With the 12th annual Harvard ETA conference only weeks away and 2026 coming to a close I thought it was a good time to recap what I'm currently seeing across the search category as we head intoredactedThe search market is ever-evolving on top of a macro backdrop that includes plenty of volatility and uncertainty with war, inflation, geopolitics, rising interest rates, and everyone's favorite topic...AI. The best way to summarize the year is not by a cheesy LinkedIn post telling everyone how grateful I am that my business grew 10% year-over-year and tagging 40 investors and 15 mentors (but geesh don't ask about inflation, labor churn, margin degradation, fixed charge coverage ratio, and why EBITDA is down 20%), but by real data and insights into what is going on in the search category. RiverStone helped searchers close 6 deals throughout 2026, many of which diligence began in earlyredactedone even in late 2024!) and transacted early in the year. In addition, RiverStone has worked on 4 dead deals post-LOI and has 2 ongoing search deals under LOI that hopefully will both close before year-end (fingers crossed). RiverStone's transaction close rate has improved dramatically in recent years, which is the opposite trend of the broader search category. The recent Stanford ETA study noted that the percentage of successful searchers closing deals is down to just 30%. RiverStone closed just 10% of deals inredactedlot of learnings, COVID adjustments, and hairy transactions), 29% of deals inredactedin-line with the industry average) and now 60% of deals in 2026, with a path to the close rate increasing to 67% with two pending transactions. As we head into 2027, I wanted to highlight a few ongoing themes that search is experiencing and offer tips / advice as searchers continue to navigate a challenging and competitive market - many of these I've written about before, but the trends continue to be persistent and I thought were worth re-highlighting. I hate dead deals just as much as everyone and want to relay learnings from prior diligence processes to hopefully help searchers avoid similar mistakes. As always, the thoughts below are transparent (some may say negative) and hopefully informative based on my experience with recent search transactions. I'm not going to sugar coat and say that modern search funds are the best thing ever - you can go to any ETA conference's opening panel for that speech. I continue to think it remains a great time to acquire your own business and be a long-term operator providing a highly attractive risk/reward trade-off with meaningful upside vs. a standard corporate job. I also think the search space will continue to institutionalize and professionalize as new pools of capital enter the category, which will only strengthen search in the years to come. If I can ever be a sounding board to your search or assist with diligence, please message me or send me an email. Happy searching into 2027! Additional blog posts with tips and advice can be found here: redacted. The Traditional Search Model is Ripe for Disruption Everyone continues to say the traditional search model will only continue to evolve and I think it's true. I think the category is ripe for change. With the amount of (i) searchers not successfully closing on a transaction during two years (or more) and (ii) the amount of gap equity available in post-LOI deals with investors passing on their pro-rata, why would you even back a searcher at the beginning of their search? What's the point of a step-up? Investors aggregate their capital to $500K-700K to fund the searcher's next two years of diligence and salary to receive preemptive rights on any future deal flow. But if 75%+ of post-LOI deals require gap equity (usually meaningful dollars) why even secure preemptive rights and have the J-curve upfront when you can see the same deal flow later on for free? Here's a perfect real-time example. I assisted a searcher on a transaction that required ~$15 million of equity. Fairly scaled business for the search category and an attractive purchase price multiple - checked a lot of boxes for what search investors are looking for. I always hear from search investors that they are looking for larger companies and can write bigger checks, many of which are trying to move away from the subscale <$1.2 million EBITDA businesses. Throughout the diligence period, investors continued to tell the searcher that they were highly interested in their pro-rata portion or even more and the searcher believed the transaction would be over-subscribed with equity at closing. As a result, the searcher elected to reduce the debt utilized at closing to over-equitize the business and provide financial flexibility early in the hold period - you can always recap the business and layer in additional debt once you're off to a strong start during the firstredactedmonths of ownership. Then it came time for the dreaded PRN's. One excuse. Then another. "We have exposure already in this segment." "We believe the sector is project-based and are going to pass." "We like the deal but are going to come in for 30% of our pro-rata." All of this feedback came within two weeks before the targeted closing, when it could've been relayed