Business succession in the SME sector across the DACH region is experiencing strong demographic pressure. As the owner generation ages, thousands of companies will be up for sale in the coming years, hoping for a successful transition. According to current studies, around 100,000 to 125,000 SME entrepreneurs in Germany alone plan their retirement by 2028. More than half of today’s SME owners are over 55 years old. The result: a “succession wave” is rolling toward the market, increasing the number of businesses for sale. Around 215,000 entrepreneurs want to hand over their companies to successors in 2025. At the same time, however, due to a lack of successors, 231,000 companies are considering closing down by the end of 2025 – an alarming development.

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Studies from succession consulting show that, in practice, 72% of owners cannot find a suitable successor, which is considered one of the major challenges in succession. Bureaucratic and tax complexity, legal aspects, and excessive price expectations also play a role. The German Chamber of Industry and Commerce finds that in 37% of cases, seller expectations are too high. No wonder every fifth company owner postpones the sale in hopes of higher prices and “better timing.” Thus, an oversupply of firms meets hesitant demand, increasingly leading to a buyer’s market. But who are the actual buyers in the succession market?

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Buyer Groups at a Glance: Who Are Business Successors for Medium-Sized Companies?

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If succession cannot be arranged within the family – which is the case for about every second company – external buyers come into focus. In the SME succession market, there are mainly three buyer groups:
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• Private Equity (financial investors),
• Family Offices,
• and Strategic Buyers.

Each of these buyer types differs in motivation, investment horizon, deal structure, and approach. For entrepreneurs, it is crucial to understand which type of buyer fits their company. Expectations of the future owner should be clearly defined in advance, as the choice of potential buyers has a major influence on the sales process and its outcome. Below, we examine the three key buyer groups in the succession market, their profiles, advantages and disadvantages, and typical approaches in business succession transactions.

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Private Equity Investors as Buyers
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Private Equity (PE) refers to investors who acquire equity stakes using fund capital to achieve significant value growth within a medium-term period. Private equity firms (also called financial investors) raise capital from institutional investors and wealthy individuals in funds and invest it in companies. Their business model aims to hold a company for several years (typically 5–7), enhance its value through strategic measures (growth, acquisitions, efficiency improvements), and then sell it profitably (exit).
Private equity is therefore a form of temporary entrepreneurship with a clear return objective. For many SMEs facing succession challenges, a PE investor can be a solution – especially if there is no internal successor and additional growth capital is needed.‍

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Motivation and Strategy of PEs

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The primary motivation of PE investors is financial return for their fund investors. They look for companies with value creation potential – through revenue growth, internationalization, digitalization, or restructuring. Typical selection criteria include scalable business models, solid cash flows, and development potential that allows for above-average returns on invested capital. Expected future earnings are decisive.
PE managers often bring business expertise, review processes and structures, and identify value levers to increase profitability. Additional capital may also be provided to finance expansion or acquisitions (“add-on acquisitions”). The investment horizon is limited – PE investors typically plan their exit from the beginning (e.g., sale to a larger strategic buyer or secondary buyout to another fund). Accordingly, they focus consistently on increasing company value.

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Deal Structures and Procedures of PEs

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Private equity transactions are often majority acquisitions. The PE fund usually acquires a majority stake (at least 51%, often 70–100%) to maintain control. Many PE deals in the SME sector take place as leveraged buyouts (LBOs), meaning the buyer finances part of the purchase price with loans that are later repaid from company profits. This increases the equity leverage and, in case of success, the return on equity.

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A key structural feature of many such transactions is the seller’s reinvestment: often, the existing owner is offered to retain a minority stake in the new holding vehicle (a so-called “rollover”). This reinvestment typically runs parallel to the PE fund structure and participates in the company’s future value. This creates an additional leverage effect for the seller: since PE investors usually work with high debt ratios, the entrepreneur can achieve a disproportionately high gain on the retained share upon a successful later exit compared to a sale to a purely strategic buyer.‍

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Earn-out clauses – performance-based purchase price components – are also common in PE deals to bridge valuation gaps and allow sellers to participate in future development. A portion of the purchase price is not paid immediately but earned later based on company performance (e.g., revenue, EBITDA, or customer retention). Typically, a period of 1 to 3 years is agreed upon in which certain KPIs must be met. If the target is missed, payment is reduced or forfeited.

