Most common types of businesses in ETA

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by a searcher from Indiana University, Bloomington/Indianapolis - Kelley School of Business
in New Canaan, CT, USA

3mos ago

Most common types of businesses in ETA

Hi all, I am curious to know what are the most common businesses/industries with LMM ETA? I know HVAC and landscaping have been hot in the past, however beyond these traditional sectors, what other spaces are typical businesses both for search-funds and ETA?

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reply by a lender 3mos ago
from Cornell University in Los Angeles, CA, USA

Hi Anon - nice to meet you. Great question. The Stanford GSB 2024 Search Fund Study (covering 681 funds sinceredactedgives us the best data on this. Since 2014, healthcare and business service companies have accounted for roughly half of all search fund acquisitions, each making up about 25% of deals. Technology and business services were the most frequent industries in the most recent two-year window studied. Beyond that, favored industries include services, manufacturing, distribution, software, and tech-enabled services. For self-funded searchers going after smaller deals (sub-$5M), service and light manufacturing industries are the most common. In terms of what makes an industry attractive for ETA broadly, searchers gravitate toward industries with healthy profit margins, low cyclicality/seasonality, high barriers to entry, and straightforward operations. Growing, fragmented, and sizable industries are desirable, especially when they're relatively early in the industry life cycle and have many companies in the target size range. So to give you a practical list beyond HVAC and landscaping: B2B services (staffing, janitorial, facility maintenance), healthcare services (clinics, home health, dental practices), tech-enabled services and vertical SaaS, specialty manufacturing, distribution, waste management, roofing/trades, pest control, and professional services (accounting, insurance agencies). Government contracting is another space that gets attention. The common thread is recurring/repeat revenue, fragmented markets with aging owners, and operations that don't require the buyer to be a deep technical expert on day one. Stanford study link: redacted Good stats breakdown: redacted We have a lot experience financing various companies via the SBA. If you ever need help reviewing a deal, I am happy to help. We work with all the major SBA lenders. The bank pay us after your loan closes, so this is a 100% free service for you. You can email me directly at redacted or schedule a meeting with me: redacted. Look forward to chatting!