Succession Gap

The succession gap describes the distance between businesses up for handover and people willing and able to take them on. It shows in the fact that the number of owners looking for a successor clearly exceeds the number of people interested in taking over. Where no one is found, many owners consider closing their business even though it is fundamentally viable.

The causes lie partly in demographics, as large birth cohorts reach retirement age while fewer people follow in start-up age brackets, and partly in the companies themselves: businesses with heavy owner dependence, unclear figures or an investment backlog struggle to find a successor even where interest exists in principle. For M&A this means a structurally supply-heavy market in which buyers can choose and sellers particularly depend on a professionally run process.

For consolidators and platform strategies the same development is the basis of a lasting supply of targets. The gap is widened by the fact that many businesses are too small or too dependent on the owner for institutional buyers, while private successors can barely finance the purchase price. The result is closures despite ongoing trading.