Exiting PE to acquire a business

Based on the most helpful WSO content, exiting private equity (PE) to acquire a business is a path that has been explored by several professionals, often through search funds or entrepreneurial ventures. Here are some insights and considerations:

1. Search Fund Path:

   • Many individuals leaving PE pursue the search fund model, where they raise capital to acquire and operate a business. This path allows them to leverage their deal experience and operational skills.
   • Success stories like Garnett Station Partners highlight this route. Founders transitioned from IB and PE to acquiring franchises post-MBA, eventually building a $1B AUM PE manager.

2. Challenges in Raising Capital:

   • Raising capital can be a significant hurdle. Investors often look for a strong track record, a clear investment thesis, and a well-defined operational plan.
   • Your PE background can be a major advantage, as it demonstrates deal experience and financial acumen, which are attractive to potential investors.

3. Operational Experience:

   • If you lack direct operational experience, it might be a challenge to convince investors of your ability to run a business. However, your PE experience in managing portfolio companies can help bridge this gap.

4. Risk and Reward:

   • While acquiring a business offers the potential for significant upside, it also comes with risks. Some WSO users argue that entrepreneurship is the only way to achieve true financial independence, but it requires a substantial time and energy commitment.

5. Alternative Paths:

   • Some professionals transition to corporate roles or other entrepreneurial ventures instead of acquiring a business. These roles often provide better work-life balance and opportunities to explore side projects.

If you're considering this path, it might be helpful to connect with others who have successfully transitioned from PE to entrepreneurship. Their experiences can provide valuable insights into the challenges and opportunities of acquiring and operating a business.

Sources: Selling Company to join a private equity fund, Walking away from buyside after associate years, Any PE people considered leaving to pursue search fund/entrepreneurship paths?, Breakdown of Post-IB Exit Opportunities, Q&A: BB M&A Banking to PE Associate and then a Pivot to a Tech VC / Growth Equity