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Danilo Boavista and Rafael Pacheco have teamed up to launch Luz Capital Partners in Chicago. They have attracted professional investors with experience in over 100 acquisitions, including firms such as Applied Equity, Generational Transfer Entrepreneurs (GTE), Hadley Family Capital, Kamylon, Kinderhook Partners, Martell Capital Partners, Northspring Partners, Operand Group, Spectra Investments, and Vonzeo Capital. They are also backed by CEOs, former searchers, and experts from organizations like GMO, JEB Capital Partners, Search Fund Ventures, Magnum Capital Partners, McKinsey & Company, MER Search Capital, Morningstar, Reframe Capital, and The Cromwell Harbor Partnership. Discover their journey…
First of all, could you both introduce yourselves and share a bit about your backgrounds and professional careers?
Danilo: I’m Danilo Boavista, I’m originally from Rio de Janeiro, Brazil, and I come from a diverse professional background with extensive experience as a young entrepreneur, management consulting and in international business and finance. After completing my education in Brazil, I worked across various industries – from Oil & Gas, Steel Manufacturing and Fertilizer, to Insurance, Clothing Retailers and Pharma/Medical Devices – gaining a deep understanding of market dynamics and strategic growth. My career has taken me to several countries, providing a unique perspective on global business operations. I also hold an MBA from the University of Chicago Booth School of Business, where I was elected Cohort President and held the position of VP of International Affairs.
Rafael: I’m Rafael Pacheco, also from Brazil. While I don’t hold an MBA like many traditional searchers, my career has been built on practical, hands-on leadership across various sectors and countries, including leading financial operations throughout Asia. My expertise lies in finance and operations, where I’ve held critical leadership roles, most notably as the CFO of a $300 million company in the US. Throughout my career, I’ve consistently translated complex financial and operational data into actionable business strategies, driving significant growth and profitability. My journey highlights the immense value of real-world experience in overcoming business challenges, and I bring this practical approach to our search fund, where I’m eager to apply my background to discovering and growing successful businesses.
How did you discover the SF model, and what motivated you to pursue it? Given your unconventional backgrounds, why did you believe this was the right path for you, and how did you decide to team up?
Danilo: I first learned about the Search Fund model during my MBA at the University of Chicago’s Booth School of Business. The concept immediately resonated with me as it aligned with my entrepreneurial aspirations and my desire to lead and grow a business. A close MBA friend of mine, who was launching his own search fund at the time, played a significant role in inspiring me. Observing his journey and eventual success provided me with a clear understanding of the potential and opportunities within the Search Fund model. His mentorship and support have been invaluable, and he has now become one of our investors and a close mentor.
Rafael and I decided to team up because we recognized that our diverse backgrounds and complementary skills would be a strong foundation for a successful search fund. While I bring a wealth of experience in entrepreneurship, strategy, and high-level operation strategy, Rafael’s expertise in operations, finance and accounting, particularly with his CPA qualification, adds a critical dimension to our team. Our shared long-term vision and commitment to creating value through business acquisitions made the decision to partner up an easy one. Together, we are confident in our ability to identify and grow businesses in the competitive U.S. market.
Two Brazilian professionals, having spent most of their careers outside the U.S., with Rafael not holding an MBA and neither of you having prior experience in M&A or PE (which is quite unusual in a SF duo), decided to raise a SF in the U.S. to acquire a company in a country where you have individually worked for 3 to 4 years. Can you share the process and challenges you faced while raising capital for your search fund?
Raising capital was indeed a challenging process, especially given our unconventional background. We started by identifying potential investors through our extensive professional network and attending industry events. We reached out to numerous investors, presenting our unique value proposition and the strengths we bring to the table. Despite initial skepticism, our determination, clear vision, and the operational expertise we offered helped us gain the trust and support of seasoned investors, former searchers, and operators. Their belief in our capabilities was instrumental in successfully raising capital for our search fund.
While it’s true that Rafael and I lack direct M&A or private equity experience, we have rigorously studied these fields to ensure we understand the intricacies involved. More importantly, we have partnered with the right investors who bring extensive M&A and PE expertise to fill any potential gaps. These investors not only provide us with strategic guidance but also complement our operational strengths, which we believe are unparalleled.
Rafael and I bring a level of operational expertise that is much harder to find among most searchers. This expertise is not only crucial for the acquisition process but is used extensively throughout the entire lifecycle of the search fund, from sourcing deals to managing and growing the acquired company. Our backgrounds in entrepreneurship, strategy, and operations give us a unique advantage in identifying and executing value-creation opportunities.
