What are your insights after buying your first company and it didn't work?

searcher profile

February 14, 2021

by a searcher from Universidad Carlos III de Madrid in London, UK

We'd like to get the community's feedback on the following idea. This is a question to all the searchers that didn't succeeded after buying your first company, What are your insights? How long it takes you to find a company after your first failure? Do you consider quitting after your first failure?

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Reply by a professional
from University of Southern California in North Palm Beach, FL, USA
Lots of good businesses fail after changing hands. That's why my clients devote considerable attention to the post-completion transition - and we do it during Pre-LOI due diligence, and then stay on it all the way through dealmaking.

The 2020 Stanford Search Fund Study reports a 33% failure (to complete a transaction) rate.
And, of those search funds that bought a business, 25% suffered losses from their investment.

Self-funders, in contrast, quit or fail to buy more often than search funders, according to my observations and interactions with brokers and advisors.

• You have to wonder why so many people begin something destined to fail, don’t you?

Perhaps the better success rate of search funds pertains to the quality of the investors, providing oversight, and sufficient capital to assure positive cash flow.
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