More than 55,000 Spanish companies turn over between €3M and €50M. The majority of their owners believe they are too small to interest a serious investor. They are wrong.
There is a conversation that repeats itself frequently in our first meetings with business owners. The proprietor of a company turning over five, six, seven million euros arrives with a question they do not always dare to ask directly: “Can a company like mine really interest someone like you?”
The answer is yes. And it is worth explaining why, because the myth that small companies do not interest investors has done a great deal of damage. It has caused business owners with excellent companies to wait too long to explore their options, or to make decisions with less information than they deserve.
There are more than 55,000 companies in Spain turning over between €3 million and €50 million. They generate the majority of industrial and services employment in the country. They anchor the productive fabric of mid-sized cities and industrial estates across the Spanish geography. And a significant percentage of them face, in the next ten years, the problem of succession: their founders are between 55 and 70 years old, and the next generation is not always in a position or willing to take over.
That universe is the market in which Blue Mountain operates. We are not a venture capital fund looking for €100M companies for headline transactions. We are permanent capital investors looking for exactly the type of company you own: solid, well-built, with history and with a future, in a size segment where the relationship between price and business quality is far superior to the large-company market.
The intuition of the business owner who says “I am too small to be interesting” has a logic to it. They see news of large M&A transactions: mergers of listed companies, purchases by international funds, transactions worth hundreds of millions. They conclude that the world of acquisitions is for other types of players.
That logic is understandable but incorrect.
The large-transaction market is in fact the most competitive and the least efficient for a buyer: many buyers chase few available companies, prices are high, and valuation differentials are small. The market for companies between €3M and €20M is precisely the opposite: there are more quality businesses available than there are sophisticated buyers capable of valuing them correctly.
That means that in your segment, a well-informed buyer can find exactly the type of business they are looking for, at reasonable prices, with the opportunity to build a direct relationship with the founder and to complete a transaction without the bureaucratic friction that characterises large deals.
When we analyse a company, the questions we ask do not begin with revenue volume. They begin with four questions about the fundamentals of the business.
What does the company really earn? Not the top-line revenue, but normalised EBITDA: what the company generates operationally, once extraordinaries and non-recurring expenses are adjusted. A company turning over €5M with a 20% EBITDA generates €1 million annually in operating result. That is the starting point.
What is the competitive position? Why do customers buy from this company and not from the competition? What would happen if a competitor appeared tomorrow with prices 10% lower? The answers to these questions define the sustainability of the business far better than revenue volume.
What happens if the founder leaves? This is the most uncomfortable question, but the most important. If the answer is “the company would stop functioning,” there is work to do before the sale. If the answer is “we have a capable management team and documented processes,” the company is attractive regardless of its size.
What is the growth potential? We do not need the company to already be growing at 20% annually. We need to see why it could grow if it had the capital, resources, or network it does not currently have. That latent potential is often the most valuable element.
One of the categories of company that interests us most is what we might call the discreet niche leader: a company that, within a specific and bounded market, occupies a dominant position. The market does not need to be large. In fact, the more specialised and technical the niche, the better.
A manufacturer of components for agricultural machinery that is the reference supplier for two of the three national tractor manufacturers has an extraordinary competitive position. It turns over €6 million. It does not appear on any list of significant companies. But it has long-term contracts, double-digit margins, and a learning curve in its production process that would take years to replicate.
That type of company, in terms of investor attractiveness, is far superior to a €30M company operating in a commoditised market with 3% margins.
Size does not determine the quality of a business. Competitive position does.
Another factor that raises the attractiveness of a small company in disproportionate measure is the presence of recurring revenues or long-duration contracts.
An industrial maintenance services company with annual contracts with 40 clients and a 95% renewal rate is, from the buyer’s perspective, a very different business from a civil works company that depends on tenders and whose visible work backlog does not extend beyond six months.
Recurring revenues provide visibility. Visibility enables planning. And the ability to plan has a price: buyers pay higher multiples for companies with predictable revenues. That means a €4M company with recurring income can be worth proportionally more than a €12M company without that characteristic.
A frequent obstacle in the sale process of small companies is not the size of the business but the state of the accounting. Many companies in the €3-10M range have accounting oriented towards tax efficiency, not decision-making: personal expenses are mixed with business ones, financial statements are not audited, and real EBITDA is difficult to calculate without significant adjustments.
This is not an insurmountable problem, but it does require prior work. Separating management accounts from tax accounts, auditing the last three years where possible, and documenting the adjustments that make normalised EBITDA different from the accounting figure: these are the tasks that transform a difficult-to-analyse company into a transparent and attractive one.
If there is one factor that can significantly reduce the attractiveness of a small company, it is the absolute dependence on the founder. If 80% of sales depend on the owner’s personal relationships, if the only person who knows how the production process works is them, if day-to-day operational decisions require their constant intervention: that is the risk the buyer sees, and it will depress the price or block the transaction.
The good news is that this dependence can be reduced before the sale. Documenting processes, empowering the management team, ensuring the main client has a relationship with the commercial director as well as the founder, establishing a decision-making structure that works without the owner’s constant presence: these are measures that take time but have a direct impact on the value of the company.
Reducing founder dependence typically takes three to four years in most cases. That is why preparation for the sale must begin long before the decision to sell is definitive.
At Blue Mountain we have acquired companies in the €3-50M revenue range. Our experience is that companies in the €3-10M range frequently present the best opportunities in terms of business quality relative to the price paid.
These are businesses that work because someone built them with effort over years. They have real clients, real margins, and real teams. What they often lack is the capital, the network, or the strategic vision to take the next step. That is exactly what we bring.
If you own a company in that range and have wondered whether your company could interest someone, the answer is: quite possibly yes, and it is worth having that conversation. You can also get an initial estimate through our company valuation calculator. Not to commit to anything, but to understand what value you have built and what options are on the table.
Let us talk. No obligation, and with complete confidentiality.
By Blue Mountain Capital
By Blue Mountain Capital
By Blue Mountain Capital
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.