Contribution picture Succession Family business KERN

Models for succes­si­on planning in family businesses

Accor­ding to Federal Statis­ti­cal Office men born in 1960 will live to be 76 and women to be 83. Statis­ti­cal­ly, today’s 63-year-old compa­ny owners still have between 13 and 20 years to live their organi­se succes­si­on in the family business in an order­ly manner.

If you want to plan your succes­si­on in good time, there are various models to choose from. Here you can get an overview:

Table of contents

Overview of succes­si­on planning for family businesses

Family buy-out: trans­fer within the family

Manage­ment buy-in (MBI): Sale to exter­nal parties

Manage­ment buy-out (MBO): Hando­ver to employees

Conver­si­on into a foundation

Respon­si­ble ownership

Emergen­cy planning for entre­pre­neurs and companies

Fixing timeta­bles for business succes­si­on in the family business

When is a compa­ny sale advisable?

Overview of succes­si­on planning for family businesses

In most cases, succes­si­on in family businesses is imple­men­ted via two soluti­ons: Through an intra-family trans­fer or the sale to a third party. We will show you here what these are and what advan­ta­ges or disad­van­ta­ges each model entails.

Family buy-out: trans­fer within the family

In the case of a family-inter­nal succes­si­on, the Trans­fer owner­ship and control of the business from one genera­ti­on to the next genera­ti­on within the same family. This approach presu­ma­b­ly ensures for the majori­ty that the values and tradi­ti­ons that have made the compa­ny successful are maintained.


The Control over the future of the compa­ny stays in the family.

The Herita­ge and family values can be preser­ved.

The Succes­si­on process usual­ly runs more smooth­ly and less disrup­ti­ve than selling to an outsi­der.

For the employees, little changes at first glance. In the course of the transi­ti­on, employees can also be subject to signi­fi­cant changes during the genera­ti­on change.

Family members who are not invol­ved in the day-to-day business can nevert­hel­ess Benefit from the finan­cial returns.


Family dynamics (overlap of the family and compa­ny systems) can affect the Making decis­i­on-making more diffi­cult and bring about conflicts.

Succes­si­on planning requi­res a lot of time and resour­ces from family memberswho may alrea­dy be busy with other tasks in every­day life.

Inter­nal trans­fers do not always result in the best person selec­ted for the job as family ties can play a bigger role than quali­fi­ca­ti­ons or experience.

Manage­ment buy-in (MBI): Sale to exter­nal parties

The sale to exter­nal inves­tors can give the family and bring finan­cial returns to the share­hol­ders and allow it to withdraw from the compa­ny altog­e­ther on a cut-off date. However, the majori­ty of this means that it loses control over the future direc­tion of the company.

On the other hand, an MBI can ideal­ly ensure that the Corpo­ra­te cultu­re is maintai­ned, while at the same time Fresh ideas and perspec­ti­ves be made possi­ble by a new management.


Selling to an exter­nal succes­sor can genera­te funds that the family business can use to invest in other oppor­tu­ni­ties, pay off debts or simply enjoy the new phase of life.

The entry of an exter­nal inves­tor can perspec­tively Increase the valua­ti­on of the compa­ny and thus lead to attrac­ti­ve sales proceeds.

An MBI can impro­ve the Impro­ve the perfor­mance and compe­ti­ti­ve­ness of the compa­nyby bringing in new perspec­ti­ves, skills and exper­ti­se. This may someti­mes be more protra­c­ted within the family.

Intro­du­cing new manage­ment can make it easier for the family, Separa­te emoti­ons from business decis­i­ons.

An MBI offers family entre­pre­neurs the oppor­tu­ni­ty to retire and to Enjoy­ing the fruits of their labourwhile they hand over the compa­ny into capable hands.


The sale of a family business means that the share­hol­ders Lose control over the opera­ti­on, the decis­i­on-making process and the future direc­tion.

The new owners or exter­nal managers may have Diffe­rent values, goals and ideas from the familywhich can cause cultu­ral problems in the existing struc­tures.

A family business has its Unique identi­ty and histo­rywhich can be lost during the sales process or through an MBI.

Exter­nal buyers or managers can bring their own team, which can contri­bu­te to the Loss of jobs for existing employees who have been working in the family business for a long time (of course, always within the frame­work of the legal requi­re­ments for the protec­tion of employees).

Manage­ment buy-out (MBO): Hando­ver to employees

A popular approach to succes­si­on in family businesses is hando­ver to employees, where poten­ti­al succes­sors are identi­fied and promo­ted within the business. As a rule, this invol­ves current manage­ment personnel.

