The $20 Million Coral Company That Nobody Knows About

0:00Welcome back everybody to another episode of Acquisitions Anonymous. I'm Bill Snell, one of your co-hosts. Me and Bill D 'Alessandro today talk about an amazing business. It's a wholesale distributor of Aquamarine. We think it's something live. We're not 100 % sure, but it is a$2.5 million EBITDA business that is trading for north of eight times. And I think this is the most bullish we've ever been about something at that purchase price, that range. It is a fascinating business. We talk about a lot of the different like modes around this business, what actually may justify that purchase price.

0:41We talk, I think probably spend most time talking about how could you grow this business? What kind of questions would you ask? Is the TAM big enough? Is this a deal that would work for a searcher or not? I'm incredibly optimistic about this business. Bill and I both really liked it a lot. It was two thumbs up. I hope you enjoy this episode. Stick around after a quick word from our sponsor.

1:12Hey everyone, it's Bill. And I want to talk to you about Quiet Light Brokerage. I was so psyched when Quiet Light agreed to sponsor the podcast because I am a customer. I have used Quiet Light to sell three businesses. And if I were selling an e-commerce or a SaaS business, I really would not consider anyone else. Like I said, I went back to them three times. I work with three different brokers at Quietlight, had a great experience all three times. Even on one occasion, they found a buyer for a business that I just didn't know it was even going to be possible to sell. So they have pulled rabbits out of their hats several times for me.

1:46They've been in the e-commerce and SaaS business brokering game a very, very long time. They really know what they're doing. They have great reach with both buyers and sellers. And the other thing I really love about Quietlight is all the brokers there are former operators. So you can't just show up and go, hey, I'm a lifetime business broker. I want to work at Quietlight. You have to be a former operator. So they all know what it's like to be in the operator chair. So if you go to quietlight.com, they have free business valuation calls, which they'll do with you. No obligation. Just tell you what they think about your business, what they think it would be worth, and then what you might need to do to kind of get it ready for market.

2:21Those guys over there are great, great SOPs, great systems. I just felt like I was in really good hands all three times with Quiet Light. So if you're interested in selling your business, especially in e-commerce or SaaS, hop on over to quietlight.com, fill out their onboarding form for a free valuation call, and you can tell them Bill or Acquisitions Anonymous sent you. All right. We are here, not so much under duress, but a little bit. We got to hammer out some podcast episodes. We've taken too much time off this summer. And we chit-chat for so long beforehand that it's like, let's talk about life and other business things.

2:54Oh, wait, we got to hit record. Oh, hit record, hit record. But Mills has found a good one. It's a quirky one, which I love about Acquisitions Anonymous. So Mills, will you read us the quirky one you found? This caught my eye. It's California-based. It's a leading aquaculture wholesale distribution company, which there's a picture of what looks like some fish in a fish tank here. And I think I know what this is, but we'll see. It says the asking price is$20 ,500 ,000 on cash flow, which they say is SDE, not EBITDA, of$2.5 million. The revenue is$20 ,225 ,000. So they're asking roughly 10 times, or no, call it eight times SDE and one times revenue.

3:45They say it's an incredible opportunity, confidential opportunity overview, acquisition of a well-established market-leading aquaculture and marine vertebrate, which they say is aquarium, fish, and corals, etc. Wholesale distribution business serving a specialized consumer products niche. They've been operating for multiple decades and the platform features specialized infrastructure, proprietary operating practices, and meaningful barriers to entry. I'm imagining like a place that has fish tanks in the warehouse. Yes, like a huge room of fish tanks. Yeah. Key highlights. They're the market leader, recognized leader in its specialty distribution category.

4:26The barriers to entry are decades of proprietary operating practices, complex logistics, and strict regulatory and compliance requirements. Oh, now I know what it is. Diversified offerings. Is it octopus? I don't know. It's live animal. It's live animal or live coral. Definitely. Diversified offerings, a varied product mix spanning multiple categories, including proprietary and specialty lines. Sticky clientele, it's highly fragmented, loyal customer base, driving strong recurring demand. They have a broad supply chain with longstanding mature supplier relationships. They say the growth drivers and value creation are internal production capability, scalable, high margin internal production and processing capability, reducing reliance on third party sourcing.

