Quite late and with a more limited distribution than in previous years, here is the annual comment on Istria’s activity.
Fund I is performing well.
- It had its first two exits in 2024 and another two recently. We expect 4-5 more this year, which may allow us to return the whole fund while 23-24 companies remain in the portfolio.
- We keep gathering learnings that will help us become better investors and provide better guidance to operators, especially since we’ve been board members in five of those exited (or soon-to-be) businesses.
- We had the chance to recycle some capital into portfolio companies to accelerate their M&A activity. A third of them so far has done one or more add-ons.
Fund II had its final close last July at €50m.
- It invested in 27 search funds in 2024, a number in line with previous years. That amounts to €1.8m invested in search. The focus on Europe remains: 22 search funds, €70k average ticket, almost 14% share.
- We have backed 23 more since January (of which 21 are in Europe), in a very active semester so far. Two of them are trailblazers in Norway (Nordover Kapital) and Switzerland (Amboro Capital, as the first traditional solo SF in the country) – exciting times!
- Circa €13m were deployed in 11 acquisitions (2 UK, 2 Italy, 2 Spain, 1 France, 1 Germany, 1 Netherlands, 1 Brazil, 1 US/Mexico). Three more have been closed so far in 2025, bringing the portfolio to 20. It should reach 30 by year end, as five deals are approved pending execution and 15 of our partners have opportunities under LOI.
The overall acquisition ratio for Istria I and II combined stands at 78.2%, considering 108 terminated funds in the portfolio. Sadly I expect this number to decrease. All those empty but noisy articles, posts and news on search funds will negatively impact the odds of entrepreneurs closing good deals.
Regarding operating companies, here are some stats as of 31-dec-2024, by year of acquisition. EVs are calculated using entry multiples, so these are conservative figures:
- 2018-2020 (4+ years of operation): 12 companies, average MOIC 3.8x, average IRR 32.8%
- 2021-2022 (2-4 years operating): 18 companies, 2.0x MOIC, 26.5% IRR
- 2023 (one year and some months operating): 9 companies, 1.14x MOIC, 8.8% IRR
The J-curve effect that I mentioned in previous notes was more pronounced in fund I than it is so far in fund II, where there’s actually no dip in the aggregate.
Some insights (mainly on the European ecosystem):
Among all the noise, every now and then there’s something interesting and insightful. These two resonated with me:
- https://www.linkedin.com/posts/dustin-sellers-6b9229_be-careful-what-you-wish-for-especially-activity-7173796726506475520-rMy6/ — By the way, shout-out to Dustin Sellers and his fellow board members for the best turnaround I’ve seen in a search fund company.
- https://www.linkedin.com/posts/steve-divitkos-76250b2a_is-the-search-fund-acquisition-rate-falling-activity-7300875965050535936-iz9m/ — Anything by Steve Divitkos is spot on.
With the growth of the asset class and the first proper wave of exits in Europe, alignment between entrepreneurs and investors remains essential. Now there are other alternatives to acquire an SME. Do your own research and then decide whether the search fund model and its dynamics are the right fit for you. When I think of all our partners, I believe in >90% of the cases a natural alignment exists, or it’s very easy to reach when circumstances change. That allows to put the focus on value creation.
The lack of suitable board members is still a bottleneck in Europe. But exits are also bringing back some much-needed capacity, as several experienced investors free up some bandwidth.
Equity gaps abound. Sometimes because of deal quality, sometimes because of cap table issues. The best solution is not to line up a long bench of candidates, who may stay on the sidelines in “wait and see” mode and require a lot of back and forth to commit, but to partner with a core set of investors who, with their experience and reputation, can draw others to the table and ensure the deal will close.
There’s much talk about long-term holds. We have always kept a flexible approach: funds of 10+3 years, with plenty of time for companies to develop, plus other solutions down the line. Until now, whenever there’s been a liquidity window, in all but one case we have decided to stay invested and continue the journey with the CEOs.
The arrival of Nicolas Fernandez de Cuevas Teran and Richard Haymerle has been a massive boost for Istria. Their first-hand experience means they are offering top-tier support and advice to entrepreneurs from day one. They can discuss search specifics as few others can. They demonstrate a sharp instinct for detecting opportunities, having analysed hundreds in the past. We could now increase the number of search funds we invest per year, but we will likely stay around 30-35 and dedicate the extra capacity to develop new initiatives to support operators, especially after witnessing how investment theses translate into great exits.
Finally, I’d like to show our deepest gratitude to Isaac Gómez for his five years with us. Last December he acquired a company with the support of Istria and a handful of usual suspects. Anything that I may say will fall short; it’s just impossible to overstate the immense value of his contribution during these years. Always helping, always pushing forward, always adding interesting angles and a huge amount of value. Best of luck in this new phase, my friend, you’ll always be one of us.
“We shall not flag or fail; we shall go on to the end.”
This article first appeared on 26.06.2025 on Linkedin, at https://www.linkedin.com/pulse/note-2024-istria-capital-ignacio-olavarr%C3%ADa-d1cfe/?trackingId=INzIPxWrfbKdst2WnL2EDQ%3D%3D
Note: The first partnered traditional search fund in Switzerland was Kronos Kapital & Management, launched in 2013.
Leave a Reply