The Search Fund Process, Divided Into 4 Stages

Take a look at how the search fund process can be simplified by dissecting the four main stages.

The Search Fund Process, Divided Into 4 Stages
Article by
GTE Staff Writer
Article Date
August 22, 2022

Stage 1: Fundraising

Aspiring entrepreneurs start by putting together a Private Placement Memorandum (PPM). This document outlines their background, targeted industries, and expected returns for investors, among several other key subject areas . Once completed, the PPM is then used to help pitch potential investors as part of the fundraising process.

Stage 2: Searching 

The search process is typically capped at two years and involves  diligently evaluating countless businesses that fit the searcher’s investment criteria. Searchers typically seek enduringly profitable businesses whose owner is looking to sell for a reason unrelated to the intrinsic value of the business itself. At this stage, one third of all searchers fail to find a suitable business to acquire. 

Stage 3: Operating

Searchers are advised to ease into the operations of the business post-acquisition, spending the first 6–12 months simply getting to know the operations and people. It isn’t until after this initial acclimation period that the searcher begins implementing his/her growth strategies.

Stage 4: Exiting 

The operator and investors typically look to exit the business after 4–7 years have passed. Hopefully the operator has grown the business sufficiently and paid down most if not all of the business’ debt to provide for an attractive exit for all parties involved.