Search Funds: How Smart Founders Secretly Launch Companies

Summary

This podcast episode features entrepreneur Ryan interviewing Carl, an M&A expert, about search funds - an entrepreneurial model where individuals or groups raise capital to identify and acquire an existing business which they then operate. They discuss the search fund model, finding the right target company, structuring equitable win-win deals between investors and entrepreneurs, market trends and opportunities, and key success factors like focusing on your industry strengths.

Takeaways

• 😊 搜索基金是一种企业收购模式,通过收购现有企业帮助企业家实现业务所有权。
• 😎 搜索基金分为两类:传统搜索基金和自筹资金搜索者。
• 🤔 成功的关键在于制定合适的激励机制,确保投资者和企业家利益一致。
• 😃 与私募股权投资不同,搜索基金让企业家有更大控制权和获利空间。
• 🙂 搜索基金市场在全球各地发展不均,美国市场较为成熟,欧洲市场仍在成长。
• 💡 企业家需要意识到通过搜索基金收购企业的巨大潜力。
• 👍 选择与自身实力吻合的行业,制定明确投资策略很重要。
• 🤝 搜索基金社区互帮互助,建立人脉关系可避免很多失误。

Q & A

什么是通过收购创业（ETA）？

通过收购创业是一种秘密策略，旨在为创业者提供必要工具，通过收购现有企业来创业，而不是从头开始建立一个新企业。

搜索基金是什么？

搜索基金是一种机制，个人或小团队筹集资金以支持他们在寻找合适收购目标的过程中的生活和操作费用。这个概念最早由斯坦福大学在80年代提出。

搜索基金有哪两种类型？

搜索基金大致可分为传统搜索基金和自资搜索者。传统搜索基金涉及筹集资金来支持搜索期间的费用，而自资搜索者则是自己承担搜索期间的费用。

如何在创业初期获得胜利而不是失败？

关键在于了解你在寻找什么样的公司，与社区交流获取建议，确保投资者和创业者之间的激励措施得当，以及避免追求错误的交易。

搜索基金和传统私募股权投资有何不同？

私募股权通常是从寻找目标公司开始，然后投入运营者。而搜索基金是从找到合适的运营者开始，然后寻找围绕该运营者建立的公司。

如何确定是否应该走传统搜索基金的道路？

这通常取决于个人的财务状况和风险承受能力。如果你没有足够的资金来支持两年的搜索过程，或者不愿意承担这种风险，那么传统搜索基金可能是更好的选择。

在进行搜索基金投资时，投资者和创业者如何分配股权？

投资者通常会获得优先股，并有权获得特定的股息。而创业者则会获得一定比例的普通股，这些股份通常会根据业绩目标在一定时间内逐步归属。

搜索基金在全球范围内的市场状况如何？

美国的搜索基金市场较成熟，而欧洲和其他地区的市场正在成长中。英国、西班牙和葡萄牙等地的搜索基金社区正在发展，但资金方面还存在一些差距。

为什么搜索基金是一个双赢的机会？

对于运营者来说，搜索基金提供了运营和拥有一家公司的机会，同时对于投资者来说，它们能够投资于由高度投入和有能力的个人运营的公司，从而实现高回报。

搜索基金投资的关键成功因素有哪些？

关键成功因素包括选择正确的业务模式，与社区建立良好的关系，以及确保投资者和运营者之间有正确的激励措施。此外，了解行业趋势和进行适当的尽职调查也至关重要。

Outlines

00:00

🚀 开场介绍

Ryan Miller 介绍了他15年来帮助人们筹集数百万美元资金的经历，并宣布本集将探讨通过收购创业的秘密策略。他邀请了他的朋友 Carl Lundberg，一位在并购、搜索基金、债务融资等领域拥有丰富经验的CEO，来分享如何为企业家购买公司的技巧。

05:02

🌟 探索搜索基金

本段落深入探讨了搜索基金的概念、种类（传统搜索基金和自资搜索者）以及它们的运作方式。Carl 解释了如何启动搜索基金的过程、如何选择传统还是自资路径、成功的关键因素，以及在早期阶段如何避免失败。他强调了与社区接触、建立声誉和关系的重要性，以及如何通过这种方式找到合适的公司进行收购。

