investments

The two ex-Bain managers launching the search fund

Andrea Taurelli Salimbeni and Niccolò Cavallaro launched LDue Capital, which raised approximately EUR 650,000 in capital with the involvement of Italian and international investors, including managers and entrepreneurs

by R.Fi.

2 February 2024

2' min read

Key points

What is a search fund?

2' min read

Andrea Taurelli Salimbeni and Niccolò Cavallaro, after several years in strategic consulting, decided to leave Bain & Company to launch their own search fund, convinced of the potential of Italian SMEs and with the will to contribute personally to a sustainable development of the Italian industrial fabric. Thus was born LDue Capital, an investment holding company whose objective is to identify and acquire a single Italian SME with a medium- to long-term horizon.

LDue Capital raised around EUR 650,000 in capital for the research phase with the involvement of Italian and international investors, including managers and entrepreneurs. Some of the leading investors specialised in the model also participated in the capital, including the Italian Search Fund Club (owned by Enrico Arietti) and Loris Lanzellotti. The importance of the investors is linked to their contribution at all stages of the search fund through their operational and investment experience.

What is a search fund?

The Search Fund concept originated in the US in the 1980s as an innovative business solution for young managers with a strong entrepreneurial vocation, through the creation of an investment vehicle aimed at the acquisition of an established company with a successful track record (i.e. entrepreneurship through acquisition).

In recent years, the asset class in question has also been enjoying growth in Europe and Italy. M&A's recent transaction involving Gruppo Tikedo SpA, a company that had been acquired by Vito Giurazza in 2019 through his search fund (Maestrale Capital), and its counterpart White Bridge Investments, is an example of how the model may have potential in our market as well.

The life cycle of a search fund consists of four phases:

-The first phase involves raising capital to finance the search for the target to be acquired. Fund principals (i.e. searchers) generally raise capital from 15-20 investors, including managers, entrepreneurs and specialised funds

-The second phase concerns the actual acquisition of a majority stake in the target company, at which point a further capital raising is carried out (intended to finance the transaction), on which the initial investors have an option, and not an obligation, to participate pro-quota

-The third phase is dedicated to the operational management of the company, where searchers take on the role of CEO, following a period of transition, guiding the company on a path of growth and development

-Finally, the last phase involves the exit from the investment with the relative valuation of the investment, with an average time horizon of 5-7 years