. And, and you can’t really fault them for that. And that’s probably the, the number one reason that transactions don’t close, especially in the economy in the last couple of years, with a lot of uncertainty out there and something new popping up every week or two. it does put a lot of uncertainty into kind of the cash flow of these businesses and, and what the long longer term prospects are. And those transactions tend to be a little bit harder to close.
Dr. Jeremy Weisz: 23:13
Yeah. So although maybe like, you know what, let’s, let’s run this for a couple more years and get it to where it’s kind of the deal that we wanted.
Sequoya Borgman: 23:22
Yeah. Once. Once a seller gets a number in their head, it’s hard to sell for a lower amount. I can understand we sell companies as well. So I, I kind of, I mean, I’m a little bit less emotional about it. And you understand when, when value values go up and values go down and, and you can’t really time it, but it’s very hard. I mean, that’s probably the most emotional transaction that that entrepreneur’s life is that sale. And if they think they’re getting X and the real values, why is it hard for them to bridge that gap.
Dr. Jeremy Weisz: 23:55
Yeah. They’re thinking this is my life’s work and you want to give me less than what I expect. Right. And there is a lot of emotion there. What about, you know, those numbers? There’s external factors, environmental things. What about from a personality culture perspective, are things that you’ve discovered in that realm from like, oh, we started talking to the owner or some of the staff. And it wasn’t from a culture perspective, wasn’t what you expected?
Sequoya Borgman: 24:22
Yeah. We usually don’t get something under LOI until we really trust that owner and understand. I mean, that’s the number one thing for me personally is sitting across the table with that owner, building relationships with them, making sure that their vision for the business aligns with what we want to do with the business, make sure that they care about their employees, care about their community, care about the business. That’s the real key to us.
If it’s an owner that really just cares about kind of getting, getting the most money for the business and, and doesn’t really care what happens when we buy it because we want.
We want that business to continue to be successful and have employees that feel like they’re valued. And, if we sit across from somebody and there’s not that trust level there or that alignment, we just don’t move forward. So those, those deals, we don’t even get under LOI, the ones under LOI, we’re already past that stage, the culture. We’ve already kind of determined that it’s a good culture. And, and we, we trust that owner and, and, there’s been a few times where we find out something after the transaction that we wish we’d known, up ahead of time, but that’s, that’s rare.
Dr. Jeremy Weisz: 25:35
I’m going to pull up your site for a second, because one thing I want to talk about is the criteria, right? And we’re talking a little bit about it, but right here, if you go to BorgmanCapital.com, we’re on the investment criteria. I’m wondering from the beginning, how has this changed over the years? And maybe it hasn’t, because I’m sure you’ve learned things over the past many years. How is this investment criteria changed from when you first started till till now?
Sequoya Borgman: 26:09
It really hasn’t changed that much. I mean, we probably do larger transactions. I’d say most of our transactions are probably in the 4 to $8 million EBITDA range, but we’ve done things up to $1,516 million of EBITDA, and we’ve done things as small as, say, $3 million of EBITDA. I think that’s always, always been kind of the, the focus, those, those businesses have enough infrastructure in place where you can, you can afford a really good team and, and, and it’s less competitive too, because I mean, the bigger companies, the ones over 15 million of EBITDA, those mostly go through kind of competitive investment bank processes where there’s a lot of bidders. And really it’s all about, that blind bidding process is who, who wins that transaction. So we try and stay under that kind of competitive space.
Dr. Jeremy Weisz: 27:11
I mean, another is, you know, it seems obviously you have businesses everywhere, but it seems like the focus is also Midwest.
Sequoya Borgman: 27:21
The focus has always been kind of where I’m here in the Midwest. We do have 15 people at the firm, and we’ve got five locations now around the country, but our focus is kind of the secondary markets where relationships matter, where you can still meet the the business owner, where you get introduced by your attorney or your, your some trusted advisor or you run into somebody at your kid’s school or at church that introduces you to a business owner that wants to sell those. Those are the locations and geographies that we’re really focused on. It’s finding those business owners that want to sell and they want to sell to somebody that really cares about maintaining their, their legacy, legacy and just being good stewards of their business.
