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Business Angels and Small and Micro-Cap Private Equity Funds as Alternative Funding Sources for SME Acquisitions

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  • Alexander Pöschl

  • Isabella Mai

Abstract

Acquiring existing companies offers an alternative route to entrepreneurship, known as entrepreneurship-through-acquisition (ETA), where aspiring entrepreneurs purchase established businesses. Our exploratory study investigates alternative funding sources for ETA transactions, focusing on business angels and small- and micro-cap private equity (PE) firms. With ETA being relatively under-researched, the study examines management buy-ins (MBI) and search funds (SF) to contribute to the emerging ETA literature. Our quantitative findings show a notable role being played by business angels in investing in MBI and reveal a correlation between business angels’ ETA knowledge and their openness toward MBI and SF investments. Moreover, our qualitative evidence suggests overlaps and dynamics between ETA entrepreneurs and small- and micro-cap PE firms, highlighting instances of both competition and collaboration. Overall, this study provides valuable insights for practitioners and researchers into the nuances of ETA transactions and the roles of different investors.

Suggested Citation

  • Alexander Pöschl & Isabella Mai, 2026. "Business Angels and Small and Micro-Cap Private Equity Funds as Alternative Funding Sources for SME Acquisitions," FGF Studies in Small Business and Entrepreneurship,, Springer.
    • Handle: RePEc:spr:fgfchp:978-3-032-17538-0_10
    DOI: 10.1007/978-3-032-17538-0_10
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