More and more young entrepreneurs are choosing not to start their own start-up, but to take over an existing business. Through the so-called search fund model, they attract investors to find, buy and manage one company themselves. "But there are still few success stories in the Netherlands.
'We're about to finish here at five o'clock, so I'd like to spend some time with people, end of day,' says Duco Salomons towards the end of his interview with Brookz. Since earning the unofficial title of "first successful search fund seeker" in the Netherlands more than a year ago, his life has looked a lot different than in the fourteen months before. Indeed, for more than a year he was quite solitarily looking for a business to take over; following the search fund model.
In short, a searcher raises capital to find a suitable company, take it over and then lead it himself as chief executive officer (CEO). Traditionally, search capital is raised in advance from investors to cover salaries and due diligence costs. This lowers personal risk because no equity is required. Another route is "self-funded," in which the search is financed with one's own funds. This carries a higher personal risk if you don't reach a deal, but can result in a larger equity stake for the entrepreneur.
Sold out conference
In recent years, search funds have steadily gained prominence in our country, but there is not yet a complete ecosystem of search funds, financiers and investors, says Ronald Kleverlaan. He is chairman of Stichting MKB Financiering and director of the European Centre for Alternative Finance. Entrepreneurs considering selling their businesses are primarily concerned with business operations and are not actively looking for this specific financing model, he observes. Knowledge transfer is often done through other entrepreneurs. 'But there are still few success stories in the Netherlands.'
Yet there is a clear upward trend, Jard van Heerde knows. He became familiar with search funds through his MBA at INSEAD in Fontainebleau and Singapore and decided to organize a conference on the subject, hoping for about a hundred participants. 'Within two weeks the event sold out and ended up with 175 people coming from all over, from Europe and the United States to Australia.' A year later, the conference was held again and 350 people attended. 'Events are an important meeting place for searchers and investors.'
For success of this relatively new M&A approach, people invariably point to the United States. There, the market has become more mature and popular over the past decade. As a result, it is now showing signs of saturation and the likelihood of success in finding suitable candidates is decreasing, Kleverlaan says. What is often less known is that the search funds model is surprisingly successful in the south of our continent, particularly in Spain and Italy. Van Heerde points out that Spain's IESE was the first MBA school in Europe to embrace the model, by a professor who was enthusiastic. And that a Spaniard who studied in the United States founded one of the first European search funds. 'That's how the ball got rolling.' In that light, it is interesting that Rotterdam School of Management has been teaching the course Search Funds since last academic year, Salomons adds.
In terms of investors, these are often individuals, such as successful former CEOs, who believe in the model and can offer operational knowledge and local presence. They connect with searchers through online platforms, conferences and search networks. Investors are kept informed of search progress after participation and provide feedback on potential acquisitions. Although the searcher is in charge, investors usually have to be convinced to commit capital for the final acquisition. According to Salomons, however, nuance is needed. "Although you keep investors informed and they keep their finger on the pulse, most of the decisions around setting up and executing your strategy ultimately lie with the searcher itself.
Solo process
Salomons followed the traditional model, which he came into contact with during his MBA at IESE Business School in Barcelona and further studies at Haas School of Business in Berkeley, USA. "I come from an entrepreneurial family and thought this was the perfect opportunity. Because of his background, he focused on businesses with a technology component. 'Because of favorable market dynamics, growth potential and fundability,' he summarizes. A huge market in which he actively or looked for opportunities in a structured way, with lists of potential businesses and through trade shows, phone calls and emails. 'It's quite a solo process. It's up to yourself to shape the search phase. You have to set up an IT infrastructure yourself, hire interns and come up with a plan of action.' It required a lot of optimism and discipline to persevere, he continues. 'You have to make the commitment every day to take the steps, even when it seems you're not moving forward.'
At the same time, search work can actually be adventurous. For example, Salomons discovered several "hidden" industries. "The moment you start searching, you find out about industries you simply didn't know existed. For example, I found the market for sensors quite interesting, because they have to be calibrated every year.'
