Search Funds - 2013: Selected Observations
David Dodson, Peter Kelly, H. Irving Grousbeck, Jason Luther, Sara Rosenthal. (2014)
Stanford GSB Case E-521, 28 pp
Dated 06/20/14; data as of December 31, 2013. Sample: "177 first-time search funds formed since 1983" (p5; this edition and 2016 say 1983, others 1984); 32 searching, 60 operating, 11 deviated or unknown, 74 terminal (22 exited, 17 acquired then shut down, 35 concluded without an acquisition) (p6); "Of the 134 funds eligible ... 117 were included in the calculations of returns" (p11). Headline: "As an asset class, search funds have achieved an ROI of 10.0x and an IRR of 34.9 percent. The median fund returned 1.0x of initial search fund investors' capital, whereas the top-performing fund returned well over 200x. ROI ... declined from 11.1x in 2011 to 10.0x in 2013" (p11); "twenty-six percent of all search funds that have reached conclusion have closed without making an acquisition"; acquisitions since the 2011 study "had a median purchase price of $11.6 million" (p10). Excludes repeat searchers; "known search funds" are those CES is aware of; returns use "data provided by the principals" and, for the 43 operating companies, "principals' estimates of market value" (p11).