2023 has been a very active year for us, at Moonbase Capital: we expanded our pipeline, spoke to dozens of searchers, invested in 11 searchers and participated in six acquisitions. We also raised a USD 7.5 million fund, and are continuing our conversation with LPs around the world, who are becoming increasingly more excited about our investment model in particular, and search funds in general.

The search fund landscape has seen remarkable shifts in 2023, unveiling strategic opportunities while projecting a promising trajectory for 2024. At Moonbase Capital, we’ve seen these developments happen first-hand through our extensive network of searchers. Amidst an ongoing recession and rising interest rates, we are thrilled to see the search fund landscape thrive in different countries, more female searchers entering the scene, as well as an expanding investor base.

Here are our key takeaways of 2023 and what we expect to see in 2024:

🇩🇪 We’ll be hearing a lot more about Germany

Germany has always been an attractive market for a long time, but one challenge has proven to be a hurdle to search funds in the country over the past years: While search funds were initiated, they were unable to close deals and acquire the companies they had set their eyes on. This shortcoming was partly blamed on the young age of the searchers.

But today, things seem to be turning around. “This year, the first German searcher in our network acquired a company,” Managing Partner of Moonbase Capital Ibrahim Abdel Rahimsaid. “We expect a larger quantity of German searchers to arise in the new year, and as the model gains momentum and exposure, sellers may increasingly favor engaging with search funds.”

At Moonbase, we’re particularly excited about the work of our friends at Seqos Capital for building an excellent pipeline of searchers, of which we’ve already invested in three – Oliver Löbbecke, Tobias Wiest and Konstantin Wree.

💂🏻London’s saturation may pave the way for other-city deals

London is becoming very saturated, as many searchers in the UK live and search for companies in the UK’s most bustling city. However, the rest of the UK remains fairly void of search funds, with a few exceptions here and there. “Of course, London is a big market with a lot of opportunities, but it may be time for searchers and investors alike to look beyond London and into the rest of the UK,” Ibrahim believes.

💰Deal – and team – sizes are getting bigger

Notably, based on what we’ve seen in our circles, larger acquisitions within the EUR 3-5 million EBITDA range are becoming more popular, signaling a shift towards higher-value acquisitions. This comes hand-in-hand with investors becoming more fond of search-duos today, as opposed to single searchers.

“Duos usually target the acquisition of bigger companies that can be operated by two people, which is what many institutional investors prefer,” Ibrahim adds.

This may come in favor for our searchers. Throughout the countless interviews we’ve conducted with searchers within and beyond our network, we’ve learned that being a searcher, and subsequently the CEO of a company is a very lonely job. Hence, having two people that are well acquainted and happy to work together at the helm of a company truly alleviates some of that loneliness, paving the way for a more collaborative, productive growth trajectory.

👩🎓Female searchers on the rise

“We’ve been meeting a lot more female searchers, compared to about 1-2 years ago,” he adds. These included two in France, two in the US, and one each in the Netherlands and China.

We’ve learned throughout our journey in the past few years that, exactly like us, people primarily learn about search funds during their MBAs, which ultimately encourages them to become searchers. Hence, it cannot be a coincidence that the rise of women taking the helm and establishing their own search funds goes back to MBA enrollment of women reaching an all-time high of 42% in 2023, as per Forté Foundation.

🇪🇺 More searchers, more investors to come in Europe

We’re mostly looking forward to an increased awareness amongst business owners and sellers in Europe about search funds, and a heightened probability of them viewing searchers as viable exit strategies, thanks to the remarkable job our searchers have been doing over the past years.

Given the increased activity of searchers across Europe in the past two years, by now, a large number of SMEs have already been approached by search funds to probe interest in potential acquisitions. Over time, this contributes to wider acceptance of search funds, additional knowledge about the model, and a generally increased sentiment of trust towards them.

“We believe that we can sow the first fruits of that process in 2024. As an SME, you have limited options to exit, so having models like search funds can encourage SME owners to figuratively raise their hand and announce that they would like to sell,” Ibrahim explains.

This would also increase the number of investors in the scene. Having SME owners sell their companies to search funds, could turn them into investors for upcoming search funds. They would have been truly exposed to the model, gone through the motions, and would therefore be all-the-more excited about becoming part of the sector.

All in all, we believe that next year will see the culmination of numerous forces coming together to drive forward the search fund sector as a whole. And we are beyond thrilled to be a part of the journey.