Deal Size - Self-funded vs. Traditional

by a searcher from INSEAD

4 years ago

I keep shifting between going down the self-funded and traditional search and there's one thing that bothers me - deal size. I want to buy a company, not buy a job, and I want a management team under me.

I know that commonly it is said that self-funded searchers tend to target / end up with smaller businesses, whilst traditional searches target larger companies ($30m rev, $3-5m EBITDA).

Assuming the self-funded searcher has built an investor network, received 'letters of available capital' in exchange for right of first refusal, and kept investors regularly updated/ engaged during the###-###-#### month search.

As such Isn't the only difference between a self-funded and traditional search where the search money comes from (savings vs. investors), which would mean that both can technically target the same deal sizes with similar success? Or am I missing something?

3 likes
413 views
6 comments

searcher from Harvard University - Harvard Business School

The deal size could be identical - depends on your capital base and investor appetite (assuming you attempt to raise money)

4 years ago | like reply | 0 likes

searcher from Indiana University, Bloomington/Indianapolis - Kelley School of Business

I agree with comments above, which support OP's thesis. One difference is the commitments attached to investor capital - theoretically, good deals and good economics means you'll raise the equity, but investors will likely prioritize the searchers they back before new searchers or outside deals. There's only so much capital per fund per year and they need to keep the portfolio flexible.

4 years ago | like reply | 0 likes

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