1,500 Deals, 20 Acquisitions, 1 Gut Punch with Sequoya Borgman
On the M&A Launchpad Podcast, hosted by Casey Minshew and Feras Moussa, Sequoya Borgman, Founder and CEO of Borgman Capital, shares practical lessons from acquiring more than 20 businesses over the past decade. Grounded in lower middle market investing, the conversation focuses on the realities of building an independent sponsor platform. Sequoya explains why business outcomes depend on leadership fit rather than financial models alone, details the strategic importance of a firm's first deal, and outlines the economic friction of dead-deal costs. He also offers advice for aspiring sponsors, discussing why starting with very small businesses can constrain growth, how flexible capital structures support seller partnerships, and where technology like artificial intelligence is beginning to streamline back-office operations.
The biggest takeaway: business models matter, but people drive outcomes.
Watch or listen the full conversation to learn more about independent sponsorship and lower middle market dealmaking.
Key Takeaways
The First Acquisition Establishes Platform Momentum
A sponsor's initial transaction sets the foundation for credibility, LP trust, and future deal flow. While a poorly chosen first business can tie up time and capital for years, a successful platform build establishes a proven track record. Sequoya experienced this firsthand when his initial deal fell apart a week before closing after the seller decided to transfer the company to his son. After launching Borgman Capital in 2017, he secured a replacement acquisition within three months: a material-handling equipment manufacturer with $3 million to $3.5 million in EBITDA. Supported by bolt-on acquisitions and an exit after five years, that initial deal provided the momentum and capital necessary to scale the firm.
People Drive Investment Performance
In lower middle market acquisitions, leadership selection impacts investment returns far more than financial engineering or growth projections. Most acquired companies are founder- or family-led businesses where the original owner wishes to step back. Replacing a founder requires bringing in a professional management team that can earn the trust of employees who were personally hired by the founder. Hiring the wrong leader often sets an investment back one to two years. When a leadership fit is wrong, sponsors must act quickly, as cultural friction and lack of management support will compound over time.
Targeting Very Small Businesses Constrains Sponsor Growth
Acquiring businesses with $1 million to $1.5 million in EBITDA presents distinct operational and financial risks for independent sponsors. These smaller companies require substantial hands-on support and management, yet after accounting for debt service and capital expenditures, they rarely generate sufficient cash flow to cover sponsor management fees or build internal infrastructure. Choosing a larger target business, even while retaining a smaller equity percentage, provides the company with greater management depth and yields the cash flow required to support an operational team and pursue future acquisitions.
Platform Infrastructure Spreads Pursuit Risks
Pursuing lower middle market transactions carries high sunk costs, including legal fees, quality of earnings reports, and environmental or customer diligence. Dead-deal costs can reach $1 million on larger pursuits, creating financial strain for individual sponsors operating without institutional backing. Building a firm with specialized capabilities across deal sourcing, fundraising, and post-close value creation allows independent sponsors to spread pursuit risks across a broader organization while providing portfolio companies with operational resources.
Questions Addressed in the Conversation
How does an independent sponsor navigate capital formation without a dedicated fund?
Independent sponsors raise capital on a deal-by-deal basis, often utilizing Regulation D investment structures for each platform. Rather than adhering to the rigid mandates of a single commingled fund, this approach allows for structural flexibility. Sponsors can invest personal principal capital, partner with family offices, tap into individual LP networks, or co-sponsor larger transactions alongside institutional investors or mezzanine funds depending on the equity requirements of the transaction.
What causes transactions to fail before reaching the finish line?
Transaction failure often stems from sudden seller reconsiderations, valuation gaps, or unaddressed risks uncovered during detailed diligence. In the lower middle market, deal certainty is impacted by macroeconomic shifts, high interest rates, and rigorous quality of earnings or environmental reviews. Because diligence expenses remain payable even if a seller withdraws or a transaction falls through, sponsors must budget for dead-deal costs as an ongoing cost of doing business.
Why do holding periods frequently align with a five-year timeframe?
Holding periods are heavily influenced by tax structures, investment momentum, and market liquidity. For qualified small business investments under Section 1202, holding a company for five years can provide substantial capital gains tax benefits. However, optimal exit timing ultimately depends on operational performance and buyer demand rather than rigid schedules, requiring sponsors to seek liquidity when a company is performing strongly and a competitive buyer pool exists.
