After the Acquisition: Long-Term Operating Paths for Search Fund Entrepreneurs

A search fund brings investors together to back an entrepreneur who finds, acquires and runs an existing company. After the acquisition, the entrepreneur usually becomes its CEO. The work now includes leading the team, understanding customers, managing cash and improving a business that already has a history. Investors will also need a way to realise their returns.

If the company still has room to grow, can the entrepreneur and shareholders continue together? Doing so requires an ownership arrangement that gives the business time to develop and gives investors a workable way to share in its value.

When a business is worth holding for longer

GJ King and Will Bressman acquired RIA in a Box in 2011 with backing from Pacific Lake and other search fund investors. The company supplied compliance software and support to independent investment advisers. In 2018, Aquiline Capital Partners acquired it from its shareholders. King and Bressman continued to lead the business, while the original search fund investors exited.

RIA in a Box kept growing and was acquired by ComplySci in 2021. The entrepreneurs and the new owners participated in that further growth. Pacific Lake no longer did.

In Why We Created Long-Term Home, Pacific Lake co-founder Coley Andrews explains why the experience prompted a different approach. A proven CEO and supportive investors could still have good reasons to remain partners after the point when a conventional exit became possible. Pacific Lake launched its Long-Term Home strategy in 2018 to support that continued partnership and provide an alternative route to liquidity.

The broader idea of a long-term hold (LTH) is straightforward: owners continue to invest in a business they believe is worth developing. More time can support growth, cash generation and the development of its people.

Keeping operators and shareholders together

Continued ownership depends on decisions about duration, reinvestment, distributions and liquidity. A business that generates cash can potentially support its own development while returning some of that cash to shareholders.

Permanent Equity raises 30-year funds and partners with management teams for extended periods. Operating cash flow allows the owners to consider both reinvestment and distributions without requiring a sale to generate every dollar of investor return. The Permanent Equity 2023 annual letter reported that 16 companies, including fund investments and the firm’s direct investments, distributed more than US$35 million to investors without selling an investment that year.

Fewer ownership changes can also reduce costs. In Spotlight on Long-Hold Funds, Bain compares a long holding period with a sequence of shorter investments under hypothetical, equivalent operating conditions. Lower transaction costs and later payment of tax on a sale leave more capital available for investment. The comparison explains a mechanism; the outcome for a real business still depends on its performance and the terms of ownership.

Growing from one business to several

A company can grow by improving its products, reaching new customers and expanding its service area. That is organic growth: developing the business it already has.

Established operations can also support acquisitions. Cash generated by the first company, together with an experienced team and a better understanding of the market, can help an owner add capabilities, enter another region or acquire a complementary business.

As the number of businesses grows, ownership and management need a clearer structure. A holding company, or HoldCo, owns shares in operating subsidiaries. Each subsidiary can retain responsibility for its customers and day-to-day work, while the parent coordinates financing, major decisions and management development. A parent can be established around one business and add others later. It can also redirect cash that one subsidiary cannot use productively to another business or acquisition.

CASE STUDY · CAPITAL ALLOCATION

Berkshire Hathaway: putting one company’s cash to work elsewhere

Berkshire Hathaway is an American holding company with businesses across many industries. In its owner’s manual, Warren Buffett describes a division of responsibility developed with Charlie Munger: operating managers run their businesses, while headquarters supports them and decides where to invest cash they do not need.

In 1972, Blue Chip Stamps, which Buffett and Munger controlled and which later became part of Berkshire, bought See’s Candies for US$25 million. Buffett’s 2007 shareholder letter reported that See’s had generated US$1.35 billion in cumulative pretax earnings since the acquisition. Only US$32 million of additional capital had been needed to support its growth.

Customers paid for their candy promptly, and the business required relatively little cash in receivables and inventory. After reinvestment and corporate taxes, the remaining earnings helped finance other acquisitions. See’s continued making and selling candy; its cash also became a source of capital for businesses elsewhere in the group.

Sources: Buffett, Berkshire owner’s manual (1999); 2007 shareholder letter (2008).

Yale School of Management’s Exploring Holding Companies in the Search Fund Ecosystem distinguishes three approaches by industry scope: one industry, a limited group of industries, and no predetermined industry boundary. The examples below use that distinction to examine both search fund businesses and more mature acquirers.

Focusing on one industry

An owner can stay within one industry while expanding geographically or adding related products and capabilities. Repeated acquisitions then build on knowledge of similar customers, services and operating problems.

Wind River Environmental began through a search fund in 1999. It services septic tanks, grease traps and other non-hazardous liquid-waste systems. The company built density in New England and expanded into neighbouring markets, bringing local teams and customers into a broader service network. Yale records 75 acquisitions under co-founder John O’Connell’s leadership. Over his 15-year tenure, annual compound growth was approximately 20% in revenue and 23% in earnings before interest, taxes, depreciation and amortisation (EBITDA).

