Is the Search Fund Acquisition Rate Falling? With Jim Edmunds, Badge Stone & Kent Weaver

In The Trenches

This episode is brought to you by ⁠⁠Boulay, the industry standard for Quality of Earnings, tax, and audit services, serving search fund entrepreneurs for 20+ years⁠⁠

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This episode is brought to you by ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Oberle Risk Strategies⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠: Insurance Broker and Insurance Due Diligence Provider for Search Funds and Other Small-to-Medium-Sized Businesses⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠

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Across all known search funds since the inception of the model in the 1980s, ~63% of funds have gone on to acquire a company. However, since 2014, the acquisition rate has decreased, hovering around ~57% over the past 10 years.

Today I'm joined by three of the most experienced and respected investors within the search fund ecosystem to discuss A) Why the acquisition rate among search funds has fallen over the past 10 years; and B) Whether the rate of acquisition is likely to fall further in the years to come.

Joining me today are Jim Edmunds (Search Fund Partners), Badge Stone (WSC), and Kent Weaver (Granite Point Partners).

Today's episode revolves around the testing of 8 hypotheses, submitted to us via a survey of 1,000+ searchers & CEOs. Those hypotheses include:

Encroachment: PE moving further down market?

Capacity: Investors with too many searchers in their portfolios?

Competition: Too many search funds in the market?

Dilution of Talent/Commitment: Too many part-time searchers?

Valuation Expectations: Sellers no longer willing to transact at palatable multiples?

Cost of Capital: Search funds have a higher cost of capital relative to other buyers?

Searcher Fatigue: Sellers and intermediaries becoming disillusioned with the value proposition of search funds?

Email: Deliverability challenges too much to overcome?

Please enjoy!