Episode 3 of the Curious Kiwi Capitalist Podcast

15th August 2019

My guest for this show is Alexander Simmons. Alex is the founder of Voyager Equity a search fund. Search funds are completely new to New Zealand with no fund yet launched but with some interest from Kiwi searchers overseas. In Australia they have gained traction in the last couple of years with at least two funds succesfully acquiring businesses. Alex is the first Australian search fund to get investment for "search capital", the traditional first tranche of investment in a fund. The other two funds self-funded their search and then got "acquisition capital" the second tranche of investment.

I have to admit I am very intrigued with this type of investment fund and have been involved with encouraging prospective Kiwi searchers in 2019. My hope for young searchers and retiring mid-market business owners is that this investment type takes off over the coming decade.

In this show we'll discuss search funds in New Zealand and Australia including:

  • what is a search fund?
  • search and acquisition capital
  • the search capital step-up and "Stanford terms"
  • search fund investors
  • research on search fund returns
  • searcher vesting
  • search funds vs private equity
  • investment parameters
  • what prospective searchers ask Alex the most
  • search fund accelerators and business schools
Alex Simmons

Show Notes

About Alexander

Alexander Simmons founded Voyager Equity earlier in the year, and it is the first search fund that has raised "search capital" in Australasia. Others have raised acquisition capital, an achievement in its own right, but no one till Alex had raised the first part of a traditional search fund. This makes Alex a real trail blazer in Australasian search funds.

Alex is English, who started his career at Bestport Ventures LLP a UK private equity firm that invests in growth capital and small buyout opportunities in the UK. He moved to Australia where he worked for Partners in Performance to get hands-on operational experience including in New Zealand. He started up his search fund Voyager Equity in 2019.

He has an MBA from INSEAD and a BA from Oxford. INSEAD has one of only a few search fund courses in the world.

Links

Voyager Equity Alex's search fund website.

Search Fund Primer 2016”, Stanford Graduate School of Business.
"International Search Funds – 2016 Selected Observations", IESE, June 2016 in IESE Search Funds
Search Funds in New Zealand: what are they and a way forward (my views in a previous article)

Relay Investments
Harvard Business School Jim Sharpe in this case who I know is a supporter of Kiwi Harvard grads doing search funds.
Search Fund Accelerator (Timothy Bovard, Boston)
Second Squared Australian Search Fund Accelerator

"Perspectives on Search Funds". A podcast series featuring all things related to search funds and entrepreneurship through acquisition. Hosted by Brian O’Connor, Adjunct Professor of Entrepreneurship at the University of Chicago’s Booth School of Business and Managing Partner of NextGen Growth Partners.

"Search Funds in Australasia with Alexander Simmons" show notes.

