Business sale or family succession?
Business sale or family succession?
For more than 20 years the Polish enterpreneurs has been creating the domestic economy. After years of fight against communism, the planned economy has been replaced by open market rules which allowed small private undertakings to develop into large and dynamic enterprises. Nowadays, the businessmen who started their companies before or at the beginning of the transformation achieve the age level, at which the work is not their priority any more. Issues such as hobbies and passions, time spent with grandchildren, travelling, voluntary work or new business ideas become more important thus they begin considering the retirement. Then the question arises: “how should I secure the business and estate created for years?”. The first answer will be to hand over the company to children or other family members.
But is it always a right thing to do?
What can be done with a company when its owner wants to retire? There are many possible solutions, some of which are detailed below:
- A company can be sold to branch or finance investor. To resolve doubts immidiately, it should be stated that private equity funds usually do not buy 100% shares of a company, although cases of this type are possible.
- A company can be sold to the board of directors and/or to employees. In this case there are also a few finance possibilities (LBO, MBO, payments from future income),
A comapny can be sold to the family members.
- Firstly, any family member will have to be willing to repossess the business and secondly, the family member must be suitable.
- A company may not be sold and it will still belong to the retired businessman, yet the company management will in hands of the professional board of directors and business control will be undertaken by the experienced and trusted supervisory board.
- Finally, a company may be placed on stock exchange, with the management given to the professionals.
The above solutions are not all possibilities, yet they constitute the most popular ways to derive benefits from the business value created for years.
When should the business be not handed over?
Blackpartners know that selling the company and not handing it over to the family members may generate conflicts. We definitely advise passing the property to children or other descendants, which allow us to develop multigenerational enterprises, so rarely found in the Polish economy. Unfortunately, handing over the business to the family members is often a mistake, for which there are at least three reasons:
- Firstly, it is possible that any of the children wants to inherit a company. They prefer their own hobbies and passions and do not identify with the business concerned. Enterpreneurs’ children are often tired of long-lasting protection of their parent and subordination of all life aspects to the business. They just want to keep away from the firm.
- Another possibility is the presence of a few possible successors and the lack of communication among them concerning the ways of development and management of the company. The owners do not want to hurt any of them and thus do not know how should the roles be divided. As a result, a few concepts may be present concerning the development and management centres which will head for the end of long-term business creation.
- Third possible situation is the lack of relevant successor who could take over the business responsibly. A succession is often concerned as a single ownership transfer and thus the successors are often not prepared for this role. A successor, however, should know the enterprise handed over to him/her very well!
On the Polish market there are some examples of responsible and well-thought successions. Sebastian Kulczyk and Dominika Kulczyk had been engaged in their father’s business for many years. Dominika has been creating her father’s image for many years, Sebastian, in turn, has taken part in the general meetings of the company. He began supervising more important projects, and at the beginning of this year he took over the management of Kulczyk Investments.
A succession in VOX group constite an almost perfect process of this kind, as Piotr Voelkel Senior had gradually taught his son, Piotr Junior how to manage the business, and finally handed over the company management to him. It has been one of the few model successions in the history of our market, for which Blackpartners can be pride of.
A succession is a long-lasting and multistage process of property and management transfer to the family members. Our company provide consulting services to family companies, thus we would like to persuade our clients to planning and performing a family succession, as it is family business that builds our economy and allow creation of multigenerational properties. Nevertheless, if an enterpeneur has no successors or the successors are inappropriate for this role, a business sale should be taken into account. In such a case, children will be also financially secured, yet their resourcefullness, creativity and inventiveness will be liberated.
Anna Jasik – Partner, Strategy Department
Mikołaj Lipiński – Partner, Transaction Advisory Department