A recent trend being seen within the UK M&A landscape is the increased prevalence of Search Funds as acquirers of established trading businesses. This relatively new phenomenon provides an interesting potential acquirer to owner managers that are looking to sell their business.
What is a Search Fund?
In its simplest form a Search Fund combines either one, or a small number of, entrepreneurs with funding from professional investors. The entrepreneurs will directly source funding from professional investors to undertake a search for an acquisition opportunity of an established business. The entrepreneur will become responsible for the management of the business (typically as MD or CEO) and the future growth of the business which in turn generates the return on the funds provided by the investors.
Search funds offer entrepreneurs an alternative to founding a start-up business and provide an established operation as a launchpad from which to grow. They also provide investors with access to an asset class that may be difficult to reach through other methods.
An increasingly popular alternative
Search Funds provide an interesting potential purchaser to the Owner Manged Business where the existing owners are looking to exit the business.
Historically professional investors have deployed their funds through the more typical Private Equity funds. This typically involve the acquired business receiving additional support from the Private Equity fund and its team in the form of experience and financial firepower, however, Private Equity Funds will typically not be involved in the day to day management of the business and so require an operational management team in place at the point of the acquisition. This often provides a challenge to the acquisition of Owner Managed Businesses, where the existing owner is deeply involved in the management of the company and their exit after the sale leaves gaps in the management team. The Search Fund model provides a ready-made replacement in the entrepreneur that will fill the role of the exiting owner.
This model therefore represents a solution to bridge the issues that typically make professional investors acquisition of Owner Managed Businesses unachievable.
How Harbourside can help
If you are a Search Fund looking to make an acquisition, we would be delighted to understand the criteria that you are working towards and will make you aware of any suitable business sales we are advising on.
We also provide due diligence services and would be happy to assist with any potential acquisitions that are being considered.
If you are an Owner Managed Business considering an exit, we can help with the sales process right through from inception to completion and can explore whether there are any Search Funds that may be applicable to your business together with the more traditional acquirer classes that have historically been seen.