Transcript: Search Funds with Alex Simmons

Bruce: What's a search fund?
Alex: Morning Bruce, quite simply it's a vehicle a company, whereby an individual such as myself raises some money from investors, that money essentially pays a modest salary to me and provide some some headroom for expenses while I go for a period of time typically two two and a half years to look for a company to buy.
So it's really something to facilitate the acquisition of a company which would be an existing company that's had a long operational history. And the seller is looking to retire or transition out of the business and then I would I would come along and buy
Bruce: We're sitting here in your offices in George Street in Sydney. You are the first person who's raised search capital, as we call it, in Australasia. Congratulations on that and that search capital as you say pays for your the salary these offices your traveling expenses anything else that the search capital component
Alex: You got your basic administrative expenses that you would incur such as CRM software and and other software that you might use for analysis and research you've mentioned travel and accommodations so visiting companies that might be interested in buying you typically want some cash to have for due diligence.
And generally that would be paid for out of the proceeds of the deal. So when your investors fund an acquisition they will actually cover the expenses in that but you need the cash. For two reasons, one you might be asked to pay before closing the deal so say accountants would generally want that.
But equally if you you proceed with a deal which doesn't complete then you're going to owe some people some money. So you need to make them whole.
Bruce: Of course. So you've raised the search capital you're now certain will get into each of these stages more soon...you'll find a target company, l you'll do your due diligence you'll like the company you'll think it makes good financial sense and then you'll go back to those investors and others to raise acquisition capital. What's that?
Alex: So those investors that have invested in the first stage, the search phase, they get the essentially the right of first refusal to fund that acquisition. So say I find a company we all like that they get the right to fund that it would generally not then be possible for someone external to fund that if they wish to take the whole deal themselves in the event that perhaps they fill 80% of it then someone else can come in and take the rest. So it's designed for them to be able to provide the full funding throughout the life of the investment rather than I don't expect a different group of people, you know in Phase 2 as opposed to today.
Bruce: Right, we should get into the general terms, but the the we can talk to us about the the standard terms, they called standard Stanford terms aren't they, of the step-up that the search capital investors get if they then proceeded into the acquisition capital. What do the general terms suggest of a step up and what does a step up?
Alex: So, I mean, I guess they are Stanford terms you probably wouldn't hear them called that necessarily because I think broadly speaking and most of search moment happens in the US the terms of pretty fixed. So the standard search terms are pretty ubiquitous and generally it works works like this. An investor will provide that initial capital small amount of capital to fund the search phase the looking.
Typically you'd have somewhere in the region of 10 to 15 maybe 20 investors at that point some of the US searches tend to have more as we've said they get the preferred right to invest in in the second stage, which would be the acquisition of a target company, For taking the risk in that first phase, so say they write a check for 25 or 50 thousand today that will get increased in value by 50% on acquiring a company so that 50k would get turned into 75k of shares in in the Target company. No cash would change hands for that. They're already paid for that option then like it's turned into shares.
So it's really a drag on the Searcher on the individual on your ultimate returns, but that's the compensation that those investors get for taking the earlier risk.
That's what search capital is, let's come back to the search process. We've talked about the acquisition capital. Or how the search capitol steps up into acquisition capital and that fresh acquisition capital can come in if required.
Let's go through the process a bit more. So you've you've raised the search capital. What did you say to investors? What how did you explain search to them?
Yes, a good question and certainly outside of the US and outside of business school graduates, this is relatively Niche and unknown.
What I will say about my investor group is that the vast majority of them have invested in search funds for a long time. So about half of my investors are in the US, about a third are in Australia. They were the ones who didn't know the search model, didn't necessarily know me.
So that was you know, there was this two parts to that was an education piece and there's also the the fundraising pitch new saley peice which, which is more about you know, selling kind of me and my vision as opposed to the model. Whereas speaking to investors that know search funds very well that they know the model they get it so it's really about you know, am I credible person to do this?
