Study on Company Succession: Emotions Complicate Handover in Swiss Family Businesses

1 September 2022. For the fourth time since 2009, the Center for Family Business at the University of St.Gallen (CFB-HSG) and Credit Suisse are jointly publishing a study on the topic of business succession at Swiss companies. 

Succession planning is one of the most important strategic tasks for every entrepreneur. Many owners even deal with the issue of succession twice at short intervals: once as the party taking over and once as the party handing over. The study shows that two-thirds of the entrepreneurs who have taken on a successor within the last ten years have already thought about their own succession and 15% have already formally arranged for it. However, saying goodbye to one's own company is not easy for many, as one's own company often represents a life's work. The survey results bear witness to this: In 80% of the company transfers carried out over the last ten years, the predecessor's retirement was due to health or age, and the handover of the company is therefore usually delayed until the last moment.

Handing over a life's work is not easy

Many predecessors can only let go of company management with a heavy heart and can still be found in the company years after the handover: According to the survey, almost half of the handing-over generation spends at least one hour a week in the company even two years after the handover. On the one hand, successors can benefit from the handover: More than half of the successors surveyed stated that they could count on the advisory voice of the predecessor in difficult decisions. On the other hand, their presence can prevent successors from developing entrepreneurial autonomy.  That is why it is important to regulate the various responsibilities through a clear division of tasks: Around 75% of the entrepreneurs surveyed consider this aspect to be very important for a successful handover process. "As the party taking over, it is important to weigh up whether the benefit that the successor can draw from the experience of the predecessor outweighs the costs in terms of undesired influence and the associated potential for conflict," says Marie Klein, doctoral student and research associate at CFB-HSG. After all, conflicts are not uncommon during the handover: in the survey, as many as 27% of entrepreneurs stated that they experienced conflictual moments during the handover process.

Between professional advice and emotions

In the context of business succession, various topics are also addressed for which the necessary expertise is often not available within the own company or for which there is simply not enough time to deal with, which is why external help is needed. According to the survey, around three quarters of the entrepreneurs surveyed see a certain to very high corresponding need for tax issues. They also like to rely on external advice when it comes to strategically preparing the company for the handover and when it comes to financial issues: around 40% see a certain or very high need for support in each case. "Timely and thorough financial planning increases the scope of action for the retiring managing director, for example, to tap optimization potential in pension provision without at the same time burdening the company's finances in the short term," says Prof. Dr. Thomas Zellweger, Director of CFB-HSG. 

Taking external factors into account

In addition, unforeseen events can influence the timing or structure of the handover. The changes in the economic environment in the wake of the corona pandemic have led some entrepreneurs to bring forward their own business handover: This was reported in 6% of cases (see fig.). But a stroke of fate or pressure from competitors, family or business partners can also unexpectedly accelerate the succession process. "Those who set the course for a smooth handover at an earlier stage start to deal with the emotional topic years before the actual handover," says Alexandra Bertschi, who is responsible for the specialist management of SME succession planning at Credit Suisse.

About the survey

As with previous editions, the current study is based on a survey of entrepreneurs: Over 150 small and medium-sized enterprises (SMEs) as well as large companies with more than 250 employees took part in the survey. The companies surveyed are those that have implemented a succession solution within the last ten years and/or where a handover is imminent in the next ten years. While these two-time constraints do not allow for direct comparisons to previous surveys, they increase the quality of the results as the survey focuses on those companies for which succession is particularly relevant. The survey was conducted on an anonymous basis by Credit Suisse in March and April 2022. The anonymized data was processed and analyzed by CFB-HSG and Credit Suisse.

The Succession Study 2022 "Business Succession in Practice" and further information on the topic can be found at www.credit-suisse.com/nachfolge.

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