LEIGH GANT | Investor

My guest this week is Leigh Gant, founder and CEO of Unio Growth Partners. We caught up recently at the Australian Shareholders Association’s Gold Coast Investor Summit, where Leigh’s insights on business and investing sparked a lively discussion. As a business owner, investor, and long-term thinker, Leigh brings a wealth of experience from building and exiting ventures, working with wealth management firms, and now helping businesses grow while guiding investors through market complexities. Influenced by investing legends like Buffett and Munger, he approaches markets with patience and a focus on real-world results.

We dove into the story of IREN, an Australian startup that’s skyrocketed on the NASDAQ. Founded by Sydney-based brothers with infrastructure backgrounds, IREN began as a Bitcoin mining operation, capitalizing on cheap, renewable energy in places like Canada. Their pivot to AI data centers has fueled explosive growth. With demand for AI compute outstripping supply—$500 billion annually is needed for data centers through 2030—IREN’s vertically integrated model positions it as a key player. Leigh shared how he invested in IREN during its 2022 lows, reaping significant returns as the AI boom took off.

Leigh also opened up about Unio Growth Partners, his “world’s smallest family office” focusing on simpler, durable micro-businesses. He talked about acquiring a marketing agency serving financial planners, turning it around by building operational systems, and exiting profitably. Leigh looks for businesses with stable earnings, avoiding those overly reliant on a single customer or key person. His experience with micro-businesses shapes his share market investing, emphasizing deep understanding of a company’s operations over chasing stock price movements.

We also touched on AI’s role in his work. Leigh uses it for everything from optimizing his calendar to creating a virtual board of advisors on ChatGPT. Yet, he’s skeptical of AI’s overhyped promises, noting the “slop” in much AI-generated content. For Leigh, human insight remains critical.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

Leigh Gant: We've just been on this pathway of an AI boom. The need for infrastructure, the need for spaces that can run these GPUs, the chips that train the large language models is just such huge demand. And IREN is to the people that understand the business was the obvious case there.

Phil Muscatello: G'day and welcome back to Sharers for Beginners. I'm Phil Muscatello. How has a tiny Aussie startup turned cheap energy into explosive data center growth? And what can you learn about the share market from the microscopic study of business practices? Thanks for joining me again as I welcome Leigh Gant back to the microphone. G'day, Leigh.

Leigh Gant: G'day Phil. Thanks for having me.

Phil Muscatello: Thanks very much for coming back on the pod.

Leigh Gant is the founder and CEO uh, at Unio Growth Partners. He's a business owner, investor and long term thinker. He's built and exited multiple ventures, worked with wealth management firms and boutique funds across Australia and now spends his time helping businesses grow and investors make sense of the market. He's influenced by the principles of great investors such as Buffett, Munger, Greenblatt, Miller and Lynch. And he approaches investing with the same way he approaches business patiently and with an eye for real world results. So we recently ran into each other at the Gold Coast Investor Summit with the Australian Shareholders association and I'JUST got to say I go to quite a few of these conferences and even ones run by the ASX and so forth but I know we're biased but I think they're much better at what the ASA puts on. What are your thoughts?

Leigh Gant: Yeah, absolutely. Well, I really love the one in the Gold coast biased being in Queensland so I think you and I enjoy staying locally. It's pretty good but yeah, I think it was well run and some really interesting presentations as well.

Phil Muscatello: I was really astonished actually by the G Space presentation. Gace is a small company, it's not listed on the share marketers yet. I think it will be. But in terms of rocket launch operations and actually understanding now that there's a launch pad at Bowen in Queensland, it's amazing, isn't it?

Leigh Gant: Yeah, absolutely, yeah. I think, you know there's quite a few good Queensland companies here. We could make this whole podcast about Queensland if you likeis ve been.

Phil Muscatello: I've been here a year so I.

Leigh Gant: Almost qualify but yeah, them and companies like Jumbo Interactive PWR holdings that, you know, there's some really innovative and very cool companies that come out of Queensland.

Phil Muscatello: And I also enjoyed Michael Kemp. Always enjoy his presentation. It was funny when I first had him on the podcast, I kind of thought he was very serious. I didn't realize because sometimes when a, you know, a zoom kind of call, you don't get the personality. But he's got such aderful dry sen of humour.

Leigh Gant: He does. Ah, he is. As a writer myself, I wish I could be as eloquent and as well written as Michael and hopefully one day I'll get there. But you, he's fantastic. And the way he's really good at integrating historical lessons like know very, very Fargo history into you, what's happening in the markets today or in politics. So yeah, Michael was very good.

David Nord: What were your favorite AI presentations at ASA this year

Phil Muscatello: And what about your favorites? Weren't were your favorite presentations and why?

Leigh Gant: Yeah, I liked and forgive me if I pronounced this incorrectly. Is it dood N from um, uh, David.

