Search Fund Secondaries

investor profile

April 13, 2022

by an investor from IE Business School in Hamburg, Germany

Hi everyone - I got a couple of questions regarding search fund secondaries:
- Can LPs usually sell their stake in the search fund prior to the company's exit?
- Is there a professional secondary buyer market for search funds?
- What fees do they usually charge?

Best,
Adrian

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commentor profile
Reply by an investor
from Universidade Católica Portuguesa in Lisbon, Portugal
People have made most points, including ROFO’’s, tag along, etc the one point I would add, is that if one investor really wants to exit and the others agree, as long as the company is in good enough shape, the company itself can buy back the shares at an agreed price. So that can also provide an exit to investors.
Ultimately the mechanisms are there, it really comes down to price and peoples perception of it.
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Reply by an investor
from University of Pennsylvania in Washington, DC, USA
In traditional search, there's been a small secondary market that's existed (and a few folks that have tried to professionalize it) but it's somewhat limited partly due to the size of the search fund ecosystem (much smaller than VC or PE secondaries) + the general long-term nature of the investors in the category (less of need for secondaries)
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