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The Hadley family has a long tradition of entrepreneurship. Can you provide a brief overview of the group’s history and the reason for establishing Hadley Family Office in 2018?
Our family’s entrepreneurial journey began in 1964 when my grandfather, Barry Hadley, started Mid-Canadian Investment Castings in his garage in Georgetown, Ontario. Over the years, the Hadley family expanded its operations through strategic acquisitions of small and medium enterprises (SMEs) across many different industries. Historically, our main areas of expertise have been in aerospace manufacturing and robotics. In 2018, we established Hadley Family Office (HFO) to professionalize our family’s investments and to create a clear, long-term strategic vision. The goal was to transition from managing individual businesses to building a structured family office that could leverage our operational expertise to support and invest in high-potential SMEs, particularly through Entrepreneurship Through Acquisition (ETA).
Hadley Family Capital is the direct investment arm dedicated to supporting ETA. Why have you concentrated your investments in the SF segment, and what is your investment philosophy?
We’ve concentrated our investments in the Search Fund (SF) segment because it aligns perfectly with our family’s long history of small business operations. The SF model allows us to partner with driven entrepreneurs and apply our expertise to help them succeed in acquiring and growing SMEs. We view our searchers as partners and so we spend a lot of time getting to know searchers up front before we consider backing their search. We want to know that there is a mutual fit and that we will enjoy working with each other over what will hopefully be a 10+ year journey together.
Our investment philosophy is to be active and hands-on investors, focusing on helping searchers where we can add the most value all across their search-operate-exit cycle. There is really no typical area where we find ourselves helping searchers most. We pull from every corner of the Hadley resources to get searchers what they need, whether that’s simply sitting down with the searcher and negotiating an LOI, or working with managers from our family operating companies to guide the searcher in building out a sales team in their new company.
We typically invest $500K to $3M per deal, focusing on traditional SFs, self-funded SFs, and gap-equity opportunities primarily in the US and Canada, with selective investments in the UK and Australia. While we are industry-agnostic, we prioritize businesses which align best with the traditional search criteria and lend themselves to being operated by a first-time CEO- characteristics like mission criticality, a stable recurring revenue base, and simple business operations among others.
Can you share any recent success stories or key learnings from your investments?
Since we started, Hadley Family Capital has backed 17 search entrepreneurs, leading to 8 completed acquisitions. A standout success story is our investment in Aerosweep, a company in Australia specializing in aviation foreign object debris management. By leveraging our operational expertise and utilizing an airport in our portfolio, we helped Aerosweep train its sales force, get an inside view to the customer, and begin to grow its presence in the North American market. This experience reinforced the importance of being an active, value-added investor and highlighted the critical role that industry knowledge, a wide resource base and a willingness to get involved directly with the search operating companies play in being a leading investor in the search ecosystem.
How do you plan to differentiate yourself from others in the SF space? What do you bring to the table, and how can your expertise add value to the searchers you back?
What sets Hadley Family Capital apart is our deep operational experience, built over three generations of running and growing SMEs. We don’t just provide capital; we actively partner with our searchers, offering them access to our extensive network, strategic guidance, and the full resources of our family office. We often take board seats to provide hands-on support, helping searchers navigate challenges and seize opportunities. Our long-term approach and commitment to the success of our searchers make us a valuable partner for searchers. As a family office -and as the first family office in Canada serially investing in search- our focus is on long term sustainable value creation. We really believe this high-touch, value-added involvement is key to getting investors, searchers and the business stakeholders the best outcomes.
Originally, your focus was in the US and Canada, but you have started to support searchers and deals in the UK and Australia. Is your aim to become a global player? How do you source and evaluate potential opportunities across different continents?
Expanding into the UK and Australia, was a strategic decision to capitalize on what we think are incredibly skilled searchers and valuable opportunities in markets where the SF model is still emerging. In Canada, we see a strong convergence with the US market as search really begins to hit its stride. While our roots are firmly in North America, we recognize the global potential of the ETA model and are excited about the possibilities in other markets -even if we may not invest in them.
