Michael Davidov·May 15, 2025

How to Use an SBA Loan to Roll Up from $6m to $140m | Michael Davidov Interview

Michael Davidov, co-founder of the Pine Street Group, acquired a $6m-revenue pediatric and young adult home health agency (American United Home Care) in Los Angeles in January 2019 alongside his longtime friend and co-founder Jonathan, using a maxed-out SBA 7(a) loan to minimize equity dilution. Both founders operated the business hands-on for the first year, digitizing HR and clinical workflows, cutting time-to-hire for nurses, and building a professional management layer before pursuing any acquisitions. Over the next five years they executed a systematic Southern California rollup: four home health add-ons, an ABA/autism therapy platform acquired via a separate SBA loan, and a transformative 2023 deal in which they acquired a larger in-home ID care agency and merged all three segments into a single diversified pediatric and young adult home care platform. By early 2024 they had installed professional management and stepped back from operations; by 2025 the portfolio — which also includes a separate vascular access business — was generating approximately $140m in annual revenue, roughly 23x the starting point. The episode is a detailed case study in roll-up strategy, SBA leverage mechanics, treating frontline workers as customers, and the compounding value of building a scalable platform before acquiring aggressively.

Deal facts

multiple: 3-5x (target range stated)
sde ebitda: ~$1m SDE (on $6m revenue at acquisition)
revenue: $6m at acquisition; ~$20m after year 2; ~$100m post-2023 transformative acquisition; ~$140m total portfolio by 2025
financing structure: SBA 7(a) maxed out (~90% of purchase price) for first acquisition; subsequent add-ons financed via conventional small bank debt (all-debt deals); new SBA loan used for ABA platform entry; investor LP capital brought in for 2023 transformative acquisition
notes: Self-funded searcher partnership (Michael Davidov + Jonathan). First acquisition: American United Home Care, Los Angeles, pediatric/young adult home health agency, closed January 1, 2019. Strategy was to max SBA leverage to minimize equity dilution. Four home health acquisitions plus two ABA acquisitions plus one ID home care transformative acquisition (2023). Portfolio also includes Vict, a vascular access business. All combined into single platform. Firm name: Pine Street Group.

Why this business

Michael and his partner Jonathan chose pediatric home health because it had no customer concentration (hundreds of individual patients), a high-credit payer (insurance), a recession-proof and COVID-proof demand profile, and a clear value proposition: providing care in the home cost roughly one-sixth of institutionalization. They also loved that the business was highly fragmented with many mom-and-pop agencies, making it a natural rollup target, and they were personally motivated by the mission of helping individuals with high physical acuities live full lives in the community.

What's working

Maximizing SBA leverage at acquisition allowed Davidov and partner to retain the vast majority of equity while deploying minimal personal capital
Spending the first year operating the business deeply before pursuing add-ons created a platform that could absorb acquisitions without being 'bogged down'
Digitizing HR, onboarding, and payroll processes (HRIS, practice management software, weekly payroll) dramatically cut time-to-hire and reduced nurse drop-off, directly translating to revenue growth
Treating frontline nurses as a 'second set of customers' — improving their experience as a recruiting and retention lever — was a key cultural unlock
Rolling up within Southern California first, then doing a transformative 'minnow acquires whale' deal in 2023 that more than doubled revenue and added a new service line (ID home care), leveraging the platform they had built
Hiring seasoned industry veterans with local ties and cultural fit as professional management in 2024 allowed founders to step back while maintaining operational excellence
Partnership between two co-founders (friends from college) doubled carrying capacity for both operations and deal sourcing

What's hard

First payroll after closing nearly failed — new bank account lacked approval rights to process payroll despite having sufficient cash; resolved by writing ~140 checks by hand and personally depositing at individual bank branches
Low barriers to entry in home health staffing mean intense recruiting competition — nurses can be hired by competitors immediately
Home health is asset-light but lacks economies of scale on people: every incremental revenue dollar requires hiring another person
Operating two separate business lines (home health + ABA) simultaneously stretched the two-founder team, eventually forcing the decision to bring in dedicated management
Regulatory and licensing complexity in healthcare creates barriers both ways — slow to enter but also creates compliance burden once inside
Reimbursement rates set by insurance payers are infrequent and unpredictable — growth thesis partly depended on timing a rate bump cycle correctly

Notable quotes

We were solving for what's the most amount of EBITDA that we could buy with the max SBA exposure and the least amount of equity so that we could keep the majority of the economics there.

I always just kind of joke with them. I'm like, you're penalizing me for getting a good deal.

I think we always viewed our frontline staff frankly almost as like a different set of customers. Without them, I mean, frankly we would have we wouldn't have had a business.

I think if you set it up for the growth, you actually will end up running faster afterwards than you would have if you would have done those first two acquisitions right away, because we would have been just so bogged down initially.