Van Heerde chose a slightly different approach than Salomons and went for a "self-funded search," which he says gave him more flexibility and a more authentic sense of entrepreneurship. 'In a traditional search fund, investors take a larger share and you usually end up with larger businesses,' he explains. He focused his probes on stable B2B businesses with EBITDA between 0.5 and 1.5 million euros. 'That is a market segment that is below the focus of many private equity parties.' In addition, he wanted a business with predictable revenue and loyal customers, to avoid unpredictability and dependence on the old owner, as with project-driven businesses. Plus, there had to be potential for improvement in business processes and organization, with plenty of room in the market.
Van Heerde recognizes Salomons' personal experience. 'The search process is a lonely undertaking, with a lot of cold calling and the need to 'educate' advisers about the search fund model. It can be mentally demanding. Many searchers give up because the journey is long and uncertain, with no immediate reward. The final phase of a deal can also be very stressful, with high stakes and potential tensions'.
Successful 'acquisition'
Salomons eventually found his new business Hotek Hospitality Group (specialist in innovative access solutions, including for hotels) by approaching the founder behind it directly at a trade show. "This allowed me to convey my personal commitment and value better than indirectly through advisers. Part of the reason he caught on to the business was the strong international market position with keyless entry systems, the good track record with great customers and room for further innovation. They already had 26 years of experience and high barriers to entry in their market. In addition, Hotek offers a unique Mobile Key solution, which allows you to open a (hotel) door with a simple swipe on your phone. Moreover, the business provides a wide range of supplies and accessories for hotels, which Salomons says is highly appreciated by hotel owners, who prefer a single point of contact. "But I also feel a personal connection to the hospitality industry. He says the previous owners wanted to step back to transfer the accumulated 'legacy' to someone with new energy and a long-term vision. 'We used a six-month transition period so I could get to know the people, company culture and processes.'
The search process is a lonely undertaking, with a lot of cold calling and the need to "educate" advisers about the search fund model
For his part, Van Heerde looked in detail at about a hundred businesses before ending up at Socho IT. The search for this business, which provides subscription management software and ERP to media companies and publishers and counts NRC, Voetbal International and De Groene Amsterdammer, among its clients, may be called short. Van Heerde started in August 2024 and completed the deal as early as March 2025; whereas a search takes one to one and a half years on average. 'We had a good click right away and a collaborative approach. I see it as a partnership rather than a 'rock solid' acquisition," Van Heerde said. His motivation, he says, is not primarily financial, but lies in personal development, the challenge and motivation to contribute to automation and digitization of the media industry.
Search funds versus MBI
The definition of search funds and the practical approach raise the question of the extent to which it differs from a management buy-in (MBI). The main difference, according to Kleverlaan, is that with a search fund, the "searcher" (and the investors) do not yet have a specific business in mind, but rather a sector in which they want to operate and then look for a suitable business. 'With an MBI, the business is often already known to the manager.' Salomons adds that search funds enable the acquisition of larger businesses thanks to capital-rich search fund investment funds. 'Also, it's a full-time search, whereas a management buy-in often takes place alongside an existing job.' And, he adds, one difference is also the presence of investors around the searcher who provide guidance and reinforce credibility to potential sellers.
Asked about possible growth opportunities when using search funds, Kleverlaan points to the fact that searchers are still predominantly male MBA graduates, such as Salomons and Van Heerde. The model, he says, offers opportunities for people with a different profile, such as middle managers who want to go the entrepreneurial route. "The risk for the searcher is lower than with a start-up, because an existing business is acquired and there is often a basic compensation during the search phase.
On the other hand, investors are putting money in for one specific business, which carries a higher risk than investing in a diversified fund. Kleverlaan: "That's why thorough due diligence on the searcher is crucial. Investors must have confidence in the searcher and add value, such as network, market knowledge.' As developments in the U.S. show, as the ecosystem matures, investors will invest in multiple search funds to spread risk. This also allows the market as a whole to grow.
After about a year at the helm of Hotek, Salomons at least experiences more comfort and less "novelty. 'I find that my MBA knowledge and previous experiences are useful for a helicopter view on various business areas. And the importance of 'people, people, and people' as the biggest success factor has certainly been confirmed. We focus very much on culture, motivation and hiring talent, for example a financial controller and business developer, for further professionalization. The work requires a lot of energy and dedication - also on weekends - but it gives a lot of satisfaction.' Van Heerde agrees: "Running the business is much more fun and energizing than the search itself.
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