Final Report-Business Transfer - FINAL CSES - 21 1 14 PDF

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Ares(2014)180425 - 27/01/2014
Final Report
Framework Service Contract for the Procurement of

Studies and other Supporting Services on Commission
Impact Assessments and Evaluations
Interim, final and ex-post evaluations of policies,
programmes and other activities
Evaluation of the Implementation

of the 2006 Commission
Communication on Business
Transfers
December 2013
P O Box 159
Sevenoaks
Kent TN14 5WT
United Kingdom
www.cses.co.uk
Evaluation of the Implementation of the 2006 Commission Communication
on Business Transfers
Contents
SECTION PAGE
1. Introduction 1
1.1 Resume of Assignment Aims 1
1.2 Structure of the Report 3
2. Policy Background 5
2.1 The Policy Context for the Transfer of Businesses 5
2.2 Assessment of the Legacy 12
3. The Methodology of the Investigations 13

3.1 Overall Approach 13
3.2 The Methodology of the Evaluation 13
3.2.1 Basic Documentation and Data 13
3.2.2 Working with the Expert Group 14
3.2.3 The Survey of participating Countries 15
3.2.4 Conducting the Interview Programme 16
3.2.5 Case Studies 16
3.2.6 Development of the Methodological Approach 18
3.2.7 Development of an Indicator Framework 19
3.2.8 Preparation of Reports 19
4. The Findings of the Investigation 20

4.1 Introduction to the Evaluation Findings 20
4.2 Relevance and Coherence of the 2006 Communication on Business Transfer 20
4.2.1 The Concept of a Business Transfer 21
4.2.2 The Extent of the Problem 23
4.2.3 The Policy Focus 24
4.2.4 The Significance of Family Businesses 25
4.2.5 Transfer as an Event in the Business Life Cycle 26
4.2.6 Findings in relation to the Evaluation Questions on the Relevance of 28
the 2006 Communication
4.3 Effectiveness and Utility of the 2006 Communication on Business Transfer 29
4.3.1 Awareness-Raising, Information and Training 32
4.3.2 Financial Environment 37
4.3.3 Legal Framework 38
4.3.4 Taxation 41
4.3.5 Findings in relation to the Evaluation Questions on the Effectiveness 44
of the 2006 Communication
4.3.6 Overall Situation 46
4.4 Efficiency of the 2006 Communication on Business Transfer 47
4.4.1 Awareness-raising 48
4.4.2 Business support services and mentoring 49
4.4.3 On-line Markets 51
4.4.4 Finance for Transfer 52
4.4.5 Taxation Provisions 56
4.4.6 Transfer to Employees 57
4.4.7 The overall Efficiency of Measures to promote Transfer 58
Contents
4.4.8 Findings in relation to the Evaluation Questions on the Efficiency of 58
the 2006 Communication and its Follow-up
4.5 European Added Value of the 2006 Communication on Business Transfer 59
4.5.1 Cross-border transfers 60
4.5.2 Evaluation and Monitoring 61
4.5.3 Data Collection 61
5. Conclusions & Recommendations 63
5.1 Conclusions and Recommendations – Introduction 63
5.2 Conclusions and Recommendations on the Concept of Business Transfer 63
5.3 Conclusions and Recommendations on the Current Policy Framework for
64
Business Transfer
5.4 Conclusions and Recommendations on Operational Issues for Business 66
Transfer
Annexes Case Studies
A1 The Effects of Evolving Business Relationships on the Transfer of 70

Businesses
1. Introduction 70
2. The Reason for this Case Study 70
3. The Definition of Business Transfer 70
4. How Business Transfer is conceived 73
5. Conclusions and Recommendations 80
A2 The Availability of Dedicated Finance for Business Transfer 82
1. Introduction 82
2. The Reason for this Case Study 82
3. The EU Policy Context 82
4. The current Response to the Recommendation on Finance 84
5. Changes in the Financial Environment for Business Transfer 87
A3 Developments in On-line Transfer Markets 95
1. Introduction 95
2. The Reasons for this Case Study 95
3. The Position in earlier Work 95
4. How On-line Markets are Developing 98
A4 Developing Effective Advice and Support 109
1. Introduction 109
3. Background 109
4. The current Situation on Support for Business Transfer 111
5. The Problems relating to Business Support Services 115
6. The Role of emotional and psychological Issues 118
7. Issues relating to Mentoring 118
8. Possible Solutions 119
Contents
A5 Issues in Cross-border Business Transfer 124
1. Introduction 124
3. The cross-border Dimension of Business Transfer 124
A6 Developing the Evidence Base on Business Transfer 134
1. Introduction 134
3. Current Data on Start-ups and Closures of Enterprises 134
4. Data on Mergers and Acquisitions involving SMEs 135
5. Data on Business Transfers at EU and national Level 135
6. Family Businesses 143
7. The Significance of Transfers in a modern Economy 144
A7 Proposals for an Indicator System 147
B1 Bibliography 152
B2 Survey Results 158
B3 State of Play in Previous Reviews of Progress 172
C1 List of Expert Group Members 174

Section
Introduction 1
This document contains the Draft Final Report being submitted by the Centre for Strategy &
Evaluation Services (CSES) LLP in respect of the assignment: ‘Evaluation of the Implementation of the
2006 Commission Communication on Business Transfers’, which is being undertaken for DG Enterprise
and Industry.
1.1 Resume of Assignment Aims
The 2006 Commission Communication ‘Implementing the Lisbon Community Programme for Growth
and Jobs: Transfer of Businesses - Continuity through a new beginning’1 built on work by the European
Commission and the Member States going back over 20 years with the aim of improving the conditions
for business transfers in EU Member States.
‘Business transfer’ refers to the process of handing over a business to new owners and usually new
management. In the past, this has often been thought to happen primarily on the retirement of the
initial owners. It often occurs after a period of difficult transition for a business, during which its
continuation and the livelihoods of those working for it can be put at risk. Even in the best
circumstances, it requires significant adjustment and change and because of the large numbers of
enterprises thought to face such a situation and the potentially major implications of the failure of
significant numbers of such enterprises to make the transition successfully, the issue of business
transfer has for some time been a matter of public concern.
Significant progress has been made over the years in relation to various aspects of the problems
associated with business transfer, but the situation across Europe remains variable and a study on
’business dynamics’2 for the Commission in 2011 estimated that each year across Europe
approximately 450,000 firms are transferred and that this involves around 2 million employees. Of
these, it was said, approximately 150,000 firms and some 600,000 jobs are put at risk because of
inefficiencies in the business transfers system.
In view particularly of the current economic circumstances and the need to make every effort to
facilitate enterprise and remove obstacles to business activity and employment, the Commission
decided to review the situation on business transfers, to identify the remaining barriers in the relevant
procedures and circumstances affecting the transfer of businesses and to assess the relevance,
effectiveness, efficiency and utility of the relevant regulatory and administrative measures and of the
support services that aim to assist enterprises in this area.
This review has been based on the collection of primary and secondary evidence through a series of
activities set out in this Report, including desk research, surveys, interviews and subsequent analysis.
This research has made use of the body of information and knowledge on the area that has been built
up at European and national levels over a number of years.
In parallel, the Commission has organised an Expert Group, which is an important source of information,
both directly and indirectly, on the current state of play in the participating countries’ policy and actions
1
Communication from the Commission to the Council, the European Parliament, the European Economic and
Social Committee and the Committee of the Regions ‘Implementing the Lisbon Community Programme for Growth
and Jobs: Transfer of Businesses - Continuity through a new beginning’ COM(2006) 117 final of 14.03.2006
2
Business Dynamics: Start-ups, Business Transfers and Bankruptcy, final report January 2011 at
http://ec.europa.eu/enterprise/policies/sme/business-environment/files/business_dynamics_final_report_en.pdf
1.
Section
Introduction 1
relating to business transfer. The members of this Expert Group were nominated by national
administrations. In addition representatives of associations and expert researchers in the field were also
invited to contribute. Three meetings took place during the course of 2013 and each meeting has
provided an opportunity to discuss with the experts the main developments with the project and to seek
their assistance in obtaining information, clarifying issues and formulating sound conclusions and
recommendations. The first meeting took place on 13th February 2013, the second meeting on 27th June
and the third and final meeting on 28th October 2013. These meetings have allowed the evaluation team
to interact with the Expert Group, both on the occasion of the formal meetings and subsequently on a
bi-lateral basis, and the generous contribution of time and information by the experts has proved to be
a valuable asset for the project. Discussion in the meetings has been supported by material developed
by the evaluation team, including drafts of the developing reports at appropriate stages.
Formally, then this project was intended to evaluate the present situation with the implementation of
the 2006 Commission Communication on business transfers in Member States and in the CIP
Participating Countries, by identifying the remaining barriers to business transfers and assessing the
relevance, effectiveness, efficiency and utility of the regulatory and administrative measures and the
support services aiming to facilitate business transfers.
Specifically the study aimed to:
1. identify the remaining significant administrative, regulatory and other barriers in this area;
2. identify measures at national, regional and local levels designed to remove or redress such barriers
3. develop indicators for assessing those measures;
4. assess the extent to which the measures effectively address the barriers in terms of their relevance,
effectiveness and utility, as well as their efficiency;
5. assess the scope and quality of information and statistics available in this area;
6. make recommendations for future work in the area.
The main tasks that have been undertaken include:

• Validation and refining of the methodological approach, including the formulation of a set of
pertinent evaluation questions. The final approach has been agreed with the steering and expert
groups.
• Collecting, analysing and presenting the necessary data to answer the evaluation questions in line
with the evaluation criteria.
• Developing a set of indicators.
• Answering all the evaluation questions and developing robust and useable conclusions.
• Formulating recommendations on the basis of the evaluation findings and in line with the purpose of
the exercise and the evaluation questions set.
• Presenting findings, conclusions and recommendations in a final evaluation report.
• Setting out the results in an interactive audio-visual presentation and presenting them in a workshop
to Commission staff, and also to stakeholder groups.
In order to establish the appropriateness of the policies and actions to be examined, the techniques
used in evaluation have been deployed to examine the relevance, effectiveness, efficiency and utility of
2.
Section
Introduction 1
the actions under consideration. Providing focus for this analysis, the following evaluation questions
have been elaborated, based on those set out in the Request for Services:
Relevance
1. Are the measures undertaken consistent with the objectives of the 2006 Commission
Communication on Business Transfers and other relevant policy statements?
2. Are the measures consistent with each other?
3. To what extent do barriers to successful business transfers hinder economic growth and
competitiveness?
Effectiveness & Utility

4. What is the extent currently of measures taken to facilitate the transfer of businesses across the
participating countries, including the extent of dedicated support measures?
5. Do measures address the full range of problems identified in earlier work on business transfer?
6. What is the evidence on the effects of these measures?
7. To what extent do existing support measures successfully address genuine business transfer
difficulties?
8. What are the remaining barriers to effective business transfers and what factors underlie these
barriers?
Efficiency
9. What aspects of measures taken to address business transfers are the most efficient or inefficient,
especially in terms of resources that are mobilised by stakeholders during the different phases of
the process?
10. What does this represent in terms of administrative and reporting burdens on stakeholders and/or
other actors?
11. Which aspects of measures in place either facilitate or hinder their adoption elsewhere?
As the investigations have progressed, further questions have been raised, initially relating to issues
raised by the Expert Group, such as the extent and nature of cross-border transfers and subsequently
arising from the investigations undertaken. It will be seen that these questions suggested that more
fundamental issues are at stake and that these require a reassessment of the nature of business
transfers and the policy implications that follow from this.
1.2 Structure of the Report
The Report is structured as follows:
• Section 2: Policy Background – summarises the policy context of the assignment.
• Section 3: Methodology of the Investigations – sets out the approach that has been taken to
the evaluation.
• Section 4: The Findings of the Investigations – sets out the detailed findings of the
investigations undertaken in four sections, addressing respectively, the ‘relevance’ of the
3.
Section
Introduction 1
policy stance, the extent to which the policy is being implemented in the participating
countries, issues effecting how efficiently the policy is being implemented and the European
value-added from the co-ordination of the policy at a European level.
• Section 5: Conclusions & Recommendations – a summary of the conclusions and the
recommendations.
• Annexes: Case Studies and supporting papers. The ‘case studies’ address particular issues in
greater detail than is possible in the main text.
4.
Section
Policy Background 2
2.1 The Policy Context for the Transfer of Businesses
Introduction
The European Commission has been championing measures to create a more entrepreneurship-friendly
business environment for more than two decades and the themes of promoting economic growth and
jobs have often been associated with this aim. Currently these issues are at the very heart of the Europe
2020 Strategy and the associated Flagship Initiatives that provide a focus for much of policy
development at a European level. In particular, these strategic frameworks very much define the
context in which actions intended to promote an improvement in the framework for business transfers
is considered. However, such actions need also to take into account a relatively well-established legacy
resulting from earlier initiatives at a European level and in the Member States.
Some of the key milestones in initiatives on business transfers have been marked by the following
developments.
The 1994 Recommendation
The Commission’s action in this field dates back to January 1993 when a symposium took place in
Brussels to establish the business transfer situation in Member States and identify best practice. This
was followed by a wide consultation and led to the adoption of a formal recommendation.
The Recommendation of 7th December 19943 aimed to improve the framework conditions for business
transfers. This document referred both to some earlier measures such as the Decision 93/379/EEC (4)
which had sought to improve the legal, fiscal and administrative environment of enterprises and also the
White Paper on Competitiveness and Employment which saw the transfer of businesses as a priority
area requiring measures to improve the situation. There was also mention of the importance of
business transfers in the Integrated Programme for SMEs and the Craft Sector of 3rd June 1994 and an
initiative announced to limit tax charges on succession or donation. At this stage it was determined that
several thousand enterprises cease trading every year because of problems related to their transfer,
with knock-on effects as regards shareholders, employees, creditors and the community.
This loss was not seen to be as a result of market forces but because of legal obstacles to transfer in the
laws of the Member States, so the view was that changes to national law would improve the situation.
Areas identified for improvement were: increasing the awareness of entrepreneurs and measures to
inform or educate them to prepare effectively for succession; financing compensation for co-heirs who
did not want to continue in the business (in family businesses); changing the legal form of enterprises to
make transfer more possible; addressing fiscal procedures that hamper the adoption of the most
appropriate legal form; issues surrounding the death of a partner or sole proprietor; fiscal burdens (e.g.
inheritance or gift taxes); valuation of the enterprise; making sale easier if the firm is not to continue in
family ownership; and encouraging employee buy-outs if appropriate.
The Recommendation invited Member States to take the necessary measures to facilitate the transfer of
SMEs to ensure their survival and to safeguard jobs. Measures suggested were:
3
Commission Recommendation of 7 December 1994 on the transfer of small and medium-sized enterprises
94/1069/EC
5.
Section
Policy Background 2
• Encourage initiatives to increase awareness, information and training in order to ensure a timely
preparation of business transfers.
• Provide a financial environment conducive to business transfers.
• Provide legal possibilities to restructure a business to prepare a transfer.
• Establish legal principles that ensure continuity of partnerships and sole proprietorships in the
event of the death of one of the partners or the owner.
• Help the survival of businesses with appropriate inheritance and gift taxes.
• Facilitate the transfer of a business to third parties by appropriate tax rules.
Concerted action by Member States was also recommended.
The Communication of 1998
Four years later the 1998 Communication reported4 on the progress of Member States in response to
the 1994 Recommendation. More specifically, the 1998 Communication mentioned that most of the
measures taken related to modifications of the legal environment in order to encourage and facilitate
transfers of businesses. Member States had modified the fiscal treatment of transfers, notably through
the reduction of inheritance and gift taxes. Other initiatives also aimed to improve the financial
prospects of businesses when they were transferred. The actions were characterised as follows:
Measures taken or proposed in order to encourage the transfer of SMEs – areas of concern
Legal Tax Support

1. Conversions of partnerships 1. Gifts and successions 1. The role of financial
into limited companies and 2. Sale to third parties institutions (existing
vice-versa measures and priorities)
3. Sale to employees
2. Simplified public limited 2. The role of intermediaries
4. Conversion of companies
company (existing measures and
5. Double taxation priorities)
3. Single-member public limited
company 6. Information and best 3. Conclusions
practice
4. Increasing the continuity of
business (legal principle/ 7. Tax reforms
administration, trust, fiducie/
business-family agreements
5. Administrative and
accountancy simplification
Source: Communication from the Commission on the transfer of small and medium-sized enterprises (98/ C 93/02)
The Communication also summarised the practical experience of transferors and transferees as
identified in a survey of European business organisations carried out in preparation for a European
4
Communication from the Commission on the transfer of small and medium-sized enterprises (98/C
93/02)
6.
Section
Policy Background 2
Forum in Lille. Lack of preparation for transfer was identified as the clearest issue. It is usually left too
late and not seen as a central management activity. A second main finding concerned the role of
valuation, which affects taxation, sale to third parties and intra-family gifting of the business. A third key
result was that the experience of the transferor could help those that take over the business, as could
the contribution of business angels, or similar advisors.
The 1998 Communication also showed that despite the improvements made, there were wide variations
among different Member States and it called for continued efforts to facilitate the transfer of businesses
through legislative and administrative simplification, effective tax reductions and easier access to
financial support for the takeover of a business. The Communication also indicated that the suggestions
in the 1994 Recommendation had “not been followed to an extent which would be sufficient to
overcome the specific obstacles met by businesses facing their transfer” (p.11). In addition, the
Communication stressed the importance of intermediaries being well informed and trained in all
relevant aspects of the business transfer. The Commission was committed to monitoring the situation
and to contributing to awareness-raising, information and training of all parties concerned.
The Best Procedure project 2001
In 2000, the Commission set up an expert group on the transfer of business to monitor the
implementation of the 1994 Recommendation. The tasks of the group included identification of new
legal, tax and support measures, assessment of the measures taken, analysis of the provision of support
measures and proposals for further action.
The final report of the group estimated that roughly one-third of all EU companies would change hands
over the next 10 years (from 25-40%, depending on the Member State). This meant that an average of
610,000 small and medium-sized enterprises (SMEs) would change hands each year, potentially
affecting 2.4 million jobs (data for EU 15). And yet, the expert group reported, barely half of the 21 tax
and legal measures that small businesses need to survive changes of ownership were in place eight
years after they were set out in the 1994 Commission Recommendation.
The expert group had noted that the values of owners of businesses had changed from those who took
over or built businesses after the war, which meant that they no longer had the strong social and
personal bonds with employees that often characterised the earlier entrepreneurs. And, although
support for transfers was provided, it was not offered in a structured manner.
The expert group identified key areas for attention: measures to facilitate transfer to third parties and
employees; special rules for inheritance and gift taxes; relief for early retirement; relief on funds from a
transfer reinvested subsequently in another SME. The group recommended that a European Business
Transfer Centre be created; a market for business transfers be developed; regular meetings on the
subject take place, training be available, public support be provided and that attention given to transfer
should equal that paid to start-ups. The Commission was encouraged to develop a detailed action plan
for implementing the recommendations.
The European Seminar on the transfer of businesses, 23-24 September 2002, Vienna
As a first follow-up to the expert group’s report, the Enterprise Directorate-General together with the
Austrian Federal Ministry of Economics and Labour organised a European Seminar on the Transfer of
Businesses in Vienna on 23-24 September 2002. The aim of the seminar was to raise awareness about
the transfer of businesses, to provide an opportunity to exchange good practice in this area and to learn
7.
Section
Policy Background 2
from each other’s successes. The results of the Best procedure project on the issue and examples of
good practice in the different Member States were presented at the seminar.
The seminar concluded that raising awareness is the starting point for successful transfers. Only after
that does practical support become important. As business transfer often involves family and partners
to the main actors, the soft factors (psychological and relational matters) are of growing importance
during the process. Yet consultants typically have very little or no experience in this field. Nevertheless,
a holistic approach is required to tackle all aspects related to business transfers: we should not ignore
the emotional side. Due to the complex nature of business transfers, professional advice is needed to
steer through the process. The existing support measures should, however, be made more visible and
be better co-ordinated.
Both the Best Project and the European Seminar on the Transfer of Businesses concluded that business
transfers should be given the same degree of importance as start-ups. According to Austrian research
presented at the seminar5, 96% of completed business transfers survive the first five years after a
transfer. The chances of survival are thus higher than for start-ups, where 75% are still in business after
five years. Moreover, a successful transfer conserves, on average, five jobs, whereas a start-up
generates on average two jobs. For these reasons it is necessary to raise political awareness of the
importance of business transfers and to promote transfers as an attractive alternative to starting up
one’s own business.
The 2002 project on business transfers
In 2002-3 the Enterprise Directorate-General followed up on its Best-Procedure project of 2001. A group
of experts nominated by their national administrations set benchmarks for key areas of business
transfer support and policy where it would be the most important to make progress. The experts
described the actions already taken or planned by the different countries and by the European
Commission to improve the implementation of the Commission Recommendation and to respond to the
recommendations made by the Best Project expert group of the previous year.
The expert group reported6 that there was still room for improvement in implementing both the
Commission Recommendation and the recommendations by the Best expert group. Nevertheless, it
indicated that the situation showed that there was an increasing policy commitment to facilitate the
transfer of businesses. However, further work was needed in the following areas: equal attention to
transfers and start-ups; measures to facilitate transfers to third parties and to employees; measures to
encourage timely preparation; exchange of good practice, and a more co-ordinated approach to support
via national Business Transfer Centres. Furthermore, in order to help find successors, more efforts
should also be made to promote transfers as an alternative to starting up.
Good Practice Guide 2003
This brochure highlighted some of the cases described in the final report of the 2001 'Best Procedure'
project on the transfer of businesses, or presented at the Vienna seminar on the transfer of businesses.
5
Austrian Institute for Small Business Research ‘Unternehmensübergaben und –nachfolgen in Österreich’ 2002
6
Transfer of businesses – continuity through a new beginning. Final Report of the MAP 2002 project - transfer of
businesses. August 2003
8.
Section
Policy Background 2
The aim of the brochure was to provide policy-makers, business support organisations and other
interested readers with examples of practical support for business transfers.
2006 Communication from the Commission: Continuity through a new beginning
In February 2005 the European Commission reaffirmed its commitment to the Lisbon partnership for
jobs and growth and in November 2005 launched a comprehensive policy framework for SMEs explicitly
recognising the importance of business transfers. The area of business transfers was then specifically
addressed the following year by the Commission Communication, "Implementing the Lisbon Community
7
Programme for Growth and Jobs: Transfer of Businesses - Continuity through a new beginning" , which
pointed out that thousands of economically sound businesses, mainly small and medium-sized
enterprises (SMEs), disappear every year because they fail to overcome the difficulties involved in the
transfer of ownership. It was estimated that up to 690,000 businesses providing 2.8 million jobs are
facing the problem of transfer to a new owner each year.
It was recalled that the European Commission had initially identified four typical problems with
transfers: (1) Ensuring continuity of partnerships and sole proprietorships; (2) Preparation of transfers
by adopting the most appropriate legal form; (3) Encouraging transfers to third parties and (4) Helping
family transfers with appropriate tax measures.
In terms of the recommended responses, there was still room for improvement: in only about 55% of
the areas of the 1994 Recommendation were measures in place. The main areas in which more effort
was required were highlighted:
• giving political attention to both business transfers and start-ups
• providing financial facilities designed to finance a transfer
• awareness raising about business transfers (including consideration of soft factors and support
mentoring)
• organising transparent markets for business transfers
• transfer-friendly taxation policy
Member States were invited to create structures to improve these conditions through national, regional
and business support infrastructures.
It is particularly on progress in relation to these areas that the current evaluation project is
concentrating.
2006 Expert Group Report on Markets for Business Transfers
A number of other policy developments and studies have contributed to the policy framework since the
publication of the 2006 Recommendation. In 2006 itself, an Expert Group reported that for various
reasons an increasing number of retiring business owners hand over their enterprises to people outside
their family, sometimes to employees but often also to young entrepreneurs who want to set up their
own business or to other investors. In order to match supply and demand for business transfers in some
countries public or quasi-public institutions have created special databases ("marketplaces"). In
7
Transfer of Businesses - Continuity through a new beginning’ COM(2006) 117 final
9.
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Policy Background 2
2005/2006 a group of national experts analysed such marketplaces, nine in detail, of which the majority
had been established relatively recently (in the past three years). The report highlighted the special
economic nature of such markets, identified success factors (not fragmented nationally, a neutral and
trusted host organisation, awareness, search features, anonymity, quality of entries, additional support
services and systematic follow-up) and drafted recommendations for their organisation.
The Small Business Act (SBA)8
In the Small Business Act (SBA) of 2008, business transfers are specifically mentioned under the first
principle: “To create an environment within which entrepreneurs and family businesses can thrive and
entrepreneurship is rewarded”. And it was again recognised that the successful transfer of businesses
preserves more jobs on average than those created by new start-ups. Particular recognition is given to
family businesses because of their typically local base, socially responsible attitudes, and combining of
tradition with innovation.
In the SBA Member States are invited to: ensure that taxation does not unduly hamper transfer of
business, put in place schemes for matching transferable businesses with potential new owners and
provide mentoring and support for business transfers.
2009 Pilot Action "Mentoring Business Transfer"
For a successful business transfer, it has long been recognised that external advice and mentoring for
the new business owner can often be the crucial success factor. Following up on an initiative by the
European Parliament, the European Commission conducted a Pilot Action on transfer of expertise
through mentoring in SMEs. The project ended in 2009 with mentoring services delivered to over 900
mentees all over Europe. It allowed a new support scheme to be tested on a large scale and helped
buyers of enterprises to overcome post-takeover difficulties, while assessing the quality and the impact
of the mentoring provided. The final report identifies the major topics of interest for the mentee and
gives information on business transfers on a national basis. It also outlines major issues for
consideration when such a scheme is rolled out (e.g. identifying the target group, choice of the
appropriate organisation, identification of experts, duration of mentoring, and format and content of
mentoring).
Family-Business Issues
A number of studies have considered the importance of business transfer for family businesses. In 2008
the report entitled an ‘Overview of Family Business-Relevant Issues’9 made specific reference to
preparing for business transfer at an early stage. According to the report, succession is seen by many
authors as the most important issue that a family business has to cope with. The report also stresses
that intergenerational transfer is not seen as an event but a process that has to be planned well in
advance to succeed.
8
COM(2008) 394 final - Communication from the Commission to the Council, the European Parliament,
the European Economic and Social Committee and the Committee of the Regions: “Think Small First” A
“Small Business Act” for Europe.
9
Austrian Institute for SME Research ‘Overview of Family Business-Relevant Issues’ 2008
10.
Section
Policy Background 2
A publication by the Global Corporate Governance Forum: “When Grandpa is also the CEO”10 makes
clear how costly dispute resolution can be. A LEMNA Working Paper: “From Wife to Widow
Entrepreneur in French Family Business. An Invisible-Visible Role in Passing on the Business to the Next
Generation” deals with the role played by widows in French Family business. This makes it clear that the
issue of business transfer should not be examined separately from matters related to the treatment of
gender in law.
The Review of the SBA for Europe of 201111
The review of progress of the SBA conducted in 2011, found that overall implementation is progressing
but that more still needs to be done. As regards business failures, it is pointed out that about one third
of business failures occur in the context of a business transfer. In response, the Commission undertook
to identify best practices to support business transfers and launch a campaign to promote these
practices, and invited Member States to develop user-friendly and widely supported marketplaces and
databases for transferable businesses and provide training and support to increase the number of
successful business transfers, including communication campaigns to raise awareness of the need for
early preparation of business transfers.
“Business Dynamics: Start-ups, Business Transfers and Bankruptcy”12
This 2011 study analysed progress to date by the Member States on implementing measures to improve
the environment for business transfers as a result the 1994 Recommendation and the 2006
Communication. It found, inter alia, that there remains room for improvement and that the situation is
highly varied across the Member States.
According to the Business Dynamics study, approximately 450,000 firms with 2 million employees are
transferred each year across Europe. Of these, it is claimed, there is a risk of losing approximately
150,000 firms representing some 600,000 jobs due to inefficiencies in the business transfers system.
Inefficiencies in the transfer system include such factors as administrative, tax or regulatory
requirements, lack of awareness of needed preparations, or lack of transparent markets for such
transactions. The same study also found that the smallest businesses are the most vulnerable to failed
transfers. Other factors of vulnerability are the legal form of a company (sole proprietorships are the
most vulnerable) and its age (companies less than three years old are very vulnerable).
In some European countries, a transfer-friendly regulatory framework is under development (in some 16
countries 50% of the recommendations have been implemented), yet even in those countries there may
still be low awareness in the entrepreneurial community and stakeholders (professional associations,
legal firms and consultants to entrepreneurs) about possibilities for transfer and about the preparations
needed. There is also a lack of systematic monitoring of business transfer activity and comparability
between countries is difficult due to differing definitions being used.
A key finding of the report is that start-ups, business transfers and bankruptcy should not be seen as
separate matters from a fiscal/legal/administrative point of view but dealt with in an integrated
framework dealing with the life-cycle of a business.
10
Private Sector Opinion 28: Barney Jordaan, University of Stellenbosch Business School.
4
COM(2011) 78 final – Commission Communication Review of the “Small Business Act” for Europe.
12
Business Dynamics: Start-ups, Business Transfers and Bankruptcy, final report January 2011 at
11.
Section
Policy Background 2
As the barriers to successful business transfers are largely to be found at local, regional and national
level, it has become clear that there is substantial utility in comparing and contrasting approaches across
Europe with a view to exchanging good practice.
2.2 Assessment of the Legacy
It was clear at the beginning of the evaluation from the account of the action on business transfer taken
over a long period that there were a number of recurrent themes. The continuing need for awareness
raising and effective support are frequently mentioned, although there is also a development in
thinking on what is required in these areas. Overall, it was apparent that there had been progress, but
also areas where developments are clearly difficult.
The current project has had to build on the earlier findings while also identifying any solutions
previously identified but not subsequently taken up. It was necessary initially to take certain parts of the
legacy for granted. One such area was the characterisation of the key aspects of a business transfer.
These had been described in the Business Dynamics study as follows:
‘The concept of a business transfer refers to processes whereby all assets representing in their
totality an enterprise as a going concern are transferred to a new owner. There may also be a
transfer of some or all of the business liabilities. The new owner may be a family member or
someone else (e.g. through a buy-out or a sale to a third party)’.
It was therefore assumed that a business transfer may arise in response to the ‘classic situation’, where
a business owner nears retirement and wishes to hand on the business to the next generation, but the
process under consideration was not confined to family businesses, and in particular, did not
necessarily refer to the new owner having family ties to the former proprietor. Similarly, the business
concerned, both before and after the transfer, may be in a variety of legal forms; it may be a sole
proprietorship, a partnership or have the status of a company, especially a private company. On the
other hand, the context in which business transfer is discussed has usually been different in the past
from that in which mergers and acquisitions are considered. This has to do with the motivation for the
change. Whereas with mergers and acquisitions the transfer of ownership takes place for commercial
reasons and is motivated by external considerations and a broader business logic, a business transfer in
the sense that has been used in this area of Enterprise policy, is motivated by the necessity for a change
in the ownership (and usually management structure) arising from internal considerations and changes
in the circumstances of the business owners.
It will be seen that at a later stage in the project, some of these assumptions had to be modified or at
least seen in a different context. However, this development will be explained subsequently in the
Report.
12.
Section
The Methodology of the Evaluation 3

3.1 Overall Approach
The work for this project has been organised in three separate phases, each of which has resulted in the
submission of one of the required deliverables. These are illustrated in the diagram below which sets
out the Work Plan for the assignment:
3.2 The Methodology of the Evaluation

Phase 1 of the project was used to undertake various preparatory tasks and to establish the detail of the
issues to be addressed and the methods to be used. Phase 2 began with the first meeting of the Expert
Group and then went on to implement the planned investigations, in the form of continuing background
research, the conduct of a survey of the participating countries, an interview programme and the
development of a series of case studies. A second meeting of the Expert Group took place during the
course of this phase, at which progress was reported and presentations were made on particular issues
and the end of this phase was marked by the preparation of the Draft Final Report with a view to its
presentation to the third Expert Group meeting. The final stage of the project consisted of discussions
on the Draft Final Report, leading up to, during and following the third Expert Group meeting and the
writing of a revised Final Report – the current version.
3.2.1 Basic Documentation and Data
In the initial stages and subsequently, the CSES team conducted desk research in order to become
familiar with the policy documentation and a wide range of studies relating to different sides of the
13.
Section

business transfer issue. Central to the desk research were the policy documents summarised in the
previous chapter, but also the extensive research at a European and national level on the extent of
transfers taking place, the characteristics of family businesses and other enterprises where transfer
poses particular challenges, the statistical information on business dynamics, on mergers and
acquisitions and on other contextual data, specific information on finance issues, inheritance law and
taxation, on-line markets, trans-border issues etc. The European Foundation for the Improvement of
Living and Working Conditions (Eurofound) provided helpful assistance with the relevant parts of a
series of studies on ‘Restructuring in SMEs’13. The details of the work consulted are to be found
throughout this Report.
The nature of the information sought from the members of the Expert Group was also considered.
Background statistical information on the SME sector, such as Eurostat’s Structural Business Statistics,
was examined, together with an initial examination of data available at a national level. The research
indicated that the extent of relevant data is rather disappointing. There was also a review of the
methods used to make calculations of the extent of the business transfer ‘problem’ reported in earlier
policy documents.
3.2.2 Working with the Expert Group
A key feature of this evaluation has been the work that has been undertaken with an Expert Group
nominated by the following participating countries:
Table 3.1: Countries Participating in the Expert Group
Belgium Italy Romania

Bulgaria Latvia Slovakia
Czech Republic Lithuania Finland
Denmark Luxembourg Albania
Germany Hungary Croatia
Greece Netherlands Liechtenstein
Spain Austria Norway
France Poland Serbia
Ireland Portugal Turkey
In addition, various bodies with an active interest in business transfers have also participated in the
work of the Expert Group and made a valuable contribution. Among EU Member States, Estonia,
Cyprus, Malta, Slovenia, Sweden and the UK did not formally participate in the evaluation, though
information relating to these countries has been included where possible.
The Expert Group members served as a good entry point for identifying the relevant authorities,
business professionals and experts active in this policy area and establishing appropriate targets for
interviews and the survey. In relation to the survey, which primarily sought to ascertain the current
13
To be found at: http://www.eurofound.europa.eu/emcc/erm/smes.htm
14.
Section

situation in the participating countries with regard to the implementation of the original 1994
Recommendation, it was seen to be important there should be a single response from each country and
from someone who is in a position to answer the questions authoritatively. A single member of the
Expert Group representing each of the participating countries was therefore selected as the target for
the survey. However, in a number of instances the Expert Group members have involved colleagues in a
better position to make a response on particular issues. In addition, the Expert Group played a
significant part in formulating the questions addressed in the survey, commenting on the original draft
and proposing amendments and additional questions.
A number of members of the Expert Group were also interviewed as part of the interview programme
and there have been on-going contributions from the Group, both during formal meetings and on a
more informal basis.
The main contribution of the Expert Group however, has been through the detailed knowledge of the
members of issues relating to business transfer, both in their own countries and at a European level.
Indeed some of the members have been active in the area over many years and had participated in
some of the earlier initiatives at a European level. Through active discussion in the Expert Group
meetings and a busy informal exchange of email correspondence, the Expert Group members have not
only been able to make direct contributions themselves, but have also involved their contacts and
associates in order to provide a rich stream of information and to explain a wide range of perspectives.
In this way, for instance, they emphasised issues that had been raised in earlier investigations, such as
the importance of the emotional side of transferring a business and pointed to new and emerging
issues, such as the growing importance of cross-border transfers.
3.2.3 The Survey of participating Countries
The intended purpose of the survey of participating countries was to establish the current situation with
measures that aim to assist the transfer of businesses. The intention was primarily to establish the
‘facts’ on provisions that are made in each country, but it was also important to take earlier enquiries
into account in order to make comparisons and trace developments over time. In particular, the aim
was to establish if there had been any further progress in implementing the measures of the original
Recommendation and to see how far the additional matters raised in the 2006 Commission
Communication had been addressed. Finally, the survey invited countries to identify new or continuing
barriers and recent developments that are addressing them.
The survey was finalised after discussion with the Expert Group and the circulation of a draft for
comments. It was sent to a total of 27 countries and the other members of the group were also able to
provide information relating to the questions in the survey. Eventually 24 countries responded to the
survey. No responses were received from the Czech Republic, Greece and Romania, in addition to the
countries that have not participated in the project at all. After the second Expert Group meeting all the
participants were given the opportunity to check and if necessary revise the answers provided. A
significant result from this process is the summary table relating to the situation of each country
participating that is presented below on page 31. This table allows an easy comparison to be made with
the progress in the implementation of the 1994 Recommendation that has been observed in earlier
periods.
15.
Section

3.2.4 Conducting the Interview Programme
The purpose of the interviews was to develop a better understanding of the dynamics and obstacles to
progress in facilitating the transfer of businesses. They have been of two kinds. The first are a set of
formal interviews with a broadly representative set of the main actors involved. There is also a second
set of interviewees targeted because of their involvement in particular actions or in work that is of
specific interest to the case studies. These interviews were less structured and their form and content
has been determined by the nature of the particular issue that gives rise to them. Members of the
Expert Group, for instance, have been approached in this way, in order to establish details or request
further information on particular issues relating to their country.
Interview Target Group Number of Interviews

Commission officials (DG ENTR, TAXUD, EMPL, JUST...) 10
EU business associations (Eurochambres, UEAPME, EVCA...) 5
National officials/members of Expert Group 13
Business associations and experts w/special interest in transfer issues 33
(Transeo, CRA….)
Total Target 61
Some interviews have been carried out at a European level, but the majority of interviews were
conducted in a selected set of 11 EU Member States and 1 participating country:
Larger EU states France, Germany, Italy, Poland

Medium size EU states Belgium, Netherlands, Portugal, Hungary
Smaller EU states Denmark, Finland, Croatia14
Non-EU countries Norway
The countries were chosen to provide a representative sample of different sizes (between them, these
represent around two-thirds of the enterprise population of the participating countries), but the aim
was also to provide a mix of countries that have been successful in implementing the 1994 Commission
recommendations and others that have come less far in the process.
3.2.5 Case studies
In parallel to the investigations through the survey and interview programme work there were a series
of case studies. The aim of the case studies was to provide greater insight into particular aspects of the
issues under consideration and, possibly also provide a good basis for future actions by participating
countries by highlighting examples of practices that could be adopted more widely. In this respect they
will have the character of good practice cases.
In this exercise, therefore, the ‘case studies’ have had the character of a more detailed examination of
a particular aspect of the main project rather than a detailed investigation into the experience of a
14
Croatia was initially included as a CIP country, but became an EU Member State as of 1st July 2013.
16.
Section

specific individual or group of individuals, which is what the term ‘case study’ often implies.
The members of the Expert Group were invited during the course of the first meeting to make
suggestions on an outline list of possible case studies. Some comments were made, but in general the
experts were in agreement with the topics suggested, which were as follows:
1) The Effects of Evolving Business Relationships on the Transfer of Businesses: the aim of this case
was to assess the significance for the business transfer process of evolving business forms and
relationships, including the dynamics within family businesses. It has looked at the evidence for
significant changes in the way that enterprises conduct their business and especially changes in
relationships within families businesses and between owners and employees, but also at the
implications of these changes for the way that business transfer is conceived and for its position
within Enterprise policy.
2) The availability of dedicated finance for business transfer: considering in particular how
arrangements to promote funding for SMEs at a European and national level have addressed
transfer issues and have been able to support business transfers. This case has looked at all the
major forms of finance from equity funds to bank guarantees and has examined the major
developments taking place influencing both the demand and supply of funds that are particularly
important for funding transfers.
3) Developments in on-line transfer markets: One of the recommendations of the 2006
Communication was that transparent markets for business transfers needed to be organised and
there has been a lot of interest in the development of on-line markets of this type. In particular, a
study in 2006, leading to an Expert Group Report, looked at nine such markets in detail. The case
study has followed up of this earlier work, reviewed recent experience and examined how these
markets have developed.
4) Developing effective advice and support (incl. emotional issues): the intention here was initially to
examine the evidence for claims that neither the public nor the private support that is available is
performing effectively in assisting firms through the transfer process. The investigation has then
sought to identify the areas where some improvements are possible and examined the case for
promoting more professional services, possibly based on regulation.
5) Issues in cross-border business transfer: although still only a relatively small proportion of the total
number of business transfers, there has been an increase in transactions which have cross-border
elements and the issue was highlighted in the first Expert Group meeting. This case has therefore
attempted to gauge the extent of business transfers of this kind, but has also aimed to establish
the nature of any problems that are particular to the cross-border aspect and make proposals on
action that is needed.
6) Developing the evidence base on business transfer: this case study was proposed as a result, on the
one hand, of the general lack of data on business transfers, revealed in the background research,
but also, on the other, of the apparent progress made in some Member States in collecting the
appropriate data and the possibility this suggests of developing a more extensive evidence base, by
exploiting the lessons learnt by those who have had some experience in the area. The aim has been
to attempt to define targets for evidence collection, including data on appropriate indicators.
The 3rd and 5th cases, in particular, were proposed in response to comments made in the first meeting of
17.
Section

the Expert Group.
3.2.6 Development of the Methodological Approach
After reviewing the material initially available, the evaluation team reflected at an early stage on the
key issues in earlier studies and policy documents in order to develop an appropriate conceptual
underpinning for the evaluation exercise as a whole and to help shape the approach to be adopted in
the investigations.
One significant element in this reflection was a consideration of the potential contribution of evaluation
disciplines to an improvement of policy performance and direction in this field. One of the central
purposes of evaluations is to promote the development of evidence-based policy and a major aspect of
this is the development of evidence on the performance of policy measures. Increasingly, there has
been a demand for evidence on the real results and longer-term outcomes of policy and this is a
feature, for instance, of the proposed COSME Programme. In the current context, considerations of this
type led to an observation that the main effort in earlier analysis has been applied in the diagnosis of
the problems of enterprises and in devising appropriate measures to address them. However, 20 years
after this initial analysis began, it is necessary to ask what have been the consequences of the measures
taken to assist enterprises facing the need to transfer, are more enterprises now making the transition
successfully and what has been the effect on economic performance and social welfare subsequently?
Unfortunately it is now very difficult to characterise the baseline situation prior to the introduction of
policy changes. However, a greater effort could be expended on assessing the effectiveness of on-going
measures and the development of a better monitoring of progress in this sense is the reason for the
proposals on indicators that is presented as a separate document (Annex A7).
Furthermore, it was apparent as the project progressed that there were wider questions than the
extent to which transfer issues as initially defined in 1994 were being addressed. Important changes
had been taking place in the intervening period that affect the transfer environment, both in the
characteristics of the SME population and in the way that the role of SMEs is now conceived in policy
terms. This has meant that certain basic questions about the ‘relevance’ (in evaluation terms) of the
original analysis had to be considered and the implications examined. As will be seen, the case studies
proved to be a useful vehicle for analysing some of these basic questions and engaging in discussions on
them with members of the Expert Group. The results of this analysis will also be reflected in the main
findings of the Evaluation.
In summary, reflection on the development of business transfer policy suggests that a shift in emphasis
is necessary from the on-going analysis of transfer problems and the measures designed to address
them towards greater attention to the overall effectiveness of the policy and its impacts on enterprises
and on the economy and social welfare. In part, this implies a shift in the framework for conceiving of
the transfer problem, or at least aspects of it and the issues currently being faced by enterprises, but
there is also a more practical element in that there is a need to address the gaps in the evidence on
these issues, and to prepare the ground for future evaluation of the policy instruments devised to
address both the new and the previously identified issues.
The development of this methodological perspective has been accompanied by the development of
corresponding tools, for instance, in adjusting the initial evaluation questions and in shaping the type
18.
Section

and form of questions to be addressed in the survey and interviews, but also in using the case studies to
enquire in detail into some the questions raised by the initial analysis.
3.2.7 Development of an Indicator Framework
Indicators can have a very useful part to play in evaluation processes and in on-going monitoring
systems, by providing clear points of reference and possibly benchmarks against which progress with
specific aspects of policy can be assessed, but of their nature, they present a partial picture and need to
be supplemented in an evaluation, in particular, with a more broadly based analysis. After discussion
with the Expert Group on a possible role for the indicator system, as part of the broader monitoring
system being developed under the Entrepreneurship and Innovation Programme and its successor
COSME, recommendations are made after an analysis presented as Annex A7.
3.2.8 Preparation of Reports
A series of reports have been delivered In line with contractual requirements, but these reports have
not only helped the development of the investigations by informing the project Steering Committee of
progress and issues arising and assisted in this way with the management of the project. The reports
were also circulated to members of the Expert Group and have thus provided material for a significant
part of the discussions at the Expert Group meetings.
An Inception Report was submitted on 1st February 2013. It contained a work programme for the
evaluation that had been slightly modified in the light of discussions and research during Phase 1 and a
description of the methodological and empirical approaches developed for the tasks of the project. The
Report also contained suggestions on the conduct of the Expert Group meetings and drafts of some of
the material to be used in the first meeting, plus outlines of the proposed subjects and format of the
case studies and proposals for the indicator system.
A good part of the content of the Inception Report was discussed at the first Expert Group meeting on
13th February 2013.
A Progress Report was delivered on 11th May 2013 providing information on the progress with the
investigations and especially the initial results from the survey. The Progress Report was presented to
the second meeting of the Expert Group and members were invited to provide comments and other
feedback.
The Draft Final Report presented a more complete picture of the findings from the investigations and
was the central document for the third and final meeting of the Expert Group. The current Final Report
is a version amended in the light of comments at the third Expert Group meeting, at a meeting with the
Steering Committee and from written observations submitted by Expert Group members and others.
19.
Section
The Findings of the Investigations 4

