If your significant other has approached you expressing interest in raising a search fund, you probably have thought at some point, “What does that mean for our near and long-term future?”
Good news – A Search Fund is a fantastic way for an entrepreneur to explore his/her creative aspirations to run and grow a business, yet provides a certain amount of structure and security which can reduce much of the financial risk of a true start-up. There is potential for distinct financial gain if the company does well, though that is typically NOT the primary outcome. Above all, a search-fund acquisition can provide the fast track to a unique opportunity for gaining deep management, strategic and operational experience as a CEO/President.
Sounds great! Anything else I should know?
The search process can be grueling, unsatisfying, and ultimately unsuccessful. It includes a lot of starts and stops, which are hard on the “searcher”, and on his/her loved ones. There is a tremendous amount of uncertainty. Post-acquisition, your partner is likely to encounter multiple management challenges inherent to the acquisition and obstacles to growth. Further, the shift to a fully operational, executive role can be jarring, exhausting and at times, lonely.
Here are Frequently Asked Questions that will hopefully be helpful in your efforts to be a valuable source of support for your partner and in managing your own experience through the process (very important!). The answers are from my own experience as a “Searcher’s Wife” over the past 4 years. Thank you “Searcher Wife” Brittany Riner for the questions!
What's been the best part about the search fund?
Watching my husband take on a risky path that has yielded the chance for him to grow and mature professionally. Seeing him run a company, encounter and overcome challenges, as well as have some success and flourish in this high-level position has brought me a tremendous amount of joy and pride.
What's been the hardest part about the search fund?
The profound uncertainty we felt for the first year and a half – unsure where we would live, when we would move, and whether he was going to have a job. I became pregnant early into the search and this uncertainty was obviously very difficult to endure with a pending baby. There were multiple periods during the search that Will felt downtrodden and frustrated, when deals fell through (which happened several times), and questioned whether the search fund was a bad idea for him and our family.
What's surprised you about the search fund?
The community support that he has received, both peers (other searchers at various points along the search fund timeline) and individuals who have previously searched, acquired and sold companies and now invest in funds. There are a number of wonderful people through the GSB and greater search fund community who have offered advice and guidance to Will, professionally in terms of his company, and as a husband and father.
Another surprise for us that emerged is that one of the aspects of the search fund I was most excited about was moving to somewhere random or new for me (e.g. Nashville or Chicago) and beginning our lives together in that city. Will ended up finding a company in NYC, where he is from and though there are certainly major gains with that, I did feel a bit disappointed that we were not going to be forging an exciting new path together in an unknown city. It's also very far from my family who are all in LA and given the nature of the job, I knew that he would be committed for 5-7 years so our place of residence was not going to be flexible for the foreseeable future.
Before the search began, my husband and his partner and his partner's girlfriend (now wife) and I all made a list of our top choices for cities. We all put Chicago as #1 so I think on some level I thought we would end up there and was quite surprised when it turned out to be New York. Now that I better understand search funds, I realize how important it is that a searcher is geographically blind in an effort to find the best opportunity, and Chicago was really a long-shot despite any preferences.
I also realized how important it is and has been for me to really make the landing spot city our new “home” so that I feel happy here, and Will can focus on running and growing his business, and not as much on whether this was a good decision. It has taken a couple years, but I have been very committed to finding my old world, my own community here, which allows Will the ability to trust in his search fund journey, insofar as how it affects our family.
How did you best support your husband in the search process? What actions/words/gestures were helpful? Did you celebrate successes -- if so, which ones and how?
I did and still do a lot of celebrating successes. During the search, when deals fell through we tried to look at it as an opportunity to learn from mistakes and each time he got further with a potential seller I tried to get Will to see it as major progress. There were many points along the way that he felt guilty for putting us through this difficult time (which I have to admit it was at times) but I tried to tell him that I believed in what he was doing and either it would work out and he would find a company or he would move on after a couple years and find a new job and I was in full support of either outcome.
Today, I still try to encourage him to focus on successes. Running a business is not easy but every day he is gaining immense value – and he is getting better and more skilled in this role!
When my husband first started his fundraising, I was given the advice from another searcher’s wife whose husband had acquired a business not to get involved with deals and not to ask questions about any leads until the pen was dry on the contract, but in the end I wanted to know about the leads and about where he was looking, even though I had to fight to tell myself "you probably won't end up living there". I personally asked that he kept me involved in his search process, and to give more information to me when there was an LOI but some spouses prefer not to know.
I spent the years of the search really focused on my job and growing my career since I knew I was probably going to take a backseat professionally when we moved - #1 because he would need to really be focused and dedicated to driving the company above anything else and #2 because we were building our family. I decided to take a job with a company that is national and in every major city so whatever city we moved to, I could stay with the same company, which fortunately I was able to do. During this time, Will was very supportive of my long hours, made dinner many nights, and encouraged me to drive towards my own professional goals. He was sensitive to the emotional challenge of feeling unsure about our next chapter.
Have you met any of his investors? What is your family's relationship like with them?
I did not meet any of the investors in the early years. I think Will has tried to keep his relationships with the investors mostly professional, although they all certainly knew I was pregnant and aware of how that would impact him. He has a few that he is quite close to but I did not really feel it was my place to meet them. I did attend the Search Fund Partners dinner in the first year of Will's search which I really enjoyed, especially talking to other spouses and to other searchers who were in their new city and working to create a new life. Recently I met two of his board members (also investors) and I found it really helpful to put a face to the name, since they have both been so helpful and important to Will.
How aware of "the details" of the search fund have you been?
Will shared most details with me, whether they were good or bad, during the search and now that he is running the company he continues to share a fair amount with me. But that dynamic is how we approach most things in our life so I would imagine this issue is specific to each couple. I have offered him some advice along the way when he has hit road bumps but mostly I just listen, ask questions and provide support.
