The selection of a suitable advisor for the organisation of company successors is a challenge for many company owners. Hans-Reinhart Grünbaum, a lawyer in the legal and tax department of the Frankfurt Chamber of Commerce and Industry, named important criteria for selecting a reputable advisor in an interview with Bolko Bouché from the Saxony-Anhalt Successor Club. In addition, he points out typical consulting traps that can be avoided when looking for a company successor. In the second part of the interview, he also looks at various fee models offered by advisors.

Caution with unsolicited contact

Mr Grünbaum, the Saxony-Anhalt Successor Club received enquiries from companies that felt they had been ripped off by their advisor in the succession process. How can this be avoided?

There are several signals that should lead to increased caution. This is the case, for example, if the consultancy firm makes unsolicited contact by telephone (cold call) or by fax and e-mail. Such actions are dubious and anti-competitive. False promises are also not permitted. For example, the courts prohibited a succession agent from using the following wording in its acquisition letter: ‘Our buyer department is currently receiving enquiries from potential buyers for a business in your sector as well as in your region’. This gives the impression that there is a concrete interest in buying, although this does not correspond to the truth.

With pressure to the conclusion of a contract

What tricks are used?

The acquisition talk with the entrepreneur interested in selling is often not conducted by an advisor or broker himself, but by a psychologically trained sales representative who is eager to dispel reservations and push for a quick conclusion of the contract. Here, too, there is often a more or less concrete reference to allegedly already existing enquiries from prospective buyers. All one has to do is sign and the company is as good as sold. The commission-dependent sales representative asks for balance sheet data, creditworthiness and purchase price expectations. After a superficial evaluation, he quotes a purchase price that is far above the entrepreneur’s expectations. The entrepreneur is of course happy and ready to sign. Or the pressure to close is built up with reference to another business that is ready to sell. Special caution is advised with all methods that are reminiscent of structural sales.

How can the client check the seriousness of his consultant or business intermediary?

There are no entry requirements for these professions. Ask your Chamber of Industry and Commerce or Chamber of Crafts for experience with consultants in the region. It is also advisable to enquire at the Federal Association of German Management Consultants (BDU), whose members are subject to quality criteria. References should be asked for at the initial interview and checked by telephone research. After the Service Information Obligations Ordinance information on the existence of professional liability insurance or codes of conduct shall be provided at the latest upon request.