A decline in email response rates is forcing deal searchers to be more creative, says Entrepreneur-Through-Acquisition searcher Christine Koval, currently on the hunt for a lower-middle-market, back-office services business to acquire.

In an interview with Search Party, Koval notes the increasing competition to find deals in the vast US lower-middle-market, as well as the ubiquity of powerful business-outreach platforms that help deal searchers discover and contact business owners. The problem is, as every searcher has become armed with turbo-charged sourcing capabilities, business owners are becoming so inundated with inbound interest, their response rates have begun to plummet, requiring searchers to revert to pre-email methods, like cold-calling.

“It is back to the olden days a little bit where your boots are on the ground, you're getting out there to learn, you're getting your face in front of business owners,” she said.

Among the key takeaways of Koval's interview:

Email outreach is fading—searchers must build in-person, personalized relationships. Koval emphasizes that email has become commoditized as more searchers adopt AI-enhanced bulk outreach, lowering reply rates and forcing a return to personal, high-effort engagement.

ETA differentiation has diminished—searchers must now sell themselves, not just the model. As many pockets of the lower-middle-market M&A landscape becomes saturated with investors, ETA searchers can no longer rely on the novelty of their model to stand out. “Just selling the alternative to private equity isn’t a differentiator anymore,” says Koval. “So I focused on, where do I have a unique insight or what are the industries that I've worked in my past career where I can draw an initial connection with that business owner.”

A compelling personal brand is now critical for effective deal sourcing: With searchers facing lower response rates and heightened competition, Koval has embraced thought leadership, podcasts and LinkedIn as essential tools for building trust before a first call. “As search continues to evolve, think of yourself as a personal brand,” she says. “You need a unique value proposition. You need to be different, and you want owners to get to see that as early as they can in the process.”

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Professionalizing the finance function of a lower-middle-market business is one of the most impactful forms of value-creation a new CEO can pursue, according to a panel of Entrepreneurship-Through-Acquisition (ETA) market experts.

To learn the importance of the finance function in ETA investments, Search Party convened a conversation between Anthony Walker, Managing Partner at Next Coast Legacy, Sam Swan, CEO of TaskRay, Eric Lougher, CFO/COO of TaskRay, Emily Young, Transaction Advisory Manager at Boulay and Jake Bitz, Consulting Controller at Boulay. TaskRay is an ETA-backed SaaS company that saw its operations transformed when it brought on board Lougher as CFO. The story of TaskRay's professionalized CFO function is at the core of this authoritative, candid and lively conversation.

Among the key takeaways of this episode of Search Party:

• A common feature of founder-led companies in the lower-middle market is a heavy emphasis on cash flow and little emphasis on forward-looking financial metrics. Anthony Walker noted that this dynamic often leaves new owners without the reporting foundation they need to lead effectively. “They've measured the performance of their business by how much cash is in the bank account," says Walker of many lower-middle-market founders. "They're not looking at sophisticated metrics or KPIs.”

• To build a finance function that supports both operational decision-making and investor transparency, operators must first assess the starting point and align it with their growth horizon. Emily Young described this as a deliberate diagnostic process that should precede any hiring or systems decisions: “The first step is - know the business. Know where it is today, know where you want it to be tomorrow, a year from now, five years from now.”

• For first-time CEOs, the limits of their own financial fluency often surface early. Sam Swan reflected on his own transition, recalling how the budgeting process made it clear that finance couldn’t remain an isolated back-office task: “It was a struggle and that to me was a pretty clear indicator that I need someone who could do this with me.”

Ultimately, a professionalized finance function doesn’t just improve decision-making in the present—it lays the groundwork for eventual exit. Jake Bitz underscored that buyers, lenders, and future acquirers all expect reliable financial operations: “Hiring the key people and having that process put in place for how you close the month and how you report is the foundation.”

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#M&A #search #privateequity #eta #searchfund #insurance

Small insurance brokerages make for "great" Entrepreneurship-Through-Acquisition deals, provided the acquirer has a deep understanding of the industry, says August Felker, an ETA searcher turned CEO of Oberle Risk Solutions.

