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

A search fund entrepreneur usually becomes the CEO once an acquisition closes. Closing changes ownership. The harder work follows: deciding which people should stay, learning the customers and cash flow, and helping an established business operate better under new stewardship.

That operating period raises a longer-horizon question. If the business is still improving, must a sale be the next step? If its cash flow can support another acquisition, should the owner hold more than one company? And what structure would let several businesses sit within a coherent long-term arrangement? Long-term holds, holding companies, and long-duration enterprises are different answers to those questions.

When is a business worth holding for the long term?

A long-term hold (LTH) begins with an operating preference. The owner intends to run a business over a longer period, allowing growth, cash flow, and management capability to compound inside it. The approach may remain focused on one company, or it may include add-on acquisitions that deepen the core business through adjacent customers, products, geographies, or capabilities. The central task remains the same: run the operating company well. Stanford has explored the idea in its Long-Term Hold case.

RIA in a Box illustrates why the question can matter. The company provides compliance software and back-office tools to independent financial advisers, covering new-adviser registration, ongoing compliance, client relationships, and billing. GJ King and Will Bressman acquired it in 2011 and sold it seven years later, creating liquidity for the founders and early investors.

Pacific Lake later reflected on that sale in Why We Created Long-Term Hold. It supported the transaction at the time, but RIA in a Box subsequently grew much faster. Beyond the two founders, a substantial portion of the additional value accrued to the next owners. The useful question was not whether the sale price had been wrong. It was why a CEO who had proven able to grow the business and early owners who still believed in that CEO could not remain invested together. Pacific Lake created its Long-Term Hold strategy in 2018 to give that combination of operator and capital another option.

When acquisition becomes recurring work

Once one operating company is stable, acquisition can become an ongoing responsibility rather than a one-time growth initiative. A holding company, or HoldCo, owns the equity of one or more operating subsidiaries while the subsidiaries continue to run their day-to-day businesses. Even a structure that starts with one company has two layers: a parent that owns and an operating company that serves customers.

Whether a second or third company belongs under the same parent is a separate operating decision. The parent may take on some combination of board work, incentives, financing, and capital allocation: deciding whether cash generated by the businesses should be reinvested, distributed, or used for the next acquisition.

This arrangement starts from the same basic structure as a traditional search fund: an entrepreneur finds and takes responsibility for a business; investors provide capital and participate in key governance through the board. Once the first company is being run well, the parent may gradually build the capacity to support another transaction and more operators. The three paths below show how that capacity can develop in different businesses.

Long-duration enterprises: planning for repeat acquisitions from the start

LTH describes a choice made after acquiring a company: to operate it over a longer horizon. In its 2026 search fund study, Stanford identified a group of teams that put long-term capital and repeat acquisitions into their original design. The study calls them Long Duration Enterprises (LDEs).

An LDE is a more specific capital and organisational arrangement. Before the first acquisition, the team assumes a horizon of more than ten years and multiple acquisitions. Investors commit capital that can be called over time, while the initial agreements define how the board will make decisions about cash and follow-on investment.

The median LDE had $20 million of committed capital at inception. That is not the purchase price of a single target; it is the capital base reserved for a longer holding period and subsequent acquisitions. Stanford’s 2026 Search Fund Study tracked 67 LDEs. Of those, 63% were formed in 2024 or later; the median group had 17 investors and raised its initial capital in roughly four months. Among LDEs formed in 2023 or earlier, 96% had completed at least one acquisition. The study does not report a separate return series for LDEs, so it describes a capital structure that is being adopted rather than a return outcome that has already been proven.

Among LDEs that have completed a first acquisition, roughly two-thirds of founders still run the initial company for about two years before gradually spending more time on capital allocation and HoldCo work. The role changes because the operating system has matured, not because a job title has changed.

These terms describe different things. LTH concerns how a business is operated over time. HoldCo concerns ownership and the work of the parent. LDE brings long-term capital, repeat acquisition, and governance into the design from day one. A company can combine all three, or use only one of them.

Three paths to growth after a first acquisition

Long-term ownership does not require every business to reach the same scale. In search fund practice, three paths appear repeatedly. The difference lies in what acquisitions are meant to accomplish.

