❤️ 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 792 words and takes about 3.5 minutes to read.

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

Today’s Rundown

• Learnings of a bankrupted search fund journey

• 7 traits that separate the best searchers from the rest

• AI rollup economics

• 3 deal / launch announcements

• 8 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

• Searchers Justin Willess and his wife, purchased a construction subcontracting business and faced a nightmare scenario that bankrupted their acquisition shared their learnings and insights:

  • Justin and his wife turned a small construction business into a data-driven organization, growing revenues from $11M to $18M and EBITDA from under $1M to $1.8M, but was ultimately forced to shut down due to legal challenges

  • Poor deal structure and inadequate legal and financial due diligence led to significant vulnerabilities, including a problematic sweep account, a Confession of Judgement clause, and unanticipated working capital needs

  • The sellers, emotionally attached and unwilling to relinquish control, undermined the business after the sale, leading to conflicts, sabotage, and a failure to honor agreements, including withholding necessary funds and manipulating financials

  • The company implemented substantial operational improvements, including modern software systems for accounting, project management, and inventory, which helped scale the business but were ultimately overshadowed by external issues

  • Legal battles, a failure to declare Chapter 11 bankruptcy early, and financial mismanagement drained resources, leading to significant losses, including $100K+ in legal fees and a $2M gap in receivables

  • Justin and his wife learned the critical importance of trust, intuition, and solid asset protection, recognizing the necessity of having a strong advisory team and clear protections in place before major deals

• Grant Hensel, a SMB/ETA investor, spoke to 118 searchers and noticed 7 traits that separate the best from the rest:

  • They're highly driven and have stories of overcoming tough challenges to succeed

  • They know exactly why they want to buy a business - seeking independence and maximizing potential

  • They're realistic with reasonable projections, focused on minimizing downside risk, trusting that the upside will follow

  • They aren’t aiming for a quick roll-up, especially without prior industry experience; buy one first, not ten

  • They build strong personal relationships with sellers, with the best deals often being chosen for reasons beyond financial offers

  • They’re transparent, acknowledging business risks and seeking help to vet opportunities

  • They're open to feedback, continuously learning from industry experts and asking questions to gain knowledge

• Pitchbook published an opinion on how AI rollup hype tests the limits of VC economics:

  • General Catalyst has committed $1.5 billion from its $8 billion fund raise to AI-driven rollups, and Thrive Capital is raising over $1 billion for the same strategy, showing strong investor interest in this emerging model

  • Finnish VC firm OpenOcean has raised €100 million to pursue AI rollups, emphasizing that even smaller firms are getting involved in this trend

  • According to McKinsey, AI could unlock up to $4.4 trillion in productivity growth, while a Salesforce survey reveals that 91% of small businesses using AI report revenue growth, underlining the potential of AI to transform industries

  • Property management startup Buena raised $58 million for its rollup strategy, highlighting how AI can enhance efficiency in fragmented industries traditionally resistant to new technology

  • However, AI rollups face challenges like substantial capital requirements, ownership mismatches, and increased competition from private equity firms, raising questions about whether this model can deliver the high returns typically expected from venture capital investments

Deal / Launch Announcements

• 🇬🇧 RD Capital Partners (RDCP), managed by Sameer Rizvi and Iryna Dubylovska, has acquired DJL Petfoods Ingredients, a supplier of premium pet food ingredients and raw materials (link)

• 🇳🇱 Tasman Succession, a search fund managed by Alex Gready and Berend Westerveld, acquired Zeker & Mobiel, a plumbing service provider (link)

• 🇵🇱 Jakub Złocki and Mikołaj Konior launched Vistula Horizon Partners, a sector-agnostic search fund (link)

Career Opportunities

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

• [PE] Investment Associate | Golding Capital Partners | Munich (apply)

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

• [PE] Investment Intern | Tikehau Capital | Paris (apply)

• [PE] Investment Intern | Golding Capital Partners | Munich (apply)

• [PE-Asset] CFO | Rainmaker Society | Dortmund/Frankfurt (apply)

• [PE-Asset] Chief of Staff | Rainmaker Society | Wien (apply)

• [PE-Asset] Value Creation Associate | HF Performance Partners | Hannover (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.