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Search Funds in Germany: Development, Current Status, and Future Perspectives

Learn how search funds are established and develop in Germany. This article explains how to conduct a company search alongside your main occupation.

Search funds are gaining increasing importance in Germany as an innovative model for business succession. In this article, we examine the specific characteristics of the German market for search funds, their development to date, as well as current trends and future prospects.

Origin and Development of Search Funds in Germany

While the search fund model has existed in the USA since the 1980s, it is a comparatively young phenomenon in Germany. The first pioneers started around 2015, inspired by successful examples from the Anglo-American region. Since then, a continuous, albeit initially slow, development has been observed:

  • Initial Phase (2015-2018): First isolated search funds, mainly founded by MBA graduates from international business schools
  • Growth Phase (2019-2021): Increasing awareness of the model, first successful acquisitions, emergence of specialized investor networks
  • Current Trend (2022-2025): Significant acceleration, growing professionalization and institutionalization of the industry

Compared to the U.S. market, where approximately 50-60 new search funds are founded annually, the number in Germany remains modest at an estimated 10-15 new formations per year but shows a strong upward trend.

Market Potential for Search Funds in Germany

Germany, with its strong Mittelstand (SME sector), offers an ideal environment for search funds. The following factors are particularly relevant:

Demographic Challenges

Demographic change is driving a significant need for succession:

  • Around 500,000 medium-sized companies face a generational change in the next five years
  • Approximately 40% of entrepreneurs have no succession plan in place
  • Many family businesses lack suitable or interested successors within the family

This situation creates substantial opportunities for external succession solutions such as search funds.

Structural Advantages of the German Mittelstand

The German Mittelstand is characterized by specific features that make it attractive for search fund candidates:

  • High specialization with often market-leading positions in niche segments
  • Solid financial structure with above-average equity ratios
  • Long-term business perspective rather than short-term profit maximization
  • Strong regional roots and stable customer relationships

These characteristics align well with the search fund approach, which also focuses on long-term business success rather than a quick exit.

Specific Features of the German Market

Compared to the U.S., where the search fund model originated, the German market exhibits some distinctive features:

Cultural Factors

The corporate culture in Germany differs in important respects from that in the U.S.:

  • Greater skepticism toward external acquisitions, especially among traditional family businesses
  • Stronger emphasis on professional expertise and industry experience rather than solely management skills
  • Expectation of long-term commitment rather than a possible exit after a few years
  • Lower awareness and acceptance of the search fund model

These cultural factors require a tailored approach by German search fund entrepreneurs.

The German legal system and tax regulations influence the implementation of the search fund model:

  • More complex regulations regarding business transfers, especially in asset deals
  • Greater importance of labor law aspects (works council, protection against dismissal)
  • Different tax treatment depending on transaction structures
  • Specific regulations concerning employee leasing in company acquisitions

For detailed information on legal aspects, we recommend our article on Legal and Formal Aspects of Business Succession.

Financing Landscape

The financing of search funds in Germany differs from that in the U.S.:

  • Fewer specialized search fund investors
  • Greater role of development banks and public financing instruments
  • More conservative valuation approaches and lower leverage ratios
  • Higher significance of seller loans and earn-out structures

Further information on financing can be found in our article on Financing Structures for Search Funds.

In recent years, the search fund landscape in Germany has developed dynamically:

Emergence of an Ecosystem

Specialized structures and networks are increasingly forming:

  • Establishment of investment firms specialized in search funds
  • Creation of community platforms and exchange forums for searchers
  • Specialized consulting firms and service providers for ETA (Entrepreneurship Through Acquisition)
  • Academic programs and courses at business schools on the topic of search funds

Diversification of Models

The variety of practiced search fund models is increasing:

  • Traditional search funds with investor participation
  • Self-funded search funds without external investors during the search phase
  • Accelerator-based programs supporting multiple searchers
  • Hybrid models with partial employment during the search phase

These different models are described in detail in our article What Search Fund Models Exist?.

Professionalization of Search Processes

Methods for identifying and analyzing potential acquisition targets are becoming increasingly refined:

  • Use of AI-supported analytical tools for company identification
  • Utilization of specialized platforms such as viaductus, which systematically scans the entire public market with its meta-search
  • Development of standardized due diligence processes for the Mittelstand
  • Building databases and valuation models specifically for the German market

Success Stories of German Search Funds

In recent years, several notable successes of search funds in Germany have been recorded:

Exemplary Acquisitions

Some successful acquisitions have contributed to the model’s recognition:

  • Acquisitions in technology-oriented sectors (software, engineering services)
  • Successful succession arrangements in traditional craft businesses and manufacturing companies
  • Growth-oriented acquisitions with subsequent expansion into international markets
  • Turnaround situations where search fund entrepreneurs took over companies in challenging phases

