Deep Dive: Why Every Failed Deal Makes You a Better Searcher
Key Takeaways
Endurance and judgment matter more than luck. Most searches fail to acquire a company, and even successful ones face long, bruising processes. The true differentiator is judgment built through failed LOIs and disciplined underwriting, not a perfect first deal
Discipline beats optimism. High valuations and rising multiples punish weak diligence. Searchers must price risk soberly, identify “kill shots” early, and avoid deals that require heroics or hinge on optimistic growth assumptions.
Behind every “overnight winˮ in ETA sits a graveyard of dead LOIs, vanishing lenders, and sellers who went radio-silent after six months of courtship. We romanticize the close; we donʼt talk enough about the bruise. But the bruise is the point.
The hard numbers are sobering. Across concluded searches, only about 2/3 actually acquire a company (slightly higher in Europe). The rest end without a deal. Closing that deal takes on average 20 months of grind.
Even when you do close, the distribution isnʼt Instagram-friendly. There is a meaningful tail of total/partial losses among acquired companies. In other words, selection quality and operating discipline separate success from write-offs.
Meanwhile, the field is crowded, and pricier deals demand perfect stories. With more searchers entering the ecosystem, multiples have been moving up, especially in the US, where multiples have expanded to 7x EBITDA. That pressure cooker is exactly where good judgment can fade. Where business plans are written to match the multiple and not the other way around.
And then thereʼs the LOI reality check. Broken LOIs arenʼt bad luck; theyʼre the curriculum. Diligence problems and valuation gaps dominate dead LOIs.
Hereʼs how to maximise LOI success:
Pre-mortem your LOI. Before you sign, identify the three likeliest kill-shots (QoE deltas, customer concentration, regulatory landmines).
What's your unfair advantage? How can you stand out - especially if you are not the highest bidder? Focus on transactions that play to your personal strengths, not just some podcast playbook that everyone is following.
Underwrite the operating story, not the deck. If your path to a 2x–5x isnʼt boringly concrete, skip it. The business model needs to work despite and not because of the new searcher.
Price in the headache. Multiples of 7x, like seen in the US, mean small cracks get expensive fast. If you need heroics or strongly rely on continued growth to make the economics work, the deal already owns you.
Respect the clock. If youʼre past month 12 with no signed LOI, widen your aperture or sharpen your spear with narrower ICP, more targeted origination lanes, or a different financing stack.
Build a “no-regretˮ kill list. Write down the five conditions that auto-kill any deal (e.g., >30% one-customer exposure; capex intensity; employee churn, WC…).
Everyone celebrates the acquisition announcement; almost no one celebrates the LOI you didnʼt close. You should. In a market where most deals that deserve to die do die, your superpower is subtraction.
If youʼre in month 19 staring at another dead LOI; youʼre in the Setback Season. The season where your pattern recognition gets teeth, your underwriting gets mean, and your gut learns when to say “noˮ before the QoE report does. Keep going. The deal you walk from is the training for the right acquisition.
Insight of the Week
Deal appetite among Self Funded searchers sits squarely in the $500k-$2m EBITDA range, where skill, not structure, drives returns. Pacing is scattered. Some searchers review a handful of deals a month, others tear through sixteen. The real constraint isn’t the pipeline; itʼs the fit. Few businesses hit the narrow filters searchers now impose. Most capital stacks look the same, including savings, SBA loans, investor equity, and seller financing. The winners build repeatable sourcing lanes instead of chasing every lead.
Deal Watch
Transactions
Aurias - UK
UK-based search fund Aurias, which acquired Saepio in April 2024, has completed a bolt-on of Ruptura, a penetration-testing specialist. The move deepens Saepioʼs offensive security capability and brings roughly 15 new team members.
For the Commute
Sid Chapani: Productization, Cash Discipline, and Building Pricing Power (HoldCo Builders Podcast)
Sid Chapani shows how productizing a services business lifts gross margin, stabilizes pricing in tender markets, and reduces customer-by-customer volatility. He walks through cash drivers that kept payroll safe, negotiating vendor terms, launching industrial product lines, and using shared services to professionalize the back office. Useful for European buyers managing long pay cycles and working-capital gaps, with clear signals on when to add selective acquisitions and a manufacturing base.
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