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Today’s Rundown:

• Newton Equity Partners on search funds as an asset class

• Search fund lecture of the University of Texas

• Launch of IE Business School’s ETA lab

• 6 deal announcements

• 5 career opportunities

Weekly Highlights

• Luis Prados de la Guardia, co-founder of search fund investor Newton Equity Partners, shared how search funds as an asset class fits into the alternative investments space:

  • Search funds provide uncorrelated returns, inflation resilience, and access to high-growth opportunities outside public markets

  • Search funds offer a niche yet highly effective investment model that blends the best of Private Equity (PE) and Venture Capital (VC) while offering superior risk-adjusted returns

  • The reasons for this superior risk-adjusted returns are:

    • Valuation arbitrage due to attractive EBITDA multiples and relatively low competition for deals in range of €1m-€5m EBITDA

    • Efficient capital structures with moderate leverage and disciplined capital allocation enhance downside protection while maintaining significant equity upside

    • Incentive alignments between entrepreneur and investors fosters long-term value creation

    • Operational upside professionalizing management, optimizing cost structures, and deploying data-driven growth strategies

  • Historical data indicates an average IRR of around 30% worldwide (with US & Canada being around 70% of the total market in terms of search funds raised and acquisitions performed), with an average MOIC of 4.5x, often exceeding PE averages

• The University of Texas ETA Club published a search fund and ETA overview presentation on Youtube:

  • How to buy and run a small business is the easy part; the real challenge is getting to a level of conviction where someone is willing to leave a traditional career (e.g., consulting, investment banking) and take the plunge into buying a business

  • Multiple arbitrage opportunity is a core reason why buying and consolidating fragmented industries (like HVAC, SaaS, and pest control) can be lucrative

  • One of the biggest risks for search fund investors is the desperation of searchers at the end of a search period, where some people may feel forced to buy "anything" just to close a deal

  • Private equity firms are moving into smaller deal markets, creating competition for search funds but due to the “silver tsunami” - many baby boomers are retiring without succession plans - there are still good acquisition opportunities available

  • Search fund entrepreneurs should think more like operators, not innovators:

    • Don’t focus on bleeding-edge tech, but rather on best practices

    • Understand that not all sellers are eager to sell, and deals require trust-building

    • Recognize that the first year of owning a business can be challenging, with potential revenue dips due to transition issues

• IE Business School launches a Entrepreneurship through Acquisition (ETA) Lab:

  • This integrative lab is designed to cultivate entrepreneurial skills, with a strong focus on strategy, financial analysis and valuation, and deal-making expertise

  • For this pilot edition, IE Business School has received 112 applications

  • Search funds are emerging as a prominent career path for students, with Spain playing an increasingly significant role in this growing sector

Deal Announcements

• 🇪🇸 Rebeca Pinheiro, a MIT MBA fellow and finance professional, launched Madrid-based RNP Growth, a search fund exclusively focused on B2B companies (link)

• 🇫🇷 Cegid, a KKR and Silver Lake asset and leader in cloud business management solutions for finance, acquired PHC Software, a software of business management tools that empower companies to adapt to change (link)

• 🇩🇪 GENUI, a small cap private equity firm focused on combining strong market financial returns by genuinely promoting social and ecological impact objectives, acquired Aagon, a software manufacturer and service provider of advanced IT in the areas of Client Management, Security and Identity Access Management (link)

• 🇩🇪 FLEX Capital, a Berlin small cap private equity firm, acquired Simovative, a founder-led software company offering a fully cloud-based, scalable solution for universities (link)

• 🇩🇪 Everfield, a software rollup backed by Aquiline Capital Partners, has acquired Esemtia, an educational software division of Grupo Edebé (link)

• 🇮🇹 Fremman Capital, a pan-European private equity firm, acquired DIESSE Diagnostica Senese, a a global leader in the specialty IVD segment (link)

Career Opportunities

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

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

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

• [PE] Investment Associate | PER | Frankfurt (apply)

• [PE] Investment Analyst | Seqos Capital | Munich (apply)

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