Whether there is a lack of successors within the family, one’s own children are pursuing different career paths or moving to other regions, or there are employees who are professionally and personally qualified but lack the financial means to acquire company shares—the reasons for the need for a succession plan involving external parties are diverse. Even though the primary wish of many business owners is for their own children, family members, or employees to take over the business, a succession plan involving new shareholders is not inherently disadvantageous. Quite the contrary: it is often through such arrangements that new shareholders come on board, opening up entirely new dimensions of growth for the company.
Are there other options besides a complete sale to third parties?
Depending on the company’s current situation and the entrepreneurs’ personal goals, various options are conceivable for the specific structure of a succession plan involving external parties. From the sale of all company shares, to retaining a portion of the shares—with or without active involvement in the company’s management or in an advisory capacity—to the participation of the company’s executives as shareholders, many arrangements are conceivable. However, it is essential that the structure be appropriate for the size of the company and not unnecessarily complex. Another essential prerequisite is that the business models or parties involved are strategically compatible and that there is good chemistry among the individuals involved. Both of these factors can be effectively assessed through intensive discussions that typically last several months.
How can the specific opportunities in the current market be identified, and are preparatory steps advisable?
When searching for specifically suitable parties for an external succession solution, it is helpful to engage partners who have a broad footprint in the market for family business transactions and the corresponding network. In doing so, the goals and framework conditions of the planned transaction should be discussed in detail so that the discreet search for suitable prospective buyers can be conducted in a targeted and effective manner. This ensures that you engage with valid prospective buyers from the outset and make the most of your limited time.
To avoid foreseeable delays in the project, it is strongly recommended—regardless of the form of external involvement in your company—to have your company objectively valued at the outset of the process. This enables you, on the one hand, to inform interested parties of the expected investment volume at an early stage. On the other hand, the evaluation serves as the foundation for following up initial productive discussions with suitable prospective investors with concrete negotiations regarding the structure of a transaction. A comprehensive company profile is also an essential part of the professional preparation for such a transaction. This allows interested parties to gain as complete an initial picture of the company as possible and to assess whether their initial interest is justified. Many questions that are to be expected in the overall context are thus already answered, and in subsequent discussions, the parties can focus on fundamental questions and topics.
Conclusion:
Although it is understandable that succession within the family or within the company itself is often the preferred solution, succession strategies involving external parties offer significant opportunities for the further development of family businesses. To explore the possibilities in this regard, it is advisable to make the necessary preparations with experienced M&A partners who have extensive networks and to proceed with the implementation steps decisively, yet discreetly—with the goal of, once the transaction has been finalized, standing before your own team alongside your chosen partner and presenting the future and new prospects for the company with full conviction.
