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The transferee

Updated: Nov 29, 2023

Company succession is something completely natural and also something necessary within our lifetime. The dangers, which hardly anyone is aware of, lurk in three different corners: the transferor, the transferee and the company.


Young businesswoman at the desk at work

The 3 dangers of company succession: Part II

Company succession has changed in recent decades to the extent that it is no longer a self-evident for children to take over their parents' business. According to a current study by the FIF (Friedrichshafen Institute for Family Businesses) in Germany, 45.5 percent of those questioned from the next generation of a family business are likely to "go their own entrepreneurial path by founding a company".[1] If the search for a suitable successor fails, the company must be dissolved. Up to a fifth of family businesses in succession situations meet this fate.


There are many mistakes that a transferee can make in a company succession.

A common mistake in business successions is that the transferee tries to make changes too quickly and doesn't allow enough time for a smooth handover of the business to themselves and the new management. Such discontinuity can be detrimental to customer, employee and supplier confidence.

Clear communication with employees, customers and suppliers is crucial for the success of a company succession. A buyer who does not communicate adequately can fuel fears and insecurities.


The skills and above all the character suitability as a successor also play an important role in this process. If these requirements are not well met, the succession can quickly tip over or (in the escalation) mean the end of the company. This does not have to happen overnight, but can become noticeable in a gradual process over several years.


Generational changes in family businesses are particularly difficult if there are several (related) successors at the same time. Here are a few prominent (German) examples of failed company successions:


Dr. Oetker

Rudolf-August Oetker, the late head of the Bielefeld clan, left eight heirs, who came from three different marriages. The older siblings, including August and Richard Oetker, were in control of the company for a long time. This changed, however, when the younger generation, led by Ferdinand Oetker, began making loud demands for more influence in management from 2014 onwards. The planned merger of the company's own shipping line Hamburg Süd with Hapag Lloyd failed due to their resistance. In 2016, compromises were reached on the composition of the advisory board and the sale of container shipping (2017). The real division of the company was carried out at the end of 2021 and thus a 14-year family dispute was settled. Can't imagine what that must have cost in terms of energy, time and money.


Bahlsen

In the 1990s there were violent conflicts within the Bahlsen family, which led to a fratricidal fight and arguments between uncles and nephews. These fronts remained in place for several years and vehement arguments broke out in the biscuit factory in Hanover. Eventually the business was split up, with Herrmann Bahlsen being settled as one of the parties to the conflict. In the course of a physical division, the baked goods company was divided into the "sweet" and "salty" areas, which were now managed independently by the brothers Werner Michael and Lorenz Bahlsen. Since then, the family feuds have been settled.

But the succession to the biscuit empire around Werner Bahlsen has also made headlines in recent years and especially at the end of last year (2022). The result: none of the four children will succeed him as CEO, instead this position will be filled externally.


DuMont Mediengruppe

At the end of 2010, a major conflict broke out in the DuMont Schauberg publishing house. Konstantin Neven DuMont, the son of the publisher Alfred Neven DuMont, was removed from the company's board of directors because of negative comments about his father - and thus his own publishing house - in a weblog. Konstantin was originally supposed to inherit his father's publishing business, but after a public mud fight he returned his seven percent share to the family. His sister Isabella Neven DuMont has since taken over the role of their late father, restoring family peace.

https://www.capital.de/wirtschaft-politik/15-konflikte-in-deutschen-familienunternehmen


Conclusion

It is not possible to ignore or hide conflicts within the family. Instead, they must be addressed and resolved directly. Also, one's own ideas and conceptions of how the family business should run cannot be implemented overnight in the company.


My Advice

If you are the transferee: Before you agree to a successor in the family business, even if your family intended it to be so from birth, ask yourself three questions:

  1. Do I want this?

  2. Do I want this?

  3. Do I want this?

Get operational support during the handover process and let a competent, impartial third party take a look at your implementation strategies. Because the discrepancy between how you perceive yourself and how others perceive you can set a costly trap that you will find difficult to get out of.



[1] Vgl. S.52, Deutschlands nächste Unternehmergeneration, Eine empirische Untersuchung der Einstellungen, Werte und Zukunftspläne, 5. Auflage und Schwerpunkt „Strategie“, FIF, 2019


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