Thoughts on industry specific search

August 28, 2017

by a searcher from INSEAD in Songpa-gu, Seoul, South Korea

Hi everyone,

I have recently started looking for acquisition opportunities. I am INSEAD alum###-###-#### with 15 years experience in semiconductor industry in technical and business roles. I also have a PhD in semiconductor design. Given the industry specific knowledge, I am primarily searching for opportunities in semiconductor or adjacent industries.

Industry specific search has some unique characteristics. For example, semiconductor industry has regions of excellence. Korea ( where I am currently located), Japan, China (emerging), Taiwan and the US( Texas and California mainly).

I would like to get your input on following issues:

1. Are investors usually open to fund global searches? Or they only fund the searches located in a specific region?

2. Has anyone on this forum tried industry specific, geography agnostic search. I would love to learn about their experiences.

3. I heard about LMM PE option for more focused searches. However, the feedback has been mixed. Some people believe it's a viable option for searchers with more experience. Others claim that PE is saturated and the contracts are defined in such a way that entrepreneurs has little chance of getting their desired return. Any thoughts?

Any others ideas/ pointers are welcomed.

Reply by a searcher
from INSEAD in R. Dr. Eduardo de Souza Aranha - Itaim Bibi, São Paulo - SP, Brazil

Hey Omer, my personal experience is that it is very difficult to convince typical search-fund investors to invest in a search-fund outside their home country. I am running a search-fund in Brazil and talked to several US investors about it; my conclusion - it's tough sell to them, to dificult to understand environmental, cultural, regulatory difences etc. and difficult to control over time as well. I shifted my focus quickly to more opportunistic international-profile investors from my personal network. Also being an INSEAD MBA (09D) I also would recommend you to use the alumni network. Unfortunately you will find that Searchfund is not a topic that is very strong in the INSEAD community (I think). But different to mos other schools INSEAD alumnus have a very international spirit and are true global citizens. Getting someone with this mindset into investing in an opportunity in which you have expertise but which is out of a specific geography might be easier. One opportunity to meet people with this profile: September 22 an 23 there is an INSEAD entrepreneurship conference in Madrid. I am going to present my project there as well.

Reply by a searcher
from Harvard University in San Francisco, CA, USA

Hello Omer, Today I talked about that exact topic with a search fund investor that invests internationally. 1) the feedback was negative for 3 reasons: 1) travel time 2) travel costs 3) cultural differences. When searching, time, budget and being considered as outsiders by the business owners are our main constraints. 2) Can't comment here. My search is generalist and focused in my home country. 3) Feedback I got from PE firms not doing search funds was that they don't do that for 2 reasons: a) their investors don't allow them to outsource the work they are supposed to perform (finding investment opportunities) b) MBIs (management buy-in) are riskier than their profile. PE firms look for experienced management teams. I would contact several of those potential investors and get their feedback directly.

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