How Matt Barnes Acquired a $400k SDE Commercial Laundry Service

Welcome to another edition of BUY x BUILD, where I write about buying and building cash flow businesses.

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Today, I’m featuring Matt Barnes.

Matt has a background in energy, finance, and private equity. He came across acquisition entrepreneurship in 2019, while working on oil and gas buyout deals, and knew right away that this is what he was meant to do.

It took a few years for him to convince his wife to let him take the plunge, but he did so in 2023 and acquired Professional Touch Laundry Services, a company based in Denver, CO that specializes in laundering table linens.

Matt’s story is impressive for a few reasons:

• At the beginning of his search, he committed to buying a business within one year, and achieved that in less than six months

• The laundry facility of the target company caught fire during diligence, but Matt agreed to honor his deal with the seller, subject to some conditions

• Matt is a man of faith, a follower of Jesus, and holds strong beliefs, one of which is that businesses should help their employees and the local community flourish. It was clear in my conversation with him that he truly embodies this and wants his business and its employees to thrive

In this post, I’ll break down exactly how he did it.

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His Story

Matt grew up in Dallas, TX, where he spent his summers working on his grandfather’s ranch.

Later in life, Matt pursued a career in private equity, but as he was spending 80+ hours a week working at a desk building financial models, he couldn’t help but think back to his time spent on the ranch, creating tangible value and seeing the product of his labor come to life.

A big part of him wanted to go back to that, and he felt that small business ownership would better enable him to trace the value of his hard work.

Also, as a devout Christian, Matt believes that “business is a platform that should be used to help its employees and others in the community flourish”, and he saw this as the next chapter of his life.

His research into small business ownership led him to the world of search funds in 2020, but given Matt and his wife were looking to start a family and recoup from years of working too many hours, they decided to hold off on business ownership for a few years. This also allowed Matt to get some more operational experience under his belt.

He decided to take a Director of Finance & Operations role at ARX Wireless, a wireless infrastructure company in the US, where he worked until early 2023.

In the fall of 2022, while at ARX, Matt decided to revisit acquisition entrepreneurship and go all in on searching for a business.

There was a moment in September, after having 20-30 calls with other searchers, that he looked at himself in the mirror and said, “I’m going to commit to buying a business within a year”, which is exactly what he did.

Having resolve and seriously committing to the process is key advice that Matt now passes onto other searchers, as he has seen a lot of people “kick the tires” for months or years before ultimately giving up.

Acquisition Process

Matt restricted his search to 75 miles around Denver but was agnostic to size and industry in order to see as much deal flow as possible. He networked aggressively with every single broker he could find around Denver.

He even did some off-market sourcing by knocking on doors at the local business parks around Denver. While he had a high hit rate in terms of conversations (40-50), he realized that either the sellers weren’t quite ready to sell or they had unrealistic valuation expectations.

In December, a fellow searcher friend sent him the Professional Touch Laundry Services deal and Matt noticed it was listed by one of his favorite brokers in Denver (Front Range Business, Inc.). He immediately contacted the broker, met with the seller in January and submitted a LOI, but the process was super competitive (15 offers) and his initial LOI was rejected.

Matt did something unique at that point - he wrote the seller a personal letter and revised the offer. In the letter, Matt talked about his faith and his plans to care for the business, its employees, and promised to keep it in his family for a long time. This struck a chord with the seller and Matt was under LOI on the deal.  

During diligence in February, something totally unexpected happened. The laundry facility caught fire. There wasn’t any structural damage to the facility but everything was covered in soot and ash, causing over $500k in damage.

Matt told the seller that if he got the facility cleaned up and retained at least 85% of the customers, he would still buy the business at the same price. The seller worked tirelessly over the next few weeks and managed to retain 100% of the customers after 4 weeks.

If it were me, no matter how much I liked the business, I don’t think I would have been able to move forward with the deal, so kudos to Matt on that.

There was also a silver lining to all this – Matt got to perform diligence on the customer base that he wouldn’t have been able to otherwise, and bought the business with a remodeled facility.

As if that wasn’t enough, after multiple turns of the purchase agreement and a few days before close, the sellers decided to back out of the deal. Matt was removed from the dataroom and told not to contact the sellers. But if you’ve come this far in the post, you know by now that Matt doesn’t take “No” for an answer. He drove to the seller’s house and left a handwritten note in the mailbox pleading him to reconsider.

Four days later, the seller came back to the table asking for a few minor adjustments to the agreement, and the deal closed a few days later.

Matt had an “incredible deal team” that included:

• Lawyer: Sherap Tharchen, Tharchen Law

• Lender: Kevin Doyle, Live Oak Bank

• Financial DD: Josh Harrison, Harrison Advisory

The Business

• Name: Professional Touch Laundry Services, Google Page

• Location: Denver, CO

• Industry: Business Services / Laundry

• Description: Specializes in table linen laundering services for businesses, serving the front range of Colorado (Fort Collins through Denver and down to Colorado Springs)

• Established: 1999

• FTE/Contractors: 15+

• Acquired Revenue (2023): Not disclosed

• Acquired SDE / EBITDA (2023): $400k

Deal Structure

Matt’s deal structure was fairly straightforward – the entire purchase price paid upfront and 90% of it was financed using a SBA loan. “It was important to me that the seller retire and receive his proceeds at closing so I didn’t consider a seller note or similar structures”.

He did have a 90-day transition period with the seller (the first two months at 30 hours per week and the last month at 15 hours per week), and recommends planning for longer even if not needed.

In terms of the SBA loan, he approached a few lenders but ultimately chose to work with Live Oak, which was not the cheapest but had a strong reputation in the market and known to be covenant friendly. As a side note, two other searchers I’ve profiled in the past have mentioned the same about Live Oak.

How’s It Going?

Matt came into the business with a “do no harm” mentality and has lived by it. He told me, “I need to earn everyone’s trust in the business to have the right to change it”.

What’s working well?

• High quality service focused primarily on a niche segment of the market – table linens. As a result, it’s able to differentiate itself from competition and command premium pricing

• Impeccably clean and well run internally with well maintained equipment

• Solid team in place – staff takes a lot of pride in cleaning, pressing and ironing table linens. Plant managers are very good at their jobs

• Loyal customer base that has been rigorously tested (less than 3% YoY churn)

Areas for improvement

• Adopting tech to automate inventory tracking and route management, which are done manually today

• Doing a brand refresh as the website and online presence are dated. This is slated to happen next week so be sure to check it out

• Creating greater staff redundancies

• Hiring a GM to oversee the day to day so that Matt is less involved in the business day to day

Exit Goals

Matt has no plans to consider an exit. In fact, he’d prefer to keep it in his family indefinitely and considers his investment strategy to be similar to the Permanent Equity model. Matt also mentioned to me that his ideal setup would be to elevate a GM in the business so that he can free up his time to consider additional acquisitions and become a multi-business owner.

If anyone is interested in connecting with Matt, let me know. He’s happy to share more about his experience and offer guidance where needed.

Looking to…?

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• Raise equity capital for your deal? I’m investing in self-funded search deals and can also make intros to other accredited investors. Email me.