Q&A with Shamus Hines
Founder and Managing Partner, Silver Field Capital
Management consulting, brand management, and i-banking tend to be the popular career paths for many MBA students at top business schools. Yet, for those that would rather get into business for themselves, entrepreneurship through acquisition (ETA) is an alternative career option that requires individuals to lean on their business school education and network as well as their professional business experience and entrepreneurial mindset to be successful. Requiring several of the same risks and skillsets as those looking to start a company from scratch, ETA is not for the faint of heart. The Polsky Center for Entrepreneurship and Innovation recently caught up with Chicago Booth graduate, Shamus Hines, MBA ’14, founder of Silver Field Capital, to discuss what inspired him to choose this unconventional career path of ETA.
Polsky Center: When did you first hear about entrepreneurship through acquisition and how did you know this career path might be a good fit for you?
Hines: One of the writing samples I submitted while applying to Booth was about where I saw myself in 10 years. I wrote about how I wanted to be running a private equity fund called “Build America,” and I wanted to buy and invest in small businesses. That had been a dream of mine ever since I could remember. Growing up with a father that was a business broker introduced me to the middle market at a very early age. I was always fascinated by small businesses, how they were run, and what they were creating. So I think I came to Booth looking for ETA, even though I had no idea what it was when I was applying.
The first time I actually came across a search fund was in a business case I read during the class, “Entrepreneurial Finance and Private Equity.” It was on Kirk Riedinger and Jamie Turner (Jamie, coincidentally is now an investor in my fund), two students from Harvard who bought a vocational school using the search fund model in the 80s.
After we read the case, we discussed it in class, and I will never forget the look on everyone else’s faces. Everyone was wide-eyed and completely puzzled by the idea. My immediate reaction was that search funds were amazing — these guys sounded absolutely crazy, and I wanted to be a part of it. But, I still struggled with the concept of raising a fund like they did. I didn’t go to Harvard, and I didn’t have big money connections. So, I put the whole thing down for a bit. It wasn’t until a few quarters later when I took “Merger & Acquisition Strategy” and heard JD Norman’s story that I started wrapping my mind around the real possibility that I could be a searcher.
JD Norman bought an auto parts company that brought in about a couple million in revenue. He sourced the deal from his accountant and paid for the deal entirely with debt, much of it seller financed. Since then, he has grown the company to produce hundreds of millions in sales. All of which is incredible, but what really caught my attention was that JD’s background was very similar to mine. He had worked in finance for about 10 years as a financial advisor; he had a wife and several kids; and he was in the part-time MBA program at Booth. It made the whole thing feel doable to me, and I decided to start raising a fund.
I began to read anything I could get my hands on that had anything to do with search funds. But, the further I got into the material, the more my initial worries seemed to be supported: search funds were amazing, but in order to raise a search fund, you needed to go to an Ivy League School with a background in consulting, investment banking, or private equity, and you needed contacts with money. I felt pretty discouraged because I didn’t have any of those qualities, but I pressed on. I still felt confident that this was what I was meant to do.
At that point, I decided to learn all I could about what search fund investors want to see in their investments, hoping that I could find a less conventional way in through sheer perseverance and knowledge. I actually made an independent study out of it with Steve Morrissette, an adjunct associate professor at Booth. I interviewed 30–40 investors/entrepreneurs and learned everything they thought about investing in search funds. Eventually, I turned my research into a paper titled “An Investor’s Guide to Search Funds” and we got it published in the Journal of Private Equity during the summer of 2015. Those connections that I made during my research and after the paper was published became integral to eventually finding a full team of investors. Ultimately, my goal was to see if there was anything I could do to find a different way into this world, and I’m happy to say that I did.
Polsky Center: Are you hoping to acquire a company in a specific industry? If so, what and why?
Hines: I came into this with a real passion for leading and motivating people. And there are so many companies out there that fit that would allow me to do that, so I really do believe I would be happy running any of them. Whether it’s a window company or the next Asurian, I think I would enjoy the work either way.
However, I’ve learned that time is your greatest asset as a searcher. So, I am planning on focusing on select industries. That focus helps to build credibility with business owners as you learn more about the industry with each conversation. Focus while searching also helps others to help you. For example, if you tell a friend, an accountant, or a lawyer that you are interested in everything under the sun and ask for a referral, it is way too broad for them to offer any real aid. Learning how to give people more manageable pieces of information is a huge time saver.
I do plan to leverage my background in financial services as much as possible in the beginning. I know the industry well and have good contacts. I will be looking for RIAs and companies that provide services to RIAs to start. It’s a growing and profitable industry, with an aging workforce and lots of recurring revenue — all great things for a search fund.
Polsky Center: What has been the most challenging part of your journey as a searcher so far?
Hines: The most challenging part of this process so far has been getting around some initial insecurity I had early on about fundraising and my ability to do the search and operate the company alone. I spent a lot of time early on looking for a partner because I thought it would help me raise money. That was totally wrong. I learned it’s more important to be looking for a partner that matches your skillset and personality. It isn’t something to manufacture. But I had to learn that the hard way.
Polsky Center: What has been the most rewarding moment as a searcher so far?
Hines: Week one on the search was an absolute honeymoon. I experienced a huge rush of excitement leaving behind my corporate job, and I felt like the world was mine.
Polsky Center: What advice do you have for other searchers or potential searchers?
Hines: Spend time learning about the alternative structures for ETA. Not everyone is a fit for each model, so make sure you understand your limitations and the limitations of each model. Don’t worry about fundraising; there is a lot of money out there for good investments. Believe in your ability to do this. The education you receive from a top tier institution like Booth is incredible and does help prepare you for success. Be open to having conversations about search funds early on in your discovery process. Don’t be afraid to cold call an investor or two to pick their brains on what this is all about. Realize that investors who are unfamiliar with ETA might not be so easy to convince. And most importantly, make sure you are 100% committed to doing this before raising your fund.
Shamus Hines is founder and managing partner of Silver Field Capital, a team of entrepreneurs with success investing in, operating, and growing private companies. Shamus has over a decade of experience in financial services, investment management, and M&A advisory. His responsibilities have included strong focuses on business development, entrepreneurship, management, negotiations and sales. Entrepreneurship is deeply rooted in the Hines family. His great grandfather and grandfather, James Hines II and James Hines III, ran several successful retail operations in the Grand Rapids, MI area including Hines & Son’s Appliances. Most notably, his father, Jim Hines IV, has over 30 years of experience in M&A advisory for middle market companies through his advisory business, Inxcorp. Jim Hines IV has also launched over five start-ups from a bakery to most recently a bio-degradable plastics distributor, H3 Sustainability. Shamus earned his B.A. in Economics from the University of Michigan, his MBA with honors from the University of Chicago Booth School of Business, and is a CFA charter holder. Shamus is deeply passionate about giving back and serving his community. He regularly serves as a lector and Eucharistic Minister at Old St. Patrick’s Church in Chicago. He is also heavily involved with the Big Shoulders Fund as a Chairmen’s Advisory Council member and stock market teacher for St. Ethelreda’s 8th grade class.