Phil Muscatello: David Nord.

Leigh Gant: David. Yeah. So I mean the presentation itself on what large language models and other applications can do for AI'wasn't too revolutionary for me. Like some of the stuff I have seen in the past. But he made it so fun. And the audience at the ASA is obviously a little bit older, is sort of more around retirees. So to see their reactions to an AI produced rap song about investing and.

Phil Muscatello: I think it's the first time they would have been, they would have heard of Hilltop Hoods.

Leigh Gant: Yeah, so that was really good. But it also, I mean there were some of the applications that started making me want to play a bit more with different models. Shane Ellis was really good as well. Another non boring presentation. So the topic was tax strategies and retirement strategies and SMSFs which isn't the most thrilling theme but the way he made it interesting was really good. But yeah, I find obviously Australian tax system and the lengths we need to go to to ensure that we can keep what we earn and what we grow for ourselves really complex. So anyone who's out there helping demystify the tax strategies and how to utilize the SMSF structure, uh, they're incredibly

00:05:00

Leigh Gant: valuable. So yeah, Shane did a really good job.

Are you using AI in any ways with your operations these days

Phil Muscatello: So are you using AI in any ways with your operations these days?

Leigh Gant: Yes, I do in multiple different ways and I'm always trying to find new ways to use AI so I have it integrated into my calendar to try and optimize my time. I think I've got five email addresses so I use a tool that sort of syncs it all and um, organizers and categorizs my inbox which really helps me keep track of things. So from something like an everyday application like that to I use and have developed my own AI board of advisors. So I've sort trained a model on chat GBT to help me with sort of business decisions. And that took a while. I put a whole heap of input into it but allows me to get you know, sort of lateral views on what I'm thinking in operating business. Just from you know, chatting to a make believe board of advisors.

Phil Muscatello: I know, it's incredible isn't it? They're just using it for something like that. I mean I've recently decided to institute a mission statement which I've never done. And then sitting there and chatting, I use Grok and chatting about that. It really focuses your own thoughts, doesn't it?

Leigh Gant: Def. Definitely. I don't think I'm using it for uh, any way to replace what I do or any of my output. But the way it's able to synthesize and get clarity from what I'm trying to do or thinking about is so, so valuable.

Phil Muscatello: And I think we'both have generations that still believe that there's something special about our human brain and what we can do. And because you we want to write under our own steam.

Leigh Gant: Yes. Well at the same time I think that you know, all the different models produce a lot of slop. Like as a writer I find it very easy.

Phil Muscatello: It's awful, isn't it when I mean you can just tell it, can't you?

Leigh Gant: Yeah, uh, it's obvious when someone hasn't put a personal touch on um, AI produced content.

I find myself debating whether white collar jobs are being totally replaced by AI

And we're going to talk about businesses that are there at the AI forefront today. But I find myself debating whether we're on the precipice of white collar jobs being totally replaced because they're just a function of compute or are uh, we actually very far away from that? Because what is coming out of the models right now is actually not that good.

Phil Muscatello: I know I saw recently a video on YouTube and it was an investment video. Obviously the whole thing was done by AI and like you said, it was slop. The content was slop. It was just about how to invest in the share market and didn't give you any actionable insights, didn't really go into any depth. And I looked and it had millions of views. I'm thinking who's watching this crap?

Leigh Gant: Other, other AI bots are uh, watching it. It's a o.

Phil Muscatello: Okay, that explains it.

Leigh Gant: A loop of uh, yeah, AI bots and tools just cycling through. So again that's you can play a game there where obviously if you start something like a YouTube channel and utilize these AI tools to produce the content and optimize it, it will then get the views but the views are probably coming from other AI tools. However you still get paid on views and things like that from YouTube so I'm sure someone's out there, ah, doing this AI arbitrage and making a killing.

IREN is an Australian startup that is now worth more than the Australian stock exchange

Phil Muscatello: Okay, so one of the great beneficiaries of AI are data centreers and I just wanted to refer to a recent article that you wrote about IREN and this fantastic company which I believe it's on the Nasdaq and it's an Aussie startup that is now worth more capitalization wise than the whole of the Australian stock exchange.

Leigh Gant: Yeah, I'm m not sure about that. It would definitely be ASX top 20 now and it has run up an incredible amount in a short amount of time. So it is a great story. We were talking earlier offline about, you know, how good it is to support Aussie'doing well. Like you know, I'm very biased towards this company because it's Australian. I mean it is doing a great job, it's executing very well but you know, a soft spot for uh, local guys killing it overseas.

Phil Muscatello: Yes, I know there's plenty of times when I see I'm interviewing people in the United States using rode microphones and I proudly point out oh well that's an Aussie company and they actually manufacture here, not even in China.

Leigh Gant: Wow, I didn't know that. That's fantastic.

