Securing growth through business transfers in an aging Europe

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While there are good reasons to support Europe’s start-up entrepreneurs, equal attention needs to be given to business transfer on Europe’s path to recovery and growth

Compared to start-ups, successfully transferred companies perform better in terms of survival, turnover, profit, innovation and employment.

Every year around 450,000 companies with a total of 2 million employees change hands in Europe. As Europe’s population ages, the number of entrepreneurs planning to hand over their businesses to new owners is increasing. Additionally, the current turmoil and unpredictability in the business environment is likely to accelerate transfer plans for many companies in Europe.

At the same time, it is becoming increasingly difficult for many entrepreneurs to find a successor within their family, so that companies increasingly have to be transferred to third parties. This can be a more time-consuming process that small business owners in particular are often ill-prepared for. In addition, some entrepreneurs are closing their businesses without even attempting to sell them.

In fact, it is estimated that around 150,000 companies are at risk of unsuccessful transfers each year, putting around 600,000 jobs at risk. Successful business transitions not only secure existing jobs, but also create new jobs and prospects for employees in terms of job continuity and professional development. They also sustain the livelihoods and economies of rural and mono-industrial areas, which make up most of the EU’s total land area.

The diverse business transfer landscape in Europe leaves room for improvement

The European Economic and Social Committee (EESC) recently adopted an opinion entitled ‘Business transfers as a promoter of sustainable growth in the SME sector’ (INT/982), in which it proposes that the EU and Member States should encourage business transfers should play a stronger role in economic and growth policy. The Committee believes that increasing the number of successful transfers would directly benefit employment, business continuity and the European economy. The EESC, which represents organized European civil society, has also drawn up a list of policy recommendations for the European Commission and Member States to improve their policies to encourage transfers.

Business transfers have been part of EU entrepreneurship policies since the early 1990s and transfer ecosystems have been developed to varying degrees in many EU Member States. Despite many years of work at both EU and national levels, a recent study by the Seinäjoki University of Applied Sciences shows that the level of attention, the current overall functionality of the business transfer ecosystem and the scope of support measures vary significantly between member states. Although the available data is too fragmented and incomplete to conduct a comprehensive comparative analysis of micro, small and medium-sized enterprise (MSME) transfers in Europe, it is clear that there is room for policy action to increase the number of successful transfers in Europe.

The right policies can support successful business transfers

One of the main action points recommended by the EESC is to raise awareness of business transfers. The earlier entrepreneurs prepare for a transfer, the more successful it tends to be. An example of a successful awareness-raising activity is the organization of business transfer promotion weeks, which are already being organized in some EU Member States such as Finland and Belgium. In addition, the establishment of national transfer interest forums, representing both public and private stakeholders, can provide a systematic, long-term and more cost-effective approach to promoting business transfers. Finally, a cross-border dialogue promoted by the European Commission could be set up between different national forums to exchange best practices in transfer promotion.

Being a start-up entrepreneur is often seen as a more attractive way to become an entrepreneur than to acquire an existing business. Therefore, the Committee calls for the development of incentives for the transfer of small businesses to young entrepreneurs, such as B. Awareness-raising activities, advisory services, mentoring and access to finance. In addition, know-how on how to buy and succeed in a business should be part of entrepreneurship education in secondary and tertiary education.

The EESC has recognized that funding remains an obstacle to successful transfers, as most transfers require external funding. The EESC urges each Member State to ensure that financial institutions are available to support MSME business transfers, for example by helping to provide bank loan collateral. In order to bring buyers and sellers together, online business transfer platforms should be developed in all EU Member States and should be accessible to micro and small businesses. In addition, connections between platforms in different Member States could improve cross-border transfers by MSMEs.

To fill data and knowledge gaps on transfers in Europe, a regular review of the situation of business transfers should be developed, for example in the form of an EU-wide transfer barometer, which would also provide input for evidence-based policy making.

Successful business transfers are a shortcut to entrepreneurship

A change of ownership is a natural part of a company’s life cycle. It offers a shortcut to entrepreneurship with ready-made products and services, customers, revenue and qualified employees. A successful change of ownership often results in a more resilient, innovative and competitive company. In addition, as companies with new owners adopt greener and digital business models, transfers contribute to the green and digital transformation in the MSME sector.

A common goal for Europe should be to make the acquisition of an existing company an attractive and well-known opportunity for a start-up. This can only be achieved if the EU and Member States put the promotion of business transfers at the heart of their economic, growth and entrepreneurship policies. While the ultimate responsibility for transfers always rests with the entrepreneurs themselves, everyone has a role to play in fostering business transfer ecosystems: the EU, national, regional and local governments and policymakers, civil society and business organisations, financial institutions and academics, just to name a few.

This article was written and provided by Mira-Maria Kontkanen, rapporteur for the EESC opinion on Business transfers as a driver of sustainable growth in the SME sector, Member, European Economic and Social Committee (EESC)Group of Employers (Group I).

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