1. Deepening a core business through add-on acquisitions

The first path stays close to one core company or a narrow industry. Add-ons supply customers, products, geography, or capabilities, while the operating centre of gravity remains in the same business. The company count may increase, yet procurement, production, sales, and customer relationships still serve one operating system. Universal Plastics is an example: it brought plastic-moulding capabilities from three adjacent companies into its existing manufacturing base and customer relationships. The operator continued to deepen a plastics business rather than assemble an unrelated portfolio.

CASE STUDY · ADD-ON ACQUISITIONS AROUND ONE CORE BUSINESS

Universal Plastics: putting add-ons into the same business

When Jay Kumar acquired Universal Plastics in 2012, it had roughly 70 employees and annual sales of about $10 million. The group added Mayfield Plastics in 2013, then Sajar Plastics and Premium Plastic Solutions in 2017. A 2021 Yale case recorded roughly 290 employees and $53 million of annual revenue. All four businesses remained within plastics moulding rather than becoming a collection of unrelated assets.

Thermoforming, gas-assist injection moulding, and blow moulding were brought together as a broader customer solution. By 2020, five production facilities operated under the Universal Plastics name, allowing customers to move from prototypes to different production volumes within one system. The acquisitions added process capability, capacity, and customer responsiveness; they did not simply add balance-sheet assets to a parent company.

Ownership Change at Universal Plastics

Universal Plastics’ 2012 transaction announcement; approximately 70 employees and $10 million of annual sales.

On the Nature of Long-term Holds: How Entrepreneurs Can Operationalize this Approach

Jeanne Odendaal, Tim Ludwig, and A. J. Wasserstein | Yale SOM | 2021. Documents the subsequent acquisitions, approximately 290 employees, and $53 million of annual revenue.

2. Building density through repeat acquisitions in one industry

The second path expands within one industry rather than across several. The owner first stabilises a company, then grows around a common customer base, regulatory setting, talent pool, and operating metrics. Each acquisition should make the next judgment more informed and make the product, geography, or service offering more complete. This is the practical meaning of buy-and-build: growth within one line of business.

GRCS Trust is an early example. It acquired CurrentWare, a governance, risk, and compliance (GRC) software business, and began with $30 million of committed capital reserved for subsequent acquisitions.

CASE STUDY · AN INDUSTRY PLATFORM THAT STARTED AS A SEARCH FUND

Wind River Environmental: repeat acquisitions in a service industry

David Dodson and two partners formed Wind River Environmental (WRE) through a search fund in 1999. The company serviced septic tanks, grease traps, and other non-hazardous liquid-waste systems. It first built density in New England and then carried the same acquisition and operating method into neighbouring markets. For an industry platform, an acquisition is not a one-off expansion: each new territory has to bring its local team, customer response, and field operations into the same service network.

The path was not linear. WRE accelerated acquisitions on Long Island and found that its integration pace had moved ahead of what the organisation could absorb. The team returned its attention to operations and integration. Yale SOM records that John O’Connell’s programmatic acquisition strategy ultimately reached 75 acquisitions; during his 15-year leadership, revenue and EBITDA grew at compound annual rates of about 20% and 23%, respectively. The company was sold to a private equity buyer in 2018 for roughly 13x EBITDA. The result connects industry scale, operating cadence, and an eventual exit rather than treating buy-and-build as a simple acquisition plan.

On the Nature of Programmatic Acquisition Strategies: How to Source Deals

Joseph N. Golden, A. J. Wasserstein, Mark Agnew, and Brian O’Connor | Yale SOM | 2020. Covers WRE’s search-fund origin, 75 acquisitions, revenue and EBITDA growth, and 2018 sale.

On the Nature of Programmatic Acquisition Strategies: Why Things Go Awry

Yale SOM | 2021. Reviews the integration strain during the Long Island expansion.

