Welcome to The Business Buying Academy with Sieva Kozinsky. Here's what we have in store for you today:

• They were early to the trend - and then lost a fortune
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• Avoid this business buying mistake​
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• How to do roll-ups like a pro
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🔑 They were early to a huge trend - but lost a fortune

We all want to jump on the next big trend early.

Now imagine if you invested in online video chatting in 2005.

You would have made a killing, right?

Not in this case.

This is a cautionary tale on time horizon and sticking to your core business.

Here's the story:

In September 2005 acquired Skype for $2.6 billion, with potential earn-out payments that could have increased the total to $4.1 billion.

The purpose of the deal was to integrate Skype’s video chat & messaging services into eBay’s marketplace to enhance buyer-seller communication and create new revenue streams through features like pay-per-call services.

At the time, Skype had 54 million users and was seen as a pioneer in online communication.

But the deal struggled from the start. Here are a few of the problems:

• Skype’s technology was difficult to integrate meaningfully into eBay’s platform. Most users preferred email or existing tools for transactions.
• The anticipated synergies, such as enabling direct calls between buyers and sellers, failed to drive significant engagement or revenue.
• Cultural and operational mismatches between eBay’s e-commerce focus and Skype’s telecom innovation further hindered progress.

Here are some key details of the deal:

• Deal Value: $2.6 billion upfront (cash and stock), up to $4.1 billion with earn-outs.
• Date Announced: September 2005; closed October 2005.
• Outcome: eBay wrote down $1.4 billion in 2007; sold 70% stake in 2009 for $1.9 billion.
• Lesson for Buyers: The acquisition illustrates the risks of buying innovative tech without a clear integration plan or alignment with core business needs. Thoroughly validate synergies and test use cases before committing to high-valuation deals.

By 2007, eBay wrote down $1.4 billion of Skype’s value, admitting the acquisition overpaid and underdelivered.

eBay bought a company leading the way in a technology that would completely change how the global economy operated within 15 years.

And they had a massive head start (Zoom would not exist for another 6 years).

But eBay didn't seem to realize the opportunity.

And eBay was the wrong operator for this business.

eBay sold Skype for a $2.6 billion valuation in 2009; just two years later, the business was sold again at an $8.7 billion valuation.

Clearly, eBay wasn't maximizing the value of the business.

And years later, Skype is shutting down while its younger rival Zoom is still around and worth $24 billion. There were many missteps along the way for Skype (but that's a longer story for another time).

My point here is that taking an advantage of an early trend is not enough for success.

I've seen plenty of people try to buy HVAC businesses over the last couple of years simply because it was the hot trend.

But you have to ask yourself: Why are you the right person to operate this type of business? What's the long-term advantage you can unlock that others can't?

🔑 Don't make this mistake when buying a business

Buying a business without getting a quality of earnings report is like buying a house without a home inspection. You’re taking a big bet without knowing what you’re buying, and it could be a disaster.

Even if the seller gives you all their financial statements, they often have very bad bookkeeping. ​

So, what should be in your QOE and financial due diligence package? ​ Here's what today's sponsor Appletree says about their QOE reports: ​

✅ Proof of Cash ​

Are revenues real? We rebuild the last 1-2 years using bank statements to verify that reported earnings arrived in the bank account.

✅ Addbacks That Actually Make Sense ​

We normalize SDE or EBITDA with logic, not wishful thinking. The hand-waving. No “adjusting away” real costs just to make numbers look better.

✅ Working Capital Analysis ​

Avoid the “Post-Close Surprise” where you’re suddenly short $150k in working capital. We calculate what the business needs to operate smoothly.

✅ Forward Looking Projections

​We model post close cash flow and debt service coverage under flat, growth, and decline scenarios – so you know how risky the deal really is.

If you’re sending out LOI’s or nearing a deal, don’t go in blind. Talk to Appletree for a pragmatic, thorough Quality of Earnings report – built by people who’ve bought businesses themselves.

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🔑 Here's how you can buy a business

I chatted with Brian Wolfe, an expert on M&A from all levels - he worked as a partner at a big law firm for 17 years, helping to close huge deals.

Now he's in the world of ETA (entrepreneurship through acquisition). He helps searchers get started, and he's bought some businesses himself - including a rollup of marketing SaaS businesses.

Brian gave me a masterclass on buying businesses.

​Watch on YouTube​

​Listen on Spotify​

​Listen on Apple Podcasts​

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Have a great day,

Sieva

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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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