00:00:11:36 - 00:00:23:33
Unknown
Welcome to the Amazing, the weekly podcast acquisition Entrepreneurs in the UK, Europe and beyond. This is a very special edition of The Amazing This Week. We are live from the Serial Acquirer Symposium in Wimpole Street in Melbourne.

00:00:23:33 - 00:00:40:27
Unknown
joined today by Robin Gold Hagen, assistant Vice president of Investor Relations at Nova Stone Capital Advisors. Robin, thank you for joining us. Thank you all for having me. Before we dive into the Nova stay model, which is super interesting, I'd love to know a little bit about you and your kind of role into investor relations and what the role entails.

00:00:40:31 - 00:01:05:28
Unknown
Yeah, absolutely. My background is probably more similar to the one of a traditional searcher in the sense that I started out an investment bank. I spent a couple of years in strategy consulting, mostly with UBS and the asset Management and Wealth Management Division before then moving into a fintech, building up the Investor Relations department of a fintech company in the growth equity space in Switzerland.

00:01:05:32 - 00:01:32:02
Unknown
I have. I've built I've built the team with yeah, with the with a different functions that are entails for this for this growth equity company and was then in fact introduced to a searcher who was active with the novice loan program and Christian, the CEO and co-founder of N.S.A. at the same time. So I sort of had entry points to N.S.A. on the two very different sides of the of the coin, Right?

00:01:32:02 - 00:01:56:06
Unknown
Yeah, which is very interesting. And I have had very interesting discussions with with the founder and eventually decided to come on boards in order to know, facilitate and really grow the Investor Relations, let's say, efforts on the European side of things. Okay. And for those that aren't aware of the way that it works, what does the investor relations role entail for you?

00:01:56:10 - 00:02:14:19
Unknown
Yes. So Investor relations, I mean, that's entails a whole lot of things. Now. There is a lot of educating, given that we are working in an asset class that is not familiar to many people. Of course. Yeah, that that is probably a large chunk of the idea educating. And then there's also a large element of storytelling. All right.

00:02:14:23 - 00:02:41:01
Unknown
What what the problem is about what we're trying to what we're trying to do. And at the end of the day, it's really it's really more an art of a science. It's about creating connections for, in my case, the European searches with the people and that maybe investors that may also be other people that are somewhat relevant for their for their for the acquisition process and yeah, connect them to the right people to spark a conversation.

00:02:41:05 - 00:02:56:36
Unknown
Interesting though, you said that it's not an asset class that's very widely known. Is that something you say is a big difference between perhaps the US market and what we have in Europe? Yeah, and that's a big part. Your job is educating and bringing investors on board, speaking to family offices, I imagine. I know that. And overtone deals are quite a few of those.

00:02:56:37 - 00:03:17:15
Unknown
Yeah, absolutely. I think the obviously the North American market is a lot more mature. The search fund model is is much more popular over there than it is over here. There are people that are I mean, right now there's certainly strong momentum. So people are seeing that there is a lot of traction in the ETA, in the search on space.

00:03:17:19 - 00:03:38:11
Unknown
And people see that in terms of, you know, linked in activity, For instance, our white papers being published or people posting about their journey, that helps a great deal. But this is still this is still like a wide spot. I mean, the search on space, the majority of of of investors that you would be speaking to will have not heard about the search fund as such.

00:03:38:20 - 00:04:04:17
Unknown
I mean, if you speak to, say, veterans in the UK, for instance, they they will then reference the bimbo model in the eighties A by in management bible Yeah yeah. Which has some some parallels, some similarities to the search fund model. But in general, outside the bubble, outside the search ecosystem there is a lot of education still to be done about about the model.

00:04:04:21 - 00:04:28:39
Unknown
And then of course, it varies by geography also within Europe, right? So for instance, in Spain, pretty much every single family office you will speak to in Spain will have funded a search at some point and. Sure, yeah, yeah. And this then, of course, Portugal, France, Italy, I mean, this move moves on to other to other countries. But in the dark region, for instance, it's still, still fairly, fairly unknown.