We source opportunities through our extensive networks, including relationships with top MBA programs, entrepreneur referrals, and strong relationships with local investors across our four geographies. Most of our sourcing now comes from searcher referrals, which we think speaks highly of our work with searchers to date. Our evaluation process is rigorous, involving multiple interviews, a detailed scorecard system, and comprehensive due diligence to ensure that each opportunity aligns with our investment criteria and the searcher’s ability to execute -it’s important to match the entrepreneur’s skillset with the business they are buying, and so there is always a moving target when investing in ETA.
What current market trends are influencing your investment strategy? How do you see the SF model evolving in the coming years, both in Canada and globally? Do you believe SFs will play an increasing role in addressing the “silver tsunami” of retiring business owners? Do you think the industry will maintain its impressive IRR performance?
The “silver tsunami” of retiring business owners is a significant trend that we believe will drive growth in the SF space. Not only that, we see it as a major risk for many SME’s without succession plans. At a macro level our dream is to make sure that these businesses all have young talented entrepreneurs with strong investors around them ready to support them as they take the reins. Unfortunately, as it stands in the US and Canada, more than three-quarters of small businesses have no succession plan and roughly the same number of owners expect to transition out of their businesses in the next decade. This is both a huge risk for SME’s and a real opportunity for searchers to help these businesses thrive which might otherwise simply disappear.
Of course, we are optimistic that the search fund model offers a compelling solution, pairing entrepreneurial talent with established businesses. I see SFs playing an increasingly important role in this transition. The model’s consistent IRR performance over the years suggests that it will continue to deliver strong returns, especially as it becomes more widely recognized and adopted globally. With the new 2024 Stanford study coming out recently, we continue to see this intriguing trend that as more capital enters the space, returns actually increase.
We are seeing many deviations from the traditional SF model, such as self-funded searches, single investor sponsors, accelerators, EIR programs, and long-term holds. What is your opinion on these emerging models, and are you open to participating in such operations?
We’re open to exploring these emerging models where they align with our investment philosophy. For instance, self-funded searches allow us to partner with highly committed entrepreneurs who have already shown success in finding a company. Single investor sponsors and EIR programs offer flexibility and can provide strong mentorship, which is something we value highly and could be in a good position to offer in the future. While we remain committed to the traditional search fund model, we are also adaptable and willing to participate in alternative structures if they present unique opportunities and align with our long-term goals. Importantly, we always look for an investor-controlled board and strong corporate governance, especially when we are looking at something outside of the traditional search model. Overall, we see these models as complementary to the traditional search fund approach, and we’re excited about the potential they offer.
Based on your six years of experience, what advice would you give to emerging investment managers or family offices looking to enter the SF space? With the increasing number of players entering this alternative asset class, what are the biggest challenges you anticipate in sourcing and acquiring companies through SFs?
My advice to emerging investment managers and family offices would be to focus on building strong relationships with searchers and to prioritize alignment of values and incentives. The SF model is not just about providing capital; it’s about offering mentorship, operational support, and a long-term partnership. ETA isn’t for the passive investor, there is lots of legwork to be done and the way to success is to be genuinely helpful from before a searcher launches all the way past their exit.
One of the biggest challenges I see is the increasing competition for high-quality searchers, which makes it essential to develop a deep relationship with your searchers, and vice versa before you embark on the journey of entrepreneurship together. Maintaining a disciplined approach to due diligence and being prepared to actively support your searchers is crucial for success in this space. The more value you can add beyond capital, the more successful you will be.
We are always looking to collaborate with other Family Offices who are interested in ETA and would welcome anyone reaching out who is looking to learn more or collaborate in search investing. One of the beautiful things about ETA is how collaborative the space is between all the stakeholders.
In terms of risks of acquiring, there are more than 1.4 million small businesses in the United States alone. Since the model started more than 40 years ago, there have been less than 1000 SFs raised. We believe search has a long runway of opportunity for finding and acquiring great businesses.
