In France, there are about twenty to twenty-five 'searchers', individuals who seek the 'perfect company' that meets specific financial and strategic criteria not understood by outsiders. These searchers aim to acquire companies, provided the current owner agrees, with hopes of fostering their growth and fulfilling their entrepreneurial ambitions. 

A search fund operates on the principle of trust, as highlighted by Ariane Olive, a business lawyer who has assisted French searchers. It consists of investment funds sourced from a group of investors who not only finance the search for suitable companies but also provide guidance and advice based on their experience as former entrepreneurs or searchers themselves. The funding process occurs in two phases: initially, investors provide around €400,000 to support the searcher's efforts, then they collectively contribute to the acquisition of the target company once identified, which can involve sums ranging from €1 to €50 million.

The search fund model has recently been introduced in France, primarily through elite business schools like INSEAD. Participants in these programs, like Hugo Pruvost, an engineering graduate turned mergers and acquisitions enthusiast, have embraced this entrepreneurial approach despite previous plans for startups. Within four months of launching his search fund, Mors Transmission, Pruvost successfully raised the initial €400,000 needed to begin identifying promising small to medium-sized enterprises across the country, although the task remains daunting.

Once a target company is identified, the challenge for searchers lies in persuading the current owner to sell. Competing against traditional investment funds can be tough, especially as many searchers are relatively young and inexperienced, which may cause hesitation among owners looking to transfer control. Pruvost adopts a personal touch, likening himself to the 'son they never had' while employing unique strategies to engage potential sellers, including personalized letters and photographs. His long-term commitment to leading the company for two to thirty years sets him apart from conventional investment approaches focused solely on short-term profits.

While the potential for failure exists, with about 25-33% of searchers globally not securing a successful acquisition, the statistics in France appear more favorable, as only one out of twenty-five guided by Olive has dropped out. Investors find the financial risk manageable, with low initial commitments relative to their potential returns. Should the search prove unsuccessful, the searcher does not have to repay their investors, highlighting the inherent risks associated with the journey. As this model continues to evolve, it may redefine paths to entrepreneurship in the country.

Reference: https://www.spark-avocats.com/search-fund-le-figaro/