Moonbase to invest USD 15 mn in search funds with an eye on emerging markets: Egyptian-led, Spain-based search fund investment firm Moonbase Capital has launched its second, USD 15 mn investment vehicle, according to a press release (pdf). Some 40% of the funds will go to search funds in developing markets — including Saudi Arabia and the UAE.

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Search funds? Search funds are investment outfits that raise funds from investors to acquire a small- or medium-sized business (SME) that is already operating well in the market, to then grow it and ensure return to their investors. Through the acquisition, the CEO of the company is replaced with a seasoned entrepreneur to lead the company for a period of time until the fund exits the investment. As a search fund investment vehicle, Moonbase invests in search funds that find scalable SMEs that will provide solid returns on investment.

The company is targeting bigger ticket sizes and a more global reach this time around: Moonbase aims to build on the successes of its first USD 10 mn fund — which backed 35 searchers predominantly located in Europe — by targeting bigger investments and backing searchers in emerging market economies that can offer exciting returns, Managing Partner Tarek El Gammal told EnterpriseAM.

The details: Moonbase’s new fund will target 10-15% stakes with an average ticket price of EUR 1.25 mn in around 15 companies over the course of the fund’s 3-4 year investment period, with plans to exit the investments within 4-5 years.

The main target: The company is looking at cash-rich and asset-light SMEs with high profitability, low customer concentration, recurring revenue — a profile often associated with a B2B service business model, El Gammal tells us.

A global view: The company is also looking to invest beyond Europe, with plans to deploy around 40% of the USD 15 mn in Latin American, Southeast Asian, and the Middle Eastern markets. While the company is not yet looking to invest in Egypt, Moonbase does have searchers currently scouring for potential investments in the Saudi and Emirati markets, El Gammal said.

The fund is being spearheaded by an all-Egyptian leadership team, including El Gammal and fellow managing partner Tamer El Bahay — both longtime players in the Egyptian and regional SME space. “We've all run SMEs in developing markets, so that's an expertise that we have that's very different to a lot of the search fund investors,” El Gammal said.

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