ANALYSIS · Succession

Search Fund Buyers: What Retiring Owners Should Know Before Taking the Call

Research from Stanford, IESE and Yale shows who search fund buyers are, what they pay, how they finance deals and why their headline return figures deserve a careful read.

Rendal Post Analysis Desk · Published October 2, 2026

An owner thinking about retirement may one day hear from a stranger who wants to buy the company and then run it personally. That caller may be a searcher, an entrepreneur backed by a small circle of investors through a vehicle known as a search fund. In its latest Search Fund Study, published in July 2026, Stanford Graduate School of Business reports that the number of these funds keeps growing and that nearly 60% of them succeed in acquiring a company (Stanford GSB). In our reading, that makes the searcher a buyer worth understanding on its own terms, because the structure behind the offer shapes the price, the financing and the handover.

Who is on the other end

Stanford's research describes the core search fund as a vehicle set up by one or two people together with a handful of investors, several of whom serve as mentors, to locate, buy and personally run a private company, usually for six to ten years (Stanford's 2024 Search Fund Study). Its Grousbeck-Holloway Center for Entrepreneurial Studies has followed more than 850 core search funds across the U.S. and Canada since 1996 (Stanford GSB). H. Irving Grousbeck, an emeritus adjunct professor of management at Stanford GSB and co-founder of that center, who helped introduce the model more than 40 years ago, called it “the most direct route to owning a company that you yourself manage” (Stanford GSB).

The money comes in two rounds. According to the 2024 study, investors first cover a modest salary and deal costs while the searcher hunts full-time, typically for about two years, and only after a target has been found and terms negotiated does the searcher raise the capital to buy it (Stanford's 2024 Search Fund Study).

The people doing the searching are mostly early in their careers. The same study found that 79% of searchers who launched in 2022 and 2023 were 35 or younger (Stanford's 2024 Search Fund Study). It also says plainly that the entrepreneurs running these companies often have little operating experience, and it presents a disciplined list of acquisition criteria as one way to reduce some of the risk that creates for investors (Stanford GSB).

What they buy and what they pay

In its 2026 study, Stanford reports that the median purchase price for companies acquired in 2024 and 2025 was $16 million, and that services, software and education were the industries searchers targeted most over that period (Stanford GSB). The more detailed 2024 study, covering deals closed in 2022 and 2023, put the median price at $14.4 million, equal to 7.0 times EBITDA, for companies with a median EBITDA margin of 27%, an EBITDA growth rate of 25% and 34 employees (Stanford's 2024 Search Fund Study). The authors suggested that fewer software purchases may help explain why the median price-to-EBITDA ratio declined from the 2022 study (Stanford GSB).

Outside the United States and Canada, IESE Business School's 2024 study of international search funds reported a median purchase price of $11.7 million and a median multiple of 5.7 times EBITDA across all acquisitions it had tracked through 2023 (IESE Business School).

Stanford's study says searchers lean toward businesses that are simple to grasp, operate in fragmented markets, face little risk of fast technological disruption and have a history of steady positive cash flow, and that they prefer healthy, profitable firms over turnarounds (Stanford GSB). In our reading, the owner of a steady, profitable and unglamorous company is exactly the counterparty these studies describe, while a business in need of rescue is not.

How the deal comes together

In the 2024 study, recent searchers named databases and their own research as the main source of their acquisition, with brokers, personal networks and the search community also in the mix (Stanford GSB). Those searchers signed an average of 3.6 letters of intent, the first about 7.8 months into the search, and they listed due diligence findings, sellers backing out, missing investor support and valuation among the reasons deals collapsed (Stanford's 2024 Search Fund Study). In IESE's 2024 international study, the average searcher screened more than three thousand businesses, held personal conversations with 159 owners and signed about four letters of intent, and among searchers active in 2022 and 2023, 63% pointed to problems uncovered in due diligence and 48% to valuation as reasons a deal under letter of intent was dropped (IESE Business School). Stanford's 2026 study says completing an acquisition typically takes around 20 months (Stanford GSB).

