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At the very latest when a family- or company-internal solution is no longer realistic, the focus shifts to selling to an external buyer—and thus to one of the most important business decisions of all.
This is rarely an “either/or” situation, but rather a matter of timing and the quality of preparation. Entrepreneurs aged 55 and older, in particular, face the challenge of balancing their personal life plans, their responsibility toward employees and customers, and the economic value of their life’s work. Those who actively shape this phase gain freedom in decision-making—and for many, that is precisely the decisive advantage.
External Succession in a Family Business: Saying Goodbye with a Vision for the Future
In many family-owned businesses, there is a desire to pass the company on within the family. This is understandable—and often deeply rooted emotionally. In practice, however, it becomes apparent that family-based or internal succession solutions are not always viable: because one’s own children often pursue different life paths, the right professional fit is lacking, or economic conditions make an internal solution difficult.
In these situations, external succession is not a failure but can open up new perspectives. It enables growth, professionalization, and access to new markets—provided it is carefully planned and not implemented under time pressure. It is crucial to view external succession as a process that can be shaped, rather than as a last resort.
Why Family Businesses Often Address Succession Too Late
Many business owners do not begin to seriously address succession until external factors increase the pressure to act: health issues, a growing operational workload, or changing market conditions. Looking back, many report that they particularly underestimated the time and organizational effort required for an external succession.
However, it is precisely during this phase that two crucial factors for success are lacking: time and choice. Those who start early can prepare the company systematically, explore various options, and select the right buyer without rushing. Experience shows that the best succession solutions do not arise under pressure, but rather from entrepreneurial freedom of action.
What Really Makes for a Good Succession Solution
In practice, successful succession projects pursue three closely interlinked objectives:
First: An optimal financial outcome.
This is not about the highest theoretical purchase price, but rather a well-balanced overall solution. The purchase price, payment structure, security, and feasibility must all align. Only then can a result be achieved that is sustainable in the long term and does not lose quality over time.
Second: Discretion and process reliability.
In small and medium-sized businesses, discretion is a key success factor. Employees, customers, and business partners are sensitive to uncertainty. A clearly structured process with a phased disclosure of information protects day-to-day operations and preserves trust—both internally and externally.
Third: A sustainable future for the company, employees, and customers.
For many family business owners, this aspect is at least as important as the financial one. The key question is not just: Who will pay? But above all: Who will continue to run the company in line with my vision? The strategic, cultural, and personal fit of the key players on the buyer’s side determines the long-term success of the succession.
Which buyer groups play a role in practice
Depending on the industry, company size, and objectives, different buyer groups may be considered. Strategic investors often bring synergies and growth prospects to the table. Private equity firms operate with clear value-creation strategies and professional processes. Family offices and entrepreneurial investors often pursue a long-term, value-oriented approach that aligns well with family-oriented structures.
However, it is not uncommon for the selection process to reveal that supposedly attractive offers are not viable in the long term, while other candidates are a much better strategic and cultural fit. Therefore, what matters most is not so much the buyer’s label as the actual fit.
Proven M&A Models for Family-Owned Businesses
In addition to a complete sale, various models have become established in practice that allow for additional flexibility. These include majority sales with a buyback option, phased succession models, or equity solutions involving management. Performance-based purchase price components can also be useful, provided they are realistic and clearly defined.
The goal should always be a solution that is understandable, feasible, and sustainable for all parties involved. Unnecessary complexity increases risks and jeopardizes a successful closing.
The Time Factor: Why Preparation Is Crucial
With proper preparation, a structured succession process can often be implemented within a manageable timeframe. However, this requires that figures, documentation, and objectives be clarified early on. The longer an unstructured process drags on, the greater the risks to confidentiality and operational stability.
In practice, it has proven beneficial to engage experienced transaction advisors early on to professionally manage market outreach, process logic, and the timeline. This relieves the burden on business owners and creates the necessary peace of mind for well-informed decisions.
Consider Legal and Tax Implications Early On
Warranties, guarantees, liability issues, and purchase price mechanisms significantly influence the quality of a transaction. These topics should not be discussed only at the end but should be incorporated into the process early on.
Close coordination with your own legal and tax advisors from the very beginning has proven just as effective as a coordinated process that brings all parties together and consistently aligns them toward a common goal.
Five Initial Steps That Make All the Difference
First: Consciously determine the right timing.
The most important first step is not detailed planning, but establishing a clear timeline: When should the succession generally take place? This decision alone creates structure and noticeably takes the pressure off the issue.
Second: Clearly define your own goals.
Before discussing figures, buyers, or models, it’s worth taking the time to honestly clarify your personal objectives: What role do the purchase price, security, and the future of the company and its employees play? These priorities serve as the compass for all subsequent steps.
Third: Gain a realistic overview of the company.
A structured assessment of the company’s financial situation, organizational structure, and unique strengths creates transparency. This phase often reveals where a professional outside perspective can help reduce complexity.
Fourth: Explore options for external succession early on.
Not every solution is right for every company. Whether it’s a strategic buyer, an equity investment, or an entrepreneurial investor—identifying realistic options early on makes subsequent decisions much easier.
Fifth: Structure the process professionally from the very beginning.
Especially when managing day-to-day operations, it has proven beneficial not to organize succession “on the side.” Experienced transaction support can help structure the process, address the right issues at the right time, and coordinate efforts with legal and tax advisors.
Conclusion
For many family-owned businesses, external succession is the realistic way to secure a lifetime’s work while simultaneously opening up new opportunities for growth. Those who act early gain time, choice, and flexibility. Professional preparation, a clearly structured process, and the right partners by your side are crucial. This results in a succession solution that makes sound business sense and enables a sustainably successful future for the company, its employees, and its customers.
