What industries are known to be too competitive for Search?

January 12, 2022

by a searcher from Lousiana State University in Houston, TX, USA

Hi,

I am just starting industry research and will select a few attractive areas to write theses. The Endurance webinar on industry research mentions crossing out too competitive/ overrun industries.

What popular search industries are overpopulated with LMM, strategics, or searchers?

What industries are investors already oversupplied on in their portfolios?

What resources are you using to gauge competitiveness and likelihood of acquisition?

It would be great to avoid overrun industries before a deep dive.

Thank you!

Reply by a searcher
from Georgetown University in 298 Classon Ave, Brooklyn, NY 11205, USA

For search funds, I've found that the best businesses are those that can fall in the "value" category. Tech/software businesses, while very attractive, are a tougher sell to search funds because it is more difficult to obtain bank financing for them. Broadly, I'd stick to service businesses, businesses with low capex, businesses that do not have significant regulatory or compliance requirements (e.g. healthcare), but stable, recurring contracts.

Reply by a professional
from University of Southern California in North Palm Beach, FL, USA

Buyer competition is responsible for more bad deals than seller misrepresentation or lousy businesses.
Competition forces some acquirers to make fatal concessions when negotiating with sellers.
• That's why so many people buy the right businesses the wrong ways.
• Or, they have to settle for what other searchers don't want.

DM me if you want to know more.

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