In The Trenches Is the Search Fund Acquisition Rate Falling? With Jim Edmunds, Badge Stone & Kent Weaver
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Feb 27, 2025 Join industry veterans Jim Edmunds, partner at Search Fund Partners, Badge Stone, co-founder of WSC, and Kent Weaver, investor in over 150 search funds, as they explore the declining acquisition rates in the search fund landscape. They analyze factors like increased competition from private equity and evolving valuation dynamics, particularly in software acquisitions. The discussion also highlights the importance of authenticity in building trust, confronting 'searcher fatigue,' and navigating the complexities of today’s market while remaining optimistic about future opportunities.
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Flat Closing Rates, Increased Returns
- Closing rates have stayed relatively flat since 2014, between 55-60%.
- Returns, excluding top performers, have increased from 20% to 33% IRR.
Navigating Private Equity Encroachment
- Private equity encroachment exists, but doesn't fully explain declining acquisition rates.
- Focus on strong independent theses and direct seller conversations to avoid competition.
The Changing Landscape of Lower Middle Market Acquisitions
- While it's still uneconomical for large PE firms to buy small companies, their platforms enable add-on acquisitions.
- Increased self-funded searchers also contribute to competition.