What I Learned Last Week 2.28.2025
Curating the best M&A, SMB, and EtA-related content since 2020.
Hello Friends!
In this week’s issue of What I Learned Last Week:
📰 Articles
🧵 Online Highlights
🗓️ Events
⚒️ Tools & Resources
💡 How I Can Help
This issue of The Business Inquirer is brought to you by:
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📰 Articles
I summarize, so you capitalize.
A Look at Search Funds and Section 1202 Qualified Small Business Stock
The article by Holland & Knight attorneys explores the significance of Internal Revenue Code Section 1202 for search funds, focusing on its tax benefits and eligibility criteria for qualified small business stock (QSBS). It emphasizes the "active business" requirement, restrictions on stock redemptions, and the importance of structuring transactions correctly to maintain QSBS status. The discussion also covers the choice between operating as a C corporation or a pass-through entity and strategies to maximize tax advantages while avoiding pitfalls.
Key insights include:
The "active business" requirement for maintaining QSBS eligibility.
Restrictions on stock redemptions that could disqualify QSBS status.
The advantages and drawbacks of structuring as a C corporation versus a pass-through entity.
How to structure rollover transactions to retain QSBS benefits.
Tax considerations for investors in search funds under Section 1202.
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Succession Gap Looms for Canadian Businesses
The article highlights a looming succession crisis in Canada, as many business owners near retirement without formal exit plans. A survey by MNP LLP found that nearly two-thirds of business owners have not structured a succession strategy, risking job losses and economic instability. With small and medium-sized businesses employing nearly 7.8 million people, the lack of planning could lead to closures and uncertainty for employees and communities.
Key insights include:
Only 10% of business owners have clear, actionable succession plans.
63.8% of Canada’s private sector workforce depends on effective succession planning.
Business closures are rising, with a 4.8% closure rate in late 2024.
Employee share ownership plans (ESOPs) and profit-sharing plans (EPSPs) are underutilized transition tools.
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Is the Search Fund Acquisition Rate Falling? With Jim Edmunds, Badge Stone & Kent Weaver
This podcast episode from Mineola Search Partners explores the declining acquisition rate in the search fund ecosystem, featuring insights from experienced investors Jim Edmunds, Badge Stone, and Kent Weaver. They discuss key factors influencing acquisition trends, such as increased competition, seller expectations, evolving industry theses, and shifts in investor behavior. The conversation also covers the changing nature of search funds, challenges with email deliverability, and the importance of independent thinking and perseverance in the search process.
Key insights include:
Declining Acquisition Rate: Search fund acquisition rates have dropped from ~63% historically to ~57% over the past decade, with predictions of further decline.
Competition & Uniformity: More searchers are chasing the same industries and brokered deals, leading to overlap and bidding wars.
Investor & Searcher Evolution: Easier fundraising has lowered barriers to entry, attracting some searchers who may not be fully committed or suited to the model.
Email Challenges: Cold outreach is becoming less effective due to email deliverability issues and seller fatigue from repetitive messaging.
Valuation Trends: Small business valuations have risen slightly, particularly in software, but high-quality businesses still justify premium pricing.
Search Strategies: The best-performing searchers focus on theme development, direct outreach, and industry knowledge rather than relying solely on brokered deals.
Market Timing & Resilience: While economic cycles impact search outcomes, perseverance, adaptability, and strong investor partnerships remain critical for long-term success.
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Landscaping roll-ups: PE's new frontier or a thorny proposition?
The article from RollUpEurope examines the growing interest in landscaping roll-ups as a new frontier for private equity (PE), comparing the sector's economics in the U.S. and Europe. With a $153B total addressable market in the U.S., PE firms are drawn to the industry due to its high recurring revenue, strong gross margins (~50%), and relatively low acquisition multiples (3-4x EBITDA). However, operational challenges such as workforce issues, seasonality, and lack of economies of scale pose risks. The European market differs due to its reliance on public sector contracts and limited equity capital availability.
