In the landscape of German SMEs, a significant challenge looms on the horizon: business succession. Recent figures from KfW indicate that a third of German entrepreneurs are over 60, accounting for about 1.2 million individuals. By the end of 2026, an estimated 15% of Germany's 3.8 million SMEs are anticipated to undergo succession. The most critical obstacle in this transition is the acute shortage of suitable successors, a gap that threatens the success of many transfer plans. As a result, approximately 46,000 companies are at risk of failing in their succession efforts.
This situation is further compounded by a 36% increase, from 2018 to 2022, in businesses needing successors compared to 2010 to 2014, indicating a growing trend of retiring owners but fewer candidates to take their place. The IfM Bonn estimates about 772,000 family businesses are set for succession, with around 190,000 are ready for transfer between 2022 and 2026. This scenario underscores the necessity of continuity for economic stability and necessitates a deep dive into business succession research.
Business succession is not merely a transaction but a complex, multifaceted process. It encompasses not only legal and financial considerations but also addresses societal and psychological elements. Effective succession planning demands longterm preparation and strategic decision-making, considering both business management and the human elements involved.
This thesis adopts a deductive approach, employing agency theory as a foundational framework to dissect the nuances of business succession. Beginning with a broad theoretical perspective, the study narrows down to address specific succession-related challenges. A rigorous literature review forms the bedrock of this research, integrating insights from academic journals, books, case studies, and existing research to create a comprehensive understanding of the intersection between business succession and agency theory.
The analysis will delve into the traits and characteristics crucial for individuals involved in business succession, focusing on the challenges faced by successors and the emotional complexities encountered by predecessors. Furthermore, this study aims to master the intricacies of business succession by marrying practical insights with theoretical frameworks.
Table of Contents
1. Introduction
1.1 Problem statement
1.2 Research Design
2. Theoretical Framework and Application of Agency Theory on Business Succession
2.1 Business Succession: Definitions and Transfer Methods
2.2 Agency Theory: Definitions and Limitations
2.3 Application of Agency Theory in Business Successor Management
3. Studying of Entrepreneur's Role and Personal Dynamics in Business Succession
3.1 Traits, and Personal Aspects of an Entrepreneur
3.2 Challenges and Personality Factors for the Successor
3.3 Challenges and Emotional Aspects for the Predecessor
4. Examination of Critical Factors and Mastering Business Succession Management
4.1 Role of External Advisors in Business Succession
4.2 Role of Due Diligence in Business Succession
4.3 Enterprise Valuation especially in Small Businesses
4.4 Considerations about Payment Methods and Financing
4.5 Critical Final Phase and Stakeholder Engagement
5. Conclusion and Outlook
Objectives and Research Themes
The primary objective of this thesis is to provide a comprehensive analysis of the business succession process in small and medium-sized enterprises (SMEs) through the analytical lens of agency theory, addressing the challenges faced by both predecessors and successors to ensure sustainable business continuity.
- The intersection of business succession management and agency theory.
- Identification of critical success factors for small business transfers.
- The psychological and personality-driven dynamics of the entrepreneur.
- The practical implementation of valuation methods and financing strategies.
- The role of external stakeholders in mitigating information asymmetry and agency costs.
Excerpt from the Book
3.1 Traits, and Personal Aspects of an Entrepreneur
For better, deeper understanding of the succession process and the personal views of each party regarding the agency theory the personality of the entrepreneur and the challenges in the path must be described first for the whole picture before each of the parties will be discussed. The live path connects both characters. The predecessor at the end and the successor at the beginning of the carrier. There is a certain point in the life of the entrepreneur, the decision or the circumstances which push them in this role. So before delving into the personalities of the predecessor and the successor it is essential to examine the personality of an entrepreneur in general.
If individuals possess distinct personality types, it is logical to assume that they possess an entrepreneurial personality type as well. The term "type" refers to a group of people who share several common traits (Naffziger, 1995). It is also important to note that when discussing a personality description, a characteristic is not always present, but rather at a specific moment in a changing set of moral and social behaviors (Moyer, 2016).
Nevertheless, entrepreneurial personalities play a pivotal role in the dynamics of business succession, where entrepreneurial personalities heavily influence decision-making, impacting both predecessors and successors.
Von Bassewitz characterizes entrepreneurs through a set of distinct traits. They are described as possessing high energy, consistency, diligence, and drive, complemented by innovative thinking and strategic wisdom. Importantly, these individuals tend not to be overly cautious or anxious.
Summary of Chapters
1. Introduction: This chapter highlights the critical shortage of suitable successors in German SMEs and outlines the deductive research approach using agency theory.
2. Theoretical Framework and Application of Agency Theory on Business Succession: This section defines core concepts like "Mittelstand" and explores the principal-agent dynamics inherent in the transfer of business ownership and management.
3. Studying of Entrepreneur's Role and Personal Dynamics in Business Succession: This chapter examines the specific personality traits of entrepreneurs and the emotional challenges faced by both successors and predecessors during the transition phase.
4. Examination of Critical Factors and Mastering Business Succession Management: This part focuses on the practical aspects of succession, including the role of advisors, due diligence, business valuation, and financial structuring.
5. Conclusion and Outlook: The final chapter summarizes the applicability of agency theory in understanding the complex succession process and suggests implications for practitioners and policy-makers.
Keywords
Business Succession, SME, Agency Theory, Entrepreneurship, Succession Planning, Management Buy-Out, Management Buy-In, Due Diligence, Business Valuation, Principal-Agent Relationship, Information Asymmetry, Mittelstand, Governance, Strategic Planning, Human Elements.
Frequently Asked Questions
What is the core focus of this thesis?
The thesis explores the complexities of business succession in small and medium-sized enterprises, specifically focusing on how agency theory can be applied to understand and manage the transfer of ownership and control.
Which theoretical framework acts as the cornerstone of this study?
The work utilizes agency theory as the primary foundational framework to analyze the principal-agent relationships and information asymmetries that arise during business transitions.
What is the primary research goal?
The goal is to provide a structured exploration of the business succession process, marrying theoretical agency models with practical, actionable insights for current business owners and potential successors.
What research methodology is employed?
The research adopts a deductive approach, relying on a rigorous literature review of academic journals, books, and existing professional studies to dissect the intricacies of business succession.
What topics are addressed in the main body?
The main body covers definitions and transfer methods, the entrepreneurial personality and personal dynamics, the role of external advisors, due diligence, enterprise valuation, and financial structuring strategies.
Which keywords best characterize this work?
The core keywords include Business Succession, SME, Agency Theory, Succession Planning, Management Buy-Out/Buy-In, and Information Asymmetry.
How does the "Mittelstand" definition impact the study?
The specific qualitative and quantitative definitions of "Mittelstand" enterprises are crucial because they differentiate these unique, often family-led firms from general SMEs, directly influencing how succession is planned.
Why are emotional and psychological factors highlighted?
The study argues that business succession is not purely a financial transaction; psychological barriers from the entrepreneur and emotional attachments to the firm significantly impact decision-making and the ultimate success of the handover.
What is the role of external advisors as discussed?
Advisors, such as tax experts or lawyers, are described as "unsung heroes" who help mitigate agency costs by ensuring transparency, objectivity, and expert guidance during complex negotiations.
- Citar trabajo
- Denis Tyulenev (Autor), 2024, Business Succession. The Practical Implementation, Múnich, GRIN Verlag, https://www.grin.com/document/1489020
