Cloudbreak
Established SMEs are one of the most attractive but least accessible segments of the private markets. Cloudbreak gives investors diversified exposure to this overlooked segment through the Entrepreneurship Through Acquisition (ETA) model, backing entrepreneurs who acquire profitable, cash-generative businesses and then operate them as CEOs to create long-term value.
A DISTINCT RISK-RETURN PROFILE
Between Venture Capital and Private Equity, there is a gap.
That gap is filled by ETA.
Entrepreneurship Through Acquisition (ETA) operates in the segment between Venture Capital and Private Equity, on established, EBITDA-positive small and medium-sized companies, acquired at attractive valuations and led by an incoming CEO.
PRIVATE-MARKET SPECTRUM
Venture Capital
Pre-profit companies | high technology and market-adoption risk | dispersed outcomes
ETA
Profitable, EBITDA-positive SMEs | acquired at attractive valuations | value created through active ownership
Private Equity
Mature companies | institutional multiples | elevated leverage and entry-price risk
ACADEMIC FOUNDATION: NOBEL PRIZE IN ECONOMIC SCIENCES, 2013
Size and Value in private markets
The 2013 Nobel Prize in Economic Sciences recognised that size and value explain long-run equity returns. ETA applies this logic directly in private markets by acquiring profitable SMEs below institutional multiples and actively owning them. It is the same repeatable approach Warren Buffett used for sixty years.
The Cloudbreak Strategy
- 1.
Strategic Focus
Small and medium-sized European companies that are profitable, established and often too small for traditional private equity funds, acquired at attractive valuations relative to their earnings and cash flows.
- 2.
Value of Fragmentation
Many ETA target sectors are highly fragmented. This creates an opportunity to combine smaller companies into larger, more efficient platforms, through economies of scale, shared functions, cross-selling and multiple arbitrage.
- 3.
Diversification
A diversified portfolio of acquired companies across multiple searchers, sectors and geographies, reducing single-deal and single-operator risk.
- 4.
Disciplined Leverage
ETA transactions are typically financed with approximately 30 to 40% leverage, applied conservatively to businesses with predictable revenues, strong cash conversion and prudent debt-service capacity.
- 5.
Active Ownership and Governance
The searcher becomes CEO, supported by investors, board governance and a value-creation plan, inside a Luxembourg AIF qualified under the EuVECA regime, with GP oversight and LPAC governance.
