Europe Takes the Lead in Search Fund Revolution

The search fund landscape is experiencing a seismic shift, with Europe now outpacing North America for the first time in early 2025 data. A recent analysis revealed that European countries claimed 9 of the first 20 search fund acquisitions worldwide in Q1 2025, compared to North America's 7 – with Spain emerging as the dominant player. This remarkable transformation comes just a decade after the model first took root in European soil.

What's driving this European surge? For starters, the compelling returns documented in North America – Stanford's study showing approximately 35% IRR historically – caught European investors' attention like a beacon. They recognized an asset class delivering private equity-caliber returns on smaller deals accessible to individuals and family offices. Additionally, Europe's demographic reality of thousands of SMEs facing succession challenges as owners retire creates perfect conditions for search fund opportunities.

"Search funds fill a niche not filled by other players," explained Carl Lundberg on a recent podcast, highlighting how they enable investors to directly participate in private companies without needing the €5M+ check typically required for PE funds. This democratization works both ways – investors can access previously unavailable opportunities with smaller checks (€200-500K), while talented managers without personal wealth can become business owners through investor backing.

## Democratizing SME Investment

Perhaps the most fascinating aspect of search funds is how they're transforming access to SME investing. Traditionally, private company ownership was reserved for PE funds. Search funds have shattered that paradigm. 

For entrepreneurs, the model is equally revolutionary. Not everyone has the next unicorn idea or desires to start from scratch. Search funds provide a pathway for talented managers to step directly into CEO roles of established businesses. This represents true democratization – no longer are company acquisitions limited to wealthy families or executives with deep pockets.

The European impact is particularly significant given the continent's vast SME segment that has historically suffered from low liquidity. Many viable businesses might have simply wound down upon owner retirement, as traditional private equity typically ignores sub-€5M EBITDA firms. Search funds are preserving these companies while creating opportunities for a more diverse pool of entrepreneurs, including more women and individuals from non-traditional backgrounds.

## Emerging Trends Reshaping the Landscape

As Europe's search fund ecosystem matures, several notable trends are emerging:

- Sector specialization: Rather than remaining generalists, searchers are increasingly developing deep domain expertise in specific industries like healthcare services or B2B software to gain competitive advantages.

- Holdco models: Some European searchers are moving beyond the traditional 5-7 year exit timeline toward building long-term holding companies that acquire multiple businesses under one umbrella – a model well-suited to Europe's fragmented markets.

- Interest rate adjustments: Today's higher interest environment has forced searchers to adjust valuation expectations and rely more on equity financing, potentially cooling the frothy multiples seen in some markets.

- Institutional interest: While historically funded by individuals and boutique funds, larger family offices and even PE firms are now taking notice, potentially bringing more capital but also pushing toward slightly larger deals.

The infrastructure supporting European searchers has evolved dramatically as well. New accelerators are training the next generation, while annual conferences at IESE and London Business School foster community development. The network effect is accelerating as successful search fund CEOs become investors and advisors themselves.

Given these trends, the future looks exceptionally bright for European search funds. The model has proven its adaptability across diverse markets from Spain to Poland, and even into Turkey and the Middle East. With thousands of SMEs needing succession solutions and a growing ecosystem of support, Europe appears poised to remain at the forefront of the global search fund revolution for years to come.