Why did you choose to pursue a traditional SF versus a self-funded search or an Entrepreneur-in-Residence or accelerated program?
We chose the traditional search fund model because it aligns with our long-term vision of acquiring and growing multiple large businesses. This model provides us with the necessary resources, network and support from experienced investors, which is crucial for navigating the complexities of the acquisition process. Additionally, the traditional model allows us to fully dedicate our time and efforts to finding the right company, without the financial constraints of a self-funded search or the, sometimes, limited scope of an Entrepreneur-in-Residence program.
You’ve successfully attracted an impressive cap table, with a mix of seasoned professional investors, former searchers, and operators. Could you detail who they are and what you expect from them in terms of guidance and support?
Our cap table includes a diverse group of seasoned investors, former searchers (we call, some of them, the OG searchers), institutional investors and industry operators who bring a wealth of knowledge and experience. They provide us with strategic guidance, mentorship, and access to valuable resources. We expect their support in various areas, including deal sourcing, due diligence, and post-acquisition growth strategies. Their involvement is instrumental in helping us achieve our goals and successfully transition from searchers to CEOs.
One of our Partnership Values, which we recommend every search team to take some time to clearly define, is that “there are no new problems, just new people”. We make these words come to life by leaning on the shoulders of these incredible investors and learning as much as possible from their expertise.
In recent years, there has been significant progress in the U.S. SF industry, empowering underrepresented groups such as women and people of color (Asian, Black, or Hispanic). Many investors believe that individuals from these groups can become high-performing SF CEOs, contributing to a meaningful social impact. What is your opinion on this, and do you think that being part of a minority group can be an asset in the U.S. SF space?
We believe that diversity and inclusion are essential for driving innovation and business success. Being part of a minority group has provided us with unique perspectives and resilience, which we consider valuable assets in the SF space. Our diverse backgrounds enable us to approach challenges creatively and build strong, inclusive teams.
As immigrants, we have faced and surpassed numerous challenges to compete at the same level as our American counterparts. This journey has proven our resilience, adaptability, and determination. Overcoming these obstacles has not only made us more resilient and adaptable but has also placed us at a high echelon of grit and performance. We bring these qualities to every aspect of our work, which is crucial in the competitive and demanding environment of search funds.
We are committed to making a meaningful social impact by empowering underrepresented groups and fostering a culture of diversity within our organization. We believe that individuals from diverse backgrounds bring unique strengths and perspectives that can drive exceptional performance and contribute to the broader success of the SF industry.
Now comes the challenging part of the journey. Are there specific industries or sectors you are particularly focused on, and why? How are you sourcing potential deals, and what strategies do you plan to use to find the right acquisition in such a competitive market?
We are particularly focused on industries that demonstrate strong growth potential and stability, such as healthcare, technology, and business services. Our deal sourcing strategy involves leveraging our network, attending industry events, and utilizing online platforms to identify potential targets. We also engage with intermediaries and advisors to uncover hidden opportunities. Our approach is thorough and systematic, ensuring we evaluate each opportunity based on its strategic fit and potential for long-term growth. As highly process oriented individuals, we are leveraging our innate skill to make sure we can go as fast as possible.
How do you plan to handle the transition from searcher to CEO, and what challenges do you anticipate in this new role?
Transitioning from searcher to CEO involves several challenges, including building credibility with the acquired company’s team, understanding the operational intricacies, and driving growth. To handle this transition, we plan to leverage our operational experience, engage in continuous learning, and seek mentorship from our investors and advisors. We anticipate challenges such as cultural integration and change management, but we are confident that our leadership skills and determination will help us navigate these successfully.
Once again quoting from our Partnership Values, our 4 main themes are: Communication, Humility, Work Hard, Work Hard, and Legacy Creation. Each of those themes is broken down into its main components, and we believe that, by following our values we will be able to quickly integrate with the company and its employees, while also opening the space for our personal and professional growth.
Looking back, is there anything you would have done differently during the fundraising process? Do you think it would have been easier to raise a SF in Brazil, one of the countries with the most local investors actively investing in SFs? What advice would you give to someone considering raising a SF?
Looking back, we would have started building relationships with potential investors earlier in the process. This would have given us more time to address their concerns and build trust. While raising a search fund in Brazil might have been easier due to the local investor landscape, higher network and lesser searcher competition, we believe that the U.S. market offers unparalleled opportunities for acquiring a mature company and lead it to growth and value creation. Our advice to someone considering raising a search fund is to be persistent, build a strong network as soon as possible, and clearly articulate your unique value proposition. Stay adaptable and open to feedback, as these qualities are crucial for success in this journey.
