The First 100 Days managing EFFISUS: A Co-CEO Journey

Founded in Vila Nova de Famalicão in 2005 by Pedro and Paulo Carvalho, Effisus has grown to develop and market innovative construction solutions, focusing on energy efficiency, building watertightness, and fire protection. With a 2023 turnover exceeding 10 million euros and a strong international presence in markets like the UK, UAE, Saudi Arabia, and Spain, Effisus is a leader in waterproofing solutions for a variety of architectural challenges. The company’s impressive project portfolio includes global landmarks such as the Apple headquarters in California and the Guggenheim Museum in Abu Dhabi.

The strategic investment from Viriato Capital, led by Miguel Costa Freire and Pablo Alvarez Guerra, aims to further Effisus’ growth, market expansion, and commitment to energy-efficient and sustainable building solutions. Effisus stands out in its niche market, boasting a diversified product range, geographical reach, and a strong brand, poised for continued success and growth.

In this insightful interview, Miguel and Pablo open up about their initial 100 days following the acquisition of Effisus. They will share their firsthand experiences and the early steps they’ve taken in their roles as the new management of the company.

Why did you decide to acquire EFFISUS, and what attracted you the most about the company?

Pablo: What we liked most is that Effisus was a different company from a typical SME in Iberia. In Effisus, we found a company with an impressive culture of collaboration and “can-do” mentality, a high performing team of professionals and, structurally, a company with a clear exposure to international markets which for us was a key point in our investment thesis.

Based on your experience, what advice would you give to searchers about effectively managing the deal process?

Miguel: I think that the most important thing is to remain calmed during moments of stress (and there will be moments of stress) and be able to, while maintaining the high focus on closing the deal, keep an eye on the companies operation, try to meet people there and remember that you are buying a company to manage it, so the day after closing should always be on their minds.

Can you share the challenges you encountered in your first 100 days as CEO and the measures you took to address them?

Pablo: The main thing is above all, the need to do several things in parallel e.g.: Time sensitive company decisions, pushing business plan and at the same time get to know well the team and the business, which is a full-time job in itself. In addition to this, we had several open points and leftovers from the deal and the search operation so my big advice would be to get rid of those as soon as possible and organize things so that new CEOs can focus on the operation.

How have you merged your strategic vision with the existing corporate culture and values of EFFISUS?

Pablo: We were lucky that Effisus existing values were quite aligned with our own in several cases – the company had already implemented a “culture” function that aims at preservation of this values- We took the approach of building on those and just gradually implement new things, rather than trying to reset the company. I believe that it is not realistic to try to change a company that has been operating for some time over the course of a few weeks or months. If change is needed, it should be done with high care and taking the required time in the process.

As co-CEOs, how do you handle decision-making and collaboration? Could you share an example of a significant decision you’ve made together?

Miguel: We have divided our areas of work so that decision making is as clear as possible. For decisions that are more strategic and impact the whole company, we discuss pros and cons and try to reach consensus. Otherwise, we believe in the principle of “disagree and commit”. Consensus is not always possible and sometimes one needs to trust his / her partners when they are very convinced of a decision.

What excites you the most about leading EFFISUS?

Pablo: To me, is the challenge of building up sustainable growth in a company with an international footprint and that can cater to such a big market as construction. Doing this with a great team is a privilege.

Reflecting on your initial period at EFFISUS, what key lessons have you learned, and how will these influence your future strategies?

Miguel: Despite having the purpose of very slow gradual change, we rushed into some decisions that maybe could have been postponed. I think that taking the time for the first two – three months to learn the ropes should be the focus of a new CEO.

Looking forward, what are your primary objectives for EFFISUS, and how do you plan to achieve them?

Pablo: Our primary plan is to achieve our targets of sustainable growth. This is not only for our investor’s sake, but also for the team behind Effisus who replies on us. We also think that Effisus offers products that improve and even save people’s lives so we are also proud to take these into the world, which will be happening to a higher degree as we grow.

If you could offer one essential piece of advice to a searcher stepping into a leadership role in their newly acquired company, what would it be?

