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The Future. Although they’ve been around for decades, search funds — money allocated for would-be entrepreneurs who are looking to acquire an existing business or merge several — are surging in popularity. They’ve historically been reserved for MBAs from top schools, but mass layoffs at blue-chip companies may lead to a broader boom of C-suite takeovers.
Conquest capital
Why start a business when you can just buy one?
- Funds start by seeding an entrepreneur with enough resources to cover their salary and expenses for their search.
- Once a company is targeted, funds provide more capital for a purchase.
- Targets are typically “profitable and in a fragmented industry (think HVAC, home health care, or waste management)” with owners who are looking to retire, per NYT.
- Entrepreneurs realize their dream of becoming CEO, while funds make money when the company eventually sells or IPOs.
In 2020 and 2021 alone, search funds raised a whopping $800 million — one-third of the total amount raised since their inception in 1986. The number of funds has also increased, multiplying from 20 funds in 2013 to 105 in 2023.
That’s because they’ve been a good bet for investors, having a rate of return of 35% — far more than the average of 15% from private equity firms over the last 20 years. No wonder PE firms are also getting into the search fund business.
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