Search fund bubble

by an member from Universidad Nacional de Educación a Distancia

4 years ago

The SF model is getting more know. More and more search fund are raised every year, and a lot of MBA are pursuing entrepreneurship through acquisition. How much growth do you think there's already ahead? Is it a good time to raise a search fund?
I would love to know your opinions.

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7 comments

searcher from University of Virginia-Darden - Darden School of Business

The bubble is really in the lower middle market PE IMO. As long as searchers are paying multiples less than 4x Ebitda on a regular basis, I can't say it's a bubble. But PE firms and some searchers of larger companies are paying ridiculous multiples with cheap debt and therein lies the necessary components of a bubble. Just my thoughts.

4 years ago | like reply | 2 likes

investor from Columbia University - Columbia Business School

While there are no doubt more searchers out there today, the supply of businesses to acquire far outweighs the searcher count. As for PE moving more down-market, it is probably true but think how hard it is for them to acquire/portfolio manage a $3MM EBITDA business. I think the key is for the searcher to "connect" on a personal level with a seller. It's possible that searchers will need to explore secondary/tertiary markets, but it's a big country (not to mention world) out there. My sense is that acquisitions exist and not at inflated multiples.

4 years ago | like reply | 0 likes

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