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Starting with a few contacts from professor Joel Peterson, founder of private equity firm Peterson Partners and current chairman of JetBlue Airways Corp., Rob Cherun and Erik Mikkelsen hashed out a business plan for their search fund, Auxo Management: Find one or more companies with $2-million to-$10-million in earnings before interest, taxes, depreciation and amortization (EBITDA) whose owners are looking to sell, then take over the business and actively manage it.

What are they looking for?

Auxo's investment criteria includes:

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  • Stable cash flows from an established business that has potential to grow with more money behind it
  • Straight forward industry, rather than complex oil and gas infrastructure, for instance, that has high barriers to entry that prevent other firms from copying the business model
  • Three or more years of continuous profits
  • A sustainable competitive advantage that isn’t easily replicated and works an interesting niche
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