The Art of Serial Acquisitions: What SMB Twitter Doesn't Tell You | Michael Curry & Keith Burns

Tim Hanson: Next to the stage, we have, 2 very accomplished entrepreneurs, Michael Curry and Keith Burns. They are, co CEOs of Apex Physics Partners, which is the largest medical physics services provider in the country. Gentlemen? So my first question is I'm a fan of dumb questions is, what is medical physics?

Keith: I'll let you answer

Tim: it. Sure.

Michael: I'll explain it how I explain it to my grandma. So essentially, medical physics is the discipline. Our business, we essentially do compliance in

Tim: our business, we essentially do compliance

Michael: related testing and inspection services for medical imaging equipment. So each piece of imaging equipment in a hospital radiology suite or an outsource or an outpatient imaging facility, has equipment that exposes the public in some way, shape, or form to ionizing radiation. Obviously, regulators want to make sure that people are safe, from a patient perspective, but also the people that are using that equipment. And the medical physicist is the, the trained technical professional, whose discipline is to, understand the inner workings of that equipment, and make sure that the equipment is functioning properly, and making sure that that equipment is safe for use to the general public.

Tim: And so how did you become the largest provider of those services in the country?

Keith: It was a a very long, 10 year journey, but, Michael and I did a search fund and raised that in 2013. So 2 months into our search fund on my birthday, we had sent an email out to a a list of brokers saying that we were looking for a business that had a compliance element that was also in health care that did not have direct reimbursement risk. So being specific about what you're looking for, was important. And then a couple of, days later on my birthday, I get this email that says, hey. We're selling this business in Maryland that is medical physics, and Michael and I were sharing, no windowed office in Atlanta.

So I look over to him. He was to my, right, and I say, have you ever heard of medical physics? And he was like, no. I was like, well, it has good margins, so we will we're going to figure it out. And, so that that

Tim: was the story. So September 11, 2013, we found that business and,

Keith: you know, been on the wild ride ever since.

Tim: And so that was the the first one, and you guys have done more since then. So, you know, I think one of the subtitles of this talk was what what x or Twitter won't tell you about making a lot of acquisitions. I I mean, I look on Twitter, everybody's killing it all the time. Have you guys just been killing it ever since 2013?

Michael: Of course, we have. Yes. Seriously, we wanted to, one of the things that we've tried to do as we share our story on this journey is be very open and honest and authentic with people. Because we were not on the stage when we started and we would go to conferences for ETA and just entrepreneurship. And And everybody on the stage just it felt like they came out of the womb.

They started or bought a company. Everything took off and just everything was kismet.

Tim: ETA, can you just define that for for the layman out there?

Michael: ETA stands for entrepreneurship through acquisition. And so we just wanted to make sure that as we shared our story, that we shared the real honest, unvarnished story. So, the short version is when we bought the business, it did not go according to plan in a number of ways. It didn't grow as fast as we wanted it to grow. Turns out that buying a service based businesses, you can buy contracts, but you can't buy people.

So having our textbook MBA and law school business plan and what we're gonna do and what Keith and I call kind of our mini Jack Welch. We all were gonna come in with the suspenders and tell everybody what to do. That flopped. And what we realized is that running a business is harder than we thought. And so while we had in our kind of SIM or plan, that we saw a lot of very interesting and favorable characteristics that lent themselves to doing serial acquisitions.

What our investors and board saw were operators, right, that didn't know the business that they bought, but had the foresight and wisdom to know that if you start adding on to a house that has an unsolid foundation, that can end up in really, really bad places. And so our journey to even get to serial acquisitions, was really 4 years of what we would call kind of painting the fence in karate kid. So a lot of just very meat and potatoes, you know, I drove in my 2011 Toyota Camry to almost every hospital in Maryland and Virginia, getting to know our customers. I mean, Keith literally met with all of our medical physicists 1 on 1

Tim: on a very routine basis, and Keith, and Keith, literally met with all of our medical physicists 1 on 1 on a very routine

Michael: basis, on a very on a very routine basis, understanding the building blocks of just getting payroll and healthcare right, making sure people had IT, to prepare ourselves to have the optionality to do that. But it wasn't come out of the gate, you know, business closed, issue a bunch of LOIs. And while at the time it didn't feel like that was the right path, I do think the approach of going slow to go fast, and just making sure you understand the business that you're in before you add to it is just critically important.

Keith: Yeah. So we so we took 4 years to get to a point. They finally said, yes. We did 3 deals in 4 months at, like, 3 times. And they were like, oh, this thing might work.

