Podcast Summary: Acquiring Minds – Episode: Stars Align After 4 Broken Deals
Title: Stars Align After 4 Broken Deals
Host: Will Smith
Guest: Keegan Dum, Former CEO of Egenuity
Release Date: April 10, 2025
Podcast: Acquiring Minds
Additional Resources:
- YouTube: Acquiring Minds YouTube Channel
- Episode Summaries: acquiringminds.co
Introduction
In this compelling episode of Acquiring Minds, host Will Smith engages with Keegan Dum, a traditional searcher who navigated the challenging landscape of acquisition entrepreneurship. Keegan shares his unique journey of encountering four broken Letters of Intent (LOIs) before ultimately acquiring one of the initial deals he had previously walked away from, leading to significant success.
Keegan Dum’s Background
Keegan Dum transitioned from a career as an engineer and operations professional at ExxonMobil to pursuing an MBA, where he discovered a passion for private equity and acquisition entrepreneurship. Initially planning to return to ExxonMobil after his MBA, Keegan was inspired by his MBA classes, particularly a course titled Entrepreneurial Private Equity, and the stories of successful private equity professionals and search fund veterans.
Notable Quote:
“I fell in love with the space [of acquisition entrepreneurship] while sitting in a class, listening to people talk about this world.”
— Keegan Dum [05:48]
Embarking on the Traditional Search
Motivated by the desire for flexibility and a departure from the traditional 30-year career track, Keegan initiated a traditional search fund in 2016. Unlike self-funded searchers, traditional searchers like Keegan benefit from an investor-supported network, providing financial backing for travel, diligence, and living expenses during the search period. Keegan assembled a team of interns to manage a brokered process while focusing intensively on proprietary deals by directly reaching out to business owners.
Process Highlights:
- Proprietary Outreach: Direct emails and calls to business owners not actively listing their businesses for sale.
- Brokered Side: Managed by interns, received minimal traction compared to proprietary efforts.
Notable Quote:
“Every day I was reaching out to owners and trying to learn if there was a real desire on their end to sell their business.”
— Keegan Dum [17:13]
Challenges: Four Broken Deals
During his two-year search, Keegan secured four LOIs, all of which ultimately fell through. The breakdown of these deals provided Keegan with valuable lessons about the complexities and psychological impacts of acquisition entrepreneurship.
Key Takeaways:
- Overanalysis: As an engineer, Keegan tends to overanalyze, leading him to give more weight to negative feedback from investors, causing him to walk away from viable deals.
- Investor Dynamics: Diverse investor opinions based on different industry experiences influenced Keegan’s decision-making process.
- Psychological Strain: The pressure of burning through personal and search fund capital exacerbated the stress of not securing a deal, contrasting with the structured support of a traditional search.
Notable Quote:
“Every one of these small companies has some reason why you shouldn’t buy it… I think I overdid it.”
— Keegan Dum [20:55]
Transition to Consulting and Re-acquisition
As Keegan approached the end of his search period without closing a deal, he chose to dissolve the search fund and pivot to consulting. This strategic shift kept him engaged with potential investors and business owners, including the owner of his fourth LOI—the software company Egenuity.
Steps Taken:
- Dissolution of Search Fund: Decided not to raise additional capital to extend the search.
- Consulting Roles: Took on roles such as a part-time president for Egenuity, gaining deeper insights into the business operations.
- Renegotiation: Leveraged his enhanced understanding and relationship with the business owner to renegotiate the acquisition terms.
Notable Quote:
“After walking away, we still talked. I got to live the pain that he had been living… that led to all of this.”
— Keegan Dum [25:06]
Acquisition of Egenuity
Keegan successfully renegotiated the purchase of Egenuity, securing a significant reduction in price by leveraging his firsthand experience and strengthened relationship with the seller. The acquisition was structured with a seller note and rolled equity, avoiding traditional debt financing.
Deal Structure:
- Revenue: Approximately $6 million with $1 million EBITDA.
