Search Fund --> PE? What Happens When a Search Fund Fails?

Applying to grad school for an MBA. I see that search funds are becoming more and more popular. However, I've read into the significant difficulties surrounding a search fund (search fund founders are, after all, basically entrepreneurs). If this is something I ultimately look into and the search fund fails to find a deal, can I leverage that experience into MM / LMM PE or growth equity? I assume the skills (sourcing, deal structuring, etc.) are similar, but unsure if it has been done. If not, what happens to the search fund dude? Corp dev? "Strategy"? Chick-fil-a?

Comments (11)

 
Most Helpful
Jul 19, 2020 - 11:28am

I'm currently running my own search fund in the US and recently graduated from a top intl. business school (LBS / INSEAD / HEC). My background pre-MBA was family office --> MM PE.

One of my sourcing strategies for the search fund has been to connect with LMM / MM PE funds to ask them to share deals with me that are too small for them to add to their portfolios. During these conversations, I've had a number of Partners offer me jobs or ask if I would be interested to get into PE. Would highly recommend this approach if you can get in front of the MM funds since you 1. have a $300k min comp. package waiting for you if the search fund fails, and 2. it significantly increases your deal flow from a source that others may not be utilizing.

Still angling for a thicc offer at Chick-Fil-A tho...

 
Jul 19, 2020 - 4:16pm

I ran into a few guys with failed or stalled funds that aren't really going anywhere at a conference I attended last year. Seemed like most were gearing up to go back to PE.

 
Jul 19, 2020 - 4:30pm

Is PE viable if you don't have a PE background pre-search fund?

Array
 
Jul 19, 2020 - 5:13pm

You can join in an operations role if you have real entrepreneurial experience.

 
  • Intern in IB-M&A
Aug 3, 2020 - 4:33am

Interned at a Search Fund a couple semesters ago. I heard a story of a guy that couldn't find another company that he wanted to buy, but eventually settled on buying 30% stake (smaller than the capital available to the investor) in business contingent on him taking a management role. The person who bought the stake also would get a bonus if he improved earnings by specific thresholds in 1, 3, and 5 years. Turned out to be an interesting alternative.

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