Business Succession: A Guide to Successful Handover

Succession: A Guide to Successful Business Transfer

Business succession is one of the central topics in long-term corporate planning. Especially in times when many companies are seeking successors due to demographic developments, this issue is gaining increasing importance. A timely and well-thought-out succession plan is essential to secure the continuity of the business while taking into account the interests of all parties involved – from the owner to employees and partners.

In this article, we highlight the key aspects of succession planning, starting with the various succession models, through strategic planning, to the psychological and financial challenges that such a transfer entails.

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Types of Succession: Internal, External, and Hybrid Models

The first fundamental question in succession planning is: Who should take over the company? The answer depends on various factors, including family circumstances, company structure, and market conditions. Essentially, the following models can be distinguished:

Internal Succession: Family or Employees

In internal succession, the company is transferred to family members or long-standing employees. This offers the advantage that successors are often already familiar with the processes and corporate culture. However, emotional or hierarchical conflicts may arise here, for example, if siblings have differing views on company management or employees feel overwhelmed in their new roles.

A well-planned knowledge transfer and clear communication can be decisive in successfully managing the handover in this scenario. Learn more in our article “Internal Succession: Challenges and Success Factors”.

External Succession: Strategic Buyers and Financial Investors

If no suitable internal successors are available, the company can be sold to external buyers. These can be strategic buyers who acquire the company to expand their business activities or financial investors who view the company as an investment for returns. External succession requires a thorough company valuation and a professional negotiation strategy, as financial and tax aspects are especially in focus.

Hybrid Models: Partial Sale and Gradual Transfer

A hybrid model, where the company is initially partially sold and gradually transferred to a successor, can offer a flexible solution. This provides both the former owner and the successor the opportunity to slowly adapt to the new structures. This model can be particularly useful for larger companies as it ensures continuity.

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Planning and Strategy: The Key to Successful Succession

Successful succession requires forward-looking and comprehensive planning. Without a clear strategy, conflicts, financial losses, or even failure of the handover may occur.

Long-Term Planning and Roadmaps

Succession should ideally be planned at least five years in advance. This gives the owner time to identify potential successors, prepare the company for the transfer, and address any weaknesses. A detailed roadmap with clear milestones helps structure the handover process.

Involvement of External Advisors

M&A consultants, tax experts, and lawyers can provide valuable support, especially in company valuation and contract negotiations. Emotional conflicts can also often be better resolved through neutral moderation. Professional advisors are indispensable, particularly in complex scenarios such as external succession or international sales.

Scenario Planning: Plan B and Contingency Solutions

Not every succession solution works as planned. Therefore, it is important to develop alternative scenarios, such as selling to a different buyer, merging with a competitor, or even the option to continue operating the company temporarily if no immediate solution is found.

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Communication and Stakeholder Management: Engaging All Parties

The success of a succession arrangement depends not only on planning but also on communication with relevant stakeholders. Transparent and sensitive handling of expectations and concerns is crucial.

Internal Communication: Employees and Management

Succession primarily affects the company’s employees. It is therefore essential to inform them early about planned changes and build trust. Managers should be actively involved in the process, as they play a central role in implementing the new structures.

External Communication: Customers and Business Partners

Customers, suppliers, and business partners should also be informed about the succession in a timely manner. Clear communication policies prevent uncertainties and protect the company from rumors that could negatively impact business.

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Internal Company Prerequisites: Creating Structures for a Smooth Transition

Before a company can be transferred, internal structures must be established or optimized to ensure the handover proceeds as smoothly as possible. A well-organized company not only increases attractiveness for successors but also facilitates the onboarding of the new owner.

Documentation of Processes

All important processes should be documented in manuals or guidelines. This ensures that the successor can understand and manage daily operations even without in-depth prior knowledge.

Establishing a Second Management Tier

A strong management team can serve as a link between the old and new owner. When the management level is well integrated, the handover can be significantly more effective.

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Psychological and Emotional Aspects: The Human Factor in Succession

Succession is not only an organizational and financial challenge but also an emotional one. This is especially true for the former owner, who is often closely connected to the company for many years.

Emotional Preparation of the Former Owner

Many entrepreneurs find it difficult to let go of their life’s work. Coaching services or exchanging experiences with other entrepreneurs who have successfully managed succession can be helpful here.

Managing Resistance Within the Team

Changes in the company often cause uncertainty among employees. Clear communication and an open ear for concerns can help defuse resistance early on.

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Conclusion: Succession as a Strategic Process

Succession is one of the most sensitive and important processes in a company’s lifecycle. Whether through family-internal transfer, sale to external buyers, or gradual handover – early and strategic planning is essential to secure the company’s continuity and the interests of all parties involved.

By considering the aspects outlined here and relying on experienced advisors, you can overcome potential challenges and bring succession to a successful conclusion. Further in-depth articles on specific topics, such as internal succession or involving external buyers, will help you address particular questions in detail.