Intentional Growth

#320: Why Acquisition Entrepreneurs and Search Funds ‘Buy Then Build’ with Walker Deibel

Sep 29, 2022

Walker Deibel, author of Buy Then Build, discusses the rise of acquisition entrepreneurs and search funds. He explains the motivations and strategies behind these entrepreneurs and the impact on valuations and deal structures. The podcast also explores the concept of search funds and the challenges in the private capital markets.

01:13:21

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Walker Deibel

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Quick takeaways

Acquisition entrepreneurs are individuals who acquire and operate existing businesses, offering an alternative to starting a business from scratch.

Search funds, typically formed by MBA students or recent graduates, raise funds from investors to finance the search and acquisition of a suitable business.

Different types of business buyers, such as single sponsors, independent sponsors, and self-funded searchers, adopt various approaches to deal sourcing and funding opportunities.

Deep dives

Overview of Intentional Growth podcast

This episode of the Intentional Growth podcast dives into the concept of acquisition entrepreneurship and explores different approaches to buying and running businesses. The episode features a discussion with Walker Dible, an expert in the field who coined the term 'acquisition entrepreneur.' The episode explores the motivations and strategies behind becoming an acquisition entrepreneur, including the desire to own and operate a business and continue a legacy. It also delves into the benefits of patient capital from search fund investors and the role of a coach in guiding the acquisition process. Additionally, the episode highlights the importance of confidence and speed to closing for successful acquisitions. Overall, the episode provides valuable insights and perspectives for aspiring entrepreneurs interested in acquiring businesses.

Value Lies Beyond the Obvious

00:26

Introduction

5min

The Rise of Acquisition Entrepreneurs and Search Funds

8min

Exploring the Flavors of Acquisition Entrepreneurs

4min

The Importance of Acquisitions in Growing Small Businesses

19min

Search Funds and Acquisition Entrepreneurship

17min

Challenges in the private capital markets

13min

Book Launch and Hardcover Expense

2min

The Importance of Acquisition Entrepreneurship and Search Funds

2min

Starting an Acquisition Lab and the Importance of Intention

4min

Ep.#6 [THEME FIVE]

What is an acquisition entrepreneur and search fund, what are the different types, and where do they get their money?

In this episode, Walker Deibel is back on the show. Walker is a serial acquisition entrepreneur and author of Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game. He is here to share what an acquisition entrepreneur is, why the market is growing, where they get their money, how they structure their deals, and why they are on the hunt to buy companies.

Today we are going to talk about the rise of the acquisition entrepreneur and how this particular exit option impacts your role as a leader, the valuations, and the variety of different deal structures. You will learn that acquisition entrepreneurs typically consist of a blend of MBA students backed by investors or corporate refugees who are looking to own a business but don’t want to go through the start-up phase. You will also learn that since they are typically solo-preneurs, they tend to stay in the market with companies below five million dollars in EBITDA.

But what if your business is over five million dollars in EBITDA?

That’s where we talk about search funds. Search funds are typically “scout teams” for investors or a group of acquisition entrepreneurs that hire students or “rookies” in the M&A space to find, negotiate, and land deals.

The summary? The rise of the acquisition entrepreneur and search funds is playing a unique role in the market by matching up capital with talent in order to help facilitate the transition of millions of baby boomer businesses to the next generation.

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What You Will Learn

What an acquisition entrepreneur is and what their motives are.
How acquisition entrepreneurs fund the purchase of a business and the role of an SBA loan.
What a search fund is and the different flavors that are out there.
The mindset of an acquisition entrepreneur and search fund.
Why buying a business is much more logical than starting a business from scratch.
How selling to an acquisition entrepreneur could impact your culture and legacy.
The types and sizes of businesses that acquisition entrepreneurs typically target and why.
How search funds started, how they work, and how they are different from an acquisition entrepreneur.
Why a search fund is a “scout team” for investors.
The role Ivy League schools have had in educating and growing the market.
What an independent sponsor is and where they come from.
What proprietary deal flow is and why investors pay an independent sponsor to capitalize on it.

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Bio:

Walker Deibel is a serial acquisition entrepreneur, bestselling author, and M&A advisor.

Walker acquired seven companies over ten years and co-founded several startups. His bestselling book, Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game, was released to critical acclaim and was recognized by Forbes as “one of the top seven books all entrepreneurs must read” and is currently being used in many universities.

Walker is a partner at Quiet Light where he helps online-based businesses exit. He is a certified M&A advisor, certified M&A professional, former SEC licensed stockbroker, and recipient of the Middle Market Thought Leader of the Year awarded by the private market Alliance of M&A Advisors. He was recognized as a lower middle market thought leader by Axial, and his writing has been featured in Inc., Entrepreneur, Forbes, Fast Company, and Harvard Business Review.

Walker is also an Emmy-nominated producer who has worked on almost a dozen films with premieres at some of the world’s most prestigious festivals, including Sundance, SXSW, and Toronto International Film Festival.

Interview Quotes:

06:22 - “I kinda joke that I started acquiring businesses because I’m a terrible entrepreneur.” - Walker Deibel

11:16 - “Baby boomers own the most companies than any other generations in history and they all need to retire by the end of the decade.” - Walker Deibel

17:48 - “There’s only two ways to grow a business: innovation and acquisition. That’s it.” - Walker Deibel

22:33 - “I think, from the seller’s perspective, the greatest thing that an acquisition entrepreneur brings to the table is the continuation of the legacy.” - Walker Deibel

27:18 - “The biggest thing you can do as a buyer is exude confidence and speed to closing.” - Walker Deibel

50:19 - “Saying you want to be an independent sponsor, as your job, is the equivalent of saying, ‘My career plan is to move to Hollywood and be an A-list actor.’” - Walker Deibel

63:17 - “They, pretty quickly, start their search by reaching out to brokers, then they turn to proprietary deal folks cause they think that’s where the magic is hiding, but in my opinion it’s not.” - Walker Deibel