5:15They have proprietary brands, which are product lines that they own, backed by exclusive manufacturing partnerships and a newly launched digital platform, enabling partners to expand their offerings through the company's fulfillment capabilities. operations and infrastructure. It's a strategically located facility, purpose-built operational infrastructure. Their technology is a modern ERP system. Human capital, they have experienced long-tenured employees, owners willing and committed to a seamless handover period to ensure operational continuity. Annual revenue, typically in the$20 to$30 million a year range.

5:57Adjusted cash flow margins are steady and increasing. Revenue and profitability are tracking ahead of last year, demonstrating resilience through economic cycles. They say it's an opportunity ideal for strategic acquirers, industry participants, distribution companies, or private equity groups seeking a platform investment with strong market positioning. Further details will be provided to qualified buyers once you sign an NDA. and there's some seller financing available to a qualified buyer. And it looks like this business is listed by a guy named Mike Taylor, who is with Established Business Opportunities.

6:37And he looks like a very happy guy on a boat, living his best life. Living his best life, for sure. That's a great shot. Thanks, Mike. No hat, not touching his face. Exactly. He looks very happy. Okay, so Bill, what do you think this is? So I think that this is a distributor of coral and sea anemone and other living underwater things. I think they probably also do living fish also. So they probably distribute to pet stores, essentially, all of the live stuff, which is fascinating. And I bet they're probably pretty big in coral and anemone because it says they have on-site production and processing, which probably means you have to like cut it apart and like put it in a, you know, on a substrate or something so it can keep growing, keep it in water, somehow get it there.

7:30I don't know if you refrigerate it. I don't know if you're like you put it in a plastic bag and start a clock. You know, I can't imagine the logistics, but like that screams moat to me. Yeah. I mean, really interesting. What I love about this is I think the perceived complexity is actually a lot bigger than the real complexity. Like what they're saying they have developed that's proprietary is truly proprietary, but it's not like it's not irreplicatable. It's just we figured out and we know that you have to do X, Y and Z in this amount of time. And if we don't like put the right substrate board for the anemone to live on, then it's going to die in 12 hours instead of in 26.

8:14You know what we get or what like those kind of things. yeah i i love this i mean it's also the type of thing that if you're a pet store like you just get your enemies from these guys and like the like the chances that you would switch over i would think are probably pretty low unless somebody has like some exotic skews that you can't get right and i would think if something it's probably trendy i think like these fish like this is the cool fish of the year the cool coral whatever you probably just keep up with it and you just add the skew. Like it doesn't seem like it would be that hard. Um, I would, I would be a little bit more nervous if they were breeding fish because that's a whole, like fish farming is like a whole different thing.

8:59Um, and that, and then there's kind of becomes these like whole animal cruelty questions. Like if you're just transporting the animal, like if you are maybe buying them in bulk, like keeping them for a week or two in your facility and fishing them out of the tank one at a time, putting them in a bag and distributing them, that's a much better business than trying to raise hordes of fish from scratch. You know what I mean? I would also like it even better if it was mostly corals and anemones, which are probably more robust. People are probably less mad at you if you happen to kill a couple of them, which is definitely going to happen, just as the cost of doing business with these.

9:38I would like this better if this was anemones and coral and less fish. But I imagine you kind of have to do both. Well, and I think that like this is, it's an interesting like, it's an interesting business that it functions as a wholesale distributor. So they aren't selling direct to consumer. They are probably just selling to pet stores. I don't think that this is the kind of thing that like Amazon's going to get into, right? Like they regulations, but like I think that that's like probably like understating it, like dealing with anything that's live, dealing with anything that ships in water.

10:19Right. And probably is also on like a very tight delivery schedule where it's not just like your lettuce is going to go bad. It's like you're going to kill the thing. It's going to all die. Yeah. You're going to kill anything. I mean, this is probably closest to like cold chain logistics. Maybe some of this is cold. Like, I don't know what the requirements are, but like this is overnight shipping. this has got to get there you know we got to show that it was alive when it went in the truck you know that type of thing um you know i i worry a little bit about kind of the animal welfare stuff because like for example like the live didn't we do like a puppy business or you have stories about a puppy mill yeah i wasn't gonna say it was puppies but yes yes i mean you didn't you weren't involved but like you saw the business and it like printed cash right but like yeah i It's business all the time.

