Winfried Hagenhoff

Company sale to the next generation - despite Corona?

Many, especially smaller SMEs and family businesses, are faced with the challenge of setting the course for a management succession in good time. Often, a suitable solution can be found in the immediate environment of the owners - but in a growing proportion of companies, this is not the case.

Especially in the last two years, many entrepreneurs see the effects of the pandemic in their balance sheets - and thus ask themselves whether it would not be better to postpone a succession plan or a sale.

Corona, for example, has led to a decline in consultations on the subject of succession at around 70% of the nearly 80 chambers of industry and commerce in Germany, and 50% of the chambers of industry and commerce expect a decline in business successions in their region (IHK-Magazin München Oberbayern, 12/2021). Especially transactions in connection with a non-family succession went close to zero, of course especially in times of lockdown (BayBG, same source). Since early summer 2021, the number of deals has been picking up again, with favorable conditions in terms of financing.

In the due diligence for the company valuation to be carried out for pending transactions, it is therefore important for both sellers and buyers to isolate the "corona effect" in addition to the usual financial, legal, IT and operations checks; a small excerpt of supplementary due diligence questions can be found as a PDF here.

In many cases, it will make sense to wait for the markets to stabilize before a sale and - if necessary - to return to a sufficiently attractive growth path in terms of sales and earnings, including necessary restructuring and investments, if these can be realistically managed, and thus to "take along" an expected upswing in terms of earnings and valuation.

However, this tends to make succession planning more urgent, and in many cases there are very good reasons not to wait. Anyone who decides to sell their company now must be prepared to create particular trust on the part of the buyer by

  • a high degree of transparency
  • careful and open communication that takes into account all stakeholders at the right time
  • willingness to continue to share responsibility for the company's success (earn outs, advisory board functions, minority shares),

and to consolidate the trust of key players in the company and, if necessary, of the entire workforce.

These are high demands for family entrepreneurs. And a good reason to seek advice and personal support - from the advisors of the local chambers of commerce and industry as well as, usually more intensively, in the run-up to negotiations with interested parties through advisory board members or external consultants with industry experience. The buyer side also often wants an existing advisory board familiar with the company to remain on board for some time after the transaction and, in the case of integration into a group of companies, also to accompany the integration.

Among the AAA Advisors you will find a number of colleagues who can accompany you on a project-related basis or permanently as an advisory board - just have a look at our advisor profiles here.

 

Image source: unsplash / cytonn photography

About the author
Winfried Hagenhoff

Winfried - formerly at Lufthansa, TNS and WPP’s Kantar- is an experienced Senior Executive Advisor. He loves to advise on innovative products and services based on empirical data, and to transform advice into strategy for brands and customer experience. As a former CTO/COO, he is passionate about tech-driven innovations, especially regarding mobility (Auto, Travel, Transport, Sharing), communication, health, public services, and production.

For the last two years, he has been supporting young tech firms and helped social institutions with pro-bono advice.


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