Would this be considered a PE FoF?
"XXX is an emerging private equity search fund that focuses on making investments in small capitalization (less than $15 million in value) companies. The search fund provides Investors with the opportunity to participate in the staged financing of the search for, and acquisition of, an existing private XXX company."
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Nah, looks like it's a SPAC
How much different is a special purpose acquisition company than typical PE? And would the skill set required be that much different?
It actually looks like a search fund which is slightly different from a SPAC. Usually a SPAC describes what could also be called a "blank check" company, where an IPO or private capital raise takes place and the proceeds are put into a bank account, with the purpose being to go out and buy a company (or companies). A good example of this is Vallares, which the former CEO of BP put together. http://dealbook.nytimes.com/2011/06/17/vallares-raises-2-18-billion-in-… http://dealbook.nytimes.com/2011/09/07/haywards-vallares-to-buy-genel-e…
A key difference with a search fund is that you raise money from investors to pay expenses during the search for an acquisition target in return for the right of first refusal to invest in the deal, but you don't actually have a COMMITMENT from those investors to put up money to invest in the company you decide to buy.
This is as opposed to PE, where you traditionally have binding commitments from your LPs to pony up money when you ask for it, or a SPAC, where the money is already in a bank account.
Here's a pretty good article on search funds: http://www.thedeal.com/magazine/ID/039305/2011/finders-keepers.php
In theory the skills to work at a search fund should be pretty similar to PE, especially growth equity-oriented PE. However, the search fund model appears to be not nearly as favorable for the management company as the traditional PE model since you don't have full discretion over investing committed capital (ie you have to find an investment, convince the owners to sell, AND convince your investors to buy) and it looks like most search funds are pretty much doing one deal at a time, which is a lot less profitable than having a $500mm fund committed to do a number of buyouts over the course of however many years.
First, thanks – sb awarded. The principal at the fund has finished the 1st round of financing (I’m not sure what the exact dollar amount is). He also said all investors must participate so that looks more PE like than search fund. I’m not sure how many deals per year he is looking to do because this is a new fund.
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