Not only locusts buy companies: There are good reasons for medium-sized entrepreneurs to invest strategically in a company purchase. In the first part of this article, we explore the question of why it now makes a lot of sense for entrepreneurs to invest strategically in buying companies.

For some time now, we have been observing trends that, taken alone, would be manageable for entrepreneurs, but taken together are highly explosive for entrepreneurs who rely exclusively on organic growth with their companies.

1. a megatrend: demographic change

The figures of the Federal Statistical Office speak a clear language: the persistently low birth rates since the mid-1970s and the constantly increasing life expectancy have led to a drastic change in the size ratio between the generations. The proportion of people under 20 in the population fell from 28.4 to 18.2 percent between 1960 and 2011. In parallel, the proportion of people aged 60 and older rose from 17.4 to 26.6 percent.

In perspective, this development means the following ratios for the future: The proportion of people under 20 will decrease from 18.2 to 15.7 percent between 2011 and 2060, while the proportion of people aged 60 or older will increase from 26.6 to 39.2 percent. In this variant, the population will decrease from currently 81.8 to 70.1 million by 2060. (Source: Federal Statistical Office: www.destatis.de, online database, 10th and 12th coordinated population projections: Population of Germany to 2050, Population of Germany to 2060, licence: Creative Commons by-nc-nd/3.0/en. Federal Agency for Civic Education, 2012, www.bpb.de)

This simply means that the number of people potentially coming to work in companies will continue to fall and thus the opportunities to grow a company organically will steadily decrease. In their studies, the DIHK and KfW have been pointing out for years that the shortage of skilled workers is accompanied by a lack of qualified staff. Lack of entrepreneurs hin.

2. the economic possibilities: Where to put the money?

The persistently low interest rate level in the euro area is another driver of investment pressure in companies. Successful financial products of the past are just that: The past. No one can yet say what long-term effects the interest rate policy in the euro area will have. Nevertheless, the run on real estate is a clear indicator of the changed investment conditions. Under the current conditions, the purchase of a healthy company that is established in the market can be a sustainably interesting and value-creating investment.

3. size, size, size: markets continue to change towards integrated business models.

Customers expect greatness. The increasing complexity of global markets and legal frameworks are forcing companies to act. Limited capacities at different levels make companies enter into cooperations and mergers. Customers expect regional proximity, services from a single source. The portal solutions of the internet are creating ever higher expectations of convenience among customers and require processing logistics for individual product suppliers that can rarely be managed by the company itself. The huge marketing budgets of the “big players” create a perception for products and services that small and medium-sized enterprises can rarely generate for themselves with their own resources. This trend can hardly be overlooked.

4. the opportunity: sales offers galore

The KfWitelstandspanel 2015 clearly shows the topicality of this issue: Three years ago there were ?only? 530,000 small and medium-sized enterprises wanted to deal with business succession, over 620,000 companies in Germany will be looking for a suitable successor in the next three years. The proportion of German family entrepreneurs looking for a solution for their company has thus risen to 17%. Three years ago, this figure was still 14 %, as Klaus-Christian Knuffmann reported in his stocktaking on the Company succession in the SME sector described.

As is so often the case, times of change - caused by the changes in the markets described above - present opportunities to act in a targeted and strategic manner. As internal succession solutions are unfortunately often not possible, a handover to an external buyer is in many cases the only alternative ? if one does not want to simply bury one’s life’s work.

This is where all those companies come in that decide to merge, expand and/or diversify by buying another company instead of trying to grow on their own.

The answer: a company acquisition can consolidate the market position

Once an entrepreneur is convinced enough to recognise the chances of buying a company, it’s “only” a question of “How do I implement such a step? This is where succession specialists such as KERN - Unternehmensnachfoge. Erfofolgreicher. come into the picture, supporting the company purchase throughout the entire process. In the second part of this blog, you will find out which aspects need to be taken into account from the experience of such projects. Then the succession specialists will discuss important steps of a strategic investment from the perspective of potential buyers or transferors.