Taking over an existing company is a worthwhile alternative to setting up a new business. Entrepreneurs can benefit from an established reputation, production structure and customer network, making their start in business easier.
Business owners are ageing and one-third of them - representing some 690 000 businesses and 2.8 million jobs - will be retiring in the coming years. This will leave many companies needing new owners.
In Europe, about 450 000 firms are transferred every year. It is estimated that one-third of these firms, representing 600 000 jobs, may be lost every year due to inefficiencies in the legal, tax and financial systems, or to too shallow or insufficiently transparent transfer markets.
To improve conditions for transfers of ownership, the European Commission has recommended different measures to the authorities in EU countries.
In 2011, the European Commission published a communication called "A review of the Small Business Act", asking EU countries to:
- develop user-friendly and widely supported marketplaces and databases for transferable businesses;
- provide training and support to increase the number of successful business transfers, including communication campaigns to raise awareness of the need for early preparation of business transfers.
Ensuring access to finance
Transferring ownership actually requires more financing than starting a business. Loans, guarantees and start-up facilities should be available not only for setting up new businesses, but also for taking over existing ones. Owners need to be better informed about mezzanine finance (combining loans and equity) - particularly suitable for business transfers.
Raising awareness and support mentoring
More companies could be properly taken over by new owners if transfers of ownership were planned in advance: this applies not only to the original managers but also to their successors. New owners need a transition period to get to know the business.
The complexity of these operations makes practical assistance vital throughout the procedure.
National authorities should also actively promote and support mentoring schemes provided by chambers of commerce, guilds and similar bodies.
Organising transparent markets for business transfers
The matchmaking between potential sellers and buyers should be supported by transparent services. Such services have to go beyond mere databases listing available businesses and offer a comprehensive mediation service for smooth transfers in a spirit of partnership.
Ensuring transfer-friendly tax systems
These can take one of any number of forms:
- tax exemptions on profits from selling a business (particularly when re-invested in another business or used to finance a business owner's retirement);
- reform of inheritance and gift taxes (for transfers within families);
- tax exemptions on investments by workers in their companies (for employee buy-outs).
A 2006 Communication from the European Commission suggested almost half of EU countries had not implemented its 1994 recommendations to this effect. More needs to be done in each country to address business transfer needs.
Check also the legislation on this topic in: