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Buscar como boss! Ariol, the deal that ignited Spain’s search fund hype
A search fund meets a deal-hungry US rollup. Guess who walks away with €33,000,000?
Pavel Prokofiev & Alex Prokofjev
October 25, 2024
Disclaimer: Views expressed here are the author's own and based on public sources. The article is intended for informational purposes only. This is not financial advice. Please consult a professional for investment decisions.
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Outside the US, which country has the highest number of search funds raised?
No, not Canada, and not even Mexico.
According to the latest report, Spain leads the rankings with 67 search funds, well ahead of runners-up Mexico (50) and the UK (34).
There are several reasons why search funds have been so popular in Spain.
One, two-thirds of the GDP is derived from nearly 3,000,000 SMEs - of which 40,000 have €2M+ in turnover. Two, the Barcelona-based IESE Business School has been a flag bearer for the movement for over a decade. Three, many of the entrepreneurs who got going in the 1980s economic boom are now in, or are approaching retirement.
The fourth reason, and the catalyst for all the hype is one man: Marc Bartomeus.
Marc Bartomeus
Marc is believed to be Spain's first-ever searcher. After more than 3 years of chasing investors as well as deals, in 2014 he acquired Repli, a manufacturer and distributor of plastic containers based in the outskirts of Barcelona. At the time, Marc had only a vague idea about packaging. However, the price was good and the sellers keen, so he dived in. 6 years later, he sold Repli to a US strategic acquirer, locking in a 5.6x MOIC for the investors - and a sweet €6M for himself (based on our calculations).
Now, Repli was neither the largest nor the most successful search fund investment. And yet, not only did Marc inspire a whole generation of Spanish and international searchers, but also supported them financially, subsequently investing in more than 70 search funds.
How did he do it?
Below, we break down Ariol’s searcher full story, including:
How Marc structured the original transaction, including the buy-in multiple and the capital structure
Hard facts about Repli's performance during Ariol's ownership
The circumstances surrounding Ariol's exit, and the multiple paid by the acquirer
Key drivers of Ariol's killer MOIC
Bonus: we teach you how to make €1,000,000 from running a business on auto-pilot. Much more if you are willing to hustle!
The backstory
Marc had learnt about search funds during his MBA at MIT. In 2010, he returned to Spain and founded Ariol: Spain's first known search fund.
Fundraising proved extremely challenging due to a) essentially 0 homegrown search fund investors in Europe at the time and b) few US investors brave enough to invest internationally.
As Marc said in this interview, “for every 100 investors that rejected me, I chased 500 others”.
Core insight No. 1: ignore rejections - keep going.
And yet somehow Marc scraped together €200,000 from twelve private investors, mostly from North America, and got going. Unlike modern-day searchers, who insist on paying themselves six-figure salaries, Marc had to contend with a mere €30,000 stipend.
Core insight No. 2: if you are not ready to run on a shoestring, at least temporarily, ETA / HoldCos aren't for you.
Finally, in 2014 luck smiled upon Marc. Repli's three shareholders had been running the business since 1988 and were looking forward to retirement. At the time of sale, Repli was generating €16M in revenues and €1.8M in EBITDA.
To quote a trade publication:
Repli manufactures and distributes industrial packaging, cosmetics, pharmaceutical and food on polyethylene, polypropylene and PET range of containers with capacities from 5ml to 1000l for all industrial sectors. Repli leads the field in the supply, distribution and manufacture of plastic containers.
Source: Webpackaging
Why this particular company / industry?
Marc had no prior experience with the packaging industry
However, he was looking for a target that could “sustain mistakes” (source) in the sense of stable, predictable cash flows
Core insight No. 3: experiment with things that don't normally blow up in your face.
The acquisition of Repli was backed by well-known search fund investors including Cabiedes, Relay and TTCER. Industry grandees including Peter Kelly, Frank Kenny and even the late Maurice Pinto (co-founder of Sea Containers, investor in Innocent Drinks etc.). Judging by Ariol's cap table, investor scepticism appears to have dissipated by the time they had to put in real cash.
The deal had to be bulletproof - and it was.
