Why do Search Funds fail?

intern profile

June 14, 2021

by an member from Università Bocconi in Milan, Metropolitan City of Milan, Italy

I'm doing some research on the possible causes leading to Search Funds failure, and I was wondering whether someone has insights on this topic or knows about case studies / real-life examples that could be useful :)

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Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA
In practice, the reason why search funds fail are a) the searcher is unable to find a deal that meets the valuation and company profile requirements of professional search investors, b) the searcher is unable to find a business that is sufficiently interesting to work for, and c) the searcher realizes that the searcher economics are less attractive than doing something else. Issues a) and c) can potentially be mitigated by going the self funded route.
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Reply by a searcher
from Washington and Lee University in Cambridge, MA, USA
Time is a big factor of why some search funds fail. Trying to maintain dry powder for 2+ years can be difficult, along with the need to continually pick yourself up after a deal fails/buyer pulls out/etc. Continuing to attack search month after month isn't something that everyone can do, and time can kill search funds that could have been successful all things considered.
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