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Search Funds Europe

Written by Alex Tsishuk | Oct 16, 2025 2:49:28 PM

Search Funds, 40 Years On: Why Europe Looks Like the Next Big Opportunity

In one sentence: a search fund is when one or two operators raise a small pool of capital to find, buy and run a single, proven business. The idea dates back to 1984 and has been tracked for decades by Stanford GSB.

What the data says (light on numbers, heavy on meaning)

Stanford’s 2024 study looked at search funds in the U.S. and Canada since 1984 and found strong long-term results: an aggregate IRR of 35.1% and a total multiple of 4.5× across the full dataset. In plain words: when this model works, it can work very well — because buyers aren’t betting on an idea, they’re buying real cash-flowing companies with existing customers.

Two more signals of maturity:

  • Record new funds launched in 2023 — the community is growing, not shrinking.

  • Exits improved in 2022–2023, lifting IRR on exited deals above the long-run average.
    Both are signs of a model that continues to scale.

Europe is catching a strong tailwind

Outside North America, IESE’s 2024 international report counted 320 search funds across 40 countries. 2023 set new highs internationally: 59 new funds and 31 acquisitions in a single year. Translation: there are more operators on the ground, more deals getting done, and a broader investor base than ever before in Europe.

Recent industry notes also point to better outcomes on international exits over the last 12–18 months — the gap with North America is narrowing as the ecosystem matures.

Why this works for Europe (and why now)

  • Real businesses, not hype. Most targets are practical B2B services and essential providers. In Europe’s fragmented lower middle market, that means loyal customers, repeat work, and room for simple improvements.

  • Operator energy. The new CEO is an owner, not a distant allocator. Weekly rhythm, hands-on changes, and alignment matter more than headlines.

  • Rational entry points. Europe still offers sane pricing for quality SMEs compared to crowded, auction-driven segments. You don’t need exotic structures to create value — you need process, people and patience.

What “good” looks like (a simple lens)

  • Customers stay because service is reliable (not just because the founder knows everyone).

  • Processes are written down, not just “in someone’s head”.

  • Cash flow turns into cash in the bank (working-capital discipline).

  • A small, trusted second line can run the day-to-day while the owner focuses on growth.

If you’re reading this as an investor or a seller

  • Investors/co-investors: search funds give exposure to one understandable business with clear levers: service quality, pricing, people, and basic digital tools. Returns in the U.S. dataset show the model can compound well when executed — that’s the headline.

  • Owners: buyers value companies that work without the founder. If client relationships, operations and decisions are already spread across the team, you are exactly the kind of business operators look for.

How I see it (EU focus)

Across the EU there’s a quiet pipeline of reliable, “un-flashy” companies ready for the next chapter. Bring in a respectful operator, tidy up processes, invest in people — and the flywheel turns. That’s why I’m building here: Europe rewards discipline over noise.

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