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For private equity, this is a common way to mitigate valuation risks while motivating the seller or management team to stay committed during the transition period. From the seller’s perspective, earn-outs offer a chance for a higher total price if the company performs well – for example, through projects nearing completion or a strong following year. At the same time, they pose risks if targets are unrealistic or external factors (e.g., economic downturns, market shifts) hinder success. It is therefore essential that earn-out clauses are clearly defined, measurable, and fair – with precise KPI definitions, transparency obligations, and control mechanisms.‍

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During due diligence, PE investors conduct thorough examinations to identify risks. Contracts are often complex, as financial investors pay special attention to warranties, financial ratios, and exit clauses. After acquisition, PE funds typically implement active governance: reporting becomes more frequent (monthly figures, KPIs), new managers or advisory boards may be installed (e.g., a PE-appointed CFO), and clear performance targets are set.

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Employee relations formally remain unchanged (§613a BGB – employment contracts remain valid), but efficiency programs may still bring organizational changes. Overall, private equity acts as a temporary owner aiming to accelerate company growth before selling again.‍

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Typical Industries and Target Companies of PEs

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Private equity firms invest across many industries, sometimes with specialization. Popular sectors include industrials and mechanical engineering, healthcare, business services, IT/software/technology, consumer goods/retail, and Industry 4.0.
Scalable business models and growth opportunities are key. For example, mid-sized industrial machinery manufacturers with international niches, medical technology firms, software providers with recurring revenues, or branded goods producers are often in focus.
Succession companies with a solid foundation but a need for digitalization or internationalization are also attractive – PEs see leverage here. Less profitable companies or those requiring heavy investment are typically avoided, except for turnaround funds.
In general, a sale to private equity is promising if the business is healthy and can grow significantly with fresh capital and management impulses.‍

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Advantages for Sellers to PEs

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Quick access to capital and liquidity: selling to a PE fund usually allows the previous owner to exit fully or partially and immediately monetize their life’s work. For entrepreneurs wishing to retire or diversify their wealth, this is attractive. PE investors can often decide and finance quickly due to large available funds.‍
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Growth capital and professionalism: PE brings fresh equity and often access to additional debt financing, enabling projects that were previously impossible (expansion, new product lines, acquisitions). PE teams bring business management know-how, providing boosts in areas like controlling, process optimization, or internationalization.‍
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Second upside potential: if the entrepreneur retains a minority share (e.g., 20%), they can benefit again from value appreciation during the later resale. This “second exit” can be very lucrative if the PE plan succeeds, allowing the former owner to cash out significantly now and still profit from future growth.‍
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Succession solution without an internal candidate: especially where no family successor exists, private equity offers a viable path to ensure business continuity. Many SMEs have successfully solved succession externally while advancing to the next level through PE involvement.‍
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Disadvantages & Possible Challenges When Selling to Private Equity‍
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Limited time horizon (exit pressure): since PE funds must sell their investments after a few years, the company will likely change ownership again after about 5–7 years. This “passing along” of the firm can create uncertainty for employees and customers. Long-term projects (e.g., 10-year visions) can be difficult when the owner is focused on exit.‍
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High return pressure: financial investors have strict return targets. If growth lags, tough measures may follow – cost cuts, divestitures, or layoffs. Short-term profitability can sometimes conflict with sustainable business development.‍
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Loss of influence and control: entrepreneurs must be prepared for the PE investor, as majority owner, to have the final say. Decisions are more data-driven and less intuitive. The previous owner loses full control and may need to adapt to a minority or advisory role (if they stay involved). For former independent founders, this can be emotionally challenging.‍
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Corporate culture and employees: transitioning to a financial investor can unsettle staff. While good PE investors emphasize stakeholder management and employee retention (since knowledge loss harms investments), employees may view strict controlling or leadership changes skeptically. The company culture often shifts toward stronger performance metrics. While the firm usually remains independent (no group integration), expectations and pressure increase.

