Thread by @Codie_Sanchez

If you follow where rich people put their money, you’ll never go broke.

Here's the unsexy asset class private equity billionaires & millionaires are flocking to:

For decades, PE meant massive funds buying massive companies:

• KKR buys RJR Nabisco for $25B
• Blackstone acquires Hilton for $26B
• Apollo takes Harrah's private for $27.8B

The formula was simple: Big money buys big companies, adds big debt, cuts costs.

But now? These same Wall Street sharks are swimming downstream - raiding Main Street and buying...

• Your local car wash chain
• Boring IT providers with 20 employees
• That HVAC company with the annoying radio ads

And they're not being quiet about it…

Just follow the money… in 2024 alone:

• Blackstone bought out Copeland, an HVAC giant for $15.45B
• Buffett dropped $11B on truck stops
• $9B+ of PE $$ thrown at collision repair

Wall Street is now targeting boring businesses. The ones most people ignore.

This trend has a name: Micro PE.

It's the application of traditional private equity strategies to smaller companies:

• $1-15M in annual revenue
• $500K-$3M in annual profits
• 10-100 employees
• Often family-owned or founder-led

To be clear - it’s not just billionaires who are catching on.

For decades, Harvard/Stanford MBAs followed a predictable path: join McKinsey, a VC-backed startup, or worst case become a banker.

Now they're skipping the building part and going straight to CEO, buying biz's.

These MBAs use the search fund model.

They raise money from investors with 1 goal: find a profitable small business to buy and run.

In 2023, a record 94 search funds launched. Almost double 5 years ago.

That's 94 MBAs who decided small biz > unicorn…

So why is all this happening? Three forces created the perfect storm:

1. Demographics

10,000 boomers retire daily, and they own 50%+ of America's 33.2M small businesses.

Most have no succession plan.

2. “Cheaper” price tags

Rule of thumb, small biz's sell at a lower multiple compared to larger biz's.

Why? They're perceived as riskier - lack of systems, key man risk, etc.

But that means you can sometimes buy a biz cash-flowing $100,000s for as little as 2-3x earnings.

3. Surpassing other asset classes

SMB returns are tricky to track - most don't disclose earnings like public co's.

BUT,

Stanford's 40-year study of 681 search funds offers a reasonable proxy...

It tracks acquisitions ($14.4M median purchase price) with firm characteristics that fall under our micro PE definition.

When we compare the annual returns:

• S&P 500: ~6-10% (depends on what time frame you look at)
• Traditional PE funds: ~11-13%
• Search fund (from 2011-2024): 33-36%

Billionaire Justin Ishbia proved this works at scale...

His playbook is conceptually simple (but requires serious execution):

1. Buy small businesses others ignore (like a 3-location vet practice)

2. Add systems any MBA would implement

3. Roll up into hundreds of locations

His investment firm, Shore Capital, now has a $7 billion portfolio with over 1000+ small businesses.

So what does this mean for you?

If you own a business: You have more options than you think (and you might be sitting on more value than you realize).

If you're looking to buy: The window is closing as more capital floods this space.

If you're an investor: There's a universe of opportunity hiding in plain sight.

You have two options:

• Path 1: Watch Wall Street buy everything around you
• Path 2: Get in the game yourself

There are ~914k businesses with sales between $1-15M in the US right now.

They're not on Robinhood. But they're available…

The truly wealthy have always known this secret:

Building from scratch makes headlines. BUYING what works builds fortunes.

If any of this peaked your interest...you should come to MSM Live.

It's a 3 day virtual event designed to teach you how to find & buy a biz that's right for you.

Think of it as your fast track to business ownership.

Check it out:
codiesanchez.com/msm/?utm_sourc…