The KING of search funds:
Will Thorndike
He has invested in 100s of business acquisitions.
His 6-point playbook for the best returns:
1. Ideal Business for Acquisition:
- Recurring revenue (60-80%)
- Low churn (<20% annually)
- Growing market 7+%
- Low capital intensity (ROTC 20+%)
2. Most Successful Business Models:
Often niche service (or software) businesses providing an essential service to a growing end market.
Ex: Asurian - roadside assistance company. Basically captive AAA.
One of the most successful search funds ever. Multi-billion $ company now.
3. Successful Searcher Qualities:
Time Management - "know what messes to step around"
Coachable - willing to listen to mentors and board members
Customer Centric - spends time with customers
4. Get Rid of The Seller:
Any seller involvement is problematic post-close.
A searcher must define an owner's post-close role very clearly. This helps drive changes in the business and culture.
5. Board of Directors:
Hard to overstate their importance.
Mix of operators with experience in similar business models and investors.
A board member's compensation is their investment and a nominal fee.
Max 5 people.
6. Prediction for the Future:
More permanent capital models will emerge.
PE hates having to sell their best companies for fund-life reasons.
Owners like selling to long-term capital with no intention of selling again.