David Sopp on his transition from PE investor to Operator and getting more attractive multiples

Introducing David Sopp
David Sopp is the Senior Vice President of Business Development at Simply Beautiful Smiles (SBS), a dental service organization, owned by Sun Capital Partners. He and his team acquire, operate, and offer back-office services to general dentistry practices across the Mid-Atlantic area. They currently have 40 locations across five states. Before joining SBS, he was a private capital investor investing in private equity and sub-debt.

What You Will Learn 

Perspectives from Being an Investor and an Operator 

Acquiring Businesses at Attractive Multiples

The Attributes of Top Performing Investors

Breakdown

[0:50] Introducing David Sopp

[3:58] What Made David Shift from Investor to Operator 

[6:43] What David Wishes He Knew as an Investor 

[8:30] Lessons from Private Equity 

[10:14] The Mistakes That Most PE Firms are Making

[12:24] How to Acquire Business at More Attractive Multiples

[15:36] Lessons for Lower-Middle Market Investors 

[19:27] Three Attributes of a Top Performing Investor

[23:24] Advice for Operators, C-Suite Executives, and Portfolio Companies

[26:23] What David Watches, Reads, and Listens To 

[28:20] Where to Reach David

[29:01] Parting Thoughts

Acquiring Businesses at More Attractive Multiples

One way is to know where to look, and that comes with developing one’s own proprietary deal workflow. More firms are considering entrepreneurs they’ve backed before and identifying investment ideas that no one else is pursuing yet. 

Another way is to use operating resources to create and realize upsides. It’s because there’s often more than meets the eye with businesses. Investors need to look into each element of a business to consider how it can potentially differentiate and diversify the business to generate more equity value. 

Finally, investors must change their mindset about investing. It isn’t always about financial engineering. Instead, investors should focus on building businesses with world class talent with more efficient systems. 

Building the exact asset that potential customers are looking for will allow investors to mitigate the prices they’re working with while also creating even more value to the business post-acquisition. 

3 Attributes of a Top-Performing Investor?

1.     Intellectual curiosity

As the world changes, so do investment strategies. 

Top-performing investors keep pace with the changing world by remaining curious about what’s new, how it’s going to affect their investments, and what challenges and opportunities are on the way. They need to be passionate about discovering new industries, meeting new people, and developing new skills. 

2.     Ability to spot patterns

Industries, no matter how different, will often share similar characteristics. Being able to spot these allows top performing investors to get up to speed on new industries and business models much faster than others. 

Top investors can leverage the patterns they recognize to scope out a better due diligence process and run sensitivities about how likely negative scenarios are going to happen. 

As David explains, it also helps top performers spot show-stopping deals: investments with unmanageable risks. These help investors mitigate their risks and identify better opportunities.

3.     Confidence 

Investing involves taking calculated risks and many people challenge investing decisions. Top-performing investors need to have the courage and conviction to articulate support for their investing theses. They need to ensure that their thesis makes sense. Without this ability, as David explains, deals aren’t going to get done.