Rafaël Dufour, CFA, the founder and chairman of Relais du Dirigeant, raised EUR 390,000, and started his search phase in 2022 for a French SME to acquire.
Sneak peek at Rafaël’s origin story: Rafaël was born in France and raised in Morocco. Being an engineer by training, he was able to gather experience across multiple countries, including Spain, Australia, England, China, and France, besides concluding an MBA in Spain. The MBA helped him do a full reset of what he wanted to do with his life, and made him realise that SMEs provided the perfect environment for the more hands-on and impactful experience he was starving for.
MC: You have quite an impressive experience leading SMEs – why don’t you tell us a bit about that?
RD: Post-MBA, I was offered the general management of a steel tube manufacturing company in Morocco. Throughout my tenure, I had to deal with strikes, anti-dumping measures, tax audits – the full package of what can happen at an SME. After leaving this SME in Morocco, I went back to Spain, where I learned that one of my MBA professors was sitting on the board of a 150-people-strong SME operating in the hygienic textile industry with annual sales of EUR 60 million. The family that owned it was stepping down and looking to hire professional management to drive the company forward. So, I stepped in and was in charge of business development and strategy. I built a EUR 30-million factory for the SME – a project which was concluded at the beginning of 2022.
MC: And how exactly did you end up being a searcher?
RD: I knew I wanted to stay in the SME world, and when my wife was offered a promotion in France, I talked to one of our friends there, Benjamin Givelet, who was a searcher at the time, to learn about the French SME job market. He convinced me that with my experience, I should launch my own search fund. It was also around the time I concluded my CFA, which helped me understand the search fund model better from the investor perspective. So, everything came together and created the right moment for me to take on this journey.
MC: What is the thing stressing you out the most about being a searcher?
RD: Out of all the different phases of the search fund journey, I’m most comfortable with the operational part, because I’ve led SMEs before and I know the ins and outs. My studies also prepared me well for the fundraising part, which I think is tough, but exciting and helps me meet amazing people. The one thing that I was most stressed about was the search itself, because it’s a hybrid between doing job interviews and door-to-door sales. For that reason, I did an internship at Benjamin’s search fund in the summer of 2022 to make sure that I was up for the task.
MC: What is the one thing you wish you had known before starting your journey as a searcher?
RD: How big of a role luck plays in this industry and how uncertain this adventure is. I used to have a manager who said that luck is the intersection of preparation and opportunity. Preparation I can control, but opportunities are volatile and can go either way pretty fast. I don’t think I was aware of the intensity and the emotional impact of such volatility.
MC: How does this opportunity volatility affect you and your family?
RD: I would say it is a very emotional process that heavily affects me and my family. I can be really excited about a potential deal that’s about to close and spend my weekends and weekdays talking to my wife about how great this deal is, we start projecting ourselves living in the other side of France, finding solutions for her to pursue her career there etc., only for the owner to change their mind at the last minute. This brings me back to point zero. There are a lot of emotional ups and downs until you close the deal. It requires a lot of resilience, for us searchers, as well as for our partners.
MC: What is the one thing you do every day as a searcher?
RD: Contacting business owners. Not a day has gone by where I haven’t at least had 20 emails going back and forth to contact business owners.
MC: Are you focusing on a certain sector for your acquisition?
RD: I prioritise all sectors in which I have some credibility due to my background, which is in very niche markets. I’m looking at businesses operating in the maintenance, robotics, industry 4.0, and spare parts distribution sectors. But given that France is not that large, you have to expand your criteria, which is something I’m open to.
MC: How do you obtain the needed data about potential companies?
RD: France is a very transparent market with financial and sectoral data bases, such as Orbis, CAP FINANCIALS, Pappers and Xerfi. Sometimes I feel it’s too transparent, because you can even figure out the marital status of a business owner and his personal address in a couple of clicks. I think that’s going too far.
MC: Are there some cultural traits you need to keep in mind as a searcher in France?
RD: I see four general traits of the typical french successful business owners, and please forgive the cliché. Firstly, finance and consulting backgrounds usually have a bad reputation among self-made business owners. Secondly, age is important. Business owners usually expect you to be above 30 years old to consider you a potential general manager, and your MBA means little to them. In fact, most of them don’t know what an MBA is. Thirdly, they expect you to have real hands-on experience. Your Excel and Powerpoint skills are useless in SMEs. Eight times out of 10 I am asked: “Did you ever sell anything to anyone?” and “Have you ever managed a team?”. These questions make a lot of sense, but you need to be ready for them. Lastly, you’ll spend a lot of time circling the topic of financial alignment with the business owners without actually touching it. That is why searchers need to carefully calculate when to bring up the topic of money. They need to avoid wasting too much time before learning that the expectations are unrealistic, but at the same time, avoid putting numbers on the table too soon and risk being seen as a financial acquirer.
MC: Are PE firms major competitors to search funds in France?
RD: When talking about transactions around companies with an EBITDA of EUR 2-5 million, some 85% of deals in France are made through strategic acquisitions, meaning companies buying companies. Private equity firms make up the remaining 15%, but they are not interested in companies with an EBITDA below EUR 2 million, which is great for searchers. The sweet spot in France for proprietary deals is EUR 1-2 million EBITDA
MC: What is the biggest challenge facing France’s businesses today?
RD: Finding talent and workers. I was shocked. I’ve been asking every single business owner I talked to in the past year about their main challenges. And I would expect answers like “supply chain disruptions”, “Ukraine”, “rising inflation” and so on. But their main concern is that they cannot find talent.
