"Riviera Capital are more than investors or advisors- they are partners. There is no "silver bullet," but a great entrepreneur who is driven, willing to listen, and who buys a solid company in an attractive industry is likely to succeed.
Those committed funds tend not to be quite ready to deploy as anyone would like, and you typically end up selling the company twicefirst, the searcher, then their investors. We serve as trusted advisors and resources, connecting first-time and veteran entrepreneurs with investors to help them access the capital necessary to close their search funds. In a sub-optimal situation, search fund entrepreneurs purchase a low growth company. CES has identified and tracked more than 400 search funds raised since 1984 in the United States and Canada. If you want to be a CEO, build a substantial enterprise, and create significant wealth for yourself, the search fund path is for you. For more details, please see our list of relevant resources. *Selecting a default edition will set a cookie. 0000005807 00000 n We enjoy the unique opportunities we have through search funds to work with young often first-time entrepreneurs as they evolve into emerging business builders and grow dynamic companies that are potential or eventual recapitalization candidates for our funds. Generally, you are searching for a high-quality business with the following characteristics: These characteristics mitigate the operating risk and will allow you flexibility and breathing room as you learn how to operate a business. We invest in solo entrepreneurs and partnerships and have seen success with both. Though its only recently really become established on the tech side of things, the search fund concept is nearly forty years old, originating at Stanford Business School.
A search fund matches your vision for your company can be a great fit, especially if they also bring sector experience, technical expertise and ready access to capital. The team provides clients with market-leading legal and business counsel throughout the entire search fund life cycle by drawing on its experience and Sidleys market-leading global practices, including Private Equity, M&A, Private Equity Fund Formation, Tax, Employee Benefits and Executive Compensation, and Regulatory. When a target is identified, each search fund investor is given the pro-rata right of first refusal on the equity required to fund the acquisition. He expects that the use of search funds will continue to grow. 0000099064 00000 n In Stanford GSBs Entrepreneurial Acquisition class students learn how to buy companies and start something new. Are you considering a search fund, preparing a PPM and/or launching soon? Search funds are often more flexible than other buyers and can help drive other interest in the market. The 2018 Stanford Search Fund Study shows that 69 percent of search funds acquire a company. Hb```V cc`a``h kAX066|JTRg'5&gj8K\b8dKgRH'12i u5!PL2gRl%g-Nhl)0W64I-|&d\. You buy a company by getting face-to-face with owners on a regular basis. You may change your preference at any time by clicking on the cookies icon. You are going to inherit the owners business and continue to build their legacy. 0000006035 00000 n 0000036852 00000 n
The search fund community is very welcoming. There is no such thing as a one-off transaction. First, the Good. First, industry searches maximize your short-term and long-term odds of success. 0000059318 00000 n According to the 2018 Search Fund Study published by Stanford Graduate School of Business' Center for Entrepreneurial Studies, 69% of search fund entrepreneurs acquire a company. For additional inquiries, please email [emailprotected], Please sign-in as a Member for free access to the Investor list, Please sign-in as a Member for free access to the Accelerators list. 0000003143 00000 n At the time of acquisition, these investors have the right of first refusal to provide the necessary equity to fund the transaction. %PDF-1.3 %
Failing to acquire is not failure.
Select Your Edition and Language Preference. Found a seller that is ready to sell, but not a fit for you? They are stuck and have no room to stretch their managerial muscles or create value. Are search fund entrepreneurs really buying scale businesses for reasonable prices? Join us and make change happen. At our core, we believe in paying it forward. We go all-in on Change Makers with more than just capital.
All rights reserved. After a few initial conversations with prospective investors, you should create a Private Placement Memorandum. 0000001336 00000 n Over the past 10 years, 75% of search fund investment capital has come from the top 25% of investors.
You are a unique buyer whom they recognize as a younger version of themselves. Search Funds broadly are vehicles for entrepreneurs to raise funds from investors interested in making private equity investments [In many instances referred to as "Fundless Sponsors" or "Unfunded Buyers" since acquisition equity & debt capital is indicated but not firmly committed]. You will spend the next five plus years learning the business, leading people, and creating value. Professional investors can help you evaluate potential opportunities and serve as strategic thought partners in your industry and company analysis. It is better to not acquire a business than to acquire a bad business. Then their lender partners need to do their own due diligence on the agreement, elongating the process. You took a risk on me and supported me very closely during the entire period at DCI. This is the toughest question that we get asked, but our criteria are both objective and subjective. There are unexplained, fund-level dynamics at play (e.g., an entrepreneur's listening skills, tendency to seek advice, and ability to detect good from bad guidance) that affect its eventual outcome. Roughly, 45% of search fund entrepreneurs have a partner.
