Welcome to The Business Buying Academy with Sieva Kozinsky. Here's what we have in store for you today:

• How to get a $49 million business for free
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• Avoid this business buying mistake​
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• My friend bought $5 billion in real estate

🔑 How one truck turned into 48 freightliners

Let's take about one of the first LBOs ever.

It happened before the term LBO existed.

The year was 1955. An entrepreneur named Malcolm McLean was running a logistics holding company called McLean Industries.

He started the business 21 years earlier with just one truck and grew it to one of the largest American trucking companies.

But now it was time to expand to an increasingly-important form of transit:

Intermodal shipping, where cargo is moved in standardized boxes between truck, ships, and rail.

To expand his empire, he eyed the Pan-Atlantic Steamship Corporation and bought it for $1 million in 1953.

The new McLean subsidiary operated 10 aging C-2 cargo ships on U.S. East Coast-to-Gulf Coast routes.

Then, he went bigger.

Time to enter the global shipping market.

The LBO we're talking about today is McLean's acquisition of the Waterman Steamship Corporation in 1955. Here are the key details:

• Waterman Steamship Corporation was a Publicly traded company, founded in 1919 in Mobile, Alabama.
• Operated 38 ships (mostly ships from WWII surplus) on global routes: U.S. Gulf to Europe, Far East, and Latin America.
• Cash-rich but operationally stagnant:
  • ~$22 million in cash and securities on balance sheet.
  • Generating ~$6–8 million annual free cash flow.
  • Family-dominated board; no clear succession plan after founder John B. Waterman’s death in 1945.
• Stock traded at a discount to net asset value (~$25/share vs. ~$35/share liquidation value).

The Deal

• Tender Offer: $25 cash per share for 51% control (1.2 million shares).
• Total offer: $49 million ($42m debt + $7m in preferred stock)

Financing:

• $22 million secured bank loan from First National City Bank of New York (now Citibank), collateralized by Waterman’s cash and ships.
• $20 million in assumed Waterman debt (existing ship mortgages).
• $7 million in McLean Industries preferred stock issued to remaining Waterman shareholders.

The structure was innovative at the time.

McLean contributed the Pan-Atlantic business to the collateral of the loans since it would be the same business as the newly-acquired subsidiary, but otherwise put up no cash or assets of its own.

In effect, the newly-acquired cash flows of Waterman would pay for the debt.

This is common practice in today's PE world, but it wasn't back then.

By 1962, the debt was fully paid off with cash flows from the business.

The exact figures aren't available, but McLean achieved approximately a 15x MOIC over 7 years, assuming a $100 million enterprise value for the Waterman/Pan-Atlantic business by 1962.

Here's are a couple takeaways:

• Find underutilized assets: McLean identified a business trading at a large discount to its liquidation value and knew he had a better use for their assets.
• Use leverage- but in a smart way. Even if McLean didn't improve the business at all, the cash flows from Waterman would pay off the debt in a few years. Essentially, they were getting a good business for free (as long as they didn't totally screw it up).

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🔑 Don't make this mistake when buying a business

Buying a business without getting a quality of earnings report is like buying a house without a home inspection. You’re taking a big bet without knowing what you’re buying, and it could be a disaster.

Even if the seller gives you all their financial statements, they often have very bad bookkeeping. ​

So, what should be in your QOE and financial due diligence package? ​ Here's what today's sponsor Appletree says about their QOE reports: ​

✅ Proof of Cash ​

Are revenues real? We rebuild the last 1-2 years using bank statements to verify that reported earnings arrived in the bank account.

✅ Addbacks That Actually Make Sense ​

We normalize SDE or EBITDA with logic, not wishful thinking. The hand-waving. No “adjusting away” real costs just to make numbers look better.

✅ Working Capital Analysis ​

Avoid the “Post-Close Surprise” where you’re suddenly short $150k in working capital. We calculate what the business needs to operate smoothly.

✅ Forward Looking Projections

​We model post close cash flow and debt service coverage under flat, growth, and decline scenarios – so you know how risky the deal really is.

If you’re sending out LOI’s or nearing a deal, don’t go in blind. Talk to Appletree for a pragmatic, thorough Quality of Earnings report – built by people who’ve bought businesses themselves.

🔑 How do you buy $5 billion worth of real estate?

My friend Jeffrey built a real estate company that owns and manage $5 billion in assets with a portfolio of 190 properties.

The lessons were hard-won over a few decades in the business.

He nearly lost everything a couple of times, but learned to manage risk while pursuing aggressive growth.

He told me how he got started in the business, how he found his initial niche, and tons of secret tips on how to buy, analyze, and manage real estate. Listen to this one if you want to build your own real estate portfolio.

​Watch on YouTube​

​Listen on Spotify​

​Listen on Apple Podcasts​

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Have a great day,

Sieva

P.S. - Are you hiring? Get started with top global talent from Somewhere (I'm a customer and investor)

Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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