00:04:28:43 - 00:04:46:49
Unknown
That's one thing that we've noticed, that it tends to be sort of more Southern Europe. Again, beginning in Spain, we seeing a lot of activity in Italy at the moment and it's gradually moving north. Yeah, but obviously you're based in I'm in Zurich, I'm in I'm in Zurich. I mean, I should say, in terms of our setup. So I'm covering I'm essentially working with the European searches.

00:04:46:49 - 00:05:22:00
Unknown
Okay. I'll construct in there, kept cable, connecting them to the to the right people. And we are active in 12 countries in Europe. Wow. Yeah. So that's that's quite a diverse geographical base to work with, which also means that for every single transaction, there is always a local bias. Right? We're speaking about SMEs here. Yeah. And we we can get to that in a bit about our investor base, which are essentially systematic investors that backing the program as such and, and investing, you know in in a in a number of search on deals.

00:05:22:04 - 00:05:45:21
Unknown
But we also like to bring in local investors for every every single transaction. And so a 1 to 1 match up so matching the local search with the local investor, I mean, Yes. So there are certain, let's say in Iberia, Spanish investors that have a preference for Spain. In Portugal, we'll be connecting with an investor that with a searcher that is that is searching or acquiring a business in that space.

00:05:45:23 - 00:06:15:20
Unknown
Okay. And then the same goes for the French speaking investor as you have the German speaking investors. So these communities in they overlap know because there is there is, say, serial search fund investors that are that have almost built an institutional approach to it and screen through dozens of people is that the risk from searches and they would be investing in asset almost globally they would even go into emerging markets so they overlap in the different geographies.

00:06:15:20 - 00:06:28:13
Unknown
But then you also have people that are somewhat as a new to the space that will focus on their on their home turf, let's say. That was to be my next question. Do you find that it's the new investors that try to stay local at first and so they kind of build confidence and get to know the space?

00:06:28:19 - 00:06:47:40
Unknown
Yeah, I think it makes a lot of sense. I mean, many investors, they start out by backing searches rather than going into an equity gap situation. Sure. Where they invest in an acquisition. And whenever you invest in a searcher, obviously there is a cultural component to assess whether somebody has, in your opinion, what it takes to be a successful searcher.

00:06:47:44 - 00:07:15:31
Unknown
And that tends to be easier for somebody that has a similar, let's say, educational or cultural background. And I think for people that that want to get started and want to build a track record and want to get immersed and involved in the scene, they will naturally start with search investment, search budget investments. Sure, they will stay fairly close to their home ground and that kind of process of of assessing a search rather than accessing the kind of asset class as a whole is something that investors are probably more used to from, you know, the startup funding model.

00:07:15:32 - 00:07:29:38
Unknown
It's all based on, you know, find a great founder rather than a great idea. So they're more comfortable with that. Yeah, I think most of the time when you speak to investors, though, they will reference an experience that they had with somebody that had approached them and told them about what essentially presented their PBM, what they were doing.

00:07:29:38 - 00:07:51:14
Unknown
And that was that is usually the first touchpoint with the model. Yeah. So essentially individuals approaching these investors and that's when they, in the best case scenario, start digging a bit what's going on, You know, why do we get all these PBMs? Why do we get approached repeatedly by searchers and what's what's happening here? And and I think that's that's a great thing in this space.

00:07:51:14 - 00:08:08:17
Unknown
You know, it's almost a bit like a grassroots movement that this is that this is spreading out. Awesome. And that's how it will grow. So we've touched briefly on searches. I mean, so know based on capital advisors, they have a fairly unique model for those that don't know, I don't know many in the scene already do. Can you kind of break down how that model works and how it differs from the traditional search fund?