months ago at the time the LOI was signed. If you already have exposure in the category and are going to pass please tell me when I sign the LOI so I can plan accordingly - don't wait. If your fund is struggling and you're writing smaller checks to try to further diversify your portfolio and extend the life of your fund just tell me. All of a sudden, a $15 million raise that was oversubscribed was over $5 million shortredacted% gap). The frustrating part was 2 of the top 5 investors who were very bullish on the deal during diligence, and each had a $1.7 million pro-rata allocation ended up coming in for $1.1 million and $800K, respectively. It's great the investors participated, but nowhere along the way did they articulate they would be coming in for 35-50% of their allocated equity, thus immediately creating a meaningful $2.0 million gap. There were five additional investors that passed on the deal outright that combined for another $3.0 million gap. And you wonder why the rate of dead deals is increasing? I also find it funny when investors pass on a deal last-minute and then immediately request their step-up to be paid in cash at closing. So not only are you blowing up my deal but you want your $75,000 cash wired at closing and are thus increasing the capital I need to raise on top of the gap you've just created? How on earth does this model sustain itself? It doesn't. I see this example occur in majority of the search deals I assist searchers on throughout diligence and it can be incredibly frustrating. My advice is simple - reach out to a broad lender base immediately upon signing the LOI (do not wait) with the goal of receiving multiple term sheets to create a competitive process. Many of these search lenders are not overly reliable and do not have an institutional process. Same goes on the equity side - I urge searchers to reach out to family offices and traditional search investors outside of their cap table immediately upon signing their LOI to prepare gap equity conversations early. So many deals require gap equity, and few deals are now being closed within theredactedinvestor cap table you initially set out on your search with. If you attempt to start gap conversations 15 days before closing, you are pushing your closing out by 2-3+ months and the odds the deal eventually closes materially decline. When you raise your search fund, you're likely cutting out some prospective investors for various reasons - I urge searchers to keep those investors warm and periodically update them on how your search is going and areas you're digging in. There is a good chance that you'll be calling on them in a few months to see if they're interested in a post-LOI deal and it greatly expedites the underwriting process if they're already up-to-speed on your firm / thesis. I also advise searchers to create some buffer in the equity numbers they're proposing to search investors - sharpen your pencil on transaction fees & expenses, the cash you plan to put on your balance sheet and leave a buffer for how much equity you may need to close a deal. Don't forget to include any sourcing fees via buyside brokers such as Axios as those dollars can add up. Many search investors tap-out at $500K-$1 million equity checks and it's much easier to cut someone's pro-rata check down vs. go back to your cap table and ask for additional dollars prior to closing. This problem doesn't exist in traditional private equity - large family offices, endowments, pensions, and insurance companies can write very large checks and if other co-investors pass on a deal they anxiously wait to mop-up any remaining equity required to close the deal. Search isn't there yet and the gap equity problem frustratingly persists. Another tip on the gap equity front is to construct your cap table with 2-3 sizable lead investors that have deeper pockets and an ability to write larger checks. Find investors that have real funds and a real investment team (ideally folks from investment banking and private equity, not just former searchers or individuals that worked at other search firms). You want to partner with investors that have capital and can flex-up and help fill a gap vs. the groups that are trying to wrangle $250K of equity and will likely take less than their pro-rata rights. The gap equity problem isn't talked about enough in search, but I give credit to a few of the more institutional groups and family offices that understand they can't be the reason a deal dies. The private equity world is small - if a Limited Partner said they could write a $20 million check to close a deal and then backed away the week before closing word would spread very quickly and that investor would be shut-out of future deal flow (essentially blacklisted) as no GP will want to partner with them. There is significant reputational risk and brand is important. The challenge with search is there are too many searchers desperate for capital and trying to find gap investors and, as a result, the same parties that blew up someone's deal may end up providing the required gap equity to close the next deal. Capital is scarce and bad actors will continue to act poorly given there are no repercussions. Construct your cap table