“The biggest impact on returns in lower middle-market businesses is who you have running the company. I’d say that’s more important than any other aspect of the business model or business plan.”
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This transcript has been edited for clarity and readability. Please refer to the original podcast recording for the complete conversation.
Feras Moussa: And so, what does it look like to really start a quasi-private equity, quasi-independent sponsor firm? What are some of the challenges that you face along the way—from identifying businesses to getting the right operator in the role, helping execute and ultimately building a team around the business of buying businesses? Casey, what were some of your takeaways?
Casey Minshew: Man, Sequoya’s story is fantastic. I definitely think entering the market before 2020 was different. In my world, I feel like the world changed after 2020. But he made a lot of great things happen.
He said something very important, which is that the first deal, especially as a sponsor, is so critically important. If you get the wrong deal, you’re going to spend years digging out of that. But finding the right deal, spending the time to get it and then getting to the finish line—which is really a return on investment for your partners—is the key to getting that next round of success.
I’ve heard it so many times. We’re going through it ourselves. We’re in year three and a half, and we’re moving some things along. It’s all about getting that return on investment to your partners so they go, “Wow, okay, these guys know how to build success.” It’s hard. He said it, too. It’s very hard, but it is worth the journey, at least in my experience.
It was great to hear from Sequoya. Twenty transactions—phenomenal.
Feras: Yeah. Again, we highlight that it’s hard. All aspects of it are hard. Finding the business is hard. Closing the business is hard. Operating the business is hard. Selling the business is hard. We dive into those different facets and what each looks like. Lots of nuggets in this one.
Building Borgman Capital
Welcome to the M&A Launchpad podcast with your hosts, Casey and Feras, with Equity Launchpad. On this podcast, you will gain insights on acquiring, investing in and selling profitable businesses in the lower middle market. Whether you’re a business owner, investor or aspiring entrepreneur, at Equity Launchpad, we will provide you with the knowledge, guidance and capital to navigate the world of mergers and acquisitions.
Casey: Can I ask you for a quick favor? If you’re getting value from the M&A Launchpad podcast, hit the subscribe button on the YouTube channel. It’s the easiest way to show your appreciation so we can continue to bring great content to you. This helps us find better, high-caliber interviews, so we really do appreciate it. Now, let’s get back to the show.
Feras: Sequoya, welcome to the show.
Sequoya Borgman: Thanks for having me. I’m excited to be on.
Feras: Likewise. For our listeners, do you want to give a little background on your firm and where you are today?
Sequoya: We launched Borgman Capital about a decade ago. We’re headquartered here in Milwaukee, and we’ve got five offices around the country. Over the last 10 years, we’ve acquired 20-some businesses.
Our focus is industrial and food businesses in the lower middle market. We’re geography-agnostic. We’ve bought companies from the East Coast to the West Coast, and we’re looking for more nice businesses to invest in.
Feras: Awesome. You clearly founded Borgman Capital. What was your background, and how did you make that jump? A lot of our listeners probably have a W-2 and a day job somewhere, and people are always eager to hear what led to that transition.
Sequoya: I started my career in public accounting. I got a master’s in accounting and worked for almost two decades—18 years—with Big Four and international firms in the private equity or transaction space. That’s where I learned that side of the business.
I had been a partner for a long time and finally decided I wanted to do something a little more entrepreneurial. My private equity friends were having a lot more fun at the time, although times are a little tougher these days. So I decided to leave public accounting and launch the firm in 2017.
A More Competitive M&A Market
Casey: That’s great. You’ve had some great growth. You also caught a different market. I always like to let people know that, as you said, times have changed a little on the private equity side. From what I’m hearing, firms are struggling to find good deals. A lot of companies have either transacted, or you have to find deals that you’re aggregating.
One piece of feedback I got on the last process we ran was, “Man, we were just struggling to find really good deals.” At least that’s coming from a lot of the private equity firms we’re talking to. How have you been? What feedback are you seeing in the market today?
Sequoya: A lot of times people ask me about our key to success. Sometimes it’s better to be lucky with timing. When we launched in the mid-2010s, capital was plentiful, banks were lending at low rates on these deals and a lot of good companies were coming to market. I think a lot of sellers who couldn’t sell in the 2008–2009 downturn were selling for reasonable multiples.