11:07Like it's an amazing, it was amazing business. But like regulatorily, like it just can get icky really fast. It's more just like the headline risk than the regulatory risk because the headline risk is like anybody who invests in a deal like that could be like, you know, paraded around and skewered. you know if there's any like like i have friends in the lettuce business right now is a terrible time because everybody's like oh you know bacteria and you know salmonella and like all these like issues well like live animals is like even more like volatile and especially if you're a professional buyer and you're taking institutional capital like pension funds don't want to be associated with something like that.

11:53Like, so you lose the ability to end up selling it up market because so many people are just like, we can't buy that. Like we can't buy a firearms business or a vice business or something that like we could be in a headline for. Yeah. But I wonder about this. Like, I wonder, like this is, I think this is better, right? Yeah. This is definitely better. It feels more, I mean, it's not tanks and nets and you know, all that stuff, but it feels closer to that. I mean, you could go into a pet store and like, they still do have the ones that still have live animals still have much more live fish and things like that.

12:24Um, but like what also when I think about this, like systems are going to matter. I mean, they say they got modern ERP, like it seems like they're dialed. They've been around for decades. It seems like they really know what they're doing. It's not just, at least according to business broker, it's not just an owner who kind of has it, has a grip on it, like a tight grip on it. It says they got a real ERP, They got systems, got just in time, live inventory, long tenured employees. Like it seems systematized and transferable, which I like. Yeah. It's really important for like when your inventory can die or expire very, very fast.

12:58The only thing I can think here that might make this work, like the price just screams issues, you know, 10 times, eight times SDE. the only thing i can think is maybe the real which they don't say anything about in the listing maybe the real estate's included i don't know i i think this is priced for private equity who would think that eight times is not that bad you know like if you if you think i mean you're going to use some leverage on it right eight eight pay eight times you get two or three turns of leverage on it and you think you can grow ebida like you could do great on this thing um yeah my fundamental question is about, is about the TAM and the trajectory of the TAM.

13:43You know, like how do you grow this thing? I don't, I'm not aware of if more or less people are getting fish. You know, I know obviously that from my past business experiences, from my business, that the dog TAM is growing, right? The cat TAM is growing. It seems to me like with more interest in pets and less interest in kids across the board that the fish TAM might be growing also. I mean, they're certainly lower commitment than a dog or a cat. Yeah. Yeah. And like, that's interesting to think about like the different subcultures, like there's reptile people, there's fish people, there's bird people, there's dog people, there's cat people.

14:17Like this, I don't know, this seems like kind of a nice offshoot in that there's like probably a certain amount of recurring demand. Like, I don't know where and how good the data would be to say like, what is the TAM for, you know, aquaculture relative to 10 years ago and what are they forecasted to be in 10 years. I can't think that there's anything that's like transient or fleeting enough that people are just going to stop having fish tanks 10 years from now relative to what they did 10 years ago. Like, it's probably about the same. I would think, I would think. So that means like your TAM's probably not exploding, I wouldn't think.

14:59So that means you, if you want to grow EBITDA, you've got to increase your penetration. So you got to either carry more SKUs, you know, you got maybe you're, maybe you go, Hey, I'm in all of these pet stores. Can I start becoming a distributor of other stuff? You know, what's interesting though, is like, I don't think that business has been great. Like you look at the public companies, like central garden pet, like those types of things, you start competing with those guys like that. I don't think that's a great business. Um, so I'd be curious about kind of where I could take this thing because at this price, you have to grow even die.

15:30Yeah. Yeah. That's the, that's the issue. And if they're so good at hyper-specialized, like getting into, you know, glass tanks or nets, like you said, or fake coral or rocks or whatever, like none of those things bring your strategic advantages to bear. And so then you've either got to go, well, all right, I'll go with a more commoditized good that I just try and throw in for volume and lower margin, or I go more complex and I start getting into fish or, you know, something that is rodents or reptiles or, you know, whatever you kind of go into adjacent live animal category, which probably turns into a different business pretty quick.

16:11Yeah. I would think. I think there are like rules of thumb in every industry. Like if you order, uh, mail order chicks, you can get like day old chickens, you know, and, and you raise the chicks and like for eggs and stuff. And I've always heard that like you need to order like at least like 20 to 25 or else like the mortality goes down for them. I'm thinking there's got to be the same thing here where they're like, oh yeah, like you have to make sure the water's this temperature when it leaves so that it's this temperature on average when it arrives or like whatever different things there are.

