When to involve investors?

May 22, 2025

by a searcher from University of Pennsylvania - The Wharton School in San Juan, Puerto Rico

I’m looking to buy multiple businesses, either one at a time or a few in parallel. For a single deal, I don’t need outside capital. But to move faster or buy multiple at once, I’d likely need an investor. Curious what others have done. Is it better to close the first deal solo and bring in investors later, or line up capital upfront and go bigger from the start?

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Reply by an investor
from Massachusetts Institute of Technology in Boston, MA, USA

Thanks ^redacted‌ for the tag here. ^redacted‌ from my perspective and having dealt with various investors involved in search funds it really depends on the sector, business size, and deal parameters. It also depends on your individual capacity or if you're working with a team. If it's you individually, I'd highly suggest playing the slow game and not taking on too much at once. Acquiring multiple companies in a short period will tax you significantly, and you may not be able to focus on all of them and their unique issues. If you're working with a team, it changes things to where a team of operators who know what they're doing can handle multiple post-acquisition processes at once, especially if they're good at operational integrations. That, I think, answers your question. Individually, I wouldn't tackle investors until you've tapped out your personal discretionary capital. With a team, move as fast as your team can, and if that means it taps out your capital account quicker, then you'll be searching for investors quicker. Just keep in mind that it will most likely be a 3-6 month timeline to acquire investors, so incorporate that into your thinking, too. Happy to discuss more if you'd like. ‌

Reply by an investor
from University of Illinois at Urbana in Chicago, IL, USA

Steven, I agree with ^redacted‌ on this one. Things get so much easier after your first. 1) Track record 2) Debt coverage is evaluated in aggregate across the combined entity. In other words, you have more flexibility. You can refinance the original loan if it's advantageous, etc. 3) Much more favorable financing if the bolt-on is in the same industry. 4) This is much less talked about, but brokers and sellers take you more seriously. They move faster, offer better terms, and often bring you off-market deals when they know you're active. So, if you have the ability to finance your first deal yourself, absolutely do it. And bolt-ons / tuck-ins to that initial deal will be far more efficient from an operating and financing perspective than an unrelated deal. You may find that those first few deals throw off enough cash that you won't need outside investment.

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