Keegan Dum·April 10, 2025

Stars Align After 4 Broken Deals | Keegan Dum Interview

Keegan Dum, a former Exxon Mobile engineer who discovered search funds during a one-year MBA program at Emory, ran a traditional search fund from 2016 to 2018 with about 12 investors, went under LOI on four separate deals, and walked away from all of them — a decision he later viewed as a mistake driven by over-weighting negative investor feedback. After dissolving the fund, he began consulting and took on a quasi-president role at eGenuity, a small Indiana-based on-premise software company serving car washes and automotive/oil-change shops (~$6m revenue, ~$1m EBITDA), which had been his very first LOI target. After six months inside the business, he renegotiated the deal at a roughly 40% lower price, financing it with a seller note, seller equity roll, and equity from former search fund investors — with no traditional bank debt. He invested heavily in operations and people post-close, grew recurring revenue ~20% in year one, then received an unsolicited acquisition offer from a competitor about a year in. He sold roughly 18 months after closing for approximately 3x the purchase price (~2.7x MOIC, ~79% IRR), then stayed with the acquirer for another 3.5 years under a generous equity package, earning roughly as much again when the acquirer was subsequently sold to a public company. At the time of the episode, Keegan was living in Malaga, Spain on a one-year family sabbatical, researching what form his next search-related activity would take.

Deal facts

sde ebitda: roughly $1m EBITDA at time of purchase
revenue: ~$6m (roughly half recurring software revenue, half equipment/hardware)
financing structure: ~20% seller note + ~15-20% seller equity roll + remaining equity raised from traditional search fund investors; no traditional bank debt
notes: Seller accepted a significant price reduction (~40%) from the original LOI price. Buyer was formerly in a traditional search fund (2016-2018, ~12 investors); deal closed after the fund was formally dissolved. Business was on-premise software (not SaaS) for car washes and automotive/oil-change shops. Acquirer negotiated away the traditional search fund 'overhang' and sought enhanced carry (30% vs 25%) only if achieving 40%+ IRR. Sold ~18 months later for ~3x purchase price (2.7x MOIC for investors, ~78-79% IRR). Buyer then stayed on with acquirer for additional ~3.5 years, earning further equity that roughly matched original exit proceeds.

Why this business

Keegan was drawn to recurring revenue and growth potential in vertical software — eGenuity checked the traditional search fund criteria boxes. He also had a personal relationship with the seller built over months of phone calls and through a failed first LOI, and then spent six months consulting inside the business as quasi-president before renegotiating to buy it, giving him deep operational knowledge and a de-risked view of the company.

What's working

High recurring revenue with very low churn — the software was business-critical for car wash and oil-change operators who relied on it daily
Built deep personal relationship with the seller (Dan) during and after the search process, which led to a reduced purchase price and favorable deal structure when renegotiating
Six months of operating as quasi-president before closing gave Keegan intimate knowledge of the business, people, and operational problems before committing
Invested in people and operations post-acquisition, cleaning up systems and growing recurring revenue ~20% in the first year
Strategic acquirer approached Keegan to buy eGenuity only ~18 months in, offering a near-3x return; the strategic premium compensated for compressed EBITDA from reinvestment
Staying on post-acquisition with the buyer for ~3.5 years yielded additional equity that roughly doubled the financial outcome

What's hard

Walked away from four LOIs during a two-year traditional search (2016-2018), all of which he later believed were viable; some sold for more than his LOI price shortly after he passed
Gave too much weight to negative investor feedback and not enough to positive — overanalysis led him to pass on deals he should have done
Business-critical on-prem software created a high-pressure support environment: when the software went down, angry car wash and oil-change operators called owners directly, which wore down the previous owner and Keegan alike
Pricing was low relative to the pain absorbed — at ~$300/month for software running a million-dollar oil-change shop, there was little upside and lots of pressure
Market maturity meant stealing customers from competitors was very difficult since everyone's customers were sticky; growth was harder than it looked
EBITDA was driven down significantly post-acquisition due to reinvestment in people and operations, complicating a straightforward earnings-based valuation when the acquirer approached
Traditional search fund investors preferred a longer hold to maximize MOIC; Keegan's interests diverged since the sale was a life-changing liquidity event for him at year 18 months

Notable quotes

I think on every one of my four deals, you know, all of them were the same. And I'm the type, you know, I'm new to this. I haven't done this. These guys have done this before. I would kind of underweigh the positive investors and give more weight to those telling me why the deals were bad, and it would start to get into my head and I'd say, you know what, this isn't the right deal. Let's move on to the next one.

You realize every single one of these small companies has some reason why you shouldn't buy it. Or at least they got a lot — every one of them has hair on them.

If you're operating an oil change shop and you're doing a million bucks a year and you've got 65 or 70 cars coming through a day and the software is screwing up and that day instead of doing 65 or 70 cars, you can do 25 or 30 — you're on the phone with the owners. Same thing on the car wash side. Yeah, it takes a very personal toll.

With Dan, I think we had like six phone calls probably where I had no idea what size the business was or if it was anywhere related to the type of business that I would want to buy, but I just kept talking to him because we really hit it off.