Phil Muscatello: Yeah, yeah, no, it's a great, incredible success story. Private company, family owned and very, very tightly held.

Leigh Gant: Yeah, superb.

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IRN is an AI data center provider that focuses on bitcoin mining

Okay, so tell us the IRN story. Who are they and what do they do?

Leigh Gant: Sure.

00:10:00

Leigh Gant: So as we mentioned, IRN is uh, founded by a couple of Australian brothers out of Sydney. Their background is actually infrastructure from Macquarie. So you know, obviously have a good background immediately. And the starting is not in AI which we will ll get to. That's more of a recent pivot. But the brothers sort of uncovered what was going on in the bitcoin space in the mid2010 of 2013, 2015 and got really interested in that space. So the thesis around building out uh, a company to mine bitcoin, not just irons but perhaps others is on a hinge point around power. So for those that don't really understand bitcoin mining, I'll try and simplify it and bastardise it in the process. But essentially you need energy obviously, because the compute to mine bitcoin, it requires a lot of energy. And so one of the knocks on mining bitcoin is that not only does it demand a lot of energy, that's not a very clean thing to do. So from their infrastructure background they wanted to build a business around this paradox. Clean up by cleaning up bitcoin mining. They traveled the world looking for how can we find cheap energy that's clean. And so finding your stranded or wasted renewable energy in places like Hydroricich Canada or mining offshoots in British Columbia, that sort of space allowed them to get that cheaper energy but also utilize it from a renewable point of view. So powers the commodity and then infrastructure is the motat. So unlike some of the businesses now that are clamoring for data centres, iron is vertically integrated, meaning that they own uh, everything from construction to endpoint, getting the land, doing the construction of the data center, uh, owning the power, et cetera. So it's not very speculative because they were able to mine the bitcoin quite profitably. But that's not really the true story now. So they're pivoted from being an exclusive bitcoin miner to being what's now known, it's a bit of a catchphrase, is the NEOC clud. They uh, are an AI data center provider. So they've got this world class capability across multiple data centers and they're able to utilize that not just for my owning bitcoin, but to be able to essentially rent out the space for AI compute. There's a lot to go on around AI, but I guess the key factor to understand what's really fueling a run up right now, and you'll see it in headlines because the biggest companies in the world are making all these deals to try and get their hands on data centers and compute, is that there's just the run in demand for computers outstripping uh, what's actually available. So just to meet current demand, US$500 billion needs to be invested in data centers per year until the year, uh, 2030. And that's just on current demand. So that is just almost untenable because where's that money going to come from? So companies that can provide the data centers and already have the compute there, uh, is like a quick and easy win for these major companies. Like Microsoft, Google, et cetera. And that's where iron finds itself. So we first invested in iron as in Unio and Unio my company is like the world's smallest family office. It's myself, my wife and a small team that work with us in our businesses. But really the investment teams, a couple of Petskseah and an 8 year old and an 11 year old, they re also on team. But yeah we saw in 2022 when Bitcoin price had come down a lot, all the bitcoin proxies like the miners got absolutely slaughtered. I think the iron share price at the time went from something in the low 20s right down to under dollars. Everyone was getting smashed in the technology space at that time as well. It was a pretty big drawdown. Like Meta for example went down under $100 and that's now up seven, eight times from that point. But yeah these smaller uh bitcoin miners got absolutely slaughtered at the same time and they were just essentially too cheap for something that's profitable and has a long Runway ahead of it. So that was the initial investment thesis but when this pivot came in it was just obvious to us that this was the pathway especially as sort of chat GBT released end of 2022 and then we've just been on this pathway of an AI boom. The need for infrastructure, the need for spaces that can run these GPUs,

00:15:00

Leigh Gant: the chips that train the large language models is just such huge demand. And iron is to the people that understand the business was the obvious case there. So I think from the absolute lows to today it's probably um, up something like 60, 63 times for us. We didn't have our investment at the absolute low. We've sort of been trickling in from near lows to sort of not near recent highs but towards the end of last year to build a meaningful position. And uh, yeah the returns been uh, quite handsome.

Phil Muscatello: Fantastic stor and it's on the NASDAQ as well isn't it? That's where it's listed. And it's pretty easy to buy US shares these days as well isn't it?

Leigh Gant: Yeahah Obviously this is uh, not a recommendation to buy. You do need.

Phil Muscatello: No, no, no, of course not. Sorry.

Leigh Gant: I should have think about the valuation but yeah, I think it depends on your view on valuation but looking ahead, for example Microsoft has announced that they cannot take on as many Azure uh customers as they would like because they're limited on compute. Building out data centers to increase compute is obviously costly and timely. And Nvidia's made deals with Iron already. In fact the CEO of Nvidia was on television just two days ago mentioning that Iron is one of their key partners. But any company that requires COMPUTE can see that Iron is already scaled and ready for that deployment. So they're going to come asking looking for deals. And so I mentioned there's other companies that have done uh, a very similar pivot. There's a company called Cipher Mining that's done essentially the same thing, not quite um, on the same scale as Iron, nor with the renewable energy, but they have a deal with Google for example. So yeah, we're very lucky that we're in the right place at the right time.

