Entrepreneurship Through Acquisition: Insights from Harvard Business School Experts

About the Episode

How can you get on the path to entrepreneurship by acquiring an established business rather than building a start-up? Harvard Business School professors Royce Yudkoff and Rick Ruback share their insights into the nuances of search fund investing, including the challenges of finding high-quality, enduringly profitable businesses. They focus on the appeal of the lower middle market, the advantages of finding a founder nearing retirement, and the appeal of the search fund approach toward entrepreneurship.

“I think the search fund model will become more popular in the coming years, and self-funded searches will become increasingly popular career choices.”

Rick Ruback

What You’ll Learn

• What a searcher looks like: What they look for, how they find capital, how deals are structured, and the advantages of this acquisition model.
• Advantages of the search fund model: How a search fund allows entrepreneurs to acquire established, profitable small businesses by raising capital from a group of investors, reducing the risks of starting a business from scratch.
• How search funds compete: Search funds can compete with other buyers like private equity firms and independent sponsors by offering a personal connection with the seller, flexibility in deal structure, and the ability to move more quickly on transactions.
• Predictions for the future: The search fund model is expected to grow in popularity, particularly for smaller businesses in the $400,000 EBITDA range, as an attractive entrepreneurial path.

Topics Covered

Want More? Related Resources: 

• What’s a ‘Main Street’ vs. a Middle-Market Company?
• The Basics of Independent (Fundless) Sponsors in M&A
• Net Working Capital (NWC) for M&A – A Complete Guide
• HBR Guide to Buying a Small Business: Think Big, Buy Small, Own Your Own Company (HBR Guide Series) by Richard S. Ruback (Author), Royce Yudkoff (Author)
• Think Big, Buy Small – Harvard Business School Newsroom podcast with Rick Ruback and Royce Yudkoff

Meet Our Guest

Royce Yudkoff

Professor of Management Practice at The Harvard Business School | Boston, MA

Royce Yudkoff is a Professor of Management Practice at The Harvard Business School. For the past 15 years, together with his colleague, Professor Richard Ruback, he has been teaching students at HBS how to buy their own company and writing about entrepreneurship through acquisition. Royce serves on a number of smaller company boards acquired by former students. Prior to joining the HBS faculty, Royce co-founded and led a private equity firm called ABRY Partners for 25 years.

LinkedIn: https://www.linkedin.com/in/royce-yudkoff-50b05a9/

Meet Our Guest

Rick Ruback

Professor of Management Practice at The Harvard Business School | Boston, MA

Richard Ruback is a Baker Foundation Professor at the Harvard Business School. For the past 15 years, together with his colleague, Professor Royce Yudkoff, he has been teaching students at HBS how to buy their own company and writing about entrepreneurship through acquisition. Rick has both taught and developed a wide variety of finance courses across his career at HBS. He has served as an advisor to corporations and directors, has served many times as an expert witness on valuation and securities issues, and has served on a number of boards of smaller companies acquired by his former students.

LinkedIn: https://www.linkedin.com/groups/13032106/