❤️ 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 863 words and takes about 4.8 minutes to read.

Today’s Rundown

• Debt vs. Equity in SMB acquisitions

• Launch of holdco Thundercat Industries

• German M&A Market 2024 Review & 2025 Outlook

• 4 deal announcements

• 9 career opportunities

Weekly Highlights

• Gareth Hawkins, CEO and Co-Founder of BizCrunch, and Adam Kempner, Managing Director at Coefficient, shared their thoughts around Funding Your SMB Acquisition: Debt vs. Equity, Trends & the British Business Bank in their podcast:

  • Search funds are gaining momentum in the UK & EU:

    • Both markets offer attractive opportunities due to lower acquisition multiples compared to the US, making them appealing to international investors

    • Limited UK-based capital participation is a still key gap

    • More structured platforms connecting searchers with investors could unlock more capital and accelerate the market's growth

  • Debt financing remains a key challenge for searchers:

    • Typical financing options include:

      • Cash flow lending - Best for businesses with recurring revenue

      • Asset-based lending (ABL) - Works well for businesses with machinery, vehicles, or property

      • Term loans - Often require personal guarantees

      • Invoice & trade finance - Useful for working capital but limited for acquisitions

    • British Business Bank’s Growth Guarantee Scheme (GGS) is a step forward, but:

      • Deal sizes are too small

      • Many lenders still require personal guarantees, increasing risk

      • Awareness of GGS as an M&A financing tool is low

  • Debt Service Coverage Ratio (DSCR):

    • Banks typically require a DSCR of 1.5x or higher

    • Experienced investors prefer 2x+ for safety - ensuring enough headroom for debt repayments

    • Searchers need to balance leverage carefully to avoid excessive risk

• Anthony Cooper launched Thundercat Industries, aiming to build a world class group of UK based manufacturing businesses:

  • Anthony Cooper, brings over 15 years of Managing Director and Group Managing Director experience, having managed both privately and publicly owned groups of manufacturing companies

  • Thundercat Industries is backed by Matt Morris and Hampton River Partners, who incubate and invest in early/growth stage Serial Acquirer holding companies

  • Thundercat’s approach is to acquire and permanently hold UK-based manufacturing businesses, providing them with long-term stability and strategic support

    • Manufacturing focus: businesses that produce essential, niche, or defensible products

    • Size: businesses with annual profits between £300k and £2m

• M&A Review published their German M&A Market 2024 Review & 2025 Outlook:

  • 2024 recap:

    • The German M&A market continued to decline in 2024, though the contraction slowed to -3% (vs. -6% in 2023)

    • Political uncertainties, such as the U.S. presidential elections and Germany’s government crisis (“Ampel-Aus”), impacted dealmaking

    • 0% GDP growth in Germany vs. 1.1% in the EU due to demographic shifts, CO2 transition costs, and global trade challenges, resulting in economic stagnation

    • Falling inflation and ECB rate cuts improved financing conditions slightly, but banks tightened lending due to recession fears

    • Impact of economic environment on M&A:

      • Rise in Distressed M&A: Corporate insolvencies increased by 12.6% YoY, leading to a surge in crisis-driven transactions

      • More Debt-to-Equity Swaps: Creditors increasingly converted debt into equity to keep struggling firms afloat

      • Shift toward smaller deals: While large transactions (over €500M) made up 61% of total deal value, more than 50% of deals were between €10M-100M

  • 2025 outlook:

    • German GDP is expected to grow by 0.8% in 2025, but weak exports and rising competition from China pose risks

    • Expected ECB rates cuts of 50–100 basis point reductions will lower financing costs, supporting M&A

    • As funding conditions improve, continuation funds will emerge as a key liquidity strategy

  • Strategic implications for M&A in 2025:

    • Exit preparedness: Strong financial reporting and deal documentation will improve transaction success rates

    • Expanded Due Diligence: ESG compliance, cybersecurity, and technological fit are increasingly critical for valuations

    • Post-Merger Integration (PMI): Cultural alignment, talent retention, and structured reporting are key to maximizing value

    • Risk management through real-time analytics: Leveraging data analytics and scenario planning tools will enhance resilience and risk mitigation

Deal Announcements

• 🇩🇪 One Equity Partners, a middle market private equity firm, acquires Wheeler Fleet Solutions, leading distributor of aftermarket parts to the medium and heavy-duty vehicle fleet market (link)

• 🇸🇪 Presto Group, a provider of fire safety, safety training, and first aid services and backed by Adelis Equity, acquired Grupo Eurofesa, a developer of fire protection systems and security systems (link)

• 🇪🇸 Bridgepoint, a leading quoted private asset growth investor, acquired SAMY Alliance, a social-first digital marketing group (link)

• 🇪🇸 Sherpa Capital, an investment firm focused on operational value creation, acquired Eqofluids, a manufacturer of aluminum piping systems (link)

Career Opportunities

• [PE Asset] CFO | Linear Partners | London (apply)

• [PE Asset] Founders Associate Intern | Tim Wagner Personalberatung | Munich (apply)

• [PE] Investment Manager | Brock & Decker | Munich (apply)

• [PE] Investment Manager | PeakSeek | Stockholm (apply)

• [PE] Investment Manager | DreamQuest Recruitment | Warsaw (apply)

• [PE] Investment Associate | PeakSeek | Helsinki (apply)

• [PE] Investment Analyst | Premium Equity Partners | Frankfurt (apply)

• [PE] Investment Analyst | PER | London (apply)

• [PE] Intern / Working Student | RG Unternehmerkapital (RGU) | Frankfurt (apply)

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.