What Channels Are Most Relevant for Finding Search Fund Targets?

Finding the right business to acquire is the cornerstone of the search fund model. With numerous potential targets out there, selecting the most effective channels for deal sourcing is crucial to your success. While many search funders rely on traditional methods, there are also innovative approaches that can set you apart from competitors. In this post, we’ll explore the most relevant channels for finding search fund targets and how to leverage them effectively, including a highly personal touch: handwritten letters and small gifts.

1. Direct Outreach: Proactive and Targeted

Direct outreach is one of the most powerful and effective channels for finding search fund targets. This involves identifying businesses that fit your acquisition criteria and contacting owners directly through phone calls, emails, LinkedIn, or a more personal approach: handwritten letters.

• Why It’s Relevant: Many small- and medium-sized businesses that are ideal for search funds are not actively listed for sale. Owners of these businesses may not have even considered selling until the right buyer comes along. By reaching out directly, you access a pool of businesses that might not otherwise come to market.

• Best Practices:

  • Personalize your outreach based on the company’s history, products, or market position. Business owners are more likely to respond to thoughtful, customized messages that show you’ve done your homework.

  • Follow up consistently, as owners may not respond to the first or second attempt.

  • Handwritten Letters: Handwritten letters stand out in the digital age and make a lasting impression. A well-written, personalized letter shows sincerity and genuine interest. You can pair this with a small personal gift, like a company-branded item, local specialty, or a thoughtful token related to the business’s industry. These small gestures add a human touch and can open doors to meaningful conversations.

• Why Handwritten Letters Work:

  • They feel personal and thoughtful, making business owners more likely to engage.

  • They show a higher level of commitment and effort than a standard email or phone call.

  • Including a small, thoughtful gift (e.g., a local delicacy, a custom pen with the company's logo, or a book relevant to their industry) adds another layer of personalization and can significantly increase the response rate.

2. Brokers and Intermediaries: Tapping into Existing Networks

Business brokers and M&A intermediaries are another important channel for sourcing search fund targets. These professionals specialize in helping owners sell their businesses and often have a ready pipeline of companies on the market.

• Why It’s Relevant: Brokers give you access to businesses that meet your criteria, often with detailed financials and growth projections, saving you the effort of initial outreach. However, because these businesses are marketed to a broad audience, competition may be higher.

• Best Practices:

  • Build relationships with brokers by being clear about your acquisition criteria and maintaining consistent communication.

  • Work with multiple brokers to broaden your exposure to potential deals.

  • Ask brokers about off-market or upcoming deals that may not yet be publicly listed.

• Where to Start: Use business broker associations (like IBBA) or platforms like Axial and BizBuySell to find brokers with relevant listings. Building strong relationships with brokers can lead to early access to listings and exclusive deal flow.

3. Online Marketplaces: Broad Visibility

Online business-for-sale platforms offer a wide array of listings from both brokers and individual sellers. These platforms provide an easy way to access multiple industries and locations, making them a valuable resource for search funders early in their journey.

• Why It’s Relevant: These platforms allow you to filter businesses based on industry, revenue, and location, making it easier to find companies that match your criteria. However, competition can be stiff, as many buyers have access to the same listings.

• Best Practices:

  • Set up alerts based on your criteria to be notified when new listings are posted. This helps you act quickly on high-quality deals.

  • Be prepared to move fast—online marketplaces attract multiple buyers, so having a streamlined evaluation process is key.

  • Use these platforms to supplement your direct outreach, but don’t rely on them exclusively, as the most attractive deals are often off-market.

• Popular Platforms:

  • BizBuySell: One of the largest online marketplaces for business sales, with thousands of listings.

  • Axial: A network that connects investors with lower middle-market companies, often featuring businesses with enterprise values between $5M and $50M.

  • BusinessesForSale.com: A global platform offering a wide range of small- to medium-sized business listings.

4. Networking and Referrals: Leveraging Personal and Professional Networks

Tapping into your personal and professional networks can lead to some of the highest-quality, off-market deals. Referrals from trusted contacts or advisors often provide access to businesses that are not publicly listed, giving you an edge over other buyers.

• Why It’s Relevant: Business owners are more likely to sell to buyers who come through trusted channels. Referrals provide a higher level of trust and can lead to less competitive, off-market deals.

• Best Practices:

  • Let your network know that you are searching for acquisition opportunities. Share your search fund journey on LinkedIn and other platforms so that your contacts know what you’re looking for.

  • Attend search fund conferences, alumni events, and industry trade shows to meet potential investors and business owners.

  • Reach out to business professionals, consultants, or lawyers who may have clients looking to sell.

• Where to Network:

  • Search Fund Conferences: Events hosted by universities like Stanford and IESE offer valuable opportunities to meet investors, fellow searchers, and advisors.

  • Industry Associations: Participate in local chambers of commerce or trade associations relevant to your target industries.

  • LinkedIn: Stay active on LinkedIn, regularly updating your profile and posting about your progress in the search fund space. Your network may introduce you to potential sellers or opportunities.

5. Local Business Associations and Trade Groups: Niche and Relationship-Driven

Local chambers of commerce, industry-specific trade groups, and business associations are highly effective for connecting with small- and medium-sized business owners. These organizations often have long-standing relationships with local businesses, many of which may be nearing a transition.

• Why It’s Relevant: Businesses in niche industries or tightly knit local markets may not be actively listed for sale. By building relationships in these groups, you can identify off-market opportunities and establish trust with potential sellers.

• Best Practices:

  • Join industry-specific associations that align with your target sectors to meet business owners directly.

  • Attend regional or national trade shows to network with owners who may be considering a sale.

  • Be patient and build relationships. Trust takes time, but being part of these communities can uncover valuable off-market deals.

• Target Groups:

  • Chambers of Commerce: A great way to get involved in the local business community and meet potential sellers.

  • Industry Trade Associations: Industry groups often have insight into member businesses that are preparing for succession or sale.

6. Family Offices and Private Equity Firms: Institutional Partnerships

Family offices and smaller private equity firms can be a useful source of deal flow, particularly when looking for businesses that may be too small for traditional private equity investment but ideal for a search fund.

• Why It’s Relevant: Family offices often have clients who are looking to transition out of their businesses. They may be willing to partner with search fund operators to help their clients transition while maintaining investment exposure.

• Best Practices:

  • Approach family offices with a clear strategy, explaining your search criteria and how you could add value to their portfolio.

  • Establish relationships with smaller private equity firms that might come across deals too small for their funds but well-suited for a search fund.

7. Cold Calling and Mailing Campaigns: Traditional Yet Effective

Traditional methods such as cold calling and direct mailing campaigns can still be effective, especially when targeting business owners who aren’t actively selling but may be open to discussions about their company’s future.

• Why It’s Relevant: These channels allow you to target businesses that are not listed for sale, which can help you access off-market deals with less competition.

• Best Practices:

  • Develop a well-crafted pitch that explains who you are and why you are interested in their business.

  • Handwritten Letters with Personal Gifts: As mentioned earlier, sending handwritten letters with a small, thoughtful gift can significantly increase your response rate. It shows that you’ve put effort into understanding the business and building a relationship. Follow up with a phone call or email to keep the conversation going.

Conclusion

The channels for finding search fund targets are diverse, and using a combination of direct outreach, brokers, online platforms, and personal networks is key to maximizing your deal flow. In particular, adding a personal touch through handwritten letters and small gifts can set you apart from other buyers and create deeper connections with business owners. By leveraging these various channels effectively, you’ll increase your chances of uncovering high-potential businesses that align with your search fund’s goals.