Search fund business success / failure stories?

searcher profile

March 03, 2020

by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Miami Beach, FL, USA

Anyone have any stories about what happened after you acquired a business? I'm particularly interested in how searchers succeeded or failed in growing a search-fund scale business (i.e. a business of the size a searcher could reasonably expect to acquire). Would love to hear lessons learned!

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commentor profile
Reply by a professional
from University of Southern California in North Palm Beach, FL, USA
Lots of good businesses fail after changing hands. That's why my clients devote considerable attention to the post-completion transition - and we do it during Pre-LOI due diligence, and then stay on it all the way through dealmaking.

The 2020 Stanford Search Fund Study reports a 33% failure (to complete a transaction) rate.
And, of those search funds that bought a business, 25% suffered losses from their investment.

Self-funders, in contrast, quit or fail to buy more often than search funders, according to my observations and interactions with brokers and advisors.

• You have to wonder why so many people begin something destined to fail, don’t you?

Perhaps the better success rate of search funds pertains to the quality of the investors, providing oversight, and sufficient capital to assure positive cash flow.
commentor profile
Reply by a searcher
from University of Virginia in Richmond, VA, USA
Good question. I'm two weeks in and wondering the answer myself. I've heard from successful ones and failed ones and I think the economic moat around your business and the terms acquire it for determine much of the success or failure.
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