Why Do Proprietary Search?

Search funds have never been hotter. In 2023, 94 new funds launched — the most ever at the time. But here’s the kicker: only 29 acquisitions closed.

That gap between the number of people raising money and the number of deals actually happening says it all. There’s too much capital chasing too few businesses. Which is exactly why proprietary search matters. The best deals aren’t hitting broker inboxes. They’re happening in quiet conversations, often before an owner has even decided to sell.

Auctions Kill Returns

We all know what happens once a business goes to a broker - it’s basically an auction where timelines get compressed, multiples rise, and the terms tilt toward the seller.

Stanford’s 2024 Search Fund Study shows median acquisition prices at about 7.0× EBITDA on deals around $14.4 million. In an auction, you can count on that number climbing. And every turn of EBITDA you overpay on the way in erodes your returns on the way out.

Compare that to proprietary deals, where you’re sitting across the table from the owner, talking fundamentals instead of outbidding competitors. The difference between buying at 7.0× and 6.0× on a $15 million deal is $1.5 million. That swing alone can decide whether you meet your hurdle rate or miss it.

The Best Businesses Aren’t For Sale

Here’s the thing nobody tells you when you start searching: the strongest companies usually aren’t listed anywhere.

Most owners aren’t actively looking to sell. They’re running good businesses, taking care of their teams, and only occasionally thinking about succession. But they’ll take a meeting if the right buyer reaches out with the right message.

That’s where proprietary search shines. It gives you access to companies that would never hit the open market. You’re finding them before anyone else even knows they’re available.

Legacy Matters as Much as Valuation

For a lot of small business owners, the sale isn’t just about the price. It’s about what happens after the ink dries.

Will the employees be taken care of? Will the brand they built survive? Will their customers stay loyal?

Proprietary outreach gives you the chance to talk about those things. You get to share your story, your values, and your vision for the company. That’s what moves the needle with sellers who care deeply about their legacy. And many of them do.

Take Back the Process

When a broker runs the deal, you’re on their schedule. Bids are due on Friday. Diligence is crammed into a few frantic weeks. The process is designed for speed, not trust.

In a proprietary conversation, the owner and buyer set the pace together. You have room to build a relationship, talk through deal structures, and shape terms that actually work. That flexibility can be the difference between a deal that happens and a deal that falls apart.

The Data Backs It Up

Stanford’s numbers are clear. Search funds have delivered an average IRR of 35% and an average ROI of 4.5× since the 1980s. For companies that exited, the IRR is even higher at 43%.

Those results don’t come from overpaying in bidding wars. They come from proprietary deals where buyers enter at fair valuations and then grow the business through hands-on leadership.

Yes, it’s risky. About 37% of searchers never acquire a business, and nearly 20% lose money. But for the ones who find the right deal, the payoff is life-changing.

The Bottom Line

Proprietary search isn’t easy. It takes persistence, patience, and a system that keeps you consistent.

But it’s also the only way to:

• Avoid inflated auction prices

• Find businesses nobody else is seeing

• Build trust with owners who care about more than money

• Control the pace and the process

• Capture the kind of upside Stanford reports year after year

  
  

The ETA landscape is getting more crowded. Proprietary search is how you stand out, how you build real conversations with owners, and how you turn all that capital into an actual acquisition. 🦬