❤️ 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 1,016 words and takes about 5.0 minutes to read.

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

Today’s Rundown

• Vision of Spanish search & SME market

• False understanding of AI rollups

• Global rise of search funds

• Insights on running a search fund

• 5 deal / launch announcements

• 9 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

New Mittelstand - the largest community of searchers in Germany. Join their exclusive Co-Creator Program for external successors kicking off this September. Apply today!

Weekly Highlights

• Olivier Lamotte and Pepe Corral, founders of search fund TEC Capital, discussed their entrepreneurial journey and vision for the Spanish SME market:

  • TEC Capital leverages Amazon-honed principles (customer obsession, data-driven decision-making, automation) to transform acquired SMEs, demonstrating how operational excellence from big tech can create value in traditional businesses post-acquisition

  • They highlight trust-building with sellers as central, recognizing that successful SME acquisitions are about relationships and legacy stewardship, not just financial engineering

  • Fundraising is framed as building a long-term partnership, not a transaction, selecting investors for complementary “superpowers” and shared values, which is critical for enduring alignment in search funds

  • TEC Capital uses tech-enabled pipeline management for efficient deal sourcing but emphasizes that while AI and systems aid search, they do not replace the human element essential in search fund acquisitions

  • They view search funds as a path to thoughtful, long-term growth by revitalizing “sleeping beauty” SMEs with data and process improvements while retaining customer closeness and founder legacy

• Nathan Benaich, founder of Air Street Capital, and Nikola Mrkšić, CEO of PolyAI, shared what investors get wrong about AI rollup of services firms that can trade more like software companies:

  • The “AI rollup thesis” assumes buying low-margin, human-heavy service firms (e.g., BPOs) and adding AI will transform them into high-margin, software-like companies, but this conflates operational efficiency with business model transformation

  • Public market evidence (e.g., Concentrix, Genpact) shows that despite AI deployments, BPOs continue trading at low multiples (5–23x EV/EBITDA) vs. true software firms (22–92x) because automation alone does not change service-based business fundamentals

  • Structural constraints in services (hourly billing models, client control over processes, low switching costs) create misaligned incentives that limit the effectiveness of AI-driven margin expansion, as reducing headcount often cannibalizes revenue

  • PolyAI’s exploration of buying contact centers demonstrated that partnering with BPOs while remaining a software company retains higher scalability and valuation potential, as true transformation requires AI-native business models, not retrofitting legacy services

  • Historical patterns reinforce that the real AI opportunity lies in building new, AI-native companies, while “AI rollups” will remain tech-enabled PE plays with capped valuations rather than scalable software platforms

• Forbes published an article about the rise of search funds: private equity's hidden gem:

  • Search funds deliver strong, consistent returns (35%+ IRR, 4.5x ROI) across cycles by enabling operators to step directly into CEO roles in stable, cash-flowing SMEs, aligning incentives more deeply than traditional PE

  • The model is maturing with greater diversity (17% of new fund managers in 2023 were women) and structural innovation (self-funded, operator-led program-backed, long-term hold variations), making it more inclusive and adaptable

  • Search funds are uniquely positioned between entrepreneurship and PE, allowing operators to earn equity while giving investors early access to overlooked businesses in the lower middle market

  • Execution risk remains high, with only ~60% of searchers closing a deal, and post-acquisition operational leadership requiring intensive effort, reinforcing the need for a portfolio approach by investors

  • The model’s durability lies in its ability to pair entrepreneurial drive with investor backing while revitalizing SMEs, making it an increasingly relevant and resilient path for long-term value creation in PE

• Juan de Dios Aguilar, a successful searcher, joined a fireside chat with Tom Matlack and shared his insights on running a search fund:

  • Trust with investors is critical to move beyond the typical 3–5 year exit, enabling long-term holds and compounding value once operational understanding matures

  • “Bullets before cannonballs” applies well to search funds: test the model by gauging investor appetite first in unproven geographies before committing fully

  • Leading acquired businesses with trust rather than fear builds a culture that sustains operational improvements, which is often overlooked in financially driven search models

  • Focusing on “Who Not How” accelerates the operational phase of search funds, reducing founder bottlenecks and building networks of expertise post-acquisition

  • Culture and employee pride are key drivers of durable operational success; search fund operators should actively cultivate these rather than focusing solely on financial engineering

Deal / Launch Announcements

• 🇬🇧 Melda Eren launched Perennia Capital, a sector-agnostic search fund (link)

• 🇫🇷 Sylvain de Backer launched BACKER TRANSMISSION, a search fund focused on B2B services, manufacturing and logistics (link)

• 🇫🇷 David Briend launched Briend & Associés, a sector-agnostic search fund (link)

• 🇬🇧 Kantik Capital, a search fund managed by Olivier Stapylton-Smith, and Mirabel Group, a search fund managed by Georges Nakhle, acquired Rhino Greenhouses Direct, a greenhouse retailer and manufacturer of Rhino Greenhouses (link)

• 🇬🇧 Mentmore Capital Partners, a search fund managed by Benjamin Melville and Xan Lowe, acquired Rowleys of Northwich, a provider of contract hire and fleet management services (link)

Career Opportunities

• [PE] Investment Associate | Novastone Capital | Europe (apply)

• [PE] Investment Intern | Armira | Munich (apply)

• [PE] Investment Intern | Armira Growth | Munich (apply)

• [PE] Investment Intern | Eurazeo Growth | Berlin (apply)

• [PE] Investment Intern | One Equity Partners | Amsterdam (apply)

• [PE-Asset] Corporate Development Manager | Field | London | £105-120k + bonus + equity (apply)*

• [PE-Asset] Strategy & Integration Lead (Interim) | Camino Search | London | £1000-1300/day (apply)*

• [PE-Asset] Head of Controlling (Interim) | Privatal | Frankfurt | €700-800/day (apply)*

• [PE-Asset] M&A Working Student | accompio | Munich (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.