Bruce: Yes.
Alex: So it was actually very, you know, it was tough and interesting at the same time to to raise the local investment. You've got people who don't know the model. So need to be taught it, I think generally investors see it and they like it. It's not an accident that search funds are doing what they're doing at the moment and and generally, you know, more and more popping up outside of the US because it is an attractive investment model for the investor but then, you know the risk of a new model and the risk of an individual that perhaps they don't know or this sounds some way novel was a challenge. So I mean really you have to sell yourself fundamentally.
Bruce: You're really a bit of a trailblazer really, or pathfinder ... trailblazer.. not sure which military analogy is best but
Alex: Not sure either is that appropriate!
Bruce: It's enough finding a good target company at a reasonable investment level but also to raise search capital under a new model is certainly difficult. So you went to them and said this is what I'm doing. This is what a search fund. Looks like you raised capital from them. What did you talk about in terms of the process you would follow and what they should expect out of it out of the other end.
Alex: Yeah. So I mean I think and very helpfully, there are materials like the standard materials on the website that talk about search in all its constituent parts and
Bruce: I'll put them in the file notes
Alex: ...the returns studies which I think happened every two years. So it's quite easy to point to the metrics and say here's you know, what investors in this asset class typically would expect.
And the process and and this is really driven by searchers in the US where the market is quite, not saturated, but very well serviced both from intermediaries with businesses that are selling and people who want to buy them, is that they need to be quite differentiated and do quite deep analysis on the industries that they want or think would be the most likely to bear fruit.
And so when you talk to investors about process because fundamentally what you're coming to them where there's a process here is a process. Whereby I'm going to identify a good acquisition and you know, you're going to fund it. We're going to buy it together and I'm going to run it and so the process is very much one of developing relationships with intermediaries in part probably 20 to 30 percent of your time spent doing that but the vast majority would be picking industries, which you think are attractive that have certain characteristics, which will probably get into. Identifying companies within those Industries and basically approaching the sellers and saying hey you interested in in striking a relationship and potentially selling your business?
You know, I liken it to is like knocking on doors to go and buy a house, right you pick a neighborhood that you like and knock on the doors and say you want to help me your house. Right?
And that, too a lot of people, is is a very strange notion. I think people are less emotionally tied to their businesses than they are their houses and you know, it's not as clean a process for them to sell their businesses as it would be a house.
Bruce: It's a very honest process though. If you look at private equity, they have their their fees that they get from committed capital from the limited partners and those fees pay for them to do the same thing. Albeit, I mean, I might throw that over to you.
What's the difference between private equity and search fund?
Alex: Yeah. I mean, I think there is quite a big difference. I used to work in private equity and we'll probably get into my story a little bit later on but what's interesting for me searching is that I'm now interested in pretty much exactly the deals and the businesses that I wouldn't have been interested in before.
So if you look at private equity typically. One they're looking to assemble a portfolio. So they've been given capital by their LPs. They want to assemble a portfolio that might have some theme or other it might not but generally you talking four six eight companies in that portfolio, your whole period is they talk about three to five years most funds are ten years in life.
And when you look at search we're talking about one business, we're talking about me going in and running it.Private equity, usually they don't do that, but some some are more hands-on than others
Bruce: They sit on the board, but not
Alex: Yeah, and some do put in operating partners, generally the bigger ones in the smaller end of the market that is unusual. So I'm going to go in run this business. It's a one shot thing. I don't get to assemble a portfolio of businesses. I'm going to run one. Private Equity would look to assemble a portfolio.
And then the type of transaction I think is fundamentally quite different. I mean if you think about what I'm looking for is that succession someone is retiring they need to pass on their business. They want to realize a sale. Private Equity generally wants management in place not always but generally till usually want management with a vision that they can provide capital for. So unless it's a trade sale or PE buy and build which is really a trade sale of a different name then you know the not going to huge overlap.