All debt, all cash on the balance sheet. And, since then you know, since 2018, we've done 12 deals. We have 2 or 3 more into LOI, and, you know, we've, like, 10 x the business, from that point. So it's it's been a really powerful vehicle, but it literally, took 4 years of of grinding to sort of get to the point. Because the key thing about the pitch was, hey.

Do you have problems recruiting physicists? Do you have problems with this? Well, we have those problems as well, and here's how we fixed it, and here's how partnering with us can make a difference. Is much better than kind of the standard business speak of, I have investors and they have money, and I want to buy the thing that, you know, you may not want to sell me.

Tim: So what I heard you guys say was 4 years of kind of capability building or re reinforcing the foundation. So how how did you know that 4 years was the right amount of time? Like, what what gave you permission to be like, oh, now we can go do I think I heard you say, you know, 3 deals in 4 months.

Keith: Honestly, it was too late. We were probably ready a year before, but, you know, we in our case, we did a traditional search. We had a search for onboard, and I think we did a pretty poor job of communicating what our strategy and vision was, and how we were sort of preparing the base. So I think the base was prepared, but I don't think we did as good of a job. So one of the things, you know, if you do have investors or you need to bring investors in to engage in a

Tim: serial acquisition strategy, I just

Keith: think really having and being on the same page with them. So, you know, that was part of it. The business, strangely enough, never lost EBITDA. I mean, we were consistently growing. It just wasn't growing as fast as we thought it would, and there was a lot of sort of miscommunications on our end.

But once we got clearer with our objectives and we could point to, we grew sales, you know, 0% the 1st year, 4% the 2nd year, 8% the 3rd year, By that time, they were like, alright. They get it. When you buy something, you actually have to do something with it is the other the other reality. They don't tell you that. They don't tell you that.

Yeah. Otherwise You're an investor.

Tim: You're a bunch of buyer.

Keith: You're right. Otherwise, you're building

Michael: what people call, a melting iceberg. And one of the things I think by doing the acquisitions after year 4, we we had better answers to what do you do with the business, the next business once you buy it. It also gave us a lot more conviction in terms of what good looks like. Mhmm. Right?

So I think that a lot of people who jump out of the gate and kinda pursue serial acquisitions, I'm not sure they have a clear sense of what optimized unit economics look like. And when you underwrite the next acquisition, what you should expect and what you should hold the team accountable for delivering once you make that capital allocation decision, versus just kind of throwing spaghetti on the wall and hoping things stick. I think the other thing too is having a clear sense of what you want the business to be. You also know where the bodies are buried, and you just have a better toolkit to solve what are probably kind of the frequently you know, posed questions and issues for the business. And so you're just more prepared and more thoughtful going in knowing kind of that core business where you did a lot of that foundational stuff, you have more conviction that you can actually create the value that is implicit in kinda doing this strategy.

Tim: It's funny. I think maybe what I'm hearing, I don't even have words in your mouth, is that maybe the business was ready after 3 years, but maybe you guys weren't ready until 4.

Keith: I think we were ready. But the the the thing is, if unless you're doing it by yourself with all your own capital, I mean, you gotta bring other people along with you. But I don't regret it because we were really ready in year 4. And what we found is, I think Michael said it best, is you really start to evaluate what's good in business. And the other thing you realize, is everything in the first business you bought isn't great either.

Right? And so there's some things that you start to build best practices, but they're not always one way. Sometimes there are things in buying that second or third or that 5th business that you look back at how you're doing things for the past 4 or 5 years, and maybe that needs to change. The other thing is you learn maybe nothing needs to change. And one of the things the biggest trick if you're buying multiple businesses is you can't promise them that nothing will change.

Like, that was the biggest lesson we learned. I think we did it one time, and they never let us forget it. Oh my god. I think you said in that one meeting that nothing would ever change. And so we started going in, and we Did

Tim: you actually say that, or did they hear what they wanted to hear?

Keith: I do not believe that we said that. Okay. That's what they said, so I'm not calling them a liar in case you ever see them. But one of the things we did is the biggest tool is we said, what are your what are your essentials and what are your non essentials? So you only get 2 or 3 essentials, and I will try my darnedest to make sure that those things don't change or that you have buy in about that.

But just the blanket statement, there will come a time where something will change, and you need to be prepared for it. And that's particularly for us, our sellers, a lot of times, will continue on with us after. So So that's an important point, I think, in general is having a philosophy around

Tim: the sellers of the businesses that you're buying, sort of what the goal is for them, particularly in the serial acquisition strategy. I think doing acquisitions and serial acquisitions, I mean, it's it's stressful. Right? And co CEO structures are not they're not rare, but they're also not common. I'm curious, being partners, what what is, what what are some of the strengths and benefits that you guys have seen over the last decade of being partners?