10:04

📈 细化搜索基金的策略

Carl 讨论了搜索基金如何为企业家和投资者创造双赢的局面，特别是通过为企业主提供继任解决方案和为企业家提供运营公司的机会。他比较了私募股权和风险投资与搜索基金的不同，指出搜索基金独特之处在于它以运营者为中心，寻找合适的公司进行包装。此外，Carl 分析了搜索基金市场的现状和发展趋势，强调了地理位置对搜索基金成功的影响。

15:05

🌍 搜索基金市场现状与展望

本段落深入探讨了搜索基金市场的地理差异，特别是美国、英国和西班牙市场的成熟度差异。Carl 提到了搜索基金如何受到商学院和特定地区投资者知识的影响，以及搜索基金为何在某些地区比其他地区更成功。他还讨论了英国市场存在的机遇和挑战，以及如何克服这些挑战。

20:05

💡 搜索基金成功的关键要素

Carl 分享了成功进入搜索基金领域的三个关键建议：意识到个人可以通过搜索基金购买和运营公司、明确自己的目标和寻找的公司类型、以及利用社区和研究报告等资源来指导自己的搜索过程。他强调了确定和追求特定行业的重要性，以及如何通过明智的选择和社区支持来提高成功率。

25:06

🎉 结语与展望

最后，Carl 强调了搜索基金社区正在扩大，特别是在英国，他对搜索基金和通过收购创业的激情。他提到了他所在的公司 Gerald Edelman 支持的相关活动和资源，如国际搜索基金中心和创业通过收购奖项，鼓励对搜索基金感兴趣的人参与并利用这些资源。此外，他提供了联系方式，邀请对搜索基金感兴趣的人进行交流。

Keywords

💡搜索基金

搜索基金指的是企业家为了收购其他公司而募集的资金。卡尔详细解释了传统搜索基金和自筹资金搜索者之间的区别。视频的核心思想就是通过搜索基金模式来实现企业家对公司的收购。

