Succession is everything. Sooner or later, every company will have to face it. And for many SMEs in this country, in the not too distant future. According to estimates by the Bonn Institute for SME Research, around 190,000 company successions are due to take place between 2022 and 2026 because the management is leaving. The figures vary greatly from state to state – Bavaria, North Rhine-Westphalia and Baden-Württemberg are most affected. Due to demographic factors, the number of handovers per year tends to increase. Since most companies are family businesses, the internal family handover is the number one succession solution. But what happens if there are no competent descendants willing to lead the company? Then there are two options: Management buy-in (MBI) and management buy-out (MBO). What sounds complicated is actually quite simple: In an MBI, the company is sold to an external management, i.e. to a third party. And in the case of an MBO, the company is sold to management from within the company, for example to the management or employees. Whether the succession can be arranged within the family, within the company or outside the company, and which succession solution is best in each case, depends on the individual factors of the company.
MBO – an advantageous succession solution with the right strategy
MBO can make sense as a succession solution if no suitable family member can or wants to succeed the company – and there is also no interest in retaining the shareholder position. The company’s own management usually knows the business and the workforce very well. This brings many advantages and a great bonus of trust. In this case, sales negotiations are also easier to conduct than with external managers. But for this succession solution to work smoothly, it must be planned well and, above all, early on. For a successful MBO in your own company, time is needed.
THE MAK`ED TEAM accompanies the current owners of a company in analyzing and deciding on succession options. If an MBO is one of the realistic right options for succession planning, the first step is to find out who is eligible for it and whether this person can even imagine it. A next important point is financial feasibility: What will be sold and on what terms? What is the optimal financing constellation in this case? For a solid management buyout financing, many factors must be taken into account and the individual conditions must be worked out. Once these pillars of the MBO are in place, internal development is planned and strategically implemented. Employees or managers are developed step by step and prepared for their future role in the best possible way with forward-looking knowledge management. Thus, at time X, they have all the competencies and tools in hand to lead the company safely into the future. Parallel to this, it is crucial that the company develops in a stable and continuous manner and is financially on a secure footing. Only then is an MBO possible. For the methodical implementation of the succession concept, it makes sense to define milestones and to analyze developments and optimize individual processes at regular intervals. In this way, optimal conditions can be created for the seller and the buyer of the company until the planned handover of the company and the course can be set for a successful company future.
THE MAK`ED TEAM knows which strategies and methods to use to successfully plan and implement individual succession management. With our high level of experience across many industries, we have already competently accompanied many medium-sized companies on their way to their planned goals and have successfully developed and implemented many succession solutions.