Challenges after succession: what happens when tradition and innovation collide?

In many family businesses you see it happening; the business has been handed over to the next generation. Time for fireworks and champagne. There is relief and a celebratory mood. "We can go back to focusing on the business, doing nice business". But tension soon arises. The older generation wants to stick to what works and how it was, while the new generation is brimming with ideas on how to do things differently and better. How do you prevent this tension from becoming a breaking point? And more importantly, how do you turn it into a strength?

It starts with recognising that there are different views. Everyone starts a business for a reason. Succession, too, has a reason. Often the motivations of the transferor differ from those of the successor - and you usually only discover this after the transfer. How do you deal with that? And how do you ensure that the business and the family do not suffer as a result?

How do you deal with different views within generations?

Recognise the pattern. The older generation wants to keep what is there. This makes sense: the current model has proven itself. Possibly emotional and cultural values for the company and the family also play a role. The new generation brings energy and ideas. They want to innovate, digitise, become sustainable - and usually faster than felt comfortable for the previous generation.

The transferor has often built the business and sees it as an extension of himself or herself. His or her motivation then lies in continuity, maintaining reputation and safeguarding the life's work. Stability and risk management are key. The successor is usually in a different stage of life and did not "make" the company, but was given it. Who is more often driven by self-development, innovation and wanting to prove their own leadership. This may mean making different choices, taking more risk or wanting to steer a different course.

That difference often only becomes visible after the transfer, because during the process the focus is on figures, structure and legal agreements - not on the underlying personal motives. This is precisely where tension can arise later.

That difference in vision and drive is not wrong. Indeed, it can be a strength. But then it has to be well organised.

Why is this not only a strategic, but also a legal challenge?

At Marxman, we see that generational differences often lead to differing expectations about:

• Control and voting rights - who gets to make what choices? And does the legal reality at the meeting table match the reality at the kitchen table?
• Division of roles and responsibilities - who picks up which tasks?
• The future direction in strategy and policy of the company - preservation or new opportunities?

If these topics are not discussed and recorded clearly and in a timely manner, there is room for misunderstandings that can grow into conflicts. And that is a shame. With the right structure and clear discussions and agreements in advance, you can turn tension into cooperation.

Three legal focal points to turn difference in vision into strength

1. Acknowledge both perspectives - and secure agreements
   Retention stands for security and experience. Renewal for growth and future. We help translate these interests into legal structures such as a family statute, shareholder agreement, management regulations and voting rights scheme, which can also include a clear delineation of roles after transfer.
2. Create a shared vision - and document it
   Not either-or, but and-and. Look for common interests and keep the long-term vision in mind. What will the company look like in 5, 10, 20 years? We ensure that agreements on control, ownership, profit distribution and exit options are clear and legally binding, without compromising the culture, vision and values of the family business.
3. Avoid conflicts - arrange governance in advance
   Lay down clear agreements on roles, the involvement of non-active family members and decision-making. This prevents ambiguity and increases harmony.

Conclusion

Generational differences are not a threat, but an opportunity - provided there is communication, structure and legal certainty. Our M&A team helps family businesses organise the transition between generations properly, ensuring continuity and harmony.

Want to know more about how we guide family businesses during or after a transfer? Get in touch with us.