Exploring success and failure in small firm business transfers

The main purpose of this dissertation is to identify the factors that explain success and failure in SME business transfers. Three key concepts have been defined in our research framework: firm resources, capabilities (of predecessor and successor) and (successor’s) strategic renewal. Firm resources originate from the resource-based view and are necessary to compete, to survive and to attain competitive advantage. The owner capabilities/human capital, such as education, experience and entrepreneurial capabilities are necessary to allocate the available firm resources. The successor’s renewal actions, including organizational changes and innovations, are vital to renew and adapt the firm to market situations. Altogether these three key concepts serve as predictors for the transfer outcomes: exit choice, transfer duration, obtained price, satisfaction and the post-transfer firm performance. The empirical results of this dissertation suggest, although not tested in one comprehensive dataset, that these three key concepts are complementary in SME business transfers. This is illustrated by the answers to main research questions. 1. Do firm resources or owner capabilities predict the exit choice for a sale or liquidation? 2. Do firm resources and owner capabilities predict performance during the transfer process? 3. Do renewal actions of the successor by themselves predict post-transfer firm performance? 4. Which kinds of capabilities predict success in business transfers? The results generate practical implications for government policy, advisors and entrepreneurs. The efforts of the Dutch government to stimulate start-ups may be less beneficial to the economy than spending the same budget and energy on potential (young) firm acquirers. Previous research shows that business transfers outperform start-ups in all fields and generate more employment. This dissertation shows that firm founders tend to liquidate their firm, whereas acquirers are more inclined to transfer their business. The Dutch government is advised to concentrate more on (young) firm acquirers and shift their budgets from start-ups, which have a relative low rate of survival, to acquiring a firm. The research outcomes lead one to question the relevance of succession planning for SMEs in transfer situations. Not only this study, but also most studies in the past two decades fail to provide evidence on the usefulness of succession planning. Both government agencies and advisors should reconsider their campaigns, which generally emphasize long term planning. Turnover, dependency on (few) customers and dependency of the firm on the owner, together with entrepreneurial flexibility, market awareness, years of ownership and familiarity with the successor are all better predictors of positive transfer outcomes such as an exit choice to sell (vs. liquidate), shorter transfer duration, greater satisfaction by the seller and obtained price. Furthermore, both advisors and the Dutch government seem to forget that 90% of all firms are micro firms and these firms are not served with corporate planning, corporate strategies or corporate finance to stay in business. How to optimize their firm value and to look at their firm as an outsider could be a more interesting focus for small firm owners. The outcomes on firm size counter the prejudice against micro firms with employees that they are unfit for business transfers. Past research shows, however, that service to this group has been neglected; the market has failed to advise micro and small firms adequately regarding exit options. Accountants and bookkeepers are not well equipped to advice on ownership transfers. Experienced business brokers tend to focus on larger clients, who can support higher fees, ignoring the majority of small business owners. This study recommends government agencies to step into the market for transfer advice. Firm owners may benefit from results of this dissertation. The research results show that acquisition experience, making the firm less dependent on the owner and having a low dependency on (a few) customers improve the likelihood of a sale. If firm owners really want to sell their firm, adopting an acquirer’s perspective might help them. Also, having a replacement or employees which are allowed to decide on day to day matters, could help to make the firm less dependent on the owner/manager’s daily presence. Flexibility is the most important capability, since it speeds up the transfer and is associated with greater satisfaction. For potential buyers five aspects seem important. First, knowing a good relationship with the predecessor may ease the transfer process, but this may come at a price: the transfer duration is longer and the price to pay for the firm may be higher. Secondly, buying a smaller firm predicts a better post-transfer performance. This probably indicates that it is easier to realize change in smaller firms. Thirdly, it seems rewarding to buy during periods of economic decline. Post-transfer performance is better in declining economic conditions than in average or economic growth conditions. So patience is rewarded if one waits for the right time to buy. Finally, the findings show that renewal after succession pays off. This means renewal by successors in general seems to benefit and revitalize small firms. Innovation and reorganization together give the better results than reorganization alone. These findings are consistent with recent findings on large companies: companies that cut costs and lower their investments clearly underperform compared to companies that cut costs and keep on investing. Promotion date: June 29, 201

The Immediate and Lagged Effects of Advisory Support in SME Mergers and Acquisitions: A Buyer’s Perspective.

The objective of this study is to shed light on the added value of the advisors in SME mergers or acquisitions: accountants, business brokers, tax consultants and lawyers. Theory is inconclusive on the added value of advisory services and research is rare. RBV predicts direct advantages for using advisory services in M&A: fewer obstacles during and directly after M&A and lagged beneficial effects involving more renewal in the firm. The theory of structural holes, agency theory and management entrenchment theory, on the other hand, predict neutral or negative effects from advisory services in M&A. The dataset includes 855 SME mergers and acquisitions in three countries, where the acquirer and target firm did not belong to the same family. Using binary logistic regressions the results show consistently that the M&A advisory services do not reduce the occurrence of obstacles in M&A, but for the positive impact of tax consultants on financial shortfalls and misinformation. However more renewal in the two years after acquisition can be observed when several advisors are involved, particularly so lawyers and bankers. The outcomes suggest that not one theory is able to predict both the immediate and lagged effects of advisory services. The theory of structural holes/agency/entrenchment predicts immediate effects best, while RBV predicts lagged effects best. The database and research design have some limitations. More fine grained hypotheses and measurements are recommended for future research

Do planning and preparation predict success in SME-transfers?

