Why succession outside the family is becoming more important

Marco Oliverio: Yes. Experience shows that succession within the family becomes more complex with every handover. In the first generation, only a few people are usually involved. By the second and third generations, the number of owners can grow quickly, bringing different interests and expectations.

This increasingly reduces the scope for workable solutions and makes agreement harder to reach. In practice, this often means that an external sale becomes not just an option, but the most realistic form of transfer, even if many families would like to keep the business in the family.

Pascal Zumbühl: Our study shows that when ownership is transferred, selling to outside buyers is slightly preferred over an MBO. When management is transferred, the balance is even.

In practice, we often see a combination of both. Ownership is transferred to external private investors as well as long-standing employees. This can work well because the existing management already knows the company, its employees and its business partners very well. At the same time, external buyers bring fresh perspectives and new ideas, which can open up further growth potential.

Ultimately, the choice of succession route depends on the company’s individual situation, including which options are available, as well as the owner’s personal and business goals.

Pascal Zumbühl: A sale to outside buyers often leads to a higher sale price and, as mentioned, brings fresh ideas and new perspectives into the company. A transfer to long-standing employees, by contrast, creates continuity and stability, including in the corporate culture. However, there is a risk of becoming too inward-looking.

Marco Oliverio: From an advisory perspective, an MBO is challenging to implement. Internal candidates know the company very well, but they do not always have the financial means to buy it on their own. Many are at a stage in life with major personal commitments, such as family responsibilities, home ownership or ongoing pension and living costs.

For sellers, this means an MBO often requires more flexibility, whether on price, payment terms or seller loans. As a result, the outgoing generation may remain financially involved for longer and continue to bear part of the transaction risk. A sale to external buyers is often easier to structure in this respect, but it requires the company to be well prepared from an organizational and staffing perspective.

Marco Oliverio: It is a long process which usually happens in three stages. First, business owners look for a solution within the family. If it becomes clear that this will not work, they next consider an MBO. Only if this is not possible does a sale to external buyers move into focus.

Each of these stages can take several years. It is therefore often eight to ten years before the company is actually sold.

Marco Oliverio: The basic rule is this: if a sale to an external buyer is planned, the company itself also needs to be ready.

We often see assets in the company that are not needed for operations, such as real estate, land or private collections. These items should be dealt with before the sale.

Clean documentation of all processes and agreements, both internal and external, is also key. Only once transferability is ensured does the company become truly attractive to external buyers. And only then can the best possible price be achieved.

Pascal Zumbühl: External consultants are extremely important. Succession quickly touches on legal, tax, strategic, organizational and financial issues. Specialists can help reduce these complexities.

Interestingly, company owners in the Succession Study were quite skeptical about this. Only 28% said they would be willing to involve external consultants in the succession process.

The main reason against using them is cost. In the overall calculation, however, these costs may prove to be a worthwhile investment. For example, external specialists may increase the chances of a successful succession or help achieve a better sale price.

Pascal Zumbühl: Yes. Succession exchanges are a very good example. They give business owners who are looking to sell access to a large pool of potential buyers, increasing the chances of an attractive sale price. According to our survey, older owners in particular remain cautious, while younger generations are more open. 

Marco Oliverio: Handing over your company is an exceptional situation for business owners. Many only go through the process once. For specialist consultants, by contrast, succession planning is part of their everyday work. They know the typical pitfalls, help to structure the process and develop different options early on.

They support the company step by step, from making sure it can be transferred to finding suitable buyers and answering tax- and wealth-related questions.

At UBS, we work with an internal team that covers all the relevant areas of expertise. The E&E desk or the responsible corporate client advisor often supports business owners five to ten years before the planned handover, guiding them through succession in a structured way. The aim is always to implement the best possible succession solution, whether within the family, within the company or with external buyers.