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One perspective on the solo-vs-partnered debate:
“Searching is the shortest part of the journey, the true value of a partner comes in the operating phase.
First, we all have heard the old adage of working in the business vs. on the business. The owners of most companies in the self-funded size range are heavily involved in the operations. While you might be able to optimize some of the processes, as a solo searcher you will likely spend the majority of your day time working in the business initially, so growing the business becomes a nights-and-weekends project. It’s easy to burn out running that schedule for several years. In a partnered search, you have an extra pair of hands from the beginning and the pace becomes sustainable for the long run.
Second, owners naturally have a more meaningful incentive (equity value) to care about the business than employees. With a partner you have someone with the exact same incentives to cover for you if you need it. Over a 5 years operating period, it’s pretty likely that something will come up that will take you out of business operations for several days, or maybe you just want to take two weeks off after a few years.”
From “Searching Alone vs. Searching with a Partner” by Buy Small Sell High
A brand new case study from Yale, on how doing due diligence as a searcher differs from other diligence venues:
When pursuing entrepreneurship through acquisition (ETA), the diligence step is possibly the most exciting. Entrepreneurs typically have spent months or years looking for a business to acquire, and now they get to explore their potential new business in an unfettered and unvarnished way. Much like getting a feel for a shiny new car, diligence is, essentially, taking the business off the lot for a test drive. Through diligence, a searcher can thoroughly research the company and reflect on the opportunity.
However, the diligence step is also likely the most dangerous. It follows a long and exhausting search process, and by this point, searchers often have placed all their chips on a single bet. Therefore, searchers have every motivation to fall prey to confirmation bias, potentially minimizing unfortunate news. Because of this, we encourage searchers to approach diligence with as much healthy skepticism (but not cynicism) as possible. Eschew a posture of “I am trying to confirm what I already believe” and embrace a tone of “How can I prove what I believe is inaccurate?” After all, diligence is the final step in what will be a multi-million-dollar investment for investors and a personal bet for searchers that can be a decade long or more.
Also a great reminder that in life and in business, it’s not just the recipe that matters, but the artistry behind it:
Memorizing the eight pillars and checking off tasks will not alone ensure that a searcher will successfully navigate the due diligence process. As in cooking or baking, a recipe will only take you so far. True success relies on artistry and craftsmanship. In diligence, we sort these capabilities into three areas: key bets, relationship management, and time management.
From On the Nature of Due Diligence in a Search Fund Acquisition by Andrew Seth Jacobs and A. J. Wasserstein.
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