Ayo Disu is the Co-Founder of Octillion Capital Partners, a value-driven digital native consumer brand platform acquiring, operating, and growing an ecosystem of inclusive and sustainable brands in the health, beauty and food and beverage industries. In his capacity as co-founder of Octillion, Ayo serves through a determined concentration on a clear acquisition process, inclusive governance, improving processes, and steering the growth of all areas of the business. He is considered a servant leader who keeps people at the heart of the organization and believes that diverse people and products are key drivers of business performance.
On this episode, Ayo and I discuss the importance of transparency, Octillion's acquisition criteria, how they prevent homogenization, and much more.
What is Octillion Capital Partners
Ayo Disu: Sure. So I'll try not to speak for too long because I get very passionate about the topic of the company. So Octillion basically was a company or is a company. me that I started after my master's degree, my second master's degree. And it came about just a lot of like reflection came around after that COVID period in that I was doing a lot of research just around, I think I was doing a lot of research around innovation.
And I was looking for a thesis to write basically, I was looking for a thesis to write for my, for my master's and everything that I suggested to my, to my supervisor at the time was just rejected, rejected, rejected, rejected. So in the quest to find a research topic, you go down a rabbit hole.
Sometimes this rabbit hole led me to something interesting known as a search fund. So I came across this Stanford search fund primer. And instead of me essentially focusing on my research, I was, I ended up reading this primers like a 40 page primer or something like that. And it just talks about a search for that.
If you that are not familiar, search fund is a subset of private equity in which an entrepreneur looks to acquire business rather than start a business. I don't have products you've worked before. And I was. familiar with the concept of just like buying and owning businesses and stuff like that. And also a lot of my degrees are focused around business.
So I was just very keen at the prospect and also the idea of actually acquiring a business, because I felt like that was where my skillset lied in terms of optimizing rather than starting. But in some ways you have to start to then learn how to optimize.
One of the things that I really liked about it was the entrepreneurship side of things in which you could combine the love and passion for entrepreneurship with basically just a love and interest in finance and bringing them together to then go into M& A.
So with that being said, after writing the station, writing the business plan within the same, at the same time, I launched the company after my thesis, which was actually awarded the best thesis in the entire department. And they wanted me to, to publish that.
But I was like, I have no interest in pursuing a research led degree or PhD. I like to do things a little bit more practically. So I launched the company and Octillion at the start was just a search for looking to buy an e commerce business. But after a bit of work, basically just starting off, obviously just building, put your head down, do as much as you can.
I came across, I got a message, right? This is like maybe a couple of minutes, like almost a year in to the company. And I get a message on LinkedIn from this guy just saying, Hey, I like what you're doing. I think you read my thesis because it got published on the actual CIMR, which is the Center for Innovation Management Research.
And he was like, Oh, I really like what you're doing. Let's catch up. Initially, I think I was working on a deal and I have, I use Notion as my kind of like digital operating system. I said, okay, I'll put this guy in my notion, but I put him in my low priority list. And then I just kept on doing what I was doing.
And then even she's out again saying, Hey, I really like to catch up. I was like, okay, let's catch up. And this was like Easter period of like 2021. If I believe we ended up chatting, got on very well, very, very, very, very good chats. And it was actually my soon to be, I'm now current business partner, Kunle Campbell, shout out to Kunle Campbell.
We just connected. We started working together just informally just to build that build that understanding. Ever since that time we've been working together since Octillion now to just bring it full circle an acquisition company that is focused on essentially building the next CPG impact conglomerate.
So take the likes of P& G, your Unilevers, your Nestle's. That sort of architecture and that sort of DNA of acquiring businesses or having a portfolio of brands in which you are then obviously serving customers in different aspects with different industries, like food and beverage, health and beauty. So at Octillion, we're focused on high impact CPG brands in food and beverage and health and beauty.
We're looking to acquire businesses that basically have a DNA. For, I would say, goodness and businesses that are category creators that do not realize they're category creators just yet. And so far, we have around three brands in the portfolio, a CPG, a food brand company called lean caffeine, which sells clean, good for you, functional nutrition products.
