Search funds have grown steadily in the U.S. and Europe over the past two decades. But what about Southeast Asia? Could this model of entrepreneurial acquisition be the missing link in solving succession risk for small to medium-sized businesses (SMEs) in the food and beverage (F&B) industry?
At The Funding Assembly (TFA), we believe search funds have strong potential in our region. We work at the intersection of legacy business transitions, private capital, and acquisition entrepreneurship. This article explores the search fund model, its relevance in Southeast Asia, and how it may become an effective alternative for F&B founders seeking retirement or exit.
What Is a Search Fund?
A search fund is a two-stage investment vehicle created by one or two entrepreneurs (searchers) who raise capital from a small group of investors. The goal is to find, acquire, and operate one privately held company, typically within 24 months. Unlike traditional private equity, search fund investors are not seeking to control multiple portfolio companies but rather to back a single operator and a focused opportunity.
The four stages of a search fund are:
- Search Phase:
- Raise USD 300,000 to USD 500,000 from 10–20 investors.
- Use funds for salary, deal sourcing, and due diligence.
- Typical search period: 18–24 months.
- Acquisition Phase:
- Secure majority control of one company.
- Enterprise value of target: USD 5–30 million.
- Investors contribute equity for acquisition.
- Operating Phase:
- Searcher becomes CEO.
- Focus: Operational efficiency, growth, and strategic value creation.
- Hold period: 4–7 years.
- Exit Phase:
- Sale to private equity, strategic buyer, or recapitalization.
- Return capital to investors.
Who Are the Investors?
Typical investors in search funds include:
- High-net-worth individuals
- Family offices
- University-affiliated funds (e.g. Stanford GSB, Harvard)
- Former entrepreneurs or search fund operators
These investors offer more than capital. They provide mentoring, deal screening support, board governance, and operational advice. In Southeast Asia, early adopters of search funds may include family offices, angel investors, and business owners with successful exits.
Why Now: The Timing for Southeast Asia
Southeast Asia is on the cusp of a generational business shift. Many SME founders in the region are over 55, and their children are either uninterested or unprepared to take over the business.
Key trends include:
- Rising succession risk in F&B and other traditional sectors
- Fragmented M&A market with limited access to structured exits
- Investor appetite for alternative private markets
- Emerging pool of MBA graduates and corporate professionals seeking ownership roles
In Singapore and Malaysia, the need is acute. F&B businesses with strong brand equity, loyal customer bases, and consistent cash flow often struggle to find successors or exit paths. The search fund model addresses this by matching a motivated operator with a legacy business in need of a next chapter.
Benefits of Search Funds for Sellers
For F&B business owners nearing retirement, selling to a search fund offers several advantages:
- Continuity: The buyer is not a large conglomerate but a committed operator who will preserve the brand.
- Speed and Simplicity: Searchers come pre-funded and with investor backing.
- Hands-On Transition: Sellers can stay on during the transition or exit gradually.
- Legacy Protection: Cultural fit is prioritized.
These elements contrast with traditional M&A, where founders may feel out of place negotiating with financial buyers focused purely on EBITDA multiples.
Challenges to Adoption in Southeast Asia
Despite the potential, the model is still nascent in Southeast Asia. Some of the key hurdles include:
- Lack of Familiarity:
- Most founders are unfamiliar with the concept of selling to an operator-backed fund.
- Thin Investor Ecosystem:
- Few investors understand the model or are willing to back first-time searchers.
- Cultural Preferences:
- Many founders prefer to keep ownership within family or community.
- Access to Deal Flow:
- Without platforms like TFA, searchers would struggle to source proprietary deals.
- Legal and Regulatory Gaps:
- Acquisition financing structures, earn-outs, and deal terms are less standardized.
Still, these are challenges that can be addressed. Education, platform infrastructure, and early success stories will unlock momentum.
Case for F&B Industry Adoption
The F&B sector is particularly well-suited for search fund acquisition for several reasons:
- High Fragmentation: Many well-run F&B businesses are owner-operated with no clear succession.
- Repeatable Models: Brands with proven operations can be scaled regionally.
- Cash Flow Stability: Unlike tech startups, F&B companies often have stable, recurring cash flow.
- Asset-Light Operations: Many F&B businesses lease rather than own, making them flexible.
Searchers with operational experience in retail, supply chain, or franchising are especially well-positioned to take these companies forward.
What TFA Is Doing
The Funding Assembly bridges the gap between retiring SME owners and aspiring operators.
We are building:
- Standardized data rooms and CIMs to shorten the search timeline.
- Confidential deal matching between qualified buyers and legacy sellers.
- Flexible deal structures including phased exits, earn-outs, and advisory roles.
- Zero upfront fees for sellers. We only charge on successful deal completion.
Search Funds vs. Traditional Private Equity
| Feature | Search Fund | Private Equity |
|---|---|---|
| Buyer Profile | Individual entrepreneur | Fund managers |
| Deal Volume | One company | Multiple companies |
| Value Creation | Operational hands-on | Leverage and scaling |
| Seller Experience | Collaborative, gradual exit | Fast exit, high returns focus |
| Typical Check Size | USD 2M–10M | USD 10M+ |
Southeast Asia lacks a strong mid-market private equity tier. Search funds fill this gap by bringing capital and talent to smaller deals often overlooked.
The Opportunity for Searchers
If you're a mid-career professional, ex-founder, or MBA looking to become a CEO, the search fund model offers a unique route to ownership. Unlike startups, you're not building from zero. You inherit a working system, loyal customers, and a proven brand.
But it's not passive. You are expected to:
- Lead operations post-acquisition
- Build trust with staff and suppliers
- Report to a board of experienced investors
For the right person, it's a path to ownership with downside protection.
What’s Next?
We believe Southeast Asia is ready for the search fund evolution. At The Funding Assembly, we’re building the tools, education, and networks to make this possible.
If you're:
- A retiring F&B founder seeking a legacy-preserving exit
- An operator looking to own and grow an SME
- An investor seeking long-term value with operator alignment
TFA is your platform.
Reach out. Let’s build the future of succession, one deal at a time.
The Funding Assembly
Transforming M&A for SMEs with qualified buyers, automated deal flow systems, and success-based fees with zero upfront.