This method allows for a seamless succes­si­on transi­ti­on, as the new leader is alrea­dy famili­ar with the company’s cultu­re, values and processes.


Secures the Conti­nui­ty of the family business by handing over owner­ship and manage­ment to capable employees or a manage­ment team.

Provi­des for a smooth transi­ti­on process for both the outgo­ing family member and the new employee/management team.

Helps, Retain key employeeswho might other­wi­se leave due to uncer­tain­ty about their future in the compa­ny.

Can lead to a increased motiva­ti­on and loyal­ty among employees who are given the oppor­tu­ni­ty to become owners or managers of the company.


Can lead to conflicts in the family if members are diffe­rent opini­ons have about how the succes­si­on arran­ge­ments are to be carri­ed out in detail.

The selec­ted staff member or manage­ment team may not have suffi­ci­ent Experi­ence, skills or knowledgeto lead the compa­ny with success.

The outgo­ing boss may find it diffi­cult to Giving up control and decis­i­on-making powerwhich can become a chall­enge in the workplace. However, this also appli­es to all other solutions.

Conver­si­on into a foundation

In rare cases, trans­fer­ring the business to a founda­ti­on can be an effec­ti­ve way of ensuring conti­nui­ty while at the same time maintai­ning the Protect the herita­ge and values of the founding family. A founda­ti­on can act as a neutral body that oversees the manage­ment of the compa­ny and whose board consists of family members and other experts.


Ensures the conti­nui­ty of the family business through a Struc­tu­red and organis­ed succes­si­on planning. The proceeds can conti­nue to benefit the family.

Offers tax advan­ta­ges both for the family members who contri­bu­te their assets to the founda­ti­on and for the founda­ti­on itself.

Offers a Mecha­nism for philan­thro­pic activi­ties and social commit­ment and helps build a positi­ve reputa­ti­on for the company.


Can be used for Loss of control or influence over the compa­ny lead, especi­al­ly if non-family members are invol­ved in the adminis­tra­ti­on of the founda­ti­on.

Requi­res careful Weighing up poten­ti­al conflicts of interest between family memberswho are active in both the compa­ny and the founda­ti­on.

Could be due to the size or comple­xi­ty not be an option for all family businesses.

Image with link to free initial consultation from KERN
KERN location map with link to consultants in D-A-CH and Poland

Respon­si­ble ownership

Taking respon­si­bi­li­ty is a new and much discus­sed concept of the Compa­ny succes­si­on. It prima­ri­ly revol­ves around the desire of compa­ny founders to ensure that their compa­ny conti­nues to be run accor­ding to their ideas and that the succes­sors pursue the same goals. Many entre­pre­neurs strive for this when looking for a succes­sor. Nevert­hel­ess, the model of respon­si­ble owner­ship is much more far-reaching and often not as econo­mic­al­ly attrac­ti­ve for the trans­fer­or as a classic sale.

Current­ly, non-profit Founda­ti­ons, Family Founda­ti­ons, Double Founda­ti­ons or Founda­ti­ons & Co. common models that can help achie­ve the goals of accoun­ta­bi­li­ty, but these approa­ches are legal­ly and fiscal­ly complex and there­fo­re less flexible.

The exact legal struc­tu­re for respon­si­bi­li­ty owner­ship is current­ly uncer­tain; however, there is a draft law that propo­ses some regulations:

  • The annual net profit of the GmbH-VE belongs exclu­si­ve­ly to the compa­ny and not to the shareholders.
  • The assets remain direct­ly tied to the fulfilm­ent of the inten­ded purpose.

In this approach to business succes­si­on planning - instead of inheri­tance or sale - the business conti­nues to opera­te independent­ly, but under careful manage­ment by trustees.

Emergen­cy planning for entre­pre­neurs and companies

Entrepreneurial emergency plan as a precaution for business succession

It is no secret that the risk of an unexpec­ted succes­si­on situa­ti­on due to death or serious illness increa­ses with age. An accident or serious illness can literal­ly take a compa­ny owner’s life even well before retire­ment age. throw you off course as an entre­pre­neur. Basical­ly, a well thought-out emergen­cy plan is a “must have” for every entre­pre­neur - regard­less of age.