💡股权

股权是搜索基金模式的关键。视频详细解释了在搜索基金过程中企业家、投资人和其他参与方之间的股权分配。股权的分配和激励对各方利益的统一至关重要。

💡私募股权

搜索基金模式被称为私募股权与风险投资的混合。它提供了一个平台,投资人和企业家能够实现互利共赢。

💡企业承接

视频的核心思想就是企业承接,即企业家通过收购现有公司来创业,而不是从零开始创建公司。搜索基金为其提供了平台和资金。

💡市场成熟度

卡尔详细讨论了搜索基金在不同地区的市场成熟度。例如美国市场较为成熟,而英国市场还有很大成长空间。市场成熟度代表着机遇。

💡社区

卡尔多次提到搜索基金的社区以及其中的关系网络对成功至关重要。这体现了视频强调的关系和声誉的价值。

💡适当行业

卡尔建议企业家最好选择他们熟悉或有相关经验的行业来进行搜索,这可以提高成功概率。这体现了视频对专业知识和领域经验的强调。

💡退出机制

搜索基金可以为中小企业主提供退出机制,比如公司承继。这是视频讨论的一个额外好处。

💡博弈论

卡尔将搜索基金比作“双赢游戏”。这体现了视频强调的博弈论方法,即实现各方利益的统一。

💡机会成本

卡尔警告搜索基金参与方要注意机会成本的风险,即错误选择会带来的损失。这体现了视频对风险评估的关注。

Highlights

搜索基金允许企业家收购现有公司,而不是从零开始建立公司。

传统搜索基金由一两名个人组成,他们先筹集资金,然后再寻找要收购的公司。

自筹资金的搜索者在搜索阶段也自费,直到找到交易时再向投资者募集资金。

建立良好的 searcher/投资者股权激励制度非常重要,以确保利益一致。

搜索基金开始于企业家,然后才考虑要收购的公司;而私募股权公司则从要收购的公司开始,然后才考虑企业家。

搜索基金为投资者提供了参与有前景的交易的机会,而企业家也获得了更大的控制权和收益份额。

避免选择错误的公司非常重要,即使这意味着要放弃已经投入了大量时间的交易机会。

获取社区和有经验投资者的支持至关重要,他们可以快速判断一个交易是否可行。

美国的搜索基金市场要比欧洲国家成熟得多,拥有更完善的生态系统。

英国现在存在股权融资缺口,这为投资者提供了机会。推动任何行业的成熟都可能带来利润。

许多中小企业老板正逐渐达到退休年龄,这为收购其业务提供了机会。

人们需要意识到他们可以利用搜索基金自行收购公司,这是一个很大的机会。

企业家需要明确自己的投资策略和行业重点,以脱颖而出。

谨慎研究并获取社区反馈非常重要。专注特定行业的搜索者更容易成功。

创建双赢是整个行业的目标。我们希望所有相关方都能从交易中受益。

Transcripts

[Music]

