Why saving small businesses matters: The community impact of SME acquisitions

Recent data from KfW Research shows the scale of this challenge in Germany alone. some 224,000 SME owners were planning to hand over their businesses by the end of 2024, with approximately 626,000 business transfers planned by 2027. Yet many owners struggle to find suitable successors, with 74% citing this as their primary challenge.

The situation in the United States mirrors this European trend. Family-owned businesses account for 64% of US GDP, 62% of employment, and 78% of new job creation, and face an expected retirement rate of 40% in the next five years.

The true value of SMEs

When an SME closes, the impact ripples through communities in ways statistics often fail to capture. As Dmitri Ivanov, who acquired Metro Vein Centers, explains: “When SMEs close due to a lack of succession planning, the consequences extend far beyond financial loss. Employees lose their jobs, customers lose services, and the broader community loses income and tax revenue.”

Javier Fernandez, who acquired Spanish company Rafe Group, has witnessed the positive impact of acquiring an SME firsthand. “We acquired the company with 80 employees. Now we are at 130,” Fernandez notes. The company's positive impact extends beyond direct employment, contributing to local economies and supporting NGOs by donating recovered furniture from large projects.

The ETA solution

Entrepreneurship through acquisition (ETA) and management buy-in (MBI) offer promising solutions to succession crises. Unlike traditional startups, MBI involves experienced entrepreneurs acquiring existing businesses, bringing fresh leadership while preserving community impact.

Academic research supports this approach. According to a 2023 scoping review by Hoffmann, Kanbach, and Stubner, ETA has emerged as a meaningful contributor to entrepreneurial capacity with the potential to substantially contribute to socio-economic rejuvenation.

“SMEs are integral to preserving the unique identity and culture of local communities,” Ivanov observes. “They often embody the history, values, and character of a place, offering personalised services that larger corporations cannot replicate.”

A win-win-win solution

For communities facing the potential loss of vital SMEs, ETA represents a win-win-win solution. Business owners secure their legacy and financial future, entrepreneurs gain a platform for growth, and communities retain essential services and employment.

For policymakers, the challenge lies in creating environments where business transitions can thrive – addressing regulatory complexity, improving access to financing, and developing networks to connect retiring owners with potential acquirers.

For entrepreneurs considering this path, Ivanov offers advice: “Look beyond the balance sheet and consider the company's role in the community. Engage with employees, customers, and local leaders to understand the company's impact.”

The lesson is clear: when we save SMEs through thoughtful acquisition and succession planning, we sustain the vital connections that make communities thrive.

The All Interests Aligned perspective

All Interests Aligned (AIA) was founded to address the succession crisis at scale. While individual transactions can save businesses one at a time, AIA's platform approach is designed to multiply this impact across Europe.

The platform brings together capital from experienced entrepreneur-investors who provide not just funding but also networks and expertise. AIA focuses on recruiting seasoned operating partners – professionals with substantial management experience who can drive transformation from day one. The interests of investors, AIA management, and operating partners are aligned to move in the same direction, creating a structure where all stakeholders benefit from successful outcomes.

AIA's collaborative model means operating partners share knowledge across the network, accelerating best practices and helping each acquired business reach its potential faster. As the platform's reputation and track record grow, deal flow increases – creating a virtuous cycle that addresses more succession challenges each year.

AIA's ambition is to become the premier management buy-in platform in Europe. But success is not measured in financial returns alone. True success means becoming the vehicle of choice for talented entrepreneurs who want to preserve jobs, maintain community ties, and ensure that a lifetime of entrepreneurial work continues to create value for generations to come.

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Charles Williams is a commercial operator with over a decade experience of investing and operating SME businesses. As Head of Value Creation & Investor Relations at AIA, his focus is to support CEOs with overall company management, EBITDA growth and transparency to shareholders.