SME succession: takeover instead of closure

Building a company over decades is a life's achievement. It is all the more painful when, at the end, there is nobody to carry it on. That is exactly what Germany is facing on a scale it has not seen for a long time: for the first time, more owners of small and medium-sized companies plan to close their business than to hand it over to a successor.

This article puts the latest figures into context, shows what is actually lost in a closure and describes the routes that allow a company to live on.

The figures: a widening gap

The KfW succession monitor for the German Mittelstand, published in January 2026, is based on a survey of more than 13,000 companies. It paints a clear picture:

Of around 3.87 million small and medium-sized enterprises, some 545,000 want to arrange a succession by the end of 2029 — around 109,000 a year.
At the same time, around 569,000 owners plan to close their business by the end of 2029, about 114,000 a year. One in four companies is considering giving up.
57% of owners are 55 or older, together more than two million people. Twenty years ago the share was 20%.
The reasons given for a planned closure are retirement age (52%), lack of interest within the family (47%) and bureaucracy (42%). Multiple answers were possible.
69% of all mid-sized companies see finding a suitable successor as the biggest hurdle.

The Institute for SME Research (IfM) in Bonn uses a different method and arrives at a smaller, but no less serious, figure. It counts only family businesses whose expected profit is at least as high as a salary from employment plus a return on capital. Of these, around 186,000 are due for handover between 2026 and 2030, about 37,000 a year — 4,000 fewer than in the previous period. The reason is not lower demand but the weaker earnings of many businesses. The IfM itself considers its estimate "probably still optimistic".

The two figures do not contradict each other. KfW captures the plans of all small and medium-sized companies, including solo self-employed people. The IfM estimates what can realistically be taken over on the market.

A third perspective comes from the advisory practice of the German chambers of commerce. The DIHK succession report 2025 counts 9,636 senior entrepreneurs seeking advice, the highest figure since 2007. They are matched by only 4,016 potential buyers. Around 5,620 companies are therefore without a candidate, and this gap has almost doubled since 2019. 27% of the owners advised are considering closure.

Why so many companies remain without a successor

The family is no longer the default

According to an IfM meta-analysis of 23 studies, only just over half of successions that actually take place go to the owner's family. 17% of companies are taken over by employees, 29% go to external buyers. Owners who counted on the next generation increasingly find themselves without a plan B.

There are too few people willing to take over

Only 17% of people who founded a business in 2024 took over or invested in an existing company. According to KfW, that share has more than halved since 2002. The demographic wave is meeting a narrow group of potential buyers.

Preparation starts too late

The chambers of commerce recommend starting preparations three to ten years before the handover, starting the search at least three years before and completing the handover itself at least twelve months before the planned exit. In practice, three quarters of owners come forward only two years before or even later. 38% are considered poorly prepared, and 70% have no contingency plan in case they suddenly drop out.

Price and letting go

According to the DIHK, 36% of senior entrepreneurs ask for an excessive purchase price, and 28% find it hard to let go. KfW puts the average asking price in the Mittelstand at €499,000, with a median of €375,000. On the buyer side, almost four in ten potential acquirers have difficulty financing a takeover.

The investment backlog before a handover

Companies with short-term succession plans invest around 32% less, according to KfW. That is understandable: anyone about to step down avoids large outlays. But every year without investment makes the company less attractive to a successor — a cycle that can end in closure.

Liquidation: what is actually lost

At first glance, closing down looks like the easier route: no search for a buyer, no negotiations, no due diligence. The numbers tell a different story.

The value of a going concern

In business valuation, the liquidation value is regarded as the lower limit of a company's value. From it, the costs of winding up, a possible redundancy plan and taxes on realised hidden reserves still have to be deducted. What is largely lost in a break-up never fully appears on a balance sheet: the customer base, current orders, established processes, the know-how of the workforce, the name in the market. Machinery and inventory sold off individually under time pressure typically fetch significant discounts.

