Bringing Transparency and Accountability to the Search Fund Ecosystem
LOS ANGELES, CALIFORNIA / ACCESS Newswire / May 6, 2025 / Today marks the official launch of the MBA Search Fund Alliance, a new initiative to reform the opaque, investor-dominated world of Entrepreneurship Through Acquisition (ETA). Backed by operators, terminated CEOs, and student leaders from top MBA programs, the Alliance aims to expose unjust practices, restore power to entrepreneurs, and rebuild a future where founders are protected, not discarded.
A Quiet Epidemic:
Search funds have long been hailed as a path for high-potential MBA graduates to become CEOs. But behind the glossy success stories lies a darker reality:
1 in 3 search fund CEOs are fired, forced to resign, or quietly removed-often with no severance and no warning.
In the past few years, about 50% of searchers do never acquire a business, despite investing years of effort and capital.
And perhaps most shockingly: the majority of ousted CEOs had no employment agreement.
"We spoke to hundreds of searchers-especially those who were fired. The pattern is disturbing," said one Alliance member. "They were set up to fail. No contract, no recourse, and no one willing to speak up. Until now."
Even those who asked for basic employment protections were often brushed aside. On Searchfunder.com, one user wrote:
"I asked about an employment agreement and was told it would come after closing. It never did." Another commented: "I was too scared to push for a contract-I didn't want to lose the deal or upset my investors."
This is not an isolated issue. It's a structural failure.
The True Cost of Failure for a Worst Case Scenario: 6-7 Years, Gone
No one talks about the full cost of a failed search post-acquistion. You can spend:
2 years searching
2 years of operating
2+ years recovering emotionally, financially, and professionally
"Searchers aren't just losing a company-they're losing their prime earning years," said one terminated operator.
Investor Silence, Systemic Risk
Investors often avoid providing employment contracts to incoming CEOs, sidestepping any risk of legal liability.
Those who speak out once termianted risk being blacklisted and are threatened not to "tarnish their reputation."
Inexperienced searcher CEOs become obedient, hoping to attain a job from the board/investors who have terminated them.
And perhaps most damning-less than 15% of traditional search fund investor shareholders ever check in after a CEO is terminated. That's based on internal research conducted by Caprae Capital.
"Out of my 16 investors in my cap table, only 2 investors checked in and asked, 'How are you doing? Is there anything I can help you with?" said one terminated search CEO who did not want to be identified.
Blaming the CEO, Ignoring the System
Recently, a closed-door roundtable amongst search fund investors was held in Boston to discuss the rise in CEO terminations across the search fund space.
One circulated slide titled "Key reasons CEOs are being fired" listed the following:
Lack of effort or ethics
Failed diligence leading to the acquisition of a distressed asset ("Betting on the jockey is easier with a great horse.")
Poor communication hygiene (relationship with board/investors/relationship with seller)
Partnership challenges
Ecosystem failures
What's glaringly absent?
Any mention of:
Investor overreach or misaligned incentives
Board conflicts or political maneuvering
Lack of support from the board, as well as search fund investors
The Narrative Monopoly
This isn't just a case of biased framing. It highlights the extreme power imbalance in the search fund ecosystem-where the same investors who dominate governance inside companies also dominate the conversation outside of them. For decades, search fund investors have controlled the narrative:
They fund the searchers
They host the conferences
They mentor the clubs
And they frame CEO terminations as individual failure, never systemic betrayal
And produce the majority of case studies, playbooks, and performance reports-a blatant conflict of interest
They sit on the panels where "case studies" are recited.
They control the checkbook-and in doing so, the conversation.
Even the most "objective" academic papers often exclude or anonymize termination stories, out of fear of investor backlash or lost access to data. It's why most searchers only hear about terminations in whispers, not case studies.
"CEO in Name Only?"
The power imbalance doesn't stop at terminations. It's embedded in the fine print:
Clawbacks: Investors can revoke equity if a CEO "underperforms" or violates broad covenants.
Equity Repurchase: If terminated "for cause" (often vaguely defined), vested equity can be bought back at original cost-often pennies.
No Consent = Forfeiture: CEOs who resign without "good reason" lose all equity in some agreements.
(Source: MVA Law comparison)
These terms give boards weapons to pressure resignations or terminate quietly.
And it doesn't stop there. Post-acquisition governance is designed for investor control:
CEO typically holds 1 out of 5 board seats
CEO must get approval on:
Business plan changes
Budget approvals
Executive hiring/firing
Capital expenditures over $100K
(Source: Searchfunder governance thread)
As one searcher said:
"Strike a lot of these or you'll be asking permission for everything."
Some insiders even ask: "Are CEOs really CEOs-or just investor-appointed custodians?" Even seasoned investors acknowledge the imbalance.
"Losing the search ticket isn't a big deal. Owning a company with the wrong CEO is." - Investor
(Source: Searchfundernews.com)
If Risk Is This High, Compensation Should Match
While the Search Fund space experience an acquisition rate of 67% up until 2020 according to Caprae Capital, recent data shows that the acquisition rate has dropped to 50%
To Recap:
50% of searchers fail to acquire
Of those who succeed, ~33% are removed
That means only 1 in 3 or 4 searchers survive long enough to build wealth
If failure and forced exits are this common, equity and protection should reflect that risk.
The Alliance advocates for:
30%+ equity and better incentives for searchers
Fair separation and vesting terms
Signed CEO employment agreements before close
Voting rights that are at par with investors
What the MBA Search Fund Alliance Stands For
This is not a support group but an organization to keep the search fund ecosystem accountable
The Alliance will:
Expose bad actors through anonymous investor rankings, public feedback, and real case studies
Hold quarterly meetings to track data, update the ecosystem, and push change
Protect searchers and CEOs-especially women, minorities, and nontraditional candidates
Shed light on legal patterns of wrongful termination, equity forfeiture, clawbacks, and board retaliation
Supported by Caprae Capital
The Alliance is directly supported by Caprae Capital, a founder-led platform and emerging force in the ETA and private equity space. With 30-40 searchers actively supported, Caprae is putting resources behind this cause.
"We believe this is one of the most important missions in our industry," said Kevin Hong, founder of Caprae.
"We are a founder-first, operator-first, CEO-first business-first, second, and third. Countries, companies, and civilizations come and go. But culture remains. We believe in standing for something. We believe in values. That is our company culture. We exist to make a difference, do the right thing, and keep things in order as needed."
A Coalition of the Willing
Current affiliated memberships through MBA programs, ETA Clubs, and Mission-Aligned Investors are represented from:
Harvard Business School
Wharton
Chicago Booth
UCLA Anderson
Michigan Ross
HEC Paris
And more
A Call to Media, Regulators, and Institutions
We invite:
Journalists to investigate boardroom abuse and silent terminations
Governance experts to study investor clauses and structural risks
Schools to protect their students, not just preserve relationships
Investors to align-or be exposed
Contact Information
Zadie Rowe
Marketing Manager
partners@mbasearchfundalliance.org
SOURCE: MBA Search Fund Alliance
View the original press release on ACCESS Newswire:
https://www.accessnewswire.com/newsroom/en/banking-and-financial-services/mba-search-fund-alliance-launches-to-challenge-unchecked-investor-po-1023945