The American ETA playbook does not work in Europe. Here is why.
Different capital, different sellers, different culture. Europe needs its own model.
Hello, and welcome back to Buyout Diary.
This broadcast is different from the last two.
The first of this month was about what you told me you needed as a European searcher in 2026. The last one was about the decision I made on the independent sponsor model and why I made it. Both were personal.
This one is not personal. It is an argument.
One I have been building since I started searching in Europe, one that comes up every time I speak with a searcher who is frustrated that their process is not producing results, and one I think every acquisition entrepreneur on this continent needs to hear before they spend another month applying frameworks that were not designed for this market.
So here it is. Four structural differences between European and US ETA. And what a European playbook actually looks like if you take those differences seriously.
This week:
Why the SBA capital stack does not exist in Europe, and what country-level alternatives actually look like
Why the succession data is being misread as a buyer’s market when it is really a trust market
Why the search fund model does not fully translate, and what European infrastructure does exist
What a European playbook looks like across capital, sourcing, positioning, and valuation
125,000.
That is the number of German businesses seeking a successor every single year. Not over a decade. Every year. And that is just Germany.
Add the Netherlands, where 210,000 to 250,000 businesses will need to transfer ownership in the coming years. Add France, where 700,000 companies will need new leadership in the next decade. Add Belgium, Spain, Italy, Austria, and the rest of Western Europe, and you are looking at one of the largest business transfer opportunities in modern economic history.
The opportunity in European ETA is not hype. It is demographic reality backed by data.
So why are so many European searchers struggling to close deals?
Part of the answer is experience. Searching is hard everywhere. But a larger part of the answer is something less obvious and more correctable: European searchers are using the wrong playbook.
Every week, someone in this community shares a US framework, a US deal structure, a US template. Stanford. HBS. The primers. The standard 80/10/10 capital stack. And then they try to apply it in Germany, the Netherlands, Belgium, or France. And it does not quite work.
Not because European searchers are doing it wrong. Because the playbook was written for a different market.
The US ETA ecosystem is extraordinary. Forty years of data, 681 tracked search funds, a 33.7% average IRR over time according to the Stanford 2024 Search Fund Study. The infrastructure it produced is real and rigorous. But Europe is not a slower version of the US. It is a structurally different acquisition environment, and the differences matter in four specific ways.
This issue makes the case for each one. And ends with what the European playbook actually looks like.
Part 1. The Capital Problem Is Structural, Not Cyclical
The US self-funded search model is built on one piece of infrastructure that most European searchers have never had access to: the SBA 7(a) loan programme.
Here is how it works in the US. A typical self-funded acquisition uses what practitioners call the 80/10/10 structure. Eighty percent of the purchase price comes from an SBA-backed loan. Ten percent from a seller note. Ten percent from the buyer’s equity. The SBA network of over 2,000 lenders originated $33.9 billion in loans in 2023, and the 7(a) programme can fund acquisitions up to $5 million at government-backed rates with terms designed specifically for business acquisition.
This is not a minor detail. It is the financial foundation that makes the entire US self-funded model viable at scale. A US searcher can acquire a $3 million EBITDA business with a relatively small personal equity contribution because the government backstops the debt. The leverage works because the instrument exists.
There is no equivalent in Europe. Not in the Netherlands, not in Germany, not in France, not anywhere across the continent.
Country-level alternatives exist and are underused:
In the Netherlands, the BMKB (Borgstelling MKB-kredieten) provides government guarantees of up to 90% for SME loans including acquisitions. In Germany, KfW offers low-interest lending programmes specifically for Mittelstand succession financing. In Belgium, PMV operates in Flanders and SOWALFIN covers Wallonia. In the UK, the Enterprise Finance Guarantee provides 80% government-backed coverage for SME acquisition loans.
These programmes are real. They are not perfect equivalents of the SBA, but they are significantly more accessible than most European searchers realise. The problem is that searchers arriving with US frameworks do not know to look for them, because nothing in the primers explains the European financing landscape.
The practical consequence of this capital gap is significant. European bank lending for SME acquisitions is more conservative than its US equivalent. Collateral requirements are higher. Covenants are tighter. Credit committees are slower. The culture of institutional leverage behind small business acquisitions simply does not exist here in the same form.