CASE STUDY · SPECIALIST SOFTWARE

Constellation Software: owning specialist software businesses for the long term

Constellation Software, a Canadian-listed company founded in 1995, owns more than 1,000 businesses. It concentrates on vertical market software: applications designed for the particular needs of an industry. Its businesses may serve many different customer industries while sharing a focus on specialised software.

Constellation looks for established market positions, recurring revenue and customers who depend on the software and rarely leave. Replacing an application embedded in important business processes can take time and money. Customer retention therefore matters to the durability of future cash flow.

Constellation also sets minimum expected returns for acquisitions, linking the price it can pay to the cash a business is expected to generate. Once acquired, businesses retain operating autonomy, while the group reinvests cash in existing operations and further acquisitions.

Revenue rose from approximately US$211 million in 2006, its IPO year, to US$11.623 billion in 2025, roughly 55 times as much. That increase includes both acquisitions and organic growth. Cash flow from operations reached US$2.732 billion in 2025, providing further capacity for reinvestment.

Sources: Constellation overview; VMS business model (2016); Constellation 2006–2007 results (2008); Constellation 2025 results (2026).

Industry focus can also bring together complementary production capabilities. Yale’s study of long-term hold practices traces Jay Kumar’s acquisition of Universal Plastics in 2012 and the later additions of Mayfield Plastics, Sajar Plastics and Premium Plastic Solutions. The acquisitions combined thermoforming, gas-assist injection moulding and blow moulding, broadening the products and production volumes the group could handle for customers while remaining within plastics manufacturing.

Choosing a limited group of industries

Other owners define several areas in which they want to keep acquiring. The businesses may share customers, technology or expertise, although the scope is ultimately a strategic choice about where the parent intends to operate.

Danaher has acquired hundreds of businesses and today focuses on biotechnology, life sciences and diagnostics. Its approach combines sustained work on potential acquisitions with operating improvement through the Danaher Business System (DBS).

In a 2016 Danaher management roundtable, executives described maintaining relationships with approximately 200 businesses that were not yet for sale. Some relationships had lasted a decade. By the time an owner wanted to sell, Danaher could draw on years of research and familiarity with the business. Before acquiring Beckman Coulter in 2011, it had also identified Blue Ocean Biomedical as a complementary acquisition, which it completed within six months of the larger transaction.

After an acquisition, DBS gives teams a common approach to improvement. They track delivery, quality and inventory, investigate problems and improve the processes behind them. DBS also extends to product development and leadership. As businesses adopt and refine these practices, operating experience becomes something the group can use again.

Keeping the industry scope open

A holding company can pursue attractive businesses across industries without setting a fixed sector boundary. This creates a broader set of opportunities, along with a greater need to understand different businesses and find capable operators.

Chenmark began with the 2015 acquisition of Seabreeze Property Services, a Maine landscaping and snow-removal business. It subsequently expanded into other activities, including frozen-dough manufacturing and boat tours. In a 2022 interview with Chenmark’s founders, James and Palmer Higgins described their willingness to enter unfamiliar industries and spend time learning how to operate in them.

Cash from existing companies helps fund subsequent acquisitions. In a 2025 Chenmark and Decata Group discussion, Palmer explained how cash accumulates at the parent for that purpose, with financing tailored to each transaction. Some purchases used bank loans; others combined cash and seller financing, with part of the purchase price paid later. The capacity to acquire therefore depends in part on what existing businesses can generate after meeting their own investment needs.

Chenmark’s account of its holding-company structure describes how cash, benefits and other shared resources can be managed across the group while each business retains operating responsibility. The parent also needs people capable of taking over day-to-day leadership as the portfolio grows.

Planning for long-duration ownership before the first acquisition

Some entrepreneurs arrange capital and governance for multiple acquisitions before buying the first company. Stanford’s 2026 Search Fund Study examines these long duration enterprises (LDEs) separately from core search funds.

LDE founders typically plan for at least ten years, raise a committed pool of capital upfront and make acquisitions with an active board. Capital is called as needed, subject to the agreed decision rights. For illustration, a US$20 million commitment might support an initial US$5 million capital call, with the balance available for later approved uses. The commitment, the amount called and the first company’s purchase price are different figures.

The study identified 67 LDEs in the United States and Canada, 63% of them launched in 2024 or later. Median commitments were US$20 million; the median investor count was 17 and fundraising took a median of four months. Among LDEs that had acquired a company, about two-thirds of founders initially operated it, for a median of two years, before shifting toward the parent company. The data include partial LDE updates through April 2026; most vehicles remain young, and the study does not yet calculate their investment returns.

