In the upper mid-market segment, financial investors are currently looking for suitable companies more urgently than owners are looking for buyers. What this means for the sales process.
In 2004, Franz Müntefering coined a term that the industry still can’t seem to shake. More than twenty years later, the term “locust” still comes up whenever small and medium-sized businesses discuss financial investors. The WELT AM SONNTAG In its special issue “SME Special” dated October 18, 2026, the publication describes an SME sector that has largely moved beyond this narrative. The former reluctance toward equity capital is increasingly giving way to the realization that new partners offer real opportunities, says Benjamin Schöfer of the German SME Federation is quoted there as saying. For owners of profitable companies, however, another finding is of greater interest. Capital is not in short supply at the moment. What is in short supply are the companies into which it can flow. This becomes clear from the size thresholds that investors openly specify. Stefan Eishold, CEO of Munich-based Arcus Capital AG, cites ten—or rather, twenty—million euros in revenue and thirty employees as the minimum size in the newspaper and draws a sober conclusion from this. The vast majority of companies seeking a successor by 2030 are, in and of themselves, not suitable for private equity. This statement divides the market into two very different halves. Above the threshold, the usual logic is reversed, because there, a limited supply of well-managed companies meets capital that must be invested within a fund’s term. This can be substantiated from two perspectives. The Succession Barometer by New Mittelstand surveyed prospective buyers and investors simultaneously in early summer 2026. For 93 percent of investors, the preferred size range is one million euros in EBITDA or more; for 60 percent, it is between 2.5 and five million. Fourteen out of fifteen wanted to expand their involvement in 2026, and 51 percent of those seeking opportunities cited finding suitable companies—not price—as the biggest hurdle. Since this was a self-selected survey with 119 responses, these figures should be interpreted as indicative of a general trend. The M&A Market Report from Oaklins Germany points in the same direction. Financial investors accounted for 35 percent of transaction activity in the first half of 2026 and 47 percent in the machinery and components sector, up from 37 percent in the previous year. This indicates that competition for target companies with compelling profiles remains intense, resulting in correspondingly high valuation levels. However, this does not mean that a good result will come about on its own. Belonging to this attractive segment is a ticket to entry, not an end result. Birgit Felden, a professor at the Berlin School of Economics and Law, sums up the prerequisite succinctly: The company must be transferable. What this means is that the financials must be sound and meaningful, that the business does not depend entirely on the owner, that there is a capable second tier of management, and that a viable plan for the future is in place. In this segment, these factors carry particular weight, because here the seller is dealing with a professional buyer who will reliably turn any gap in preparation into a bargaining chip. When there are several financially strong prospective buyers, price alone is rarely the deciding factor. Financial investors differ significantly in their time horizons, financing structures, and strategic approaches. It is precisely these differences that determine which partner is a good fit for which owner and which company, and they often tip the scales in the end. A case from Birgit Felden’s consulting practice, described in the newspaper, illustrates this point clearly. The list of buyers included both private individuals and financial investors. In the end, a financial investor won the bid, and the deciding factor was not his financial strength but his plan. He wanted to merge the company with another one so that together they could hold their own against the competition from China. It is precisely this selection process that lies at the heart of our work. We systematically build a pool of serious buyers and evaluate them not only based on their bid, but also on their time horizon, financing structure, and their stated intentions regarding the location, workforce, and management. Which Preparation what is needed for this and why A single prospective buyer does not yet constitute a market We have described this in other sections. Feel free to contact us at any time—with no obligation and, of course, in complete confidence— Connect with us on, if you'd like to discuss this in more detail.