Iron announces convertible notes to fund expansion; dilutive at conversion

Phil Muscatello: And what about the convertible notes, fund expansion that's coming up?

Leigh Gant: Yeah, so I mean it is great to see good management of companies in any sector where if they need to raise capital for scale and growth, they do so when the uh, share price is at all time highs, not at. So Iron has just announced a uh, Y convertible notes for I think it's about US$835 billion and it's institutional only. So if it does go through, it is dilutive by about 4% at the conversion point. But I guess most people would, first reaction would be oh, oh no, they're raising and it's dilutive, that's no good. But they see the need to scale quickly. That money is exclusively going to be used to scale the AI side of the business. They already project the revenues that it's going to be generating from their existing space to be at least another 500 million next year. So being able to build out more capacities is going to be very lucrative for the business. The price at which it converts is not T to 2031 and it's about double from where the share price is now. So it's not going to be converted that debt unless the company is going exceptionally well. As a percentage those convertibles are uh, far higher than say a recent raise by Tesla. I think it's pretty good. And it's only two days since the announcement and the share price is already back to all time highs, which is an indication that it's got a lot of momentum and a lot of sentiment. But also I guess for the rational people, they don't see a need to jump off the wagon really when the company's raising. So I do think it's good. I'm excited to see how big it can get. I'm very conscious around valuation. As I said, I'm not buying now. We bought Quite a while ago. So we'll see where it goes. But the demand is insane and they've got what people need now.

A convertible note is financial jargon for a debt instrument that can be converted

Phil Muscatello: Leigh, I can't get you let you get away with using a piece of jargon and not explaining it. What's a convertible note?

Leigh Gant: Okay, so essentially it is financial jargon for a debt instrument. So anytime a business, whether it's your local gardening business or AI company that needs to raise money, raise capital to maybe it's to scale the business, to grow their business or to essentially cover maybe their'outgoings because the business is not going well. One way or another they need to raise debt. So one way of raising debt is obviously to dilute investors and increase the share count. So put out more shares and attract investors one way or another. So that's an equity raise. Another way of doing it is essentially by using debt instruments like bonds. So a convertible note is similar to a bond in that

00:20:00

Leigh Gant: you are borrowing money from said investors and at some point that can be converted. So convertible converted, it can be converted into cash or it can be converted into shares in the business. So this particular case it's at the discretion of management. How it can be converted at the end of the period. So the end of the period is 2031. And in this case it can be converted into shares in the business and that's where it becomes dilutive. They need to essentially create more slices of the pizza to reward those who lent them the money to expand in the first place.

Phil Muscatello: Fantastic explanation. Thanks very much for that.

Leigh Gant: I always love to do that.

Phil Muscatello: It does, yeah, very much.

Leigh Gant: Um, there's plenty of jargon out there and yeah, I always like to think of, I mean bonds is actually even more complex in terms of language than.

Phil Muscatello: Anything I know, I know. And how to value them and when they go up and when they go down and interest rates and it's amazing, but's it's just interesting in terms of this and talking about the use of capital.

May: Share buyback by Gyg, Guzman E. Gomez has attracted criticism

I know we're going now off on a side path here at the moment, but I've been reading about for example the share buyback by Gyg, uh, Guzman E. Gomez, which has attracted a lot of criticism. They're saying, well, why are you buying back shares when they're expensive rather than cheap? And if your business model is so good, shouldn't you be using that money to be creating more stores? So, you know, understanding and looking at the way companies use capital is really intrinsic to valuing companies as well, isn't it?

Leigh Gant: Definitely. I'm not massively knowledgeable on gg. You. I have had a few of their burritos in the past and I'm not a shareholder. But, yeah, you can understand why perhaps shareholders would be disappointed that in this case there's a buyback when you. I mean, it's up to management. May, perhaps management of the view that shares are not expensive at the moment and that the valuation is not exuberant and perhaps that is the best use of capital. But I guess many would disagree with that, especially if they're relatively early in their journey and don't have a massive global footprint and accelerating earnings. Perhaps, uh, yeah, a buyback'not the best use of capital.

Unio Growth Partners is investing in micro businesses

Phil Muscatello: Okay, Leigh, so tell us about Unio Growth Partners and investing in micro businesses. And how many laundromats do you own?

