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Company succession options

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Company succession options. Succession is a topic that typically arises in medium-sized companies. The entrepreneur as owner and managing director often shapes the picture there. In such companies, the question of changing staff has to be settled at some point – if only for reasons of age.

In the majority of cases, succession in the family is still preferred. The handover to the son or daughter is often ruled out – due to a lack of interest, skills or simply because there is no family successor. Then another solution has to be found. Whether in the family or from outside: every company succession is a complex process that requires know-how and expertise. Good advice from outside is required.

Successor From The Company

If family succession is not an option, it makes sense to first look around among co-shareholders or employees for possible successors. The advantage is: “Candidates” like this are connected to the company, taking over the management is comparatively smooth – “they know their way around”. If the company is sold to its managing directors or executives, one speaks of a management buyout (MBO) – a variant of the internal handover.

The often weak capital base of the buyer poses a problem with internal company successions. It is, therefore, essential to find sustainable financing solutions for the purchase price. Public funding can also be used.

External Succession Solutions

External succession is used when the company is sold to third parties. There are different possible buyer groups:

  • Management Buy-In (MBI): Buyers are people with management know-how who want to lead and develop the company themselves. It is not uncommon for self-employment to be achieved through an MBI.
  • Strategic investors are most other companies, often competitors. The purpose of the purchase is to improve one’s market position, use synergies or expand the product range. The advantage: strategic investors are often particularly financially strong and pay prices that go beyond the pure company value.
  • Financial investors: above all want to make a profit. After a temporary commitment, the company is to be resold with “added value”, possibly also by going public. Some financial investors target incredibly lucrative parts of a company; the rest are sold off. Breaking up is also an option.

The Alpha And Omega: Good Preparation Whichever form of succession is chosen, it requires foresighted and early preparation. With the handover, there is a comprehensive need for legal regulation. Tax aspects play an essential role, as do inheritance and corporate law issues. The company cannot only continue with the handover – the motto “keep it up” does not work. It almost always requires a realignment. In many cases, a smooth transition is recommended, in which the senior entrepreneur will remain at your side for a while. A well-prepared succession is an essential requirement for the company to have a future

Hello, I have been working as an investment consultant and author for more than 20 years. I love what I do and I have enriched everyone around me. A lot of money is not important, the main thing is how you use the money.

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