Business succession can take many different forms, each with its own legal and tax characteristics. The intra-family succession is the classic model — the business is transferred to the next generation, often with the involvement of holding structures or gift arrangements. The management buyout (MBO) transfers the business to existing management, while external succession involves a sale to a third-party buyer. Each model requires a carefully tailored legal and tax strategy.
Determining the right purchase price is one of the central challenges in business succession. The value of a business depends on numerous factors: earnings power, market position, customer relationships, tangible assets, and growth potential. Standard valuation methods such as the discounted cash flow method or the multiplier method provide orientation, but negotiations are ultimately shaped by the specific circumstances of the transaction and the strategic interests of buyer and seller.
Due diligence is the systematic review of a business before the conclusion of a sale agreement. The buyer examines the legal, financial, and operational situation of the target company in order to identify risks and negotiate the purchase price. From the seller's perspective, thorough preparation for due diligence — including a vendor due diligence report — can accelerate the sale process and strengthen the negotiating position.
The purchase agreement for a business succession is one of the most complex contracts in corporate law. It must comprehensively address representations and warranties, indemnification provisions, earn-out clauses, non-compete obligations, and transition arrangements. The structure of the transaction — whether as a share deal or an asset deal — has significant implications for both sides, particularly from a tax perspective.
In a share deal, the buyer acquires the shares in the company — with all its assets, liabilities, and contracts. In an asset deal, only specific assets and liabilities are transferred as selected by agreement. The share deal is simpler to execute but the buyer inherits all existing liabilities. The asset deal allows greater flexibility in selecting what is acquired but requires more complex transfer documentation.
The duration of a business succession process depends heavily on its complexity and the type of transaction. A straightforward succession can be concluded in three to six months. Complex transactions involving due diligence, financing rounds, and regulatory approvals can take twelve months or more. Early planning is therefore essential.
Succession planning should ideally begin at least three to five years before the intended handover. This allows sufficient time for structural optimization, tax planning, and the identification and preparation of suitable successors. Last-minute successions frequently result in avoidable tax burdens and unfavorable transaction terms.
Earn-out clauses are provisions in purchase agreements under which part of the purchase price is made contingent on the future performance of the business. They allow the bridging of valuation gaps between buyer and seller. The seller benefits from participating in future success; the buyer reduces the upfront acquisition risk. However, earn-out clauses require careful drafting to avoid post-closing disputes.
A change in ownership typically requires several contracts. The central document is the share purchase agreement, which governs the transfer of shares, including the purchase price, payment terms, warranties, and guarantees. For a GmbH, a notarized share transfer agreement is also required, as the transfer of GmbH shares must be notarized. The company agreement should be reviewed and, if necessary, amended, especially if the ownership structure changes. Employment contracts for managing directors or other corporate officers must also be reviewed. For more complex structures, additional shareholder agreements, ancillary agreements, or loan agreements may be required. It is important that all contracts are coordinated and do not contain contradictory provisions. We draft and review all necessary contracts and ensure they are legally sound and tailored to your specific situation.
