04.07.2022
Do you know a track and field athlete who has won the Grand Slam? Exactly! The same principle applies to succession planning: In large companies, „M&A“ is daily business in the responsible department. But in SMEs, it's different. There, the transaction business is usually a matter for the boss. Learn about the most common pitfalls for SMEs.
The challenge of SME sales
Whether company acquisition, sale or succession planning: The difficulty with SMEs is that day-to-day operational business takes up a lot of space. There is little capacity for the strategic issues of succession and continuation of the company. As a result, succession planning is nolens volens put on the back burner and left to chance.
When the transaction does take place, the company is poorly prepared and risks being sold below value.
Specific pitfalls can include:
First things first: start early
It is helpful to start thinking about succession planning early. Ideally, the owners form an opinion as to whether an internal or external solution is favored. Internal solutions (e.g. management buyout) have the charm of greater planning security and continuity. External solutions are associated with greater risk, but can lead to a higher sales price due to bidding competition.
Dealing with the sale issue in good time allows you to practice for the worst case scenario. Planning calculations and due diligence documents can be systematically prepared. Company valuations can be made and the development of value over time can be analyzed.
Almost as important: external know-how
t can also be helpful to seek contact with a transaction advisor at an early stage, who can use their experience to help identify stumbling blocks. Transaction advisors have the advantage of bringing an external perspective to the transaction process. Already in the preparation phase, but especially in the hot phase of the transaction, they can provide good support through their experience and objectivity and help to avoid deal breakers.
Who is effected?
The Swiss corporate landscape is characterized by a large number of SMEs. In terms of numbers, these make up the absolute lion's share of all companies with around 600,000 SMEs. In terms of the number of employees, SMEs with up to 250 employees are also responsible for two-thirds of all jobs
According to a recent study by Dun & Bradstreet, around 15% of all SMEs are affected by an open succession.
This is in line with the perceptions from the field. In our discussions with entrepreneurs, we repeatedly find that the topic of succession planning is a moving one.
How to make SME succession a succes
Sales and succession planning are of great importance for SMEs. Often, their preparation is neglected by the owners due to absorption by day-to-day business. The athlete has a hard time at a Grand Slam tournament ...
This can end up selling the business short.
By addressing the issue early on and involving an experienced transaction advisor as a sparring partner, many pitfalls can be identified and mitigated. This is how succession becomes a success.
Further questions? We find individual paths to a successful company sale. We would be happy to help you, too – just write to us.