4.1 Introduction to the Evaluation Findings
This chapter presents the main findings from the investigation. In order to provide a well-structured
account of these findings, the following sections have been ordered in line with the main elements of
any evaluation. That is, the first section considers issues relating to the relevance of the measures taken
to address business transfer problems and the coherence of the approach adopted in the 2006
Communication. There is then an examination of the effectiveness of the 2006 Communication in
promoting business transfer measures, to be followed by a consideration of how the effectiveness of the
measures might be improved, that is how the efficiency of policy in this area might be promoted. In this
area, most of the responsibility for initiatives lies with the Member States and other participating
countries, but there are few areas where cross-border issues arise and a short final section will,
therefore, address developments of this kind and consider if there is any need for action at a European
level.
In addition to the results of the investigations presented here, there are also the six case studies that
have considered a series of particular issues. Some summary of the discussion in the case studies is
presented in this chapter, but obviously a fuller account can be found in the case studies themselves,
which are presented as annexes to the Report.
4.2 The Relevance and Coherence of the 2006 Communication on Business Transfers
As Chapter 2 of this Report shows, the development of policy at a European level to promote a better
environment for the transfer of businesses has had a long history. The basic reference point is the 1994
Commission Recommendation on Business Transfers, on which the 2006 Communication draws in its
restatement of the measures deemed necessary to bring about a better environment for transfers. It is
worth remarking, however, that the full title of the Communication is ‘Implementing the Lisbon
Community Programme for Growth and Jobs. Transfer of Businesses – Continuity through a new
beginning’ and the first paragraph of the document locates the policy within the Lisbon strategy for jobs
and growth as part of ‘a comprehensive policy framework for SMEs’.
Nonetheless, the problem of business transfer is described pretty much in the original terms:
‘Europe’s population is ageing and the potential for business transfers is increasing. One third of EU
entrepreneurs, mainly those running family enterprises, will withdraw within the next ten years.
According to estimates this could affect up to 690,000 small and medium-sized enterprises and 2.8
million jobs every year’.
The Communication then goes on to explain that there had been progress since the 1994
Recommendation, but that there was ‘still room for improvements’ in a number of areas. And although
there are fresh elements introduced, including the suggestion that business transfers might be given
political attention similar to that devoted to start-ups and that it is important to organise transparent
markets for business transfers, the main message was essentially that further effort was needed in the
direction already outlined.
To a large extent, therefore a major part of the current evaluation has been an analysis of the extent to
which there has been further progress in implementing the original Recommendation. The detail of this
analysis will be set out subsequently in the section on the effectiveness of the policy and it will be seen
that there are a number of variations on the central theme. However, in general terms, it was evident
from an early stage that there had not been much further progress in the sense that there have not
20.
Section

been many new measures introduced by EU Member States since 2006 that are in line with the original
recommendations.
This early finding caused the evaluation team to reflect on the reasons for this apparent lack of progress
and to discuss it with members of the Expert Group, in interviews and at the second Expert Group
meeting. The conclusion from this reflection was that transfer clearly remains a problem for businesses,
but there are fundamental questions that should be raised about the ‘relevance’ of the 2006
Communication. Could the problem of business transfer have been mis-specified? Or have the current
needs of SMEs evolved in a way that has made the original focus redundant? Are the traditional ways of
thinking about business transfers the most helpful in understanding the real issues to be addressed? Has
the focus on barriers and regulatory and fiscal reform diverted attention from other measures that
could be more effective?
The elaboration of various aspects of these questions has been evident in the work to develop a number
of the case studies, but especially those on the ‘Effects of Evolving Business Relationships on the
Transfer of Businesses’ and on ‘Data on Business Transfers’. The more detailed explanations are to be
found in these case studies, but a series of issues can be summarised here. Overall, the conclusion has
been that previous analysis has definitely had a certain validity, but that it has been partial. It has failed
to address the full range of appropriate policy questions and has only considered some of the issues that
SMEs have to address. A refocusing of the debate is therefore required, involving a different
conceptualisation of the problem and, to a significant extent, a different approach to the development
of policy measures.
The following explains some of the issues:
4.2.1 The Concept of a Business Transfer
It is perhaps surprising that there was no real definition of the concept of ‘business transfer’ when it was
first raised as a policy issue and that specifically the original Recommendation does not define the term.
In more recent work a variety of slightly diffident definitions have been used, including that in the
Transfer of Undertakings Directive15 that is primarily concerned with employees’ rights in the event of a
transfer.
The first case study considers this question of definition, tracing the statements made in various policy
documents, but the principal issue appears to be: what is it that makes business transfer a policy issue?
How is it different from the general process of re-allocating assets and resources through normal market
processes? The answer is usually provided by reference to examples and the prime example is the case
of an entrepreneur, who has founded and developed a business over a number of years and who now is
facing the need to transfer the business prior to retirement. The enterprise concerned is an SME with a
single owner and frequently, there is an additional feature in that the firm is a family business and the
person retiring may either hand on the business to a successor within the family or may wish to sell it to
an outsider or to employees. In other words there are various institutional features that are used to
distinguish an enterprise that falls within the scope of the policy area in question and that differentiate
such an enterprise from others that do not. So, the mere desire to sell an enterprise for profit would not
15
Council Directive on the approximation of the laws of the Member States relating to the safeguarding of
employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses
2001/23/EC of 12 March 2001
21.
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originally have been considered sufficient to have the process regarded as a business transfer. Mergers
and acquisitions are not part of the picture then, or are they?
The problem with using archetypal examples as a way of delineating the scope of a policy is that the
examples do not provide clear rules for deciding on the limits of the policy and they tend to focus
attention on particular manifestations of the issue. The problems highlighted are real and concrete
examples can help communicate some of the central issues, but the approach of citing examples can
distract attention from slightly different problems that arise elsewhere.
In fact, it has always been said that there are other reasons why the issue of transfer might arise.
The 2003 Guide on Business Transfer, for instance, says:
‘Business transfers are still very often triggered by the entrepreneur’s retirement. However,
retirement is only one reason. Other reasons for transfers which also play an important role include
personal decisions (e.g. early retirement or change of profession), changing competitive
environment (e.g. changing markets, new products or new channels of distribution) or personal
events (e.g. divorce, ill health, or death)’.
More recent definitions have gone even further. In many of the earlier discussions, it was implicitly
assumed that mergers and acquisitions were excluded from what was meant by ‘business transfer’. In
the definition used, for instance, by the Expert Group on Business Transfers in 2006, it was said that
‘‘business transfer’ means the transfer of business property to another person or enterprise whereby
the original enterprise continues to operate’. Transfers that led to an enterprise losing its identity as
would be the case in a merger are excluded. The main reasons for this would appear to be the original
policy emphasis on saving jobs. Mergers can be associated with job losses.
More recently, the Business Dynamics16 study, published in 2011, defined the term as follows:
‘Business transfers refer to the process where "all assets representing in their totality an enterprise
as a going concern" are transferred to a new owner’
This definition suggests a further widening of the concept.
The lack of a clear definition originally is unsatisfactory. Nor is the situation resolved by referring to
typical examples, especially when, over time, the examples seem to extend to more and different
circumstances. Other elements of the characterisation of a business transfer need to be considered, but
it will be seen as the consideration of these elements progresses and as the evidence of actual practice
is presented that there are certain aspects of it that stand out.
Transfer for whatever reason can be a difficult process, especially for SMEs. Primarily, therefore,
attention should focus on the process of transfer and the need to prepare for it as an issue in Enterprise
policy addressing a problem potentially faced by all SMEs. Interventions in response to the specific
circumstances of particular types of enterprise need a separate analysis. This conclusion will be
explained further in subsequent sections of the Report.
16
European Commission ‘Business Dynamics: Start-ups, Business Transfers and Bankruptcy’ January 2011
22.
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4.2.2 The Extent of the Problem
As has been seen, the 2006 Communication starts by stating the ‘transfer problem’ – it is asserted that
‘Europe’s population is ageing and the potential for business transfers is increasing’ and that ‘one third
of EU entrepreneurs, mainly those running family enterprises, will withdraw within the next ten years’.
The Communication then refers to estimates that this could affect up to 690,000 small and medium-
sized enterprises and 2.8 million jobs every year. These estimates have been widely quoted in policy
discussions and academic research.
The Business Dynamics report in 2011 made an estimate of the current scale of the ‘transfer problem’
and the Commission’s website17 now refers to 450,000 businesses being transferred in the EU every
year, involving 2 million jobs, and cites a further estimate from the study that Europe is losing
approximately 150,000 firms a year and around 600,000 jobs, due exclusively to inefficiencies in
business transfers.
Given that the Communication and policy in this area generally takes these observations as a starting
point for a discussion of potential remedies, it is important to consider the basis for such claims and the
extent to which they are empirically verifiable.
As the sixth case study on data on business transfers explains, the statistical basis for any claims about
the extent of transfer activity is very weak. Although Eurostat and national statistical authorities collect
data on the numbers of the birth and deaths of enterprises, they do not collect data on transfers. Those
making estimates, therefore, of the numbers of transfers and the consequences of failed transfers have
no consistent basis across Europe to rely on and, in the absence of a commonly accepted definition,
tend to focus on slightly different target groups.
The numbers quoted are, in fact, an aggregation of different estimates based on varying methodologies,
survey responses and expert opinion. The BEST-project on the transfer of small and medium-sized
enterprises in 2002 was the origin of the numbers most often quoted. It made what was called a
“rough” estimate of the number of business transfers in process at any one moment in the EU. It
focused first on the self-employed and starting from the basis that approximately 20% of the self-
employed are over 55 years old and that the proportion of self-employed working beyond the age of 65
will remain more or less constant at the same level as in 2000, the group calculated a number that
would retire within ten years.
There are then calculations of the number of owners of enterprises with employees that are likely to
retire within the next ten years, based on data sets of varying completeness from the national studies of
12-15 Member States. Putting the two sets of figures together, there is the calculation that an average
of at least 610,000 SMEs are likely to be transferred each year, of which 300,000 are SMEs with
employees involving 2.1 million jobs (assuming that an SME with employees has 7 employees on
average), and 310,000 are SMEs without employees.
The report makes clear that, because of the assumptions made, the calculation should be treated with
great caution. Subsequent developments show that this has not always been the case.
17
http://ec.europa.eu/enterprise/policies/sme/business-environment/smooth-transfer/
23.
Section

The 2006 Communication extrapolates from the data produced by the 2002 BEST project to arrive at a
figure of up to 690,000 SMEs being affected every year and 2.8 million jobs under the heading ‘One third
of European enterprises are facing a transfer’.
The Business Dynamic report in 2010 provided some revised figures, Starting with the 2006 figures
(themselves based on an extrapolation from 2002) modifications were introduced on the basis of survey
results from Austria, Finland, Norway and Romania and revised estimates for Germany and France,
based on national studies. These studies all had differing approaches, but using the countries concerned
as a sample and projecting the data proportionately, it was estimated that approximately 450,000 firms
are being transferred each year in the EU–27, affecting 2 million employees.
It can be seen that the figures are rather approximate, but it is also not entirely clear what they are
measuring. It can be seen from the original work in 2002, that the total number of SMEs involved are
heavily influenced by the numbers of self-employed – enterprises without employees - that are
withdrawing from economic activity. It is true that a lot of these are involved in activities that could be
taken up by someone else, but often these businesses are primarily based on the knowledge, skill and
experience of the individual self-employed person. In these cases, apart from the market opportunity
and the client list, it is not obvious what can be taken over. Nor is it clear how a transfer in this sense
differs from a start-up by another self-employed person. In the statistics, a good part of the closures
observed of this kind of enterprise have a counter-part in the start-up statistics. A significant proportion
of the ‘failed transfers’ might thus be better seen as part of the normal churn in the SME sector.
Moreover, it is sometimes difficult to see the potential job losses in the same light as those arising in
other circumstances from the poor performance of a business. It is evident that there are cases where a
viable business is closed because of a mishandled transfer and the job losses and disruption caused is
damaging for the individuals concerned and represents a real economic loss. But, on other occasions, if
the business is basically viable, it will be picked up by other firms, possibly using the same assets and
staff and the net employment effect will be considerably lower than the initial headline figure. It is
perhaps for this reason that job losses from failed transfers do not figure prominently in the popular
consciousness.
These considerations should not be taken to imply that there is not a transfer problem. On the contrary,
there has been ample evidence provided by the investigations for the evaluation that transfer can be a
critical moment of change for many enterprises and the markets in which they operate, as will be
explained. Rather the analysis suggests that the figures that have been widely quoted may be misleading
and have almost certainly caused the focus of the analysis to be misdirected. These assertions need to
be elaborated. However, to do so requires taking into account a series of other considerations that are
examined in the following sections.
4.2.3 The Policy Focus
The statement of the policy problem in terms of avoiding the possible negative consequences for
employment has also had implications for the way that the policy debate has progressed. Although
there have been references, in the 2006 Communication and elsewhere, to the opportunities
represented by businesses in the process of transferring, especially for young entrepreneurs, the
emphasis has always been placed on reducing the difficulties faced by those involved in a transfer rather
than exploring the potential opportunities in the situation. Consequently, although there is reference to
24.
Section

providing information, advice and mentoring services and promoting access to finance, the weight of the
policy response is in terms of regulatory and fiscal changes to reduce practical difficulties in effecting a
transfer. Overall, with its emphasis on avoiding problems rather than encouraging the exploitation of
opportunities, the way that policy is conceived in this area might reasonably be characterised as being
rather defensive.
In contrast, and in line with the more optimistic stance of Europe 202018 and its associated policy
orientations, with their objective of smart, sustainable and inclusive growth, greater emphasis could be
placed on the opportunities afforded by business transfer, for business renewal and the injection of
fresh ideas, but also for the restructuring and strengthening of established businesses and not only at
retirement, but at other critical points in the development of businesses and the markets in which they
operate.
It is relevant in this context that a number of Member States have shown an interest in enterprises of an
intermediate size in recent years or ‘mid caps’ as they are sometimes known. There has traditionally
been an interest in these firms in Germany, since they represent an important section of the Mittelstand
but in the UK too with its Mid-sized Businesses Growth Review and notably in France there has been
considerable interest in the potential of enterprises of an intermediate size, that, it is argued, have some
of the greatest potential for innovation, further growth and the development of operations on a global
scale19. A report submitted to the French Prime Minister in 2010 - the Retailleau Report20 - develops the
analysis of the contribution of enterprises of an intermediate size to the French economy and
particularly to its future growth. These enterprises already account for 21% of employment at a national
level, 25% of turnover, 31% of export value, 30 % of investment, and 26% of internal expenditure on
R&D. Their potential is said to be even greater. Frequently, it is among enterprises of this size that the
real gazelles can be found – enterprises with high growth rates and a significant innovation
performance.
Generally, it is said, Europe is not particularly good at growing businesses from small beginnings into
major companies, or even modest companies of an intermediate size. Yet if this process is to be
encouraged, surely the targets for the corresponding policy measures are likely to be the well-
established SMEs with a potential for further growth that are precisely the type of enterprise where a
need for a transfer arises. The potential contribution of well-managed transfers to this process has been
neglected; it ought to have had a greater profile as part of a more positive orientation towards the
opportunities presented by business transfers, but could well in the future find its place among the
measures that are directed towards a more active promotion of economic growth.
4.2.4 The Significance of Family Businesses
As well as detracting from a full appreciation of the complete range of issues at stake with business
transfers, highlighting the difficulties experiences by family businesses in the transfer context probably
18
Communication from the Commission ‘Europe 2020 A strategy for smart, sustainable and inclusive growth’
COM(2010) 2020 final of 3.3.2010
19
See also Betbèze, J-P., Saint-Étienne, C. ’ Une stratégie PME pour la France’ 2006
20 Retailleau Bruno, Kirsch Alain-Roland, Faucheux Marianne, Magne Yves ‘Les entreprises de taille intermédiaire
au coeur d'une nouvelle dynamique de croissance’ February 2010
25.
Section

does a disservice to the family business sector by distracting attention from their strengths and their
broader contributions to the European economy.
Transfer is a significant issue for family businesses, but the first case study on ‘The Effects of Evolving
Business Relationships on the Transfer of Businesses’ points to ample evidence of the wider significance
of family businesses and especially their role within the SME sector. The study for the Commission by
the Austrian Institute for SME Research and others in 200821, for instance estimated that across Europe,
about 70 - 80% of enterprises are family businesses and that they account for about 40 - 50% of
employment. Family businesses bring a number of advantages with their approach to business and
frequently their engagement in local communities.
Many of the SMEs affected by business transfers as previously conceived have indeed been family
businesses and there will undoubtedly continue to be the particular issues faced by family businesses in
the transfer situation. They should continue to be addressed and in fact need special attention.
However, given the demands of modern management and the alternative opportunities for younger
people with higher educational attainments, succession within the family is now likely to take place in
only between 15 and 35% of transfers. The typical transfer is now to a non-family member. This has
important implications, not least for financing, since transfers outside of a family are more likely to
require cash. It also has implications for the selection of policy issues that need to be highlighted. The
previous emphasis on inheritance laws and taxes, for instance, was undoubtedly addressing a major
problem for family businesses, but may have deflected attention from the need for more broadly-based
incentives relating to finance for SMEs. Similarly, if transfers are now largely to persons outside of the
family, there is a greater need for mechanisms to find candidates, such as on-line platforms, and also
processes to allow sellers and acquirers to get to know and learn from each other.
A reduction in the emphasis on family businesses as the typical transfer case, however, will not only
allow greater attention to be paid to the broader set of transfer issues that need to be considered for
the variety of different circumstances in which a transfer can take place, it will also allow the transfer
problems encountered by family businesses to be considered in a more focused way, within a specific
analysis of family businesses as a whole.
4.2.5 Transfer as an Event in the Business Life Cycle
Business transfer has often been characterised as something that occurs at a certain stage in a business
life cycle, usually associated with the retirement of an owner. So, for instance a 1998 Communication
from the Commission22 states that ‘after the creation and growth of the business, the transfer is the
third crucial phase in the life-cycle of a business. Many jobs are at stake when the founder reaches his or
her retirement age and has to envisage the handing over of the business.’
This characterisation does not necessarily preclude a transition to a new cycle, but nonetheless the basic
model is of a single entrepreneur who establishes or takes over a business at a young age and then has a
number of years over which the business is managed and hopefully grows until the point where the
21
KMU Forschung Austria et al ‘Overview of Family Business Relevant Issues’ 2008.
22
Communication from the Commission on the transfer of small and medium-sized enterprises
(98/C 93/02)
26.
Section

owner begins to consider retirement seriously and has to address the problem of transfer. This is
thought to occur sometime after the owner reaches the age of 55 – the age mentioned in the 1994
Recommendation.
This model is undoubtedly grounded in a certain reality. It clearly describes a process that takes place in
many businesses all over Europe. The question is whether it is the only, or the most appropriate, model
in current circumstances.
The case study on the effects of evolving business relationships (Annex A1) points to evidence that
transfers are increasingly taking place below retirement age and this tendency was pointed out in
interviews with members of the Expert Group and other experts. At the same time, it was remarked that
greater longevity and the recent pressures on retirement plans from lower annuity rates and interest on
savings are both keeping business owners active, though not necessarily in the same business.
Furthermore, the image of an entrepreneur who devotes the whole of his/her career to a single
business fails to take account of the fact that the skills, attributes and temperament required to spot a
business opportunity and establish a new enterprise are not necessarily those that are needed in
someone who is adept at developing an established business. A different mind-set is often required in
the development phase, especially in businesses that grow from small beginnings to establish a strong
market presence. A transfer is required to allow the development to take place, but this can happen well
before the start-up entrepreneur is ready to retire.
Nor should it be assumed that there is always a single owner. Frequently enterprises are set up as a
result of collaboration between two or more entrepreneurs. Certainly, it often occurs that new business
partners are introduced into a business as it grows, in order to bring in more capital, formalise
management structures or make use of additional expertise. In a Finnish study of buyers conducted in
2013 and reported to the evaluation team, 44% of transfers had purchases by two or more persons23. As
educational levels rise and business complexity increases, the tendency for more of the workforce to
participate in ownership and management of enterprises has grown. And in all of these circumstances,
the owners of a business are likely to have different ages and retirement plans. Again the idea of a life
cycle event is undermined.
Furthermore, as work by Oséo24 in France has highlighted25, in certain sectors selling assets as a going
concern is part of the process of growing a business, as seen over the longer term. In sectors such as the
restaurant trade and hotels, a successful business might involve several instances of ‘trading-up’, selling
the current property and business in order to buy a bigger one, much in the same way as families might
move up the housing market over a lifetime. A business transfer is required at each stage, but again this
is clearly a process different from that imagined in the standard model.
There are many reasons therefore to adopt a more fluid conception of business transfer than the
established model would suggest. Rather than as something that happens at the end of a business life
cycle, it should be seen as something that can happen throughout the development of a business.
23
The Finnish study has not been published but some findings were made available to the evaluation team.
24
Now bpiFrance
25
Oséo ‘La transmission des petites et moyennes entreprises’ 2005
27.
Section

This conclusion becomes even more significant if transfer is seen as an opportunity to develop
businesses in a more dynamic economy and perhaps to contribute to restructuring processes. Although
it cannot be applied to all situations by any means, highlighting the possibilities in many cases for a fresh
injection of ideas and capital and a possible reconfiguration of the productive assets of a market,
relocates the promotion of effective transfer from a policy backwater to the mainstream of current
policy debate.
The case for this conception of business transfer as an occasion for restructuring and development is
reinforced by emerging evidence26 that the performance of the firm can be enhanced post-transfer by
organisational change and innovations and that the effect applies to firms of all sizes. In fact in the study
just cited, based on evidence in the Netherlands, the smaller the firm the better the post-transfer
performance. The perception that new owners can bring renewed energy and growth into the economy
is also beginning to influence policy. The Nærings- og Handelsdepartementet (Ministry of industry) in
Denmark, for instance, launched an SME Strategy some 3 years ago with a specific focus on Business
Transfer precisely because it believed that this could contribute to growth in the economy.
A more dynamic conception of the nature of business transfers as part of a vibrant and entrepreneurial
economy, however, still requires actual transfer to be processed efficiently. Consequently, attention to
many of the issues that have been previously emphasised needs to continue, but these issues have to be
seen through a different lens and the relative importance of some of them will have changed.
4.2.6 Findings in relation to the Evaluation Questions on the Relevance of the 2006 Communication
The initial orientation of the work undertaken to assess the continuing relevance of the 2006
Communication and its recommendations was determined to a large extent by a series of evaluation
questions raised at the beginning of the assignment. After reflection and discussion with members of
the Expert Group and others, it is now apparent that some of these questions were not radical enough
and more fundamental questions about the basic definition of the policy issues have been raised.
Nonetheless, it is worth recapping at this point, the findings on the original questions, since these
remain an important part of the picture.
• Consistency of measures undertaken with the objectives of the 2006 Commission Communication on
Business Transfers and other relevant policy statements
One of the main exercises of the 2006 Communication was to take stock of the progress made by
Member States in implementing the 1994 Recommendations. It found that the older Member States
had implemented an average of 60% of the measures originally recommended and new Member States
approximately 45%. There were, however, relatively large differences in implementation rates
depending on the type of measure, Some new recommendations were also introduced, such as a
proposal to give transfer the same political attention as start-ups and a call to organise more
transparent transfer markets.
The extent to which there has been further progress with the initial Recommendations will be set out in
the next section of this chapter, but it has been seen that the whole orientation of transfer policy has
26
For instance, Lex van Teeffelen & Lorraine Uhlaner ‘Strategic renewal after ownership transfers in
SMEs: do successors’ actions pay off?’ International Journal of Entrepreneurial Venturing, Vol. 2, Nos.
3/4, 2010
28.
Section

been questioned and this, in fact has been offered as an explanation of why some of the countries
participating in this exercise, and indeed some of the other EU Member States, have not consistently
focused on the recommended policy developments.
Having said that, the initial recommendations are found to be still relevant, except in the sense that a re-
focused approach to policy development in this area would move the weight of attention away from
regulatory reform, where many of the provisions have been implemented to issues relating to the
taxation environment and the provisions relating to business support and access to finance.
• Consistency of measures with each other
The original measures, as modified in the 2006 Communication did indeed form a coherent package in
which the various measures proposed reinforced each other. The main problem for a number of them
was that they were focused on particular aspects of the transfer problem, which were real enough, but
which did not consider the problem as a whole and tended to neglect the positive opportunities
presented by the possibility of transfer. Consequently, measures, for instance, intended to increase
access to finance for transfers, tended to imply the creation of funds especially dedicated to transfers,
rather than emphasising the need for other sources of funding available to SMEs to take into account
the particular circumstances of transfers in their normal operations
• Extent that barriers to successful business transfers hinder economic growth and competitiveness
Given that many of the regulatory barriers to transfer have now been addressed (though not all), the
main constraining factors on the way that business transfers can assist economic growth and
competitiveness appear to be, first of all, the lack of appreciation of the positive potential from transfers
to contribute to a better structuring of the economy and to re-invigorated entrepreneurship and
management, as part of a positive process of growth and change within a dynamic economy, and
consequently, the less than systematic attention paid to other areas that the original Recommendations
and the 2006 Communication drew attention to, namely, the taxation regimes affecting transfer and the
access to appropriate support services and finance.
The following section will provide greater detail on the current situation across the participating
countries in relation to the 1994 Recommendation, before the Report goes on to consider in another
section the issues that are the most pressing in terms of affecting efficient transfers.
4.3 The Effectiveness and Utility of the 2006 Communication on Business Transfers
The results presented in this section aim to provide an account of the current situation in each of the
main areas that form the core of the 1994 Recommendation, together with the developments
subsequently proposed by the 2006 Communication. They therefore aim to provide a clear account of
the ‘current state of play’ in terms of the implementation of the programme of action set out by the
original policy documents. Care was taken to base the survey questionnaire on earlier work and also to
allow a comparison with the 2010 Business Dynamics report that covered a lot of the same ground.
However, in order to complement this picture, in addition to examining the policy provisions in each
country relating to the main policy areas that formed part of the original Recommendation, the
opportunity was taken to identify other developments in the field of business transfer, such as cross-
border activity, monitoring arrangements and continuing barriers.
29.
Section

Clearly in conducting a survey of this kind, it is important to obtain an authoritative response from each
of the participating countries. The survey was therefore completed by the members of the Expert
Group, nominated to represent their country, although, of course, they have generally consulted
relevant colleagues in providing answers. After the initial results were presented at the second meeting
of the Expert Group, the members who had provided responses were given the opportunity to address
anomalies and inaccuracies in interpreting the responses and a number took advantage of this
opportunity.
A systematic presentation of the results of the survey can be found as Annex B2. The following section
sets out the highlights and provides an analysis. It also makes a comparison with previous assessments
of the implementation of the Recommendation, in order to establish how much progress has been
made in the different areas. In addition, in order to complement information from the survey with that
derived from background research and the interview programme, additional material has been referred
to, especially when this can add quantitative data.
It should be remembered that that the survey results are based on responses from the experts
nominated for the different countries participating in the project, who have been required to provide
their assessments of developments in a wide variety of areas. In general, it has not been possible to
check these assessments independently. Furthermore, while in some areas, such as in relation to
legislative changes, the question of whether or not there has been a development is quite
straightforward, in others it is more difficult to judge. A relatively low level of activity may still count as
a contribution to awareness-raising, for instance. The results therefore need to be interpreted with
some caution.
The management of the survey has been explained in the previous chapter. Here we should note that a
total of 25 survey questionnaires have been received from 24 countries27 – leaving the Czech Republic,
Greece and Romania without a response, as well as the 6 countries that have not appointed a member
to the Expert Group (Estonia, Cyprus, Malta, Slovenia, Sweden and the UK). The overall results are
presented in Table 4.1 below:
27
Two questionnaires were received from Belgium – from Flanders and Wallonia, respectively.
30.
Section

Table 4.1: Implementation Up-date - 2013
Company with one member
Legal principle of continuity
Sale to employees tax relief

Deferring inheritance tax
Tax neutral restructuring
Reduced inheritance tax
Re-investment tax relief

Unanimity not required
Financial environment
Retirement tax relief

Change of legal form
Awareness raising
Country
SMEs/Companies
Simplification
Total + or (+)
Belgium + + + - + Ø + Ø + + + + + 10
Bulgaria (+) - + + + + + Ø Ø Ø Ø Ø Ø 6
Czech republic
Denmark + + + + + + + Ø + + Ø Ø + 10
Germany + + + + + + + Ø + + + + Ø 11
Estonia
Greece
Spain + + + + + + Ø Ø + + Ø + Ø 9
France + + + + + + + + + + + + + 13
Croatia (+) (+) (+) + + Ø + + Ø Ø Ø Ø Ø 7
Ireland (+) + + (+) + (+) + - + + + + Ø 11
Italy (+) (+) + + + + (+) Ø + + Ø Ø + 10
Cyprus
Latvia (+) Ø + (+) + + + + Ø Ø (+) Ø Ø 8
Lithuania (+) Ø + + + + + + + + Ø Ø Ø 9
Luxembourg + + + (+) + + Ø (+) Ø(+) Ø(+) Ø (+) (+) 9
Hungary (+) Ø + + Ø Ø + + + + Ø Ø Ø 7
Malta
Netherlands + Ø + + + + + Ø + + Ø Ø + 9
Austria + + + + + + + + + + + Ø + 12
Poland + - + + + + + + + + Ø - + 10
Portugal + Ø(+) + + + + + Ø + + Ø Ø Ø 8
Romania
Slovenia
Slovakia (+) Ø + (+) Ø + (+) + Ø Ø Ø Ø Ø 6
Finland + + + + + + + Ø + + Ø Ø Ø 9
Sweden
United Kingdom
Total EU 19 11 19 18 17 16 17 9 14 14 6 6 8 174
Albania Ø Ø + + + + + Ø Ø Ø Ø Ø Ø 5
Liechtenstein + - + - + + + + - - - - - 6
Norway + (+) Ø + Ø + + + Ø + Ø Ø + 8
Serbia (+) (+) + - + + + (+) + + Ø Ø Ø 9
Turkey (+) (+) + Ø + + Ø Ø Ø Ø Ø Ø Ø 5
Total CIP 4 3 4 2 4 5 4 3 1 2 - - 1 33
31.
Section

Legend:
+ Recommendation implemented Ø Recommendation not implemented

(+) Recommendation partially implemented/ planned - No information
Countries that did not respond to the survey Countries not represented on expert group
Although we have not managed to obtain feedback from all countries, it is nonetheless possible to
compare the situation with that set out in the 2006 Communication and that in 2010, to be found in the
Business Dynamics report. The overall comparison with previous years is presented in tables to be
found in Annex 6, but the following sections make the comparison in relation to each of the main areas
that were surveyed.
4.3.1 Awareness-Raising, Information and Training
Awareness-Raising
This section looks at the implementation of Article 2 of the 1994 Commission Recommendation which
deals with public or private initiatives aiming to stimulate increased awareness, information and training
of businessmen on the process of transfer.
Most of the countries that responded have put measures in place to raise awareness among business
owners and prospective buyers. This is an area which has continued to exhibit good implementation
rates throughout the period under review, as the table below shows. Some countries appear to have
regressed especially compared to 2010, but this can generally be explained by the fact that the 2010
survey did not distinguish between ‘implemented’ and ‘partially implemented/planned’ initiatives. The
comparison with the situation reported in 2006 is more direct.
Table 4.2: Development in Implementation – Awareness-raising initiatives (Q.7)
BE BG DK DE ES FR HR IE IT LU LV LT HU NL AT PL PT SK FI
2006 + / - + (+) + / (+) + + - (+) Ø + + - (+) Ø +
2010 + + + + + + / + + + - + Ø + + + + Ø +
2013 + (+) + + + + (+) (+) (+) + (+) (+) (+) + + + + (+) +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø + + (+) (+)
Legend:
(+) Recommendation partially implemented/ planned / No comparison available
- No information
32.
Section

Although a majority of the surveyed countries have implemented some awareness-raising measures,
the extent of such initiatives varies considerably between countries. Of the 24 countries that responded
to the survey, 11 report that there is either high or very high availability of awareness-raising measures
aimed at owners (AT, BE, DE, DK, ES, FR, LI, LU, NL, NO, PT) – with initiatives aimed at buyers being
slightly lower, but in 7 (8) countries it was thought that this type of measure was very limited (BG, IE, IT,
LV, LT, (HR), RS, TR). The following figure gives an overview of the level of availability within the group of
respondents:
Figure 4.1: Level of availability of awareness-raising initiatives (Q.7)
As the figure shows, owners and prospective buyers are targeted more or less equally when it comes to
raising awareness, with a slightly higher availability of ‘owner-related’ measures.
Furthermore, in spite of the measures adopted by a number of countries, the general feedback from
interviews and the evidence from studies suggest that the majority of enterprises are still not preparing
for transfer or are not aware of the need to do so.
Business Support
Schemes to provide support to businesses on the process of transfer did not form part of the
Commission Recommendation in 1994, but they were referred to in the 2006 Communication and
constitute an important element in trying to improve the effectiveness of transfers generally. Of the 24
responding countries, only 6 reported that there is a high or very high availability of such specific
support on business transfer (BE, DE, DK, FR, LI, LU), whereas 8 (6) said it is moderate and the rest that
there is either very little organised support or no support at all. The figure below gives an overview of
the level of availability of support specifically targeting owners or prospective buyers.
33.
Section

Figure 4.2: Level of availability of business support (Q.7)
Although not quite as readily available as measures to raise awareness, most countries provide some
sort of business transfer support, as the chart shows.
More detailed information on the business support measures that are available in different countries
can be found in case study 4 (in Annex A4). Frequently support measures that are intended to meet
other objectives, such as those promoting start-ups and growth or measures tailored to particular types
of enterprise can assist with the transfer process. Measures of this kind can be found in Eurofound’s
ERM database28 on support instruments for restructuring. This database provides information on about
400 measures in the Member States of the European Union and Norway. Similarly there is some
discussion of measures that may be used to support transfers to be found in a Eurofound study on
‘Restructuring support instruments’29.
Training and Mentoring Schemes
The last point to be mentioned under Article 2 of the 1994 Recommendation was schemes to train
businessmen in order to ensure their preparation for a successful transfer. Mentoring was not
specifically cited in the original Commission text, but it was highlighted in the 2006 Communication with
a proposal for a pan-European pilot project which was subsequently run by Eurochambres30. As a result
of this project initiatives of this type have become increasingly popular in many countries, especially for
prospective buyers who need support in the period after taking over an already existing business.
It is particularly AT, BE, DE, DK, FR, LI, LU and NL that are active in this field. Mentoring and training
initiatives are also dealt with in more detail in case study 4.
28
http://www.eurofound.europa.eu/emcc/erm/supportinstruments/
29
Eurofound ‘Restructuring support instruments’ 2013
30
Eurochambres: Final Report ‘A Helping Hand for SMEs – Mentoring Business Transfer’, Aug. 2009
34.
Section

Respondents rated their availability as follows:
Figure 4.3: Level of availability of training and mentoring schemes (Q.7)
If we look at the existence of the three types of support in individual countries, using the same grading
system as in table 4.1 above, the situation is as follows:
Table 4.3: Availability of initiatives – awareness- raising, business support and training/mentoring
Awareness + (+) + + + + (+) (+) (+) + (+) (+) Ø + + + + - +
Support + (+) + + + + (+) (+) (+) + (+) (+) (+) Ø + + + (+) +
Training + (+) + + (+) + Ø(+) (+) (+) + - (+) (+) + + + (+) (+) +
AL LI NO RS TR
Awareness Ø + + (+) (+)
Support Ø + (+) (+) (+)
Training Ø + Ø (+) (+)
Legend:
(+) Recommendation partially implemented/planned - No information
The survey also asked about the availability of specific initiatives for the transfer of family businesses.
This type of business represents the ‘classic case’ of businesses that experience problems with transfer,
but as the figures show, the schemes provided in this field mainly concern awareness and training –
there is less specific support and training available to family businesses, as such.
35.
Section

Figure 4.4: Availability of specific initiatives for family business transfer (Q.8)
A series of examples of public and private initiatives in the fields of awareness-raising, business support
and training and mentoring were quoted by responding countries. Some of these have been considered
in case study 4.
The survey finally questioned respondents about the overall effectiveness of initiatives to stimulate
increased awareness, information and training in their country in bringing about successful business
transfers.
Figure 4.5: Effectiveness of initiatives in bringing about successful business transfer (Q.13)
The overall assessment is that measures of this kind are having an effect, with business support and
mentoring judged to be the most effective and awareness-raising ‘quite effective’. This also has to be
36.
Section

set against the contrast with support measures targeted at start-ups. While 7 of the countries indicated
that policy measures supported business transfers on an equal footing with measures for start-ups (AT,
BE, DE, DK, LV, NL, LI), 11 said that transfer measures had a lot less weight.
4.3.2 Financial Environment
This section looks into the implementation of the second area of the 1994 Commission
Recommendation - Article 3, the availability of a financial environment conducive to successful business
transfer.
In general terms, the financial environment is perceived to have weakened in several of the
participating countries, reflecting the overall position in relation to access to finance in many parts of
Europe. Subsequent interview discussions indicated that this perception has been considerably
influenced by the increased difficulty that SMEs in all situations are having in accessing finance. The
effects of the difficult financial environment on SMEs have been confirmed by many studies31.
Table 4.4: Development in Implementation - Financial environment
2006 + / + + - + / (+) (+) + Ø - Ø - + (+) - Ø +
2010 + + + + + + / + + + Ø + Ø + + + + + +
2013 + - + + + + (+) + (+) + Ø Ø Ø Ø + - Ø(+) Ø +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø - (+) (+) (+)
Legend:
(+) Recommendation partially implemented/planned / No comparison available
- No information
The responses to the question asking about the availability of different kinds of financial support
instruments showed a more differentiated position.
31
See for instance, European Central Bank ‘Survey on the access to finance of small and medium-sized enterprises
in the EURO area, April to September 2012’ and:
Eurostat ‘ The proportion of unsuccessful loan applications by SMEs has risen with the economic Crisis’, Eurostat
news release 144/2011.
37.
Section

Figure 4.6: Availability of financial support instruments
While for all forms of finance, a number of countries either have no dedicated support or very low
levels, there appears to be more provision for loans and loan guarantees (including micro finance loans)
than for equity finance. There is little specific provision for equity or mezzanine finance for transfers,
with the exception of Belgium and France. There is greater provision of loans, with 7 countries
indicating ‘quite high’ or ‘very high’ availability, especially loans suitable for micro businesses (up to
€25,000), in the case of Finland and Spain. Loan guarantees are also available in the same countries,
although this may be part of a general loan guarantee scheme for SMEs. In Denmark for instance, over
the period of 2009-2012, 30% of all ‘Vækstkautioner’ (special guarantees – up to €268,000 - to facilitate
access to loans or credits) were allocated to enterprises involved in a transfer of ownership.
4.3.3 Legal Framework
Article 4 in the Commission Recommendation from 1994 dealt with establishing appropriate legal
instruments to allow the best conditions for transfer.
The recommendation concerning ‘Change of legal form’ proposed that enterprises should be allowed to
change from one legal form to another without the need to wind up the firm or create a new legal
entity, whilst taking the rights of third parties and members into account. Most countries had managed
to implement this recommendation in the early responses to the initial recommendations, as the table
below shows, and there have been hardly any changes in the situation since 2006.
38.
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Table 4.5: Development in Implementation - Change of legal form (Q.22)
2006 + / (+) + + + / Ø + + (+) + + + (+) (+) + (+) (+)
2010 + + + + + + / + + + + + + + + + + + +
2013 + + + + + + (+) + + + + + + + + + + + +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 + + Ø + +
Legend:

(+) Recommendation partially implemented/ planned / No comparison available
- No information
Article 4 also contained the proposal that SMEs should be able to establish themselves in the form of a
public limited company with ‘a very small number of shareholders’ and a simplified establishment and
management procedure compared with that of public limited company whose shares are owned by
large sections of the public. Of the 24 countries that completed the survey, 19 reported that this was
possible within their regulatory framework. Compared with the review of 2010 the results for Hungary
and Slovakia have deteriorated. As neither country reacted to a request to check for inconsistencies, it is
assumed that they may have revoked previous rules.
Table 4.6: Development in Implementation - Simplification SMEs/ public limited company (Q.23)
2006 + / + + + - / + Ø (+) Ø + Ø + + Ø - Ø +
2010 + + + + + + / + + + Ø + + + + + + + +
2013 + + + + + + + + + + + + Ø + + + + Ø +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 + + Ø + +
Still in relation to public limited companies, it was proposed that Member States should allow the
creation of a public limited company with only one ‘partner’ in accordance with the Twelfth Council
Directive 89/667/EEC. Whereas the situation on this point has generally improved since 2006, as the
table below shows, in the case of Belgium and Hungary this provision no longer appears to exist.
39.
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Table 4.7: Development in Implementation – Private limited company with one member (Q.24)
2006 Ø / + + + + / Ø + + + + + + + + Ø + +
2010 + Ø + + + + / Ø + + - + + + + + + + +
2013 Ø32 + + + + + Ø (+) + + + + Ø + + + + + +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 + + + + +
Another topic relating to the legal framework governing business transfers is the question of the ‘legal
principle of continuity’. This was dealt with in Article 5 of the Recommendation which proposed that
Member States should ensure that, in the event of the death of one partner, a partnership could be
kept as a going concern with or without the participation of the deceased partner’s heirs. Although the
picture has remained more or less the same since 2006, in Spain and Luxembourg the legal framework
no longer appears to allow for this33.
Table 4.8: Development in Implementation - Legal principle of continuity (Q.25)
2006 + / + + (+) - / (+) + + + + + + (+) (+) + - +
2010 + + + + + + / + + + + + + + + + + + +
2013 + + + + Ø + + + (+) Ø + + + + + + + (+) +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 + + + + Ø
Legend:

- No information
The Recommendation’s Article 5 also proposed that family law and inheritance law should not prevent
an enterprise from being kept as a going concern in the event of the death of a partner or a sole
proprietor, especially with regard to the unanimity rule for decisions taken within the joint ownership.
This particular recommendation appears to have caused problems in several countries in the past. The
32
Although it is not possible in Belgium to set up a Public Limited Company with 1 member only, it is possible to
set up a private limited company (SPRLU) with only 1 member. It is possible that the 2010 survey used this as a
reason to put ‘+’.
33
Neither country reacted to a request to check for inconsistencies, so it is assumed that the framework has
changed.
40.
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situation has not really improved since then and of the 24 countries that have completed the 2013
survey, only about half (11) stated that legislation existed in this field.
Table 4.9: Development in Implementation - Unanimity not required (Q.28)
2006 Ø / - Ø - - / - + Ø + Ø + - + Ø - Ø Ø
2010 Ø - - Ø - - / - + Ø + Ø + - + Ø - Ø Ø
2013 Ø Ø Ø Ø Ø + + - Ø (+) + + + Ø + + Ø + Ø
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø + + (+) Ø
An area that had not been raised previously, but which was mentioned in the context of the legal
framework for transfers was the issue of whether insolvency laws currently are best framed to help
businesses with problems to restructure and re-launch themselves. The Commission has proposed a
reform of insolvency law and one of its aims is to promote a rescue culture that will allow for the
continuation of viable businesses and a second chance for honest entrepreneurs. In particular,
facilitating further out-of-court and early restructuring schemes, when the debtor and main creditors
agree on a plan, may help enterprises facing transfer in difficult circumstances. These matters are still
under discussion, but again suggest that a re-orientation of the conception of business transfers might
help align their management with the developing legal framework.
4.3.4 Taxation
Generally the taxation regimes are thought be fiscally neutral, that is, they avoid introducing distortions
into the system that could influence the way that transfers are carried out. In this respect the situation
remains quite positive as was earlier the case.
Table 4.10: Development in Implementation - Tax neutral restructuring (Q.31)
2006 + / + + - + / + Ø - + + + + + + - Ø +
2010 + + + + + + / + + - + + + + + + + + +
2013 - + + + + + + (+) + (+) (+) + + + + + + (+) +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 + - + - Ø
Legend:

- No information
41.
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14 of the 19 EU countries responding indicated that there are now reduced taxes or exemptions on
assets transferred to family members, by either gift or succession. Austria reports that inheritance and
gift taxes have been completely abolished.
Table 4.11: Development in Implementation - Reduced inheritance tax (Q.32)

