Niche or Broad? Advice from Experienced Searchers

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by a searcher from University of Toronto
in Toronto, ON, Canada

1yr ago

Niche or Broad? Advice from Experienced Searchers

Hey everyone! I’m new to the search fund scene but have consulted in manufacturing, travel/transportation, banking, and insurance. I’m torn between specializing in one sector or staying broad and letting the best opportunity emerge. Specializing might help build deeper networks and spot hidden gems, but staying flexible could uncover unexpected—and sometimes better—deals.

If you’ve tried one approach or both, what did you learn, and what would you do differently? Is there any data suggesting one path is more successful, or does it all come down to personal preference and luck?

Thanks in advance for sharing your thoughts!

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reply by a lender 1yr ago
in Falmouth, MA, USA

I agree with ^redacted‌. The more you specialize in one or few industries, the deeper your knowledge grows with each new deal.

reply by an intermediary 1yr ago
from The University of Chicago in Chicago, IL, USA

1) Search broad, buy Niche
2) First broad, then narrow to Niche,

Coming out of ETA or corporate management, most people have less than zero buying experience. So, in the early phase, focus on learning the acquisition process and the give and take. Then narrow it down to niche. I know of many buyers who found the niche business early, but did not know how to makes an offer, how to "read" the seller, how to stay focused on building and maintaining chemistry, how to pace/adjust the discovery to seller and his/her advisors, how to overcome objections, how to live with limited information, etc.

When I taught at Kellogg, I told the class, buying is like going on a date (i learned this form a very successful buyer of mine, whose acquisition is taught in B-schools as a case study). Everyone has an idea of the ideal partner, but in the beginning, you cast a broad net, then you become more selective. Most advisors, including schools, tell you what to do once you get on the alter, but not how to get there.

One more thing. In my 35 years, I have represented many buyers. All of them bought a business they were comfortable with, but all of them also said after the purchase, "they did not know such business existed".