This landmark publication by Tembo Search Partners addresses one of the most critical and under-discussed economic issues in Germany, Austria, and Switzerland: the demographic-driven succession crisis in SMEs. It presents ETA as a powerful, values-aligned, and scalable model to preserve, modernize, and transition the Mittelstand sustainably.
PART I: The Challenge
1/ A silent crisis in SME succession
Between 2023 and 2027, over 625,000 SMEs in Germany alone will seek successors. The situation is similar in Austria and Switzerland. Many of these firms are family-owned, regionally rooted, and economically vital, yet increasingly vulnerable due to aging founders, lack of familial successors, and mistrust in conventional buyers like private equity firms or large corporates.
- Family succession is failing due to disinterest or unpreparedness in the next generation.
- Financial buyers are often rejected for their short-term focus and detachment from the company’s identity.
- Strategic buyers can lead to loss of regional identity or even site closures.
A structural solution is urgently needed—one that ensures continuity, respects legacy, and enables future growth.
2/ The Mittelstand under pressure
The Mittelstand is defined less by size and more by ownership structure, long-term mindset, and personal accountability. In Germany, over 99% of companies are SMEs, contributing 52% of GDP and employing 60% of the workforce. Similar proportions exist in Austria and Switzerland.
Yet, the demographic pressure is intense:
- Most SME owners are 55–70 years old.
- Many have no clear succession plans.
- These are not failing companies—but ones at risk purely due to succession gaps.
This is more than an economic issue—it is cultural and societal. These entrepreneurs often view their businesses as life’s work, deeply personal and emotionally significant.
PART II: Introducing ETA
3. What is ETA?
ETA is a model originating from Harvard and Stanford in the 1980s. It provides entrepreneurial individuals (typically aged 30–40, with consulting, investment, or corporate experience) a structured path to buy and operate an SME, with financial backing from aligned investors.
Key elements:
- The “Searcher” raises a small fund to search for 1–2 years for a suitable company.
- Upon acquisition, the Searcher becomes CEO and leads the company for the long term.
- Investors include family offices, business angels, and entrepreneurial capital providers.
ETA is not about flipping businesses. It is about building trust, safeguarding legacy, and enabling renewal.
4/ Why ETA is right for the Mittelstand
ETA aligns deeply with Mittelstand values:
- Continuity: The Searcher takes over leadership, not just ownership.
- Long-term orientation: No pressure for quick exits; average hold periods are 5–10 years.
- Trust-based handover: Built on personal relationships, cultural respect, and shared responsibility.
The model avoids the weaknesses of:
- VC: too speculative and scale-focused.
- PE: too transactional, often using heavy leverage.
- MBO/MBI: requires insider access or significant wealth, which many Searchers lack.
ETA provides a path for capable but under-capitalized leaders to assume meaningful responsibility.
PART III: The ETA ecosystem and Tembo Search Partners
5/ The role of the entrepreneur
ETA is a life decision, not a job promotion. The Searcher embodies:
- Resilience during rejection-heavy search phases.
- Empathy in transitioning with founders and teams.
- Strategic vision to modernize and grow the firm.
- Skin in the game, through equity ownership and operational risk.
ETA entrepreneurs typically bring:
- Business degrees (often MBAs).
- Strategic, M&A, or operational experience.
- A strong ethical compass and entrepreneurial ambition.
6/ The role of the investor
ETA investors differ from typical financiers. They are:
- Engaged partners, not just capital providers.
- Mentors and sparring partners, especially in the early CEO months.
- Often family offices or former entrepreneurs, aligned with the Searcher’s long-term view.
Investors in ETA benefit from:
- 30%+ average IRR (per Stanford data).
- Lower downside risk due to mature, cash-flow-positive target firms.
- Deal-by-deal flexibility, rather than committing to blind-pool funds.
7/ Target company profile
Suitable ETA targets are:
- SMEs with €5–30M revenue and €1M+ EBITDA.
- Positive cash flow, low leverage, and limited capex needs.
- Niche market leaders with stable, recurring revenue and strong customer relationships.
- Ready for ownership change but in need of modernization.
ETA avoids overly founder-dependent firms, high capital-intensity industries, or heavily regulated sectors.
8/ Tembo Search Partners: structured, impact-driven ETA in action
Tembo is a German-based ETA platform founded by Christian Gieger and Benedikt von Hatzfeldt. It aims to professionalize and expand ETA in the DACH region with:
- Full upfront financing of Searchers’ salaries for up to 18 months.
- A rigorous selection process for entrepreneurs, emphasizing values, maturity, and leadership potential.
- Operational support throughout the search, acquisition, integration, and scaling phases.
- A strategic partnership with MPC, a century-old German family office.
Tembo’s target: support up to five ETA entrepreneurs per year, ensuring high-impact transitions, job preservation, and continued regional economic strength.
PART IV: Execution and post-acquisition impact
9/ The first 100 Days: from deal to CEO
After the acquisition, the new CEO enters a delicate transition:
- Gaining team trust, preserving culture while assessing needed changes.
- Implementing financial controls, strategic clarity, and HR structures.
- Working closely with Tembo and investors through structured onboarding modules covering strategy, liquidity, leadership, and stakeholder engagement.
This period defines the tone and success of the long-term leadership journey.
10/ Long-term outlook: exit, continuation, or ETA 2.0
After years of stewardship, ETA entrepreneurs typically face three options:
- Sale to strategic/long-term buyer, often with legacy in mind.
- Management buy-in or continuation with new investor base.
- Succession to another ETA leader, continuing the entrepreneurial relay.
In each case, the goal is to preserve culture, sustain performance, and enable generational renewal.
PART V: Broader impact
11/ Economic, social, and cultural effects of ETA
ETA is not just an investment strategy, it’s a vehicle for economic resilience, generational renewal, and leadership development.
- Economically, it keeps healthy SMEs alive.
- Socially, it empowers new entrepreneurial talent.
- Culturally, it preserves the identity and values of Mittelstand firms, often passed down over decades.
ETA fills a crucial void between legacy and modernity, offering a human-centric, capital-efficient, and scalable answer to one of Europe’s most pressing economic transitions.
Conclusion
ETA is emerging as a vital tool for preserving the Mittelstand, not by transforming it into something new, but by passing the baton to a new generation of responsible leaders. Backed by the right investors and platforms like Tembo, ETA holds the promise of renewing Europe’s entrepreneurial core, one company at a time.
