Business transfer: a factor of economic growth

Business transfer in factor of economic growth

An economy is not a force to be endured, but rather shaped and managed. It should not be seen as the result of fate, but rather the outcome of actions taken and their implementation. These can have either a positive or negative impact on the evolution of a country’s economy. In this realm, nothing can be overlooked. The parameters are numerous and complex, and some can counteract each other. It is a delicate alchemy, primarily composed of a plethora of ingredients, each necessary but sometimes not sufficient, contradictory or complementary.

BUSINESS TRANSFERS: AN ENGINE FOR ECONOMIC GROWTH:

Business transfers are a crucial ingredient for economic growth, warranting supportive measures. Given that there are about 225,000 SMEs in France with a turnover between 1 million and 50 million euros, the issue is of significant importance.

TRANSITIONING: THE MOTIVATIONS :

The primary motivations driving an entrepreneur to sell their company are diverse. However, by identifying the two or three main drivers, we can likely cover a large part of the motivations. Firstly, we have a segment of companies experiencing rapid growth, led by relatively young managers who wish to liquidate an asset to focus on other activities. They do not rule out creating a new company or shifting industries. These transitions are typically smooth and contribute to economic growth.
Our focus is on the second segment, where the company leader considers selling the business when they feel they can no longer generate additional value within it. This does not necessarily mean that the company itself is incapable of creating added value, but rather that the leader no longer has the desire or ability to do so. They may be tired, ill, wishing to retire, obstructed by a family or non-family shareholding that hinders the company’s development, etc.

This “pathology” can cause blockages at the company level:

• The leader is reluctant to invest further, fearing the creation of debt, and bankers are absent or no longer supportive
• The leader is not hiring new staff or replacing those who have left
• Products are becoming obsolete, their renewal is no longer relevant, R&D is weak and no longer allows the company to keep pace with the markets

It’s crucial to note that generalizing this pathology associated with certain leaders would be misleading and inaccurate. Luckily, as previously stated, many companies are sold at the right time by their leaders and are taken over by professionals who ensure their longevity. However, apart from this scenario, the central question is how to avoid the pitfall into which hundreds of companies fall each year.
We cannot force the entrepreneur in this second “segment” to sell. However, we can create a more favorable environment.

ENCOURAGING TRANSITIONS:

Originally, the tax incentive that allowed company managers to benefit from a “privileged” taxation on capital gains within a four-year period (two years before and after the retirement date) played a significant role in motivating company managers not to “miss” this opportunity. Unfortunately, this current tax deduction is not sufficiently motivating as it has little effect on companies valued over one million euros, which is our target group.
The Hamon law on employee information has been a hindrance and, although it has been partially nullified, it remains a definite obstacle to business transfers. This obstacle affects all transfers for companies with a turnover between 1 million and 50 million euros.

It is also crucial that the company leader can seek advice from their chartered accountant or any other trusted person involved in the life of their company to discuss the transition when the time is right (or even well before). The act of transferring ownership, while being a managerial act, is also a highly personal and confidential consideration for the company leader. They may often find themselves isolated in the face of this issue, and this solitude can often lead to delays which not only destroy value but also risk jeopardizing the company’s assets. Some companies end up in our Commercial Courts, a place they should never have occupied with better foresight.

Regrettably, it’s easy to devalue a company, lose jobs, reduce competitiveness, and lose expertise if we disregard this act of management that is the sale of a company. The preservation of our assets, regardless of the sector, should be our primary concern. We are not owners but stewards. Our mission is to consistently create added value and ensure its longevity.

Georges Mereau
Email : georges.mereau@actoria.eu
Phone : +33 (0)6 80 40 29 18

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