wisely! Avoid Subscale Assets Having helped searchers for the past 6+ years I've observed the industry long enough to now see plenty of searchers shutting down their search. Close rates are declining and many searchers are trying to extend their search beyond two years, partner with another searcher, or buy additional time to find that perfect business. It can be discouraging to go on an investor's website (which usually isn't updated) and see all sorts of searches launched inredactedwith expired websites, meaning none of those searchers successfully closed deals. Two of the dead deals I incurred this year were due to searchers targeting a buy-and-build strategy with a subscale initial asset. This is not overly surprising, but the lesson needs to be repeated. If you're targeting a niche segment with a heavy focus on M&A it's going to be very hard to convince your investors that jumpstarting the thesis will work on an $800K EBITDA business as the foundation. There isn't enough infrastructure in-place to build upon. No foundation exists. The company likely lacks professionalization, is mismanaged, and will require significant investment into people and systems to truly serve as a 'platform' for a buy-and-build. Then you add in your CEO salary, you need to hire a Controller to bolster the finance / reporting function (the books are a mess...shocker), and you need to invest into an ERP and CRM system along with minor technology / AI investments. Your 'beginning' EBITDA is gone. Get this feedback from your investors early. Some of those $800K-$1.2 million EBITDA businesses could serve as great tuck-ins to diversify your customer base, end markets, or create cross-selling opportunities, but you need a platform of scale and a solid foundation in-place to jumpstart a buy-and-build HoldCo. The add-ons should ideally not be larger than your initial acquisition as it'll create organizational challenges. I continue to tell searchers that for M&A-heavy theses you want $2-4+ million of EBITDA and can then layer in the $500K-$1 million EBITDA tuck-ins to drive scale. Your investors do not want you to start a new thesis with <$1.0 million of EBITDA as you have little wiggle room and cushion to service your debt, interest and amortization payments, and excess free cash flow to re-invest into growth. The DPI Problem Similar to private equity, search, while newer, is experiencing the same DPI and distribution problem. Investors are holding on to investments for longer and the usual 5-year average hold period is extending to 6-8+ years. As a result, investors are lacking distributions or DPI and without getting capital back to their investors, many LPs are not looking to 're-up' or invest into the next fund as they're waiting for capital to be returned. Successful exits and DPI are the best way to get investors to commit to your next fund essentially recycling proceeds from a huge win to fund their next capital calls. There are always quick wins across search and the home runs / unicorn deals that everyone hears about, but the norm is holding periods are being extended and it is impacting search investors' ability to raise new funds (especially at greater sizes). Many investors are unable to increase their fund size, and I've also seen plenty of search investors shut-down their funds or move away from the category. Individuals who are highly active on LinkedIn promoting the search space are often writing $25K-250K checks into search deals - they may be a great brand or mentor to have along for the ride, but keep in mind their equity check is not going to get your deal across the finish line. A lack of successful exits and distributions is impacting private equity and also impacting search. Become Best Friends with Your Top 2 Lead Investors I've seen searchers handle communication with their cap table differently throughout the post-LOI process and now have enough experience to know this typically leads to different outcomes. I've preached it before, but overcommunicate with your lead investors. I'm not saying this like suck up to your 8th grade math teacher. But your top 1-2 investors (or maybe 3-4 depending on how diverse your largest investors are as a % of your total search) are ultra-important to your search. It is going to be extremely challenging to close your deal if 20% (typical top investor concentration) or 35% (top two investors) of your cap table passes on the deal that you're excited about. I am telling you from far too many dead deals and scars having worked in the search space for six years - loop your 1-2 largest investors into a potentially interesting opportunity BEFORE you sign an LOI. Do not sign an LOI that has hair on it, or the valuation is questionable, or the structure isn't ideal before consulting your lead investors. Your investors have seen enough deal flow over the past 5-10 years and should be a sounding board on how to construct your LOI or what valuation is appropriate, how to leverage holdbacks / earnouts, and how to create optimal alignment with the seller. Use them as a resource. One of the worst situations that often sets a searcher up for failure is signing an LOI and then bringing in investors and outside third-parties to review. The challenge