The search fund has been presented as an attractive alternative for those entrepreneurs who want to become CEOs of an established company. However, a study by Stanford University shows that 33% of the search funds analyzed were unable to complete a single acquisition; it goes without saying that 25% of those who were able to acquire a company showed a partial or total loss of the initial investment.

The origin of this problem lies during the origination in the search process, either in a proprietary way or through intermediaries, and it is also accompanied by a lack of experience in the acquisition and purchase structuring, so it is difficult at the stages to reduce risks involved in this type of undertaking.

How are we going to address the issues?

Starting a search fund requires data, methodology, funding and a live learning process to increase the chances of success in closing a transaction, as well as training to run an organization and take it to the next level.

Given the above, we are looking for entrepreneurs (cohort) who wish to participate as operating partners to start their search fund through our program, accompaniment and investment to dedicate themselves full time for a period of up to 24 months and from there continue as future CEOs in the organization they wish to lead. This works as follows:

Deal Origination

We have a program that allows knowing the best practices to start the search in a proprietary way, that is, contacting business owners directly or through intermediaries within our network.

Once the program is finished, the search for the targets will begin based on a profile design of the operating partner to determine which competencies and skills are the most critical to explore the industries that reflect their potential.

Likewise, you will have access to analysts who will support each of the operating partners in auxiliary activities (for example, targeting, monitoring, industry analysis, valuation, etc.) during their search period.

The operating partner will have the freedom to manage the team in charge, build the necessary skills and delegate the functions to diligently search. The collaborative environment between the generation of participants, plus the management team of Ascendis Partners will generate the best bonds of trust and favorable conditions to transcend successfully.

Does the investment make sense?

It is essential to put into practice a formal investment process that is agile, oriented and that knows how to respond to the detection of niches that are not properly served and ripe for growth potential. The subsequent selection of companies must follow a rigorous process that accompanies not only detecting attractive opportunities in terms of price and genuine desire to sell by business owners, but also that the fundamentals conducive to scaling the organization exist.

Structuring and Deal Closing

Each transaction is different, but one of the most frequent aspects of failure is the lack of efficient structuring to be able to close an investment. Taking this into account, one of the greatest benefits of being part of Ascendis Partners is precisely being able to structure the best payment conditions, working capital, legal and tax implications to motivate the closing of the investment opportunity.

100 Day Plan

The post-acquisition transition to becoming the future CEO requires a new mindset and skill development to lead an organization. This entails a full understanding of the strategic and tactical areas of the company; but also, to translate the execution of the changes required in the short term, as well as to translate the vision in the medium / long term.

Operation and Scaling Up

The business operation should contemplate an approach with priorities according to the 100-day plan, such as growing the organization and balancing an efficient allocation of resources to generate higher income, decrease costs, and introduce new products or services. In addition, both geographic and inorganic growth will be considered for future acquisitions or accessories that add value to the business.

This exercise will be accompanied by corporate governance by members of Ascendis Partners, who will be closely involved with advisory roles, board members including independent directors, but above all, establish a benchmark to guide the new CEO.

Value Creation

Finally, at this stage, the organization’s decision to sell will be sought and thereby distribute the resources both to the Ascendis Partners platform and to the entrepreneurs based on the results obtained as part of their management. It should be noted that other potential capitalization scenarios in favor of the current entrepreneurs and Ascendis Partners are not ruled out due to the achievements and trajectory of efforts achieved until then.

The alignment of incentives by entrepreneurs and investors is vital to the success of a transaction. That is why we distinguish ourselves by offering the following benefits to our entrepreneurs:

  • A percentage of participation in the creation of value of the company (defined as “carry”);

A pool of participation in common with the rest of the generation of entrepreneurs, that is, a basket will be assigned on the carry obtained with the rest of the entrepreneur participants when they are successful.