The essence of entrepreneurship through acquisition – episode 4

Starting out in business doesn’t have to mean creating a company from scratch. Buying a company out is also an option. But how often does this happen? And what are the pros and cons for future CEOs, investors and intermediaries?

Diving headlong into this fascinating subject are Vlerick’s own Professor Miguel Meuleman and international buyout specialist Timothy Bovard. A former professor at INSEAD and Columbia Business School, Timothy was a guest speaker at our very first Mergers, Acquisitions and Buyouts Conference in 2012. Now, ten years later, he offers insights and perspectives on acquisition as a route to entrepreneurship.

In 2015, Timothy founded Search Fund Accelerator, an investment firm building further on the historical search fund model and that focuses on micro-LBOs. It pairs talented potential CEOs with businesses that have significant potential for growth. He coaches them throughout the search, due diligence and acquisition processes and unites them with investors providing the equity for the transaction. Miguel is Professor of Entrepreneurship and Director of the Vlerick Entrepreneurship Academy.

Listen in to this final of four Insight Talks to learn about cultural differences and why there are still so few female buyout entrepreneurs. Or go back to episode three, if you missed it.

The essence of entrepreneurship through acquisition – episode 4

In this final of four Insight Talks, Professor Miguel Meuleman interviews international buyout expert Timothy Bovard on cultural differences and why there are still so few female buyout entrepreneurs.

You have been teaching entrepreneurship through acquisition, both in the US but also in France at INSEAD. Do you see any cultural differences between Europe and the US in the way in which buyout entrepreneurs approach this kind of challenge, but also in terms of the ecosystem and the mindset?

Timothy Bovard: “It's not because I'm an American, but it is much easier in the United States because of the size of the market. There’s the number of targets in the market. But also the fact that in the United States a private equity fund is not going to buy a business under five million of EBITDA. It's not worth their time and effort. So that leaves a whole tranche of companies that is available to buyout entrepreneurs. And in the United States the information on those companies doesn't exist. Since they're not on the radar screen of other potential buyers, it makes them that much more valuable when a buyout entrepreneur actually finds the business.

In Europe, there's going to be much turnover of companies, much transition of companies from one generation to the next so the opportunity is there. But as you alluded to earlier, there are many more buyers for these businesses coming from family offices, private equity funds, and other buyers. So I think it's more challenging in Europe. It's also obviously broken into different countries. You were wondering earlier whether there is sufficient volume for the search fund model to take off in Belgium? From the investors’ perspective probably not because they're not going to be able to invest in five or ten searchers per year in Belgium. But if you zoom out on a European basis you can be investing in searchers in France, Spain, Germany, Belgium, and the Netherlands and build that portfolio to diversify your risk. And you’re also diversifying with country risk and different geographies. So I think that's definitely possible on a European level.”

So looking back over the past ten years, entrepreneurship through acquisition is very much of a male thing. We would like to see more female buyout entrepreneurs. Is that similar in the US? And what can we do to get more women onto that buyout journey?

Timothy Bovard: “It's very similar in the United States. According to Stanford studies, only 3% of searchers are women. So I'm very proud that at Search Fund Accelerator, we have 12%. Still not great, but four times better than the sort of the average across the country. I think women have only just begun hitting the C-suite jobs and business in general. So I think it's following that. I think many women don't consider that this is a possibility for them. And it certainly is. I think it's obvious that women are perfectly qualified to be CEOs and run companies, and often many times better than men. I think it's a great lifestyle business both for men and women. One of my investors was the one  

who cooked the dinners every night. He was the one who raised the kids and being a CEO for him was very important in that lifestyle and balance choice with his wife. So I think women just have to go and do it. The investors are certainly open and seeking women to start participating in that search fund ecosystem.”

Thank you, Timothy. Ten years ago, you were a keynote speaker at our Mergers, Acquisitions and Buyouts Conference. I think you have given a spark to the ecosystem here in Belgium. And I think maybe without you we would not have had this anniversary of the conference today. So thank you very much and I wish you all the best with your accelerator and other plans in the US.