is you're working so hard to build trust with the seller, who likely does not know you at all, and the easiest way to kill trust in a diligence process is to 're-trade' the deal you already agreed to. The seller thinks they have a handshake deal and you'll close in 90 days but in reality, diligence is going to drag on for 6 months and you're hoping for a 15% haircut on valuation along the way. This rarely leads to closed deals. I personally hate reviewing a signed term sheet and wondering why additional key points weren't negotiated upfront. "Geesh that's a large equity raise did you ask the seller if they'd be open to a seller note with a 6-7% flat interest rate and year one is fully PIK interest to preserve cash in the business and pay-down third-party debt? That'll also be a cheaper cost of capital vs. the third-party leverage you have modeled in." I see this far too often and your lead investors will likely have similar questions. Each transaction is made up of sources (how you fund the transaction with debt and equity) and uses (what the capital is used for including paying cash at closing, transaction fees & expenses, earnouts, etc.) Finding the right balance of debt and equity and not over-levering the business is incredibly important in search. The challenge is the entire process is circular. Lenders often move slowly during diligence, and you don't know whether you'll receive a single term sheet or five proposals to choose from, each of which may provide a varying degree of term loan amount and access to a revolver. I typically urge searchers to skip senior term loan plus mezzanine debt structures as subordinated debt is incredibly expensive today at 12-15% interest (too much for a subscale search deal). Plugging a gap with mezzanine debt almost never works in search and the businesses are too small. You then need to raise the correct amount of equity, which is impacted by the amount of seller rollover / seller note agreed to as well as the amount of third-party debt you can raise, and, by the way, the 'committed equity' you raised isn't committed at all its an option to invest (hence my gap equity rants for the past 18 months). When I hop on a kick-off call with a searcher, my heart sinks when they say they've signed an LOI, but their lead investor is likely out. "I think I can still close." You're now in a 20% hole and it's only the first inning. And chances are there are 4-5 other smaller investors who will now likely pass because the lead investor (whom they are friends with and know well) is out and they'll just follow-suit. The search space is becoming very similar to VC around 'groupthink' where the top 2-3 leads are highly influential on the rest of the capital raise. Funny side note on one of the search deals that closed this year - a mid-size investor had expressed to the searcher that they were out and going to pass on a deal. They didn't appear interested and didn't do much work. The searcher appreciated the feedback and shifted their efforts to gap equity as well as slightly re-structuring the deal with the seller. A few weeks go by and the searcher issues PRN's to close the deal by month-end. The investor that passed asked if XYZ firm was going to participate as the lead investor. The searcher politely told them that the lead investor was, in-fact participating for their full pro-rata amount and would sit on the board. The investor changed their mind on the spot and told the searcher, "I'm interested and going to submit my docs for my $1.5 million pro-rata allocation." Poof. Just like that. $1.5 million out of thin air is suddenly raised from the dead. No diligence. No calls on what the business does or why it's a good fit for the searcher or what the value-creation plan looks like or how the searcher believes the downside scenario is mitigated. Just sign and submit the docs. That's not how most investors perform diligence (I hope) but goes back to the point that your top 1-2 lead investors are critical in the equity raise. Groupthink is becoming far too common in search. "If XYZ firm is in, then I'm in." Two final pieces of advice on this topic. (i) Not only are your top 1-2 lead investors critical for the equity raise, but I've seen countless deals saved because your top leads can step-up for additional equity and write a larger check to fill the gap. Your lead investor flexing from $2.0 million to $2.6 million to help close a deal is far easier than finding six $100K checks from HNW individual investors. The ability to scale-up your equity check in search is becoming so important. Find the right lead investors who can scale with you (especially for buy-and-builds) and who may be interested in writing a larger check if equity is available. Secondly, (ii) Meet with your leads in-person during diligence. Get your 1-2 lead investors up-to-speed as quickly as possible near the LOI stage, but importantly, do it in-person. If you have a big presentation to your lead investor coming up to go through the model and investor memo in-detail do it in-person. I've seen a few searchers do this and it pays dividends. Fly out to see your investor in-person and present to their team. Get dinner after and further build the connection. Have