2006 + / + + + + / + + - - + (+) + + + Ø + +
2010 + Ø + + + + / + + - - + + + + + Ø + +
2013 + Ø + + + + Ø + + Ø(+) Ø + + + + + + Ø +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø - Ø + Ø
A study by Copenhagen Economics for DG TAXUD in 201134 looked into this issue in some detail. It
established that of the (then) 27 Member States of the EU, 18 levy specific taxes upon death while nine
(AT, CY, EE, LV, MT, PT, RO, SK, SE) do not do so. However, some of these countries tax inheritances
under other headings such as income tax. Some Member States, for instance the UK and France, grant
exemptions if the inheritance is in the form of business assets or shares that continue to be used for
business purposes. More specifically, the study points to 13 of the 18 Member States with taxes upon
death provide exemptions or special relief for transfers of family owned businesses at that point. The
five Member States said by the study to be without such exemptions or special relief were Bulgaria,
Denmark, Lithuania, Luxembourg and Slovenia. This differs slightly from the situation reported in the
survey for the evaluation, reflecting differing interpretations of the significance of exemptions granted.
Similarly, where still applicable, the situation is eased by allowing inheritance tax to be deferred:
Table 4.12: Development in Implementation - Deferring inheritance tax (Q.34)
2006 (+) / Ø + + Ø / + + (+) - + - + (+) - Ø - +
2010 + Ø + + + + / + + + + + - + + + Ø + +
2013 + Ø + + + + Ø + + Ø(+) Ø + + + + + + Ø +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø - + + Ø
On the other hand, there appear to have been few developments in tax relief to encourage business
owners to transfer to third parties before their death. Most countries have still not introduced any
34
Copenhagen Economics ‘Study on Inheritance Taxes In EU Member States and Possible Mechanisms to Resolve
Problems of Double Inheritance Taxation in the EU’ Aug 2010, revised May 2011.
42.
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legislation to this effect, apart from Belgium, Germany, France, Ireland and Austria, with Latvia planning
to do so in future. There are actually a couple of countries that appear to have revoked previous
provisions (DK, HU).
Table 4.13: Development in Implementation - Retirement tax relief (Q.40)
2006 + / + + - + / + Ø Ø - Ø + Ø! + Ø Ø Ø Ø
2010 + - + + - + / + Ø Ø - Ø + Ø + Ø Ø Ø Ø
2013 + Ø Ø + Ø + Ø + Ø Ø (+) Ø Ø Ø + Ø Ø Ø Ø
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø - Ø Ø Ø
The situation is similar when it comes to promoting re-investment of profits made on selling a business
and things have remained largely the same as in 2006 with most countries still not making use of an
incentive of this kind. There is one positive change – in the case of Ireland - and a couple of reversals in
the relief that is granted, in Denmark and the Netherlands.
Table 4.14: Development in Implementation - Re-investment tax relief (Q.42)
2006 + / Ø + + + / Ø! Ø Ø - Ø Ø Ø Ø Ø Ø Ø Ø
2010 + Ø + + + + / Ø Ø Ø - Ø Ø + Ø Ø Ø Ø Ø
2013 + Ø Ø + + + Ø + Ø (+) Ø Ø Ø Ø Ø - Ø Ø Ø
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø - Ø Ø Ø
Finally, there have also been a limited number of changes with regard to using tax incentives to transfer
businesses to employees. In fact, if anything, the situation here is worse than it was in 2006.
Table 4.15: Development in Implementation - Sale to employees tax relief (Q.43)
2006 (+) / + Ø (+) (+) / (+) Ø Ø - Ø + +35 (+) Ø Ø Ø Ø
2010 + Ø + Ø + + / + Ø Ø - Ø + + + Ø Ø - Ø
2013 + Ø + Ø Ø + Ø Ø + (+) Ø Ø Ø + + + Ø Ø Ø
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø - + Ø Ø
35
The situation for 2006 on ‘Sale to Employees Tax Relief has been changed from a ‘Ø’ to ‘+’. It was marked
wrongly in the 2006 Communication, as the measure was already implemented at that stage.
43.
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In relation to cross-border transfers, the responses indicate that only 9 of the 17 countries replying to
this question have established unilateral inheritance tax relief to prevent international double taxation
of inherited businesses (DK, ES, FR, HU, IE, IT, LT, NL, NO). The remaining 7 countries did not respond to
this question.
4.3.5 Findings in relation to the Evaluation Questions on the Effectiveness of the 2006 Communication
At this point it is useful to summarise the findings on the effectiveness of the 2006 Communication in
the terms of the original evaluation questions.
• The extent currently of measures taken to facilitate the transfer of businesses across the
participating countries, including the extent of dedicated support measures
The 2006 Communication reported that 60% of the original recommendations had been implemented
(and 45% in new Member States). Based on responses to the survey of the experts nominated for this
project in relation to their own countries, the current situation shows an improvement but not as
significant as might have been expected. The 19 Member States that responded to the survey have at
present implemented 70% of the original recommendations, with ‘old’ Member States counting for
77.5% and NMS for 58%. Including CIP countries, the overall implementation rate amounted to 66%.
For the five countries participating in the project that are not EU Member States, it is not possible to
make a comparison with earlier periods, but currently they have implemented about 48% of the
recommendations overall, though with large variations between countries.
The overall figures should be treated with some caution. A large part of the apparent improvement is
accounted for by all the countries participating now saying that there are awareness-raising actions and
nearly all saying that that taxation structures are fiscally neutral. But in more detailed responses less
than half of the respondents state that there is a ‘good provision’ of awareness-raising activities, with
mentoring and dedicated business support being less available. In the field of dedicated business
support measures – which were not directly mentioned in the original recommendations but which have
nonetheless proved essential especially for smaller businesses – only a small group of core countries
(25%)36 have high or very high availability of such measures. In the remaining countries there is either
very little organised support for transfers or none at all.
In terms of access to finance, half of responding Member States claim to have good availability of
tailored financial support instruments, whereas a third say they have no provision (mostly NMS). In the
other CIP countries participating, dedicated finance appears to be relatively rare. The general impression
from the fieldwork is, however, that enterprises involved in transfers are finding the current financial
climate difficult, as are other SMEs, but that there is no specific problem particular to transfers and
indeed that those who are able to present a good business case are mostly able to find finance, mostly
in the form of loans or loan guarantees.
Although most Member States have by now either reduced or abolished inheritance tax on business
transfer (only 4 of the 18 responding Member States have not done so), when it comes to the other tax-
related recommendations, there are still significant shortcomings to be found. Of the six proposed tax
measures, only about half (56%) have been implemented on average in the participating Member
36
Six countries reported that they provide a lot of support businesses on the issue of transfer: Belgium, Germany,
Denmark, France, Liechtenstein and Luxembourg.
44.
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States, and only 35% within the other participating countries. In fact, several countries are considering
or have started to revoke advantageous tax provisions previously available, as a result of the financial
crisis (eg. BE, DK, FR, HU, LV, NO, SK).
The overall conclusion is that in substance and with some minor improvements, including a catching-up
process on the part of newer EU Member States, the general situation has not changed much since the
2006 Communication, as will be explained further in the next section.
• Coverage of the full range of problems identified in earlier work on business transfer
The fieldwork and survey results show that measures in place in Member States and participating
countries do not necessarily address the full range of transfer-related problems. The areas that have
seen the highest success rates are those that relate to changes to the regulatory environment, such as
allowing firms to change from one legal form to another or to set up as a public limited company with a
simplified structure or with a single owner. Some 79% of the suggested measures in this field have been
put in place in participating countries across the board. Awareness-raising measures also show good
implementation rates with all 24 responding countries reporting that they organise some activities to
raise awareness, although 10 countries say that the availability of such activities is very low. When it
comes to providing access to dedicated finance or giving tax relief in various ways to facilitate the
transfer process, there are a lot less measures to be found.
Overall, therefore, the conclusions has to be that the coverage of the problems identified in earlier work
is partial and only approaching ‘satisfactory’ in relation to regulatory provisions. This situation may also
be judged to be poor in comparison with other areas of Enterprise policy. It is certainly the case that the
recommendation of the 2006 Communication that business transfer and start-up initiatives should be
put on an equal footing has not been implemented at any level.
• Evidence on the effects of the measures
The responses to the initial initiatives on business transfer pre-dated the development of current
evaluation systems and this may explain why very few countries have systems in place that monitor or
evaluate measures to support and promote effective business transfer. It should be said that even the
European Commission has less extensive monitoring of business transfer developments than, for
instance those relating to business start-ups.
Furthermore, basic data on business transfers and their effects are collected consistently only in a few
countries and, while it is true that there have been a number of studies on key issues for business
transfer in various countries, comparison between them is often difficult, because of the use of differing
definitions and the examination of differing issues that may be related but are often sufficiently
different to make it impossible to aggregate data or make direct comparisons. Some studies focus, for
instance, on family businesses, while others look at all enterprises.
The evaluation has even cast doubt on the accuracy and usefulness of the widely quoted figures for the
number of enterprises at risk, pointing to both conceptual and practical problems.
All in all, therefore, the evidence base for assessing the effects of the measures introduced to assist
business transfers is very poor and later parts of the Report make some proposals on this issue.
The one area where some interesting evidence is emerging, as will also be seen subsequently, is in
relation to the performance of enterprises, post-transfer. It appears that the anecdotal evidence cited in
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interviews of a positive effect from the injection of new ideas, organisation and capital, is being
substantiated in more systematic analysis conducted in various academic studies.
• Extent to which support measures successfully address genuine business transfer difficulties
While the evidence from the survey on the effectiveness of support measures in addressing genuine
business transfer difficulties is relatively limited, there is ample evidence presented in official documents
and academic studies and cited in interviews that the issues to be addressed in the business transfer
process have generally been correctly identified in earlier work and specifically in the 2006
Communication.
It has been argued in the previous section of this chapter that support could be more positively
orientated, with an emphasis on the opportunities presented by the occasion of a transfer, but this re-
orientation of existing support does not imply any major change in the mechanisms previously
developed, except perhaps in some of the material used in awareness-raising activities. The issues to be
tackled in providing effective advice or in arranging appropriate finance have been understood for some
time and there has been little to suggest a re-definition at this level. The conclusion therefore ought to
be that support measures are generally pointing in the right direction. There is however, a further
question of how effective they are and some evidence that there are some considerable problems here,
but these issues need to be broadened to a more general consideration of the efficiency of the support
that is provided and this is discussed further in the following section.
• The remaining barriers to effective business transfers and the factors underlying them
From the description of the situation in most countries, it is clear that many of the regulatory barriers to
business transfer have been overcome. The exception is the recommendation that unanimity rules
governing inheritance in the case of partnerships or sole proprietorships should not prevent the
business from being kept as a going concern. Here there are still only 8 Member States that have such
provisions (and 4 of the other participating countries). In addition, it will again be seen subsequently
that new barriers are becoming apparent in the area of cross-border transfers. Even so, the main areas
for further work relate to taxation provisions and business support, including awareness-raising and
providing access to finance.
The main considerations leading to the comparatively slow progress in the non-regulatory areas,
probably relate to cost, since implementing these measures extensively would certainly be more costly
than changing regulations, but also to a failure in some countries to appreciate the significance of
business transfer as an issue in Enterprise policy. The previous section of the report has suggested that
this may have been because of the way that the business transfer issue has been characterised.
An area not previously considered in the business transfer context is the way that insolvency law assists
or obstructs the transfer of businesses in financial difficulties. The current proposals from the
Commission on a reform of insolvency laws are still under discussion, but are intended to promote
effective restructuring and the continuation of viable businesses. A new more dynamic conception of
business transfer is very much in line with this thinking.
4.3.6 Overall Situation
The general conclusion, then, emerging from the survey responses is that there has not been much
further progress in the implementation of measures to improve the framework for business transfers
46.
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since the 2006 Communication. The main earlier gains were in changes in legislation and improvements
in relation to inheritance law and tax. There have been fewer developments in areas such tax
arrangements for third parties or employees or in the provision of dedicated support and finance
initiatives.
Part of the problem here is that policy relating to business transfer has simply not been given sufficient
profile. It is clear, for instance, that in spite of earlier recommendations that business transfer be put on
a similar footing to policy promoting start-ups, this has simply not been achieved in many countries, nor
- it could it be argued - at a European level.
The following section pays further attention to the pattern of responses to the original
Recommendation and the extent to which policy measures have addressed the basic problems of
business transfer.
4.4 The Efficiency of the 2006 Communication on Business Transfers
This section of the report summarises issues to do with the efficiency of measures to support and
promote effective business transfer, but also focuses on developments currently and since the 2006
Communication that have helped to improve transfer processes and make transfers more successful.
In this section, evidence has been drawn from the Expert Group meetings, from background research,
the survey and the interviews, but especially from the detailed work that has been undertaken for case
studies. Naturally, a fuller picture on the specific issue under consideration is presented in the case
studies; the main report relies on this more detailed work and in most instances summarises the
arguments and highlights the conclusions.
The original Recommendation and the additional measures highlighted in the 2006 Communication
were of three kinds. There were proposals that the Member States should change regulations, such as
company law allowing single person companies, there was reference to changes in taxation provisions
and there was mention of support measures, such as the provision of information aiming to stimulate
awareness of the transfer issue and the provision of a conducive financial environment. In short,
regulatory, fiscal and support measures were proposed.
Already by the time of the 2006 Communication, some progress was noted particularly in relation to the
regulatory provisions. So, it was said that changes meant that there were no major problems in
restructuring a business to prepare for a transfer and that it was easier to organise small firms as limited
companies. There had also been some progress with the legal principle of continuity of partnerships,
though there was further scope for allowing partnership agreements that have proved to be useful in
some countries. Generally, therefore there had been reasonably good progress with the regulatory
issues and even with the taxation of inheritance and gifts. It was in relation to support measures that
there had been the least satisfactory developments. The Communication highlights the fact that not
enough is done to raise awareness of business transfers and that the financial environment is often not
conducive to business transfers. In referring to new elements that needed to be added to those
mentioned initially, it also mainly highlighted support issues, such as providing adequate financial
conditions, raising awareness, improving support services, including mentoring and the coverage of ‘soft
factors’, and the need to organise transparent markets.
It is useful to ask at this stage why there was this difference between the apparent progress in
regulatory matters but a comparative failure to develop support measures. In a sense the answer is
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obvious, although not previously commented upon. Member States took action relatively early on in
relation to regulatory changes that could be implemented without any great cost, but the support
measures required expenditure and competed with other priorities.
The possible exception in this explanation is the reduction in inheritance and gift taxes, which clearly led
to some loss of revenue, but even after income and corporation tax revenue are taken into account,
together with the reluctance to extend tax benefits to third parties taking over an enterprise, the
argument could apply in this case.
The previous section has shown that the overall position in terms of the implementation of the original
objectives has not changed much since 2006. However, behind the headline situation, there have been
interesting developments in a number of areas, which also suggest elements that are likely to be
important in any renewed strategy to deal with transfer issues. These are considered under the
following headings
4.4.1 Awareness-raising
Highlighting the need to prepare for the transfer of businesses has been recognised as a major element
in any public action addressing business transfer, right from the beginning. The transfer of a business is
often a relatively complex affair and generally needs to be prepared well in advance. Encouraging
enterprises to be aware of the need to prepare for transfer and to think of it as a process sometimes
extending over a considerable period has been a theme continuously raised in discussions of business
transfer over the years.
Various public authorities and also business organisations, chambers of commerce etc., have taken
action to publicise this message since the early days, but there is consistent evidence that most
businesses fail to take appropriate steps and EU policy statements regularly announce that greater
effort is needed.
However, it could be that the approach adopted has inadvertently exacerbated the problem. By
stressing the need to prepare for retirement, awareness-raising efforts may have indicated that this is a
problem for the future that can be safely left for another day.
The arguments rehearsed in the first section of this chapter mean that it should not be assumed that
the transfer problem is something that primarily occurs at the end of a life cycle, when a single owner is
reaching retirement age. On the contrary, increasingly this will describe only a minority of transfers.
Appreciation that transfer is an event in the development of a business that can happen at any time
suggests a rather broader approach to awareness-raising.
It may still be appropriate, as has happened in Austria and the Netherlands, to contact business owners
approaching a certain age, with a view to encouraging them to review their plans for disengaging from
their businesses. However, if increasingly transfer can be regarded as an occasion of potentially major
significance for the strategy of a business or a set of related businesses, preparation for transfer needs
to be at the core of management strategy and equally of business training and education. If transfer is
regarded as an opportunity for re-configuring a management team and business assets, it needs to have
a higher profile in management discussions and in business textbooks and business curricula.
The problem of finding the resources to increase awareness-raising activity may therefore be resolved,
at least to a certain extent, by changing the way that transfer is conceived.
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4.4.2 Business support services and mentoring
The provision of information and support services to SMEs faced with the prospect of transfer has also
been a recurring theme throughout the development of policy in this area. In addition to actions to
promote awareness of the issue, where a wide audience is envisaged, it has also been recognised that
there is a need to support individual enterprises, either those with owners wishing to move out of a
business or those where there is someone interested in taking a business over.
In relation to individualised services, there have been more focused discussions at various times on
particular kinds of service, for example, the use of mentoring or the need to take ’soft factors’ into
account in shaping the assistance given. The case study on developing effective advice and support
provides an overview of these developments, before going on to consider issues arising from the
accumulated experience in this area.
Feedback from interviews indicates that in some countries public advice services on transfer are
underfunded as compared with support provided for start-ups and other areas of SME activity and that
there is insufficient training of staff to work in this area. Private sector support has developed in some
countries, but in others remains relatively restricted. The overall provision of advice and other forms of
support therefore continues to be an important issue.
However, even where there is provision, there are still significant matters to be addressed. A particular
point on the effectiveness of business support and advice from private sector providers has been raised
in a recent article by Lex van Teeffelen entitled ‘Avenues to improve success in SME business transfers:
reflections on theories, research and policies’37. This paper reviews the academic research into support
for business transfers and sets out rather negative conclusions. There is some evidence that the use of
advisers has negative consequences for the post-transfer performance of enterprises and studies in the
United Kingdom and the Netherlands are cited, which show that many advisors are ill-equipped to
provide advice over the entire process of a business transfer. It also appears that professional SME
advisors in general target their services at medium-sized firms and are too expensive for small firms.
An important part of the problem with traditional advisers – accountants, solicitors, bankers, even
brokers – is that they only have a partial grasp of the issues, usually only in the area of their own
competence and often only need to address the issue occasionally. But, advising on transfer needs an
up-to-date grasp of a wide range of issues including the analysis of financial information, accounting,
commercial law, taxation matters, often sectoral knowledge and contacts with sources of finance, plus a
certain grasp of psychology and an ability to deal with emotionally sensitive questions and individuals. It
is not surprising that specialists in the area have emerged, although currently in most countries there is
no control over those who may claim to be such a specialist.
At the first Expert Group meeting, there were several contributions insisting that business transfer
should not be regarded as an event, but rather as a process that should take place over a long period.
Enterprises need to be aware of the transfer issue well before they arrive at the point when it needs to
happen and they need to be helped to plan for the eventuality. Part of this preparation, and one of the
reasons that it needs to happen over a prolonged period, has to concern the psychological and
motivational issues that are a significant feature of an entrepreneur’s position within an enterprise. It is
37
Lex van Teeffelen entitled ‘Avenues to improve success in SME business transfers: reflections on theories,
research and policies’ June 2012
49.
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difficult for a successful entrepreneur or CEO to let go of control or face the consequences of growing
older and this aspect of transfer needs to be addressed alongside the financial, organisational and legal
issues that are also part of the transfer picture.
Another matter raised in the interview programme and also mentioned in the Expert Group meetings,
has been the need to respond to the perceived failings in the advice and support available by promoting
an increasing professionalisation of this service, and possibly introducing regulation of service providers.
The development of professional advisers on transfer in both the private and the public sectors is to be
welcomed and their further development encouraged, but such advice can be expensive, particularly if it
accompanies the whole process over several years. Nor is it necessarily appropriate for all businesses,
especially micro businesses. On the one hand, it is necessary to help businesses to appreciate that they
are in danger of losing much more than it costs to have good advice, if the transfer of their business is
not successful. Those who are prepared to pay for professional advice in the sale of a house should be
able to recognise the need for it in the sale of a business. Equally, there are cases of relatively small
scale and straightforward businesses where expensive advice is not necessary. In these cases – probably
rather large in number, the services of the usual business support agencies ought to be sufficient to
provide general orientation and warnings on pitfalls. Advice of this kind can often be provided on-line
and there are well established guides and on-line advice to support this process38.
However, in the cases where professional advice is needed, there is a substantial policy issue relating to
the assurance of professional services. The emergence of specialist advisers that concentrate on
business transfer is encouraging and should be promoted further as a matter of policy, but an important
part of this development is establishing an appropriate framework. It should not be possible for simply
anyone to be able to claim that they can provide advice in this area. An issue raised in some countries,
notably France, is whether the provisions of the MiFID Directive - the Directive on markets in financial
instruments (2004/39/EC)39 apply to those providing financial advice in transfer cases or whether
something similar should apply. In any event, it is clear that there is scope for the development of
appropriate standards and/or codes of conduct and possibly registration. Again, as the case study on
support services shows, there have been developments in France along these lines.
More generally, there have been some encouraging developments at both national and European levels
in the direction of improving standards. The work of Transeo, the European business transfer
association, has facilitated debate and an exchange of good practice and points the way to further
improvements, both in relation to improving the consistent provision of a first-class professional service
and in strengthening public and semi-public services, especially for smaller enterprises.
The overall situation with support services, therefore, is that this is a policy area where there has not
been consistent development in the past, but where especially if there is to be a re-focusing of transfer
policy on assuring efficient transformations and re-allocations of resources in a growing economy, the
38
For instance, Cédants et Repreneurs d’Affaires (CRA) : ‘Transmettre ou reprendre une entreprise’ (Guide), 2014
or Brunello, Toni ‘Kit Brunello Systems’
39
Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial
instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European
Parliament and of the Council and repealing Council Directive 93/22/EEC, OJ 2004 No. L145/1.
50.
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development of effective professional advice, which is often essential for the smooth running of the
transfer process, should have a much higher profile.
4.4.3 On-line Markets
A recommendation of the 2006 Communication, following on from the work of the Expert Group on
Markets for Business Transfers, was that transparent markets for business transfers should be
organised. This partially referred to the need for impartial services that could provide ‘a comprehensive
mediation service to guarantee ordered and well-structured transfers in the spirit of partnership’, but
part of the transparency is also the availability of on-line systems that allow sellers and buyers to be
brought together. This particularly is the subject of the case study on on-line markets (Annex A3).
The case study presents an overview of sites identified either by earlier studies or through research,
including sites identified in interviews. Most of the sites considered by earlier studies have continued to
flourish and to increase both the numbers of the businesses for sale and the numbers of those looking
to purchase a business. The German site, Nexxt-Change, for example, now regularly has over 7,500
businesses for sale on offer and facilitates over 1,000 transfers each year. These sites tend to cater for
the more complex forms of transfer and are concentrated in a core group of countries – Belgium,
France, Germany, Luxembourg and Austria that are active with other initiatives specifically for business
transfers. With the exception of the Spanish ‘Plan de Continuidad Empresarial’ and in Portugal, where
the SME agency IAPMEI, is shortly to launch a new national platform, there does not appear to have
been much of a development in the sort of sites recommended by the Expert Group in the period since
2006. Attempts by various Chambers of Commerce in Italy, for instance, to create regional sites have
met with varying degrees of success and have not yet led to the establishment of a similar national
facility. Elsewhere, such developments as there have been have involved ‘advertising sites’ more than
anything else.
The previous studies did not pay much attention to the broadly-based ‘advertising’ sites. Some of these
sites have existed for a long time in the sense that they originally took the form of a physical publication.
One explicitly claims to have been ‘connecting buyers and sellers since 1870’. Nowadays they essentially
consist of a website on which it is possible to advertise a business for sale. The notices posted on these
sites consist of a structured statement of the main features of the business. Some access to additional
information and commercial advisers is often provided, but basically they envisage a more or less direct
contact between the sellers and the buyers, without any substantial intermediation.
Frequently these ‘advertising’ sites will also offer franchises and sometimes property and other goods
and services for sale, but they cater for a relatively large number of businesses when compared to the
on-line markets previously highlighted. In addition, the businesses advertising are mainly micro and
small businesses. Some have an international dimension, with businesses in different countries and
often different language versions. A site used in the UK, for instance, - Businessesforsale.com – claims to
have 64,000 businesses for sale in 26 countries. However, the businesses involved are often mainly in
the service sector – retail, hotels, personal health care etc. and are generally relatively small, with an
annual turnover seldom above €1.5 million. In other words they serve a particular market, in which
although individually most of the businesses concerned are not substantial in terms of their impact on
the economy, collectively because of the numbers involved, they are rather more significant and
consequently ought to be a definite part of policy consideration in the business transfer area.
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It should be said that, although the model is relatively simple, these ‘advertising sites’ are gradually
becoming more sophisticated. A Polish site, Bizvendo, developed with EU funding support (ERDF) and
launched in 2011, operates in English and German as well as Polish and has various support features
built in. There is an on-line tool to help sellers prepare an information memorandum, setting out the
firm’s basic business information and also a step-by-step instrument to help owners to value their
business. The site can also direct businesses to advisers of various kinds and to potential investors.
The other, more established, on-line markets previously considered are often in a better position to
assist somewhat larger enterprises (though still SMEs) and enterprises to be found in manufacturing and
some parts of construction, the ICT sector etc. Essentially in these cases, the business and transfer issues
are rather more complicated than when it comes to selling a small retail outlet. In these circumstances,
there is clearly a greater need for professional assistance and mediation.
The case for intermediation lies in the market failures relating to information transmission. Initially there
is an asymmetry of information between seller and buyer. The seller knows his or her business better
than the buyer and has an incentive to hide certain facts and this failing is particularly pronounced in the
case of smaller enterprises that are exempt from requirements to publish the financial information
required of larger enterprises that typically are covered by company legislation. Checking by an
intermediary can help alleviate the problem. There is also the need in many cases for confidentiality. A
business owner cannot let it be known that he or she is thinking of selling a business, without this
potentially affecting the behaviour of customers, business partners, employees, suppliers and providers
of credit. All of these effects can reduce the value of the business. Being able to preserve this
confidentiality is also facilitated by the use of intermediaries.
Intermediaries can also play a useful role both in bridging differences between sellers and buyers,
notably in relation to the perceived value of the business and also in helping to arrange finance and
ensuring that the business under new ownership gets as promising a start as possible.
The Expert Group commented on the problem of the proliferation of on-line markets, suggesting that if
a comprehensive national database cannot be established, there should at least be a national portal for
all such databases. The PBI site in France (formerly Oséo) acts in this way and there appears to be a
similar motivation behind the ‘Startvaekst’ site that is being developed in Denmark and the ‘Suomen
Yrityskaupat’ site in Finland. However, there is clearly scope for other initiatives of this kind elsewhere.
The developments in this area may therefore be regarded as a moderate success, even though there is
scope for a more active development of marketplaces for both relatively simple and more complex
transfers in a number of countries and the all the systems could benefit from a mutual learning process
based on a continuing review of developments in this area. The existing systems appear to have been
developed cost-effectively and present models for those countries that are yet to develop them, but this
could be investigated further. It is noteworthy that in a number of countries, these market places are
well integrated into the developing provision of professional advice services. It is these cases that are
likely to have the most impact in the future.
4.4.4 Finance for Transfers
The financing of transfers has been another issue that has had some prominence since the beginning of
EU initiatives on business transfer and the promotion of a better financial environment for SMEs more
generally has been a major part of Enterprise policy for many years.
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In this context it may initially appear to be particularly disappointing that the results of the survey
conducted for the evaluation indicated that there had not been substantial change in the nature or
extent of financial measures intended to provide an environment conducive to business transfer since
2006. As can be seen from the presentation of the survey results in the previous section, those
countries that had measures in place specifically for business transfer in the earlier period have
strengthened them in some cases, but there has not been any marked extension of dedicated provision
beyond the core set of countries that were already active in the area (Belgium, Denmark, Germany,
France, Austria and in effect Finland). It has been noted that these are the same countries that are
active in other areas of support for transfers.
Among the countries that are active, there is more provision for loans and loan guarantees (including
micro finance loans) than for equity finance. The availability of mezzanine finance for finance is
restricted to two countries.
What is more surprising is that specific provision for transfers have dropped out of financial measures at
a European level.
The Entrepreneurship 2020 Action Plan40, published early in 2013, has a section on ‘Easier business
transfers’, in which it speaks of the development of ‘special financial facilities designed to finance
transfers’ and suggests that existing European funds could be used (in conformity with their rules and
priorities) to support transfers of SMEs intending to continue running the business. But in the section on
‘Better access to finance’ the Action Plan puts the emphasis on the fact that entrepreneurs have
difficulties raising finance in the early stages of their businesses and mainly concentrates on addressing
problems at this stage.
Similarly, in the Action Plan to Improve Access to Finance for SMEs41, published in 2011, although there
is reference to a series of developments that could undoubtedly assist business transfers, including
measures to improve lending to SMEs, improving the regulatory framework for venture capital,
improving SME access to capital markets and reviewing the impact of bank capital requirements on
SMEs, there had been no specific mention of financing business transfer at all.
This tendency of business transfer to have little or no profile in EU policy positions on finance for SMEs
was also apparent in the Commission’s initial proposal for a Programme for the Competitiveness of
enterprises and SMEs (COSME) 2014-202042, where around half of the proposed budget of €2.5 billion
was expected to be devoted to facilitating access to finance for SMEs. There was no explicit reference to
business transfers at all in the programme as initially proposed, though it is understood that this has
been modified in as yet unpublished later versions and that an environment conducive to business
transfers is now part of the COSME objectives.
40
Communication from the Commission to the European Parliament, the Council, the European Economic and
Social Committee and the Committee of the Regions ‘Entrepreneurship 2020 Action Plan. Reigniting the
entrepreneurial spirit in Europe’ COM(2012) 795 final of 9.1.2013
41
Communication from the Commission to the Council, the European Parliament, the Committee of the Regions
and the European and Social Committee ‘An action plan to improve access to finance for SMEs’. COM(2011) 870
Final of 7.12.2011
42
Proposal for a Regulation of the European Parliament and of the Council establishing a Programme for the
Competitiveness of Enterprises and small and medium-sized enterprises (2014 - 2020) COM(2011) 834 final of
30.11.2011
53.
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With the exception of those Member States where longstanding provisions have been developed
further, it would appear that neither the Commission nor the participating countries have been very
efficient in promoting finance measures for business transfers. However, a closer look at the situation
suggests that a different interpretation can be put on the findings of the survey.
It should be noted, first of all, that those countries that do provide dedicated finance often do so
through programmes that have a close relationship with agencies that are providing advice.
It then has to be said that many stakeholders commented that the general financial environment for
SMEs has worsened since 200843 and this situation affects SMEs seeking to finance a transfer as much
as SMEs in other situations. Furthermore, as will be seen in the section on transfers to employees
below, specific problems can arise with the financing of particular types of transfer.
However, specifically in relation to finance for business transfers, in spite of the fact that with changing
relationships within family businesses especially, the requirement for external finance is growing, as
businesses are increasingly sold to someone from outside of the family and the passing on of
enterprises in the form of an inheritance or a gift declines to be replaced by monetary considerations,
there does not appear to be a major or general problem of access to finance. This may be the result of a
marked decline in the numbers of businesses being offered for sale, as owners decide to postpone
sales, in the hope of getting a better price with an eventual recovery. Or the same phenomenon may be
the result of the disruption of retirement plans as a result of low annuity rates and low interest on
savings. But, a consistent feedback from the interviews conducted for the evaluation has been that any
transfer that can present a good business case will eventually be able to find appropriate finance, from
a bank or increasingly from other sources.
The observations on other sources of finance are also interesting. A number of those interviewed
commented on the increase of funds being made available from wealthy individuals. Former owners
that overlap with this category are also making a greater input, often allowing flexible pay-back,
effectively of loans and also providing and helping to ensure continuity. Sometimes both former owners
and other private individuals are acting as business angels.
There are, of course, particular businesses, especially very small businesses where there are difficulties
in finding finance for a transfer. This may be part of the more general problem of agreeing a valuation –
nearly always a point of tension between a seller and a buyer. Sellers tend to believe that their
businesses are worth more than the buyer is prepared to pay or the provider of finance is prepared to
acknowledge. Transfers to employees are also said to encounter more difficulties than other forms of
transfer, unless they can access funds specifically established to finance the creation of employee-
owned enterprises. Moreover, there is the effect, already mentioned, that the difficulties encountered
by some businesses are more pronounced in the current economic situation. However, overall, the view
of the members of the Expert Group and others involved in transfer processes is that the difficulties
generally arise because of a failure to prepare a proper case and especially to provide appropriate
43
Evidence to this effect is cited above – European Central Bank ‘Survey on the access to finance of small and
medium-sized enterprises in the EURO area, April to September 2012’ and:
Eurostat ‘ The proportion of unsuccessful loan applications by SMEs has risen with the economic Crisis’, Eurostat
news release 144/2011.
54.
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financial information. This does suggest that as part of awareness-raising actions there should be
emphasis on the importance of sound financial information for enterprises of all sizes, as part of the
long term preparations for transfer.
The other qualification to the general picture concerns the situation of young entrepreneurs. The 2006
Communication and other policy documents have referred to taking on an established enterprise
through transfer as an alternative to starting–up a new firm. However, in contrast to the situation with
older entrepreneurs, there is not much evidence from interviews and elsewhere of this happening to
any marked extent. Part of the explanation might be found in an interesting study conducted by the
Economist Intelligence Unit, on behalf of Zurich44 and published in November 2012. This study points to
an emerging long-term economic risk arising from a major disparity in the distribution of personal
wealth between the ‘baby-boom’ generation and younger people. Increasing levels of personal debt
among the young, arising from high unemployment levels and education expenses and difficulties in
entering the housing market have created a ‘capital-lite’ generation that is not in the best position to
raise finance for entrepreneurial activities. This is clearly an issue that needs further consideration.
Summarising the situation, then, although there are particular issues with preparing the case for finance
and the difficulties faced by younger entrepreneurs, there would not appear to be a major demand for
transfer specific finance. The reason that the participating countries (and the Commission) have not
made more progress in providing transfer specific finance is that it is not really needed as such. And
indeed the original Recommendation did not even propose it; it merely talks of a financial environment
conducive to business transfers.
Or perhaps this should be stated slightly differently. As was pointed out by a number of the experts
consulted, transfers can make use of funding established under other headings. Sometimes transfers
are explicitly excluded, but funds established to assist start-ups can often be used if the circumstances
are otherwise appropriate, while on other occasions funds established to promote growth are more
appropriate. Of particular interest, given earlier discussion of the role of transfers in assisting the
reconfiguration of European industry are the initiatives in Spain and Portugal that can assist business
transfers that are part of measures designed to promote the concentration and consolidation of
enterprises. As described in more detail in the case study on the finance of transfers, in Portugal, FACCE
(Fundo Autónomo de Apoio à Concentração e Consolidação de Empresas), established in 2009, is a fund
for the support of restructuring and the concentration and consolidation of enterprises, particularly
SMEs. The funding can take the form of participation in equity, the purchase of debt instruments or a
loan. The whole package can be up to 40% of the total finance required and be worth up to €10 million.
Similarly in Spain, among a series of finance programmes for SMEs from ENISA (Empresa Nacional de
Innovación), funding for transfers is available under a Mergers and Acquisitions programme, if the
project involves a corporate transaction (merger, acquisition or division) designed to increase the
company’s competitiveness. The programme provides loans of between €200,000 and €1,500,000.
The conclusion is that there is generally a financial environment conducive to transfers, in spite of the
apparent lack of progress referred to in the previous section. Of course there can always be further
improvements, especially if there is a clearer conception of the role of transfer in offering an
44
The Economist Intelligence Unit ‘Derailing the future of economic growth: The demographic time bomb facing
the UK SME economy’ November 2012
55.
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opportunity for a reconfiguration for productive resources. But in practice, it would appear that there
has already been a movement in the direction of a more fluid conception of transfer. Many financing
schemes accommodate transfer of various kinds, but there are also examples, as in the cases from
Portugal and Spain, where as part of an integrated response to the financial crisis, a more dynamic
conception has been developed of the role of transfer in the development of SMEs and their potential
to contribute to a strengthened industrial structure.
However, remarks in the survey and in interviews suggested that even in countries with relatively good
provision, the situation differs depending on the nature and size of the enterprise. Generally, micro
enterprises find it more difficult to access finance than medium-sized enterprises.
4.4.5 Taxation Provisions
An issue closely related to that of financial considerations is that of taxation. By 2006, a number of
countries had either removed inheritance tax or had introduced exemptions for those inheriting
business property. In the UK, for instance, there is Business Relief from inheritance tax and in France,
subject to certain conditions, the Dutreil scheme allows three-quarters of the value of a family business
to be transferred without any liability for transfer tax. These reliefs and the removal of inheritance tax
in Austria and Sweden have changed financing requirements in these countries and in France, since
2008, there have been tax incentives encouraging investment in businesses that have improved the
availability of funds considerably.
However, the pressure currently being felt on public finances has meant that there have been
modifications to exemptions previously granted or even discussion of re-introducing inheritance taxes.
In France, the tax authorities have indicated a tightening up in their guidelines on the rules for the
Dutreil laws, specifically in the situation where there is a partial sale of securities inherited. A certain
degree of uncertainty has been caused even by the potential for such developments and this has had its
own impact on the financial environment. A more stable taxation and regulatory environment, it is
thought, could well improve matters.
In other countries, there have been restrictions on carrying over losses in acquired businesses for tax
purposes, reducing the incentives for potential purchasers.
A more fundamental question, however, relates to the target for taxation reduction. The original
Recommendation first of all concerns inheritance and gift taxes (Article 6). In article 7, it then considers
taxation relating to transfer to third parties, but only relief for owners on the income or capital gains on
the sale, incentives for the reinvestment of the profits made on the sale of a business in another
enterprise and incentives promoting the transfer of the enterprise to the employees. The 2006
Communication comments that only a few countries appear to have followed the 1994
Recommendations on the transfer to third parties and that more needs to be done to encourage the
sale of businesses to employees, but does not make any broader proposals on taxation. In view of the
earlier discussion on the appropriateness of focusing on family businesses and transfer at retirement,
there is the question of whether or not the proposed measures are efficiently targeted, though again it
is not suggested that the original target was wrong, except in the sense that it was not comprehensive
enough.
Especially, if the inheritance and gift tax problem is largely resolved, the attention in any revised
recommendations ought to be turned to general incentives to invest in SMEs that those helping to fund
56.
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a transfer can benefit from. A number of countries already have such schemes and there are some
reports that they have already contributed significantly to the funding situation for transfers.
4.4.6 Transfer to Employees
Both the original Recommendation and the 2006 Communication referred to the encouragement of the
transfer of an enterprise to employees, either in the form of an enterprise set up by employees or, more
specifically, a co-operative.
In the past, there has been a tendency to resort to a co-operative structure when a business has faced
financial difficulties, often in an attempt to save the jobs of those employed in the firm. This, of course,
is not an ideal situation in which to launch a co-operative. More recently, with rising levels of education
and skill in the workforce, there has been a tendency to consider a co-operative in more positive
circumstances, although even here it is more likely to be a practical solution in some situations than in
others. Requiring substantial amounts of initial equity or saddling the co-operative with high levels of
debt are obviously disincentives for those considering participation in a co-operative, so it is easier to
establish them in business activities that have low capital requirements or are labour-intensive, such as
generally in the service sector, and where the degree of cooperation among employees is high (e.g. ICT,
consulting, creative activities)45. It is in these areas that finance arising from the establishment of a co-
operative is particularly relevant.
There are a number of advantages of business transfers to employees. Firstly, transfer of the enterprise
to the workers can contribute to on-going stability during the transfer process, and to continuing
economic activity as well as the maintenance of existing jobs. This is particularly important in the case
where the owner has been the founder of the enterprise and the emotional attachment to the business
is strong. The employees are the most familiar with the functioning of the enterprise and it is in their
interest is to preserve their jobs and to collaborate with clients, banks and suppliers. Additionally, there
are a number of support structures and financial support providers through the cooperative
federations. Finally, the employee solution can be beneficial from a regional perspective, keeping the
development and growth maintained in the region.46
Involving employees may therefore be a good solution even in the more dynamic context in which, it is
suggested, transfers should be viewed. Of course there are also risks connected with such transfers.
CECOP underlines the point that ordinary enterprise employees are often able to invest only limited
equity capital in the business and therefore debt and leverage are likely to be high for the members.
The newly established cooperative needs to quickly establish a capital stock in order to reduce such
leverage. Additionally, especially in the current economic climate, previous profitability of the
enterprise does not guarantee future prosperity and sometimes the workers can be insufficiently
prepared to manage the enterprise. These, however, are considerations that can apply to other forms
of transfer.
Transfers to employees may also face particular difficulties. Enterprises taken over by employees often
have a better survival rate than other enterprises, especially over the longer term. Evidence to this
effect is cited in the CECEP publication ‘Business transfers to Employees under the Form of a
45
From the guide La reprise d’entreprise par les salariés en coopérative. p.183-184 Guide transnational www.les-scop.coop.,
46
From the guide La reprise d’entreprise par les salariés en coopérative. Guide transnational www.les-scop.coop
57.
Section

Cooperative in Europe’47 which shows that worker cooperatives and social cooperatives, tend to have a
specific capacity to adapt to change, maintain jobs and economic activity even when they are at risk,
thanks to their specific ownership, governance and capitalisation model, and that they are able to
pursue a social mission at the same time, such as creating sustainable jobs, labour integration, or
providing social, health, educational and environmental services to the community. It is argued that
their governance models help them anticipate and prepare restructuring processes in time, in
association with the employees and other stakeholders of the cooperative, ensuring adequate and
sustainable solutions that minimise the negative social impact of the restructuring process. There are
examples from Italy, Wales and France, in particular, which show that cooperatives resulting from a
transfer have an 82.5% survival rate after 3 years, as against only 66% for traditional enterprises.
In spite of this, financial institutions are often more reluctant to get involved with co-operatives than
other forms of enterprise and the co-operative has to rely on specialised agencies established to
provide support to this form of business. However, there are considerable differences across
participating countries in the availability and extent of support of this kind, This represents a significant
constraint on the possibility of organising transfers to employees.
4.4.7 The overall Efficiency of Measures to promote Transfer
It has been seen that, given the progress made before 2006 with regulatory matters, the telling aspects
of policy for promoting business transfers are in the areas of taxation and support measures (including
finance). These are areas that tend to require more expenditure than regulatory reforms, but in some of
them there have nonetheless been some encouraging developments, although not always as a result of
actions directly targeted at transfers. In fact, in terms of improving the efficiency of policy in this area,
the new orientations proposed in the way that business transfers are conceived are very much in line
with the direction that the most promising developments in support services and finance are
progressing anyway.
4.4.8 Findings in relation to the Evaluation Questions on the Efficiency of the 2006 Communication and
its Follow-up
• The relative efficiency of measures
In view of the lack of evidence on the effects of measures, it has not been possible to make a
comparative assessment of their relative effectiveness and efficiency. The effects of regulatory
measures are generally thought by experts to have been positive, although they tend to be regarded as
necessary rather than sufficient conditions for promoting an efficient transfer of businesses and
attention has now moved to matters of taxation and support, including measures to facilitate access to
finance.
Taxation provisions that facilitate the transfer of a business, and especially those that fall outside of the
treatment of inheritance, are currently the subject of political debate in a number of countries, just as
transfer outside of the family is becoming the usual situation for most enterprises, but this is part of a
larger debate on public finances, rather than the efficiency of transfer processes.
47
‘http://www.cecop.coop/IMG/pdf/bussiness_transfers_to_employees_under_the_form_of_a_cooperative_in_e
urope_cecop-4.pdf
58.
Section

