According to the Institute for SME Research in Bonn, approximately 100,000 businesses in Germany that are ready for succession will be up for sale between 2022 and 2026. Those who buy rather than start a business secure cash flow from day one, an established brand, a loyal customer base, and a well-coordinated team.
What makes the difference:
▸ Start-up phase: New startups typically lose 18 to 36 months in market development, while buyers immediately take over an established revenue structure
▸ Buyer profiles: MBI managers, industry strategists, family offices, holding companies, and buyers financed with KfW funds have access to a wide range of opportunities
▸ Financing: The typical structure consists of 20 to 30 percent equity, KfW ERP promotional loans, acquisition financing from the buyer’s primary bank, and seller loans
▸ Valuation: Multiplier methods based on EBIT or EBITDA provide the first reliable benchmark, supplemented by DCF and net asset value analysis
Those who assess early on which industry, size, and region align with their own experience lay the groundwork for a structured search and a realistic financing model.
Those who plan acquisition financing in a structured manner buy themselves time, market share, and cash flow from day one. According to the Institute for SME Research (ifM Bonn), approximately 100,000 companies ready for succession will be up for sale in Germany between 2022 and 2026. This creates a historically favorable acquisition window for buyers, particularly in the traditional SME sector. In many cases, acquiring an established company is the economically superior option compared to starting a new business: an existing customer base, an established brand, a well-coordinated team, and supplier relationships are already in place, and there are no start-up losses.
When you buy a company, you’re buying a functioning business cycle. While startups typically incur losses in their first few years, an established company generates positive revenue from day one. The buyer takes over a proven value chain with existing relationships.
An overview of the key advantages over starting a new business:
Existing customer base: Recurring revenue, established customer relationships, and a robust order book.
Established brand: Reputation and brand value are already in place; there’s no need for time-consuming brand-building.
Cash flow from day one: Operating cash flow immediately supports debt service and the company’s self-sustaining operations.
Well-coordinated team: Experienced employees, established processes, and documented industry expertise.
Supplier relationships: Terms, supply chains, and framework agreements are well-established.
No start-up losses: No lean period lasting two to five years.
Better access to financing: Banks are much more willing to finance a track record of earnings than business plans.
Lower market risk: Product-market fit has been proven, and the business model has been validated.
Buy-Side M&A Advisory: Success-based, typically on the Lehman scale (5/4/3/2/1 percent on a sliding scale), ranging from 3 to 8 percent of the purchase price depending on the transaction volume.
Due Diligence Costs: 30,000 to 150,000 EUR, depending on complexity (number of companies, international structures, real estate, IT, personnel).
Legal Advisory Services: SPA negotiations, warranties, indemnities, closing support.
Tax advisory: Tax due diligence, structuring advice (asset deal vs. share deal), purchase price allocation.
Notary fees: For share deals, based on shares; for asset deals, based on assets.
Incidental financing costs: Processing fees, creation of security interests, guarantee fees.
Loan amount up to 25 million EUR.
Term up to 20 years.
Amortization-free start-up years.
Up to 80 percent liability exemption for the primary bank, which significantly facilitates the granting of the loan.
Eligible projects include business start-ups, business consolidation, and active equity investments, including business acquisitions.
Seller loan: Replaces a portion of the required equity with subordinated debt.
KfW liability exemption: Reduces the bank’s risk and increases its willingness to lend.
Earn-out structures: A portion of the purchase price is deferred based on future earnings performance.
Mezzanine capital: Bridges the gap between equity and senior debt.
Co-investor: Participation by a family office or an investment company.
Asset-based financing: Secured financing using valuable assets (machinery, receivables, real estate) through separate financing lines.
Hidden Liabilities: Concealed liabilities, missing provisions, pension obligations, and guarantee risks.
Customer Churn Following a Change in Ownership: Revenue erosion is a risk when customer relationships are heavily dependent on specific individuals.
Employee turnover: Key personnel leave the company following a change in ownership.
Off-the-books funds and compliance risks: Undocumented transactions, gifts to decision-makers, antitrust violations.
Pending Legal Disputes: Ongoing lawsuits with customers, suppliers, and former employees.
