Succession planning is something every business owner should consider early on. Whether you are looking to step back, sell, or transition ownership to a new management team, having a clear plan in place is crucial – not just for securing the future of the business but also for ensuring the best outcome for employees, customers, and the wider economy.
At the Development Bank of Wales, we have supported more than 450 succession transactions, investing nearly £200 million to help businesses transition successfully. What we have learned is that the earlier an owner starts to consider their options, the smoother the process will be.
Often business owners assume that succession means selling to an external buyer, but in reality, there are multiple routes to explore, including trade sales, employee ownership trusts, and management buyouts (MBOs) – each route with its own advantages.
MBOs are the most popular type of succession deal. Around 70% of the transactions we support involve management teams taking ownership, often after spending years building their knowledge and experience within the business. This route provides continuity, ensures a smooth transition, and allows the business to retain its identity, culture, and customer relationships. But for it to work, planning is key.
We have seen this approach work extremely well for companies across Wales. Take Avantis Marine, for example, a business based in Bridgend. The management team were minority shareholders but wanted to take full ownership. With our support with debt and equity investment, they were able to complete a buyout and since then, the business has grown significantly, with its turnover more than quadrupling in the least three years. This kind of growth shows the potential that can be unlocked when a committed team is given the opportunity to take the business forward.
One of the most common concerns owners have is around financing an MBO. Many assume that their management team simply won’t have the means to buy the business. In reality, there is dedicated funding available to support these transactions.
Our Wales Management Succession Fund is specifically designed to provide between £500,000 and £3 million in funding for management teams looking to take over a business. This means that business owners do not need to wait for an external buyer – they can work with their existing team to create a plan that benefits everyone involved.
Beyond financing, successful succession planning also involves getting the fundamentals in order. That means ensuring accounts are in good shape, contracts are up to date, and the right structures are in place to support the transition. It’s also about having open conversations – both with advisors and with the people within the business who may be the future owners. Many business owners find these discussions difficult, but starting them early makes for a far less stressful process when the time comes to step back.
Every business is different, and so is every succession plan. Some owners may want to fully exit, while others may prefer to retain a shareholding and remain involved in a reduced capacity. Some may look to pass ownership to family members, while others may explore employee ownership. The important thing is to understand what options are available and to work with the right advisors to find the best fit.
Ultimately, succession planning should not be an afterthought – it should be a key part of running a business. With the right support and careful planning, business owners can secure a smooth transition and ensure that their legacy continues long after they step away.
