The essence of entrepreneurship through acquisition - episode 1

Vlerick Insight Talks: Professor Miguel Meuleman meets buyout expert Timothy Bovard

Miguel Meuleman

By Miguel Meuleman

Professor of Entrepreneurship

12 April 2022
Insight Talks - Entrepreneurship through acquisition

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 first of four Insight Talks to discover things potential acquirers should know, and expectations they should set.

Insight Talks - Entrepreneurship through acquisition

The essence of entrepreneurship through acquisition – episode 1

In this first of four Insight Talks, Professor Miguel Meuleman interviews international buyout expert Timothy Bovard on things potential acquirers should know, and expectations they should set.

You have been promoting entrepreneurship through acquisition for a decade now. Why buy your own company rather than start one from scratch?

Timothy Bovard: “If you don't have an idea for a company, does that preclude you from being an entrepreneur? Absolutely not. There's nothing wrong with looking for a company to buy to run as its CEO. It’s very entrepreneurial because the idea is to buy typically a smaller type of business that has growth potential. Through that growth, you can create the exact same type of curve that a start-up entrepreneur could create if they were successful. But we know that 90% of start-ups fail. If you buy the right company, do good due diligence and run it well as a CEO with a good team, you should have a 90% probability of success. So, entrepreneurship through acquisition can really inverse the odds.”

What are the essential skills, attitudes or competencies that you need as an individual to be successful as a buyout entrepreneur?

Timothy Bovard: “First of all, you need a pretty wide vision of business and a wide set of skills, or at least experiences, in business. To be a leader, you need to have a certain amount of charisma. You have to have vision. You have to have the ability to motivate people. I think it boils down a lot to the organisation and who you surround yourself with within a company that will make or break it. In conclusion, it's being a jack of all trades and maybe a master of some.”

Is entrepreneurship through acquisition often a team effort of two people who together embark on a search or is it typically something individuals undertake?

Timothy Bovard: “There's both two-person teams as well as individuals. I kind of prefer the individual effort, as in an organisation there's only one CEO and not some sort of a two-headed monster, if you will. However, the CEO is not alone. One of the first things that we talk about with our CEOs is the organisation structure. Many times, it starts out very flat because you're buying a company where everybody reports to the owner. And then when a buyout entrepreneur comes in as a CEO, you slowly start seeing the company structuring with more managers and creating a better hierarchy which means responsibility in communication structure.”

One important reason why people want to buy their own company is to realise an entrepreneurial dream, to be autonomous. But is it also typically an attractive option from a financial perspective?

Timothy Bovard: “I don't think there's any buyout entrepreneur who doesn't think about it and hopes that they will make a life-changing amount of money. But I do believe that by far the number one driving factor here is the desire to be a CEO, to be in control of their lives and their destiny. And to reap the rewards and suffer the consequences of their own decisions, rather than being part of a large machine where they feel disconnected between what they do and what the results are.”

You have been coaching a lot of students in the past. What tips do you give them when they start this journey of buying their own company?

Timothy Bovard: “When starting out, the most important thing is to do a reality check. Do you really want to run a company? Because I see too many people who convince themselves that that is what they want, even though they really have a deal mentality.

When I bought my first business, I thought I would sell it again in three or four years and I ended up running it for 12 years. That’s kind of typical, to get into a business and to be running it for a long time.

And then it's finding out what your strengths and weaknesses are. Be honest with yourself and search for the types of businesses where you'll have a fit, where you'll be seen as credible and where your experience will help you not only in the search and acquisition phase but also once you're managing the business.”

In terms of searching for a company, what advice can you give in sourcing deal flow?

Timothy Bovard: “What we recommend is to do a proprietary search. It means that the searcher - based on their experience and their interests - will first define industry niches that they're interested in searching in. Healthcare is not an industry niche. Pulmonary or respiratory therapy is. An industry niche is small and well-defined. Then, they would do web scraping to identify the companies in that niche, screen those to find out which ones look interesting and then send an email out to the company owner to find out whether or not they might be interested in having a discussion for a potential sale of their business. And it's just repeating that process cycle through different industry niches in a high-volume manner that will lead to success.”

Discover more insights on entrepreneurship through acquisition in episode two of this Insight Talks series.

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Miguel Meuleman

Miguel Meuleman

Full Professor