In total, the process of acquisition typically takes around two years to complete. As stated, the acquirer will then take on a key leadership role within the acquired company. The previous owner often retires at this stage, meaning the business begins a new life under new management. Great for economies, great for entrepreneurs Entrepreneurship is already a hot topic among business students the world over. It’s the most common major at the University of Chicago Booth School of Business, for example, where more than 70 per cent of students graduate with a concentration in entrepreneurship. The school’s offerings that focus specifically on ETA are also soaring in popularity – in fact, Chicago Booth’s ETA 101 Workshop had 94 registrants last year, compared to 57 the year before. Why is ETA such an attractive option for MBA graduates and entrepreneurs? The bottom line is that while it’s inevitable that starting or acquiring a business of any size and operating in any industry carries an element of risk, the benefits of entrepreneurship through a successful acquisition are undeniable. For the entrepreneurs themselves, there are plenty of perks. First, many young entrepreneurs consider ETA to be a risk-mitigated path, providing them with the reassurance and confidence to delve into company ownership at an earlier point in their career. Acquiring the foundations of an already successful business removes the pressure for many and offers the kind of stability that leads to increased autonomy and empowerment over decision-making. Today’s younger generations are more purpose-driven than those that preceded them, as has been illustrated by a 2021 study from Ernst & Young on Generation Z’s attitudes towards the workplace. Being able to lead a small, sometimes even local, business through an acquisition allows young entrepreneurs to deliver real and tangible impact to those around them. For many, such purpose-driven work is not as easy to find in other career paths commonly followed by MBA graduates, such as management, consulting or investment banking. For the economy, ETA is a no-brainer. In fact, according to the Stanford GSB study, nearly three out of every four searchers who completed an acquisition made a positive return. The acquisition and then further growth of businesses already in existence leads to increased revenue, maintained and often higher numbers of jobs, as well as upsurges in local service provision – all pillars of a strong and successful economy. Using MBA education to drive business success The process of acquiring an existing business allows MBA graduates to use their business school education to elevate and propel real-world outcomes. For example, most business schools teach pricing strategy and MBAs can inject this knowledge and expertise into existing businesses, helping them to refine and improve their pricing structures for improved profitability.
acquire and then generating further funds to make the purchase themselves. This can be done through personal funds or by raising capital with bank financing, for example. Typically, a self-funder undertaking the ETA process would have more flexibility and freedom to choose the business that they invest in and what they want to do with it. After all, if a self-funder solely uses personal funds to make the acquisition, they aren’t bound by the restrictions and opinions of third-party investors. Being self- funded, they may also be able to command a higher share of equity ownership. It’s worth noting, however, that self-funded acquisitions tend to be smaller in scale than other types because they are frequently restricted by limitations to personal funds. The second option is to use a search fund (thanks to Irv Grousbeck). Such a fund is created by an entrepreneur who forms an investment vehicle with investors in tow to look for and acquire another company. Essentially, a search fund leans on the capital of investors to turbocharge an acquisition. These acquisitions are typically of a larger size due to increased access to capital and can generate greater economic rents. However, there are, of course, more players with a stake in the game. Alternatively, entrepreneurs seeking an acquisition can choose a sponsored route. In other words, they can take funding from, and affiliate themselves with, a sponsor that is usually a private equity group. Essentially, this means they can enjoy the infrastructure, deal flow, intellectual property and committed capital of a firm that is already built and established. This route also means that the entrepreneur has access to mentorship, support, networking and guidance from others who have typically completed the process, or something similar. For first timers, this is often a welcome benefit.
44 | Ambition | MARCH/APRIL 2024
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