Corporate succession faces major challenges

Although more and more companies are ready to be taken over in this country, only a few people want to start a business. The main reasons for this are the corona pandemic and the ongoing war in Ukraine, the effects of which are also having a negative impact on day-to-day operations. This is the result of the current DIHK report on company succession.

Corona pandemic dampens interest in the topic of corporate succession

The Corona crisis has left clear traces in the economy. Company succession is also affected. According to this, in 2020 only half as many founders sought information from the IHK who were striving for a takeover as in the previous year 2019. Because while there were still around 4,300 people in 2019, the Chambers of Industry and Commerce only had around 2,100 interested parties in 2021.

A particularly strong decline in interest was observed in the retail and catering sectors affected by the lockdowns, as well as in small service companies. Although not quite as strong as among interested parties, the number of senior owners who are being advised and who are looking for a successor has fallen significantly – by 16% to 6,021 consultations. For comparison: in 2019 there were still 7,227.

If one compares successors and owners with one another, it can be said that almost three times as many old owners are now looking for a successor as people who are aiming to take over a company.

According to the IHK consultants, one reason for the decline in both parties is in particular the increased uncertainty about entrepreneurship. Because many entrepreneurs had fought for the existence of their business in the course of the challenges during the pandemic and therefore had to put their search for a successor on hold.

At the same time, due to the increasing shortage of skilled workers, well-trained prospective successors received attractive offers for dependent employment and therefore often decided against taking over a company.

Entrepreneurs currently have to overcome many problems

The current situation caused by the corona pandemic and the effects of the ongoing war in Ukraine, such as increased gas and electricity prices, are also causing a decline in interest in taking over a company, especially among young people.

Other regulations such as the Supply Chain Due Diligence Act (external link), the EU taxonomy, OECD projects and EU guidelines on the international tax system also deter potential company successors.

Successors and bosses don’t come up with anything green when it comes to the price

The study also published information on the personal hurdles faced by senior owners and those interested in succeeding. The study found, for example, that 43% of the old owners had not prepared for the company succession in good time at the time of the IHK consultation. Because many put off the emotionally challenging and tax-legally complicated task of putting the company in the hands of others.

In addition, 36% of senior entrepreneurs find it difficult to emotionally let go of their life’s work. This is a possible reason why 39% of the old owners demand an excessive purchase price at the beginning of the negotiations, according to the IHK experience. This comes about because the own work done over the years and the personal commitment is taken into account. Business start-ups who are looking for a company to take over, on the other hand, have to contend with major financial problems, as around 39% have difficulties financing the business takeover.

(reading tip: evaluation and purchase by the successor).

The consequences of not preparing the company succession in good time can be far-reaching. IHKs report that many senior entrepreneurs put off the issue of company succession if their own children do not want to continue their parents’ business.

The search for an external successor is then often not tackled thoroughly. Investment, innovation and digitization requirements as well as the development of new business areas can thus fall out of focus. The consequences are reduced transferability and attractiveness for potential successors.

DIHK President Peter Adrian sees politics as a duty

DIHK President Peter Adrian calls on politicians to take action: “Politicians urgently need to take countermeasures and must not burden medium-sized companies with further guidelines, laws and regulations,” says Adrian. “The easier it is made for successors to lead a company, the easier it is to find suitable managers for the successor.”

In addition, Adrian demands that the relief measures agreed in the coalition agreement should be implemented quickly. For example, it should be possible to set up a business administratively and legally within 24 hours.

It is advantageous if founders and old owners get help in the form of business start-up advice on the subject of company succession. Because a consultant can help successors to apply for the right funding. A start-up consultant can also support senior bosses in determining the company price. Such advice is subsidized by the state. You can find out which subsidies are suitable here in our free subsidy check.