What do you look for in a search fund entrepreneur? The principals of these Search Funds called searchers- are usually (but not always) recent graduates of top business schools here in the U.S. and abroad. The model offers relatively inexperienced entrepreneurs with limited capital resources a quick path to managing a company in which they have a meaningful ownership position. Third most is the size of the acquired company; the bigger the better. 
They complement each other- with different skillsets, backgrounds, and opinions- increasing the diversity of ideas in the board room. Join the wait-list for this 5-week online course tailored specifically for individuals seeking to acquire and operate a small company. The larger and faster growing the industry, the more opportunity there is for you to build a great company. Acquisition: We work with entrepreneurs and search funds to assess and close domestic and international acquisitions in a wide range of industries. In our experience, four out of five will make money, with three out of five on or above their base case plan.
Search funds only have to do one dealthis means, unlike all the other buyers we work with, there are fewer downsides to bad behavior. To learn more about these cookies, how we use them on our website, and how to revise your cookie settings, please viewour cookie policy. This capital will be used to pay your salary, travel expenses, and any administrative expenses during your search. We work hard to earn long term relationships of trust, with many of our entrepreneurs becoming investors and advisers themselves. Search fund deals have gotten smaller as the hot M&A environment has pushed all financial acquirers downmarket, with median acquisition price around $10 million across industries. All rights reserved. Searchers buy every kind of company imaginable, but healthcare has been the most popular, amounting to 35% of recent search fund acquisitions.
Riviera Capital have been great, highly-engaged partners. Professional search fund investors, like Pacific Lake Partners, can help you avoid sub-optimal situations. Purchase prices generally range from $10 million to $30 million, with the equity portion between $6 million and $24 million. Second, a bias towards action is critical. As individual searchers, they have the time to work with sellers. You will spend your time learning about new industries and talking with CEOs/owners. A minimum of three years of double-digit growth. There are some regulatory compliance complications with those that are actively employed in public financial markets, so many investors tend to be private market direct investors or indirectly through small institutional fund managers. 0000099142 00000 n 0000003377 00000 n 0000006660 00000 n "As entrepreneurship through acquisitions gains popularity, more and more marketers try to sell Peterson Search Partners, a Peterson Partners strategy dedicated to search funds and micro-cap "The last two years also shifted how people evaluated their lives and the investment they were "One question that team members at my company, a boutique investment bank that provides merger BankProv, a future-ready commercial bank that offers adaptive and technology-first banking We use cookies to ensure a smooth browsing experience. Successfully running a tech company is far beyond the capabilities of most searchers. Copyright 2022 Peterson Partners. Macro-Finance, Initiative on Business and Environmental Sustainability, Stanford Latino Entrepreneurship Initiative, Stanford Innovation and Entrepreneurship Certificate, Overview of Center for Entrepreneurial Studies, Overview of Certificate & Award Recipients, Public Policy Lab: Homelessness in California, Overview of Real-Time Analysis and Investment Lab, Overview of Facilitation Training Program, Overview of the Impact Design Immersion Fellowship, Stanford Impact Founder Fellowships and Prizes, 2022 Search Fund Study: Selected Observations, 2020 Search Fund Study: Selected Observations, 2018 Search Fund Study: Selected Observations, 2016 Search Fund Study: Selected Observations, Search Funds - 2013: Selected Observations, Search Funds - 2009: Selected Observations. The key metric in the success of a search fund is a fit between the company and the searcher. They have learned from investing behind many search fund companies. You want to talk with investors and operators that can provide capital, but more importantly, advice and guidance during your entire search fund journey.
0000001726 00000 n Employee Benefits and Executive Compensation.
Often these companies are under-managed prior to the acquisition. In this informal model, entrepreneurs take on the costs and risk of searching for a company to buy. Riviera Capital invests alongside entrepreneurial leaders who seek to accelerate the growth of business service companies with proven and differentiated business characteristics. Are you a small business owner or represent small businesses and want to speak with entrepreneurs seeking to acquire and operate companies? At the end of the day, it's your call to make.
