Some founders chase optionality. Peter Kang chose focus.
When Peter first came on the show, he was incubating multiple agencies inside Barrel Holdings while hunting for acquisitions. Since then, he’s shut down or exited subscale bets, doubled down on operator-led M&A, and closed a meaningful deal: AO2, an Amazon-focused agency with leadership ready to step up on day one.
This episode is a play-by-play of what changed, why he made those calls, and how he structures deals to win without over-engineering them.
From “Launch Everything” to “Own What Scales”
Peter and his cofounder were running two tracks: incubate new agencies and buy existing ones. Reality check:
- Small launches demanded the same energy as larger businesses but moved the needle far less.
- The 80/20 (and power-law) effects inside a portfolio are real: attention and capital cluster around the biggest contributors.
Result: they exited or shut down early-stage brands (including Catalog and Bolster) and reallocated attention to scaled, durable agencies. Hard conversations, cleaner portfolio.
“Those smaller agencies weren’t bad, just subscale. We needed to spend our limited cycles where the compounding was real.”
How AO2 Showed Up (and Why They Moved)
Yes, they run a professional sourcing process, but AO2 came from a serendipitous conversation at a conference breakout. Lesson: do the disciplined work and leave room for luck, quality deals can start anywhere.
Timing wasn’t perfect: tariffs hit in April during diligence. That volatility became a stress test rather than a deal-killer. Barrel watched churn/pauses, monitored the month-over-month deltas, and re-underwrote quality of revenue in real time.
“We color-coded the book: bedrock keepers, likely retain, at-risk and revisited monthly. That gave us conviction without retrading.”
What Made AO2 a Fit
- Leadership continuity: A respected internal president could take the helm immediately. Kang’s preference: promote from within post-close; it calms teams and preserves client trust.
- Stand-alone brand: Barrel keeps strong agencies intact; brand, culture, and go-to-market, while layering in operating discipline and shared services.
- Sector familiarity: As lifelong operators, they can evaluate client dynamics beyond a checkbox QoE. That reduces “surprise” risk after LOI.
Deal Structure: Simple, Protective, Operator-Smart
- Heavy cash at close + seller note tied to a revenue baseline (downside protection if top line sagged).
- A long-tail profit share “sweetener” for the seller—useful politically, but in hindsight, not necessary. The takeaway: don’t add sprinkles you don’t need.
- No elaborate earnout gymnastics; the emphasis was on leadership continuity and book retention, not financial origami.
“In agencies, retention bonuses for key people usually beat complex seller incentives. Reward the operators who drive tomorrow’s results.”
The HoldCo Thesis (and Why It’s Not PE)
Kang distinguishes two holdco archetypes:
- Capital allocator (Berkshire-style): buy great businesses, redeploy cash.
- Operational holdco (Danaher playbook): install systems, continuous improvement, margin discipline.
Barrel is #2. They keep brands independent but operate with common standards: documentation, client service expectations, leadership development, and lean delivery.
They’re also evolving their capital stack:
- Still using SBA 7(a) where appropriate.
- Adding deal-by-deal outside equity with a preferred return and a modest management fee, accepting that near-term cash flow to the holdco may be limited while investor prefs are serviced and debt amortizes.
- The offset: existing wholly owned agencies continue to grow EBITDA, and debt paydown builds equity.
This is not a “buy, blitz, flip” private-equity sprint. Barrel optimizes for durable compounding over 8–10+ years, not multiple expansion on a 3–5 year timer.
AI, Lean Teams, and Resilience
AI isn’t a cliff; it’s a lever. Barrel prefers sub-30-person teams that can serve large books through automation, workflow, and rigorous process, with the human layer clients still expect.
The thesis: AI increases complexity and pace. Agencies that embrace it and stay lean gain share; agencies that fear it fall behind.
What You Can Steal for Your Next Deal
- Pick your lane. Optionality looks smart; focus compounds.
- Underwrite the client roster, not just the P&L. Color-code relationships, revisit monthly during diligence, and price the risk.
- Promote from within. A credible #2 stepping up is retention insurance.
- Keep structures simple. Cash + targeted seller note + team retention > Rube Goldberg earnouts.
- Raise precisely, not generally. If the deal is good, the equity shows up, prefer deal-by-deal until your holdco valuation justifies raising at the top.
- Play long. Ten steady years of 5–10% growth and solid margins, with debt amortization, beats short-term heroics.
Listen to the episode
Hear the full breakdown of AO2, the portfolio cleanup, how Barrel thinks about investor prefs and cash flow, and the systems they install after close.
If you’re building a holdco or buying your first agency, this one’s a blueprint.
▶️Listen to the full episode.
