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Last year, Istria maintained its pace of investment from 2022, engaging in 26 search funds and 12 acquisitions. However, despite the consistency in the number of investments, the capital deployed saw a significant increase, reaching approximately €12M.
Of the 26 SFs invested in, 23 were based in Europe (Thallo, Izisoft Capital, Roxbi Capital, Candor Equity, Muri Capital, Ulam Transmission…), marking a shift from previous years where support extended to Latam and the US. The average ticket size for these investments stood at around €60k, constituting approximately 11.7% of the cap table pre-dilution. Notably, Istria observed a decline in the ratio of funds invested vs those considered (30-40%), reflecting the growing competitiveness within the ecosystem. In total, there are 55 active SF in their portfolio, and out of them, 16 have companies under LOI.
The 12 acquisition deals in 2023 (€9,6M invested) spanned across various regions including France (Actibio and Maillon), Italy (Villa Guelfa, Caris Servizi and Link.it), Poland (Velis), Brazil (Syonet and Kofre Tecnologia), Spain (Amix Levante), Germany (Euroscope), and the UK (Harlow Printing). Average figures for the last 10 companies are: €3,1M ebitda, 34% margin, and 5,4x EV/ebitda, which point towards slightly larger and cheaper compared to previous investments. The acquisition ratio within the portfolio now sits at 79.7%, with Istria’s involvement in 72.5% of the deals, although they expect these figures to decrease a bit in the coming years, in line with the development of the asset class.
Observing the market trends, Istria identified significant shifts, particularly in the SF landscape. While previously, strong candidates could readily secure funding, the current market demands a more strategic approach, recommending advanced planning, sector-specific expertise demonstration, and deliberate investor selection. Moreover, Istria emphasizes the importance of acquiring exceptional businesses at reasonable prices amidst the influx of capital and increasing competition. This calls for entrepreneurs to set high standards early in their search process to ensure investor confidence and mitigate risks effectively.
To conclude, Ignacio Olavarría expressed an unpopular opinion: the proliferation of growth brings about considerable noise, especially within the realm of marketing. As information inundates mainstream channels, the ecosystem attracts increased attention, which, ironically, can hinder entrepreneurs’ ability to secure proprietary opportunities, except perhaps in regions where search funds are still emerging. It’s encouraging to witness the SF model gaining traction in these areas.
