Statistics tell us that retirement remains the most frequent driver for business transfers. Some 70% of transfers are age-related.
It used to be the case that a family business was mostly taken over by the next generations. In the last few years, however, this form of succession has become less and less frequent, so that now and in the future securing a tailor-made solution in good time is increasingly important.
Even if a business handover seems still to lie in the distant future, you should be asking yourself the following questions:
1) Does anyone in my family want to take over my business?
2) Does this person have the necessary aptitude?
If you cannot answer both these questions at any given time with a clear and definite ‘yes’, some other questions inevitably arise:
- Can I identify a suitable and interested successor among the current management team?
- Shall I recruit a new manager or a seasoned external manager (via Interim Management, for example), who can in time grow into the successor role?
- Or shall I prepare for a sale of the business in a timely manner?
By its nature, a business transfer takes two forms:
1. Internal transfer:
a) within the family, to a child or family member
2. External transfer:
a) within the business to an employee, mostly to someone from the management team
b) to a strategic purchaser
c) to financial investors
With the three varieties of Type 2, there come into play not only the emotional aspects of the transfer and ‘letting go’ but also the financial means of the transferee.
Why should you plan, and prepare in good order, for the transfer of your business?
A well-prepared transfer – especially to an outsider – ensures a quicker and smoother sale and immensely increases the chances of a better sale price.
Moreover, with a speedier and well-planned process, you minimise the risk that your customers and employees find out prematurely about the change in ownership and terminate their employment or business relationship with you on the grounds of the resulting insecurity. At the same time, a well-planned and swiftly executed sale will attract more potential acquirers thereby boosting the sale price.
Good preparation and documentation will also minimise any risks associated with guarantees and warranties for the business to be transferred.
We therefore recommend that anyone running a business should:
- instead of just letting the business transfer ‘happen’,
- perhaps only being forced to sell in an emergency
- or in the sad case of the sudden death of the owner-manager being without arrangements for those left behind,
in every case be well prepared in advance for the succession issue.
At Panthera, we specialise in every type of business succession and we should be happy to advise you.