For the first time on record, more German SME owners plan to close their companies than to hand them over. Across Europe, the numbers tell the same story at different speeds. This is the defining opportunity, and obligation, of the next decade for entrepreneurs and investors.
This article is the first in a three-part series on the European search fund opportunity. Part two examines how the search fund model adapts to European markets. Part three makes the case for investment into search funds.
The number that should worry Europe
In January 2026, KfW Research published its latest Nachfolge-Monitoring Mittelstand, the most authoritative tracking study of business succession in Germany. Buried in the findings was a number with no precedent in the study’s history.
By the end of 2029, 545,000 German Mittelstand owners plan to hand their business to a successor. Over the same period, 569,000 plan to close their business entirely.
Read that again. In the largest SME economy in Europe, planned closures now outnumber planned successions. Roughly 114,000 companies a year intend to shut their doors, not because the business has failed, but because the owner is retiring and no successor exists.
This has never happened before in KfW’s monitoring. Succession in the Mittelstand has always been difficult, but the baseline assumption held: most viable companies would eventually find a buyer, a family member, or a manager to take over. That assumption no longer holds.
The driver is demographic and it is relentless. According to the same KfW study, 57 percent of Mittelstand owners are now aged 55 or older. That is more than 2 million people, and it is up three percentage points in a single year. Twenty years ago, the figure was 20 percent. Owners who actually intend to transfer within the next two years are, on average, already past their 66th birthday.
These are not recycled European Commission estimates from a decade ago, the kind that still circulate in most coverage of this topic. This is primary survey data from more than 13,000 German SMEs, collected between February and June 2025. The crisis is not coming. It is here, and it is being measured.
It is not just Germany
Germany is the loudest data point because KfW measures the problem so thoroughly. But run the same lens across Europe and the pattern repeats, market by market, each on its own clock.
France. In November 2025, Bpifrance Le Lab published the largest study of French business transmission to date, surveying close to 5,000 owners. Forty percent of French SME and mid-cap leaders intend to transfer their business within five years. That puts roughly 370,000 companies in scope for transmission by 2030. Yet at the current pace of completed deals, only around 130,000 will actually change hands. The potential market is nearly three times larger than the realised one, and Bpifrance estimates close to 3 million jobs sit inside the affected companies. Bpifrance has responded by making transmission a strategic priority, launching a dedicated national plan in 2025.
Switzerland. Research by the Center for Family Business at the University of St. Gallen, conducted with UBS, expects around 168,000 Swiss SMEs to undergo an ownership transfer by the end of 2030. Two-thirds of Swiss SMEs describe themselves as family businesses, and the study series reaches a blunt conclusion: most owners start planning far too late.
Italy. SMEs account for over 99 percent of Italian companies and nearly 78 percent of the workforce. The succession problem there is structural and well documented: by Intesa Sanpaolo’s analysis, only around half of Italian family businesses make it to the second generation and just one in ten to the third. Confindustria’s GenerAZIONI work frames the Italian generational handover as a challenge for the coming decade, which means Italy’s wave lands later than Germany’s, roughly 2026 to 2035.
Spain. Over 85 percent of Spanish companies are family-owned, and multiple studies put the share with a formal succession plan below 30 percent. Spain matters for a second reason, which we will come to: it is also the European market where the solution has advanced furthest.
Plot these national timelines side by side and you get something like a succession clock for the continent. The DACH region and France are in the thick of it now, through roughly 2030. Italy and Iberia skew two to four years later. No European economy of any size escapes it.
Why succession fails
Three forces explain why so many viable companies cannot find a successor, and all three show up consistently in the primary data.
The first is simply age. Retirement remains the number one stated reason for planned closures in the KfW data, year after year. The post-war founder generation built Europe’s SME base through the 1970s, 80s and 90s, and that generation is now exiting the workforce together, in a compressed window.
The second is family. Among German owners planning to close rather than transfer, 47 percent cite a lack of interest from within the family. The children of Europe’s founders have university degrees, urban careers and options their parents never had. Fewer of them want to run a regional industrial supplier or a specialist services firm, however profitable it may be. The family pipeline that quietly handled most European succession for two generations is thinning.
