A Tale of Two Economies

Understanding which one you're operating in is probably the most important strategic decision you'll make as a searcher. Not because one is better, but because they reward completely different approaches.

Economy One: The Coastal Market

The coastal market - New York, San Francisco, Boston - is built on speed and efficiency. Sellers here have advisors. They've prepped financials, built data rooms, and expect a competitive process. Sophisticated intermediaries run tight timelines. Everyone knows the playbook.

This creates real benefits: liquidity, clear pricing, predictable processes. If you have capital ready and want to move fast, Economy One works beautifully.

But efficiency has a price. So much capital chases these standardized deals that valuations get pushed up. Average multiples run around 5.8x EBITDA in these markets. That's the premium you pay for speed and packaging.

For a lot of buyers, that trade makes sense. You're paying for infrastructure and predictability. Fair enough.

Economy Two: The Regional Market

Then there's the regional market - Midwest, Southeast, smaller metros. Different rules entirely.

In Economy One, efficiency is the currency. In Economy Two, trust is.

Sellers here often haven't spent months prepping a process. They're owners who built something over decades in their community, and they're thinking about legacy as much as liquidity. The transaction doesn't happen because the math works. It happens because the relationship works.

The competition looks different too. You won't find twenty PE firms bidding in week one. You might be the only serious buyer at the table.

This creates what we call valuation arbitrage. While coastal deals trade near 6x, regional deals often sit closer to 3.7x EBITDA. That's a massive gap.

But don't mistake the discount for a free lunch. You're not paying a premium for speed - you're paying with time instead. Building trust over months of coffee and dinners before anything gets papered. That's a different kind of cost.

Why This Matters: The Numbers

Nearly two-thirds of all search fund deals happen in regional markets. That's not an accident.

The demographics are compelling. In Ohio, 56% of businesses are owned by people over 55. That's a wave of transition coming. And 60% of Boomers in these regions are open to seller financing, which changes deal math entirely.

The opportunity is real. But it comes with a catch.

The Permanence Requirement

"Less prestige, more permanence. Less pitch, more patience... Alpha is, invariably, in places unexpected."

— Cash & Carried, "Flyover Country, Operating Partners, and The Deal-by-Deal Play"

Economy Two demands something Economy One doesn't: physical presence.

You can't Zoom your way into a proprietary deal in Columbus. It doesn't work. You have to actually be there - showing up at industry events, joining the Chamber, becoming part of the community.

In the coastal economy, you can be a sophisticated buyer from anywhere. Check clears, you're good. In the regional economy, geography acts as a filter.

That "discount" on purchase price? Think of it as a dividend paid to people willing to commit. Willing to move their families, put down roots, become part of the fabric of a place.

Trust can't be wire-transferred.

For a lot of searchers, that's a dealbreaker. Leaving your network. Moving somewhere you don't know anyone is hard. That's fine, Economy One exists for a reason.

But for those willing to do it, the competition drops off a cliff.

What This Means for Search Strategy

This isn't about finding the "right" market in some abstract sense. Both economies are rational. Both work.

It's about understanding which economy's rules match how you want to operate. If you want speed, process efficiency, and you're willing to pay for it - Economy One is built for you. Compete on capital and execution.

If you're willing to trade speed for relationships, premium valuations for sweat equity, and you're ready to commit to a place, Economy Two is wide open. Compete on trust and presence.

The searchers who struggle are the ones who try to play Economy Two with Economy One tactics. They send cold emails from Brooklyn expecting Columbus business owners to hop on a Zoom next week. It doesn't work. The rules are different.

Pick your economy. Then play by its rules.