Dr. Jeremy Weisz: 28:08
What about from an industry market perspective? I know early on you had several manufacturing companies. What type of businesses do you like to invest in?
Sequoya Borgman: 28:20
We tend to invest in more older industries, we’ve, we’ve done very well in the food space. We’ve acquired quite a few manufacturers. We’ve bought some distributors, a couple equipment rental businesses. It tends to be businesses that have been around 40, 50, 100 years. Have a really nice business model, great employees, a long track record of making it through cycles, just strong cash flow. We’re not doing technology or high growth, healthcare and stuff like that. There are a lot more, higher multiples and a lot more competition. So, and we’re in the Midwest, I mean, it’s kind of the breadbasket of manufacturing here in Milwaukee and that’s where we got our start. So it’s, it’s an area we like.
Dr. Jeremy Weisz: 29:13
Did Covid period help you or was there? I mean, there was a lot of turmoil in general, but I feel like there was a lot of consumption, at least manufacturing, but there was also shortages of things and transportation. How did Covid affect the businesses in your portfolio?
Sequoya Borgman: 29:32
Well, it definitely affected my stress level when, when it first happened, I thought the sky was falling and all our businesses were going to go out of business. But fortunately, everybody actually thrived, through Covid. After the first three months or so, there were a lot of challenges with supply chains and labor was probably the biggest challenge. But you, as long as you don’t put your head in the sand, you focus on business fundamentals and do what is within your control. That’s really all you can do in a situation like that. And, and all, all the business came, came through that, that situation even in better shape than, than going in. And it really set all, all our businesses and the way we look at things is really, you’ve got to plan for the unexpected and these things are going to happen.
And Covid was, was one challenge, but inflation was probably worse than Covid and, and, kind of the, the pricing with, with oil and gas right now and, and tariffs, you name it, all of that. Those challenges are just one thing after another. And you’ve just got to manage the business and manage what’s within your control and just do the right things for the companies. And that’s probably the best lesson is you can’t control a global pandemic, but you can control what’s going on with your business and the businesses we’re investing in. I mean, all these are under 100 million in revenue. They’re a very small portion of their market. So maybe the overall market is down. But if you outwork your competition, you do the right things. You can still thrive in those types of situations.
Dr. Jeremy Weisz: 31:12
I do want to talk about some. You have a very interesting portfolio. I do want to talk about some of the companies in the portfolio, but you mentioned I know before we hit record, we were talking about the deal market and what that’s like right now. Can you talk a little bit about that?
Sequoya Borgman: 31:30
Yeah. The deal market’s been slow over the last two years. Valuations are down slightly. financing is down quite a bit. And that really put a pause on transactions. A lot of bigger firms paid high multiples in 212223. And that puts a real pause on transactions. There’s still a lot of businesses out there, but I think a lot of them are either a lot hairier or there’s a reason they need to sell the better businesses. They’re just holding on to them till kind of multiples come back. So the overall deal market has been, last year was our slowest year, really in the history of the firm.
We. We closed one transaction and that transaction. We had been talking to that business owner for two years. so it wasn’t something we found last year. We have closed, while we closed one transaction a month or so ago, and we’re going to close one next week. So this, this year is picking up a little bit for us, but it’s still slow compared to what we were doing prior to, to that, where we’re closing for 4 or 5 deals a year. it’s just, but with our model, I mean, we don’t have to deploy capital and, and we’re very selective if, if you.
Dr. Jeremy Weisz: 32:41
Just keep running the business in the portfolio and managing that, I mean, probably keeps you, keeps you plenty busy, I imagine.
Sequoya Borgman: 32:48
Yeah, there’s, there’s plenty to, to, but, but as we sell companies, we sold one last year, we sold two a year before that. I mean, it’s, it’s, you have to replace them. I mean, we have a team that that they need to stay busy. So, but if nothing good and we’re still looking at 1500 transactions, it’s just we don’t see anything we like. We’re not going to buy anything we like.
And I personally invest in all these myself. So, I mean, if I don’t see it as a good investment for me personally, I’m not going to pursue anything.
Dr. Jeremy Weisz: 33:18
Talk a little about the criteria for selling. Right. I mean, you buy this, you know, certain criteria and then, you know, you’re building them up and eventually you’re going to sell them, I imagine. What’s your criteria for deciding on that?