an authentic conversation about why the opportunity is compelling. The day trip and flight costs pay for itself. Get their transparent feedback in-person. Do not present your full materials for an hour via Zoom and then anxiously wait a week for feedback. There will be a critical stage during diligence where you reach a go / no-go meeting to decide if you pursue or kill a deal with your top 1-2 investors and those meetings are best done in-person. I think your investors will agree and will be happy to spend the extra time with you. Investors are Becoming Overly Selective Given the recent boom in search over the past decade, more and more searchers are launching on an annual basis to find the right business to acquire. As a result, there are roughly the same number of investors that are backing a growing number of searchers - it's highly competitive and, as a result, investors can be more selective than ever. I recently checked in with a HNW individual search investor (and former searcher) to hear what they're seeing in the marketplace. " The challenge is that I’ve not found a searcher worth investing in for about 6-9 months. It's been almost a year since I invested in a new search. My own 40 searchers had a 25-30% success rate and many deals were not worth doing. Too expensive and too much hair. Too many voyeuristic searches, wanting the outcome but not the hustle, wanting the job but not a real “search.” Search has finally eaten itself, I’m afraid." The response from the investor was blunt, but I think there was also a lot of truth in it. Success rates are declining, investors are taking on J-curve risk in backing a searcher's salary for two years, with many searches shutting down without successfully closing a deal. Purchase price multiples are rising, and many situations involve a lot of hair with customer concentration, declining earnings, key-man risk, or material leverage (including seller note) to fund the deal. The comment on hustle resonated as well - I speak with all sorts of newly launched searchers and usually after a 30-minute call I can tell pretty quickly if the searcher has the 'grit' to grind past midnight, work through diligence efficiently, ask the right questions, and manage the debt and equity raise to reach a successful closing. Many searchers don't know what they don't know and it becomes overly apparent during diligence when its crunchtime. It is more important than ever for searchers to be buttoned up during the post-LOI diligence phase as investors have ample deal flow in backing more searchers and not all deals will close. Investors can be picky and selective given the number of newly launched searches per year. AI Slop is Real AI is great and we all love Claude, but ultimately your investors and lenders can see right through AI slop and it becomes overly apparent when you're trying to talk through a deal that you don't know very well. AI investor presentations could not be more obvious - the buzzwords, the industry jargon, the formatting. While it's a great starting point to dig into a subsector and find relevant research AI will only get you so far. I highly discourage searchers from relying solely on AI to build their investor presentation, and even worse, their LBO model. It may save time, but the quality sucks. It will set up your diligence process for failure and if you somehow close your transaction, set you even further behind post-closing without a solid foundation of financial analysis and KPI's to leverage for your post-close value-creation plan, budgeting process, etc. Be smart with where you plug AI into your search to augment your diligence process. Yes, all LBO models are made up of hundreds of assumptions and no model is perfect. But it's the process of building the LBO from the bottom-up, evaluating various growth levers, projecting customer behavior, and toggling cash flow assumptions that allows for you to better understand the true drivers of value-creation in the business (hopefully it's organic growth and not based on exit multiple expansion). A detailed bottoms-up P&L projection based on the company's growth levers (customers, end markets, service offering, products, physicians, etc.) is invaluable as the searcher shifts from acquiring to operating. Leverage AI and interns where you can, but ultimately you need to own your diligence process. LP's and investors are becoming increasingly skeptical of the use of AI in diligence and how well you truly know the business. Don't Over-Engineer Diligence Many searchers are Type A (trust me, I understand this pain point myself). You want diligence to be perfect. You want absolutely every box to be checked and a clean transaction with no hair. Those deals largely don't exist anymore and certainly not for 5.0x EBITDA or the multiples your investors want you to pay. To be transparent, one of the dead deals I incurred this year was due to the searcher over-engineering diligence. The reason the deal died was completely self-inflicted, which was a painful process to witness. Every single step of the way had to be perfect. "We just got updated October financials can you update the model, investor presentation, and all of the returns? I'd like the top customer to grow at