my name is Ryan Miller and for the past

15 years I've helped hundreds of people

to raise millions of dollars for their

funds and for their startups if you're

serious about raising money launching

your business or taking your life to the

next level this show will give you the

answers so that you too can enjoy your

pursuit of making billions let's get

into it does it not feel like Venture

capitalists are hiding from us easier

ways to start a business join me on this

episode of making billions as I walk

through a secret strategy called

entrepreneurship through acquisition

giving you the tools you need in your

pursuit of making billions here we go

hey welcome to another episode of making

billions I'm your host Ryan Miller and

today I have my dear friend Carl

Lundberg Carl is a CEO at Gerald Edelman

LLP with his expertise in Acquisitions

and search funds due diligence debt

funding for UK Acquisitions and

management buyin he's a game changer

who's revolutionizing the world of m&a

in its industry so what this means is

that Carl understands how to buy

companies for entrepreneurs is about to

teach you how to do the same so Carl

welcome to the show man hi Ryan thanks

so much for having me on I've uh I've

been a longterm follower of the podcast

and um really love what you're doing and

the community and your story as well is

really inspiring to me so I'm been

really looking forward to having this

conversation with you likewise brother

this is so good to have you calling all

the way from the UK it is truly an honor

to have someone with your caliber and

expertise in search funds and how to buy

companies for entrepreneurs we're going

to get into all of that stuff but before

we do let's let's go let's hit them

right between the eyes for the beginners

what is a search fund and then we'll get

into how to win and not lose when you're

starting out on on this path so what is

a search fund of course yeah so a search

fund I mean really when we talk about

search funds often what we we mean is a

kind of categorized into two different

buckets one is the traditional search

fund which is something that was devised

in Stanford University back in the 80s I

believe um and then also grouped in that

now is really any other entrepreneurship

through acquisition route so broadly can

be split between traditional search

funds and self-funded Searchers so both

entrepreneurs um looking to acquire

businesses a traditional search fund

will be an individual or or or a group

of individuals normally one or two who

raise a search fund so a pot of money to

fund the search period while they're

looking for a company to acquire and a

self-funded Searcher will be someone who

still goes through that search phase but

funds that bit themselves so effectively

with the means to live off their own

savings or other income while they're

searching for that business both both of

those when they find a deal will then

generally talk to investors to help them

fund that that transaction and acquire

the business to go in and run it I love

it perfect so when someone's starting

out in the search fund whether you're an

entrepreneur looking to work with the

fund that will find you a company or you

are a search fund either way there's

some rules whether they're spoken or

unspoken and often they result in two

things how to win and how not to lose so

maybe we could warm up people listening

around the world we're in 100 countries

around the world to help us understand

in the world of search funds how do you

win in the early days I think the first

decision to make of course is whether

you need to go down the traditional

route or whether you're going to do it

self-funded and normally it's quite an

easy decision particularly if you're

going down the traditional route because

it means well usually it's because

actually I don't have the means to to to

not work for up to two years and or you

may have the means but you may not have

the risk appetite to do that so there's

a decision to be made and so you make

that decision if you're going to go

traditional then you need to start

looking to raise some search Capital if

you're going self-funded you can kind of

get straight into the search how to get

things moving in the early days really

are to establish really what it is

you're looking for now there's a few

things that um characteristics of of

Target companies that are fairly common

across search funds and ETA type deals

so you need to know that and the best

way to do that is to do a lot of reading

but also to reach out and get in touch

with the community um here in the UK

we've got a small but growing community

of people who who are in this space and

the Ecco system is very supportive so

really you need to talk to as many

people as you can and then really deal

flow is is super important because you

do have to kiss quite a few frogs

unfortunately before you find the right

uh deal perfect and with a traditional

search fund how do you break that out so

an entrepreneur comes to you let's let's

just use an example so we'll say someone

who is a Superior Insurance salesperson

and they're like I'm really good I've

got a good 15 18 years left in my career

of at least what I would prefer to have

I don't know if I want to do this for

someone else but I'm really good at my

job I would love to own my own insurance

company I know how to sell it I don't

know how to build a company and then

they go to to you at your firm and you

say perhaps we can help you with that we

can help you find that so when you work

together with an entrepreneur how do you

break out the equity right because

obviously there's owners there's equity

and we do it for Capital so it's not

search charity right it's search fund

and so there's there's some Equity to be

had and we're on a show called making

billions and so there's ways that people

go about to do this in the private

market so maybe you can walk me through

a little bit of some of the just the

equity stack not the full Capital stack

just the equity stack of who gets pref

if there's any pref shares who gets

common how do you make that allotment to

those guys really really let's unpack

this and and give the entrepreneurs a

sense of what to expect yeah and that

that's that's a really good um question

