Search Funds and Agency Theory: an empirical analysis

In the contemporary landscape of asset classes available, the search fund model represents an attractive investment vehicle and opportunity suited both for investors looking for high returns and for young and talented entrepreneurs willing to become owner-CEOs early in their career path. Involving the exchanges among three main actors, that are searcher(s), the investor base and the target company, search funds are included within the broader category of Entrepreneurship Through Acquisition (ETA) and represents a niche inside the private equity investments. Attractive financial returns, mentorship provided by the investors, fast possibility to become CEO of a SME company are only some of the advantages of search funds. Nonetheless, this asset class is not free from some issues. The investors-searcher relationship can rightly be framed within a principal-agent relationship, seen from the perspective of the agency theory. Like any of these types of relationships, also players in search funds are subject to common agency problems, brought about by different goals and information asymmetry characterising the parties. At the light of these issues, the objective of this thesis is going deeper into the areas of the model that could be improved and associate them with the agency framework, trying to propose some solutions to improve the search fund model, thanks to a structured survey on the investors’ community. As a consequence of this empirical analysis, the four chapters overall into which the work is structured will also contribute to fill a gap in the literature about search funds, which so far has never addressed the relationship between agency theory and this asset class, except for one specific case, thus increasing the uniqueness of this thesis.