Acquiring Minds: FedEx & Fencing: A Pivot into Ownership

Host: Will Smith
Guest: Matt O'Brien
Release Date: April 3, 2025

In the April 3, 2025 episode of Acquiring Minds, host Will Smith engages in a comprehensive conversation with Matt O'Brien, a seasoned entrepreneur with a track record of business acquisitions. This episode delves into Matt's strategic journey from acquiring a FedEx route to venturing into the commercial fencing industry, and the pivotal lessons learned from a challenging third acquisition. The discussion offers invaluable insights for aspiring acquisition entrepreneurs, emphasizing the importance of due diligence, operational efficiency, and strategic growth.

1. Introduction to Matt O'Brien’s Acquisition Journey

Matt O'Brien enters the conversation as a two-time successful business acquirer. His entrepreneurial voyage began with the purchase of a single FedEx route, which he adeptly expanded before exiting during the lucrative COVID-19 boom in the logistics sector. Building on this success, Matt acquired a commercial fencing contractor in 2022, nearly doubling its revenue. However, his third acquisition—a trucking business—resulted in a significant loss, underscoring the unpredictable nature of acquisition entrepreneurship.

Notable Quote:

Will Smith [00:00]: "Today’s guest is two for three on his business acquisitions... But recall I said he’s 2 for 3. He also shares with us what happened with the unhappy third acquisition..."

2. First Acquisition: FedEx Route Growth and Strategic Exit

2.1 Identifying the Opportunity

Matt's foray into acquisition entrepreneurship was sparked by a banker who introduced him to a FedEx route opportunity in Louisville, Kentucky. Intrigued by the stability and operational efficiency inherent in the FedEx contractor model, Matt dedicated a year to researching and understanding the logistics business.

Notable Quote:

Matt O'Brien [04:52]: "It was about a year’s worth of research, data, due diligence to really just find out and understand all that I could about FedEx..."

2.2 Expanding the FedEx Operations

Starting with a single tractor and driver in Knoxville, Tennessee, Matt capitalized on organic growth opportunities through FedEx’s expansion of freight lanes. By establishing additional lanes in St. Louis and other locations, he expanded his operations to nine lanes.

Operational Details:

• Lanes and Hubs: FedEx structures contractors’ operations through lanes, each requiring consistent daily schedules. Matt strategically focused on geographical concentration to optimize operational efficiency.
• Challenges Faced: Managing operations remotely from Louisville posed logistical challenges, especially during peak periods like the COVID-19 pandemic when e-commerce surged.

Notable Quote:

Matt O'Brien [06:21]: "I got them through an interview process... then I needed to go buy the equipment, hire the drivers and do all the onboarding..."

2.3 Selling at the Peak

Recognizing the inflection point as COVID-19 pandemic inflamed demand for logistics services, Matt decided to exit his FedEx business in 2021. The sale yielded a seven-figure outcome, bolstered by the peak in e-commerce-driven logistics demand.

Financial Outcome:

• Sale Price: Multiple of EBITDA at 3.5x.
• Revenue at Sale: Approximately $3 million.
• Margins: Maintained around 20%.

Notable Quote:

Matt O'Brien [18:17]: "We went to market on a multiple of EBITDA and we were at three and a half times... Our EBITDA is pretty, it's almost doubled."

3. Second Acquisition: Commercial Fencing Contractor Success

3.1 Acquisition Motivations and Due Diligence

Following the success of his FedEx venture, Matt acquired Professional Fence M&A Launchpad in 2022. The fencing business was generating $2.5 million in revenue at the time of purchase. Key factors influencing this decision included:

• 100% Commercial Focus: Purely B2B operations without residential elements.
• Recurring Revenue: Introduction of temporary fencing rentals for construction sites and annual events.
• Strong Leadership: The involvement of the seller’s son, Chris, who would play a pivotal role post-acquisition.

Notable Quote:

Matt O'Brien [31:23]: "There were several elements to it that we really liked... having been only and always in business to business was something that I wanted to stay in."

3.2 Strategic Growth Initiatives

Under Matt’s leadership, Professional Fence experienced substantial growth:

• Revenue Growth: Increased from $2.5 million to approximately $4.95 million within three years.
• Operational Efficiency: Implemented detailed tracking of accounts receivable and optimized inventory management using systems like Skits.
• Enhanced Pricing Strategies: Updated pricing models to better reflect project costs and improve margins.

Operational Enhancements:

• Job Pack System: Organized materials and job-specific items to reduce downtime and enhance workflow.
• Standard Operating Procedures (SOPs): Established formal processes to streamline operations and improve employee performance metrics.

Notable Quote:

Matt O'Brien [41:56]: "We really understand what our fixed costs are in the construction world... updated our pricing, how we go about actually putting price to our projects."

3.3 Strengthening the Leadership Team

A critical component of the fencing business’s success was the seamless transition of leadership to Chris, the seller’s son. By fostering trust and securing a two-year employment agreement, Matt ensured continuity and stability within the organization.

