Feedback on Combined Search / Private Equity-Backed Thesis

July 12, 2023

by a searcher from University of Nebraska - Omaha in Peachtree City, GA, USA

Hi All,

A few months back I started investigating business acquisition opportunities alongside roles as a PE-backed CEO. I immediately dismissed the PE opportunities due to a belief that they would mean I would have to abandon a company every 5 years or so, and thus focused on solely on acquisition. During my search I've learned that a) I'm not ready to relocate my family and b) while PE does intend to sell off businesses there are opportunities for CEOs to remain involved post-sale along with some attractive equity options.

As of today, I'd like to remain open to both paths and merge any well-suited opportunity into my pipeline. In the end, my wish is to lead an interesting venture and participate in its equity growth. I recognize that this may not be a "by the book" plan, but I think it's best to be up front with my intentions and goals. I've created this simple thesis synopsis to share with both PE firms and sellers.:

https://drive.google.com/file/d/14NZYDNxphIETooGum911xndTieAFGiO7/view?usp=sharing

I would value your feedback on any of this information.

Reply by a searcher
in United States

I would agree with Josh. I think the only time you’ll be “forced out” is when the business is sold to a strategic acquirer (and even then it doesn’t happen 100%). You can plug your own numbers in, but if you assume a 35% chance the exit is to a financial buyer or a public exit and 65% to a strategic, and you assume 20% of the strategic buyers will ask you to stay on, you’re looking at 35% + 65% x 20% = 48% chance you won’t have to switch. I think it’s probably quite a bit higher than that for most orgs, but just to give you something to think about. Good luck!

Reply by an investor
from University of Missouri in Austin, TX, USA

Aaron, you can absolutely stay with a PE-backed company post-transaction. In fact, that may be a very big determining factor for many buyers looking at the company come sale time. Very few people want to immediately replace the person steering the ship, especially if they are good. Additionally, you will more than likely have the option (or be highly-pressured) to roll some of your sale proceeds into the next transaction. Do not dismiss this option. I would also add that remote work is continuing to become more widely accepted.

Best of luck to you!

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