What Does Buying a Business Really Cost? A Practical Cost Overview

Equity

• Personally contributed funds, which are typically required to cover both the purchase price and all ancillary costs (e.g. advisory fees, due diligence, notary). Banks rarely finance these transaction costs.
• Investor equity stakes: Particularly in larger transactions or where owner equity is limited, external investors provide additional capital through an equity injection. This increases financial flexibility, but typically comes with a share in future profits and a degree of co-decision-making rights.

Debt financing

• Traditional bank loans remain the backbone of SME financing in the DACH region. A typical leverage ratio of 2–3x equity is standard, with lenders requiring a viable business model, collateral, and often personal guarantees.

SBA Financing:
Widely used in the USA, barely available in Europe.

Public funding (e.g. KfW, AWS):

In Germany, Austria and Switzerland, development banks such as KfW (Germany) and AWS (Austria) play a central role in financing business successions. They frequently offer low-interest loans, long repayment terms and, in some cases, liability exemptions – making them a decisive component in the financing mix for many buyers.

Conclusion:
The choice of financing model has a significant impact on equity requirements, flexibility, and decision-making rights. For many buyers in the DACH region, traditional bank financing – supplemented by public funding where appropriate – remains the standard approach. It is also important to bear in mind that ancillary costs (e.g. advisory fees, due diligence, notary) must be factored into the overall financing amount.

3 Ways to Search

Classical financing:
Still the standard across the DACH region. Requirements: a viable business model, collateral, and often personal guarantees. Leverage is typically 2–3x equity. Public funding programmes (e.g. KfW) can complement or secure the financing structure.

Investor Participations & Search Funds:

• Classic Search Fund:
  Investors provide equity and debt capital for the search and acquisition phase. The searcher contributes management expertise and industry knowledge, while investors offer capital, mentoring, and strategic support. Upon a successful deal, the searcher receives a performance-based equity stake, with investors retaining control rights.
• Advantages: Lower equity requirement, access to experience and capital, professional support.
• Disadvantages: giving up equity and control, investor co-determination.
• Self-Funded Search:
  The search phase is financed primarily from personal funds or with limited external capital. Investors are only brought in – if at all – for the acquisition itself, typically as pure capital providers without extensive control rights.
• Advantages: Maximum entrepreneurial freedom, higher equity participation, flexible structuring.
• Disadvantages: Higher personal risk, limited resources during the search phase, and above all a classic "chicken-and-egg problem": investors who were not involved from the outset of the search phase are often not immediately available when it comes to the actual acquisition. The search for investors typically only begins once a concrete deal is on the table – which can lead to delays and uncertainty.
• Our service for self-funded searchers:
  We provide access to a curated database of investors and financing partners with a specific interest in entrepreneurially led succession solutions. This allows you to combine entrepreneurial independence with flexible financing.

Consulting fees:

• M&A advisors: 2–5% of the purchase price (often performance-based)
• Tax adviser / auditor: €5,000–20,000
• Solicitor: 5,000–20,000 €

Due Diligence (target company assessment):

• Financial, legal and (where applicable) technical DD: €10,000–50,000 (depending on complexity and size)
• This already highlights that a thorough business valuation when acquiring a company is closely linked to the overall costs involved.

Additional costs:

• Notary and court fees: approx. 1–2% of the purchase price
• Start-up / transfer costs, commercial register, fees: €1,000–5,000

Financing costs:

• Interest, processing fees, and where applicable, arrangement commissions
• Return on equity for investments / search funds

Important note:
It is not uncommon for ancillary costs to add up to 8–12% of the purchase price, and they must be factored into budget planning from the very beginning.

Assumptions:

• Purchase price (multiple 5x EBITDA, EBITDA €300,000): €1,500,000
• Equity: €400,000 (approx. 27%)
• Debt capital: €1,100,000
• Additional costs (approx. 10%): €150,000
• Total capital requirement: €1,650,000

Breakdown of ancillary costs:

• M&A Advisory: €45,000
• Due Diligence: €20,000
• Solicitor/Notary: €20,000
• Financing costs/bank fees: €15,000
• Other: €50,000

Important takeaways:

• Ancillary costs should not be underestimated and must be factored in from the outset.
• The equity requirement is higher than often assumed, as banks frequently do not finance ancillary costs and working capital.
• The total debt service (including principal repayment and interest) must be in line with the earning power of the target company.

As emphasised in "Buy Then Build", acquiring a business is more affordable for many executives than commonly assumed – provided the financing is soundly planned and all costs are realistically calculated. Those who underestimate ancillary costs or allow for too little equity risk unpleasant surprises. Professional advice and a structured approach are therefore indispensable.

Alongside the costs themselves, factors such as the chosen deal structure in a business acquisition or the valuation methodology are also decisive for the ultimate financing burden.

A complete overview of all steps is provided in our business acquisition checklist.