The Searcher: the triathlete in the corporate world
What is a Search company?
A Search company is when a young professional, between 30 and 45 years old, with solid training, professional experience, and an entrepreneurial vocation, convinces a dozen investors to finance his search costs to find a healthy, cash generative SME in a growing sector, with good margins, and above all, owned by an older entrepreneur, who wants to retire, but has not planned his succession.
Usually, the Searcher will be looking for around €300K to €450K in order to fund a small salary, database costs, interns, travel, and, if necessary, due diligence costs.
This whole process is a long-term endeavour that involves the total involvement of the young searcher for 5 to 7 years. It requires good preparation, motivation, resilience, talent and a wide range of skills. It is for this reason that we liken a Searcher to the triathlete of the corporate world.
Is the Search Fund model popular?
The Search Fund model is gaining popularity in Europe, and in Spain in particular. After several years in a take-off phase with few Searchers, the sector has reached a phase of strong growth, as is usually the case with successful new models.
The number of Searchers, who are discovering Search Funds, and Investors, who are learning about the surprising returns they produce, has increased notably. However, Europe is still trailing behind the USA, with only 200 Searchers compared to their 1300 Searchers.
Why is the Search Fund model gaining popularity?
Alongside the current economy of SMEs comes the era of baby boom entrepreneurs who are reaching retirement age without succession. Younger, ambitious searchers are eager to take control of their companies, and allow these older entrepreneurs’ legacies to continue after they retire.
What do the Investors get out of a Search Company?
Once a suitable company has been found, the investors who financed the search have the option to invest their proportional share in the purchase. Usually, depending on the size of the SME found, this amount will be about €4 million and upwards, always to be shared between a dozen investors.
Why can the Searcher’s journey be described as a corporate triathlon?
Like top-level athletes, the Searcher must start their event with a combination of good training and experience. A good Searcher doesn’t need to be a specialist in anything in particular, but needs a variety of skills:
- Excellent intellectual level
- Strategic vision
- Having worked in very demanding environments and under pressure
- Having managed small teams
- Having done commercial work
You can be better in one aspect or another, but you cannot lack the basic talents. You have to be good at everything! The Searcher really is the triathlete of the corporate world.
The test, once the Search Funds have been raised (and that in itself is a hurdle…), the search for a company begins. This requires a well targeted, planned, organised, systematic process: search by sector, by geography, by size, by profitability, by type of owner… It is a “funnel” search.
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What are the phases of being a Searcher?
- The Searcher has to locate good target companies, using a good database of companies and tools that search the internet for keywords and companies of entrepreneurs of retirement age.
- Once the companies have been found, using internet tools, the Searcher has to locate the owner and get in contact with him.
- Once contact has been established, the Searcher must make a proper diagnosis of the business and its future possibilities and gain the entrepreneur’s trust.
- The due diligence must be carried out,
- An acquisition loan must be negotiated with a bank, and
- If everything fits together, a purchase contract must be negotiated with the entrepreneur to cover the buyers against contingencies or hidden defects.
- Having experienced private equity investors is essential to select the right company and buy it on the right terms.
However, these steps are only the beginning. Once the purchase has been made, the Searcher becomes the CEO of the company, and surrounded by a board made up of some of the investors, manages the SME in a dynamic way, to create a lot of value, and a few years later, sell the transformed company all together. The Searcher, at that point, will take a share of the capital gains if he has created value for the investor.
If the Searcher does its job well, on the day of the sale of the company, it will be sold in a competitive process that generates value. Investors will have made a good return, and the Searcher will take its share of the capital gains.
How do we provide help to searchers at ONEtoONE Great Searchers?
Try to provide the searcher with all the help he may need to make his work more efficient:
- Giving you free access to databases and sophisticated search tools in the first phase.
- Advising you in the process of analysing and buying the company, with a support team with many years of experience in Private Equity and M&A.
- Supporting you from the board of directors in the management of the company as well as in the divestment process.