The Search Fund Model: A Brief Primer
A search fund is an investment vehicle in which an entrepreneur, the "searcher", raises capital from a group of investors to find, acquire, and operate a single small or medium-sized business. Unlike private equity, where fund managers acquire multiple companies, the search fund model is built around one thesis: a committed operator running one business for the long term.
The model was born at Harvard Business School in 1984, when Professor H. Irving Grousbeck helped launch the first search fund; Stanford GSB later built the field's longest-running research program. Since then, the model has grown from a niche corner of entrepreneurial finance into a global phenomenon.
What the Data Shows
The most comprehensive data on search fund performance comes from the Stanford Graduate School of Business 2026 Search Fund Study, authored by Peter Kelly, Stefanos Zenios, and Dom Ng. Their findings reveal the maturation of a once-experimental model:
- 862 search funds have been formed in the United States and Canada through 2025
- 94 new search funds were raised in 2023 alone, a record year
- The aggregate pre-tax IRR is 33.9%, with a 4.75x ROI, which ranks search funds among the best-performing asset classes over the study period
- Search fund CEOs typically acquire businesses valued between $5 million and $30 million
- The typical target company has $1M-$5M in EBITDA, stable cash flows, and limited customer concentration
Internationally, the 2026 IESE International Search Fund Study reports 492 search funds formed across 48 countries, with a record 96 launches in 2024 and 46 acquisitions in 2025. Spain leads every market outside the US and Canada, with 98 search funds and 56 acquisitions.
Why Spain?
Several structural factors make Spain exceptionally well-suited for search fund activity:
1. A Massive Succession Gap
Over 85% of Spanish companies are family-owned. According to multiple studies on family business continuity, fewer than 30% of these businesses have a formal succession plan. The founding generation is aging, and many owners face the choice of selling to a stranger, passing the business to an unprepared heir, or simply winding down.
Search funds fill this gap by providing a structured, operator-led acquisition model that preserves the company's culture and legacy while professionalizing management.
2. A Fragmented Market
Spain's SME market is enormous and deeply fragmented. The vast majority of businesses in Spain have fewer than 250 employees, and thousands generate EBITDA in the €1M-€3M range. At these sizes, the businesses are too small for traditional private equity but too valuable to be ignored. Search funds operate precisely in this gap.
3. Institutional Credibility
IESE Business School has played a pivotal role in legitimizing the search fund model in Spain. Through its annual Search Fund Conference, dedicated research, and alumni network, IESE has created an ecosystem of searchers, investors, and advisors that rivals the Stanford network in influence within the Iberian market.
4. European Deal Economics
Acquisition multiples in Spain are generally lower than in the US and Northern Europe, reflecting less competition and fewer institutional buyers in the lower middle market. This means searchers can acquire quality businesses at 4-6x EBITDA, compared to the 6-8x or higher multiples common in the US.
Challenges and Realities
The opportunity is real, but it is not without complexity:
- Bank financing in Spain can be more conservative than in the US. Credit committees typically require detailed business plans, proven cash flow generation, and may impose stricter covenants. The absence of SBA-style government-backed lending means that structuring acquisition debt requires more creativity.
- Cultural nuances in deal-making are significant. Spanish sellers, especially family business owners, often prioritize trust, personal rapport, and the buyer's commitment to the company's legacy over price alone.
- Legal and tax structure requires careful planning. Spain's financial assistance rules prohibit the target company from providing guarantees or security over its own assets to facilitate the acquisition of its shares, which affects how acquisition SPVs are structured.
- Operational reality in Spanish SMEs can differ significantly from what Anglo-Saxon trained operators might expect. Financial reporting may be less formalized, ERP systems may be outdated, and management processes may be heavily centralized around the founder.
What a Good Search Looks Like in Spain
Based on our experience and the available data, the most successful search fund acquisitions in Spain share several characteristics:
- The searcher has genuine local knowledge, language fluency, cultural understanding, and ideally, an existing network in the advisory and business community
- The target business has stable, recurring revenue, limited customer concentration, and a defensible market position
- The seller is motivated by succession rather than distress, they want their legacy preserved, not liquidated
- The capital structure is conservative: modest leverage, seller financing or earn-outs where appropriate, and equity investors who are truly long-term aligned
- Post-acquisition, the new CEO has a clear operational cadence and a realistic 100-day plan
The Path Forward
Spain's search fund ecosystem is maturing quickly. The combination of structural succession demand, IESE's institutional support, attractive deal economics, and a growing pool of experienced investors makes Spain one of the most compelling markets globally for entrepreneurship through acquisition.
For operators with the right combination of ambition, humility, and local knowledge, the opportunity to acquire and build an enduring business in Spain has never been stronger.
"The best search fund acquisitions aren't the ones with the highest IRR on paper. They're the ones where the searcher genuinely becomes the long-term steward of the business."