Leigh Gant: Yes, well, Unio, our business is very, very different to, um, own. We are not on the edge of AI and data centreers. We're far, far more boring than that. And we're not raising capital either. So earlier I mentioned it's like the world's smallest family office, and that's how we like to think of it. A family office is an instrument to look after family. Family capital. And we have spent our careers. My wife, she's quite successful in her own career, and I've built and exited a few small businesses. And we wanted to have a vehicle that we could invest in both listed markets and private markets, uh, and see essentially what we could do. I mean, obviously I'm a massive Warren Buffett fan, a real fanboy, and dreams of being, uh, like Berkshire Hathaway are probably unrealistic. But if you understand the company, Berkshire Hathaway is a vehicle for Warren to have capital to constantly compound. So they have private businesses, they have listed businesses. And he's looking conversely to what we were just discussing, always looking for the best place in his mind as to where the capital can compound. So Berkshire has participated in share buybacks and at that time Warren's discretion was that was the best use of capital to compound. How can I get the best rate of compounding from the capital that we have? So we invest in microus businesses because of our size. We're very, very micro. We are not Berkshire Hathaway size nor anything like it. But, you know, I have a passion and for small businesses after, obviously building and running my own small businesses. And there are a lot out there in Australia. It's the backbone of our economy. There's, you know, millions of small businesses, not only.

Phil Muscatello: And, um, small business is the largest employer of Australians Apart from the government, I believe at this stage.

Leigh Gant: Yeah, the government's doing its best to catch up. But yeah, uh, that's exactly where I was going. Right. It is the backbone because it employs so many people. And, uh, I find that there's nothing greater than going down to my independently owned cafe and having help around our house with independent tradies and things like that. Not massive conglomerates, these small businesses that people have put blood, sweat and tears in to grow

00:25:00

Leigh Gant: and operate. You hold sentimental value to the owners. But, uh, also, you know, there's plenty of successful ones, regardless of how tough the Australian economy and the business environment is.

Unio works as, you know, three different tiers

Phil Muscatello: So Leigh, give us some specific examples of companies that you've invested in and are helping to build.

Leigh Gant: Yep, for sure. So Unio works as, you know, three different tiers or like a three spoke flywheel. We have a contracting business where we work and partner with other businesses to help them grow, specifically working within marketing, sales and helping them with their tech stack. So making sure that businesses are, uh, not overspending and not underutilizing the right tech stacks to get their operations, sales and marketing going in the right direction. That's one arm. Then we actually invest in private businesses. We have actually recently exited one of our holdings. So we did own a marketing agency. We have exited that after acquiring it a couple of years ago. It's a successful exit and that's been moved on. But we now actually we still work with the new owner of the agency. And that is a roll up of multiple agencies. I'm not industry specific in anything that we would like to acquire, whether Holly or as a part share owner, uh, in private businesses it could be anything. So it just needs to be understandable to ask. We need to like the business and we can talk about what that actually means. But we have to like it, we have to understand it, we have to value it and want it to be part of our holdings. And then the third and final wheel is our listed or on market investments. And so we like to take as much cash flow as we can from the other two parts and invest it. And then like I was saying about Warren Buffett and other great investors, if you've got these different engines running that can compound and you've got cash flow, it's a real luxury. You're trying to put the cash where it needs to go or where it should go to best compound at any time.

We're looking for companies that we can own for a long period of time

So like, what kind of businesses do we like to invest in privately? They have to be really simple, uh, to own something like iron, like I Find that I understand it, but it's complex. I don't think I could be the CEO or anywhere close to that, uh, of a company like Aon. I'm a happy part owner in IT as an investor. But could I operate that company? No way. So it has to make sense with our professional backgrounds and also just be something that's really durable. I know we've just had an exit, but we are looking for companies that we can own for a long period of time. One of our friends and we helped on this deal has just bought a, like a gardening business. But for large properties like acreage and commercial clients, that's a great business. Like, it's very undestruptible. It's got a great base of clients, recurring revenues, like all the systems and processes are there, the equipment, uh, is well looked after, all that kind of stuff. And it's got a good team already in place. That's ideal for someone of our size who needs to have the ability to not work in the business every day, but also still be familiar with the operations. So that if we do need to step in, we can. Businesses that are more complex or larger where we can't step in and we can't be helpful is not really appropriate for us.

Phil Muscatello: So you don't have to go out there with the chain, sort of help out.

Leigh Gant: Well, yeah, I don't mind doing a bit of physical labor, actually. That would be really good. But yeah, if someone's going to need me in the deal room on some complex data center, uh, deal, then I'm not the right person.

Phil Muscatello: So when you're looking at these businesses as part of the criteria, the fact that they're missing something, perhaps that they're not marketing to their best abilities or that there's been changes which they haven't recognized, which you can then help to grow the business. Is that part of the dynamic that you're working with?