I think very worthwhile scenario to

Think Through actually because you know

these things come up this is that's a

very realistic situation let's assume

that this individual is you know

probably got a mortgage and children and

you know certain costs that mean

actually they would rather go to

traditional route because it will give

them some level of security and an

income over that period so they would go

and talk to a group of investors and

there there are um there's a small group

really around the world of investors so

it's quite easy to know where to go to

there's a few in the UK and there's a

couple of people with funds that invest

in traditional search and then in Spain

and in the US there's also a pretty good

uh network of potential investors out

there as well so they would figure out

how much money they're going to need to

raise and that normally is going to be

based on how much do they need to earn

so they'll put a salary in their budget

for a couple years normally um there's

going to be some software costs there's

going to be a little bit of travel and

there's going to be DD costs so due

diligence and other things but you know

broadly you're looking at probably

between 300 and 600k as a raise for the

search period that will be issued to the

investors as capital and the terms of

that are such that when a deal is

identified a transaction the search

Capital will roll into the transaction

at a 1.5 multiple so effectively you get

a 50% uplift for investing early in the

search Capital because obviously there's

some speculative risk there that

obviously they might not find a

transaction and the money might run out

and they might go back to having a job

and so um let's say then 18 months down

the line they find a transaction and

they come back the search Capital also

gets you optionality so it gets you a

preemption to invest in the transaction

and say there's a transaction it's a 1

million ebit Dar you know insurance

broker that the indiv idual fines to buy

they're going to pay say4 million pound

for it or dollars for the for the you

know sake of an example and let's say

they're going to put some debt in right

so so there's an equity Gap they're

going to put debt in of 2 million and

there's an equity gap of say 2 million

the money that they raise will be raised

normally through the issue of preference

shares so an equity investor then puts

in2 million pound and for that they

receive preference shares worth2 million

and they will have a preferred dividend

attached to them usually between 8 and

12% and they will Al get the investor

will also get the line share of the the

common Equity the ordinary shares as we

call it in the UK the the Searcher the

entrepreneur in in this example the the

insurance operator who's found the deal

will usually get between eight and 10%

of the ordinary capital and this is by

the way assuming that they haven't

invested any cash they haven't

co-invested um they usually get 8 to 10%

on day one they then get a further 8 to

10% that vests over a certain amount of

time which is you know as long as they

stay in a management position position

in the business post and then they'd get

another 8 to 8 to 10% that would usually

vest on a on a straight line basis in a

range of irr outcomes and and and

normally the irr targets are between it

starts vesting at 20% and you'd vest all

of it by the time you get to 35% IR

which obviously is a pretty pretty

decent irr for the um for the investors

so you're only being diluted down out of

the ordinaries to the tune of about 25

to 30% as a as a an equity investor in

this scenario if you've got 35% IR

already um so that's kind of the the the

Bare Bones of how the structure would

work yeah I love that now you mentioned

earlier so that's how you win right so

you got to get your Equity incentives in

place you got to make sure investors and

Searcher or entrepreneur also have the

right incentives in place and that's

typically that's one thing we don't we

always think Equity is a way to make

money and while that's true it's also a

way to align incentives between

operators and owners and so when we have

that equity share and and allotments and

I mean I know in the news right now Elon

Musk is is pretty pissed he didn't get

his $50 billion Equity bonus or

something like that and he's upset at

the state of Delaware there's all kinds

of stuff that happen when to say through

Equity we can give you incentives the

shareholders will provide the operator

those incentives and so uh not that that

happens here but you can see that this

is a very emotionally and powerful thing

that moves Behavior a lot is equity

incentives now that's how we win but

also in the early days whether you're a

Searcher an investor or anything in

between there's ways that you can kind

of get uh a little lost or or

potentially lose or or to get knocked

down what are some ways I know you

mentioned speaking to the community is a

good thing to do on this show we believe

in reputation and relationships are some

of the greatest assets and so the reason

why I bring that up reputation Community

relationships all of those things start

to tie together can you unpack that a

little bit more on speaking with the

community and just how that ties into

not losing in the early days yeah um

it's incredibly important in um this

this space which is still a you

relatively small sub sector of kind of

m&a uh and and thankfully there is a

growing Community as I mentioned and and

they are they do tend to be very

supportive and and collaborative and

there's not a huge amount of you know

competitive tension and between searches

talking to the community will get you so

far you you you and particularly talking

to those who have done deals and

actually those who have failed to do

deals you'll learn a lot but it also

comes down to whether or not you take

the advice whether or not you do learn

from other people's mistakes and there

is this kind of sunk cost fallacy that

people often tend to be aware of but but

find it very difficult to adhere to

themselves if you're going down the

wrong path if you've identified a

company that you think is the right one

and as you find out more about it you're

starting to to to dilute that thought

