A puzzle lingers at the heart of the Nordic region’s relationship with entrepreneurship through acquisition (ETA), the model in which an individual operator acquires and then runs an established small or medium-sized business with investor backing (variants include the search fund and the management buy-in, or MBI). Erik de Stefanis has spent the better part of two years thinking about it. The Nordics are usually early adopters. Their small-business succession demographics mirror the rest of Europe almost exactly. And yet, while Italy now has some 60 search funds and Spain roughly 100, with around 30 exits already behind them, Scandinavia has almost nothing to show. For a region that is generally ahead of the curve, that absence is as puzzling as it is conspicuous.
De Stefanis is an unusually well-placed observer of that gap. Born in New York to a Swedish mother, he grew up speaking the language and moved to Sweden full-time as a boy, finishing school and university there before returning to the US for a career in tech investing. Disillusioned, as many were, by the post-COVID boom in which companies “were raising a tonne of money, no revenue,” he found himself drawn to the unglamorous end of the market – “actual operations, and cash flow.”
De Stefanis read the Harvard guide to buying a small business, and in his application to Harvard Business School argued that the ETA ecosystem in the Nordics was underdeveloped and ripe with opportunity. He has been building toward that thesis ever since, most publicly in a pair of widely read Substack essays. When All Interests Aligned set out to understand whether the Nordic region is, in the words of one of its own team, “blue ocean or just an area where we’re never going to make an impact,” de Stefanis was the natural person to ask.
The demand side of the case is the part de Stefanis holds with most conviction, because it rests on numbers that look familiar. In Sweden, he has cited figures showing that 43% of small-business owners are over 55, with a meaningful share already past the traditional retirement age. That adds up to some 47,000 businesses that will, sooner or later, need a successor. “The demographics of many owners very heavily mirror the demographics of SMB owners in the US,” he says. “People in their 60s who don’t know what to do with the company afterwards.”
What strikes de Stefanis is not the scale of the need but how little the owners seem to register the options in front of them. “It’s surprising, because PE is not new in the Nordics, lower-market PE is not new, but many owners that I’ve talked to really don’t understand that there’s even someone out there who might be willing to buy their company.” Many of these founders have no children interested in taking over – “I’m looking at chimney restoration businesses now; a lot of owners don’t have kids willing to take over” – though he is careful to note that even this may be shifting, as a generation of younger people watches white-collar careers disrupted and reconsiders whether the family firm is, in fact, the more interesting path.
How much of that pool is acquirable, as opposed to destined to wind down or pass within the family? Here de Stefanis is candid about the limits of his certainty, but he points to a trend that works in the buyer’s favour: the definition of “acquirable” is widening. “When people talk about ETA, they talk about a uniform buy box – at least 500K or 750K of EBITDA. But I’m seeing more people buy smaller and smaller companies.” As competition pushes searchers further downmarket, firms that “two years ago would probably not even bother to look at” are coming into play. His best guess is that a larger share of the Nordic succession pool is acquirable today than would have been three years ago.
If the need for succession planning is real, why has the ETA / MBI model not arrived? This is the question most observers keep circling, and de Stefanis’s answer has two main strands.
The first is capital. The Nordic lower-mid market, he argues, is “hyper-competitive” and unusually mature. It is “the birthplace of many of these serial entrepreneurs who have been buying up very small companies for years.” For two decades, Nordic owners have had a credible exit to PE in a way that sellers in Spain or Italy, at a comparable moment, did not. The opportunity was simply never as “glaring” for ETA. Compounding this is the region’s famous data transparency: in Sweden, even a company “doing tens of thousands of revenue” has its numbers available online, which makes sourcing efficient and due diligence cheap in a high-trust society. The same conditions that make the lower market attractive also make it crowded.
The second strand is education – or its absence. “Master’s degrees are common in the Nordics,” de Stefanis notes, “but the typical MBA is not as common as it is in the US, and as it is in other parts of Europe.” Schools such as IESE in Spain have run ETA conferences and courses for years; INSEAD has its own offering. “In the Nordics, there’s none of that. That educational pathway to inform people about the strategy doesn’t really exist.” When Chris Morgan of All Interests Aligned and his colleague, intern Oscar Loukos, went looking, they could find only a single Finnish school teaching the subject. De Stefanis could name no others. Research from leading business schools in Sweden, Finland, and Denmark converges on the same point: investors find the ETA model unfamiliar and are reluctant to commit, and the Danish work is especially pointed on this – capital there is cautious. Unfamiliarity and a thin pipeline of teaching, in other words, reinforce each other.
Underlying both strands is the mechanism de Stefanis keeps returning to: the flywheel. In the US, searchers draw on fund-of-funds, specialist investors, lawyers who know the model, and former operators who mentor the next cohort. Each successful deal produces the capital and expertise that make the next one likelier. Europe’s version, he points out, began with a single turn of the wheel. “The first European search fund was led by a Spaniard who went to MIT. I believe he bought a company in Spain, did an add-on in Italy, sold it, and he and his investors – mostly European – made a chunk of money and started recycling that into the ecosystem.” Spain and Italy, in his reading, are simply “five or 10 years ahead of the Nordics.” The wheel there is turning. In Scandinavia it has barely begun to move.