The third is friction. Bureaucracy has surged as a stated reason for giving up on succession, reaching record relevance in the latest KfW monitoring. Transferring a business is legally and administratively harder than closing one, and a meaningful number of owners are now choosing the path of least resistance.
But there is a fourth, less discussed reason, and it is the one that matters most for readers of this series. The market for external succession is underdeveloped at precisely the company size where most of these businesses sit.
Private equity rarely reaches down to companies with one to five million euros of EBITDA; the fund economics do not support it. Trade buyers exist, but a sale to a competitor frequently means consolidation, relocation and job losses, which is exactly what most founders fear. Employee buyouts remain rare across most of Europe. For hundreds of thousands of healthy companies, the honest answer to “who could take this over?” has been: nobody in particular.
That is the gap. Not a gap of company quality, but of successor supply.
The successor Europe didn’t know it had
A search fund is, in essence, a vehicle for one or two people to become that successor. An entrepreneur, often with an MBA and several years of operating or professional experience, raises capital from a group of investors to spend roughly two years searching for a single established company to acquire. On acquisition, the searcher becomes the CEO. The investors take board seats. The previous owner hands over to a committed individual who has staked their career on this one business, not to a fund managing forty positions.
The model was developed at Stanford in 1984 and spent its first three decades as a largely North American phenomenon. That has changed. The model’s mechanics, economics and track record are the subject of the third article in this series; what matters here is the fit between the model and Europe’s succession gap.
Academic research has started to formalise that fit. Hakan Ener and Antonio Dávila, in the European Management Journal, characterise searchers as hybrid successors: external candidates who behave like internal ones, combining the fresh capital and professional management of an outside buyer with the personal commitment and continuity of a family successor. They describe the result as a family business without kinship, and position the searcher as the second-best succession outcome available to a family firm, behind only a genuine handover within the family.
I made the same point more plainly in an interview with Mergermarket last year. For some family-owned businesses, a searcher can be like the daughter or son that takes over the business and preserves the legacy.
Our own deal experience at Moonbase has taught us something else about what European founders actually want. Searchers with an engineering background or strong operational expertise often have more success convincing founders to sell their companies than those coming from purely financial or consulting backgrounds. Founders are not selecting for the highest bidder. They are selecting for the person they trust to run the company they built.
The evidence suggests the model is working in Europe. IESE Business School’s 2024 international study, which tracks search funds outside the US and Canada, found that 79 percent of international search funds that completed their search went on to acquire a company, a materially higher conversion rate than the long-run North American figure. The median acquired company had 7.8 million dollars in revenue, an EBITDA margin of 24 percent, and 50 employees.
Sit with that last number. Every median European search fund acquisition is 50 jobs that continue under committed, personally invested ownership rather than facing a closure or a consolidating trade buyer.
And the volume is shifting. In the first quarter of 2025, European countries accounted for 9 of the first 20 search fund acquisitions recorded worldwide, ahead of North America for the first time. Spain alone had seen 67 first-time search funds formed by the end of 2023, the most of any market outside North America, with the pace of new launches still rising since. What began as an American import is becoming, deal by deal, a European succession institution.
Proof it works: four European exits
A succession model only matters if the companies thrive afterwards. The European track record is young, but the early landmark cases are instructive.
CTAIMA, Spain. Acquired in 2020 by Baluarte Capital, a search fund led by Lorenzo Zavala and Luis de los Santos, this Tarragona-based contractor management software company merged with competitor e-coordina in 2024 and attracted investment from Hg, one of Europe’s leading software investors. Investors in the original fund have described it as the most successful search fund investment in Europe to date, with a reported net return of close to eleven times capital. The founder’s company did not just survive succession; it became an Iberian market leader.
Tethys, France. In 2020, French searcher Philippe Saussol acquired Tethys, a specialist in pyromechanical systems for the defence, space and security sector, supplying groups such as MBDA, Naval Group, ArianeGroup and Safran. Over the following six years he grew earnings roughly three and a half times. In May 2026, after a competitive auction, the private equity firm Abenex took a majority stake in a transaction that valued the company at more than 40 million euros, with the management team and Bpifrance reinvesting alongside. Search Funds News described it as the strongest search fund exit yet recorded outside the United States. It is, by deal value, the largest European search fund exit to date, and a striking demonstration that the model reaches well beyond software and services into Europe’s industrial base.