3. Building a parent company that supports several businesses

The third path concentrates on building a parent capable of supporting several companies. The centre does not run every business day to day. It develops shared capability in talent selection, board support, deal execution, financing, and reinvestment, while each operating business remains led by its own accountable operator. The model may begin in one industry and widen when the parent has earned the capacity to support a broader acquisition scope. The important point is not to own many unrelated sectors immediately; it is to build the parent capability gradually through the operation of real businesses.

CASE STUDY · A SEARCH-FUND MODEL INSIDE A LONG-TERM PARENT

Kingsway: turning search, acquisition, and operation into a parent-company capability

Kingsway’s parent-company capability is visible in its operating data. Its Kingsway Search Xcelerator (KSX) business completed six acquisitions in 2025. Revenue grew 59%, while adjusted EBITDA grew 41% to $9.5 million.

By year-end, Kingsway’s existing operating companies had trailing-twelve-month EBITDA of $22 million to $23 million. KSX contributed the majority of the company’s revenue and adjusted EBITDA in both the third and fourth quarters of 2025. The point of these figures is not one successful deal. They show that search, acquisition, and operating support have begun to function as a repeatable parent-company capability.

Professional Warranty Service Corporation (PWSC) was one transaction within that system. Kingsway acquired it in 2017 and sold it in 2022 for $51.2 million of base consideration. Including distributions received while it was held, the outcome was roughly 10x the original $5 million investment over about four and a half years. KSX continues to recruit early-career operators to source, acquire, and run companies. The parent provides capital, transaction, and management support while operators retain day-to-day autonomy. After PWSC was sold, the capital, deal experience, and operator-development capability remained available for the next acquisition.

Kingsway Search Xcelerator

Kingsway Corporation’s description of its search, acquisition, and operator-support model.

Kingsway Reports Fourth Quarter and Full Year 2025

Kingsway Corporation; KSX revenue, adjusted EBITDA, acquisition count, and operating-company EBITDA.

Our Companies

Kingsway Corporation; PWSC acquisition, sale, and return record.

These paths can overlap, and no entrepreneur needs to follow all of them. The practical question is which capability the business currently depends on: operating depth in one company, consolidation within an industry, or the platform capability of a parent. Organisation design should follow that answer.

From search funds to mature long-term ownership

The three paths above come from search-fund practice and its extensions. Broader long-term owners help show how the same capabilities can develop at greater scale.

Constellation Software: decentralised operations, concentrated capital allocation

Founded in 1995, Constellation Software has operated for more than 30 years and owns more than 1,000 software businesses. Its acquisition criteria focus on specialised software companies that serve a particular vertical or geography, with proprietary products and recurring revenue. These are B2B vertical-software businesses that deepen a workflow in a specific industry rather than consumer software built for everyone. Teams may have only a few employees or several hundred.

Constellation’s organisation is equally instructive. Acquired businesses retain operating autonomy, while capital allocation, talent development, and acquisition methods are held on a common platform. Each business remains responsible for its own customers, products, and profit and loss. The parent does not try to merge more than 1,000 companies into one organisation. It allows more specialised businesses to continue operating in their original markets. Its $700 million acquisition of Optimal Blue in 2023 shows that the system can also execute larger transactions. In May 2025, Cantech Letter reported First Avenue Investment Counsel CIO Brian Madden’s estimate that Constellation’s total shareholder return since its 2006 IPO was roughly 36,000%. That is a historical return as of the report date, not an expectation of future performance. This long-running model places acquisition criteria, operating autonomy, and capital allocation within one system rather than treating them as disconnected choices.

Danaher: making post-acquisition operating improvement routine

Danaher follows a different path, with more emphasis on the operating system. It has acquired hundreds of businesses since 1984 and discloses that more than half of its revenue now comes from acquisitions completed in the past decade. In 2025, revenue was approximately $25 billion; as of August 5, 2026, market capitalisation was about $140 billion. Scale does not prove that every acquisition succeeded. It does show that the acquisition-and-operation method has been tested across multiple cycles.

