Lessons from Search Fund Coalition's 'NYC ETA Deal Team Day'
I spent last week in NYC with 150+ searchers, operators, and investors. Here’s what’s really moving the needle in SMB acquisitions right now.
Good afternoon, NextGen Generalists!
I spent last week at ETA Deal Team Day in NYC, where 150+ searchers, capital providers, and small business operators gathered to pull back the curtain on what’s working—and what’s getting in the way—in the world of small business M&A.
This wasn’t a highlight reel. It was honest, gritty, and incredibly practical. Here’s what I learned from the front lines of lower-middle market deal teams.
Diligence is a Battlefield
Financial diligence can make or break your deal. Panelists urged searchers to extend exclusivity to 90 days in LOIs and watch out for tricky red flags: unfinished work-in-progress, deferred revenue, and COVID ERC credits that might come back to haunt you.
One cautionary tale? A P&L showing $200k in revenue but no COGS—a classic sign of financial window dressing that could sink your deal.
💡 Pro tip: Working capital isn’t a one-time number—negotiate pre-LOI and bake it in. Post-close liquidity is king.
Legal Minefields (and How to Avoid Them)
LOI best practices? Avoid deposits—they’re hostages, not down payments! Panelists stressed that S-Corp deals can be limiting, and generic broker templates often miss critical details (like asset sales vs. stock sales).
💡 IRS caution: The IRS treats certain preferred equity structures like debt—watch your structuring to keep SBA lenders happy.
Capital Stacks & The New SBA SOPs
The Debt & Equity panel was all about creative dealmaking in the face of new SBA SOP rules. Lenders flagged that partial ownership shifts must be stock sales (no asset workarounds), and post-close liquidity is non-negotiable for long-term success.
✅ Equity waterfalls: 8–12% preferred return, with equity splits only after 19% step up.
✅ One-liner wisdom: “Use a good loan broker—bad ones can kill deals.”
✅ Wish I’d known: Double your working capital ask—no one tells you this upfront!
Operational Risk: The Hidden Killers
The Risk & Ops panel reminded us: “Everything gets more expensive after close.”
✅ Sales tax & registrations—confirm them early.
✅ Subcontractor risk—don’t assume coverage for third-party vehicles or equipment.
✅ Customer contracts—non-assignable contracts can become a real problem in asset deals.
From Searcher to Operator: The Real Game Begins
Operators shared what happens after the deal closes—and it’s not in the Excel model. They emphasized the need for:
🔹 A mentor or peer group
🔹 A solid operating system (EOS is popular!)
🔹 A 90-day post-close plan that covers rebranding, customer outreach, and culture-building.
💡 One operator’s candid take? “I wish someone told me to double my working capital ask and start my marketing plan before closing.”
The remainder of the 2025 ETA Calendar
Missed the NYC ETA Deal Team Day? Here are a handful of the ETA and lower-middle market private equity conferences you can attend:
September
September 5–6 – Southeast ETA Conference
Charlottesville, VA
Hosted by UVA Darden School of BusinessRegister HERE
October
October 29 – Richard L. Osborne ETA Symposium
Cleaveland, OH
Hosted by Case Western Reserve UniversityRegister HERE
November
November 4 - 6 – Main Street Summit
Columbia, MORegister HERE
November 19 – Booth-Kellogg ETA Conference
Chicago, IL
Hosted by Chicago Booth and Northwestern KelloggRegister HERE
Want to share your own ETA conference lessons? Or curious about how to apply these insights to your next deal? Shoot me a message at stanley@portageep.com — I’d love to hear how you’re navigating the space!