Search Fund

The Search Fund concept has existed for almost 30 years and was originally developed at the U.S. universities Harvard and Stanford. Objective of the strategy is to allow often comparatively young entrepreneurs with the help of private investors to take over the management in a selected company. Typically, the acquired companies are doing in a future situation.

History

In 1984, Irving Grousbeck, former visiting professor at the Harvard Business School developed ( now a professor at the Stanford Graduate School of Business ), the idea of Search Funds. His aim was to give young entrepreneurs the opportunity to search for a company to buy this, manage and zoom. In his own words, a Search Fund " The most direct way to own a business and manage" is. This is made possible by the support of an active investor base, said support is both financial nature is perceived ( financing of the search and acquisition of the company) as well as by applying a consultative mentoring role (eg through the provide of networks or industry expertise ).

Concept

The core of the model is a two-stage process

• Search In the first stage one or two so-called "search Funder " for a company to be acquired and receive financial support from a group of investors. This phase takes place with the purchase of a company your degree.
• In the second stage, the search Funder surgically senior roles inherit in the purchased company. The investors support the new management often within the framework of directorships and as mentors.

Since 1984, the Search Fund model has already been implemented worldwide over 150 times, with currently about 40 active searching Search Funds are known. The regional distribution extends from the North American continent (USA, Canada) over South and Central America to Europe. In recent years, particularly Europe and emerging countries have experienced an increased growth of Search Funds.

Process

• Fundraising:

Search the Funder looking for investors who are willing to provide them with capital to search for a suitable companies available in the first phase of funding. during the average 1.5 years of enterprise search are covered by this search capital incurred expenses (eg administrative or legal costs).

• Companies Find & Buy:

After securing the funding follows the search for a suitable company. Depending on the general economic environment, characteristics of the addressed Industries of the target company and regulatory features, this process can take several years. In case of a successful search, the so-called acquisition capital is usually contributed by the investors of the first round of funding in a second stage capital for the actual company purchase. In addition, are customary sources of financing for corporate transactions for the application (for example, vendor and loans).

• Operational management and sustainable value creation:

In the first months after buying the company, the new management with the given company makes familiar. It then attempts by various measures to achieve a sustainable increase in value. Typical lever are for example Increased sales, improved operational efficiency, improved corporate finance and other selected ( supplementary ) acquisitions.