Ryan Sullivan·August 19, 2024

5 Businesses Acquired with a Long Term Hold Model | Ryan Sullivan Interview

Ryan Sullivan is a career manufacturing executive who co-founded North Park Group in December 2021 alongside partner Greg Toppel to acquire and hold US lower-middle-market manufacturing businesses for 20-30 years. Drawing on experience running a manufacturing holding company where they completed 10 acquisitions, Ryan and Greg structured a deal-by-deal (non-fund) model backed by ~40 repeat investors who receive an 8% preferred return plus quarterly distributions from free cash flow — more like real estate than traditional private equity. By the time of this episode, North Park had acquired four businesses and was closing a fifth: Electron (electrical terminal blocks, Wichita KS, ~$500k EBITDA, ~$8m revenue), Phoenix Electric (DC motor brush holders, Chicago IL, ~$1.7m EBITDA, ~$5m revenue), Dicky Manufacturing (security seals, St. Charles IL, ~$500k EBITDA, ~$6m revenue), and Never Leak (roof flashings, Mississippi, ~$1.5m EBITDA, ~$8m revenue). Every deal pairs a SBA 7(a) business loan with a 504 real estate loan, keeping overall leverage near 50/50 and business-only debt near 30/70, so businesses can withstand a 40-50% revenue decline and still service debt. Ryan's central thesis is patient, conservative capital: buy century-old businesses at ~4x EBITDA, bring operational energy and modest improvements without disrupting what works, own the real estate to signal permanence to employees and sellers, and model returns at just 3% annual growth — yet still target 20%+ annualized investor returns purely from cash generation and debt paydown. Operating partners take personal guarantees on individual businesses, share in a 25% carry and 10% management fee pool across the whole portfolio, and benefit from the collective scale and knowledge of the group.

Deal facts

multiple: ~4x EBITDA (typical for portfolio)
sde ebitda: Electron: ~$500k EBITDA at acquisition (grew to ~$700k); Phoenix Electric: ~$1.7m EBITDA; Dicky Manufacturing: ~$500k EBITDA; Never Leak: ~$1.5m EBITDA
revenue: Electron: ~$8m; Phoenix Electric: ~$5m; Dicky Manufacturing: ~$6m; Never Leak: ~$8m
financing structure: SBA 7(a) on business + SBA 504 on real estate; overall ~50% debt / 50% equity; business debt alone closer to 30% debt / 70% equity; 8% preferred return to investors; 25% carry above pref; 10% of unadjusted EBITDA management fee
notes: Portfolio of 5 businesses (as of Aug 2024): Electron (Wichita KS, electrical components), Phoenix Electric (Chicago IL, brush holders for DC motors), Dicky Manufacturing (St. Charles IL, security seals), Never Leak (Mississippi near Memphis, roof flashings), plus a fifth closing Aug 2024. Total equity deployed ~$14m across four businesses; ~$20m total debt. Real estate purchased with each business. Deal-by-deal raises (not a fund); ~40 committed investors. Targeting 20%+ annualized returns modeled conservatively at 3% growth over 8 years with buy-and-hold (20-30 year) intent.

Why this business

Ryan spent his entire career in manufacturing businesses and believes deeply in US manufacturing. He and partner Greg Toppel had already executed this strategy inside a prior portfolio company, so they knew lower-middle-market manufacturing (typically $500k-$2m EBITDA) was underserved and could be bought well. Ryan prefers diversification over concentration, loves the 100-year legacy businesses that have survived every downturn, and is drawn to companies that look 'aged by 20 years' where operational improvement can generate returns without needing aggressive growth. He only buys businesses where he feels he could run every machine himself.

What's working

Conservative capital structure (~50/50 debt/equity, business debt alone ~30/70) means businesses can absorb a 40-50% revenue decline and still cover debt service, making personal guarantees manageable
Buying and owning the real estate alongside each business signals permanence to employees, provides a clean full exit for retiring sellers, and adds a real estate return component
Operating partner model: partners take personal guarantees, run individual businesses day-to-day, and share in management fees and carry across the whole portfolio, creating alignment and reducing isolation
Year-one philosophy of 'don't mess it up' — learning from existing employees and processes before making changes — preserves the cash-generating track record of businesses
Low-capex manufacturing businesses with high free cash flow conversion (~80%+ of EBITDA) enable quarterly distributions to investors without needing a liquidity event
100% LOI close rate and no retrades builds strong seller trust and differentiation in competitive processes
100-to-1 deal funnel discipline: looking at ~100 companies per acquisition, losing bids by small margins rather than overpaying
Portfolio synergies: shared resources, knowledge, and cross-company support reduce the isolation of small-business ownership
Targeting 20%+ annualized returns modeled conservatively, with upside from real estate appreciation and EBITDA growth beyond base case

What's hard

Extended search droughts: after buying two businesses back-to-back in 2022, went over a year without closing another deal, generating significant doubt and stress
Small deal economics mean a lot of work for smaller absolute dollar returns — critics note it is labor-intensive relative to larger deals
Moving Phoenix Electric six miles within Chicago risked employee attrition; retaining 100% of employees exceeded expectations but required significant planning
Financing two Dicky Manufacturing and Never Leak acquisitions simultaneously (LOIs signed one week apart, closing 30 days apart over the holidays) created intense diligence pressure
Fundraising deal-by-deal from friends and family creates personal stakes — losses would be felt at Thanksgiving; emotional weight exceeds institutional fundraising
Imposter syndrome and self-doubt were significant psychological hurdles despite a strong track record

Notable quotes

Our strategy in year one is just don't mess it up. You're taking over what has historically been a good business, it's a profitable cash generating business, it's been around for 100 years. We're not the smartest people in the room — don't get itchy and mess it up in year one. Just go in and learn from the people that have been running the business for 20 or 30 years.

Personal guarantees are only scary in a scary deal. If it's not a scary deal, if it's a deal that you believe 120% in and you see very little risk in the deal, then the personal guarantee is not scary.

One of our partners basically called it the Moneyball approach to buying businesses. We're not necessarily looking for home runs, we just want to get on base. If you just get on base every single time — singles and doubles — you get a great return.

I never buy a business where I don't feel like I could run every machine and make the parts if I had to.