ifo Institute / Foundation for Family Businesses: Almost Half of Family Businesses in Germany Are About to Pass to the Next Generation

15 January 2024, Munich. In the next three years, 43 percent of German family businesses are due to transfer a company or shares.

Annette von Maltzan, ifo Institut: "Especially larger businesses with more than 250 employees are planning for a generational change in the next three years – in fact 50 percent of them."

The Institute and the Foundation for Family Businesses determined these figures in 2023 in a survey using their joint FamData database and analyzed them in an article published in the latest edition of ifo Schnelldienst.

Another survey using this database found that 42 percent of all businesses surveyed do not yet have a management successor lined up from within the family. Owners are getting older and a dwindling number of family businesses – most recently only 34 percent according to another survey – are managing to complete a family-internal succession.

It is also rare to find young talent from within the ranks on supervisory boards: only one-quarter of companies are able to appoint new family members to replace outgoing ones. So the retirement of the baby boomer generation is impacting not only the supply of skilled workers but also the availability of company successors. Moreover, a survey of business sentiment in summer 2023 revealed that 61 percent of family businesses consider inheritance or gift tax to be either a heavy or a very heavy burden.

For now, the figures from the database underpin the longevity of family businesses. Almost half are in their second or third generation. Around one-fifth of them have made it beyond that. The oldest companies in FamData have existed since the 14th century. A proud 5 percent were founded before 1900, while another 10 percent go back to the first half of the 20th century.

Since 2017, the ifo Institute has been collecting key shareholder data for the Foundation for Family Businesses in surveys on economic policy issues. Every year, the participants include between 1,500 and 2,000 entrepreneurs from family businesses and non-family businesses of various sizes from a wide range of industries. The database now contains more than 12,000 companies, half of which are family businesses.

Rainer Kirchdörfer, Chairman of the Foundation for Family Businesses: "FamData is a valuable research tool – especially when it comes to the topic of succession. The next generation of entrepreneurs have great confidence in their family business’s ability to perform and innovate. However, the conditions under which family businesses operate must improve radically. Bureaucracy, energy prices, the shortage of skilled workers, and the tax burden are discouraging the next generation."