and you're thinking actually I'm not I'm

not so convinced but I'll spend so much

time on it that I'm going to keep going

that's how you lose the reality here is

that it's far better overall to not do a

deal than to do the wrong deal and also

there are going to be other

opportunities so there is an opportunity

cost to pursuing the wrong one even if

you come out and you get the chance to

do another one and and and you do end up

doing a deal the opportunity cost is is

is not insignificant so really what you

want to do is one the group of investors

that you've gone to if you can get some

people with m&a experience in there then

that's brilliant because particularly

people who see a lot of deals they're

going to have more of a benchmark to

look at and say this isn't good or I've

looked at this industry these are the

issues that you need to be completely

clear on as red flags day one and you

can get an easy no a quick no so having

having a support not just of the wild

community but actually in your investor

base with some experience who can help

you to quickly say no stop you pursuing

incorrect businesses and and and

ultimately stop you from buying the

wrong company and and really they're the

key ways to avoid losing in this

situation that's right yeah a good

friend won't let you drive it over the

cliff so to speak so it sounds like and

keep me honest here Carl it sounds like

this is very similar to private equity

in the sense that you're buying

businesses but not exactly it's also

this hybrid between V uh VC and PE

Venture Capital private Equity now just

listening to you it sounds like that

private Equity starts with a corporation

that they want to buy and then they will

drop in operators where search funds

start with the operator and figure out

the company that they're going to wrap

around that would you say that's a fair

very overly simplified analysis

absolutely that's um that's really it

and and and the benefit to this this

benefits to both sides that's a win-win

because the benefit to the the operator

is that and and I had a conversation

with someone only this morning about

exactly this point which is you know

very impressive individual great

academic background great business

background and if this individual had

gone to a recruitment consultant and

said can you find me a PE business

that's looking to do buy out a company

and they want to put a new operator in

he's not going to be incentivized enough

he he's he's too good an individual and

and I don't mean that as a slight to

anyone that would do that but he's too

entrepreneurial too driven too ambitious

to go and sit in there with a private

equity business maybe with a little bit

of an equity incentive and a salary

that's unremarkable whereas what you can

do in the search situation is put

something together himself have a group

of investors that are backing you and

supporting you and providing guidance

but actually operationally hands off

don't want to meddle unless they're

asked to give some involvement and they

will which means that one you've got

more control two you've got more of the

equity and therefore more of the upside

and on the investor side what it means

is if you invest in a PE fund and that

PE fund has got a pot of 200 million and

they need to deploy that they will do

that and they'll buy the best companies

they can but ultimately they need to buy

quite a lot of companies because they

got to deploy the money right and so

they're not all going to be the best and

they're not all going to get the best

attention and they're not all going to

get the best management team what you

have in this situation is one there's a

far lower barrier to entry because the

the checks that you need to write as an

investor to get into it aren't a million

plus they're far lower often and two

you've got someone who one is a very

highly capable individual with usually a

very good academic background and good

business experience and this is their

everything they're putting their whole

time and all of their energy into making

sure that this works because this is

their career this is one single

investment for you but for them it's

everything and what could be better when

you're an investor passively just

watching someone really go for it and

and and so the reality here is that for

investors but also for operators it just

makes sense it also provides a brilliant

succession solution for business owners

um knowing that someone's going to come

in and nurture and develop and run the

business that you've built over many

years usually um and someone is there

that cares and is going to give it that

attention I love that and that what

you're talking about and and folks what

Carl and I are talking about is

essentially the Crux of the show and

also private markets is investors need

operators and operators need investors

and so where they all come together in a

very it's a very beautiful way is in

search funds and so it never is more

pure than in a search fund where

investors and operators come together

funders and Founders they come together

and really create something valuable for

everybody so win-win is certainly the

name of the game here now I'd love to

transition just into the market the

state of the market of search funds and

everything that we've talked about let's

let's really punch this up where do you

see the search fund market now where and

where do you see it going it varies um

depending on geographical location um in

the US the the Market's very well ahead

of of other jurisdictions in terms of

maturity this concept as I mentioned at

the beginning of the show came about

from Stanford University back in the 80s

and it's it's gradually grown in the US

and and and certain measures have been

put in place to make it easier in the US

for this for this to happen um obviously

the US is a very different place to to

Regions within Europe particularly the

UK in terms of scale size population um

and even state borders and and and

different laws and other other matters

whereas the UK is probably far more

simple place from many perspectives um

but the US is probably 10 15 years ahead

of the UK in terms of how the

snowballing of of the the ecosystem

develops and and and the appetite of

