A groundbreaking new study from researchers at HHL Leipzig Graduate School of Management is shedding light on how entrepreneurship through acquisition (ETA) is evolving in the digital age. The comprehensive research, led by a team that has been at the forefront of ETA scholarship, reveals a complex landscape where traditional business wisdom meets digital transformation—with surprising implications for the future of small business acquisitions.
The study, “Entrepreneurship Through Acquisition in the Digital Age: Exploring Acquirer Identities, Motivations, and Strategies,” represents one of the most comprehensive qualitative examinations of modern ETA practitioners to date. Through in-depth interviews with 18 business buyers across North America, the research uncovers critical insights into how acquisition entrepreneurs are adapting their strategies for an increasingly digital economy.
The HHL Leipzig Graduate School of Management research team employed a rigorous qualitative methodology, conducting semi-structured interviews with acquisition entrepreneurs at various stages of their journeys. The participants represented a diverse group including self-funded searchers, solo entrepreneurs, and experienced business professionals, primarily based in the United States and Canada, with some international perspectives from practitioners of other nationalities including Spanish entrepreneurs.
“Given the early state of ETA and, in particular, the limited research on the perspectives of business buyers in this context, this study employs a qualitative approach to uncover informants' views on the ETA process,” the researchers note. This methodological choice proved crucial in revealing nuanced insights that might have been missed in purely quantitative studies.
Dr. Alexander Hoffmann, lead researcher of the study when he was a Ph.D. candidate at the business school and founder of Searchers.com, a podcast about entrepreneurship through acquisition, explains the significance of this research approach: “Just as entrepreneurship research has shown the critical importance of distinguishing between different types of entrepreneurs to understand their distinct traits and approaches, our study addresses the notable absence of research on the diverse personas engaged in ETA. Through in-depth interviews with 18 business buyers—from self-funded searchers to serial entrepreneurs—we reveal the complexity of modern ETA practice, particularly in the context of digital business acquisitions where existing knowledge has not kept pace with rapidly evolving market realities.”
Perhaps the most striking finding from the HHL research is what the authors term the “digital dilemma” facing modern ETA practitioners. The study reveals a pronounced divergence in attitudes toward digital businesses among acquisition entrepreneurs, with practitioners falling into distinct camps based on their technological comfort levels.
“While some interviewees, particularly those with backgrounds in technology or IT services, actively pursued SaaS companies or other digital companies, many expressed caution or outright avoidance of purely digital businesses,” the researchers found. This hesitancy stemmed from legitimate concerns about high valuation multiples, perceived volatility, and lack of personal expertise in managing such enterprises.
The concerns identified by practitioners are well-founded. The research highlights perceived risks including the rapid pace of technological change, the potential for disruptive innovations such as artificial intelligence, and the challenge of sustaining recurring revenue models. As the study notes, “Recent research suggests these concerns about technological disruption are well-founded, as generative AI shows significant potential to democratize expertise, reshape white-collar work, and enable new value creation.”
However, the research reveals a more nuanced and potentially game-changing perspective. While purely digital businesses were viewed with caution, practitioners showed strong interest in “traditional companies with significant digital improvement potential.” The researchers identify this as a potential “sweet spot” in ETA strategy—combining the stability of established operations with the growth potential of digital transformation.
This finding suggests that the future of ETA may not be about choosing between traditional and digital businesses, but rather about identifying established companies that can be transformed through thoughtful application of technology. According to the research, this approach represents an optimal positioning within ETA strategy—leveraging the reliability of proven business models while unlocking opportunities for technological advancement and growth.
Dr. Hoffmann elaborates on the significance of these findings: “ETA offers a compelling path to preserve business legacies while generating attractive risk-adjusted returns, particularly as ageing owners seek succession solutions. While purely digital acquisitions face financing hurdles and valuation concerns, our findings suggest that traditional businesses with significant digital improvement potential represent a particularly promising yet underexplored opportunity—combining the stability and fundability of established operations with untapped growth through technological transformation.”
All Interests Aligned (AIA), the European management buy-in platform, sees this research as validation of their strategic approach to SME transformation. “Successful ETA in the digital age hinges on acquiring traditional SMEs with untapped potential for digitalization—mitigating risk while unlocking growth potential,” notes AIA CEO Peter Hajdu, drawing from his extensive technology background at companies like Cisco and Dura-Line.
AIA advocates for a systematic approach to evaluating digital potential in traditional businesses. When operating partners are originating deals, Hajdu suggests they should be looking for solid operations with outdated digital infrastructure, or infrastructure which is ripe for digitalization. “We believe that the lower tech the industry that you invest in, when you start leveraging some technology, the marginal benefit becomes very big,” Hajdu explains.
This philosophy was demonstrated during Hajdu's tenure at Dura-Line, where he transformed a plastic pipe manufacturing business into a comprehensive infrastructure solutions provider. “We deployed software to provide more services,” he recalls. “One was around digital education, how the pipe should be installed, and it was a very popular model used by some of the largest hyperscalers in the world. And the other one was around underground network design, how to leverage it, how to utilize and optimize the physical product that you would buy.”
AIA emphasizes that collaboration between searchers—a key differentiator of their platform — becomes even more valuable when navigating digital transformation opportunities. The shared knowledge and experience across their network helps identify and execute on digitalization strategies more effectively.
One of the most significant theoretical contributions of the HHL research is the introduction of the concept of “deal clarity”—how well-defined a searcher's acquisition criteria are. This framework encompasses factors such as target industry, location, company size, and specific financial metrics.