Leigh Gant: Yeah, I think definitely in the businesses that we partner with. So our consultancy, we call it a growth partner because we're literally there to partner with the business and help them grow. We're not going to be, uh, employees. We're literally going to sit side by side with you and work with you to achieve your growth goals. I think that's definitely the case. We will speak to potential partners about what they've done to get to their size that they currently are, and if there's gaps missing that we know we can fill and take them to the next level of growth. That's a perfect marriage. That's exactly what we want to do, and we're doing

00:30:00

Leigh Gant: that mainly in the finance space at the moment. So we work with some boutique funds and like investment platforms, education platforms and wealth advisors. So a business that'srt of around low seven figures, they've already gotten out of that startup phase, but they're probably hitting a plateau where they can't actually have a chief marketing officer and a head of distribution and all those sor of leadership positions as well as a fulfillment team. And we come in and say, well, we can do that at a fractional level until you're ready to employ people at all those positions and accelerate you through that growth without you spending an arm and a leg and making all the mistakes that everyone normally does along the way. For acquiring businesses, though, we actually don't want to be in that position. I would actually say that's kind of a red flag where they haven't figured out how to have stability in earnings growth. It doesn't have to be an enormous earnings growth for a business that we acquire. We just want to have stability there because we're looking at buying something that's more mature and set up so that we don't have to go in there and do heaps of work. I think that's been. I mean, that's something I've made a mistake for in the past where I've been an owner in a business. And it's essentially a turnaround story, like they don't have their growth taken care of. And I know that I can help in that space. However, that's not a really good investment decision.

Phil Muscatello: You want it to be far more turnkey. Is that the case?

Leigh Gant: Yeah, definitely. I think the less renovations we have to do to the business, the better. And I think I've got a long list of mistakes and things that I've made in business that I've now taken as a playbook to learn from. And a whole bunch or there's a podium of errors that I've made and essentially they form the case for my red flags.

Many great businesses are available now because owners are retiring

Amber Lights When I'm looking at businesses to acquire or invest in, are you.

Phil Muscatello: Confused about how to invest? Life Sherpa can ease the burden of having to decide for yourself. Head to lifeshherara.com.au to find out more. Life Sherpa, Australia's most affordable online financial advice m and there's many great businesses that are available now because the owners are retiring. You know, they. Or built by the boomer generation. The kids, you know, they're ungrateful children don't want to have anything to do with the greatness that's provided for their well being and um, that this is a real process actually this came up, I didn't actually see the presentation but Sebastian Evans, who's got some listed investment companies with naos who presented at the conference, that's one of his playbooks is finding those kind of businesses that need to be passed on and handed to another generation, not necessarily their own one.

Leigh Gant: Yeahah, absolutely. I mean that is definitely where we want to go fishing. I think there's a case to be made that those companies deserve to keep going. There needs to be a steward for those legacies which makes us sound holier than holy. But I do believe in that like these are great businesses that have served their communities or have great growth stories over a long period of time and to be not critical of the children of these owners, perhaps they're just not interested in those businesses. I know for when my children are not interested in the businesses that we work with so they're far more interested in their own things. They're a bit young um, that ah, uh, I uh, can convince them surely. But yeah, you don't want to see those businesses just disappear. The other thing I think is quite interesting is that a lot of business owners either just don't know they can sell their businesses or they think of selling their businesses too late, they suddenly wish to retire and the businesses aren't um, built to sell. So whilst maybe clearing up growth issues is a red flag if there's businesses that come to us or I can discover that don't have systems and processes and operating procedures all sorted out and have the opportunity to remove the owner from day to day operations through smart hiring, a little bit of technology and perhaps better uh, org structure. That's really interesting. So it may impact earnings in the short run while you're restructuring the business a little bit. But if you can prove that it will be then st for another 10, 20 years without the owner, uh, in the business all the time. That's the potential essentially for a bargain because a valuation needs to include obviously how easy is the company to run. And yeah I've definitely seen a lot of businesses where

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Leigh Gant: the owner is still stuck in working in the business rather than on the business and they suddenly wish to sell and they uh, go oh this business is not an asset, it's currently a job and I need to transform it into an asset so I can sell it. And I think that would be the ultimate sweet spot is to find a really desirable business that's going to come to us asking for help to make it built to sell. And I would say well you I could be the suitable buyer after we complete that job.

Phil Muscatello: So give us a specific case study of a business that you've acquired. It'd be really good. I think it's a great learning to understand businesses is how they operate. And you we can apply this to our investments in the markets as well for sure.

Leigh Gant: I'm really happy to use the company I already mentioned that we recently sold. We exited. Exited is the fancy private equity way of saying I sold the business.

Phil Muscatello: This is the marketing agency, isn't?