Sequoya Borgman: 33:34
I think when, when we’re really exceeding our investment expectations, that’s the time to exit. When, when they’re, they’re really home runs or, or, better than, than you ever expected. That’s usually and we, or if there’s a lot of buyers that are approaching you for that business, you know, that it’s a really good, good time to sell. And that’s really all the ones we’ve sold have kind of been in that situation where either there’s some proactive buyer that’s reaching out to us. We sold equipment rental business to a big public rental company that reached out to us, or people reaching out to us and we’ll hire investment banker and go through a process that’s probably more likely, a process.
Dr. Jeremy Weisz: 34:23
Is there a specific metric you’re looking at? Because I mean, I could see whether it’s doing well, let’s just keep running it and, and making money off of it. Right? So is there a certain metric like we want to, once we get over whatever, five times, let’s not get too greedy, let’s just sell it and return it back to the portfolio.
Sequoya Borgman: 34:45
Yeah. I mean, my, my number one responsibility is to our investors to give them the highest return possible. And if that’s we’re in a situation where we can do that, we sell. And, and the longer you hold on to a business, the, the harder it is to maintain those high IRR. The cash on cash return may increase. But you’re really focused on the true annual IRR. And if you can make a lot of money in 3 or 4 years, your IRR is going to be a whole lot higher than if you do it in 10 or 12 years. So those are the best times to exit those transactions. We’re constantly really the, the, every time we have an internal meeting or anytime we’re thinking about one of these companies, the number one thing we think about is what’s the best interest for our investors?
Dr. Jeremy Weisz: 35:30
Have you found it? I mean, you’ve bought and sold a lot of businesses. Have you found a sweet spot of like, okay, on average, the ones we’ve sold for the most, like we’ve kept for three and a half years or something like that? What, what has been like timing wise? Have you seen a, a, not a trend, but like actually any, you know, repetition there.
Sequoya Borgman: 35:56
Yeah. I’d say there’s some tax benefits for holding businesses for five years. We set these up as qualified small businesses. Anything under 75 million. Any of those transactions.
So there is a big benefit to hold for five years. But we’ve sold it in three years. We’ve sold it for four years. Really when the returns are really much, much better than we expect. So those are the two factors. So I’d say probably five years is the target, but maybe it takes eight years or ten years to really realize that return. Most of these businesses, I mean, were built over 50, 60, 70 years. It’s, it’s, you don’t create a ton of value in one year or two years, but sometimes that happens, and some of these, they grow with kind of industry trends and, and the economy grows at 2 or 3%.
You can’t expect every business to grow at 20 or 30% each year. So those, all those factors kind of go into evaluation of, but we’re new. I mean, even at ten years, we’re still a new, new firm out there compared to people that have been investing for decades. And, and if the average holds. I know that the average hold right now is extended just given the lack of liquidity out there. But if it was five years, I think it’s now around seven years. If. And given that we’ve been around ten years, some of those businesses we only bought three years ago or four years ago or five years ago. So I asked myself that question again in another decade, and I’ll have a better, better answer. Answer on the average.
Dr. Jeremy Weisz: 37:27
And maybe the same, I don’t know who knows. Right.
Sequoya Borgman: 37:29
Yeah, it could be the same.
Dr. Jeremy Weisz: 37:32
Just break down IRR for a second internal rate of return and, and how that’s calculated just so people can understand how you think and what you’re, what you’re thinking about with that percentage.
Sequoya Borgman: 37:44
Yeah. It’s just the, the return you get no different than investing in the stock market. You buy, buy something for $100, you sell it for 120 the next year. You’ve made a 20% IRR on that, that investment. That’s how we look at these these transactions as well. I mean, if if somebody invests a couple million dollars in a deal and we sell it five years later and they get a 20 or 30% return, those are kind of the targets that we’re we’re shooting for. So it’s just just math really. And, yeah.
And in our business, I mean, no change from the 80s when the leveraged buyout game really started is a lot of that returns based on borrowing some money from a senior lender and you pay that, the company pays that down. So you buy something with 50% equity, 50% debt, and you pay that down over five years. You’ve doubled your equity value in that business. I mean, that’s a really good return alone without all the value creation that you can do and growth that can happen in that business over that period as well. So, like any leveraged kind of investment, that’s where a good portion of your return comes from.
