Scotland’s first Search Fund seeks £50m firm to buy
Scottish entrepreneur Nick Hodgson is launching the country’s first Search Fund, a US-inspired vehicle used to acquire and grow businesses.
Mr Hodgson, who hails from Edinburgh, has raised an initial £380,000 for his Tinto Hill company which will identify a profitable Scottish business which will be acquired for up to £50 million.
Search funds are a new-style approach to business acquisition. They differ from private equity as, once acquired, the fund manager will run the day-to-day operations of the business.
Mr Hodgson, who launched Deliveroo’s operations in Scotland, says it is a viable succession plan for business owners looking to retire.
Since their inception at Stanford University’s Graduate School of Business in 1984, more than 700 Search Funds have launched around the world, with their popularity often attributed to their high average internal rate of return (IRR) of 33.3%.
Tinto Hill’s search is industry-agnostic and is focused on:
- Between £1m and £5m EBITDA
- A fair valuation, with an enterprise value of up to £50m
- High-quality recurring cash flow
- A strong existing management team
- EBITDA margins greater than 15%
- Potential for growth.
Target sectors include Energy Transition Services, Specialist Facilities Management, Testing, Inspection & Certification, IT Services, Education & Training, and SaaS.
Before launching Deliveroo in Scotland Mr Hodgson led global operations at start-up Airsorted – now known as Houst, the world’s biggest Airbnb manager. He has an Executive MBA, with distinction, from Warwick Business School.
He said: “Launching Scotland’s first-ever Search Fund is a hugely exciting project. Scotland has a proud and extensive history of financial innovation and there is nowhere more appropriate to launch this new fund than in my home town.”
He added: “The hunt is now on to find a firm that meets our requirements.”