There have been awareness campaigns in a number of countries, but they have tended to be
intermittent and there have been few efforts to assess their overall effectiveness. Evidence was cited on
the doubtful effects of advice and support provided for individual enterprises in the process of transfer,
but this mainly referred to private sector support rather than support where there is public expenditure
and it was also evident that there is emerging good practice in this area that appears to be developing a
more consistent and professional approach and addressing some of the problems identified in earlier
provision. The major problem now appears to be the cost of such support to enterprises, which means
that it is not available to smaller SMEs that have to rely on public and semi-public support agencies,
where attention to transfer issues often has a low priority.
Dedicated finance for SMEs facing business transfer is restricted to a core group of countries and an
implication of the re-orientation of the policy perspective on transfers towards one that makes their
dynamic potential more evident is that the main efficiency issue in this context is more a matter of how
all forms of SME start-up and growth funding can be used to assist transfers, especially given the
evidence on positive performance post- transfer.
• Administrative and reporting burdens on stakeholders and/or other actors
The administrative and reporting burdens arising from measures proposed in the 2006 Communication
are generally negligible, once the regulatory changes have been put in place. In fact it might even be
argued, given the paucity of data on transfers, that there are not sufficient reporting requirements and
it has been pointed out that moves to reduce the financial reporting requirements on smaller
enterprises may have adversely affected the efficiency of transfer processes.
• The adoption of measures elsewhere
The question of which aspects of measures either facilitate or hinder their adoption elsewhere again
raises the issue of whether or not the traditional conceptual framework for business transfer policy is an
appropriate one. Some countries have fully accepted this framework and have adopted dedicated
measures that correspond to it. Others appear to less certain of the framework and have definitely been
slower to adopt measures specifically for business transfers. This may have something to do with the
relative strengths of a family business culture in the respective countries, but whatever the reason, it is
clearly easier to reproduce initiatives in another country, if both sides share the same conception of the
issues to be addressed.
Having said that, the proposed refocusing of business transfer policy will not make dedicated measures
redundant. They will need to be based on a broader conception, but the experience of those responsible
for current measures will in fact be valuable in sensitising those operating more horizontal instruments,
such as general SME start-up and growth funds, to the particular issues of business transfer. In this
sense the biggest contribution to promoting the wider take-up of measures to support business transfer
will come from the re-orientation of transfer policy.
4.5 The European Added Value of the 2006 Communication on Business Transfers
Business transfer has primarily been seen as a policy issue that is most effectively addressed at a
national or sub-national level and most of the investigations of the effectiveness of this policy have been
conducted on the assumption that this remains the case. Apart from particular areas, such as the
Transfer of Undertakings Directive, usually stemming from policy motivations beyond the main focus of
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Enterprise policy, action at an EU level has mainly been a matter of supporting national developments
through analysis and reference to good practice in particular cases. It is generally assumed that this
should continue to be the case.
However, at an early stage, the Expert Group pointed to the growing significance of cross-border
transfers and although estimates from the survey and some of the interviews suggest that only
somewhere between 1% and 10% of transfers currently have some kind of trans-border element, this
development does raise certain issues that should be addressed at a European level.
4.5.1 Cross-border transfers
Cross-border transfers can have advantages both for sellers and buyers for a number of reasons. For
sellers there is the wider market that opening up cross-border possibilities can bring. For buyers, there
may be personal motivations, such as the prospect of a fresh start in a new location or that the
acquisition of a new business may form part of (partial) retirement plans. For business purposes, there
may be a number of reasons for acquiring a business in another country. There may be the opportunity
to buy into another market or to extend control over more of the supply chain or to acquire a
competitor and consolidate a market across different countries. Additionally, a base in another country
provides a wider scope for searching for and co-operating with business partners. More generally, the
process might be regarded as applying the logic of the Single Market in the context of business transfers.
The case study on Cross-border Transfers notes that, although still a small proportion of all transfers,
there has been something of a tendency for the numbers of cross- border transfers to rise and not only
among firms located in border regions, which have sometimes been thought to be the main areas where
such developments are prevalent. The case study goes on to consider a number of the issues that can
arise as a result of the cross-border element. The most significant are the lack of information available,
especially on smaller enterprises and the fiscal barriers that can inhibit cross-border transfers.
The lack of financial and related information constitutes a major challenge for foreign investors (and
imposes additional cost and time requirements), especially those interested in smaller firms. Although
efforts have been made by international institutions to promote greater financial data disclosure and
harmonisation for non-listed companies, the situation continues to be uneven across the EU and this
inhibits the development of cross-border transfers. The transition from national standards to IFRS48,
although costly, has several advantages: increased transparency, improved management information
and standardisation of information. More could be done to promote transition to these standards in
order to improve the businesses transparency and to facilitate cross-border benchmarking.
An obstacle that has received some attention is the domestic rules on inheritance taxes which give rise
to two potential cross-border problems - cross-border discrimination may arise if non-domestic assets
and/or liabilities are subjected to higher levels of inheritance tax than equivalent domestic categories;
and assets and liabilities may end up being taxed for inheritance purposes in more than one EU tax
jurisdiction potentially leading to very high levels of taxation. The domestic rules on inheritance tax vary
substantially among the 27 Member States of the EU. Eighteen levy specific taxes upon death while nine
do not do so but some of those nine do tax inheritances under other headings such as income tax.
48
International Financial Reporting Standards
60.
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To tackle the problems with inheritance tax, the Commission adopted a Recommendation on relief for
double taxation of inheritances 49 on 15th December 2011. This indicates that cross-border inheritance
tax problems could be resolved without any harmonisation of Member States' inheritance tax rules by
ensuring that Member States' rules interact more coherently with each other so as to reduce the
potential for double, or multiple, taxation of inheritances. As regards tax discrimination, the
accompanying Commission Staff Working Paper50 sets out the EU case-law principles for non-
discriminatory inheritance taxation, with a view to encouraging Member States to avoid actions that
obstruct the operation of the fundamental freedoms. The Recommendation envisages the preparation
of an evaluation report in three years’ time based on a monitoring of Member States' practices. As yet,
no Member State has adopted the specific provisions of the Recommendation.
It will be necessary to review developments in this area as it develops, in order to identify problems as
they emerge and assess the extent to which existing problems have been resolved.
4.5.2 Evaluation and Monitoring
Since the Recommendations were published in 1994, a significant development at a European level has
been an increasing emphasis on the evidence base for policy making and the introduction of evaluation
regimes and monitoring systems. This lack of an evaluation framework in the area of policy on business
transfers and the general lack of data in the area have been problems for the current evaluation that
have inhibited the assessment of the effects of previous policy. In order to help to change this situation
for future assessments and to provide a better basis for future co-operation between the Member
States and other participating countries in this area, the current exercise has both conducted a case
study on data issues (Annex A6) and developed proposals for an indicator system that might be used to
help monitor progress, within the overall framework established by the COSME Programme. The
proposals for an indicator system are presented as a separate document (Annex A7).
It should be remarked at this point that the EIP monitoring system and other tools for the overview of
policy developments, such as the SME Performance Review, appear to show little interest in business
transfers, especially in contrast to the amount of data collected on business start-ups. This is at least
partially because of the difficulty in obtaining accurate data on the number of transfers taking place.
The case study on data has some suggestions in this regard.
4.5.3 Data Collection
Supporting a development of an evaluation and monitoring framework for this area of policy, there is
also scope for greater co-operation at a European level in the collection of data on transfers and their
implications.
To obtain a full picture, it is necessary to disaggregate the portmanteau term ‘business transfers’ in its
major components and distinguish between firm sizes (zero employees, micro firm, etc.), types of
transfer (intra-family, intra-firm and to third parties), and drivers of transfer (restructuring, retirement,
illness, death and desire to sell the business to buy something else). Such an exercise should also pay
49
Commission Recommendation of 15 December 2011 regarding relief for double taxation of inheritances
(2011/856/EU)
50
Commission Staff Working Paper ‘Non-discriminatory inheritance tax systems: principles drawn from EU case-
law’ SEC(2011) 1488 final of 15.12.2011
61.
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due attention to the fact that not all firms are transferable, and possibly trace the movements of assets
and staff associated with the end of a business’ activity.
However, more immediately, it might be possible to build on existing practice and data collection. With
a couple of simple questions about intentions to transfer or close over the next five years and some
useful cross-tabulation, the Small Business Survey in the UK is able to generate some interesting data on
the extent and nature of transfers. Encouraging other statistical authorities to do something similar
would help generate a lot more reliable information on the basic characteristics of the transfers that are
taking place.
Equally some contextual information can be provided by the work of the European Foundation for the
Improvement of Living and Working Conditions (Eurofound). The European Restructuring Monitor
(ERM) collects data on trends in ownership changes, but mainly for larger enterprises. The fact that it
does not cover all enterprises means that there is a limited application in the current context, but if
business transfers are increasingly seen in the context of structural change, the ERM could become
increasingly relevant. In addition Eurofound also conducts studies on particular issues, such as
restructuring among SMEs, and with greater co-ordination these specific studies could also contribute
to the information gathering exercise.
62.
Section
Conclusions & Recommendations 5

5.1 Conclusions and Recommendations - Introduction
Preliminary conclusions on issues raised in the initial evaluation questions have been set out after each
major section in the previous chapter. It is now possible to state the main conclusions of the overall
analysis and associated recommendations. These are broadly at three different levels:
• the conclusions and recommendations on the conceptual framework that define the nature of the
business transfer issue and how it relates to other aspects of Enterprise policy
• the conclusions and recommendations that relate to the current policy framework for business
transfer and, in particular, the 2006 Communication and its follow-up
• the conclusions and recommendations on areas of operational and practical concern affecting
business transfer processes.
These three categories are inter-related, but it is important to understand the proposed shift in the way
that we conceive of business transfers, before it is possible to go on to the conclusions and
recommendations on how policy in this area can be further developed and how practical steps can be
taken to assist enterprises that are in the process of transfer.
5.2 Conclusions and Recommendations on the Concept of Business Transfer
A major conclusion of the evaluation is that the ‘relevance’ of the traditional conception of business
transfer should be questioned. It is not so much that the original conception was wrong, but that it
describes only part of the situation. The typical transfer is not something that takes place at the end of a
business life cycle, prior to the retirement of a single owner. This only describes a minority of cases. A
different focus for transfer policy is required.
There has never been a definitive definition of ‘business transfers’ in the context of Enterprise policy.
This has unfortunate consequences, not least in the development of a consistent evidence base on this
area of policy.
The policy orientation that stressed the threat to jobs posed by the need of retiring business owners to
transfer their businesses has been based on extrapolations from limited data, represents at best a
partial perspective and may even have been counter-productive. A more positive orientation would
stress the opportunity that transfers represent, by facilitating future growth development (and thereby
also safeguarding jobs).
Transfer is an event in the development of a business that can happen at any time, not just when an
owner is reaching retirement. It has a significant part to play in a dynamic economy, especially in the
organic process of re-allocating resources and restructuring the productive assets of the economy.
This more positive conception of business transfers would place associated policy nearer to the centre
of current EU strategies to promote growth.
Depending on the circumstances of the individual business and particularly the size of its operations, a
transfer can be like restarting a business or more often, an opportunity for the business to re-organise
itself, to grow or take a new direction through the injection of fresh ideas, talent and possibly capital.
63.
Section

Recommendations – the Concept of Business Transfer
1. Policy on business transfer needs to be re-focused to address the problems faced by SMEs in a
wider set of circumstances than has previously been envisaged. This should include a more fluid
conception of business transfer, as something that can happen throughout the development of a
business rather than as an event associated with the retirement of the owner.
2. The term ‘business transfer’ should be defined by the European Commission. For the purposes of
Enterprise policy, the evaluation team recommend the following definition:
‘a business transfer is the process of transferring, for any reason whatever, the controlling
interest in the business of an SME, by means of a transfer of either shares or assets. It is usually
accompanied by a change in the management of the firm.
3. The ‘transfer problem’ should not be characterised primarily in terms of the potential effects on
employment, which are uncertain. Instead, the policy issue should be placed within the context of
EU objectives of promoting smart, sustainable and inclusive growth. The opportunities presented
by transfers should be highlighted, particularly where they are an occasion for a re-structuring of
productive assets and resources within a market.
Family Businesses & Business Transfer

Although the situation varies from one country to another, it is no longer the case that most transfers
involve handing on a business within a family and, although it was never regarded as the whole picture,
the tendency to conflate the transfer problem and the problems of family businesses has probably done
a disservice to both sides.
Family businesses make an important and distinctive contribution to Europe’s economy and, as has
begun to happen, should be the subject of specific policy attention, which should include analysis of the
particular problems faced by family businesses in the transfer situation.
Recommendations – Family Businesses

4. The issue of business transfer should not be conflated with the transfer problems of family
businesses.
5. Equally, family businesses continue to make an important and distinctive contribution to Europe’s
economy and all the issues they face (including transfer) should be addressed in parallel and as a
coherent whole.
5.3 Conclusions and Recommendations on the Current Policy Framework for Business Transfer
The Basis for Business Transfer Policy

Although it is argued that business transfers should be seen as a part of the ‘normal’ processes of a
market economy, ‘business transfer’ still remains a significant issue for Enterprise policy, not least
because of the market failures that particularly affect SMEs and hinder the transfer process.
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It is not possible to assess the extent of the business transfer ‘problem’ with any confidence. Previous
estimates of the number of enterprises and jobs at risk are likely to have been overstated. However,
there is longstanding evidence that successful transfers secure more jobs than start-ups and new
evidence that there is an improvement in the post-transfer performance of enterprises. Furthermore,
the potential for business transfers to contribute to a more dynamic economy has largely been
overlooked.
Although the recommendation of the 2006 Communication to ‘give political attention to both business
transfers and start-ups’ has not resulted in a more even-handed approach, even by the Commission, the
case for this approach still remains.
Within this context, there are special opportunities that arise in the transfer of enterprises to employees
and evidence that enterprises that have been taken over by employees have a better survival rate than
other enterprises, especially over the long term. There are also special difficulties faced by such
enterprises, including in relation to access to finance.
Recommendations – the Basis for Business Transfer Policy

6. Transfer should continue to be regarded as a significant event for SMEs, which requires policy
interventions to address market failures and promote efficient outcomes.
7. The recommendation of the 2006 Communication to ‘give political attention to both business
transfers and start-ups’ should be implemented by the EU and participating countries.
8. In this context, the opportunities for employees to take over a business should have a higher
profile and the particular problems of financing such transfers addressed, not least by drawing
attention to the evidence on the post-transfer performance of employee-owned businesses.
Implementation of the 2006 Commission Communication

The conclusions of the evaluation on the implementation of measures to support business transfer,
since the 2006 Commission Communication are based mostly on a survey completed by the experts
nominated by the participating countries.
There has not been much progress in the implementation, since the 2006 Commission Communication,
of the measures advocated by the original 1994 Recommendation.
The main ‘regulatory measures’ – changes to legislation - had already been implemented by EU Member
States by 2006 and have also been implemented by other participating countries. There had also been
reductions in inheritance taxes in many EU Member States. It has proved more difficult to implement
changes in taxation encouraging take-overs by third parties and employees and to provide effective
‘support measures’ such as awareness-raising, business support services and dedicated finance
measures.
The issue of whether insolvency laws facilitate the transfer of businesses in financial difficulties had not
previously been raised, but the proposals from the Commission on reform of insolvency laws, currently
under consideration are intended to promote effective restructuring and the continuation of viable
businesses and appear to be helpful in developing the more dynamic development of transfers that is
proposed.
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Section

Recommendations - Implementation of the 2006 Commission Communication
9. The policy measures that were originally intended to address barriers to business transfer should be
kept under review and there should be a reaction to new barriers, particularly in relation to
international transfers.
10. The main policy challenges that policy makers now need to address are in the areas of taxation and
support measures, notably awareness-raising, professional advice to enterprises and access to
finance.
5.4 Conclusions and Recommendations on Operational Issues for Business Transfer
The operational issues for policy on business transfer concern the following areas:
Cross-border Transfer
The growth of cross-border transfers, though still a limited proportion of the total, has revealed new
barriers, essentially in the operation of the internal Market in this area. Problems with cross-border
inheritance are being addressed by the Commission.
Recommendations - Cross-border transfer

11. The limitations on cross-border transfer caused by inconsistencies in the treatment of financial
information will need to be addressed, as the number of cross-border deals grows. More should
be done to promote transition from national accounting standards to IFRS in order to improve
business transparency and to facilitate cross-border benchmarking.
12. The monitoring of the implementation of the Commission Recommendation on Double Taxation
of Inheritances needs to take the business transfer dimension into account and further action
should be taken if double taxation and discrimination are not being effectively addressed.
Advice and Support

It is generally acknowledged that many enterprises face a complex range of legal, financial, taxation,
organisational and emotional issues when a business transfer becomes advisable and those involved
often need professional assistance in negotiating a successful outcome. Although there are encouraging
developments in the provision of dedicated professional advice services, both in the public and private
sectors, there is still a lot to be done, especially in establishing an appropriate framework in which the
quality of these services can be assured.
Raising awareness of the need of any business to prepare for transfer remains a major challenge for the
Commission and the participating countries. A change of emphasis in the presentation of transfer may
assist this process.
Recommendations - Awareness-raising
13. Early preparation for transfer should continue to be stressed in awareness-raising initiatives, but
as something that can occur at any stage of a business’ development, rather than an event that
66.
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is associated with retirement.
14. The Commission and the Member States need to encourage a situation where transfer is
thought of as a strategically important process that enterprises should see as a critical element
in their strategic planning. Business education and training, in particular, need to provide
appropriate coverage of transfer as a strategic element in business planning, involving the
possibility of a significant reallocation of resources.
Recommendations - Business support

15. Effective professional advice is needed by many of those involved in business transfers. This
should be a business transfer policy priority.
16. The information and advice needed by smaller enterprises can often be provided by the normal
business support agencies, but there needs to be explicit provision and this should be organised
consistently on the basis of national structures.
17. For transfers that are more complex, professional advisers specialising in business transfer are
necessary. The development of these dedicated professional advisers should be encouraged and
a framework for delivering quality services in this area developed by the authorities, including
definition of professional standards and/or the development of codes of conduct and possibly
involving obligatory registration
18. It is necessary to ensure that specialised advisers can cover the whole range of issues that arise
in a transfer context, including the emotional aspects that can have a major influence on the
outcome. Improvement of support services could usefully be co-ordinated at a European level,
building on the work being undertaken by Transeo, for instance, with the aim of codifying good
practice, and where appropriate standards, at least with respect to the following areas:
- appreciation of the psychological and emotional issues arising with transfers and knowledge of how
to address them
- valuation
- legislation relating to changes in ownership
- taxation issues relating to changes in ownership
- expertise in strategic management and marketing
- expertise in the integration of businesses
Given the importance of preparing for transfer during the development of a business, this advice
may need to be available over a considerable period.
19. Firms have to be made aware by those providing support that business transfer involves costs
and enterprise managers should be encouraged to plan for these costs.
Access to Finance
There is a tendency to a greater requirement for finance in effecting business transfers, because of the
declining incidence of succession within families. Currently, this tendency may be masked as owners are
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reluctant to offer their businesses for sale, because of reduced valuations in the current market
conditions and the disruption of retirement plans by a range of factors.
The general view, however, is that the availability of appropriate bank finance is not a problem for well-
prepared propositions, though this is in a context in which bank finance generally has become more
difficult and the problems faced by particular groups (transfers to employees or young entrepreneurs of
the ‘capital-lite’ generation) need attention. An interesting development is the increasing involvement
of the previous owner, especially in providing transitional finance..
A number of experts mentioned that there is a growing presence of private investors in the financing of
transfers, in many cases encouraged by tax incentives such as the fiscal package of 2007 in France. In
some cases, however, the source of the funding is from outside of the EU.
Attention to transfer issues in public initiatives to promote SME access to finance is low both at a
European and national level, with the exception of a core group of countries that have long been active
in the transfer area., The need, however, is for consideration for business transfer within schemes that
assist start-ups and enterprise growth, rather than for dedicated business transfer finance.
There are already schemes in Portugal and Spain that provide funding for business transfer as part of
measures designed to strengthen industrial structure.
Recommendations – Access to Finance

20. Clarification is necessary from the Commission of the regulatory basis on which financial advice
can be provided (whether or not it is covered by regulation of providers of personal financial
advice).
21. Although for well-prepared businesses currently, there does not appear to be a major problem
in accessing finance for transfers, this situation could change and has to be monitored, especially
the factors that could lead to an increased demand for funds.
22. Further analysis is also advisable of how well prepared funds that generally assist SMEs to access
finance are, for dealing with the particular circumstances of business transfer, and of their
effectiveness in assisting the subsequent development of the enterprises transferred.
23. The encouragement of young entrepreneurs to take on the challenge of an existing business
needs to be more soundly based. An investigation needs to be undertaken by the Commission of
the problems faced by young entrepreneurs of the ‘capital-lite’ generation.
24. Schemes linking the availability of finance to the restructuring of industry and the longer-term
promotion of growth are an interesting development that might be more widely adopted.
On-line Transfer Markets

There are a growing number of on-line transfer markets, with varying provision for access to
professional assistance. Given the different needs of micro businesses and those that are larger and
more complex, these differences in support provision are appropriate, but further improvements could
be made, not least in promoting links and cross-reference between the different sites.
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Section

Recommendations – On-line Transfer Markets
25. National authorities should encourage the development of on-line transfer markets for both
micro enterprises and larger more complex SMEs. Sites should be encouraged to link with other
sites, including sites from other countries.
26. All on-line markets facilitating business transfer should be encouraged to provide access to
impartial advice and the quality of the information posted should be monitored. There is a
strong case for mediation in sites with larger SMEs and more complex deals.
The Evidence Base

The data on business transfer are very limited and largely depend on national studies focusing on
differing aspects of the transfer situation. Consideration of business transfer began before the
development of the current framework for evaluation and monitoring at a European level. Appropriate
systems need to be put in place to improve the evidence base for decision-making in this area and for
assessing progress with policy interventions. There would appear to be a possibility to discuss with the
European Foundation for the Improvement of Living and Working Conditions (Eurofound) whether it
could make a systematic contribution to data on the context in which business transfers take place.
Recommendations – Evidence base

27. The Commission and participating countries should consider how the evidence base for business
transfers can be improved, initially by including appropriate questions in existing data surveys,
such as those in the UK’s Small Business Survey.
28. The area of business transfer should be brought within the usual Commission arrangements for
evaluation and monitoring. Consideration should be given to the indicators proposed in Annex
A7. They are intended to fit into such a framework.
More detailed conclusions and some additional recommendations are to be found in the case studies
that are annexed.
69.
Annex
Case Study: The Effects of Evolving A1

Business Relationships
The Effects of Evolving Business Relationships on the Transfer of Businesses
1. Introduction
This case study looks at a series of questions that are fundamental to the orientation of policy in relation
to business transfer, and in particular, how evolving business relationships have changed the nature of
transfers currently taking place. The implications for the orientation of transfer policy are considered.
2. The Reasons for this Case Study
Feedback at the early stages of the evaluation and questions raised by the initial review of the literature
suggested that the evaluation team could usefully look both at the central concept of a business transfer
and how this was being affected by changes in the SMEs that have typically been seen to encounter
problems. How the problem of business transfer is conceived has important implications for the choice
of remedies. These issues are therefore a significant element in any assessment of the continuing
relevance of EU policy on business transfers.
3. The Definition of Business Transfer
The recognition of the problem of business transfer at a European level goes back to around 1989, so by
the time of the Commission Recommendation of 199451 and the associated Commission
Communication52 that explained the background and reasoning for the initiative, there had been fairly
extensive diagnosis of the problem and of the constraints faced by businesses in achieving a successful
transfer.
It is rather surprising therefore that the 1994 Recommendation and associated documents provide no
clear definition of the term. Instead, a number of the characteristics of the process are referred to and
the problems that can arise in this process. So, transfer definitely involves a change of ownership and in
most cases management. It is applied to SMEs and is described as being a third stage in the evolution of
a business following on from its ‘start-up’ and ‘growth’ phases. It can take the form of a transfer by
succession (usually someone in the family) or transfer by sale (usually someone outside of the family).
Furthermore, there is reference to the desirability of the continuity of businesses, mainly because of the
effects of a failure to transfer businesses successfully in terms of the loss of viable businesses and the
effects of this on employment. However, there is no attempt to say definitively how a business transfer
is distinguished from other changes of ownership that are part of general on-going processes involving
the re-allocation of resources within a market economy, such as those arising with mergers and
acquisitions. With business transfers, there are clearly considerations of a social or institutional nature
that distinguish them from a re-allocation of business assets that are part of normal market
transactions, but apart from a few clues, such as references to businessmen who have reached the age
51
Commission Recommendation of 7 December 1994 on the transfer of small and medium-sized enterprises
94/1069/EC
52
Communication on the Commission recommendation of 7 December 1994 on the transfer of small and medium-
sized enterprises O.J. EC C 204 z 23.07.1994, pp. 1-23
70.
Annex

of 55, there is no specification of what these non-market characteristics are, either in the
Recommendation or in the associated documents.
Subsequent policy documents and discussion of business transfer have generally continued to avoid a
precise definition of the central concept. Instead there is often reference to an archetypal case of a
family business in which the original owner is reaching retirement age. In fact some of the early interest
in the issue was prompted by the observation that the owners of many of the businesses established in
the post-war years were reaching retirement age. A similar consideration is prompting a growing
interest in the issue in former Communist economies.
However, the concept has never been entirely restricted to family businesses; nor has the motivation for
transfer always been restricted to retirement or other personal events. The 2003 Guide on Business
Transfer, for instance, says:
‘One of the most critical phases in the life cycle of an enterprise comes at the time of transferring
its ownership and leadership. These transfers of businesses can take place within the family, to
employees or to third parties. Business transfers are still very often triggered by the entrepreneur’s
retirement. However, retirement is only one reason. Other reasons for transfers which also play an
important role include personal decisions (e.g. early retirement or change of profession), changing
competitive environment (e.g. changing markets, new products or new channels of distribution) or
personal events (e.g. divorce, ill health, or death)’.
It is interesting that in the Guide a changing competitive environment is mentioned as a possible reason
for transfer. This already suggests a broader scope for the concept than the archetypical case.
In 2006, the Expert Group on Business Transfers proposed what is probably the tightest definition53, so
far:
‘In this report ‘business transfer’ means the transfer of business property to another person or
enterprise whereby the original enterprise continues to operate.
In the case of most of the small and medium-sized enterprises (SMEs), and in particular for those
that are personal companies, a business transfer is accompanied by a transfer of management
duties. For limited companies the case is less clear. Usually, if at least 51% of the shares of a private
limited company change hands this will also be a transfer. In the case of public limited companies a
change of ownership of shares will not be considered a transfer owing to the general division of
management and ownership in these companies.
A ‘succession’ is a business transfer within a family, usually from the parents to the children. Other
transfer forms include management buy-out or sales to a third party’.
Note that in this definition, the concept is restricted to SMEs, in which ownership and usually
management responsibilities are transferred, but only where the original enterprise continues to
operate. Most mergers and acquisitions are therefore excluded by this definition.
53
Report of the Expert Group ‘Markets for Business Transfers. Fostering Transparent Marketplaces for the Transfer
of Businesses in Europe’ May 2006
71.
Annex

Note also that there is no reference to family businesses within the core definition. In fact the report
goes on to comment that ‘in the past, the transfer of a business within the family – from parent to
children – was common, if not the general case’ but that while this type of transfer still appeared to be
more frequent than other forms (e.g. management buy-outs or sales to third persons), the number of
transfers to third parties was increasing. In the view of the Expert Group this was one of the reasons
why it was becoming more important to facilitate the matching of potential buyers through on-line
markets – one of the central issues under consideration by the Group.
More recently, the Business Dynamics54 study, published in 2011, adopted an even broader definition:
‘Business transfers refer to the process where "all assets representing in their totality an enterprise
as a going concern" are transferred to a new owner (sometimes referred to as an assets purchase).
It may also take other forms to include the transfer of all or some of the business liabilities. The
new owner refers to a third party, including family members.’
This definition does not include organisational continuity as a necessary element. In other words
mergers and acquisitions are also included within the scope of the definition. It is also clear that a
transfer to family members is only one of the situations to be considered.
In the absence of a clear original definition, it can be seen that operationally the way that business
transfer is conceptualised has drifted away from the archetypal case. It will be seen that there are
reasons for this and that a revised conception of the problem might well be appropriate. However, it is
necessary to take into account a series of other considerations before elaborating on this statement.
These will be set out in the following sections.
At this stage it is worth remarking that the 2006 Commission Communication, that is the reference point
for the current evaluation, has a number of interesting aspects with respect to the concept of business
transfers. On the one hand, the Communication presents the established picture of the potential for a
large number of transfers primarily within family businesses and with a significant potential impact on
employment. On the other, it points to educational and social reasons for the decline in family
successions and suggests that ‘in the future we will see more transfers to third parties’.
It should also be noted here that the way that business transfer is conceptualised is important for
various reasons, but not least because of the consequences for the way that the policy debate has been
structured. In particular, it is possible to point to the following:
• The absence of a clear definition has inhibited the gathering of European-wide evidence on the
extent, processes and effects of business transfer. It is often difficult to aggregate, or make
comparisons across, the different studies that have taken place.
• The emphasis on transfer as an event necessitated by the retirement of an owner and the
associated focus on saving jobs as the policy objective have tended to obscure the opportunity
represented by transfers.
54
European Commission ‘Business Dynamics: Start-ups, Business Transfers and Bankruptcy’ January
2011
72.
Annex

• A further consequence of this orientation has been that policy measures have largely been
restricted to a consideration of the barriers to transfer in the business environment, to the neglect
of other possible measures of a supportive kind.
• The central role attributed to family businesses in the characterisation of business transfers has
probably distorted the debate about the role of this important institution within the small firm
sector, as well as the debate on business transfer.
• One of the consequences of the emphasis on the situation of family businesses has been a focus in
some countries on inheritance issues rather than more generally on taxation incentives to invest in
businesses.
It should be emphasised at this point that there is no suggestion that the issues addressed in earlier
debate on business transfers are not real in some sense. Apart from anything else, the issues highlighted
have clearly been based on practical problems experienced by real SMEs. Rather, as will be seen, the
suggestion is that the analysis has not been complete, has not taken account of certain developments
that have become increasingly significant and has led to partial policy solutions.
4. How Business Transfer is conceived
This section of the case study will examine various aspects of the conception of a ‘classic’ business
transfer to see how far they reflect current circumstances. It will provide the basis for proposals
concerning a different conceptual framework in the next section.
The Life Cycle of Enterprises
Business transfer has often been characterised as something that occurs at the end of a business life
cycle. So, for instance a 1998 Communication from the Commission55 states:
‘The transfer of business is one of the key issues of the European Commission's enterprise policy.
After the creation and growth of the business, the transfer is the third crucial phase in the life-cycle
of a business. Many jobs are at stake when the founder reaches his or her retirement age and has
to envisage the handing over of the business.’
This characterisation does not necessarily preclude a transition to a new cycle, but nonetheless the basic
model is of an entrepreneur who establishes or takes over a business at a young age and then has a
number of years over which the business is managed and hopefully grows until the point where the
owner begins to consider retirement seriously and has to address the problem of transfer. This is
thought to occur sometime after the owner reaches the age of 55 – the age mentioned in the 1994
Recommendation.
This model is undoubtedly grounded in a certain reality. It clearly describes a process that takes place in
many businesses all over Europe. The question is whether it is the only, or the most appropriate, model
in current circumstances.
55
Communication from the Commission on the transfer of small and medium-sized enterprises
(98/C 93/02)
73.
Annex

The first matter to consider is how far the classic model continues to describe the typical situation with
transfers. The evidence on the age of owner at transfer is not extensive, but, the Small Business Survey
carried out in the UK every year found in 201256 that 14% of SME employers anticipate the full transfer
of ownership in the next five years and a further 9% anticipate the closure of their business. The fact
that almost one in four of UK businesses are expecting to either be transferred or closed in the next five
years suggests that the issue is considerably broader than one for owners facing approaching
retirement. In France, a recent study on the transfer and sale of SMEs and enterprises of an
intermediate size57 shows even more clearly that transfer at retirement should not be regarded as
typical. Although micro enterprises were excluded, the study shows that 54% of the transfers in small,
medium and intermediate enterprises take place before the owner reaches 55 years.
On the other hand, the assumption that business owners retire soon after the age of 55 is also beginning
to look less like even an approximate description of the real situation. Greater longevity and the recent
pressures on retirement plans from lower annuity rates and interest on savings are both keeping
business owners active, though not necessarily in the same business. The case study on financing
business transfers gives further consideration to these issues and considers feedback from interviewees
on the increasing contribution of private individuals and former business owners to funding transfers.
From another perspective, the standard model fails to take into account the changing role of
entrepreneurs, especially in the more dynamic enterprises that grow more rapidly and consistently and
that provide a large proportion of the employment that is generated in the SME sector. The skills,
attributes and temperament required to spot a business opportunity and establish a new enterprise are
not necessarily those that are needed in someone who is adept at rolling out an established business,
getting it to grow successfully in domestic markets and then perhaps across national borders. Different
mind-sets are often required in the development phase, especially in businesses that grow from small
beginnings to establish a strong market presence. Some entrepreneurs can make the transition, but
others are temperamentally unsuited to the roll-out phase or may not have access to the capital needed
and prefer to sell out and take on another challenge. Again a transfer has to be negotiated, but for these
reasons too, it may well happen well before the end of the business’ life cycle.
Furthermore, as work by Oséo in France58 has highlighted in the past, in certain sectors selling assets as
a going concern is part of the process of growing a business, as seen over the longer term. In sectors
such as the restaurant trade and hotels, a successful business might involve several instances of ‘trading-
up’, selling the current property and business in order to buy a bigger one, much in the same way as
families might move up the housing market over a lifetime. A business transfer is required at each stage,
but this clearly is a process different from that imagined in the standard model.
56
A report by BMG Research for the UK Department for Business Innovation & Skills ‘Small Business
Survey 2012: SME Employers’ April 2013
57
Alain Tourdjman & Thomas Le Dret, Groupe BPCE, ‘La Cession-Transmission des PME’ Les Carnets de BPCE
L’observatoire December 2012.
58
Oséo ‘La transmission des petites et moyennes entreprises’ 2005
74.
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There are already a series of reasons therefore to adopt a more fluid conception of business transfer
than the established model would suggest. Rather than as something that happens at the retirement of
an owner or at the end of a business life cycle, it should be seen as something that can happen
throughout the development of a business. Furthermore the reasons for doing so are often more
positive than is traditionally imagined.
Family Businesses
Many studies have underlined the importance of family businesses within the SME sector across Europe.
A study for the Commission by the Austrian Institute for SME Research and others and entitled
‘Overview of Family Business Relevant Issues’59 was carried out in 2008. It surveyed the family business
landscape in 33 countries across Europe, including the EU Member States, EEA and candidate countries.
It illustrated how diverse family businesses are and in fact identified a total of 90 different definitions of
the term. Overall, however, the study concluded that across Europe, about 70 - 80% of enterprises are
family businesses and that they are active in all sectors of the economy. They also account for about 40 -
50% of employment.
These figures have been broadly confirmed in studies at a national level, a number of which are referred
to in the report mentioned in the previous paragraph. More recently, a Report for the Institute for
Family Business in the UK, by Oxford Economics60, showed that in 2010 there were 3 million family
businesses in the UK, made up predominantly of SMEs and accounting for two-thirds of firms in the UK
private sector. They have a significant economic impact, providing 9.2 million jobs - 40% of total private
sector employment (around 50% more than the entire UK public sector). They generated 35% of private
sector turnover and nearly a quarter of total value-added. They also contributed 14% of total
government revenues in taxation.
Both reports point out that family businesses have a number of strengths and bring a variety of benefits
to the economy and society more generally. The Institute for SME Research, for instance, notes that
family businesses are older than non-family businesses on average and tend to focus on a firm’s long-
term sustainability rather than short-term profits. When a firm is transferred to the next generation, it is
not only financial assets which are passed on, but also social and cultural capital in the form of a value
system that emphasises the importance of honesty, credibility, modesty, respect, commitment to
workforce and community and engagement in (local) Corporate Social Responsibility activities.
Family business owners are often more willing to wait for a return on their investment (they represent
“patient capital”) and their growth trajectories tend to be stable and continuous in comparison to non-
family businesses, which can take more dynamic and volatile routes.
As was pointed out in interviews with Expert Group members, family connections and links with the
local community are said to be one of the strengths of the Mittelstand that has long been seen as a
major bulwarks of the German economy.
59
KMU Forschung Austria et al ‘Overview of Family Business Relevant Issues’ 2008.
60
Oxford Economics ‘The UK Family Business Sector. Working to Grow the UK Economy’ Institute for Family
Business November 2011.
75.
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It has also been argued that family businesses have certain inherent advantages in the transfer situation.
The report based on the work of the Expert Group61 published in 2006 cited an article setting out a
transaction cost rationale for transfer within the family62. The argument is that the transfer of
businesses entails certain transaction costs, which can reduce the value of the business handed over or
even constitute prohibitive obstacles to the development of comprehensive transfer markets. Inside
families, familiarity with the business and established relationships can reduce these transaction costs
significantly, though, of course this is not guaranteed and family relations generate problems that
endanger the transfer.
However, the situation appears to be changing. The Oxford Economics study referred to above noted
that the proportion of family businesses in the UK private sector had declined noticeably in recent years.
In 2006, 73.7% of private sector firms were family businesses; by 2009 this proportion had declined to
66.1%.
Perhaps more significantly, the indications on the way that succession plans are changing point to
important issues that are arising.
A review by PriceWaterhouseCoopers of the results of recent Small Business Surveys conducted in the
UK found that in both the 2008 and 2010 surveys, a higher proportion of family businesses expected the
closure or transfer of their business in the next five years compared to non-family firms. In 2010, 29% of
family businesses expected the closure or transfer of their business, while the figure for non-family
businesses was 17%. In absolute terms, this implied that, in 2010, 860,000 family SMEs were expecting
either the closure or the transfer of their business within the next five years. On average, this means
that 172,000 firms a year were in this position. In Denmark, where about 75% of consolidated firms63 are
family owned, around 30% of firms expect a change of management in the next 5-10 years with family
businesses representing a larger proportion than other firms. This is partially linked to age with 17% of
family business owners being over 65 years and 37% between 55-65 years. There are also more family
firms with a planned exit strategy (30.4%) compared to 21.8% in other businesses.
The nature of the transfer expected is of major significance. This appears to vary between countries, so
that in Germany, a study of family businesses for the ‘Institut für Mittelstandsforschung’ (IfM) Bonn,64
published in 2012 but based on survey data from 2008 and 2009, found that, of the 77% of the
businesses which were making plans for a hand-over, 41% planned to hand the business on to someone
61
Expert Group Report ‘Markets for Business Transfers. Fostering Transparent Marketplaces for the Transfer of
Businesses in Europe’ May 2006
62
Bjuggren, Per-Olof and Sund, Lars-Göran ‘A Transaction Cost Rationale for Transition of the Firm within the
Family’ Small Business Economics, vol. 19, pp. 123-133. 2002
63
Not including sole proprietorships and subsidiaries - corresponding to nearly 40,000 firms. ‘Transfer – your
Firm’s Future’ by the ‘Danish Business Authority (2009)
64
Petra Moog, Rosemarie Kay, Nadine Schlömer-Laufen, Susanne Schlepphorst ‘Unternehmensnachfolgen in
Deutschland – Aktuelle Trends’ IfM-Materialien Nr. 216 June 2012
http://www.nexxt.org/service/studien/00502/index.php
76.
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in the family and a further 10% to someone within the firm, but 12% planned to hand on the business to
someone external. In enterprises with less than 10 persons employed, this proportion rose to 18%. 36%
had not decided who would succeed them.
Elsewhere, however, the tendency to transfer outside of the family has been more marked. In a study
conducted in Finland, whose results have been made available to the evaluation, 38% of a survey of
business owners over 55 years of age were planning to sell their firm to an outside buyer when they give
up the main responsibility while 28% were planning to close down the firm and only 20% believed they
would find a successor within the family.
Again in the UK, the SBS survey for 2012 shows that of those anticipating the transfer of their business,
26% will pass ownership to somebody within their own family. This was most likely to be the case for
micro-businesses (27% compared to 12% of medium-sized businesses) and for those in construction
(53%). 69% anticipate selling outside of their family, with those in transport, retail and distribution (80%)
and information/ communications (95%) most likely to do this.
According to the evidence submitted via Transeo, the ‘Cedants et Repreneurs d’affaires’ in France report
that 50,000 businesses were transferred during 2011. Out of these, only 16,000 were SMEs. In turn, of
these 6,000 SMEs were transferred within the family (just over 1/3).
In the Netherlands, older evidence reported by EIM in 2005 was based on an analysis of share registers
at Chambers of Commerce65. It estimated that some 13-15,000 transfers take place per year and that
business transfers constituted about a third of the number of start-ups, although employment effects
are much greater. About two-fifths of the transfers over the 15 years before 2005 were within a family,
of which some three-quarters from parent to child. About one fifth of transfers were management buy-
outs and about a quarter management buy-ins.
A Danish study looking at transfers over the period 1995-200366, calculated an average of 63% of
transfers taking place within the family, but more recent data from a survey in 200967 had only 24% of
all businesses responding intending to transfer to another family member, with sale to another firm in
second place at 19%; management buy-outs or buy-ins at around 18% and sale to employees 11%. The
figures are not directly comparable but suggest a continuing decline. More direct evidence of this trend
is provided by an Austrian study68, citing results of a regular survey by the Austrian Institute for SME
Research, which showed the proportion of family businesses transferring within the family had declined
steadily over a decade - from 75% in 1996 to 50% in 2006.
Overall then, for the countries where there is some evidence, succession within the family ranges from
around 15% to 35% of family businesses and the numbers have been declining. In addition, even where
there is no firm evidence, such as in Poland, everyday observation reported in interviews confirms the
65
See also EIM (2005); Entrepreneurship in the Netherlands. Business Transfer: a new Start
66
Erhvervs-og-Byggestyrelsen (DK): ’Ejerskifte: Din Virksomheds Fremtid’, Danish Business Authority, October
2009
67
Presentation by Danish Business Authority (Erhvervs- og Byggestyrelsen) ’Ejerskifte, Statistik om ejerskifter i
Danmark baseret på spørgeskemaundersøgelse’, 2009.
68
Mandl, Irene & Voithofer, Peter: ‘Transfer and succession in Austrian Family Firms’, 2010
77.
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general conclusion. At this rate, the family business landscape could be markedly changed over a
relatively short time.
The reasons for this fall in the succession rate, according to interviews, come from both sides. The
requirements of modern businesses in terms of management capabilities mean that owners’ successors
need more than a blood relationship to recommend them, while the opportunities for younger
generations opened up by higher education levels and a global job market suggest that younger people
may increasingly be attracted away from family businesses by career prospects elsewhere.
Moreover, the situation within families is changing. The Finnish study already referred to shows that
expectations of parents with regard to the involvement of their children in a family business have
evolved. Most of the parents in the study that are about to give up their business (56%) believe that
their children should decide for themselves if they want to carry on their parents’ business activities or
not. In addition, there were fewer parents that definitely wish their children to continue their firms than
parents who do not wish it. 30% of the entrepreneur parents had what was termed a ‘weaning culture’ –
arranging for their children to pursue a different path, while only 14% had an ‘obligation culture’ where
they obliged their children to succeed them.
An important question that arises from this analysis is whether or not the earlier concentration on the
problems of transfer in family businesses might not have done a disservice to non-family businesses and
family businesses alike. Transfers outside of the family have their own problems. The case study on
finance for transfers, for instance, points to significant funding implications that arise from a growing
tendency to transfer outside of the family. Equally, only addressing the transfer problem for family
businesses meant that other issues and particularly the possibilities of exploiting more the strengths of
family businesses have been neglected. As the study by the Austrian Institute for SME Research pointed
out, a general lack of awareness by politicians of the economic and social/societal contribution of family
businesses has meant that there have been few attempts to create a family business friendly
environment.
The Complexity of Business Relations
Other changes that are taking place in the way that businesses, including family businesses, operate
also require certain adjustments in how we think about business transfers. A recent French study on the
transfer and sale of SMEs and enterprises of an intermediate size69 suggests that there is increasing
complexity in the business relationships that enterprises develop and the ownership patterns that
reflect these relationships. This study up-dated one conducted in the previous year and together the
two studies represent a major source of information on the current extent of the transfers taking place
in France and of the nature of these transfers.
The extent of networking and of enterprises working together on the basis of both formal and informal
relationships, are an element that complicates the picture the traditional stand-alone business. It is
pointed out, for instance, that between 1997 and 2009, the proportion of enterprises with less than 250
employees that belong to a group of enterprises increased from 21% to 52 %, meaning that the legal
69
Alain Tourdjman & Thomas Le Dret, Groupe BPCE, ‘La Cession-Transmission des PME’ Les Carnets de BPCE
L’observatoire December 2012.
78.
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and organisational forms of businesses are becoming more complex. Even for family businesses, the
family relationships are only part of the situation. On the other hand, the study finds that family
connections within this more complex situation continue to be of some significance. In addition, the
situation is often more fluid than imagined in the ‘classic’ case. Rather than waiting for retirement, as
has been already mentioned, the study shows that 54% of transfers take place before the owner
reaches 55 years.
The implications of these developments are that transfer too can be more complex, for instance in
putting a value on the relationships that a firm enjoys, but at the same time the potential for finding a
solution may also be increased. This suggests that the need for professional assistance in negotiating a
transfer is increasing, but it also strengthens the argument that transfer needs to be seen as part of
processes that should aim to deliver an improved configuration of business assets within a competitive
economy.
Other studies point to other complicating factors. For instance, the significant changes in the dynamics
within family businesses themselves is considered by a number of studies, not least the growing
importance of female family members in ownership and in formal management.
Closure of Businesses
It has been common to pose the problem of business transfer in terms of the survival of businesses and
the consequent loss of employment, should they fail. In fact, Article 1 of the 1994 Recommendation
states:
‘Member States are invited to take the necessary measures to facilitate the transfer of small
and medium-sized enterprises in order to ensure their survival and to safeguard the jobs
which depend upon them’.
Consequently, the number of jobs under threat is a common feature of any discussion of business
transfers. But, there is a question of how accurately this situation is characterised.
Clearly it is a tragedy if a successful, viable business is destroyed because of difficulties that have arisen
in effecting a transfer. There may be unnecessary disruption of people’s lives and the final situation after
the dust has settled and resources have been re-allocated may not be as efficient as under the former
enterprise.
However, the suggestion implicit in the discussion of some of the headline figures is that jobs are
inevitably lost permanently. But even a failed transfer is not the same as the closure of a business that it
is fundamentally uncompetitive, where there is little hope of saving the jobs involved. A viable business
that is forced to close leaves a gap in supply that can be taken up elsewhere. Often this can be by some
of the same people setting up a new business, but even where this is not the case, there will be gains in
employment elsewhere, meaning that the net effect on employment is considerably less than initially
imagined.
More fundamentally, the focus on the problem of business transfer deflects attention away from the
opportunity that is potentially present either for fresh initiative to be brought into the business or for a
reconfiguration of the business and its assets through merger or acquisition or new alliances with other
businesses.
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Equally, it should be recognised that there are sometimes good reasons for closing a business when an
owner withdraws. Sometimes the former owner had unique or very rare characteristics that cannot be
replaced. In other cases the business is clearly having problems. The SBS report for 2012, for instance,
comments that whereas overall those anticipating the transfer of their business were no more likely to
have decreased turnover and fewer employees than average, 63% of those anticipating closure had a
lower turnover than twelve months previously (compared with an average of 31%) and 24% had fewer
employees (compared with an average of 19%).
5. Conclusions and Recommendations
After observing that there has never been an ‘official’ definition of business transfer, in practice the
scope of the term has been determined by the use of examples or scenarios, in which a typical transfer
is envisaged. It turns out, however, that a number of the elements of the classic situation envisaged by a
lot of the discourse on business transfers are not really representative of the situation faced in most of
the business transfers taking place today. In most cases they continue to represent the circumstances
faced by some of the enterprises facing transfer, but reliance upon them to characterise the issue is
likely to be misleading.
In particular, the image of an entrepreneur who establishes and develops a family business over a
lifetime and, with impending retirement, is faced with the need to transfer the business, preferably to
someone in the family, can be quite misleading and does not correspond to the way that SMEs,
including family businesses, are developing. A refocusing of the conceptualisation of family business is
required.
First of all, the idea of transfer as occurring with the retirement of an owner and as a third stage in a
business life cycle is not really helpful, especially as the concept of retirement is becoming more and
more elastic, but the process of transfer, which even in the simplest cases is still relatively complex and
may be accompanied by a whole series of personal, legal, financial and emotional factors, is certainly
real enough. It is necessary to recognise that it is an important event in the development of a business,
but that it can take place at any point of that development and may even take place on a number of
occasions. And there is no need to specify the reason why the transfer is taking place in any definition.
The problems that need to be addressed can arise in a variety of different circumstances.
Equally, it has been argued that tying the concept of transfer to family businesses is not particularly
helpful, either for understanding most of the processes, or for family businesses, for whom transfer
issues are only one of a range that they face, where the family organisation requires specific attention.
Finally, defining the ‘transfer problem’ only in terms of the potential impact on employment is not the
most helpful approach. It is based on a rather defensive stance that is difficult to substantiate and it
ignores the fact that transfer can be regarded more positively as an opportunity for a business to re-
organise, inject new ideas, talent and drive, and possibly also capital, and for the economy to gain from
a re-allocation of productive assets and resources.
The recommendations arising from this analysis are:
1. Policy on business transfer needs to be re-focused to address the problems faced by SMEs in a
wider set of circumstances than has previously been envisaged.
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2. Transfer should continue to be regarded as a significant event for SMEs, which requires policy
interventions to address market failures and promote efficient outcomes.
3. The term ‘business transfer’ should be defined. For the purposes of Enterprise policy, the
evaluation team recommend the following definition :
‘a business transfer is the process of transferring, for any reason whatever, the controlling interest
in the business of an SME, by means of a transfer of either shares or assets. It is usually
accompanied with a change in management.’
4. A more fluid conception of business transfer should be adopted. Rather than as something that
happens at retirement or at the end of a business life cycle, it should be seen as something that can
happen throughout the development of a business.
5. The ‘transfer problem’ should not be characterised primarily in terms of the potential effects on
employment. Instead, the opportunities presented by transfers should be highlighted, particularly
where they are an occasion for a re-structuring of productive assets and resources within a market.
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Case Study: The Availability of A2

