Distressed business acquisitions are so interesting to me. Whoever gets good at this is going to make a shitload of money in the next decade.
You can buy them for a severe discount compared to paying 3-4x EBITDA. There are almost no buyers, so terms and price are 100% negotiable. The market is so dark. I know a ton of SMB acquirers and investors. But when I see a distressed deal, I only know one person who is a fit to buy it.
Some of them are actually run pretty darn well. They just owe an absolute crap ton of money. You can negotiate with creditors to take pennies on the dollar or extended terms on outstanding debt, because the alternative is bankruptcy where they might get nothing.
If you can stabilize it fast, you can turn around and flip it for arbitrage or hold it.
On day one, you walk in and everyone's pissed at you. You're the bad guy who owes them money. Vendors could be freezing service and demanding payment. Lenders may be foreclosing. Employees could be underpaid or unpaid for weeks.
You have to walk in and immediately handle a lot of complicated, stressful and high impact conversations while being an outsider. If you know how to turn around distressed businesses, or you have an existing platform you can roll a distressed business into, you can make a killing. But it is risky. This is business on legendary difficulty.
The key when doing this is finding companies that are operationally sound but financially screwed. Where money, capital, or debt is the key problem.
That's the whole ballgame. You're not fixing broken operations or a broken product. You're solving a capital structure problem. If the business itself works, and you can restructure the debt or bring in the right capital, you've got something valuable underneath all that distress.
If you're building a peer group for acquisition entrepreneurs, these are the conversations that matter. Not theory. Real deals where the upside is massive and the downside is losing everything.
The opportunity here is real, but it's not for everyone. You need to move fast, handle conflict, and know how to negotiate with creditors who have nothing to lose. Most people can't stomach it.
But if you can walk into chaos, stabilize a business that's hemorrhaging cash, and structure a deal that works for everyone, the returns are unlike anything else in small business acquisitions.
Start looking for operationally sound companies drowning in debt. That's where the fortunes will be made.