In an interview with Search Party, Felker shares his personal ETA journey to becoming the CEO of a leading lower-middle-market insurance brokerage, starting with being raised by a father who ran a St. Louis, Missouri, insurance brokerage. (Felker's grandfather also was an insurance broker).

Felker discovered the ETA model while working for two Stanford MBAs who had acquired a lower-middle-market logistics business, an experience that convinced him he wanted to follow the same path in his field of expertise. “When I first heard of the search fund, I was like, this is the coolest thing I’ve ever heard.”

Felker's ETA search was fortuitous in two ways: He identified the company he ended up acquiring within a matter of weeks, and he was connected to the seller not by an investment banker, but by the editor of an insurance trade journal. “I said what I was trying to do, and this editor was like, ‘I know someone who's selling their business in Madison, Wisconsin. You want me to connect you with him?’”

The most stressful part of the deal came late in the acquisition negotiation, when the seller pushed back on final contract terms, such as the earnout and non-compete. “We were so far in and committed," says Felker. "That really threw me for a loop.”

Felker explains how the most impactful move he made as CEO was to hire three top-performing producers who dramatically boosted sales: “It’s like recruiting an NBA all-star. They came in and were writing so much new business it just totally changed the game.”

Oberle Risk Services provides insurance to ETA-backed companies, among other lower-middle-market clients. "The ETA community is a great community," he says. "How can you not like someone who's risking their financial future and moving across the country? I mean, it's just the coolest thing.”

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#smallbusiness #finance #lending #privateequity #eta #searchfund

The relationship between lender and lower-middle-market CEO is a critical factor in the success of ETA deals, say veterans of the Entrepreneurship-Through-Acquisition strategy. This episode of Search Party is about how to get the most from your lender over the lifecycle of an ETA investment, with expert commentary from ⁠Castle Capital ⁠Managing Partner and ETA veteran Chandos Mahon, Conor Tidgwell of ⁠Avidbank⁠ and Anthony Walker of ⁠Next Coast Legacy. ⁠

Central to the conversation is the story of the relationship between Avidbank's Tidgwell and Mahon, who as an ETA acquired, ran and ultimately sold a recycling business called Castle Tire. Under Mahon's leadership, the lower-middle-market company did a total of ten add-on acquisitions financed by Avidbank, plus a facility financing. Along the way, Castle Tire's debt structure changed again and again, with close and transparent coordination between borrower and lender.

Among the key takeaways from the engaging and lively conversation:

Treat your lender as a strategic partner, not just a source of capital. In an ETA deal, the lender often provides the largest slice of the capital stack, making frequent, transparent communication a key to long-term success. “Your lender is your largest investor. Avidbank was my largest partner in this deal," notes Mahon.

"Radical transparency" enables flexibility and prevents surprises. Lenders are more likely to support growth or navigate tough times if they’re looped in early and often. According to Avidbank's Tidgwell, “If we get caught with a surprise and we’re in a reactive mode, that’s typically when lenders are less flexible.”

Financing tuck-in acquisitions requires confidence in cash flow and covenant wiggle room. Lenders are open to supporting add-on acquisitions, but only when the platform business has proven stability and enough covenant cushion to absorb uncertainty. “We’re looking for probably a half turn, at least, of cushion on these covenants. We want to make sure it’s an add-on that makes sense for the business, but I think you always start with the numbers, to make sure there’s adequate cushion out of the gate," says Tidgwell

Covenants can - and should be - adjusted to support growth. If a company's expansion plan makes strategic sense, lenders are often willing to rework covenants to accommodate short-term trade-offs for long-term gains. Walker described a Next Coast portfolio company meeting in which “the lender kind of raised their hand and said, ‘Hey, why are we talking about constraints here? What does the business need? Isn’t the right decision to relax the covenants in the interest of pursuing that growth?’”

