This article was first published on Search Funds News.
During my career as both an investor at Moonbase Capital and an operator who has scaled and sold SMEs to global companies, I’ve developed a unique perspective on board effectiveness. Currently serving on two boards of search fund-acquired companies, I’ve experienced firsthand how the right board composition can dramatically accelerate growth—and how poorly structured boards can create unnecessary friction. After reviewing the insightful research paper “Search Fund Company Boards: How CEOs Can Build Boards to Help Them Thrive” by AJ Wasserstein and Jason Panaos from Yale School of Management, I found many of their findings aligned with my real-world experiences. Let me share the crucial insights about search fund boards that can transform company performance, along with practical applications I’ve observed in the field.
1. The Board’s Role Extends Far Beyond Basic Governance
The most impactful search fund boards transcend basic governance responsibilities. For first-time CEOs navigating the complexities of running an acquired business, boards should function as a trusted advisory group rather than just oversight. Effective boards provide mentorship, strategic guidance, and critical connections that help CEOs avoid common pitfalls. As Wasserstein and Panaos note, “the most effective boards do more than oversee – they actively support CEOs in strategy, leadership development, and making critical introductions.” However, maintaining the right balance is crucial. While providing support, boards must avoid micromanagement. The best boards offer directional guidance without inserting themselves into day-to-day operations, creating value through strategic input rather than operational interference.
2. Board Composition Is More Important Than Board Structure
Many search fund boards begin heavily weighted toward investors—understandable given their capital protection interests. However, this often creates an imbalance that limits the board’s overall effectiveness. Search fund CEOs benefit tremendously from having board members with hands-on operational experience who have built and scaled businesses themselves. Including at least one or two independent directors with industry-specific knowledge creates balanced perspectives and provides neutral voices during inevitable investor-CEO disagreements. The ideal search fund board combines financial oversight with operational expertise, industry knowledge, and specific functional skills relevant to the company’s growth objectives. This diversity of experience creates a more rounded advisory team capable of addressing multifaceted business challenges.
3. CEO-Board Relationships Must Be Built on Trust and Transparency
Even perfectly structured boards fail without strong CEO-board relationships built on mutual trust. The worst scenario is when CEOs view their board as evaluators they must impress rather than advisors they can leverage. Successful CEOs engage proactively with board members, especially during challenging periods. By sharing authentic updates—including problems and uncertainties—CEOs unlock the board’s full potential as a problem-solving resource. The most productive board dynamics emerge when CEOs feel comfortable being transparent, knowing they’ll receive constructive support rather than judgment. This trust-based relationship dramatically increases a board’s impact on company performance and enables deeper, more meaningful strategic conversations.
4. Boards Should Evolve Through Company Growth Phases
A search fund company’s board requirements change significantly as the business matures. In early stages, investor representation often dominates to protect capital and provide financial guidance. However, as companies scale, boards must evolve to include more operational expertise and industry-specific knowledge. The research emphasizes that “as businesses grow, their boards must grow with them – shifting from capital protection to value creation.” Boards that fail to adapt can become impediments rather than accelerators. Forward-thinking CEOs anticipate these transition points and proactively restructure their boards to support upcoming growth phases. This evolution might include adding executives with experience in specific growth levers relevant to the company’s strategy, whether that’s geographic expansion, product development, or acquisition integration.
5. Active Boards Create Significantly More Value Than Passive Ones
The contrast between actively engaged boards and those that merely fulfill procedural requirements is stark. Passive boards limit themselves to quarterly meetings and routine reviews, while active boards continuously contribute through ongoing engagement. The most valuable board members provide support between formal meetings—making introductions to potential clients or partners, offering guidance on key hires, and serving as sounding boards for strategic decisions. This level of engagement transforms a board from a governance requirement into a powerful competitive advantage. In my experience, the search fund companies that scale most successfully typically have deeply engaged boards where members maintain regular communication with CEOs and provide real-time input on emerging opportunities and challenges.
6. Independent Directors Provide Critical Balanced Perspective
Many search fund companies delay adding independent directors, but this represents a missed opportunity. Independent board members bring objective perspectives unclouded by investment concerns, helping balance financial priorities with operational realities. These directors often serve as valuable mediators when conflicts arise between investors and management. By focusing purely on what’s best for the company’s long-term success rather than any single stakeholder’s interests, independent directors help maintain strategic alignment during challenging periods. For search fund CEOs navigating their first leadership role, independent directors can also provide mentorship without the complications that sometimes arise from investor relationships.
7. Board Meetings Should Focus on Strategic Discussion, Not Reporting
Effective board meetings prioritize strategic discussions over operational reviews. Rather than spending valuable face time reviewing detailed metrics that could be shared in advance, the best meetings tackle significant challenges and opportunities. Many productive board meetings begin with variations of: “What keeps you up at night?” This approach shifts the conversation from reporting to collaborative problem-solving, making meetings genuinely valuable rather than perfunctory. Savvy CEOs distribute materials well before meetings, establish clear agendas focused on decision points rather than updates, and reserve majority of meeting time for forward-looking strategic discussions rather than backward-looking performance reviews.
8. The Best Boards Develop CEOs into Stronger Leaders
For many search fund entrepreneurs, acquiring a company represents their first CEO role. The transition from searcher to chief executive involves a steep learning curve, and effective boards recognize their crucial role in supporting this leadership development. Beyond business guidance, strong boards help CEOs develop critical leadership capabilities around team building, strategic prioritization, and organizational management. This developmental support helps first-time CEOs mature more quickly into confident leaders capable of driving sustainable growth. The most valuable boards understand that supporting the CEO’s personal development directly impacts company performance and creates long-term value for all stakeholders.
9. Effective Governance Creates Accountability Without Bureaucracy
Effective governance establishes accountability without creating unnecessary administrative burden. When board roles are clearly defined and decision processes are well-structured, governance becomes an enabling framework rather than operational red tape. Healthy boards cultivate a culture of constructive challenge where assumptions are tested and decisions are refined through productive debate. This accountability mechanism improves decision quality without undermining CEO authority when implemented properly. The key distinction is between oversight that improves performance versus oversight that simply creates additional work. The best boards focus relentlessly on the former while eliminating the latter.
10. Balance Investor Expectations with Long-Term Value Creation
While search fund investors rightfully expect strong returns, the most sophisticated board members balance short-term performance with long-term value creation. This perspective recognizes that sustainable growth sometimes requires patience and reinvestment. Effective investor-directors serve as strategic partners rather than just financial monitors. They understand that maximizing long-term company value—not just quarterly EBITDA—ultimately delivers the best investor returns, and they govern accordingly. This balanced approach helps CEOs make decisions that build enduring value rather than chasing short-term metrics at the expense of sustainable growth.
Final Thoughts on Building Your Ideal Search Fund Board
For search fund entrepreneurs, a well-constructed board represents perhaps the single most valuable asset beyond the business itself. When properly structured and engaged, your board can dramatically accelerate growth, provide critical support during challenges, and help you develop as a leader. My advice to search fund CEOs is straightforward: invest significant time in board construction, engage your directors deeply and authentically, and remember that your board should function as a strategic advantage rather than a governance requirement. This brings us to an important industry question: Are search fund-acquired companies currently building boards that maximize their potential? In many cases, I see room for improvement—particularly in adding independent directors earlier and evolving board composition more proactively as companies scale. The search fund model has matured significantly, but board construction practices haven’t always kept pace with this evolution.
