2020 Search Fund Study: Selected Observations
Peter Kelly, Sara Heston. (2020)
Stanford GSB Case E-726, 32 pp
Dated August 13, 2020; data as of December 31, 2019. Sample: "401 first-time search funds formed since 1984"; 90 searching; "Of the 305 funds no longer searching, 101, or 33%, closed without making an acquisition. The remaining 204 searches successfully acquired companies" (p4); 186 in the financial analysis, "excluding 18 companies that had been operating for less than one year" (p3). Headline: "The aggregate pre-tax internal rate of return for investors was 32.6% through the end of 2019, down from 33.7% in the 2018 study, and the return on invested capital was 5.5x, down from 6.9x in 2018" (p2); "The IRR excluding the top 5 returns increased for the fifth study in a row, to 28.5%, while the ROI excluding the top 5 funds decreased slightly, from 3.0x to 2.9x" (p7); "In the current study, 67% of all searchers made an acquisition" (p8); median purchase price fell "from $13.1 million to $10 million", median EBITDA multiple 6.0x (p6). Same exclusions as 2018 (serial, self-funded, single sponsor; discussed only in Appendix C); claims data "from virtually every known search fund and acquisition" (p7).