Transforming opportunities: Why ETA is key for Singapore’s next-gen enterpreneurs

SINGAPORE stands at a crossroads. Built on the entrepreneurial grit of first and second-generation business owners, many iconic brands and family-run businesses now face a looming challenge: succession. A growing number of business owners – once the architects of Singapore’s economic miracle – are reaching retirement age. Yet, for many, finding someone to “take over” their legacy is proving elusive.

This issue isn’t new, but the urgency underscores the importance of Entrepreneurship Through Acquisition (ETA) – a practical pathway enabling aspiring business leaders to buy into established businesses rather than starting from scratch. ETA offers a win-win solution for outgoing founders and budding entrepreneurs alike.

The business proposition, which has its roots in the search fund model, originated and was popularised in the 1980s by Irving Grousbeck, then a professor in Harvard Business School. Essentially, the search fund is an investment vehicle where an entrepreneur (or a group of them), backed by investors, would go search for, evaluate and acquire an existing business. They would subsequently step in as CEOs to manage and grow the business, with plans to exit them some years later.

Over the years, the ETA concept has evolved whereby the seller can also be the “investor” by providing a “seller loan”, with the loan recovered through a share of future earnings of the business over a one to two-year period, ensuring they have skin in the game to help the new owners succeed.

When most people think of entrepreneurship, they picture starting something from scratch, building it with sweat and tears, from rags to riches. This narrow and romanticised view of building a business should not be the only route of entrepreneurship. This is especially when buying an existing business that has already achieved product-market fit with recurring revenue is a much safer and faster way for young Singaporeans to be their own bosses.

A legacy at risk

Singapore has no shortage of legacy businesses struggling to find successors. Take, for instance, Song Fa Bak Kut Teh, a household name synonymous with the delicacy. While the brand continues to thrive and expand, many traditional eateries have disappeared because the original owners couldn’t find the right buyers or successors. There is no lack of examples. These include Balmoral Bakery, a family-run bakery since the 1960s; Xiang Xiang Nasi Lemak, established since 1977 in Tanjong Pagar Plaza Market & Food Centre; and Uggli Muffins which closed for good in October 2023 (and made a comeback in June “due to overwhelming demand”). Like many legacy businesses, the future of these eateries depends on whether the next generation steps in – or if an outsider sees value in acquiring and scaling them.

Not every legacy business can be like Selamat Datang Warong Pak Sapari, a hawker stall at Adam Road Food Centre, where third generation Sumadi Sapari returned to take over the stall after more than two decades as an engineer. For many, the absence of a ready successor underscores the importance of creating viable pathways, such as ETA, to ensure these businesses continue to thrive.

The government’s Hawker Succession Scheme, designed to ensure the transfer of legacy hawker stalls to new operators, underscores the importance of preserving Singapore’s Unesco-recognised hawker heritage. Combined with ETA, these efforts can create a holistic framework to safeguard both cultural and entrepreneurial heritage.

Why ETA matters

ETA ensures continuity, not just in operations but also ethos. Unlike larger business groups or private equity, which often prioritise integration and profit, ETA acquirers are vested in the cultural fit and strategic vision of the business. For many founders, these intangible elements are just as crucial as financial outcomes.

Kay Lee Roast Meat Joint is a classic case of how things can go awry when such businesses are sold to big business groups or private equity. In 2014, the founders sold the business for S$4 million to electronics firm Aztech Group, which then had plans to roll out at least 10 restaurants. A decade on, the brand now has only its original stall.

ETA provides a smoother path for succession, ensuring the acquired business retains its unique identity while benefiting from fresh perspectives. Entrepreneurs gain a headstart – an established customer base, operational infrastructure, and brand equity – while founders see their life’s work live on.

Eldred Wee, managing director of Edenity who has over 10 years of mergers and acquisitions experience working with SMEs, said: “We are seeing more middle-aged Singaporeans (who are) sick of corporate life, wanting to own their positive cashflow business from day one approach us to help look out for such businesses to take over.”

A national imperative

ETA isn’t just a business strategy – it’s a national necessity. SMEs form the backbone of Singapore’s economy, contributing nearly half of gross domestic product and employing 70 per cent of the workforce. Without effective succession planning, the repercussions on the economy could be significant.

To accelerate the adoption of ETA, policymakers and financial institutions can step in. Grants, mentorship programmes and financial tools tailored for acquisitions – including tweaks to the Enterprise Financing Scheme – could unlock immense value for both founders and buyers. Universities and continuing education providers could roll out ETA programmes to train budding entrepreneurs and mid-career professionals interested in how to search for, evaluate, and structure the acquisition of such businesses.

Singapore’s business environment – transparent, supportive, and network-driven – is ideal for ETA. Its close-knit community fosters trust, a key factor in matching founders with the right acquirers. Furthermore, ETA aligns with the national emphasis on sustainability, ensuring legacy businesses continue to contribute to economic and cultural growth. It also better allows for greater diversity in the economy, instead of a few “Singapore Incorporated” conglomerates with many brands under it.

Conclusion

For ETA to thrive, both entrepreneurs and founders must embrace its potential. Entrepreneurs must see acquisition as a viable path to owning a business, while founders must recognise the value of handing over to capable stewards rather than waiting indefinitely for familial successors.

By weaving ETA into Singapore’s business culture, we can preserve heritage brands, empower the next generation, and sustain economic growth. With complementary efforts like the Hawker Succession Scheme, ETA can help ensure that iconic businesses and traditions endure for generations to come.

The baton is ready to be passed. Willing hands just need to grasp it.

The writer is an entrepreneur, and an affiliate faculty of SMU and NUS, specialising in strategy and entrepreneurship