A team that later establishes a parent company and starts acquiring again has created a holding-company structure. Whether it also fits Stanford’s LDE category depends on how the venture was organised and funded at the outset.

Selling remains part of the ownership decision

Owners still need to assess whether the current team and capital structure give the business the best conditions for its next stage. A larger group may sometimes offer customers, employees and the company opportunities that its present owners cannot provide.

Kingsway owns operating businesses and, through its Kingsway Search Xcelerator programme, backs entrepreneurs who find, acquire and run companies. The operator leads the business, with capital and support from the parent.

Kingsway acquired Professional Warranty Service Corporation (PWSC), a provider of residential warranty products and services, in 2017. Its PWSC sale announcement reported base consideration of US$51.2 million in 2022. The sale proceeds and distributions received during ownership together represented approximately ten times Kingsway’s initial US$5 million investment over roughly four and a half years.

The sale did not end Kingsway’s acquisition activity. KSX completed six acquisitions in 2025, according to the Kingsway 2025 results. Selling one subsidiary can sit alongside the continued development of others and further investment by the parent.

Giving the business more choices over time

An entrepreneur can spend many years developing one company. With capable teams and suitable capital, the same owner may eventually take responsibility for several. The business’s pace of growth, the operator’s abilities and investors’ time horizons need to develop together.

Continued ownership gives profits, people and operating experience time to accumulate. Those resources can widen the company’s next set of choices: strengthen its existing position, expand into another business or wait for an opportunity worth pursuing.

Sources

• Aquiline Capital Partners, Aquiline Capital Partners Acquires Compliance Software and Solutions Provider RIA in a Box, 2018.
• ComplySci / PR Newswire, ComplySci and RIA in a Box Join Forces to Launch the Future of Compliance Software, 2021.
• Coley Andrews, Pacific Lake, Why We Created Long-Term Home, 2026.
• Peter Kelly and Sara Heston, Stanford Graduate School of Business, Long Term Hold, 2024, case E870 Long Term Hold.
• Permanent Equity, Investments We Make.
• Brent Beshore, Permanent Equity, Awe, Health, and Fear: 2023 Annual Letter, 2024.
• Hugh MacArthur, Bain & Company, Spotlight on Long-Hold Funds: Opening Up New Horizons, 2018.
• Warren Buffett, Berkshire Hathaway, An Owner’s Manual, 1999 edition.
• Warren Buffett, Berkshire Hathaway, 2007 Letter to Shareholders, 2008, p. 7.
• Trish Higgins, Rich Littlehale and A. J. Wasserstein, Yale School of Management, Exploring Holding Companies in the Search Fund Ecosystem, 2024, pp. 3–4.
• Joseph N. Golden, A. J. Wasserstein, Mark Agnew and Brian O’Connor, Yale School of Management, On the Nature of Programmatic Acquisition Strategies: How to Source Deals, 2020.
• Constellation Software, Constellation Software.
• Constellation Software, Annual Information Form, 2016, pp. 9–14.
• Constellation Software, Constellation Software Inc. Announces Results for the Fourth Quarter and Year Ended December 31, 2007 and Declares Annual Dividend, 2008, p. 7.
• Constellation Software, Constellation Software Inc. Announces Results for the Fourth Quarter and Year Ended December 31, 2025 and Declares Quarterly Dividend, 2026.
• Jeanne Odendaal, Tim Ludwig and A. J. Wasserstein, Yale School of Management, On the Nature of Long-term Holds: How Entrepreneurs Can Operationalize this Approach, 2021.
• Danaher, Acquisitions: Advancing the Danaher Portfolio.
• George L. Roth and Art Kleiner, strategy+business, Danaher’s Instruments of Change, 2016.
• Danaher, Danaher Business System.
• Generational Equity / PR Newswire, Generational Equity Announces a Partnership between Seabreeze Property Services, Inc. and Chenmark Capital Management LLC, 2016.
• Acquiring Minds, 7 Years Later: Leaving Wall Street to Buy Small Businesses, 2022.
• SMBash, Building a Holdco the Hard Way: Lessons from Chenmark and Decata Group, 2025.
• Chenmark, That C-Corp Life, 2020.
• Peter Kelly, Stefanos Zenios and Dom Ng, Stanford Graduate School of Business, 2026 Search Fund Study: Selected Observations, 2026, case E967, pp. 15–18 and exhibits 10–11.
• Kingsway, Kingsway Search Xcelerator.
• Kingsway Financial Services / PR Newswire, Kingsway Reports Second Quarter 2022 Results and Announces Sale of PWSC for $51.2 Million, Entrance Into an Option Agreement to Repurchase a Portion of Its Debt, 2022.
• Kingsway Financial Services, Kingsway Reports Fourth Quarter and Full Year 2025 Financial Results, 2026.