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Family Offices as Buyers in the SME Sector

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Family offices are investment firms that manage the wealth of affluent families or entrepreneurs and directly invest in companies. They combine characteristics of financial and strategic investors. Family offices usually manage their own family wealth (single family office) or pool the capital of several families (multi-family office).
They therefore invest without external fund investors and are not bound by fixed fund durations. Unlike private equity funds, which aim for an exit after 5–7 years, family offices often follow an “evergreen” model without any sale pressure. This long-term perspective allows them to invest patiently in succession cases and weather turbulent periods, as there is no external return pressure from time-limited funds.‍

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Motivation and Strategy of Family Offices‍

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Family offices primarily focus on preserving and sustainably increasing family wealth across generations. They invest freely according to the owners’ preferences and are less concerned with short-term profit maximization, focusing instead on long-term, steady growth. Many family offices have entrepreneurial backgrounds and bring with them industry expertise, experience, and networks. This entrepreneurial DNA makes them valuable partners: they can provide advisory support, open doors to new markets, and think strategically — without having competing business interests like strategic buyers. In succession situations where the previous owner wishes to withdraw in an orderly manner, family offices can step in as silent partners or majority shareholders who continue to develop the company in the founder’s spirit. They often operate “at eye level” with management and respect the existing company culture.
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Deal Structure and Procedures of Family Offices

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Family offices are highly flexible in financing. They can offer customized participation models — from minority stakes to full takeovers. Thanks to the absence of rigid requirements, transitional models can often be tailored individually. For example, it may be agreed that the senior entrepreneur stays on as an advisor for a few years or that ownership transfers gradually. Family offices stand out because they invest without a fixed exit strategy: there is no compulsion to sell after a few years. This builds trust among selling entrepreneurs, since the company is not resold quickly but typically remains long-term within the family office portfolio. Financing is usually provided from the family’s own equity, sometimes supplemented with bank loans, but generally with moderate leverage compared to private equity. Consequently, financial pressure on the company is lower. Family offices have recently been very active and, in 2024, represented one of the largest investor groups in the private-markets space, underlining their growing influence in SME M&A.

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Typical Industries and Target Companies‍

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Family offices invest broadly, often without strict industry focus. They are particularly attracted to SMEs with solid earnings and market positions — for example, in mechanical engineering, consumer goods, healthcare, IT/software, or services. Sustainable business models and low concentration risks are key. Many family offices prefer companies with manageable risk profiles since their focus lies on wealth preservation. Technology firms with growth potential, traditional industrial businesses with niche leadership, or hidden champions are of interest — especially when the family behind the office understands the sector (often based on its own entrepreneurial background). Example: if the family built its wealth in industry, its family office tends to invest in industrial or technology firms it understands. Overall, family offices are key partners for SMEs when it comes to shaping successions gently and with a long-term mindset.

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Advantages When Selling to Family Offices‍

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Long-term perspective: family offices think in generations rather than quarters. This ensures a stable owner who is not planning to sell after a few years but is interested in sustainable growth. Since there is no integration pressure as with corporations, the company’s identity is usually preserved. Decisions are made with the founder’s legacy in mind.‍

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Flexible transition models: family offices can keep the previous owner on board as an advisor or minority shareholder if desired. Such transitional arrangements help the entrepreneur emotionally detach while preserving valuable know-how for the company.‍

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No external return pressure: without fund investors behind them, investment decisions are made with a long-term and sustainable view. Short-term profit maximization at any cost (e.g., drastic cost-cutting) is less of a focus, providing stability for the business.‍

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Know-how and network: an entrepreneurial family office brings not only capital but also expertise and connections from which an SME can benefit. The new owner often has industry knowledge and can offer strategic impulses.‍

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Disadvantages & Possible Challenges When Selling to Family Offices‍

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Limited synergies: compared to strategic buyers, a family office can rarely leverage operational synergies (e.g., shared production or distribution). The company generally remains standalone — which can also be a desired feature.‍