Whether the strength of Nordic private equity is the cause of this gap or merely a symptom of the same underdevelopment, de Stefanis leans toward the former. “I think the need may not have been as pressing,” he says. The typical searcher cohort doesn’t know about the model; the opportunity was never as obvious; and the lower market is efficient enough that conventional buyers have had little reason to leave room for anyone else.
And yet he does not conclude that the door is closed for ETA. The opening, in his view, lies where a financial buyer, like a PE fund, is weakest: in selling the story. Among his friends who have searched and acquired, “most of the time they have won the deal not on price, but because of the story – because they’re able to convince the seller, hey, I’m not going to come in and change the name on the door or change the team on day one.” An individual, he argues, can build that kind of trust more readily than an institution, though he is honest that it does not sway every seller; plenty “could care less” and simply want to know their team will be looked after before turning to the question of money.
In markets and regions where trust comes to the fore, MBI practitioners have an important advantage: the deal is built over time, on trust, because the incoming operator normally has the time to get to know the current owner and, often, the senior management team as well. Compare this with a PE acquisition, where the incoming CEO is most often parachuted in after closing.
Most of the time they have won the deal not on price, but because of the story...
This is where a platform which enjoys secure funding changes the calculation. De Stefanis agrees that deal-independent commitment is hard to secure anywhere; most searchers lack the track record to raise acquisition capital before they have a deal in hand. But that is exactly the friction such a platform is designed to remove. For a market nervous about the fundraising uncertainty that dogs the classic search-fund structure, a buyer who arrives with secured funding and an experienced operator already attached is answering a question the region has been asking.
The proof points are still thin, but they exist. De Stefanis points to private equity firm NS Intressenter, whose 2016 acquisition of PriceRunner has become a landmark precisely because its founders did not set out to run a search fund and yet, in structure, did exactly that: a pledge of capital, a search, and then acquisition financing. “It turned out to be a very large deal,” he says, “and that structure was unique at the time – it still is.” Around it, a scattering of activity has begun to cohere: self-funded searchers working full-time in Stockholm; a new permanent-holding vehicle in Denmark that has reportedly acquired two companies in short order; former private-equity professionals leaving their funds to become independent sponsors; and operators who, having failed to find a single company to buy and run, pivoted to building acquisitive platforms instead.
The blue ocean is quiet, but that doesn't mean it is empty.
None of this yet amounts to an ecosystem, and de Stefanis is the first to say so. But this sparseness is itself an opportunity. “I think there’s an opportunity for somebody to really own the narrative in the Nordics,” he says – to host the first conference, invite the European and American fund-of-funds, bring in the lawyers who have structured these deals, and build a funnel of would-be searchers where none exists. In a market this small, the first mover’s advantage is real.
Which of the Nordic countries is most prepared to move? De Stefanis distinguishes between two kinds of readiness. For the ecosystem to flourish – for investors to engage – he leans toward Sweden, with its concentration of capital and of Stockholm-based professionals who have passed through US MBA programmes and are familiar with the model. For a searcher’s raw odds of success, he is less sure. The handful of data points he has from Finland and Denmark are encouraging, but he will not over-claim from them. The honest answer is that the region is converging into a single story in some respects and fragmenting into distinct national markets in others.
De Stefanis is, in the end, more bullish than cautious. Asked what case he would make to a would-be Nordic operator weighing an acquisition against starting a company or joining a fund, he returns to a point that cuts against the gloom of the “why not yet” question. Because investors are unfamiliar with the model, the terms have not yet hardened. “A few people I know who have acquired there (in the Nordics) have gotten much better terms than they would have in the US.” People who studied in the States and learned the American playbook have found the Nordic market far more open to negotiation. The downside, he notes, is the same anywhere: a stretch without salary, or the risk of buying a bad company. The upside is the chance to be one of very few people reaching out to owners, as an individual, able to tell a story no one else in the market is telling.
The reason ETA has not arrived in the Nordics – no one is teaching it, information is scarce, and local private equity is strong – is not a reason to stay away. It may be the clearest argument yet for a platform that brings secure funding, experienced operators, and a stewardship story the region has not heard. The blue ocean is quiet, but that doesn't mean it is empty.
We don't know for certain why entrepreneurship through acquisition has been so slow to arrive in the Nordics, and Erik's explanations are hypotheses we hold as plausible explanations. We do have a view on one part of the puzzle, though.
The classic search fund asks a lot of everyone involved. The searcher spends a year or two looking, with no guarantee of a deal. Investors are asked to commit to a model they may not be familiar with, with no guarantee of an outcome at the end. And the owner is asked to trust an individual or searcher pair whose funding may or may not come through. In a region that values predictability and trust, that uncertainty may be one reason the model has struggled to take root.
AIA’s approach starts from the opposite end. Our entrepreneurial investors have allocated €350 million to fund SME acquisitions, so the operating partners (OPs) we back have the resources to see a deal through. Business owners are reassured that our buyers can close. Our investors know who they are backing, and are committed to the model. The OP can concentrate on the one thing that wins deals in this market: being the right successor for a business someone has spent a lifetime building.
We could be wrong, and we'd like to find out. If you are an operator, an investor or an academic working on ETA in the Nordics, reach out to us.
Contact: Chris Morgan, christopher.morgan@all-interests-aligned.com
Mukul Pandya is the founding editor of Knowledge@Wharton and a former Associate Fellow at Oxford University’s Saïd Business School. He writes regularly about entrepreneurship through acquisition for All Interests Aligned.
