Learning about the Search Fund Model at Three Pillars Capital

Name: Edward Tao Zhu

Year: Sophomore

Major(s): Economics

Minor(s): Asian Literature & Culture

CFS Class: Business Field Studies

Employer: Three Pillars Capital

This fall quarter I was interning at Three Pillars Capital, a search fund piloted by an ex-military investment banker. It was interesting to learn about the search fund model, which in essence is a private equity firm interested in acquiring and operating only one company. The search criteria is mostly similar to PE, and we mostly target companies that have strong, recurrent revenues in a fragmented market that is defensive against economic downturns. The intern pool consisted of 4 interns, evenly split between NU and UChicago. The primary task of interns is to facilitate the lead generation process. The process includes pitching suitable industries, creating a contact list, and contributing to the CRM/campaign work. There are also other kinds of projects including industry roadmaps, and occasionally the interns get the chance to dive deeper into companies through reviewing CIMs and other materials. My experience at the search fund was positive, though it was somewhat repetitive at the end. However, what the experience empowered was a deeper understanding of the current capital market. With a mountain of available capital and low-interest rates, valuations are being steadily driven upwards. Companies are willing to pay higher than ever in the recent decade for the same company. For my firm, it was extremely hard to compete for bids brought to us by investment bankers because established private equity firms are willing to pay a lot more than before. Consequently, the operating aspect (of portfolio companies) has become a more and more important part of private equity as IRR is being driven down by expensive purchase prices.