An investor and his business partners were gearing up to celebrate one of their latest milestone achievements. The trio had just closed their third private equity fund at $500 million and left the office a little early to commemorate the event with champagne and ribeye at a nice downtown restaurant.

As they were being seated, Tom, the senior partner of Slippery Rock Capital, noticed a woman sitting by herself at the next table, maniacally pecking away on her laptop. Scattered about were numerous papers and plans. Her untouched meal had reached room temperature a long time ago.

Curious, and feeling somewhat of a kinship with a person so obviously driven, Tom introduced himself and asked the woman to take a break and have a seat at his table. After a few handshakes and sharing a bit of his own story, Tom asked her why she was working so feverishly in a relatively empty restaurant on a Thursday afternoon.

She smiled a bit wearily and said, “Do I look that frazzled?” Her name was Ann, and she owned Ann B. Engineering, LLC, a successful, growing civil engineering firm that was celebrating its 10th anniversary this year—well today, actually. She had been at the restaurant most of the afternoon working on a rather challenging bridge project. She had met with her client earlier that day for lunch and instead of wasting time driving across town to return to the office, she decided to stay put while things were still fresh in her mind. It would be quiet enough until the dinner crowd started to show up.

Tom nodded in approval and flashed his partners a quick look they’d seen before—he was onto something. Could it really be this easy? An engineering and construction investment was Slippery Rock’s priority in this third fund, and he may have walked right into a solution. With $1.2 trillion of federal investment coming through the IIJA over the next five years, the opportunity was there to generate significant returns—with the right investments, of course.

Ann shared that prior to starting her own company, she spent several years working for an ENR Top 500 firm—and not completely by choice. She began her career at a local firm where her hard work and dedication eventually led her to the position of being one of six minority shareholders identified to eventually buy out the founding principals.

But that didn’t happen. Unbeknownst to Ann, the founding principals made the decision to sell the firm externally, cash out, and retire soon thereafter. The six would-be next-generation leaders were left behind to ride out the duration of their employment agreements—and without a shot at ownership in the newly formed organization.

“The founders must’ve been offered quite a deal,” said Paul, one of the partners.

“Can’t blame them. The market has been hot the last few years,” added Brian, the other partner.

Ann steered the conversation away from the deal details and said, “The sale was actually a blessing in disguise. I had made enough money in the transition to feel comfortable starting my own company. It was a risk. But it was also a dream I always hoped to pursue—and I decided it was the right time to go for it. I have to say, it was the best business decision I ever made.”

“Ann, are you looking to grow your firm?” Tom asked.

“Yes,” said Ann. “But it’s next to impossible to find people.”

Paul then asked Ann about the firm’s markets, clients, and geographic expansion plans, and Brian began to inquire about the kind of margins a firm like hers could produce. Ann was beginning to feel the conversation was turning into an inquisition, and Tom recognized it.

“What do you love about running your own firm?” asked Tom in an attempt to relieve the pressure unwittingly applied by his partners. Ann went on at some length about the satisfaction of building a purpose-driven organization with great people who helped create a unique culture. And she didn’t have a boss. But as Ann went on, she also began to acknowledge how tough the road had been—the long days and nights, having a hand in every decision big and small, watching the books, and spending the firm’s 10-year anniversary alone in a restaurant working on a bridge project. She was also worried about the mountain of backlog that kept growing—and whether she’d be able to hire enough people to get through it all.

“Sounds like you have your hands full,” said Tom. “You need to increase your prices, and with the greater revenue, scale your headcount. With more staff, you could take on bigger projects, and with bigger projects, you could generate higher profits. You know, Ann,” Tom continued, “we’ve bought, built, and exited nine businesses over the last five years, and we can help you, too.”

“We could help you expand and acquire!” added Paul, perhaps a touch too excitedly. “With just a little leverage, we could add offices in every major metropolitan area in the region, building the firm’s capabilities in transportation, water, power, and more!”

“Lots of synergies there,” nodded Brian.

“Think of it, Ann—$3 million of revenue could be $50 million of revenue before you know it,” concluded Tom.

“But how long would all that take?” Ann asked.

“Oh, five to seven years or so,” Tom replied.

“But what then?” Ann inquired.

“When the time is right, we would sell the company,” said Tom. “Hopefully for somewhere in the 8-10x EBITDA range by then. At that point, you could wind down or even retire.” With a laugh and a half-shrug, Tom added, “You could even start your own firm again.”

Original content can be found at www.morrisseygoodale.com.

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