What does a search fund say it does to create value?

Sammanfattning: In this paper we identify what a search fund says it does to create value for its investors and the relative importance of the value creating activities according to a search fund. We examine this through a case study of NS Intressenter and its acquisition of PriceRunner. Historically, search funds have been limited to the US but the phenomenon has recently started to spread internationally where NS Intressenter is the first known search fund in the Nordics. We discover that in order to create value, a search fund applies several examples of operational, financial and governance engineering. It appears that operational and governance engineering are the most important value creation levers where the choice of CEO/searcher is the most important factor. It is followed by an incentive mechanism from share ownership among management, improved IT and information system, and the use of detailed and frequently tracked KPIs, which are the three next most important factors and are roughly of equal importance. This discovery contributes to the topic of search funds, an area which is poorly researched, still in its early days, and non-existent in the Nordics. Specific research about value creation in search funds is untapped where practitioners today merely rely on practical guidelines. Despite that search funds have generated an aggregated return of 6.9x ROI / 33.7% IRR from 1984 to 2017, no research has investigated the tangible value creating levers among search funds. Thus, by exemplifying how a search fund creates value, this paper also bridges the gap between the practical guidelines on how to launch and operate a search fund made by practitioners, with the unexplained returns that search funds have achieved.