Sequoya: That’s changed. I think it’s a lot harder today, in 2026. Buyers’ expectations remain high. A lot of the better companies are not going to market. It seems like there are a lot more hairy deals out there. We see about 1,500 companies a year, and a lot of those transactions just aren’t closing like they were for the decade before that. There’s also a lot more money chasing those deals.
The big funds have to deploy the capital they’ve raised over the last four or five years, and it’s putting a lot of pressure on the lower middle market where we play. The bigger firms aren’t able to do the transactions in their preferred size and space, so they’re coming down-market and doing more add-ons, or they’re doing smaller deals and trying to make up for it in volume. They’re paying up for those assets, which makes it very competitive for us and makes it hard to buy something at a reasonable multiple.
Feras: The ecosystem has matured. You have more buyers, and you have more sellers who better understand how to value their businesses, prepare to sell and negotiate for the highest multiple. As all that happens, it gets harder and harder to find deals that make sense. Then you add inflation and higher interest rates, and the whole thing gets harder. But there’s still opportunity out there.
The First Deal—and the Gut Punch
Maybe to bring it back, what was the first deal you ended up doing? How did you find it, how did you structure it and what gave you the confidence to go get it?
Sequoya: I don’t know if it’s a funny story, but it’s a good lesson. I actually had my first deal lined up under LOI before I left. Being a partner in public accounting comes with a nice salary, and it’s hard to walk away with nothing to count on.
I had a company under LOI and walked away from a nice, cushy career. That deal ended up falling apart about a week before closing when the seller decided not to sell. He ended up selling to his son instead. That was a gut punch for sure.
That happens a lot more than people think. Not all deals get over the finish line. I had to go home and tell my wife that my whole business plan had collapsed, but I stuck with it. I found another deal within about three months and closed it in about 90 days. So, nine months after I launched, we finally closed that first deal.
It was a material-handling company. We did a couple of add-ons and exited it after about five years. It was a great investment, and that’s really what set us up for success. You have to be picky about the company you start with. After that, we were off to the races. We closed another deal soon afterward, and we’ve been on a pace of closing three or four deals a year since then.
Casey: Day to day, I’m meeting with sellers and having conversations about their businesses and how things are going. I have to agree with you. Especially today, the cost of capital is different and sellers’ expectations are high.
But I am seeing activity in smaller transactions. Instead of looking for a deal making $6 million to $10 million in EBITDA, I’m seeing deals between $1 million and $3 million. We may be able to put a couple together, aggregate them and get the EBITDA up. We can be the group that aggregates them and then gets them to the buyers looking for larger EBITDA businesses.
We’ve been playing a couple of different routes. But when you buy those businesses, you still have to get operating partners and run them. It’s not like you buy one and it just cash-flows. There’s a lot of work that goes into that first deal.
I heard a couple of people on another podcast talk about how it took about five years for their sponsor business to start generating cash flow and establish a track record, so their LPs could say, “Yes, these guys can turn a deal and make it work.” It sounds like that five-year mark was part of your world, too. You brought the deal together and finally had an exit. Does that confirm the five-year mark?
Why the First Investment Matters
Sequoya: You’d like to get some capital back. The thing with this business is that with every company you buy, you’re putting more capital and more of your net worth into that business. You need some liquidity eventually, or you run out of capital.
We’ve held things longer than five years. A lot of our deals are structured so you get the Section 1202 tax benefits of the five-year hold. So, for anything under $75 million now, we structure it so that if you hold it for five years, you pay little or no capital gains tax. That’s a big driver of holding for five years.
But we’ve sold things in three years and four years. You can’t really time the market. You have to exit when the investment is doing really well and there’s a good buyer pool for that asset.
Feras: To echo that, for anyone looking to build an actual firm or do multiple deals, that first one is really important. That’s the one you’re going to sell and point to for the rest of your career until you get the next two or three and grow from there.
Be patient and get the right first deal. If you perform for those investors, they’re going to tell their friends. Then you have at least a little momentum to build from.
What was the size of that first business? How did you structure the capital stack? You said material handling—was it a distributor or something else?
Sequoya: It was a manufacturer of material-handling equipment. We ended up buying a distributor as well and bolted the two together. It was a nice business and actually our smallest business ever. I think EBITDA was around $3 million to $3.5 million.