Dedicated Finance for Business Transfer
The Availability of Dedicated Finance for Business Transfer
1. Introduction
‘A financial environment which is conducive to successful transfers’ is an important objective announced
in the original 1994 Commission Recommendation on Business Transfers.
This case study reviews the current situation in terms of dedicated measures that provide access to
finance for business transfers in the countries participating in the evaluation and draws conclusions on
how far the situation has changed since 2006. It also looks at a number of factors that are influencing
both the demand for finance and its supply and how these are developing, including the impact of the
current situation in the economy in general.
Finally, the case study points to financial support that is available to business transfers as part of a
restructuring process and the promotion of economic growth. This type of support is seen to be linked to
a more dynamic conception of the business transfer process.
Access to finance is critical for all stages of an SME’s development and it is important to know how far
policy initiatives have been able to facilitate this access at the stage where a business is being
transferred. More particularly in the context of the current evaluation, it is important to know how far
the situation has changed since the last major review in 2006.
However, in order to be able to make a proper assessment of the need for transfer finance in the
current situation, it is also necessary to review the determinants of both the demand and supply of
finance and how these are changing. After assessing the current situation with finance initiatives, the
case study therefore goes on to consider a series of factors that are bringing about some major changes
in the area.
3. The EU Policy Context
The original 1994 Commission Recommendation on the transfer of small and medium-sized enterprises
invited Member States to take the necessary measures to facilitate the transfer of small and medium-
sized enterprises in order to ensure their survival and to safeguard the jobs which depend upon them.
Article 3 of the Recommendation on the ‘Financial Environment’ states that:
‘Small and medium-sized enterprises should be provided with a financial environment
which is conducive to successful transfers’.
The 2006 Commission Communication on Transfer of Businesses explains that a transfer generally
requires more financial funds than a start-up since not only the material and financial assets have to be
paid for but also the relations with clients, suppliers, trade reputation, expectations of future returns
etc.
It then comments ‘Financial facilities designed for start-ups are not always sufficient to finance a
transfer’. The appropriate financing solution will often require a mix of equity, mezzanine finance and
debt, depending on the interests of the concerned parties and the repayment limits of the business.
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Furthermore, putting together the right solution takes time and unless the preparations start sufficiently
early in the process, a tailor-made solution is not always found in time to maintain a viable enterprise.
The implication is that dedicated financing arrangements are necessary to address the particular needs
of business transfers.
However, of the 25 EU countries at the time of the Communication, less than half had financial
assistance targeted at business transfers and tailor-made measures for transfers were rare. Usually it
was a matter of support for start-ups being used for financing transfers.
Part of the purpose of this case study is to consider the extent to which specific measures have been
taken more recently to make finance available for business transfers. However, at the same time, there
is a need to take into account other changes in the environment in which transfer takes place and to
provide an overall assessment of current needs in this area.
First, it is of interest to note the extent that the finance of transfers has been covered in more recent EU
policy initiatives.
The Small Business Act (SBA)70 in 2008 emphasised that the EU and Member States should create an
environment within which entrepreneurs and family businesses can thrive and entrepreneurship is
rewarded, commenting that they need to care for future entrepreneurs better, in particular by fostering
entrepreneurial interest and talent, particularly among young people and women, and by simplifying the
conditions for business transfers.
The SBA also states that the EU and Member States should facilitate SMEs’ access to finance, and in
particular to risk capital, micro-credit and mezzanine finance, but as in many subsequent policy
statements, there is no specific reference to provision for the finance of transfers.
The Entrepreneurship 2020 Action Plan71, published early in 2013, has a section on ‘Easier business
transfers’, in which it notes the implications of failed transfers and puts transfer in the context of
encouraging entrepreneurship by remarking that ‘acquisition of a 'going concern' may be an attractive
alternative to starting a new business’. It goes on to speak of the development of ‘special financial
facilities designed to finance transfers’ and to suggest that existing European funds could be used (in
conformity with their rules and priorities) to support transfers of SMEs intending to continue running
the business. But in the section on ‘Better access to finance’ the Action Plan puts the emphasis on the
fact that entrepreneurs have difficulties raising finance in the early stages of their businesses and mainly
concentrates on addressing problems at this stage.
Similarly, in the Action Plan to Improve Access to Finance for SMEs72, published in 2011, although there
is reference to a series of developments that could undoubtedly assist business transfers, including
measures to improve lending to SMEs, improving the regulatory framework for venture capital,
70
“Think Small First” A “Small Business Act” for Europe COM(2008) 394 final of 25.6.2008
71
Communication from the Commission to the European Parliament, the Council, the European Economic and
Social Committee and the Committee of the Regions ‘Entrepreneurship 2020 Action Plan. Reigniting the
entrepreneurial spirit in Europe’ COM(2012) 795 final of 9.1.2013
72
Communication from the Commission to the Council, the European Parliament, the Committee of the Regions
and the European and Social Committee ‘An action plan to improve access to finance for SMEs’. COM(2011) 870
Final of 7.12.2011
83.
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improving SME access to capital markets and reviewing the impact of bank capital requirements on
SMEs, there had been no specific mention of financing business transfer at all.
This tendency of business transfer to have little or no profile in EU policy positions on finance for SMEs is
also apparent in the most recent statements, notably in the Commission’s initial proposal for a
Programme for the Competitiveness of enterprises and SMEs (COSME) 2014-202073, where around half
of the proposed budget of €2.5 billion was expected to be devoted to facilitating access to finance for
SMEs. There was no explicit reference to business transfers at all in the proposed programme, as initially
proposed. Apparently this has been changed in later versions, though at the time of writing these are
not publicly available.
4. The Current Response to the Recommendation on Finance
In assessing the current situation on the availability of finance to assist business transfers, it has not
been possible to undertake a dedicated enquiry into the situation in each participating country, but the
responses to questions relating to this issue in the survey conducted as part of the evaluation and the
discussions about finance that have been part of the interview programme have provided an overview
of the situation.
The Business Dynamics study74 in 2010 identified public financial institutions in France, Finland and
Germany (Oséo, Finnvera and KFW) that have provided support specifically for transfers, with
developments also taking place in Portugal and Poland. It also pointed to special financial products to
support business transfers developed by the private sector in France, Latvia, the Netherlands, Norway
and the United Kingdom.
The same study also provided information on the quality of financial information available on firms
being transferred on the basis of a survey. This is a critical consideration for purchasers, but according to
the survey respondents, the quality of the information available can be quite low, although this does
depend on the legal form of the firm. For sole proprietorship firms, more than 60% of the experts
considered the level of information to be low or very low across all 33 European countries participating,
for partnerships the percentage was 61% and for limited liability companies, it was 34%. The study
recommended that ‘the quality of financial information has to be improved for micro firms and in
particular for sole proprietorship firms’.
The survey conducted for the current evaluation looked further into these issues.
An overall assessment was made of the extent to which the original Recommendation in this area has
been implemented. This required asking if the financial environment is conducive to successful business
transfer. In general terms, the responses indicated that the financial environment has weakened in a
number of the participating countries.
73
Proposal for a Regulation of the European Parliament and of the Council establishing a Programme for the
Competitiveness of Enterprises and small and medium-sized enterprises (2014 - 2020) COM(2011) 834 final of
30.11.2011
74
Calogirou, C., Fragozidis, K., Houdard-Duval, E., Perrin-Boulonne, H. ‘Business Dynamics: Start-ups, Business
Transfers and Bankruptcy’, PLANET S.A., CCIP, DTI and GFA 2010
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Table 1: Development in Implementation - Financial Environment
2006 + / + + - + / (+) (+) + Ø - Ø - + (+) - Ø +
2010 + + + + + + / + + + Ø + Ø + + + + + +
2013 + - + + + + (+) + (+) + Ø Ø Ø Ø + - Ø(+) Ø +
AL LI NO RS TR
2006 / / / / /
2010 / / / / /
2013 Ø - (+) (+) (+)
Legend:

(+) Recommendation partially implemented or planned / No comparison possible
- No information
Querying the survey data with the relevant respondents led to clarifications which established that the
situation has actually not changed substantially since 2006, except in the sense that access to finance
has generally become more difficult for all enterprises as a result of the financial crisis and possibly also
because of the stricter prudential requirements that have resulted from it. This conclusion is supported
by the more detailed responses to the survey.
The availability of different kinds of financial support instrument is indicated in Figure 1.
Figure 1: Availability of financial support instruments
On the availability of financial support instruments that are tailored specifically to business transfer,
generally there is not much specific provision for equity or mezzanine finance for transfers, with the
exception of in Belgium and France. There is greater provision of loans, with 7 countries indicating ‘quite
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high’ or ‘very high’ availability, especially loans suitable for micro businesses (up to €25,000), in the case
of Finland and Spain. Loan guarantees are also available in the same countries, although this may be
part of a general loan guarantee scheme for SMES. In Denmark for instance, over the period of 2009-
2012, 30% of all ‘Vækstkautioner’ (special guarantees – up to € 268,000 - to facilitate access to loans or
credits) were allocated to enterprises involved in a transfer of ownership.
It therefore appears that while for all forms of finance, a number of countries either have no support or
support at very low levels, there is more provision for loans and loan guarantees (including micro
finance loans) than for equity finance. The availability of mezzanine finance in this area appears to be
restricted to two countries.
When asked to estimate the usage of financial support instruments tailored to business transfer,
Belgium, Denmark, Germany, France and Finland indicated reasonable use of loans and loan guarantees,
with other countries such as Austria, Spain and Norway indicating more limited use of them. In Finland,
it was said that support from state owned Finnvera is used in about 50% of business transfers.
Some countries like the Netherlands point out that, although there is not specific provision for transfers,
more general schemes for SME finance are available to enterprises involved in a business transfer. One
third of all the entrepreneurs who access BMKB75 funds use it for business transfers, while 40% of
entrepreneurs use it for start-up. Slovakia is also planning support in this way.
More generally, it appears that the core group of countries that are the most active in terms of assisting
SMEs involved in business transfer (Belgium, Denmark, Germany, France, Austria and to a certain extent
Finland) are also the ones that have dedicated financial arrangements. In some cases, there are close
operational links. In the Walloon region of Belgium, for instance, Sowaccess, which manages an on-line
marketplace and provides advice to both parties in a transfer, is part of the Sowalfin Group. Sowalfin is
active in co-financing on the basis of conventions signed with all the major banks and in providing access
to public funds (loans, subordinated loans, guarantees and equity) that form part of a finance package,
along with private sector contributions. This close collaboration between Sowaccess and the parts of
Sowalfin responsible for finance make an effective combination.
At the same time, the links between private transfer advisers and banks and other sources of finance
also make it easier to arrange a finance solution for those that make use of such services. This can be an
important consideration in the overall accessibility of finance in countries such as Denmark, France,
Germany and the Netherlands.
However, remarks in the survey and in interviews suggested that even in countries with relatively good
provision, the situation differs depending on the nature and size of the enterprise. Generally, micro
enterprises find it more difficult to access finance than medium-sized enterprises, but this is related to a
series of broader issues that have yet to be considered in this case study. One matter relating to these
issues was, however, covered in the survey in that the participating countries were asked about the
quality of publicly available financial information on firms to be transferred, with a differentiation
between the legal form of firms and their size (micro, small and medium). With the exception of
Denmark, Germany and the Netherlands, where the information available is said to be of ‘quite high’ or
‘very high’ quality, the information available is generally characterised as either of’ very low’ or
75
Borgstelling MKB - Dutch credit agency for SMEs
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‘moderate’ quality or not available at all. For some countries, however, the legal form or size of an
enterprise (micro, small or medium) did make a significant difference. This was the case in Belgium,
Spain, France, Norway and Finland, where information is generally more readily available on limited
companies than on sole proprietorships or partnerships and on medium-sized more than small
enterprises, while information on micro enterprises is often of very low quality.
Overall then the survey indicated that there had not been substantial change in the nature or extent of
financial measures specifically intended to provide an environment conducive to business transfer since
2006. Those countries that had such measures in place in the earlier period have strengthened them in
some cases, but there has not been any marked extension of provision beyond the core set of countries
that were already active in the area.
It is important however, to appreciate that this is a conclusion relating to formal public policy measures
specifically intended to support business transfers. There have been other changes in the financial
environment that have had a considerable effect on the financing of transfers. These are to be
considered in the next section.
5. Changes in the Financial Environment for Business Transfers
While the environment for the financing of business transfers is certainly influenced by institutional
arrangements and policy measures that affect the availability of finance for those interested in
purchasing businesses, it is also affected on the demand side by a number of factors influencing the
extent of the need to raise finance at the point of transfer, especially when the influence of these
factors is changing significantly.
The Implications from the Dynamics of Family Businesses
The first of the case studies supporting the evaluation has examined some longer term changes in the
nature of business transfers and our conception of them. A number of these changes have a particular
significance for the financial environment in which transfers take place. In the first place, it has been
seen that, although family businesses continue to play a major role within the SME sector across Europe,
there are important changes taking place in some parts of Europe, at least when it comes to the point at
which they are being transferred.
A study for the ‘Institut für Mittelstandsforschung’ (IfM) Bonn,76 published in 2012 but based on survey
data from 2008 and 2009, focused primarily on family businesses in Germany. Of those surveyed, 77%
were making plans for handing over their businesses. 2% intended to close the business and the rest had
not considered the issue. Of those with plans for succession, 36% had not decided who would succeed
them, 41% planned to hand the business on to someone in the family and a further 10% to someone
within the firm, but 12% planned to hand on the business to someone external. It is interesting that for
enterprises with less than 10 persons employed, this proportion rose to 18%.
76
Petra Moog, Rosemarie Kay, Nadine Schlömer-Laufen, Susanne Schlepphorst ‘Unternehmensnachfolgen in
Deutschland – Aktuelle Trends’ IfM-Materialien Nr. 216 June 2012
http://www.nexxt.org/service/studien/00502/index.php
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The arrangements for handing over the business have implications for the finance requirements. The
IfM survey found that 60% of those who had taken over a family business in Germany had received it as
a gift or an inheritance, either completely or, in a small proportion of cases, with the initial owner
retaining part of the business. In cases where the business was purchased, usually more than one
source of finance was accessed. 62% had used their own resources, 59% obtained bank credit and in
38% of the cases the seller gave the purchaser a loan. Public funds were involved in 10% of the cases
and mezzanine finance in 2%. Clearly, if the proportion of cases where a family business is handed over
to within the family falls, it is likely that the requirement for finance will rise.
Evidence from elsewhere suggests that in some countries at least, this tendency is becoming significant.
In a study conducted in Finland, whose results have been made available to the evaluation, 38% of a
survey of business owners over 55 years of age were planning to sell their firm to an outside buyer when
they give up the main responsibility while 28% were planning to close down the firm and only 20%
believed they would find a successor within the family.
In the UK, 14% of firms questioned for the Small Business Survey 2012 anticipate the full transfer of
ownership in the next five years and a further 9% expect the closure of their business. And while family
businesses account for two-thirds of firms in the UK private sector, of those anticipating a transfer, only
26% will pass ownership to somebody within their own family. In contrast to Germany, this was most
likely to be the case for micro-businesses (27% compared to 12% of medium-sized businesses). A
declining share of family succession is likely to translate into a much greater requirement for finance.
Taxation
However, another consideration in the inheritance dynamic is the effect of taxation. By 2006, a number
of countries had either removed inheritance tax or had introduced exemptions for those inheriting
business property. In the UK, for instance, there is Business Relief from inheritance tax and in France
subject to certain conditions the Dutreil scheme allows three-quarters of the value of a family business
to be transferred without any liability for transfer tax.
However, the pressure currently being felt on public finances has meant that there have been
modifications to exemptions previously granted or even discussion of re-introducing inheritance taxes.
In France, the tax authorities have indicated a tightening up in their guidelines on the rules for the
Dutreil laws, specifically in the situation where there is a partial sale of securities inherited. A certain
degree of uncertainty has been caused even by the potential for such developments and this has had its
own impact on the financial environment.
Effects on a Business’ Valuation
A series of further changes affecting the demand for finance, indicated in interviews and by members of
the Expert Group, concern the effects of the current recession and the banking crisis. These factors
have clearly affected SME access to finance generally, but there have also been specific effects on the
need for finance for transfers. First of all, the recession has affected expectations concerning the
valuation of businesses. Value is often set at multiples of earnings – usually between 4 and 7 times
annual earnings these days (after taking out any cash in the business and debts), but this is lower than
before the banking crisis.
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This in turn has reduced the number of businesses that are made available for sale. It is reported that
business owners are deferring their withdrawal from their business because they believe that in current
circumstances they will not receive what they think their business are really worth. They would rather
wait and see if the economy recovers. This partially emotional reaction is reinforced by more practical
considerations. Reduced annuity rates and very low rates of interest on savings may have disrupted
retirement plans and - together with the general tendency for the retirement age to increase - are
encouraging business owners to stay on.
Valuation is, of course, a broader issue and perhaps is the central question for many business owners
and prospective purchasers. It is widely reported that agreeing a valuation of the business is often the
most difficult part of a transfer negotiation.
There are a number of elements in the valuation of a business, depending principally on the type of
business concerned and where it is in terms of its expected life cycle. Different formulae are recognised
by accounting standards and practice. Ultimately though, prospective earnings are a major element in
most circumstances. Owners are likely to emphasise past earnings as a guide to the future, but may also
tend to emphasise the value of the goodwill and the intangible assets of the business as a source of
potential future earnings. Prospective buyers may see things differently. In these circumstances it often
helps to have an independent broker to find common ground between the two parties and provide the
basis for a deal.
The more particular point, however, is that these problems in coming to an agreement on the value of a
business have been made even more difficult in current circumstances by the increased uncertainty of
future earnings and consequently the number of firms being offered for sale has fallen. This is estimated
to be by about 40% since 2008, according to one Dutch expert.
Availability of Financial Information
An issue related to the valuation process is the availability of financial information, especially on small
and micro businesses.
The Business Dynamics study had reported that for sole proprietorships and partnerships, around 60%
of the experts surveyed considered the level of information to be low or very low across all 33 European
countries, while only 34% considered this was the case for limited liability companies. The study had
commented that the quality of financial information has to be improved for micro firms and in particular
for sole proprietorship firms.
The problem is that in the early stages of a negotiation, the development of mutual confidence is crucial
and particularly at the stage before there is direct contact between the partners, the availability of
appropriate information plays can have a significant effect on this process. It also affects the ability of
intermediaries to play an effective part. The absence of financial information means that they are
inhibited from forming objective judgements about the performance and value of the enterprises being
sold.
This is an additional factor reinforcing the tendency of intermediaries to concentrate on the larger SMEs,
although Sowaccess in Belgium, for instance, works with enterprises with a value of between €300,000
and €5 million.
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The situation is made even worse if the enterprises being transferred have been operating in the black
economy at all. Valuations have to be based on recognised data and if part of the business’ activity has
been hidden, this can have significant implications for the sale price when a transfer is being arranged.
Enterprises of all sizes do need to be made aware of the importance of sound financial information, as
part of the long term preparations for transfer. This may even be a counter-weight in the otherwise
laudable tendency to reduce the administrative burden on SMEs in matters of financial reporting.
Sources of Finance
Comments by a number of experts have broadly confirmed the figures from Germany referred to above
in relation to the sources of finance for a ‘typical’ transfer. Usually it is a matter of putting together a
package. A purchaser would usually be expected to provide around 30% of the purchase price from
funds he/she is able to access. Loans can form a large part of the rest. Equity investment is relatively
minor, mainly restricted to the purchase of medium-sized firms and often in the form of mezzanine
finance.
The general view is that the availability of appropriate bank finance is not a major problem. Businesses
that are about to be transferred usually have an established track record and most of the experts who
commented on this issue said that if the case for financing a transfer was presented properly and had
merit, the banks would usually provide the necessary finance. As indicated above, in a number of
countries there may also be public loans or public guarantees covering a large proportion of the loan,
though hardly ever 100%.
An interesting development, commented on by a number of experts, is the increasing involvement of
the previous owner. This may be in the form of a loan in an ‘earn-out’ arrangement or even an equity
investment, implying a longer-term engagement. In this way the previous owner can often act as a
business angel and provide advice and guidance as well as finance, on the basis of a particularly intimate
knowledge of the business.
It is also the case that there is an increasing number of high net worth, or just relatively well-off,
individuals interested in purchasing established businesses, including former owners who have sold on
their previous business. Often this can be part of a semi-retirement plan, but in other circumstances it
can be associated with more active involvement, possibly as a Business Angel or in the form of private
equity investment. A number of experts mentioned that there is a growing presence of private investors
in the financing of transfers, in many cases encouraged by tax incentives such as the fiscal package of
2007 in France. In some cases, however, the source of the funding is from outside of the EU.
It is difficult to know the extent of the contribution made by former and existing business owners and
others with wealth available for investment. In the Finnish study referred to earlier, 6% of the
respondents showed an interest in making capital investments in other firms. Scaled up to a national
level, this would mean over 4,400 entrepreneurs interested in playing this role. Furthermore, 78 of the
entrepreneurs over 55 years of age that were surveyed were thinking of buying another firm after the
business transfer. On a national level this would translate into some 2,200 entrepreneurs. This evidence
relates to only part of the potential pool of private investors and it would suggest that although the
effect should not be exaggerated, it is of real significance.
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It is somewhat surprising in this context, therefore that Business Angels in the usual sense (i.e. not
former owners) have not figured more prominently during the investigations for the evaluation, even
though interviewees have been prompted to comment on their involvement. It is true that the classic
conception of a Business Angel is of an almost avuncular figure who assists a young start-up
entrepreneur with funds and advice. However, it is easy to conceive of a similar role for someone
making a parallel contribution for a large proportion of the businesses involved in a transfer, especially if
a more dynamic conception of business transfer is adopted, along the lines proposed in the first case
study. It is not easy to establish the scale of support provided by even a typical Business Angel. The
evaluation report on Business Angel Markets and Policies77 rehearses some of the problems in
establishing the number of Business Angels and the level of their investment, but there is clearly a range
from relatively low levels up to half a million euros or more. The average size of a deal was estimated to
be in the range of €100,000 - 200,000 for most countries. Sums of this amount could clearly form a
useful part of an overall finance package in many cases of business transfer. It would appear, then, that
there is definite scope for promoting a greater Business Angel role in the transfer context as well as in
relation to start-ups and perhaps particularly in assisting young entrepreneurs interested in taking over
an existing enterprise rather than setting up a new one.
The involvement of young entrepreneurs in business transfer, however, was also mentioned much less
frequently than might have been expected on the basis of the profile that has been given to this
possibility in EU and national policy statements and initiatives. Part of the explanation might be found in
an interesting study conducted by the Economist Intelligence Unit, on behalf of Zurich78 and published
in November 2012. This study points to an emerging long-term economic risk arising from a major
disparity in the distribution of personal wealth in the UK, where 80% of net personal wealth is owned by
the ‘baby-boom’ generation. In contrast the younger generation is increasingly characterised as ‘capital-
lite’. On average, young people in the UK graduate from university with £53,000 (€62,000) of debt. More
generally young people in Britain have low levels of personal savings and are increasingly reliant on
credit. Furthermore, they find it more difficult than their parents to enter the housing market. The net
effect is that with lower levels of personal capital and home equity than their baby-boom parents, they
have a substantially weaker base from which to raise finance. Elsewhere in Europe, the reasons for a
growing inter-generational wealth disparity may differ. It may, for instance, be the result of high youth
unemployment, but the problem is not confined to the UK and is a factor affecting the ability of business
transfers to bring fresh blood into established businesses.
Some experts observed that although small, private equity interest in transfers was increasing. Others,
however, commented that the expectations from private equity in terms of the anticipated returns, the
typical time horizons and the degree of control expected meant that private equity investment was only
possible in a small proportion of transfer cases.
Transfer of ownership or sales to employees or management buy-outs are also possible exit routes for
business owners and this route is said by some to be of growing interest, especially for owners who are
keen to see the business that they have established thrive well into the future. The potential for this
77
CSES ‘Evaluation of EU Member States’ Business Angel Markets and Policies’ October 2012
78
The Economist Intelligence Unit ‘Derailing the future of economic growth: The demographic time bomb facing
the UK SME economy’ November 2012
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route does, however, vary between countries. Banks are said to be unsympathetic generally to funding
transfers to employees and recourse is often made to specialist agencies established to support co-
operatives. However, the number and financial capacity of such agencies varies considerably between
countries, meaning that this route is more significant in Italy, Spain and France, for instance, than in
other countries.
Management buy-outs are often supported by venture capital or private equity funds and are observed
only in larger medium-sized enterprises. A transfer to employees can take place in all but the smallest
SMEs and can take various forms. The most interesting in terms of financing the transfer are those cases
where a co-operative is established, since across the participating countries, there are a number of
support structures though the co-operative federations that are linked with specialist providers of
financial support.
In the past, there has been a tendency to resort to a co-operative structure when a business has faced
financial difficulties, often in an attempt to save the jobs of those employed in the firm. This, of course,
is not an ideal situation in which to launch a co-operative. More recently, with rising levels of education
and skill in the workforce, there has been a tendency to consider a co-operative in more positive
circumstances, although even here it is more likely to be a practical solution in some situations than in
others. Requiring substantial amounts of initial equity or saddling the co-operative with high levels of
debt are obviously disincentives for those considering participation in a co-operative, so it is easier to
establish them in business activities that have low capital requirements or are labour-intensive, such as
generally in the service sector, and where the degree of cooperation among employees is high (e.g. ICT,
consulting, creative activities)79. It is in these areas that finance arising from the establishment of a co-
operative is particularly relevant.
Transfers as Part of the Restructuring of an Industry
The tendency to transfer a greater proportion of family businesses to new owners that are not relatives
and other factors, such as developments in on-line markets and the growing professionalisation of
intermediaries have moved the process of business transfer more closely to the mergers and
acquisitions market or at least towards normal market transactions in the allocation of business
resources. These developments are explored more fully in the first case study and this section relies to a
certain extent on the fuller explanation of them to be found there, since the last two sources of finance
to be considered are very much in line with this shift in the nature of business transfer and its place
within a modern economy.
The support measures concerned are available in Portugal and Spain – where funding is available to
transfers through measures that are designed to promote the concentration and consolidation of
enterprises.
In the case of Portugal, FACCE (Fundo Autónomo de Apoio à Concentração e Consolidação de Empresas)
that was established in 2009 with a budget of €175 million, is a fund for the support of restructuring and
the concentration and consolidation of enterprises, particularly SMEs. It is operated by ‘PME
Investimentos’ and managed with IAPMEI’s support. It can be used to provide finance for business
transfers that contribute to the consolidation process. The funding can take the form of participation in
79
From the guide La reprise d’entreprise par les salariés en coopérative. p.183-184 Guide transnational www.les-scop.coop.,
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equity, the purchase of debt instruments or a loan. The whole package can be up to 40% of the total
finance required and up to €10 million. It is interesting that this particular measure, conceived of as part
of an integrated response to the financial crisis is based on a dynamic conception of the development of
SMEs and their transfer and their potential to contribute to a strengthened industrial structure.
Similarly in Spain, among a series of finance programmes for SMEs from ENISA (Empresa Nacional de
Innovación) a public company, attached to the Ministry of Industry, Energy and Tourism, funding for
transfers is available under a Mergers and Acquisitions programme if the project involves a corporate
transaction (merger, acquisition or division) designed to increase the company’s competitiveness. The
programme provides loans of between €200,000 and €1,500,000. Again, this placing of transfer into the
context of a dynamic development of the competitiveness of the enterprise reflects a broader tendency
that is a significant theme in the evaluation.
The review of the current situation on the availability of finance for business transfers has shown that
there have not been any major developments since 2006 in terms of initiatives specifically designed to
provide ‘a financial environment which is conducive to successful transfers’ - in the words of the initial
1994 Recommendation. The core set of countries that were making specific provision in 2006 have
continued to do so and in most cases have consolidated and strengthened this provision, but there have
been no significant new initiatives in any of the other countries specifically designed to assist business
transfers.
Having said that, there are other sources of finance that can be used to fund transfers and the general
view of members of the Expert Group and others interviewed is that, even though the current financial
environment has made the situation more difficult, essentially any transfer that can present a good
business case will be able to find appropriate finance, from a bank or increasingly from other sources.
This suggests that the longstanding emphasis in policy commentary on the need to prepare for a
business transfer well in advance is also critical from a financial point of view. If businesses are to
access finance to fund a transfer, they need to present a good case and this needs careful preparation
and planning.
While traditionally for family businesses, the transfer to successors within the family has often been
through gifts or inheritance, the increase in the number of transfers to persons outside of the family,
which appears to be a strong trend, means that financial transactions are likely to increase in volume.
The effect of this long-term increase in demand for finance is currently being reduced, as business
owners are deferring the sale of their businesses, because of a fall in business values with the recession
and the disruption of retirement plans caused by low annuity rates and low interest on savings.
Currently, the funding of transfers appears to from variety of sources, but private wealth has become
more important, partially as a result of tax incentives, and not least because of a growing tendency for
former owners to continue to have an interest, including a financial interest, in their former businesses.
In this context, encouraging business angels more explicitly to engage in the transfer market is an
obvious step to be taken, though there are signs that a parallel encouragement of young entrepreneurs
of the ‘capital-lite’ generation may be less effective. Other possibilities include a greater involvement of
employees, including in the form of a co-operative.
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More generally, however, interesting developments in Spain and Portugal were noted in which finance
is available for business transfer under schemes that aim to promote the restructuring of industry and
the concentration and consolidation of enterprises. These financial measures are in line with seeing
transfer as part of a process, highlighted in the first case study, of encouraging growth and improving
competitiveness by bringing about the renewal of enterprises or a more efficient configuration of
resources through restructuring.
1) Although for well-prepared businesses, there does not appear to be a major problem in accessing
finance for transfers, this situation has to be monitored, especially the factors leading to an
increasing need for funds.
2) Further analysis is also advisable of how well prepared funds established with more general
objectives are, for dealing with the particular circumstances of business transfer, and of their
effectiveness in assisting the subsequent development of the enterprises transferred.
3) Good preparation and planning for a transfer, frequently including the involvement of transfer
professionals, is essential for obtaining a satisfactory price for a business being transferred. This
message needs to be part of awareness campaigns highlighting the importance of proper planning
and preparation.
4) Enterprises of all sizes do need to be made aware of the importance of sound financial information,
as part of the long term preparations for transfer. This may even be a counter-weight in the
otherwise laudable tendency to reduce the administrative burden on SMEs in matters of financial
reporting.
5) Business Angels need to be encouraged to engage in the transfer market as well as with start-ups.
6) The encouragement of young entrepreneurs to take on the challenge of an existing business needs
to be more soundly based. An investigation needs to be undertaken of the implications of the
‘capital-lite’ generation for such developments.
7) Linking the availability of finance to the restructuring of industry and the longer-term promotion of
growth is an interesting development that might be more widely adopted.
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Case Study: Developments in on-line A3

Transfer Markets
On-line Markets for Business Transfer
1. Introduction
The 2006 Commission Communication on Transfer of Businesses called for the organisation of
transparent markets for business transfers. At around the same time an Expert Group examined a
series of specific on-line markets, described how they operated and formulated a series of
recommendations on how they should develop. This case study examines more recent
developments with regard to on-line markets for business transfer before commenting on how the
situation has developed since 2006 and the implications for future developments.
Transparent marketplaces in which enterprises can be bought and sold are an important means for
effective business transfer. On-line market places are an obvious way to organise such transactions,
but earlier policy statements have emphasised that they need to be supplemented with professional
mediation services.
This case study examines the way that such market places have evolved since 2006, when they were
last considered in detail at a European level and draws conclusions about the implications for the
future.
Although subsidiary in this context, a recurrent theme in the following exposition is the extent to
which such market places operate across borders.
3. The Position in Earlier Work
The effective transfer of businesses is clearly assisted by the existence of efficient market places in
which sellers and purchasers can meet and also gather information about comparable opportunities
and some of the subsidiary elements that are necessary for a successful deal.
Such market places have existed for a long time, in the past created, for instance by the emergence
of a publication in which announcements of an intention to buy or sell were routinely made. The
emergence of the Internet has greatly facilitated this process, allowing the market place both to be
open to many more participants and also be become much more sophisticated in terms of the
extent and quality of the information offered and the processes involved.
Because of the central importance of open, transparent markets in the facilitation of business
transfer, and within this the particular contribution of on-line markets, their development has come
to be seen as a critical element in the promotion of effective business transfer. This was already the
case at the time of the 2006 Commission Communication on ‘Transfer of Businesses – Continuity
through a new beginning’80, which is the main point of focus for the current evaluation. In its
Recommendations for Future Work, the Communication called for the organisation of transparent
markets for business transfers. It commented:
80
Communication from the Commission to the Council, the European Parliament, the European Economic and
Social Committee and the Committee of the Regions ‘Implementing the Lisbon Community Programme for
Growth and Jobs. Transfer of Businesses – Continuity through a new beginning’ COM(2006) 117 final of
14.03.2006
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Transfer Markets
‘To facilitate transfers to third parties the match making between potential buyers and sellers
should be helped by establishing and supporting impartial services for the concerned parties.
Such services have to go beyond the mere establishments of databases for transferable
businesses and to include a comprehensive mediation service to guarantee ordered and well-
structured transfers in the spirit of partnership.’
It also pointed to the market places operated by Chambers of Commerce or similar impartial
institutions in a number of Member States.
Shortly afterwards in May 2006, the Commission published the Report of the Expert Group on
Markets for Business Transfers and since then there has been further work, notably by Transeo, the
European Association for Transfer. This case study will review this work, provide an overview of on-
line markets currently and consider the salient issues in the current state of development.
The 2006 Expert Group Report on Markets for Business Transfers
The 2006 Expert Group Report entitled ‘Markets for Business Transfers. Fostering Transparent
Marketplaces for the Transfer of Businesses in Europe’ provides a kind of baseline against which
subsequent developments can be judged. It is therefore worth setting out the main elements of this
Report before going on to consider more recent developments.
The report was based on the work of an Expert Group, nominated by the national authorities of 18
EU Member States plus Turkey. Denmark, Croatia, Cyprus, Estonia, Ireland, Latvia, Lithuania, Malta,
Portugal and Slovakia did not participate.
The Report commented that an increasing number of retiring business owners hand over their
enterprises to people outside their family, sometimes to employees but often also to young
entrepreneurs who want to set up their own business or to other investors. In order to respond to
this situation, it was increasingly important to be able to have marketplaces that match supply and
demand for business transfers and, in some countries, public or quasi-public institutions have
created special on-line markets.
The Expert Group had analysed nine marketplaces, operating in Belgium (Overnamemarkt in
Flanders and Sowaccess in the Wallonia Region), Germany (Nexxt-Change), France (Passer le relais),
Italy (Borsa delle Imprese), Luxembourg (Bourse d’enterprises), the Netherlands
(Ondernemingsbeurs), Austria (Nachfolgeboerse) and Finland (Yrittajat). These systems are analysed
in considerable detail and there will be subsequent reference to some of their characteristics.
However, at this stage, it should be noted that most of these on-line markets had only been
established in the previous three years, but that together the nine sites contained around 11,000
transferable businesses and the success rate of those offering businesses for sale was estimated to
be around 25%. It was also observed that there was a considerable disparity between the number of
sellers and the number of buyers, with a preponderance of the former.
The Report went on to analyse the desirable features of these on-line markets and the elements that
represented good practice. These were listed as follows:
• National databases should not be fragmented. If a comprehensive national database cannot be

established, at least there should be a national portal for all such databases.
• Databases and portals should provide links to well-established databases in other countries.
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Transfer Markets
• A neutral and trustworthy host organisation is a key success factor for a transfer database.
Natural candidates for this function are Chambers of Industry and Commerce and Chambers of
Craft Industries and Business Support Organisations, particularly in countries where
membership of these organisations is mandatory.
• A transfer marketplace will be more successful if it is not restricted to a database with a

discovery service only. Useful additional services that could be provided include information on
transfer issues, mediation services during negotiations and tutoring.
• Anonymity is of central importance, especially for most potential transferors. Contact details or
descriptions that would reveal the identity of a firm should only be published with the
authorisation of the person placing the advertisement. Contact queries could be directed to an
anonymous mail box. More security is provided if contacts are organised by the database host
organisation or by intermediaries.
• It is advisable for the host organisation to ensure a certain level of quality of database entries.
This should include at least a regular check to see if advertisements are still valid. Assistance in
drafting advertisements is also often useful. Moreover, an ex-ante check of companies before
inserting an entry into the database could be considered.
• In order to adjust and improve marketplaces and to account for public funds that might be used
to support them, a systematic follow-up of its success (e.g. in the form of a “success rate”) and
the factors that determine the success is advisable.
• Promoting awareness of on-line marketplaces is necessary among their potential users, by
choosing a suitable domain name, by linking with other types of government business support,
by advertising, by awareness-raising campaigns and by the distribution of information in related
contexts (e.g. Chamber of Commerce and trade seminars on other topics).
• Minimum search criteria are specified: economic sector and trade, geographical situation
(region or even city) and size (indicated by size classes of employees and/or turnover). Other
useful search criteria are price (range) and the planned date of the transfer.
The Report did refer to other forms of provision in the other countries represented in the Export
Group, but mostly the on-line markets covered are public or semi-public. Even so, there is a
considerable variation in practice in the way that the systems considered operate. This will be
examined further below.
Transeo Working Group Matching Platforms
More recently, Transeo, the European Association for Transfer, has had a working group examining
matching platforms. The full report of this group has not yet been published, but Transeo has kindly
shared some of the results that are already available.
The Transeo Working Group has also looked in detail at a series of on-line marketplaces and
examined their characteristics. To a certain extent, these overlapped with the platforms identified by
the previous Expert Group, but reflecting the membership of Transeo and other organisations with
which it is in contact, the cases considered include on-line markets developed in the private sector.
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The main focus is on on-line systems in Belgium (Sowaccess), Denmark (Match-online.dk), France
(CRA), Italy (StudioCentroVeneto), the Netherlands (MKBase), Finland (the Finnish Company
Acquisition Ltd) and Norway (Gess.no).
Details will be provided by Transeo of the performance of each of these on-line markets, but overall
conclusions at the moment are along the following lines:
• Ideally, matching platforms should be hosted by a neutral organisation.
• They should provide a national overview of businesses available for transfer.
• They should be more than a “website” managed by private stakeholders, where neutrality and
independence are not guaranteed.
• Both the seller and the buyer should be anonymous, which implies the existence of a support
structure behind the on-line database, to conduct active matching.
• Personal contacts of platform managers with potential sellers and buyers improve the chances
of accurate matching and of keeping profiles up to date.
• There should not be too many search indicators.
• The quality and reliability of profiles made available in the platform and the corresponding
quality of the services provided by the platform team is essential.
• The internationalization of matching platforms is also essential to enable SMEs that could be
sold abroad to be matched with the relevant candidates. A collaboration between regions and
countries is very important and represents a real challenge. Professionals should be in charge of
the implementation of such interconnections between platforms.
• Awareness of matching platforms among sellers and buyers could be improved.
4. How On-line Markets Are Developing
Further information, particularly of a contextual kind has been provided during the course of the
current evaluation exercise, in the form of responses to survey questions and those arising during
interviews and also in presentations at the second expert group meeting. Together with the
information provided by the earlier work, the additional input has made it possible to put together
the following overview of the current situation:
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Overview of Available On-line Markets
Key to Abbreviations: S = Survey results; ExG = Expert Group; Tr = Transeo study; Pb = Public or semi-public; Pr = Private
Country Site Source Public/private
Austria Nachfolgeborse Osterreich: www.nachfolgeboerse.at S/ExG/Tr Pb 2012: Offers 2,553 Demand 440
Nachfolgeborse Wien: 2011: Offers 2,411 Demand 422
http://wkwicfo8.wkw.at/online/page.php?P=339 S Pb 2010: Offers 2,150 Demand 418
Belgium Sowaccess.be (Wallonia): S/ExG/Tr Pb 2012: Sowaccess : 20 Transactions (SME)

http://www.sowaccess.be/ 2011: Sowaccess : 22 Transactions (SME)
BruSade.be (Brussels) S Ventreprise.be, otherwise known as Overnameweb.be
Ventreprise (Wallonia) & Overnamemarkt (Flanders): S/ExG/Tr Pr has been active since 2005 in Belgium, France and the
Netherlands
www.Ventreprise.be
www.Overnamemarkt .be
Bulgaria A few private internet sites for buying and selling of S

business
Denmark Match-online.dk: S/Tr Pb/Pr Match-online EXECUTUVE is for larger enterprises

www.match-online.dk Match-online.dk has assessed its activities. Before the
http://www.match-online.dk/executive/ S Pr crisis there were between 250 and 300 enterprises for
sale on the site. Since 2010 the figure has gone down to
www.danskfirmabors.dk, www.virksomhedszonen.dk, S Pr
appr. 180 enterprises each year.
www.amino.dk/virksomhedsbors S Pr
Portal :
http://startvaekst.dk/omejerskiftedanmark Pb
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Finland Suomen Yrittäjät (The Federation of Finnish Enterprises) S/ExG 2012: 55 (ads 850)
Yrityspörssi: http://www.yritysporssi.fi/ Suomen 2011: 45 (ads: 650)
Yrityskaupat (The Finnish Company Acquisition Ltd): S/Tr
2010: 35 (ads: 500)
http://www.yrityskaupat.net/
Total amount of ads for sale is about 2000 in all on-line
Also some other national public and private platforms and
matching platforms.
a few public or semi-public regional on-line data-bases.
Yrittajat ExG Pb
France Bourse de la transmission: S Pb BPI France – formerly Oseo

http://www.reprise-entreprise.bpifrance.fr/
Portal to other sites : http://www.reprise-
entreprise.bpifrance.fr/oseo/articles/partenaires
Passer le relais : ExG Pb Ile de France region
http://www.passerlerelais.fr/
CRA (Cédants et Repreneurs d’Affaires) Tr Pb National non-profit association
250 transfers each year. 570 transferable companies in
the database. Website has 40.000 visitors each month.
Numerous matching platforms are available. For instance ; Tr+
Fasacq, CCI, Brutade, IT-FFB, Chambre de Métiers et de
l’Artisanant, FDC, MECANET and AGORABIZ.com.
Germany Nexxt-change: S/ExG /Tr Pb 2012: 1189

www.nexxt-change.org 2011: 1316
2010: 1265
Tr: With approximately 7.000 transferable businesses in
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their database Nexxt-Change is able to realize about
1500 transfers each year. Each month 2 million visitors
enter the German website.
Deutsche Unternehmberbörse Dub.de GmbH Tr Pr Tr: This company has on average 600 transferable
www.Dub.de companies in their portfolio. Each month 110 000
visitors enter the website
MA Strategie: Tr Pr The focus is on transactions which exceed the volume of
http://www.ma-strategie.de/ 1 million euros.
Hungary http://www.topceg.hu/ ExG Pr