So. It's like a two in one in that company that we have the clean coffee side of things. When we sell incredible coffee, to be honest with you, that's free from microtoxins, free from heavy metals, free from pesticides. And then underneath that we have a sister brand called clean and pure that sells other supplements such as MCTL powders, collagen, bone broth, all that good free stuff.
And then the other brand that we've recently just acquired is a skin tech brand that I'm keeping the name close to my chest because it's actually undergoing a, a rebrand at the moment. And there are a lot of interesting things in the works from that.
But to just summarize, octillion is ACPG impact conglomerate or aspiring conglomerates. And yeah, we're looking to buy 20 companies in the next seven years. So far we've done three, so there's 17 more series to be completed, so yeah.
Hands-On Acquisition: Octillion's Approach to Managing Companies Post-Acquisition
Alex Bond: We were talking before the show about what the acquiring workload is, right? So when you and your team at Octillion are acquiring these companies. How hands on are you when actually running them after the fact?
Ayo Disu: We're truly hands on, especially for the level of businesses that we provide. So typically, these businesses are like sub 10M, in terms of revenue sampling. So typically, they're usually founder led businesses. Founder, maybe the founding team, with a couple of VAs.
It's actually maybe one or two full time employees. In some cases, it's really just when we're operating with a couple of officers, personnel, consulting, and all that stuff. So we're really hands on, especially from now on. Now, that's not going to be the case forever. If you're trying to acquire 17 or 20 businesses, you cannot run 20 businesses.
At least at the moment, we're very hands on, but we're also looking for leaders, leaders of businesses to basically represent us so that we are not. So right now, the way that we're trying to do this is to put in place robust system and processes so that the system will run the business, but the people will run the system so that the business is not people dependent, it's system dependent.
Because again, you can always trust your system, but you can't always trust the people. So again, if you make a bad mistake, you can plug someone out of your system, but then replace them back into with another person in the system, but the business and the system is fixed.
So right now we're just putting up those processes and systems so that it would enable us to fire ourselves when we find the right people that we believe can lead the companies in the same way that we would lead the companies. So answer your question fully, we're quite hands on for the time being.
Strategic Focus: Octillion's Choice of Health and Beauty Industry for Acquisitions
Alex Bond: Why specifically this industry or niche that you decided in, you know, health and beauty, nutritional aspects. Why did you guys decide to pick and acquire companies that have to fall under that umbrella?
Ayo Disu: Yeah. So I think, as I said before, when Octillion started, the goal was just to buy an ecom business and that's just extremely generic. There's so many types of eCommerce businesses out there.
So we had to kind of be a little bit more introspective and also a little bit more selective. Plus also, we need to look at sorts of like, okay, look, if we're going to be doing this, if we're going to dedicate the next decade of our lives to doing this.
We want to do it on something that we actually really care about. We're not just looking to, to make money. Don't get me wrong. We're a for profit enterprise, but you can make profit, but also still do well and also still have to have fulfillment in terms of like the jobs or the companies that you actually work for.
We looked at our own personal lives. From a young age, I've always wanted to be a footballer. That was my first ever, like this is soccer in the states. I wanted to be a footballer. And I remember when I started to really take diet seriously. I realized just the impact it could have on my performance.
And with that, I've just kept this cadence all through my life of, again, my diet is not perfect, don't get me wrong, but I'm very cognizant and I'm very aware of what I'm putting into my body. I fast, I do like an OMAD diet typically. Now I'm struggling a little bit more just because I'm getting so busy.
But I'm very cognizant and I'm very aware of what I'm eating as well as also what I'm like putting onto my bodies from a skincare standpoint. So that was the first thing you're just looking at in our own lives and that business partner KC, he had an even bigger health scare, bigger reason to live a healthier lifestyle, just because of obviously what he had gone through in the past.
So when we're looking at all of that, plus also we're looking at macro trends as to kind of how the world is changing, consumers are a little bit more aware about what they're putting into their bodies as well as also putting onto their bodies. That coupled with the fact that if you're looking at it from a macro level in terms of what is out there currently.
As I mentioned, the companies like Unilever, Kellogg's, they control a large proportion of what we eat, what we consume. A lot of times people think they have so much choice, but they don't actually have that much choice as to what they're consuming and also what they're putting into their bodies because it's still coming from the same brand.