Were you nervous in Will's process of searching for a business to buy in terms of 1) finding a business and 2) where you would move?
Will originally said he was focusing on big cities only, but at one point was talking seriously with a company 45 minutes outside Daytona, Florida! My feelings about the city varied. At times, I felt like I had a big say and then at other times, I realized that Will needed to proceed with any real opportunity, any potential deal, and I had to swallow my emotions about moving to that city because if that was the only place he could find a company, than I knew we would have to move there.
As I mentioned, I had very mixed emotions about moving to NYC but in the end it was the best deal for Will, and fortunately it has been a really wonderful location for us personally. He knew and was aware that this was not my dream city and we had to battle some conflict on that topic in the first year of the acquisition phase. Because I was not that thrilled to move here and struggled a bit in the beginning, he felt both resentful that I wasn't being supportive of his professional endeavors, (especially because it was such a hard year coming into the new company and trying to begin the process of building it) and guilty for forcing me to move here. But we have worked very hard to find a balance – we moved to a neighborhood and community where we both feel comfortable and happy, and make frequent trips to my family in California. With much compromise and effort, we really feel like a unified force through this search fund process.
How did/do you and Will create boundaries when it comes to managing your jobs and your personal life?
I'm not sure if this is just Will but he has been very good in this area. He really did not spend all weekend working during the search phase and makes an effort not to do that now, especially since our weekends are largely time for him to spend with our two children. He checks his work email all the time – like most people! – but the boundaries around our personal life are established and it does not feel like the search fund or the acquired company consume us.
Do you have children? If so, did you have them during the search process? If so, how did the Search Fund impact that life change and vice versa?
I got pregnant about 3 months into the search. We figured everything in our life was up in the air, so why not just add to the adventure! And I can tell you it has been totally worth it. At times it has been tough - Will had to travel several times in the first few months of our son's life since he was in the middle of trying to close a deal and then we moved across country when Leo was 4 months old - but I don't regret for one second taking the plunge and having a baby at this time. We made it work and that's the best that you can hope for as a parent. There never is a "right" time to have kids and in a way, the search fund introduced the concept of a new chapter for us, so becoming parents was just part of that. And we love being parents!! We just had our 2nd child in the Fall, and though Will continues to have to travel every month for work and has to work late most nights, being CEO means he has more control over his time and he can go in late when needed or travel for personal reasons without having to explain himself.
How much time passed from signing of the LOI to when the deal was done? ~4 months
When the deal was done, what was the next day like?
Will was CEO; the buck stopped with him & his partner.
Did you have a gap in time from the day the deal was done to the day Will officially became CEO? No :-) This meant that we needed to be in New York for the signing and he would need to start running the company right away the next day. I could move with him at that time or be on my own with our son in San Francisco.
...If not, how did you manage to move to NYC?
We packed up and moved in 2 weeks with a 3 month old. To say the least, it was some of the hardest moments of my life. I also was leaving California where I'm from and moving to a city where I never thought I would raise kids. There was a lot of emotional turmoil involved for me. We moved in with Will's parents for a month, which was also very difficult and added to the feeling of displacement. It was December and there was little on the market for renting...we ended up moving into Will's sister's apartment and she moved home because she was starting grad school. This was INCREDIBLY fortuitous.
When did you start looking for a place to live? Did you wait until the deal was done to sign a lease/buy your apt?
In the weeks leading up to the closing we started looking for an apartment, although we were not able to find anything within our price range and desired location. That said, Will’s partner and his girlfriend had no other options and did find an apartment within 1-2 weeks of looking at the market. We had the newborn baby so we were even more limited with our time to look for a place to live but necessity is the mother of invention. We would have figured out a situation somehow, albeit the window of time to do so was very short. Another option would have been to stagger our move – Will could have moved in December and started to look for a place on his own and then I could have moved with the baby in January or February. I believe many search fund spouses use this approach. But we valued being together over anything else so moving with him was what I opted to do.
How did you know your price range if you didn't know what his salary would be?
I would suggest assuming a more conservative salary initially because the final sale value is still being established in the weeks leading up to the sale, but it is likely the searcher will have a vague sense of what his income will be based on the financials established for the purchase.
Anything else that you think would be good for me to know?
I think important to note is that an LOI is only the first step. Will signed 6-7 LOIs before he closed a deal. There is a good chance the due diligence process will reveal that the price the searcher and his investors are willing to pay based on the company’s actual financials is not enough for the owner (who thinks his company is worth more and has more growth potential than the numbers reveal).
This could and is likely to cause the deal to fall through and this outcome is really about protecting the searcher. You do not want him/her to get involved in a company that is not a good deal because that is enormous, insurmountable pressure. Since a searcher’s job is to grow a company to provide substantial profit to the investors (which is its own set of pressures!), it is important to buy the company at a reasonable price. It is better to not find a company and ultimately shut down the search fund than to buy a company that is not a good deal and have your partner incredibly stressed for 5-7 years in an unviable situation. Also if your partner discovers any major red flags about the industry or the company in general during due diligence, he will probably need to walk away. It is extremely frustrating and disappointing to everyone but it is the right path - and therefore I recommend being a voice of support at this time.
Also important to mention is that the transition to the CEO is very exciting at first, but can also be very, very challenging. Depending on your spouse’s background, it may be the first time he/she is in a truly operational and executive role and it is hard work, primarily psychologically, to run a company. Managing people is the toughest work in the world, no matter how thrilling your strategic goals and the company’s potential growth are.
Good luck and do not hesitate to reach out to me with questions!
Wife of Will Bressman
Search Fund: Rushmore Financial Services
Acquired Company: RIA in a Box (November 2012)