We sat down with Derin Sonmez, who co-founded Aeqor Partners alongside Frederico Usai, to talk about their journey into search funds. What started as a road-trip conversation during business school led to testing the waters with 100 companies, and later reaching out to more than 5,000 across Italy.
Both have a strong technical background: Derin built his career in the global automotive industry and has worked on the design of iconic cars like the Maserati Ghibli and Fiat 500, and later led innovation at Chinese carmaker Changan before his MBA at INSEAD. Federico is an aerospace engineer with experience at Aurora Flight Sciences, Fiat’s research center, and Destinus, where he developed flight software and worked on supersonic aircraft projects.
In this interview, Derin shares what they’ve learned about the Italian market, why they focus on central and northern regions, and how their engineering backgrounds give them an edge in technical industries that many searchers avoid.
Moonbase Capital: Tell us your backstory, how did you and Federico meet and decide to launch a search fund?
Derin: We met at INSEAD. Federico was my classmate, and he was already super determined to do the search fund. I wasn’t convinced at first. I thought it was more of an overhyped MBA topic. I wanted to go into VC, but I didn’t get a satisfying job. I accepted an offer from my previous employer, Changan Automobiles, a Chinese automotive manufacturer.
During the MBA, Federico kept talking about the search fund model, demographics of Italy, and succession cases. That got me thinking. While on a summer holiday two years ago, I decided to give it a try with him.
First, we did a test run. We identified a sample of 100 companies, contacted them, and measured the market and how we worked together. Out of 100, 10 showed interest, and 4 invited us to their premises. We saw market potential, liked working together, and decided to raise funds for a proper search fund.
Moonbase Capital: How has the response been as you scaled beyond those first 100 companies?
Derin: We have now contacted around 5,000 companies. The statistics are similar: 9-10% positive interest, 3-4% serious interest. That’s a high number. Combined with Italy’s demographics, succession cases, and low level of technological advancement in family companies, it confirmed that Italy is an interesting market.
Moonbase Capital: Let’s talk a bit about fundraising: how was that experience for you?
Derin: For us, it was longer than average. It took six months. But recently, some Italian searchers have taken a year, so it’s not too bad. But most Italian searchers are from Consulting or PE backgrounds, and investors love that profile.
We didn’t fit that. Some Institutional investors didn’t appreciate our combination of 2 operators as much. They were not convinced enough about our ability to evaluate companies. But others, like Ibrahim, said, “These guys have energy, they’ll figure it out.”
Moonbase Capital: What industries are you currently looking at?
Derin: Our approach has changed a lot. At the beginning, we were agnostic except for agriculture, real estate, insurance, financial services, and consultancy firms, which we decided we did not wish to pursue. Later, we added construction, recycling, and design or engineering studios to this list.
We excluded those because of legislation, unconventional dynamics, or dependence on the owner. We also don’t touch financial services because we don’t have deep technical competence there.
What we do look for is either:
- A company where we can add direct value with our technical backgrounds. I come from automotive, and Federico is an aerospace engineer. We’re not afraid of complex technical companies like software, industrial automation, precision components, or computer assembly.
- A very simple company in a highly fragmented industry where an MBA-trained person can apply a buy-and-build strategy.
Moonbase Capital: Can you share anything about your pipeline, how active is it today?
Derin: We have about 10 serious conversations now, with 3 at LOI stage. Those are a precision component manufacturer in the defense sector, a computer assembly company, and a cleaning service.
Owners of technical companies tend to like us more. They see our backgrounds and think we can take over. But we avoid companies that are too sophisticated; if we can’t learn the activity in 1.5 years without the owner, we exclude it.
Moonbase Capital: Geographically, where are you searching in Italy?
Derin: We focus on central and northern Italy. We exclude the south for several reasons: weaker infrastructure, limited resources, elevated risks in some regions, and a different working mentality.
In terms of industrial clusters, Milan, Veneto, and Bologna are very advanced, but competition is higher. In the center (Tuscany, Rome, Umbria), companies are less advanced, but competition is lower and deals are better.
Moonbase Capital: In our research, we identified challenges in Italy like high energy costs, tax compliance burden, payment delays, and high capital gains tax. How do you factor these into your search?
Derin: Energy cost is a big problem, but it depends on the industry. If it’s a commodity product, it’s risky, but quite often the cost of the energy is shifted to the final customer along the value chain.. We avoid heavy energy users like foundries unless they have something unique.
Payment delays are common, especially with smaller clients. But you can see this on the balance sheet already, so it’s not a surprise.
Tax rules are pretty much the same across Europe, and they can be navigated without many problems with the right collaborators. Also, Italy is recently becoming an important hub of investment for foreign capital.
Moonbase Capital: What data sources and tools are you using?
Derin:. We use publicly available data, and we have a proprietary software to automate the process of reaching out to owners. We identified around 17,000 companies that fit our parameters. We’ve contacted nearly 6000 of them based on 2023 data, and when 2024 data is published, we’ll do the same.
We also use a CRM and third-party tools to find owner and manager emails, then run campaigns to contact them.
Moonbase Capital: Do many of the companies you reach already know about search funds?
Derin Sonmez: About half of the ones who respond have been contacted before. But the market is not too crowded yet. In the €2m+ EBITDA range, competition is high – PE funds, searchers, industrial buyers. There, you need a strong competitive advantage, and it can’t be money. Our advantage is continuity and flexibility with the seller’s role.
Some owners dislike funds because they only ask financial questions. We ask industrial and technical questions, and that builds trust. But at the end of the day, money matters too. Bigger companies may go with whoever pays more.
We’ve found smaller companies less competitive and more open to us. That’s why we believe Solo searchers in Italy can find amazing opportunities.