Generative AI as a Key Technology for Business Succession in the Skilled Trades

The Succession Crisis in the German SME Sector

Germany faces an unprecedented challenge: by 2026, around 190,000 medium-sized companies will require succession. These businesses collectively employ over 2.4 million people and form the backbone of the German economy. However, qualified successors are scarce – demographic change, shifting career preferences among younger generations, and complex handover processes further exacerbate the problem.

The consequences of unsuccessful succession are severe: business closures, job losses, and economic downturns in entire regions. This is a structural challenge that demands innovative solutions.

Political Direction in the New Coalition Agreement

The new CDU/SPD coalition has recognized this issue and outlined concrete measures to promote business succession in their coalition agreement presented on Wednesday. Under section 1.1 "SMEs, Crafts, and the Self-Employed" (link), it states:

"To relieve companies from bureaucracy, we will work with the federal states to switch the collection of import VAT to a clearing model. In the craft sector, around 125,000 businesses will be handed over in the coming years. We support business transfers and start-ups in the craft sector. We want to resolve the investment backlog in educational institutions with reliable funding."

Planned measures include:

1. A funding program for AI startups
2. Tax incentives for startups, especially addressing succession issues
3. Increased focus and reach for this topic
4. Regulatory easing for AI-supported transaction processes

These political initiatives could pave the way for a technology-driven transformation in the succession market.

What Can Generative AI Achieve in the Succession Process?

Generative AI, i.e., AI systems that create new content based on existing data, offers diverse applications in the context of business succession:

1. Business Valuation and Potential Analysis

Traditional valuation methods often reach their limits with small and medium-sized enterprises due to missing comprehensive data or the inability to adequately consider niche market specifics. Generative AI can close these gaps by:

• Analyzing unstructured data from business reports, customer reviews, and industry trends
• Simulating various market scenarios and their impact on company value
• Identifying hidden value drivers overlooked by conventional analyses
• Predicting future developments based on historical data and market trends

2. Matching Buyers and Sellers

One of the biggest challenges is finding suitable successors. AI systems can assist through intelligent matching:

• Analyzing personality profiles of potential successors and aligning them with company requirements
• Identifying strategic synergies with other businesses
• Considering "soft factors" such as corporate culture and leadership style
• Proactively identifying potential buyers who would traditionally be overlooked

3. Process Optimization and Documentation

The administrative burden of a business transfer is enormous. AI offers significant efficiency gains here:

• Automated creation of legally compliant contract drafts and documents
• AI-supported due diligence with automatic risk detection
• Digital consolidation of relevant company data into structured data rooms
• Continuous monitoring of the handover process with proactive recommendations

4. Communication and Negotiation Support

Generative AI can also assist in direct communication between parties:

• Preparing sales presentations and exposés
• Analyzing negotiation strategies and recommending optimal outcomes
• Translating complex financial and legal matters into understandable language
• Moderating virtual negotiation sessions with real-time feedback

AI Solutions on the Market: From Herbert-AI to Integrated Platforms

The market for AI-supported succession solutions is rapidly evolving. Various providers position themselves with specialized offerings:

Our solution here is Herbert-AI, an AI agent developed specifically for SMEs. This solution supports the entire succession process from initial contact to contract signing and particularly facilitates smaller companies’ access to professional M&A services. Through automated communication, data-driven valuations, and intelligent matching of buyers and sellers, even companies with limited resources can benefit from structured succession support.

In addition to specialized AI agents, there are comprehensive platform solutions that map the entire succession process. These combine AI functions with human consulting and offer an end-to-end solution from a single source.

Challenges and Ethical Considerations

Despite AI’s enormous potential in the succession process, important challenges must be addressed:

Data Protection and Confidentiality

Company data is among the most sensitive information. The use of AI therefore requires the highest security standards and transparency:

• Ensuring GDPR-compliant data processing
• Clear regulations on data storage and deletion
• Transparent communication about AI usage to all parties involved

Responsible Use of AI

The deployment of AI in the sensitive area of business succession must be responsibly managed:

• Avoiding discrimination caused by biased algorithms
• Human-in-the-loop approach for critical decisions
• Regular ethical review of AI systems

Technological Hurdles

Not all AI solutions deliver on their promises. Companies should pay attention to the following:

• Realistic assessment of AI capabilities
• Sufficient data basis for reliable analyses
• Integration capability with existing processes and systems

Future Perspectives and Recommendations for Action

The development of generative AI will fundamentally change business succession in the coming years. Experts expect that by 2030, over 60% of all succession processes will be supported by AI systems.

For entrepreneurs planning succession, the following concrete recommendations can be derived:

1. Inform yourself early: Gain an overview of available AI solutions and their potential for your specific case.
2. Prepare digital infrastructure: Ensure a solid data foundation with structured company and financial data.
3. Use hybrid approaches: Combine AI support with traditional consulting to leverage the best of both worlds.
4. Start pilot projects: Test AI solutions initially in defined areas before digitizing the entire succession process.
5. Utilize funding opportunities: Inform yourself about the funding programs for AI-supported succession solutions announced in the coalition agreement.

Conclusion: AI as an Opportunity for SMEs

Generative AI offers a historic opportunity to alleviate the succession crisis in the German SME sector. By automating complex processes, improving matching between sellers and buyers, and providing sound decision-making foundations, more business transfers can be successfully executed.

The political framework set by the new coalition agreement creates favorable conditions. It is now up to entrepreneurs, consultants, and technology providers to seize these opportunities and jointly secure the future of the German SME sector.