Search funds help find the next generation of entrepreneurs
Families dream of a seamless transition of their businesses to a successor - specialised platforms can help.
If a family has no children, or the children they have are not interested in taking over the family firm, this can pose a serious challenge for a small or medium-sized business. What will happen to the firm? Should it simply be abandoned? Or sold? There are nearly 470,000 companies with 499 employees or fewer in Germany – demographic trends mean that the issue of who will take over the company is becoming increasingly important. According to a study conducted by the promotional bank KfW, another problem is that interest in self-employment is declining in Germany.
Search funds resolve problems of succession
Many entrepreneurs are not aware of one possible solution to the problem of succession. For some years, search funds have been doing their best to resolve the succession problems facing SMEs. Three parties are involved in this model: the current owner who wishes to pass on their business. The potential takeover candidate - for the most part these are young people who would like to be self-employed but do not wish to start their own business. And the third and possibly decisive party is an investor or pool of investors. They finance the takeover and receive a stake in the company in return.
According to a report in the German daily “Frankfurter Allgemeine Zeitung”, Germany is home to around 15 search funds who help with company takeovers. The newspaper reports for example that Jan Woitschätzke, an investment banker, has been investing in search funds for years. He explains that the great strength of the concept, which was originally developed at Harvard University, is “that one works together with the business individuals”.
Nexxt-change – the German government’s search fund
The German government also has its own search fund. The Federal Ministry for Economic Affairs and Climate Action runs nexxt-change, an internet platform that puts firms interested in finding a successor in touch with entrepreneurs wishing to start their own business. Various banks, consultancy firms and chambers of industry and commerce are also involved. Sonia Maaß, a 30-year-old master goldsmith based in Hamburg, was able to acquire a goldsmith’s workshop in the Hamburg district of Harvestehude with the help of nexxt-change. The platform set up talks between Maaß and the previous owners and helped her deal with the formalities of the takeover. “I’ve been able to make a small dream of mine come true here. I hope I will be able to pursue it for many more years to come,” Maaß says on the nexxt-change website.
