Global Steel Equipment Supplier: Navigating Acquisition Challenges in a Complex Industry

In a recent episode of Acquiring Minds, Adam Salman shared his unique journey of acquiring a multinational steel manufacturing equipment supplier. This acquisition story stands out for its scale, complexity, and the challenges Salman faced in fundraising and navigating a highly specialized industry.

From Corporate Career to Search Fund Entrepreneur

Adam Salman's path to entrepreneurship through acquisition was not a typical one. With a background in global corporate strategy and a master's degree in global entrepreneurship from Babson College, Salman spent over a decade working in various roles across Asia and Europe. His experience in corporate strategy, particularly in materials science and industrial markets, laid the foundation for his eventual foray into entrepreneurship.

"I've been on this entrepreneurial path for my whole career really," Salman explained. After years of colleagues telling him he was too entrepreneurial for the corporate world, Salman decided to take the plunge into search fund entrepreneurship.

The Search for the Right Opportunity

Inspired by the book "Buy Then Build" by Walker Deibel, Salman began his search for a business to acquire. However, he quickly realized that many of the opportunities available to typical searchers didn't align with his global industrial experience.

"I looked around and I was like okay I could buy a franchise, I could buy a gas station, and these things which were arts and crafts right," Salman recalled. "Those don't align with my career. Those don't align with what I am qualified to run."

This realization led Salman to partner with Nova Stone, a search fund accelerator that focuses on mid-career professionals. With Nova Stone's support, Salman was able to target larger, more complex businesses that aligned with his expertise.

The Acquisition: A Global Steel Equipment Supplier

After an extensive search process, Salman identified a unique opportunity: a multinational company that supplies steel manufacturing equipment to America's steel manufacturers. The business has operations in Canada, the US, Mexico, and Asia, selling into South America, the Middle East, and Europe.

"We have operations in Canada, US, Mexico, in Asia we're selling into South America, we're selling into the Middle East, we're selling into Europe," Salman explained. "So it's a global industrial company which helps keep vital assets such as steel manufacturing intact."

The company provides a wide range of equipment and services across the entire steel manufacturing process, from mining equipment to furnaces, ladles, and transfer cars. Its value proposition lies in its ability to source globally and provide comprehensive solutions to steel manufacturers.

Navigating Complex Fundraising Challenges

The fundraising process for this acquisition proved to be particularly challenging. The scale and complexity of the business meant that many traditional search fund investors were hesitant.

"One investor is like 'Wow man you are dancing with giants,'" Salman recalled. "I still remember that quote on their rejection letter."

Faced with these challenges, Salman explored alternative fundraising methods, including a brief foray into crowdfunding through Wefunder. However, this attempt was ultimately halted due to SEC compliance issues.

Despite these setbacks, Salman persevered. He attended independent sponsor conferences, networked extensively, and eventually cobbled together a diverse group of investors, including high net worth individuals, family offices, and funds.

"We were able to ultimately find really great value-add investors, employees, funds, high net worth individuals, family offices," Salman said. "And all of those investors have been active to a certain degree and just following up and saying 'How can I help?'"

The Business Model and Growth Opportunities

The acquired company operates as a crucial intermediary in the steel manufacturing industry. It sources equipment and parts from a global network of vetted manufacturers and supplies them to steel producers worldwide.

The business model is built on strong relationships with both suppliers and customers, creating a significant moat. "The data that this company has, and also the data right, like it takes a lot of diligence just to spec in one supplier," Salman explained.

Looking ahead, Salman sees significant growth opportunities:

1. Global Expansion: Targeting new steel manufacturers in regions with low energy costs, such as the Middle East and Brazil.
2. North American Growth: Continuing to serve and expand within the US market.
3. Green Steel Transition: Assisting steel manufacturers in their transition to more environmentally friendly production methods.
4. Engineering and Construction Services: Potentially expanding into more comprehensive engineering, procurement, and construction (EPC) services.

Key Takeaways for Searchers

Salman's experience offers several valuable insights for other search fund entrepreneurs:

1. Think Big: Don't be afraid to target larger, more complex businesses if they align with your expertise.
2. Persistence in Fundraising: Be prepared for a challenging fundraising process, especially for non-traditional deals.
3. Value of Relationships: The relationship with the sellers and the existing team can be crucial to a successful acquisition and transition.
4. Industry Expertise Matters: Deep knowledge of an industry can help you identify and capitalize on unique opportunities.
5. Leverage and Ownership: As Naval Ravikant says, "Find your opportunity and angle, then put leverage on it, and you can lift the world."

Conclusion

Adam Salman's acquisition of a global steel equipment supplier demonstrates the potential for search fund entrepreneurs to target larger, more complex businesses. While such acquisitions come with unique challenges, they also offer the opportunity for significant impact and growth.

As Salman put it, "I never thought I would have been here without putting my name on the line." His story serves as an inspiration for searchers willing to take on bigger challenges and leverage their unique expertise to build substantial businesses in complex industries.

For those interested in learning more or connecting with Adam Salman, he can be reached on LinkedIn, where he serves as the CEO of the acquired company.

Article created from: https://www.youtube.com/watch?v=4J8LebmkUuo