Thousands of German SMEs Cannot Find a Successor

4 min read

Since 2019, purchase-price expectations among outgoing owners in the German Mittelstand have risen sharply. In 2024, the IHKs (German Chambers of Industry and Commerce) saw a record number of consultations with owners willing to sell, against just over 4,000 prospective buyers. To take over a business, the successor needs a financing plan that goes beyond the purchase price.

More businesses than buyers

Around 545,000 SMEs are planning a business succession by the end of 2029, according to KfW, Germany’s state-owned promotional bank. Over the same period, around 569,000 owners do not plan to continue the business after they step down. One in four companies says it is considering a deliberate closure of the business.

On the takeover market, supply significantly exceeds demand. In 2024 the succession advisers at the IHKs counted almost 10,000 consultations with owners willing to sell, according to the DIHK (Association of German Chambers of Industry and Commerce), more than at any time since the report began in 2007. Only just over 4,000 prospective buyers were interested in a takeover.

For 5,620 businesses on offer, there was no potential successor. This gap has almost doubled since 2019.

What is a vendor loan? A vendor loan is a loan granted by the seller to the buyer in a business takeover. It converts part of the amount owed on the purchase price into a loan that the buyer services later. It is usually subordinated, meaning the seller ranks behind the other lenders. Interest is often not paid until maturity.

Rising price expectations among owners

For successions planned between 2025 and 2029, owners are aiming for an average sale price of around 499,000 euros, according to KfW. In 2019 the average was still 372,000 euros; adjusted for inflation, that equates to an increase of around 9.5 percent. In KfW’s view, the actual average is likely even higher.

Across all owners planning a succession, the average target is 1.2 times annual revenue and the median is 0.6 times. KfW sees this as an indication that the vast majority of owners are not setting their purchase prices too high. Among the retiring owners advised by the IHKs, however, 36 percent are demanding an excessive purchase price, in the IHKs’ assessment.

In the view of the Bankenverband (Association of German Banks), a takeover resembles a start-up situation with high capital requirements, even though the company already generates earnings. On top of the purchase price, the tax burden, working capital and replacement and new investments must be financed. In future the successor must pay interest and principal, known as debt service, out of distributed profits.

Ways to finance the takeover

Nearly four in ten prospective buyers report financing problems to the IHKs. Overall, the situation has eased somewhat of late, according to the IHKs’ experience. Bank lending remains difficult, though the somewhat better interest rate environment is bringing slight relief there. The options for financing the succession from one’s own resources have deteriorated somewhat again.

From the relationship bank’s perspective, the main risk is an excessive purchase price, because the buyer may then no longer be able to cover interest and principal from profits. An operating business that throws off more cash is better placed to support liquidity and debt service.

Among other instruments, the Bankenverband cites the vendor loan, in which the seller leaves part of the purchase price outstanding as a loan. With an earn-out clause, the purchase price depends on future profits and is paid in instalments, usually over one to three years, at most over five years.

On guarantees, 31 percent of IHKs report improvements and only 3 percent report deteriorations. Default guarantees from the guarantee banks are available nationwide for amounts up to 2 million euros and cover up to 80 percent of the credit requirement to be secured. Funding, such as from KfW programmes, must be applied for before the takeover; retrospective approval is not possible.

Bureaucracy and late planning

As a hurdle to succession, 69 percent of all SMEs cite the search for a suitable successor, 45 percent the bureaucratic burden. Only 18 percent cite the successor’s need to secure the financing.

Among companies with closure plans, 52 percent cite the owners’ retirement age and 42 percent the bureaucratic burden as reasons. Among the reasons for closure, no other factor has gained as much importance year on year as bureaucracy.

Three quarters of the retiring owners advised by the IHKs only turn to external contacts two years or less before the planned handover. According to KfW data, annual investment volume falls by around 32 percent in companies with short-term succession plans, as owners scale back investment before the handover.

Little time left until the handover

The average age of SME owners is just over 54; in 2003 it was 45. More than half of owners are now 55 or older. Owners planning a short-term succession by the end of 2026 are already 66.5 years old on average.

With early planning, purchase price and subsequent costs can be calculated together. Funding and guarantees can then be applied for in good time before the takeover.

Frequently asked questions

Image source: AI-generated (September 2026)