There are a few searchers and a handful of independent sponsors executing on this value creation strategy. Happy to chat.

Obvious advice, but the business model you choose to roll up is critical and should be long-considered. I would only target industries where people are successfully rolling up companies right now.

A less intuitive key learning I had working in PE was the incredible difficulty of integrating businesses. Most acquisitions don't add value and a lot of times it's because of integration issues. The multiple arbitrage is tantalizing and easy to see, but the executing integration can be difficult, so don't underestimate that. I would personally target business models where acquisitions could operate rather independently and do not need huge merging of teams (e.g. medical practices and auto shops come to mind). There are probably fewer cost synergies with businesses that operate more independently - on paper - but the ease of integration is worth it, imho, if your primary goal is targeting the multiple arbitrage in the lower middle market, which I am assuming you are.

^[redacted]‌ - Tagging a few of your peers in the DACH region that might be able to comment on your roll-up strategy in Germany:

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To our friends the DACH region, THANK YOU for helping to make Searchfunder a collaborative community! Be sure to take full advantage of your UNLIMITED access to our GERMAN language IBISWorld reports & BVR Deal Stats, now available under the INDUSTRIES & VALUATIONS tabs at the top of this screen. Here are the direct links:

www.searchfunder.com/ibisworld

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Searchfunder is currently working on partnerships with DataAxle & ZoomInfo to help with your proprietary outreach. If you have additional suggestions for partnerships that would benefit the Searchfunder community in the DACH region, please PM me.
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With Best Wishes, ^[redacted]‌

Hi Philipp, I think the main hurdle for most searchers for this strategy is the required capital. It means probably 10m in equity at least which is probably larger than what most search funds have at their disposal

Hi Philipp, I have no Perfect example, but I think maybe Small Cap Funds in Healthcare Can provide some insights there. Stichwort MVZ and potentially private radiology cases.

@Julian, shouldn’t debt get you pretty far towards that goal alone? Maybe not in a traditional search fund financing model but SBL should provide a good boost.

@Alexander: In my head I was at 10m Equity, 20M Debt. Not sure if you can get more leverage for these small deals in Germany. So if you look at a nucleus company with about 2M EBITDA this (depending on the industry) can be anything from 7-15M of this 30M overall. Then you still have enough for another 3-5 smaller add-on acquisitions which for me is the minimum to call it a roll-up strategy rather than opportunistic M&A.
Obviously, everything is dependent on the industry, how synergies can be realized, etc.

Take my reasoning with a grain of salt as I don't look at traditional searchfund targets and financing structures.

Hello Philipp, fellow inseader here.
We have some cases in our portfolio (~55 search funds, ~80% of them in Europe, 14 companies, 2 did add-ons already in their first year, others are in the process). So far going well, even if I quite agree with Chisam's second paragraph above and I'd say a PE-style, roll-up play from the start is not easy for a search fund.
On the other hand, given current market conditions capital should not be a problem (but this means you have to be more vigilant, not less)
Happy to chat if you want, I can share some insights both for search stage and operation. [redacted]

Hi. From my experience roll-ups and follow-on acquisition strategies differ quite a bit, and a traditional SF has pros and cons to each approach. If you want to discuss further hit me up on [redacted]

Have a look at Andreas Mildner (LBO not SF) on LinkedIn, very good track record.