www.cegalku.hu
Ireland Not aware of any specific links. S
Italy Incontrerete (Chambers of Commerce national platform) S
Borsa delle Imprese ExG For the region Emilia Romagna
StudioCentroVeneto Tr
Latvia
Lithuania
Luxembourg Luxembourg Chamber of Craft Industries ExG Pb Mediated by the Chambre des Métiers
http://www.cdm.lu/entreprise/conseils-aux-
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entreprises/cession
Luxembourg Chamber of Commerce: ExG Pb Only by direct contact with the Chamber
http://www.cc.lu/cession-transmission-dentreprise/
http://www.espace-entreprises.lu/fr/cession-
transmission/
Netherlands There are several sites, privately run, that match buyers S Exact numbers do not exist, about 40 to 50 %, 14 % of
and sellers. all transfers are the result on an on-line match.
Pr
www.investeringsplaza.nl,
http://www.bedrijventekoop.nl/ Pr
Ondernemingsbeurs ExG/Tr Pb 500 transferable businesses and 15 000 unique visitors

http://www.ondernemingsbeurs.nl/ on the website each month
MKBase: Tr Pr Offers 4,000 profiles and 550 advisers

http://www.mkbase.nl/
www.Brookz.nl (www.Overnamematch.nl.) Tr Pr Circa 300 transferable companies can be found in their

database nowadays, and between the 30 and 50
transfers are realized each year
Poland Bizvendo: Pr Advertising site with supplementary tools

http://www.bizvendo.pl
Startinvest: Pr Advertising site
http://startinvest.pl/ogloszenia/sprzedam-firme
Sprzedambiznes.pl: Pr Advertising site
http://sprzedambiznes.pl/
KupSprzedaj.pl ExG Pr General Advertising site
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http://www.kupsprzedaj.pl/
Portugal Fintrans S Pb This platform has however a very limited scope, serving
www.fintrans.pt mainly for sellers and buyers to manifest their interest.
There is no matching mechanism.
2012: 7
For 2013 the creation of a national web platform
dedicated to business transfers is planned, in which
IAPMEI will bring together the business associations and
the main private brokers
Romania
Slovakia
Spain Plan de Continuidad Empresarial : S Pb 2012: 13

http://www.plancontinuidadempresarial.es/ 2011: 8
Reempresa: S Pb 2010: 10
http://www.reempresa.org/ Advertising site – 42,000 businesses for sale
http://es.negocius.com/ Pr Advertising site
Sweden ExG There are two nationwide commercially operated

marketplaces
United Businessesforsale.com: ExG Pr Advertising sites

Kingdom http://www.businessesforsale.com/ Over 64,000 businesses for sale in 26 countries (incl
franchises)
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Daltons Business: Pr 31,000 businesses for sale
http://www.daltons.co.uk/business/
Albania
Croatia
Liechstenstein
Norway Gess.no S/ Tr Pr
http://www.gess.no/
finn.no S Pr Advertising site
http://www.finn.no/
Serbia
Turkey Sirket Ortagim: S Pr Private initiative

https://www.sirketortagim.com/anasayfa.aspx
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This ‘Overview of On-line Markets’ does not make any claim to be comprehensive, but it does bring
together the sites that have been considered in earlier work, plus a number of other representative sites
and in that sense allows an overview to be obtained of the current situation across Europe.
It will be seen that most of the sites previously considered have continued to flourish and to increase
both the numbers of the businesses for sale and the numbers of those looking to purchase a business.
The German site, Nexxt-Change, for example, now regularly has over 7,500 businesses for sale on offer
and facilitates over 1,000 transfers each year.
There continues to be a variety of forms taken by on-line markets and indeed this variety has been
extended. In particular, there are substantial differences in the extent to which intermediaries are active
in mediating between buyers and sellers. This intermediation can take different forms. It can be as little
as a reference to the possibility of professional advice right up to a compulsory checking of the
information posted and intervention. A number of sites offer both possibilities, allowing clients to
choose the form they wish to use.
Parallel to this there is a fair degree of variation in the charges for using the on-line facilities, with the
commercial sites typically offering differing levels of service with corresponding charges. Usually the
charges consist of a standard fee for putting information on the site for a certain amount of time, but
there are also cases where the buyer is charged a percentage of the price agreed (0.6% in the cases
identified).
The case for intermediation lies in the market failures relating to information transmission. Initially there
is an asymmetry of information between seller and buyer. The seller knows his or her business better
than the buyer and has an incentive to hide certain facts. Checking by an intermediary can help alleviate
the problem. There is also the need in many cases for confidentiality. A business owner cannot let it be
known that he or she is thinking of selling a business, without this potentially affecting the behaviour of
customers, business partners, employees, suppliers and providers of credit. All of these effects can
reduce the value of the business. Being able to preserve this confidentiality is also facilitated by the use
of intermediaries.
Intermediaries can also play a useful role both in bridging differences between sellers and buyers,
notably in relation to the perceived value of the business, and also in helping to arrange finance and
ensuring that the business under new ownership gets as promising a start as possible.
Valuation is an issue that is considered more in the case study on the financing of transfers, but in the
current context, it should be noted that the seller often perceives the business to be worth more that
the buyer is willing to pay.
This sort of professional input is clearly easier to build into the procedures of a specific on-line market,
when it is associated with a business support agency, as is the case with Sowaccess in Belgium
(Wallonia), Nexxt-Change in Germany and the Bourse de la transmission in France. In other cases, there
are issues to do with the assurance of the professionalism of the advice offered. Again this is a question
that is considered in another case study – in this instance, the case study on support services. However,
in the current context, the issue of the role of intermediaries and their professionalism can usefully be
seen in the context of a broader perspective on how on-line markets operate.
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The previous studies have not paid much attention to the broadly-based ‘advertising’ sites. Some of
these sites have existed for a long time in the sense that they originally took the form of a physical
publication of the kind referred to at the beginning of this case study. One explicitly claims to have been
‘connecting buyers and sellers since 1870’. Nowadays they essentially consist of a website on which it is
possible to advertise a business for sale. The notices posted on these sites consist of a structured
statement of the main features of the business. Some access to additional information and commercial
advisers is often provided, but basically they envisage a more or less direct contact between the sellers
and the buyers, without any substantial intermediation.
Frequently these ‘advertising’ sites will also offer franchises and sometimes property and other goods
and services for sale, but from the business transfer perspective, they are quite interesting. First of all,
they cater for a relatively large number of businesses when compared to the on-line markets previously
highlighted. Secondly, the businesses advertising are mainly micro and small businesses. In addition, the
sites often have an international dimension, with businesses in different countries and often different
language versions. A site used in the UK, for instance - Businessesforsale.com – claims to have 64,000
businesses for sale in 26 countries. However, the businesses involved are often mainly in the service
sector – retail, hotels, personal health care etc. and are generally relatively small, with an annual
turnover seldom above €1.5 million. In other words they serve a particular market, in which individually
most of the businesses concerned are not substantial in terms of their impact on the economy.
Collectively, however, because of the numbers involved, they are rather more significant and
consequently ought to be a definite part of policy consideration in the business transfer area.
Finally on ‘advertising’ sites, it should be said that, although the model is relatively simple, they are
gradually becoming more sophisticated. A Polish site, Bizvendo, developed with EU funding support
(ERDF) and launched in 2011, operates in English and German as well as Polish and has various support
features built in. There is an on-line tool to help sellers prepare an information memorandum, setting
out the firm’s basic business information and also a step-by-step instrument to help owners to value
their business. The site can also direct businesses to advisers of various kinds and to potential investors.
In this respect, they are moving in the direction of some of the already established private sector on-line
markets, such as Bedrijventekoop in the Netherlands, which also has on-line tools to help business
analysis and valuation and provides access to advisers. In some cases, some of these sites are operated
by businesses that are active in the area of mergers and acquisitions.
In contrast, the on-line markets considered in the earlier reports are often in a better position to assist
somewhat larger enterprises (though still SMEs) and enterprises to be found in manufacturing and some
parts of construction, the ICT sector etc. Essentially in these cases, the business and transfer issues are
rather more complicated than when it comes to selling a small retail outlet, simply because the business
is more complex, both in its operations and in its finance structure, and because it usually involves more
people. In these circumstances, there is clearly a greater need for professional assistance and mediation.
The overview presented in the table above also allows a perspective on what might be called ‘structural’
changes in the situation with on-line markets. It is noticeable that with the exception of the Spanish
‘Plan de Continuidad Empresarial’ and in Portugal, where the SME agency IAPMEI, is shortly to launch a
new national platform, there does not appear to have been much of a development in the sort of sites
recommended by the Expert Group in the intervening period. There is a concentration of such sites in a
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core group of countries – Belgium, France, Germany and Austria, but the attempts of various Chambers
of Commerce in Italy to create regional sites have met with varying degrees of success and have not yet
led to the establishment of a similar facility. Elsewhere such developments as there have been have
involved ‘advertising sites’ more than anything else.
The situation in the newer Member States is worth noting. As yet, the issue of business transfer does
not appear to have very much profile in these countries and the on-line markets that have developed
are definitely of the ‘advertising’ kind. Poland illustrates how these have multiplied, though, as
remarked before, it is interesting that some of these sites have begun to offer more support and access
to professional advice. It may be argued that these are more appropriate for the kind of enterprise that
is being transferred. However, it is not only the newer Member States that rely on this type of on-line
market. The UK, Ireland and Sweden appear to be in the same position. Furthermore, they exist in one
form or another in most countries.
The Expert Group commented on the problem of the proliferation of on-line markets, suggesting that if
a comprehensive national database cannot be established, there should at least be a national portal for
all such databases. The PBI site in France (formerly Oséo) acts in this way and there appears to be a
similar motivation behind the ‘Startvaekst’ site that is being developed in Denmark and the ‘Suomen
Yrityskaupat’ site in Finland. However, there is clearly scope for other initiatives of this kind elsewhere.
There is a gradually growing set of on-line markets for business transfers that are extending across
Europe. However, with the exception of Spain and potentially Portugal, new on-line markets are not
being provided by the ‘neutral and trustworthy host organisations’ such as Chambers of Industry and
Commerce or other Business Support Organisations, envisaged in the 2006 Report from an Expert Group
on these markets. Furthermore, although there is often reference to additional services, including
information on transfer issues, mediation services and tutoring, and there is some evidence of a growing
sophistication in such services, all the new sites stop short of the type of the comprehensive mediation
service called for in the Commission’s 2006 Communication.
Having said this, and recognising that professional mediation can be vital for a successful outcome in
transfers of larger and more complex SMEs, examination of the nature of the businesses posted in
‘advertising’ sites suggests that they are providing a valuable service that can often be the most
appropriate for micro and small SMEs that have a relatively low turnover and a relatively
straightforward business model.
Overall, therefore, there appear to be some positive developments taking place in the development of
on-line markets. However, there is clearly still scope for additional provision to be made and especially
for the sort of integrated market and mediation service that larger SMEs require and that was called for
in the 2006 Communication.
In addition, it should be noted that all on-line markets are showing a gradual tendency to move beyond
national boundaries and accept both businesses for sale and interest in buying from countries beyond
the home country of the site. This effect could be multiplied, if more sites had links to counterparts in
other countries.
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Recommendations
1. National authorities should encourage the development of on-line provision for both micro
enterprises and larger more complex SMEs.
2. All sites should be encouraged to provide access to impartial advice and the quality of the
information posted should be monitored. There is a strong case for mediation in sites with larger
SMEs and more complex deals.
3. Quality standards for platforms could be developed, with corresponding certification systems in
order to promote their credibility and the trust of their users. The operators of such sites could be
encouraged to co-operate in developing and implementing such standards.
4. Sites should be encouraged to link with other sites, including sites from other countries.
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Case Study: Developing Effective Advice A4

and Support
Developing Effective Advice and Support
1. Introduction
It is commonly acknowledged that the process of transferring a business can be very complex. It
requires a combination of organisational, financial, fiscal and legal expertise – not to mention a way of
addressing the emotional concerns for those involved – so most business owners feel the need for some
degree of expert support and advice throughout the process. Support for SMEs is especially vital since a
large number of business transfers occur in the micro-firm segment, where resources of all kinds are
limited.
However, several studies have shown that there is a lack of good advice on transfer for the owners of
smaller businesses. Many traditional SME advisers, such as accountants, lawyers and banks, appear not
to be able to cover the whole transfer process, and there seems to be a tendency for advisors to target
larger companies, in that their services are too expensive for small firms.
The aim of this case study is to examine in more detail claims that the business support available to
small-firm owners in the transfer process is not as effective as it should be.
This case will examine the evidence for these claims, having first investigated what the survey
conducted for the evaluation reveals about the existence and quality of business support and mentoring
in Member States currently. It will then go on to look at the emotional issues that can emerge in
connection with a transfer. On this basis it will seek to identify areas where some improvements might
be possible, examine the case for promoting more professional services, possibly based on regulation,
and point to examples of possible solutions that may constitute the way forward.
3. Background
Efforts to inform entrepreneurs about the importance of preparing themselves for transfer well in
advance of the event are generally thought to improve the chances of successful business transfers. The
1994 Commission Recommendation sought to incite Member States to encourage initiatives - both at
public and private level - to stimulate increased awareness, information and training of businessmen
about transfer (article 2) as part of the wider set of recommendations.
By the time the Commission published its 2006 Communication81, only 8 of the then 25 Member States
had implemented this particular recommendation, with another 7 having either partially implemented it
or planning to do so. It was therefore thought necessary to reiterate the plea to Member States to
organise or support activities to make business owners aware of the need for a timely preparation, for
instance by personal mails aimed at business owners of a certain age or awareness-raising activities for
business advisors such as accountants, banks and tax advisors. It was also necessary to increase the
awareness of buyers and especially of young entrepreneurs, to the potential advantages of taking over a
transferred business. Member States were also encouraged to promote mentoring schemes in order to
address the psychological barriers faced by owners that have to let go of their business.
81
Commission Communication ‘Transfer of Businesses - Continuity through a new beginning’ (COM 2006/117)
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and Support
In this context it was noted that the European Parliament had suggested that the Commission should
launch a pilot project laying down principles for a European training and mentoring scheme which would
improve the transfer of knowledge and core competencies essential for business transfers.82 The pilot
action ‘A Helping Hand for SMEs – Mentoring Business Transfer’ was coordinated by Eurochambres
working with 33 of their members on the ground. The project which was carried out over 33 months
from 2007 to 2009 aimed to provide free support to 1,000 buyers in 18 countries, each for a ten-day
period. Apart from delivering the mentoring service on the ground through Eurochambres’ partners in
Member States, the project included an evaluation component which assessed the quality of the
mentoring provided.83 Given the differing conditions for transfer in participating countries, each
mentoring session was tailored to the specific needs of the buyer in question. An assessment of
satisfaction at the end of the project’s implementation period showed that participants generally found
the experience ‘useful’.84 It was recommended that a mentoring service should be implemented at a
national or regional level in order to adapt the service to the local specificities in terms of the profile of
the mentees and of the business transferred.
By 2010, when the Business Dynamics report85 took stock of Member States’ implementation of the
recommendation on awareness-raising, support and mentoring, the situation had improved further. By
then, 22 of the 27 countries involved had either implemented, partially implemented or planned to
implement86 the Commission’s proposal, at least with regard to awareness-raising initiatives.
The report also provided a further analysis of the existence in Member States of training and mentoring
schemes aimed at owners and prospective buyers and gave an overview of the type of organisations
providing these. In 7 countries (BE, FR, DE, IT, PT, SK, SE) there was a high degree of availability of such
initiatives, with training mostly provided by Chambers of Commerce, business associations and public
bodies, and mentoring offered by private organisations or Chambers. 10 countries (AT, BG, DK, FI, EL,
LU, NL, PL, UK, TR) had a more moderate provision with private organisations being the most likely
organisers, although public bodies were involved in Denmark, Finland and the UK. In 6 countries (HR,
EE, HU, LV, LT, RS, SL) no training or mentoring was available at all87. The report did not investigate the
quality of such initiatives.
82
EP budget reference line 02 02 03 03, pilot project within the meaning of Article 49(2) of Council Regulation (EC,
Euratom) No 1605/2002 of 25.6. 2002 on the Financial Regulation applicable to the general budget of the
European Communities, OJ L 248, 16.9.2002, p.1.
83
This project component was carried out in cooperation with two French partners (CRCI Rhône-Alpes and
University of Savoie). A short description of the main conclusions of this analysis can be found below in section 7
on Mentoring.
84
The average satisfaction rate was 1.97 with 1 being ‘very useful’, 2 ‘useful’ and 3 ‘satisfactory’. The areas of
advice that scored best were ‘accounting & finance’ (1.87) and ‘human resources’ (1.89), whereas ‘legal & fiscal
aspects’ and ‘IT systems’ received average rates of 2.07 and 2.12, respectively.
85
Business Dynamics: Start-ups, Business Transfers and Bankruptcy, European Commission, January 2011
86
It should be noted that the report did not distinguish between the different levels of implementation in the
same way the previous report had done.
87
Since the survey for the current Study was completed, the creation of a new Family Business Institute in Croatia
has been announced which will provide advice and training on transfer for family businesses. The announcement
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and Support
4. The Current Situation on Support for Business Transfer
The survey conducted as part of the current Evaluation asked respondents to rate the availability of
initiatives specifically targeted at preparing business owners and prospective buyers for transfer. The
survey also looked at awareness-raising, but this case study will mainly examine initiatives to provide
more tailored business support and training and mentoring schemes. A total of 24 countries responded
with two responses from Belgium (Flanders and Wallonia).
As the table below shows, a large proportion of the countries responding reported that the availability
of business support specifically relating to transfer, and aimed at owners, was either very low or
moderate (16 countries/66.6%). The situation with regard to potential buyers was not very different (15
countries/62.5%). Only 3 respondents considered the provision to be very high (BE, DK, LI) with 3
countries saying that it was high (FR, DE, LU).
Table 1: Availability of business support initiatives preparing owners and buyers for transfer
Aimed at
Aimed at owners prospective
b. Business support measures buyers
Nº % Nº %
Very low 8 33.3 9 37.5
Moderate 8 33.3 6 25.0
High 3 12.5 4 16.6
Very high 3 12.5 2 8.3
Not available 2 8.3 3 12.5
Total 24 100.0 24 100.0
Some examples of initiatives were given in this context. In Denmark, for instance, a special business
transfer awareness and support campaign targeting buyers, sellers and business advisors was launched
in the autumn of 2012, anchored in a public-private cooperation of more than 35 stakeholders with the
intention of creating a lasting effect after funding has ended. As an element of the campaign, 600
enterprises are being offered a guidance session free of charge to provide them with the necessary skills
for the transfer process and where relevant referral to private service providers88.
In Portugal, IAPMEI (Instituto de Apoio às Pequenas e Médias Empresas e à Inovação) runs a
programme FINTRANS which provides technical advice and support for pre-assessment of the company,
and technical support to prepare a business presentation for potential buyers with disclosure of
selected information to potential investors. In addition the programme offers participating enterprises
the opportunity to facilitate access to appropriate financing solutions through partnerships with
came in connection with the adoption of the first ever SME Strategy (2013-2020) and a new law for Craft
businesses in October 2013.
88
http://erhvervsstyrelsen.dk/pressesoeg/547119/5 / http://startvaekst.dk/ejerskifte/0/4
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financial institutions. There are plans to create a nation-wide transfer platform in 2013. Private support
initiatives are typically conducted by international business advisors, who are frequently in demand, but
often do not have sufficient technical staff to do this sort of work.
In Belgium, the three regions (Agentschap Ondernemen in Flanders, Brutrade in Brussels and Sowaccess
in Wallonia) have developed well-organised systems of awareness and preparation programmes for
sellers and buyers and facilities for matching. The Flemish government also offers subsidies for
businesses to obtain advice on how to put together a transfer plan and Sowaccess offers access to
diagnostic tools for both sellers and buyers, plus training and information sessions and pre- and post-
takeover clubs where buyers can exchange experience and tips. As a subsidiary of a corporate finance
group, their services are also tied in with access to finance.
In Spain, the Ministry of Industry, Tourism and Commerce (MINETUR) has set up a specific plan for
business transfer - ‘Plan de Continuidad empresarial’ 89 as part of a major €84 million. Plan to provide
support to entrepreneurs.
There are a number of transfer platforms that have been set up to support business owners and buyers,
among others the WKO portal in Austria 90 and in Italy, where different regions have set up the so-called
KBS platform91 which provides support to business owners through trained experts within business
associations. The Kit.Brunello.System (KBS) is a toolset repeatedly recognised as a good practice by the
Commission, Following the recommendations of the Commission BEST Report, it includes 15 good
practice tools in several languages for organising awareness-raising and surveys, such as a handbook for
micro businesses and tools for self- and group analysis. What is particularly interesting is that these
tools are available free of charge and thus challenges the notion that transfer advice has to be
expensive. Furthermore, there are currently plans within Confindustria to organise a tour in 5 regions to
run an awareness and training campaign for business owners and managers and family business
members and the Iurcovich Institute in Rome contributed with significant research, consulting and
training courses in the field of transfer.92 However, there are very few private business consultants
focused on transfer in Italy, and the ones that do exist have not adopted the systematic approach that is
used elsewhere.
In Finland, there are measures in some regions to provide advice along with access to finance for buyers
through Finnvera’s Regional Business Transfer Advisory Service.
However, in several countries there appears to be very little support, and the initiatives that are
available are mainly privately organised. This is the case in Lithuania, for example, where it is only
private M&A advisors and corporate banking departments of national banks that offer some minor
initiatives for their clients. In Norway, it is also banks that offer transfer advice, such as tax planning, to
owners.
89
www.plancontinidadempresarial.es/Documentos/Guia_Transmisiones_VG_web.pdf
90
Platform set up by business transfer consultants for buyers and sellers
http://portal.wko.at/wk/format_detail.wk?angid=1&stid=596872&dstid=7271&opennavid=0
91
http://kbs.studiocentroveneto.com/scvtool/?lang=en&id=15
92
http://www.iurcovich.it/
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Survey respondents also provided information about training and mentoring initiatives. Here again,
many countries have limited availability of such measures, especially those targeting prospective
buyers. A third of the 24 respondents state that there is ‘very low’ provision of schemes aimed at
owners, and even less availability for prospective buyers (45.8%). Where the picture is somewhat better
than for business support is with regard to mentoring schemes aimed at buyers, where 37.5% say that
the availability is either ‘high’ or ‘very high’. The countries suggesting that there are a lot of measures at
the disposal of businesses are Belgium , Denmark and Liechtenstein (‘very high’) and France, Germany
and the Netherlands (‘high) with Austria and Wallonia also having ‘high’ availability for potential buyers.
In the case of the Netherlands, this is largely based on private sector provision.
Table 2: Availability of training/mentoring on business transfer for owners and buyers
Aimed at
Aimed at owners prospective
c. Training/mentoring schemes buyers
Nº % Nº %
Very low 8 33.3 11 45.8
Moderate 5 20.9 1 4.2
High 4 16.6 6 25.0
Very high 3 12.5 3 12.5
Not available/No answer 4 16.6 3 12.5
Total 24 100.0 24 100.0
In spite of the fact that the frequency of transfer within families has decreased in recent years, several
countries provide transfer support especially for family businesses. As the figure below shows, this is
particularly the case with regard to awareness-raising initiatives, but mentoring and training are also
provided by 8 of the 24 responding countries. This is provided in AT, BE , DK, FI, IT, NL, LI and LU; other
support measures for family businesses exist in BE, DK, FR, HU and LI. Several countries have plans to
introduce this type of support (LT, PT, SK, AL, HR) with HU, IE, LT, PT, AL, HR also planning to provide
mentoring/training for family businesses.
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Figure 1: Availability of specific initiatives for family business transfers
Other business transfer initiatives on offer in some countries include measures specifically targeted at
business advisers, such as accountants, lawyers, bankers and other intermediaries with a view to
improving their understanding of the issues surrounding business transfer and the quality of their
services. Less than half of the countries responding (10 in total) offer this type of support. No examples
of this type of initiative were provided by the survey respondents.
Table 3: Availability of specific initiatives for business advisers involved in transfer
Options Nº %
Yes 10 41.7
No 9 37.5
Measure planned/ necessary in
5 20.8
future
No answer 0 0.0
Total 24 100.0
Although the existence of services to support small business throughout the transfer process is of
paramount importance, the uptake of such initiatives and their quality and effectiveness is obviously a
precondition for their success. The survey also investigated this aspect, as table 4 below shows.
When it comes to the effectiveness of the support on offer in terms of bringing about successful
business transfers, the verdict is somewhat mixed. Nearly half the respondents (48%) estimate that the
initiatives available in their country are either ‘quite effective’ or ‘very effective’, with just over a third
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(36%) who consider training/mentoring initiatives to be effective. However, there are quite a lot of
cases where respondents either did not answer or suggested that the type of measure was not
available. The countries where transfer initiatives are judged to be most effective are FR, HU, PT, LI, SR
and HR for business support, and BE (Wallonia), NL, SR and TR for training/ mentoring.
Table 4: Effectiveness of different types of initiative in achieving successful business transfers
Business support Training/mentoring
Options Nº % Nº %
Data not available/no answer 6 25.0 9 37.5
Not effective 0 0.0 0 0.0
Moderately effective 6 25.0 6 25.0
Quite effective 6 25.0 5 20.8
Very effective 6 25.0 4 16.6
Total 24 100.0 24 100.0
The above analysis shows that most countries provide some degree of business support and mentoring
and/or training specifically aimed at transfer, although these measures are not always judged to lead to
successful transfers. The following section will look at some of the reasons why SMEs continue to face
problems in connection with the process of transfer in spite of the various initiatives that exist.
5. The Problems relating to Business Support Services
In the past ten years, a number of studies have highlighted the need for SME owners to have access to
professional support during the transfer of their business, given the complexity of the process. Not only
does a successful transfer require an understanding of a vast array of organisational, financial, fiscal and
legal issues, it is also likely to put those involved under significant emotional pressure. Potential buyers
are just as likely to need quality support, but may be less prone to suffer emotionally in the process.
Business transfer has sometimes been compared to selling a house, with the big difference that there is
typically plenty of support out there for house sellers and buyers, in spite of the economic transaction
being significantly simpler than that of a business transfer.
There is some differentiation of perceived need among different types of business owner. A Finnish
study whose results were made available to the evaluation found that the need for external expertise
was more often expressed by women and entrepreneurs with no vocational education. In terms of the
size of the business, the greatest need for external expertise was perceived in firms with 5–10
employees, whereas one person firms had the least need. Furthermore, the need for assistance was
greater in family businesses than in non-family ones, and in manufacturing firms. There also appears to
be a link between the continuing viability of a firm and its need for expertise. It was entrepreneurs
looking for an external buyer who had the greatest need for external expertise, but this did not mean
that those planning a generational transfer within the family were not in need of assistance.
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In its Final Report, the Expert Group involved in the 2002 MAP project on the transfer of SMEs93
stressed the need for appropriate professional support to steer buyers and sellers through the process,
but suggested that, although many support services do exist, they are often fragmented and tend to
concentrate on one specific aspect of the transfer process. In addition, advisers are rarely equipped to
deal with the whole spectrum of advice needed. The report concluded that a holistic approach to
transfer advice was needed. Moreover, existing support measures should be made more visible and be
better co-ordinated. Raising awareness should be the starting point for successful transfers and practical
support should only follow afterwards. The report also suggested creating a virtual pan-European
business transfer platform with a network of national transfer centres, based in bodies such as
Chambers of Commerce or other existing support networks for SMEs; an idea that was never actively
pursued, at least not at a European level.
The Small Business Service (DTI) in the UK reached some of the same conclusions in its 2004 report
‘Passing the baton – encouraging successful business transfers’.94 According to the authors the business
support systems in the UK and the rest of Europe – whether public and private – are not as equipped as
necessary to deal with the increasing volume and complexities of the business transfer market and It
was proposed to set up an accredited training programme for advisors to equip them with the skills and
knowledge to adequately manage business transfers, and for private and public sector support to be
better coordinated. It is not clear whether these recommendations have been taken any further, as
there is no UK representative on the expert panel and support services in the UK have been radically re-
organised in recent years.
Several other studies have examined the failure of markets to provide adequate advisory services on
transfer. One Dutch study by the ING bank95 found that professional SME advisers have a tendency to
specifically target medium-sized firms over small ones and that their services are too expensive for small
businesses. Dr. van Teeffelen at the Utrecht Hogeschool has also authored several research studies on
this issue. His 2009 study on the role of advisers and their way of working on business transfer96 showed
yet again that many advisors are ill equipped to provide advice over the entire process, a point which is
further exacerbated by a lack of cooperation between different types of advisers. The study
concentrated on the involvement in the different phases of transfer of four different types of business
advisers: accountants, business brokers, banks and business consultants, typically based within
Chambers of Commerce. The study did not include lawyers. Accountants are often seen as the
preferred advisers of small business owners, a notion which was further supported by the data of this
study. But in terms of transfer advice, accountants are mainly involved in the preparative phases and do
not have the full picture necessary to guide businesses through the process. The study actually revealed
that a quarter of accountants choose to withdraw from subsequent stages of the transfer process, as
they are afraid of potential liability if advice provided is incorrect. In the phases following general
93
Transfer of businesses – continuity through a new beginning. Final report of the Expert Group on the transfer of
SMEs - MAP 2002 project. August 2003
94
Passing the baton – encouraging successful business transfer, Evidence and key stakeholder opinion, Small
Business Service (DTI), I. Stone, P. & G. Braidford (2004)
95
How entrepreneurs rate advisers, D. De Waard, ING Economic Department, 2002
96
Adviseurs aan het word: werk- en zienswijze bij bedriftsoverdracht, L. Van Teeffelen, Kamer van Koophandel
Nederland, 2009
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awareness-raising and preparation, it appears to be business brokers that are the most active, being
involved in both the matching, negotiation and contracting stages, whereas banks are the favourite
advisers for the contract phase. Consultants from Chambers of Commerce appear mainly to have a role
in the initial stages of the process and are the ones that are most active in providing businesses with an
initial orientation and in raising awareness of the issues at stake. It should be noted, though, that in
some countries they are only allowed to provide advice on orientation and planning.
Dr. van Teeffelen and other researchers also question the added value of financial advisers. As van
Teeffelen states in his 2012 report ‘Avenues to improve success in SME business transfers’: 97
‘Financial advisors have a detrimental effect on post-transfer performance, increase the
duration of the transfer process and have no effect on the price obtained’. He goes on to say
that ‘accountants, bankers, business brokers and lawyers have little success in overcoming
acquisition obstacles related to financing and unexpected financial shortfalls, as well as cultural
and staff problems after acquisition.’
The fact that business owners wanting to sell up have to rely on several different advisers with diverging
‘agendas' and opinions of what is important, is also likely to confuse them and create problems. It would
appear, according to van Teeffelen, that a lot of advisers act out of commercial self-interest and propose
to their clients what is most advantageous to themselves.
Other experts consulted have commented that there are significant differences in the role of
accountants across Europe and their capacity to provide advice and that problems often arise if they are
called on to provide advice on transfers only infrequently. In these cases especially, a lack of familiarity
with the issues can lead to inappropriate advice being offered98.
From this evidence and from comments of the members of the Expert Group and others, it appears that
what is most needed in order to improve the market for business advice on transfers, is specialised
transfer experts with an understanding of the whole picture from start to finish. In particular, this should
include an understanding of issues that are highly relevant to ensuring a successful transfer. These
include:
- an appreciation of the psychological and emotional issues arising with transfers and
knowledge of how to address them
- valuation experience and expertise
- knowledge of legislation relating to changes in ownership
- knowledge of taxation issues relating to changes in ownership
- expertise in strategic management and marketing
- expertise in the integration of businesses.
97
‘Avenues to improve success in SME business transfers: reflections on theories, research and policies’, L. van
Teeffelen, Hogeschool Utrecht, 2012
98
Institute of Chartered Accountants in England and Wales (ICAEW) http://www.icaew.com/
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The quality of these services needs to be assured by certain quality standards or a specific Code of
Conduct. Looking at the evidence from Dr. van Teeffelen in more detail, it would seem that there is
scope for business brokers to be able to follow their clients throughout the full process – but as has
been shown earlier, there are issues with regard to the overall quality of their services, and reservations,
given their tendency to deliberately target medium-sized businesses with larger budgets. In this context,
it has been mentioned that transactions under £250,000 are often disregarded, since part of the
brokers’ earnings are determined by a percentage of the selling price. On this basis, it would seem that
in order to change the current picture a process of business adviser professionalisation is called for and
especially within the group of business brokers who already have the potential to cover the whole
transfer process.
6. The Role of emotional and psychological Issues
Many entrepreneurs are reluctant to let go and therefore fail to prepare for the transfer of their
business, especially those who have created and built up their own firms over a number of years. Given
that a transfer often involves the entrepreneur’s family and close business partners, psychological and
relational matters are likely to affect the process. If someone has spent their life building up a firm, they
are more inclined to want to see their children take over and if they do not wish to do so or perhaps lack
the necessary ability, this might act as a ‘block’ and stop the owner from selling up. This type of
entrepreneur is also likely to attach a purely emotional value to their business and would probably want
to be compensated accordingly, when selling up. However, it is questionable whether potential buyers
are willing to pay for what is not of direct value to them. In order for a transfer to be successful, it is
essential that the seller and buyer trust each other which is often helped by there being some kind of
emotional or psychological bond between them. This is particularly important for smaller businesses; in
larger companies the owner trying to sell would typically be assisted by specialists and would not get
directly involved.
Emotional and psychological considerations (so-called ‘soft’ factors) are increasingly acknowledged
these days as having an important effect on the process of transfer, yet consultants typically have very
little or no experience in this field. It is important that a more holistic approach is adopted and that all
aspects are taken into account in the support that is provided, and preferably early on. Reluctance to
sell up will often mean that the transfer of know-how and skills takes place very late, if at all, with
potentially serious effects on the continuity of the business.
7. Issues relating to Mentoring
As already mentioned the 2006 Communication urged Member States to promote mentoring schemes
to deal with these soft factors and introduced the idea of launching the pan-European mentoring pilot
project which was subsequently run by Eurochambres (see above).
When this pilot project ‘A Helping Hand for SMEs - Mentoring Business Transfer’ finished in August 2009
after 33 months of implementation, it was recommended that a mentoring service should be continued
at national and regional level. Most of the Chamber partners felt that they had learnt a lot and wanted
to build on this experience in future. As the survey results show, several countries have continued to
organise mentoring programmes or other types of training for business owners and potential buyers.
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Although the project was considered to be quite successful overall, it did run into a number of problems
on the way and had trouble achieving the goal of providing 1,000 people with 10 man-days of mentoring
each, in spite of a 9 month extension of the project. It turned out to be difficult to recruit the targeted
number of potential mentees, particularly in Central and Eastern Europe where business transfer was
not yet that much of an issue. This was partially due to a lack of data on transfers and insufficiently
detailed business registers which made it hard to identify eligible entrepreneurs. Furthermore, as newly
established small entrepreneurs, many mentees had difficulty attending the full duration of the
mentoring process (10 days) due to workload and other commitments and consequently had to cancel
regularly. It was also noticeable that consultancy and mentoring were not perceived as an urgent need
by some entrepreneurs, while others were suspicious of outside interference. The participating
Chambers also had difficulty supplying staff with the necessary expertise to act as mentors and
therefore had to resort to recruiting private consultants99.
The evaluation of the exercise also concluded that buyers mainly faced difficulties relating to
accountancy and finances, access to financing, strategic and human resource management and legal and
fiscal issues, with women and young buyers typically facing more difficulties. Older buyers were most
interested in cross-cutting areas like strategic management, whereas younger ones wanted mentoring
on accounting and financing and legal/fiscal affairs. Areas where mentoring appeared to have less value
was exports, property rights and e-commerce. In terms of the length of the mentoring process, 10 days
was thought to be an adequate amount of time. Participants were generally interested in further
mentoring and half of them were prepared to pay for it.
One of the significant recommendations at the end of the project was the importance - for transfer
support to be successful - of bringing together the whole spectrum of experts involved in the process
(public authorities, Chambers of Commerce, banks, accountants, lawyers etc.) and getting them to
coordinate their action efficiently. It was suggested that public-private partnerships (PPP) would be a
good way of establishing this cooperation. It was also recommended that mentoring programmes
should be made very flexible to fit into the needs and availability of the small business owner.
8. Possible solutions
The above analysis points to a number of problems in the provision of support to entrepreneurs
involved in a business transfer, whether as sellers or buyers. Over time, a number of possible solutions
have been proposed in order to make the business transfer market more successful, such as increased
awareness-raising, creating advice services following the ‘one-stop shop’ model100, setting up training
and mentoring programmes101 or improving the co-operation and co-ordination between advisers.102
99
Whereas the daily rate offered to participating Chambers of Commerce was fixed at €260, daily rates of private
consultants ranged from €650 in Belgium, €800-1,000 in France and €1,200 in Germany, for instance.
100
Transfer of businesses – continuity through a new beginning. Final report of the Expert Group on the transfer of
SMEs - MAP 2002 project. August 2003
101
Commission Communication ‘Transfer of Businesses - Continuity through a new beginning’ (COM 2006/117);
Eurochambres: Final Report ‘A Helping Hand for SMEs – Mentoring Business Transfer’ August 2009; Passing the
baton – encouraging successful business transfer, Evidence and key stakeholder opinion, Small Business Service UK,
2004.
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Little has been done to address the costs of advisory services. So far, there are few national programmes
that have been successful in tackling the business transfer market as a whole. Initiatives have often
been instigated for one particular transfer phase, at local or regional level or they have been short-term
projects.
It is interesting to note that there is a marked difference of opinion between entrepreneurs themselves
and business advisers as to which solutions are the most effective. In the 2009 study by Dr. van
Teeffelen mentioned above, he examined these differences and came to the conclusion that
entrepreneurs by far favoured access to professional advice as being the best way to overcome barriers
relating to transfer (67%), whereas all categories of business advisers (excluding banks) thought that
information and awareness-raising were the most effective solutions (accountants: 54%, brokers: 60%
and business consultants: 92%). Few people rated ‘businesses doing their homework’ as being of
relevance.
The cost of appropriate advisory services is a significant issue. Many small businesses are put off by the
cost and feel that they are not in a position to afford the services that exist. Subsidies to cover part of
the cost involved could be a possibility, but in the current economic climate many national and regional
administrations would not be in a position to follow this route. Examples of this type of strategy can be
found in Denmark where the government is currently offering guidance sessions free of charge to 600
firms as part of a major business transfer campaign (see above) and in Germany (Baden-Württemberg),
where a 50% subsidy has been provided to sellers and buyers to cover the cost of advisory services.
Inspiration can also be found in the Italian system where the KBS system offers transfer toolkits free of
charge.
There exist a number of self-help manuals and there is often guidance provided on web sites that is
appropriate for the simpler cases. Among these, there are some well-established examples, such as the
practical guide entitled ‘Transmettre ou reprendre une entreprise’, published by CRA in France and the
Kit.Brunello.System referred to above that has been cited as good practice by the Commission on
several occasions.
It might be more worthwhile to address the fact that most advisory services are provided on a one-to-
one basis which explains their costly nature. If access to advisers was provided on a group basis, costs
could be reduced significantly, without necessarily affecting the revenue of advisers. Group-based
programmes also allow those participating to exchange experiences and learn from each other. In the
past, experience in Flanders with group-based awareness and advice sessions under the PLATO
programme has been very successful, and the same has been the case in the Netherlands where a series
of low-cost sessions for groups of entrepreneurs involving presentations by several transfer experts and
subsequent group discussion have been very popular103. There may, however, be problems in
addressing the specific characteristics of each case with such an approach and these can make quite a
difference to the outcome.
102
‘Passing the baton…’ study (see above); Adviseurs aan het word: werk- en zienswijze bij bedriftsoverdracht, L.
Van Teeffelen, 2009
103
Avenues to improve success in SME business transfers: reflections on theories, research and policies’, L. van
Teeffelen, Hogeschool Utrecht, 2012
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It should be recognised that there is a considerable variation in the type of support that is needed. The
discussion in this case study has tended to concentrate on the more complex and difficult cases, that are
most significant economically and where objectively there is a real problem. There are, however, a very
large number of small businesses, where a transfer is still a rather special event, but where the process
is a lot more straightforward than for larger enterprises. These are cases where general business
support agencies should be able to provide information and highlight the potential pitfalls, though there
is clearly scope for improving awareness of transfer issues among the staff of such agencies and also for
improving access to specialist assistance, where this is needed.
In many other cases, dedicated professional support is highly advisable. For these cases, an attempt is
necessary to change the mind-set of business owners and potential buyers. As mentioned earlier,
transfer is sometimes compared to selling a house, a transaction where people expect to have to pay a
certain percentage of the sales price in order to receive the necessary professional support. It would not
be unreasonable to develop a similar system for selling a business. A first step would be to raise
awareness that there is a certain cost involved in getting advice on transfer, but in relation to the
potential losses associated with a failed or unsatisfactory transfer, such costs are worth incurring.
An essential counter-part to developing a greater awareness of the need to pay for advice is improving
the professionalism and transparency of the advisory services on offer. Currently, it is extremely
difficult for entrepreneurs to gain an overview of the support services that are available to them and to
judge their quality. These are often not described in any detail on the websites of the providers, and
mostly there is no mention of the fees involved. Generally, advisers are not required to conform to any
particular professional standards or codes of conduct. This applies especially to business brokers who,
in many countries, appear to be able to set up in business without any prior requirements in terms of
their knowledge and experience. Other groups of advisers who are bound by professional standards,
such as accountants, might not necessarily be equipped to provide support in this field, since it is rare
that they learn about business transfer as part of their education and training. Moreover, as already
seen, advisory ‘products’ tend to only cover part of the transfer process, as a result of which businesses
would have to rely on 2 to 3 different advisers, who might have diverging opinions on what is important.
The market for business transfer would gain significantly from having clear European guidelines
governing the provision of advisory services in the field, since this would enhance the credibility and
added value of transfer advisers and offer protection to their clients. The work undertaken by Transeo
and its member organisations is an important contribution in the right direction and there is
considerable scope for encouraging further developments building on good practice among existing
providers, but there may also need to be regulatory provisions, or at least clarifications, The EU has
regulated the European market in financial services and instruments through various Directives, most
recently the 2004 MiFID Directive implemented in 2006.104 This legislation has provided the
104
Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments
amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the
Council and repealing Council Directive 93/22/EEC, OJ 2004 No. L145/1. This Directive was implemented in 2006 by
Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European
Parliament and of the Council as regards organisational requirements and operating conditions for investment
firms and defined terms for the purposes of that Directive, OJ 2006 No. L241/26 - so-called ‘Level 2 Implementing
Directive’.
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harmonisation needed to offer investors a high level of protection and to allow investment firms to
provide services throughout the Single Market, on the basis of home country supervision.
It is generally understood that this legislation applies to personal investment advice. The question is
whether similar legislation is needed for advisory services offered in connection with the corporate
investment decisions inherent in a business transfer, or whether some transfer advice is already covered
by the MiFID Directive.
In France, there is already regulation of consultants advising on business transfer in the same way that
the services of financial advisers are regulated, and a Code of Conduct has been set up to govern their
activities. The Code is managed by the CCIFTE (Compagnie des Conseillers en Investissement, Finance et
Transmission d'Entreprise), the main association in France for financial business advisers,105 which is
approved by the body regulating financial markets: AMF (l‘Autorité des marchés financiers). The Code
provides a specific definition of what is meant by ‘investment advice’106 and what is required by those
who provide this type of service. The Code’s field of application with regard to advice on business
transfer is also clearly set out, specifying the conditions that apply to the activity carried out by this type
of adviser. The different categories of advisers are specified as banks, estate agents, independent
financial advisers, accountants, lawyers, notaries, transfer associations (such as CRA – Club des Cédants
et Repreneurs d’Affaires), Chambers of Commerce and Bpifrance (the French investment bank).
This approach is inspired by the MiFID Directive and raises the question of whether professional
corporate finance advisers elsewhere ought to be covered by the same provisions. There is an issue of
interpretation of the scope of the Directive here, but in any event, the conclusions of the research
showing the inadequacies of a lot of the existing provision require a response.
The development of professional services specifically advising on business transfer in a number of
countries shows that dedicated professional support is possible. This is further re-enforced by the
reported growing interest in this area by the larger consultancy firms. But these developments need
further encouragement and action by the authorities to establish the appropriate standards and
operational framework.
In the past ten years, because of the complexity of the process in many cases, a number of studies have
highlighted the need for SME owners to have access to professional support during the transfer of their
business. Not only does a successful transfer require an understanding of an array of organisational,
financial, fiscal and legal issues, it is also likely to put those involved under significant emotional
pressure. Potential buyers can also need quality support.
A large proportion of the countries responding to the survey reported that the availability of business
support specifically relating to transfer was either very low or moderate. In several countries there
appears to be very little support, there are few national programmes that have been successful in
tackling the business transfer market as a whole, initiatives have often been instigated for one particular
105
CCIFTE became ACIFTE as of 1st of July 2013 after a merger with the AACIF
106
Definition of investment advice: to provide personalised recommendations to a third person, either at their
explicit request or at the initiative of the firm providing the advice, with regard to one or several transactions
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transfer phase, at local or regional level or they have been short-term projects. In some countries, the
initiatives that are available are mainly organised privately.
In terms of the effectiveness of the support on offer, the verdict is somewhat mixed. Nearly half the
respondents consider that the initiatives that are available in their country are either ‘quite effective’ or
‘very effective’ and just over a third regard training/mentoring initiatives as effective.
However, there is a wider picture involving the way that a broad range of business advisers contribute at
various points in the transfer process. Research cited on the role of advisers and their way of working on
business transfers showed that many advisors are ill equipped to provide advice over the entire process
or to provide support on emotional and psychological aspects of a transfer (so-called ‘soft’ factors) that
have been acknowledged to have an important effect on the success of the process. Financial advisors
can increase the duration of the transfer process and there is evidence that they can have a detrimental
effect on post-transfer performance.
1) Effective professional advice is needed by those involved in many business transfers. This should be
a policy priority.
2) This professional advice should be based on expertise that is specific to business transfers,
including in the following areas:
- appreciation of the psychological and emotional issues arising with transfers and knowledge of
how to address them
- valuation
- legislation relating to changes in ownership
- taxation issues relating to changes in ownership
- expertise in strategic management
- expertise in the integration of businesses
3) It also needs to be clear where appropriate advice can be accessed.
4) Given the importance of preparing for transfer during the development of a business, this advice
may need to be available over a considerable period.
5) The information and advice needed by smaller enterprises can often be provided by the normal
business support agencies, but there needs to be explicit provision and this should be done
consistently.
6) For transfers that are more complex, professional advisers specialising in business transfer are
necessary. The development of these dedicated professional advisers should be encouraged and a
framework for delivering quality services in this area developed by the authorities, including
definition of professional standards and/or the development of codes of conduct and possibly
involving obligatory registration.
7) It is necessary to ensure that specialised advisers can cover all issues that arise in a transfer context,
including the emotional aspects that can have a major influence on the outcome.
8) Clarification is necessary of the regulatory basis on which financial advice can be provided.
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Case Study: Issues in Cross-border A5

