Germany's SME Succession Crisis Intensifies as 231,000 Companies Plan to Close by 2025

Germany's SME succession crisis is about to get worse. Search funds could be the answer, but more successful deals and investors are needed.

, and Administrator

2025 October 8 . 12:00 PM

1 min read

There are few cars,buildings in the right corner and there are few other buildings in the left... — There are few cars,buildings in the right corner and there are few other buildings in the left corner.

Germany's SME Succession Crisis Intensifies as 231,000 Companies Plan to Close by 2025

Germany's succession crisis among SMEs is set to intensify as the baby boomer generation retires, with 231,000 companies planning to shut down by 2025. Florian Adomeit from Amber online M&A marketplace suggests 'search funds' as a solution to this looming issue. However, the lack of successful deals and investors is currently hindering their establishment in Germany. 'Search funds' involve 'searchers' who raise capital to acquire and run medium-sized companies. While 681 have launched in North America since 1984, only 20 have been established in Germany. These funds differ from classic private equity, with 'searchers' typically having operational backgrounds rather than financial ones. In the rest of the world, including Germany, the average internal rate of return (IRR) stands at 18.1%, though many recent deals are yet to double investors' capital. The succession issue is exacerbated by a shortage of buyers for small businesses. To attract more investors and buyers, successful deals by the few active 'search funds' in Germany are needed. Several institutions, such as the Deutsche Börse and the Bundesverband Investment und Asset Management (BVI), are promoting and supporting the 'search fund' market in Germany. As the baby boomer generation retires, Germany's succession crisis among SMEs is set to worsen. 'Search funds', with their unique structure and 'searchers', offer a potential solution. However, more successful deals and investor attraction are needed to boost their establishment in Germany. Various institutions are actively promoting and supporting the 'search fund' market to address this critical issue.