“The level of deal clarity varied among interviewees, with some having a clear focus on specific industries, locations, and sizes, while others maintained a more open and flexible approach,” the researchers found. “These preferences were often influenced by factors such as personal background, expertise, and interests.”
The research reveals that deal clarity is not static but evolves iteratively. “Several interviewees mentioned that their search criteria evolved based on their exposure to different industries and their understanding of the acquisition process.”
This finding has significant implications for how acquisition entrepreneurs approach their searches. Those with high deal clarity, particularly in specific sectors, demonstrated more targeted approaches and could better articulate value propositions to sellers. However, the study also emphasizes the importance of maintaining flexibility to capitalize on unexpected opportunities.
The HHL research uncovers significant innovations in how ETA deals are financed, particularly as they relate to digital transformation strategies. The study reveals a prevalence of self-funded searches among practitioners, with many planning to utilize various financing options including SBA loans, investor partnerships, and seller financing for actual acquisitions.
Particularly noteworthy is the finding that “financing digital acquisitions emerged as another challenge, with traditional lenders often reluctant to fund asset-light businesses.” This reluctance creates both challenges and opportunities. While purely digital businesses struggle to secure traditional financing, established businesses with digital transformation potential offer the asset base that lenders prefer while providing the digital upside that entrepreneurs seek.
The research highlights creative approaches to deal structuring, with practitioners “forming partnerships or small investment groups to pool resources and expertise, exploring alternative financing sources such as search funds, family offices, or industry-specific investors, and even acquiring smaller businesses to use them as platforms for future add-on acquisitions.”
The study provides crucial insights into how successful acquirers approach digital transformation after closing deals. The researchers found that “post-acquisition strategies frequently focused on implementing operational efficiencies and leveraging technology to drive growth,” but with a notable emphasis on understanding the acquired business before implementing significant changes.
Key strategies identified include:
• Technology as an Enhancement Tool: Rather than wholesale digital replacement, successful acquirers focus on “leveraging technology and digital tools to drive growth,” while maintaining the core operations that made the business successful.
• Data-Driven Value Creation: “The role of data analytics and business intelligence in driving post-acquisition growth was also highlighted, with some participants discussing the use of data to identify growth opportunities and optimize operations.”
• Platform Building for Scale: Several practitioners described “ambitious consolidation strategies in fragmented industries, with plans to acquire numerous add-on businesses over several years, ultimately aiming to create larger, more valuable entities.”
The HHL research reveals how digital transformation is reshaping the entire ETA ecosystem. “The interviews consistently highlighted the pivotal role of brokers, advisors, and mentors in the acquisition process, with many practitioners citing these relationships as crucial to their success,” the researchers found.
However, digital tools are changing how these relationships work. The study notes increasing use of “online platforms and in-person events to build relationships with brokers and source deals.”
Competition is intensifying as digital transformation becomes more widespread. “As competition intensifies, searchers develop innovative strategies to differentiate themselves, particularly in popular industries or regions,” including focusing on niche industries, leveraging unique skill sets, and building strong personal brands.
While the research focused primarily on North American practitioners, the findings have significant implications for the global ETA landscape. The researchers note that “future research could address this limitation by expanding the geographic scope to include other regions, such as Europe, Asia, and Latin America, where ETA practices may differ due to varying institutional, cultural, and economic factors.”
This is particularly relevant given the succession crisis facing SMEs globally. In Germany, for example, KfW Research data shows that some 224,000 SME owners were planning business transfers by 2024, with many of these businesses facing the dual challenge of succession planning and digital transformation. One of the most intriguing findings from the HHL research relates to what might be called “collaborative competition” within the ETA ecosystem. Despite increasing competition, the study found that “engagement with various ETA communities and local forums emerged as a key strategy for knowledge sharing and support, underscoring the collaborative nature of the ETA ecosystem.”
This creates an interesting dynamic where practitioners compete for deals while sharing knowledge and supporting each other's growth. “These platforms play a vital role in facilitating connections between ETA practitioners, investors, and advisors, providing educational resources, and fostering a sense of camaraderie.”
The Leipzig-based HHL researchers conclude with important implications for various stakeholders in the ETA ecosystem. Dr. Hoffmann emphasizes the practical value for different groups: “For practitioners, the research emphasizes the value of adopting a multi-pronged deal sourcing strategy, combining both broker-mediated and proprietary approaches while maintaining flexibility in acquisition criteria. Investors should understand the subtleties of ETA strategies—especially in balancing traditional and digital acquisitions—as potential avenues for value creation. For policymakers and educational institutions, the study highlights the need for tailored support systems, including specialized financing options and training in both traditional and digital business models, to better equip aspiring entrepreneurs to navigate the complexities of the ETA landscape.”
Perhaps most importantly for policymakers and educational institutions, the study highlights “the need for tailored support systems. Programs that provide specialized financing options, alongside training in both traditional and digital business models, could better equip aspiring entrepreneurs and investors to navigate the complexities of the ETA landscape.”
The HHL research positions digital transformation within ETA as more than just a business strategy—it's a potential solution to broader economic challenges. “This study highlights the growing role of ETA in addressing the business succession crisis, positioning ETA as a critical contributor to economic stability and entrepreneurial dynamism.”
As the researchers conclude, “ongoing research into ETA is crucial to understanding its expanding global relevance and potential to democratize business ownership, driving broader economic development and fostering new opportunities for entrepreneurship.”
The digital age presents both unprecedented challenges and extraordinary opportunities for the ETA community. The HHL Leipzig Graduate School of Management research suggests that those who can successfully navigate the intersection of traditional business operations and digital transformation—guided by concepts like deal clarity and supported by collaborative networks—may find themselves at the forefront of a new era in entrepreneurship through acquisition.
