M&A Market Outlook from RKCA

04/02/25 • 16 min

RKCA, an investment bank focused on privately-held lower middle market businesses, presents its outlook for the 2025 M&A market. The firm anticipates a strong year driven by significant private equity dry powder and increasing activity from family offices and individual investors.

While senior lenders are cautious and the cost of capital has risen, "quality" companies with strong financials, documented processes, experienced management, and resilience will command premium valuations.

RKCA advises business owners considering a sale to begin preparation early, emphasizing that a proactive and well-managed process yields the best results. They offer services to evaluate businesses and guide owners through various transaction scenarios, aiming for client success.

Find information on RKCA Investment Banking here: https://www.linkedin.com/company/rkca/posts/?feedView=all

Find the full post here: https://www.linkedin.com/posts/rkca_rkca-2025-ma-market-outlook-activity-7298444358574358528-pBBO?utm_source=share&utm_medium=member_desktop&rcm=ACoAABGzL5gBDtJNUCsnAPn6tKYpDHZSNFxIWh8

DISCLAIMER: The BizNexus Roundup podcast features AI hosts whose analysis is based entirely on pattern recognition and reports created by actual human experts. While our hosts can process vast amounts of data, they've never actually closed a deal or sat in a boardroom.

Our discussions draw from publicly available sources and expert insights, but we strongly encourage listeners to consult the original documents and reports referenced in each episode for the complete context and analysis. The AI hosts' market predictions and deal assessments, while data-driven, are no substitute for professional human judgment and due diligence.
For actual M&A advice, please consult qualified human experts and always go to the source materials to get the full story.

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Intro Music Artist: DJ Freedem | Track: Pretty Boy

Find information on RKCA Investment Banking here: https://www.linkedin.com/company/rkca/posts/?feedView=all

Learn More About BizNexus

Show Credits

Intro Music Artist: DJ Freedem | Track: Pretty Boy

Previous Episode

Taking a look inside Bruce Mark's Transaction Brain - LinkedIn

Here’s a condensed version under 1,700 characters:

SBA Financing for Partial Acquisitions

This post explores using SBA 7(a) loans to acquire 88% of a company, with the seller retaining a minority stake. Bruce Marks states, "So there you have it, a stock sale for the purchase of 88% of an existing business, funded by an SBA Loan," demonstrating its feasibility.

Synergistic Acquisition

The deal aims to create a stronger combined business through:

Operational Synergies: Cost savings and process efficiencies
Strategic Synergies: Market expansion and competitive positioning
Financial Synergies: Improved profitability and cash flow

Deal Structure & Seller Financing

Equity Injection: $1,100,000
Seller Notes: $4,000,000 (39% of the deal) – critical to making the deal work
SBA Loan: $5,000,000 + $700,000 Pari Passu Loan

Contingent Seller Notes vs. Earn-outs

"SBA does NOT allow for 'earn-outs' but does allow for 'Contingent' Seller Notes," ensuring compliance.

Valuation & Sale

The buyer paid 6x EBITDA ($2M avg. past 3 years)—a standard multiple in the insurance industry. While this was a stock sale, Neal Patel notes that asset sales can also facilitate equity rollovers.

Personal Guarantees & Equity Concerns

No PG required if seller owns <20% post-close (Patel)
The seller’s 12% stake (~$1.5M value) vs. buyer’s 88% ($1.1M) often causes deal friction (Adhikari)

Conclusion

This case study illustrates SBA-backed acquisitions with seller equity rollovers, highlighting structuring strategies, compliance considerations, and financial implications.

Read that full post here: https://www.linkedin.com/posts/bruce-marks-mba-cmaa-7938b67_wssbruce-im-looking-to-acquire-88-of-activity-7282422490096660481-QTrR?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAB93fwBBqpG4EyWpoMTT0FThJ1EDPH5rg8

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Intro Music Artist: DJ Freedem | Track: Pretty Boy

Next Episode

The LMM Is RAINING Zero-Money Down Acquisition Gurus... What to think?

Key Ideas and Facts:

The AI breaks down a recent LinkedIn post by Ben Kelly (and the comments) about his zero-money down business acquisition process.

Background: Ben Kelly acquired three businesses (SaaS, Nail Salon, and Web Design) while working as a W-2 employee. He claims to spend only 2 hours per week on one of them, and none on the other two.
SaaS Company: Revenue - $1,318,163, Cash Flow - $150,000, Weekly Effort - 2 hours
Nail Salon: Revenue - $1,124,889, Cash Flow - $30,000, Weekly Effort - None
Web Design Company: Revenue - $256,667, Cash Flow - $10,000, Weekly Effort - None
8-Step Acquisition Strategy: The post outlines an 8-step strategy for acquiring a small business while employed:

SBA Loan Application: Apply for an SBA loan at a bank, providing a business plan, W-2 pay stubs, tax returns, and a personal financial statement.
Financial Audit: Audit Profit and Loss statements (P&Ls) and tax statements. Kelly suggests offering an accountant 2.5% equity in the business in exchange for their services.
Seller Communication: Understand the seller's motivation, prioritizing retiring owners with well-built businesses. "I love buying from retiring boomers because I know their businesses are usually built well & the reason for selling isn't to do with a business flaw."
Private Investor Search: Find a private investor, potentially through your network or LinkedIn.
Financial Analysis and Offer: Analyze Seller's Discretionary Earnings (SDE), which Kelly equates to cash flow. Make an offer of 2.3x the SDE. "If SDE is $1M, make an offer of $2.3M."
SBA 7a Program and Investor Equity: Use the SBA 7a program where a private investor covers the 10% down payment on the loan in exchange for a 15% equity stake (a 50% equity bonus on their 10% down payment). "Essentially, they get 15% equity for paying 10% down. You're $0 out of pocket."
Business Management: Implement changes to run the business "passively" using employee bonus schemes, hiring a general manager, and building out systems. "Your staff are incentivized and able to run daily operations without you being there."

Find that full post here: https://www.linkedin.com/feed/update/urn:li:activity:7295804728960028672/

Learn More About BizNexus

Show Credits

Intro Music Artist: DJ Freedem | Track: Pretty Boy