Company succession in SMEs – what options are there?

Übersicht Verbergen

In a good 50% of family businesses, succession is resolved within the family. The company or the company shares can be transferred to the family member or members by way of a gift and thus free of charge, but also by transfer in return for recurring payments, or by sale, such as to a third party.

Even if the family-internal company handover is the preferred succession solution, around 18% of companies are sold to employees and just under 29% to external third parties. This means that a staggering 44,000 companies will have to look for a buyer outside their family between 2018 and 2022.

Family-external succession solution

In recent years, succession solutions outside the family or family circle have increased. This category of succession outside the family includes the sale of the company to the following persons or groups of persons outside the family:

to a strategic investor (these are often competitors, customers or suppliers) or
to a financial investor (private equity)
to one or more employees from the company’s own workforce (management buy-out)
to external executives/managers such as former managing directors (management buy-in)

The reasons for selling the company can vary. Regardless of the reason and the respective case constellation, it represents a special situation and a major challenge for the company owner(s), both on a professional and emotional level. If the owner of a medium-sized company sells the business for reasons of age, for example, it is usually the first time that the economic life’s work is brought to market and materialized through the sale. The owner, who is experienced in the day-to-day running of his company, is experiencing the sale situation for the first and usually only time in his life. He is therefore inexperienced and does not know what decision to make and is also regularly completely overwhelmed emotionally.

Excursus from our consulting practice

As consultants, we have sat on the buyer’s side of numerous mandates and have had the situation several times where our counterparts, i.e. the sellers of the company, have sold their company without external, professional support and thus on their own initiative.

Our plea first and foremost – please get experienced and knowledgeable expertise on board, because even seasoned and experienced entrepreneurs often find themselves completely overwhelmed both professionally and emotionally in this new situation. This greatly complicates the process and slows it down. It is not uncommon for sales talks to be broken off completely. In our experience, the following points can play a role here:

The seller has not adequately prepared the sale, essential documents are not available or have to be prepared on request during the process
The company owner does not know the usual steps in the process and appears surprised or haphazard
The emotional closeness to the life’s work leads to irrational and unprofessional-looking statements and actions
As a result of the process, the seller neglects the day-to-day business, which has a detrimental effect on the company, its financial results and thus its value

[1] Kay, R.; Suprinovic, O.; Schlömer-Laufen, N.; Rauch, A. (2018): Company successions in Germany 2018 to 2022, IfM Bonn: Facts and Figures No. 18, Bonn.

[2] Petra Moog, Rosemarie Kay, Nadine Schlömer-Laufen, Susanne Schlepphorst: Unternehmensnachfolgen in Deutschland – Aktuelle Trends. Bonn 2012, p. 3.

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