Search Fund

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The search fund concept has existed for almost 30 years and was originally developed at the US universities of Harvard and Stanford . The aim of the approach is to enable relatively young entrepreneurs, with the help of private investors, to take over the management of a selected company. Typically, the acquired companies are in a succession situation.

history

In 1984, H. Irving Grousbeck, then visiting professor at Harvard Business School (now professor at Stanford Graduate School of Business) developed the idea of ​​the Search Fund. His goal was to give young entrepreneurs the opportunity to look for a company, to buy it, to manage it and to grow it. In his own words, a search fund is "The most direct way to own and manage a company". This is made possible by the support of an active investor base, whereby this support is both of a financial nature (financing of the search and acquisition of the company) and by exercising an advisory mentoring role (e.g. by providing networks or industry expertise ).

concept

The core of the model is a two-step process

  • In the first stage, one or two so-called “search funders” look for a company to be acquired and receive financial support from a group of investors. This phase ends with the purchase of a company.
  • In the second stage, the search funders take on operational leading roles in the acquired company. The investors often support the new management in the form of directorships and as mentors .

The search fund model has been implemented over 150 times worldwide since 1984, with around 40 active search funds currently known. The regional distribution ranges from the North American continent (USA, Canada ) through South and Central America to Europe. Recently, Europe and emerging countries in particular have seen increased growth in search funds.

process

  • Fundraising:

In the first financing phase, the Search Funders are looking for investors who are ready to provide them with capital for the search for a suitable company. During the company search, which takes about 1.5 years on average, this search capital covers the costs incurred (e.g. administrative or legal costs).

  • Company Search & Buy:

After securing the financing, the search for a suitable company follows. Depending on the general economic environment, characteristics of the addressed industries of the target company and regulatory features, this process can take several years. If the search is successful, in a second step capital for the actual company acquisition, the so-called acquisition capital, is usually contributed by the investors in the first financing round. In addition, the usual sources of finance for corporate transactions are used (e.g. seller and loan).

  • Operational corporate management and sustainable value enhancement:

In the first few months after the company was bought, the new management familiarized itself with the transferred company. Subsequently, various measures are used to try to achieve a sustainable increase in value. Typical levers are e.g. B. sales increases, an improvement in operational efficiency, improved corporate financing as well as selectively further (supplementary) acquisitions.

Individual evidence

  1. ↑ A PRIMER ON SEARCH FUNDS: A Practical Guide to Entrepreneurs Embarking on a Search Fund page ii
  2. ↑ a b c d e f A PRIMER ON SEARCH FUNDS: A Practical Guide to Entrepreneurs Embarking on a Search Fund
  3. ^ A b Stanford Business School Knowledge Base for Search Funds
  4. ↑ SEARCH FUNDS — 2011: SELECTED OBSERVATIONS ( Memento of the original from July 15, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF; 524 kB) @1@ 2Template: Webachiv / IABot / www.gsb.stanford.edu

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