Fueled by Private Capital: How ETA is taking off

The Rise of Private Capital and ETA (Entreprenuership through Acquisition)

The private capital market has surged over the last decade, with global assets under management (AUM) almost tripling from $9.7 trillion in 2012 to $24.4 trillion in 2024 (Ernst & Young). This success comes as a surprise to many, given the observed downward trend in private equity deal volume and values in the past two years (PwC). A post-pandemic era rife with rising interest rates and inflation, among other challenges, had slowed dealmaking and complicated valuation. However, a recent turnaround has proved the market’s ability to withstand even this economic uncertainty. In 2024, the global private equity deal value rose 14% to $2 trillion, marking the first year of growth since 2021 (McKinsey & Company). 

With the buildup of dry powder in recent years, investors are eager for new strategies to deploy capital. One such strategy, Entrepreneurship Through Acquisition (ETA), has been gaining traction—among both MBA students and the broader market (Darden School of Business). The 2024 Stanford Search Fund Study reported a historic 94 new search funds for business acquisition purposes formed in the past year (Stanford Graduate School of Business).

What’s Propelling ETA?

As previously noted, private capital will likely naturally drive ETA. Excluding hedge funds and family office capital, there is about $3.2 trillion in dry powder—capital ready to be invested (Ernst & Young). With more accessible funds, investors such as private equity firms and venture capitalists have greater flexibility to support acquisitions. Additionally, a stronger private capital market attracts more buyers, increasing liquidity and encouraging higher valuations. Entrepreneurs have access to a wider array of exit strategies, such as selling to private equity firms or market competitors.

Demographic shifts are also creating favorable circumstances for ETA. According to the U.S. Census Bureau’s 2019 Annual Business Survey, over 50% of American business owners were 55 or older (U.S. Census Bureau). With all Baby Boomers reaching retirement age by 2030, a surplus of business owners will soon be exploring succession plans. While a majority of Baby Boomer businesses are profitable, their Millennial and Gen Z family members tend to be uninterested in inheriting. Younger generations have a greater number of career opportunities available to them and often pursue jobs in technology, healthcare, media, and operations (Forbes). This leaves a wave of Baby Boomers considering acquisition as a possible exit strategy; given their strong motivation to cash out, this seller’s market is likely to offer more favorable terms for buyers.

Recognizing these trends, MBA programs and business networks have begun to highlight ETA as a career path. The Yale School of Management has offered an Entrepreneurship Through Acquisition class for the past few years, while Harvard Business School organized its first gathering of ETA educators in 2022. More recently, the University of Virginia’s Darden School of Business launched an ETA club in 2024 and plans to host an annual Southeast Entrepreneurship Through Acquisition Conference in fall of 2025 (Darden School of Business). The greater emphasis on ETA in entrepreneurial circles will drive further interest in the field.

Is the private market over-hyped?

While it is evident that ETA has great potential, current challenges suggest it may be overhyped. For one, the private capital market isn’t entirely thriving. Following the swell in dealmaking in 2021-2022, a backlog of unsold companies and inflated valuations have made exits more difficult (McKinsey & Company). With tighter exit conditions, ETA deals may become less appealing to investors, as buyers are more uncertain of profitable exits.

Recent economic challenges in the U.S. are also likely to hinder ETA development. Escalating trade tensions and rising tariffs have contributed to global stock market declines, raising concerns of a potential recession (The Guardian). This unpredictability has triggered sell-offs and further caution among investors, which could lead to more difficulty for ETA searchers in raising funds and closing deals. In addition, despite the Federal Reserve’s attempts to lower interest rates in late 2024, higher-rate and tighter lending environments remain a concern for private capital, as noted by McKinsey & Company.

ETA vs. Start-up Entrepreneurship

Despite the current economic climate, ETA remains more promising than the startup route. Acquiring a profitable and operational business significantly reduces the risks of launching an entirely new company, providing an immediate revenue stream, loyal customer base, and proven business model. The influx of Baby Boomer-owned businesses ready for acquisition provides a unique opportunity for entrepreneurs to take over well-established companies.

However, it is important to note that ETA requires a unique set of skills in evaluating and operating an acquired business. More startup founders should certainly consider entering this space, but not before exploring MBA programs or other forms of education/communities to learn specific ETA strategies for success.

Shout out to Georgia Tech!

Quite a few of Georgia Tech’s initiatives directly assist in developing local startups and companies, creating opportunities for private capital investment and potential ETA acquisitions.

• Advanced Technology Development Center (ATDC): A cooperative model developed by Georgia Tech and corporate sponsors, ATDC provides coaching, a curriculum, and networking opportunities for tech startups.

• Georgia Artificial Intelligence in Manufacturing (AIM): A federally funded program aiding small and mid-sized manufacturing companies in integrating AI into their work..

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