In an interview with the German Press Agency (dpa), Claus Ruhe Madsen, President of the Rostock Chamber of Industry and Commerce (IHK), warns in forceful words of the consequences of insufficiently prepared company successions in Mecklenburg-Vorpommern. According to a study by the Institute for SME Research, 2,200 medium-sized companies in the region are due to be handed over by 2018. The President of the Rostock Chamber of Industry and Commerce pointed out to dpa that many companies are not optimally prepared for the generational change because some owners only want to ‘reap the fruits of their labour and in the process run down the operating resources’.
Based on the figures from the Ministry of Economics Mecklenburg-Western Pomerania the problem is much greater. The ministry estimates that by 2025 around 10,000 businesses will have to organise their business succession in Mecklenburg-Vorpommern. This figure makes it clear how important a successful generation change is for the individual business but also for the economic well-being of entire regions.
KERN - Company Succession. Successful underlines that the correct preparation of a company handover is a critical factor for success. In our daily practice we experience that not all measures are taken in preparation of a company sale in order to optimise the achievable purchase price. In the following, we point out some typical problems with the generation change in medium-sized businesses.
1. investments are neglected
Investment measures that are offered, for example with a view to digitalising production or a modern external image, are omitted with a view to the pending sale or because the owner is convinced that things have ‘always been good’. This may make the company less attractive for potential buyers. According to Claus Ruhe Madsen sellers, on the other hand, should look at their business as if they were going to run it for another 30 years. A KfW study pointed out the increasing investment backlog some time ago.
2. valuable representation of the company is not created
There is often a lack of in-depth company presentation in an exposé. However, this would underline the value of the company and thus the purchase price expectation. The positive side effect: By preparing an exposé, entrepreneurs prepare themselves optimally for the upcoming talks and know the strengths and weaknesses of all areas of their company.
3. there is no company valuation
In some cases, the seller refrains from carrying out a business valuation. However, such a company value appraisal would help to substantiate the purchase price idea in the negotiations.
Furthermore, the essential values of the company, which are reflected in the contractual relationships with customers, suppliers, landlords, licensors, etc., are often not set down in writing or systematically documented. Prospective buyers then seize on this during the company audit and argue in favour of a reduction in the purchase price. A professional Contract management counteracts such developments.
4. unprofessional handling of the intention to sell
The intention to sell is not handled discreetly, for example by already making the company name public in sales exchanges or at least making the company identifiable. Many prospective buyers observe the market over a certain period of time. If they notice that a certain company is still being offered at the same purchase price after a longer period of time, they conclude that it is either a hard-to-sell company or that the expected purchase price is too high.
5. the company is insufficiently prepared for an unexpected emergency.
Most entrepreneurs have already heard about the contents of the emergency kit. Nevertheless, 70% of all German company owners have not packed their emergency kit or have packed it insufficiently. If the boss unexpectedly drops out, it quickly becomes existentially threatening for small companies because, for example, no powers of attorney for accounts have been issued or deputy arrangements have been agreed and implemented. An unexpected emergency can quickly threaten the existence of a company.
The accompaniment of a consultant specialised in business succession can therefore be valuable for many reasons: He discusses the possibilities for optimising the purchase price with the seller in advance, structures and plans the sales process, prepares a professional exposé and, if necessary, a valuation about the company, makes his network available for the search for qualified buyers and examines possible buyers with regard to suitability from a professional, human and financial point of view. In addition, he can accompany the seller throughout the entire sales process and professionally support the purchase price and purchase agreement negotiations. An overview of the Most important contents of an emergency kit you will find here.
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