Transcript
Introduction
Patrick
In this episode, I continue to pull on one of the most interesting threads that I have uncovered in the course of producing this podcast, the world of permanent equity. My guests today are Royce Yudkoff and Rick Ruback. Two Harvard Business School professors, who have partnered to create a popular class that teaches students how to search for, acquire, and run a small business directly after graduation. The course is aimed at students who want hands-on management experience as soon as possible. After purchase, there's no timetable for selling the business. Indeed, if done well, there's never any reason to sell because the free cash flow yields to owners are higher than most alternatives.
I approached this conversation from an investor standpoint. LP Investors usually partner with the searchers to form what is called a search fund. A search fund allows recent MBA grads to spend time looking for a business and ultimately acquire it. The result is small in scale but it's often a high return proposition for investors. I loved our discussion on what to look for in a business and what to avoid. The principles we list are useful for investors of any kind and will be particularly appealing to those from the buy and hold, value investing, or quality investing camps.