International Search Strategy: Capital Structure, Debt Access, and Building Trust Across Cultures

I recently spent an hour with two international searchers, and our conversation surfaced some strategic considerations about searching outside the US that I haven't seen discussed enough in our community. The conversation began with AI risks, which I've been obsessing over lately, but quickly moved into the practical realities of executing an international search. What emerged were insights that apply whether you're searching in Israel or any market where the playbook differs from the traditional US search fund model. *The Debt Access Challenge One of the most underappreciated challenges in international search is access to debt. The irony is that bigger deals are actually easier to finance than smaller ones. In Israel, I've found that private equity funds doing mid-market deals can access 50% leverage with reasonable terms, while smaller deals force you into personally guaranteed debt or creative seller financing. The banking world is bifurcated by deal size, and each tier has different rules. This creates a strategic imperative: if you're searching internationally where debt markets are less developed, sometimes doing a larger deal actually makes more sense than starting small. A $5M EBITDA business may give you access to institutional lenders that won't look at a $2M deal, regardless of how good it is. *The Local Capital Provider Advantage Here's what I advised the searchers: your equity capital providers aren't just check-writers, they're credibility builders. In markets where relationships drive business, having a recognized local investor as your anchor tenant changes everything. When you're sitting across from a business owner and can say "the largest private equity fund in Vietnam is backing us," that matters. Even better if that investor can join meetings, speak the language, and vouch for you within the local business community. The search fund investor community provides valuable strategic guidance, but local investors provide something equally important: market credibility, banking relationships, and cultural fluency. They can introduce you to lenders who might otherwise never take your call. In relationship-driven banking markets, being associated with a known player can move you from the lower-market banking division (with personal guarantees) to middle-market terms (without PG), even on a smaller deal. *Cultural Considerations: The Trust-Building Timeline We discussed how certain markets require more touchpoints to build trust. In some Asian business cultures, the timeline for establishing credibility with a seller is fundamentally different than in the US. You can't compress relationship-building into three meetings. This isn't a disadvantage if you build it into your strategy, it's just a different rhythm. *Rethinking the Growth Imperative We also talked about the venture capital versus private equity orientation in search funds. My sense, and I could be wrong, is that the search fund world has increasingly chased growth stories and tail events, influenced perhaps more by Stanford's venture capital orientation than HBS's private equity approach. But international markets often present a different opportunity: highly inefficient, stable cash flow businesses where the value creation comes from operational improvement rather than growth. In an AI-disrupted world where long-term business model certainty is declining, there's something to be said for prioritizing near-term free cash flow over distant exit multiples. For international searchers especially, finding businesses where you can achieve 70% leverage without recourse may be more valuable than finding a high-growth business at 20% leverage. *The Strategic Question The real question for international searchers: are you building a mini-VC fund or a mini-PE fund? The answer should drive everything: your investor selection, your target business profile, your capital structure strategy. And in markets with less developed debt financing, the answer may need to tilt more toward the PE model than you initially expected. How are other international searchers thinking about these capital structure questions?