Bruce: The other thing I note is that you have a lot of very high quality businesses that come on the market that might have an EBITDA of even up to five million dollars and especially in Australia, less so in New Zealand where the PE firms are bit smaller, they're just they're just not interested.
You've got a quality mature business there that that is proven itself through that high level of EBITDA and it can't include financial buyers in its buyers list. And that's why I think search funds are an exciting addition to the landscape of Australasian capital markets.
Alex: I totally agree and I think as well given the that mix of...
It's different in the UK said private equity plays lower in the UK, but here certainly you're right that like 5 million is getting towards the lower end of what they'll do but the demographics pretty obvious, right? You've got a lot of businesses that are owned by essentially Baby Boomers who will be retiring in the next few years and generally those sales aren't "I need to sell the business now".
But over that five or ten year time period a lot of these businesses will have to change hands.
Bruce: And I'm not going to dive into exit planning and Baby Boomers because I think that's a whole topic and of itself. Okay, so you have the right to search capital. You've found the target company you've acquired it. You've run it you've added value to it. What's the next stage?
Alex: Its a good question. And I think it's in many ways how I think about it to have a predetermined notion of what the end looks like is difficult because it fundamentally, it relies quite heavily on the characteristics of that business and the industry it's in.
Certainly, the investors do want to realize liquidity at some point and you know an exit of some sort, you know, there are ways and means of achieving that without actually selling the business. So you could in the US for example, some of the businesses there have done recapitalizations where they take on more debt, pay out some of the shareholders and continue.
And certainly what is true is that the biggest success stories in search have the longest hold periods? Far more often than not so investors who some of them have held things for 20-25 years still hold them.
Bruce: Sounds like a transition to permanent capital rather than than a normal search fund modeled to me.
Alex: Yeah speaking to one of my investors in the night. He said that really it's only after about four or five years that the Searcher who is now the CEO of the company then starts to really add value in a very accreative way. So you buy this business within the first couple of years you really stay on an even keel learning the business and then you start to become this this all around and well develop CEO and from year 4 onwards is when you start to make the changes and feel confident to make the big changes that can really change the outcome.
And so you're not going to realize that in three to five years.
Bruce: Yeah I you though in your case you might extend that period of time for heck even a lifetime, you end up adding further businesses to your platform to use PE- speak. But what would a standard searcher do in the US, they would hold it up for on average four or five years. I can't remember the the term and then they'd...
Alex: Yeah, its a good question, I don't I can't remember the median time to exit and probably given the the growth of such funds over the last five or ten years the stats aren't going to be that great either because we're still in the whole period for most of the more recent acquisitions.
What is more common in the US is the ability I think to refinance and take out or return capital to investors and they will still hold an equity stake in the upside. But then there's less pressure to achieve some exit if you'd had your capital back, you've got a stake in this business you very happy to watch it grow for any length of time.
Whereas I think in other geographies that there may well be a push to try and exit after five eight ten years.
Bruce: And we don't mirror the US in Australasia, but we rhyme with it don't we. I don't know how we'll rhyme in the future, but I here on the permanent..that longer term holding of search funds.
I think in the US 3-7 years is the average holding period and having made improvements whether that's at the end of the day, it's either an increase in the in the earnings and or an increase in the multiple with pay downs of debt, the Searcher would then exit hopefully at a good IRR perhaps even 28 30 33 percent and the research is not showing us what the variance is other than on a very summarized level so we can't do a Sharpe ratio comparison here of of search funds versus the funds or VC! But there's I'm sure if you look at the Stanford research, which will link to, there is a large variance that you can see there. Okay. So talk, let's go back to the parameters.
Alex: So as regards the the characteristics of the Target business
Bruce: That's right and industries etc.