people develops and also the

understanding of investors and lenders

to fund these things without thinking oh

I don't know that's a it's an MBI what

does this individual know about running

a business I'm not investing in that

which which you know there's still a

little bit of that going on in the UK

now in the US it's it's very well

established and it's it's very normal

the business schools have a massive

impact as well so out out in in the US

Stanford Harvard run ETA courses um and

they teach search funds and

Entrepreneurship acquisition in the NBA

programs I I I often make a joke that

you know you qualify from your NBA at

Harvard and you walk out the front door

and there's just a group of people with

bags of money you know trying to fund

your search um but there's so many that

come out of Harvard and they're all you

know the calber of people that come out

is obviously very high as well um in the

US there's the SBA loan scheme which

helps people to fund you know purchases

of of of businesses and we don't have

something like that in the UK but in

Europe Spain in particular and other

parts of Europe it's really growing um

the the Market's pretty mature in Spain

now um the UK is continuing to grow and

really there's there's a lot of

opportunity still though I think one of

the key things is is the profile of the

business owners and actually it is that

that baby boomer generation who founded

businesses who are now approaching

retirement age and there's so many of

them and you know fragmentation of

business as well m&a hasn't really been

a hugely common thing for smmes in the

UK perhaps like it has been in in the US

for a long time so there's a lot of very

small businesses owned by people who

have done very well for themselves you

know bought bought a house and paid off

their mortgage in the '90s or the 0s and

bought the holiday home in the south of

France or in Spain in in the 0s and you

know and and and have enough and are

still earning you know half a million

pounds a year for example and don't

really need to sweat the asset right so

there's some lwh hanging fruit in in a

lot of these businesses as well where

for example you know we can improve the

business we can improve the marketing

whatever else um so it's growing um I

think in terms of investing knowledge is

spreading in the UK as I say Spain is

far more mature Portugal's got a lot of

deals going on as well but there is a

bit of a gap probably in the UK at the

moment where the lenders have kind of

gotten board the second tier lenders um

High Street Banks tend not to be

particularly interested or or helpful

dare I say um in the UK un fortunately

but um but there is a bit of a gap in

the equity funding in the UK and a lot

of cap tables I see have got us

investors and Spanish investors um

necessarily in order to fund enough to

get the uh the deals through I love that

yeah and that Equity Gap in the UK to me

represents an opportunity so it just

says hey if you've got equity and you

want to fill that Gap there's some

profit to be had so anywhere that you as

an investor or even an entrepreneur that

you can drive the maturity of any

industry up uh typically that act can

result in profit obviously it's not that

linear but that is certainly represents

a very interesting opportunity of doing

this in Europe but anywhere around the

world to be honest I love it so as we

round Third Base I'm wondering if there

were two or three things that you can

let our fans around the world know that

you find the most valuable in this

sector what would you say I think number

one is getting the point to people and

many many know this but really it's

mostly those who have come out of a

business school mid-career professionals

who have perhaps gone back to school to

do an NBA um or who happen to know

someone who has or or or happens to be

somehow involved in Surge I mean I I I

you know my colleagues here will tell

you it's all I talk about and everyone I

talk to I I bore them to death talking

about surge funds um but if you don't

Happ them to bump into me uh or if you

haven't just come out of business school

lots of people don't know about this and

they don't realize that actually you can

go and buy a business you know not

everyone can indeed not everyone should

um and not everyone even should try to

but there's a lot of people out there

who are very capable um and who can go

and buy a business and there's also a

lot of businesses out there that are

suitable for someone to come along and

buy so I think there's a huge

opportunity for young people and I say

young people I mean people with a period

of their career left to go in identify

businesses that need some improvement

need some succession solution and put

together a situation that presents to

investors something that is a incredible

opportunity when you're looking at

things like 35% irr but also gives them

the opportunity to one run their own

business and two make substantial IDE

themselves from their carried interest

effectively that that comes with the

ordinary SL common stock that they'll

they'll hold so I've seen a lot of

people make a reasonably substantial

amount of money from buying a company

perhaps making some boltons but growing

it you know putting in place that

marketing fixing the website and and and

taking those steps that probably the

founder didn't need to maybe a bit of

geographical expansion as well and so

there is just a fantastic opportunity so

I think the first is people need to

understand that they can do it and that

the the opportunity is there really then

the next step is you need to be pretty

clear about what it is you're trying to

achieve I've got some clients in the

space who are very much value investors

you know we we I was joking with one of

them not so long ago we were saying you

know we we're bringing our colleagues

you appetite to pay for things up a

little bit you know we're pushing him up

to 3x now and I think you know up from

Two and a half times evitar he's now

willing to pay three-ish you know and um

so there's some who who who will hold

out and find a deal and think this is a

cracken deal they do some proprietary

Outreach find off Market businesses and

and and strike deals that are just