16:43Yeah, yeah, definitely. There's a whole bunch of sort of acquired knowledge. So, but like I would probably feel pretty good absent knowing much about this market, feel pretty good that this roughly sustainable TAM and that your positioning in that TAM is probably pretty defensible given the complexities. What I wouldn't understand is kind of market share. Like if they've got 5 % market share, you know, maybe you can get to 10 and that's how you grow. But I want to understand very specifically, am I taking share in my market if my market isn't growing or am I going to have to go into adjacent product lines and do those adjacent, do I have any kind of reason to win, right to win in those product lines or not?

17:26Don't you think it's hard to figure out the, like, what the TAM is for something like this and like, what's your relative market share? Uh, I don't know. I think you probably back into it by looking at the individual customers. Like I would bet there is decent concentration here. You know, there's probably a couple big boys and I would go into of the bit. So I try, what I've tried to do is figure out the share of the market that the big boys had, right? You can probably try to figure that out. And then what share of their business do I have, right? Can you just walk into the store and go, what fish are they not getting from me?

17:58What coral are they not getting from me? You know, if I had all of their fish and coral, what would I be doing? And is there a reason they're not getting it all from me, et cetera? Yeah. Yeah.

18:12the joys of work from home no joys of work from home i don't know if you guys just heard my kids on the recording you know what bill if you got them a fish tank this might not happen maybe i should get them if i got them a fish tank i would the pita would people would be on my doorstep because i'm not sure that fish i have young kids so i wouldn't want to be that fish uh so but this This is a big business though, right? So it's 20 million in sales. Shockingly big, especially for a wholesale distributor. Like this is not, you know, this is not direct to consumer. This is not e-commerce margins.

18:45I think their margins do line up with being a wholesaler, you know, and accepting as a distributor. They're not making anything. They've got to get something from somebody else, hold it in inventory, which there's no mention of what their inventory is. I mean, if this business has$10 million of inventory included, like the dynamics change wildly. Well, so let's talk about that because on one hand, right, it's a distributor. So like a part of what they do is we have it in stock and we can get it to you tomorrow. Right. And we, and there's not a huge lead time. So there probably is some inventory on the flip side.

19:21It's all live. So like you can't be holding it for, you can't hold a year of inventory on a certain fish. I mean, maybe. Yeah. maybe they won't get older and die and then you got to feed it and there's like talk about carrying cost like you got to like pay to keep the thing alive like it's consuming but if it's in power if it is like if it is anemones and coral then i don't think it's like it it might i wonder and this is just like me totally speculating is it the kind of thing where like it grows and reproduces and you just like are almost working with like the mother so to speak yeah and you're just like harvesting, you know, off of it.

19:59That would be really interesting. That would be. Yeah. It's like, it's like a sourdough yeast strain or something and you keep cloning it over and over. Yeah. I mean, it's in which the inventory that you have or like the, the, uh, like, uh, batch or so to like, so to speak that you're working off of could be like really proprietary, which it says they have proprietary skews. So like maybe it is like certain color or like shape like this one has really good genetics and you're like breeding anemones which is like your breeding stock but it's actually you know uh coral it makes you think about like risk and insurance too like if you have power outage of that building and like everything dies like you're over you need generators you need insurance you know so i i do wonder about the inventory position of this business and i mean because yeah like if it's 10 minutes how do you even cost your inventory Like, is it like the mother anemone?

20:54Like, how would you even price that? Yeah. But like, talk about moat. That's so cool. I'm fascinated. I'm fascinated by it. I just, I don't think they can be given the live nature of it sitting on a ton of inventory for too long. I mean, absent like the mother type thing. And also weirdly, like, how do you cost that? Like if you're growing your inventory for free, essentially, which I don't think is the case or their margins will be better because like then, yeah, like more like a manufacturer. So I think they're probably kind of more distributor model, inventory in and inventory out. And that's why they end up with the 10 percent net margin.

