Supporting a Search Fund in Acquiring and Growing a Business

Challenge

A group of experienced entrepreneurs approached our firm for guidance in establishing a search fund to identify, acquire, and scale a promising small or medium-sized business.

Approach

Our corporate transactions and private equity teams collaborated to provide comprehensive legal support throughout the search fund lifecycle:

• Assisted in the formation of the search fund entity, including the drafting of the limited partnership agreement and other organizational documents
• Advised on the search and screening process, helping the fund managers evaluate potential acquisition targets and conduct thorough due diligence
• Negotiated the purchase agreement and related transaction documents for the selected target company, addressing issues such as valuation, seller financing, and post-closing integration
• Counseled the search fund on post-acquisition strategies, including the implementation of growth initiatives, operational improvements, and strategic partnerships

Result

The search fund successfully acquired a well-established manufacturing company and, with our continued support, has achieved the following milestones:

• Increased the target company's annual revenue by 25% within the first year of ownership through strategic expansion into new markets
• Streamlined the target company's operations, resulting in a 20% improvement in EBITDA margins
• Recruited a highly capable management team to drive the company's growth and integration into the search fund's portfolio
• Positioned the search fund as an attractive investment vehicle, leading to the successful fundraising of additional capital for future acquisitions

Industry Benchmark

According to a recent study by the Stanford Graduate School of Business, search funds have demonstrated an aggregate pre-tax internal rate of return (IRR) of 33.7% and a return on invested capital (ROIC) of 5.5x, outperforming many traditional private equity investment strategies.