Handover of the business: The senior boss often causes trouble

Handover of the business: The senior boss often causes trouble

The platform “betrieb-zu-haben.at” conducted the 2022 company succession study together with the Management Center North (MCN). The results are extremely interesting: According to the Austria-wide survey, more than 60% of the takeover consultants surveyed found that most conflicts lurk within the family circle. Investment backlogs and overly optimistic planning calculations also cause problems. In addition, companies are often sold below their intrinsic values.

But first things first: By 2027, around 41,700 small and medium-sized businesses are due to be handed over - that's 26% of all SMEs in Austria's commercial economy. The newly founded platform “betrieb-zu-haben.at”, together with the Management Center North, carried out a comprehensive survey from February to April 2022 among representatives of consulting professions involved in company succession. Tax advisors, auditors, management consultants, lawyers, experts and other successor advisors took part. One of the numerous findings is that senior bosses often cannot let go after handing over their life's work and continue to interfere with the younger generation's management of the company.

39 possible problem areas that could arise for the neo-entrepreneurs after a takeover were queried. The most agreement (sum of “strongly agree” and “somewhat agree”) was with 68% for the answer option “Conflicts with family members employed in the company”, followed by “Conflicts with remaining senior entrepreneurs” with 63%. The pent-up investment requirement is often underestimated (62%) or the planning calculations were too optimistic (59%). When it comes to the handover within the family circle, several factors sometimes come together, as study director Thomas Reischauer knows from management consulting practice: "If senior bosses continue to have a say in the company, this can lead to the young people's authority being undermined vis-à-vis their employees, which is very frustrating. Conversely, it can become a financial problem if the older generation that has been working up to now suddenly disengages completely because their workforce is then lacking and additional employees have to be hired," says the expert.

An important finding of the study is that there are often serious differences between the company values ​​determined by experts and the prices actually achieved upon sale. Different assessment methods were compared. Conclusion from co-study leader Harald Schützinger: "There are usually relatively high discounts on the company values ​​determined. This is due, among other things, to the fact that forecast calculations for the future play an important role in the discounted cash flow method, which are often doubted by buyers." In contrast, multiplier methods often use sales or operating results from previous years, which is easier for potential buyers to understand. “If you want to sell a company, you should start putting your business figures in order years beforehand,” recommends business and tax consultant Schützinger.

Peter Buchegger, who founded the successor platform “Betrieb-zu-haben.at” together with Reischauer and Schützinger, points out that determining the fairest possible company value also plays an important role when handing over within the family circle. “If a business is handed over to a particular daughter or son and there are several siblings, the others usually have to be replaced, which of course has a certain potential for conflict,” says management consultant Buchegger. But even in sales negotiations with external people, things don't always go smoothly, according to Buchegger's experience. Common reasons why potential buyers cancel a deal are asking prices that are too high or insufficient preparation by the seller, the discovery of unforeseen risks or the inability to agree on individual contract details.

"Unfortunately, there are still entrepreneurs who no longer invest years before retirement, handover or the intended sale and neglect the key figures. However, it would be correct to act with foresight: a detailed operational analysis and the introduction of measures to improve the key figures years before the transfer will more than pay for themselves when they exit through significantly higher sales prices," explains the expert.