- Acquisition Price: ~40% reduction from initial LOI.
- Financing: 20% seller note, 15-20% rolled equity, and the remaining funded by new investors.
Notable Quote:
“We reduced the price significantly… a 40% reduction in the price of the business.”
— Keegan Dum [48:04]
Operating Egenuity
Post-acquisition, Keegan focused on operational improvements, investing heavily in his team and systems to stabilize and grow the business. This strategic move initially reduced EBITDA but positioned Egenuity for sustainable growth.
Operational Strategies:
- Team Investment: Enhanced hiring and training to improve customer service and operational efficiency.
- System Implementation: Streamlined processes to manage recurring revenue and reduce customer churn.
- Market Expansion: Identified opportunities to add complementary services and products.
Notable Quote:
“We dropped the EBITDA significantly, down to a few hundred thousand, because I was looking for the long term and wanted to build the right team.”
— Keegan Dum [62:15]
Sale of Egenuity and Secondary Success
A year and a half into his role, Keegan was approached by a competitor interested in acquiring Egenuity. Despite the challenges of reducing EBITDA for operational improvements, Keegan negotiated a sale at a 2.7x Multiple on Invested Capital (MOIC), significantly exceeding initial investment expectations. The sale included a generous retention package and subsequent equity growth, culminating in a substantial financial return.
Sale Highlights:
- Acquisition Multiple: Sold Egenuity for approximately 2.7x MOIC.
- Retention Package: Keegan received equity in the new parent company and stayed on to drive further growth.
- Final Outcome: The parent company was acquired by a public entity, amplifying Keegan's equity stake and total returns.
Notable Quote:
“We sold the business for three times what we had acquired it for 18 months earlier.”
— Keegan Dum [71:36]
Life After Acquisition
Following the successful sale, Keegan and his family took a year-long sabbatical in Malaga, Spain, focusing on family time and personal growth. This break allowed Keegan to recharge and contemplate his next entrepreneurial venture within the acquisition entrepreneurship landscape.
Personal Insights:
- Work-Life Balance: Emphasized the importance of quality family time and breaking free from the intense work cycles of acquisition entrepreneurship.
- Future Plans: Keegan is in the ideation phase for his next venture, leveraging his extensive experience and network.
Notable Quote:
“We have a whole different family experience… the quality time with my wife and kids was amazing.”
— Keegan Dum [73:22]
Key Takeaways and Insights
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Importance of Relationships: Building deep, genuine relationships can create unexpected opportunities. Keegan’s rapport with Egenuity’s owner facilitated the eventual acquisition after initial setbacks.
Notable Quote:
“You don't realize how important it is to really build deep relationships in this process.”
— Keegan Dum [76:16] -
Flexibility in Strategy: Pivoting from a traditional search to consulting allowed Keegan to stay engaged and positioned him to seize the perfect opportunity when it arose.
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Operational Excellence: Investing in team and systems is crucial for stabilizing and growing an acquired business, even if it requires short-term financial sacrifices.
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Investor Alignment: Aligning incentives with investors is vital. Keegan negotiated terms that allowed for greater upside based on performance, demonstrating the importance of customized deal structures in unique circumstances.
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Managing Psychological Strain: Acquisition entrepreneurship involves significant emotional and psychological challenges, especially when deals fall through. Staying disciplined and maintaining focus is essential.
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Exit Strategies: Understanding when and why to sell is as important as knowing how to acquire. Keegan’s decision to sell at the right time maximized returns and provided further opportunities.
Conclusion
Keegan Dum’s journey underscores the resilience and adaptability required in acquisition entrepreneurship. From facing multiple failed deals to successfully acquiring and eventually selling a business at a substantial profit, Keegan exemplifies the transformative potential of persistence, relationship-building, and strategic pivoting. His story offers invaluable lessons for aspiring acquisition entrepreneurs navigating the complexities of buying and growing a business.
Connect with Keegan Dum:
- LinkedIn (Link to Keegan’s LinkedIn profile)
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