Introduction
Written by Lukas Wenzel & Markus Schupp of Westfalenfinanz
The German Mittelstand – the backbone of one of Europe’s largest economies- is entering a period of profound transition. A generation of entrepreneurs is approaching retirement, while internal succession solutions – whether through family members or management buyouts – are becoming increasingly limited. As a result, external succession through a transaction is emerging not merely as a viable alternative, but often as the most effective way to ensure long-term continuity.
For business owners, this decision is rarely purely financial. It is strategic and deeply personal. It involves identifying a successor capable of preserving the company’s heritage while providing the capital, expertise, and governance required for future growth. In this context, two buyer groups dominate succession transactions: strategic acquirers and private equity investors. Each offers distinct advantages, as well as different implications for the company’s future trajectory.
Market Environment and Structural Challenges
Demographic change is the defining driver of succession activity in Germany. More than half of German business owners are over the age of 55, and an estimated 840,000 ownership and leadership transitions are expected in the coming years. At the same time, the pool of qualified internal successors continues to shrink. Surveys indicate that a substantial share of family-owned businesses lack a suitable next generation, reflecting shifting career preferences as well as the increasing complexity of managing modern enterprises.
Beyond demographics, structural pressures are intensifying the need for external solutions. Digital transformation, persistent skilled labor shortages, and global competitive dynamics require continuous investment in technology, processes and organizational capabilities. Simultaneously, higher interest rates, tighter lending conditions, and geopolitical uncertainty have materially increased both operational and financial complexity.
In this environment, selecting the right successor is no longer a matter of preference. It is a prerequisite for long-term stability and sustained competitiveness.
Strategic Buyers as Long-Term Successors
Strategic buyers – typically corporate acquirers operating within the same or adjacent industries – approach acquisitions with a long-term, integration-driven perspective. Their objective extends beyond ownership; it is the integration of the target into an existing industrial platform.
Strategic acquisitions enable buyers to expand market share, strengthen supply chains, access complementary technologies, and enhance overall competitive positioning. For sellers, this often translates into attractive valuations, as strategic acquirers can realize synergies that are unavailable to financial investors. This incremental value potential is frequently reflected in what is referred to as a strategic premium.
Integration into a larger corporate structure can also provide operational resilience, access to capital , and entry into broader international markets. However, this stability entails structural trade-offs. The company typically relinquishes its independence, and decision-making authority shifts to the acquiring organization. For founders who place a high value on autonomy and cultural continuity, this transition can be profound.
Private Equity as a Flexible Succession Solution
Private equity represents a fundamentally different ownership model. Rather than integrating the business into an existing corporate structure, private equity investors pursue value creation through active, performance-oriented ownership.
Beyond providing capital, private equity investors contribute strategic guidance, operational expertise, and access to professional networks. Their investment thesis typically includes initiatives such as geographic expansion, operational improvements, digital transformation and buy-and-build strategies designed to accelerate scalable growth.
A defining feature of private equity transactions is structural flexibility. Sellers often retain a minority stake through rollover equity, enabling them to participate in future upside while gradually transitioning leadership responsibilities. This approach aligns incentives and supports continuity.
However, private equity ownership is inherently time-defined. Investment horizons range from three to seven years and are structured around a clearly defined exit strategy. While this model can accelerate growth, professionalization, and strategic focus it may also increase emphasis on medium-term value realization.
Choosing the Right Successor
The choice between a strategic buyer and a private equity investor depends on the seller’s strategic objectives and personal priorities.
Strategic acquisitions typically offer long-term integration, operational stability, and in many cases premium valuations driven by identifiable synergies. Private equity investors, by contrast, provide structural flexibility, continued ownership participation, and the opportunity to share in future value creation.
There is no universal solution. The optimal path depends on the company’s competitive positioning, its growth potential, and the owner’s long-term aspirations.
Conclusion
Succession is one of the most consequential decisions a business owner will ever make. It shapes not only financial outcomes, but the long-term trajectory of the company itself.
Strategic buyers and private equity investors each offer compelling pathways. Strategic acquisition provides integration, scale, and long-term stability. Private equity offers flexibility, growth capital, and continued participation in future value creation.
A well-structured transaction process – guided by experienced advisors – enables owners to evaluate these alternatives objectively and select a successor aligned with their financial, strategic, and personal priorities.
In successful succession transactions, the objective is not merely to transfer ownership. It is to secure the company’s future and preserve the legacy that built it.
This article was originally published at
https://ma-review.de/artikel/private-equity-vs-strategischer-kaeufer
