Business Takeover: What Buyers Must Check First

Anyone taking over a business is not buying an idea. They are buying a past: existing contracts, established routines, long-standing customer relationships — and everything that was never tidied up over twenty years.

That is precisely the appeal. An acquisition starts with revenue, a workforce and market access, where a start-up begins at zero. And that is precisely the risk: you also inherit the issues nobody mentions in the sales memorandum.

How we guide buyers through this process — from target search to closing — is set out on our page on buying a company.

The market is sizeable: the Institut für Mittelstandsforschung Bonn expects around 186,000 businesses in Germany to be ready for handover between 2026 and 2030. The highest succession figures fall on business-related service providers and on companies with annual revenues between 500,000 and 1 million euros (IfM Bonn, Daten und Fakten No. 37, 2025).

Not every takeover is the same

The term covers three very different routes, and the differences decide liability, tax and financing.

Buying the shares (share deal). You buy the shares in the company; the legal entity itself does not change. All contracts continue because the contracting party formally stays the same — but you also take on every legacy issue, known and unknown.

Buying the assets (asset deal). You buy individual assets: machinery, inventory, customer base, trademarks. What transfers is what the contract says. That limits risk but makes the transaction more complicated, because every material contract has to be transferred individually and often requires the counterparty's consent. Our comparison of asset deal and share deal goes through the trade-offs.

Management buy-in or buy-out. You step in as an external manager or take over as an existing employee. Professionally this is often the smoothest transition, financially the most demanding — the differences are set out in MBO or MBI.

What transfers automatically

Two things pass to you regardless of what the contract says. They are the most common source of unpleasant surprises in the first year.

The workforce. In Germany, section 613a of the Civil Code (BGB) provides that on a transfer of business by legal transaction the acquirer steps into the rights and obligations arising from the employment relationships existing at the time of transfer. Collective and works agreements become part of the employment contracts and may not be changed to the employees' detriment for one year. Dismissals because of the transfer are void. Employees must be informed in writing before the transfer and may object within one month. The former owner remains jointly liable for obligations that arose before the transfer and fall due within a year. What this means in practice is covered in business transfer and employees.

Legacy liabilities. Anyone continuing a business often takes on its liabilities as well — in Austria, section 38 of the Commercial Code (UGB) governs this for business-related legal relationships. An exclusion of liability is only effective against third parties if it is registered, publicly announced in the customary manner, or communicated to the creditor; a clause agreed only between buyer and seller is not enough. Under section 39 UGB the seller remains liable for obligations falling due within five years of the transfer.

None of this is a reason to avoid an acquisition. It is a reason to take the review seriously and to settle the structure with a lawyer and a tax adviser — this article replaces neither.

Five risks buyers routinely underestimate

Owner dependency. If the seller personally holds the key customer relationships, carries the pricing logic in his head and signs off every order himself, you are buying a business that becomes a different one without him. Test what happens if he does not show up the day after closing.

Customer concentration. A client accounting for 40 per cent of revenue is not revenue, it is a cluster risk. Ask about the contract term, the notice period, and who owns the relationship.

Deferred investment. Businesses coming up for handover have often been in savings mode for years before the sale. Machinery, IT and vehicles say more about the real purchase price than the profit and loss account does.

Contingent obligations. Pension commitments, open warranties, pending proceedings, contamination on the site, unpaid levies. This is the core of any due diligence — and the reason it should not be treated as a formality.

Key staff. It is not only the owner who leaves. Check which performers are close to retirement anyway and who will take the handover as their cue to go.

What you pay, and what sets the price

For small and mid-sized businesses, value is usually derived in practice from multiples applied to operating earnings and then adjusted for net debt. How that works in figures is explained in the multiple method; our free company valuation calculator gives you a first order of magnitude.

More important than the multiple is how the purchase price is structured. Very few acquisitions are paid in full at closing:

• An earn-out ties part of the price to results in the coming years. It bridges differing expectations but creates disputes when the basis of calculation is loosely defined.
• A vendor loan defers part of the price. It relieves your financing and keeps the seller committed to an orderly handover.
• Holdbacks secure warranty claims for a defined period.

From a buyer's perspective these are not merely concessions by the seller; they are risk protection. What you pay later, you only pay if the assumptions held.