What does exist in Europe, and what most US-trained searchers underestimate, is seller financing. European sellers are frequently more open to staying involved financially in a transaction than searchers expect. A seller note or earn-out structure is not a sign of a weak deal in Europe. It is often the most natural and culturally aligned tool available, because it gives the seller a bridge rather than just a cheque, and it allows the buyer to close a deal without needing institutional debt to cover the entire gap.
In Europe, seller financing is a primary structure. Treat it as one.
Part 2. The Succession Opportunity Is Being Approached Wrong
The data on European SME succession is striking. Most searchers know the broad story. Fewer know the specific numbers that reveal where the real opportunity sits.
In Germany, 54% of SME owners are already 55 or older. Nearly 40% have passed 60. These are current figures from KfW Research’s 2024 analysis, not projections. The consequence is that approximately 186,000 German companies will require succession within the next five years, according to IfM Bonn’s 2024 estimates. Of the 9,600 companies currently engaged in active succession counselling through DIHK, only 4,000 have identified a concrete takeover candidate. That is a 58% gap between businesses that need a successor and businesses that have found one.
The direction of travel on family succession makes this more acute. In 2016, 41% of German SME transfers went to family members. By 2019 that had fallen to 34%. Today, 60 to 70% of German SME transfers go to external buyers: management teams, employees, other companies, or acquisition entrepreneurs.
The Netherlands shows nearly identical patterns. Between 210,000 and 250,000 Dutch businesses will need to transfer ownership in the coming years, according to CBS and MKB-Nederland’s 2024 analysis. A 2024 Nyenrode study found that more than 85,000 Dutch family businesses are currently in active transfer processes. And like Germany, 25 to 30% of Dutch SME owners have no designated successor at all.
France rounds out the picture. The Banque de France and BPCE research puts the number of French SMEs facing a generational transfer at over 700,000 in the next decade. The French market has particular characteristics worth noting: the transmission d’entreprise ecosystem is more institutionally developed than Germany or the Netherlands, with regional Chambres de Commerce actively facilitating introductions between retiring owners and external buyers. CRA (Cédants et Repreneurs d’Affaires) is the closest French equivalent to a structured SME transfer network and worth knowing if you are searching in France.
These numbers describe an enormous market. But they do not describe an easy market.
Here is the mistake most searchers make when they encounter this data. They read it as a buyer’s market. Low competition, motivated sellers, strong deal flow. And so they approach it the way a buyer’s market is approached in the US: with a clear acquisition criteria document, a structured outreach campaign, and a process designed to filter efficiently.
This approach fails in Europe because it misreads what the data is actually describing.
These 125,000 German business owners seeking successors every year are not sellers in the traditional sense. Most have never heard of ETA. Many have never been through a business transaction before. They are founding families who have spent 20 to 40 years building something, and they are thinking about what happens to their employees, their customers, their suppliers, and the community around their business when they are no longer there.
They are not looking for a buyer. They are looking for a steward.
A cold LOI sent to a Mittelstand owner who has never engaged with the M&A world will not land the way a similar approach lands in a US context where business brokers have pre-educated sellers on the acquisition process. The opportunity is real. The approach to it matters enormously.
A useful reference here: Transeo’s European SME Transfer Barometer publishes annual data on transfer volumes, seller motivations, and success rates by country. If you are building your search around succession demographics, this is worth reading before you write your first outreach letter.
Part 3. The Search Fund Model Itself Does Not Fully Translate
The IESE Business School tracks search fund activity outside the US and Canada in its biennial international study. The 2024 edition, covering data through December 2023, provides the clearest picture available of where European search funds actually stand.
Outside North America, IESE counts 320 search funds across 40 countries. 2023 was a record year internationally: 59 new funds formed and 31 acquisitions completed. Spain leads Europe with 67 search funds ever formed, followed by the UK with 35. Germany, Europe’s largest economy and home to the Mittelstand, has seen just 20 search funds since 2009.
The returns data shows an international ROI of 2.0x and IRR of 18.1%, compared to the Stanford 2024 US figures of 4.5x ROI and 35.1% IRR. This gap looks significant. But one number explains most of it: 62% of all international search fund acquisitions have happened since 2020. The exits have not matured yet. This is a young market, not a weak one.
