Search Fund While in PE

Working in PE, it's fairly common to come across companies for sale that would be interesting to buy in a search fund-like deal (raise money for the acquisition then run the company yourself), but that are too small for the PE firm (so not direct competition, but still tricky). Has anyone ever tried to do this while working in PE? If so, how do you navigate it with your PE employer and full-time job?

Edit: I'm only talking about the search/diligence phase. In other words, how/when do you broach the subject with your employer given you came across the company through your job? How do you reach out to the company appropriately? Etc. etc. Obviously would have to quit the PE job once you've bought the company.

Comments (6)

 
  • Analyst 1 in CorpDev
Nov 2, 2019 - 2:45pm

What in the world makes you think it's a manageable idea to be both in PE and running a totally separate company? Being a good CEO is a massive time commitment and requires expertise for a Search Fund to be an option. What LP would want an employee at a fund managing their money doing that? Even more so if they were someone at the carry level but I'm guessing you're not just by the fact you're asking this question.

 
  • Prospect in IB - Gen
Nov 2, 2019 - 7:21pm

To clarify, I was just talking about the search/acquisition part - obviously you'd have to leave the PE job to run the company.

 
Nov 3, 2019 - 10:29am

The search part is a ton of work...it's not something you can do while working normal PE hours.

Also how do you intend on covering dead deal fees and related expenses? If you don't have an operating background then you'll suck at due dd'ing an asset inexpensively?

I'm not saying you shouldn't try anyways but it's a little more work than most realize... your boss will not be thrilled either is my guess...

 
  • Prospect in IB - Gen
Nov 3, 2019 - 1:28pm

I was thinking about the search phase as just being opportunistic - i.e. you see an interesting candidate in the course of your regular job. So the search wouldn't be as time-consuming although the diligence still would be. And agreed, clearly there are issues with this approach and the boss wouldn't be thrilled which is the genesis of this thread.

Good point on the fees/expenses. Guess that would just be a risk that would have to come out of savings in this scenario (assuming savings can cover it).

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