Tax audits: Ongoing or foreseeable tax audits with risks of back taxes.
Product liability and warranties: Risks arising from products or services already delivered.
Due Diligence: Structured review covering the areas of commercial, financial, legal, and tax, as well as IT, ESG, and compliance where applicable.
Warranties and Indemnities in the SPA: The seller is contractually liable for defined matters. Common examples include balance sheet warranties, tax warranties, and compliance warranties.
Earn-out: Deferral of a portion of the purchase price to a future date, linked to earnings or revenue targets.
Escrow Accounts: A portion of the purchase price is deposited into an escrow account to secure warranty claims.
W&I Insurance: Insurance against breaches of warranties and indemnities; particularly common in private equity transactions.
Reverse Break Fee: A contractual penalty in the event of unilateral withdrawal by one party.
Dimension | Startup | Acquisition |
|---|---|---|
Time to Profit | 2 to 5-year ramp-up phase | Profitable from day one |
Market risk | High (product-market fit uncertain) | Low (business model validated) |
Ability to secure financing | Difficult; often limited to equity and government-backed loans | High; banks and KfW finance based on historical earnings |
Staffing | Starting from scratch, high recruitment costs | Acquisition of established teams |
Brand building | Investment-intensive, takes several years | Established brand value |
Initial capital requirements | Lower in absolute terms | Higher, but partially financed with debt |
Typical buyer profiles
Those who prefer to buy a company rather than start one typically belong to one of the following buyer groups. Each group has its own motives, financing structures, and selection criteria.
Strategic buyers
Competitors, suppliers, or customers acquire the company to secure market share, expand into adjacent segments, or increase the depth of value creation. Strategic buyers often pay the highest multiples because they can realize synergies (cross-selling, procurement, back-office operations).
Management Buy-In (MBI)
An external executive takes over the company, typically using equity and bank financing. Typical MBI buyer: an experienced manager (ages 40 to 55), often with a background in DAX-listed companies or the SME sector, seeking entrepreneurial responsibility.
Management Buyout (MBO)
The existing management team acquires the company from the owner. Advantages: continuity, reduced information asymmetry. Often combined with seller loans, KfW funding, and mezzanine financing.
Search Funds
Young entrepreneurs (often with an MBA background) raise search capital from investors, identify a target company, and acquire it as managing partners. Well-established in the U.S., still developing in Germany.
Private Equity
Financial investors with a clearly defined buy-and-build or platform strategy. Investment horizon typically 4 to 7 years; exit via trade sale or secondary market.
Family Offices
Asset management firms for mid-sized entrepreneurial families with a long-term investment horizon. Often no fixed holding periods; focus on substantial mid-sized companies with stable cash flow.
International Investors
Strategic and financial investors from Europe, North America, and Asia who acquire market access, technology, or “hidden champions” in the German SME sector. Often have heightened requirements for compliance, reporting, and due diligence.
What does it cost to acquire a company?
The costs of acquiring a company consist of the purchase price and transaction-related expenses. The purchase price is based on valuation methods such as the income approach according to IDW S1 or the DCF method—two of the most commonly used forward-looking business valuation methods.
Valuation Ranges in the SME Sector
According tothe DUB SME Multiples Report Q1/2026, cross-industry EBITDA multiples for German SMEs fall within the following ranges:
Size Class | Revenue Range | EBITDA Multiple |
|---|---|---|
Micro-Cap | < 5 million EUR | 3.4 to 4.9x |
Small-Cap | 5 to 50 million EUR | 4.0 to 5.6x |
Mid-Cap | > 50 million EUR | 5.2 to 7.0x |
Positioning within these ranges depends on market position, customer structure, margin quality, growth, and management depth.
Transaction-Related Costs
In addition to the purchase price, there are transaction-related costs that must be taken into account early in the financing plan:
Financing Options
In the SME sector, financing for business acquisitions rarely comes from a single source. A typical financing structure consists of several components that differ in terms of risk profile, term, and availability.
Equity
In traditional acquisition financing, banks typically require 15 to 30 percent equity relative to the purchase price plus transaction costs. Equity can come from personal assets, the sale of existing investments, or the participation of co-investors.
