MBA required before starting the search?

May 16, 2020

by a searcher from Frankfurt School of Finance & Management gGmbH in Frankfurt, Germany

Hi guys,

how helpful is the MBA in convincing potential owners and investors in the search process?
Considering that the MBA fees could be a substantial part for the investment already would you suggest rather to get a MBA or join a MM company in a Mgmt position to gain specific experience.

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Reply by a searcher
from Massachusetts Institute of Technology in Miami Beach, FL, USA

If you're less-experienced and want to do a traditional search fund with traditional search fund investors, you'll want an MBA from one of the top search fund producing schools like Stanford or Harvard. I doubt business owners would care about not having an MBA; even with MBAs, business owners want to make sure you could actually acquire the business (i.e. you have the financing).

Why wouldn't you want to get an MBA? Yes, cost is one factor. If you're dead-set on search funds, then the cost of going to a Stanford or Harvard is likely outweighed by how they plug you into the search fund community. But if your options are not search fund heavy-hitters (like an MIT Sloan) or, worse, a lesser-known school (like University of Miami), then the MBA advantage is less important. If working instead of an MBA gives you connections and/or a personal war chest to do a self-funded search or to get non-traditional investors to back your traditional search fund, then working could be ideal.

Obviously, there's no right answer because it'll depend on your preferences and personal situation. I'm a fan of formal education so long as it doesn't wreck you financially (e.g. I wouldn't suggest someone take out a $200k loan to get a gender studies degree when you've got 2 kids to put through pre-K). Unlike law or medicine, an MBA isn't a requirement to work in the field (besides some corporations where getting to a certain level requires an MBA).

Reply by a searcher
from California State University, Los Angeles in Beverly Hills, CA, USA

I'm only now starting my search fund life. However, I've been in corporate finance (by way of corporate banking) for 15 years and financed private equity deals. As a whole, management experience is very important. However, an MBA is looked at as such - An MBA. It doesn't replace relevant workplace experience and abilities. There are MBAs currently working as pizza delivery drivers. It is more of what can you do and what have you done... So, the reliance purely on an MBA would be very misguided by any investor who doesn't look at the whole picture. That said, an MBA opens an entire network that one without wouldn't have. I have a ton of MBAs in my network from great schools, and I've talked with them about my thoughts of getting an MBA. They all said the same thing - Why? Well, I wanted to increase my knowledge and job prospects within the bank. They all said the same thing - I know everything that an MBA would teach me. However, the MBA opens a network of motivated and driven people that you wouldn't have access to otherwise. So, if I'm looking at getting out of banking and into a different world, an MBA would be great for a network - And that is what you're paying for... Or, if I wasn't in corporate finance and I was looking to get into, and MBA is great. Either way, it is all about the network.

So, short answer - No, you do not need one. As a recovering banker, I don't care about an MBA. I care about abilities.

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