Acquiring Minds Podcast: Episode Summary Title: How to Build a Holdco Foundation: Patiently
Host: Will Smith
Guest: Heather Anderson
Release Date: February 27, 2025

Introduction

In this episode of Acquiring Minds, host Will Smith engages in an insightful conversation with Heather Anderson, the owner of CraneWorks. Heather shares her journey from a Marine Corps infantry officer to a successful acquisition entrepreneur, detailing the strategic steps she took to build a solid foundation for her holding company (Holdco).

Heather Anderson’s Background

Heather Anderson’s path to acquisition entrepreneurship is rooted in her leadership experiences within the Marine Corps. Discussing her transition from military service to the business world, Heather explains how her desire to lead and make a tangible impact propelled her towards buying a business.

• Marine Corps Experience:
  “[...] I served as an infantry officer for four years, and by the end of my commitment, I realized I wanted to continue leading people in organizations without the looming bureaucracy that would have delayed meaningful contributions by two decades.”
  [05:55]

• Education and Decision to Search:
  Heather pursued a history degree followed by an MBA from the University of Virginia’s Darden School of Business. “During my first year at Darden, I discovered the search concept and immersed myself in resources like the HBR guide and Stanford primers, ultimately deciding that the search model aligned best with my goals.”
  [08:00]

The Search Process

Opting for a self-funded search model, Heather sought autonomy and control over her acquisition decisions, avoiding the constraints of managing multiple investors often associated with traditional search funds.

• Financial Parameters and Resources:
  “I was targeting businesses with EBITDA between $500,000 and $1.5 million, initially setting a baseline of $750,000. My savings from the Marine Corps, combined with partial equity contributions, provided the necessary capital to pursue opportunities.”
  [13:00]

• Search Strategy:
  Heather employed a multi-channel approach, leveraging business brokers, proprietary deals, and networking with intermediaries. Tracking the effectiveness of each channel revealed that broker-mediated deals consistently ranked higher in quality, leading her to concentrate her efforts there.
  “I found that 40% of my leads came from brokers, and the top five deals I pursued were brokered, prompting me to focus predominantly on this channel.”
  [21:52]

Acquisition of CraneWorks

Heather successfully acquired CraneWorks through a strategic approach facilitated by a business broker named Don. The deal structure was thoughtfully crafted to align with both her financial capabilities and the seller’s needs.

• Deal Structure:
  “The acquisition was structured with 45% senior debt from two regional lenders, 20% seller notes, and 10% personal equity, totaling 55% of the deal funded through equity.”
  [42:06]

• Reasons for Acquisition:
  CraneWorks met Heather’s criteria with its steady, recurring contracts from military clients and an EBITDA within her target range. Her familiarity with military operations and the company’s geographical proximity further solidified her decision.

• Role of the Seller:
  Unlike typical acquisitions where the seller exits entirely, Heather negotiated to keep the founder involved in a supportive role.
  “The founder wanted to stay engaged in projects he enjoyed, allowing me to run the business while he contributes as needed.”
  [36:03]

Operating CraneWorks: Six-Year Journey

Since acquiring CraneWorks in January 2019, Heather has focused on building a robust foundation through steady, deliberate growth.

• Initial Challenges:
  “Within the first six months, a division within CraneWorks collapsed, resulting in significant financial loss and employee turnover. However, this setback reinforced the importance of focusing on the core business.”
  [47:04]

• Growth Strategy:
  Implementing the Entrepreneurial Operating System (EOS) framework, Heather prioritized high-quality service delivery and incremental growth. This approach led to tripling the company’s size and expanding the team from 12 to 26 employees.
  “We’ve grown about 3x by maintaining quality and leveraging word-of-mouth referrals, avoiding the pitfalls of rapid, unsustainable expansion.”
  [50:29]

• Cultural Leadership:
  Heather emphasizes the significance of clear leadership and maintaining a culture of safety and quality. By promoting a seasoned CEO and keeping the founder involved in a non-managerial capacity, she ensured smooth operational transitions.
  “It’s crucial for the organization to clearly recognize who is in charge to avoid confusion and maintain a strong, unified culture.”
  [39:24]

Transitioning to a Holding Company

After six successful years at CraneWorks, Heather is poised to transition into building a holding company, aiming to acquire additional businesses either related or in entirely different industries.

• Vision for Holdco:
  “My long-term vision is to build a portfolio of companies, maintaining autonomy and supporting each with the necessary resources for success. This approach contrasts with serially acquiring and selling businesses, focusing instead on sustainable, long-term growth.”
  [71:09]

• Current Transition:
  Heather has recently promoted Marshall to CEO of CraneWorks, allowing her to concentrate on inorganic growth strategies, such as pursuing new acquisitions to expand CraneWorks’ geographical reach and service offerings.
  “Marshall is an incredible leader, perfectly positioned to guide CraneWorks into its next chapter while I focus on growth through strategic acquisitions.”
  [75:35]

• Why Holdco Over Serial Acquisition:
  Heather prefers the Holdco model to foster lasting relationships and build a cohesive family of companies. “I believe in holding high-quality businesses indefinitely, reinvesting profits back into the companies, and nurturing outstanding teams that deliver exceptional value to customers.”
  [72:48]

Future Plans and Insights

Looking ahead, Heather plans to continue growing CraneWorks organically and through acquisitions, aligning new opportunities with her vision for the holding company. She remains open to acquiring both related and unrelated businesses, potentially partnering with other operators to manage new acquisitions.

• Growth Through Inorganic Means:
  “I’m focused on helping CraneWorks expand in new geographies and skill areas, while also seeking additional companies that can complement our existing operations or diversify our portfolio.”
  [75:35]

• Leadership Philosophy:
  Heather underscores the profound impact small business leadership can have on employees’ lives, emphasizing the responsibility and personal rewards that come with owning and operating a business.
  “Leading a small business allows you to directly influence employees’ benefits, purpose, and daily experiences, making it an incredibly rewarding role.”
  [64:56]

• Recommendations for Aspiring Searchers:
  Heather advises prospective acquisition entrepreneurs to thoroughly understand their desired business, maintain clear leadership, and prioritize building a strong organizational culture. She also highlights the importance of being adaptable and committed to long-term success over quick wins.
  “Search is a grind with lots of ups and downs, but perseverance and a focus on quality leadership can lead to rewarding outcomes.”
  [18:20]

Notable Quotes

• On Long-Termism:
  “Only now, having led the business himself for six years, tripled it, and identified a capable replacement, is Barker turning his attention to what's next, which could be building Craneworks further by starting to acquire other businesses.”
  [00:00]

• On Leadership and Culture:
  “It’s crucial for the organization to clearly recognize who is in charge to avoid confusion and maintain a strong, unified culture.”
  [39:24]

• On the Reward of Business Ownership:
  “Leading a small business allows you to directly influence employees’ benefits, purpose, and daily experiences, making it an incredibly rewarding role.”
  [64:56]

Conclusion

Heather Anderson’s episode on Acquiring Minds offers a comprehensive look into the strategic patience required to build a successful holding company. From her disciplined search for a suitable acquisition to the meticulous growth and eventual transition of CraneWorks, Heather exemplifies the principles of long-termism, strong leadership, and sustained operational excellence. Her insights provide valuable lessons for entrepreneurs aspiring to embark on the path of acquisition entrepreneurship.

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