Business transition

Family business business transition case studies
10 points when considering business transition
Effective succession planning (in German)

Possibly the most important business decision you will ever make. And almost certainly the toughest

For a family business, transition is a once-in-a-lifetime decision. Perhaps no challenge has as much potential to exacerbate the special stresses—or, conversely, highlight the special advantages—of operating a family business.

And as if the business, emotional, legal, and technical issues weren’t thorny enough, consider this daunting fact: only about 30 per cent of family businesses survive into a second generation.

As reluctant as many families may be to tackle the issue, the health and longevity of a family business depend on careful transition planning—and on communicating the results of that planning to the right stakeholders at the right time. Doing so will increase the likelihood that your business will endure well beyond the leadership transition, delivering lasting value to your family.

Turning generational change into success

At PwC’s Family Business Services, we have an experienced team, arrayed across our global network of firms, dedicated to helping family business owners develop and execute each step in their succession plan, so that the whole process runs as smoothly and efficiently as possible.

  • Come Think With Us. What are your most important goals—both commercial and personal—in thinking about your business transition? What are your business’s key value drivers? We start by selecting the right people to discuss these issues with you, and the challenges you’ll need to navigate along the way.
  • Succession strategy. We then use the findings of these Come Think With Us sessions to clarify a clear succession plan—including timing, future ownership and management shares, and issues of capital.
  • Sale of the business. If a sale is the best option, we work with you to get the best price for your business by identifying the right buyer, while respecting your confidentiality.
  • Tax-efficient structuring. Regardless of the transition vehicle you chose, we can help you negotiate a commercially optimal, tax-efficient solution to transfer the ownership of your business when the time is right.

Transition planning is one area where your leverage tends to diminish with time. The decisions you make will affect the future of your business, customers, employees—and, most importantly, yourself and your family. Therefore it is often wise to solidify a business succession plan sooner, rather than later.

We invite you to contact us to explore how we can help you turn your moment of biggest challenge into one of your biggest opportunities to create a legacy of success.

Case studies

The client's challenge

The founder wanted to transfer the family business to his four children. He was concerned, however, about what would happen if one or all of his children developed financial problems or wanted to sell their share in the family business for cash. The founder also wanted to ensure that no non-family member could become a shareholder in the family business.

Our response

We helped our client create a step-by-step succession strategy. We also drafted individualised donation contracts — including tailor-made withdrawal rights, whereupon, given certain events, such as bankruptcy of one of his children, that child’s share would revert back to the founder. Additionally, we drafted new articles of association for the company, including special provisions preventing the transfer of shares to non-family members without the consent of the other shareholders.

The client's challenge

The founder of the family business had no (sufficiently qualified) successors in his family. Nonetheless, he wanted the business to thrive for the long term — securing earnings for the benefit of the family and continuing to operate in his spirit even after his death. Therefore, he decided that a sale to an outside party would not be an option.

Our response

We presented several options to the founder. The one he selected was a transfer of the business to a family trust. Although the family forfeited ownership of the business upon its transfer to the trust, we designed special provisions for the trust’s by-laws ensuring that family members would continue to participate indefinitely in the profits of the business. We also incorporated in the by-laws certain management guidelines which safeguarded the spirit of the founder into the future.

The client's challenge

The founder did not wish to transfer the business to family members because he saw no family member qualified to manage it. He decided his only option was to sell the business to a third party.

Our response

We helped the founder with several transaction-related activities — including preparing the necessary documents, editing the financial data and performing due diligence. Later, we helped him assess the various purchase offers, select the best offer, and optimise the tax structure of the family business prior to closing. We also drafted the purchase agreement and supported the founder in his negotiations with the purchaser.

The client's challenge

The founder of a German family business was its sole shareholder and managing director. He died in an accident without any succession plan. The disposition of his estate would have triggered extremely high inheritance tax — and caused a succession in ownership and management that was not desired by all stakeholders. The family had to find a way to reduce or avoid the steep inheritance tax and to steer the succession in the right direction.

Our response

We presented several options to the family members, laying out the tax consequences of each one. In the end, the widow chose to waive her right to succession, clearing the way for her children to qualify as heirs.

This waiver entitled the widow to a matrimonial claim against the children — something that is not subject to German inheritance tax. The children, for their part, were able to reduce their inheritance tax burden to the extent of the matrimonial claim paid to their mother. Thus the collective inheritance tax to the family was significantly reduced — and yet all family members received a portion of the estate.

We developed the plan, implemented the entire structure, drafted all necessary documents, evaluated the decedent’s estate, and prepared the inheritance tax return.

What makes family businesses different?

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