It’s like buying stocks with a margin account. I mean, if stocks do well, you magnify that return because you borrowed that money. Unfortunately, that’s a risk in the business too. If they don’t do well, then you get those margin calls and, and it really impacts your equity value. So you’ve, you really have to be very selective on what companies we buy and make sure that they can service that debt and that they do have that strong cash flow. And that’s that we can count on that cash flow for the, the, the life cycle of our investment.
Dr. Jeremy Weisz: 39:30
I mean, it’s clear now. I mean, you have over 500 accredited investors. And so like, you find a deal, you’re like, hey, they trust you. You have an accounting background. Like this guy does his diligence and the firm does the diligence. Hey, who wants in? Right. But in the very beginning, right? You have a deal. You need capital, right? You find, whatever, $3 million EBITDA business and you’re like, okay, like I’m not funding this thing myself. So in the beginning, how did you, what was the reach out like? And how did you get people on board for some of these deals? Or did you just go to the bank?
Sequoya Borgman: 40:09
Well, the first first transaction, I think we had 26 investors in that deal. And I really asked everybody I knew, and I mean, fortunately, I’d been in the private equity and kind of deal space for a long time. I had a pretty good network, so that helped for sure. But a lot of people do want to invest in these types of businesses and, and you don’t have access to them as most individuals unless you know, somebody like me or you, you, are extremely well connected. I mean, finding these types of investments is difficult. There’s a lot of platforms like venture investing or real estate investing directly, but investing in a kind of lower middle market private equity leveraged buyouts. I mean, you can invest through funds, but a lot of those have fund minimums and stuff that may be outside the reach of most, most people. But, yeah, we’ve always had that first deal.
I did have to ask a lot of people to raise the money for that one, but then ever, ever since then, it’s kind of those 26 people talk to all their friends and then they talk to all their and all, all the family offices that invest with us. It’s just a small world. They all know each other and it’s really grown by word of mouth. It’s not like we’ve purposefully tried to get 500 LPs in our deals. It’s just they’ve one stock to another and it’s kind of grown up across the nation. And then a couple of years ago, we launched a new platform. It’s called PassTheHat.com, and it’s for credit investors and smaller institutions and family offices to get direct access to our deals. And that’s really taken off. It’s been, I mean, just managing that many investors. Yeah. So, that’s a separate, so.
Dr. Jeremy Weisz: 41:55
Someone’s interested in investing with you. Is that what this is?
Sequoya Borgman: 41:59
This is more for the retail investors that want access to these types of investments. and it helps. I mean, there’s a whole back office fund administration platform called asset class that manages all the back office part and fund administration part and, and all the credit investor checks and everything that goes with that. So it takes a lot of the heavy lifting off of us just with that many investors. And I named that when I first launched, I was talking to an investment banker friend and he was asking me, since we hadn’t raised a fund yet, he was asking how we were going to fund these transactions. And I told him we, we’d, we’d get, get some family offices and, and smaller institutions and credit investors to invest. And he’s like, what, where are you going to pass the hat? And, and he said it kind of flippantly. I don’t think he, he thought it was the best idea, but it worked out and I ended up buying the domain name, passed the hat.com just because of his comment. And, it’s really taken off.
Dr. Jeremy Weisz: 43:02
Yeah. So you could see people can kind of see what deals are on the horizon. You could even kind of search the investment type offerings, minimum investment ends and things like that.
Sequoya Borgman: 43:13
Yeah, yeah.
Dr. Jeremy Weisz: 43:14
What have you included in this site that you got feedback from? You know, they’re like, oh, you know, Sequoya, we need to it doesn’t have this.
Sequoya Borgman: 43:25
Yeah. Those those sites. I mean, we’ve improved it over the last couple of years since we launched it. I mean, it’s really based on, I don’t know if you’re, you’re a car guy, but bring, bringatrailer.com is kind of what it’s based on. And I’m not a car guy, but I’ve checked out that site and it’s kind of addicting. I like investing in businesses. I invest in a lot of businesses outside of the firm of, of outside deals we do. And I was, I said if there was a site like that that listed great businesses like what we buy that I clearly have interest in something like that and that’s how we base the site. So if you go to that auto auction site is very similar to.