Alex: So typically there are what I would describe as hard criteria. So size would be an obvious one. And so I'm looking for a business in the two to five million dollar ebitda range. That's fairly broad church.
But equally they're not too small and one of the the risks around buying a smaller business is there isn't enough management capacity within the business to actually, you know, you end up doing everything essentially on your own.
Bruce: And this key main risk, the owner dissapears, adn the value disappears.
Alex: That's right and all the relationships will be held by the exiting owner which you don't really want. And the second reason is I like to describe it as it keeps the wolf from the door and if you got earnings and stable earnings of two three million dollars EBITDA there's a margin of safety there. And really all the characteristics that I'll go on to describe is more about margin of safety.
And the correlation in the statistics and the research that Stanford and others have done is generally with a lack of failure rather than a success. So the characteristics that investors like such as high recurring Revenue low customer concentration growing industry. The correlation is stronger with not failing than it is with.
Succeeding which is it is nuanced. Right but essentially what it's saying is it keeps you in the game to get you through that period when you're learning the business and if you can basically make it through that then the longer hold periods are those that are most often do well.
What else do we have as regards the industry low low capex so high cash generation within the business.
Industry margins again. This is a margin of safety type thing. But if you've got needed a margin of 20 25 percent, that's much healthier than 5 or 10%.
As regards the company itself. What you really want is we've talked about that there is Management in place. Everything's not going to fall over as soon as the owner leaves.
That it's a simple business to understand. It's not if we have to talk about servers and things like that. I'm not comfortable doing that and you know wouldn't for see me running a business where the daily talk is about things to do with servers and widgets and and I see that's not really me.
The ownership structure needs to be reasonably clean. Otherwise, it gets very messy to do the deal and it's very expensive to do the deal.
So I think those are the main ones and really the most important ones I'll come back to are the industry criteria. So growing industry. High cash generation. High recurring Revenue. Low customer concentration those sorts of things.
Bruce: Some people would say that thetTarget business should also be reasonably simple to run. If it's too complex whether it's from a technology point of view or industry process point of view then the searcher...and you're you're you're not not a young MBA by any means Alex you're an experienced operator, but one of the ways, one of the types of people that run search funds are graduates who are only two years out of an MBA School Stanford Harvard or Insead are the big search fund universities it seems.
You're hiring a very enthusiastic extremely smart person, you're not hiring you're investing into this person, and the business owner is super experienced and knows the industry very well, but perhaps doesn't have the enthusiasm and dare I say it the super smarts of the person coming into it.
And so despite being an incredibly smart the searcher still needs to very quickly understand the business the business is to complex, it's not for a searcher or at least that's my impression reading the research.
Alex: Yeah, I think that's right to point. I think it was too simple and I suppose I don't have hard evidence on this but speaking to investors and my own observations are that anecdotally the businesses that are bought by self-funded such as and I know we haven't talked about that yet and and but these are people who have not raised capital and essentially use their own capital to go out and find something to buy, they would find generally slightly simpler businesses.
The problem there is that it's probably harder to create value, it's overly simple, and these tend to be the businesses that very cheap. So if you've got a quality business high recurring revenue, it must be providing some value to customers that is unique to a point and therefore it ain't going to be dead simple. There's got to be something that business is doing that is in some way complex
Bruce: The intangible asset part of the business price. People are always surprised how small tangible assets are of any business sale. But as you say the value is in the intangible components behind the the business processes etc.
So yeah, I don't think we covered that. You have a self-funded Searcher and a searcher who has raised search capital and seems I think in Australasia, it's more likely to be a self-funded searcher. I know of you and perhaps one other who has raised search capital, but I think we should assume that the searcher will go out to investors get commitment for the acquisition capital, well not commitment but strong interest in the acquisition capital, and then have to fund the search themselves.
Okay. Let's go through the vesting process. How do you see the vesting process?