Key insights include:
Attractive Industry Dynamics: Landscaping businesses offer recurring revenue, high gross margins, and lower acquisition multiples compared to other fragmented service industries.
Early PE Interest: Firms like KKR and CI Capital Partners are acquiring landscaping companies, but the roll-up strategy is still in its early stages.
Operational Challenges: Localized service complexity, seasonal demand, labor shortages, and pricing pressures impact profitability.
European Differences: European landscaping roll-ups rely heavily on government contracts, face less competition, and have lower access to private capital.
Major Players: Green Landscaping Group and Idverde are leading European consolidators, with strong M&A-driven growth but mixed public market performance.
🧵 Online Highlights
I scroll, so you don’t have to.
Going full-time on a self-funded search without years of runway? Risky. Desperation leads to bad deals. Part-time searchers keep leverage and sanity intact…
This thread & infographic break down the key players in the franchise ecosystem…
Employment vs. business sale non-competes are worlds apart — and state laws matter. Know the difference…
The right SBA 7(a) loan officer can make or break your deal. Forget rankings — find someone who knows how to navigate challenges and push the deal forward…
Buying a landscaping business? Don’t overlook equipment and other hard asset diligence…
SBA now allows seller rollovers in asset purchases — preserving cash, aligning interests, and limiting liability. Structuring it right is crucial…
Asset purchase, stock sale, or LLC buyout, each has its own set of documents and checklists…
🗓️ Events
MIT EtA Conference (Feb 28) - Cambridge, MA
iGlobal Independent Sponsors (Mar 4-5) - Miami, FL
SBIA West Coast Capital Summit (Mar 25-27) - Los Angeles, CA
London Business School EtA Conference (Mar 28) - London, UK
HoldCo Conference (Mar 31-Apr 3) - Sundance, UT
SMBash (Apr 2-4) - Dallas, TX
NOVA SBE EtA & SF Conference (Apr 3) - Carcavelos, Portugal
2nd Annual UCLA ETA Search Fund Roundtable (Apr 9) - Los Angeles, CA
M&A Launchpad Conference (May 3) - Houston, TX
Mittelstand Summit 2025 (May 20) - Berlin, Germany
🎵 Listening: “Too Much History“ by Jack Savoretti 🎵
How did you like this issue of the newsletter?
⚒️Tools & Resources
I want to share some tools & resources that I have found helpful. Please note that some of these are paid sponsors or affiliates of the newsletter.
PrivSource - PrivSource helps you source deals and connect with transaction partners without ever paying a success fee.
X5 Deals - Proprietary deal sourcing for a great price. They do the tedious and time-consuming job of deal sourcing so you can spend more time on DD and closing.
Rejigg - Platform that connects searchers/investors directly with owners of off-market small businesses ($200k - $3M EBITDA) considering exits. All deals are sourced by the Rejigg team. Their team adds 15 to 20 new deals each week.
Kumo - 100,000+ deals sourced from thousands of brokers and marketplaces. Plus, AI-powered listings, robust data & analytics, and more.
DealFlowXchange - The premier private capital funding community for raising and deploying capital. Use discount code DUEDILIO for 20% off your lifetime membership.
BizNexus - Marketplace + off-market origination in one platform. The marketplace averages about 10k active listings & pre-CIM opportunities, and the off-market origination focuses on data & multi-channel.
Secret - Say goodbye to overspending on SaaS. With Secret, you get access to up to $1,000,000+ in savings on the best software to run your search, operate, and scale your business.
Deal Sourcing Guide - a comprehensive list of business marketplaces, brokers, deal origination firms, and more.
💡 How I Can Help
Whenever you’re ready, here are a few ways for us to work together…
Schedule 1:1 consulting on deal sourcing, due diligence, M&A ecosystem, newsletters, entrepreneurship, or anything else you’d like to discuss
Promote your brand to business buyers, investors, SMB owners, and other M&A participants by sponsoring this newsletter
Assemble your M&A deal team with DueDilio
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