00:08:08:28 - 00:08:33:07
Unknown
Yeah, absolutely. I mean, we we consider ourselves as an operator led search model, which is essentially a partnered approach. The main difference of the NCA program is that we are focused on mid-career professionals and in the traditional model, what you see, I mean, if you go to the leading business schools, it's mostly M&A, MBA graduates that have two or three or four or five years of experience in the typical industries.

00:08:33:10 - 00:09:02:27
Unknown
PIB Consulting. In our case, the approach is slightly different. We're going for a demographic that is our average searcher is about 43 years old. Okay? So they bring 15 to 20 years of operating experience. Now, they are not necessarily M&A professionals with a private equity background. So they are first and foremost very good, very capable operators. Sure. And oftentimes they come across the search model through a time and spend it, you know, doing an executive MBA, for instance.

00:09:02:31 - 00:09:20:16
Unknown
Now, then the risk profile of somebody like that that has, you know, a high paid corporate job as a family mortgage to pay slightly different from, let's say, the MBA that, you know, takes it takes a gamble of raising a search fund, which means you could consider that the equivalent of starting a company. Maybe you're the last two decades.

00:09:20:20 - 00:09:44:28
Unknown
And so what we're doing with partnering with these individuals, we are the largest program of this kind. So we receive around 4000 applications every year. Wow. That is Europe and North America. They applied to the program and then we have what we call our assessments and a team that essentially evaluates all of these candidates. Now, this is a three month process with business cases, panels, panel discussions, 1 to 1 interviews.

00:09:44:32 - 00:10:10:41
Unknown
And the end of that process, we typically on boards and so 4 to 8 individual individuals per quarter that then get an offer to join the program. Wow. What does it mean to join the program? Joining the program means that we will fund your search budget. Essentially, this is one fundamental difference to the traditional search fund model where you raise your search budget in order to get started.

00:10:10:45 - 00:10:34:33
Unknown
In our case, where we and we are saving, let's say, some time for the for these guys. Sure. In the sense that the day you are onboarded, you can get started right away and you will get funded by the program. So there is sort of, say, a baseline salary that should cover the essentials. Let's say that depends a bit on where you live in Hungary is going to be different than in New York, for instance.

00:10:34:33 - 00:11:01:26
Unknown
Yeah. And you will, for instance, be supported by an analyst. Now we have a team in Israel that's focuses on everything, everything digital, all the databases, all the information. Okay? So that helps them a great deal. If you imagine I mean, we've been in in business since 2019, really with the first searches starting probably in 2020. We've approached a lot of businesses since then and we've spoken to a lot of brokers, a lot of service providers.

00:11:01:30 - 00:11:22:42
Unknown
So we're keeping track of that. And we have a we have a global database to help our searches navigate, you know, who has been approached already, who are, let's say, preferred vendor contacts. All of these things will make your life a lot easier and help you on what is most essential, and that is finding that needle in the haystack is finding that perfect company for you.

00:11:22:42 - 00:11:41:01
Unknown
Absolutely. So said that you have this kind of various expertise is sourcing. So yeah, I was going to ask about how your acquisition entrepreneurs fund their companies. Do you do they do any proprietary search of their own on top of the database that you provide? They will, yes, there is. I mean, there's different routes that you can go down.

00:11:41:05 - 00:12:00:35
Unknown
So there's old school ways of sending letters, for instance, right then of you have the obvious ones emails, I generated emails, that type of stuff that you can do. You will be attending industry conferences, right? You need to put yourself out there. But what we see is that the companies that we're looking at are have any brokers. Yeah.

00:12:00:45 - 00:12:19:19
Unknown
Also in this segment off the market. Okay. Which is, in our opinion, a good thing. Okay. It's a good thing because brokers tend to manage the expectations of the seller. Yeah, we tend to I mean, we all of them, all of us have some sort of a bias when it comes to the things that we own. Rage would always value your own apartment or your own car.