No tax shortcut

For German tax purposes, giving up a business is treated like a sale under Section 16 of the Income Tax Act (EStG). Assets that are not sold are valued at their fair market value. The allowance of €45,000 from age 55 applies only once and is reduced for gains above €136,000. A closure therefore brings no tax advantage of its own. The difference lies solely in the value achieved.

Time, obligations, liability

Closing a business means ending employment relationships, and under Section 622 of the German Civil Code (BGB) statutory notice periods can reach seven months for long-serving employees. For a GmbH, remaining assets may only be distributed one year after creditors have been called upon (Section 73 GmbHG), and liquidators are liable for breaches. Winding up often ties the owner down for longer than expected.

An honest caveat

Not every planned closure concerns a healthy company. An earlier KfW analysis (data from 2020) shows that businesses planning to close are, on average, considerably less profitable: 34% were loss-making, and the median annual profit was €5,000 compared with €40,000 across the Mittelstand. That is precisely when it is worth asking whether an acquirer with capital and operational experience can change the picture — for example through investments the previous owner no longer wanted to make.

Takeover: what it preserves

A takeover preserves what a liquidation destroys.

Jobs: In a share deal, the employer remains the same anyway. In a transfer of business, employment relationships pass to the acquirer under Section 613a BGB, and dismissal because of the transfer is invalid.
Processes, products, supply chains and customer relationships remain intact. KfW highlights this explicitly for handovers to management and employees, but it applies to any continuation.
The location and the name: apprenticeships, regional suppliers, the trust of customers who have been ordering for decades.
For the owner: a purchase price instead of liquidation proceeds, and often the opportunity to shape the transition — for example through a limited period of continued involvement, a reinvestment or an advisory role.

The life's work lives on. And that is more than an emotional argument: in most cases it is also the better economic outcome.

Routes to a handover

The KfW survey shows which routes owners would prefer (multiple answers possible): 55% think of the family, 42% of an external buyer, 28% of employees and 24% of co-owners or existing management.

Family: emotionally obvious, but only viable if the next generation wants to and is able to run the company.
Management buy-out: existing management takes over. It knows the business but usually needs capital and support with financing.
Employees or external management: a management buy-in brings new leadership from outside, often combined with investors.
Strategic buyer: a competitor, customer or supplier that integrates the company into its group.
Operational acquirer with its own capital: an investor that brings not only money but takes on responsibility in management itself and continues the business.

When it is time to act

The most important rule is simple: earlier than feels right. In concrete terms:

set up a contingency plan: powers of attorney, access, contracts, contacts
reduce dependence on the owner: spread decisions, customer contacts and knowledge across several people
put documents in order: annual accounts, contracts, permits, condition of the equipment
obtain a realistic valuation before a price becomes fixed in your mind
do not postpone investments just because the handover is getting closer
hold conversations with potential successors and acquirers while there is still time for several options

What is changing in 2026

Two developments deserve attention. On 13 October 2026, the German Federal Constitutional Court will hear a case on the tax relief for business assets under inheritance tax (ref. 1 BvR 804/22). When and how it will rule is open. For owners planning a transfer within the family, the ruling may change the calculation.

At European level, the European Commission published a recommendation in June 2026 to make the transfer of small and medium-sized enterprises easier — with platforms that bring sellers and buyers together, and with tax and legal simplifications. In 2024, the EU alone had almost 8.9 million self-employed people aged 55 and over. Succession is not a purely German problem.

How Evoraxia approaches succession

For owners without a successor within the company, our goal is clear: an orderly takeover, continuation of operations and preservation of the company.

We bring our own capital and invest it ourselves — as equity and debt. Depending on the situation, we take over the company in full or invest as a co-owner. We fill the management role ourselves or support the existing leadership, and we can draw on the operational resources of our own manufacturing companies. A staggered transition, in which the previous owner stays on board for a while, is often the best route.

A first conversation is confidential and without obligation. It is worthwhile before the decision to close has been made.

This article is for general information only and does not replace legal, tax or business advice in an individual case. Figures as of September 2026.

Succession instead of closure: how a life's work lives on