An investment vehicle created by an entrepreneur to search for, acquire, and manage a mid-market company, funded by investors who back both the search phase and the acquisition.
In recent years, a new breed of entrepreneur has emerged — one that does not create companies from scratch but buys them. The search fund is the vehicle that makes this possible: a model of entrepreneurship through acquisition that connects ambitious professionals with investors who finance the search for and purchase of a mid-market company, so the entrepreneur can run it and grow it.
A search fund is an investment vehicle created by one or two individuals (the “searchers”) with the specific purpose of identifying, acquiring, and managing a single company. Unlike a private equity fund, which buys multiple companies, a search fund focuses on a single acquisition, and the searcher becomes CEO of the acquired company.
The model, originated at Stanford Graduate School of Business in the 1980s, operates in two phases:
The searcher raises a modest initial capital (typically between 300,000 and 600,000 euros) from a group of investors (usually 10 to 20 individuals or institutions). This capital funds the searcher’s salary, travel, legal advisors, and deal origination costs during the search period.
During this phase, the searcher analyses hundreds of companies, contacts potentially willing owners, and filters opportunities against predefined criteria: size (typically 1 to 5 million EBITDA), sector, geography, team quality, barriers to entry, and growth potential.
When the searcher identifies a target and negotiates preliminary terms, they return to their investors for the capital needed for the acquisition. Search-phase investors have preferential rights to participate in the acquisition phase, usually on favourable terms (first-offer rights, conversion of search capital into acquisition equity).
The typical financial structure of the acquisition combines:
The searcher becomes CEO and runs the company with the goal of growing its value over a five-to-seven-year horizon.
For mid-market business owners looking for a successor, search funds represent an increasingly relevant alternative:
Personal commitment of the buyer. Unlike a PE fund where management is handled by an internal team, in a search fund the buyer becomes CEO. They are staking their professional career (and part of their personal wealth) on the company’s success. That level of commitment is difficult to replicate.
Business continuity. Searchers look for stable, profitable businesses — not candidates for aggressive restructuring. Their goal is to grow what already works, not to dismantle and reassemble. For founders who want their company to continue operating with its essence intact, a well-selected searcher can be the ideal buyer.
Searcher profile. Searchers are typically professionals aged 28 to 40 with training from top business schools and prior experience in consulting, investment banking, or corporate management. They combine analytical rigour with entrepreneurial drive.
Appropriate deal size. Search funds operate in an acquisition range (enterprise value of 3 to 15 million euros) where there is little competition from institutional PE funds, which target larger transactions. This benefits sellers of smaller companies that do not attract institutional buyer attention.
Several markets have developed vibrant search fund ecosystems. The factors driving growth include:
Business demographics. Hundreds of thousands of family-owned mid-market businesses will need a succession solution in the coming decade. Search funds fill a market gap: companies too small for PE funds but too large for individual entrepreneurs without a financial structure.
Academic ecosystem. Top business schools worldwide have championed the model, producing more searchers annually and building alumni networks that support new searchers.
Investor network. A consolidated community of search fund investors exists — former successful searchers, family offices, private investors — facilitating both funding and mentoring for new searchers.
Attractive company base. The mid-market offers an abundance of profitable, stable, well-positioned niche companies at reasonable multiples.
Typical search fund acquisition criteria include:
A 34-year-old former management consultant with an MBA raises a search fund with 15 investors providing 450,000 euros for the search phase. Over 18 months, they analyse more than 200 companies and contact 80 owners.
They identify an industrial maintenance services company with 30 employees, 4.5 million in revenue, 900,000 euros of EBITDA, and a 67-year-old founder with no family successor. The company holds recurring maintenance contracts with automotive and food manufacturing plants.
Acquisition structure:
The founder stays on as an advisor for 12 months. The searcher assumes the CEO role and over three years: implements a CRM, hires a commercial director, wins three new industrial contracts, and improves margins through route planning optimisation. EBITDA grows to 1.4 million. The company, acquired for 5.4 million, is now worth over 9 million at the same multiples.
Not exactly. The key differences: (1) a search fund acquires a single company, not a portfolio; (2) the searcher becomes operational CEO, not a fund manager; (3) the searcher’s compensation structure rewards long-term value creation, not management fees. It is closer to an entrepreneur buying an existing business with investor backing than to a fund manager.
That is precisely where search funds add the most value. Companies with EBITDAs of 500,000 to 2 million euros are often too small for PE funds (which target larger equity tickets) but too large for an individual without financial backing. The search fund fills that gap. If your company is profitable, stable, and has growth potential, it may be exactly what a searcher is looking for.
Evaluate three things: their prior professional experience (do they understand your sector or similar sectors?), their investors (are they individuals or institutions with experience in businesses like yours?), and their plan for the first 12 months (is it realistic, respectful of the existing culture, and focused on growth rather than just cost optimisation?). A good searcher will arrive at the table having done their homework: they will know your sector, will have spoken with industry experts, and will have a clear vision of how to grow the business.
If you wish to explore a potential collaboration or present an investment opportunity, we invite you to contact us. We guarantee absolute confidentiality in all our conversations.