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Succession is inevitable. Sooner or later, every company faces it—and for many SMEs in this country, that time is not far off. According to estimates by the Bonn-based Institute for SME Research, around 190,000 business successions are pending between 2022 and 2026 due to management departures. These figures vary significantly by state, with Bavaria, North Rhine-Westphalia, and Baden-Württemberg being the most affected. Due to demographic shifts, the number of annual handovers is trending upward. Since most of these are family businesses, an internal family handover is the preferred solution. But what if there are no capable heirs willing to take the lead? That leaves two options: Management Buy-In (MBI) and Management Buy-Out (MBO). While it sounds complicated, it is quite simple: in an MBI, the company is sold to external management, i.e., third parties. In an MBO, the company is sold to the existing management team, such as current executives or employees. Whether succession can be handled within the family, within the company, or externally, and which solution is best in an individual case, depends on the company's specific circumstances.
MBO – An advantageous succession solution with the right strategy
An MBO can be a sensible succession strategy if no suitable family member is able or willing to step in—and there is no interest in maintaining shareholder status. The existing management team usually knows the business and the staff very well. This offers many advantages and a significant trust bonus. Sales negotiations are also easier to conduct in this case than with external managers. However, for this succession solution to work smoothly, it must be planned well and, above all, early. A successful MBO in your own company takes time.
THE MAK`ED TEAM supports current business owners in analyzing and deciding on succession options. If an MBO is a realistic and viable path for succession, we first determine who is eligible and whether they are interested. Another key point is financing: What is being sold and under what terms? What is the optimal financing structure in this case? A solid Management Buy-Out requires many factors to be considered and individual terms to be developed. 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 roles through forward-looking knowledge management. This ensures they have all the skills and tools needed at the right time to lead the company safely into the future. At the same time, it is crucial that the company develops stably and continuously and remains on a sound financial footing. Only then is an MBO possible. For the methodical implementation of the succession concept, it is useful to define milestones and regularly analyze developments to optimize individual processes. This creates optimal conditions for both the seller and the buyer by the time of the planned handover, setting the stage for a successful future.
THE MAK`ED TEAM knows which strategies and methods are used to successfully plan and implement individual succession management. With our extensive experience across many industries, we have competently guided many medium-sized companies toward their goals and successfully developed and implemented numerous succession solutions.
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