00:12:19:21 - 00:12:40:07
Unknown
Is worth more than the exact same car is always somebody else. The same thing goes for a company very even more so if you spend 20, 30 years building it. Yeah, you read. You are a bit biased in the sense that you will look for the reports where you see the highest multiples. You know, you think about comparable transactions that probably are nothing alike.

00:12:40:07 - 00:13:03:44
Unknown
Sure. And you come up with with perhaps an irrational sense of what your company may be worth. Yes. And this is where the brokers then come in that they they are they're more sensible, they have a better understanding of the market and they tend to manage expectations. But the sellers, which I think you need to be, there's always an element of negotiation to get to the final price.

00:13:03:48 - 00:13:21:26
Unknown
But you cannot you can't be too far apart. Yeah, there needs to be some sort of a needs to be reasonable. Now I'm so, yeah, it's something that we see quite a lot when we speak to sellers And as you said, you know in the to quote Arsene Wenger, everyone thinks I have the prettiest wife at home. Everybody, everybody will go and find out, you know, the highest multiple.

00:13:21:26 - 00:13:41:35
Unknown
And that's a business that has been preparing for, you know, exit for three years. Their books are all in order. You know, they haven't been doing anything clever to minimize profits, to minimize tax and that kind of thing. And yeah, everybody wants to go out, you know, five x multiple and maybe they're not quite ready for that. So that's interesting that you say that about brokers because in the UK and it's the same anywhere there are different kinds of brokers.

00:13:41:44 - 00:14:05:35
Unknown
We tend to find that those in the kind of smaller boutique brokerages do what you say and they kind of prep them better for sale and some more will perhaps give a slightly higher multiple to get the seller on board. Do you find that at all of different maybe locations of different qualities of brokers? Yeah, that is probably I mean, I suppose the UK market is more professional and probably even more broker than than than in other countries.

00:14:05:41 - 00:14:28:33
Unknown
In other countries, what we often see is that they are the accountants or tax advisors that, you know, have sort of a brokerage arm or will advise them in in the sale of the company. I think there is always it's always important to keep in mind there's also different incentives in play, right? I mean, as a broker, you want to sell as fast as possible at the at the highest possible price.

00:14:28:33 - 00:14:47:07
Unknown
Or maybe sometimes you're you're even inclined to just sell. Maybe there would be other buyers out there that you could get an extract or a better price on. So there is a couple of I think there's probably a couple of things that that you need to navigate, especially as a buyer and anything you will encounter all sorts of different brokers as you sat.

00:14:47:07 - 00:15:08:41
Unknown
Right? Or some would provide excellent information at the start. Some will barely provide any information. So this is this is a challenge that you are always faced with as a as a searcher now. And so it's good to go back to the searches and and the the excellent program that the NCA provide. You know, could you give some of the searches out there that maybe interested in this, some tips on what it is that you're looking for in a good searcher?

00:15:08:41 - 00:15:31:27
Unknown
Yeah. Yeah. So the typical profile that does well that does probably yeah. Does very well in the program are people that have had operating experience obviously panel responsibility, leading people. And in most cases our searchers have had into proverbial experiences in the past the obvious they started the business or they have been running a business on the side.

00:15:31:31 - 00:15:53:01
Unknown
I think this mix of experience does does help a lot. So you need to be you need to be a self-starter. In a way. It's a very lonely journey. Even though you're supported by this entire team. But at the end of the day, it's you. You need to you need to find a way to spend this up to three years that you're having.

00:15:53:05 - 00:16:22:36
Unknown
And, you know, stay really focused. Be honest to yourself. What are the things that work? What are the things that don't work? And because this is a very lonely experience, this is not if you let's say you spend all your life in a corporate setting surrounded by it, by people and always worked in a team. While teamwork is certainly very important, you need to be able to work autonomously just on your own and motivate yourself every single day to, you know, to go off to to go off to the company, I can imagine.

