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Several years ago, the Garrigós family launched Aniol. What was the aim of this family office?
The Garrigós family is one of the four founding families in Fluidra. Fluidra was founded by four individuals in 1969 and is now a publicly traded company with a leading position in swimming pool equipment worldwide. The company grew and Aniol was established in 1987 as a holding company. Fluidra went public in 2007 and Aniol started to act as a family office, which owns a stake in Fluidra along with other investments, primarily in real estate and private companies.
The aim is to preserve and grow the family’s wealth by making impactful investments.
In 2020, you began your foray into the SF model. What attracts you to this alternative asset class?
We are not attracted to purely financial investments. We like operational investments in the real economy with great managers and partners. The underlying idea is to replicate at a smaller scale the success the family had with Fluidra. We believe that our experience can be helpful for some CEOs. In my personal case, I was investor relations manager of a €20 bn industrial holding company during its IPO and I spent 15 years as corporate development director of a 10,000 people-strong industrial multinational. Furthermore I have been part time entrepreneurship professor for many years and even wrote my PhD thesis on business angels screening criteria.
In 2020 we stopped investing in startups and concentrated in SMEs. The SF model extends our deal flow, it is a new channel to receive deals that are usually more qualified than what you get through brokers. Other advantages are the alignment of interest between searchers and investors, the two years it gives you to get to know the searcher, and the structure that is already set. The downside is dilution, minority stakes, the probability to exit in a few years, and a high rate of mortality after due diligence, but the advantages are bigger.
What does Aniol’s current portfolio look like? How many searchers and deals have you supported?
Currently we have only one company acquired (Termoformados Termopack) in Spain, and another currently in closing in the UK, 5 searchers in Spain (Izisoft, Terra Firma, Bentayga, Telos, Fidelis), 3 in the UK (Ashington, Thames Equity Partners, Vericor), 1 in France (Exicap), in Italy (Aeqor), and Turkey (Spera). We have committed to 4 more that are currently fundraising (Targos, TEC Capital and Covadonga in Spain and JCTC in France). We are also following right now two equity gaps in the UK and France that are in the last stages of the deal. We have 6 companies more, but they did not arrive through the SF channel.
Your focus is on the main European countries, but we’ve also noticed that you’ve ventured into pioneering searchers, such as Fahir Han in Turkey. Does this indicate that you are open to backing other searchers in non-core countries?
Indeed, our focus is on Spain, France, the UK, Italy, and Portugal. Those are countries that are close and where we can understand each other with searchers, sellers, other investors, and even customers or suppliers. We made an exception with Fahir as he had managed and grown an SME before. In our opinion, that compensated for the distance risk. We are prepared to make more exceptions in similar cases. For example, right now we are seeing good searcher profiles in Germany.
When it comes to searchers, you emphasize the importance of operational experience and seem to prefer “older” candidates, having supported many senior searchers aged between 40 and 50. What are your selection criteria, and what is your typical process for deciding to support them?
We believe that part of the Fluidra success is attributable to a hands-on attitude and the capacity and flexibility to work with different partners and team members. We try to apply those principles to other investments.
First, we look a lot into motivation and opportunity cost for searchers. What are they leaving behind to become searchers?
Second, operational experience is also important. Searchers typically don’t have sector experience. This is a substantial risk that we try to reduce with operational experience in other sectors. Managing an SME differs significantly from working in investment banking or management consulting. MBA programs tend to be heavy on corporate strategy but light on execution. MBAs help with the purchase but are no guarantee of post-acquisition performance. We want to check that searchers have managed people before and had PL responsibility, even at a very small business or startup. Some investors focus on strategy and financial credentials, which primarily mitigate downside risk during the search phase. In our opinion the biggest risk is not the search. Losing the search ticket is not a big deal. Owning a company with the wrong CEO is.
Third, we have been lately looking into differential search strategies. In Spain for instance, we saw in the last months very interesting companies coming from self-funded searchers with heterodox approaches. The best was a guy networking with insolvency lawyers selling assets of insolvent companies. Of course, he did not want insolvent businesses but this way he reached the acquirers of the assets, that were solvent and growing.