Both: Take the time in building relationships with your team, in the end, most companies are all about people and having a team that trusts you and in which you can rely is the best safety net for a CEO

Is it true that searchers seemto gravitate towards largercompanies than before?

🔍 Historically, team composition has influenced target size, but recent studies suggest a nuanced trend favoring partnered searchers.

📊 As the model matures and institutional investors enter the fray, the acquisition spectrum widens, inviting larger deals into consideration.

🛠️ Complex deal structures and evolving debt dynamics are reshaping strategies, empowering SFs to navigate larger acquisitions with strategic finesse.

💡 Shaping future strategies: Amidst this evolving landscape, entrepreneurs must adapt, mastering the intricacies of larger deals while sustaining a focus on operational excellence.

Curious to explore these trends further? Read the full article and gain insights from our expert:

EFFISUS: Arada Capital Partners’ First Investment in Portugal

It is with great pleasure that we, at Arada Capital Partners SCR, announce our first investment in Portugal through the acquisition of a stake in Effisus – Excellence in Weatherproofing, a leading multinational in the waterproofing solutions sector for ventilated facades. This strategic investment was carried out via Viriato Capital, a Search Fund led by the distinguished Miguel Costa Freire and Pablo Alvarez Guerra.

Effisus was founded in Vila Nova de Famalicão in 2005 by Pedro Carvalho and Paulo Carvalho to develop and market integrated construction solutions aimed at promoting energy efficiency and ensuring the watertightness of building facades and roofs, as well as fire protection. Effisus’ waterproofing solutions can be applied in a wide range of situations, from cladding facades of high-rise towers and skyscrapers to solving waterproofing issues in elements such as gutters, skylights, window frames, joints, and perforations.

Effisus ended 2023 with a turnover of more than 10 million euros. Exports account for the majority of the company’s turnover, with its main international markets being the United Kingdom, United Arab Emirates, Saudi Arabia, and Spain. Effisus currently has about 40 employees, distributed between Portugal, the United Kingdom, and Dubai.

Its portfolio of exclusive products for building facades and roofs includes dozens of projects, such as the Apple headquarters in California, the iconic Museum of the Future and Burj Al Arab hotel in Dubai, the Guggenheim Museum in Abu Dhabi, the new Google headquarters in Dublin, Santiago Bernabéu Stadium in Madrid, Hudson Yards in New York, Battersea Power Station in London, and the Riyadh Metro in Saudi Arabia.

Viriato Capital’s investment in Effisus aims to boost the company’s growth, strengthen its position in current markets, and promote entry into new markets. Furthermore, this investment supports the development of solutions at Effisus that contribute to greater energy efficiency and sustainability in building construction, thus aligning with environmental preservation. It is noteworthy that the name ‘Effisus’ derives from ‘Efficiency’ and ‘Sustainability’ in English, reflecting the core of its business mission.

Effisus holds a niche position in a target market with macro tailwinds, focusing on a high-value segment that is well diversified in terms of both products and geography. With a solid track record of financial success, growth with good margins and profitability, the company maintains a robust pipeline for the accomplishment of its business plan. The company, with its strong brand and unique value proposition, is excellently positioned for this new phase of growth.

Press article: https://www.eleconomista.es/capital-riesgo/noticias/12658744/02/24/viriato-capital-crece-en-portugal-con-la-compra-de-effisus-.html

Starting a Search Fund: motivations, fundraising and investor captable

What do you believe are the correct motivations that an entrepreneur should have to launch a Search Fund? In your case, what drove you to undertake entrepreneurship through acquisition?

Fernando: The right motivations for launching a Search Fund, in my view, are a trifecta of ambition, curiosity, and a keen interest in operational leadership. Firstly, there’s the ambition to helm a business, not just to start from scratch but to steer an existing entity to new heights, finding fresh opportunities and growth, and  blending entrepreneurial spirit with practical execution.

Secondly, curiosity is key. You’re diving into established businesses, industries, perhaps even markets you’re not initially familiar with. This demands a voracious appetite for learning and an ability to quickly understand and adapt to new business landscapes.

