Exit Ready Roundup: October 2024
Though search funds still make up a relatively small percentage of lower middle market investors, this investment model continues to gain prominence. In December 2019, I had the pleasure of attending the HBS Entrepreneurship Through Acquisition (ETA) conference for my third consecutive year. It’s been incredible to see firsthand the search fund community gaining prominence. I’d like to sincerely thank Harvard Business School and the ETA Club at HBS for producing the incredible event.Â
For those unfamiliar with ETA, it is a career path in which professionals (often after an MBA program) acquire a profitable lower middle market business and assume the role of CEO to directly run and grow the business’ value. ETA takes the fundamental concepts of traditional private equity and substitutes in high-end MBA talent rather than proven and professional operating partners.
Over 400 individuals attended this year’s HBS conference, largely consisting of current and prospective search fund entrepreneurs, investors, and niche service providers. In addition, former search fund entrepreneurs were in attendance as panelists to share their experiences related to the acquisition and value creation process.Â
These are my three key takeaways from the conference:
1. The future pool of search fund entrepreneurs is quickly extending beyond the top MBA communities:
2. “Institutional-grade” ETA LPs are growing, leading to an increase in the availability of capital for search fund entrepreneurs:Â
3. Winning deals is getting harder due to changing ETA market dynamics:
As the ETA landscape evolves, Axial currently serves 68 active searchers, helping them both originate deals and connecting them to Axial debt and equity capital sources to make it easier for them to close funding gaps at closing. We’ll continue to actively support high quality searchers in 2020 (both MBA and otherwise, funded and unfunded), especially those whose approach to deal sourcing overlaps with Axial’s areas of high activity.
For a more comprehensive overview on the search fund model, I would recommend the following resources:Â