Alex: So the Searcher incentive is I guess I would call it so what happens is it's agreed upfront as part of the model e the incentive for the searcher or searchers because often search funds are done as a pair rather than as an individual and this is fairly standard pretty straightforward an individual in the Stanford standard search fund terms can earn up to 25 percent of the upside that's generated. So you might call it similar to a carry in private equity. If you buy business for ten keeping them the simple everything that you sell it for above 10, you can get 25% of and that is vested over three different tranches of shares the first third of the 25 is done on acquisition. So we close the acquisition and then immediately the shares 8.3% is is granted straight away. The middle chunk vests over time so typically over a four-year period in a month by month, you get more shares up to the the eight and eight point three percent there.
And the final tranche is performance-related. What is fairly common again is that is done on an IRR basis of 20 to 35% the sliding scale. So if investors realized 25 percent overall on their investment, then you get that fraction so 5 over 15 percent, so a third of your allocation for that final tranch of shares. For a pair of searchers that would be 30 percent instead of 25 percent.
Bruce: And during that time you've been paid a CEO or general manager salary. So that's probably market rates if not slightly less the market rates .
Alex: I hope so. Hope its market rates
Bruce: So you are getting a salary you're not just doing this all for free with hope of just vested shares.
So Alex, when you talk to other searches, what are the things that you talk about the most?
Alex: I think that splits into two. One is established searchers who are looking for businesses. We will compare notes and talk about this practice.
I think for prospective searchers and I do get a lot of. calls with prospective searchers who are perhaps looking to raise their own search fund. We spend a lot of time on the industry and the characteristics that we've spoken about but also a lot of time on the type of search fund that they might the route they might go down and there isn't just one flavor of search funds, you know, there are different ways you can do it. So for example, I've raised funds from investors, I've raised the capital at the start. So to an extent have committed investors throughout the process. Others with briefly alluded to earlier essentially go it alone. They use their own funds. Maybe they've got a husband or wife who's is working and can support them through that period while they're not earning a salary so they will use their own funds and potentially then engage investors when they're looking for acquisition capital.
And a third route, which is starting to become more common across the world I think, is the accelerator model which is different again. So this is a bit more like a PE fund that would raise capital from investors and then they they look to recruit searches and they will fund their search and then we'll have arrange the investment for the follow-on for the acquisition.
You know, there's no right answer to to which route to go down. I think they've all got the challenges that will got the positive aspects but in those conversations with searchers, I think it's a very personal decision but also very important decision and typically one that they will spend their time thinking about.
Bruce: Related to accelerator, which is there is an accelerator program that started up in Australia, there is the what I call the search fund of funds which are just another investor really, but they've professionalized the the search fund investor approach. There's a number of large ones out of the US. They've done it very well and I understand provide very good support. There is the issue that they require a certain size. And so if you're looking on the smaller side of search funds they are probably not for you. If you looking on the larger side of search funds, and you might be coming up against private equity funds if you are, then these guys certainly are for you and I'd certainly recommend the US search fund of funds.
Alex: Yet. They're all you know, I know most of them have spoken to most of them and have one of the the recognized international investors Relay Investments as one of my investors. They have extensive experience both of investing in search fund transactions but also how you do a search. And I think it's quite good to have that mix of institutional and individual investors.
But you're absolutely right, they've got a dedicated fund that invests solely in searches and in search fund acquisitions i.e. the acquisition phase of the search fund. But there is this delicate balance then between the checks that they want to put to work In deals and you're running up against private equity here. So the reason I've chosen 2 to 5 is that range to me feels big enough at the lower end and three is probably where I want to end up big enough at the lower end yet not so big that you run into either run into private equity or you're looking at what I'd consider a little bit of a ridiculous situation where I'm taking of her business that has 700 employees and you know, I'm not sure that I'm totally qualified to do that.