Lastly, a genuine interest in fostering a positive organizational culture and building strong teams is vital. The success of a Search Fund often hinges on the ability to inspire and lead a team effectively, nurturing talent and driving collective success.

My journey towards entrepreneurship through acquisition was driven primarily by the sense of ownership that a Search Fund brings. It offers more than just equity, it’s more about being in charge from start to finish, leading the project, and making key decisions, and I find it very compelling.

Another crucial aspect for me was acknowledging that personal and professional growth has come mostly from pushing myself into new challenging environments. There is a certain excitement in stepping out of my comfort zone and continuing to learn about businesses and teams.

Along these lines, I’ve had the privilege of exploring various facets of companies, each intriguing in their own way, however leading multidisciplinary teams is where I found my true calling. It’s this blend of leadership, learning, and complete ownership that drives my passion for entrepreneurship through acquisition.

How did you approach the fundraising process? What strategy did you follow to raise the search capital?

F: Approaching the fundraising process for a Search Fund requires thorough preparation and a clear strategy. The first step is to gain a deep understanding of the Search Fund model. This means delving into its structure, incentives, and the nuances of what works and what doesn’t. It’s essential to determine if this path aligns with your commitment and career goals, especially considering the real risk of failure and the need for honest self-assessment about the challenges ahead.

Fortunately there are many resources available that helped me solidify my understanding of Search Funds. There are plenty of online resources at your disposal but I would particularly highlight searchfunder.com, and of course going through the Search Fund bible: the Stanford Search Fund primer. There are also a few podcasts that provide valuable insights into the practical aspects of this model, I particularly like Search Funded, and In the Trenches.

Another useful way of becoming comfortable with the model is by speaking with as many searchers as you possibly can, both successful and unsuccessful. I’m very grateful to this community for having helped me during my research, for their candid advice and their warmth along the process. Even now I continue to leverage the searcher network.

Only after this groundwork was completed I began drafting my Private Placement Memorandum (PPM) which is the document you introduce to investors to present your case. The document is fairly standard but there are three sections in particular that require thorough attention: the first one is the About Me section, in which you succinctly explain who you are, what motivates you, and your professional experience. The second, is the areas of focus, in which you should expand on certain verticals or industries that are particularly appealing to you. Finally, it’s important to go through the costs section, to think about how you want to invest the funds during the search process.

Having completed this preparatory work, I was in a strong position to understand my own value proposition, and it enabled clarity to craft an engaging and persuasive pitch to investors. Ideally the pitch should encapsulate who you are, your purpose, areas of interest, your strengths —and weaknesses!, and your search strategy.

What helped you the most in the fundraising phase, and what were the main challenges you encountered?

F: I was fortunate to have the guidance of a couple of mentors throughout this process. Their insights and advice were invaluable and I strongly recommend anyone embarking on this path to seek out mentors. Their experience and perspective were a guiding light in navigating the complexities of the fundraising process.

Following their recommendation, I spoke with as many searchers as possible, local and international, to get their perspective on their journey. Although every search is unique, I was able to find certain patterns that helped me undertake the fundraising process with confidence.

As for challenges, while my journey was relatively smooth, I recognize that this isn’t always the case in such ventures. Common hurdles often include aligning investor expectations with the realities of the search fund model, navigating the competitive landscape for funding, and effectively communicating one’s unique value proposition in a crowded market. I was prepared to face these challenges, thanks to the groundwork laid by my mentors and the insights gained from other searchers. This preparation turned potential challenges into manageable aspects of the process.

You have a balanced cap table between institutional and private investors? What were you looking for in investors? What were the characteristics of your ideal cap table?

F: Every searcher’s journey is unique, and the composition of the cap table that suits one might not suit another. For me, there were three key aspects I focused on while shaping my ideal cap table: geography, background, and personal fit.

In terms of geography, I sought a mix of investors from diverse regions: I wanted to benefit from the knowledge of local investors who are well versed in the Spanish ecosystem and idiosyncrasy, the expertise and tenure of American investors who have seen it all and done it all, and the insights and connections of other international investors across different markets and cultural landscapes. A geographically diverse cap table can offer a wealth of knowledge and networking opportunities crucial for global business expansion.