We were able to grow that business and did really well on it. The thing with smaller businesses is that they require a lot more handholding and effort on your part. They take more time, and the management team needs more help. They simply don’t have the resources that bigger businesses do.
I always tell people who are starting out and buying their first business to try to buy something bigger. Even if you have a little less of the equity stack, the business has more resources and more cash flow to pay you a management fee or salary and cover expenses.
With smaller businesses, your time and resources get bogged down in managing the company, but you won’t have the cash flow to continue growing the business, adding to your team and looking for the next one. Be careful about starting too small.
The bigger the business, the more competitive it is and the harder it is to find. Most larger-EBITDA businesses go through a competitive auction process that is hard to win. The caveat is that if you’re buying a business with $1 million or $1.5 million of EBITDA, after debt service, the investments you want to make and capital expenditures, there is very little cash flow to pay yourself—at least during the first couple of years, until you grow the cash flow.
That’s one of the challenges of starting with very small businesses. It’s also why many of those businesses are bought by individuals using SBA financing. At that size, it’s more of a lifestyle business.
Casey: I would echo that. A lot of our podcast listeners are looking to acquire their first business. Some have acquired a business and are now thinking they might want to move to the sponsor side.
A lot of those listeners hear “20 transactions” and think that’s unbelievable. You’re still a sponsor, and you’ve got five locations. In my opinion, that’s a big win for the company and its growth. What have been some of your biggest struggles and challenges in building that business?
The People Challenge
Sequoya: I’d say all the challenges revolve around people. We’ve hired the wrong leaders for some businesses, and we’ve made that mistake more times than I can count. The biggest impact on returns in lower middle-market businesses is who you have running the company. I’d say that’s more important than any other aspect of the business model or business plan.
Most businesses we buy are entrepreneur-led, founder-led or family-run companies where the owners want to transition out. You bring in a new professional management team, and there are challenges with that transition. The hardest part of what we do is finding the right leader for these businesses.
When you make a mistake and hire the wrong person, you have to make a change, and that usually sets the investment back a year or two. That’s the big risk. You have to be very diligent about vetting your leaders.
Feras: It’s not easy. People go in thinking it all works on paper: “I’m going to buy this business, it has this EBITDA, I’m going to project slight incremental growth of 2%, and everything is roses.” But what I’ve learned is that there is no easy business, whether it’s the business of buying businesses or operating them. All of it is hard, and it typically comes down to people.
There’s a phrase I’ve heard: “Hire fast, fire faster.” A lot of times, you won’t know until you get the person in. Spend the time and effort to try to get the right person, and don’t let a bad fit stew. That has been one of the biggest mistakes I’ve made. We knew we didn’t have the right person, but we were hesitant to make a change because there’s friction in making that change. Then it sets you back a year and a half, and you still make the change you should have made much sooner.
Sequoya: That’s probably the biggest lesson I’ve learned. People interview very well. They have great resumes and go through all the cultural assessments. Then, usually within the first 30 days, you know they’re not a cultural fit, they’re not the right leader for that business or they don’t get the support of the rest of the management team.
That’s a big challenge when you’re replacing a founder who hired nearly everyone in the business. It’s more like a family, and many employees may reject or not support the next leader. That sets the leader up for failure if the team doesn’t support them, and the company suffers as well. It’s tough on both sides. I don’t say it’s always the leader’s fault, but if you have the wrong leader, you have to make a change.
Scaling an Independent Sponsor Platform
Casey: When did you evolve from being you and a couple of people building a business to having 15 people in the company? After the first deal and a few bolt-ons, when did you really start to expand as a group?
Sequoya: Our plan all along was to build a lower middle-market private equity group, which is probably 10 to 20 people. We probably added more people than we needed. We funded it through my personal savings and net worth, not from revenue from the businesses. There simply wasn’t enough revenue from management fees or closing fees to fund the infrastructure we needed.
Once we had the main infrastructure, we started adding a couple of people a year—people who wanted to do what we were doing as independent sponsors but wanted to be part of a bigger group or have access to the resources and capital.
We continue to do that. We have the platform, track record and capital. We want people who can source nice investment opportunities. If they want to do it on their own, more power to them, and I’ll help them as well.
