The Largest Wealth Transfer in German History: 600,000 Companies Seeking Successors by 2028

Germany is facing an unprecedented economic upheaval: By 2028, around 600,000 small and medium-sized enterprises (SMEs) will be seeking successors. This is not only an impressive figure but also represents the largest wealth transfer in the history of the German economy. Estimates suggest that company values totaling over 300 billion euros will change hands in the coming years.

This article explores the background of this development, analyzes the opportunities and challenges, and shows how both potential buyers and sellers can optimally prepare for this historic wealth transfer.

The Demographic Time Bomb in the German Mittelstand

The German Mittelstand, often referred to as the backbone of the economy, faces a massive demographic problem. The baby boomer generation, which built numerous successful companies in the post-war years, is reaching retirement age. According to statistics from the Institute for SME Research (IfM) Bonn, over 40% of business owners in Germany are older than 55 years.

The consequences of this demographic development are far-reaching:

Approximately 600,000 companies with around 3 million jobs are set to be handed over by 2028
Only about 40% of family businesses have succession secured within the family
Around 30% of companies fail to find a suitable successor and must close

These figures highlight the gravity of the situation: Without successful succession arrangements, there is a significant risk of job losses, reduced tax revenues, and economic decline.

In our article Business Succession, we delve deeper into the fundamental challenges of succession planning.

Why Family Internal Succession Is Becoming Rarer

Traditionally, medium-sized companies in Germany were passed down within the family. However, this model is working less and less. The reasons are diverse:

Demographic Change: Smaller families mean fewer potential successors
Changed Career Preferences: Many children of entrepreneurs pursue different career paths
Higher Qualification Requirements: The complexity of business management has increased
Globalization and Digitalization: New challenges require new competencies

In our article Internal Succession: Family and Employees, we examine the advantages and disadvantages of family succession solutions in detail.

This development leads to more companies needing to be sold externally. The external succession through strategic buyers or financial investors is therefore gaining significant importance.

The Macroeconomic Dimension of the Succession Wave

The sheer scale of this wealth transfer has significant macroeconomic implications:

Jobs: Approximately 3 million jobs depend on successful succession arrangements
Tax Revenues: Several billion euros annually for federal, state, and local governments
Regional Economic Structure: Rural regions, in particular, depend on successful SME successions
Innovative Capacity: The loss of companies also means a loss of innovation potential

The economic consequences of failed successions are enormous. Estimates suggest that the total economic damage caused by unrealized business successions could amount to around 100 billion euros by 2028.

The situation is especially dramatic in the crafts sector, where many businesses already have to close due to a lack of successors. In our article Business Succession in the Crafts Sector, we explore the specific challenges of this industry.

The Deal of the Century for Entrepreneurs

While the succession situation is concerning from a macroeconomic perspective, it offers unique opportunities for entrepreneurs interested in buying:

Wide Selection: Never before have so many solid companies been available for sale
Moderate Prices: The large supply tends to lead to realistic valuations
Established Business Models: Instead of starting from scratch, you can build on existing foundations
Financing Options: Banks and funding programs support business successions

As we explain in detail in our article Succession Instead of Starting a Business, buying an existing company often offers significant advantages over founding a new one.

Particularly attractive for buyers: The advantages of buying compared to founding outweigh the alternatives in many cases.

Financing the Acquisition: More Options Than Ever Before

A central topic in business acquisitions is financing. The good news: There are more financing options available today than ever before.

Classic Financing Options

Bank Financing: Debt financing through bank loans remains a mainstay
Equity Capital: Equity financing through own funds or family & friends
Mezzanine Capital: Flexible solutions such as subordinated loans or profit participation rights

Funding Programs Specifically for Successions

KfW Entrepreneur Loan: The KfW Entrepreneur Loan offers favorable interest rates
ERP Funding: ERP funding specifically for successions
Regional Support: Regional economic development with attractive conditions

Our article Financing Business Acquisitions provides a comprehensive overview of all relevant financing options.

For buyers with limited equity, we offer special information in our guide Financing Business Acquisitions with Little Equity.

