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Today’s Rundown:

• Relay Investments Europe’s insights of search fund investing

• Interview with a searcher on raising and operating a search fund

• Permanent Equity’s 2024 annual letter

• Podcast with Kellogg ETA Club Co-Presidents: 'The Journey is Worth It'

• 6 deal announcements

• 5 career opportunities

Weekly Highlights

• Matthias Knaur and Ivan Peña Uribe, founders of Relay Investments Europe, one of Europe’s most active search fund investors, shared their insights of search fund investing:

  • For entrepreneurs, the first and foremost step in any acquisition is securing a reasonable purchase price by earning the trust and confidence of the business owner

  • However, in Europe a very large percentage of acquisitions fail due to “broker deal expense”, which often stem from greed and a lack of trust between parties

  • To ensure a successful transaction, entrepreneurs must foster a deep, trust-based relationship with the owner - akin to a "blood brotherhood" - where both parties are equally committed to achieving a mutually beneficial outcome

  • Similar to traditional private equity, key drivers of return include EBITDA growth, vertical integration, financial leverage, and multiple expansion

  • These key value drivers can often be unlocked through straightforward initiatives such as the professionalization of the company's product or service offerings, the implementation of a CRM, or the introduction of robust accounting frameworks

  • True business growth begins when entrepreneurs gain a profound understanding of the existing customers and their challenges, enabling them to tailor solutions that drive sustainable expansion

  • Even if these growth levers are not fully realized, entrepreneurs can still achieve a successful exit by positioning the company for a solid valuation

• João Diogo Stoffel, founder of search fund Project To Be, shared his journey of raising and operating a search fund:

  • João moved from law to entrepreneurship, inspired by his family's entrepreneurial background 

  • He faced investor skepticism due to Portugal’s small economy and financial crisis but overcame it by securing Spanish and international backers

  • After a failed acquisition, he pivoted to early education, launching Project To Be, which faced immediate challenges from the COVID-19 pandemic

  • So far, Project To Be acquired six schools, growing rapidly through a buy-and-build strategy, focusing on leadership, culture, and operational integration

  • This search fund rollup achieved 30% annual growth and aims for an EBITDA of €5-6 million within three years

• Permanent Equity, a generational partner that invests out of 30-year funds, published their 2024 annual letter:

  • Permanent Equity achieved nearly $50M in distributable free cash flow across its portfolio, with $400M in revenue on $230M of invested capital

  • Initially skeptical of traditional board structures, Permanent Equity has now embraced a smaller, highly accountable board model; the new approach aims to balance strategic oversight while avoiding inefficiencies and misaligned incentives seen in larger boards

  • Historically focused on majority ownership, the company is now open to minority investments (30-49% equity) when the leadership team is aligned and the business meets specific criteria

  • Permanent Equity acquired Brian’s Cabinets, a luxury cabinet manufacturer, and witnessed significant growth at Pac Air/Air Cert and Rylee + Cru, showcasing successful transformations and operational improvements

  • AI has a transformative potential on business operations, but practical applications for small business are still evolving

• Search Party, video-podcast dedicated to ETA, published a new episode “Kellogg ETA Club Co-Presidents: 'The Journey is Worth It'“:

  • ETA tends to offer more "internal goods" than "external goods”, meaning that while potential money and status may not be as stratospheric as one might find in private equity or investment banking, the intangible benefits of "seeing your fingerprints all over something" are possible in spades in an ETA career

  • While raising money to acquire and run a lower-middle-market business is possible for almost everyone, it doesn't mean it's the right path for everyone

  • Success in ETA requires tremendous resilience to handle frequent rejection as well as a strong passion for business transformation

  • Many aspiring searchers underestimate the challenges of acquiring a business without a committed fund and the scrutiny they will face from investors and stakeholders

Deal Announcements

• Allie Stuckless, a ex-J.P. Morgan VP, launched Vericor Capital, a search fund focused on healthcare, business services, and life cycle services (link)

• Everfield, a rollup for vertical market and specialist software companies, acquired Matrix POS, a suite of POS, payments, and HR solutions (link)

• Interpath Advisory, a H.I.G. asset and services provider for financial advisory and restructuring services, acquired Kerkhoff Consulting, a management consultancy for purchasing and supply chain management (link)

• Synacti, a holdco that focuses on acquiring software businesses to hold forever, acquired Callbell, a SaaS for customer communication via direct messaging apps (link)

• Total Specific Solutions, a provider of vertical market software services, acquired Acto Informatisering, a software company that provides solutions for technical companies active in the installation industry (link)

• VEDA, an Investcorp asset and SaaS for HR solutions, acquired blink.it, a learning management system for e-learning and blended learning (link)

Career Opportunities

• [PE Asset] Corporate Development Director | Phipps Cameron | London (apply)

• [PE Asset] Senior M&A Manager | Camino Search | Europe (apply)

• [PE Asset] M&A Associate | Camino Search | Amsterdam (apply)

• [PE] Investment Manager | HF Opportunities | Frankfurt (apply)

• [PE] Investment Analyst | Tim Wagner Personalberatung | München (apply)

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