- Search Fund
Search Funds are vehicles for
entrepreneurs to raise funds frominvestors interested in makingprivate equity investments.
*In the first stage, a small group of investors back operating manager(s) to search for a target company to acquire. A fund may or may not find a targetacquisition company. Investors are able to invest apro-rata share in the target company, subject to their individual liking.
*In the second stage, the General Manager(s) of the Search Fund take operating roles in the acquired company—CEO, President and the like.Search Funds typically target companies in the $5 million to 30 million price range, requiring $2 million to $10 million of equity capital, in fragmented industries, with sustainable market positions, histories of stable cash flows, and long term opportunities for improvement and growth. Service and light manufacturing companies outside high tech industries are popular targets. Often these companies are under-managed prior to the
acquisition .Most Search Funds are started by entrepreneurs with limited operational experience and possibly no direct experience in the target industry. The goal of the investor is to place promising, motivated managers in an environment with a high probability for success given the oversight and experience of the investors themselves.
The origins of the Search Fund are often traced back to
H. Irving Grousbeck , a professor at Stanford University's Graduate School of Business, who originated the concept in1984 . Since then, it is estimated that over 70 funds have been formed, with 12 operating currently. The bulk of successful Search Funds have been raised by alumni of eliteMBA programs with access to strongprivate equity networks (e.g.,Harvard Business School , Wharton and Stanford Business School). [ [http://www.businessweek.com/magazine/content/06_25/b3989647.htm The CEO Fast Track: Starting a search fund can be the first step toward running your own company] .BusinessWeek , SUMMER, 2006.]ee also
*
Private Equity
*Bootstrap funding
*Entrepreneurship References
* [http://www.gsb.stanford.edu/CES/resources/search_funds.html Search Fund site of the Stanford Center for Entrepreneurial Studies]
* [http://www.bizjournals.com/seattle/stories/2003/09/29/newscolumn2.html Young investors put faith in search-fund strategy] , Puget Sound Business Journal, September 26, 2003
* [http://mba.tuck.dartmouth.edu/pecenter/research/pdfs/search.pdf Note on Search Funds] .Tuck School of Business , Center for Private Equity and Entrepreneurship
* [http://www.businessweek.com/magazine/content/06_25/b3989647.htm The CEO Fast Track: Starting a search fund can be the first step toward running your own company] .BusinessWeek , SUMMER, 2006.
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