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As a growing number of MBA students become interested in Entrepreneurship-Through-Acquisition (ETA), a proper understanding of the challenges involved in finding and running a business is essential, say Austin Fruchter and Rohit Datta, Co-Presidents of the Columbia Business School ETA Club.

The Columbia ETA Club provides students with exposure to the ETA process, connecting them with investors, operators, and service providers to better understand the search opportunity. “Search is a relatively lonely process,” says Datta, adding that the club also plays a crucial role in building a support network for students before and after they graduate.

Over the past year, interest in Columbia’s ETA club has surged, with events doubling and more students engaging in the ecosystem.

In a candid interview with Search Party, Fruchter and Datta describe common traits among ETA-oriented MBA students. Many are drawn to the tangible nature of small business ownership, seeking to step away from high-level corporate roles in favor of hands-on leadership. However, misconceptions persist—particularly about the level of personal commitment and operational complexity involved. “Some students don’t realize how ‘dirty’ it can get,” says Fruchter.

The co-presidents also highlight the robust investor ecosystem surrounding Columbia’s ETA program. Investor interest is high, and Columbia students are encouraged to engage with potential backers early. “You don’t want your first interaction with an investor to be, ‘Hey, I need money,’” says Datta.

Fruchter and Datta themselves plan to partner on a search fund after graduation, and they discuss the benefits of partnered search. “It’s incredibly impactful to have someone who pushes you and refines your thinking,” says Fruchter.

Datta, who previously co-founded a SaaS company, agrees, noting that the right partnership can mitigate individual weaknesses.

Looking ahead, the Columbia ETA leaders see institutional capital increasingly moving into the space. But they hope the ETA community’s emphasis on people remains its defining trait. “The people in the business drive the value creation,” says Fruchter. “Taking care of employees and empowering your team is a major factor behind the success of search-acquired businesses.”

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Failing to strengthen the sales function can undermine the growth of a newly acquired business, a CEO stumble made worse in a leveraged environment, three veterans of the lower-middle-market tell Search Party.

Founder-led small businesses often lack structured, scalable sales systems—and the ETA searchers-turned CEOs who acquire them must rapidly diagnose and improve how EBITDA is generated, according to a panel of experts convened for a Search Party conversation.

The need for a sales plan is of particular importance to Entrepreneurs-Through-Acquisition (ETA), who search for, acquire, and run lower-middle-market businesses, in most cases as first-time operators.

These CEOs must also navigate the realities of a leveraged environment. Katie Walker, a Principal at Plexus Capital, highlights the added pressure of servicing debt while investing in growth. "Hope is not a strategy," Walker says. "Many of these businesses grew at 10% per year under a founder. But that’s not a plan—that’s just inertia. Counting on that same trajectory post-acquisition is dangerous."

Walker urges CEOs to stress-test their growth assumptions and be realistic about sales investments. Many underestimate the time and resources required to build a functional sales operation. "Without a structured, high-performing sales team, growth stalls," Walker warns. "And in a leveraged environment, that’s a real problem."

Dustin Sellers, a Managing Partner at ETA private equity firm Next Coast Legacy, explains that many of these businesses have grown on relationships and referrals, not disciplined sales execution. But following an acquisition, growth isn’t optional—it’s necessary to meet the demands of debt service and investor expectations. "Most first-time CEOs have never sold anything," Sellers says. "They come from top business schools where they studied branding, pricing, and marketing—but not sales execution. And now, they must create a revenue flywheel, fast."

Mark Mullins, a sales consultant specializing in private equity-backed businesses, warns that new CEOs often fail to grasp their own sales organization’s weaknesses. "They know finance, they know ops—but they assume their sales team must be doing something right," he explains.

Mullins says he often meets CEOs who say, "We need more sales," but can’t articulate why they’re selling what they’re selling—or why they’re not selling more. By digging into the details—reviewing sales calls, analyzing customer conversations—Mullins often finds a fundamental lack of accountability and process. "Many legacy salespeople simply aren't A-players—and they never will be," he says. "New CEOs need to decide quickly: Can they improve? Or do they need to be replaced?"

