Yale SOM case note on potential questions for searchers and investors
February 16, 2023
by an investor from INSEAD in Hermanus, 7200, South Africa
I am delighted to share a case note on "Questions Aspiring Search Fund Entrepreneurs and Potential Investors Might Ask Each Other" that I had the privilege to work on with A.J. Wasserstein (Yale School of Management). See the link to the case below.
Above all, we hope this case note will help aspiring search fund entrepreneurs better prepare for investor conversations and help them build a strong and aligned group of investors to support them on their journey.
A particular word of thanks to ^redacted and redacted for sharing your perspectives and insights.
https://yale.app.box.com/s/74nwp8q40kc6u9p22hencd1lo3zthx3b
from INSEAD in Dubai - United Arab Emirates
I had a discussion last week with an informal mentor/advisor of mine to give me some feedback on the first draft of my PPM. This person has PE experience but was not familiar with the search fund model - not so many here in the UAE are.
The company EV size range I am targeting overlaps with the lower end of what local and regional PE firms would look at. As such, this person asked me why someone should invest in a search fund with the intention of acquiring just the one company if they can invest a similar amount in a PE fund and put their money to work on a diversified portfolio of similarly sized companies.
I suggested that search funds and PE shouldn't necessarily be thought of in either/or terms and that search funds can offer a portfolio additional diversification due to the types of companies they target (those normally below the radar of PE firms).
I also suggested that search fund investors are attracted to the potential for higher returns (>30% vs###-###-#### % for PE?) and the opportunity to provide guidance/advice/mentorship and take an active role in their investment.
Are there any other compelling reasons that one should be aware of when this specific question between searchers and investors comes up?
from The University of Texas at Austin in Dallas, TX, USA