What the IESE data does confirm is the structural differences that make the model harder to execute in Europe.
The LP community for European search funds is thin and fragmented. There is no equivalent of the concentrated US institutional investor base that has backed hundreds of funds over decades. European family offices and high net worth individuals understand the search fund model far less consistently than their US counterparts, and they are spread across 27 different regulatory and tax environments.
There are no standardised European search fund documents. In the US, Goodwin Procter’s template based on the Stanford framework has been used by hundreds of funds. In Europe, every fund is built from scratch because the legal structures differ by jurisdiction. US participating preferred stock does not translate directly to Dutch BV law, German GmbH structures, or Belgian SRL requirements. Each requires its own legal architecture to achieve the same economic outcomes.
The deal sourcing infrastructure gap is equally significant. The US has the Association for Corporate Growth with over 10,000 members and the International Business Brokers Association with 1,800+ brokers. Europe has Transeo Association, the pan-European network for SME transfers operating in 20+ countries and covering the €500,000 to €25 million transaction range. National equivalents like BVMW in Germany and MKB-Nederland provide access to owner communities. But the infrastructure is thinner and less standardised.
Critically, many of the best European SME acquisition targets are not listed for sale anywhere. They will never appear on a broker’s platform. Finding them requires direct outreach to owners before they have entered a formal sale process, and building the kind of relationship that means you are the person they call when they are ready.
This is why direct outreach is not just a tactic in European ETA. It is the primary sourcing strategy.
A useful case study here: Integrated Search, a UK-based self-funded searcher community, has documented how the most successful UK acquisitions in recent years came through accountant referrals and direct owner outreach rather than broker listings. The pattern holds across Germany and the Netherlands too. Searchfunder’s European threads are worth reading if you want to see this firsthand from practitioners.
Part 4. The Cultural Problem Is The Hardest One To See
The capital gap is visible if you look for it. The succession data is quantifiable. The infrastructure differences can be mapped. But the fourth structural difference between US and European ETA is harder to see because it is not in any dataset.
It is the way European business owners think about their businesses, and what they actually want from a sale.
In the US, entrepreneurship is celebrated publicly and loudly. Selling your business and moving on is normalised, even admired. The concept of buying a business with leverage, placing a professional CEO to run it, and earning investor returns is well understood. Business schools teach it. Podcasts celebrate it. The language has a shared vocabulary that sellers recognise and respond to.
In continental Europe, particularly in Germany, the Netherlands, Belgium, Austria, and Switzerland, business ownership carries a different weight. The Mittelstand ethos is stewardship, not exit. Many founders who have spent decades building a business would be deeply uncomfortable sitting across the table from a buyer who leads with their investment thesis, their return expectations, and their exit timeline.
The US playbook is built on transparency about the model. In Europe, leading with the model before the relationship is a consistent and costly mistake.
This is not a minor cultural nuance. It is structural. The KfW data shows that even as family succession has declined, sellers still overwhelmingly prefer it as their first choice. Why? Because family succession carries the implicit promise of continuity. Of the business remaining what it has always been. Of employees being taken care of. The fact that family succession is becoming less feasible does not reduce the desire for what it represents.
External buyers who want to close European deals need to offer something that addresses this desire, not something that ignores it.
Words matter in this context. “Acquisition” sounds clinical. “Target” sounds transactional. “Deal flow” sounds like something from a different world entirely. Words like “continuity,” “stewardship,” and “succession” open more doors in European seller conversations because they speak to what the seller is actually thinking about.
The timeline matters too. In the US, a buyer can move from initial contact to LOI in weeks if the fit is right. In Europe, the relationship between a buyer and a potential seller often needs months before a transaction conversation can begin at all. This is not inefficiency. It is how trust is built in cultures where trust precedes transaction rather than emerging from it.
In Europe, accountants, notaries, and regional banks are the real gatekeepers of deal flow. These are the professionals who know which business owners are thinking about succession, who maintain multi-decade relationships with the families involved, and who can make an introduction that carries genuine credibility. A cold approach to a German Mittelstand owner through LinkedIn will rarely succeed. A warm introduction from a trusted regional accountant who has known that owner for twenty years is how deals begin here.