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Varying professionalism: family offices differ widely. Some operate with high professionalism; others act more opportunistically. The quality of collaboration depends heavily on the philosophy of the respective family. Therefore, carefully vetting a family office as a partner is crucial.‍

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Capital size: while many family offices are well-funded, they typically invest in established, profitable companies. Very large deals or highly distressed firms are less likely to be handled alone. In such cases, they may form co-investments with other investors or holding companies.‍

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Return expectations still exist: even family offices aim to grow their wealth. Although they are more patient, they will not tolerate unprofitable performance indefinitely. Thus, the family office’s entrepreneurial goals should align with the company’s future plans.

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Strategic Buyers for Business Succession

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Strategic buyers (often called “strategics”) are companies that acquire other businesses for strategic reasons. Typically, they are industry peers, competitors, suppliers, or larger corporations aiming to strengthen their core business through acquisitions. Unlike financial investors, strategic buyers are not primarily motivated by short-term financial gain or later resale but by industrial logic and the long-term integration of the acquired business into their corporate group. Possible motives for strategic buyers include entering new markets or customer segments, expanding product portfolios, realizing synergies (e.g., shared procurement, production, or sales), industry consolidation (buying competitors), or gaining access to innovations and technologies. For SME owners selling their company, a strategic buyer can be appealing because such buyers often understand the business perspective and value qualitative factors such as market position, customer base, and product quality — not just financial metrics. In many cases, strategic buyers even pay higher prices because they can include synergy effects in their valuation.

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Motivation and Strategy of Strategics

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Strategic buyers follow an industrial strategy. The acquisition serves as a means to strengthen their own company.
For example, a larger company may acquire a smaller SME because it offers innovative products that fit perfectly into its own range. Or a regional competitor might buy to increase market share. Since the goal is to improve their strategic position, these buyers are willing to invest long-term — there are no exit considerations, as the acquired company is usually integrated permanently. Instead of planning a later sale, the focus is on integration (vertical or horizontal).
Importantly, strategic buyers assess a company differently than financial investors do: they look not only at the standalone profitability of the target but also at the value contribution to the overall organization. This can work to the seller’s advantage — when strong synergies exist (e.g., the target’s products perfectly complement the buyer’s portfolio), the buyer may pay a significantly higher price than a financial investor would. However, these synergies must be realistic and truly beneficial.

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Deal Structure and Procedures of Strategics

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Strategic acquisitions usually involve 100% takeovers or majority stakes, as buyers aim for full integration. Typically, the buyer acquires all shares (share deal) or all essential assets (asset deal), and the previous owner exits completely. However, there are also cases where the seller retains a role for a transition period — for example, continuing as managing director or advisor to ensure smooth handover, especially regarding customer relationships or specialized know-how.
Strategic buyers often finance acquisitions through their own balance sheet (equity or corporate bank loans). Among SMEs, larger mid-sized firms may acquire smaller competitors using their own funds, while corporations use dedicated M&A budgets.Earn-outs or vendor loans are less common than in PE transactions but can occur, for instance when the seller stays involved during the transition and shared goals are set.
The integration process is the central post-acquisition focus: depending on strategy, the acquired company may gradually merge (e.g., joint branding, consolidated administration, IT, and procurement, elimination of duplicate roles, etc.).
In Germany, employee protection laws (§613a BGB) ensure employment contracts remain valid, but restructuring can still occur if roles overlap.
Culturally, strategic acquisitions often mean change: the company’s existing culture meets that of the buyer. Integration risks arise here, as cultural alignment

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Typical Industries and Target Companies of Strategics

