Entrepreneurship through acquisition (ETA) means becoming an owner-operator by buying an existing business instead of starting one. The buyer, often called a searcher, finds a company to buy and run. The best-known models are the traditional search fund and the self-funded search.
Entrepreneurship through acquisition suits people who want to own and run a business without starting one from scratch.
How it works
A buyer, often called a searcher, looks for a private company to buy. They then lead it as its chief executive. Most target established, profitable businesses whose owners want to sell.
The main models
- Traditional search fund. The searcher raises money from a group of investors to pay for the search. Those investors usually get the first chance to fund the purchase. The searcher earns a share of the equity over time.
- Self-funded search. The searcher pays the search costs. They often buy a smaller company with more debt and keep a larger share of the equity.
- Related models. These include single-investor backing, accelerators and long-term holding companies. Independent sponsors, who raise money one deal at a time, are a close relative.
How deals are financed
Most deals combine the buyer’s or investors’ equity, a bank loan and a seller note. Smaller deals may use a US Small Business Administration (SBA) 7(a) loan, which sets its own down payment and cash flow rules.
What sellers should know
An ETA buyer is a financial buyer who will also run the company. Expect questions about how the business runs without you. Searchers often ask the seller to stay for a transition and to finance part of the price.
This is general education, not legal, tax or investment advice.