Danaher’s distinguishing feature is the way it turns post-acquisition improvement into a repeatable daily system. The Danaher Business System (DBS), developed in 1988, covers problem solving, continuous improvement, talent development, and customer response. Acquired businesses retain their operating specialisation, while DBS provides common tools, processes, and rhythms. Danaher now has more than 15 science and technology businesses and approximately 60,000 employees. It is not compelled to trade on a fixed timetable; it allocates capital around attractive markets, differentiated technology, and long-term value creation. For acquisition entrepreneurs, the lesson is practical: before adding transactions, develop an operating system that can make each acquired business better. Danaher’s acquisition materials and Patrick O’Shaughnessy’s conversation with co-founder Mitch Rales provide further detail.

Chenmark: keeping cash, talent, and ownership inside one company

In a 2017 account of its early operating practice, Chenmark wrote that it had acquired six operating businesses in its first 24 months. Each had at least ten years of revenue and profitability; the original management team stayed, or a new CEO took over. This is one of the difficult parts of a small-business HoldCo: not simply acquiring companies, but giving several small businesses better access to capital and talent while preserving operating responsibility.

Chenmark does not place its businesses in a fund that expects an exit. It uses a C-corporation, a U.S. corporate structure that holds the businesses together over the long term. Cash from a business with limited reinvestment opportunity can move to another business or the next acquisition. Benefits, insurance, financing, and information security can be managed at group level. Operating incentives remain connected to each company’s cash flow, while equity participation sits at the HoldCo level. The model is not a traditional search fund, but it gives a concrete answer to a common small-business question: how can an owner preserve operating accountability while allowing cash, talent, and ownership to compound together? Chenmark’s operating account and its explanation of the C-corp holding structure provide more detail.

These mature references sit outside the search-fund model, but they put the three earlier paths into proportion. Constellation shows how small, decentralised vertical-software companies can retain autonomy under long-term capital. Danaher shows how a management system can support repeat acquisitions. Chenmark returns the question to smaller businesses, showing how ownership, talent, and cash flow can begin to reinforce one another at an earlier stage.

Writing the long term into capital and governance

Long-term capital gives an operator more time to make decisions, while bringing several questions forward. How far should the initial commitment extend? Who decides on additional capital? What authority does the board have over acquisitions and leverage? How should cash flow be divided between distributions and reinvestment? When should a founder move from CEO work to capital allocation? How will investors obtain liquidity? These are decisions that need workable answers while the business is still small.

For that reason, an LDE requires one additional level of responsibility relative to a traditional, single-acquisition search fund. Before the first transaction, the owners need to make provision for the capital, governance, and talent implications of a second and third transaction.

Berkshire Hathaway: operating autonomy and redeployment of cash

Berkshire Hathaway offers a useful reference for how long-term capital can enter daily business life. Operating managers are responsible for customers, teams, and day-to-day decisions within clear boundaries. Cash generated by the businesses returns to headquarters, where it can be compared across several uses: reinvestment in the existing business, acquisition of another company, public securities, or temporary retention. Berkshire’s strength lies in repeatedly turning operating cash flow into a new capital-allocation choice. Its annual letters offer a direct record of that discipline.

CASE STUDY · HOW INVESTOR DURATION CHANGES EXIT PRESSURE

Permanent Equity: a 30-year fund gives operations more time

Permanent Equity writes time into its capital contract. It raises 30-year funds, and designs an initial investment to cover approximately 27 years of an operator’s tenure, potentially longer. Its reference to “15 years” means that it has spent 15 years telling business owners that it has no intention to sell; it is not the fund term, nor is the structure an evergreen vehicle with no defined life.

Investors accept that arrangement through a shared view of return sources and incentives, rather than a simple personal bet on the manager. They assess whether businesses can generate free cash flow, distribute part of it to investors, and retain the appropriate portion for reinvestment. Permanent Equity does not disclose a directly comparable net fund IRR. Its 2023 annual letter reported that 16 companies in its system had distributed more than $35 million to investors without an investment being sold, while continuing to reinvest millions of dollars. For limited partners, a longer duration can mean fewer decisions driven by fund expiry or pressure to deploy capital. For operators, it can create room to operate without managing to a pre-set sale window. A sale can still occur, but only when Permanent Equity is no longer the right owner for the business.

Investments We Make

Permanent Equity; 30-year funds and an initial investment horizon of approximately 27 years.