Leigh Gant: Yeah, it's the marketing agency. So to begin with, the way in which I first started looking for businesses to buy, private businesses to buy was essentially getting as many IMs information memorandums as I could from business brokers and just analyzing them. So an information memorandum is essentially a booklet with basic details about businesses for sale. So you can see very high level things like what the business does, how it operates, perhaps the last five years of revenue and maybe a few specific sector related items about the business. So it's not really deep but you can essentially do a little bit of analysis, little pre due diligence from those to see if you're interested. And I hadn't bought a private business in the past. I'd sold businesses but never gone through the process of buying it. So when you become a self directed investor, you're not perfect from day one. You've got to put in the reps and you might look at hundreds and hundreds of potential investments before you make your first one. So it's very similar with a private business. You've got to get the reps in first before you go out and buy one.

Phil Muscatello: Iose, you need an understanding in a field, don't you?

Leigh Gant: Yeaheah. And after, if you find a business just from looking at information memorandums, you don't just put an offer in and buy the business. So there's quite a process from there and the first step is to then go and find even more information about that business before you meet anyone or talk to the broker. So I was essentially doing it as a mental exercise to prepare myself to at some point buy a business. Except in this process I came across a small marketing agency that really spoke to me because my background at the time, I've had a few different jobs but I have worked in marketing a bit and I was the chief marketing officer at the time for Australian Shareholders Association. So this marketing agency was quite small, it worked with Financial services. So financial planners and accountants. And it had been for sale for a while and the asking price had dropped over a couple of years and I was looking at it and was a retiring owner. Um, financial services make sense to me having you know, worked in investing for a while so I spoke the language and you know, I've got the work experience in marketing. So I said oh, this is pretty interesting. So yeah, I just accelerated through that process and ended up buying the company. It took about six to eight months to go through all my research, due diligence and agreement on price and all that kind of stuff. We can skip those details now. But yeah, eventually I bought the business and it had key things at a high level that I was looking for. Retiring owner who wanted to exit. So that reduces some of the risk from competition and things like that. Like if the owner wants to get out and then go and start the business again with a different name, that's a bit risky. So y.

Phil Muscatello: No need for a non compete clause hu.

Leigh Gant: Yeah, yeah. Which is actually really hard to kind of enforce as well. So you know, just because it's written down doesn't mean that it's actually very protective of your business. But yeah, retiring owner, it was very profitable. When I went through due diligence I understood that there wasn't really any standard operating procedures. It was kind of all locked away in the owner and the team members heads like they'd been operating this business for so long that it was just automatic to them, like how to do the execution of day to day operations which is not great for scale. And like I said, that's not really a sellable asset. You need to have not only project management software and things like that in place, but also literally how to do the jobs, who does them, like step by step checklists of

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Leigh Gant: how to do things and none of that really existed. So for a lot of people that should be a red flag. But for someone like me, I go, I'm really good at developing those and I know this space, I can put that together and we can scale this business really quickly. So yeah, so we took it over uh, and immediately that was my first priority is to obviously settle into running the business, but at that same time develop the backbone of administration and operations so that we could scale and take up the opportunities that were out there. The retiring owner had essentially put the brakes on any growth over two to three years because she wanted to exit, but she wanted to get out, she wanted to retire, she wanted to, you spend time on the beach or whatever. It Was rather than running a business. So she wasn't taking on um, new clients. I knew that we could grow it just from my own network. So I was really happy to do that. Of course not everything goes to plan. I'm a very big optimist when it comes to business and uh, it can.

Phil Muscatello: You have to be really, don't you?

Leigh Gant: But perhaps I was a little bit too optimistic because you know, it was really, really hard work. The first six to eight months was super hard. So getting to know team members, restaffing after people moved on from the business, setting up that admin and operations backbone, there was a lot of me working with my hands on the tools rather than working on the business from the top. I was in there doing the work. So that was quite challenging. But it paid off. We did end up growing the business. We did end up bringing in a really great operating team. It was very efficient. So not only did we grow revenue, we grew the margins. So that's like throwing rocket fuel on a fire. Like if you can grow the revenue and improve margins of any business, of any site, you're essentially there's a lot more coming to the bottom line. So that was really good.

A roll up is where you buy similar sort of business over and over again

And yeah, it was a roller coaster uh, internally and lots of long nights on ah, my behalf which was really difficult but it sort of paid off. So within a year we were already, I was personally was already receiving offers on um, the business because within my network people understood what I was doing and I know others who were setting up roll ups. So uh, roll up is where you buy a similar sort of business over and over again so that you can form one large group of businesses. So it could be childcares, it could be marketing agencies. It doesn't have to be just one sector. Uh, but you know you're buying the same sort of business over and over again to create one large business of that sort. So a few marketing agency roll ups essentially ask me, are you interested in selling? And um, initially the uh, answer was no because I'd just done all this hard work. But at some point I thought well you know, you got to take the opportunities when they come. And that's what happened recently and we exited from there.

Phil Muscatello: Wow, fantastic. Congratulations. It's a great story.

Leigh Gant: Thank you. Thank you.

