Acquiring an existing business is often a lower-risk approach to business ownership, but involving an American Indian tribe can add a new dimension of advantages!
In the next ten years there will be an interesting shift in the ownership interest in millions of small businesses. The shift in ownership is related to the retirement of Baby Boomer business owners.
There are approximately 75 million Baby Boomers reaching retirement age in the next 7 years, many of them will either sell or close their businesses. This represents a staggering transfer of wealth and business assets.
Baby Boomer businesses represent a significant portion of the economy, with estimated assets exceeding $10 trillion spread across more than 12 million privately-owned enterprises. However, the traditional method of transferring ownership faces significant challenges, as younger family members often lack interest in assuming business responsibilities. This presents a significant opportunity.
Most family businesses may seek a broker to sell the business to an outside group. However, a tribe can create tremendous value in such a transaction.
Continuing down this thought path, there are several target investors that may consider some business acquisition routes, such as LPs, venture capitalists, private equity firms, holding companies, and smart private investors. However, many of them seek unicorns and they are chasing dreams of big deals, they are not seeking solid family businesses.
Acquiring an established family business presents a compelling opportunity, with a high success rate of 75% for continued operations. In contrast, investing in unicorn startups and chasing speculative ventures can prove costly, with a failure rate as high as 90%.
A TRIBAL APPROACH MAY BE UNMATCHED
We believe that engaging in business acquisitions with a tribe offers a nuanced approach that can be highly beneficial for both sellers and investors. By exploring this model, both parties can potentially achieve better outcomes. Let's take a closer look.
POSSIBLY ONE OF THE BEST WAYS TO DO M&A DEALS
Many family businesses can be elevated with tribal ownership, resulting in increased revenue. This model offers access to exclusive markets, regulatory advantages, tax benefits, specialized knowledge, and contracting opportunities, leading to enhanced growth and profitability.
This model approach presents unique investment opportunities for investors. A tribal economic platform, a holding company, can serve as leverage for additional deal flow, roll-up strategies, and portfolio diversification.
This collaboration can serve as a powerful platform to expand operations, secure funding, hedge against negative market trending, and diversify business portfolios. This approach can ultimately drive growth and maximize M&A potentials. There are aspects to this that we can discuss in a private briefing.
Defined and targeted exit strategies can also be designed with tribes, as they would be glad to buy pipelines of family business M&A transactions.
WHERE DOES INNOVATION HAPPEN?
The large number of businesses changing hands in the next few years creates a competitive marketplace for buyers. This also provides a variety of investment options and opportunities for growth. These activities could play into the hands of niche business holding activities for smaller investors.
Moreover, we see this market as holding enormous potential under an American Indian business holding model, this is a new dimension of business opportunity. You can view more on the subject matter here.
In our opinion, business acquisitions can be a smarter and safer strategy for investors or companies. If you are looking to expand operations, diversify your portfolio, or improve your competitiveness, a tribal collaboration may be a good option.
If you would like to learn more, feel free to reach us here.
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