During the past year, the lawn and landscape industry has begun to receive a considerable amount of attention from the different segments of the private equity community, including large and small private equity funds, family offices and, recently, search funds.
A search fund is a relatively new kind of private equity vehicle. The search fund has investors who back an entrepreneur in his or her search for a business to acquire and manage. In the first phase of the search fund, the fund backs the entrepreneur during the search process, which may take as long as one to two years. When the investment is identified, the search fund investors finance the acquisition in a more typical private equity fashion.
While there have been a variety of investment formats on this theme, search funds have been around since 1984 The concept was conceived by H. Irving Grousbeck, a professor at Stanford University’s Graduate School of Business. It has often been used with new MBAs from prestigious business schools. The fund managers have access to private equity contacts through their schools or through other networking. They may not have significant operating experience and make not have experience in the target industry.The idea is to place promising managerial talent in situations with a high probability of success with the oversight and experience of the fund investors. An ideal target investment has a sustainable market positions, a history of stable cash flows along with long-term opportunities for growth and improvement.
Some search funds may well find a fit in the lawn and landscape industry.
——————————————
The Principium Group is an advisory firm serving lawn, landscape and similar businesses in the areas of mergers & acquisitions and exit planning. Contact us at 888-229-5740 or [email protected].