UK Search Fund Experience
October 29, 2024
by a searcher from University of Exeter in London, UK
Hi all,
For background, I am a private equity professional considering search.
There is a ton of available info online (and on this website) RE search but all very US focused.
I wanted to ask some questions specifically pertinent to the UK - any input from past or current searchers / other folks would be much appreciated!
Structuring
- Did any of you manage to avoid having a layer of preferred equity? For obvious reasons, I would like to have ordinary shares only. At what "cost" did it come / what other terms did you have to concede on?
- In addition to investing some of your own money in the common equity how was the "carry" or sweet equity for the searcher structured? Did you buy C shares at a nominal value in the same way a PE management incentive plan works? Keen to understand mechanics and tax implications (especially with the current labour gov in power!)
- Do you have any suggested law firms who you would recommend speaking to about structuring fund and deal? Want to get myself the best economics I can possibly get
Search phase
- Identifying companies: how did you go about this / where did you filter most of the companies from? Companies house is great but for companies who are eligible for "micro accounts" it is not possible to find financial info
- Out of the identified companies, how did you filter down to the ones that you thought were more available to transact?
- With what methods did you have the most outreach success? Brokers, direct emails, reach out.
If brokers / websites were useful can you please share relevant names
Debt financing
- Which banks / credit funds provide search fund financing? A list would be really helpful?
- Obviously dependent on business but Assuming the target is stable, profitable and highly cash generative (limited capex), how aggressive are banks on leverage amounts? For instance, If I wanted to acquire a business (as described) for 5x EBITDA, is getting 4x leverage attainable? Am used to large cap credit funds so interested to see how banks think of leverage
Finally, I'd love to connect with UK searchers so if you are interested in connecting please let me know!
Thanks!
from Columbia University in Cairo, Cairo Governorate, Egypt
On deals sourcing, companies house has all the information you will need. You can use brokers but I have seen the quality deals coming mostly through proprietary source.
On debt financing, there are loads of different options including ThinCats and alikes but you need to run through them and check on which ones provide suitable structures to your target acquisition.
from Stanford University in London, UK