The most important information at a glance
Every year, many companies in Austria are faced with the challenge of a company succession. However, only approximately one third of all companies achieve a handover that satisfies both parties.
With many years of experience, Bank Austria regards itself as a competent partner in the comprehensive process of business succession.
Business Transfer
Those who put their heart and soul into their company, should take care of an organised succession early on. Ultimately, the company is your lifetime’s work that you want to place in the best hands.
Therefore, it is sensible to expect a lead time of three to five years in order to prepare the best possible handover. Only prudent planning ensures the continuation of the operation and its success in a long-term manner.
Business Takeover
The advantage of a takeover is in particular that a working company can usually continue to operate without a major delay. You can bypass almost all the work to build it up, and you usually gain faster sales. Based on the existing key figures and data, future business development can be better estimated.
Types of company transfer
For all types of company transfer, you are recommended to think about the future in good time. Thus, identify family members, employees in your company or business partners who you see as potential successors as early as possible.
A management buy-out (MBO) means that the company is taken over by the operational management of the company, with this takeover perhaps being supported by financial investors. In the case of a management buy-in (MBI), external managers buy into the equity of the company being acquired.
Mixed forms are often also applicable, in which in-house managers are the new owners of a company jointly with external investors or managers (MBO/MBI).
For a manager who is thinking about a takeover, the prospect of participating in the company’s success is attractive, and they can also directly influence this. With an MBO, the additional advantage lies in the fact that the manager or the management team knows the strengths and weaknesses of the company being acquired, and has already been involved in the decision-making process in the past. For an MBI, the transfer risk is greater, since this inside knowledge is not available. The audit effort is therefore greater for a pure MBI.
Decisive criteria for MBOs/MBIs are the expertise and knowledge of the acquiring manager or management team. In addition to long-term experience (“track record”), their financial and workload capacity in particular must be adequate. An MBO or MBI often exceeds the financial resources of a single manager or group of managers.
Most financing is therefore a combination of equity capital, debt capital and/or a mixed form such as mezzanine capital.
However, for detailed and specific questions about your individual legal situation regarding the company succession, we strongly recommend that you take expert advice from a notary or a lawyer.
A handover within the family is traditionally the most common form of company transfer. If there is a suitable successor within the family, the other entitled family members (such as siblings) must be compensated accordingly. This alone can lead to serious emotional and financial problems in advance of the company transfer. Therefore, a careful procedure helps everyone.
Sold versus gifted
In contrast to the transfer to a third party, the transfer of the business within the family can be made either as a sale or a gift. Whether the successor has to pay an adequate financial consideration for the takeover of the company or not, is influenced by both tax and other factors. An important factor in this decision is also whether the transferor already has a suitable pension scheme, or if they are dependent on the “purchase price” of the company to fund their retirement.
Gifting company shares to a private foundation
Private foundations can represent an attractive form of variant under certain conditions for a company succession. The construction of a private foundation is one possible way to ensure the continued existence of assets such as company shares in the long term through a contract. It can guarantee that the lifetime’s work of the founder is maintained and continued in the way he wants, even after his death.
However, for detailed and specific questions about your individual legal situation regarding the company succession, we strongly recommend that you take expert advice from a notary or a lawyer.
The classic sale is basically characterised by the search for a potential buyer. Once they are found, a balance of interests is negotiated. The successful continuation of the company, the financial protection of the transferor and a fair market price are the key points.
Before the active search for a buyer begins, the current state of the company should be documented precisely and comprehensively, and the existing potential for success must be analysed. Once an interested party is found, the sales process will enter its decisive phase.
Negotiations should seek to reach agreement on a price and the exact process of the sale. The process must take into consideration aspects of civil, corporate and tax law as well as considerations on what happens after the sale. For example, it may be important that the person selling the company remains with the company for a time to ensure a gradual transition. This can be achieved by means of so-called “earn-out models”, whereby the payment and the amount of the purchase price are distributed over several years, and are made dependent on the achievement of specific economic targets.
However, for detailed and specific questions about your individual legal situation regarding the company succession, we strongly recommend that you take expert advice from a notary or a lawyer.
Tip
The Austrian Chambers of Commerce (WK) have a successor exchange which lists information about companies available for handover accessible to a wide range of interested parties on the Internet at http://www.nachfolgeboerse.at.
