Trends der Unternehmensnachfolge

5 important trends in business succes­si­on in 2019

Two trends in business succes­si­on are becoming incre­asing­ly clear. Accor­ding to the current DIHK Report on compa­ny succes­si­on, 150,000 compa­ny bosses will be looking for a succes­sor by 2022. And the concerns of German family entre­pre­neurs are clear­ly incre­asing. Becau­se fewer and fewer people want to be entrepreneurs. 

Below we look at the five most important trends in business succes­si­on in 2019:

Trend 1: Econo­mic uncer­tain­ty makes business succes­si­ons more difficult

After years of growth, German entre­pre­neurs are spoiled: the order books are still full. The figures are still right. However, more and more dark clouds are gathe­ring over Germany’s family businesses. Two major develo­p­ments threa­ten the successful German econo­mic model:

Demogra­phic development

For examp­le, the current demogra­phic develo­p­ment is a cause for great concern: Germany’s cohort of entre­pre­neurs with the highest birth rate will celebra­te its 55th birth­day in 2019. That is why the DIHK recom­mends that bosses of this age prepa­re for the genera­tio­nal change. By 2022, # 60% of all entre­pre­neurs older than 55 years of age.

DIHK: ‘A serious problem for the locati­on is gradu­al­ly emerging Germa­ny. This is parti­cu­lar­ly true for struc­tu­ral­ly weak regions.?

This is becau­se of the 150,000 compa­ny heads affec­ted by succes­si­on, only just under 6,700 entre­pre­neurs found their way to one of the 79 German Chambers of Indus­try and Commer­ce. In contrast, the interest of those taking over the business is clear­ly waning. IHKs throug­hout Germa­ny advised only about 4,200 poten­ti­al compa­ny buyers. This is 50(!) percent less than in 2009.

An older study by KfW shows that older family entre­pre­neurs tend to invest less. This increa­ses the invest­ment backlog and reduces compe­ti­ti­ve­ness. The hesitant approach of family businesses to digita­li­sa­ti­on is just one example.

Foreseeable econo­mic stagnation

Every entre­pre­neur can remem­ber the drama­tic econo­mic crisis of 2008 to 2010. Orders collap­sed and finan­cing became more diffi­cult. The econo­my, which was accus­to­med to success, is now facing a similar threat again.

The reasons are manifold:

  • Radical change of entire indus­tries: Examp­les include the retail trade, energy produc­tion and the automo­ti­ve indus­try. The radical upheavals have an impact on suppli­ers, their employees and families.
  • Incre­asing protec­tion­ism: The trade wars, Brexit and the incre­asing foreclo­sure of foreign markets threa­ten the German export econo­my. This is also having a negati­ve impact on indivi­du­al businesses.
  • A shorta­ge of skilled workers becomes a shorta­ge of unskil­led workers: The shorta­ge of skilled workers is incre­asing­ly becoming a shorta­ge of unskil­led workers. In additi­on to highly quali­fied positi­ons, it is incre­asing­ly diffi­cult to find staff for simple jobs. This further limits the flexi­bi­li­ty of companies.

Trend 2: More compa­ny sales in times of econo­mic uncertainty

The econo­mic uncer­tain­ty and their incre­asing age leads to many questi­ons among compa­ny heads: ‘Should I quit?’ or ‘Is there a succes­sor in the family?

However, succes­si­on within the family is now not always the appro­pria­te choice: the child­ren are still too young or have other interests. A general trend in business succes­si­on shows that entre­pre­neu­ri­al child­ren are the Shy away from family succes­si­on.

Only 20 years ago, the family-inter­nal genera­ti­on change was the deter­mi­ning succes­si­on model. Accor­ding to the DIHK, the child­ren of entre­pre­neurs are incre­asing­ly going their own way outside the paren­tal business. Conse­quent­ly, an “automa­tism” of family-inter­nal succes­si­on exists in fewer and fewer companies.

Entre­pre­neurs must there­fo­re incre­asing­ly look for exter­nal succes­sors. Many do so too late. Becau­se a good third of entre­pre­neurs find it diffi­cult to emotio­nal­ly let go of their life’s work.

Thus, in the future we will see more compa­nies looking for a succes­sor in econo­mic­al­ly diffi­cult times.

Trend 3: Buyers deter­mi­ne business succes­si­on trends

For compa­ny buyers, the ageing of socie­ty results in an incre­asing­ly better negotia­ting positi­on. The cohorts of 25-45 year-olds are thinning out, while more and more compa­ny bosses are retiring.

After all, many sectors are alrea­dy acqui­rer markets. In other words, corpo­ra­te buyers are alrea­dy choosing from a varie­ty of offers. This is true for many Crafts enter­pri­ses, the Tradethe construc­tion indus­try, the service sector and the hospi­ta­li­ty indus­try. The compul­so­ry master craftsman’s certi­fi­ca­te in many trades makes the search for succes­sors even more difficult.

In the past five years, we have also seen a clear trend towards more profes­sio­na­lism on the part of poten­ti­al buyers. This is why compa­ny buyers expect profes­sio­nal­ly prepared and coher­ent infor­ma­ti­on even before they get to know the seller for the first time. Poorly prepared trans­fer­ors and exagge­ra­ted price expec­ta­ti­ons thus cause projects to fail early on.

Fortu­na­te­ly, women are incre­asing­ly interes­ted in taking over a compa­ny. The share of poten­ti­al Business succes­sors in counsel­ling sessi­ons has increased by almost 58% since 2010.