And their model is based around just repeat purchase. So in order to get that repeat purchase, they're going to put a lot of things that will drive that. So a lot of additives, a lot of sugar, a lot of salts, a lot of chemicals that to be very honest with you, they're killing you. But you don't know.
And really, a lot of like the research is also funded by these big industries, big farmers is a huge, huge case study for that. If you look at obviously what happened in America with the opioid epidemic and the Sackler family, you see that a lot of research is actually being funded by the company.
For us, when we just saw, obviously there's a big problem, there's an obesity crisis at the moment. It's a modern day epidemic. And I think that is having an impact as to not just your physical wellbeing, but also your mental wellbeing, which is why you're seeing the rates of like depression, anxiety fly through the roof.
And to be honest with you, some of these things are, they're not just mental, but they're also physical, which is based on just how you feel really. And as they say, like you are what you need. So if you're eating a lot of like terrible foods, you're typically going to feel quite like bad, lethargic, depressed.
And also, if you're translating that to, let's say, like the skincare industry, the skincare industry is also fairly secretive that you don't really know what's happening. You also don't really understand some of, like, these ingredients that they're actually putting onto some of these creams, some of these serums.
You don't really know. So what we're trying to do right now is trying to dispel that as well as also just provide natural, easy to understand, traceable ingredients, at least for our skincare products when we eventually go into that market so that it just dispels the myths around, essentially, skincare.
So really it was basically just how we're living. Where is the world going, and where would we like to make the most impact, and where do we think we can make the most impact. And that basically formed the basis of our decision making process to go into food and beverage and health and beauty.
Transparency and Beyond: Key Criteria in Octillion's Acquisition Decision-Making Process
Alex Bond: And I want to talk about that decision making process a little bit, because what I'm hearing you say, Ayo, is that transparency is key a little bit in kind of whether it's with companies that you're trying to acquire, or whether it's how they or you are selling to the public, is that transparency isn't something that we see as often nowadays. Is that a major criteria in a company that you're looking for? And what are some of those other criteria in a company you're looking to acquire?
Ayo Disu: Yeah. So I'd say like, definitely you're seeing companies being transparent now. I think one of the things that I was essentially accelerating that it's just social media, but also it's the consumer is getting smarter along with the days that the consumer is blind to the fact, blind to what a company does. Now, all you need to do is just Google some stuff on the internet. You have obviously social media in which you have people actually calling out brands for doing X or doing Y.
So the consumer is getting smarter and brands starting to realize that, Oh my God, if we're going to, if we're going to thrive or sustain ourselves in this modern world, we have to become a little bit more transparent in our operations. So transparency is key, but obviously there's different levels of transparency just because you're trying to be transparent doesn't necessarily mean you're going to give away all your secrets and stuff.
For us, I think transparency, at least from a skincare standpoint, was just around like the ingredient list, like what are you putting into these Into these, into these creams and serums that you're making from a food standpoint, it's just basically like, where are you sourcing all of these all of this from?
What are the actual, like nutritional benefits of these products? And again, you get into that sort of granularity when you're a bit deeper into diligence. Going back to the question around our criteria we're looking for a couple of things. Looking for a business that is simple to understand and operate.
So taking the owners from something like Warren Buffett we're looking for companies that are profitable. So profitable companies anywhere between 250 minimum, but at least 250,000 STE EBITDA net profits. Looking for a company that has a recurring nature to its service. So, which is why we like skincare and food and beverage, because you have that repeat purchase which is then optimizing for CLTV.
We're looking for companies that have started their path towards sustainability. Again, whether that be in the form of your packaging, whether that be in the form of your impact, whether that be from like your supply chain, maybe just sourcing from Local or regional manufacturer supply chain.
So for example, with our food business, a lot of our supply chain is based around the Europe zone.
So it's actually reducing our carbon emissions. We're looking for companies that have the high potential for growth, obviously. That's super important for businesses that have at least 20 percent net margin. So strong operating and financials that can lead into even stronger margins as we expand, as we infuse optimizations across the board.