21:37So they probably don't have a ton and because it's live. One of the biggest risks in entrepreneurship through acquisition is buying a business with fragile systems, unclear demand or a single owner who holds all the knowledge. Franchising approaches that problem differently. You are buying into an established brand with documented systems, unit-level data, and repeatable operating playbooks. The hard part is knowing which franchises are actually worth evaluating. That's why Alex Merezniak, former CEO of 2U Laundry, built Fransy. Fransy is a free platform that helps acquisition-minded entrepreneurs explore franchise ownership without broker bias.

22:06You answer a few questions, and Fransy shows you franchise opportunities that align with your capital, lifestyle, and long-term goals. You also get free coaching from people who have actually built and scaled franchise businesses. If you're exploring ETA and want to understand whether franchising fits your acquisition strategy, visit franzi.com. That's F-R-A-N-Z-Y dot com. And thanks to them for sponsoring today's episode. I went to Mike's listings and Mike, the broker in this case, only has this business for sale, which I think makes it even a little bit juicier because this, I mean, Mike looks like he's, you know, kind of semi-retired.

22:42He's on a boat with sunglasses and just like smiling. So he's obviously, you know, he's doing something right in life, but this is his only listing. I think that maybe makes it a little bit more, uh, just salacious. Yeah. I mean, I, I wonder, and there's a lot of guys like this who kind of are opportunistic brokers, like maybe he knows the seller, you know, that type of thing. Um, so he also, he looks like he's an older guy. It says in his bio that he's worked at banks and thrift and loans. And he's like, he'd been in and around this for a while. Yeah. um i also wonder how many buyers there really are for this thing i mean it's not quite it's two million in ebitda like it's not quite big enough for like real big time private equity um so i don't know that you got to pay eight times you know they're probably probably two like two other strategics or something and i wonder why they haven't already bought it yeah you know and if they haven't already bought it i i would want to understand that and I don't know the answer, but they might feel like they'll just squish it and they don't need to buy it.

23:43They'll just wait till you buy it and cut price and squeeze you out. Or maybe they're not financially healthy or I don't know why, right? But you might not need to pay eight times for this. It's interesting because on this company, Established Business Opportunities, it looks like there's maybe more going on. but I'm going to switch to this screen. Like it looks like a more legit website, you know, at least like a little bit, but kind of canned the more you get into it. But if you go to their listings, it just links to Biz by Sell or BizQuest. But then up here, you can call or text Mike. So it's like, it's all Mike.

24:28It's just him. I mean, this guy's on the signal. He's part-time business broker. Okay, there's Mike and Seth. About us, meet Mike and meet Seth. yeah and see they've got they got real estate licenses too you know like these guys are just doing on the side so he's been around since 2024 doing this he's also been doing uh caldwell banker and yeah a bunch of different bunch of different real estate um i would be fascinated to see the sim uh yeah i agree quality of the sim and how they're thinking about it you know it is it's possible this is a great business and this is the thing about acquisitions anonymous like we have not signed the nda we don't know about this business um but like if i'm a searcher this is potentially good it's chunky enough it's two million in ebitda i mean i clearly i can't pay 20 million as a searcher but like i could pay 10 million probably you know heather's not here to tell us but like you max out your 5 million sba you maybe get a little bit of perry pursue loan you're into this for one or two million of equity and you got eight of debt on it and you've paid 10 times and you probably got, you easily make your coverage ratio.

25:40This is a good searcher business. You can pay yourself hundreds of thousands of dollars a year. You can create real meaningful equity value. It's probably relatively stable. I would certainly want a transition agreement with the owner because I don't want to kill all the fish. In my first week, I wouldn't want him to just like, here's the keys, see you later. And you just got a warehouse full of fish and coral. You can adjust the temperature, you know, at the right time of the day. Yeah, exactly. So I want to transition, but like, this is a, I think a good searcher business. I think that there's some like thing hiding in the wings, whether it's like the real estate or the inventory or something that, I don't know, it's the optimist in me, the hopeful optimist.

26:19It's like, maybe there's something there that makes this a little bit more palatable where you could say, all right, I'll do a sale lease back on the real estate, you know, because this is stretching too much to come up with this much purchase price consideration. But I think this is like a hundred percent worth signing the NDA on and then figuring out what's really here. Like what is it? Is it coral? Is it CNM &E or is it something else? So this is not the business if you're with us on YouTube, but I just Googled for live fish. Here is my growth plan for this. If I were to buy it, I'm launching D2C, right?