Business Transfer
Cross-border Transfers
1. Introduction
Although still only a relatively small proportion of the total number of business transfers, there has been
an increase in transactions which have cross-border elements and the issue has been highlighted by
members of the Expert Group. This case will attempt to gauge the extent of business transfers of this
kind, but will also aim to establish the nature of any problems that are particular to the cross-border
aspect and make proposals on any action needed.
In addition to examining the policy measures that formed part of the original Commission
Recommendation, the opportunity has been taken to identify other developments in the field, including
an apparent increase in cross-border activity and the issues particular to this side of transfers, such as
issues to do with the cross-border aspects of inheritance tax.
3. The Cross-Border Dimension of Business Transfers
The purchase of an enterprise will usually involve a due diligence exercise, including checking the
performance and prospects of the business, the status of its assets and property and its liabilities and
debts, plus the nature of its relationships with customers, employees and other business partners. If the
acquisition of the business follows the death or retirement of the former owner, there may be other
considerations to take into account, including that the legal processes have been properly completed
and that any claims on the business have been settled. When a cross-border acquisition takes place, the
processes become even more complicated and it may be necessary to check on unfamiliar legal,
taxation, employment and general business conditions. It will usually be necessary to make use of
professional advisers to obtain the necessary information, assess the situation, plan the acquisition
process and assist with contractual and financial matters.
Nonetheless, cross-border acquisitions can be appealing for a number of reasons. There may be
personal motivations, such as the prospect of a fresh start in a new location or the acquisition of a new
business may form part of (partial) retirement plans. For business purposes, there may be a number of
reasons for acquiring a business in another country. There may be the opportunity to buy into another
market or to extend control over more of the supply chain or to acquire a competitor and consolidate a
market across different countries. Additionally, a base in another country provides a wider scope for
searching for and co-operating with business partners. More generally, the process might be regarded
as applying the logic of the Single Market in the context of business transfers.
The attraction of transfers across borders appears to be growing. Clearly, such a transfer may make
sense in areas close to borders or in smaller countries with a limited local market, but feedback from
interviews suggest that there are other considerations, such as the life-style motivations referred to in
the previous paragraph. Transeo has provided the information that, in an enquiry about a growing trend
towards international transfers, 73% of its members questioned, agreed that there is a definite shift in
this direction.
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However, according to Sowaccess107, although the interest in cross-border business transfer is
increasing, the situation is still rather imbalanced and there are number of barriers to successful
business transfer to another country.
Apart from other matters, there is the basic consideration that businesses with less than five employees
are usually transferred to owners that need to work in the business every day. This restricts the
potential for a new owner to operate from a distant location.
Evidence on cross-border business transfers
Small and medium-sized enterprises (SMEs) account for around 90% of firms in the European Union but
only 8% of them engage in cross-border trade and only 5% have subsidiaries or joint ventures abroad.
While it has become easier in recent years to set up businesses across the EU, more needs to be done to
improve the access of SMEs to the Single Market, facilitate their growth and unlock their business
potential.
There was an upward trend of intra-EU cross-border Mergers and Acquisitions (M&A) in value and
number from the beginning of the 1990s until 2005, with a reversal of this trend staring in 2005. During
the 1990-2005 period, the share of intra-EU cross-border M&A in the total number of acquisitions in the
EU also increased, suggesting that M&A were increasingly used as a channel for cross-border market
access across the EU.108
After a five-year period of continuous growth of merger and acquisition activity, reaching a peak in
2005, there has been a downward trend since the onset of the economic crisis. In 2008 the collapse of
M&As that had EU companies as a target was more pronounced than the one recorded worldwide
(30.9%) and by the group of developed countries (34.8%). This situation was mainly caused by significant
decrease in the possibilities for companies to invest in cross-border M&A due to limited access to
finance.109
The data from 2010-2012 for cross-border M&A show a gradual recovery, which could indicate that the
number of M&A will start rising again. This could mean more interest by companies in cross-border
business transfers, including those involving SMEs.
The survey responses indicated that it is rather difficult to estimate the percentage of cross-border
transfers out of all business transfers in the EU. Respondents were not able to point to statistical data in
this field. However some of the interviewees suggested that the cross-border transfers constitute
around 1-2% of the total number, with very few cross-border deals valued at less than 5M€.
Table 1: Country specificities regarding cross-border deals110
• Finland: as is the situation with the general foreign investment trends, cross-border deals represent
only one sixth of the total number (an abnormally low percentage, when considering the size of the
Finnish economy). The ratio falls to one-in-fifteen when it comes to non-Scandinavian acquirers.
107
http://www.sowaccess.be/en/home.html?IDC=533
108
Mergers and acquisitions. Note N° 4. 2007 (pdf) – DG ECFIN
109
European cross-border mergers and acquisitions- realities and perspectives; Vancea Mariana; University of
Oradea Faculty of Economics
110
Source: Transeo
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Business Transfer
However, Finland benefits from an intense local M&A market where the supply meets a quite large
domestic demand.
• Switzerland: Cross-border deals in Switzerland make up one third of the total. In particular, German
and American investors have acquired small Swiss companies. Doing business in Switzerland is
dominated by the discretion culture. The importance of data protection and privacy can lead to
substantial information asymmetries between buyers and sellers, which are a damaging obstacle to
cross-border deal making.
3.1 Barriers to cross-border business transfers

Different business culture
According to Transeo, one of the main obstacles for cross-border transactions is the difference of
business culture across countries. It is well established that emotional and motivational issues are of
major importance in business transfers in general. Negotiating these issues can be even more difficult in
trans-border situations.
The transfer market is presently dominated by local acquirers but there are signs that there are an
increasing proportion of cross-border deals, especially in smaller countries (e.g. Belgium -
Luxembourg).111 Country specificities have however been observed and some of them represent a
particular obstacle to cross-border transactions. A small market-size, a local language that is not widely
spoken elsewhere, atypical regulations or geographical remoteness from the demographic core of
Europe generally makes a market less attractive to foreign investors.
In addition sometimes, sellers do not appreciate the importance of providing access to financial and
corporate information. One interviewee remarked that these obstacles are mostly due to cultural
considerations, since informal information is often available locally and sellers simply do not see the
difficulties that external purchasers might face. Technical aspects can always be solved by consulting a
local expert, but it is a lot more difficult for somebody from outside to access informal sources of
information. One of the interviewees suggested that is some countries e.g. Eastern European Member
States, the cultural differences regarding bookkeeping, transparency over financial and human resources
is rooted in the historical context of that region. This practical difficulty has been confirmed by
interviewees in the study.
It has been suggested that smaller owners of family firms are sometimes reluctant, to report full income
and make use of transparent accounting practices. At the moment of sale, they can have an unpleasant
surprise when such practices negatively affect company valuation.
The cultural differences in business transfers exacerbate problems with the general availability of
financial data and the transparency of business processes in SMEs.
Availability of financial data
The success of a local M&A market – i.e. the intensity, efficiency and fluidity of the deal-making process
- depends on its capacity to attract foreign investors, and the latter needs to feel comfortable when it
comes to financial information.
111
Sowaccess PowerPoint Presentation, Expert Group Meeting 27 June 2013
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The case study on finance for business transfers suggests that access to information can be a significant
issue, especially in the acquisition of smaller SMEs. In a trans-border context, the difficulties are
magnified.
Efforts have been made by international bodies to promote greater transparency through the
harmonisation of accounting standards and practices and more extensive disclosure of financial data,
but for non-listed companies, the situation largely remains uneven across the world. In the EU, the
Fourth Accounting Directive112 governs both disclosure requirements and accounting templates for
companies, although there are exemptions for smaller companies and the legislation does not cover sole
proprietorships. However beyond this framework, local practices and amendments have been so prolific
that the Member States still present an eclectic picture today. Transeo has argued that the situation can
be represented as follows:
Table 2: Current Accounting Frameworks113
9 The Germanic group (Germany, Luxembourg and Austria): accounting is regulated by

commercial law, but non-listed companies do not usually publish financial information as
required by the law, since the fines applied are not material. A credit institution – Credit
reform – collects some basic and unverified information from the companies themselves,
on a voluntary basis.
9 The Anglo-Saxon group (United-Kingdom, Ireland and Netherlands): Basic financial
information (often a shortened balance sheet but rarely items from the income statement)
is made public for most companies. The accounting format is not standardized.
9 The Continental group (France, Belgium, Spain, Italy, Denmark, Norway, Finland, and
Sweden): All non-quoted companies (even the smaller ones in some countries) are required
to publish a full set of financial information, presented in a standardized accounting format.
Usually 70% to 90% of the firms conform to the rules.
9 The “US-inspired group” (Canada, Latvia and Switzerland): just as in the USA, non-listed
companies are not required at all to publish financial data.
There is also a different business culture that lies behind the formal differences in local accounting
frameworks, Anglo-Saxon systems usually emphasise substance over form. Companies are required to
provide a fair view of their financial situation. In Continental Europe, most of the countries have
adopted a fixed accounting system, compulsory for all companies, irrespective of industry or size
specificities. This difference could lead to misunderstandings when counterparties from both systems
are confronted. Country specificities have been however observed and some of them represent an
obstacle, in particular in cross-border transactions.
The regulatory dimension chiefly affects cross-border transactions. Complex regulations, diverging from
international standards generally put off foreign investors. The issue is even sharper in federal countries
where regional entities develop their own legal framework. As far as domestic deals are concerned, the
112
78/660/EEC
113
Transeo
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Business Transfer
complexity of the regulatory environment is known and taken into account by the parties. However,
some national regulations – especially when it comes to environmental matters - may hinder a deal-
making process. The time required for some administrative procedures can increase.
The problem is that foreign acquirers can be reluctant to invest in an environment with different
accounting conventions, since it costs time and money to investigate and react to local peculiarities.
When local accounting principles differ markedly from the widely accepted international standards - as
embodied in the International Financial Reporting Standards or IFRS – there is a substantial obstacle to
cross-border operations. Countries that have adopted or allowed international standards for the
companies’ statutory financial statements improve the transparency and the attractiveness of the
transaction market to foreign and local investors.
The transition from national accounting standards to IFRS, although costly, has several major
advantages: increased transparency, improved management information and the standardization of
information. Moreover, standardization facilitates cross-border benchmarking. For example, the
introduction of the IFRS concept of fair value in many countries has positively impacted on local
businesses and has been much appreciated by investors.
Tax issues
The domestic rules on inheritance taxes in the EU give rise to two potential cross-border problems,
namely discrimination and double taxation. Inheritance taxation may therefore create two potential
Internal Market problems. First, cross-border discrimination may arise if non-domestic assets and/or
liabilities are subjected to higher levels of inheritance tax than equivalent domestic categories. Second,
assets and liabilities may end up being taxed for inheritance purposes in more than one EU tax
jurisdiction potentially leading to very high levels of taxation.
Inheritance tax
As established in a study for DG TAXUD by Copenhagen Economics in 2011114, the domestic rules on
inheritance tax varied substantially among the (then) 27 Member States of the EU. Eighteen levy specific
taxes upon death while nine (Austria, Cyprus, Estonia, Latvia, Malta, Portugal, Romania, Slovakia and
Sweden) do not do so but some of these countries tax inheritances under other headings such as
income tax. Some Member States, such as the UK and France, grant exemptions if the inheritance is in
the form of business assets or shares that continue to be used for business purposes. 13 of the 18
Member States with death taxes provide exemptions or special relief for transfers of family owned
businesses upon death. The six Member States without such exemptions or special relief are Bulgaria,
Denmark, Lithuania, Luxembourg and Slovenia.
114
Copenhagen Economics ‘Study on Inheritance Taxes In EU Member States and Possible Mechanisms to Resolve
Problems of Double Inheritance Taxation in the EU’ Aug 2010, revised May
2011.http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/2010/08/inheritan
ce_taxes_report_2010_08_26_en.pdf
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Member States applying inheritance taxes differ regarding whether they tax the estate or the heir115 i.e.
whether they tax on the basis of a personal link of the heir or the deceased, or both, to those Member
States. They may treat as a personal link the residence, domicile or nationality of the deceased or of the
heir and some Member States use more than one of these factors. The meaning of these terms may also
differ from one Member State to the other.
Note that while the problems of inheritance taxes as between countries can clearly be a concern for
family businesses, they are also relevant for business owners that do not anticipate a transfer within the
family. Even if the business is not to be passed on, most owners would wish to pass on the proceeds of
its sale. In this case the prospect of inheritance tax difficulties inhibits the initial acquisition of a
business in another Member State, consequently affecting the demand side of cross =-border transfers.
Furthermore, most Member States apply inheritance tax to assets located in their jurisdictions even if
neither the deceased nor the heir has a personal link with the jurisdiction in question. While effective
rates of inheritance tax may be low in the case of inheritances passed to heirs who are closely related to
the deceased, the rates can reach 60-80% in some Member States in cases where the deceased and the
beneficiary are not related.
Other Double Taxation
Dividend tax poses several challenges to businesses at a national level. Subsequently, when double or
even multiple taxation applies to cross-border dividend distribution, the negative implications of taxes
on businesses may be substantially larger than in a purely national context and this can represent a
substantial barrier.
In the case of double taxation on cross-border dividends, portfolio investors have the possibility of
converting their dividend income into capital gains by selecting investment instruments such as
investment funds (Collective Investment Vehicles) that do not distribute dividends but where the
investor can realise his/her share of the accumulated profit by disposing of his/her share in the CIV.
Although the CIV might face double taxation as a portfolio investor as well, the small business owner in
practise almost never has this possibility of converting his/her dividend income into capital gains116 and
this act as a disincentive to invest directly in real businesses.
In a number of countries inheritance and gift taxes have been reformed to facilitate transfers within the
family. This is less the case with regard to taxes that affect the transfer to third parties, i.e. allowances
against personal income tax, corporation tax, capital gains taxes, and in some countries earlier measures
are in danger of being revoked.
The situation can be made worse if ‘tax free’ transfers are conditional upon being resident in the
Member State concerned. However, certain Member States have ‘ring fencing’ rules whereby a change
of residency of an owner of an enterprise leads to forced taxation of non-realised gains. Such ring
fencing is typically put in place to prevent owners from moving out of a Member State with a high
115
Communication from the Commission to the European Parliament, the council and the European Economic and
Social Committee Tackling cross-border inheritance tax obstacles within the EU; COM(2011) 864 final
116
http://www.europeanfamilybusinesses.eu/documents/EFB-
GEEF%20Dividends%20Consultation%2019APR2011.pdf
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taxation of capital gains/deferred profits and realising the gain in another Member State. However, it
does mean that incentives that are available at a national level become more unsure when there are
cross-border elements.
However, the extent of double taxation following from cross-border inheritance cases is currently
limited. The revenue in Member States from inheritance taxes amounts to less than 0.5% of total tax
revenue – and the cross-border share will amount to far less. Furthermore, there is a tendency towards
lower effective inheritance tax rates. There is, however, a caveat to the conclusion that the problem is
only limited. It cannot be ruled out than the low share of cross-border succession cases is to some
extent a result of the expectation of double taxation on inheritance and that we are therefore
underestimating the problem by looking at the current number of cross-border succession cases.
Confronted with the double taxation problem, it may be that some EU investors prefer to liquidate the
investments in good time before they die if they foresee a situation with a risk of double taxation on
cross-border inheritance. There are clear indications that the problem will increase in magnitude over
the coming years as more people migrate to other Member States and back again and more real estate
and other assets are purchased abroad. This will eventually lead to more and more cross-border
inheritance cases in the future.117
According to Eurostat data and the Copenhagen Economics Study on Inheritance Taxes in EU Member
States, the main reason for the limited progress on solving the problem of double taxation of cross-
border inheritances may result from some cost-benefit analysis at national level. On the one hand, the
efforts required to negotiate and conclude a tax treaty within the area of inheritance is generally the
same as other areas. On the other hand, with the limited revenue generated from the inheritance taxes
in most Member States, the potential benefits from a tax treaty are much higher in the areas of income
and capital taxation. Moreover, the gains and losses from such treaties may be quite unevenly
distributed both within populations and between the contracting Member States. 118 There is therefore
no major incentive on the part of the national authorities to resolve the problems in this area.
To tackle the problems with inheritance tax, the Commission adopted a Recommendation119 on double
taxation of inheritances on 15 December 2011, which indicates that cross-border inheritance tax
problems could be resolved without any harmonisation of Member States' inheritance tax rules by
ensuring that these rules interact more coherently with each other, to reduce the potential for double,
or even multiple, taxation of inheritances.
As regards double taxation, the Recommendation suggests that given that Member States have few
bilateral treaties to eliminate double taxation of inheritances120 and seem not to have taken the
117
http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/2010/08/inheritance_
taxes_report_2010_08_26_en.pdf
118
Eurostat data and the Copenhagen Economics Study on Inheritance Taxes in EU Member States and
Possible Mechanisms to Resolve problems of Double Inheritance Taxation in the EU, August 2010
119
Commission Recommendation of 15 December 2011 regarding relief for double taxation of inheritances
(2011/856/EU)
120
Annex II to the Communication gives an overview of the existing double tax treaties on
inheritances
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initiative to negotiate more such treaties, the focus should be on improving Member States' existing
national measures to relieve double taxation of inheritances.
As regards tax discrimination, the accompanying Commission Staff Working Paper121 sets out the
principles in EU case-law for non-discriminatory inheritance taxation and aims to explain and illustrate
the operation of the fundamental freedoms. EU citizens would therefore be more aware of the rules
which Member States must respect when taxing cross-border inheritances. It could also assist Member
States in bringing their inheritance tax provisions into line with EU law and would thus support and
complement the Commission's on-going infringement actions against discriminatory inheritance tax
provisions. The solutions proposed would also be applicable and beneficial to those who inherit SMEs
across borders.
The Recommendation also suggests that there are plans to prepare an evaluation report in three years’
time based on monitoring Member States' practices and any changes made as a result of the initiatives
presented in the document. Currently, however, no Member State has taken up any of the
recommendations.
Matching platforms
Only the Member States, their national, regional and local administrations and business support
organisations can create the conditions for successful business transfers. Apart from reforms of laws and
regulations, implementing a supporting infrastructure to reach the SMEs across Europe facing a transfer
has been recognized as important in a series of policy statements. This includes the distribution of
information to administrators and support providers, identification and exchange of best practice,
training the trainers, the development of teaching material, tool kits and many related activities.
The Expert Group in 2006 also proposed to create a European business transfer centre, a virtual
European platform to coordinate information gathering, share best practice across Europe, and facilitate
cross border co-operation with regard to cross-border transfers and advised that similar centres should
also be created at national level.
Such a centre could involve creating a European sellers’ and buyers’ marketplace in connection with the
business transfer centre, to link up existing national databases and encourage countries that do not yet
have such databases to set them up. 122
The case study on on-line markets considers the development of such marketplaces in various countries
across Europe and notes that there has been the growth of a limited international dimension to many of
the systems used. The further development of links between such systems is an obvious way to
strengthen the international dimension, but it was argued at the second Expert Group meeting that it is
important to ensure high standards in this developing market in a way that guarantees the neutrality
and independence of the operation. It is also important to establish clear ground rules for such
developments. It has been argued that the seller and buyer should remain anonymous and there should
be a support structure behind the on-line database to conduct active matching.123
121
SEC(2011) 1488
122
2006 Expert Group report on markets for business transfers
123
Sowaccess PowerPoint Presentation, Expert Group Meeting 27 June 2013
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Recent European judgements on cross-border cases
Judgements of the European Court of Justice in some recent cases have pointed to a series of issues that
might impinge on the development of cross-border transfers, particularly if a new owner from a
different Member State wished to relocate the business or change its administrative seat. In the VALE
Costruzioni Srl124 case, a limited liability company originally established under Italian law, wanted to
transfer its seat and business to Hungary in order to operate there in accordance with Hungarian law. It
applied to delete itself from the Italian companies register and applied in Hungary to register itself as a
Hungarian company that is a successor to the Italian company. The registration was rejected by both the
court of first instance and the appeal court. The appeal court argued that under Hungarian law, a
company that is not Hungarian cannot be listed as a predecessor in law. The Hungarian Supreme court
subsequently upheld the appeal court's assessment and stated that the transfer of the seat of a
company governed by the law of another Member State entailed the reincorporation of the company in
accordance with Hungarian Law and a reference to the original Italian company cannot be regarded as a
conversion under Hungarian law, because Hungarian law on conversions applies only to domestic
situations. However, the Supreme Court decided to request a preliminary ruling from the ECJ.
Following the VALE Epitisi kft CJEU decision, transferee Member States in the EU (or EEA) are in principle
obliged to recognise companies from other Member States which under current domestic law are able
to and wish to re-domicile to another EU (or EEA) Member State under the same terms and conditions
as domestic companies. However, in many Member States there is no procedural mechanism for
implementing such a transaction (and there is no harmonisation over the associated requirements),
which means that in practical terms transfers of registered offices involving those Member States would
be very difficult to achieve – the legal mechanism for giving effect to the CJEU decision is unclear.
Consequently, in practice a new owner from another Member State may face difficulties in re-domiciling
the company taken over.
In the VALE decision, the ECJ casts some light on an issue that had been already raised by the court’s
judgment in the Cartesio125 case. According to this decision, a company must not be hindered from
leaving a Member State when it intends to move to another Member State and will consequently be
governed by the law of the host Member State. This statement raises the question of whether host
Member States had to provide for the possibility of cross-border conversions. The VALE decision has
made it clear that Member States that provide for national conversions may not prohibit cross-border
conversions. While the VALE decision has clarified some aspects with regard to cross-border
conversions, a lot of questions still remain unsolved.
Wishing to re-organise corporate activity and restructure a business internationally may be an important
motivation for acquiring a business in another European country and within this many organisational
configurations are conceivable, including the possibility that the owner might wish to continue to
operate in two or more countries. Having flexibility in the way that firms are organised and formally
registered and governed can only facilitate this process and although there is not much evidence that
the difficulties highlighted in recent cases have posed major problems in the development of cross-
border transfers, any additional flexibility can only help.
124
Case C-378/10
125
Case C-210/06
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In its 2012 Action Plan on European company law and corporate governance, the Commission
announced further investigation of the need for and feasibility of a Directive on the cross-border
transfers of registered offices. In January 2013, the Commission launched a Consultation on the cross-
border transfers of registered offices of companies. The purpose of the consultation was to get more in-
depth information on the costs currently faced by companies transferring their registered offices abroad
and on the range of benefits that could be brought by EU action on the cross-border transfer of them.126
The implications for the development of cross-border business transfers ought to have a place in these
investigations.
There is a gradually growing cross-border dimension for business transfers in the EU. However, there are
still a number of issues relating to the processes.
One of the obstacles to cross-border transactions appears to be the difference of business culture across
countries. It is crucial to take time to understand the way of life and to build stronger contacts with the
other party. This would again seem to underline the importance of good professional advice.
• Availability of easily accessible consultants with knowledge of local language and business culture
could improve the interest in cross-border business transfers.
The lack of qualitative financial information constitutes a major challenge for foreign investors (and
imposes additional cost and time requirements), especially those interested in smaller firms. Although
efforts have been made by international institutions to promote greater financial data disclosure and
harmonisation for non-listed companies, the situation largely remains uneven across the EU and this
inhibits the development of cross-border transfers.
• More should be done to promote transition from national accounting standards to IFRS in order to
improve business transparency and to facilitate cross-border benchmarking.
Inheritance taxation may create two potential internal market problems - cross-border discrimination
may arise if non-domestic assets and/or liabilities are subjected to higher levels of inheritance taxes
than equivalent domestic categories; and assets and liabilities may end up being taxed for inheritance
purposes in more than one EU tax jurisdiction potentially leading to very high levels of taxation. The
domestic rules on inheritance tax vary substantially among the 27 Member States of the EU. Eighteen
levy specific taxes upon death while nine do not do so but some of those nine tax inheritances under
other headings such as income tax.
• It seems that the 2011 Recommendation regarding relief for double taxation of inheritances is a
way forward. However, the Commission with Member States should ensure appropriate follow-up
to this package.
Overall, the growth of cross-border transfers has exposed a series of new barriers to the effective
operation of the Internal Market. There is clearly a scope for additional provision to be made and
especially for the accounting standards, harmonisation of inheritance tax issues and availability of local
financial information.
126
http://ec.europa.eu/internal_market/consultations/2013/seat-transfer/index_en.htm
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Case Study: Developing the Evidence A6

Base
Developing the Evidence Base on Business Transfer
1. Introduction
In this case study we review the availability of data on business transfers. First there is an overview of
what is currently available on business dynamics – data on start-ups and closures of enterprises, and
then see what the position is as regards Mergers & Acquisitions (M&As). Afterwards the case study
looks at what is available at EU and national level on business transfers, and also specifically on family
businesses. After that we comment on the significance of transfers in a modern economy and suggest a
possible way ahead for the future of data collection, within a context of more active monitoring of policy
in this area.
EU policy on business transfers was established in 1994 and at that stage there was no systematic
evaluation of Enterprise policy. In principle, it would be useful to establish a firm data foundation on
which to base and from which to monitor developments, but since the prospects of improved data are
not that promising, this case study ends with a series of pragmatic proposals to improve the situation.
From this point of view, the case study should be read alongside the annex on indicators (annex A7).
3. Current Data on Start-ups and Closures of Enterprises
These data provide some context for enterprise formation and termination. As part of its Business
Demography statistics127, Eurostat records data on births, deaths and survival of enterprises.
Thus, for example, the 2010 data suggest that there are some 24 million active entities in the 26
Member States that provide data inputs on business demography to Eurostat, of which some three
quarters are in the services sector. Generally, according to Eurostat, about 10% of the stock of active
entities is born and dies each year. Overall, there was a decrease in births of 2.4% on 2009 in 2010 (9.9%
of the total or 2,376,000 firms), but that hides a great many variations between Member States. In
addition, since the reference data for 2004 were set up, it is possible to track survival rates for firms.
Thus, for example, less than half the firms born in 2004 were still active in 2009. While there are
differences between countries, in terms of births by firm size by employment, by far the majority are in
the 0 and 1-4 employee categories (well into the 90% range), with some 90% of births in the 0 employee
category in Finland, and about 80% in the 1-4 employee category in Portugal. A similar pattern is
reflected in deaths of firms, 10.6% of the total or 2,520,000.
Importantly, from the point of view of this study, the Eurostat births and deaths (exits) data do not
include entries into the population due to mergers, break-ups, split-off or restructuring of a set of
enterprises. Nor do the statistics include entries or exits resulting only from a change of activity.
The data also track longevity of firms, but because Eurostat does not record entries into or exits from
the population due to the abovementioned factors, this is not of relevance from the point of view of
business transfers.
127
Business Demography Statistics, June 2013
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Eurostat has indicated that it has no plans to try and obtain more detailed information on business
transfers as the options to do this have been considered and are seen as imposing unnecessary
additional burdens on, especially, small businesses.
4. Data on Mergers and Acquisitions involving SMEs
Included within the wider envelope of business transfers is what can be considered typical merger and
acquisition (M&A) activities. As regards data related to M&A, especially among SMEs, very little is
readily available. Some organisations such as Thomson Financial and Bureau van Dijk track mergers and
acquisitions, and UNCTAD tracks cross-border M&A (direct investment), but different definitions of what
is an acquisition, especially as far as what is considered to be the required level of shareholding to
enable control or influence decision-making in a firm, are used and there is no consistency.
Eurofound research on restructuring in SMEs also found very little data on M&A by SMEs; and what is
there is very fragmentary. It seems that the main reason for this is that SME M&As generally do not
reach the thresholds relevant for registering/checking the case against competition law. According to
Eurofound acquisition by SMEs seems to be an unusual way for SMEs to develop, as far as respective
data are available128. They tend to be the target rather than the initiator of such ventures (mentioned,
for example, in the national reports for the Czech Republic, Lithuania and the Netherlands). Generally
the view is that the owner of the business is seen as the driver of transfer, rather than being sought out
by an acquirer. As a European average, in 2005 1.7% of SMEs carried out a merger or acquisition
process, while the figure is three times higher for large enterprises129.
The Eurofound report points out that national research gives only a few indications about the extent of
mergers & acquisitions within the SME sector. For France, Lithuania and Spain, the national reports
mention that there has been an increasing number of SME mergers & acquisitions, resulting from
general concentration tendencies. In Belgium, Denmark, France, Poland and the UK, many SMEs
consider merger & acquisition as a way to tackle the effects of the global and economic crisis – either by
selling their business or by taking the opportunity to buy a company in crisis and expand. Nevertheless,
such trends are still far from being proportional to the SMEs’ economic importance.
Another reason why there is little information available may be because it does not pay commercial
contractors to identify and track the thousands of small transactions continuously taking place in the
economy. And in cases where it is tracked, it does get expensive. As is explained in section 3 (e.g. in the
French and Norwegian examples) there are some firms operating in this area, and such data can be
accessed to help compute overall numbers.
5. Data on Business Transfers at EU and national Level
Different organisations in different countries have adopted different approaches to measuring business
transfers. In particular, some approaches estimate the number of firms in business transfers that have
128
Eurofound (2013); Restructuring in SMEs in Europe, Publications Office of the European Union,
Luxembourg. pp.22-3
129
Gonzalez, N.Z., Las fusiones y adquisiciones como formula de crecimiento empresarial, Minsterio de Industria,
Turismo z Comercio Madrid 2007
135.
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taken place, while others concentrate on estimating the number of potential/forthcoming business
transfers. These and other differences are summarised below.
• The European Commission
Final report of the Expert Group on the transfer of small and medium-sized enterprises, May 2002,
This expert group report provided what they called a “rough” estimate of the number of business
transfers in process at any one moment in the EU in the following way. The group started from the basis
that approximately 20% of the self-employed are over 55 years old, ranging from 10 to 26% depending
on the Member State, and assumed that male and female entrepreneurs at an age of 55 or above will
retire within the next ten years. It also assumed that the proportion of self-employed working beyond
the age of 65 will remain at the same level as in 2000. (This approach therefore has a strong focus on
business transfers among the self-employed).
There are four tables in Annex 1 of the report: potential business transfers, business dynamics, reasons
for transfers and types of transfers (each table in turn based on data sets of varying completeness from
12-15 Member States’ national studies), which provide the basis from which to extract information and
lead to the suggestion that approximately one third of all businesses need to be transferred to new
owners in the next ten years (ranging from 25% to 40% depending on the Member State). This
corresponds to an average of at least 610 000 SMEs to be transferred each year, of which 300,000 are
SMEs with employees involving 2.1 million jobs (assuming that an SME with employees has 7 employees
on average), and 310,000 SMEs without employees.
The report states that retirement is only one cause of business transfers. For example, table 3 in the
same annex shows that in Germany and Austria it is estimated that it accounts for about 42-43% of
business transfers, 54% in the Netherlands and 58% in France. So as the report makes clear, these data
are only valid under the assumption that the different causes of transfer are of similar weight in the
Member States. Consequently, it should be interpreted with great caution.
The 2006 Communication uses the data produced by this expert group and extrapolates to arrive at the
numbers supporting the heading ‘One third of European enterprises are facing a transfer’. The point
being made here is that one might question the value of an extrapolation based on an estimate that is
seen as clearly “rough” and partial by those making it.
Review of the "Small Business Act" for Europe - The Communication from the Commission to the
European Parliament, the Council, Economic and Social Committee and the Committee of the Regions
(Brussels, 23.2.2011 Com (2011) 78 final).
This document states that about one third of business failures occur in the context of a business transfer
and it is therefore essential to improve the framework conditions for business transfers, as over the next
decade up to 500,000 businesses providing 2 million jobs will have to be transferred every year. There is
not a reference to the source of the data presented.
Business Dynamics: Start-ups, Business Transfers and Bankruptcy”. The economic impact of legal and
administrative procedures for licensing, business transfers and bankruptcy on entrepreneurship in Europe
(DGENTR)
136.
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The section of the report dealing with business transfers is based on a literature review and survey
results, “as there is very limited statistical data available on the number of business transfers at
European and national levels”. Results are based on some 363 responses to a survey. The study indicates
that no statistics on business transfers are available from Eurostat and that the only sources are
national, the analysis of which is subject to important difficulties related to matching definitions
employed by each country.
The Business Dynamics estimate for the number of business transfers in Europe was arrived at in the
following way. Starting with the “latest” European Commission Communication (see above – 2006)
estimates are made that transfers affect up to 690,000 SMEs every year that altogether provide 2.8
million jobs in the European Union. The study notes that the estimate was made in 2005 based on data
for Germany, France, Italy, the Netherlands, Austria, Sweden, Finland, Romania and the United Kingdom
(as seen above, it was in fact an extrapolation of the 2002 “rough” estimate). Updated data were
identified for Germany and France, and the survey provided an opportunity to collect data for other
countries. On this basis, an estimate for 2010 was made using data from Germany, France (2005), and
Business Dynamics survey data from Austria, Finland, Norway and Romania. Using the above countries
as a sample and projecting the data proportionately to include the remaining countries, it was estimated
that approximately 450.000 firms are being transferred each year in the EU 27, affecting 2 million
employees. This is an estimate that is somewhat lower than the previous one of 2006.
Survey respondents consider that European firms that are not transferred due to system inefficiencies
could contribute an additional 150,000 firms to the EU economy, if transferred.
At the same time, no strong demand for business takeovers seems to exist (the economic climate
prevailing at the time of the survey might also have influenced this result). Only around 25% of
Europeans considering a business start-up would prefer to take over an existing business as opposed to
starting a new one. According to experts' opinion, the number of firms in Europe which are not
transferred because of reasons other than economic ones may be estimated at around 63%130. Based on
this it was estimated that every year there is a risk of losing approximately 150,000 firms and 600,000
jobs due to inefficiency in transferring businesses.
The preceding paragraphs suggest that current EU data on business transfers are based on some strong
assumptions and rough estimates from 2002 that have been extrapolated and added to by further
research and estimates based on surveys. This suggests that a new fresh start should be made to
develop more robust data.
Under the following bullet points we consider the national estimates that have been identified. In
addition, the Eurofound Report on Restructuring in SMEs in Europe (p.17) also refers to some further
130
A distinction was made between failed transfers due to economic reasons (i.e. no valuable assets) and other
reasons. Economic reasons are a normal aspect of the business cycle. As an example, micro-firm non-transfers are
often correlated with a high level of new business start-ups. This implies that instead of having firm transfers,
closure and setting up a new business is preferred. In sectors like plumbing for example, owners sell their
equipment to an employee who intends to establish a new business. However, this type of transfer is not visible in
statistics.
137.
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studies in Austria, Belgium, Poland and Sweden.131 (see also ‘Section 6: Family businesses’ below –
Austria).
• Germany (DE)
Unternehmensnachfolgen in Deutschland 2010 bis 2014 - Schätzung mit weiterentwickeltem Verfahren,
IfM (2010).
IfM Bon has been carrying out research on business transfers for over 20 years. They have concentrated
on the transfer of businesses between generations. The Institute has developed estimates for the
number of business transfers in 1999, 2000, 2001 and 2004. Basic data are from the micro-census and
the data on business turnover. Estimates have been based on various assumptions. These include the
assumption that firms with a turnover of less than €50,000 would not have an interest in transferring
their business assets. These are therefore excluded. Similarly it is assumed that owners that are 60 years
old would be planning to withdraw within 5 years. The challenge to estimates based on assumptions
such as these lies in the findings of research by for example BPCE (see below) that age is not the key
driver in business transfers, and that many transfers involve small firms with turnovers that are less than
€50,000 per year.
According to this estimate, some 110,000 businesses would be transferred between 2010 and 2014,
involving some 1.4 million employees – or 22,000 transfers per year, involving some 287,000 employees
per year. Of these, 85% would be driven by age, 10% by death and 4% by illness.
• Denmark (DK)
A report on business transfer published by the Danish Business Authority in 2009132 contained a large
amount of statistical data on the transfer situation in the Danish market. With family-owned businesses
131
For 2012–2021 it is estimated that about one third of the Austrian SMEs will be subject to business
transfer/succession (BMWFJ. Mittelstandsbericht 2012. Bericht über die Situation der kleinen und mittleren
Unternehmen der gewerblichen Wirtschaft, Bundesministerium für Wirtschaft, Familie und Jugend, Vienna.). In
Belgium, 28% of SMEs will be looking for a successor during the next 10 years (Lambrecht, J. and Naudts, W.
(2007), Overdracht en overname van kmo’s in België, FOD Economie, SVO EHSAL-K.U. Brussels.). In France, an
estimated 600,000 CEOs (most of them in charge of SMEs) will retire in the next decade (Voss, E. (ed) (2007),
Structural change, company restructuring and anticipation of change in the European small and medium-sized
enterprise sector, background document Restructuring Forum ‘Adaptation of SMEs to change’, Wilke, Maack und
Partner, Brussels, 26–27 November 2007). In Germany, it is estimated that about 66% of the companies facing a
business transfer have an annual turnover of less than €1 million (Hauser, H.-E.,Kay, R. and Boerger, S. (2010),
Unternehmensnachfolgen in Deutschland 2010-2014, IfM-Materialien 198, Institut für Mittelstandsforschung,
Bonn). In Poland, 58% of SMEs are contemplating a business transfer to the next generation (Kowalewska, A. (ed)
(2010), Firmy rodzinne w polskiej gospodarce – szanse i wyzwania, Polska Agencja Rozwoju Przedsiębiorczości,
Warsaw). In Sweden, 40% of the SME owners want to sell/leave their enterprises within 10 years due to
generation shifts, source: Företagarna (2008) Alliansen i halvtid,
132
See Erhvervs-og-Byggestyrelsen:EJERSKIFTE DIN VIRKSOMHEDS FREMTID and EJERSKIFTE, Statistik om
ejerskifter i Danmark baseret på resultater fra spørgeskemaundersøgelse Okt./nov. 2009. The report aimed to
raise awareness about transfer among both owners and potential buyers and to help them prepare for it. It was
based on a Study carried out by the CEBR - Centre for Economic and Business Research, an independent research
organisation under the Copenhagen Business School.
138.
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making up a large proportion of businesses in Denmark, it was suggested that some 20,000 family
businesses with around 160,000 employees were due to be transferred in the next 10 years. The report
analysed a wealth of issues from the current ownership structure, the age of those selling, and the
potential buyers, to the experience and background of the new directors and the continued involvement
of families after a transfer. It showed that sale within the family constitutes 63% of all transferred
businesses, with external buyers amounting to 16%, financial buyer 13% and employees 8%. In the case
of transferring to the family the average age of the outgoing owner was highest with 59 years, whereas
the average age of owners selling to a financial buyer was 49 years only. Based on a survey of business
owners, distinguishing between family businesses and others, overall only 23.8% of businesses surveyed
had an exit strategy, while 61% of businesses expected to see an ownership change in the next 10 years.
33% of owners considered continuing part-time in the business when transferred, 11% were expecting
to start a new business. Statistics Denmark is currently working with the Danish Business Authority to
update and improve the data related to business transfer.
• Finland (FI)
In Finland an approach to estimating numbers of business transfers has been developed based on a
study of entrepreneurs of retirement age. Varamäki, Tall & Viljamaa developed a study focussing on
transfers for those entrepreneurs of 55 years of age or older133. In Finland, at the time of the study, it
was estimated that there were about 74,000 entrepreneurs that are 55 years old or older. A survey was
carried out: 15,000 questionnaires were sent and about 20% replied.
According to the responses, it is estimated that about 28,000 firms will be transferred to new ownership
in the next 10 years, or about 2,800 per year. In addition, there will be succession in family firms of
about 14,800 over the period, or some 1,500 per year. About 20,000 firms are expected to close down,
or 2,000 per year. This will affect some 8,000 jobs every year.
Another survey was carried out among young entrepreneurs and had 170 responses: according to this
20% of those under 50 years of age were willing to sell their business, while 42% were willing to buy,
which suggests there is potential for successful business transfers.
The Finnish SME barometer estimates that about 10,000 business transfers could be realised every year
during the five following years134.
• France (FR)
The main sources of data identified in France were INSEE, Oséo and BPCE.
Institut National de la Statistique et des Etudes Economiques (INSEE)
In France, INSEE collects national data and surveys a certain number of firms every year (60,000 in 1987;
40,000 in 2005). It captures data on new firms made up of the whole or part of another firm on the basis
133
Elina Varamäki - SEINÄJOKI UNIVERSITY OF APPLIED SCIENCES, Juha Tall - SEINÄJOKI UNIVERSITY OF APPLIED
SCIENCES, Anmari Viljamaa - SEINÄJOKI UNIVERSITY OF APPLIED SCIENCES “BUSINESS TRANSFERS IN FINLAND -
SELLERS' PERSPECTIVE”
134
Pk-yritysbarometri, Spring 2011, Federation of Finnish Enterprises, Finnvera, Ministry of Employment and the
Economy, Finland.
139.
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of purchase of going concerns or titles of firms. This information comes from the declarations of firms
registered at the Centres de Formalités d’Entreprises (Sirene). However, there is a comment that the
figures underestimate the number of transmissions by about 50%.135 Based on those estimates there
were about 60,000 restarts of firms in France in 2004 of which 50,000 were micro firms (175,000
employees); 5,000 small firms (105,000 employees); and, 500 medium-sized firms (51,000 employees).
Furthermore, where INSEE estimated 60,000 business restarts, APCE (the Agence pour la Création des
Entreprises) estimated 55,000. A study by Melleno came up with 40,000 and one by CNCFA/ Epsilon
produced a different number as well.
La transmission des petites et moyennes entreprises (Oséo, 2005)
This study is now somewhat dated but it does provide useful methodological information and
characteristics about the sample group in question. It is understood that a more up to date publication is
imminent. Oséo (now bpifrance) has been active in the field of supporting business transfers by
providing a guarantee (Sofaris) since 1984. At the time of the report (2004) Oséo had accompanied
some 27,000 firms on their transfer journey, and the study was based on a representative sample of
3,000 taken from the larger total. INSEE has estimated that about half of all business transfers were
financed by a bank loan. It is not clear how many of these also made use of a guarantee, but clearly
3,000 is a good number from the point of view of a sample.
The report provides a wealth of interesting details about the segment represented by the sample of
firms in question (users of a guarantee). For example: 44.1% of firms were from the “services
particuliers” sector (essentially hotels, restaurants and cafés) and 28.9% from commerce. 48% had no
employees, and 76% less than 3 employees. 60% of firm cessations were due to retirement, and less
than 10% were intra family in industry, business services and wholesale; while less than 5% were intra
family in retail. The “repreneurs” were getting younger compared to studies carried out in previous
years (41 years old on average and 37 years old in retail), and the main cause of ceasing activities in
hotels and restaurants was to buy larger units (that is, significantly, not retirement). Other than cyclical
factors, the main issue facing transfer was the increasing importance of debt and having to pay it back –
although of course this was not usually an issue in intra family transfers. But the share of non-family
transfers was increasing (p.10). Also, in the hotel/restaurant sector, property values have a major impact
on the affordability of the project. After financial risk, the next most important risk factor is departure of
the individual manager due to death or illness. Experience in the sector and knowledge of the firm
reduces risk substantially (for example in intra-family transfers or transfer to a former employee this
falls to a very low level).
BPCE L’Observatoire : Quand les PME changent de mains (2011) & La cession-transmission des PME
(2012)
BPCE L’Observatoire recently produced these two key reports. The methodology for the reports was
developed for firms with 10 up to 249 employees (that is, SMEs, excluding micro enterprises) and the
“intermediate”-sized firms of 250-4999 employees. It excludes agriculture (traditionally an important
sector for intra-family transfers) as well as finance/ assurance. This is probably a more interesting
segment from the point of view of a private financial institution but excludes the largest part of the
135
Oséo (2005); La transmission des petites et moyennes entreprises, p.8.
140.
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market in terms of number of transfers (firms with 0 to 9 employees). The BPCE estimate is that in this
segment there were 12,932 transfers in 2011 and 13,256 in 2012.
The studies took measures to avoid double counting and were carried out by Experian pH using a
filtering process applied to the following data bases: Altares (tracking changes in shareholdings),
Infolegale, Corpfin, and INSEE (Evenements). There was also a qualitative research exercise in 2011
based on 1,480 managers of firms with 10-249 employees. The research could distinguish between
natural deaths, legal disappearance, changes in directors (intra-family) and changes in shareholders.
One of the key conclusions of the study is that in this segment retirement or age of the owner is not the
key driver in business transfer. More transfers occur before owners are 55 years old than after. With the
proviso that this excludes micro firms (the most numerous type of enterprise in the EU, and agriculture)
and is based on the French population, it does suggest a questioning of the 2002 Expert Group estimate
and those based on it in 2006 and 2011.
The 2012 report looked specifically at intra-family transfers (excluding agriculture), which is a small and
declining part of transmissions. This is also the part of the market that has the least onerous
commitments as regards debts on transfer. It can also be very much influenced by tax changes: for
example there was a jump in 2011 due to anticipated negative changes in following year. There are also
more intra-family transfers in the 20-249 employees segment than in the 10-19 employees segment.
One of the key problems in intra-family transfers in France is that since the legal changes in inheritance
law of the last two decades it has been difficult to preserve the equal share in the inheritance of each
descendant.
• Italy (IT)_
In Italy Infocamere tracks visits to the “Incontrerete” website, and Unioncamere’s Osservatorio sulla
demografia delle imprese tracks some data related to business transfer. These are reproduced below.
Table 2010
Of which:
Total Of which:
companies No continuity - With continuity Inter- Not
ceased truly ceased - did not cease generarational generational
Anno transfer (1) transfer
2007 433,515 374,694 58,821 12,502 46,319

