The Desired Retirement
A Case Study: The retiring owner of an engineering firm is also the company’s managing director and wishes to hand over the business as part of a succession plan. He plans to complete the handover in about 6–12 months and to finish training his successor within the same timeframe.
Three Parties—What Now?
A potential buyer is a holding company (GmbH) that operates through relatively independent subsidiaries and is looking to acquire target companies in the certification and testing sector. The head of the M&A department at the holding company is generally very interested in the acquisition and considers the company to be promising, but has made it a condition that an on-site managing director take over the role of the current managing partner. A second prospective buyer—Mr. Müller—is also interested in acquiring the company as an MBI candidate. He is holding talks, but these initially come to nothing because the aspiring entrepreneur receives a combination of risk and salary in his salaried job that suits him better than the high-risk working life of a “full-blooded entrepreneur.” He does not want to go into debt up to his ears to finance the acquisition. Mr. Müller fears that he might “bite off more than he can chew” with the company purchase. He has a family that will still depend on a steady income in 12 or 24 months.
Creating a Win-Win Situation
The solution is easy to outline, even if there are often still a few hurdles to overcome in its concrete implementation: following an intensive getting-to-know-you phase between the MBI candidate and one of the directors of the holding company, Mr. Müller acquires a minority stake in the target company. The well-capitalized, less risk-averse holding company purchases the majority stake as agreed.
As long as the company’s financials are in order and the company develops entirely according to plan, Mr. Müller can operate relatively freely within the company. In any case, he has significantly more leeway than a typical employee, even though he is not the sole owner but merely a managing co-partner.
In this way, all parties have achieved their goals and secured what matters most to them. Mr. Müller gains the opportunity to work independently and entrepreneurially; the owner enjoys a well-deserved retirement; and the holding company gains a profitable stake in a region that was previously a blank spot on its map.
The new company can fully leverage the economies of scale within the group through “shared services” and the centralized allocation of orders. The team itself (in this case consisting of the MBI candidate and the employees of the target company) cannot be forced together; rather, they must fit together like two pieces of a puzzle.
Perseverance Pays Off
It should be noted that licensing and accreditation criteria can sometimes make such transactions in safety-critical sectors arduous and complicated. However, the effort is often worthwhile, as a significant portion of the companies’ value creation and pricing power stems from the fact that accreditation procedures create barriers to market entry, thereby keeping supply below demand.
Conclusion: Solving the acquisition puzzle requires time and perseverance. During negotiations, legal, regulatory, and organizational obstacles must be patiently overcome in order to ultimately create a successful new entity. When this is achieved, it is a great source of satisfaction for all involved.
