In Conversation with 3 Founders Who Sold Their Companies to Search Funds

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Episode Summary with Timestamps

• Introduction of Guests and Episode Goals (3:26)
  • Steve introduces the three founders: Alicia Browner, David Marshall, and Rob Day, who sold their companies to search funds in recent years.
  • The episode aims to cover various aspects of selling a company, including the importance of price, the role of experienced investors, and the transition period.
    
    
• Alicia Browner’s Background and Company Journey (5:25)
  • Alicia Browner shares her background in mathematics and her career in the aerospace industry before founding Prelude Dynamics.
  • Alicia discusses the challenges of selling the company in 2017 and 2020, including delays due to FDA processes and the impact of COVID-19.
  • She highlights the importance of having a CEO who was already familiar with the business, which influenced their decision to sell to their COO.
    
    
• David Marshall’s Background and Company Journey (8:24)
  • David Marshall describes his career in sales commissions and incentives, leading to the founding of Performio in 2009.
  • He discusses the decision to bootstrap the business and the eventual acquisition by a search fund in 2019.
  • David emphasizes the importance of understanding the investors and the searchers behind the acquisition.
  • He shares his experience of transitioning from a hands-on role to a more advisory one post-acquisition.
    
    
• Rob Day’s Background and Company Journey (11:02)
  • Rob Day talks about his diverse background in risk management and the founding of Integrity Advocate.
  • He explains the challenges of creating a proctoring solution for online exams and the decision to sell to a search fund.
  • Rob highlights the importance of communication and trust in the relationship with the search fund buyers.
  • He discusses the ongoing involvement of himself and his business partner in the company post-acquisition.
    
    
• Concerns and Excitement About the Search Fund Model (12:59)
  • Rob shares his initial excitement about the search fund model and the importance of finding a buyer who understood their business.
  • David and Alicia discuss their initial unfamiliarity with the search fund model and the importance of understanding the investor group.
  • Alicia emphasizes the role of the investor group in providing long-term support and the importance of having a CEO who was already familiar with the business.
  • David highlights the importance of getting to know the key investors and the searchers behind the acquisition.
    
    
• Evaluating Buyers and Non-Price Considerations (17:46)
  • Alicia discusses the importance of non-price considerations, such as the ability of the buyer to continue the success of the product and the impact on employees and clients.
  • David emphasizes the importance of understanding the structure and management of the business post-acquisition.
  • Rob compares the process to dating, focusing on the long-term relationship and the importance of communication and trust.
  • The panelists discuss the challenges of evaluating buyers and the importance of finding a good fit for the business and the team.
    
    
• Transition Period and Emotional Challenges (31:35)
  • Alicia shares her experience of a shorter-than-expected transition period due to the familiarity of the new CEO.
  • David discusses the emotional challenges of seeing changes made to the business and the importance of maintaining involvement in the company.
  • Rob highlights the importance of communication and planning ahead to mitigate emotional challenges during the transition.
  • The panelists discuss the importance of having a clear transition plan and the challenges of balancing personal and business interests during the transition.
    
    
• Valuation and Structure of the Deal (53:51)
  • Alicia explains the decision to roll equity into the acquired business and the importance of maintaining control over the company’s future.
  • David discusses the negotiation of the valuation and the importance of understanding the buyer’s perspective.
  • Rob shares the importance of finding a valuation that made sense for the long-term success of the business.
  • The panelists discuss the challenges of working capital adjustments and the importance of understanding the financial implications of the deal.
    
    
• Debt and Near-Death Experiences (1:11:56)
  • The panelists discuss the use of debt in financing the acquisition and the importance of understanding the financial structure of the deal.
  • Alicia shares a near-death experience with the LOI and the importance of having a detailed agreement.
  • David recounts the stress of winning a tender for their biggest customer during the acquisition process.
  • Rob highlights the importance of understanding the tax ramifications and the flexibility in structuring the deal to mitigate tax expenses.
    
    
• Final Thoughts and Advice for Sellers (1:24:17)
  • The panelists share their final thoughts on the importance of communication, planning, and understanding the buyer’s perspective.
  • Alicia emphasizes the importance of finding a buyer who aligns with the company’s long-term goals and the importance of maintaining some equity.
  • David highlights the importance of understanding the buyer’s strategy and the role of the investor group.
  • Rob advises sellers to focus on the long-term success of the business and to maintain involvement in the company post-acquisition.
    
    

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