Anatomy of a Search: 40 Interns, 25 Months, 20 Offers

hen Jessica Markowitz learned about the traditional search fund model for acquiring a business, she saw it as an ideal entry point into entrepreneurship. And after years of trying to dream up the perfect business, she liked that acquisition wouldn’t require coming up with — and validating — a new business idea.

A couple years after Jessica got her MBA from University of Chicago’s Booth School of Business, she was perusing LinkedIn and noticed a fellow Booth grad was already a CEO. She contacted him to ask what he was up to, and he explained that he’d bought a business through a search fund.

“It just immediately clicked: this is what I want to do, and I need to figure out how to get there,” she says.

“When I learned about the search fund, it kind of married those pieces: problem solving, leading teams, value creation, with the long term perspective, really being held accountable for every decision made, and being part of the value created.”

Together with Trista Engel, she started a search fund journey that would eventually culminate in the 2018 acquisition of Paragon Legal, a legal services firm providing interim in-house counsel to corporate legal departments.

The search took 25 months (not atypical for traditional search funds), and Jessica and Trista relied heavily on about 40 different interns to help them screen and reach out to companies along the way.

Jessica estimates that their search team reached out to about 9,000 companies and 8,000 brokers. That resulted in 500 phone calls and 60 visits to businesses. They ultimately made 20 actual offers — “half from proprietary and half from our intermediaries” — before acquiring Paragon.

There’s a lot to learn from Jessica’s acquisition experience, including the machine she and her business partner set up to power their search.

In this episode of Acquiring Minds, she explains her criteria for acquiring a business and why a search fund made sense, what attracted them to Paragon, and why running a legal services business without a law degree hasn’t been an issue.

Check out:

‍✳️ About Jessica Markowitz

✳️ Top takeaways from the episode

✳️ Episode highlights with timestamps

✳️ Links & mentions

Acquisition Entrepreneur: Jessica Markowitz

‍💵 What she acquired: When Jessica and her business partner decided to acquire a business through a traditional search fund, they wanted a company with margins over 15% and at least $2 million in EBITDA. More than two years later, they found what they were looking for in Paragon Legal. They acquired the business in August 2018.

‍💡 Key quote: “The funny thing about traditional searches, and I think it's changing now, but [from our investors] there's a little bit of, go do it, see what you can do, and not a lot of guidance. Almost a little bit like a test. So we built the playbook. We built the intern onboarding. We built it all. I think a lot of search funds that are successful end up with something similar. But it is a lot of reinventing the wheel every time you start. So those first six months, really, we were testing everything out.”

‍👋 Where to find her: LinkedIn

Acquisition Tips From the Episode

‍Top takeaways from this conversation

‍📈 Acquisition opportunities can come from the most unexpected places.

Jessica and her business partner were interested in legal services and were connected to a competitor of Paragon’s when someone mentioned the company. They researched Paragon and learned that it had made the Inc. 5000 list several times and that the owner had left the Bay Area and moved to Taiwan and was therefore operating it from another continent.

That detail made them think the owner might be open to an offer.

They reached out. Though the owner had no interest in selling at that point, they had a good conversation and stayed in touch. A year later, the owner was ready to sell and she wanted to sell the business to Jessica and Trista.

“Of the 10 offers that we put in on the proprietary side, three of them came from referrals, through people we had talked to that weren't interested, but we stayed connected, and they connected us to someone in the industry that they're friends with that wanted to sell. So, you just never know,” Jessica says.

💍 Acquiring a business with a partner? Screen the partnership as rigorously as you screen the deal.

‍When acquiring a business with a partner, you have to be prepared for your lives to revolve around each other, but not many people take the time to consider what will happen if it all goes wrong.

During business school, Jessica and Trista had often talked about doing something together and when they learned about search funds, they both realized it was something they wanted to do. But when they started talking about running a business together, they wanted to make sure they’d be good business partners and still remain friends. They met almost every weekend for six months to explore whether acquiring a business together was the right move for both of them.

“We read partnership books, wrote a partnership charter, did scenario planning, we shared work reviews, we did working style exercises, we put in a lot of work to figure out if we were going to remain friends after we embarked on this journey,” Jessica says. “We decided we both want to do this. We both want to work with one another. We're going to be a better team together.”

🤝 Foster a strong relationship with the seller to ensure a successful acquisition.

Neither Jessica nor Trista are lawyers, and there was some concern about how this could impact business in the early days.

One thing that helped them survive the transition without losing a single client or attorney was having a great relationship with the seller, whom they trusted and admired. She supported them during a three-month transition period and stayed on as an investor and board advisor.

“Clients and attorneys really trusted her. We got the benefit of the doubt for that from a lot of people,” Jessica says.

Episode Highlights

‍Inflection points from the show

‍[3:05] The path to search: Jessica met her future business partner, Trista, at University of Chicago’s Booth. But it wasn’t until after business school that she learned about a search fund as a path to acquisition.

[5:27] Rigorous partnership analysis: Jessica and Trista didn’t want to jeopardize their friendship and wanted to be sure that partnering together was a good decision. They spent six months assessing if they’d be good business partners.

Jessica Markowitz of Paragon Legal — Jessica Markowitz

[8:53] Search fund appeal: Post b-school, Jessica loved her job, but always felt a pull towards entrepreneurship. When she first learned about a search fund, it had immediate appeal.

[10:38] Traditional search vs. self-funded: Jessica and her business partner wanted to target a bigger business, which is part of why it made sense to go the traditional search route. She talks about why that path was so appealing to them.

[12:37] Target criteria: Jessica lists the attributes they sought in a business, including a B2B service in a fast-growing industry with more than $2 million EBITDA and 15% margins.

[13:56] Searching for 2+ years: Jessica outlines the search process, which lasted 25 months and leaned on “an army of interns.” Over the course of the search, Jessica estimates they reached out to 9,000 companies, had about 500 calls, and ultimately made 20 offers.

[17:22] Big vs. small: Jessica talks about how the search process changes depending on the size of the business and other criteria.

[20:07] Intern tasks: Jessica breaks down how they worked with interns throughout the search process. Jessica and Trista built their search operation playbook from scratch, fine tuning processes as they went.

[25:22] Finding Paragon: Legal services was an industry they were interested in, which led Jessica and her partner to Paragon (which only operated in the Bay Area). They also learned that the owner had moved to Taiwan and thought that fact might indicate openness to an acquisition. But when they reached out to the owner, she had no interest in selling.

[27:40] Strong connections: Despite the owner’s lack of interest in being acquired, Jessica and Trista stayed in touch with her. A year later when she decided she did want to sell, they were the only ones she wanted to sell to.

[31:46] Getting into legal services without legal experience: Jessica explains how having no legal experience wasn’t a hindrance, and how the skillsets she and her partner had were the right ones to grow the business.

[38:45] Acquiring brand value: It would be difficult to build a similar company today compared to when Paragon started 15 years ago. Jessica talks about how the landscape has changed in that time, and how important the “prestige factor” is in attracting the best talent and the best clients.

[40:54] Fast change in a slow industry: The legal services industry is changing faster than ever due to an increased focus on budgets in legal departments — especially since COVID.

[42:24] Client acquisition increase: Changes in legal services have helped Paragon’s growth. The company has already brought on 40 new clients this year compared with around 27 total last year.

[45:15] Acquisition fears: Jessica worried the business might be too dependent on the owner and with a small corporate management team, there was also concern that if another person left the company everything would fall apart. While a key person did leave soon after the acquisition, the business was able to endure without much disruption.