There are a couple of risks that I put more weight to when investing in micro businesses

Phil Muscatello: So what are some of the things or uh, maybe just one thing because we've got to wrap up the interview now. We're just about to go over time is what's something that you've learned from operating with micro businesses that you apply to your share Market investing.

Leigh Gant: There's probably a couple of risks that I put more weight to. Now one of those is customer concentration. So if you uh, are looking at investing in a bit like a service style business and that business has a list of customers. So regardless of how many customers are on that list, if there is a single customer that makes up a large percentage your revenue, maybe it's 20, 30, 40% that is really good in one way is that your potential investment has the trust of another client and they're making lots of money from that client. But it's a massive risk because if that client moves on, you suddenly see that 20, 30, 40% of revenue disappear. So you have to be really wary of companies that say, oh we've had these clients for years because we're so good, we've got all this trust and deep relationships with our clients because our lifetime average lifetime engagement is seven or eight years. Whilst that is great. But if there's a risk from one of those clients leaving even on good terms, the destruction and revenue is scary. So that's one thing key man risk. Obviously if you, you have a business where the founder, CEO uh, is integral to the business and then maybe something bad happens and they suddenly can't work in the business anymore

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Leigh Gant: or they want to retire or something like that. I've put more weight in that recently after seeing how not in a business that I actually own'm sorry a friends that I've seen him having to quit because of health reasons and that business just falling apart really quickly. So I would be really conscious of keyman risk on the other side if a company is really well managed and um, built as an asset, even if there's a person like Warren Buffett who's obviously the face of Berkshire Hathaway, it can still operate exactly as it is without Warren in charge. Yes, it's probably going to miss some of the magic that Warren brings. But I don't think the operations of Berkshire Hathaway are going to change too much without Warren being at the helm. And there's actually an even more recent example from a large serial acquirer, a very well known Finance Bros. Company in uh, Constellation Software. It's a uh, acquirer of small software companies. They've got made over uh, 750acquisitions over uh, the last couple of decades. And that CEO and founder uh, Mark Leonard just retired on health reasons and the share price dropped like quite a lot in a very short amount of time. I think it was its biggest drawdown ever. But I guess what most people miss is that the person who's taking over Mark's position has been with the company for decades. And the company is totally built to run without Mark Leonard in the driver's seat. So, you know, if you picked up shares at the very bottom tick there, you've probably done really well because I don't think it's going to make a huge impact without Mark Leonard as CEO. Uh, so those two are the big risks that I would look for to avoid, I guess, in listed markets in the future. Any positives that I would look for? Probably not. I just think it's so crucial to really understand the businesses that you're investing in, whether it's, you know, private or listed markets. You just have to really understand the business because looking at what the share price is doing tells you nothing about the business itself. All it does is tell you about the action in the, uh, in the auction market, that is, uh, you know, the share market or private world. You've got to understand every little bit of the company and how it operates if you want to be an investor in it. Yep.

Phil Muscatello: It's not easy investing directly in the share market. You actually do need to put in the work, don't you?

Leigh Gant: Yeah, well, Charlie Munger says if you think it's easy, you're stupid. So I like to think I'm not stupid.

Phil Muscatello: So if listeners and viewers want to find out any more about you, where can they find you?

Leigh Gant: Yep, you can visit unioowthparners. Uh, com do. We're actually about to restructure uniogrowthparners.com uh, at the moment where we're going to. As I said, we've got three engines and we're going to split them up into their own digital spaces. You can wait for that or you can find me on, um, LinkedIn. I also write in a number of places on the Motley Fall Ras team Invest My you'll find my name behind some articles everywhere. So just Google me and reach out. I absolutely love talking investing, whether it's private markets or listed markets. So if anyone ever wants to chat, you'll find an near in me and.

Phil Muscatello: Even sometimes lurking on X as well.

Leigh Gant: Ye, yes, I don't like to do too much on X but I get impulses to uh, start chatting back and forth. You know, it's a very noisy place, X but there's some true gems on there and if, if you're able to filter, uh, all the rubbish and to uncover gems, you'll do well on X. But if you don't like noise and you don't like lots of people shouting at each other. Maybe avoid X.

Phil Muscatello: Great investing advice. Avoid X. Unless you're getting some, uh, gems out of there, which you can. There's some great people there that you can follow as well and get some information.

Leigh Gant: Yeah, for sure. I totally admit that I have found investing ideas through X. Probably more now going off onto places like substack where writers are able to explain themselves deeper. But yeah, I think, you know, there's still really clever and great investors that spend time on X, but you have to have a really good filter, uh, like a personal filter to understand what's true, what's not, what's noise, what's signal.

Phil Muscatello: Leigh and thank you very much for joining me today.

Leigh Gant: Thanks, Phil.

Phil Muscatello: Thanks for listening to sharers for begin. You can find more at chesforbeginners.com. if you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing for their future.

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