And yeah, we're looking for businesses that typically have like a small product catalogs or small SKU size. So anything between ideally five to like 15 to 20 products, or maybe even 30 products for the time being. But obviously as the team grows, as the team skills, then we can amp all of this criteria up acquisition size anywhere from 1 to 7 million. And yeah, that's a bit of right criteria.
Red Flags and Deal Breakers: Evaluating Company Fit in Octillion's Acquisition Process
Alex Bond: I'm curious what happens when you find a company, right. That has all of these attributes and kind of ticks all these boxes. What some of the red flags that pop up that might then make you decide that it's not really a good fit.
Ayo Disu: I think when you probably just do a little bit more diligence on the company. Again, typically you can typically like to do like share based deals, like actually buying the entire company by all the shares, but typically looking to do that if the company doesn't have much liabilities.
So one of the big strip flags is that if you go into the financial and you see a lot of liabilities. Because you'll be buying the entire company, it means that you'll be taking on all of those liabilities. And that's typically what we do not want to do, especially for now, I'm looking to infuse a bit of debt to buy the business.
So we need to ensure that we have a strong financial profile so that we can obviously Take the business and grow the business. So that's one thing. Red flags is just like a lot of liabilities, at least from a financial standpoint.
Second thing is just its interaction with the seller. So this is a little bit more of a qualitative factor, but it really, it really is extremely important because again, you're buying the business from essentially like a willing seller.
So I'm hoping that the center is typically quite responsive to questions, to queries. That's another big thing, just like interaction with the seller, the relationship with the seller, you're looking at potential. Another thing we don't like to see is revenue concentration. So again, if a lot of your revenues, let's say, and this is e commerce, right?
So typically revenue is not that concentrated because you're getting it from a plethora of different customers. It's not like a B2B company or B2B SaaS company when you're depending on maybe like three, four, five to almost 10, 10 clients, if there's revenue concentration from a certain customer or someone.
That's another big red flag because maybe the background, the, the, the customer and the previous owner, the current owner have a working relationship and the customer are related. Should you then acquire the business? Would you then have that sort of relationship? Would you have that same leeway?
So that's another thing just to obviously be cognizant about looking at potential growth opportunities as well. Like sometimes you might want to sell a business or some people might want to sell a business because to be very honest with you, there's not much else you can do to really grow the business.
So when we say like skin on the bone, we want there to be skin on the bone for us so that when we're coming in there, we know that, okay, we can take this business from 5 million to potentially like 50 million. And then we say, okay, we've done our part. And then we pass it on. So there needs to be enough skin on the bone.
If there's no skin on the bone, it's just not that interesting. As well as also some, just other, some, some other factors that we look at in terms of just like from a compliance standpoint we look at obviously some, some marketing some marketing metrics. Effectiveness of cash on the team products, all of that. So there's, thet of different factors that come into place, but which is why we put a lot of emphasis on the initial like screening bits.
So that's, and diligence. It's basically just like really just studying a couple of key areas, checking on the dotting on the i's, crossing on the t's. So that we know that, okay, should they pass diligence, we're most likely going to buy this business. So we do a lot of work up front so that the work later on is not as much.
Alex Bond: You've talked a lot about the quantitative criteria and the quantitative necessity in terms of what checks your boxes, but you used the word just now in your answer, qualitative. And I think that that's very important to help contextualize maybe why Someone is selling their company. Is that an important factor that you look into? Because that is a little bit more intangible.
Ayo Disu: Absolutely. I think you have to, you have to understand motive, right? You have to understand motive as they always say in like the legal world, what is the motive behind this person's action? Because if your motive is pure, then it will lead to an easier transaction in that the person is forthright. They're honest.
If the motive is not pure, then it will probably cause a lot of problems later down the line because they need a little bit more, a little bit more cunning in their motives. So for example, let's say, you know, that there's a problem that you have foreseen because you have been in this industry for a while.
And potential new buyers do not know about this problem, maybe because it's an industry specific thing, or just because they are not super familiar with that industry. And you're trying to obviously offload this business so that basically you do not have to bear the risk and you can more or less just cash out.
These are some of the reasons why you obviously just have to consider the qualitative factors and understand the motive for whether the person is selling the business. So that's a key question I always ask them, like, why are you selling the business? Particularly if it's a business that is on the up and up.
