Mt. Auburn Partners Search Fund Custom Case Solution & Analysis

1. Evidence Brief (Case Researcher)

Financial Metrics

Fund Size: $600,000 raised from 12 investors.
Search Period: 24 months.
Compensation: $100,000 annual salary for the searcher (covered by fund).
Acquisition Target Criteria: EBITDA between $1M and $3M; growth potential; recurring revenue; low customer concentration.
Investor Structure: 12 investors provided capital for search costs and potential acquisition equity.

Operational Facts

Geography: Search focused on the United States.
Search Methodology: Proprietary sourcing (direct outreach to business owners).
Team: Single searcher (entrepreneur).
Constraints: 24-month window before investors have the right to liquidate remaining fund capital.

Stakeholder Positions

Searcher: Focused on balancing rigorous due diligence with the time pressure of the 24-month search window.
Investors: Seeking a high-IRR exit (typically 5x-10x) via acquisition and eventual sale of a small-to-medium enterprise.

Information Gaps

Specific industry targets are not defined in the summary data.
Lack of data on current deal flow velocity or conversion rates at the 18-month mark.

2. Strategic Analysis (Strategic Analyst)

Core Strategic Question

Should the searcher pivot from a broad sector search to a deep-dive, industry-specific acquisition strategy to ensure a deal closes within the remaining search window?

Structural Analysis

Buyer Power: High. The searcher is small; business owners often have multiple exit options or may choose not to sell.
Searcher Constraints: The 24-month clock creates a hard deadline. Time is the primary currency.

Strategic Options

Option 1: Industry Vertical Pivot. Focus exclusively on one industry (e.g., HVAC services or B2B software). Trade-off: Higher domain expertise, faster due diligence, but risks missing a gem in an adjacent sector.
Option 2: Direct Outreach Acceleration. Double the pace of cold outreach. Trade-off: High intensity, potentially lower quality of vetting, high burnout risk.
Option 3: Strategic Partnership. Partner with an industry-specific broker to access off-market deals. Trade-off: Lower acquisition cost efficiency due to fees, but higher conversion probability.

Preliminary Recommendation

Pursue Option 1. The searcher must specialize to become a credible buyer in the eyes of intermediaries and sellers. Specialization reduces the time required for due diligence, which is critical given the remaining time.

3. Implementation Roadmap (Implementation Specialist)

Critical Path

Select one industry vertical based on historical search data (Week 1).
Map the top 200 potential targets within the target EBITDA range (Weeks 2-3).
Initiate high-touch, personalized outreach to owners (Weeks 4-12).
Execute LOI on the first viable candidate (Week 16).

Key Constraints

Time: The 24-month deadline is immutable.
Access: Reaching the business owner directly without intermediaries is the only way to avoid bidding wars.

Risk-Adjusted Implementation

Set a drop-dead date for the current pipeline. If no LOI is signed by month 20, the searcher must shift to a search for a smaller, distressed asset to ensure the fund capital is deployed and the searcher remains in the game.

4. Executive Review and BLUF (Executive Critic)

BLUF

The searcher is currently failing the time-value test. A broad search in a competitive SME market is a recipe for a burned-out searcher and a liquidated fund. The recommendation to pivot to a single industry vertical is mandatory. The searcher must stop acting as a generalist and become a domain expert in a niche where they can identify value others miss. If the searcher cannot close a deal within the next six months, they should return the remaining capital to investors rather than chasing marginal assets to satisfy ego. Success here is not about volume of outreach; it is about the conversion of a specific, vetted target.

Dangerous Assumption

The assumption that a broad search surface area increases the probability of a win. In reality, it dilutes the searcher’s credibility and increases the time required for due diligence on every potential lead.

Unaddressed Risks

Owner Sentiment: The risk that the selected target owner is not actually willing to sell, regardless of price (Probability: High).
Capital Exhaustion: The risk that search costs will deplete the fund before a deal is signed (Probability: Medium).

Unconsidered Alternative

The searcher should consider a micro-acquisition strategy—buying a smaller, profitable business that serves as a platform, then executing add-on acquisitions to reach the target EBITDA. This mitigates the risk of failing to find a single perfect $2M EBITDA target.