Search Fund Story of Dan Schweber
After searching for a while, he bought an air duct cleaning company
"I will never work in a corporate job ever again," Schweber told BI. "There's no amount of money that you could give me." He estimated he'd “need to meet 50 owners and have 500 introductory calls a year. That meant that he'd need to send initial emails to 4,800 businesses.”
Matt Levine says:
What I would really like to read, though, is an article about what it is like to be the founder/owner/CEO/exterminator of a regular pest control business. Are you constantly getting automated cold emails from recent Harvard MBAs? Is it endless business lunches at the local diner? Do you need to hire an intern to sift through the mountain of termsheets? Also are valuations up? I feel like, 10 years ago, the average local pest-control company probably got fewer than, you know, three takeover bids per month. Now, many more. Surely you could get an auction going? Sell to the very most overconfident Stanford MBA? I guess I would also like to read an article about what it is like to be the sell-side investment banker for all these pest control companies. Could be fun.
Anyway here’s another Business Insider article about search funds, which pleasingly does get into what the sell-side experience feels like:
[Atlantic Duct Cleaning CEO/owner Tom] Keys was used to receiving emails like this. He had started Atlantic in 1995 as a 28-year-old with several years of experience in the heating, ventilation, and air conditioning industry. Even today, duct cleaning is pretty obscure. But back then, virtually no one thought about the dust, bugs, pet hair, skin cells, mold spores, and all the other gunk that piles up inside a building's ventilation system — and the occasional need to clean it out. Keys had the idea to do it with newer equipment than the tiny operations he knew of that ran on bare-bones crews. He grew the company painstakingly, bit by bit. By 2021, Atlantic was bringing in $4 million in annual sales, with impressive profit margins and a few dozen people on staff.
Many of Keys' suitors were private equity firms with deep pockets that were consolidating HVAC shops in the area. They offered Keys huge sums of money for his business, but he knew the PE playbook: They would almost certainly fire many of the employees he would leave behind. Other suitors were young searchers like [Columbia MBA Dan] Schweber who would, in theory, be less likely to strip his company into pieces. ...
Upon receiving the 12th email from Schweber, Keys finally picked up the phone and called him.
All he wants to do is clean gunk out of ducts and his phone keeps buzzing with desperate emails from private equity and search funds. Anyway eventually Schweber bought the duct cleaning business and is now ecstatically happy. (“I will never work in a corporate job ever again. There's no amount of money that you could give me.”) I do wonder, though, how many cold emails he’s getting now. Do search-funders flip their companies to other search-funders?
Photo Credit: Business Insider