Revealed Interview: Torge Barkholtz on Revisiting Small and Medium Enterprise Succession Via Operator-Based Investment Strategies
Novastone Partners, a private equity firm based in Europe, is making waves in the industry with its unique approach to investment. The firm, co-founded by Torge Barkholtz and Christian Malek, is sector-agnostic but cautious, focusing on business services, MedTech, HealthTech, and engineering, while avoiding capital-intensive industries and hyper-growth tech [1].
The risk profile of Novastone Partners is carefully considered, looking beyond just making good deals. The company evaluates how factors like tariffs, regulation, or politics could affect growth, ensuring a well-rounded approach to investment [1].
Novastone Partners focuses on Small and Medium Enterprises (SMEs) with EBITDA ranging from $3 million to $10 million, recurring revenues, and a clear leadership gap [1]. The firm has already closed 23 acquisitions and has more on the horizon, aiming to build a new playbook for the generational handover of Europe's business backbone [1].
The Operator model at Novastone Partners is an Operator-Led Search Fund program that focuses on mid-career professionals identified as the best operators to acquire, grow, and eventually exit businesses. Instead of requiring operators to contribute their own capital, Novastone syndicates deals on a deal-by-deal basis, raising capital from varied sources such as high-net-worth individuals and small family offices [1][2].
Operators are incentivized through equity participation, potentially earning up to 20% equity if they meet certain internal rate of return (IRR) targets for investors. This alignment of interests closely aligns their interests with business growth and successful exits [1][2].
Novastone Partners' approach addresses the private equity industry's common criticism of being impersonal and short-termist by putting operators—experienced leaders who actively manage and grow acquired businesses—at the center of value creation. The operators are deeply involved in running the acquired companies, injecting a more hands-on, long-term, entrepreneurial approach [1][2].
Operators at Novastone are supported by a team of over 50 people at Novastone Capital Advisors across various departments. They are incentivized to stay for the long haul with a structure that rewards them based on Key Performance Indicators (KPIs) [1].
The centralized RAIF fund structure in Luxembourg supports cross-border deals, focusing on European investments for the European side and North American investments for the US team [1]. Novastone Partners' CEOs are hands-on, team-first operators who are not isolated in corner offices [1].
In Barkholtz's view, private equity is neither a savior nor a villain, but a tool that works best when handled by people who understand the weight of legacy. Operators at Novastone are driven by experience and empathy, not just financial gain, and they lead with common sense rather than Excel sheets [1].
Novastone Partners' approach is about developing profitable companies with no succession plan, rather than restructuring them. The firm involves developing companies beyond just managing them, extending into company culture, workforce stability, and customer confidence [1].
Candidates for the Operator role undergo a rigorous seven-stage assessment process, with only around 1% making it through [1]. Operators search for companies locally due to language importance, as Novastone Capital Advisors operates across Europe and North America [1].
In summary, Novastone’s Operator model combines entrepreneurial leadership, flexible capital sourcing, and strong incentive alignment to create a more personal and long-term focused approach in private equity investment. The firm aims to address private equity's image as impersonal, extractive, and short-termist, offering a refreshing alternative in the industry.
[1] Novastone Partners. (n.d.). Retrieved from https://www.novastonepartners.com/ [2] Operator-Led Search Funds: A New Approach to Private Equity. (2021, March 16). Retrieved from https://www.bain.com/insights/operator-led-search-funds-a-new-approach-to-private-equity/
- Novastone Partners, a private equity firm, is making strides in the industry with its unique investment approach, avoiding capital-intensive industries and hyper-growth tech while focusing on sectors like business services, MedTech, HealthTech, and engineering.
- The firm looks beyond just making deals, considering the risk profile and evaluating factors that could impact growth, such as tariffs, regulation, or politics.
- Novastone Partners focuses on Small and Medium Enterprises (SMEs) with EBITDA ranging from $3 million to $10 million, recurring revenues, and a clear leadership gap, having already closed 23 acquisitions.
- The Operator model at Novastone Partners is an Operator-Led Search Fund program that focuses on mid-career professionals as operators, acquiring, growing, and eventually exiting businesses.
- Operators are incentivized with equity participation, potentially earning up to 20% equity if they meet certain internal rate of return (IRR) targets for investors, aligning their interests with business growth and successful exits.
- Novastone Partners addresses the private equity industry's criticism of being impersonal and short-termist by putting operators—experienced leaders who actively manage and grow acquired businesses—at the center of value creation.
- Operators are supported by a team of over 50 people at Novastone Capital Advisors across various departments and are incentivized to stay for the long haul with a structure that rewards them based on Key Performance Indicators (KPIs).
- Novastone Partners aims to develop profitable companies with no succession plan, extending beyond management into company culture, workforce stability, and customer confidence, offering a refreshing alternative in the private equity industry.