Notable Quote:

Matt O'Brien [36:24]: "We did engage into an employment agreement, which helps as well... that allowed for two years of trust building."

4. Third Acquisition: Trucking Business Failure and Invaluable Lessons

4.1 Acquisition Overview

In March 2023, Matt expanded his portfolio by acquiring a trucking company. Contrastingly, this venture ended in a significant loss, emphasizing the complexities and risks inherent in acquisition entrepreneurship.

4.2 Challenges Encountered

Several factors contributed to the failure:

• Insufficient Working Capital: Initially funded with a 10% equity injection via an SBA loan, Matt underestimated the working capital required, necessitating additional injections of $150,000 from personal funds.
• Rising Operational Costs: Increases in insurance premiums and labor costs eroded profit margins.
• Declining Revenue Per Load: The value per freight load decreased, impacting overall profitability.
• Operational Oversights: Lack of detailed understanding and tracking of key performance indicators (KPIs) hindered effective management.

Financial Impact:

• Total Loss: Approximately $500,000 due to operational capital burn and additional equity injections.
• Exit Strategy: Divested both equipment and real estate to mitigate further losses.

Notable Quote:

Matt O'Brien [72:11]: "It was, it was, it was at least 500,000. Yeah, it might have been more than that... It was the working capital burn that we were experiencing."

4.3 Key Learnings

This failure underscored several critical lessons:

• Importance of Working Capital: Adequate funding to cover operational shortfalls is paramount.
• Due Diligence on Equipment Lifespan: Understanding the depreciation and replacement cycles of capital assets can prevent financial strain.
• Operational Transparency: Lack of detailed financial tracking and SOPs can lead to unforeseen challenges.
• Focus and Attention Allocation: Managing multiple businesses simultaneously can dilute focus and adversely impact performance.

Notable Quote:

Matt O'Brien [65:39]: "So I would be very wary, very conscious of your equipment... what does the lifespan of that equipment look like?"

5. Strategies and Lessons from Matt O'Brien

5.1 Operational Efficiency

Matt emphasizes the significance of operational efficiency in driving business growth. By implementing structured systems and enhancing workflow processes, businesses can achieve higher throughput and better margins.

Notable Quote:

Matt O'Brien [60:14]: "We have a throughput system as to where it comes in. It’s highly organized, and that’s helped dramatically."

5.2 Financial Prudence

Understanding financial metrics and maintaining robust working capital reserves are crucial. Matt's experience highlights the necessity of overestimating operational funding needs to cushion against unforeseen expenses.

Notable Quote:

Matt O'Brien [55:29]: "I think that it's never going to be a bad thing to put in more capital than you need... it's better to be safe."

5.3 Leadership and Employee Relations

Securing trust and establishing clear leadership roles are vital post-acquisition. Matt’s collaboration with Chris ensured that the fencing business maintained its operational integrity and employee morale.

Notable Quote:

Matt O'Brien [36:38]: "He just came to this place of peace with himself that he just didn’t want to be the buyer... he is the reason that the business is successful."

5.4 Strategic Growth and Diversification

While diversification can open new revenue streams, Matt advises caution. Ensuring that each business aligns with the overarching strategic thesis and maintaining focus on core competencies are essential for sustained growth.

Notable Quote:

Matt O'Brien [77:08]: "Would you be discouraged to continue to try and do it again? The answer is no... it's going to yield some pretty solid distributions."

6. Conclusion and Insights for Acquisition Entrepreneurs

Matt O'Brien’s journey from acquiring a FedEx route to managing a thriving fencing business, and enduring the setbacks of a failed trucking venture, encapsulates the multifaceted nature of acquisition entrepreneurship. Key takeaways for listeners include:

• Due Diligence is Non-Negotiable: Thorough research and understanding of the business, especially regarding financials and operational processes, are foundational to successful acquisitions.
• Operational Efficiency Drives Growth: Implementing structured systems and SOPs enhances productivity and scalability.
• Financial Planning Must Account for Uncertainty: Adequate working capital reserves can safeguard against unforeseen operational challenges.
• Leadership Transition is Crucial: Ensuring seamless leadership handover and securing key employees can maintain business stability post-acquisition.
• Learn from Failures: Setbacks provide invaluable lessons that inform future acquisitions and refine strategic approaches.

Closing Thoughts: Matt O'Brien’s story is a testament to the resilience and adaptability required in acquisition entrepreneurship. His successes and failures offer a roadmap for aspiring entrepreneurs to navigate the complexities of buying and growing businesses, emphasizing the importance of strategic planning, operational excellence, and financial prudence.

Notable Quote:

Matt O'Brien [79:35]: "I don’t think there's any question. My hope is that the loss those lost funds are going to be a 10x as what value we can bring in all things."

For those interested in delving deeper into acquisition strategies and learning from seasoned entrepreneurs like Matt O’Brien, Acquiring Minds offers a wealth of knowledge through its podcast episodes, YouTube channel, and detailed episode summaries available at acquiringminds.co.