Searcher Duos are unlocking higher returns in complex acquisitions
Moonbase Capital
We invest in lucrative search funds, giving seasoned investors the opportunity to invest in MBA entrepreneurs.
15 minutes with… is a Moonbase Capital series that picks searchers’ brains on current market conditions, what challenges they are facing and the actual technicalities of what it takes to be a search fund entrepreneur.
Searcher duos are on the rise and favoured by investors for numerous reasons. According to Stanford and IESE, searcher duos tend to bring higher returns, can buy better companies, and handle more complex acquisitions.
Anval Capital , one of our searcher duo investments, was founded by two serial entrepreneurs from Spain who have already built and exited a business together. Luis PéREZ DEL VAL SHERIFF and Miguel Angel Anton , both pioneers in the Spanish internet scene, bring a wealth of experience and a proven track record.
Luis began his professional life in banking, specialising in mergers and acquisitions. Transitioning to the media industry, he played a key role in major projects with Superposition, Spain's leading media company, including its IPO. Inspired by the dot-com boom of the late 90s, Luis founded an innovative wedding directory, a free platform for couples to find providers. This venture weathered the internet bubble burst and captured 3% of Spain's total internet advertising online investment, eventually going public in 2010 and expanding to ten countries across Latin America and Europe.
Miguel's entrepreneurial journey began under personal circumstances, stepping in to run his family's business due to his father's illness. He launched one of Spain's first e-commerce sites in 1999 and later founded a leading food delivery company in 2007, expanding it across Europe before selling it to a French group. Not stopping there, Miguel launched a last-mile delivery service, writing the algorithm himself and managing a team of 100 drivers. This venture was eventually acquired by Luis and integrated into Lola Market, with Miguel staying on as an advisor.
Their collaboration at Lola Market, a European equivalent of Instacart, proved highly successful, culminating in an exit to Glovo, which was later acquired by Delivery Hero.
Attending a self-funded meeting in Barcelona, Miguel discovered the search fund model and saw it as a perfect fit for his skills. He discussed the idea with Luis, and together they launched Anval Capital, a search fund backed by leading investors such as Relay Investments , Istria Capital , ALZA Capital Partners , Ethos Partners , Beka Finance , Cerralvo Capital , Cabiesa Capital , and, of course, us – Moonbase Capital .
Luis and Miguel have been searching for the past two years. We caught up with them to see how it’s been going.
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MC: What areas are you focusing on now for acquisitions?
Luis: We are primarily looking in Spain, and possibly Portugal. Spain has a larger market size, which is important when looking for companies with significant EBITDA. We avoid B2C sectors because they are highly volatile and trend-driven. For example, you can buy a restaurant that is super fashionable, but in two years, it's gone. Same with clothes.?
Miguel: We also avoid real estate companies and private finance companies. Essentially, we have a set foreign investment thesis, and any company that does not align with this thesis is discarded. We would love to have companies that operate in several countries. After all, Luis has run a company in 10 countries, and I have run a company in five countries. We love travelling and talking to people from everywhere, and we would be delighted if the company ran operations in multiple countries. It is an asset we look for, although it is not so common for people to prefer companies with operations in many countries.
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MC: How do you source your deals?
Luis: We use a combination of brokers and proprietary searches. We have a CRM system to manage tasks related to brokers and direct contact with companies. We also use software that collects financial data from all registered companies in Spain, allowing us to filter and upload potential targets to our CRM. We aim to contact about 200 companies each week.
Miguel: Initially, we focus on companies with an EBITDA between 5 to 6 million euros. We then load these companies into our CRM and discard those that belong to multinationals or international companies. This is because the owners and decision-makers of these companies are often difficult to locate, and the local country manager in Spain may not have the authority or willingness to sell. If a sale is to occur, it usually goes through an M&A professional, making it impractical for us to approach these subsidiary companies.
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MC: How effective is your email outreach strategy?
Miguel: Our email outreach strategy involves sending multiple follow-up emails if we do not receive a response initially. Typically, if the first email doesn't get a reply, we send up to four or five additional emails. If there is still no response, I make a phone call to the owner.
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MC: What is the response rate to your initial emails?
