Direct investment offers a genuine alternative to traditional private equity for middle-market entrepreneurs. We explain how it works, what sets it apart, and why more business owners are choosing it.
When a Spanish business owner thinks of “investors,” the image that comes to mind is typically a venture capital fund, an international asset manager, or perhaps a business angel who turns up in the news. The reality of the investment landscape in Spain is far more diverse, and paradoxically, the model best suited to most entrepreneurs — direct investment — is the least understood.
Direct investment means that an investor — whether a family office, a business group, or a private estate — acquires a significant stake in a company without the intermediation of an investment fund. There is no fund manager. There is no investment committee with forty partners. There is no rigid entry and exit calendar.
This model is especially relevant in Spain because the business fabric is overwhelmingly composed of family companies turning over between 5 and 100 million euros. They are too small for the large funds and too big for business angels. Direct investment fills that gap.
According to data from the INE and ASCRI (the Spanish Private Equity Association), more than 900 private equity and venture capital transactions were recorded in Spain in 2022, with a total volume close to 7.5 billion euros. However, the vast majority of these deals cluster at two extremes: tech startups (venture capital) and large corporations (buyouts above 100 million euros).
The middle ground — companies with EBITDA between 1 and 10 million euros — receives a disproportionately small share of that capital. By market estimates, fewer than 15% of private capital transactions in Spain target the lower middle market. Yet this is precisely the segment that holds the greatest number of companies, the largest volume of employment, and arguably the best opportunities for value creation.
For the owner of a family business turning over 20 or 30 million euros, direct investment offers three core advantages that traditional private equity cannot always match.
A typical private equity fund has a ten-year lifecycle, with a three-to-five-year investment period and a similar divestment window. From day one, the clock is ticking. The fund manager must demonstrate returns to limited partners and eventually sell.
The direct investor faces no such pressure. A family office invests its own capital. If the company is performing well and the outlook is favourable, it can hold the position indefinitely. If a transformation needs more time, that time is available. This flexibility is enormously valuable in a market where business change rarely fits predetermined calendars.
In a structured fund, an investment decision passes through multiple filters: the analysis team, the investment committee, the fund’s legal advisers, LP representatives. The process can take six months or more.
In direct investment, the decision chain is shorter. At Blue Mountain, investment decisions are made by the people who will be directly involved in managing the company afterwards. We know the business because we have analysed it ourselves. This allows us to move with greater agility — something the selling entrepreneur values enormously, especially when timing is sensitive.
This may sound intangible, but it is probably the most important point. The Spanish business owner — particularly the founder who has spent thirty years building the company — needs to know who they will be working with. They do not want to deal with a team of analysts who will rotate in two years. They want to sit across from the person who will make decisions about their company’s future.
Direct investment allows that. The relationship is between people, not institutions. In a market where trust is everything, that closeness makes the difference.
It would be dishonest to present direct investment as a solution without nuance. It has limitations the entrepreneur should understand.
The first is concentration. A fund diversifies across fifteen or twenty companies. A direct investor may hold a more concentrated portfolio, which implies greater risk per deal. This is mitigated by experience, rigorous due diligence processes, and a clear investment thesis — but the risk exists.
The second is capacity. A large fund has value-creation teams, international networks, and the ability to hire top-tier consultancies. A direct investor may not have that infrastructure. The question the entrepreneur should ask is: what does my company actually need? If the answer is a close partner who understands the business and makes decisions with agility, direct investment wins. If it needs a global platform for international expansion, a fund may be more appropriate.
Spain is experiencing a particularly favourable moment for direct investment. The generation of entrepreneurs who founded companies in the 1980s and 1990s is reaching retirement age. Many have no clear successor. The Bank of Spain estimates that around 200,000 companies will face a succession process over the coming decade.
These companies need solutions that do not always fit the private equity mould. They need an investor who understands family dynamics, who respects the founder’s legacy, and who has the patience to manage a transition that is as emotional as it is financial.
Direct investment, well executed, is that solution. At Blue Mountain, we have been demonstrating it for over a decade.
Dirk Manuel Martens Jimenez Founder, Blue Mountain Capital
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
If you wish to explore a potential collaboration or present an investment opportunity, we invite you to contact us. We guarantee absolute confidentiality in all our conversations.