As Q1 2024 comes to a close, we thought it may be helpful to put together a list of tips for searchers based on lessons learned during various diligence processes in the current M&A environment. Interest rates are declining, the debt markets have stabilized (and are coming back), COVID adjustments have largely ramped off, and the Baby Boomer generation continues to search for liquidity in light of retirement creating ample opportunity for the search community. RiverStone Reporting has assisted 25+ searchers over the past three years and through our experience in private equity and investment banking throughout the past decade, have seen the good, the bad, and the ugly when it comes to diligencing and acquiring a small business.

Whether you're in the midst of your search or recently launched your fund, we wanted to lay out tips and best practices to help make your search as efficient as possible. Below are examples of our tips and the full detailed list can be read here:
24 Tips For Search Funds During###-###-#### from a Private Equity Lens) Tip #3: If a Lender Can't Underwrite Putting Debt on a Business, Maybe You Shouldn't Put Equity on it Either Tip #7: Deals Fall Apart. Your Pipeline of Opportunities Should Not Tip #8: Preserve Cash and Monitor Debt Covenants

We are always happy to hop on a brief intro call with searchers, search investors, lawyers, consultants, QoE providers, SBA loan advisors, and operators around potential ways to collaborate in the growing space. Structuring your first LOI, creating detailed customer retention / cohort analysis, building a robust LBO model, constructing a 60-page investment memorandum, and developing a 100-day value creation plan is not easy on top of building a relationship with the seller and managing third-party diligence streams. Surrounding yourself with an A-team of advisors and professional resources can be critical to ensure you not only find a business to acquire, but the right business.

Riverstone brings an institutional private equity lens to diligence and helps the searcher work efficiently and effectively through the acquisition process. Our team's prior private equity experience includes investing $1.7 billion into lower middle market companies. Key areas of value-add include financial analyses, KPI deep-dives, assisting with investment memo slides (and formatting), and building a more detailed LBO projection model with return sensitivities. Over 50% of our compensation is only paid if you successfully close on a transaction (fully at-risk) and we often rollover 100% of our compensation into your deal, creating strong alignment of interest, as well as often continue to help the business post-closing with financial reporting, KPI's, 100-day value-creation plans, and quarterly board packages (fraction of the cost of a CFO). We are happy to provide a services deck in how we collaborate with searchers as well as a list of references upon request.

We anticipate M&A activity to pick over the next 12 months as debt markets have settled and interest rates are set to slowly decline and normalize. We've chatted with many of you whether it be a brief intro call, coffee at the Harvard ETA conference, or collaborating on a transaction together and are excited to continue the dialogue. We look forward to assisting more searchers acquire and run niche small businesses in the lower middle market throughout 2024!