The financing is where a seller's interests are most directly engaged. Beyond the original backers, the 2024 study lists seller debt, seller equity rollover and earnouts among the possible sources of acquisition capital, alongside senior and subordinated loans and equity from new investors (Stanford's 2024 Search Fund Study). The study also states that the purchase is expected to take place at fair market value (Stanford GSB). In our reading, that list deserves the closest attention from an owner, because a seller note, a rolled stake or an earnout leaves part of the proceeds tied to how the new chief executive performs.

Sellers in the 2024 study had a median age of 55, and their engagement after closing lengthened to six months from four months in the prior study (Stanford's 2024 Search Fund Study). More than 90% of searchers reported a positive relationship with the seller after the transaction, and 12% intended to keep the seller involved indefinitely, figures that come from the buyer's side (Stanford's 2024 Search Fund Study). The study adds that new owners typically make few significant changes in the first six to 18 months while they learn the business (Stanford's 2024 Search Fund Study).

Reading the return figures

Returns are part of the model's appeal to investors, the Yale authors note (Yale School of Management), and the headline numbers are strong. As of December 31, 2025, Stanford's 2026 study reports an aggregate internal rate of return of 33.9% and a return on investment of 4.75x across all search funds, along with an aggregate public market equivalent of 2.88, which it presents as evidence that search funds have consistently outperformed the S&P 500 (Stanford GSB).

In a 2025 case from the Yale School of Management, Jacob Thomas, a professor of accounting and finance at Yale SOM, Daniel Lazier, a search fund entrepreneur, and A. J. Wasserstein, a senior lecturer in the practice of management at Yale SOM, caution that the figures in Stanford's 2024 study, the edition they examined, are entrepreneur-reported rather than investor outcomes, and that they are gross numbers before fees paid to general partners in pooled funds (Yale School of Management). Drawing on Stanford's own series, they note that aggregate multiples fell from 11.0x in the 2011 report to 4.5x in the 2024 report, and sat near 3.0x once the top three to five funds were set aside (Yale School of Management). In their own sample of 12 investors across 23 funds, the weighted average multiple was 2.50x and no investor matched the 4.5x aggregate multiple in Stanford's 2024 study, though the authors caution that participants chose to share data and call their findings directional at best (Yale School of Management). They also found that only 51% of the 1,192 investor bets on entrepreneurs in their data returned at least 1.0x once failed searches are counted (Yale School of Management).

IESE's international study reported an overall return on investment of 2.0x and an internal rate of return of 18.1% as of the end of 2023, but its authors warned that with only 15 positive exits it was too early to draw firm conclusions about that group (IESE Business School). The Yale authors summed up their view by saying search fund investing and entrepreneurship “should not be approached cavalierly” (Yale School of Management). In our reading, a seller should treat the published averages as the backdrop to the searcher's pitch to investors, not as a forecast for any single company, including theirs.

What a selling owner should do

Start by checking who stands behind the searcher. The 2024 Stanford study explains that search investors receive the right, but not the obligation, to fund the acquisition (Stanford's 2024 Search Fund Study). In our reading, that makes an offer only as firm as the backers' willingness to write the larger check. In our reading, asking which investors have signaled support for this specific deal is a fair question before granting exclusivity.

Next, look past the headline price. In our reading, a seller note, rollover or earnout means, in effect, lending to or investing alongside a first-time chief executive, and those terms belong in the negotiation from the start.

Then plan the transition as carefully as the sale. Stanford's figures point to a handover measured in months and to new owners who tend to move slowly at first, which in our reading gives an owner room to protect employees and customers if the arrangement is written down rather than assumed.

Finally, prepare for diligence before the first letter of intent. Because problems found in due diligence were the most cited reason for dropped deals in IESE's survey of searchers (IESE Business School), in our reading the owner who surfaces issues early stands a better chance of reaching a close with a buyer who intends to run the business personally for years.