So, revenue is growing, gross margins are good, net margins are good. There is a plethora of avenues in which you can take to grow the business. Why are you selling? Why are you really selling? Let's understand the motive here. Typically people can sell their businesses for different reasons.
You get the fact that maybe they've taken the business to a point in which they feel like they can't, or like sin basically. And they're just thinking to now do something else. A lot of people sometimes are quite good at starting businesses, growing the business, and then they're looking to sell, but they're not really looking to run the business for a prolonged period of time.
Some people, to be very honest with you, are just bored, in that, okay, I've taken this business. It's not as fulfilling as I would like, and maybe I have other projects that are a little bit more fulfilling that I would like to see, maybe we utilize the capital or utilize a bit of the capital from, from selling the services into, and then that's it.
But yeah, it's a very important aspect, a lot of qualitative factors to consider obviously with an acquisition as well as also just like running the company as to okay, you have to put yourself in the in the shoes of the customers, have to put yourself in the shoes of a plethora of different stakeholders so that you can try to make the best decision.
But at least from an acquisition standpoint, understanding the motive and reason as to why the seller is willing to sell that business. And also assessing yourself, so assessing, we always assess ourselves and our ability to run these businesses is crucial for just making the right decisions.
Balancing Diversity and Competition: Octillion's Approach to Preventing Homogenization and Monopolistic Tendencies in Brand Acquisitions
Alex Bond: I'm very interested in what you said earlier. It's kind of stuck with me about your comments about like a PNG or Unilever and how the illusion of choice can happen in the free market with a goal of acquiring 20 brands.
How do you prevent from being homogenized essentially where all your brands have similar business models or plans and aren't competing with each other? I mean, how do you go about not creating like a monopolistic society that way?
Ayo Disu: Oh, I think with what we're trying to do, especially with every brother, we're trying to do every brand is unique. Every brand is, every brand is different. The way I look at brands is, is that like a brand is like your friend. I'm sure you have more than 20 friends and they're all very different, right? So that's the same way that I think that we are looking to build our brands and then they will each have their own tone of voice, their own voice.
And it's kind of similar to obviously what a lot of people that have obviously gone down this route have done in that. Yeah. Well, our brands are different too. But we're trying to have brands that are different, but brands are also good for you. The octillion DNA is good for your brand.
So even if you're buying from one of our other brands, you know, that This is a certified good brand because of essentially the main company that it's attached to. There's no funny business. It's just good, decent food and beverage products and skincare products.
Alex Bond: Because you've elevated your brand too. So it has the Octillion stamp of approval a little bit.
Ayo Disu: Exactly. It's almost like when you see like certified B Corp, you know that, okay, this company has undergone like a rigorous process to getting that accreditation. And there was something that I was going to say in which you ask for like a criteria as to what things that you look out for.
And so I won't go into, I'll try to keep it brief, but like, it's one of the reasons why we picked the first company that we acquired link a theme in that the story of that brand was just incredible in that. The founder of the business, I believe his father had dementia and unfortunately passed away from dementia.
And as a prevention mechanism, he was researching just ways to prevent getting dementia. And one of the things that he came across was just intermittent fasting. And as he was doing intermittent fasting, one of the things that came across was obviously how you sustain yourself during the fast.
And I believe he really liked coffee. So he started looking into this whole Bulletproof coffee movement. So I'm sure you could know people like Dave Asprey with his brand and some of these other people and just the entire Bulletproof coffee movement. He was like, okay, I'm going to try and do this, but I'm going to do this as clean as possible.
So creating coffees that basically were free from mycotoxins, which was from pesticides, were free from heavy metals and tasted incredible. And that story resonated with what we were trying to do at Octillion, which is providing customers with the best in class, good food products.
So when you marry those those two things together, it's exactly what you just said in that the brand that we acquired matches with the brand story of the acquirer. So there's this. like flow of authenticity throughout the supply chain, the acquisition supply chain.
And it's going to pass down to the customer because what we're now doing is that we're now infusing better operational efficiencies. We're basically putting more love, more attention, more resources into the business so that we can provide, obviously just better quality products for our customers.