Everyone wants to buy a company. They’ve smelled blood

The explosion of SME buyers in Spain—and what it means for business owners looking to sell

This is just a small sample of the emails my partners and I at Bondo Advisors receive every week. On top of these, there are LinkedIn messages, web form submissions, and unsolicited phone calls. I stopped trying to count them a long time ago.

“At [Industrial Group], we are looking to acquire and personally operate industrial SMEs in Spain. We currently have one company in due diligence and are negotiating a second LOI, but we want to identify a third opportunity. EBITDA between €0.5M and €2M, margins >15%, B2B, no customer concentration above 5%.”

“I am currently analyzing SME acquisition opportunities in Spain, mainly in services/B2B, with positive EBITDA. I am interested in transactions with a purchase price in the region of €1M, understood as an order of magnitude.” (Sent from a Hotmail account.)

“I am currently interested in acquiring a company that meets certain specific criteria. Industry/sector: B2B. Company size: revenue between €1M and €5M, EBITDA above 10–15%. Location: Madrid, Catalonia, and the Basque Country.” (Sent from Gmail.)

“I am reaching out because I am leading a project to acquire service companies with recurring revenue. I currently have a transaction in an advanced analysis phase in a B2B services sector. Figures: revenue ~€500k / EBITDA ~€60k. My intention is for this to be the first of several acquisitions over the next 24 months.” (Sent from Gmail to ‘undisclosed recipients’.)

“I am exploring acquisition opportunities in Spain. We are interested in companies with revenue of €2.5 million and EBITDA of approximately €400,000.” (Sent from Gmail.)

For a while, I tried to archive all these contacts in a “potential buyers” folder. The folder kept growing. And growing. At some point, after several video calls I’d rather forget, I stopped archiving them.

Why are there so many?

It’s no mystery—there’s a huge demographic issue behind all this. According to the IESE International Search Funds Study 2024, Spain is the second-largest market in the world for this type of investment precisely because the conditions are ideal: more than 85% of Spanish companies are family-owned and fewer than 30% have a succession plan.

According to Emprendedores magazine, more than 60% of SME owners are now over 55, and in 2024 SME M&A transactions in Spain grew at double-digit rates, driven precisely by retirements and lack of succession.

Soly Sakal, CEO of Rhombus (someone whose opinion on this market I respect), adds in a recent report that one-third of European SME owners will retire over the next ten years, and that between 70% and 90% of Spanish family businesses have no succession plan.

All these new buyers have smelled blood. Older entrepreneurs (and, with a bit of luck, perhaps slightly senile), in sectors with no natural buyers, with no M&A experience and no advisors, who have no real alternatives and will end up accepting very, very favorable terms for the buyer.

The model everyone is trying to replicate

The model everyone is trying to replicate is the search fund—a vehicle that has been working in the United States for decades and has become very fashionable in Spain in recent years. So much so that, according to the IESE International Search Funds Study 2024, Spain is the second-largest market in the world, behind only the U.S. According to Cuatrecasas, 67 search funds have been created in Spain over the last decade, most of them between 2021 and 2023. Based on what I see day to day, I’d estimate that 20–25 new ones are appearing every year.

The idea behind a search fund is quite simple. I explained it with numbers in this article: you buy a stable, cash-generating business, finance part of the acquisition with bank debt and deferred payments, and the business itself repays that debt over time through its cash flow. Even without improving the business, leverage alone can almost double your investment in five years. If you manage to make operational improvements, returns can be very attractive.

When executed well, this model works very well for the buyer and provides an exit route for small business owners who don’t have many potential buyers. The problem is that around the original model, a much broader and more uneven ecosystem has emerged, with very different profiles in terms of experience, available capital, and—let’s be honest—seriousness.

What are they actually looking for?

All these buyers—serious and less serious (those with a website and those with just a @gmail, or even more vintage, a @hotmail)—are essentially looking for the same thing:

A business where EBITDA truly converts into cash, without being trapped in working capital or constant reinvestment. Recurring, predictable revenue. Customers who don’t churn. Sectors that don’t depend on economic cycles. Low CAPEX, because no one wants to buy a business that requires constant reinvestment just to keep running. And ideally, a team that operates without the historical owner—or can learn to do so within a reasonable time.

At the core, they’re looking for something they can buy that more or less runs itself, and where it would take something truly stupid to destroy it.

The real prize is finding a company with a “flaw” that is actually an obvious opportunity: one that has never tried to sell internationally because the founder doesn’t speak English, one that hasn’t raised prices in years out of inertia, one without an ERP system and poor margin visibility, or one where all commercial relationships are concentrated in the founder.

The financial reality of these deals

Unfortunately for the “poor owner without succession,” most of these buyers come with little (or no) capital of their own. The typical structure combines equity from investors, bank financing, and often seller financing (the infamous vendor loan and deferred payments). Multiples are low—generally between 3x and 5x EBITDA, sometimes less—and a significant portion of the price is often deferred via earn-outs tied to future performance.

In other words, the seller not only receives less than they would from a strategic buyer but also assumes additional risks: deferred payments that depend on the buyer successfully managing the business, and earn-outs that may never materialize if performance deteriorates.

These deals typically occur in sectors without natural consolidators and at sizes that don’t attract private equity funds, which generally don’t look below €4–5M EBITDA. For small companies, the pool of buyers capable of paying a fair price and closing with certainty is limited—and that’s where buyers gain negotiating power.

What can an owner do if no top-tier buyer appears?

If you own a small company in a fragmented sector with no strategic buyers or private equity interest, there are a couple of alternatives worth exploring before accepting a tough deal.

The first is merging with another company in the same sector with younger or more professional management. Instead of selling 100% under poor terms, you trade ownership percentage for a stake in a larger, more valuable company. Scale increases your chances of attracting better buyers in the future. That said, the shareholders’ agreement must be carefully structured: agreed dividends, tag-along rights, and protections against unwanted decisions.

The second is simply not selling—or at least not yet. If the price on the table doesn’t justify giving up something you’ve built over decades, another option is to hire a strong professional manager, give them equity with vesting, involve them in decision-making over a few years, and turn the company into a dividend-generating asset during your retirement.

It’s not an exit—but if the alternative is selling cheaply, collecting dividends for two decades might be a much better outcome.

Bonus: my theory on choosing which search fund to engage

For the companies we advise, search funds are usually the last option—not because they aren’t legitimate buyers, but because they tend to offer lower multiples and, in my experience, have a lower closing rate after signing an LOI compared to strategic buyers.

That said, sometimes they are the only real option—and in those cases, you need to know how to work with them.

Since there are dozens of search funds with almost identical investment criteria, the question becomes: which one do you approach?

A typical search fund has a two-year search period, sometimes extendable to three. Early on, they are in exploration mode: comparing, learning, rejecting opportunities—often for reasons that are just excuses to keep looking. That’s natural. Nobody buys the first house they visit.

So newly launched search funds? Discarded.

If, by month 18 or 20, a searcher still hasn’t closed a deal, my theory is that this is the moment to approach them. Their deadline is approaching, they’re no longer browsing—they’re ready to execute quickly if something fits.

But it’s just a theory. It could be completely wrong. Maybe those who haven’t closed anything are simply the weakest searchers—the ones who can’t find deals or always propose the lowest prices.

I haven’t closed a deal with a searcher yet, so I don’t have the data. When I do, I’ll let you know.

While finishing this article, I received yet another email. Someone looking for companies in Spain with succession issues, EBITDA between €2M and €3M, willing to pay 3x–4x.

What a relief not to have anything for them.

By Joshua Novick, partner at Bondo Advisors