The concept of search funds has always captivated us as we believe in the unique and attractive risk-return profile for both entrepreneurs and investors. Obviously, this was also the reason why we have started our weekly newsletter, covering all news around search funds and holdcos in the micro, small, and low-mid cap market. For over five years, we have delved into this asset class, systematically tracking investments in searchers and their respective vehicles.

Our proprietary database has grown to include over 330 search funds.

To provide a glimpse into the depth of our research, we’ve curated a preview of 20 search funds from our database. Premium subscribers of Buy & Build Europe get access to the full database of of over 330 search funds (last update: 04/2025).

What Are Search Funds?

Search funds are a distinctive investment vehicle that have gained prominence in the entrepreneurial and financial ecosystems over recent decades. This innovative model bridges the gap between aspiring entrepreneurs and seasoned investors, creating a symbiotic relationship that can result in substantial returns for both parties. But what exactly is a search fund, and why is it garnering so much attention? Let’s dive deeper.

At its core, a search fund is an entrepreneurial investment model where an individual or a small team - referred to as "searchers" - raise capital from investors to acquire and operate an established, profitable business. Instead of starting a company from scratch, the search fund model focuses on identifying existing businesses with strong cash flows, scalable operations, and untapped growth potential.

How Do Search Funds Work?

The lifecycle of a search fund typically unfolds in four phases:

1. Raising the Search Fund
   Searchers begin by raising initial capital from investors to fund their search efforts. This phase involves assembling a group of investors who believe in the searcher’s ability to identify and acquire a promising business.

2. Search and Acquisition
   Once funded, the searchers dedicate themselves full-time to sourcing, evaluating, and negotiating the purchase of a business. They often target companies in niche markets, with revenues between $5 million and $50 million, that are profitable and lack a clear succession plan or are owned by individuals looking to retire.

3. Operating the Business
   After acquiring the business, the searcher transitions into a CEO role, focusing on driving growth, enhancing operations, and increasing the company’s value. This hands-on management approach is a hallmark of the search fund model.

4. Exit or Long-term Ownership
   Finally, after a period of growth and operational improvement, the searcher and investors may decide to sell the business, generating returns on their initial investment. Alternatively, the business may be held for the long term, providing ongoing dividends and value appreciation.

Why Are Search Funds Attractive?

Search funds are particularly attractive for two key groups:

• Entrepreneurs: Search funds offer aspiring entrepreneurs a clear path to business ownership, bypassing the high risks associated with starting a new venture. They provide the financial backing and mentorship needed to take on the responsibility of running a business.

• Investors: For investors, search funds represent an opportunity to diversify their portfolios with a high-potential asset class. By investing in search funds, they gain access to a curated pool of businesses and the possibility of significant returns, often outperforming traditional private equity investments.

What Are Challenges of Search Funds?

While search funds present exciting opportunities, they are not without challenges. The search phase can be long and uncertain, as identifying the right acquisition target often takes years. Furthermore, running a business post-acquisition requires strong leadership skills, resilience, and the ability to execute a clear growth strategy.