For this reason, the entre­pre­neu­ri­al Emergen­cy plan among the most important precau­tio­na­ry instru­ments for compa­ny owners. However, it is also one of the most negle­c­ted precau­ti­ons. Becau­se around 70 % of all entre­pre­neurs have no or inade­qua­te emergen­cy prepared­ness. In the process, a careful­ly maintai­ned entre­pre­neu­ri­al emergen­cy file regula­tes the essen­ti­al business and perso­nal succes­si­on issues. In this way, it facili­ta­tes business succes­si­on in the family business and expli­cit­ly ensures the contin­ued existence of a compa­ny. This includes, among other things:

  • A repre­sen­ta­ti­ve who has been consul­ted and agreed with a Substi­tu­te regula­ti­on and a written Emergen­cy plan. Inciden­tal­ly, it does not help to appoint one’s spouse as a proxy. Such a proxy arran­ge­ment would be obsole­te, among other things, if something happen­ed to a married couple on a joint holiday trip.
  • A Adviso­ry board regula­ti­on for compa­nies with about 15 employees or more. A Adviso­ry Board is a cost-effec­ti­ve instru­ment. In doing so, he can support the compa­ny owner in strate­gic issues and, in an emergen­cy, take over the opera­tio­nal manage­ment of the compa­ny at short notice.
  • Clear Powers of attor­neyThese include priva­te powers of attor­ney and account autho­ri­ty for the compa­ny and priva­te accounts as well as a power of attor­ney or procu­ra­ti­on for the deputy.
  • The compa­ny contracts synchro­nis­ed with the Entrepreneur’s will.
  • Other documents such as a Overview of key business partners, custo­mers or suppli­ers. And quite banal: A Key and password list.

Fixing timeta­bles for business succes­si­on in the family business

The drafting of the will usual­ly also answers the 3 Ws of genera­tio­nal change: Whe will Wan Wen handed over?

If a suita­ble and willing succes­sor is available in the entre­pre­neu­ri­al family, he or she should join the compa­ny in good time. It is recom­men­ded that one Timeta­ble for the hando­ver of opera­tio­nal manage­ment in the compa­ny and to work out the trans­fer of the assets.

In practi­ce, the trans­fer of assets due to a gradu­al trans­fer of shares often takes place after the trans­fer of manage­ment. In this context, it is advisa­ble to draw up a Business valua­ti­on on in order to value of the compa­ny in the estate.

The incre­asing freedom and wide choice of profes­sio­nal perspec­ti­ves as well as a labour market that is still going well are current­ly ensuring that the majori­ty of child­ren from entre­pre­neu­ri­al families decide against a genera­ti­on change within the family. As a result, many family-run compa­nies are alrea­dy affec­ted by a Lack of entre­pre­neurs threatened.

Expert tip: Check the use of third-party management

If the compa­ny is to remain in family owner­ship, a Third-party managers a possi­ble alter­na­ti­ve. An experi­en­ced exter­nal manager could support the junior with his know-how and give the compa­ny additio­nal valuable impul­ses from outside. The search for and induc­tion of such a non-family manager requi­res careful planning and usual­ly takes several months.

When is a compa­ny sale advisable?

Graphic on the potential for conflict, when a company sale is advisable

However, often neither a genera­ti­on change within the family nor the use of an exter­nal manager is an option. Then a Compa­ny sale another alter­na­ti­ve. Senior entre­pre­neurs should prepa­re for this eventua­li­ty early on. After all, an exter­nal compa­ny succes­si­on takes an avera­ge of one to three years.

It is there­fo­re helpful for entre­pre­neurs to deal with the genera­ti­on change at an early stage. For the first time, entre­pre­neurs should think about succes­si­on planning in the family business from the age of 55. Becau­se a business succes­si­on, unlike other projects, is a life decis­i­on that takes time to prepare.

Average duration of a family-internal business succession

Our daily counsel­ling practi­ce and various studies show: A late sale of the compa­ny makes a successful baton change more diffi­cult. Two possi­ble causes are a weake­ning innova­ti­ve strength combi­ned with an incre­asing invest­ment backlog.

For this reason, early and thorough prepa­ra­ti­on of the compa­ny sale pays off in econo­mic­al­ly good times. Support­ing the change of baton by specia­lists with transac­tion experi­ence is an invest­ment with a high return. Thanks to their experi­ence, these straight Emotio­nal business succes­si­ons goal-orien­ted and identi­fy poten­ti­al conflicts at an early stage. In this way, they reduce the time and finan­cial expen­dit­u­re of the process and spare the parties invol­ved emotio­nal stress.