Trend 4: Unrea­li­stic price expec­ta­ti­ons reduce prospects of success

Accor­ding to a DIHK study, more than 40 percent of all entre­pre­neurs expect an infla­ted purcha­se price at the begin­ning of a sales project. The value of a compa­ny is not the value of all past invest­ments or the imputed sum of all the boss’s “overti­me”.

Rather, the purcha­se price of a compa­ny expres­ses the future profit expec­ta­ti­ons of a buyer. There­fo­re, a valua­ti­on prepared by specia­lists helps Business valua­ti­on accor­ding to a recog­nis­ed proce­du­re when deter­mi­ning the purcha­se price. A change of perspec­ti­ve helps you to assess your own purcha­se price expec­ta­ti­ons. Ask yours­elf how much money you would pay for your own company.

If, on the other hand, a compa­ny succes­si­on is delay­ed too long, the value of the compa­ny is more likely to decli­ne, warns the DIHK.

Trend 5: Oppor­tu­ni­ties for family businesses and start-ups

For start-ups and SMEs on a growth course, this develo­p­ment in business succes­si­on offers a whole range of opportunities.

Family businesses as strate­gic investors

For examp­le, we are seeing greater conso­li­da­ti­on in certain sectors, which is also driving smaller family businesses. For examp­le, craft businesses are incre­asing­ly acting as strate­gic inves­tors. Such compa­nies often look speci­fi­cal­ly in neigh­bou­ring regions for takeovers in their own sector. Over the last few years, small craft or trade businesses with few employees have become larger compa­nies with many locations.

Start-ups minimi­se risks

Moreo­ver, the takeover of a compa­ny offers a parti­cu­lar­ly attrac­ti­ve Start-up quite a few oppor­tu­ni­ties. From my own experi­ence, I know how diffi­cult it is as a start-up to reach the right target group and achie­ve the first sales. By taking over an existing compa­ny, a founder invests in an existing custo­mer base and functio­ning process. This strategy avoids a longer invest­ment and set-up phase, facili­ta­tes finan­cing and reduces risk.

What can entre­pre­neurs do concretely?

I would answer this questi­on from two directions.

Younger entre­pre­neurs and start-ups

Years of oppor­tu­ni­ties lie ahead of you. Becau­se a signi­fi­cant increase in the supply of attrac­ti­ve compa­nies can be expec­ted in the future. Attrac­ti­ve oppor­tu­ni­ties will arise especi­al­ly for well-capita­li­sed SMEs and manage­ment buy-in candi­da­tes (MBIs).

As a general trend in business succes­si­on, we expect a signi­fi­cant increase in offers on public market­places such as Nexxt-Change. As of the begin­ning of January 2019, almost 6,600 offers from a wide range of sectors and compa­ny sizes are adver­ti­sed here.

However, this is only the tip of the iceberg. For the majori­ty of deals will conti­nue to be invisi­ble below the surface. These succes­si­ons will conti­nue to be organis­ed via infor­mal networks, associa­ti­ons or M&A specia­lists as well as non-public platforms.

There­fo­re, for success, a clear strategy and a clear Profi­le for the compa­ny search crucial. Conse­quent­ly, the resili­ent networks specia­lists with transac­tion experi­ence invaluable when searching ‘below the water surface’.

Senior bosses in search of successors

As a senior entre­pre­neur looking for a succes­sor, you are in a battle for the best minds.

That is why a multi-stage prepa­ra­ti­on of the business succes­si­on pays off for you. Becau­se good prepa­ra­ti­on avoids the risk of expen­si­ve mista­kes and project abortions.

After all, the basic questi­on is: ?What I want to hand over When to Whom.? In prepa­ra­ti­on for this important life decis­i­on, you as an entre­pre­neur should answer these questions:

  • How fit is my compa­ny for a genera­tio­nal change or a compa­ny sale?
  • What prepa­ra­to­ry work do I need to do to increase the value of the company?
  • How well would my business conti­nue if I were to be out for 3 months?
  • Do I have my Corpo­ra­te emergen­cy kit packed?
  • When do I plan to hand over my business to a successor?
  • In what form do I want to accom­pa­ny my compa­ny succes­sor after the handover?
  • Should I have an experi­en­ced specia­list accom­pa­ny me in this important task?

Becau­se no entre­pre­neur can escape a trend of business succes­si­on. Like everyo­ne, we have to let go of our profes­sio­nal task at some point or hand it over in advance.

Photo: ©media­mo­di­fier / pixabay (CCO)

What trends are influen­cing business succes­si­on?

The trends of an ageing socie­ty and a coming stagna­ti­on of the econo­my make business succes­si­on more diffi­cult. This also includes the rising shorta­ge of skilled workers, disrup­ti­ve changes in entire indus­tries and incre­asing protec­tion­ism. In additi­on, there is a decli­ne in genera­tio­nal changes within the family. 

What do the current trends in succes­si­on mean for the sale of a compa­ny?

The trends increase the pressu­re on the seller’s side, as many compa­nies are looking for a succes­sor. Buyers, on the other hand, have a high choice of suita­ble compa­nies and expect meaningful and conclu­si­ve infor­ma­ti­on right from the start. 

What oppor­tu­ni­ties do succes­si­on trends offer poten­ti­al buyers?

First of all, family businesses have good oppor­tu­ni­ties to take over other compa­nies in their sector. In additi­on, start-ups can consider­a­b­ly reduce their entre­pre­neu­ri­al risk with the purcha­se of a compa­ny and do not have to laborious­ly build up their business first. After all, they take over existing custo­mers and tried and tested processes.