a 5.3% CAGR not 5.5%. And can we run three additional downside scenarios highlighting how the business will perform if the recession hits in 2029P instead of 2028P? I'd also like to model a 7-year projection with a dividend recap in year four as my investors want to see how the business performs during a longer hold period. By the way November financials should be ready in two weeks so we can do the same refresh mid-next month." Oh wow. Let's take a step-back here. We all want to see the latest LTM financials and performance of the business no doubt, but when you're talking to your investors on if they like the deal or not presenting 10 different scenarios and two projection hold periods is going to cause heads to spin. There is a reason private equity firms present their Limited Partners with 3-4 scenarios tops, all across a 5-year hold period. Beyond that is a black box. You want to show a 50% net IRR across a 7-year hold? Happy to do it and I'll tweak the model, but what value does that really add to your diligence process? It's great to be detail-oriented throughout commercial diligence, but you reach a tipping point where being too in the weeds and over-engineering every single analysis will take too much time and kill your own deal. The seller / owner will also get fatigued with you asking them 300 questions, many of which are from investors who didn't get past page 4 in your investor presentation. I can't stress this enough, but you can't over-engineer diligence. The challenge with searchers vs. a traditional private equity firm is a PE fund has a team of four individuals working on a transaction together who have dozens of M&A reps under their belt. The searcher is trying to close their first deal (usually their first or second LOI ever signed) - they don't know what they don't know. You don't have a feel for if the seller is sketchy, which EBITDA adjustments to accept, how to negotiate the net working capital peg, if diligence is moving at a slow pace (or is this normal??), and how to pushback against investor requests. As a result, many searchers get bogged down post-LOI and spend an extra 2-4 months spinning their wheels on trying to perfect their model or slightly tweak the earnout so it's "perfect". I've said it before and will say it again - TIME is the #1 killer of deals. The longer you drag out the diligence process the more likely the seller is going to get fatigued, find another buyer, or change their mind and simply choose to hold on to the business. RiverStone works closely with searchers right at the LOI stage to have a gameplan for building the teaser, mini presentation, preliminary mini LBO (investors always want a quick read on returns upfront), full investor presentation, and comprehensive LBO to ensure commercial diligence does not drag-on and ultimately have a higher probability of successfully closing. Pick your battles, but not every element of diligence is going to be perfect and that's okay. In the deal I noted above, I hate to say it but the searcher (not the seller) is really the one who killed the opportunity. The LOI was signed in September. A usual goal would be to close by year-end withinredacteddays. Then the seller is on vacation and not providing the raw financials you need to kick-off diligence. Then the QoE team isn't overly responsive during the holiday. "My investors told me to take a vacation now because I won't be able to once I'm operating the business post-closing." Okay, no problem, but I just want to make sure we actually reach a closing. I usually don't hear of private equity firms going on vacation during live diligence and they have a deal team of 4-5 people, not a single individual. Then the over-engineering begins in building 30 scenarios in the model, restructuring how revenue is built, and relaying dozens of new questions to the seller on technology and operations. It's now March. Seven months since the LOI was signed. The deal was proprietary so there is no banker in the middle pushing both sides to reach a closing. The seller is fatigued with providing so many data requests and answering so many questions. Your QoE, which already took too much time, is now stale and will require a refresh as your investors don't want to close on a deal with financials that are 4-5 months old. That's another $5-7K to refresh the report. Diligence fees are adding up. It's now July. I politely check-in with the searcher - "Hey just seeing how diligence is progressing and if you're still targeting a closing this month?". I could've bet my life savings on the response I was about to receive. "Oh no, the deal died. The seller frustratingly is now saying he wants to wait 4-6 months before talking to any buyer." I don't blame them at all given how the process was managed (very frustrating given 50% of RiverStone's fee is success-based and at-risk and we poured a ton of effort into this diligence process that spanned 10 months). 