Seller Financing as the Key to the Deal

A particularly interesting model that is becoming increasingly important in the context of the succession wave is seller financing. Here, the seller remains partially involved in the financing, which offers several advantages:

Lower equity requirements for the buyer
Signal of confidence from the seller in the company’s future
Smooth transition of responsibility

There are various models of seller financing:

Seller Loan: A classic seller loan with fixed repayment rates
Earn-Out Arrangements: With earn-out arrangements, part of the purchase price depends on future success
Silent Partnerships: Combinations with silent partnerships for flexible transitions

In our article Earn-Out: Profit Participation for a Fair Purchase Price, we explain the details of these models.

New Business Models in the Succession Market

The succession wave has also led to the emergence of innovative business models that democratize the market for business acquisitions:

Search Funds: The American Model Arrives in Germany

Search funds are a model originating from the USA, where entrepreneurs specifically search for companies suitable for acquisition, purchase them with investor capital, and then manage them themselves. This model is gaining increasing importance in Germany.

The advantages:

Professionalization of the company search
Broader access to capital
Higher success probability through a structured approach

In our articles on Search Fund Models and Search Fund Capital Raising, we provide detailed insights into this innovative form of business acquisition.

Buy-and-Build Strategies in the Mittelstand

Another development is buy-and-build strategies in the Mittelstand, where entrepreneurs or investors acquire several smaller companies within an industry and merge them into larger, more competitive units.

This strategy offers:

Economies of scale through larger operating units
Synergies in purchasing, sales, and administration
Increased competitiveness against international rivals

Succession Challenges as an Innovation Driver

Interestingly, succession can also act as a catalyst for innovation and modernization, as we describe in our article Succession as an Innovation Driver.

Young successors often bring fresh perspectives:

Digitalization: Modernizing outdated business processes
New Business Models: Expanding traditional offerings
Internationalization: Opening new markets
Sustainable Orientation: Implementing ESG criteria

Particularly in digitalization, there is enormous potential. Our article Digitalization of SMEs with AI shows how artificial intelligence can open new perspectives even for smaller companies.

Tax and Legal Framework Conditions

An important aspect of the wealth transfer is the tax and legal framework. Depending on the legal form and transaction structure, significant differences can arise.

Differences by Legal Form

Tax treatment varies depending on the company’s legal form:

GmbH: Tax aspects of GmbHs
Sole Proprietorship: Business disposal in sole proprietorships
AG: Sale of AG shares

Asset Deal vs. Share Deal

A fundamental decision with significant tax implications is the choice between:

Asset deal: Purchase of individual assets
Share deal: Purchase of company shares

Our article Business Sale: Which Taxes Apply provides a comprehensive overview of the tax aspects.

Practical Tips: How to Successfully Master Succession

Finally, we would like to offer concrete recommendations on how buyers and sellers can optimally leverage the opportunities of this historic succession wave.

For Sellers:

Plan early: Ideally start succession planning 3-5 years before the planned exit
Prepare the company: Increase company value through digital transformation
Professional valuation: Have a realistic company valuation conducted
Structure the handover process: Use our step-by-step guide to selling a business

For Buyers:

Gain relevant experience: Prepare specifically for the acquisition
Secure financing: Explore various financing options for a GmbH
Conduct due diligence: Use our due diligence checklists
Plan integration: Carefully prepare for the first 100 days after acquisition

For further information, we recommend our checklist for buying a company and our detailed guide These 5 Steps for a Successful Business Acquisition.

Conclusion: A Historic Window of Opportunity for Entrepreneurs

The impending wealth transfer through 600,000 business successions by 2028 presents enormous challenges for Germany but simultaneously offers unique opportunities for the next generation of entrepreneurs.

Those who set the course correctly now can benefit from this historic wave—whether as sellers handing over their life's work into good hands or as buyers taking over and developing an established company.

The time to act is now. Whether you want to buy or sell: Get expert advice and use the extensive resources on our platform to successfully navigate the succession process.

Do you have questions about business succession? Contact us—we are happy to assist you on your path to a successful business purchase or sale.