This study (re)tests the relationship between planning and transfer success. Previous studies show that planning increases satisfaction, but find no or only weak relations to transfer effectiveness. 76 Dutch SME business owners, who succeeded in the transfer, were surveyed. To improve on previous studies reliable scales were constructed and results were tested for common method bias, social desirable answering and nonresponse. Multi regression analyses indicate that planning and preparation does relate to satisfaction but has no relation with performance. To predict effectiveness of SME transfers both the market and entrepreneurial abilities of the buyer seem more appealing

Stille revolutie financiering mkb

Recent besloot Schiphol om €350 miljoen in de luchthaven te investeren. Investeerders en financiers staan in de rij. Dat is helaas niet het geval voor jonge ondernemers met een innovatief idee, kleine bedrijven die snel groeien en ondernemers die een bedrijf willen overnemen. Het geld voor ondernemen is er wel, maar zie het maar te vinden

Het profiel van overnemers en opvolgers: Hun slaagkans en de verschillen met starters

Aanleiding Er is weinig bekend over de verschillen in de ondernemersprofielen van starters, overnemers en opvolgers. Als voorbereiding op een grootschalig onderzoek van de HU/KvK Nederland is de literatuur op dit gebied bestudeerd. Literatuurstudie Er zijn 9 (wetenschappelijke) publicaties gevonden die ingaan op de verschillen tussen starters, overnemer of opvolgers. Bij gebrek aan directe studies zijn daarnaast 28 publicaties verzameld, die betrekking hebben op de slaag- en faalfactoren bij overname en opvolging. Vraagstelling Wat zijn de belangrijkste verschillen tussen starters, overnemers en opvolgers en welke factoren verhogen de slaagkans bij overname en opvolging? Resultaten De uitkomsten uit de verschillende studies geven een vrij eenduidig beeld. Personen met meer werkervaring, ondernemers- en managementervaring, branchekennis en een hoger inkomen kiezen eerder voor overname dan het starten van hun eigen bedrijf. Daarbij valt op dat overnemers doorgaans hoger zijn opgeleid dan opvolgers, maar lager zijn opgeleid dan starters. Bij de entry keuze moeten we bedacht zijn op de verschillen per branche, want daar waar hoge toetredingsdrempels aanwezig zijn of de startkosten hoog zijn, daar is overname waarschijnlijker dan starten. Ook meer specifieke ondernemerscompetenties zijn van belang voor het welslagen van een overname of opvolging, zoals een goede relatie met de verkoper, marktbewustzijn, flexibiliteit, doorzettingsvermogen en het kunnen leiden van veranderingen. Daarnaast zijn deze kenmerken van belang het realiseren van de financiering van een overname. Voorts spelen timing van de aankoop, het hebben van enig eigen kapitaal en de marktsituatie een rol van betekenis. Voor familieopvolging geldt dat opvolgers vanuit eigen interesse en alleen bij gebleken geschiktheid, goed opgeleid en met (externe) ervaring een grotere kans van slagen hebben. Van hen en van overnemers van een voormalig familiebedrijf wordt veel gevraagd bij veranderingen en vernieuwingen, daar bij familiebedrijven doorgaans grotere weerstanden bestaan tegen veranderingen

Structuurnota lectoraat Coöperatief Ondernemerschap

Het Kenniscentrum Innovatie en Business ziet in ondernemerschap een sleutel om het innovatievermogen van de Utrechtse economie te vergroten. Steeds meer wordt onderkend dat ondernemerschap of een ondernemende houding van groot belang is voor onze studenten, de toekomstige professionals. Daarom stellen wij voor een lectoraat op het gebied van ondernemerschap op te richten. Het uitgangspunt is dat ondernemerschap in deze tijd vraagt om samenwerking. Coöperatievorming, keteninnovatie en internationale samenwerking zijn steeds belangrijker zijn om de concurrentie voor te blijven en/of groei te realiseren

Expert opinions on SME Transfers Hazards for policymakers and entrepreneurs

The EU and national governments rely on expert panels and opinions for their policies (EU, 2003; EU, 2006a; EU, 2006b) on SME ownership transfers. Also entrepreneurs depend on expert opinions and advice. We know from expert studies that expert judgment may lead to confusion and conflicting results. Can we rely on expert opinions in ownership transfers, especially if there are different specialists involved? 71 Dutch SME specialists on ownership transfers (accountants, bankers, business brokers, business consultants) and 10 entrepreneurs were interviewed with open questions. The answers were counted and the averages of different groups of specialists were tested by one-way ANOVA and Tukey’s HSD. The results indicate that expert opinions are largely divergent on issues, but become convergent on solutions. Most given solutions by experts are more awareness/information and involving professional advice. Not the accountant, the international most widely used advisor by entrepreneurs in ownership transfers, but the business broker seems best fit to advice. Business brokers are active in more phases of the ownership transfer, are better connected to other specialists and have the most structured working method. We detect serious market failure to provide advice for entrepreneurs on business transfers. More than one specialist is needed, the best suited advisor - the business brokers - are unattainable for most micro firms. To overcome market failure transfer vouchers might connect entrepreneurs better to business brokers. Our results are confined by the sample, being small, select and nationa

Do planning and preparation relate predict success in SME-transfers?

This study (re)tests the relationship between planning and transfer success. Previous studies show that planning increases satisfaction, but find no or only weak relations to transfer effectiveness. 76 Dutch SME business owners, who succeeded in the transfer, were surveyed. To improve on previous studies reliable scales were constructed and results were tested for common method bias, social desirable answering and nonresponse. Multi regression analyses indicate that planning and preparation does relate to satisfaction but has no relation with performance. To predict effectiveness of SME transfers both the market and entrepreneurial abilities of the buyer seem more appealing