Of the 29 Italian search funds analyzed (of which 10 were born in 2024, confirming the recent phenomenon), 11 have already made Italian acquisitions, the first report of the POLIMI Graduate School of Management says. It was presented last May 6th during an event where BeBeez International acted as media partner
On 6 May, Tuesday, Eureka! Venture and The University of Chicago Booth School of Business alumnus Paolo Guida, MBA, announced the launch of ETA Fund, the first Italian institutional investment vehicle for search firms. Guida is a seasoned M&A and private equity professional that pioneered the serial investments in Italian search fund since 2017. He joined Eureka! Venture as partner and key-man of ETA.
Guida was speaking on the sidelines of the Entrepreneurship Through Acquisition, the first Italian annual conference about the search fund market that took place at Milan’s POLIMI Graduate School of Management – Campus Navigli which also presented its Search Fund Observatory, MBA and Elective Courses (press release and report).
BeBeez International acted as media partner for the event and in September 2024 published Insight View about search funds with a focus on Italy. The item is available for the subscribers to BeBeez News Premium and BeBeez Private Data and includes information about the vehicle that already closed acquisitions, those who are still looking for targets and divestments.
A search fund is an investment vehicle through which promoters raise capital from investors to identify and acquire a single company, with the aim of actively managing it and growing it over the long term. The search fund capital aims to attract resources from private investors. Once closed the acquisition, the searchers manage and develop the company full-time.
The BeBeez Insight View says that in 3Q24, 25 search funds were active in Italy, 12 of them were looking for a target, one is closing, 11 closed an acquisition, and one sold the purchased asset. Nostos Capital, Eolo Capital, Alpha Generator Capital, Peak35, and Leonessa Capital started to operate in 4Q24.
The POLIMI GsoM Search Fund Observatory analysed 29 Italian search funds (10 born in 2024) and pointed out that 11 closed deals. The sectors of investments include labelling, pharma, laser tech, food & beverage, waste management, software, fashion, education, and facility management. The targets are in Lombardy (5 acquisitions), Veneto (2), Toscana (2), Piedmont (1), Emilia-Romagna (1), and Latium (1).
Italian searchers are on average 34 years old, while 32% is less than 35 anni, 58% is 35 – 45, 10% is older than 45. The majority of searchers (66%) works on his own, 34% in couple, women make only 3% of them (vs 7% in the international benchmark). Most of the searcher have a professional background in general management (37%), strategic consulting (32%), investment banking and private equity (31%).
One out of five searchers has previous entrepreneurial experience, 63% of them has a Master in Business Administration (3% from an Italian University, 47% in Europe, 13% in USA). Half of Italian searchers found out about this business model during MBA classes.
Domestic and international institutional investors account for 49% of LPs, family offices for 18%, individuals, angels and personal holdings for 33%. Investors are from Italy (30%), Europe (55%) and America (15%).
The resources for the scouting stage amount to 0.558 million euros on average with a median of 17 investors per fund. Such budget is necessary for financing the searcher (47%), transaction costs (25%), travels (13%), and marketing (15%). The average searcher’s salary is in 7 out of 10 cases between 0.05 – 0.1 million per year. Searchers implement a proprietary search strategy with the support of brokers. From a strategic point of view, they are mainly oriented towards companies with a defensible business, with potential for organic growth or through sector consolidation, operating in non-cyclical sectors and with low technological or regulatory risk. On average, searchers approached 1543 companies, received responses from 24.7% of them, signs of concrete interest from 12% and a positive outcome with letter of interest from 0.2%.
Andrea Rangone, a PoliMI professor of Entrepreneurship and Digital Business Innovation, said “The Search Funds are an innovative investment model for the Italian market and they can have an important role in fostering generational change and the replacement of entrepreneurs at the helm of SMEs with growth limitations with high-level managerial figures capable of unlocking potential and promoting business scale. The results of the Observatory’s research show how the diffusion of these instruments is still in its infancy in Italy, but is steadily increasing. To accelerate their development, the emergence of an ecosystem that brings together investment funds, specific training programmes and research with up-to-date data is essential”
Stefano Peroncini, ceo of Eureka! Venture, added: “Italy’s most talented searchers go abroad to raise the necessary capital to buy an Italian company, mainly because until today there was not yet a generation of institutional investors. ETA Fund aims to prove that also Italian LPs attentive to the return on the territory (such as Fondazione CR di Lucca) can fulfill the role of anchor investor of Italian search funds and give continuity to our SMEs with renewed entrepreneurial energy. ETA is an institutional response to a structural problem of our economy”.
Guida will head ETA Fund and will receive the support of ambassadors such as entrepreneurs, CEOs and professionals experienced in the vehicle’s areas of interest as well as in legal, m&a due diligence, executive search and business development, who will work alongside the searchers and acquired companies.
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