“A Search Fund is an entrepreneurial path undertaken by one or two individuals, called ‘Principals’, who form an investment vehicle with a small group of aligned investors, some of whom become mentors, in order to search for, acquire, and lead a privately held company for the medium to long term, typically six to ten years.”— Stanford GSB Search Fund Study

The Search Fund lifecycle comprises four stages.

  • [1] raise capital

    2 to 6 months

    Principals first raise $250-720k from 10-20 investors to fund search costs, giving investors the right to “step-up” 1.5x and participate “pro rata” in a potential acquisition

  • [2] search & buy

    Up to 30 months

    Principals identify, negotiate and structure an acquisition, then present the deal to their investors, soliciting a follow-on round of funding, typically $5-15m

  • [3] manage & grow

    4 to 7+ years

    Principals grow the business as full-time CEOs, executing on various growth strategies, creating meaningful value for their stakeholders and themselves

  • [4] return capital

    3 to 6 months

    Principals create liquidity, returning capital plus preferred return to investors, then participating in 20-30% of the remaining profit, based on performance

As an investor in Search Funds, our investments are phased, first a component to fund the Principals’ search, then the option to participate in the acquisition.

  • ~US$ 40k "Search Unit"

    1.5x “step up” + the right to participate in the Acquisition

  • US$ 400k - US$ 2m “Acquisition Financing”

    depending on deal size & capital structure; with preferred return, often with a “hurdle rate”

  • >30% gross returns

    Search Funds generate an average gross IRR of 32% and return ~5x invested capital

 

Search Funds originated in the United States in 1984 and have scaled rapidly, with dedicated institutional Search Fund investors following suit to support the expansion of the model.

Based in Canada & South Africa, ambit partners takes a global view, investing in top Search Funds in commercially compelling markets around the world.

  • avg PE / VC returns

    For over 3 decades, Search Funds have outperformed PE/VC by 2x

  • avg IRR

    Globally, Search Fund acquisitions have an average IRR of 32%…

  • avg MoIC

    …and an average Multiple on Invested Capital of over 5.0x.