The stages of transferring a business
Identify opportunities
The issue of transfer is particularly important for small and medium-sized companies, which are less visible to international investors but which are a fundamental pillar of the national economy. In Luxembourg, SMEs represent 75% of jobs. Given that a third of business owners are expected to retire in the next few years, the subject is becoming more important. What's more, family transfers are becoming less and less the norm, with 30-35% of European companies finding it difficult to hand over to the next generation.
Many factors can prompt a transfer, the most common of which are:
- The assigner’s retirementA desire to reduce workload
- The business owner’s health
- The assigner may also have other personal projects that they would like to pursue with the proceeds of the sale.
In addition, the idea of selling the company may come from an external opportunity, or from the desire to take the company in a new direction, in line with the assignee’s individual profile.
It is important to be able to detach yourself emotionally from your company in order to think about the future of the company and its employees.
Ask the right questions
Thinking about the future is an important step towards a successful handover. You must be ready to hand over the reins to a new leader and be mentally prepared that you will no longer be required.
So the assigner needs to think about whether they want to sell and start preparing their company for a future transfer. They then have to decide whether they want the staff to take an equity stake, whether they want to withdraw completely or gradually, whether they want to mix a number of considerations, etc.
When a business owner decides to sell, they must assess the price at which they would be prepared to sell the company, particularly if it includes a real estate component that a buyer might not wish to take over.
You have to be transparent with the assignee, because it is the assignee who will be exposed to potential risks on several levels. You have to analyse your own situation as the assigner(s) and also as the assignee(s).
At the same time, the assigner needs to consider whether the business should be passed on within the family, or taken over by employees, competitors, customers or strategic investors. They need to talk to a number of buyers to find the profile that best meets their expectations (selling price, business development potential, employee takeover, etc.).
Buyers can have very different characteristics:
- A strategic buyer will sometimes be able to offer a higher sale price thanks to the synergies that can be achieved.
- A financial buyer can integrate the company into a broader development strategy.An internal assignee will already be familiar with how the company’s structure works.
- This is when business owners will call on specialists if they feel the need, to help them assess a range of sales prices, to support them in preparing the company for future transfer, etc.
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