In terms of process, we do two interviews and ask sometimes for references.
A few months ago, you wrote an insightful paper for us on international SF returns, comparing the Stanford and IESE studies. The latest findings show an increased gap between USA/Canada returns (from 35.3% IRR in 2022 to 35.1% in 2024) and the rest of the world (from 19.4% in 2022 to 18.1% in 2024). Does this suggest the rest of the world will not catch up to US performance? Do we currently have sufficient data to trust these figures, or do you believe the number of exits is still not representative?
The USA/Canada returns have a significant number of exits as a backup, about 150 cases. The rest of the world data has a very limited number of exits, around 15. Why do these returns differ so significantly? It can be a matter of insufficient data or that the market is indeed different outside the USA and Canada. In Europe for example we tend to do less growth deals and we still operate in small national markets. There are almost no transnational build-ups or expansion cases in search funds. In the USA by contrast you have substantial scalability without going abroad.
In case the European market turns out to be a lower returns one, that would be still attractive for investors but it would become an issue with searchers and the third tranche.
There are very few investors that have had enough exits to prove that their approach is right. Rather than copying, investors must be very humble and develop an investment approach drawing on intuition and their own strengths.
It seems that the pipeline of searchers and deals has grown significantly in 2024. Have you noticed this trend? How do you manage to evaluate all the opportunities with a limited team and time?
There is a consolidation of the UK and France as active and interesting markets and Germany and Italy are developing fast. Spain by contrast has grown in number but not in quality. The motivation question is becoming key there.
The team is indeed limited, so we try to have a lean process but with unavoidable milestones. Meet searchers at least twice before commitment. Visit the company at least once before acquiring. We also need to convey our role and strategy as investors. Good searchers tend to have oversubscription as high as 175% so they are also selecting you.
We present our strengths: we know about SMEs, we are not playing spray and pray in the segment so we will have time for them, we can add value, we are patient.
Now there is a trend towards funds. Many searchers believe funds have endless pockets and resources to support them. In reality, funds make many investments and cannot be active in all of them. Furthermore, they are very selective for acquisitions and usually generate equity gaps. A good metric to check funds would be to know how many search ticket they turn into acquisitions, or whether they have the capital to follow every fund they are invested into to the acquisition phase.
Finally, we try to act together with other investors with similar principles, exchanging deals and roles to extend our reach. For example, we can contribute our operational experience visiting the company and in exchange we can rely on a more experienced investor that we trust for the legal agreements review. We try to have a strong network with the other 3 Catalan family offices active in the space.
Looking ahead to 2025, do you plan to continue increasing your participation in SFs and deals? What are your objectives and vision for the SF market in the future?
We plan to maintain the investment pace achieved in 2024 at 10 searchers per year. There is a lot of institutional money entering the market and adding pressure to go for bigger deals, almost competing with private equity. This cannot end well because with dilution we need to acquire 25% below private equity to achieve similar returns. A secondary issue is that big investors don’t go to Boards so the increase of institutional money has meant weaker Boards. This can be an issue due to the shortage of experienced Board members that can be a balance of the power of the CEO.
There might be a trend in which funds transition to bigger deals and the rest will need to find efficient structures to acquire companies below €2 million EBITDA. We expect that with time different models and strategies of EtA will develop. We are watching closely self-funded deals and Holdcos. These models are appealing for long term investors like us.
However there are no standard rules and we lose that advantage of traditional SF. In self-funded sometimes searchers ask for dilution as high as 50% or they want you to commit your money to DD while they keep theirs to contribute as equity to the deal at a premium. Holdcos they try to split search and operate but they shift all the incentives to the search. In reality one needs to reserve some equity incentive for the operators. Furthermore, even if you buy companies with great management teams, the Holdco will eventually be drawn to operate the acquired businesses. Searchers also are imaginative in their approaches, there are more and more informal searchers running a self-funded search as a side gig while working for another company.
