How important are local language skills for European Searchfunds?

April 14, 2021

by a searcher from IESE Business School in Madrid, Spain

In the early stages of launching a search fund and trying to narrow down on location.

1. US (I'm from the US, and my partner's wife is from the US)
2. Spain/Iberia (my partner is Spanish, we both live in Spain, but I don't speak fluent Spanish)
3. other Europe (I speak fluent German, so we could cover DACH, or the Nordics with English)

We are open to location, but how much is local language a must-have for BOTH partners? I suppose it really depends on the situation/seller. Any postive/negative examples would be really helpful! Thanks.

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Reply by a searcher
from IESE Business School in Madrid, España

For Spain, In my experience it will depend on the business and how you share responsibilities between the partners, there is not a 'Sure yes, you need to be fluent!!!' or 'You should not bother!' answer., If one of you speaks fluent spanish should be enough! It also depends on where the business target is located: for business outside the 8 big cities (Madrid, Barcelona, Bilbao, San Sebastián, Vigo, Sevilla, Málaga and Valencia) the issue may be bigger (but you may find exceptions) - only some of the members of the mid-management team will understand or deal well with English, But is not a barrier, I know some European investors that are buying Spanish companies and dealing well with the management team that usually speaks English quiet well (at least the General Manager or the CFO)/ with enough fluency. Facing negotiations with your investors the focus, I assume, will be on the knowledge of the country and businesses in the country - how things work in Spain, and not on local language fluency

Reply by an investor
from New York University in Berlin, Germany

For Germany, I'd say speaking German is indispensable for running the business. The team will be much more comfortable in German and depending on the type of company there will be people with no English skills at all. Further, your typical customers will probably prefer a German-speaking business partner as well. I believe that same holds true for basically any big country in Europe.
The question whether both of you need the local language skills also comes down to the team dynamic amongst you two. This would require some soul searching on your part whether both are comfortable with such a situation. It could get messy with one seemingly doing the heavily lifting and the other coasting along - I am exaggerating here.
From an investor's view point, I'd closely look and evaluate each deal whether both searchers can add value even with one not speaking the language, i.e. if the target company sells a lot internationally then such a situation might work better than with predominantely local customers.

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