The Search Fund Journey | Mark Sinatra, Jim Vesterman & Matthew Zucker
Coming from multiple different professional backgrounds prior to Wharton, alumni Mark Sinatra, Jim Vesterman & Matthew Zucker came back to share ups and downs in their search fund journey with the Wharton ETA Club.
Mark Sinatra is currently an active search fund investor and advisor based in San Diego. Shortly after graduating Wharton’s MBA program in 2006, Mark started a search fund with the goal of acquiring, growing, and leading a lower-middle market company. Two years later in July 2008, Mark acquired an HR outsourcing company, Staff One HR, through the search fund model. Mark led Staff One HR through a period of substantial growth highlighted by achieving the Inc. 5000 list four years in a row and culminating in Staff One HR’s sale to its largest privately-held competitor, Oasis Outsourcing, in December 2017. Mark assumed an executive role with Oasis Outsourcing until its sale to Paychex in December 2018. Prior to Wharton, Mark worked as a consultant and investment banker. Mark is an MBA graduate of The Wharton School, and holds a BA in Economics from Fordham University. He is a Certified Predictive Index analyst and graduate of the Stagen Integral Leadership Academy.
Jim Vesterman is the Chief Executive Officer of Raptor Technologies, the nation’s leading provider of integrated safety technologies to K-12 schools. After acquiring Raptor in April 2012, Jim has grown the company from 7,000 K-12 customers to over 34,000. Prior to Raptor, Jim was the founder and Managing Director of Liberty Place Capital, which was a private equity Search Fund used to find, acquire, and manage a single operating entity. Jim began his career at Monitor Group, a global strategy consulting firm serving Fortune 500 firms, and Monitor Clipper Partners, a $650 million middle-market private equity fund. Jim has served in senior operating positions in firms ranging from technology start-ups to Fortune 500 operating companies. Jim also served in the United States Marine Corps in the Special Operations forces and was awarded the Combat Action Ribbon and the Navy and Marine Corps Achievement medal for his service in Iraq. Jim earned his bachelor’s degree from Amherst College and his M.B.A. from the Wharton School.
Matthew Zucker is currently a Managing Director of ETA Equity. Matt’s prior experience includes four years serving as Chief Investment Officer of a single-family office deploying capital across asset classes, with a particular focus on private equity and search fund investing. His investing experience also includes the founding and management of The Zucker Group, a search fund sourcing micro-cap M&A opportunities in North America. Prior to his investing career, he spent three years as a strategy consultant at The Monitor Group and KPMG and four years as a computer programmer with Southwest Airlines. He earned his MBA from The Wharton School at The University of Pennsylvania and his BBA in Management Information Systems from The University of Texas at Austin.
What is the moment you committed to the search path?
Matthew Zucker [MZ]:
I started to kind of immerse myself in a lot of different classes and activities of Wharton. It really dawned on me quite quickly that my career goal was to run a business and the search fund model for me was really the most direct path of entrepreneurship. I spent a good part of my second year reading case studies, talking to folks who were successful and folks who were not successful, doing my diligence.
Searching with someone else as a team as opposed to searching alone?
Jim Vesterman [JV]:
Once you’re out [of business school] the probability that you have this exact same timing [about to embark on something new and don’t have a job] with someone is a lot lower. Also, back in the day, you got 30 percent of the company whether you were a solo or in a pair so that was another reason [to go solo].
Mark Sinatra [MS]:
We spent a number of months talking about forming a relationship and using people in common. The main reason was that when you think about the search you need two real skillsets. On the search phase, you need deal sourcing, deal experience, transactions experience and then when buying a company [you need] operational expertise. The skillsets were highly complementary.
Many searchers initially rely heavily on broker deals just to get things to come across the desk and then over time some of the more proprietary or opportunistic things tend to dominate. Was that the pattern for you all as well?
[JV]:
My philosophy was there are two types of brokers there’s high-quality brokers and mediocre brokers. With the high-quality brokers, …, they’re high quality because they run a proper process and then you overpay. I looked at those deals because I could learn and you could get a meeting with the CEO and say ‘Who were your best competitors’ and then you would go try to get the competitors but you would never win those deals.
Were there any hard times during the search?
[JV]:
Lots of hard times. Being especially for a solo searcher it’s an emotional roller coaster. One thing we didn’t touch on in solo versus nonsolo search is the problem, the main problem with being a solo searcher is during the search period you only have so much bandwidth and for you to dig deep on a deal you end up not dedicating time to pipeline building. It’s very hard to not let your pipeline dry up. Whereas if you’re a dual pair you can have someone working on the pipeline while you’re digging deep.
How to form a board for your company?
[JV]:
You want to be taking dollars that are people that you want to have on your board… If you find somebody with particular industry expertise that you really get to know well, you could add a lot of value. Even they’re not in your investor base. Bring them on board. Get them committed and then go carve out space for them from your existing investors. From an investor's perspective, yes it might be less money that gets put into the deal but the value that that person brings could potentially be astronomical.
The Wharton ETA Club wants to again express its gratitude to Wharton alumni Mark Sinatra, Jim Vesterman & Matthew Zucker for sharing their fantastic stories.
