May 1, 2018

Because you’d probably rather read this post than face your workday head-on, here are a few snippets of info that we thought were interesting…


We recently read1 that in the U.S. there are over 220,000 businesses with $5M to $50M in revenue, more than half of which have owners over the age of 55.  That means ~110,000 domestic businesses will need some form of ownership and/or management transition in the next 10-20 years.


Thanks But No Thanks


The easy answer is family: children are natural heirs to their parents’ businesses. But there’s one big problem, says a recent UBS financial services report2: “Millennials make reluctant successors. Four in five current business owners say their children would rather inherit money from the sale of a business than the business itself.”  Plus, “while more than half of business owners’ adult children work for the business full- or part-time, few are interested in assuming ownership.”



Plus, 62% of business owners worry about how their successors will carry on their legacy:


Baby Boomers vs. Millenials

As UBS points out: “It remains to be seen…who will fill the void. While Millennials are the most inclined to start a business, they are conflicted about following through. More than any other generation, they believe starting a business is far too risky and inflicts high levels of stress.” We don’t disagree, and we think buying an established, successful business (“entrepreneurs through acquisition”) is the next best thing.


“Old School” Philosophy

At Pursuant Capital, while we technically (reluctantly?) qualify as millennials, we are “old school”.  We prefer to meet business associates in person for lunch or coffee, rather than quick texts or phone calls.  We take notes by hand, rather than on a fancy tablet. And we target “old school” businesses instead of popular, high-flying tech companies.  As an industry veteran describes it3: we are looking for “boring businesses”.  But don’t let that fool you: these businesses are vital to the economy, prosper in good times and bad, and are highly profitable.


State of the Market

In 2017, “…the lower middle market remained active and [transactions less than $2MM] were at an all-time high.”4  “Small business owners should be bullish on sales in 2018,” said Warren Burkholder, CBI, President of NEVRG, Inc. “With the corporate tax rate dropping to 21 percent and the repatriation of overseas capital, companies will have more capital to allocate to acquisitions. And with heavy competition in the marketplace, even more companies will be pursuing smaller market transactions.”


Unsurprisingly, retirement leads as the primary reason to sell, followed by burnout:



But even as an increasingly high number of businesses “hit the market” and transition to new owners, it remains a “seller’s market” based on valuation multiples and other M&A terms:



Our Role

“The next fifteen years will be the largest intergenerational transfer of private businesses in the history of the world…”5  And that’s where we come in: Pursuant Capital is a privately-financed search fund in pursuit of profitable, Tampa-based small businesses to buy and operate for the long term.


The University of Chicago Booth School of Business said it best: “The [search fund model] offer[s] business owners both a way to achieve liquidity and to solve succession planning issues. Since most private equity funds require management teams to stay on after an acquisition, [the search fund] is a unique alternative for business owners to consider. Further, as awareness of the model continues to grow, we believe more owners will be open to the concept and perhaps even seek it out.”6


As always, if you come across a great article, send it to us. If you learn of an interesting industry, let us know. And if you know of any business owners who may need an exit plan, we’d appreciate an introduction. We’ll be in touch again soon.


Joey & Sam

        1   2 Thanks to our friend Doug Graska (UBS) for sending this report. UBS Investor Watch: Who’s the boss? Business ownership: Who’s in, who’s out and who’s holding back   3 Thanks to Brent Beshore ( for all of his thoughtful content and instruction: 4 Market Pulse Q4 2017:
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