These investors will each provide a portion of the initial search capital, typically between $400,000 and $500,000. 61 0 obj << /Linearized 1 /O 63 /H [ 880 477 ] /L 218976 /E 125275 /N 13 /T 217638 >> endobj xref 61 22 0000000016 00000 n There are some self-funded searchers out there, but the majority answer to investors. Partnering with exceptional entrepreneurial leaders to buy and build leading companies in the lower middle market.
Ask yourself some simple questions to see if this is a good career path for you. However, the model is beginning to catch on in Europe and Latin America as well. Search funds are still primarily a North American phenomenon, across Canada, Mexico and the US. The reader should not assume that an investment in the portfolio companies identified was or will be profitable. You will find the companies are in major cities with access to talent and customers: New York City, Boston, San Francisco, Houston, Charlotte, Denver, and Los Angeles. Should you have an interest in learning more about our search fund efforts, please contact searchfunds@housatonicpartners.com. A strong board can keep the entrepreneur from making any body blow mistakes early on while he or she learns how to manage and grow an organization. All Rights Reserved. Portfolio Company Operations: Once the acquisition is complete, our transactional team helps entrepreneurs, investors and boards of directors grow their investment and maximize returns. We, and the entrepreneurs that have gone before you, want to help you. Tech M&A is becoming more and more popular among search funds, and Id say that the majority of our clients these days have been approached by a searcher in one form or another. 0000002900 00000 n Selling the company twice is bad enough, but search funds do the same in due diligence. Sidleys search fund team is composed of the industrys legal market leaders. What are my chances of acquiring a good business? Find them (both searchers and operators), reach out, and listen. After a few initial conversations, investors and existing search fund entrepreneurs can suggest a few well-established law firms in this space. Are you considering buying a small company? ", "Uniquely, Riviera Capital took the time to first understand who we are as people and how we think, and after we built that strong mutual rapport, the relationship evolved to understanding the investment opportunity itself. People make all the difference, and who we back is our primary investment question. If you would like to make any additions or corrections, please submit an inquiry.
Exit: As entrepreneurs, investors and boards of directors assess exit alternatives at various points over the life cycle of their investments, we help develop an effective exit strategy. The searcher builds confidence and credibility that engenders trust with the eventual seller who decides to sell her/his business to the entrepreneur. The model offers relatively inexperienced entrepreneurs who have limited capital resources a quick path to owning and managing a companyfinding an opportunity that already has product market fit, but needs additional effort to take it to the next level. Many are started by entrepreneurs with limited operational experience and possibly no direct experience in the target industry. ", "The depth and breadth of their experience as both operators and investors has been extremely helpful right from the start. 
0000002851 00000 n Our team has the market knowledge, experience and skill to negotiate all aspects of the exit transaction, including navigating the issues that arise between entrepreneurs and investors, as well as between sellers and buyers.
Copyright 2012-2022.
The best part of our work is the lasting relationships we build with incredible entrepreneurs. 0000002291 00000 n A Search Fund needs to secure their loan partners to provide the funds to get the deal done when they are in due diligence with the seller. 0000002812 00000 n They listen carefully and are a great sounding board, enabling faster decision making. Among the subjective criteria, we focus on your past experiences, your motivations behind pursuing a search fund, your demonstrated history of resourcefulness or entrepreneurship, and your willingness to listen. START HERE: Is buying a small business right for me? Would you like to make this selection your default edition? We understand the search, its risks, and the specific actions you can take to maximize your odds of buying a good company in a good industry. A 2020 CES analysis of 401 qualifying search funds (linked below) found the aggregate pre-tax internal rate of return to be 32.6%, and the aggregate pre-tax return on invested capital to be 5.5x. $5 million to $30 million with a strong base of recurring revenue. You grow more competent and credible in the industry, which will help you build trust with your eventual seller.
We participate for a chapter of growth, usually 5-10 years, during which we work hard as a trusted coach and advisor in building brands, systems, and human capital. Search funds also need to have ready cash flow from the company they acquire, in order to to service the debt on the funds that they raise.
These entrepreneurs forego the need for a large pool of investor/mentors and rely on personal experience, capability and informal mentorship in their search, closing and operating decisions. You have gained deep industry knowledge and developed relationships with CEOs, successful investors, and operators who can help you find another great opportunity. The 2022 Search Fund Study reports on the financial returns and key qualities of search funds formed in the United States and Canada since 1984. We form true partnerships and are alongside each step of the way to preserve existing legacies while creating enterprise value. We put our companies and their management teams first, so we can achieve more together in the long run. Alignment of search strategy and investment philosophy are extremely important criterionwhen selecting your investors.
