Do Traditional Searchfund Investors Prefer Businesses at lower multiples that "Needs Fixing"?

by a searcher from New York University

3 years ago

Do your investors prefer you to find a business that "needs fixing" that trades for a lower multiple or one that needs no fixing but just has an owner who is passive/doesn't want to work hard anymore to grow it? 

I know self-funded searchers like businesses that "need fixing" that they can pay 3-4x for. In either case, we're all likely first-time operators so probably stay away from "needs fixing?" 

Any help or thoughts would be great!

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77 comments

professional

No unless it just needs a working capital peg. Its very risky investing in turnarounds in newbies. Too many things can go wrong that typically can't. Specifically billing versus your actual cash receipt collection. That will kill the company if it's not done right.

7 months ago | like reply | 0 likes

searcher from Universität Vienna

Usually established companies that are not in turmoil, but do offer significant upside potential

1 year ago | like reply | 0 likes

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