How are small business acquisitions structured in the UK?

April 17, 2025

by a searcher from City University London - Cass Business School in London, UK

Hello Searchfunder community, I am trying to get a better understanding on how deals are being structured in practice for small business acquisitions in the UK in the c. £750k - £1.5m EBITDA range. There is plenty of general info out there, but not much transparency on how funding actually comes together in real-world deals. I would really appreciate hearing from those who have done it - especially UK or Europe-based searchers or investors. Here is what I’m trying to figure out: 1. What EBITDA multiples are typical right now in this range? 2. How are deals getting split between debt, equity, and seller finance? 3. What multiple of EBITDA are lenders comfortable with (e.g., 2x, 3x)? 4. What kind of interest rates and repayment terms are you seeing? 5. Who are the go-to lenders in this space (e.g. Shawbrook, ThinCats etc.)? 6. For the equity portion - are you raising from investors, using personal funds, or a mix? 7. If bringing in equity investors, what kind of terms or equity stakes are they asking for (preferred returns, equity splits, board seats, etc.)? Would love to hear your experience - even just a quick outline of how your deal came together. I am sure others would find it helpful too. Thanks in advance for any insight you are open to sharing!

Reply by a professional
from University of Nottingham in London, UK

Hi Jozsef, a few answers below: 1. Multiple really depends on sector, if a SaaS business you are probably talking 8-10x, if a contractual recurring revenue model business (but not SaaS) probably more like 6-8x, if a reocurring revenue, long tenure customer type model then probably 4-6x and if more of a one-off model then sub 4x. 2. Its a bit of a balancing act with a few factors in play, mainly the gross leverage the lender is willing to go to, the debt vs equity split they need and the multiple being paid. A typical structure could be 2.5x gross leverage on the debt and a 50:50 debt vs equity split. Seller finance/earn out/deferred consideration is a useful tool to bridge valuation gaps. 3. Depends on the lender however most could comfortably get 2-3x gross leverage. 4. Interest rates vary significantly from lender to lender. It usually goes ABL financing, high street bank, challenger bank, fund in terms of least to most expensive. Cheapest we have seen is 4% + BBR, most expensive 8-9% + BBR. You will probably be able to get a split between amortising and bullet 5. There are about 10 lower-mid market lenders who will look a search deals. The right one to go to often depends on the EBITDA (some won't look at companies below a certain size) of the target and the debt quantum (as often lenders will have a minimum cheque size they are willing to deploy). Finding lenders on £750k EBITDA businesses can be quite tricky, however £1.5m EBITDA is much easier. Shawbrook, Thincats, TriplePoint, Growth Lending are probably the most active in the cash flow lending space. On the ABL side you could look at lenders like Allica, Close, IGF etc. 6. Traditional searchers will normally have almost all the equity raised from external investors. Self-funded its a mixture of personal funds and external investors depending on deal size). 7. The equity percentage self funded searchers end up with varies massively on a deal by deal basis, with key factors being the level of personal funds committed, the strength of the deal and the requirements of external investors. Some lower mid market PE funds will need a majority meaning if they are involved the max a searcher could get would be 49% of the company. Hope that helps!

Reply by a searcher
from Durham University in London, UK

In my experience in the UK at that size due to (lack of) available debt, whilst sellers obviously always start with high aspirations, most transactions occur in the 3-5x EBITDA range, including earnout/deferred payments. Pricing > 6x is typically the reserve of strategic buyers / recurring revenue models that tick all the boxes. You see those of course, but you also see good businesses trade at 2.5-3x, so whilst pricing varies quite a lot (and not just due to fundamentals), it's not the case that you have to pay high multiples to buy good businesses

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