New report on corporate succession in Germany

Company succession continues to play a major role in the German economy: Established companies employ workers, generate tax revenue and must be retained. In many cases, however, it becomes family-internal no successor found. For outsiders, there is then the opportunity to take over successful companies or to realize the idea of ​​”making yourself independent” through a company succession.

Bring business start-ups through company succession many advantages with itself: If a start-up is often characterized by great uncertainty and the making of many assumptions due to a lack of data, you can usually access sufficient historical data when taking over a company. This database enables a realistic assessment of the future success of the company at the time of founding a business. The critical and risky start-up phase of start-ups is no longer necessary.

The success of companies often stands and falls with the network and the awareness of the company or brand. Establishing a new company or brand involves considerable effort investments linked to marketing. If you take over an existing company with a good reputation, you can build on the success and focus on the core business. These companies already practice division of labor on a regular basis, so that as a business owner you no longer have to cover all areas.

The infrastructure of premises, employees and customer relationships is in place and allows the immediate generation of sales. The prerequisite is a proper company takeover, in which prospective founders should seek professional support.

Current findings of the successor monitor 2020

Even if the currently published successor monitor 2020 (external PDF link) refers to the 2019 financial year and therefore does not yet take into account the effects of the COVID19 pandemic, the results provide information about important ones developments in the market.

That’s the average age of transferors increased by around one year compared to the previous year. Most transferors are between 64 and 66 years old at the time the company is handed over, which means that advancing age is probably the most common reason for selling a company. The reason for the sale is not irrelevant for the successor and should be checked: It is possible to sell a successful company without an apparent reason, but it can also indicate a company in difficulty.

In the long term, however, the Succession Monitor 2020 also shows that two years after the company takeover, in 66.7% of cases the Sales volume has increased. Many company successors set the course in the initial period after the business takeover investmentswho are to lead the company into the imagined future. These reduce the EBIT, which has increased significantly in 43.1% of cases two years after the company takeover.

The company succession is thus one success model. Of course, this presupposes the economic skills of the transferee.

A frequently observed one Business takeover failures still takes place when determining the purchase price and preparing the financial plan. There are numerous tools available on the Internet for (simplified) company valuation. This is often intuitively equated by buyers with an adequate purchase price – wrongly. Because there are sometimes serious differences between the value of a company and an adequate price for a company.

Company value vs. company price

To what extent do the company value and the company price differ?

  • The purchase price for a company as part of a company takeover is of great interest to both parties. When determining this, however, buyers often fail to clean up the calculation bases.
  • Profits or surpluses from the profit and loss account or the income surplus account must be checked, for example, to ensure that an appropriate entrepreneur’s salary is taken into account. In the case of corporations (e.g. the legal form GmbH), the amount of the entrepreneur’s wages paid so far should be checked to ensure that it is customary in the industry. In the case of partnerships (e.g. sole proprietorships), the entrepreneur’s salary must be deducted in full. Only then can the basis of calculation be reused.
  • With an operating result (EBIT) of, for example, EUR 150 thousand and a multiplier of 4, a company without debt would theoretically have a company value of 4 x 150 = EUR 600 thousand. However, in the case of a sole proprietorship, the personnel costs for the entrepreneur himself are not included in the accounting. With a standard industry salary for a tourist manager of EUR 140 thousand, the following calculation results: 4 x (150 – 140) = EUR 40 thousand.
  • If necessary, the calculation basis must also be adjusted for existing liabilities before the multiplication. Very few companies are completely debt free. Only after the full adjustment does the calculated amount show the value of the equity and thus an adequate company price. A professional management consultancy can help with the determination and guide prospective entrepreneurs through the purchase process.

Company succession as a model for success

The acquisition of a company is a complex process. However, once mastered, founders expect good chances of success when acquiring a healthy company. In addition, funding for company successions is steadily increasing in Germany. In many federal states, founders can get support from a professional management consultancy be subsidized by at least 50%. Our funding check can be used to determine which advisory funding is possible in individual cases. The right consultant can be found using the consultant search.

banks as lenders are also very receptive to company succession, so founders have good prospects of successful financing. A professional business plan increases the chances of this. That is also possible Utilization of a promotional loan of the Reconstruction Loan Corporation (KfW). With this, founders benefit from repayment-free start-up years and particularly low interest rates.

On the Nexxt Change company succession platform (external link) of the Federal Ministry for Economic Affairs and Energy you will find current offers for companies that are up for sale. You can use our funding check for other funding options (grants and funding loans).