Mike Miller was 25 years into a successful career as a stockbroker when he hit his midlife crisis. Since he still loved his wife and had no interest in sports cars, he opted to change professions. 

“I decided, ‘I know what a good business looks like. I’m just gonna go out and start doing things on my own,’” he said.

Rather than start a new company, in 2006 Miller—who had worked with what was then Investors Group, now IG Wealth Management—began buying existing small- and medium-sized businesses that could generate reliable returns. 

With each acquisition he installed a plucky young CEO to lead the business.

What Miller was doing, though he didn’t have the name for it at the time, was effectively operating a search fund—a type of silent partnership model whereby a financier funds an acquisition and finds a CEO to run the company for them. 

Now, Miller is formalizing the process—also known as entrepreneurship through acquisition—with his new company Regenerative Capital Group (RCG). 

The B.C.-based firm launched in 2021 with an initial $10-million fund dedicated to buying companies and training new CEOs to lead them. The company, which is raising more money, is now in the process of selecting its first cohort of “CEOs in residence” for a sort of accelerator program. Beginning in January, up to six participants will have 18 months to find a company to lead. During that time, RCG will pay them a small salary and help them identify an acquisition target. Once they land on a company to buy, RCG will make the purchase and begin paying them a typical CEO salary. Over the course of five to seven years, RCG will transfer 25 per cent of the company to the new chief executive. 

As well as bankrolling the fund, Miller serves as chair of RCG’s board, acting as a mentor to the future CEOs. Cordell Jacks, whom Miller recruited 20 years ago for an executive leadership program, co-founded Regenerative and acts as its chief executive. 

The model is rooted in the idea that the skills needed to start a company from scratch are often different from those needed to run it once it’s matured—a difference that has often sparked debate over the expiry dates of founders-turned-CEOs. 

On the surface, the approach looks like a typical middle-market private equity play: a shrewd buyer sweeps in and buys an undervalued company, finds efficiencies and sells it for a profit. 

But Miller said unlike most small private equity plays, he isn’t interested in distressed assets to flip or sell for parts. “We just like to buy good companies and make them great.” Miller tried to turn around a distressed company once and found it was more work than it was worth. “We’d never do it again,” he said. 

Regenerative’s ideal acquisition target is a company with untapped value that has low capital expenditures, recurring revenue and operates in a fragmented industry—that is, one that hasn’t been cornered by a clear leader like an Amazon or Walmart.

Finding that type of Goldilocks company with an owner willing to sell may seem unlikely, but Jacks said the candidate pool is vast.

Over three-quarters of Canada’s small business owners are planning to leave their companies in the next decade, according to a January report from the Canadian Federation of Independent Business. A large majority of them are retiring. But 91 per cent of business owners have no formal succession plan in place, leaving more than $2 trillion in business assets in the balance. 

“We have a looming economic and social capital crisis in Canada if these businesses aren’t being transitioned well or being closed, sold for assets, whatever it might be,” said Jacks. “That’s a big issue. So coming in with a plan, and with bright entrepreneurs who want to take over these types of businesses, the opportunity is right there.” 

Jacks said the search model can also reduce the high failure rate that entrepreneurs experience starting their first companies. Recent numbers from the U.S. Bureau of Labor Statistics show about 50 per cent of startups fail within the first five years. 

“We don’t have time for our best and brightest to be failing at those rates,” said Jacks. “We need to address bigger, existential, polycrisis-type issues.”

Toronto-based lawyer Mario Nigro said versions of the search-fund model have existed in Canada for over a decade, but they often go by names like pledge funds or one-fund deals. Those deals typically have an entrepreneur raise money from a small group of investors to fund their acquisition of a company, which that entrepreneur will ultimately lead. 

But Nigro said RCG’s approach is different from anything he’s seen in Canada. That’s because it takes the fundraising piece off the entrepreneur’s plate and focuses on emerging leaders through an accelerator program.

It’s a feature of the American search-fund model, which Harvard Business School originated in the 1980s. “It’s very strategic,” said Nigro. “Professors in the MBA program have a dual purpose. One, they teach [students] about [entrepreneurship through acquisition], but two, they also look for the top students so they say to them after class, ‘Why don’t you do a search fund? I’ll fund you.’” 

Stanford’s latest search-fund study, published every other year, found that 37 per cent of people who pursued entrepreneurship through acquisition had taken a business school course on the subject. However, Jacks said, there are no such programs at Canadian universities—something that surprised him.

“We have a very healthy [entrepreneurship] ecosystem in Canada … that is startup focused,” he said. “We have all the funding and all the incubators and all the accelerators for every step of the life cycle, but we’re not focusing at all on entrepreneurship through acquisition.” Part of the reason, he said, is that acquiring someone else’s company simply isn’t as sexy as the narrative of the founder toiling away in pursuit of a eureka moment.

Before Miller started buying companies nearly 20 years ago, he worked with the dean of the University of Manitoba’s business school to identify local entrepreneurial talent and, after graduation, train them for executive roles through a two-year executive MBA-style program at Investors Group. Miller ended up hiring a graduate of that program, Iggy Domagalski, as CEO of Swan Compressors, the first company Miller bought in 2006. Jacks is another alum of the program, where he met Miller in 2002. 

Entrepreneurs who buy companies through a search fund hold them for a median of 5.7 years before exiting, according to the Stanford report. Miller said he plans to keep the companies in RCG’s portfolios for much longer. “We found that for the first 10 years, you can grow [companies] pretty well, you can probably quadruple them. But it’s the next 10 years that really is exponential growth.” He said by holding companies longer, they can also grow to have a greater social impact. 

Indeed, social impact is baked into RCG’s process. What exactly that looks like will depend on the company, but Jacks said they must have a “net-positive impact” on all stakeholders, including employees, clients and everyone along a company’s value chain. “How, ultimately, are these businesses … supporting the thriving and nourishing and flourishing of people, culture, environment [and] humanity?” said Jacks. 

So far, Miller is bankrolling RCG’s search fund himself, but he said Jacks is courting other potential investors with an eye towards growing the fund to as much as $50 million to invest over about five years. “If we get the right aligned investor, and I think we will, we’ll make a bigger social impact,” he said.