Dr. Jeremy Weisz: 44:12
I’ve heard, I mean, I’ve heard people talk about it for sure. I’m not a car person, but it has come up in conversation numerous times of, you know, just being, like you said, addictive. Here it is right here, bringatrailer.com and actually very successful too.
Sequoya Borgman: 44:29
Yeah. And that’s what instead of having cars that maybe you wanted when you were a teenager and couldn’t afford at the time, this is like businesses that you’d love to invest in, but, maybe you don’t have access to and, and that’s, that’s what we list. We don’t have, we don’t have as many listings as, as, as they, they do. Like I said, we’re pretty selective on what we we list on there. But, yeah, we’ve got really nice opportunities in there.
Dr. Jeremy Weisz: 44:55
So what I’ll do is I wanted to just talk about a specific example and people can check this out. If they go to BorgmanCapital.com, you can go to, you know, the portfolio operate under the operating companies portfolio over here. There’s a number of them here. We can see Gilman Cheese Corporation, Southeastern Meats, K.G. Stevens, Technical Products, Buck Bone Organics, Continuus. Harlo. I know, I don’t know which one you want to talk about either Harlo or Gilman, which would be a fun one to talk about even from the beginning, like how you met them and, and how it all happened.
Sequoya Borgman: 45:32
Well, yes, that’s where in Wisconsin we can talk about our cheese company. There’s another private equity firm in Wisconsin that owned a cheese company when I launched. And they said, you can’t be legitimate unless you own a cheese company. So that’s not why we bought the company. It was very, very fortuitous, but. Yeah. Gilman Cheese. We bought that company about eight years ago. A really, really nice family business that was run by a husband and wife couple. They still sit on the board today. They’re still still involved with the business. and that business is just done by tremendous people.
People like cheese and, and we actually about 3 or 4 years ago, we bought their, their main competitor in the space dairy food USA that was owned by an Austrian family office and, more than doubled the size of that business, alone. And it’s really had some growth since then. So it’s just been a really, really great investment. They’ve got two nice facilities here in Wisconsin and, and, do a lot of private label, but also some branded stuff. If you ever fly on an airplane and you get a snack box, that’s, that’s, Gilman’s product and those, all, four of the major airlines carry our product.
Dr. Jeremy Weisz: 46:50
How did. I mean, what did the initial conversations look like? Because again, like they’re selling their their life’s work here. What did that look like?
Sequoya Borgman: 47:00
Yeah, they, they hired their, their accounting firm to help them sell the business, and that’s how we got introduced is through their accounting firm. We were able to build a relationship with the husband and wife, the hands very, very impressive. He, he was a West Point guy. Very ran ran the company like a military operation and, really, he bought it. It had been kind of a family dairy, cheese business that was very small. And, he bought it about 20 years before we got involved and really grew it in a nice size business, something that was very profitable and right in our wheelhouse. And, and he was looking to retire.
And, he, we hit it off. It was, like I said, to sit across the table. We actually went and went to, to dinner with him and his wife and, and, decided to move forward and, and he had other options. He was talking to other buyers and he wanted to sell somebody that really would take care of his employees. And, somebody local as well. I think those were the two factors. And he even put in, in his, in the LOI that we would not lay off any of the employees for the first two years. There were some other things that he really cared about that we would continue to fund, the charitable organizations in that town.
We still fund all the high school scholarships in that town for kids going to college. And, we really support that community. And that was one of his main factors. And I love buying companies from individuals like that, but they care more about the community and their legacy and what’s going on with that business. And we know those businesses are going to continue to do well because those employees enjoy working at those businesses. They’ve got very loyal, low, low turnover, great employees, again, you take care of the people. People take care of the customers. I mean, those investments do great.
Dr. Jeremy Weisz: 49:04
So first of all, I just want to thank you. Thanks for sharing the journey. It’s pretty incredible. And in your lessons, I want to encourage people to check out BorgmanCapital.com to learn more and check out more episodes of the podcast. And thanks so much for joining me.
Sequoya Borgman: 49:20
Yeah, thanks for having me.