Sellers notes that the best CEOs acknowledge their blind spots early and bring in sales expertise fast. "The ones who hire a sales leader quickly are the ones who scale successfully," he says. "The ones who try to figure it out themselves often find they’re a year in—and two quarters behind plan."

ETA CEOs are often skilled in operations, finance, and strategy, but without a clear, repeatable sales playbook, they risk stalling their company’s momentum. "You're not being asked to reinvent sales," Sellers says. "You're being asked to execute on the basics. And if you don’t, the business won’t grow."

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Shortly after acquiring security-camera service ⁠EyeQ Monitoring⁠ nine years ago, Markus Scott had no way of knowing he’d eventually grow revenue by a factor of 24. He was too busy dealing with “a whole list of terrible things” that indicated the business was doomed. In an interview with Search Party, Scott says, before detailing these tribulations: “This is the place where I should be pouring bourbon.”

Scott’s path to profitable growth is an Entrepreneurship-Through-Acquisition (ETA) success story, but it started as a looming failure. The day the acquisition closed, the first-time CEO learned an employee had been accused of sexual harassment. Then the company’s servers contracted a virus. Then the bookkeeper quit. Then the seller tried to start a competing business. Scott says the deep relationships he built with his workers ended up improving team culture, which impacted customer satisfaction.

Scott grew up in a middle-class home in Gainesville, Florida. His father was a former San Diego Charger turned educator, with an entrepreneurial side business to supplement the family income. Scott says he, too, eventually wanted to build a lasting business. When he learned about the ETA model, Scott enrolled in business school at Kellogg, and eventually raised north of $300,000 for a two-year search.

After a “devastating” month-fourteen deal collapse, Scott eventually found a very small business in a great industry. His investors, including Next Coast Legacy, encouraged him to structure the deal like a growth equity investment. Scott was a walk-on linebacker and fullback at the University of Florida. While his time on the field was minimal, Scott says the discipline of daily, grueling workouts prepared him for the roughness of entrepreneurial life.

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An increasing supply of investor capital is chasing business-school students contemplating ETA as a career, and "search-curious" MBA candidates should know the risks involved are manifold, but well worth the journey, according to Matthew Conley and Daniel Lazier, Co-Presidents of the Kellogg School of Management's Entrepreneurship Through Acquisition Club.

The Kellogg ETA Club was spun out of the school's private equity club in order to raise awareness of ETA, share best practices and help students self-reflect on whether their skills, personalities and life goals align with this non-traditional career path, say Conley and Lazier.

In a frank discussion, the co-presidents discuss the growing popularity of ETA across MBA programs, and the personal qualities that Kellogg ETA club members tend to share, principally a desire to control their own destinies and pursue a more impactful form of business leadership. The search-curious at Kellogg tend to be "motivated by something different than money," notes Lazier.

Conley says ETA tends to offer more "internal goods" than "external goods," meaning that while potential money and status may not be as stratespheric as one might find in private equity or investment banking, the intangible benefits of "seeing your fingerprints all over something" are possible in spades in an ETA career. In particular, having an impact on the lives of your employees and their families can be very gratifying, says Conley.

The co-presidents describe the pleasantly "round-elbowed" ecosystem of the Kellogg ETA search ecosystem.

The ETA club is a locus of activity at Kellogg, with potential investors sometimes visiting the campus several times per week. Lazier estimates that within the three-sided ETA market, demand from investors is highest, followed by interest from MBA students. The supply of available lower-middle-market businesses for sale, notes Lazier, is not increasing, and estimates that some 30% of searchers never find a business to acquire.

Conley says that the ETA club aims to make clear the risks not only of not finding a business, but of being unable to successfully lead the business once acquired. That said, Conley notes that even searchers who do not ultimately become CEO of an ETA-backed business often find related positions in search-owned businesses and at investment firms in need of analytical and due diligence talent.

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