How does the potential for a recession affect the Search Funder?

November 21, 2022

by a searcher from The University of Michigan - Stephen M. Ross School of Business in Portland, OR, USA

Curious to understand how the chatter of a (potential) recession is affecting Search Fund conversations? In negative ways? (sellers are risk averse to transacting in this environment?) Positively? (sellers are anxious to consummate a deal ahead of a potentially more difficult macroeconomic environment?)

I'd be curious to hear/share the anecdotes from this community on what some of the prevailing thoughts (good and bad) about how a recession might affect the Search.

Reply by a searcher
from College of William and Mary in Bethesda, MD, USA

I think it all depends on where the owners are in their cycle. The reality is that there are people already looking to retire. Surviving COVID was a challenge and depending on the severity of the recession, some may take that step sooner rather than later. Of course, there are others that will be strong enough to wait it out. Overall, I see it as an opportunity, though financing terms will become more conservative potentially causing deal structuring to become more difficult.

Reply by a searcher
from University of Kentucky in Lexington, KY, USA

I have seen a mixture of both due to the current area. Either really desperate sellers who just want to get a deal done and don't care on price/terms as long as it gets done. But I have also seen those who are hesitating and slowly moving forward due to the environment.

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