Performance Metrics of German Search Funds

The performance of German search funds shows positive trends:

  • Average search time of 18-24 months until acquisition
  • Typical company size: €2-15 million in revenue, €0.5-2 million EBITDA
  • Typical purchase price multiples between 4-6x EBITDA
  • Post-acquisition growth rates typically in the double-digit percentage range

Challenges for Search Funds in Germany

Despite the positive trend, search funds in Germany face specific challenges:

Awareness and Acceptance

The concept is not yet widely known:

  • Low awareness among potential sellers, especially in rural areas
  • Skepticism toward young successors without extensive industry experience
  • Reservations about the supposedly "American" model
  • Competition from established succession forms (management buy-in, strategics, private equity)

Accessibility of Attractive Acquisition Targets

The market for attractive acquisition candidates is competitive:

  • High purchase price expectations, especially in economically strong phases
  • Competition with strategic buyers and private equity firms
  • Limited transparency in the market for medium-sized companies
  • Many attractive acquisition targets are not publicly offered

To increase transparency and efficiency in company searches, the viaductus Meta-Search systematically scans the entire public market.

Skilled Labor Shortage and Demographic Change

Demographic change affects not only succession but also operational business models:

  • Increasing difficulty in finding and retaining qualified employees
  • Need to modernize and digitize traditional business models
  • Adaptation to changed customer expectations and market conditions
  • Rising costs for recruiting and retaining personnel

Regulatory Requirements

Increasing regulatory demands pose challenges, especially for small and medium-sized enterprises:

  • Growing effort for compliance and reporting
  • Specific industry regulations (e.g., healthcare sector)
  • Heightened requirements in ESG (Environment, Social, Governance)
  • Complex regulations in international business relations

Future Prospects for Search Funds in Germany

The outlook for search funds in Germany is promising:

Growth Potential

Several factors indicate further growth:

  • Increasing interest from business school graduates in Entrepreneurship Through Acquisition (ETA)
  • Growing attention from investors to alternative investment forms
  • Rising acceptance of the model through successful reference cases
  • Demographically driven increase in succession volume in the coming years

Institutionalization and Professionalization

The industry is becoming more structured and professional:

  • Establishment of specialized funds and accelerator programs
  • Development of standardized processes and best practices
  • Increasing academic research and teaching on the topic
  • Closer exchange with established search fund markets, especially the USA

Digitalization and New Technologies

Technological developments offer new opportunities for search funds:

  • AI-supported tools for more efficient company search and due diligence
  • Digital platforms like viaductus to increase market transparency
  • New financing forms and platforms
  • Opportunities through the digital transformation of acquired companies

Internationalization

The search fund landscape is becoming increasingly international:

  • Growing interest of international investors in the German Mittelstand
  • Cross-border activities of German search funds
  • Knowledge and experience exchange with established search fund markets
  • Increasing standardization of processes and methods in the international context

Further information can be found in our article on Entrepreneurship through Acquisition in Germany.

Recommendations for Aspiring Search Fund Entrepreneurs

For those interested in founding a search fund in Germany, the following recommendations can be derived:

Preparation and Qualification

Thorough preparation increases the chances of success:

  • Building relevant management skills and industry knowledge
  • Intensive engagement with the search fund model and its variants
  • Networking with active searchers and investors
  • Analyzing successful and failed search fund cases

Developing a Search Strategy

A well-thought-out search strategy is crucial:

  • Clear definition of search criteria and target market
  • Building a network of multipliers and information sources
  • Using digital platforms such as the viaductus Meta-Search
  • Developing a personal value proposition for potential sellers

Cultural Adaptation

Adapting to German business culture is important:

  • Emphasizing industry expertise and professional know-how
  • Communicating long-term perspectives and value preservation strategies
  • Sensitivity to entrepreneurs’ emotional attachment to their company
  • Considering corporate culture and employee interests

Financing Structure

Financing should be tailored to the German market:

  • Combining various financing sources (equity, debt, subsidies)
  • Considering seller loans and earn-out components
  • Realistic assessment of purchase prices and transaction costs
  • Building a reliable network of co-investors

Conclusion

Search funds have significant potential in Germany to help solve the succession problem in the Mittelstand. Despite some challenges and the need for cultural adaptation, an increasingly professional ecosystem is developing that supports the founding and success of search funds in Germany.

The combination of demographic change, a strong Mittelstand, and growing interest from qualified entrepreneurs and investors creates favorable conditions for further growth. At the same time, the specific German context requires a thoughtful adaptation of the originally American model.

For aspiring search fund entrepreneurs, it is crucial to engage intensively with the peculiarities of the German market and develop an individually suitable strategy. With proper preparation, a strategic network, and the use of modern tools such as the viaductus platform, the chances of establishing a successful search fund in Germany are good.

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