Alyeska International, Inc.: Company formed after Alaska Search Partners, LLC, the first Search Fund created in Alaska as well as the first Search Fund focused on Alaska headquartered businesses.
Search Fund: The private equity Search Fund Model was first created in the early 1980s.
- Entrepreneur(s) raises a pool of capital from investors to cover expenses during the search for an attractive business to buy.
- Once a target company is identified and due diligence begun, additional capital is raised from the Search Fund investors, other individual and institutional investors, and banks to complete the acquisition.
- Original Search Fund investors typically receive a 50% step-up in basis on their initial investment. The original Search Fund capital is applied to securities in the acquired company irrespective of whether they opt to participate in the acquisition financing.
- Proven to be successful for ~30 years and now being aggregated into portfolios.
Core Thesis of the Search Fund Model: Placing well-educated, high caliber, strongly motivated managers into an environment with upside opportunity will yield attractive risk-adjusted returns for Search Fund investors as well as earned equity for the Searchers.
Target Companies: Search Funds tend to acquire companies with —
- in fragmented industries,
- sustainable market positions,
- histories of stable cash flows,
- revenues of $5 – $40 million annually,
- EBITDA of 10% – 30% depending on the industry,
- basic supervisory/management infrastructure,
- daily operations not dependent upon the owner,
- long-term opportunities for improvement and growth.
Table: Search Fund Performance
|
Investment Multiple |
Internal Rate of Return |
|
| Asset Class Multiple |
10.0x |
34.9% |
| Excluding top 3 funds |
2.8x |
26.9% |
| Excluding top 5 funds |
2.3x |
23.4% |