🌟 Hello, Reader

Welcome to KSMC Double Klick, your bi-weekly briefing on M&A, finance, and AI innovation.

Here are this edition’s insights.

Warm regards,
Kapil Sukhija
Founder, KSMC

📊 Deal Strategy Deep Dive

Financing Tailwinds as a Strategic Lever: SBA "Made in America" Guarantees in Lower Mid-Market Deals

On March 31, 2026, the SBA launched its "Made in America" loan guarantee, raising the federal guarantee on qualifying manufacturing loans to 90%, up from the standard 75%. It runs through the International Trade Loan program and took effect on May 1, 2026, covering manufacturers in NAICS sectors 31 through 33, up to a $5M loan. SBA deals typically close with about 10% equity down, so the higher guarantee improves the lender's risk position more than the buyer's eligibility.

The Challenge

• Valuation inflation: Cheaper, better-backed debt finds its way into price. With upfront fees also waived on qualifying loans up to $950,000, multiples on good manufacturing assets tend to drift up.

• Execution risk: SBA eligibility tests and documentation slow a deal. A buyer leaning on SBA approval can lose a competitive process to one with committed conventional capital.

• Structural limits: SBA rules constrain seller notes and rollover equity, and impose standby terms on subordinated debt. The structure has to fit the program without losing the commercial objective.

Illustrative Example

On a $4M CNC machining shop, the buyer puts in about $400K and finances $3.6M through an SBA partner bank. At a 75% guarantee the bank carried roughly $900K at risk. At 90% it carries about $360K. The equity check is unchanged, but lender exposure falls by close to 60%, which loosens credit and can push a competitive buyer to bid higher.

The Canadian Gap

Canada has no acquisition-financing equivalent. Its closest program, the Canada Small Business Financing Program, guarantees 85% of a lender's eligible loss but caps support at $1.15M per borrower. It will not finance a share purchase, the usual structure for a Canadian seller protecting capital gains, and goodwill is fundable only inside an asset deal and capped at $150,000.

So as the U.S. channels capital into domestic manufacturing, the financing gap for Canadian SME buyers widens, including for those buying Canadian manufacturers. Raising the CSBFP cap and allowing share-based acquisition financing would do more for domestic succession than most grant programs.

Success Factors

• Screen eligibility first: Confirm manufacturing classification and size standing before spending on diligence. An ineligible target needs a conventional plan.

• Model leverage against price: Quantify how the 90% guarantee changes achievable leverage and the price it supports. Capacity is not a reason to overpay.

• Brief the seller early: The financing supports certainty of close but limits seller notes (subordinated) and standby terms. Surface that before it surprises anyone late.

• Plan for timing: SBA approval adds weeks. Build it into the schedule, and line up a conventional or bridge option in parallel where speed decides the deal.

Share Your Perspective: Are you building the Made in America guarantee into your manufacturing playbook? And if you work both sides of the border, where is the Canadian financing gap costing you deals?

🌍 Global Pulse

Private Equity’s New AI Problem

Private equity has spent years backing law firms, accounting practices, consulting shops, and other professional services businesses because they combine recurring revenue, low capex, and sticky client relationships. That thesis now looks more exposed. The latest warning is that AI is beginning to attack the very thing that made these assets attractive in the first place: billable human labor.

The risk is not simply that AI will reduce headcount. It is that it will compress pricing power, shorten turnaround times, and make junior-heavy delivery models less defensible. In sectors like legal and advisory services, if AI can complete first drafts, document review, research, and basic analysis faster and cheaper, buyers will start asking harder questions about margins and fee structures.

For sponsors, the immediate issue is underwriting. Historical EBITDA may overstate sustainable earnings if revenue is still being charged on old staffing models while delivery is already becoming more automated. That creates a valuation trap: the business may look resilient on trailing numbers, but its forward margin profile can reset quickly once clients begin demanding productivity pass-throughs.

Why This Matters for M&A

• Revenue concentration in labor-heavy advisory lines becomes more fragile if clients can unbundle work or shift lower-value tasks to in-house teams.

• Synergy assumptions in professional services roll-ups may be too aggressive if AI reduces the need for the incremental staff that drove the original consolidation case.

• Quality of earnings (QofE) work needs to distinguish between genuine efficiency gains and temporary margin uplift from underinvestment in technology.

• Retention risk rises for senior rainmakers if the platform’s value proposition starts to look more like software-enabled delivery than relationship-led advice.

What To Underwrite In This Cycle

• Separate workflow automation from true differentiation: firms that own proprietary data, specialist judgment, or regulated workflows should hold up better than generalist service platforms.

• Rebuild forecasts from the bottom up using task-level productivity assumptions, not just top-down growth rates.

• Stress test new deals under a scenario where pricing power weakens even if volume remains stable, since AI may shift the economics before it eliminates the work entirely.

• Test whether EBITDA margins are being supported by delayed hiring, backlog timing, or lower associate utilization rather than durable pricing strength.

Source: Financial Times article published June 16, 2026

🤖 AI Tools Spotlight

Ideogram 4.0

Ideogram 4.0 is an AI image generator built for design, and the newest version from Ideogram. Most people will use it through its website, which has a free tier. There is also a paid version developers can build into their own apps, charged by the image.

What The Tool Does?

Type a description and it creates the image. What sets Ideogram apart is that it gets the words right. Most AI image tools get any text you ask for wrong, turning a headline or a label into gibberish. Ideogram spells it correctly, even with a lot of text and in different languages. The new version also lets you say where things go, so a headline or a logo lands where you want it instead of wherever the tool decides. The images come out sharp enough for real use. And once it is done, you can pull the background out to drop the image onto something else, or change the text without starting over.

Why It Matters

If you make any branded visuals, the words are the hard part. A social post or a newsletter header usually needs text on it. Ideogram is the one that handles it, which makes it genuinely useful rather than a novelty. It also runs on your own machines if you need it to, so nothing has to leave your systems, which matters where privacy or data rules are tight. It is a marketing and content tool, so use it for the visual side of your brand.

Explore the tool here.

💭 Dealmaker’s Quote

“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has.”

- Jack Bogle

🏢 About Us

KSMC is a boutique consulting firm founded by Big 4 alumni driven by an entrepreneurial and innovative vision. We provide comprehensive M&A Advisory Services; CFO Advisory; and Bookkeeping and Accounting Services. Our expertise and network spans the complete transaction lifecycle, from financial due diligence (QoE reviews) and business valuations to full sell-side mandates, serving middle-market clients across industries in US, Canada, UAE, UK, India, Puerto Rico, and Botswana.

Know more and reach out to us here.

Disclaimer: This newsletter is provided for informational purposes only and does not constitute any form of advice. We do not have any sponsorship, affiliate, or commercial arrangements with any companies, tools, or services mentioned in this newsletter. All examples and case studies are based on publicly available information and are included for educational purposes only.