But it’s hard. If you don’t get a business in your first couple of years, you’ll probably run out of savings and move on to something else. If that first business has challenges, you may be tied up for five years in a company that isn’t paying you much at all.
The Cost and Risk of Pursuing Deals
We’ve pursued businesses where our dead-deal fees were $1 million. That’s tough for an individual to absorb. If you’re part of a team, you can take some of those risks and spread them across a larger organization.
With that first deal that fell apart, I still had to pay the attorney fees, Q of E fees and all the other fees out of my pocket. Again, my wife is very understanding. It wasn’t part of the business plan. You don’t account for all the costs that surround what we do.
Casey: It’s a significant amount of cost, especially the Q of E. When you find that deal, it gets quite pricey. If you’re looking at $10 million-plus of EBITDA, I imagine the Q of E gets very expensive. We ran a process over the last six months and are still working on the deal. The Q of E ran about $110,000. It was a lot. It’s a big investment to chase a deal and then have it blow up.
Sequoya: Right now, I feel like only about 50% of deals are actually closing. I haven’t seen actual statistics, but that’s based on talking to people in the industry and hearing how many deals aren’t getting over the finish line.
That’s a lot of fees to absorb. Sometimes you can get sellers to pay some of those fees, especially a Q of E. But there are also environmental diligence, customer diligence and other costs that you have to pay whether you close or not. It’s a risk in the business, and it’s built into the business model.
Ideal Deal Size and Partnership Structure
Feras: For someone who has a deal, what’s the ideal size for you? If they want to bring you something, what do you want to see?
Sequoya: Of course, the bigger the business and the lower the multiple, the better. We’ll look at almost anything. The low end of our range is probably $3 million to $4 million of EBITDA, and anything over $10 million is pretty competitive these days.
We’ve bought businesses with up to $16 million of EBITDA, which is probably the largest we’ve done. But we like businesses with $4 million, $5 million, $6 million or $7 million of EBITDA. We’d invest in those all day long. If someone comes in with something smaller that is a nice roll-up opportunity, we’ll talk to them about that as well.
Casey: What does that look like? When you work with a traditional private equity firm, are you working with someone who is just a sponsor, or are you putting your capital out like a private equity firm?
Sequoya: Technically, we’re an independent sponsor. We raise capital for each deal on a deal-by-deal basis and set up a Reg D fund for that platform. At this point, my partners and I put a lot of our own capital into the deal.
We also have more than 500 LPs who have invested with us over the last 10 years. We offer the opportunity to them to fill out the equity if needed. If it’s a much larger deal, we’ll partner with another group. We’ve worked with mezzanine funds that put mezzanine financing into a deal and sometimes invest a little equity, as well as other institutional investors.
It depends on the deal size, but most of our traditional deals use our own capital and capital from investors who have invested with us in the past.
Casey: So you’re basically co-sponsoring. Someone has a deal and a good opportunity, but capital raising isn’t their strength. They can come to you and say, “Let’s co-sponsor.” That independent sponsor can have a part of the deal, but you’re bringing most of the capital. I’m sure you’ve built out structures for working with individuals who bring you a deal.
Sequoya: We have a standard term sheet at this point because we’ve looked at a lot of those. We’re also looking for people who want to join us. If they have a deal and want to join a bigger group, we’ll bring them on. They get a big piece of the carry and fees, a business card and the backing to keep doing deals.
Some people just want to buy one or two companies and manage them. That may call for a different structure. Because we don’t have a dedicated fund, we’re very flexible.
With a fund, you have a mandate that you must follow, and you can’t deviate because your LPs restrict you. We can use many different structures with a seller when buying a business, and we can be flexible when partnering with someone as well.
We’ve been there. We are an independent sponsor, and when I first started, it was just me. I know what people are going through and how difficult it is. It’s not fun to work harder than you’ve ever worked in your life and not get paid. I can commiserate with people going through that process.
Casey: There are so many variables. Behind every door, there’s a new variable—from raising capital to working with the seller, understanding the business, and hiring and vetting people to run it. All those things require different skill sets.
Having that partnership or a group behind you can let you focus on what you do best, such as finding deals, while others put together the capital and provide the team. That’s the ideal sponsor. You’ve built a great platform as an independent sponsor to grow and scale. Congratulations.
