German SME Sector Braces for Succession Wave Amid Opportunities and Challenges
The German SME sector, a backbone of the economy, faces both opportunities and challenges. Many entrepreneurs are ill-prepared for succession, while the market for takeovers has shifted in favour of buyers since 2022. A massive succession wave is expected in the next five years due to demographic changes.
The sector is seeing above-average activity in industry and manufacturing due to transformation and economic structure. Some SMEs are using current challenges as an opportunity to strengthen themselves through acquisitions. Financing is not a barrier, with banks and funds providing sufficient liquidity.
However, the situation is not without its complexities. The willingness of the younger generation to take on entrepreneurial responsibility has significantly decreased. Geopolitical uncertainties are making planning more difficult for both buyers and sellers. The price expectations of buyers and sellers often converge once the seller decides on succession, but transactions are relatively stable with less movement in large deals.
In the coming five years, the situation of business transfers in the German Mittelstand is expected to face challenges due to cooling business sentiment and weak credit availability. However, positive developments could arise from growing demand for skilled workers in sectors like renewable energy, potentially benefiting the overall economic environment for such transitions. The sector's resilience and adaptability will be key in navigating these changes.
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