The search for a company, i.e. identifying and approaching companies potentially ready to be handed over, is one of the greatest challenges for company successors. Senior entrepreneurs see the biggest problem in finding the right candidate for a succession outside the family.
Almost unanimously, we hear in our daily consulting practice that ?the matching of successor-ready company owners with their successors? takes up most of the time of a succession project. The results of various studies by the DIHKof chambers, banks and the KfW also point to this problem.
In our four-part series, we describe how acquirers can accelerate the process of finding a company through good preparation and a modular search strategy. In the first part we deal with the definition of a clear search profile for the search for a company.
A clear search profile facilitates the company search
The search for a suitable company always begins with the definition of a clear search profile and the preparation of suitable documents. In doing so, a searcher should be clear about in which industry, region and at what price he wants to get involved. All three factors are equally important here.
Particularly with generalist managers, we often experience that the sector orientation is not important at all in the first talks. We then often hear: ‘No problem. I can familiarise myself with any business model. This may be possible without any problems, especially if there is a second management level. Thomas Dörr, a consultant specialising in corporate succession in Frankfurt, points out a factor that should not be underestimated: “SMEs that are ready to hand over their businesses often want a successor with industry experience. This means that the definition of a sector often becomes a critical success factor in the search. At this point, company successors should consider which sectors are attractive to them and what expertise is associated with them. A clear industry profile can usually be derived from this.”
Sector profile, investment level and regional focus
A second important point is the regional orientation, since in most cases a medium-sized company cannot be managed from a distance or relocated without further ado. In this respect, it is best for a company successor to involve his or her family in the project before the search begins. Certainly, a successor can commute for a limited time. In the long term, however, the question of a move usually arises. And this very far-reaching decision must be supported by the family of the business successor.
It is also essential to determine a possible investment level. The share of equity capital plays an important role here. Experience shows that with 15-20% equity capital and a refinancing background of three to a maximum of eight years, one has a good starting position for the development of a viable financing concept.
At the end of this process, there are ideally two profiles: In addition to a purchase request for company exchanges, a more detailed successor profile should also be created that can be distributed via suitable networks.
Click here for the other parts of this series:
Part 1: How a clear search profile facilitates the company search.
Part 2: Which company exchanges are suitable for the search?
Part 3: How can a consultant support a company search?
Part 4: How a direct approach speeds up the company search?
