By Ignacio Olavarría
Fund I
After two exits in 2024, eight occurred in 2025 and three more in 2026 so far. Their average MOIC and IRR stand at 4.9x and 39% (net for Istria). These do not include several deferred payments, earn-outs and three equity roll-overs, which should push the MOIC of those 13 exits to at least 5.5x. There are two >10x, three >5x and six >3x, with no losses so far (although there’s one looming). Istria was a board member in seven of them.
Later this year we’ll conduct a deeper analysis of the exit processes and the value creation levers, aiming to offer entrepreneurs relevant insights for their journeys.
Of the 13 exits, six were to PE funds, three to strategic acquirers, three to strategics backed by PE, and only one recap. We think long term and have no rush in selling companies. Exits have happened only when management thought it was the best option. Six recaps were offered to us and we only took one, in the rest we decided to stay and keep supporting the CEOs for a few more years. We believe this flexibility is essential to achieve excellent returns and to adapt to the company’s development and the entrepreneur’s own cycle and preference.
Credit where it’s due: I’m proud of my partner Simon Bores Llanos, who made some contrarian calls that turned out to become very successful investments for Istria. A few deals where many people passed but he had both the grit and the vision to dig deeper, understand the true value of the business, and bet on the entrepreneur.
The like-for-like value of the portfolio increased +29.3% in 2025. It still holds 19 companies (plus the three equity roll-overs mentioned above), among which we see at least five with the potential to deliver >6x.
DPI is currently above 1.6x and expected to reach >3x upon termination.
Fund II
It completed 11 acquisitions in 2025 plus five so far in 2026: 12 in Europe, two in the US and two in Latam. One of them was via equity gap, all others had Istria as investor in the search. We are of course open to gaps but believe in the value of developing solid partnerships, and the search phase is perfect for that. We took four new board seats, two more upcoming.
Nearly €21m were invested in those 16 acquisitions (range €900k-2m). The fund is now ~85% deployed (33 companies). With the capital remaining it will acquire 5-6 more.
Additionally, it invested €2.3m in 35 new search funds, 30 of them in Europe. They were 11 partnerships and 24 solos, which is a significant change vs the historical balance in the portfolio (55% solo / 45% duo).
It had two early exits, both with IRR>60% and an average MOIC of 3.1x. Their returns have been recycled into new acquisitions –again, flexibility. So far fund II is performing better than fund I was at the same point in time, but we remain cautious as it’s still early.
Overall, since our first investment in a search fund in 2016 and considering both funds, Istria has a 77% acquisition ratio (100 search funds acquired a company out of 130 terminal ones) and a 65% hit ratio (Istria participated in 65 of those 100 deals).
Fund III
Legals took a bit too long because we worked on some clauses to add even more flexibility and follow-on options. Subscription period is about to open and a first close is expected in July. Hard cap is €80m. As of yesterday, 19 search funds have been invested or committed since January.
Brief comments on the market (mainly applies to Europe)
Reviewing my note on 2024 (…), I could repeat here the same comments on alignment, noise, etc. If anything, the trends are even more distinctive. If you are an entrepreneur considering this route, dig below that surface of trivial posts and fake narratives. Aim to have meaningful conversations with fellow entrepreneurs and investors. Understand whether this is what you really want to do. And keep in mind that the limelight and the noise may be good for other market “participants”, but bad for you and your chances of acquiring a great company to run and own.
Search Fund criteria are strict and it’s difficult to find them all in a company. But they are incredibly effective at protecting the downside and setting the foundation for upside. Obviously, what happens during the operation phase is what makes the difference. Fast forward to exits, I have seen that for a buyer to pay a very high multiple, at least two of these three features are necessary (not sufficient): high growth (organic or inorganic), a hot market, and a top management team that they need. That said, the best strategy may be not to sell – ever?
Many portfolio companies have engaged in M&A activity. A few are pursuing buy & build strategies. We like them much. But here’s a word of caution: a buy & build strategy may mask a mediocre business model. We lately see too many deals where the main value driver is M&A. While consolidation can certainly create value, we believe the most compelling opportunities start with a great business: one with strong fundamentals, durable competitive advantages, and attractive organic growth prospects. In those cases, M&A becomes a powerful accelerator of value creation rather than the core investment thesis. And that is less risky for the entrepreneur.
The popularity of search funds brings abundance of capital but also uncertainty in decision-making, lack of long-term stability, difficulties to build solid partnerships, often contradictory advice, and the focus on marketing that I mentioned before. In this environment, Istria aims to provide consistency and certainty to entrepreneurs and co-investors: support, visibility on where we stand, rigorous analysis, knowledge sharing, a clear decision-making process, honest feedback, leadership when needed, fast execution (esp. when it matters most), etc.
Q1 2026 just marked our tenth anniversary. It’s almost unreal to look back and almost impossible to predict where the ecosystem is heading to. We have many initiatives in progress, both to keep strengthening our value proposition to entrepreneurs and to capitalise on the opportunities we see in the SME space. And for that we are building the best team. Of that, I’m sure.
Nicolas Fernandez de Cuevas Teran ; )
This article first appeared on 23.06.2026 on Linkedin, at https://www.linkedin.com/pulse/note-2025-istria-capital-ignacio-olavarr%C3%ADa-hva7e/
Leave a Reply