Financing

An acquisition is rarely financed from a single source. The usual mix is own funds, bank debt, public development loans and a vendor loan; mezzanine components are added in some cases. Banks look less at asset backing than at whether the acquired business can service the debt out of current earnings — and whether you are professionally capable of running it. The individual building blocks are covered in financing a company acquisition.

One practical point: settle the financing structure before you submit an indicative offer. An offer that later fails at the bank costs you access to the seller — and in a tight market, your reputation as well.

For tax purposes, the allocation between acquired assets and goodwill matters, because it determines future depreciation. That allocation belongs with your tax adviser; it is one of the points where an asset deal and a share deal differ most in economic terms.

The process in six steps

1. Sharpen the search profile. Sector, region, size, earnings level, your own role after the takeover. A vague profile produces site visits, not transactions.
2. Find targets. Public marketplaces cover only part of the market; many businesses are never listed. The difference between the two routes is set out in succession exchange or M&A adviser.
3. First conversation and confidentiality. The non-disclosure agreement comes before the figures — for a seller, discretion usually matters more than price.
4. Indicative offer. A non-binding price range based on the first documents, together with your key assumptions. How such an offer is built is described in the indicative offer.
5. Due diligence. Review of figures, contracts, staff, tax and legal matters — with the aim of confirming the assumptions from step 4 or correcting the price.
6. Contract and handover. Purchase agreement, warranties, price mechanics, transition period. The full process is described in the company acquisition process.

Allow six to twelve months from a serious search to closing. In advised processes with prepared documents, three to six months are realistic.

What is different in Austria

The logic of the review is the same; the legal framework differs. Liability on continuation of a business is governed by sections 38 and 39 UGB, and the transfer of employment relationships by the AVRAG rather than section 613a BGB. Operating permits and trade-law qualification certificates are separate items to check on a takeover — particularly in regulated trades, where the qualification attaches to a person and does not transfer with the business. Buyers looking at Austria will find the differences from the opposite perspective in selling a company in Austria.

FAQ

What is the difference between a business handover and a business takeover?

They are the same event seen from two sides. The departing owner speaks of a handover, the incoming one of a takeover. In practice the questions differ sharply: the seller optimises price, tax and timing, while the buyer examines substance, risk and financeability. The seller's perspective is covered in business handover.

Am I liable as a buyer for my predecessor's debts?

That depends on the structure. In a share deal the liabilities stay inside the company and pass to you in full economically. In an asset deal the transfer follows the contract — but statutory liability applies regardless, in Austria for example section 38 UGB on continuation of a business. An exclusion of liability is effective against creditors only if it is registered, announced or communicated. The specific arrangement belongs in legal review.

Do I have to take on the employees?

On a transfer of business in Germany the existing employment relationships pass to the acquirer by operation of law under section 613a BGB. A dismissal because of the transfer is void; dismissals for other reasons remain possible. Employees must be informed in writing beforehand and may object within one month. A corresponding rule applies in Austria under the AVRAG.

How much equity do I need for a business takeover?

There is no universal ratio — it depends on earnings power, asset backing, security and your own experience. In practice, lending banks expect a visible equity contribution and want to see that debt service can be covered out of current earnings. A vendor loan is often accepted as a quasi-equity component and reduces the equity required.

How do I find a business that is available?

Through public succession marketplaces, through chambers and associations, through tax advisers and banks — and through direct, confidential approaches to owners who are not yet on the market. The last route is the most demanding and regularly leads to better targets, because there is no bidding contest.

How long does a business takeover take?

Six to twelve months from a serious search to closing is normal. Advised processes with prepared documents often run in three to six months. Due diligence itself usually takes four to eight weeks, and the subsequent contract phase another four to six.

Is a takeover worth it compared with starting from scratch?

You buy revenue, a workforce and market access instead of starting at zero — and you pay a price that reflects exactly that head start. Economically, a takeover pays off where the business works without its current owner and where the purchase price still allows debt service out of earnings. Where neither holds, founding your own business is often the more honest route.

Facing this situation yourself? IGCP advises buyers and successors independently — the initial conversation is free of charge, without obligation and strictly confidential. → igcp.at