Regarding background, I looked for investors with a variety of professional experiences and industry expertise. There were two aspects in particular that I aimed for: first, investors with a strong financial background that could complement my operational expertise. Second, having former searchers that have lived through the Search Fund process, and could add value when facing uncertainties.

Finally, personal fit was paramount. It’s essential to have investors who share your vision and values, and with whom you can build a relationship based on trust and mutual respect. The right personal fit means having investors who are not just funding sources but true partners in the journey. They should be individuals who understand the entrepreneurial journey’s ups and downs and are committed to the long-term success of the venture.

Thus, my ideal cap table was not just about the numbers. It was a carefully curated group of individuals and institutions who form the backbone of a robust, supportive, and dynamic investment team. On this note, Arada stands out as a significant investor, closely aligning with my key criteria. Their global perspective with local knowledge, diverse industry background, and strong financial expertise are bringing invaluable insights and perspectives. Beyond their professional acumen, Arada’s alignment with our long-term vision and core values has been remarkable, making them not just investors but valued partners in our journey.

What will be the strategy you will pursue during the search phase, and how will the relationship with your investors be managed?

F: During the search phase, my strategy will be focused on meticulous market analysis and targeted company evaluations. I’ll be prioritizing businesses that not only fit my investment thesis but also have potential for significant value creation. Efficiency in this process is key, so I’ll be leveraging technology and a data-driven approach to streamline the search. At the moment I’m building a team of interns that will be helping during the process, and I plan on mentoring them in one of their first real world workplace experiences.

As for managing relationships with investors, transparency and regular communication will be my pillars. I plan to keep investors informed through regular updates, ensuring they’re aware of the progress and any pivotal decisions. This open line of communication will not only build trust but also allow for valuable input from investors, leveraging their expertise and insights.

LIBNOVA has received the 2023 European Technology Award in the R&D category

On December 1st, the fourth edition of the European Technology Awards 2023 was hosted at the Ritz Hotel in Paris. At this prestigious event, LIBNOVA was recognized and awarded as the Best European Technology Company in the Research and Development (R&D) category.

Jacobo Vera, CEO of LIBNOVA, and Antonio Guillermo Martinez, Founder and Head of Product of LIBNOVA, were in charge of collecting the award that recognizes the company’s commitment to maintaining high standards in the digital preservation industry through research, innovation and the development of cutting-edge technological solutions that allow long-term archiving to ensure future access to digital collective memory.

For LIBNOVA it is a true honor to be recognized as the Best European Technology Company in R&D, and this award gives the impetus to continue its path of innovation and excellence, leading the future of digital preservation technology.

SEARCHFUNDED Podcast – Conversation with Javier Puig

In this episode of SEARCHFUNDED, Javier Puig engages in an interesting conversation with the podcast host, Nicholas Lall. The podcast delves into valuable perspectives on Search Funds as an asset class, explores the inception of Arada Capital Partners, and discusses its investment strategy.

SEARCHFUNDED is a podcast centred on interviews with acquisition entrepreneurs and investors, aiming to distil the best practices for acquiring and operating an established business.

The Search Fund Arcadio Capital acquires LIBNOVA: the global leader in digital preservation

Translation of elEconomista newspaper aticle.

Arcadio Investments, the search fund created with the purpose of facilitating generational transition for a spanish SME business owner, has acquired the software company Libnova.

Libnova is the global leader in digital preservation with a presence in 20 countries across five continents. The investment firm, supported by Arada Capital Partners, has completed its acquisition after evaluating over 1,000 Spanish companies across multiple sectors.

The founder and CEO of Arcadio Investments, Jacobo Vera, has assumed the role of the new CEO of the Spanish company, specializing in supporting businesses and organizations in safeguarding their digital content. The co-founder of Libnova, Guillermo Martínez, remains as a shareholder alongside Arada Capital Partners and other American and European investors. Furthermore, he will continue to be involved in the new phase of the company.

