Who will take over the baton when the boomers step down?

The management level of German business is facing a generational change: according to the Kreditanstalt für Wiederaufbau (KfW), over one million business owners are 60 years or older. The report “Unternehmensnachfolge 2024” (Company Succession 2024) by the German Chamber of Industry and Commerce (DIHK) provides insights from around 48,000 consultations conducted by the DIHK's advisors. These show that around a quarter of a million companies could be affected by premature closures in the next five years. According to the DIHK's findings, there are more than three times as many offers as there are people interested in taking them over. These figures tie in with a KfW survey published at the beginning of last year, according to which around 560,000 of a total of 3.8 million SMEs are expected to be handed over or sold to a successor by the end of 2026. A further 190,000 owners plan to exit the market without a succession plan.

Reasons for the lack of interest in company takeovers

The main reason for this development is the demographic change, which naturally narrows the generation of potential successors. However, this is not the only reason for the bottleneck: high energy costs, inflation-related consumer reluctance, a lack of skilled workers and great uncertainty about future economic policy are causing the target group's interest to wane. DIHK President Peter Adrian comments on this as follows: “Many entrepreneurs feel that they are not being taken seriously by politicians and perceive the increasing number of detailed regulations and small-scale obligations as bureaucratic and often completely disproportionate.” The deteriorating conditions are a major factor that makes entrepreneurship increasingly unattractive for the younger generations.

Politics tries to create measures

Politics has recognized the need for action and is relying on planned initiatives such as the Growth Opportunities Act, the Fourth Bureaucracy Reduction Act or the Acceleration Pact of the federal and state governments. Overall, the measures are intended to relieve companies of tax burdens, reduce bureaucratic hurdles and improve conditions for investment and innovation. However, according to the DIHK President, the decisive factor is whether the resulting relief can be quickly implemented in business practice. This is not yet in sight, as a number of originally planned improvements have already been restricted, such as the adjustments to the loss statement or the taxation of retained profits in partnerships.
 

A look at the various sectors reveals differences. While supply and demand in the hospitality, hotel and retail industries differ by more than fivefold (fourfold in retail), industrial companies appear to be relatively attractive for successors. Here, the excess factor from supply to demand is only 1.6 – a moderate figure in an industry comparison.

Requirements for industrial entrepreneurs are significantly higher
 

The demands on industrial entrepreneurs appear to be higher than in other sectors. Technical expertise and a willingness to pay high prices for existing plant and machinery are required. However, factors such as increased financing costs, high energy costs, a persistent shortage of skilled workers, digitalization pressure, increasing sustainability and ESG requirements, and extensive documentation requirements (e.g. supply chain control) also pose risks for potential successors.
 

The list of challenges is long, and the topic is highly relevant. If industrial companies cannot continue to operate because of a failed succession plan, then, according to the DIHK, this could have serious consequences for upstream and downstream value chains if it results in the loss of special niche services that only a few providers offer.

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You can also read the article “What does young talent management need?” (link to blog post: Young talent management: what protection is needed?) and get information on the appropriate insurance cover for managers.