Succession planning: how to make succession in family-owned businesses a success

The widespread claim that only about 30% of family businesses survive into the second generation and just 12% of those, who make it are passed on to a third generation, has never been more relevant in the Baltic countries.

Karl-Erich Trisberg, WALLESS partner and attorney-at-law has recently sat down for an interview to discuss family businesses and succession planning with Dr. Christian Bochmann, partner at Flick Gocke Schaumburg law firm in Germany, lecturer at the Law Faculty of the University of Leipzig and Managing Director of the Center for Family Business Law of the Bucerius Law School in Hamburg.

In Germany, the traditions of family businesses are very strong. Here in the Baltic states a significant number of business owners, who started their companies at the dawn of re-established independence, are now looking forward to retiring or focusing on other ventures and facing similar challenges. Those include:
• shortage of qualified and suitable successors willing to take on the responsibility
• miscalculation of how long it takes to prepare a company for such a fundamental change
• lack of clarity in the succession plan
• absence of common ground between generations
• inadequately identified role descriptions.

“More often than not clients approach lawyers too late. On some occasions, they do not come at all, assuming they will be able to work it out naturally,” says Dr. Bochmann, who is also a co-author of a recently published book on family-owned businesses and succession planning “Generation Verantwortung – Wenn Eigentum Verpflichtet”.

Unfortunately, this is usually the worst option. Dr. Bochmann advises that it is easier to find solutions when the older generation is still in business, is available to share their expertise, and put to good use the respect they have in the eyes of successors, employees, partners, and customers.

It is advisable to approach lawyers during the planning phase. Five years before the actual handover would be the ideal timeframe to carefully plan the succession to make it a success.

Although selling the company is usually not a desired option, it can make sense and be in the best interest of all stakeholders if family succession is not a promising option.

The interview (in Estonian) with Dr. Bochmann is available at Edasi.org: https://edasi.org/149261/dr-christian-bochmann-vahe-on-noori-kes-oleksid-valmis-pereari-vastutust-kandma-elutoo-uleandmine-jargmisele-polvkonnale/

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