Design Your Company for the Exit From Day One · Andy Harris, STS Capital Partners

What we talked about.

Andy Harris, a managing director at STS Capital Partners, joins Sunny Ray to unpack what it really takes to build a company that can achieve an extraordinary exit. Drawing on his path from chemical engineer at Exxon to three-time hired gun CEO for private equity backed businesses, Harris explains how STS helps privately held, family owned middle market companies prepare for and execute successful sales. He shares hard won lessons from leading Sturgis through the Great Recession, orchestrating fourteen acquisitions at Accella, and navigating his own exit as a founder. The conversation covers founder risk, customer concentration, the value of a sellside quality of earnings report, and why every business, whether it plans to sell or not, should be run as if preparing for an exit. Harris also discusses how AI is reshaping buyer targeting and diligence, and closes with thoughts on whether deal making can ever happen without people at the center of it.

A three time hired gun CEO turned M&A advisor explains why every founder should build their company like it's for sale.

The questions, and the answers.

What is STS Capital Partners and what problem do you solve?

We're a boutique international sellside advisory firm with over thirty managing directors worldwide. We help privately held, entrepreneurial and family held businesses in the fifty million to one billion transaction range prepare for and achieve an extraordinary exit, meaning maximum strategic valuation plus whatever personal outcomes the owner needs. It's really matchmaking between what the owner wants personally and getting paid top value for the business.

What did engineering give you that an MBA didn't?

As an engineer you learn process, systems, and a structured, disciplined approach to problem solving, getting from A to Z methodically. I started at Exxon as a process engineer, which was the fortune number one company at the time and the holy grail for chemical engineers. I quickly learned a pure technical career path wasn't for me and moved into technical sales and marketing instead.

At Sturgis, what did you learn navigating the Great Recession?

Thirty to forty percent of our business was reinforced fiberglass plastics like boats and bathtubs, and that market nearly collapsed. It wasn't a matter of if but when markets would turn, so we expanded manufacturing into Asia and controlled costs without layoffs. When the recovery came we took off like a rocket, ending up thirty percent above pre-recession levels and achieving a great exit.

Out of fourteen acquisitions at Accella in under five years, which one nearly broke it?

Believe it or not, none of them. Our rule was don't screw it up, so we put businesses on common ERP and systems but let them keep running as they had been rather than forcing changes. Even if a business flatlined, we gained value through supply chain purchasing discounts and multiple arbitrage, buying at five to seven times EBITDA and eventually selling the platform at over twelve times EBITDA to Carlyle Construction Materials.

When you sat in the founder's chair for your own exit, what surprised you most?

Getting through an exit is a massive lift because you're running the business day to day while also facing intense scrutiny and diligence from multiple buyers that deepens as you narrow to the final one. My advice is to do a sellside quality of earnings report ahead of time, align your executive team, and get your financials, taxes and estate planning in order at least a year before starting the process.

What do founders often think they've done to prepare that turns out to be useless?

The biggest value detractor is when the business revolves around the founder as the rainmaker with all the customer relationships, so the business would suffer if something happened to them. The second biggest issue is customer concentration, where one or a few customers make up more than half of revenue, which shrinks the buyer pool and depresses what buyers are willing to pay.

How is AI changing diligence and buyer targeting today?

We use AI with well scripted prompts to identify likely strategic buyers and model what a combined business would look like, essentially scoring fit on a scale. Clients who've already implemented AI, like a staffing client that went from seventy to eighteen employees using agentic AI for candidate sourcing while increasing volume, get premium valuations versus businesses where the AI upside is only potential and not yet realized.

What happens to deal making if the counterparty isn't a person?

I think a person will always need to be involved at the end of the day, even if technology can theoretically assess acquisitions and valuations. People are still your number one asset, and I actually believe AI will be a net increase in employment because businesses will need more people to manage the added volume and efficiency, even as some positions get displaced. People still buy from people.