Strategic acquisitions take place across virtually all industries. They are frequently seen in the industrial sector, in automotive and mechanical engineering (where supply chains are being consolidated), in the technology sector (where large corporations acquire innovative start-ups or niche players), in healthcare (e.g., laboratory groups buying diagnostic labs), and in retail/consumer goods. In principle, every strategic buyer looks for targets that align with their own business direction.
Examples include: a major automotive supplier acquiring a smaller specialist to integrate its technology into its portfolio, or an IT service provider buying a software developer to gain access to its products and customers. Private equity portfolio companies also occasionally act as strategic buyers when executing buy-and-build strategies — though this still ultimately follows a financial investor logic. For SME owners, potential buyers are often regional competitors or international market leaders. In succession situations, there are also cases in which customers or suppliers acquire the company to expand their value chain (forward or backward integration).
A strategic buyer succession essentially always means that the company fits into the strategic puzzle of a larger player.‍
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Advantages When Selling to Strategic Buyers‍
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Synergy-driven high purchase price: Strategic buyers are often willing to pay a premium if the acquired company provides significant value to their own business. This can mean maximum proceeds for the seller — sometimes more than a financial investor would offer, since synergies are factored into the price.‍
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Long-term security for the company: Since no resale is planned, the entrepreneur knows their life’s work is in lasting hands. The company becomes part of a larger whole and often gains better long-term prospects (e.g., access to resources, technologies, global distribution). For employees, this can offer greater long-term security than a PE exit into unknown hands.‍
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Opportunity for continued involvement: Many strategic buyers appreciate the former owner’s know-how and keep them involved temporarily — as an advisor or for a limited time in management. This eases knowledge transfer and can make the seller’s transition smoother. For employees, familiar faces remaining in place initially can also stabilize the transition period.‍
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Complementary strengths: The buyer brings resources that the smaller company previously lacked (e.g., strong sales channels, larger R&D departments, or better purchasing conditions). The acquired company can thus grow faster or operate more efficiently within the group. For the founder, it is satisfying to see their company further developed within a larger organization and possibly expanding internationally.
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Job retention (often): Strategic investors are generally interested in retaining employees, as they bring valuable expertise and customer relationships. Especially in times of skilled labor shortages, a good buyer will aim to keep staff. Although restructuring may occur, an orderly transition that respects the workforce is often an explicit goal — after all, the buyer wants to acquire a functioning business.‍
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Disadvantages & Possible Challenges When Selling to Strategic Buyers‍
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Loss of independence: After being acquired by a strategic buyer, the company completely loses its autonomy. Future decisions will be made by the parent corporation. For long-term employees and customers, this represents a major change. The company name may disappear over time, processes will be standardized — the business becomes part of the larger organization.‍
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Integration risks: Merging two companies is complex. Different corporate cultures can create friction, and key employees may leave if they feel uncomfortable in the new environment. IT systems, reporting structures, and hierarchies must be aligned. If integration fails, the anticipated synergies may not materialize, and the acquired company may suffer.‍
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Possible layoffs: Despite commitments to retain staff, redundancies can occur — for instance, where duplicate roles exist (two accounting departments, two marketing teams, etc.). For sellers who care deeply about their workforce, this can be a sensitive issue. It is important to review the buyer’s intentions in advance and, if necessary, negotiate socially responsible measures.‍
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Slower decision-making: In a corporate environment, decisions are often more bureaucratic. A previously agile SME must now comply with corporate policies. Innovation projects may require longer approval processes, reducing flexibility. Some customers or suppliers may react negatively to the SME now being “part of a large corporation.”‍
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No way back: Once the company has been sold to a strategic buyer, there is rarely a path back to independence. If collaboration does not go as hoped, the former owner cannot simply take over again (unlike in the PE case, where a buyback or management buyout might be possible at exit). Such a step therefore requires careful consideration.

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Outlook on the Development of the Buyer Market

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Demographics Drive Supply and Competition in Business Acquisitions

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The number of medium-sized companies for sale is expected to continue rising in the coming years as the baby boomer generation retires. At the same time, there remains a shortage of new entrepreneurs, meaning that well-positioned companies will still attract interest - but buyers can afford to be selective. A two-tier market is likely to emerge: highly healthy, future-oriented firms (with digital competence, innovative products, and solid profitability) will be in high demand and command high prices, while companies lacking clear prospects or with outdated business models will struggle to find buyers and increasingly face closure. Already, there are three times as many companies for sale as there are potential successors. This succession gap could widen even further in the short term - offering solvent buyers the chance to choose from many attractive options.

