Any Search Fund horror stories?
June 27, 2019
by a searcher from The University of Michigan - Stephen M. Ross School of Business in Ann Arbor, MI, USA
June 27, 2019
by a searcher from The University of Michigan - Stephen M. Ross School of Business in Ann Arbor, MI, USA
from University of Pennsylvania in Chicago, IL, USA
My business partner (CFO) and I seriously considered buying a small business in Grand Rapids, MI that was on campus at GVSU in summer###-###-#### We got into DD and decided to walk away, not because we had concerns with the future prospects, but largely because we thought the owner was too talented, and that we would have trouble replacing certain functions in new hires and we didn't think we could do those functions well ourselves. The business appeared sound, well managed and profitable. 2 years later, just the other week, my CFO was in the area, and he decided to drive by the business. Place was boarded up. Takeaway: the risk is real. Now, did it fail, or did the owner simply not find any suitors and decided to shut it down? He was in poor health, after all. Or would we have gone bankrupt if we bought it? Who knows. This real example also demonstrates that some businesses don't survive without the owner - typically, from my experience, this is intentional. If you see these dynamics, be careful!