For founders & CEOs concerned with legacy and the future of the business itself, a search fund can be a good match, because the new owner will generally have those interests at heart as well. Additionally, experienced and successful operators and investors will join your board of directors to help you take the already high quality business to even greater heights. This website uses cookies. While we would happily invest in a great company in any location, we would be surprised to find one in the middle of nowhere. Especially in a situation where a technical founder has built a great product and laid the groundwork for a great business, having an energized, business-savvy new CEO taking the reins can be the perfect match. Search fund equity investors typically consist of high net worth individuals, private equity firms as well as family offices. Fundraising: Our experience and familiarity with investors offers our entrepreneur clients a true market advantage. Yes! If you prefer, please email us directly [emailprotected] or tweet us @SearchFundOrg. In the operating phase, according to Stanford, 71% of search fund companies make money. Courses in entrepreneurship through acquisition are starting to be offered at top business schools, taught by those who know the process first-hand. As an entrepreneur, you offer more than a transaction. In the first year to eighteen months after the acquisition, you will likely make no radical changes to the existing business, opting instead to gain familiarity with the company and your new role. All of this leads to a higher mortality rate among searcher deals, even those that reach the Letter of Intent phase and exclusivity.
You may opt out of analytical cookies by sliding the button to the left. Search Funds Could Be the Answer, Personal Information, Activities & Awards, Overview of Operations, Information & Technology, Driving Innovation and New Ventures in Established Organizations for Teams, Frontiers in Coupled Human-Natural Systems, Harnessing Data and Tech for Ocean Health, Political Economy of Environmental Sustainability, Junior Faculty Workshop on Financial Regulation and Banking, Quantitative Marketing PhD Alumni Conference, Theory and Inference in Accounting Research, Overview of Centers & Research Initiatives, Overview of Corporate Governance Research Initiative, Overview of Corporations and Society Initiative, Overview of Policy and Innovation Initiative, Overview of Stanford Latino Entrepreneurship Initiative, Overview of Value Chain Innovation Initiative, Alison Elliott Exceptional Achievement Award, John W. Gardner Volunteer Leadership Award, Jack McDonald Military Service Appreciation Award, Overview of Long-Term Career & Executive Coaches, Overview of Alumni Consulting Team Volunteers, Overview of Stanford GSB Alumni Association, Overview of Companies, Organizations, & Recruiters, Overview of Recruiting Stanford GSB Talent, Overview of Leveraging Stanford GSB Talent, Overview of Internships & Experiential Programs, Overview of Alumni Consulting Team for Nonprofits, Social Innovation & Nonprofit Management Resources, Postdoctoral Fellowship in Organizational Behavior. Joel Peterson Founding Partner & Chairman, Clint Peterson Managing Partner, LISTEN NOW: Running Stuff, a Peterson Partners podcast. If an entrepreneur does choose the solo route, a way to hedge oneself from this phenomenon is to hire another recent MBA graduate or experienced operator early after acquisition. Below is a list of several search fund investor platforms. We offer decades of experience in search and a vast network of resources for exceptional people seeking entrepreneurship through acquisition. All Rights Reserved. They are resourceful, well-educatedself-starters who know one thing:they want to be their own boss. Searching is a daily battle of will and commitment; but it's also a proven, viable approach that works. While you search and operate, you will be paid a salary commensurate with your experience and location. In this book, Jan Simon, Managing Partner of Vonzeo Capital and Academic Director of the International Search Fund Center at IESE Business School, presents a best-practices-based roadmap for searchers, acquisition entrepreneurs, investors and board members.
Despite their relative youth and inexperience, searchers as an asset class have generated exceptional long term returns: according to the Stanford Center for Entrepreneurial Studies, the aggregate IRR of the search fund asset class through year-end 2015 was 36.7%, and the aggregate multiple on invested capital was 8.4x. Search fund entrepreneurs self-select. Copyright 2022 Peterson Partners. 2022 Pacific Lake Partners. By limiting your search to a tighter geographical area, you lower your chances of finding a high quality business. This written document outlines the specifics of your search fund with an emphasis on your search strategy, acquisition criteria, and sample industries. Its the most direct way I know for aspiring MBA entrepreneurs to get into business for themselves. With this capital , you will be able to operate a search for approximately 24 months (the median months to acquire a company is 19.3 according to the 2018 Search Fund Study). Alignment ensures your investors will be attentive during your search and excited to participate at the acquisition. You have successfully set your edition to United States. 
