Why Europe Matters for Search Funds
The 2024 IESE International Search Fund Study tracks 320 funds across 40 countries — and Europe represents the second most developed international ETA market after Latin America. The United Kingdom, Spain, and Germany collectively account for most of the region's activity, but they are not interchangeable markets. Each presents distinct opportunities, structural challenges, and investor ecosystems.
For searchers based in Europe or targeting European acquisitions, understanding the country-specific landscape is more important than understanding "European ETA" as a monolithic concept.
United Kingdom: The Most Mature European Market
The UK has the deepest ETA infrastructure in Europe. Three known positive exits in the IESE dataset — the second highest internationally after Mexico — reflects a market with established deal flow, more experienced legal and advisor infrastructure, and a seller community with growing familiarity with the acquisition model.
The UK advantage: English-language deal flow, common law legal system, and proximity to a US-trained ecosystem of advisors and investors. Many US-based search fund investors are willing to back UK searchers specifically because the language, legal, and financial systems closely mirror the US model. The UK also has a stronger mid-market M&A advisory ecosystem than most European countries, which means quality of earnings, legal diligence, and deal execution processes are better understood by all parties.
The UK challenge: acquisition multiples have risen meaningfully in the past three years. UK small business sellers are increasingly sophisticated about valuations, often instructed by accountants who follow US multiple benchmarks. Deals that would trade at 3.5–4x EBITDA in secondary US markets may trade at 5–6x in the UK, compressing returns relative to entry.
Financing is also more complex. The UK equivalent of SBA lending — the British Business Bank's Growth Guarantee Scheme — provides partial guarantees but at smaller scale and with more restrictive terms than US SBA 7(a). Most UK acquisitions require a larger equity contribution than equivalent US deals, which increases the equity raise requirement and dilutes founder returns.
Spain: The IESE Ecosystem and Its Advantages
Spain is the home of the IESE International Search Fund Center — the primary academic institution tracking global ETA activity — and this geographic proximity has created a self-reinforcing ecosystem. Spanish searchers have direct access to IESE's network, alumni connections, and the largest concentration of internationally experienced ETA investors in continental Europe.
Two positive exits in the IESE dataset underscore that Spain is a functioning, if early-stage, market. Spanish businesses in sectors like industrial services, B2B distribution, and professional services have valuations that remain favorable compared to the UK and US, reflecting lower market awareness of ETA as an exit path.
The challenge in Spain is seller education. Spanish business owners, particularly in family-owned companies outside major cities, are often unfamiliar with the acquisition entrepreneur model. Relationship-building timelines are longer. Seller notes and earnouts — common in US deals — are less standard in Spanish M&A culture, which can complicate deal structuring.
Germany: Large Market, Low ETA Penetration
Germany has the largest small business economy in Europe — the Mittelstand (German for "middle class of businesses") comprises approximately 3.5 million companies, many of them highly profitable, export-oriented, and owner-operated. The succession dynamic is acute: German Mittelstand owners are aging, and many have no succession plan. This creates a structural opportunity that closely mirrors the US Boomer succession story.
Yet ETA activity in Germany remains limited. The reasons are primarily structural: language barriers (most deals require German fluency), cultural resistance among Mittelstand owners to outside ownership, and limited local ETA investor infrastructure. German business sellers are often highly protective of their employees and company culture, making the relationship-building and deal process longer and more trust-dependent than in US or UK markets.
Searchers who are German-speaking, culturally fluent, and willing to run a longer search process can access targets at multiples that are genuinely favorable — often 3–4.5x EBITDA — in an underpenetrated market. The upside is real; the time investment and barrier to entry are also real.
The Pan-European Investor Landscape
Most US-based search fund investors apply geographic restrictions. European searchers need to identify investors who explicitly back international deals — a smaller but growing universe that includes IESE alumni networks, European family offices with alternative investment mandates, and a handful of dedicated international ETA funds.
The financing gap remains the defining structural constraint across all European markets. Without SBA-equivalent debt guarantees, European acquisitions typically require 25–40% equity contributions, which increases raise size, limits founder ownership, and compresses IRR. Searchers who can identify European banks with appetite for acquisition financing — or sellers willing to carry substantial seller notes — gain a material structural advantage.
What Mayfaire Row Looks for in European Deals
We evaluate European deals on operator quality and business fundamentals first, geography second. Our preference is for UK or Spanish deals where legal infrastructure is mature enough to execute efficiently. For European searchers, we look for genuine market knowledge, language fluency, and pre-existing relationships in the target market — not just proximity to an attractive market.
*Sources: IESE Business School International Search Fund Center, "2024 International Search Fund Study" (data through December 31, 2023), 320 funds across 40 countries. Mittelstand statistics: Institut für Mittelstandsforschung Bonn, 2023.*