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Business Succession

Summary: Business succession is the process of handing over a company to the next generation—whether within the family, to employees, or to external buyers. In Austria, thousands of SMEs are facing succession issues. Successful succession combines strategic planning, business model development, and human factors.

What is business succession?

The business succession involves the transfer of management and/or ownership of a company to a successor. It is one of the most critical moments in a company’s lifecycle—and at the same time, a strategic opportunity for renewal.

A wave of successions is expected in Austria in the coming years: According to the WKO, thousands of medium-sized enterprises are affected. Around one-third of all handovers fail or lead to closure—often because planning starts too late or no suitable successor is found.

Forms of succession

  • Intra-family succession: Handover to children or relatives—classic, but not always possible or sensible
  • Management Buy-out (MBO): Takeover by existing executives—advantage: continuity and company knowledge
  • Management Buy-in (MBI): Takeover by external managers—brings a fresh perspective and new competencies
  • External succession / Sale: Sale to third parties, strategic investors, or private equity firms
  • Employee participation: Handover to the workforce—e.g., as a cooperative or through participation models
  • Fusion / Merger: Merger with a complementary company

The succession process

Successful succession requires 3–5 years of lead time:

  1. Strategic preparation (3–5 years before): Analyze the business model, make the company “succession-ready,” and reduce dependencies on the owner
  2. Search for a successor: Internal or external? Define the requirement profile, identify and vet candidates
  3. Business valuation: Objective valuation as a basis for negotiation—earnings value, asset value, multiplier methods
  4. Induction and handover: Gradual transfer of responsibility, knowledge transfer, and handing over customer and partner relationships
  5. Legal and tax structuring: Articles of association, tax optimization, financing structure
  6. Post-merger phase: Change management for the team, communicate the new strategy, and create stability

Succession as an opportunity for innovation

Business succession offers a unique opportunity for strategic renewal:

The combination of existing substance (customers, know-how, brand) and new innovative power is the greatest asset of succession.

Business valuation and financing

Central aspects of financial succession planning:

  • Valuation methods: Capitalized earnings method, discounted cash flow (DCF), multiplier method—often several methods are combined
  • Value drivers: Customer relationships, brand strength, recurring revenue, employee know-how, USP
  • Financing sources: Equity, bank financing, seller loans, venture capital, subsidies
  • Earn-out models: Part of the purchase price is paid based on performance—reduces risk for both sides

A solid business model with a clear value chain and a good pricing strategy significantly increases the company value.

Succession in Austria: Figures and support

  • WKO Succession Exchange: The largest platform for business transfers in Austria—anonymous advertisements for transferors and successors
  • Subsidies: AWS succession funding, young entrepreneur funding, founding privilege for new company formations within the framework of succession
  • Consulting services: WKO Start-up Service, tax advisors specializing in succession, specialized M&A advisors
  • Tax aspects: Real estate transfer tax, capital duty, and income tax optimization during the handover

Typical mistakes in succession

  • Starting too late: Succession needs 3–5 years of lead time—many only start when it becomes urgent
  • Emotional blockage: “Letting go” is difficult for founders and owners—professional support helps
  • No clear business model: If the company depends too heavily on the owner, it is hardly transferable
  • Unrealistic price expectations: Emotional value and market value often diverge
  • Family over competence: Intra-family succession only if the person is also professionally and personally suitable
  • Forgetting the team: Employees need transparency and involvement—uncertainty leads to fluctuation

Are you planning a business succession and want to position the business model for the future?
We support transferors and successors in strategic development—for a succession that creates value.

→ Schedule a consultation now

Frequently asked questions about business succession

When should I start succession planning?

At least 3–5 years before the planned handover. The earlier you start, the more options you have: finding and training a successor, strengthening the business model, utilizing tax optimizations, and increasing the company value.

How much does a business succession cost?

Costs include: business valuation (€3,000–€15,000), legal and tax advice (€5,000–€30,000), optional M&A advisor (success fee 3–5% of the purchase price). In addition, there may be investments in the company’s transferability. Subsidies can cover part of the consulting costs.

What makes a company “succession-ready”?

Succession readiness means: the company functions independently of the current owner. This requires: documented processes, an independently acting management team, diversified customer relationships, a clear business model, and strong brand positioning.

How do I find the right successor?

First, define a requirement profile: professional competence, leadership experience, entrepreneurial thinking, and cultural fit. Search simultaneously internally (executives, employees) and externally (succession exchanges, M&A advisors, industry networks). Plan for an induction phase of at least 12–24 months.