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The Best ETA Searchers May Not Be the Best Dealmakers
- Celine Nguyen, CFA
- 6 days ago
- 4 min read
A conversation with a dance studio owner over the weekend reminded me of the ETA searcher community.
This person is my daughter’s dance teacher. She is an accomplished dancer who has won multiple international dance awards.
She has been running her studio for several years, but lately, business has become more challenging. The economy may explain some of it. However, she also admitted that she hates the business side of running the studio.
She loves dancing, teaching, mentoring, and developing other dancers. But when it comes to the other side of the business - finding new students, balancing cash flow, figuring out what to post on social media, chasing unpaid invoices, dealing with cost pressures - she finds it incredibly painful and boring.
Whenever she sits down at the end of the day to do this work, she struggles to focus. She may stare at the screen for a while, sometimes needing a glass of wine to get herself into the mood to do these tasks.
She said she wished someone would bring her 10, 20, or however many students to her, and she would only need to focus on teaching and dancing.
After hearing that, I said, “You need a business partner."
“You clearly don’t enjoy the business side, but the studio cannot become a successful business without it. Find someone who complements you - someone who is good at marketing and sales, managing finances and helping out with various other things that are part of running a business."
“Even if you have to share the ownership 50:50, together you could be far more successful than you are trying to do everything alone, especially when one side of the business neither interests you nor plays to your strengths.”
She agreed and is now looking for that person.
The Front End and Back End of ETA
That conversation reminded me of the ETA community. Many searchers in that community are trying to do everything themselves. In many ways, they are similar to this studio owner.
For the studio owner, the front end involves marketing the studio, finding and enrolling students, managing the finances and ensuring the business is profitable. The back end involves running the classes, teaching and ensuring the students are happy.
For an ETA searcher, the front end involves finding the diamond in the rough: the one business in a sea of hundreds worth pursuing. Then comes the research, analysis, modelling and stress testing needed to build conviction that it is the right business, at the right price, and to give investors and lenders the confidence to fund the deal.
The back end begins after the acquisition. It involves leading the team, improving the operations, growing the business and ultimately generating the return that justified buying it in the first place.
Just as this studio owner excels at the back end but struggles with the front end, many ETA searchers are in the same position. They are capable operators who could do an excellent job running a business, but they struggle with the search and acquisition process.
The irony is that unless they succeed at the front end, they never get the opportunity to prove how good they are at the back end.
Many ETA Searchers Never Reach the Part They Are Good At
A typical search takes between 18 and 24 months. Yet even after investing that much time, many searchers still do not complete an acquisition.
Stanford data cited by SMEVentures shows that approximately 43% of concluded traditional searches end without an acquisition. In other words, nearly half never reach the operating phase they entered ETA to pursue.
This does not necessarily mean they would have been poor operators. It may simply mean they could not get through a front end that required a different set of skills.
Zenify's Partnership Model
At Zenify, we don't believe every capable operator should have to become a full-time deal originator, investment analyst, financial modeller, negotiator and capital raiser before they can run a business.
Instead, we selectively partner with experienced operators whose strengths lie in the back end.
Zenify takes responsibility for the front end: defining what to look for, finding opportunities, approaching business owners, identifying which businesses are worth pursuing, conducting the analysis and modelling, valuing and negotiating the deal, and managing the transaction through to completion.
For the right operator and the right opportunity, we can also bring together the capital from investors and debt providers.
The operator brings the industry knowledge and operating capability. They take responsibility for leading and growing the business after completion, and they invest their own capital alongside our investors.
This is a selective partnership model. We look for operators who:
Have substantial experience as an operations manager, general manager, CEO or in a similar senior role
Have run the type of business they want to acquire, or one closely related to it
Can invest approximately 5% to 20% of the required equity
Have the judgement and temperament to take responsibility for an established business
The exact structure depends on the operator, the business and the capital required.
My daughter’s dance teacher does not need another world-class dancer. She needs someone who understands what she does but is strong in the part of the business she finds difficult.
An experienced ETA operator may need the same thing.
Zenify can manage the front end so that the right operator gets the opportunity to do what they are best at: running and growing the business after the acquisition.
Looking for an acquisition partner?
Zenify partners with experienced operators to find, assess, fund and acquire established businesses. We lead the acquisition process and help arrange investor equity and debt, while the operator takes responsibility for running and growing the business after completion.
This model is intended for experienced operations managers, general managers and CEOs who have relevant industry experience, and can invest 5% to 20% of the required equity.
About the Author
Celine Nguyen, CFA is the Founder of Zenify Investments, a Sydney-based buy-side M&A advisory firm. With over 20 years' experience across investment analysis, corporate finance, private equity and mergers & acquisitions, she helps ambitious acquirers find, buy and grow businesses. Through Zenify, she guides clients from initial strategy through to completed transactions.
