❤️ 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 1,023 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

• The holdco conundrum

• Search fund boardroom toolkit

• Beyond the search fund hype

• Search funds became quietly professionalized

• 2 deal / launch announcements

Database Overview

Get access to our two databases of +400 search funds and +380 search fund investors as a premium subscriber.

• Preview search funds database

• Preview search fund investors database

Weekly Highlights

• Cape May Wealth published a piece on the holdco conundrum:

  • A holdco offers permanent capital, no forced exits, and expense pass-through at the holding level, which is attractive to GPs - but from an LP perspective, indefinite lock-ups, lack of redemption, and unclear liquidity often reduce flexibility versus standard 10–15 year PE fund lives

  • Cost structure is a major risk; unlike capped 1–2% management fees in funds, holdco-level expenses (salaries, offices, deal costs) are uncapped and can materially consume early cash flows, especially when portfolios are small - eroding EBITDA before any multiple arbitrage can matter

  • Long-term compounding and synergies are overstated in practice as most holdcos acquire stable, slow-growth businesses, where value creation is front-loaded in the first 2–3 years; beyond that, incremental growth after costs is often weak, making sell-and-reinvest more attractive than permanent hold

  • Multiple expansion is fragile and can reverse since public-market corrections (e.g., post-2021) can cause listed holdco comps to trade at lower multiples than private targets, breaking the expansion thesis and leaving acquirers unable to justify entry prices; many public holdcos trade at persistent discounts to NAV

  • For aspiring GPs without exceptional reputation, holdcos are often the hardest structure to fund; more “market-standard” paths - single-platform MBOs, deal-by-deal independent sponsor models, or traditional funds - typically offer higher fundraising success probabilities, clearer governance, and better LP alignment than exotic, founder-friendly holdco structures

• Richard Augustyn, an experienced serial entrepreneur, shared a search fund boardroom toolkit:

  • Board effectiveness is deteriorating as the search fund ecosystem scales

  • CEOs report needing more coaching, while experienced directors are overstretched and newer directors lack training - eroding trust and performance that historically defined search fund boards

  • High-performing search fund boards are intentionally small and skill-balanced, typically 3–5 members, blending operators, investors, and selectively experts or locals, with clear role coverage (e.g., lead director, veteran, emerging director, confidant) rather than symbolic seats

  • Being a director is a material commitment of ~80–120 hours per year, including quarterly formal meetings (at least two in-person), monthly or biweekly CEO check-ins, and hands-on follow-through (introductions, sales comp design, hiring guidance)

  • Board discipline and preparation drive value as best practice includes distributing materials 7+ days in advance, focusing meetings on decisions and strategy (not reporting), reviewing full financials vs. budget and prior year, and holding non-executive sessions to deliver structured CEO feedback

  • Strong boards institutionalize accountability and renewal, with quarterly CEO feedback, annual formal performance reviews, annual board self-assessments, and term limits - treating governance as an evolving system rather than a static structure

• Agame Search Fund, a search fund investor, shared their opinion on beyond the hype: why Yale’s search fund study matters for serious investors:

  • Yale’s study of ~1,200 search fund investments and $700M+ deployed capital reports a 2.5× weighted-average MOIC, materially below the 4.5–5.0× figures often cited from Stanford - because Yale measures actual investor experience, not deal-level outcomes that assume participation in every home run

  • Search fund returns are dominated by idiosyncratic (operator) risk, not market beta

  • Portfolio outcomes hinge on CEO execution, and missing even one top-decile performer can dramatically depress overall fund returns

  • Capital inflows have intensified competition, with roughly $1B of new capital entering the asset class every ~3 years, diluting talent and eliminating the early-era advantage of simply “buying stable businesses cheaply”

  • Sustainable upside now requires active value creation, not passive ownership; to achieve the model’s 3–5× target outcomes, investors must help CEOs professionalize sales, upgrade systems, and selectively execute M&A - “alpha” has shifted from entry price to post-close execution

  • The consistent driver of outperformance is high-touch mentorship because top outcomes correlate with investors spending time, judgment, and operational support during crises, reframing search as an active partnership rather than a passive capital allocation exercise

• José Moreno, managing director of search fund investor AIJ Global on 2025 – the year search funds quietly professionalized:

  • 2025 marked a structural step-change in professionalism as valuation multiples stabilized for the first time in ~4 years, interest rates forced tighter capital discipline, and QoE became non-negotiable even for sub-$5M EBITDA deals, signaling institutional-grade underwriting moving downstream

  • Search went global at scale; nearly 30% of funded searchers now operate outside the U.S. & Western Europe, targeting fragmented markets with better pricing - ~5.1–7.1× EBITDA in Asia-Pacific vs. 6.5–8.5× in the U.S. - especially in healthcare services, BPO, niche manufacturing, and maintenance-heavy sectors

  • The “MBA-only” searcher profile faded as 2025 saw a surge in mid-career operators (10–15 years experience) and industry specialists, enabling more complex deals, higher use of earnouts and seller rollovers, and comfort buying larger, operationally nuanced businesses

  • Capital structures converged toward micro-PE; self-funded search grew meaningfully, syndicated equity became standard, and family offices increased allocations; average leverage moderated to ~4.1× EBITDA, improving deal certainty and making searchers more attractive sellers’ counterparts than traditional PE

  • Tech became table stakes, not an edge: 68% of investment firms now use AI for sourcing and market analysis, automated QoE cut diligence timelines by 25–40%, and real-time operating dashboards reshaped first-100-day execution - making speed, data quality, and precision the new baseline for competitive searchers

Deal / Launch Announcements

• 🇬🇧 Maple House Capital, a search fund managed by Innocent Udia, acquired Millenium Site Services, an engineering, repair, maintenance, and painting services business in the rail industry (link)

• 🇮🇹 Star First Partners, a search fund managed by Alessandro Conti, acquired Olistika, a super-premium pet food company (link)

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.