WHY DO SEARCH FUNDS WORK?
Passionate entrepreneurs leverage decades of investor experience to generate superior returns.
Discerning, natural sellers
Company owners are usually older individuals seeking retirement, without a defined succession plan, and seeking the right steward of their legacy.
Close alignment of incentives between entrepreneurs and investors; searchers receive common equity vesting over time and tied to the company’s performance.
Checks and balances
Even though searchers run the company, investors control the Board and must sign off on important decisions.
Target companies have straightforward business models, low capital intensity, and healthy cash flows.
Searchers customize transaction terms to meet sellers’ needs, enabling them to pay less than other buyers.
The vast majority of searchers graduate from top MBAs and choose to become searchers over other profitable career options.
Small transactions outside PE firms’ target size allow for low valuations and favorable terms.
Many SF investors executed successful searches themselves and have invested in the asset class for decades.
Funding the search capital allows investors to get to know the searchers well and gauge their fit as future CEOs before acquiring a company with them.
Searchers primarily target B2B companies in non-cyclical industries to produce a larger margin of safety.
Lack of correlation
Target companies are small,
niche-focused, and operate in
non-cyclical industries, so they remain insulated from broader political and macroeconomic risks.
Aspiring searchers solicit advice from current searchers, investors, and operators, most of whom are happy to guide and mentor them.