The FORT Podcast: Tim Ludwig – Partner @ Majority Search – A Deep Dive on Search Funding

Tim is a Partner at Majority Search, a private equity firm focused on helping top mid-career professionals pursue entrepreneurship through acquisition (EtA).  He is a veteran search fund investor who has backed over 80 search funds and first-time CEOs since 2007 and purchased three companies directly. Before Tim began investing in search funds, he was an executive at a diversified real estate company, consulted with Arthur Andersen and a middle-market manufacturing company, founded two online publishing companies, and held positions with Dell and a venture-backed start-up. Tim graduated from The College of Wooster, received his MBA from the University of Michigan, and lives in San Diego with his wife and two teenage children.

On this episode, Chris and Tim discuss:

  • A deep dive into the search fund industry and how it matured over time.
  • What Tim has learned from interviewing hundreds of CEOs.
  • How Majority Search structures deals that align incentives.
  • Lessons from valuing 1000’s of small businesses.

Listen on:
Apple Podcasts


(2:51) -Tim’s background and career

(17:28) – What is a Search Fund in traditional vs. self-funded?

(25:42) – How do deal structures work when you begin a Search?

(29:25) – How big is the Search Fund community and how can people get in? 

(32:47) – EBITish on Discord

(34:08) – What are some characteristics of a successful Searcher?

(45:46) – Is there a way to sense if someone has common sense and judgment?

Chris now acts as the Searcher for the remainder of the episode

(52:40) – What are the best practices for finding businesses to buy?

(59:43) – What are some industries or business types that really excite you?

(1:03:42) – What does the process look like once we’ve got an LOI between a Searcher, Search Fund, and Seller?

(1:10:11) – Is there any one reason that causes deals to fall apart?

(1:12:14) – Do you prefer if the seller stays on in some capacity during the transition to new owners?

(1:15:35) – What kind of returns are you looking for to determine if an acquisition was a success?

 (1:18:56) – What are some low-hanging fruit new owners can capitalize on to grow a business they’ve acquired?

(1:23:07) – Do you care if owners implement some kind of EOS or other operating systems?

(1:24:08) – What should an owner expect to see in their first 30-60 days on the job?

(1:27:41) – What does the owner’s relationship look like when working with someone like Majority Search? 

(1:31:46) – How are returns made throughout the life of an investment?

(1:34:23) – What’s the balance between the portfolio owner and the CEO creating ideas for growth?

(1:35:57)- How do you handle unexpected hyper-growth?

(1:39:19) – How do you think about the wave of Baby Boomer business owners headed for retirement?

(1:41:46) – Who would you back if they came to you as Searchers: Elon Musk or Jeff Bezos?


Episode Summary

In a captivating episode of Chris Powers’ esteemed podcast series, the audience was graced by the profound insights of Tim Ludwig. Esteemed for his unparalleled expertise in the niche business domain, Ludwig’s career trajectory boasts of a rich tapestry of experiences, which he generously shared during the conversation.

Tim Ludwig’s journey, marked by serendipity and meticulous decision-making, led him to the world of search funds. His initial exposure to this realm came during his time at graduate school, where a Harvard business school case study on search funds piqued his interest. What was particularly intriguing for Ludwig was the notion that seasoned investors were willing to back inexperienced yet driven individuals, entrusting them with the mammoth responsibility of running a small business. This approach, while seemingly unorthodox, resonated with Ludwig’s aspirations, prompting him to delve deeper.

As the dialogue evolved, the audience was introduced to the intricacies of search funds. These funds typically operate within a two-year window, during which searchers, backed by minimal capital, embark on the arduous journey of identifying a viable business to acquire. These searchers, often fresh from business school, forsake more lucrative opportunities to immerse themselves in this intense quest. The process is akin to sales, wherein a vast funnel of potential businesses is methodically narrowed down to that singular, perfect acquisition.

Ludwig emphasized the changing dynamics of this process. With the advent of advanced technological tools, the outreach capacity has exponentially increased. While erstwhile methods involved contacting hundreds of businesses over a span of months or years, modern searchers engage with thousands weekly. This surge, however, comes with its challenges. Increased outreach has amplified the noise for potential sellers, making the process of breaking through increasingly intricate.

On acquisition, the searcher steps into the business, often with limited understanding of its day-to-day operations. Ludwig highlighted the significance of implementing proven methodologies and systems in these acquired businesses. The transition is marked by challenges, necessitating an active involvement post-acquisition and a reliance on the systems and structures inherent in the business. Regular board meetings serve as pivotal platforms, offering CEOs the opportunity to elevate their strategic viewpoints.

Diving into the financial dimensions, Ludwig elaborated on the typical structure of these businesses. Predominantly set up as LLCs, the tax implications for investors are paramount. Emphasizing the notion of reinvestment, Ludwig articulated the preference of investors to see capital being judiciously employed to grow the business and enhance long-term equity value. Drawing a parallel to real estate, he touched upon the tax efficiencies and predictable cash flows intrinsic to real estate investments.

In conclusion, this enlightening episode with Tim Ludwig was a veritable treasure trove of insights into the world of search funds and small business acquisitions. With Ludwig’s seasoned perspective guiding the narrative, listeners were equipped with invaluable knowledge, enabling them to navigate the intricate landscape of business acquisitions with informed clarity. For those keen on exploring the domain of niche businesses and search funds, this episode stands as an indispensable beacon, illuminating the path with expert reflections.


The Fort is produced by Johnny Podcasts

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