Business Succession

Turnover from day one, the company is established, the team trained: The takeover and succession of an existing company is often a lengthy process, which, compared to the classic start-up, brings many advantages, but also hurdles. You should therefore check the company in detail in advance and arrange the handover as systematically and carefully as possible. 

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According to calculations, up to 2020 companies will prepare for a company succession in Rhineland-Palatinate by 1.700, in Hesse there are up to 11.500 companies and in Baden-Württemberg even 21.700 companies.

Source: German Business Exchange Baden-Württemberg, Rhineland-Palatinate, Hesse

Central questions

  • Do you want to dare to take over a company on your own or do you consult a management consultancy specializing in succession? Funding is also available for advisory services.

  • How would you like to finance? Have you compared credit options and of course also the funding opportunities for company takeovers?

  • How much is the company really worth? Have you carefully checked the balance sheets for the past three years?

  • What are the company's development opportunities? What are your goals for the next 3-5 years? Do the employees, customers, partners and subcontractors go along with this?

  • Who will support you with the purchase? With a GmbH in particular, there are many tax law aspects to consider.

When the company is handed over, processes and structures are already in place. It is important to demonstrate entrepreneurial thinking and ability from the very beginning: to continue to satisfy the existing customer base and at the same time to win new customers, to secure the competitiveness of the company as well as the jobs in the long term, if necessary to optimize processes that have been learned and are stuck.

There are many options for structuring corporate succession and handover and should definitely be discussed with a tax advisor, lawyer or management consultant and the family - regardless of whether it is a matter of internal family succession or external succession planning.

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A first overview of the types of corporate succession:

  • Sale for a one-off payment - Right from the start, the buyer has free power of disposal, the seller is not dependent on the entrepreneurial skills of his successor.

  • Sale for recurring services, such as B. Pension or installments. The successor does not pay the agreed purchase price in one amount, but pays it on the basis of a pension, installments or a permanent burden over a longer period of time. The advantage for the buyer: He may not be dependent on outside financing. In this case, the seller is dependent on the success of his successor. A permanent load consists of recurring expenses over a minimum period of ten years. Permanent burdens differ from pensions in particular in that they do not require equal or constant benefits. You can, for example, use the company's sales volume or the seller's cost of living as a guide.

  • Company handover to family members by will or inheritance contract.

  • Gradual transfer through the establishment of a partnership or corporation can be made to family members or persons outside the family by founding a partnership or corporation. Thus the company will be handed over in stages (participation in the operation, co-partner).

  • Lease - If an entrepreneur is not or not yet ready to hand over or sell his company in full, it is possible to lease a company. One advantage: both parties can be guaranteed regular income.

  • Hire - As a rule, the successor can use the operating rooms for a fee. In this case and in contrast to leasing, equipment and machines are bought by the successor.

  • Management Buy-Out (MBO) - If there is no successor, a company can be sold to its own management. A great advantage for both sides: seller and buyer know each other, the buyer or buyers know the company very well and have already proven themselves in the management of the company. It can be disadvantageous that fewer innovations are to be expected in the company due to long periods of employment.

  • Management buy-in (MBI) - When a company is taken over by external managers, a lot of new impulses often come into the company. Of course, the training period for the “new” management is significantly longer than with a management buy-out. If internal managers cannot bring in enough capital, a mixed form of management buy-out and buy-in can also be implemented.

  • Foundation - In order to maintain a company, regardless of the descendants, the establishment of a foundation is suitable, because a foundation does not need owners or shareholders. The legal independence of a foundation is defined in Sections 80 - 88 of the German Civil Code. The foundation's assets are separate from the assets of the founder and his descendants; the heirs are excluded from the company's succession. A company is preserved through the foundation. The law prescribes very little mandatory: The foundation is a diverse legal form.

  • Going public - This is where the unity of the owner of the capital and the management is dissolved. This can make it easier to arrange a successor or to find a suitable successor. One option is to convert the company into a public company. The listing of a company is linked to minimum requirements and is a lengthy process.

  • Small joint stock company - The classification of a company as a small AG is not based on sales or the number of employees, but on the basis of non-participation in the capital market. It is even possible to set up a one-person AG. Small stock corporations are subject to simplified rules.

You can find detailed information and professional advice on corporate succession at the regional chambers of industry and commerce:

Business promotion / corporate law

Christian Schwöbel
Tel: 06221 9017-679
christian.schwoebel@rhein-neckar.ihk24.de

Constanze Dräger-Maier
Tel: 06221 9017-678
constanze.draeger-maier@rhein-neckar.ihk24.de

Interesting links on the subject of company handover:
Tips for founders: