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idw - Informationsdienst
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A new study of IESE Business School in cooperation with Stanford Graduate School of Business shows that acquisition and company founding via search funding is gaining traction in Europe.
München/Barcelona, November 4, 2016. The third biennial study of international search funds (published in 2016 by IESE in partnership with Stanford Graduate School of Business) shows that search funds are gaining traction outside North America. Findings:
1) In 2015, international search funds reached a new peak of activity:
- 11 new funds raised
- Six acquisitions completed
2) When comparing International funds with US/Canada funds:
- The aggregate pre-tax internal rate of return (IRR) was 36.7% for US/Canada and 33.4% for international funds – very similar.
- The aggregate pre-tax return on investment (ROI) was lower for international funds (2.8x) compared to US/Canada funds (8.4x) – probably due to shorter holding periods, as more than three quarters of the funds analyzed were formed after 2007.
- The IESE authors warn that it is still too early to draw firm conclusions about the asset class, and they focus the report on the characteristics of international search funds:
3) International searchers are starting to raise money faster and raise more of it (median amount rose from $282,500 to $383,395 per searcher)
4) The time to raise funds decreased from six months to between four and five months.
5) 12 are located in the UK, where the oldest international fund was founded in 1992, nine in Europe, 11 in Mexico, seven in the rest of Latin America, three in Asia, two in the Middle East and one in Africa.
6) There is a preference for acquisitions in business services, IT, healthcare and education, in descending order of popularity.
7) The searcher typically ends up being the owner-operator of the company acquired. However, unlike their US counterparts, the European companies acquired generally have a board of directors. Searchers rated positively their boards for effectiveness.
About the study
The study surveys 45 first-time funds outside the US and Canada, tracking their development in 14 countries spanning four continents. It only considers first-time search funds, excluding self-funded searches and second-time search funds.
Each searcher, or pair of searchers, was asked to complete a survey that included questions about their personal background and professional profile. They were also asked about the fundraising process and the geographic focus, target industries and company characteristics of their search fund. When possible, searchers were also asked about acquisitions, operations, liquidity events, and returns or valuation (and implied return).
The International Search Fund conference
On October 27-28, 2016, the 2nd International Search Fund Conference at IESE brought together search fund entrepreneurs and investors. The conference was also designed to introduce the funded search model to aspiring entrepreneurs and investors interested in a new entrepreneurial investment model.
Together, the conference and the published report help deepen understanding of a new asset class, one that is still relatively unknown outside the United States, where it was first developed more than 30 years ago. Search funds are investment vehicles to finance entrepreneurs (often fresh from business school) as they hunt for opportunities to acquire and grow existing companies. Typically, about 10 to 15 investors put money up to pay a modest salary to a recent MBA or two as they search for a promising company to buy, operate, and, ultimately, offer an exit opportunity for the fund investors.
When it works out well, young entrepreneurs get the opportunity to put their studies into practice at the helm of a company and investors are rewarded with a healthy yield.
About IESE
IESE, the business school of the University of Navarra, is one of the world’s top business schools and has pioneered business education in Europe since its founding in 1958 in Barcelona. IESE distinguishes itself in its general-management approach, extensive use of the case method, international outreach, and emphasis on placing people at the heart of managerial decision making. With a truly global outlook IESE, with campuses in Barcelona, Madrid, Munich, New York and São Paulo, currently runs programs on four continents.
For more information, please visit http://www.iese.edu
or contact:
Jessica Schallock
Head of Marketing Communications
IESE Business School Munich
Phone +49 (0)89 242097913
JSchallock@iese.edu
http://www.iese.edu
http://www.ieseinsight.com/doc.aspx?id=1864&ar=7 Info and download of study
http://www.iese.edu/en/faculty-research/events/international-search-fund-confere... 2. International Search Fund Conference 2016
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