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In January 2024, after more than seven years with Kinderhook Partners, you transitioned from investor to searcher. What motivated you to establish Rou Partners and pursue this entrepreneurial path? Can you tell us about your background?
I was born in the U.S. and lived in New York until I was 15, when my parents, both Uruguayans, decided to return to their roots. I spent about ten years in Uruguay, where I began my professional career. Driven by ambition, I returned to the U.S. in 2016 and joined Kinderhook Partners, where I discovered the Search Fund model.
Although I have a career rooted in investment, it was never my primary pursuit—it evolved naturally. My preference has always leaned toward operational roles, and not having created something of my own was frustrating. I loved brainstorming with searchers and seeing how we could support them, and I was fortunate to serve on the board of NeoAssist in Brazil.
Deep down, I realized I wasn’t truly happy in the U.S. and wanted to return to Uruguay. I kept thinking about launching something but didn’t see myself starting a project from scratch. Despite Uruguay’s small size, things were changing: the country already had three unicorns, the economy was improving year by year, and I was motivated to contribute modestly to that success. After speaking with people in my professional network, I discovered that foreigners generally held Uruguay in high regard, viewing it as a transparent, stable, and secure place to invest, with almost no corruption.
After seeing the opportunities and challenges companies face up close, I chose to become an entrepreneur and bring the SF model to Uruguay. The challenge of preserving and enhancing a company’s legacy excites me. I have deep confidence in the SF model and what it can offer Uruguayan companies, having spent seven years at one of the top American investment firm in this sector.
With your extensive background in investment, I imagine fundraising may have been relatively straightforward. What criteria did you use to select your investors, and who are they? As a pioneer in any market, there are unique challenges. What difficulties did you face in convincing investors of Uruguay’s potential? Any advice for searchers aiming to pioneer in “virgin” markets?
Indeed, the fundraising process wasn’t difficult. The only challenge I faced was that some investors’ strategies didn’t cover Uruguay, so they couldn’t adjust their management mandates. Within just a month and a half, I was already oversubscribed internationally. That said, it was important for me to have some local investors, which proved more challenging. Uruguay lacks family offices, and funds don’t understand the SF model. Luckily, Ricardo Deal believed in me, and I managed to attract four other private local investors, though I had to reduce the unit size for them. Local investors see this as a significant commitment, as most people here invest in real estate rather than businesses, making it difficult for them to grasp the idea of betting on me to eventually present them with a promising deal.
In total, I raised $400k to finance Rou Partners from 19 investors, 14 of whom are international: Ambit Partners, Ashford Venture Partners, Cerralvo Capital, Kinderhook Partners, Paltus Capital, KYR Capital, TMB3 Fund, Jamie Turner, George Jankovic, among others. I also received support from several Spanish investors like Cabiedes Inversiones, the Ruiz family, José-María Clotet, and Marc Barthomeus. This was important because of Spain’s close ties with Uruguay, and I had already shared captables with some of these people in the past, so I knew what they could bring.
For new searchers looking to pioneer in emerging markets, my advice is to start locally and not be discouraged. I made the mistake of starting with international investors—easy in my case—but it took nearly three more months to convince local ones. I thought big international names would ease the process, but in the end, that didn’t help since locals didn’t know the model or the sector players. Patience and resilience are key. Additionally, prepare to educate the market, from legal advisors to financial consultants, not to mention sellers. The process can be frustrating and time-consuming, but it has its advantages: a large, competition-free market, and the opportunity to use media to build awareness and explain the model.
Uruguay’s market is relatively small. How many SMEs fall within your target size, and how have you approached them? Could you walk us through your current search process? How many potential targets have you contacted, and how do business owners react to the SF concept?
Although small compared to neighboring economies, Uruguay boasts the region’s highest GDP, an institutionally stable and business-friendly government (regardless of the political party in power), and both the healthiest democracy and lowest levels of corruption in the Americas. Local SMEs face significant succession challenges due to a rapidly aging population and low birth rates, creating an opportunity for SFs to leverage these demographic shifts among roughly 2,300 SMEs within the SF’s target size.
It isn’t difficult to find companies here. Professionals are very open to discussions, and they lack many alternatives due to limited market liquidity and low private equity activity. For every 100 emails we send, we get around 50 responses and meet with about 20 companies. These are exceptional metrics in this sector. Over the eight months we’ve been active, we’ve contacted roughly 450 companies.
As for the SF model’s reception, it has been very positive since it offers a solution to the succession issue. We are completely transparent, explaining that our investors need to validate the deal. Ultimately, it’s about aligning everyone’s interests to make the deal work.
What sectors have attracted you most during your search? If I’m not mistaken, you’ve already signed your first LOI. How is that potential deal progressing?
Initially, we focused on three main sectors: IT & Software for their growth and recurring revenue, agriculture with its potential beyond the local market, and professional services, particularly those linked to tourism and call centers.
Over the past few months, I believe I’ve spoken to every tech company in Uruguay. But as you know, a searcher’s best plan is flexibility, so we ultimately signed an LOI with a logistics company, with a value within typical criteria (EV between $5-25M). The deal is progressing well; we’re already in the first stage of due diligence, though we’re keeping our pipeline open should any issues arise. If all goes well, this acquisition could wrap up our search in under a year.
In many Latin American countries, leveraging a buyout can be challenging. Is that also true for Uruguay? How does the banking system support or hinder acquisitions?
In some Latin American countries, financing a buyout with favorable terms is challenging, with interest rates often exceeding 10-12%. In Uruguay, it’s quite the opposite. The financial system consists of a public bank, Banco Republica, which holds over 50% of the market, and about ten private banks, with Banco Santander, Banco Itaú, BBVA, Scotiabank, HSBC, and Citibank being the most active players.
Specifically, they offer LBO loans with terms of 7-10 years, including end-term bullet payments, with highly competitive interest rates between 4.5% and 6%. Our low-risk profile allows us to benefit from a uniquely favorable position.
Isolation is often one of the toughest challenges for searchers. Since Rou Partners is Uruguay’s first SF, how do you maintain resilience? Do you feel added pressure or responsibility as a pioneer in this field?
Indeed, it’s the most challenging part of the journey. I didn’t expect the search phase to be so isolating, and even with a team, staying motivated and resilient in the face of numerous challenges is essential. To address this, I keep in close contact with a searcher in Chile; we hold regular discussions since we don’t compete in the same market, allowing us to exchange opinions on deals, progress, and concerns. Building connections with other professionals for support and motivation is critical.
I also have the support of my investors, particularly locals, though having been on the investor side, I know they’re continually evaluating me, so I can’t always openly share my struggles. As a pioneer, I do feel the added pressure, but for me, it’s an extra motivation. I know I must acquire a quality company to pave the way for others. My goal is to make this operation a success story that will be studied at Stanford in a decade.
Are you noticing increased interest in the SF ecosystem in Latin America, aside from established markets like Brazil and Mexico? What’s your vision for the growth of SFs in the region over the next five years?
Being far south, I have a somewhat limited view, but I see significant potential in Argentina, though it has yet to be politically stable enough to inspire investor confidence in the SF model there. Chile is an interesting market with past SF transactions, as are Paraguay and Guatemala. Brazil and Mexico remain strong markets where the SF culture has proven itself, though exits are still needed.
So far, no one has followed in my footsteps in Uruguay, but I believe there’s potential for one or two SFs annually. Within five years, it’s likely that almost every Latin American country will have had new searchers actively seeking acquisition opportunities.