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Family Offices on the Rise in Germany

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Recent years have shown that family offices are playing an increasingly important role — a trend likely to continue. Numerous entrepreneurial families have accumulated significant capital during past boom years and are seeking sustainable investments. For the DACH region, it is expected that even more family offices will acquire direct stakes in SMEs, as volatile stock markets and low bond yields (or generally uncertain capital markets) make private-equity-style direct investments appealing. Multi-family offices and platforms pooling several families could increasingly appear as buyers, enabling larger transactions.
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Private Equity Adapts‍

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The private equity industry faces new challenges between 2025 and 2030: rising interest rates have made LBOs more expensive, while geopolitical risks and regulation (e.g., ESG requirements) affect investment calculations. Nevertheless, PEs still hold vast amounts of “dry powder” (committed capital) and must deploy it. We will likely see PE funds focusing even more on high-quality targets and becoming more creative in financing structures (e.g., using less leverage, more equity, or co-investors). For the succession market, this means financial investors will remain active buyers — particularly in the small- and mid-cap segment (enterprise values around €10–100 million). They could increasingly view succession cases as opportunities to acquire strong businesses at favorable prices, especially if the economy weakens and strategic buyers hesitate. Specialized succession funds may also emerge, focusing specifically on taking over and long-term supporting SMEs through succession transitions.
Additionally, buy-and-build strategies (acquiring multiple small firms to form a larger group) are expected to continue, helping consolidate fragmented SME sectors.‍
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Strategics: Pause and Comeback as Successors‍

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Currently, strategic buyers are showing some restraint. Many companies are focused on internal transformation projects (digitalization, sustainability) and are acting more cautiously on acquisitions. However, in the medium term — by around 2030 — a comeback of strategic buyers is likely: future challenges such as AI, decarbonization, and global competition will drive corporations to seek growth through acquisitions. International buyers could increasingly look to the DACH SME sector — for instance, U.S. or Asian firms seeking access to the European market or acquiring German technology leaders. The race for technological leadership may spur strategic M&A in areas such as climate and environmental technology, automotive, medical technology, and industrial automation. For sellers, this means that those operating in future-relevant industries can expect interest from multiple strategic buyers, pushing up prices.
However, scrutiny will intensify — strategic buyers will rigorously assess whether a target fits their long-term strategy. Not every opportunistic deal will pass corporate approval anymore. Quality and strategic fit will be key criteria.
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Financing Environment and Company Valuations‍

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Volatile financing conditions are expected through 2030. Periods of higher interest rates can lead to lower valuation multiples (as debt becomes costlier and buyers less willing to pay inflated prices). However, competition for attractive succession cases will still drive up prices, as solvent buyers bid against each other. We may therefore continue to see high valuations in certain sectors, while others (with many sellers but few buyers) experience downward price pressure. From a seller’s perspective, flexibility in deal structures will be increasingly important. Models such as earn-outs, staggered purchase prices, seller reinvestments, or longer-term revenue-sharing arrangements could become standard tools to bridge valuation gaps and balance risk between parties. Likewise, government support (e.g., subsidized loans for successors or guarantees) could be expanded in the DACH region to facilitate more takeovers and prevent company closures — indirectly strengthening the buyer market by enabling more successors to step in.
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New Buyer Models such as Search Funds and Succession Platforms‍

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Alongside traditional buyers, innovative models are emerging. For example, search funds are gaining traction. These involve young entrepreneurs raising capital to acquire and personally lead an SME. Already established in the U.S., this model is spreading to Europe and could become a viable option for smaller companies in succession situations. At the same time, online succession platforms and matching tools are becoming more professional, increasing market transparency and connecting private investors (e.g., MBIs looking to become entrepreneurs) or niche family investors who were previously hard to find. Finally, more employee ownership models could appear (e.g., cooperatives or foundation-based takeovers) where traditional buyers are lacking. German lawmakers are already discussing measures to simplify employee equity participation — which could take effect by 2030, making employee-led successions a more attractive option.