Generic types of business succession - examples and refined chart

 

Some real-life examples of business successions wouldn't fit in the chart introduced in the previous blog. That useful obstacle led to this "take two" version of the matrix.

  

Figure 1. Generic types of business succession

Below are typical managerial decisions which relate to the four generic types of business succession.

1. Management retained / Ownership retained

a) Partial management succession

This type of business succession includes cases when the company franchises (or licenses) out the right to use its business model, so the franchisees become de facto business unit managers of the franchiser.

b) Partial ownership succession

In this generic type of succession the company's owner retains the majority stake in the equity in 

undertaking public listing on a stock exchange, 

• merging with another company, 
• establishing a joint venture, 
• selling business to a financial investor or to other types of external or internal buyers.

2. Management transferred / Ownership retained

In this type of succession the owner benevolently gives the management to employees or to external parties but holds the majority or full ownership control of it.

3. Management retained / Ownership transferred

This generic type refers to situations when the company's owner sells the majority stake but holds a managerial position due to specific personal assets in the same sorts of deals as named in 1b.

4. Management transferred / Ownership transferred

This covers cases of the owner's full withdrawal from the company through selling it to internal or external buyers. That cause of succession also includes

• divestments, 
• contracting out, 
• rescues.

References

Co-Operatives (2003), “Delivering employee and community buyouts”, available at: www.uk.coop/document/delivering-employee-and-community-buyouts-guide-succession-process (accessed December 2013).

Hawkey, J. (2002), Exit Strategy Planning: Grooming Your Business for Sale or Succession, Gower Publishing, Aldershot.

Howorth, C., Westhead, P. and Wright, M. (2004), “Buyouts, information asymmetry and the family management dyad”, Journal of Business Venturing, Vol. 19 No. 4, pp. 509-34.

Sherman, A. (2003), Parting Company: Innovative Strategies to Plan for Succession, Manage the Transition, Sell or Transfer Your Business, Kiplinger Books, Washington, DC.