Search fund model combined with employee-owned holding company?

searcher profile

June 25, 2019

by a searcher from Indiana University at Bloomington in Carmel, IN, USA

I run an employee-owned company near Indianapolis. We're in the early stages of creating an employee-owned diversified holding company. The plan is be a great succession option for some owners of micro-middle market businesses, and to ultimately own and operate a large portfolio of solid $5-50M revenue businesses. I believe the employee-ownership component is a potentially significant competitive advantage in situations where the owner/founder cares a lot about how the business ownership change will impact the employees. Our approach will be to make the entire process as easy as possible, and provide peace of mind because the employees will be in a great situation after the transition.

I'm intrigued by the search fund model, in particular hiring bright and driven professionals who are ready and willing to run an acquired small business. I'm curious if this idea sounds interesting to searchers and if you have any advice as I explore this possibility.

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Reply by a searcher
from Indiana University at Bloomington in Carmel, IN, USA
Update: we continue to grow; completed another acquisition in April 2024 and (fingers crossed) we will be completing the acquisitions of our 5th and 6th companies in the coming months. (Both are under LOI.) I'm finding that certain sellers highly value our long-term hold and 100% employee-owned approach. Leading an EV portfolio company is a lot of fun too, since employees become more aligned with leadership and share in the success of our businesses.
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Reply by an intermediary
from University of Washington Bothell in Portland, ME, USA
That's great! I love hearing stories like this. Thank you for sharing. When you were making your decisions about structure what support did you use? Any consulting firms or lawyers to recommend? I have clients that are interested in doing similar things. I would be delighted to have a 1:1 with you to chat sometime. Reach out if you'd like.
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