Fundamentals of a Search Fund |
This article will explore the key differences between Private Equity (PE) and Search Funds. By PE, we refer to everything from large-cap funds (e.g., Blackstone, Carlyle, KKR) to small-cap funds making equity investments as low as €2-3 million. At first glance, they may appear quite similar, but each takes a unique approach to acquiring and growing businesses. We will dive into the key distinctions between these two strategies and explore why Search Funds present an exciting opportunity—especially for aspiring entrepreneurs and MBA graduates looking to make their mark in the world of business.
Before diving deeper into the differences, let’s set out the different stakeholders involved in the two asset classes.
The stakeholders
Search Funds operate around two key stakeholders:
- The searcher is an individual, often with a background in business, who decides they want to own and manage a company rather than start one from scratch. However, buying a business requires money and expertise, which the entrepreneur may not have on their own.
- Investors are the friends, family, local investors, and institutional investors dedicated to Search Fund investing, such as Innesto Partners, who will back the searcher during their search for a company and during the acquisition of the selected company.
Whereas Private Equity involves the following two key stakeholders:
- Limited Partners (LPs) are the investors who contribute capital to the fund.
- General Partner (GP) is the Private Equity firm itself, which is responsible for managing the fund and making high-level decisions regarding portfolio companies.
