Once a company has been acquired, the ‘searcher’ becomes an ‘operator’, taking over the CEO role. After transiting, the operator will use the first 100 days to organize the new governance of the company; evaluate the company’s systems, its checks and balances, and the availability of information. In order to effectively manage the company, it will be important to determine what information the CEO and management team needs to receive, when and from whom. The following 3 a 9 months will serve to focus on getting to know the business and the company. Most investors and search fund experts will advise the operator not to make any changes during this period unless necessary. Examples could be: putting a halt to unethical practices or changing personnel who are highly disruptive.


Companies in the micro acquisition space often lack control systems, have reduced human resource policies, have inadequate IT-infrastructure, lack key personnel and suffer operational inefficiencies.  Entrepreneurial acquisitions are characterized by strong boards that will assist the inexperienced operator in detecting these challenges and developing plans of action that lead to growth and value creation. Because of the nature of the operators and the companies they acquire, boards tend to meet six times a year during the first two years of the acquisition. While the acquisition focuses on buying a good company at a fair price, operator and board cooperate to transform a good company into a great one.


The transition

Research undertaken by Deloitte shows that 85% of post-merger integration (PMI) problems have a human relations undertone. To reduce these potential conflicts the searcher will use the due diligence process to make a list of issues to be addressed. He might also agree on a detailed TSA (Transition Service Agreement) with the seller. This legal document defines the responsibilities, time commitments and compensation of the seller post-closing. Alternatively, the seller does cease all involvement upon closing of the acquisition.

The first 100 days


Large companies that are successful serial acquirers create PMI roadmaps with checklist that can surpass 100 pages. Speed is of the essence and PMI teams implement these with military precision so that the employees, suppliers and customers of the acquired company feel part of the acquirer or newfound entity as soon as possible. While this is the right process when dealing with overcapacity, most acquisitions in the search funds space take place in a fragmented industry. Efficient acquisitions in fragmented industries follow different patterns. Joseph Bower (HBS) published the results of a year-long research on the matter in Not All M&As Are alike-and That Matters (HBR, 2001).


Because acquisitions tend to take place in fragmented industries and the new CEO lacks experience, two principles are of essence: learning and uncertainty reduction. Bar urgent matters, the newly appointed CEO should use the first 100 a 300 days to understand all critical aspects of the business as well as its stakeholders. Only once the operator and board have a good understanding of the business could they start to manage the company for growth by introducing changes that will increase the value for shareholders and other stakeholders.


The other critical factor to address is the reduction of uncertainty that is introduced by the acquisition of the company that is now being led by a young, dynamic though inexperienced CEO. It is therefore essential that a detailed plan of attack addressing the first 100-days was developed pre-closing. Central to this plan will be communication with stakeholders. Typically the new CEO will first address employees (day 1), followed by customers, suppliers and other stakeholders. A good dry run preparing the communication as well as Q&A is of importance.




Search funds as an asset class have started to be noticed. Its historic high performance and performance persistence shows strong similarities with US venture capital, arguably with lower levels of risk. Research does not find similar characteristics in other asset classes. Like search funds (entrepreneurship through acquisition) venture capital combines creative, energetic young entrepreneurs with experienced investors and board members.


Boards play a pivotal role by supporting and mentoring the searchers. This is especially true in the first 2 years of the acquisition where during the first 12 months the board assists the operators in learning the business and developing the new governance structure of the company. The following year is typically dedicated to the implementation of adjustments that will increase the company’s moat. Because of the important nature of both learning and implementing, boards often meet six times a year during the first 24 months.


When composing a board operators are advised to invite board members with complementary skills and experience to the operators as well as to other board members. Boards should contain a mix of members with strong operational experience, sector knowledge, business model innovation, strategy and financial expertise. Both Stanford and IESE studies (2016) report high effectiveness of board members with the highest marks going to operators in related industries.



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