Thoughts on Business Transfers in Europe
This topic will become especially relevant for family businesses that, for one reason or another, have not developed a business successor within the family. There are many reasons for that – first of all, not every child wants to follow their parents’ footsteps. Without a proper successor, there is a need to attract professionals from the outside and even think about selling the business. Audrius Zabotka, an expert of business transfers and succession, says: “Looking inside of successfully developed businesses, we see that there is no one-fits-all scenario – some business owners transferred businesses to successors, others relied their business development on outsourced professionals. In any case, every family business founder had to address the question of how to ensure the continuity of the business – entrust its management to family members, who could and would like to further expand it, or, perhaps, sell the business to unrelated buyers. And such an issue will have to be addressed in the coming years by many family businesses. There is no one right answer what to do in this situation because each business situation is individual and unique. However, in order to keep a business running successfully, it is necessary to identify the issue of business transfer and this issue must be perceived by the business owner as a significant and task that need a lot of focus and timely decisions.”
“Preparation for business transfer is not a few days job – a properly planned and implemented business transfer process can take 3-5 years. After all, to prepare a business for sale or transfer, it is necessary to properly arrange and prepare not only documents and administrative part, but also business processes. If a potential business successor lacks the necessary competencies, it is expedient to create a training and education plan, find a business transfer form suitable for both parties, transfer the accumulated experience, know-how, contacts, etc.,” notes A. Zabotka.
In a time of economic crisis caused by pandemics, business owners and managers must first and foremost address the issues of business liquidity, continuity and survival issues. However, the development of a business transfer strategy should not be postponed to the distant future, as life is full of surprises, and sometimes, unfortunately, unpleasant ones. Imagine that the sole owner (shareholder) of a business, as well as the manager of a company, dies unexpectedly. If he or she was the only person authorized by the company in state institutions, as well as the only person with the right to sign documents, then the business will face high survival issue, as legal inheritance proceedings can take up to 3-6 months. In that case only one question matters –will business be able to survive for such long period without the head of the company, without the possibility to conclude or adjust contracts, make transfers in banks, fulfil their obligations to suppliers and creditors, pay salaries to employees, etc.
Over the next decade, 500,000 businesses in the European Union will face business transfers each year. Those businesses are creating jobs for more than 2 million Europeans. Unsuccessful or failed business transfers cost not only for business owners and their families, workers, but also for states, as lost jobs increase rates of unemployment, increase the need for social benefits and reduce tax revenues.
In 2011, European Commission published “Business Dynamics” study, where was estimated that 150,000 companies with 600,000 employees are being lost in Europe each year as a result of failed business transfers. It is worth to mention that business transfer in the European Union has already become acknowledged as essential issue and has some targeted funding. The project “Innovative Business Transfer Models for Small and Medium-Sized Enterprises in the Baltic Sea Region” (INBETS BSR), funded by the EU Interreg Baltic Sea Region Program, is one of the examples of such funding. The project is being implemented with partners from countries around the Baltic Sea region (lead partner – Baltic Sea Academy (Germany)). The INBETS BSR project aims not only to develop the most effective models of business transfer, but also to contribute to the business support system, which is needed to better identify and understand business transfer issue and purposefully fund its solutions, ” notes the Vilnius Chamber of Commerce, Industry and Craft general director dr. Almantas Danilevičius.
– Written by the Vilnius Chamber of Commerce, Industry and Crafts