❤️ 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 913 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

• Development of EBITDA margins in an ETA business

• Search fund traction in the UK

• HoldCo exist after 23 months

• Step-up mechanism in ETA

• 3 deal / launch announcements (1 search fund exit!)

• 5 new career opportunities (1 search fund opportunity!)

Your Self-Funded Acquisition Starts Here. Few spots left in New Mittelstand’s exclusive 3-month fall program for 8 hand-picked successors. Apply now to secure yours!

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

• Yale School of Management published a paper on Expanding EBITDA margins in an ETA business? Don’t expect it, but don’t lose hope, either:

  • Based on a dataset of 44 ETA firms, actual EBITDA margins declined by ~10 percentage points post-acquisition, despite CEOs forecasting an average 6-point increase

  • Only 12 of 44 firms achieved margin growth, and 32 experienced contraction

  • Asset turnover (revenue ÷ assets net of cash) increased by ~35% from years +1 to +4 post-acquisition in a 33-firm subsample, indicating improved operational efficiency despite margin declines

  • Non-debt leverage (assets net of cash ÷ equity + net debt) also rose by over 30% during the same period, reflecting strategic use of operating liabilities to fund growth without increasing traditional debt

  • These combined improvements in turnover and leverage more than offset declining margins, leading to a rising EBITDA ROIC over the holding period

  • Across 33 exits, average entry EBITDA multiples were ~6.0x while exit multiples averaged ~14.0x, demonstrating substantial multiple expansion that was a major contributor to investor returns

• Mark Rowntree, a M&A and growth adviser for SMBs, shared his view on ETA in the UK: The buyout model quietly gaining traction:

  • ETA buyers in the UK typically fund a ~2-year search with £500k in working capital and earn ~£80k/year during the search

  • Acquisitions are structured with 70–80% cash on completion, 10% vendor rollover, and 10–20% earnout

  • Sellers often benefit from more upfront cash than in traditional PE deals, and buyers tend to acquire at 20–25% lower EBITDA multiples compared to PE, making ETA deals more accessible and attractive for succession-lacking SMEs

  • Orca Equity Partners emphasizes backing individual operators with strong emotional intelligence, humility, and perseverance rather than generalist funds - most candidates have elite MBAs and forgo significantly higher salaries

  • Debt is often less aggressive than PE-style financing, with increasing support from banks familiar with the ETA model

  • ETA investments, according to US data cited, have historically delivered ~4.5x returns - significantly higher than UK PE averages (2–3x) - by unlocking operational value through talented leadership and hands-on execution in under-managed SMEs

• HoldCo Builders with PrivateEquityGuy released a new podcast episode with Mike Botkin on how he left real estate PE, bought 6 companies and sold to a strategic buyer in 23 months:

  • Mike Botkin acquired his first business (a $780K revenue landscaping firm) without prior industry experience, no personal capital, and no debt - eventually scaling through 6 acquisitions and exiting in under 2 years, demonstrating that speed, focus, and operating leverage can generate fast and significant outcomes even from modest starting points

  • His approach prioritized rigorous customer-level unit economics, dropping ~$3M of unprofitable recurring revenue over time and actively terminating bottom-quartile clients every quarter, while targeting and winning large commercial accounts, resulting in margin expansion and high-quality revenue concentration

  • All acquisitions were structured with no debt and required sellers to stay involved post-sale

  • Botkin used a high-conviction, all-cash model to move quickly, avoid lender constraints, and optimize operational flexibility - a stark contrast to common SBA-funded buyouts

  • Botkin emphasized “burn the boats” commitment, giving up majority equity in exchange for institutional backing, and operating with intense, maniacal focus - eschewing passive holdco models and advocating for concentrated effort and control as the pathway to outsized returns

• Grant Hensel, a successful SMB investor and entrepreneur, shared an explanation about step-ups in ETA:

  • In self-funded search, the "step up" mechanism effectively reduces the investor's entry multiple - e.g., a 4x acquisition can result in a true investor multiple closer to 2x - by allocating more post-close equity to the searcher without requiring additional capital

  • For searchers, step up ensures their equity stake reflects the value they create by sourcing, negotiating, and operating the deal - aligning incentives without diluting investor protections

Deal / Launch Announcements

• 🇪🇸 SALVAVIDAS CARDIO, leading AED program manager and an asset of search fund Vesta Capital Partners managed by Carlos Fernandez, has been exited to Safe Life, a group of companies focused on delivering life-saving equipment and training (link)

• 🇨🇭 António Carvalho launched AC Capital Partners, a search fund focused on healthcare (link)

• 🇬🇧 Robert Shore launched Shorefox Partners, a search fund focused on health & biotech (link)

Career Opportunities

• [Search Fund] Search Fund Working Student | Faulhaber Nachfolge | Berlin (apply)

• [PE] Investment Intern | Cinven | Frankfurt (apply)

• [PE] Investment Intern | 3i Group | Frankfurt (apply)

• [PE-Asset] Head of M&A | VentureLink | Frankfurt (apply)*

• [PE-Asset] M&A Manager | hallo theo | Berlin (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.