Buy & Build: A Strategic Approach for Search Funds

Here is the link to the full post (free): https://searchfundinsights.substack.com/p/buy-and-build-a-strategic-approach

During my studies, I freelanced for a couple of investors (PE MDs) and set up a buy-and-build roll-up story of vet clinics. This was my first encounter with self-funded search funds although, at that time, I had never heard the term “search fund” before. I first heard the term “search fund” last year when I decided to pursue this roll-up idea on my own after identifying a great market opportunity, but this time backed by investors for the acquisition equity. Little did I know that there was a big community behind it. Having a private equity background, I was surprised to learn that most searchers primarily focus on value creation through operational improvements rather than planning with a lot of inorganic growth.

In my today's free newsletter post, I explore why I believe searchers should be open-minded to adopt some private equity strategies, such as buy-and-build, especially German-based searchers (as well as in similar markets Benelux, etc.).


Summary of the post:

Buy & Build Strategy: This approach involves acquiring a platform company and making several smaller add-on acquisitions to create value through economies of scale, operational efficiencies, and market expansion.

Limited Management Experience: Young searchers can benefit from M&A expertise, starting in roles like Co-CEO or Head of M&A to learn the business before managing day-to-day operations.

German Market Potential: The German SME market is ripe for buy & build strategies due to fragmentation and megatrends such as digitization and demographic changes, making it ideal for market consolidation.

Value Creation: While margin expansion through operational improvements is crucial, realizing multiple expansion by enhancing company value for future buyers is equally important.

Strategic Benefits: Combining operational improvements with strategic acquisitions can drive significant growth and higher returns, making buy & build a compelling strategy for search funds.
Here is the link to the full post (free): https://searchfundinsights.substack.com/p/buy-and-build-a-strategic-approach