When the Entrepreneur and Private Equity Want the Same Company
The relationship between entrepreneurship through acquisition (ETA) and small- or micro-cap private equity (PE) is the clearest test of whether ETA is its own mode of entry. The same small company can be an owner-operator’s chance to build a career, a PE firm’s add-on acquisition, or a potential co-investment. To understand which relationship is present, we need to separate the evidence of target overlap from the conditions that make competition or cooperation possible.
This distinction matters because “PE” is too broad a label for the question. Large funds, small-cap investors, and micro-cap investors do not necessarily pursue the same companies or use the same ownership logic. The focused evidence here concerns small- and micro-cap investors in Germany, Austria, and Switzerland. It adds detail to a wider literature that says PE has moved down-market and may compete with ETA, but it should not be read as a market-wide survey of every fund or acquisition entrepreneur.
The overlap is real, but it has a boundary
ETA entrepreneurs and smaller PE investors can meet in the same target zone because both may be interested in privately held SMEs with established operations and room for improvement. For an entrepreneur, a small company can be large enough to support an owner-operator role while still being understandable and accessible with personal or assembled capital. For a PE firm, the same company may be attractive as a platform or as an add-on to a buy-and-build strategy.
A buy-and-build strategy uses a platform company and adds smaller businesses to expand its scale, geography, capabilities, or market reach. That makes a target attractive for a reason that differs from the entrepreneur’s reason. The ETA buyer may want to take control of one company and grow it through direct operating decisions. The PE investor may want the company because it fits an existing portfolio and can contribute to a larger combination. Both are evaluating resources, but they are assembling those resources into different ownership plans.
The DACH study reports this overlap most clearly in smaller transactions, especially add-on deals. Some PE managers described direct encounters with ETA entrepreneurs; others said that competition depended on the entrepreneur’s ability to finance the purchase. A well-funded individual may acquire the entire company and leave no need for PE. An entrepreneur without sufficient capital may be unable to compete for a larger target but could still be valuable as the person who operates it. Target size therefore affects both the intensity of competition and the possibility of partnership.
The wider scoping review reaches a compatible but broader conclusion: the most intense competition for ETA can come from lower-middle-market PE investors moving down-market, while PE participation tends to decrease as targets become very small because sourcing and deployment may be less efficient. The two observations should not be turned into one universal threshold. They describe a moving boundary shaped by fund size, target economics, financing capacity, industry, and the cost of finding and completing a deal.
The evidence also has different denominators. The scoping review maps a broad and heterogeneous research base. The DACH article reports interviews with 12 PE professionals and eight succession experts, using a purposive exploratory design. Its ratings treated target overlap as conditional or close to neutral, while 11 of the 12 PE informants expressed a preference for investing alongside ETA entrepreneurs in SME transactions. The difference is not a contradiction: broad market literature and a focused investor sample are answering different questions. The 11-of-12 result is strong evidence of openness among the people interviewed; it is not an 11-out-of-12 probability for the PE market.