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Stanford GSB’s 2024 Search Fund study offers a comprehensive analysis of 681 SFs in the U.S. and Canada since 1984 (focusing on “traditional” SF), shedding light on the dynamic landscape of our industry and it’s impressive growth.
Here are some key highlights:
– Stable financial returns: IRR remains stable, standing at 35.1% (slightly down from 35,3% in 2022), with ROI at 4.5x (decrease from 5.2x), indicating consistent performance.
– Record launches: 94 new SFs in 2023, marking a significant increase.
– Acquisition trends: Median purchase price dropped to $14.4M (from $16,5M); acquisitions decreased slightly (by 11 to 29 from the peak in 2021). Median EBITDA multiple was 7x, with companies having a median EBITDA margin of 27%, a growth rate of 25%, and 34 employees.
– Decrease in investor capital: $682M was invested over the past two years, down from $776M in the previous two years.
– Demographic shifts: Younger and more diverse searchers, with 79% aged 35 or below and an increase in female participation, accounting for 18% of searchers who launched in 2023 (up from 11% previously).
– Educational influence: higher enrollment in EtA classes, showing increased interest and preparedness.
– Industry focus: Most searchers adopted a industry-focused approach, examining an average of 4.8 industries. The top targeted industries remain Software, Tech-enabled Services, and Healthcare Services.
– Fundraising dynamics: Median capital raised per searcher increased for the 1st time in 4 years to $500k, although the median number of investors per fund decreased from 14 to 12. Time to raise funds remained at 3 months.
– Acquisition rates: 63% of concluded searches resulted in acquisitions, a slight decrease from 66% in the 2022 study.
– Trends and evolving models: The study notes the growth of Long Term Hold models, and alternative models: growth in self-funded searches, single-investor models, accelerators, and entrepreneur-in-residence.
Conclusion: Search continues to grow in popularity. Mentorship, collaboration, grit, drive, and a focus on the young entrepreneur have been core principles of the search industry and important factors in its success.
For those keen on understanding the intricacies of SFs and the evolving trends, the full study provides invaluable insights and detailed data.
Explore the Study Here:
https://www.gsb.stanford.edu/faculty-research/case-studies/2024-search-fund-study
