The generational transition is the process by which the ownership and management of a company is transferred from one generation to the next. This phenomenon, common especially in family businesses, represents a critical moment for the continuity and survival of the company itself.
What is the Generational Transition?
Essentially, generational handover is the transfer of control of a business from the founder or current owner to a successor. This successor can be a family member, an internal executive, an outside buyer, or an investor. The process is not only about the legal ownership of the company, but also about the transmission of skills, knowledge, values and corporate culture.
The Phases of the Generational Transition
The generational transition is generally divided into several phases:
- Scheduling: It is the phase in which the entrepreneur begins to consider the future of the company, identifying potential successors and defining the criteria for the transfer of leadership and ownership.
- Successor Formation: The successor is prepared to take control of the company, through a training course that may include operational experiences, support and coaching.
- Transition: This phase involves the progressive transfer of responsibilities, where the successor begins to make key decisions, often supported by the predecessor.
- Consolidation: Once the transition is completed, the successor fully assumes the role of leader and owner of the company, consolidating his position and eventually implementing new strategies.
Why Is It Important?
The generational transition is crucial to ensure the continuity of the business. A well-managed process can ensure that the company continues to thrive, while maintaining its identity and competitiveness. However, if not properly planned, it can lead to internal conflicts, loss of value and, in the worst cases, the cessation of business.
Managing the generational transition is particularly important in family businesses, where personal dynamics can complicate the process. It is essential to approach the transition with a clear strategy, involving all stakeholders and, often, relying on expert advisors to guide the transition.
What options does the entrepreneur who is affected by the generational transition have?
In the context of the generational transition, entrepreneurs have different alternatives to ensure the continuity of their company. Here are some of the main options:
1. Family Succession
- Transfer to children or other family members: The most traditional option is to transfer ownership and management of the business to one or more family members, usually to children. This solution allows the ownership of the company to be kept within the family, but requires adequate preparation and careful planning to avoid family conflicts and ensure that the successors have the necessary skills. Often this option is not feasible because there is no successor in the family or it is present but considered inadequate.
2. Transfer to third parties (M&A)
- Sale to external investors: If there are no family members willing or able to take control of the company, the entrepreneur can sell the company to an outside investor. This option may include selling to a private equity fund, to another entrepreneur, or to a large company in the sector.
- Sale to a strategic partner: The entrepreneur can sell the company to a business partner or a competitor, often with the aim of creating synergies and valuing the company.
3. Search for an external successor
- Looking for a young external manager: If there are no family members willing or able to take control of the company, the entrepreneur can look for an external successor. The successor may, for example, be a young manager with experience in the sector who will support the entrepreneur and then gradually take his place. This option allows the entrepreneur to keep the company shares, delegating responsibility and operational management.
4. Management Buy-Out (MBO)
- Purchase by Management: This option involves selling the company to existing management. Management buy-out can be an attractive option because the management team already knows the company and can ensure a smooth transition.
5. Liquidation
- Closing and Sale of Assets: If none of the options are viable or desirable, the entrepreneur may decide to liquidate the company, selling all the assets and closing the business.
Conclusion
The generational transition is a key moment in the life of a company. This is not just a transfer of ownership, but a real change in leadership and strategic vision. For this reason, it requires careful planning and a structured approach to ensure that the business continues to thrive over time.
The choice of the best option depends on the specific circumstances of the company, the wishes of the entrepreneur, and the availability of suitable successors. Planning the generational transition in advance and with the help of experts can make the difference between the success and failure of the transition.
