The factors for successful succession

Internal or external transfer?

UBS is well placed to help thanks to its wealth of experience in all aspects of succession. Every entrepreneur follows a unique path through life, and the focus is always on searching for the best future solution. Three options are in the foreground: a transfer of the company within the family, i.e. FBO (family buyout), sale to the existing or new management, i.e. MBO (management buyout), or sale to financial investors or to another company as part of a takeover transaction, i.e. M&A (mergers and acquisitions).

The specific procedure does not always prove to be easy. According to UBS specialists, there are a number of stumbling blocks. Along with the lack of a strategy for the future, another frequently encountered hurdle is a disregard for preparatory work. Other potential obstacles are the owner’s lack of willingness to hand over the company and responsibility at the appropriate time, or inadequate solutions due to a lack of resources or poorly qualified successors.

Entry age of 50

“Ideally, the whole process should begin when the previous owner is around 50 years old,” says client advisor Del Fante Ferrario. “This phase gives the owner exactly the right amount of time to carefully prepare their company for a subsequent handover and to deal with the right succession solution in depth.” The entire process often takes several years. “If legal restructuring is required on top of that, it must be initiated at least five years before the transfer due to legal requirements,” emphasizes Rukavina.

There are also good practices in the event of the unexpected death or serious illness of the previous owner. It is very important that responsibilities are quickly transferred to another person within the management. “Once they have reached a certain size and legal form, companies have deputizing regulations to ensure that operations can continue,” explains Rukavina. “The owners may be represented by their heirs or executors, whom we also assist with the succession solution.”

An unexpected event often gives an entrepreneur the impetus to start thinking about the future of their company and to prepare accordingly. Subjects such as inheritance contracts or wills can also be brought up during this comprehensive analysis.

A welcome change of perspective

In addition to specialist knowledge, this also requires a great deal of sensitivity, for example if the previous owner, who built up the company and successfully managed it for years, feels unable to part with his life’s work. “A change of perspective usually helps, as it creates the necessary distance to everyday business,” summarizes Rukavina. By taking a different view of the private pension needs of the entrepreneur in the course of overall planning, questions often arise about the future income required and about the handling of other assets tied up in the company.

Such clarifications focus on the value of a company. “Depending on the initial situation, the parties involved have very different ideas about the selling price or the value of the business,” says Lienhard. “Emotions play a big part in this.” The bank’s specialists then determine the “fair” value. “It’s important to balance the needs of the previous owner with the interests of the other parties,” Rukavina explains as she describes this procedure.

In the best-case scenario, the due diligence process goes smoothly and the company passes into new hands. “A joint event is frequently organized with all the key participants to conclude the transfer,” says Del Fante Ferrario. “The sale marks the end of the owner’s previous role. However, this is by no means the end of UBS’s client service, which is now passed on to its private client advisors,” adds Rukavina. “Once the whole process has been completed, we also ask for feedback from those involved,” says Lienhard. “And that’s when it becomes clear that entrepreneurs have everything to gain from dealing with the succession process early on and from working with the right advisors.”

What belongs to whom?

“Strong teamwork and an analytical approach have proven their worth,” Del Fante Ferrario sums up her wealth of experience. This results in comprehensive assistance, in the course of which important aspects are evaluated by different experts in order to find the best solution. “Clients should also take advantage of the opportunities offered by the separation of corporate and private assets and pension planning,” recommends Rukavina. Many companies have not drawn any clear boundaries here. This makes good pension and asset planning even more challenging.

The experts

Succession within a company raises complex business, legal, financial and tax issues, the interdependencies of which are often difficult to assess. For this reason, at UBS experienced experts always work hand in hand. This holistic approach significantly improves the quality of the advice given.