What is a search fund and how does it buy businesses?

A search fund runs in stages. First, one or two "searchers" raise a relatively small pool of capital from a group of investors to fund a roughly one-to-two-year search for a single company to acquire. Once they identify a target and sign a letter of intent, they raise a larger round of acquisition capital from those same backers, close the deal, and the searcher steps in as the full-time CEO. Unlike a private equity firm that buys and holds many companies, a search fund is built to buy and operate exactly one.

On the buy side, search funds usually target durable, profitable lower-middle-market businesses, often those generating about $1-5 million in EBITDA, and tend to pay in the range of 3-5x EBITDA, somewhat below what a larger PE platform or strategic acquirer might offer. The purchase is financed with a stack of investor equity, bank or SBA acquisition debt, and frequently a seller note or earnout. As with most institutional deals, expect roughly 60-80% of the price as cash at close, with the remainder structured as a seller note, earnout, or equity rollover, and about 4-6 months from signed LOI to closing.

For a seller, a search fund buyer can mean strong continuity. Because the searcher intends to run the business personally, they usually want existing employees and managers to stay, and they often ask the owner for a defined transition period of several months to a year or more. The trade-off is that the searcher is typically a first-time operator relying on outside debt and equity, so the certainty and speed of close depend on their financing. It is worth diligencing their committed capital and track record before signing.

DealSeam works differently from a traditional business broker: we surface qualified buyers, including search funds, PE firms, and family offices, and introduce them to owners only where there is a genuine fit, with the buyer paying a success fee and sellers paying nothing. We never guarantee a sale or a price; the right buyer type depends on your size, industry, and goals.