Invest Like The Best
Episode 423 Entrepreneurship Through Acquisition
Invest Like The Best

Episode 423: Entrepreneurship Through Acquisition

Invest Like The Best

Episode 423

Entrepreneurship Through Acquisition

Royce Yudkoff and Rick Ruback are professors at Harvard Business School. We cover the bifurcation of search funds, how acquisition entrepreneurs achieve returns that consistently outperform private equity, and the common red flags that can break otherwise promising deals.

This episode is brought to you by:

Ramp. Ramp's⁠ mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Go to ⁠Ramp.com/invest⁠ to sign up for free and get a $250 welcome bonus.

AlphaSense. ⁠AlphaSense⁠ has completely transformed the research process with cutting-edge AI technology and a vast collection of top-tier, reliable business content. Invest Like the Best listeners can get a free trial now at ⁠Alpha-Sense.com/Invest⁠ and experience firsthand how AlphaSense and Tegus help you make smarter decisions faster.

Ridgeline. ⁠Ridgeline⁠ has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. Head to ⁠ridgelineapps.com⁠ to learn more about the platform.

Show Notes:

(00:00:00) Welcome to Invest Like the Best

(00:05:23) Changes in the Small Firm Acquisition Space

(00:06:52) The Impact of SBA Loans on Acquisition Entrepreneurship

(00:08:55) The Evolution of Entrepreneurship Through Acquisition

(00:10:09) Risk and Return in the Search Fund Model

(00:13:38) The Role of Investors in Funded and Unfunded Searches

(00:19:33) Criteria for a Good Acquisition Target

(00:28:36) The Growing Popularity of Self-Funded Searches

(00:43:21) Challenges and Red Flags in Small Firm Acquisitions

(00:49:47) Exploring Margin Expansion and Growth

(00:51:02) The Impact of Practical Teaching in Business Education

(00:52:12) Keys to a Successful Business Class

(00:53:30) The Role of Theory in Practical Business Education

(00:55:29) Challenges and Rewards of Teaching Business

(00:57:46) Capital Allocation in Small Businesses

(01:00:50) Advice for Aspiring Business Searchers

(01:03:45) Value Creation and Business Lifecycle

(01:08:20) Deciding to Leave Private Equity

(01:11:20) The Future of Higher Education in Business

(01:16:06) Ongoing Relationships with Former Students

(01:18:45) Favorite Business Cases to Teach

(01:24:46) Encouraging More People to Pursue Business Ownership

Entrepreneurship Through Acquisition

Introduction

Patrick
My guests today are Rick Ruback and Royce Yudkoff. Rick and Royce are Harvard Business School professors who teach their students how to search for, acquire and run small businesses directly after graduation. It's nuts, but it's been almost a decade since our first conversation and unlike many past interviews that become outdated due to technology or market changes, the core principles they shared about entrepreneurship through acquisition remain remarkably relevant today.

They explore fascinating developments in the search fund ecosystem, including the bifurcation between funded searchers targeting larger companies and self funded entrepreneurs finding success with smaller businesses. Rick and Royce share their accumulated wisdom on what makes a company worth buying, why the magic is in the multiples, and how their students consistently achieve impressive returns through patient value oriented business acquisition. Please enjoy my second great conversation with Rick Ruback and Royce Yudkoff.

Access the full transcript
Sign in or register to view episode transcripts.

Contact

Get in touch at help@joincolossus.com