Following the investment, Jacobo Vera has initiated an ambitious growth plan. “The expansion of digital preservation is unstoppable, and our goal is to ensure that our product reaches every corner of the world,” explains Vera to elEconomista.es. “We are already market leaders, but we aim for more. We will strengthen our teams to continue delivering the service our customers expect, further enhance our products, and expand our international presence.”

Founded in 2009, Libnova’s mission is to proactively and systematically safeguard digital content, ensuring its accessibility, usability, and authenticity over time. The company, with over 70 clients, generates 65% of its revenue internationally, with the United States leading in revenue contribution at over 40% of the total.

Among its clientele, Libnova boasts prominent public and private institutions globally, including the British Library, Stanford University, Princeton University, Oxford University, Cambridge University, and organizations like Bayer, CERN, and the U.S. Department of Energy. In 2021, Libnova was selected for the Archiver project, funded by the European Union and led by CERN, to develop a solution for preserving large-scale research data sets. As a result, this year, the company has been nominated as a candidate for the European Technology Award in the category of R&D, with the winners to be announced in late 2023.

Javier Puig, investor and advisor of Arada Capital Partners, explains, “We have been studying the digital preservation industry for some time, and the market fundamentals are very positive. With this operation, Arada Capital Partners expands and diversifies its portfolio. The private equity managed by Tressis operates in five different geographical regions. Among its ongoing operations, one that stands out due to its advanced stage is the acquisition of an internationally oriented industrial company based in Portugal.

Arada Capital Partners has a current portfolio of 17 search funds operating in five different geographic regions (Spain, France, Portugal, Italy, and the United Kingdom). and two portfolio companies: IESMAT, a Spanish leader in applied technological solutions, and Libnova, the company mentioned in this article.

The consolidation of Search Funds as a strong asset class

In this new interview conducted by Capital & Corporate we delve into how Search Funds offer various advantages to both investors and searchers, and why are Search Funds becoming a stablished asset class.

Historically, investor returns have exceeded 30%, outperforming comparable private equity asset classes. The sector is experiencing significant growth, allowing investors to build diversified portfolios and allocate substantial amounts of capital. In addition, Search Funds allow investors like Arada Capital Partners SCR to play a more active role in the companies in which they invest, leveraging their experience and expertise.

The Search Funds model offers clear advantages to searchers. First, it allows them to own, manage and grow an established company. Secondly, seekers can benefit from the guidance and support of experienced investors. Finally, they have the opportunity to earn a significant share of the total capital while aligning their objectives with those of the investors.

Search funds whet investor appetite

We are delighted to have been able to collaborate with Capital & Corporate on the publication of this article in the latest issue of their magazine. We agree with them that Search Funds are a fascinating asset class, not only for investors, but also for entrepreneurs around the world.

The below article published by Capital & Corporate, a reference for private equity and M&A professionals in Spain, explains to professional investors how Search Funds connects experienced entrepreneurs with investors, and how this model is emerging as the new asset class for investing in SMEs.

Positioned by many somewhere between venture capital and traditional private equity, Search Funds offers average returns of 30% by investing in operational companies with proven business models. With over 40 registered search funds, Spain is positioning itself as one of the leading markets globally, thanks to its strong presence in the low middle market.

In the article, Arada Capital Partners, as an international institutional investor with presence in various geograhies, discusses the advantages of the Search Fund model and why it is a very interesting vehicle for both investors and highly qualified entrepreneurs.

Search Fund ecosystem contiunes to develop rapidly in Europe

The Search Fund ecosystem continues to develop rapidly in Europe. More and more media are interested in knowing more about the model and understanding better the characteristics that make it unique: collaborative environment, alignment of interests and efforts between searcher-management-investors, market niche with great growth opportunities…

At Arada Capital Partners we are very proud to help in the development and professionalization of the model. Last week Javier Puig had the opportunity to introduce the Search Fund model on TV by the hand of Negocios TV, a Spanish TV channel very focused on business and economics.

 

For those who speak Spanish, please find attached the video in case it is of your interest.