Sequoya: Thanks. I feel fortunate. We have a value-creation team, too. We have a leader with an operational CEO background who puts together a whole value-creation plan, and we have the staff to support everything that goes along with it.
Some people are really good at that part of the business, fundraising or sourcing deals. We’re looking for people who can add value in one of those three legs of the stool.
Favorite Sectors and Investments
Feras: You’ve done 20 transactions. What’s your favorite vertical and your favorite deal, and why?
Sequoya: They’re like my kids: whichever one is doing best at the time. They go through cycles. My favorite child one year is probably my least favorite the next, depending on performance.
I’m a CPA by background, so I’m really a numbers person. I’m more focused on the cash flow of a business than on what it actually does. They’re all fun to get to know—the business story, facilities and people—but at the end of the day, we’re investors and focused on the numbers. My favorites are the ones doing best.
I miss the businesses we’ve sold, and we only sell the ones that are doing extremely well, because that’s when you want to exit.
We do like the food space and have done really well there. About half of our investments have been in food, and we look at most food deals that come across our desk. We’ve also done really well in the equipment-rental business.
Feras: Everyone who has had an equipment-rental business seems to have done well.
Sequoya: I would highly recommend looking at the equipment-rental space. It’s more of a financial investment than people think. We did really well in that investment. We’re actually closing on another equipment-rental business tomorrow, as long as the date doesn’t get pushed. We like the space, look at a lot of opportunities there and hopefully will have another one in the portfolio tomorrow.
Feras: Congratulations.
The Rocket Round
Casey: That is great. We want to jump to the rocket round. This is where we ask our guests three critical questions. First, what do you like to do in your free time?
Sequoya: I like to push myself, so I like to do extreme things. I climbed Mount Kilimanjaro last year. I recently got my pilot’s license. A couple of weeks ago, I hiked the Grand Canyon. I’m a big skier. You name it—I do all those outdoor sports.
Feras: You’re me in a different form. I did Mount Rainier. Casey also did Mount Rainier, but we did it at different points in time. He did it later in life; I did it when I was much more youthful. I also got my pilot’s license—the whole shebang. We’ll have to go flying sometime. We have to get you out here in Houston.
Sequoya: Definitely. I’ll fly down there. Maybe I’ll wait until it cools off a little and come down in the fall, but I love Texas.
Feras: Next question: What is the most memorable moment in your business journey?
Sequoya: I talked about it a little bit, but I think it was that first punch in the gut and realizing how hard this is to do. I tell our team all the time that if this were easy, a lot more people would do it.
It is a challenge. Finding businesses is really hard. Getting them over the finish line is really hard. Managing them is probably the hardest part. Then you try to sell a business, and that’s hard, too. We’ve tried to sell businesses where deals have fallen apart or buyers have walked away.
People hear about how great this industry is and how great it is to buy companies and do what we’re doing. But if they knew all the challenges and how hard it is, fewer people would try it. It is difficult, but rewarding as well.
Casey: I agree. Last question: What’s your favorite tool or resource?
Sequoya: Right now, everyone is probably using AI as much as they can. There are many good tools and resources out there—Claude, ChatGPT, you name it. We use all the AI resources, and they have made my life much simpler.
We’re trying to get all the portfolio companies to use AI more. I feel like we’re still on the front end of seeing real value creation and cost savings, but I think we’re close. The next step is automating some back-office functions—accounting, finance and sales. There’s a lot of real value creation that will happen soon.
Right now, it saves me a ton of time and frees me up to talk to business owners and do what I enjoy.
Casey: We’re seeing it as well. Both of our portfolio companies are running with it. As you said, we haven’t seen much ROI yet, but we have a financial dashboard coming at one company that will be so helpful because it puts all the data in one place.
Feras: Sequoya, that was a wealth of information. How can listeners get ahold of you?
Sequoya: A lot of people reach out to me through LinkedIn. They can also reach out through our website, Borgman Capital, for business owners or people who want to partner with us. We also have Pass the Hat for individual retail investors who want to invest in our deals.
Feras: Awesome. We’ll put links to both in the show notes for listeners.
Casey: I really enjoyed meeting with you. It was a very inspirational conversation, and we look forward to getting to know you more.
Sequoya: It was nice meeting the two of you as well. Thank you.
