Are search funds used for buy and build acquisition models?

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May 16, 2021

by a searcher from University of Manchester in Seattle, WA, USA

Hi,

Are search funds commonly used for multiple acquisitions as per a buy and build model, or do they normally limit themselves to just one acquisition?

If the buy and build model is the goal, I suppose one can get round this by using the cash generated by acquisition #1 and/or cash flow lending to fund further acquisitions, but I'm curious how this is normally approached. Any insight appreciated.

Best,

Andrew

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Reply by a searcher
from INSEAD in R. Dr. Eduardo de Souza Aranha - Itaim Bibi, São Paulo - SP, Brazil
I did two acqusitions more or less at the same time. But indeed, I figured early in the process that this is difficult to sell to traditional search-fund investors. So I ended up doing a self-funded search and later only financed the actual deals with investor money. For me this combination worked well.
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Reply by a searcher
from Westmont College in Santa Barbara, CA, USA
I’d like to chime in as I’m currently under LOI for 3rd acquisition to bolt on. Your be surprised the level of seller financing possible on follow on deals especially if the bolt on acquisitions are smaller. Using cash flow from first two deals as equity into 3rd deal with seller note,
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