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In 2018, Bruno Lea launched the 1st SF in France, and in just 18 months, he successfully closed the acquisition of Performer. We revisit with him his various acquisitions and his unique vision of the French SF market.
1/ Curiously, the French search fund market in France is extremely young. In 2018, you were the first to launch one in the Hexagon. What difficulties did you find in attracting investors at that time, and also in explaining the model to the CEOs you were approaching?
There is a French expression that says “je comprends vite mais il faut m’expliquer longtemps”, I’m quick on the pick-up…if you explain me often enough. 😊
So yes, we had to wait until 2018 to see the first Search Fund in France (35 years after the US, 25 years after UK, 10 years after Germany and Spain). But the good news is that once we have understood the interest of something, we are very quick in France to make it grow.
In 2024, the total of SF created in France will be greater than 30, more than in Germany for example. We can even say that, currently, France has the world fastest growing rate of new SF!
Talking of my search fundraising experience back to 2018 I would say it was quite simple to attract international traditional SF investors as a pioneer in a developed country like France that still belongs to the G7 (world club of major economies). Their rational was quite pragmatic: if the Search Fund Model flies in other G7 countries why wouldn’t it fly too in France! And they were and are right.
It took me more time and energy to convince French investors to participate in my SF, but now that many understood the beauty and proven returns of SF (33% ROI versus “only” 15% for classic Private Equity) more and more are joining the movement of that compelling fastest growing niche asset class.
On the other side, concerning CEO-Owners/Potential Sellers I was approaching I decided not to explain them the SF Model because it can, at least in France, be confusing for family-business owners. Indeed, many of them distrust or are suspicious towards funds and they want to talk with the future day-to-day real leader of the company, not a representant of a fund. Though bearing “fund” as part of its name, the SF Model is not exactly a fund, it is a shell within which an individual entrepreneur could bring, in one block, several million euros equity (vs. kilo euros equity) to acquire one and only one great company to manage and grow it. Presenting it that way to family-owned companies’ potential sellers gives searchers a competitive advantage to generate a very qualitative deal flow.
2/ In less than 18 months, you managed to finalize the acquisition of Performer. Can you detail the acquisition a bit, who were your investors?
Searching is an intense full-time job. You must be 100% focus on your unique objective: finding one great company to acquire and grow. Of course, you need to develop strategies and tactics to optimize your chance of being successful in the search phase but, at the end, only one thing counts: THE acquired company, not how many companies you have screened nor how many LOIs you have signed nor how close you were in a potential acquisition. To be a good searcher you must develop a dealmaker mindset.
My statistics are quite common: 1.317 personalized letters sent to potential sellers in 2018, 144 answers (nos & yeses), 60 calls, 30 on-site visits, 7 very advanced discussions, 1 acquisition: Performer CNC, €19M revenue, €1.8M EBITDA in 2019. 15 investors, including known lead funds of SF like Relay, Istria, JB46, and other investors familiar with the SF Model like FINAVES V, the fund of my alma mater IESE Business School, and 5 French investors.
3/ More than 4 years later, the company has undergone significant growth, moving from a turnover of €19M in 2019 to over €50M in 2023. What were the drivers of your growth, what challenges did you have to face, and how would you describe your experience as a CEO?
Performer Group is a provider of machines tools, automation systems, industrial & collaborative robots, tooling…present in 5 countries with 80 employees generating €50M revenue and continually exploring business model innovations. We grew the company by a mix of organic growth (product/service expansion & new business lines like renting) and external growth (2 M&A).
Like for any entrepreneurial journey, there was no shortage of interesting challenges! When you buy a company in July 2019 and a second one in December 2019 there was no way to predict that 2 months later you will have to face the most incredible crisis: Covid. I remember 90% of our sales orders dropped at the beginning of the Covid lockdowns. Nevertheless, having run the business under such severe circumstances provided us with some key learnings and/or edge that we have used in subsequent crisis (supply chain disruption, Ukraine war, inflation, interest rates hikes, uncertainty on potential recession, difficult labor market, etc.)
4/ After these 4 and a half years of management, what are your plans for the future? Are you currently contemplating preparations for an exit?
In our Board Meetings we regularly have thought-provoking discussions about capital allocation, repayment of acquisition funds as well as, separately, re-cap, dividend recap, partial or full exit options and timeframes. Various high-level scenarios have been discussed. It is still an ongoing process and reflection to be continued during our next Board Meetings. My plan for the future is the same since the very first day: create value for all shareholders and stakeholders.
5/ Let’s go back to the French market. Following your example, many search funds have been launched in France, and we currently count around a dozen transactions completed in recent years (half of them in 2023). However, the number of active search funds remains modest, with around ten currently in active pursuit. How do you think the market will evolve? Is the presence of numerous French private equity players engaging in relatively smaller transactions compared to other countries hindering development? Do top-tier business schools (HEC, ESSEC, INSEAD, etc.) play an important role in promoting awareness of Entrepreneurship Through Acquisition?
At the present time, Europe, and particularly France, provides the right context and momentum for SF for at least 3 main reasons:
- In 2024, 25% of the family-businesses owners are over 60 years old and this figure will rise to 33% in 2030. They are looking for viable succession solutions that respect their values of legacy and continuity. For most of them, their children cannot or do not want to take over. They are looking for the ideal son-in-law (that has the financing!), not for their daughter, but, for their family-business.
- A new generation of 30-40 years old aspiring entrepreneurs, motivated by a life project and highly qualified eagerly looking for autonomy and ownership are knocking at the door.
- More and more seasoned investors with an entrepreneurial mindset are discovering the beauty, and excellent returns (X 2 vs. classic Private Equity), of the well-proven SF Model.
And of course, seeing top schools like HEC, CentraleSupélec, INSEAD, Mines, ESSEC multiplying classes, conferences and inviting top guest speakers contributes to accelerate the dissemination and adoption of SF as both a fast-track for fledging entrepreneurs to become CEO and one of the fastest growing niche asset classes of the moment.