Miguel: The response rate to the initial email is quite low. To give an estimate, if we send out 50 emails, only a few would respond on the first attempt. The exact numbers vary, and we track all this information in our CRM. Although the response rate is not high, persistence and follow-ups are key components of our strategy. We reach out to about 200 companies per week.
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MC: In some markets, like France, the use of brokers is widespread. How do you find it working with brokers in Spain?
Miguel: We encounter several challenges when working with brokers, particularly when they opt for a competitive process instead of our preferred bilateral approach. In a competitive process, we face significant difficulties because we need to initiate a capital call. This requires ensuring that all LPs) are aligned with the deal, which takes additional time and coordination. In contrast, private equity funds typically have already raised the necessary funds and can invest directly, giving them a substantial advantage. Moreover, the parameters in competitive processes are often higher than those we are accustomed to with our search fund criteria. Our strategy involves looking to acquire businesses at a lower price, often those with succession issues, which is more feasible in a bilateral setting.
Luis: Both brokers and proprietary searches because each method has its own advantages. We've found valuable opportunities through both channels, so it's important to remain flexible and leverage all available resources in our search for potential acquisitions.
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MC: What do you find most rewarding and challenging about your work and how do you balance these aspects?
Luis: For me, the best part is visiting companies and speaking with founders or CEOs. It's fascinating to learn about their journeys and see how hard they have worked. You get to dive deep into the details of the company and its activities, observing the significant decisions that have shaped the company's history. Learning about the challenges they faced during the COVID-19 pandemic and how they overcame them or turned them into advantages is particularly insightful. After these visits, conducting financial analyses adds another layer of understanding, showing how business concepts translate into meaningful numbers.
Miguel: The most rewarding part for me is the immense opportunity ahead. Beyond our current commercial activities, we have the chance to acquire companies valued between three to five million without worrying about fundraising. The prospect of building a significant company excites and challenges me the most. On the flip side, the least motivating tasks are the mechanical, routine activities that every job entails. The worst part, however, is dealing with an overwhelming influx of deals where it's hard to remember which ones are truly promising.
Luis: Another is the relationship with M&A boutiques and brokers. My role involves a lot of networking and maintaining visibility within the M&A ecosystem. This requires constant engagement with, which isn't easy because you can't always be in their face; you have to find subtle ways to stay top of mind, like sharing interesting articles or meeting up for coffee. Meanwhile, Miguel handles more data-driven tasks, attacking databases with numbers. The challenge lies in balancing these responsibilities without becoming a nuisance to our contacts.
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MC: How do you stay on top of your tasks and deal flow?
Luis: We split our responsibilities, with Miguel handling the direct contacts and me focusing more on broker relationships. Our analysts support us by performing detailed financial analyses and market potential evaluations. Once a company looks promising, we both attend meetings and work together on structuring deals.
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MC: Are there any macroeconomic trends or geopolitical factors you are currently considering?
Luis: We believe the economy is worsening, which could present opportunities as founders might lower their value expectations. Since COVID, these expectations have likely decreased. However, rising interest rates due to inflation are a concern because they will make acquiring debt more expensive.
Miguel: In my experience with smaller companies, there's little correlation between our performance and the broader GDP. The primary concern is the rising interest rates, which will make debt more expensive when we need to finance acquisitions. This directly affects us and is linked to high inflation. While inflation control measures are necessary, I'm not overly concerned about broader macroeconomic trends.
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MC: What else is top of your mind lately?
Miguel: Right now, I'm very focused on AI. I believe AI will significantly transform companies. Recently, we signed a long-term LOI with a company where we can implement AI to enhance efficiency, professionalism, and customer experience. My background in technology drives this interest, and I think AI is crucial for the future. We need to be early adopters to stay ahead.
Luis: Like Miguel, I'm always thinking about scaling businesses after acquisition. I'm currently reading "Fast Scaling" to learn more about growing companies efficiently. We keep updated on the latest trends through webinars and investor updates. Although we were heavily into hedge fund strategies a year ago, now a quick update suffices. We find it valuable to hear firsthand experiences from searchers during webinars, as their testimonials offer practical insights beyond what books and papers can provide.