Matt Bodnar on Buying at <5x and Mastering Deal Flow
Matt Bodnar shares how disciplined valuations and high-volume deal flow power his strategy for buying sub-5x businesses and building long-term alpha.
Matt Bodnar is a dynamic and accomplished independent sponsor based in Nashville, Tennessee. Following a career as a trader at Goldman Sachs, Matt acquired a tiny IT services business in 2011. He ran it, developed it into SaaS, and grew it to a point where he extracted himself from day-to-day management in 2017. Since then, he’s been an independent sponsor.
The first key to generating strong returns, according to Matt, is strong deal flow. Higher volume equals more opportunities. Generating deal flow isn’t the necessary evil before closing a deal and starting value creation - it is rather a key to value creation.
Matt has a TedX presentation on YouTube, where he presents 23 different deal flow strategies in 45 minutes. He is enormously sophisticated on this.
It doesn’t take long to learn that Matt has an expansive footprint online. He’s been a podcast host (with five million downloads), he has an email subscriber list, he posts videos daily. This is all part of a broader content marketing strategy, and also a quest to learn.
Voluminous deal flow is important to identify opportunities that are priced well. And for Matt, a good valuation is below 5x of EBITDA.
At below 5x, the capital structure doesn’t require too much equity. This makes the equity raise easy and high returns more plausible. If you can project high returns, by the way, you may also be able to charge higher fees to the limited partners.
Finally, Matt advocates for larger deals (above $3 million of EBITDA) where there is hair. His perspective is that this complexity constitutes the opportunity.
In a 2 × 2 matrix of good and hairy deals versus big and small size, Matt argues that the best space to funnel your attention is on the larger deals that can be repaired.
Listen for Matt’s insights on deal flow strategies, holding periods, valuations, and other investment philosophy.
More recent episodes
To Exit or Not to Exit: 2x MOIC in 2 Years
Discover how Sarkaw Aziz acquired a vacation rental platform with creative financing and achieved a 41% IRR in just two years through strategic growth and timely exit.
The 3-5-7x MOIC Underwriting Framework
Princeton grad Rick Apple built Upside Growth Partners in Nashville, scaling 12 platforms while raising 5 kids. His strategic sourcing and 3-5-7 framework drive consistent success from retail to roofing.
A Portfolio Marked Up at 10x MOIC
Discover how Stenning Schueppert's radical alignment approach at Evolution Strategy Partners drives 10x returns in private equity, outperforming traditional fund models.