ETA, search fund, independent sponsor or holding company: what's the difference?

What do the four terms mean?

• ETA. Entrepreneurship through acquisition. It describes buying an existing business instead of starting one. It is a category, not a structure.
• Traditional search fund. Investors fund a search budget of typically $400,000–$600,000. The searcher finds and runs one company. The searcher typically earns about 20% of the common equity, and sometimes less, in tranches. The median 2024–25 purchase price was $16 million.
• Self-funded search. The searcher pays for the search and typically buys a $1 million–$10 million business with 75–90% SBA debt. The searcher keeps roughly 60–80% of the equity.
• Independent sponsor. A dealmaker finds a company and raises equity for that one deal from a capital partner. The sponsor is paid in fees and carried interest, most commonly a 2% closing fee and carry above an 8–9.9% hurdle.
• Holding company. A parent company that owns several operating businesses and keeps adding them. It can be private or public.

How do they compare on deal count, capital and control?

The first three are built around one deal. Their investor terms, debt and timelines assume a single company that will be sold or held. A holding company is built around a sequence of deals.

• Number of deals. Search funds and self-funded searches plan for one, with add-ons possible later. Independent sponsors raise capital deal by deal. A holding company plans for many from the start.
• Who supplies capital. Search investors, SBA lenders and capital partners each fund one company. A holding company raises capital at the parent, so it can move on the next deal without a new raise each time.
• Who controls. In a traditional search fund, investors typically hold board seats. In a sponsor deal, the capital partner typically holds key consent rights. In a self-funded search or a holding company, the founder usually controls the cap table.
• Exit. Search and sponsor investors usually expect a sale. A holding company can hold indefinitely and return cash through distributions, buybacks or a listing.

Why is a holding company a different kind of path?

Because value can come from structure, not only from running one business better. Larger companies sell at higher multiples. GF Data's 2024 medians were 4.5x EBITDA for companies with $1–10 million of enterprise value, 6.5x for $10–100 million and 9.0x for $100–500 million. A holding company that buys small companies at the low end of that range and grows into a larger platform may be valued at the higher end.

That gap is not free money. It closes if you overpay, borrow too much or fail to integrate. A platform also needs management, reporting and capital that one small company does not. But it is the reason the most valuable acquirers think about the second and third deal before they close the first.

When does a public holding company make sense?

This is the path most ETA discussions leave out. A public holding company can pay sellers in stock and raise capital in the market. The market may also value the platform at a higher multiple than the businesses inside it.

The evidence cuts both ways. An academic study of more than 6,000 IPO registrations from 1990 to 2024 found that completing an IPO raises a firm's annual probability of making an acquisition by about 12 percentage points. About three-quarters of the extra deals were paid at least partly in stock. But among newly public firms, stock-paid deals underperformed cash deals by 20–30 percentage points over three to five years and were about 50% more likely to end in delisting.

My view is that going public is realistic only for holding companies with real earnings or a clear path to them, and books an auditor can work with. Most buyers should not go public. For those who should, our best outcome, not a typical one, started with a company that went public with about $1.5 million in revenue at a $3.5 million starting valuation after raising about $100,000. Over seven years the founder made three acquisitions, one of which failed and was closed, and sold the original business. The company moved to Nasdaq and was sold for $240 million in cash. The routes and their costs are set out in the PublicFinancial ETA public holding company playbook.

Which path fits you?

• If you want to run one company and own most of it, a self-funded search fits, provided you can sign an SBA guarantee and the SBA loan fits under the $5 million 7(a) cap, which counts affiliates.
• If you want to run one larger company and need the search funded, a traditional search fund fits, in exchange for a minority stake.
• If you want to do deals without running each company, the independent sponsor model fits, with fees and carry instead of majority ownership.
• If you want to own several companies, a holding company fits. You can start it with any of the other three. The question is whether the first deal is set up so a parent can sit above it.

Worked example: the same profit inside a single company and a platform

This is illustrative math. Real multiples vary, and overpaying or failing to integrate destroys value.

1. Buy a business earning $1 million a year at 4x: $4 million, paid with debt, seller notes and equity.
2. Held on its own, that profit is still worth about $4 million at the same multiple.
3. Inside a platform valued at 10x, the same $1 million of profit supports $10 million of value before any growth.
4. The $6 million difference is the reason to think in platforms. It is also exactly what disappears if the platform never earns the higher multiple.
5. If the platform is public and pays sellers in stock, issuance becomes the risk. At Castellum, a NYSE American company, more than 80% of a roughly $6.6 million acquisition was paid in restricted stock, and the share count rose from about 53 million to about 94.6 million between March 2024 and March 2026.

Where these numbers come from: Search fund deal size comes from the 2026 Stanford Search Fund Study; search budgets and searcher equity from Long Angle; self-funded terms from Smash; sponsor economics from the Citrin Cooperman 2025 survey. Multiples by deal size come from GF Data via Carry and Conquer. The IPO and acquisition research comes from the CLS Blue Sky Blog and the Castellum figures from this case review. The SBA cap comes from the SBA.

Related questions

Is a holding company just a search fund that buys more than once?

No. A search fund's terms assume one company and usually a sale. A holding company raises capital at the parent, keeps what it buys and plans its structure, reporting and team around a sequence of deals.

Can a small holding company really go public?

Sometimes. A well-known small holding company, Tiny, chose to list on the TSX Venture Exchange through a reverse takeover. Others have failed: MBH Corporation, a UK holding company of about 19 businesses, delisted in January 2024 and entered administration a month later.

Do I need to decide on a holding company before my first deal?

You do not need to form one first. You do need to decide what the first company could go into. Lender consents, investor terms and the purchase structure are easier to set correctly at closing than to change afterwards.

What comes next

If the holding company path fits, the next question is how to build one: read How do you build a holding company for acquisitions?

Related articles

• Traditional search fund or self-funded search: which is right for me?
• What's the difference between a self-funded searcher and an independent sponsor?
• What percentage of searchers actually buy a business, and how do the returns turn out?
• Should a holding company go public, and at what size?
• How do you build a holding company for acquisitions?

• How does a public company run a search-fund program (Kingsway KSX)?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.