Search fund activity in Canada (Toronto)
August 02, 2024
by a searcher from Ryerson University - Ted Rogers School of Management in Toronto, ON, Canada
What can be said about the search fund activity in Toronto and greater Canada? Is there a noticeable trend in the number of searchers increasing YoY? If so, what are their success records and which industry gets the most investment play?
Is there an ample amount of investors readily available to invest in search funds? If so, how does one come to engage and solicit commitments from them?
Not to be presumptuous , but it doesn’t feel like the canadian economy (especially its capital markets) and policies are conducive for the would-be entrepreneur/searcher. At least, no where close to the States.
Interested to hear data-backed and opinionated commentary on this.
from University of Calgary in Airdrie, AB, Canada
Background:
While I haven’t pursued a traditional search fund, I was part of Regenerative Capital Group’s final selection process for their search fund/accelerator program, an exceptional group of people by the way. Within my network, there are people who have undertaken traditional searches, self-funded searches, and hybrid approaches. I have been a full-time searcher for seven months and on the journey for over a year, employing a multi-thread strategy that includes proprietary, network, and intermediary prospecting. I’ve had thousands of conversations with business owners and industry insiders, evaluated 40 companies in-depth, submitted many EOIs, and issued four LOIs, with one executed.
Trends Among New Searchers:
Unless you’re curious about the broader market, I’d recommend focusing on more actionable questions that will drive your search forward. Leverage resources like the Stanford Guide or SIG report for statistics on search funds. While opinions vary, I believe that choosing an industry or segment should be based on the searcher’s specific interests and expertise rather than what’s most popular.
Ample Amount of Investors:
Generally, the supply of investors exceeds the number of deals in Canada. This perspective shifts based on factors like the type of search, deal structure, timing, and characteristics of the Searcher. From my conversations, it seems that raising capital in the first half of 2024 has been challenging for search funds. Engaging with search fund investors typically starts with reaching out for an introductory call; many are open to brief discussions. ^redacted posts can help identify potential investors. He helped point me toward key people early in the process. Acquisition Opportunities in Canada: There are numerous excellent opportunities in Canada. While timing significantly influences the process, there are more SMB owners than searchers. Contrary to what I was told early on, not every SMB owner has been contacted by other searchers. To stand out, be structured, genuine, and true to yourself.
Despite perceptions that Canada is less conducive to ETA compared to the U.S., I see opportunities in these challenges.
• It’s harder to find great SMBs to acquire: Great, keep grinding, as other searchers may give up
• Canada doesn’t have the SBA: Great, let’s get creative with structure because hundreds of thousands of SMBs still need a succession plan
• Search Fund Investors are on holiday? Great, perhaps other investor classes would be interested in >30% returns
from University of Calgary in Calgary, AB, Canada