00:16:22:36 - 00:16:41:25
Unknown
So that's where that kind of entrepreneurial if you have gone through the startup process, there was a kind of lonely journey at the start. So it's a mix of that. And then also managing a large team and the corporate and the operating process for sure. But you'll have a lot of stakeholders throughout the process, right? There's all these third party providers, service providers, there is the sellers, there is the brokers, there are the investors, of course.

00:16:41:25 - 00:17:01:40
Unknown
And you need to be able to distinguish between them and the different, let's say, the different levels of information. And you just need to be able to adapt to your counterpart. Okay. Interesting. I'm and you know, we touched earlier on the kind of differences between the US and the EU. And I know the UK you kind of span both.

00:17:01:40 - 00:17:22:21
Unknown
I mean, is there anything else out there that you think really separates the two things? I know that the US is, is certainly more mature, but also in terms of, you know, sort of valuations and multiples and stuff, we seem to be getting better rates in the EU compared to the US because perhaps not as much competition. Yeah, we see slightly lower multiples in the in the US, in the US market.

00:17:22:25 - 00:17:41:40
Unknown
Other than that, I think of course the the model is super well known in the in the US. Right. I think that helps to a degree that service providers you can you can essentially skip all that educational aspect. Right. And the amount of times I'm speaking to people that have never heard about the search fund model before, this takes up a lot of time as well.

00:17:41:40 - 00:17:57:26
Unknown
I think that makes it slightly easier perhaps in the US. But yes, it is a very competitive it's a very competitive market. But the same thing is about to happen in over here as well. We are. That leads you into my final question because, you know, we we we feel that we kind of sit at the brink of a wave of ACA.

00:17:57:26 - 00:18:23:22
Unknown
And I know it's really popular in southern Europe, but in the UK and it's starting to grow. And what do you see is the future of of M&A, SMB, M&A in the EU? I think it's certainly very exciting If you attend any FCA search, one conference at the leading schools, I mean, they're they're essentially growing exponentially. Yeah. So there is a lot of momentum in the space now, A lot of momentum means that there will be new searches entering the scene.

00:18:23:25 - 00:18:51:11
Unknown
All right. I mean, especially for MBAs, is a very attractive proposition. I understand the let's say, the financial the financial gain of financial upside. If this is done well, then it's certainly very attractive. Sure. Now, understanding the model doesn't necessarily mean that it's the right thing for you. So I think there is probably also a bit of a natural selection then of the searches that will get funded now that will be able to to to raise the search fund successfully.

00:18:51:15 - 00:19:10:24
Unknown
And there will be others that that that won't manage to raise to raise sufficient search budget. And that is because I mean the investors and there's also more and more investors that will be investing in search budget they'll they'll be able to compare it right They'll see so they'll get already now they receive so much inbound interest from.

00:19:10:24 - 00:19:32:20
Unknown
Sure hiring searchers that's and that the same goes for us of course and always assessments and a process but I'm now just speaking about let's say the traditional Sure yeah is the search a profile they are there be they be able to already select, you know at a very early stage who they think has the right profile, has what it takes after simple conversation.

00:19:32:25 - 00:19:51:14
Unknown
Yeah. But on the other hand, it's I mean there is there's numbers out there about the potential, you know, targets that you can acquire, the number of companies changing hands or that are supposed to change hands. So these are these are gigantic numbers. Sure they are. If they're entirely accurate. And all of these companies are good assets, a different question.

00:19:51:18 - 00:20:17:19
Unknown
But in principle, there is a lot of targets, good targets out there. Yeah. So I think there is definitely space for further further expansion and more and more searches entering the scene. And then we will see new types of models emerging. You have all you have self-funded, you have dual searches, you have self-funded dual searches. There is all types of or and yeah, there's all types of ways you can go about it.

00:20:17:23 - 00:20:33:03
Unknown
And I think this will, this will probably be, yeah, this will continue for sure. Excellent. Well Roman, thank you so much for joining us and everybody at home. If you're interested in applying for the NCA program, please do so via the website will include all the links below. Thank you very much. My pleasure. Thank you.