CCVs vs. traditional SFs: Key Structural Differences

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Committed capital vehicles (CCVs) are starting to become more mainstream in the European search fund ecosystem, branching out from the traditional, single-deal entrepreneurship-through-acquisition model. What began as a niche corner of entrepreneurial acquisition, emulating a trend seen in the US a few years ago, is now surfacing more frequently across the European scene. We welcome this development, as it confirms that the model is incorporating best practices observed across the Atlantic.

Notwithstanding this, while CCVs are a welcome addition to the ETA asset class, their risk-reward profile is not necessarily equivalent to that of a traditional search fund and should be assessed and understood carefully.

Optionality vs upfront commitment

A traditional search fund is designed to acquire and operate one exceptional SME for several years. By contrast, CCVs pursue roll-up or build-up strategies from day one, consolidating multiple companies within a fragmented niche to create a larger platform. Prior to launch, entrepreneurs typically identify a target industry or sector, define a consolidation and integration roadmap, and build a pipeline of credible targets - sometimes with a platform company already under LOI.

To enable a programmatic roll-up rather than a one-off buy-and-hold strategy, searchers raise firm capital commitments from the outset, hence the label “committed capital vehicles.” This is where the first meaningful difference emerges: optionality is largely removed. Investors commit the full amount of their participation upfront. In traditional search funds, investors typically have several months to evaluate the searchers’ performance and retain final discretion over participation in the acquisition. In CCVs, investors commit capital at inception and delegate acquisition approval to the board.

This certainty of capital is critical. It provides credibility to the entrepreneurs in competitive processes and allows them to execute transactions at the required pace, thereby reducing execution risk in the consolidation strategy.

Unlike single-asset search funds, operators of multi-acquisition vehicles focus on building scalable platforms through M&A with ongoing board approval. As a result, the board assumes even greater importance beyond its traditional mentorship and support role, acting effectively as a capital allocation and governance body.

MOIC over IRR

CCVs are typically oriented toward longer-duration value creation. Capital is reinvested into the platform to fund add-on acquisitions, integration efforts, and operational improvements, with distributions deferred in favor of compounding. In this context, multiple on invested capital (MOIC) often provides a more meaningful measure of success than internal rate of return (IRR).

This emphasis reflects a fundamental shift in objective: rather than optimizing for early liquidity, CCVs aim to maximize the long-term value of a growing equity base. Returns are driven by sustained earnings growth, the cumulative impact of reinvesting at attractive incremental returns, and, in some cases, multiple expansion at exit.

Incentives are typically structured accordingly. Entrepreneur economics are often tied to achieving specific MOIC thresholds rather than early distributions, aligning behavior around capital efficiency, disciplined reinvestment, and long-term value creation.

However, compounding is not automatic. It depends on the continued availability of opportunities that earn returns above the cost of capital. As platforms scale, maintaining underwriting discipline becomes more difficult, and the risk of declining marginal returns increases. The ability to allocate incremental capital as rigorously as the first euro deployed is what ultimately separates enduring compounders from short-lived consolidators.

Same value-creation levers, different weights

The underlying drivers of value creation remain largely the same as in traditional search, but their relative importance differs. In CCVs, multiple expansion tends to play a more prominent role.

An investor acquires a platform company in a fragmented industry and then executes a series of add-on acquisitions (bolt-ons or tuck-ins) to achieve scale, synergies, and multiple expansion, ultimately creating a larger integrated group. Value creation hinges on acquiring smaller targets at lower multiples, integrating them into a standardized operating model, and exiting at a higher consolidated multiple. Top-line growth, margin expansion, and debt repayment remain core pillars of value creation.

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Both traditional search funds and committed capital vehicles are grounded in the same underlying premise: backing exceptional individuals to acquire and grow high-quality small businesses. The strategies differ in structure, pacing, and risk profile, but each offers a compelling path to value creation when executed with discipline. As CCVs become more prevalent, understanding these distinctions is critical for optimal capital deployment within the ETA ecosystem.

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