Rafael Quinn·April 15, 2024

How to Build a Mini Berkshire Hathaway | Rafael Quinn Interview

Rafael Quinn is a California-raised, Panama-based investor who, alongside his Colombian-Panamanian business partner, has spent 13 years building a private holding company modeled explicitly on Berkshire Hathaway. After careers in US and Panamanian finance/asset management, he made his first acquisition in 2011 — a B2B industrial lubricants and filters distributor in Panama for ~3.5x earnings with 90% private financing — and has since acquired six platforms including a BPO/call center business, the beloved Athens Pizza restaurant chain (now 20 locations), and three US businesses (a furniture retailer in Hickory NC, and two water heating distributors covering seven western/northern states). Their model is strict: never work in the business, never pay dividends, retain all earnings to repay debt and fund the next acquisition, target 4-5x multiples on businesses with long histories and strong management teams, and be patient enough to pass on years of deal flow until the right one appears. The US expansion was funded via a $40m convertible debt offering from outside investors, structured to eliminate default risk by tying repayments to earnings. Key lessons include the dangers of over-leverage, the hidden complexity of rapid restaurant scaling, and the critical importance of management continuity as a deal filter.

Deal facts

purchase price: ~$1.225m (first deal: ~$1.225m at 3.5x on $350k earnings); Athens Pizza: ~$4m at 5x on $800k earnings; US furniture retailer and water heating distributors acquired via $40m holdco raise
multiple: 3.5x (first Panama deal); ~5x (Athens Pizza); 4-5x (US acquisitions target range)
sde ebitda: First Panama deal: ~$350k earnings; BPO: ~$350-400k earnings; Athens Pizza: $800k earnings pre-tax; BPO today: ~$1m profit; furniture retailer and water heating distribution amounts not specified
revenue: First Panama deal: ~$5m revenue; BPO: ~$4m revenue at acquisition (now ~$12m); Athens Pizza: not stated separately
financing structure: First deal: 10% cash down, 90% private lender financing (5-year interest-only, bullet payment). US holdco: $40m raise via convertible debt offering — 70% from outside investors at 8% interest with equity conversion warrant (up to 20% of debt at par), 30% equity from partners ($12m)
notes: Six total acquisitions across Panama and US: (1) industrial lubricants/filters distributor Panama ~2011; (2) BPO/call center Panama ~2012 (majority stake); (3) Athens Pizza restaurant group Panama 2016 (20 locations now, 15 corporate/5 franchise); (4) bolt-ons: Cinnabon franchise Panama, steel cable distributor, logistics company ~2017-2018; (5) Hickory Park furniture retailer Hickory NC 2021; (6) water heating distribution WA/OR/AK 2022; (7) third US acquisition (water heating distribution MN/WI/ND/SD) recent. US holdco ~70% deployed of $40m.

Why this business

Rafael and his partner were drawn to private company acquisitions because they saw buying businesses at 3-4x earnings as far more attractive than stocks at 15-25x or real estate at 8% cap rates. They were intellectually drawn to investing as a craft — Rafael describes tracking baseball card prices as a child as his first 'mini stock market,' and views analyzing company financials as intrinsically pleasurable work he could do for hours. The Buffett-inspired model of delegating management, retaining earnings, and compounding cash flows across multiple boring, durable businesses matched both their temperament and their lifestyle preference of living in Panama.

What's working

Delegated management model: promoting internal operators or retaining seller-operators allows partners to remain investors rather than day-to-day managers
Retained earnings / no dividends policy: all cash flows recycled into debt repayment then new acquisitions, compounding the holdco over time
Buying at 4-5x multiples provides sufficient margin of safety that businesses don't need to grow to generate good returns
Focus on businesses with long operating histories (20-65 years), customer diversification, supplier diversification, and products unlikely to be disrupted (lubricants, water heating, furniture)
Athens Pizza grew from 3 to 20 locations by capitalizing on pandemic-era second-generation restaurant spaces at lower capex (~$300k per location in Panama)
BPO business grew ~3x in profit since acquisition, now approaching $1m in earnings with ~350 employees
US water heating distribution: two acquisitions covering 7 states, second deal sourced via referral from existing CEO at industry conference
Convertible debt structure for US holdco removed default risk by tying repayments to earnings performance rather than fixed amortization
Patience as competitive advantage: sitting on hands for 3+ years between acquisitions rather than chasing suboptimal deals

What's hard

First deal was 90% leveraged — Rafael says he would never do 90% leverage again as it creates extreme blowup risk
Second acquisition (BPO): CFO quit 2 weeks after closing; hidden 'bridge account' in books masked disorganized financials; Rafael spent 6 months in the accounting department unwinding the mess
BPO founder/seller stayed as CEO but conflicted with holdco's cash-preservation mandate — he was an entrepreneur who kept starting new cash-draining ventures; had to be transitioned out within 9 months
Three-year dry spell 2013-2016 with no major acquisitions in Panama; deal flow was largely distressed or failing businesses, not what they wanted
Restaurant rapid expansion: going from 5 to 20 Athens Pizza locations in ~2 years during/post-pandemic caused significant operational stress — had to build production center, logistics chain, admin processes simultaneously; Rafael says they would have taken the original 5-year timeline in retrospect
Raising the $40m convertible debt offering was extremely difficult: fixed-income investors wanted higher yield with no equity, equity investors wanted more upside with no fixed return; had to find a niche investor type
Finding businesses earning over $1m in Panama proved impossible — multiples expanded sharply at that threshold, making deals uneconomic
Operating internationally (Panama-based with US acquisitions) added friction: had to use a US Skype number and US address just to receive deal information from brokers

Notable quotes

We were more lucky than good back then. We were so naive in what we were doing. We didn't even see how it could go wrong.

Cash to a company is like oxygen. When you have it, you don't even think about it. But when it's not there and you need it, it's the only thing you're thinking about.

I don't call our salary — it's not like oh I get a salary but it's a quasi dividend. We pay a salary that we believe if you combine the two is what it would cost to hire a CEO to do what we're doing for the holdco.

I still look at all of them. I reply to most of them if it's a personal email sent to me... The reason I do that is because you never know when that broker is going to find the one that is the one I want to buy.