Service and light manufacturing companies outside high tech industries are popular targets.
Entrepreneurs generally buy smaller companies ($500k to $2.5m EBITDA) and finance their acquisition with personal equity (0-30%), investor equity (10-35%), seller note (10-35%) and senior bank debt (30-60%). You put so many resources fromPetersonto work to help me and the broader investment community succeed. Our founder, Joel Peterson, invested in and sat on the board of Asurion, one of the earliest and most notable search fund investments.
Among the objective criteria, we look at your search strategy, industries of interest, screening criteria for an attractive company, and your proposed terms. Big-Data Initiative in Intl. Analytical cookies help us improve our website by collecting and reporting usage information. IESE | Webinar to Discuss the 2020 Search Fund Studies, IESE | 2020 Search Fund Studies Webinar Q&A, IESE | International Search Funds - 2020 Selected Observations, Stanford GSB Search Fund CEO Conference Recordings, IESE | International Search Funds - 2018 Selected Observations, IESE | Re-Thinking Search Fund Incentive Structures, IESE | International Search Funds 2016 Selected Observations, Search Fund: Best Practices for the Search Phase, IESE | Search Funds: What Has Made Them Work? Professor Grousbeck helped conceive of the search fund and advises many of the entrepreneurs who have used them. This is the fun part. The partners of Riviera Capital have worked together for over 20 years, and have been active in entrepreneurship through acquisition and search funds since 2003. ", "Riviera Capital is the kind of partner that you want to go into battle alongside.
We have the vital combination of experience and business and legal acumen necessary to navigate all tasks encountered by our clients. After acquisition, the bigger and better the industry, the more opportunity there is for a resourceful entrepreneur to build a meaningful company. I do not take those many nuances for granted. Nov 2014, IESE | International Search Funds 2013 Selected Observations, Search Funds Death and the Afterlife 2012, MBAs Latest Pitch to Investors: Skip the Startup, Invest in Me, The Search Fund Model: How To Become A 28-Year-Old CEO, Stanford's B-School Sensation: Plot a Takeover in Two Weeks, Business-Buying Search Funds Gain Momentum, Search Funds: A Financing Option for Business Buyers, Business Opportunities Abound, Even in Bad Times, Paying Entrepreneurs to Buy the Right Business, Looking for a Company to Run? Their journey began at Fortune 500 companies before founding a venture funded startup and then becoming Self-funded searchers and operators. Our roles include serving as company counsel, advising on day-to-day issues and representing boards as they negotiate and close major transactions to promote the growth of their companies. In many instances, search phase and acquisition capital can be self-funded by the entrepreneur in order to obtain more favorable ownership economics. Furthermore, the typical search funds more generalist outlook versus the deep technology backgrounds of strategic acquirers and even most of the Private Equity funds we tend to work with just doesnt usually match up. By continuing we assume you accept the use of cookies. $1 to $5 million with a minimum of 20% margins.
Search funds are fast responders. That said, the most recent Stanford study suggests correlation (not causation) between partnership Search Funds and top quartile outcomesbut we believe it's not that simple. However, we do have to talk about the Bad. Over the long-run, the industry will be the biggest determinant of your success. And most importantly, I have no question that they are on my side. HWF}Wj_--{dx7mahSF~Fb2@x&O*VYS?,RZfmN!!A/QvIJ#I9K2ZblB,(VB,$=zy. Typically, we see searcher salary around $130,000, and CEO salary is around $180,000, which will grow as you gain experience. They are insanely responsive, right from the fundraising stage, through to pursuing potential targets. it@YpD~ B
You did so much as my lead investor. We also represent clients during liquidity events, such as sales and divestitures, mergers and initial public offerings.
Our experience overwhelmingly suggests that the quality of the company one buys and the industry in which it operates are the most influential factors in the entrepreneur's eventual outcome. Inquire here: Sample PPM [Traditional Search] - Please sign-in as a Member for free access to a Sample PPM, Stanford GSB - Search Funds 2020 [Traditional Search Funds], Stanford GSB - Search Funds-2016: Selected Observations, Stanford GSB - Best Practices for the Search Phase, Equity Investors - Please sign-in as a Member for free access to the investor list, SBA 7(a) Loans & SBA Searcher Use Example, Proprietary Tools: MarketingStack, Avention, Hoovers (D&B) & InfoUSA, Other: BizEx ValuationTool, Valuation Multiples, SBIA Lower Middle Market Investment Insights & ACG Events.