Water Direct, United Kingdom. Acquired in 2022 by Adam Johnson’s Soris Capital Partners, this emergency water supplier grew to the point where Eurazeo, a major European investment house, acquired a majority stake within roughly three and a half years of the original deal.
Logiscenter, Spain. Acquired in 2019 by Miguel Arias and Lorenzo Dávila of Asta Capital, the Madrid-based technology distributor was sold to the American group Levata in 2025, in what observers described as one of the most successful exits in the Spanish market’s history.
The pattern across all four is the same. A founder-built company, a committed searcher-CEO, several years of focused growth, and an exit to a larger owner at a step change in value. The returns are what bring investor capital back for the next searcher, and the next succession. That loop, capital recycling into new successions, is how a model scales into an institution.
A note of honesty that readers will not find in most coverage: the return figures in these cases are reported by the investors involved rather than independently audited, and headline European exits remain few in number. The early signal is strong. It is still early.
The window
For both entrepreneurs and investors, the timing of this moment is unusual, and it is worth being precise about why.
Conventional logic says a wave of motivated sellers should produce a seller’s market with rising prices. The opposite is happening. The Argos Mid-Market Index, which tracks the EV/EBITDA multiples paid for unlisted eurozone mid-market companies, printed 8.3x in the fourth quarter of 2025, its weakest level since the first half of 2014. Multiples are compressing into the supply wave, not rising with it.
For a searcher, that means the entry environment favours buyers: more willing sellers, more rational prices, and less competition from private equity at the smaller end of the market. For an investor, it means the rare alignment of structural demand, disciplined entry pricing, and a competitive field that has not yet institutionalised.
Precision also requires a caveat. The KfW data shows that near-term German successions, those planned for 2025 and 2026, are largely well prepared, with successors found or negotiations underway. The structural gap opens from 2027 onwards, as the much larger medium-term cohort hits the market without the same preparation. This is a five-to-ten-year arc, not a fire sale. Anyone selling urgency by the quarter is selling something else.
At Moonbase, our working assumption is that the gap will widen before it narrows. The supply of credible searchers in Europe is growing, but it is growing more slowly than the supply of owners who need them.
A generation of CEOs
It is easy to lose the human scale inside numbers this large, so consider what one planned closure actually is. It is a company that survived the oil shocks, the euro transition and a pandemic. It is a founder in their late sixties who still knows every customer by name. It is fifty people whose jobs work because that company exists in that town. Multiplied by 114,000 a year, in Germany alone.
I grew up inside a business like this. My father founded an ingredients company (flavour and fragrance) in Egypt in the 1980s, and I spent years working alongside him before my brother and I helped scale it and eventually exited. I know what a founder feels in the final years of ownership, the mix of pride and quiet worry about what happens next. That experience is why succession is not an abstract market for me, and why Moonbase exists.]
We built Moonbase around a simple observation: Europe has more good companies than good successors.
The succession crisis will be answered one way or another. Either hundreds of thousands of viable European companies close over the coming decade, taking their jobs and their accumulated knowledge with them, or a generation of entrepreneurs steps into the gap and a generation of investors backs them to do it.
The second outcome is already underway. It is simply not yet at scale.
If you are an operator or recent MBA weighing the searcher path, the second article in this series examines how the search fund model actually works in Europe, country by country, and what it demands of the people who attempt it. If you are an investor or family office wanting to understand the asset class behind these successions, the third article sets out the economics, the returns and the honest risks.
Europe needs successors. The interesting question is who will step forward.
Sources: KfW Research, Nachfolge-Monitoring Mittelstand 2025 (Fokus Nr. 526, January 2026); Bpifrance Le Lab, Transmission et reprise d’entreprise (November 2025); Center for Family Business, University of St. Gallen and UBS, succession study series (2026); Confindustria, GenerAZIONI; IESE Business School, International Search Funds 2024 (ST-658-E); Stanford Graduate School of Business, 2024 Search Fund Study; Ener, H. and Dávila, A., “What makes search fund entrepreneurship different in Europe?”, European Management Journal 41(4), 2023; Argos Mid-Market Index, Q4 2025; Mergermarket/ION Analytics, August 2025; Search Funds News; Abenex (May 2026).