❤️ Thanks to everyone who brought our newsletter to the attention of new readers last week. The “share function” can be found at the end of the email. Today’s newsletter counts 803 words and takes about 4.0 minutes to read.

In case you missed out on our last episode, please find it here.

Today’s Rundown

• Search fund performance equity calculation

• Search funds and private credit

• Permanent holdco insights

• 4 deal / launch announcements

• 5 new career opportunities

Database Overview

Get access to our two databases of +350 search funds and +370 search fund investors as a premium subscriber.

• Preview search funds database

• Preview search fund investors database

Weekly Highlights

• Tom Matlack, a seasoned serial entrepreneur, shared an update of his idea of how to calculate search fund performance equity:

  • Tom Matlack updated his original search fund performance equity formula to better align incentives, addressing the increasing complexity of cash flows and the industry's current focus on MOIC rather than IRR

  • The original formula imposed a 35% IRR hurdle for exits within five years (to discourage early exits) and a 20% IRR hurdle thereafter; however, the updated approach shifts entirely to a MOIC-based framework, which reflects how outcomes are commonly discussed today

  • The new proposed MOIC thresholds for performance equity are (with linear interpolation between these points):

    • 20% equity at 3.0x MOIC

    • 40% at 3.5x

    • 60% at 4.0x

    • 80% at 4.5x

    • 100% at 5.0x or above

  • A minimum IRR of 20% at final exit remains a prerequisite for any performance equity to be earned, but both MOIC levels and IRR requirements can still be negotiated case-by-case

  • This updated formula is intended primarily for traditional search fund holding periods of 5–10 years, while acknowledging that alternative models may be needed for significantly longer hold periods of 15–20 years

• Tara Sammons, journalist at Bridging & Commercial, published an interview on search funds and private credit’s growing role in entrepreneurial acquisitions:

  • Search funds traditionally rely on upfront equity to finance both the search and acquisition phases, but private credit (debt financing) is increasingly supplementing or replacing equity, often structured with 1:1 debt-to-equity ratios and flexible terms such as interest-only periods and balloon payments

  • Lenders like Triple Point concentrate heavily on evaluating the entrepreneur’s operational capability and leadership potential, as they effectively function as the business's new management - making individual due diligence central to the underwriting process

  • Typical acquisitions involve SMEs with stable, recurring revenue and predictable cash flows, often in sectors like healthcare services, tech-enabled services, and B2B verticals, with limited emphasis on sector specificity but high focus on revenue durability

  • The UK market remains nascent with limited competition; niche lenders and some family offices are active, while high street banks generally avoid the space due to perceived risk

  • Currently constituting about 10% of their SME lending, Triple Point sees search funds as a growing niche, with expansion contingent on sourcing strong entrepreneurial operators and building internal experience and track record

• BizCrunch published a new M&A Zing podcast episode with Nadim Kapadia on the permanent holdco - healthcare, early years & the long game:

  • Nadim Capadia is pursuing a self-funded holdco model launched in 2025, favoring autonomy, flexibility, and higher personal equity retention over the traditional investor-backed search fund structure

  • His search focuses on smaller SMEs (lower EBITDA thresholds than traditional search funds), primarily in healthcare (care homes, domiciliary care) and early years education, with qualitative emphasis on company culture, management strength, staffing, regulatory performance (CQC, Ofsted), and seller alignment

  • To compensate for the absence of institutional backers, Nadim leverages his personal network, diplomatic background, and independent advisory relationships to build a deal team and access sector expertise

  • His sourcing strategy is multi-pronged, combining broker-led deals (favoring smaller, independent brokers for more qualified leads), proprietary outreach (direct mail, email campaigns via BisCrunch), attendance at industry events, and buy-side advisory support using AI-based targeting tools

  • Nadim’s approach emphasizes patient, long-term ownership with a buy-and-build strategy, operational value creation, and seller empathy; he views resilience, daily incremental progress, and a marathon mindset as critical to navigating the challenges of the self-funded ETA journey

Deal / Launch Announcements

• 🇩🇪 Don Holland and Henrik Buehler launched H&B Mittelstandspartner, a sector-agnostic search fund (link)

• 🇬🇧 Alec Dent launched 1868 Capital, a sector-agnostic search fund (link)

• 🇫🇷 Clément Béguin and Mikaël Boulon launched Lapiaz Transmission, a sector-agnostic search fund (link)

• 🇪🇸 Olivier Lamotte and Pepe Corral launched TEC Capital, a sector-agnostic search fund (link)

Career Opportunities

• [PE] Investment Manager | PER | Essen (apply)*

• [PE] Investment Associate | PER | Munich (apply)*

• [PE] Senior Investment Analyst / Associate | PER | London (apply)*

• [PE] Investment Intern | Adiuva Capital | Hamburg (apply)

• [PE-Asset] CFO | Camino Search | Utrecht (apply)*

_*Headhunter

Any suggestions, questions, or criticism? Any topics that should be covered in the future? By answering this email, you’re sliding right into my inbox.