Business transfer planning The link between success and succession Katleen Van Havere, senior expert UNIZO 22 nd of April 2005, Portoroz, SLO

2. I. About transfer of businesses II.Facts and figures (ING study – 2004) III. What needs to be done ?

3. About transfer of businesses SMEs changing hands each year (Netherlands: ; Germany: ; Flanders: ) 2.4 million jobs Who will take over these businesses ? - Some worrying tendencies  More transfers outside the family circle  Starting up a new firm is more popular  Ageing population

4. About transfer of businesses (2) Major socio-economic importance of successful tranfers (job creation!) Preparing the successor ING study, February 2004 : competences (“quality”) and personality of the successor are crucial Also confirmed by recent research (EIM, March 2005, Netherlands) ->

5. Business transfers in the Netherlands, Germany and Flanders ING economic bureau, UNIZO and MKB Netherlands Published February SMEs - industry and services – N, G, F Perspective of the successor Report  Preliminary definitions - focus  Size of the transferred enterprises  Objectives of the transfer  Assistance of advisors  Bottlenecks  Results after transfer

6. Focus ‘Transfer of ownership’ = the transfer of the ownership of an enterprise to one or more persons (private individuals) OR to another company or enterprise, who continue the commercial activity of the enterprise and want to guarantee the continuity  5 types of transfer Phases in the process of transfer Measuring success by ‘growth’ - three categories :  Top of the class  Middle of the class  Bottom of the class

7. Transfer of ownership: 5 types Transfer to private individuals 5. Merger Transfer of ownership Transfer to private individuals Transfer to another company 1. Succession within the family 2. Management-buy- out (MBO) 3. Management-buy- in (MBI) 4. Takeover/ acquisition 5. Merger

8. Phases in the process of transfer of ownership PhasesActions Negotiation and transfer Preparation Post-transfer Orientation – strategy – search for companies Validation – financial, legal and fiscal analysis – finding finances – negotiating and concluding the agreement Implementing changes – reaping rewards

9. Average number of employees involved with a transfer of ownership, by degree of success The Netherlands FlandersGermany Top Middle Bottom Average (weighted)

10. Objectives of the ‘top-of-the-class’- enterprises

11. Assistance of advisors 5 categories  Accountants  Banks  Business brokers  Lawyers  Tax advisors Netherlands : 94 %, Flanders : 91 % Germany : 83 %

12. Appreciation of advisors

13. Major bottlenecks, by type of transfer of ownership NetherlandsFlandersGermany Succession within family No bottleneck (% respondents) 53%70%63% Finding finances 36%16%19% MBOFinding finances 47%60%29% MBIFinding finances 46%39%29% Company culture/cooperation with personnel 17%0%25% Takeover/acqui- sition Company culture/cooperation with personnel 29%31%20% Finding finances 26%27%11% MergerCompany culture/cooperation with personnel 37%31%48% Finding finances 14%19%4%

14. Bottlenecks for the top of the class, by region (in % of the respondents)

15. Results, by region (in % of the respondents) The Netherlands FlandersGermany Increased turnover65%69%59% Increased number of customers 68%59%58% Increased profit58%63%62% Increased employment43%40%31%

16. Dominant type of transfer by degree of success, per region The Netherlands FlandersGermany Top of the class MBI, TakeoverMBOTakeover Middle of the class Family succession MBI, mergerMerger Bottom of the class MBU, mergerFamily succession Family succession, MBO, MBI

17. Business transfers in the Netherlands, Germany and Flanders : conclusions Investing in education of entrepreneurs – importance of professional advice What about family businesses ? How to finance a business transfer ? Paying attention to the market of business transfers ‘pays’ in terms of profit, employment, tax income for the government, innovation

18. What needs to be done ? Parties concerned = EU (EC), national governments, business organisations AND the enterprises themselves Europe ?  Recommendation (1994) – Communication (1998)– Best report (2002) – Final report Vienna (2002) – MAP report (2003) – ‘good practice guide’ (2003)  A new Recommendation (?)  For the future : promotion (business transfers = start-ups!) research support (awareness – training – assistance)

19. What needs to be done ? (2) Business organisations – UNIZO  March, 2004 : UNIZO-conference on business transfers (‘SME-policy-day’)  ‘Action plan’ 1. Sensitisation and information 2. A transparant market place for buyers and sellers 3. Improving the fiscal environment (inheritance and gift taxes) 4. Better financial instruments 5. Investing in professional advice 6. More research to address unanswered questions

20. Sensitisation and information UNIZO training institute (‘Integraal’)  Book (practical guide) – ca issues  Four seminars – autumn 2005 Special program for SMEs with high potential for further expansion (‘KMO Contact’) ‘Startersdag’ : a yearly event for everyone interested in starting up a business Draft code on corporate governance : special attention to family businesses (‘family governance’)

21. A transparant market place for buyers and sellers Launched by UNIZO, April 2005 With the support of the Flemish government Contact mediation system for buyers and sellers in Flanders + practical information and useful contacts/links on business transfer

22.

23. Professional advice ING study : positive correlation between the assistance of advisors and being top of the class Flemish support measure : ‘adviescheques’ : cheques to pay for advice, for 50 % paid by the Flemish government