Bruce: Let's talk about you. So how did you get into search funds? What was the journey.
Alex: So I I did an MBA at Insead. There is a course there.
At many of the Business Schools they run a course on ETA entrepreneurship through acquisition, which is a search fund course and I was taught by a guy called Timothy Bovard who who didn't actually do a search fund himself, but he now runs the search fund accelerator in Boston, he built up a business in France and did extremely well.
He taught me the course. I thought this is a great model. Previously, I'd spent five years in lower mid-market private equity in London. So similar size of business 20 to 30 million Sterling enterprise value type businesses. There we were looking to provide growth capital but I liked working with smaller business never really wanted to go and work for a big business did an MBA with a view to being more hands-on learning how to run businesses, because in private equity it's I'd liken it to its a bit like owning a football team you sit in the stand and you can make more money available for new players and change the management and all this stuff, but you're not really on the pitch and so I went to business school to transition to roles or a role that would bring me closer to the pitch and I think I see the CEO as being someone who's the coach in the dugout that is directing the action on the pitch and masterminds it but doesn't necessarily score the goals as it were. So that was the intention of going to business school and discovered search funds through this course at Insead and then really decided that, you know, I wanted to do that some point in the future.
Bruce: As far as I can tell, and please correct me if I'm wrong, the three headlines schools that are pushing entrepreneurship through acquisition "ETA" or search funds are Harvard, Stanford and Insead. A New Zealander that I've spoken to has just come out of Insead and got very interested in search funds and we'll see if he sets one up in New Zealand a talented young man.
I don't have his permission to give you as name but he's one of many another person, who I will give his name is Johnson Wang who came to the Harvard ETA course and he has set up a search fund searching here in Australasia based out of Melbourne. And so there are there are some strong connections there back to those schools from within New Zealand.
Funny enough I called up my--I did Entrepreneurship Masters many years ago--so I called up my old Professor and said have you heard of this and he is a gray-haired old fellow. He said no, I've never heard of this what the heck is it, so even for business academics here in New Zealand. It's a it's a new thing.
Right. So you have your view you went through private equity did your MBA at Insead? And after that you said this is me I'm going to come to Australia and set up a search fund.
Alex: Well not exactly I mean, just to jump in, I think IESE in Madrid sorry not in Madrid in Barcelona Spanish geography's let me down there, they're quite heavily into search funds and they co-author the Stanford study for the international i.e. non-US. So IESE in Barcelona, Insead and then generally yes Harvard, Stanford and I think Columbia and Booth and Chicago
Bruce: Booth in Chicago which has an excellent podcast on search funds and I'll link to that in the show notes.
Alex: So yeah and look it is becoming more, it's growing in popularity, but it's not surprising that people haven't heard of it, especially in this part of the world. So I took a job in essentially in management consulting but really heavily hands on operational consulting. So doing maintenance shift starts at 6 a.m. in New Zealand actually and and you know, Dairy and Airlines and all these things really to learn what it's like to be in a business and what running a business looks like. And then through about a year into that I was like hey, I think you know, I think Australia is actually a really great geography to do a search because the market is not saturated at all. I think the demographics are very similar to the US and you know, I think there's this massive opportunity here for for that succession good businesses private equity doesn't play too too low down in the in the Enterprise Value space.
Bruce: It's funny, I see a parallel between investment strategy whre your home market has to be Australia and New Zealand in the case of New Zealand investors in the public stock markets through portfolio building up their portfolios because there isn't sufficient diversification in the New Zealand stock markets. And so you build your home portfolio, so to speak, in Australia New Zealand. It seems to me to be the same thing will apply with search funds. New Zealand isn't sufficiently big enough to do a search fund just in New Zealand. You have to include Australia or for the Australians listing will just do Australia rather than in a small geography and indeed if you're looking to build out your target company, you may need to start in New Zealand and build out until into Australia is one potential growth strategy.
Alex: I mean did speak to someone in New Zealand and they made a very interesting point about why startups in New Zealand the ones that are successful tend to be really successful is you have to build the business to scale internationally because you don't have a choice. Your home market isn't big enough to support the growth that you need or that you want. Whereas in Australia is just about big enough. So in New Zealand, you've got to say we're going International very early sort of Xero did any did very well.
Bruce: True any final thoughts.

Alex: I think it's a very interesting time for search funds in the region. There's a lot of activity. Yes I raised the first funded search here, but I think a lot of that was that my timing was very good for the first time in my life who graduated in 2009 from University. That wasn't a great time to get a job. So I think my timing was good. but at the same time raising the funds really is just about building the car and getting it to the start line. You haven't actually started the race yet. And the searching is very much the make or break activity. So there is a fairly constant pressure that goes with that.
It's not a stressful pressure but it's an acknowledgement that the clock is ticking and you know, there's something out there that I need to find but I don't necessarily know where it is. So it's there is that pressure but I think it's a good it focuses the mind and that's not a bad thing. I

Bruce: I think it's the way of the future and it's been a pleasure interviewing you about search funds.
I think this is the way that that we'll build out those businesses that baby boomers are exiting through younger people taking them over in vehicles like such funds and I think you've described the search fund process really well. Thanks Alex. Best of luck.
Alex: My pleasure and hope has been been helpful. Thank you.