Permanent capital
Federation acquires profitable B2B software companies and holds them for good. Founders keep running what they built – with a partner behind them that turns a good business into a compounding one.
What we buy
We partner with businesses that are often systems bought by an operations manager rather than a CIO. They may not be the most sophisticated pieces of software in a company, but they are often some of the most important. If they go down, work stops. For instance, software that schedules clinical trial site visits. Software that tells a factory floor which batch to run next. Software that plans tomorrow’s deliveries across a fleet of vans.
These businesses also tend to sit in a gap in the market. They are too small for most private equity funds, and venture capital was never a natural fit because they have been profitable for years and have not had historical exponential growth trajectories. A strategic buyer may have little reason to keep the product independent, meaning it can easily get absorbed into a larger platform.
That is where we see the opportunity. Federation buys these businesses and uses AI to make them better, faster, and more efficient.
Our view
There is a lot of discussion around AI making it possible to rebuild software products with a small team and a foundation model. In some categories, that is absolutely happening.
But we think there is an important difference between rebuilding a software interface and replacing the underlying business.
AI can make screens, reports and front ends much faster and cheaper to build. It does not recreate ten years of customer data, deep knowledge of a specific industry, a trusted position in a regulated workflow, or the integrations that connect a system to everything else a customer relies on.
And in many of the businesses we look at, the software has become part of the day-to-day operation of the customer. When the system of record stops working, orders don’t get shipped, production doesn’t happen, or processes simply stop.
That underlying position is much harder to replicate than the interface sitting on top of it.
Where we invest
Clinical research and healthcare, compliance and regulatory technology, cybersecurity and data governance, financial services. Software customers keep because a regulator, an auditor or a threat model requires it. Requalifying a replacement costs more than the licence ever will.
Logistics, manufacturing and supply chain, field operations, trades and local services. The systems behind physical work – the schedule, the route, the batch record, the job card. Here, workflow depth does the job that regulation does in the first pillar.
We acquire platform companies in Europe and North America. Add-on acquisitions, anywhere in the world.
Criteria
Track record
The founders of Federation have built businesses worth more than €2bn, led software M&A and investing at major technology-focused private equity firms, and completed acquisitions across multiple continents. That experience shapes how we invest, acquire and build at Federation.
Experience from leading institutions.
The alternative
Selling your company is only the beginning. What matters is what happens after the deal closes. Different buyers take very different approaches. Here’s what that looks like in practice.
| Dimension | Private equity | Venture capital | Strategic acquirer | Federation |
|---|---|---|---|---|
| Holding period | Typically three to five years | Until a future financing or exit | Usually held as part of the wider business | Indefinite. We buy to hold. |
| What they need from you | Returns within a defined investment period | Strong growth and a path to a large outcome | Strategic fit and successful integration | A strong business that can keep compounding. |
| Who runs it | Management structure may change after acquisition | Founder-led, with board involvement | Usually part of a larger business unit | The founder. With more support behind them. |
| Profitability | Important, often alongside leverage | Growth typically takes priority | One part of a larger P&L | Our starting point. We buy profitable businesses. |
| The brand | May be retained or changed | Typically retained | May be consolidated or repositioned | Kept. We don’t rebrand the businesses we acquire. |
| The product | Developed with the investment horizon in mind | Optimised for growth and future funding | Shaped by the needs of the wider organisation | Built for the long term. |
Our values
Whether that means selling today, years from now, or simply finding the right long-term owner, we’re always happy to start a conversation.