10 months is a long time - macro risks change, customer behavior and underlying performance change, family dynamics within the ownership change, and importantly the seller's mind may change. Especially in a proprietary deal the seller may change their mind and ultimately they don't have to sell. Transact in three months on the initially agreed upon LOI terms? Everyone's happy. Ask 300 questions and drag diligence on for nine months with no end in sight? My guess is the seller is going to find another partner, probably a private equity firm who has done this before, will pay a greater valuation, and can close in 90 days. Don't over-engineer diligence. The fourth and final search deal that died during 2026 was due to the underlying company continuing to accelerate growth during the diligence phase. The searcher was moving quickly throughout diligence, however, the company was scaling monthly revenue by 40-50% vs. the prior year. Each new month the owner closed the books you could tell they were contemplating if 'now' was really the right time to transact and sell given the momentum in the company. After a few months went by, the owner pulled out of the process and elected to hold on to the business as it was continuing to scale and throw off significant free cash flow. The purchase price became stale as EBITDA grew by a few hundred thousand and the owner wanted a higher valuation, but ultimately chose not to transact at all. It just goes back to the theme of time killing deals. Many Investors are Pausing on Software Software has been a huge theme for search over the past 15 years and produced some ridiculously successful outcomes and eye-popping returns. A few of the RiverStone closed transactions this year were software and tech-enabled businesses and valued off of revenue or ARR. The theme here is simple - there are search investors that either love or hate software deals and usually the response is binary. Be aligned with your top 3-4 lead investors if they are open to revenue multiples or specifically backing you to pursue a software deal. There are several search investors along with dozens of private equity firms that significantly overpaid for software businesses during theredactedsoftware bubble coming out of COVID. Many of those investments are underwater and the companies still afloat are now challenged by AI disruption. Multiples are coming down. I have nothing against software deals, but the space has generated significant volatility over the past five years after a decade of success and there are a lot of binary outcomes - be thoughtful on why your cap table backed you, if ARR multiples are acceptable and if software is a good fit for your background. If you are running a search to buy a software business and your investors believe it's a good fit for you, by all means proceed. If you launched your search to acquire an industrial services business and you found a niche software application for 5x ARR proceed with caution and receive investor feedback immediately. Find the Next Niche Certain themes across private equity continue to be overheated and the same goes for search. More buyers interested in a category leads to more competitive processes, higher valuations, and will reduce your odds of outsized returns. I especially tell searchers to be cautious with 'proprietary' deals where "it's just me and one other private equity firm, but they want to sell to me". I hear this time and time again - proprietary is great, but if there are real private equity firms at the table (with real funds and committed capital) I view that as competitive. Put yourself in the seller's shoes - you may be willing to transact for a 10% discount to find the right partner and cultural fit, but the private equity fund is now setting that ceiling and the odds of you getting a good deal dwindle. Themes such as medspa, HVAC, home services, landscaping, roofing, and pharma services / clinical trials all remain highly competitive. As a result, you've seen recent success stories with searchers (and small PE firms) moving into tangential categories that are less competitive, but have a lot of the same attractive underlying characteristics and still produce high free cash flow. Rather than acquiring into the competitive HVAC category we've seen groups have recent success in acquiring garage door maintenance businesses (both commercial and residential). Instead of acquiring a landscaping business some searchers have found success with tree removal. Being patient and finding the right niche will pay dividends later on once you're operating. Hopefully the tips above help existing and new searchers navigate the diligence process and successfully close on deals. I hope to continue to have open dialogue with both searchers and investors on areas RiverStone can best add value and how to make the commercial diligence process as efficient as possible. I continue to believe the search space offers a very attractive risk-reward trade-off for both searchers and investors and the outsized return potential is far greater in the lower end of the market vs. the middle market. I love the free cash flow dynamics and real EBITDA that searchers are acquiring vs. high-growth venture deals that burn cash flow and have greater volatility and see plenty of upside for the search space going forward. Please reach out to the RiverStone Reporting team if we can be a helpful outsourced resource in moving through commercial diligence more efficiently and effectively and happy searching in 2027!