What are the typical phases of a search fund?

A search fund progresses through three distinct phases, each with specific objectives and timelines. The first phase is the fundraising and search phase, which typically lasts 18-24 months. During this period, the searcher raises initial capital of approximately $350,000-$500,000 from 15-20 investors to cover personal salary, office expenses, travel costs, and professional fees. The searcher then systematically contacts between 2,500 and 5,000 potential target companies, conducts meetings with business owners, and evaluates acquisition opportunities. On average, searchers receive positive responses from only 3-5% of companies contacted and must conduct around 100 face-to-face meetings before identifying a suitable target. The second phase is the acquisition phase, where the searcher presents the identified opportunity to investors, who then decide whether to participate in purchasing the company. Approximately 70% of initial investors typically reinvest at this stage. The acquisition is structured similarly to a leveraged buyout, with a balanced mix of debt and equity financing. Those investors who choose not to participate receive their initial investment back plus a 50% premium. The third phase is the operational phase, lasting 5-10 years, during which the searcher operates as CEO, implementing growth strategies and working to increase company value. Investors serve on the board and provide strategic guidance. This phase concludes with an exit event, typically a sale to a strategic buyer or private equity firm, at which point returns are distributed according to the ownership structure.