incredible day one you've made a lot of

money even if it's unrealized um but but

there are others who just want a stable

cash generative business that delever

the debt over time and you know and and

maybe has a little bit of growth maybe

there's some bolt-ons and you can take

some multiple Arbitrage from from

increasing you know your um your ebit

Dar from bolting on new businesses at a

lower multiple than you might sell at

later but just to know what's your

strategy what are you trying to achieve

and then think about sector Focus as as

well you do need to set yourself apart

in some way and there are a lot a lot of

Founders who who who have nurtured the

business over the years and really built

it and and it's their baby really and

they don't want to pass it to someone

who you know has no idea about the

industry okay so so I what I would say

is if you've got some business

experience try to place your strengths

and try to look for something that is in

an industry that you at least have have

some some idea about either you've

consulted in or you've worked in um or

it's something that you can demonstrably

say look I can I can make a difference

here and I'm going to look after your

staff and your business and everything

else so so really that's um that's

number two know know what it is you're

looking for Identify some of these key

markers of you know stable cash flow

ebit data cach ratio which we want to be

as correlated as possible inless you're

looking for an asset heavy business but

usually people do not in these

situations the ebit down margin should

be between 10 and 30% ideally I mean if

it's higher great but you need to then

understand why and then think about all

those other things about marketing and

everything else and point three really

is overall think about how you're going

to achieve it and how quickly make sure

you do your research make sure you speak

to the community and understand from

other people um there's a great research

paper that was released in January of

2023 so over a year ago now but it was

by um an alfit called the search

Investment Group I think they're based

in the US and it was a self-funded

search study uh so it talked about

self-funded Searchers and actually it it

had some interesting points in there

saying that actually those who were

looking in a particular industry and F

using the surge rather than saying you

know what we're going to buy something

in any industry as long as it ticks

certain markers those folks in our

particular industry actually tended to

do a deal more quickly than those who

are being more opportunistic and looking

at everything so there's certain things

like that that actually you can pick up

on learn about and and steer your search

towards to to make it more likely that

you're going to succeed here perfect

well thank you for that so as we wrap

things up is there anything you would

like our fans around the world to know I

think it's worth saying that you know

actually this community is expanding um

obviously I'm I'm I'm very well plugged

into the UK Community here um I'm as you

may tell I'm incredibly passionate about

search and Entrepreneurship through

acquisition I I I probably would in in a

in a in another life have been have been

uh doing it myself but I really enjoy

working with clients and helping them to

do it so I do that in the UK but also my

firm Geral edman um is a sponsor for the

um International search fund Center

which is connected to Esa business

school in Barcelona there is a

conference that happens uh by anually in

Barcelona and I think the year there's

one in Stanford I think the Barcelona

one's actually the largest in the world

so for anyone interested in the space it

it is an International Conference so

people from all around the world who are

interested in search will attend that um

and it's worth looking into that we also

in London for anyone who's in London or

f a trip to London um I founded last

year the entrepreneurship through

acquisition awards that we run here and

so we'll be running that again in in

November this year um I think it's

around the sixth or 7th of November 2024

and and hopefully that will continue to

be um you know an annual event but what

we do it's a it's a great excuse to one

celebrate people who have unlocked value

for people created succession Solutions

and and basically done great ETA deals

but it's more a collaborative assessment

in that you know these these deals the

Great Deals here are create win-win it's

less one-sided than a PE deal might be

if you're if you're a PE firm and you

buy a company really cheap and maybe

slightly underpay for it that's probably

a really good deal for you in in the

search Community normally you've got you

know people staying in on a consultancy

basis or maybe even they're rolling some

Equity over it's far more collaborative

so what you want to do in these deals is

win-win create the SE session solution

that the seller wants find a nice deal

that makes both sides win and so and

that's how we assess these Awards so we

hand out awards that have created

opportunities like that um and uh and so

for anyone that would like to attend

that please you know don't hesitate to

get in touch we have got a website that

is is part of our website as a firm so

it's awards. Jerald edelman.com um where

you'll be able to view the details of

the awards and and obviously all updated

for each annual event as well so really

you know it's just anyone that wants to

to have a chat about ETA generally I'm

always uh willing and and and very happy

to do that and um you know for any

advice or or deal flow or you know

Financial due diligence assistance

valuations whatever else it might be you

know where to find us awesome well I

appreciate that so just to recap

everything Carl and I spoke about don't

build a company buy one with a search

fund number two is know what you're

looking for and finally number three is

look for those research reports you do

these things and you too will be well on

your way in your pursuit of making

[Music]

billions wow what a show I hope you

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and Founders until then my friends stay

hungry focus on your goals and keep

grinding towards your dream of making

billions