Liquidity Gridlock Meets Succession Cliff: Why Search Funds Are Poised to Clean Up

I keep hearing the same refrain from PE managers trying to unload “orphan” portfolio companies, brokers watching founders edge toward retirement, and lenders pulling back on leverage. Assets are stuck, sellers are nervous, and seasoned operators are thin on the ground. Preqin counts about 3.6 trillion dollars in unrealized PE assets. The latest IBBA Market Pulse shows 70 percent of business owners over 55, with nearly half planning to exit within five years. Layer on higher rates, frothy 2021 valuations, and a shortage of mid-market buyers, and you have a widening bid-ask gap begging for operator-led search funds to step in. 1. Data Behind the Bottleneck 3.6 T in unrealized private-equity assets. Many deals priced for 2019 multiples are waiting for a repricing event. 70 percent of U.S. small-business owners are 55+. Roughly 45 percent plan to exit within five years (IBBA / Exit Planning Institute). Translation: liquidity is locked at the top, succession risk is rising at the base. 2. Why This Matters to Search Funders Price Reset Window. Valuations are compressing, giving disciplined acquirers leverage. Operator’s Edge. Search CEOs deliver the “safe pair of hands” that both PE sellers and retiring founders want. Financing Tailwinds. Cash-flow lenders still favor profitable, owner-operated targets that can show clear operational upside. Multiple Paths to Upside. Stabilize, professionalize, bolt on add-ons, then either sell back to PE or hold and compound. 3. Two Real-World Use Cases in Flight Fund A Mandate: Acquire “stranded” PE assets in light-industrial services between 5 M and 20 M EBITDA. Approach: Track funds facing term expirations, then present a hands-on plan that fixes working-capital choke points in the first 90 days. In the current live deal, a seller note bridges a two-turn valuation gap and protects downside. Early Results: Within eight weeks of LOI, the team identified a two-point margin lift by tightening procurement and rationalizing SKUs. Lenders approved senior debt at 2.5 × EBITDA despite the tighter credit market. Fund B Mandate: Roll up founder-owned B2B distributors with owners aged 60+ and succession issues. Target size 1 M to 5 M EBITDA. Approach: Direct-to-owner outreach paired with a “stewardship transition” program that keeps the seller on as an advisor for 12 months. Earn-outs tied to customer-retention milestones align interests and reduce headline pricing. Early Results: First platform closed at 4.8 × EBITDA, a full turn below recent comps. A day-30 focus on culture, payroll stability, and CRM upgrades has already surfaced two tuck-in candidates from the retiring owner’s network. Both cases follow the same playbook: source from motivated sellers, structure for alignment rather than headline multiples, and execute a 90-day stabilization plan that proves credibility with staff and lenders. Operators have never been more valuable. When capital is stuck and sellers are searching for stewardship over sky-high multiples, the searcher who can roll up sleeves, stabilize quickly, and drive disciplined growth holds the strongest hand in the market. The runway for building enduring, compoundable platforms is wide open—if you’re ready to move.