Companies

Ideal Corporate Attributes
Search Fund Resources
Contact

As a business owner looking to sell your business one avenue may be to have the business acquired by a Search Fund.

Ideal Corporate Attributes

Financial Criteria

Revenue Range: Businesses with annual revenues typically between $5 million and $30 million.
EBITDA: Stable or growing EBITDA, usually in the range of $2 million to $5 million, indicating healthy profitability.
EBITDA Margins: often above 15%, suggesting strong pricing power and efficient cost management.

Business Characteristics

Stable and Recurring Revenue: Preference for companies with predictable, recurring revenue streams, such as subscription-based models or long-term contracts.
Low Customer Concentration: No single customer should represent a disproportionate percentage of total revenue, reducing risk.
Strong Market Position: A well-established position within its market, often with a niche or specialized focus that provides a competitive advantage.

Operational Criteria

Simple Operations: Straightforward business models that are not overly complex to manage, facilitating a smoother transition of leadership.
Growth Potential: Opportunities for organic growth and expansion, possibly through geographic expansion, new product lines, or increased market penetration.
Fragmented Industry: Operating in a fragmented industry where consolidation opportunities exist, allowing for potential growth through acquisitions.

Management and Ownership

Owner’s Willingness to Transition: Current owners who are looking to retire or exit the business and are willing to assist with a transition period.

Search Fund Resources

Stanford 2020 Search Fund Study: Selected Observations

A study of the financial returns and key qualities of search funds formed in the United States and Canada since 1984. This study provides data and insights to support the search fund community including current searchers, CEOs, investors and entrepreneurs evaluating whether they want to pursue a search fund.

https://www.gsb.stanford.edu/faculty-research/case-studies/2020-search-fund-study-selected-observations

Stanford Search Fund Primer

For those contemplating the pursuit of a search fund, the CES has created a practical guide to answer the most frequently asked questions. The Primer aims to provide an unbiased view of the benefits and challenges, explains the model from the entrepreneurs’ and investors’ perspective, and gives many operational and execution tips from previous search fund entrepreneurs.

https://www.gsb.stanford.edu/faculty-research/centers-initiatives/ces/research/search-funds/primer

Stanford Search Fund Page (including historical studies)

Stanford’s Search Fund Page provides links to their Search Fund Primer and Search Fund Studies.

https://www.gsb.stanford.edu/faculty-research/centers-initiatives/ces/research/search-funds

Search Fund Videos from Stanford GSB

A series of videos from classes and panels focused on Search Funds.

https://www.youtube.com/playlist?list=PLED130F32CB9F698E

What it Takes to be a Search Fund Entrepreneur

The search fund model explained by experienced investor Coley Andrews.

IESE Publications

IESE – International Search Funds – 2020: Selected Observations

This note is a biennial study completed by IESE Business School on search funds that were formed outside the United States and Canada. It was undertaken in partnership with Stanford Graduate School of Business.

https://media.iese.edu/research/pdfs/ST-0603-E.pdf?_ga=2.111175684.1247359484.1610519995-838263832.1600832263

IESE – Search Funds – What Has Made Them Work?

This note highlights the key success factors of search funds based on interviews with past searchers and serial search fund investors.

https://media.iese.edu/research/pdfs/ST-0357-E.pdf?_ga=2.219759001.1247359484.1610519995-838263832.1600832263

IESE Re-Thinking Search Fund Incentive Structures

This study analyzes several components of the typical search fund acquisition structure, with the aim of strengthening the alignment between the searcher and investors.

https://media.iese.edu/upload/ST0452E_2.pdf?_ga=2.43729317.1247359484.1610519995-838263832.1600832263