A relevant example: Roland Berger’s long-running research on German Mittelstand succession has consistently found that business owners rank trust and cultural fit above price as their primary selection criteria when choosing an external successor. The most recent edition of their Mittelstand study is worth reading if you are targeting Germany. The same pattern, slightly less documented but equally present, holds in the Netherlands and Belgium.
Part 5. What The European Playbook Actually Looks Like
The four structural differences above are not reasons to avoid European ETA. They are the map. Once you understand the terrain, you can navigate it.
On capital:
Before you start your search, map the financing landscape of your specific country. In the Netherlands, understand how the BMKB guarantee works and which banks actively use it for acquisition financing. In Germany, speak to someone who has used KfW succession programmes before you approach your first seller. In Belgium, understand which regional scheme applies to your geography. In the UK, know the Enterprise Finance Guarantee inside out.
More importantly: structure seller financing as a primary component of your deals from day one, not as a gap-fill when bank debt falls short. In Europe, a seller who keeps 15 to 20% through a seller note or structured earn-out is often a more aligned partner post-acquisition than one who takes full cash at closing and walks away.
On legal structure:
Before you structure your first deal, find a local M&A lawyer who has closed at least five SME acquisitions in your specific jurisdiction. This is not optional. Dutch BV law, German GmbH structures, Belgian SRL requirements, and UK limited company mechanics each require their own legal architecture to achieve the same economic outcomes you might assume are standard. US deal terms like participating preferred stock do not translate directly, and the cost of discovering this mid-negotiation is significant. One good transaction lawyer with a track record in your country will save you more than their fee on your first deal.
On deal sourcing:
Build relationships with Transeo Association member advisors in your target markets. This is your access point to the closest thing Europe has to a structured intermediary network for SME transfers. In Germany, engage with BVMWchapters in your target region. In the Netherlands, work with MKB-Nederland networks and regional accountancy practices.
Do not wait for businesses to come to market. The best European SME acquisition targets will never appear on a broker platform. Direct outreach to owners who are approaching retirement age, in industries and geographies where you have genuine knowledge, is where the best deals start. This takes longer. It also produces less competition.
Think regionally before you think nationally. A searcher with deep knowledge of a single market will consistently outperform a searcher with surface-level coverage across five countries.
On positioning:
Build your reputation before you need it. The searcher who has been writing about ownership, showing up at local business events, and having honest conversations about succession for twelve months will close deals that the cold outreach searcher will not. European sellers do not buy acquisition models. They buy people they trust.
Do not lead with your criteria. Lead with curiosity about the business, its history, what the owner has built, and what they are trying to protect. Understand what the seller is afraid of losing before you begin talking about what you want to gain. The transaction conversation will come. The relationship has to come first.
On valuation:
European deal multiples are lower than US equivalents, and this is an advantage for buyers, not a weakness of the market. Southern European mid-market deals averaged 5.3x EBITDA in the first half of 2025, according to Dealsuite’s M&A Monitor. In Spain, search fund targets typically trade at 4 to 6x EBITDA versus 6 to 8x or higher in the US. Lower entry multiples mean more room for value creation, more manageable debt service, and more realistic seller expectations.
The lower multiple environment is not a consolation prize for the absence of SBA financing. It is part of what makes European ETA genuinely compelling if you approach it with the right tools.
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The Summary
The US ETA ecosystem is not wrong. It is extraordinary. But it was built for a specific market, at a specific moment in time, with specific infrastructure that does not exist in Europe.
Copying it wholesale here is not a strategy. It is a shortcut that will cost you time, credibility, and deals.
The European opportunity is real. The succession gap across Germany and the Netherlands alone represents hundreds of thousands of businesses that need external buyers over the next decade. The demographics are not slowing down. The family succession pipeline is not recovering. The gap between businesses seeking successors and qualified buyers who understand what these sellers actually need is widening every year.
The searchers who will win in Europe over the next decade are not the ones who read the most US primers. They are the ones who understand their local financing landscape, who source deals through relationships rather than listings, who treat European sellers with the patience and respect their life’s work deserves, and who build reputations before they need them.
Europe does not need a translated American playbook.
It needs its own.
Hit reply and tell me: what is the biggest structural difference you have personally encountered between the US model and your own market?
See you next Monday. Alexander