And and conversely, has there ever been a time where you're like, damn it. I wish I was doing this by myself.

Keith: Of course. Which one? Of course. You know, I was like, of course, I'll do it better. It was early, though.

I think, honestly, the stress came when you're not doing well in general or you're not meeting expectations. So let me say that. Either yours, your investors, it always creates an extra tension. So I would say in the last, what, 5 or 6 years, Michael and I, you know, had a serious argument, like, once. And then, like, literally, we went to lunch, like, right after it.

What was it about? He said something in a meeting, and I just went and backed down. And then he got louder, and then I got louder. And then

Michael: Then we went to lunch. You guys

Tim: you guys are just hungry. You were hungry.

Keith: But no. My the reason I'm even here, Michael is a master relationship builder. So the when we were doing our m and a, the absolute best, Michael would go out, meet the people, roughly negotiate the deal, say, you gotta meet my business partner, Keith. And he would hand them over. It was like a relay race, and he would hand the baton over.

I would say, alright. These terms, I know Michael said that, but, like, we can't do it that way or or that's perfect. And I would take it the rest of the way, and I would actually close the deal. But it was perfect because it always left him as when they got frustrated with me, they can always funnel back to Michael and say, he keeps getting on my nerves. Can you help me fix it?

And he would come in and and go from there, and then we'd work through the integration with myself and the rest of the team. And so I do think it is critical to have roles, and he he was great at that front of the funnel, getting the deal sort of done. And then I would paper it and then take it to a close. And that's how we did, you know, 90% of our deals.

Michael: So I would so just to to tack on to that, kind of 2 key things that Keith mentioned. 1, if you are doing anything in partnership, whether it's running a company together, I think, being honest and self aware about what you're good at and what you're not. I think where we stumbled and it felt more painful is like 1 plus 1 was like negative one, And we sat in a bunch of meetings together where it's like, this is totally a Keith meeting. Why am I wasting 45, like, minutes of my life and, like, we don't need like, we don't need to hold hands and make every decision in this business. But I think what helped us to get there is, we had an executive coach took us through a process called BAM,

Tim: which is building a building alignment meeting. And I think after we had

Michael: that meeting where we made a lot of our expectations of one another that were implicit explicit, and we had an opportunity to really be honest and share. Here is I've known you for a long time. Here's why I see you being very good. Here's where I'm good. And here are my expectations of you and otherwise.

And we trust each other enough to know that, a, if there is a disagreement, we can talk about it. But now we need to, in order to create value for this business, trust one another to get in those swim lanes, swim in those swim lanes, and trust that if there is a conflict that requires both of us, that there's enough trust built to have those conversations, but just aligning those expectations was key.

Tim: Last question. There were a lot of operators in the audience here at the at the summit. You guys have done a number of acquisitions. Obviously, you've dealt with a lot of operators. I'm sure there are deals you've seen that you haven't done, and, obviously, deals you've done that you maybe papered over a few things along the way.

As operators are thinking about running their businesses and maybe open to taking investment in the future, what are a couple things, tangible things somebody can do now to make themselves an exciting investment opportunity for folks like you?

Keith: You know, 1 I mean, the three things that we always check, and it's your financials. So it is usually for people that start

Tim: a business or buy a business.

Keith: They don't think about it quite as much, but having really strong financial statements, you know, if you can have someone in house, that's a great luxury. But if not, they are great outsourced providers. But having really good financials is is huge. I mean, you you can you know, if you don't, it really will degrade the quality of the the earnings multiple that you get. The second one is great customer relationships.

So in all of our deals, before we actually close, we do channel checks with all the customers. So making sure that your major customers are actually excited about the business. They are actively using your product or service, and they feel really strongly about it. And then the third thing I I believe is is having good engagement with your employees, because the worst thing you can do is buy a business and all the employers are mad at the former owner or mad at the business. And so my view is if you can focus on the people and your customers and making sure that, you know, the financials are in order, the rest of the things, you know, we expect that we're not buying a perfect business, but any of those 3 can really sink, you know, the the pro you know, how attractive your business is, in my opinion.

Tim: Jonathan, thank you very much.

Keith: Thank you.

Tim: Appreciate your time.

Michael: Thank you for having us.

This transcript was generated with Transistor AI