How to Invest with a Permanent Approach

Permanent Equity; underwriting based on free cash flow and reinvestment rather than a pre-set exit valuation.

2023 Annual Letter

Permanent Equity; 16 companies distributed more than $35 million to investors. The firm does not disclose a net fund IRR.

2025 Annual Letter

Permanent Equity; the boundary between an intention not to sell and a considered sale decision.

The cost of repeated transactions: tax and compounding

Permanent Equity shows how capital duration can reduce exit pressure. Fewer transactions can also produce a more direct financial result: more cash remains in the business to compound. Bain & Company sets out the arithmetic in Spotlight on Long-Hold Funds. In a hypothetical comparison with equivalent operating performance, it contrasts holding one company for 24 years with holding four companies consecutively. The first arrangement incurs fewer transaction costs. With the sale occurring later, capital-gains tax is realised later as well, allowing capital that would otherwise be paid in tax to continue compounding inside the business. The model’s after-tax return is nearly double that of the serial-ownership case. This is not a return promise for every company. It is a reminder that transaction frequency itself changes the path of tax and compounding.

Selling remains an operating judgment

Long-term ownership gives owners time to make the judgment. Continuing to operate, reinvesting, and selling should be considered within the same question: is the business still best developed by the current team, or could a larger system provide customers, employees, and the business with better conditions for the next stage?

CASE STUDY · A DISTRESSED ASSET AND INDUSTRY CONSOLIDATION

Russell Poore: from two regional businesses to industry consolidation

Russell Poore originally planned to raise a search fund but ultimately pursued a self-funded search. In 1998, he raised capital from a private equity firm and simultaneously acquired two document-destruction businesses, in Salt Lake City and Phoenix, to create US Shred. The Salt Lake City business had entered Chapter 11 shortly before closing. Poore invested his own money and substantial time in restoring its operations, then asked Tim Ranzetta to lead the local team while he continued to run Phoenix.

After both regional businesses resumed growth, US Shred won a major US Bank contract that attracted the attention of its largest competitor, ShredFast. The businesses merged in 1999. The combined company was then sold in 2001 to the U.S. subsidiary of Omega, a large Australian holding company. The case belongs in a discussion of sale because it traces a complete operating path: stabilise a difficult asset, build the regional businesses, and sell when industry consolidation offers a better opportunity.

Russell Poore

Joel Peterson and Alicia Seiger | Stanford Graduate School of Business | 2003. Covers the two US Shred acquisitions, Chapter 11 turnaround, US Bank contract, ShredFast merger, and sale.

Conclusion: post-acquisition operation is the work that matters

A search fund does more than identify and acquire a company. From search-period investors, transaction structure, and board design through the entrepreneur’s post-closing operating responsibility, it is an entrepreneurial journey that runs across acquisition and operation. LTH, HoldCo, and LDE take the discussion further: how should an owner operate, organise, and allocate capital after closing?

At the outset, the priority is still to take over the first company carefully and serve its customers and team well. Once there is stable cash flow and a functioning operating system, the owner can decide whether to make add-ons around one business, acquire repeatedly within an industry, or gradually build a parent capable of supporting several companies.

Long-term ownership is not a pre-commitment to never sell, nor a race to assemble many businesses. At each stage, the operator has to answer the same question: will this capital decision, acquisition, or organisational arrangement make the current business and the next stage of operation better? The ability to keep making that judgment is what turns a long hold into an operating capability rather than a holding period.

Sources

• GRCS Trust, GRCS Trust Launches with US$30M of Initial Committed Capital, PR Newswire.
• Constellation Software, Q4 2025 Shareholder Report; Cantech Letter, Constellation Software Has Delivered a 36,000% Return Since Its IPO, 2025.
• Danaher, 2025 Annual Report and Proxy.
• Chenmark, Context Is King and That C-Corp Life.
• Jan Simon, translated by Leo Wang, Search Funds and Entrepreneurial Acquisitions: The Roadmap for Buying a Business and Leading it to the Next Level, Shanghai University of Finance and Economics Press, 2025, ISBN 978-7-5642-4538-2.