Company succession – What to think about?
The everyday life of an entrepreneur involves numerous decisions. These are not always made easily or quickly. It becomes particularly challenging when not only business aspects play a role. This is the case, for example, with company succession, which can be a very emotional matter.
Business succession represents the transfer of a company to a new owner to continue the company under new management. Typical reasons include age, possible illness, or death of the original owner.
The succession process is complex, and its planning can be a major challenge for entrepreneurs. Both economic and personal aspects need to be considered and reconciled. In this article, you will find helpful advice for a successful business succession.
Forms of company succession
First of all, what forms of company succession are there? In principle, solutions can be found within the family or the company as well as externally. The various options, including possible consequences, should be discussed with experts in the field and, if necessary, with the family.
The sale of a company can be made in return for a one-off payment or recurring payments. The latter variant can, if necessary, save the buyer side external financing. Possible variants would be the sale against an annuity, an installment payment or also a permanent burden consisting of recurring expenses. The minimum period is 10 years.
Entrepreneurs also have the option of leasing the company. In this case, ownership does not pass to the successor. Instead, the owner can benefit from ongoing income.
Another option would be to rent out. In this case, the successor can only use the business premises in return for payment. In contrast to leasing, the facility is purchased.
Management buy-out and management buy-In
If no successor can be found within the family, the business can be sold to the company’s own management as part of a management buy-out (MBO). If the company is taken over by an external management, on the other hand, this is referred to as a management buy-in (MBI). If the internal managers do not have sufficient capital available, a mixture of both forms is also conceivable.
The right time for company succession
Timely planning is the be-all and end-all when it comes to company succession. The goal of succession planning is, on the one hand, the continuation of the company. On the other hand, the focus is naturally on the economic security of the entrepreneur. Among the decisive factors can be
- the age of the entrepreneur,
- the current phase of the business,
- the situation of the industry and
- the family circumstances.
It makes sense to address company succession in particular if sustainable growth is anticipated.
Finding the right successor
When looking for a suitable successor for a family business, it often makes sense to search within the family. Alternatively, an internal or external succession would be a possible solution.
Especially if no solution can be found within the family, the search often proves to be very difficult for many entrepreneurs. In this case, it makes sense to involve an M&A advisor. In this way, you gain access to a broad network of potential investors and are accompanied at every step of the transaction.
Checklist: Important steps in business succession
Company succession is extensive. The various steps include
- the analysis of the company with review of the sale options,
- the determination of an approximate value of the company,
- a convincing presentation of the company,
- the selection of possible investors,
- the solicitation of offers,
- the decision for the ideal buyer,
- the compilation of all necessary documents for the due diligence process and
- the careful review of the purchase agreement documents.
This usually raises numerous questions, including tax aspects and liability issues. Without professional expertise and legal advice, it becomes difficult here.
Signing and closing
The final step in the sale of a company is the final transfer of the company. Here, two process steps must be distinguished: the signing and the subsequent closing. The signing represents the signing and thus the conclusion of the sales contract. At this point, however, several conditions can still be defined, which must be fulfilled after the signing.
However, it is not until the closing that a transaction is finally completed. Now all conditions precedent has been fulfilled and the purchase price can be paid.
Whether company audits or tax and contractual aspects: The process of a company succession is extremely complex and requires a thorough approach, which requires a lot of professional know-how. In addition, there is the emotional side of the process, which often makes it very difficult for an entrepreneur to make the best possible decisions for the future of the company.
Do you need help with company succession?
With Conpair, you have a strong partner at your side who accompanies you in all important decisions and necessary processes in the context of a company sale, right from the start. There is a lot to think about and organize – we will gladly take on this complex work for you. If you are a medium-sized company looking for a company succession, you should not hesitate and consult an expert.