Financable deals, tangible digitalization levers, and a special succession situation make microcap companies an ideal entry point into entrepreneurship for those looking to get started—while also offering sellers a realistic, stable succession solution.
The succession market is undergoing visible change: while start-ups and large transactions attract a lot of attention, a segment that is particularly interesting for many first-time buyers is growing in the background. This refers to microcap companies with an EBITDA of around €0.3 to €0.7 million. For those looking to acquire a company for the first time, this size category is often the most pragmatic entry point into entrepreneurial responsibility. And this segment can also be attractive for sellers when it comes to a reliable and sustainable handover.
This article shows why microcaps are so exciting, what opportunities and risks are typical—and how both sides can manage the transition professionally.
The microcap sweet spot: What it means
In this context, we are referring to companies that typically:
- achieve EBITDA of roughly €0.3 to €0.7 million,
- are owner-managed,
- have well-coordinated teams and stable customer relationships,
- but rarely have been professionally digitized or scaled.
These are not "small start-ups," but established companies—often with many years of experience in the market. This is precisely what creates the sweet spot: large enough to be economically attractive, yet manageable enough to keep entry realistic and controllable.
Get started with predictable financing—without excessive capital pressure
A key advantage of the microcap segment is its comparatively good financing options. Deals of this size can often be financed through a balanced mix of
- traditional bank loans,
- public funding programs,
- and a moderate equity ratio
In many cases, valuations range from three to four times EBITDA, which often allows for purchase prices that are feasible for buyers without necessarily involving large investment companies or external investors.
This has several positive effects:
- Control and freedom of choice remain more firmly in the hands of the buyer.
- The debt ratio remains within a range that is sustainable even under conservative assumptions.
- There remains budget for investments after the acquisition – instead of tying everything up in the purchase price.
It is precisely this combination of realistic entry and calculable risk that is the main reason why many investors focus on microcaps.
Value leverage through digitalization and professionalization
Many microcap companies are operationally sound: loyal customers, functioning processes, reliable employees. At the same time, the degree of digitalization is often low —and that is precisely what creates potential. The company is "running," but there are numerous adjustments that can be made relatively quickly to improve it.
Typical levers include, for example:
- Introduction or expansion of a CRM system for structured customer work
- Controlling professionalism with clear KPIs and regular evaluations
- Digitization of processes such as quotation preparation, scheduling, purchasing, or accounting
- Modernization of the online presence to attract new customers
- Automation of recurring administrative tasks
Even modest measures can have a noticeable impact. For investors, this means that microcaps not only provide ongoing returns, but often also offer concrete, realisable opportunities for value appreciation that can be realised within a few years.
Operational proximity: Learning within the company instead of just from reports
Another advantage is the proximity to the operational business. Buyers not only take on a management role, but also gain direct insight into:
- Procedures and processes,
- Customer relationships,
- Team and role structures,
- the daily operational challenges.
This leads to a steep learning curve: the business model is understood not only through numbers, but also through genuine interaction—with employees, customers, and the market. Decisions have a faster and more immediate impact than in larger organizations.
What's more, contact with sellers is usually more direct in microcaps, as they are often founders or long-standing owners. This means that discussions are often less formal and more trust-based, focusing not only on price but also on how the company should be managed in the future.
Market environment: The wave of succession in small and medium-sized enterprises
Due to demographic factors, a large number of companies are facing succession issues—especially owner-managed small and medium-sized enterprises, which are precisely the size of many microcaps.
Typical starting point:
- Owners of advanced age
- no suitable successor within the family
- economically stable, but not large enough to attract the attention of many investors
For those looking to buy, this is a rare situation: many potential target companies, but comparatively few buyers who are searching for them in a structured and professional manner in this segment. This can increase the chances of finding a suitable company—provided that those looking to buy take a focused approach.
Typical risks in the microcap segment—and how to manage them effectively
Of course, every acquisition involves risks. In the microcap sector, certain issues arise particularly frequently—but many of them can be easily managed with thorough preparation and clear agreements.
1) Dependence on the owner
The founder is often the key contact person for customers or the expert on technical issues. Their abrupt departure can cause uncertainty.
A proven solution is a planned transition phase during which the seller provides structured training for their successor—e.g., through temporary employment, consulting, or earn-out arrangements. This ensures that knowledge and customer trust are transferred in a controlled manner.
2) Low management depth
A second management level is rarely well developed. Absences can therefore have a greater impact.
Approach: identify key roles before the deal; after the takeover, establish rules for representation, clear role profiles, and, if necessary, a small management circle.
3) Investment and digitization backlog
The low level of digitization is both an opportunity and a risk.
Important: a realistic investment plan for the first 12–24 months (systems, processes, priorities, budget) so that necessary measures are not underestimated or postponed.
4) Customer or supplier concentration
It is common to have a high proportion of sales coming from a small number of customers or to be heavily dependent on suppliers.
Approach: Check stability and contractual situation, assess substitutability, and then systematically build up diversification (additional customers, alternative suppliers).
Those who openly address these points and translate them into concrete measures lay the foundation for stable development after the takeover.
Why sellers benefit from external successors – and how transitions can be successful
For many entrepreneurs, their business is their life's work. An external handover is emotionally demanding—but often the most realistic option if there is no successor within the family.
An external successor often brings new ideas and additional skills (e.g., digitalization, human resources, marketing). And: The transition does not have to be abrupt. In practice, models in which
- Tasks are handed over step by step,
- Knowledge is transferred in a structured manner,
- the buyer grows into the role,
- and implicit know-how remains within the company.
This creates a transfer process that respects the seller's perspective and gives the buyer security.
Deal sourcing in practice: How searchers find suitable companies
The path to the microcap sweet spot does not start with financing, but with deal sourcing. Successful seekers usually combine several channels:
Direct approach
Personal contact (letter, phone call, on-site appointment) often has a stronger impact than generic mass communication—transparency is crucial: Who am I, what am I looking for, how do I envision the succession?
Networks & recommendations
Tax advisors, banks, lawyers, and regional associations are often familiar with succession issues. A clearly formulated search profile increases the chance of receiving suitable recommendations.
Digital channels (e.g., LinkedIn)
For digitally savvy entrepreneurs, a personal, individually worded message can be a good way to start.
Deal sourcing platforms
Platforms such as DUB, DEALCIRCLE, and AMBER help identify target companies, structure market segments, and find contacts. They do not replace conversation, but they do increase reach, transparency, and efficiency.
As a rule, the combination of data-based tools (breadth) and personal contacts (depth) delivers the best results.
Conclusion
Microcap companies offer a particularly attractive entry point for buyers: they are affordable, operationally accessible, and offer clear value levers through digitalization and professionalization. At the same time, they give sellers the opportunity to hand over their companies responsibly and actively support the transition.
At a time when the wave of succession is having a major impact on small and medium-sized businesses, this sweet spot is more than just a niche: it is a segment in which buyers and sellers can create sustainable solutions—provided the process is structured, based on partnership, and designed with a clear view of opportunities and risks.
This is a specialist article by Kai Hesselmann, co-founder and managing partner of DEALCIRCLE.