2008 410,652 363,775 46,877 9,988 36,889
2009 379,990 337,078 42,912 9,543 33,369
2010 389,450 337,430 52,020 9,655 42,365
(1) Si stabilisce un passaggio generazionale se la media di età della compagine imprenditoriale dell'impresa cessata
è inferiore di almeno 15 anni rispetto alla compagine imprenditoriale della nuova iscrizione
Source: Unioncamere, "Osservatorio sulla demografia delle imprese", 2011
These numbers suggest that about 13% of firms, over the years 2007-2010 continued to trade after
apparently ceasing, and of these about a quarter were passed on within a family.
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• The Netherlands (NL)
The Netherlands have developed data based on an analysis of share registers at Chambers of Commerce
and then applying econometric techniques. According to research by EIM and Meijaard some 13-15,000
transfers take place per year.136 Business transfers constituted about a third of the number of start-ups
(although employment effects are much greater). About two-fifths of transfers over the 15 years before
2005 were within a family, of which some three-quarters to from parent to child. About one fifth of
transfers were management buy-outs and about a quarter management buy-ins.
• Norway (NO)
In Norway a project was carried out to estimate the number of business transfers between 2001 and
2007137. It used a business database (Menon) with data from registers kept by Dunn and Bradstreet that
have information on all companies reporting in Norway. If the owner is a person they hold data relating
to age and gender and if it is a company, information about that organisation is held. (Reservations are
expressed about the quality of the shareholders’ register – the report’s authors suggested that that
would be a good area for the government to invest in).
This study only considered firms where labour costs reported in the accounts were above €1 million
(equivalent to some 20-30 employees). In effect, as suggested by other research, this means that the
largest number of business transfers is excluded, although those with most impact are included.
A key aspect of this approach is that change of ownership is related to control. How this occurs is not
hard and fast as a new owner can have blocking power with 34% of shares, if the largest shareholder.
Alternatively, changes must be registered if there is more than 50% ownership. Companies are required
by law to only register certain degrees of change in ownership, not all changes. The point is that there is
a continuum of situations reflecting different mixes of ownership and control that may require quite
detailed investigation to determine what the actual position is. To ensure that there were only actual
changes in ownership a manual check was made on the 500 largest firms as a result of which 70 were
eliminated. On the basis of this method 39,500 ownership changes were identified in 27,000 companies
over the period 2001-2007.
The study also explicitly refers to contextual factors: the demographic structure is not expected to
change in the next 5-10 years, but it appears that changes in ownership are becoming more frequent in
the period covered by the study due to factors such as the economic upswing (2000-2007); tax reforms
affecting changes in ownership; and, a structural change reflecting the increased disposition of owners
to implement changes more frequently. The result is that the authors expected a third of the companies
concerned might change ownership in the eight years ahead, and maybe more depending on the rate of
business creation.
Clearly this study that focuses on a specific segment is useful and provides a great deal of insight, but it
does not answer the data question on a national level.
136
See also EIM (2005); Entrepreneurship in the Netherlands. Business transfer: a new start
137
Eierskifter i Norsk næringsliv. Omfang, markedsforhold og økonomiske effecter (2009), Menon Business
Economics
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• The United Kingdom (UK)
In the UK the Small Business Survey is carried out every two years. The survey asks participating firms if
they anticipate closure or full transfer of their business in the next five years. It also asks firms to
distinguish what type of firm they are. Thus, in 2008 and 2010 a higher share of non-family firms
expected to transfer than did family firms. In 2010, 29% of family businesses expected to transfer
compared to 17% of non-family businesses.
The results for the 2012 SBS had 9% of SME employers anticipating the closure of their business in the
next five years. 14% anticipated the full transfer of ownership, or about 172,000/ 34,000 per year while
70% did not think either of these things would happen.
6. Family Businesses
Family businesses are of major importance in the EU. Overall it is estimated that they make up between
two-thirds and four fifths of all businesses.
• Austria (AU)
A study to understand business transfer and succession in Austrian family firms was carried out in
2010138. The model and data used for this study is based on regular studies on business transfers in the
wider sense (i.e. not just family business) conducted in Austria. The approach comprises a data model to
estimate future transfers as well as a survey of realised transfers (plus some estimates of the number of
transfers realised using the secondary data model). In the study business transfer is defined as “the
transfer of ownership and management of a business to another person or entity whereby the original
company keeps up its business activity.” This does not include the instance of a company being
liquidated and being reborn (e.g. as a “pre-pack”) on its own or as part of another firm. The elements of
the model developed for Austria are as follows:
Data sources used are from the Austrian Federal Economic Chamber, from the main Association of
Austrian Security Institutions, and KMU proprietary data.
They include in their calculations enterprises from one-person enterprises up to those with 249
employees. However, not all one-person enterprises are included. Only those working 30 hours or
more per week, not trading from home or based at client premises, with more than two constant
customers and self-employed for more than three years, are included. Some 15% of one-person
enterprises are considered transferable.
From the remaining data they identify the share of firms that will reach pensionable age between
2009-2018 corrected for those that will remain professionally active after retirement or withdraw
due to accidents, ill health or death.
Finally, the result is corrected for firms that are not considered transferable: those with no or little
equity, or with several years’ trading losses.
This produces the number of potential transfers – not those realised.
138
Irene Mandl, DG ENTR/KMU Forschung , Transfer and succession in Austrian Family Firms
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This is quite a complex model, making use of both data from actual share registers and imputed
estimates. It calculates a potential number of transfers - in contrast to an an observed figure, but also
cites actual figures. According to the study, for instance, some 6,600 transfers occurred in Austrian
craft and services firms in 2008. For the decade 2010–2019 it is estimated that about 55,200 Austrian
small and medium-sized enterprises (SMEs; including one-person enterprises) will face the challenge of
mastering a business transfer. This corresponds to about 18% of the SMEs of the craft and services
sector. During the decade 1996–2006 a decreasing tendency of intra-family transfers occurred. While in
1996 about three quarters of all successions took place within the family this share amounted to only
50% in 2006 (data obtained directly from the survey).
• UK Family Businesses
According to a study by Oxford Economics there were about 3 million family businesses, representing
66% of firms, present in the UK. In terms of distribution by size around 75% (2.2 million) of these firms
were micro businesses with no employees, with a further 639,000 (or 22%) family firms employing
between one and nine employees Of these, it was estimated that that some 860,000 SMEs expected to
close or transfer the business over the next five years, or some 172,000 per year.
• Other comments
The Italian and French data (as well as German data mentioned in the Austrian study) all suggest that
the proportion of family firms handing on the business to another family member is declining.
7. The Significance of Transfers in a modern Economy
While the above review of data suggests that there is not a great deal of precision as regards the actual
number of firms being transferred at a given moment, nor for those that might be transferred in the
future, the number of firms affected does remain significant. Even if the 450,000 number of the Business
Dynamics report is scaled down, to say 400,000, this is still about 1.5% of all firms in the EU, and a not
negligible share of the approximately 10% of the number of all firms being created or exiting each year
in the EU. In fact, even half that number, if one removes firms that cannot readily be transferred, such
as those with 0-employees firms it is still significant.
But some trends are apparent in the data. In the first place, the share of intra-family transfers seems to
be declining. This could have important longer term implications for the development of the economies
of the EU, and particularly some EU Member States.
Furthermore, transfers fluctuate with the business cycle due to impacts on asset values at different
stages of the cycle. This is particularly apparent in sectors where fixed asset values are very important
such as hospitality and catering, which is also a sector with a high share of business transfers. This has
implications in the current economic climate where in some EU Member States sellers may want to sit
out the downswing and in the process may lose the chance of selling, especially if there are is a credit
crunch present as well. The point here is that business transfers should not be seen in isolation, but as
closely linked to issues such as SME finance, SME development and longer term demographic change
when considering their role in the economy.
But generally speaking, business transfers in their various guises are a characteristic of a healthy
economy, part of its underlying tissue or fabric, and there is every reason to try to ensure that transfers
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do run smoothly in the general process of creative destruction that drives the economy so that capital,
both intellectual and physical, is not wasted and lost, and there are not avoidable job losses.
The above review of approaches to developing data on business transfers in the EU makes it clear that
different approaches include different definitions, criteria and assumptions and data development
methods, in their studies, for example, in terms of firm sizes, age categories, sectors, and ways to
measure ownership and control. At the same time, there does not seem to be a great deal of work
published on the fundamental a transferable business, and how this may influence estimates.
But the overview does make it clear that the business transfer process as a whole is highly complex and
different studies take different approaches to deal with this. Some take a bottom-up approach starting
with share registers; others a top-down approach using demographic projections; often a mix of the two
is used and a further approach is survey based from which extrapolations to a wider population are
made. The Austrian study looks particularly useful in this respect. But none of the studies use the same
approach, so the quantities can’t be “added up” to arrive at a comparable EU number, or estimate, nor
can the results of different studies for the same country be readily compared. At best there is a mosaic,
or patchwork of results, at worst it is more of a kaleidoscope.
There does not appear to be a readily available method to just, for example, add a box to an existing
form that will enable identification of a business transfer. There are existing company register databases
that can be accessed for this purpose, even if they are not perfect.
Few of the persons interviewed were aware of other work being carried out in other Member States,
particularly when there are language barriers.
It is also clear that changes in the business environment can have an important influence on the nature
and number of business transfers through for example changes in expected retirement ages due to
change in business outlook; the effect of a changed business outlook on sale prices; comparisons
between expected success of starting something new as opposed to buying a going concern (or its
assets/ liabilities).
Recommendations
The wide range of definitional and related data issues that have been identified above suggest there is a
need for detailed empirical work with a common methodology across several EU Member States to
produce robust and comparable information. This is necessary so that the nature and extent of the issue
can be well defined and assessed and the type and level of any intervention determined.
Such comparable empirical work could be on the basis of an agreed methodology for studies and for
data collection. Different countries currently have different ways of recording changes in ownership. In
the UK this is done through a dedicated institution - Companies House; in the Netherlands it is through
Chambers of Commerce. These company registers are the key empirical source of information about
ownership changes, even if they are not always up to date and complete. In some instances the data
bases are quite sophisticated and can be consulted electronically, as in the case of Sirene. In other
instances extracting information about changes in ownership is complex and carried out by specialised
value added resellers of such data. Such research could be repeated periodically, say every two to three
145.
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Base
years, to measure changes and to allow regular publication of reports that will keep awareness of the
issue in the public eye.
To obtain a full picture, it is necessary to disaggregate the portmanteau term ‘business transfers’ in its
major components and distinguish between firm sizes (zero employees, micro firm, etc.), types of
transfer (intra-family, intra-firm and to third parties), and drivers of transfer (restructuring, retirement,
illness, death and desire to sell the business to buy something else). Such an exercise should also pay
due attention to the fact that not all firms are transferable, and possibly trace the movements of assets
and staff associated with the end of a business’ activity.
However, more immediately, it might be possible to build on existing practice and data collection. With
a couple of simple questions about intentions to transfer or close over the next five years and some
useful cross-tabulation, the Small Business Survey in the UK is able to generate some interesting data on
the extent and nature of transfers. Encouraging other statistical authorities and other organisations
collecting business data to do something similar would help generate a lot more reliable information on
the basic characteristics of the transfers that are taking place.
In the countries, such as Germany and Austria, where regular surveys of transfer activity already take
place, such a development in general business surveys would need to be co-ordinated with the more
studies that are already focused on transfer, but the advantage of a relatively simple approach that is
widely adopted is that it may eventually lead to the collection and comparison of basic data at a
European level.
It might be possible to involve the the European Foundation for the Improvement of Living and Working
Conditions (Eurofound) in improving the information base. Eurofound has the mandate to provide
information on structural change and restructuring and currently collects data through the European
Restructuring Monitor (ERM) on changes in ownership resulting in job creation or destruction. This is
already an important background to the development of a view of business transfer as a positive
contribution to the dynamic restructuring and development of the European economy. However, ERM
currently only covers major restructuring events – transfers mentioned in national media, involving 100
or more jobs (loss or creation), or at least 10% of the workforce of large firms – and it is difficult to see
how with its current methodology, this could be extended to cover smaller enterprises. However, the
experience of Eurofound in collecting data of this kind and its contacts with the social partners could
allow it to play a useful part in developing a consistent and practical approach to the collection of better
data.
The research has identified that there is a lack of awareness among those collecting data on business
transfers of what researchers in other countries are doing. This is a pity as it seems that there could be
significant benefits from such knowledge sharing. Development of a thorough multilingual bibliography
and translation of some of the reports, or parts of them, such as those of BPCE and Oséo, or the one by
Menon for example, could provide useful knowledge to be shared. There does not appear to be a good
forum for exchange ideas on measurement and we would recommend that creation and development
of such a forum should be looked into. It may for example be hosted through an existing portal like
www.zunia.org, or a new locus could be selected.
146.
Annex
Proposals for an Indicator System A7

The Use of Indicators relating to the Transfer of Businesses
One of the aims of this evaluation has been to highlight a relevant set of indicators to form the basis for
an on-going monitoring of business transfer developments and to make a contribution to a broader
process of evidence-based policy making.
The selection of indicators needs to take into account the guidance of the Commission and DG ENTR
that has already been established to support the development of such frameworks. It is useful to bear
in mind, for instance, the Secretariat General’s ‘Practical Guide on Objectives and Indicators’ which
emphasises the need for a practical approach that should be kept simple and tied to results-based
management. The development of indicators in particular should avoid over-elaboration. Measuring
progress is not an end in itself and the costs of measurement should be contained. Furthermore, it has
to be remembered that, as well as being relevant to those using them, indicators should be meaningful
to an external audience, which will include non-experts.
There is also guidance already developed by CSES specifically for DG ENTR that should be observed. This
includes the ‘Operational Guidance on Indicators’ (released in February 2010) and the framework
offered by the ‘Operational Guidance on Formulating the Objectives and Indicators of the Management
Plan’, (released in October 2010). These reports echo some of the findings that have already been
established in the existing Commission documentation and reinforce and further develop a number of
principles that are of direct relevance to DG ENTR. As specified by the previous research, guiding the
formulation of the indicators should be a recognition of the Intervention Logic which sets out the
objectives, implementation mechanisms and intended results of the policy or measure intended for
assessment.
In seeing where discussion of monitoring and indicator systems is leading, it helps to frame two central
questions at an operational level:
• What is the specific programme or measure under consideration trying to achieve?
• What can best illustrate the extent to which the objectives are in fact being achieved?
In responding to these questions there are a number of practical considerations that should be taken
into account in addition to the general orientations that have been outlined. Standard monitoring and
evaluation practice emphasises that the objectives to which the indicators are to relate should be clearly
expressed and conform to the SMART criteria (Specific, Measurable, Achievable, Relevant and Time-
bound) in accordance with standard evaluation good practice. The indicators themselves should
conform to the RACER criteria (Relevant, Accepted, Credible, Easy and Robust).
Following this logic, indicators should be developed with due regard to the principle of proportionality,
they should be easy to measure and be kept as simple as possible. In their development it is necessary
to consider the administrative burden imposed, the time and resources necessary for the collection of
the information needed and the possible data constraints. As a result:
• Indictors should not disrupt the measures they are trying to promote;
• Existing indicators and existing data should be used where possible;
• There should not be too many indicators. They are meant to assist understanding of how policy is
developing, not obscure it in a mass of indigestible detail.
147.
Annex

It is also worth remembering that indicators are not intended of themselves to give a complete picture.
They are intended to ‘indicate’ important developments and sometimes will only do so indirectly, when
it is not possible to capture the direct effects. The proposed indicators should contribute to the effective
communication of the achievements of EU policy, illustrate its responsiveness to the needs of
enterprises and the broader community and contribute to the effective discharge of the requirements of
accountability on the part of those responsible for implementing the Programme. Finally, it is important
to recognise that for indicators to have meaning they need to be stable over time in order to establish
continuity in the monitoring system.
In addition to these broad principles there are also a series of more pragmatic considerations. Currently
the preparations for the new COSME programme have included the elaboration of a new monitoring
system, which includes the definition of a set of indicators that is still under discussion. In principle,
indicators developed for the business transfer policy area should take into account the developing
framework for monitoring and reporting under this programme and indeed the wider reporting systems
of DG ENTR and the Commission generally – notably the Annual Management Plan.
In fact, it is understood by the CSES team that no indicators have specifically been proposed relating to
business transfer in any of these contexts. Similarly, among the fairly extensive list of indicators
developed for the SME Performance Review, which monitors progress with the implementation of the
Small Business Act at a Member State level, there are also only a few indicators that might relate to
business transfer. The only indicators that could be directly relevant are the following:
• Time required to transfer property (in calendar days)
• Cost required to transfer property (% of property value)
Interestingly, this situation contrasts with the number of indicators relating to enterprise start-ups and
seems to be symptomatic (even within the Commission services) of a continuing concentration on start-
ups, in spite of recommendations in the 2006 Communication and elsewhere for a more even-handed
approach to start-ups and transfers. Other policy frameworks and indicator systems, including the DG
ENTR Management Plan similarly overlook variables relating to business transfer issues. As a result, the
development of a sound set of indicators could very well not only have a useful role to play in assessing
progress within the current project, but may also help to strengthen the profile of business transfers as
a policy issue. This is a matter that should be considered further.
As already outlined, the starting point has to be the main objectives of policy on business transfers and
these, of course, are now quite well established. An issue for further reflection and discussion is
whether the attention should be directed to the broad set of initial objectives or to the more focused set
that are highlighted in the 2006 Communication.
The 2006 Communication recommended the following as areas for future work:
Give political attention to both business transfers and start-ups.

Provide adequate financial conditions for business transfers.
Raise awareness, consider soft factors and support mentoring.
Organise transparent markets for business transfers.
Ensure that tax systems are transfer-friendly.
Create appropriate structures to broadly implement the recommendations.
148.
Annex

The set of indicators suggested below takes both frameworks into account.
It should also be remembered that the CSES team are proposing that after a period in which the main
attention has been focused on identifying the appropriate measures to take in response to the problems
encountered in business transfer, the concerns of policy should now be moving towards a greater
emphasis on assessing the effects of the measures taken. Have the policy measures worked?
This development is also in line with the recommendations of evaluations of the Competitiveness and
Innovation Programme and a significant new orientation proposed for the COSME Programme, in that
greater attention is to be paid to the longer term effects of policy measures – results and long-term
impacts – as opposed to the previous concentration on more immediate outputs.
This approach would also correspond to the basic purpose of indicators, which is to provide a more
efficient way of assessing the continuing relevance and the effectiveness of policies and reporting on
progress in implementation and the attainment of policy objectives. In this respect, indicators have an
important function in assisting the Commission and national public authorities to fulfil accountability
requirements and to communicate the progress being achieved in policy to stakeholders and the wider
public.
Taking all these considerations into account, the following represents the set of indicators that have
been proposed to guide the investigations that are taking place and eventually to assist the effective
monitoring of developments in the future.
It is important that indicators, and monitoring and evaluation procedures more generally, are
recognised and accepted by the policy community that makes use of them For this reason, the list was
discussed at the second meeting of the Expert Group and was modified in the light of comments at the
meeting and subsequently.
It is also important for implementing a sound application of the agreed indicators, to establish a
harmonised definition and understanding of the term “business transfer”, and to translate this into
“measureable” elements.
Finally, it will be clear that rather unusually, the list of indicators proposed will require that business
transfers as an issue be given appropriate weight in Enterprise policy and that a commensurate effort
will be made at national and European levels to collect the appropriate data. This approach has been
taken, because existing data sources could not support an adequate monitoring system and that it is
preferable to make proposals about the desirable indicators for such a system.
Indicators for Monitoring Business Transfers :
Objective Indicator (Potential) Source Effect Level
General Number of business transfers each year National SME Result
surveys (to be
arranged)
Number of enterprises with zero National SME Result
employees transferring each year surveys (to be
arranged)
Number of SMEs closing each year National SME Result
surveys (to be
arranged)
149.
Annex

The percentage of business transfers that Dedicated studies (to Result/Outc
fail within 5 years be arranged) ome
The five year turnover growth rate of Dedicated studies (to Outcome
transferred companies be arranged)
The five year productivity growth rate Dedicated studies (to Outcome
(value-added per head) of transferred be arranged)
companies
Political attention to Number of initiatives focusing on each Reports of Output
both business policy area authorities (currently
transfers and start- available)
ups
Financial The annual sums available from public Reports of public Output
environment funds for: funding agencies
- equity finance available to support (should be available
business transfer with some
- mezzanine finance available to redefinition)
support business transfer
- loans available to support business
transfer
- loan guarantees available to support
business transfer
Transparent markets The annual volume of acquisitions through Reports by the Result
for business transfers a representative business transfer web site respective web sites
in each country (currently available)
Awareness, Support Annual public budget for business transfer Reports of national Output
and Mentoring awareness campaigns for sellers authorities (currently
available)
Annual public budget for business transfer Reports of national Output
awareness campaigns for buyers authorities (currently
available)
Number of enterprises explicitly contacted Reports of nationalResult
by public authorities or business support authorities/business
agencies to alert them to the issue of support agencies
transfer (currently available)
Extent of actions to encourage potential Reports of nationalResult
new entrepreneurs to consider taking over authorities (currently
an existing business as an alternative to available)
starting a new one *
Number of enterprises annually benefitting Reports of national Result
from public and semi-public mentoring authorities/business
services support agencies
(currently available
150.
Annex

with some data
collection)
Tax systems Existence of fiscal provisions reducing taxes Reports of national Output
on assets explicitly used to finance transfer authorities (currently
(including inheritance tax, gift tax, available)
registration fee and provisions relating to
third parties and employees) *
Legal Framework Existence of Member State rules that allow Reports of national Output
decisions by heirs without unanimity * authorities (currently
available)
* Qualitative indicator
A number of these indicators are sensitive to the relative emphasis placed on different elements in the
overall policy framework for business transfers. Furthermore, given that the feasibility of collecting data
on some of the variables depends on developments in the definition and collection of appropriate data,
it will take some time to develop a definitive set of indicators. A consensus, however, on which variables
can usefully be regarded as appropriate indicators will assist in the development of the right conditions
for their implementation.
151.
Annex
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152.
Annex
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157.
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Survey Results B2
Information on your organisation
Q1. Please indicate the name of your institution/organisation
Q2. Please indicate contact details
Q3. Please indicate your country
Q4. Which are the main organisations in your country that are involved in the implementation ….
Q5. Is there a specific policy or strategy at regional or national level regarding the support of SME
transfers?
Options Nº %
Yes 11 44.0
No 11 44.0
Measure planned/ necessary in future 2 8.0
No answer 1 4.0
Total 25 100.0
Q6. Has the government officially appointed an organisation in order to take care of this competence?
Options Nº %
Yes 6 24.0
No 16 64.0
No answer 2 8.0
Total 25 100.0
Awareness-raising, Information and Training

Q7. Please assess the availability in your country of initiatives specifically targeted at preparing
business owners and prospective buyers for transfer
Aimed at prospective
Aimed at owners
a. Awareness-raising initiatives buyers
Nº % Nº %
Very low 7 28.0 8 32.0
Moderate 3 12.0 4 16.0
High 7 28.0 7 28.0
Very high 5 20.0 3 12.0
No answer 0 0.0 0 0.0
Total 25 100.0 25 100.0
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Survey Results B2
Aimed at owners
b. Business support measures buyers
Nº % Nº %
Very low 8 32.0 9 36.0
Moderate 8 32.0 6 24.0
High 4 16.0 5 20.0
Very high 3 12.0 2 8.0
No answer 0 0.0 0 0.0
Total 25 100.0 25 100.0
Aimed at owners
c. Training/mentoring schemes buyers
Nº % Nº %
Very low 8 32.0 11 44.0
Moderate 6 24.0 2 8.0
High 4 16.0 6 24.0
Very high 3 12.0 3 12.0
No answer 2 8.0 0 0.0
Total 25 100.0 25 100.0
Q8. Are there specific initiatives for family business transfers?
Awareness-raising Business support Training/mentor

initiatives measures -ing schemes
Options Nº % Nº % Nº %
Yes 12 48.0 6 24.0 8 32.0
No 6 24.0 11 44.0 8 32.0
Measure planned/ necessary in future 5 20.0 6 24.0 7 28.0
No answer 2 8.0 2 8.0 2 8.0
Total 25 100.0 25 100.0 25 100.0
159.
Annex
Survey Results B2
Q9. Are there specific initiatives for business advisors (accountants, lawyers, bankers, and other
intermediaries)?
Options Nº %
Yes 10 40.0
No 9 36.0
No answer 1 4.0
Total 25 100.0
Q11. Are there any measures targeted at individual enterprises emphasising the need for a timely
preparation of the transfer?
Options Nº %
Yes 11 44.0
No 12 48.0
No answer 0 0.0
Total 25 100.0
Q12. Do measures distinguish between different types of buyers and sellers, for example by type of
business transfer, age or social group?
Options Nº %
Yes 6 24.0
No 16 64.0
No answer 2 8.0
Total 25 100.0
Q13. Please assess the effectiveness of the following types of initiative in bringing about successful
business transfers in your country
Contacting Awareness- Business Training/

individual firms raising support mentoring
Options Nº % Nº % Nº % Nº %
Not effective 1 4.0 0 0.0 0 0.0 0 0.0
Moderately effective 9 36.0 6 24.0 7 28.0 7 28.0
Quite effective 8 32.0 10 40.0 6 24.0 5 20.0
Very effective 2 8.0 3 12.0 6 24.0 4 16.0
Not available 4 16.0 5 20.0 5 20.0 7 28.0
No answer 1 4.0 1 4.0 1 4.0 2 8.0
Total 25 100.0 25 100.0 25 100.0 25 100.0
160.
Annex
Survey Results B2
Q14. How do policy measures in your country supporting business transfer compare with those for
start-ups? Does business transfer have:
Options Nº %
A lot less weight 11 44.0
Less weight 6 24.0
Equal weight 7 28.0
More weight 0 0.0
A lot more weight 0 0.0
No answer 1 4.0
Total 25 100.0
Financial environment
Q15. Please assess the quality of publicly available financial information on firms to be transferred,
within each of the following enterprise types and sizes
Sole proprie- Ltd liability Medium

Partnerships Micro firms Small firms
torships companies firms
Options Nº % Nº % Nº % Nº % Nº % Nº %
Very low 6 24.0 4 16.0 5 20.0 8 32.0 5 20.0 5 20.0
Moderate 4 16.0 5 20.0 3 12.0 4 16.0 4 16.0 3 12.0
High 1 4.0 2 8.0 4 16.0 1 4.0 4 16.0 3 12.0
Very high 2 8.0 2 8.0 5 20.0 2 8.0 3 12.0 5 20.0
Not available 8 32.0 6 24.0 4 16.0 6 24.0 5 20.0 5 20.0
No answer 4 16.0 6 24.0 4 16.0 4 16.0 4 16.0 4 16.0
Total 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0
Q16. Are there special acquisition websites (‘matching platforms’ or ‘market places’) in your country
dedicated to the selling and acquiring of established firms?
Options Nº %
Yes 14 56.0
No 7 28.0
No answer 1 4.0
Total 25 100.0
161.
Annex
Survey Results B2
Q18. Please assess the availability of financial support instruments that are tailored specifically to
business transfer
Equity Mezzanine Loans Loans (up to Loan

Other
finance finance (>€25,000) €25,000) guarantees
Very low 5 20.0 7 28.0 5 20.0 4 16.0 4 16.0 3 12.0
Moderate 7 28.0 2 8.0 3 12.0 3 12.0 2 8.0 1 4.0
Quite high 3 12.0 3 12.0 3 12.0 4 16.0 3 12.0 0 0.0
Very high 0 0.0 0 0.0 4 16.0 4 16.0 5 20.0 0 0.0
Not available 6 24.0 8 32.0 7 28.0 6 24.0 8 32.0 6 24.0
No answer 4 16.0 5 20.0 3 12.0 4 16.0 3 12.0 15 60.0
Total 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0
Q19. Please estimate the usage of financial support instruments tailored to business transfer
Equity Mezzanine Loans Loans (up Loan

Other
finance finance (>€25,000) to €25,000) guarantees
Very low 7 28.0 6 24.0 6 24.0 5 20.0 5 20.0 3 12.0
Moderate 5 20.0 2 8.0 3 12.0 3 12.0 2 8.0 1 4.0
Quite high 2 8.0 1 4.0 1 4.0 2 8.0 2 8.0 0 0.0
Very high 0 0.0 0 0.0 3 12.0 3 12.0 3 12.0 0 0.0
Not available 5 20.0 8 32.0 7 28.0 7 28.0 7 28.0 6 24.0
No answer 6 24.0 8 32.0 5 20.0 5 20.0 6 24.0 15 60.0
Total 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0
Q20. Are firms in the industrial sector required by insurance companies and banks to have an
environmental audit in order to secure funding?
Options Nº %
Yes 3 12.0
No 17 68.0
No answer 5 20.0
Total 25 100.0
162.
Annex
Survey Results B2
Q21. If yes, is this a source of problems?
Options Nº %
Yes 1 33.3
No 2 66.7
No answer 0 0.0
Total 3 100.0
Legal framework
Q22. Do business owners have the right to change the legal form of the business in order to facilitate
its transfer without the need to wind up the firm?
Options Nº %
Yes 23 92.0
No 2 8.0
No answer 0 0.0
Total 25 100.0
Q23. Are small and medium-sized enterprises allowed to establish themselves as a public limited
company (PLC) with a restricted number of shareholders and a simplified structure?
Options Nº %
Yes 22 88.0
No 3 12.0
No answer 0 0.0
Total 25 100.0
Q24. Is the creation of a public limited company (PLC) with only one member allowed?
Options Nº %
Yes 20 80.0
No 4 16.0
No answer 0 0.0
Total 25 100.0
163.
Annex
Survey Results B2
Q25. Is it possible to ensure continuity of partnerships and sole proprietorships in the event of the
death of a partner or the owner (legal principle of continuity)?
Options Nº %
Yes 20 80.0
No 3 12.0
No answer 0 0.0
Total 25 100.0
Q26. Are the remaining partners allowed to decide on the continuation of the business as a going
concern without the consent of the deceased partners’ heirs?
Options Nº %
Yes 12 48.0
No 11 44.0
No answer 0 0.0
Total 25 100.0
Q27. Does the partnership agreement take precedence over the terms of a will or gift (where there is
a possible contradiction)?
Options Nº %
Yes 18 72.0
No 5 20.0
No answer 2 8.0
Total 25 100.0
Q28. In the event of the death of a member of the partnership or the sole proprietor, have provisions
been made so that family law and inheritance law do not prevent the enterprise from continuing as a
going concern (in particular the unanimity rule for decisions relating to joint ownership?
Options Nº %
Yes 11 44.0
No 11 44.0
No answer 3 12.0
Total 25 100.0
164.
Annex
Survey Results B2
Q29. Are there measures in place to ensure that the payment of the share of the deceased and
compensation to minority heirs do not jeopardize the survival of the enterprise?
Options Nº %
Yes 7 28.0
No 13 52.0
No answer 4 16.0
Total 25 100.0
Q30. Is it possible to conclude a succession pact?
Options Nº %
Yes 14 56.0
No 7 28.0
No answer 3 12.0
Total 25 100.0
Taxation
Q31. Does the principle of fiscal neutrality apply in the following areas?
Transfer of Mergers Division/ex- Registration

Stamp duties
assets change shares fees
Options Nº % Nº % Nº % Nº % Nº %
Yes 13 52.0 15 60.0 15 60.0 9 36.0 8 32.0
No 5 20.0 3 12.0 2 8.0 5 20.0 6 24.0
Measure planned/ 2 8.0 2 8.0 1 4.0 1 4.0 2 8.0
No answer 5 20.0 5 20.0 7 28.0 10 40.0 9 36.0
Total 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0
Q32. In the case of transfer within a family, are there reduced taxes or exemptions on assets
exclusively used for the business, in the following cases?
Transfer by
Transfer by gift
Options succession
Nº % Nº %
Yes 13 52.0 13 52.0
No 8 32.0 8 32.0
Measure planned/ necessary in future 0 0.0 0 0.0
No answer 4 16.0 4 16.0
Total 25 100.0 25 100.0
165.
Annex
Survey Results B2
Q33. In the case of transfer to third parties, are there reduced taxes or exemptions on assets
exclusively used for the business, in the following cases?
Transfer by
Transfer by gift
Options succession
Nº % Nº %
Yes 5 20.0 5 20.0
No 14 56.0 14 56.0
No answer 5 20.0 5 20.0
Total 25 100.0 25 100.0
Q34. Is it possible for heirs to spread or defer the payment of inheritance tax?
Options Nº %
Yes 12 48.0
No 7 28.0
No answer 6 24.0
Total 25 100.0
Q35. Are the reduced and/or deferred inheritance taxes dependent upon the business continuing as a
going concern for a minimum period?
Reduced taxes Deferred taxes
Options
Nº % Nº %
Yes 7 28.0 4 16.0
No 11 44.0 13 52.0
No answer 7 28.0 8 32.0
Total 25 100.0 25 100.0
Q36. Is there unilateral inheritance tax relief to prevent international double taxation of inherited
business?
Options Nº %
Yes 9 36.0
No 8 32.0
No answer 8 32.0
Total 25 100.0
166.
Annex
Survey Results B2
Q37. If yes, does the unilateral tax relief apply to:
Options Nº %
Movable assets 4 44.4
Real estate 6 66.7
Applies otherwise 5 55.6
Q38. Did your country implement the Commission's Recommendation (2011/856/EU) on relief for
double taxation of inheritances? Or did it take any other measures so as to provide double taxation
relief for transfers of businesses?
Options Nº %
Yes 7 28.0
No 11 44.0
No answer 7 28.0
Total 25 100.0
Q39. Does the tax assessment of a business take account of the possible change in the value of the
business some months after the death of the owner?
Options Nº %
Yes 1 4.0
No 17 68.0
No answer 7 28.0
Total 25 100.0
Q40. Are there any tax incentives in place to encourage business owners to transfer to third parties
before death but after the age of 55 years (retirement tax relief)?
Options Nº %
Yes 4 16.0
No 16 64.0
No answer 4 16.0
Total 25 100.0
Q41. Do tax incentives exist for the reinvestment of the profits made on selling a business?
Options Nº %
Yes 4 16.0
No 14 56.0
No answer 6 24.0
167.
Annex
Survey Results B2
Total 25 100.0
Q42. Are these incentives dependent on reinvestment in another enterprise not quoted on the stock
exchange and the enterprise being actively engaged in the production or sale of goods and services?
Options Nº %
Yes 2 8.0
No 15 60.0
No answer 7 28.0
Total 25 100.0
Q43. Are there any tax incentives or special rules for business transfers to employees (reduced capital
gains tax, no registration fees, deferred taxation, etc.)
Options Nº %
Yes 7 28.0
No 13 52.0
No answer 4 16.0
Total 25 100.0
Overall Situation regarding Business Transfer

Q46. Please assess the effectiveness of the current regulatory framework in your country in terms of
providing a conducive environment for successful transfers.
Options Nº %
Not effective 4 16.0
Moderately effective 9 36.0
Quite effective 6 24.0
Very effective 1 4.0
No answer 5 20.0
Total 25 100.0
Q47. Are there any systems in place for evaluating or monitoring the effectiveness of policy measures
on business transfers?
Options Nº %
Yes 2 8.0
No 13 52.0
No answer 5 20.0
Total 25 100.0
168.
Annex
Survey Results B2
Q48. Please estimate the risk of business failure in the period leading up to, and during a possible
transfer, in the following circumstances?
Retirement of Leverage Transfer Owner death/ Owner to start

owner buyout within family illness new activity
Low risk 1 4.0 2 8.0 4 16.0 1 4.0 2 8.0
Moderate risk 2 8.0 5 20.0 8 32.0 1 4.0 4 16.0
Quite high risk 6 24.0 5 20.0 2 8.0 2 8.0 4 16.0
Very high risk 3 12.0 1 4.0 0 0.0 10 40.0 3 12.0
No impact 1 4.0 0 0.0 0 0.0 0 0.0 0 0.0
No answer 12 48.0 12 48.0 11 44.0 11 44.0 12 48.0
Total 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0
Q49. Please estimate the risk of business failure after transfer in the following circumstances?
Retirement of Leverage Transfer Owner death/ Owner to start

owner buyout within family illness new activity
Low risk 1 4.0 1 4.0 6 24.0 1 4.0 2 8.0
Moderate risk 4 16.0 6 24.0 4 16.0 2 8.0 2 8.0
Quite high risk 4 16.0 5 20.0 2 8.0 4 16.0 6 24.0
Very high risk 1 4.0 0 0.0 0 0.0 5 20.0 1 4.0
No impact 3 12.0 1 4.0 1 4.0 0 0.0 1 4.0
No answer 12 48.0 12 48.0 12 48.0 13 52.0 13 52.0
Total 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0
Q50. Do you have any information indicating which factors are likely to make SMEs more vulnerable
to transfer failure?
Micro Small Medium
Size of firm
Nº % Nº % Nº %
Negative impact 5 20.0 2 8.0 1 4.0
Moderate impact 4 16.0 5 20.0 4 16.0
Positive impact 0 0.0 1 4.0 4 16.0
Very positive impact 2 8.0 2 8.0 2 8.0
No impact 1 4.0 2 8.0 1 4.0
No answer 13 52.0 13 52.0 13 52.0
Total 25 100.0 25 100.0 25 100.0
169.
Annex
Survey Results B2
Sector of activity Industry Construction Trades Horeca Transport&Com
Nº % Nº % Nº % Nº % Nº %
Negative impact 3 12.0 10 40.0 2 8.0 1 4.0 1 4.0
Moderate impact 3 12.0 0 0.0 5 20.0 6 24.0 8 32.0
Positive impact 5 20.0 1 4.0 1 4.0 2 8.0 1 4.0
Very positive impact 0 0.0 1 4.0 1 4.0 0 0.0 0 0.0
No impact 1 4.0 0 0.0 1 4.0 1 4.0 1 4.0
No answer 13 52.0 13 52.0 15 60.0 15 60.0 14 56.0
Total 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0
Real estate,
Services Other
Sector of activity business act.
Nº % Nº % Nº %
Moderate impact 7 28.0 0 0.0 0 0.0
No impact 2 8.0 1 4.0 1 4.0
No answer 14 56.0 21 84.0 24 96.0
Total 25 100.0 25 100.0 25 100.0
Level of price/ Level of value

Level of firm’s debt
Financial indicators earnings ratio added
Nº % Nº % Nº %
Moderate impact 5 20.0 2 8.0 3 12.0
No impact 0 0.0 0 0.0 0 0.0
No answer 14 56.0 14 56.0 14 56.0
Total 25 100.0 25 100.0 25 100.0
Sole Limited liability Family owned

Partnership
Legal form proprietorship company company
Nº % Nº % Nº % Nº %
Negative impact 6 24.0 1 4.0 0 0.0 0 0.0
Moderate impact 2 8.0 4 16.0 4 16.0 0 0.0
Positive impact 0 0.0 4 16.0 3 12.0 5 20.0
Very positive impact 1 4.0 0 0.0 2 8.0 0 0.0
170.
Annex
Survey Results B2
No impact 1 4.0 1 4.0 1 4.0 0 0.0
No answer 15 60.0 15 60.0 15 60.0 20 80.0
Total 25 100.0 25 100.0 25 100.0 25 100.0
< 3 years 3 to 5 years 5 to 10 years >10 years

Age of firm
Nº % Nº % Nº % Nº %
Negative impact 5 20.0 1 4.0 0 0.0 1 4.0
Moderate impact 1 4.0 3 12.0 2 8.0 2 8.0
Positive impact 2 8.0 4 16.0 4 16.0 0 0.0
Very positive impact 1 4.0 0 0.0 2 8.0 5 20.0
No impact 1 8.0 3 12.0 3 12.0 3 12.0
No answer 14 56.0 14 56.0 14 56.0 14 56.0
Total 25 100.0 25 100.0 25 100.0 25 100.0
Family Individual Another

Employee(s) Private equity
member(s) buyer business
Transfer to:
Nº % Nº % Nº % Nº % Nº %
Negative impact 2 8.0 1 4.0 2 8.0 1 4.0 2 8.0
Moderate impact 5 20.0 4 16.0 3 12.0 1 4.0 1 4.0
Positive impact 2 8.0 3 12.0 3 12.0 6 24.0 2 8.0
Very positive impact 2 8.0 2 8.0 2 8.0 3 12.0 0 0.0
No impact 1 4.0 1 4.0 1 4.0 1 4.0 1 4.0
No answer 13 52.0 14 56.0 14 56.0 13 52.0 19 76.0
Total 25 100.0 25 100.0 25 100.0 25 100.0 25 100.0
171.
Annex
State of Play in Previous Reviews B3

of Progress
172.
Annex
State of Play in Previous Reviews B3

of Progress
173.
Annex
List of Expert Group Members C1

MS country Member CIP country Member
Belgium Bernard Jehin Albania Name withheld
Christine Margreve
Bulgaria Name withheld FYROM N/A
Czech Rep. Name withheld Iceland N/A
Denmark Dorte Heegaard Johansen Israel N/A
Helle Holtsø
Germany Holger Maus Liechtenstein Simone Frick-Lendi
Reinhard Gumlich
Estonia N/A Montenegro N/A
Greece Name withheld Norway Tor Arne Berge
Spain Jesús Casado Navarro-Rubio Serbia Aleksandra Vučetić
France Yves Jouot Turkey Sıddık KAYA

Gilles De Courcel
Croatia Snježana Ivić Pavlovski (->July ’13) Other Member
Divna Plenča Biloš (with Lučijana organisations
Bilandžić as substitute)
Ireland Orla Kenny Transeo Jean-Pierre Di Bartolemeo
Jean-Marie Catabelle
Marie Depelssemaker
Italy Toni Brunello CCIFTE Amauri Catrice
Cyprus N/A EFAA Marie Lang
Latvia Name withheld Eurofound Irene Mandl

Lithuania Raminta Krulikauskienė European Darius Movaghar
Family
Businesses
Luxembourg Laurent Koener CECOP Bruno Roelants
Hungary Péter Pogácsás’
Malta N/A
Netherlands Monique Aerts
Austria Peter Voithofer
Poland Anna Zebrowska
Portugal António Francisco Balsa Cebola
Romania Adrian Panait
Slovenia N/A
Slovakia Martin Svoboda
174.
Annex
List of Expert Group Members C1

Finland Tapani Kaskela
Juha Tall
Sweden N/A
UK N/A
175.

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Framework Service Contract for the Procurement of

Evaluation of the Implementation

3. The Methodology of the Investigations 13

4. The Findings of the Investigation 20

Annexes Case Studies

A1 The Effects of Evolving Business Relationships on the Transfer of 70

B2 Survey Results 158

B3 State of Play in Previous Reviews of Progress 172

C1 List of Expert Group Members 174

The main tasks that have been undertaken include:

Effectiveness & Utility

Legal Tax Support

The Methodology of the Evaluation 3

3.2 The Methodology of the Evaluation

The Methodology of the Evaluation 3

Belgium Italy Romania

The Methodology of the Evaluation 3

The Methodology of the Evaluation 3

Interview Target Group Number of Interviews

Larger EU states France, Germany, Italy, Poland

The Methodology of the Evaluation 3

The Methodology of the Evaluation 3

The Methodology of the Evaluation 3

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

Company with one member

Legal principle of continuity

Sale to employees tax relief

Reduced inheritance tax

Re-investment tax relief

Retirement tax relief

The Findings of the Investigations 4

+ Recommendation implemented Ø Recommendation not implemented

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

The Findings of the Investigations 4

+ Recommendation implemented Ø Recommendation not implemented

The Findings of the Investigations 4

+ Recommendation implemented Ø Recommendation not implemented

The Findings of the Investigations 4

+ Recommendation implemented Ø Recommendation not implemented

The Findings of the Investigations 4

Table 4.11: Development in Implementation - Reduced inheritance tax (Q.32)