Bank Loan
The acquisition loan from the primary bank is the traditional backbone of the financing. Banks assess the viability of the financing based on historical and projected cash flows, debt service coverage ratio (DSCR), and collateral. Terms typically range from 5 to 10 years.
KfW-ERP Start-up Loan
A key funding instrument for acquisitions is theKfW-ERP Universal Startup Loan. Key terms:
Vendor Loan
A vendor loan is a subordinated loan from the seller to the buyer in the amount of a portion of the purchase price. Typical range: 10 to 25 percent of the purchase price. Advantages: Sends a positive signal from the seller (confidence in the future), bridges the financing gap, and often has a lower interest rate than mezzanine financing.
Mezzanine Capital
Mezzanine bridges the gap between equity and senior bank loans. Characteristics: subordinated, longer term, higher interest rates (8 to 15 percent), often with an equity kicker. Providers include specialized mezzanine funds and development finance institutions.
Investment Companies
In larger transactions, investment firms, family offices, or private equity investors act as co-investors. They contribute equity and, in some cases, expertise, but demand a say in decision-making (advisory board, reporting, veto rights on strategic decisions).
Options with Little Equity
The question of“buying a company without equity” is on the minds of many potential acquirers. Realistically, an acquisition is generally not viable without any equity at all. However, with a well-thought-out financing structure, equity ratios of 5 to 15 percent are achievable.
Strategies for reducing the equity ratio:
Risks and How to Mitigate Them
A business acquisition is only as good as the risks that are identified and mitigated in advance. When acquiring a company, buyers assume all liabilities, obligations, and risks not expressly excluded.
Frequently Asked Questions About Acquiring a Business
Is it worth buying a business instead of starting one?
In many cases, yes. When you acquire an established company, you’re buying an existing customer base, a well-coordinated team, supplier relationships, and positive cash flows. You avoid the startup losses associated with a new business, market risk is lower, and access to financing through banks and KfW is significantly better. Starting a new business can be advantageous over an acquisition if there is a clear market differentiation model that does not currently exist in the market. For traditional SME sectors with established business models, an acquisition is generally the economically superior option.
What financing options are available when acquiring a company?
A business acquisition is typically financed through several components: equity (15 to 30 percent), traditional bank loans, the KfW ERP Universal Start-up Loan (up to 25 million EUR, term of up to 20 years, liability exemption of up to 80 percent), seller loans (10 to 25 percent), mezzanine capital, and investments from family offices or private equity investors. Earn-out structures tie portions of the purchase price to future earnings performance.
How much equity do I need to acquire a company?
In traditional acquisition financing, banks typically require 15 to 30 percent equity relative to the purchase price and transaction costs. With seller loans, KfW liability relief, and mezzanine financing, structures with equity ratios of 5 to 15 percent are possible in individual cases. Without significant equity, financing is generally not viable, except in special cases such as management buyouts with seller loans or investment companies.
What types of KfW promotional loans are available?
The key instrument is the KfW-ERP Universal Startup Loan. It finances business start-ups, business consolidation, and business acquisitions with loan amounts of up to 25 million EUR, terms of up to 20 years, grace periods during the initial years, and liability relief of up to 80 percent vis-à-vis the primary bank. In addition, there are other ERP and KfW programs, as well as supplementary promotional loans from state development agencies.
How long does a business acquisition take?
A structured business acquisition typically takes 6 to 12 months from defining the search criteria to closing. In cases involving complex structures (international buyers, multiple companies, real estate) or extensive due diligence, the process may take longer. The phases include target identification, initial contact with an NDA, an indicative offer (LOI), due diligence, SPA negotiations, and closing and handover.
What are the risks involved in a business acquisition?
Typical risks include hidden liabilities, pending legal disputes, tax risks arising from ongoing tax audits, customer dependencies and loss of customers following a change in ownership, employee turnover in key positions, and undocumented agreements. These risks are mitigated through structured due diligence (commercial, financial, legal, and tax), warranties and indemnities in the purchase agreement, earn-out provisions, and escrow accounts for a portion of the purchase price.
An article by Sebastian Göring, Managing Partner at EUROCONSIL.
