Company succession from the takeover perspective

It is becoming increasingly important for company owners to consider their own company succession from the entrepreneur's point of view. This is because the number of managers who, after a successful career as an employee, want to realise their entrepreneurial ambitions once again is continuously increasing. This development goes hand in hand with the decreasing willingness of subsequent generations to join their parents' company. 

Intra-family successions are declining

The children have felt first-hand the family restrictions and sacrifices often associated with the founding years. And the options on the labour market are diverse, the Lack of entrepreneurs is developing in parallel with the shortage of skilled workers.

A weighty question is the 'make-or-buy' decision of the (external) manager. decision of the (external) manager. His view of the company succession from the perspective of the acquirer is naturally different from that of the retiring senior entrepreneur.

A significant advantage for the company buyer is usually that he encounters established structures. The business model is tried and tested, customers and cash flows are available. The company buyer is spared the arduous work and the risk of founding a company. He can already assess in advance of the takeover to what extent his entrepreneurial talents represent a "fit" to successfully develop the object of his desire after the takeover.

Buying a company or setting up a company?

With a takeover, the acquirer knows his financial commitment and the business planning is more predictable compared to a greenfield start-up. In addition, the financial risks are more manageable than with a start-up, which can turn out to be a bottomless pit. For this very reason, banks usually find it easier to finance the takeover of an established company than to finance a start-up.

So far, so good. So what should takeover candidates wait for when the general conditions are so favourable? Where are the stumbling blocks in realising the entrepreneurial dream?

Company succession from the point of view of the takeover expands the perspective

First of all, there is the company owner who is parting with his life's work. The generational change is a highly emotional decision with far-reaching personal consequences. For an acquirer, it is important to find out whether the entrepreneur is actually willing and ready to let go and how he envisages this process. Should responsibility be passed on gradually or should a radical cut be made with the sale? Does this correspond to the wishes and ideas of the acquirer?

Consider emotional factors

All in all: many things are feasible! The takeover modalities can be flexibly tailored to the needs of the transferor and transferee. Ingo Claus, expert for corporate succession at K.E.R.N ? Die Nachfolgespezialisten, comments: 'We see succession solutions in which the senior entrepreneur draws a line under the company by signing the purchase agreement and withdraws completely from the company. However, this is the exception. As a rule, we see a gradual exit of the former shareholder. This can mean that the former shareholder remains with the company as an advisor or in an advisory board function and the acquirer thus benefits from his know-how. At the other end of the scale, a gradual transfer of the shares is conceivable. This can go so far that the takeover candidate initially joins the company as (interim) managing director without shares in order to sound out his own suitability. True to the motto: "So test he who commits himself forever".

The "nose factor" between the transferor and transferee also plays an important role. Here, considerable tact is needed in dealing between the parties. After all, a terse 'great shop' is not necessarily understood by the transferor as the appreciative message that the takeover candidate wanted to send. Generally speaking, the greater the understanding between the parties, the more willing the transferor will be to make concessions of all kinds. It is considered an accolade for the transferee if the former shareholder participates in the takeover financing with a vendor loan.

Good planning of the generation change increases the probability of success

Regardless of the individual case, careful planning of the takeover is always recommended. In addition to sounding out the financial feasibility of a takeover, it is essential for the acquirer to draw up a meaningful business plan in the course of the business succession. He needs this for himself in order to have a frame of reference in case of undesirable developments, and of course for the financing banks. The positive side-effect: when preparing the business plan, the transferee is forced to deal in detail with all facets of the company and the planning derived from it. This makes him a competent discussion partner for the transferor and financiers.

Observing these criteria makes a significant contribution to the success of the succession arrangement, so that the transferor and transferee can celebrate the great happiness of a successful handover at the end of the day.

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