Entrepreneurship through acquisition, often abbreviated as "ETA" or "search fund entrepreneurship," is a business strategy in which individuals or groups of entrepreneurs acquire existing businesses instead of starting a new venture. Here's a brief summary of the key points:
Instead of creating a new company, entrepreneurs identify and purchase established businesses that align with their interests, skills, and growth aspirations. Typically, these companies at the time of acquisition have $5M-$15M in revenue and may not have a prominent succession plan.
Entrepreneurs who pursue ETA typically take on active roles in the acquired business, becoming owners, managers, or leaders, with the goal of revitalizing or scaling the company.
Entrepreneurs seeking to acquire businesses may self-fund the search and acquisition of a company, or they often seek investors to help fund and advise the searcher throughout the acquisition. Acquisitions can be financed through bank loans and seller's notes as well.
ETA offers a potentially lower risk profile compared to launching a startup, as acquired businesses often have established customer bases, revenue streams, and operational infrastructure. 90% of startups fail and only 1% of those that succeed reach more than $1M in revenue. Through ETA, there is a 70% chance of owning a company with more than $1M in revenue and positive return on investment (ROI).
The ETA strategy focuses on strategically growing and improving the acquired business, which could involve operational enhancements, new product/service development, or expanding into new markets.
Entrepreneurs often aim to build value in the acquired business and eventually exit through a sale, merger, or other exit strategy, realizing a return on their investment.
Entrepreneurship through acquisition requires a unique skill set, including due diligence in identifying suitable target businesses, negotiation skills, and the ability to manage and innovate within an existing business. ETA has gained popularity as a path to entrepreneurship for those looking for a more structured and potentially less risky approach to business ownership. This club aims to help students interested in learning these valuable skills which not only help in entrepreneurship, but they also are valuable in creating new product lines, departments, etc. in existing businesses.
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