Escolar Documentos
Profissional Documentos
Cultura Documentos
1
(August 2007)
BASELINE ANALYSES:
DENMARK, FINLAND, GREECE, AND ITALY
Edited by:
Ari Peltoniemi
Denmark
Michael Ahring Petersen, Væksthus Syddanmark
In cooperation with
Poul-Georg Jertrum & Troels Lemonius, UdviklingsCenter Haderslev
Erik Dam, Sydvestjysk Udviklingsforum, Esbjerg
Marlene D. Lindholm, South Denmark European Office, Bruxelles
Finland
Heikki Luukkonen, Kokkolanseudun Kehitys Ltd, KOSEK
Tapani Hirvonen, Joensuun Seudun Kehittämisyhtiö Ltd, Josek
Greece
Ninetta Chaniotou, European Profiles S.A, EPR
In cooperation with
Eirini Vlachaki and Kostas Triadas, European Profiles S.A, EPR
Natasha Xarcha, Union of Hellenic Chambers of Commerce and Industry,
UHCCI
Vasiliki Karatzikou, Union of Hellenic Chambers of Commerce and
Industry, UHCCI
Italy
Paolo Zaramella, StudioCentroVeneto sas, SCV
PREFACE
The Baseline Analyses as the first published report of the REINO project
form a synthesis of the current situation related to the business transfer
processes in the four partner countries. This region-specific report gives
information about the standards and practices in the field of business
transfers of micro companies in different partner countries. In that way
it is possible to make comparisons and to find good and transferable
practices. The outcomes of this report can be utilized in the upcoming
activities of the project.
EXECUTIVE SUMMARY............................................................. 1
Introduction....................................................................... 9
The results of the analyses suggest that the challenges and problems
related to the business transfer processes are generally the same no
matter which country is in question. There is not much to do for the fact
that the entrepreneurs are ageing everywhere. Entrepreneurs over 50
years of age form the generational transfer potential. In addition, the
size structure of the companies is convergent in all four countries. A great
majority of the businesses in the four countries are micro companies
with less than 10 employees.
The options which the transferor has concerning the future of his company
are very similar. A choice has to be made between a generation change,
sale of the business or closure of the business. Sale of the business to
the current management or to the employees or to a third party is an
option which is becoming more common in all of the four countries.
As to the services available for entrepreneurs, in general the business
transfer services are scattered, and more centralized coordination is
needed. However, there are great differences between different nations
and regions in relation to what kinds of service providers are available.
The main characteristics and challenges of each analyzed country in the
field of business transfer process can be described as follows:
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Denmark
Danish business is characterized by having many small firms which
possess large adaptability. It is estimated that the industrial political
efforts concerning generational transfers are most useful when aimed
at the smaller companies.
The core qualities of the micro companies are often user innovation
and large flexibility. Many of them will face a business closure when the
entrepreneur retires. As a consequence, workplaces and know-how will
be lost. This will for example have a negative impact on the companies’
local and regional relations. The lines of business that will mainly suffer
from the negative consequences are estimated to be manufacturing and
affiliated sub-contractors that provide knowledge services.
Typically, the new owners were well informed of the hard values, such
as the processes in the company, the line of business and the interest
groups. Then again, there was a lot less knowledge of the soft values
within the companies. The transferred companies mentioned taxation
and bureaucracy as the most important problems followed by value
determination and financing. Companies planning a transfer considered
finding a suitable successor as the main challenge.
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The possibility for a family member to take over the company was not
relevant for most of the interviewed companies. Either they had not
thought about it at all or the other family members were not interested
(in most cases). Only two respondents considered that they did not
receive enough information on the services available in the business
transfer process.
It seems that the company owners who were planning or were in the
process of a business transfer tended to have an ambition of staying
on for a transition phase (often 1-2 years). This supports the fact that
such a transition phase is recommended so that the new owner is
ensured access to all knowledge (including tacit knowledge) within the
company.
Finland
Within the next ten years, 70 000-80 000 businesses in Finland will face
finding a successor due to retirement of the current entrepreneur or
due to other matters related to ageing of the entrepreneur. According to
different estimates, approximately 40 per cent of businesses in Finland
facing a business transfer do not know who the successor will be.
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Nearly all the interviewed entrepreneurs said that they needed more
information on business transfers and wanted professional help in
technical aspects such as taxation, value determination, legislation, and
financing. The entrepreneurs expressed a wish that in the beginning of
the process there would be a neutral party to activate the process, offer
information, and provide an expert.
The need for support in emotional issues also appeared from the
interviews. Several respondents stated that it is difficult for them to
step aside and transfer responsibility to the younger generation. The
entrepreneurs who had a successor in their own family felt that it
was easier for them to step aside because the successor was already
familiar with the business and its operations and was qualified from
the transferor’s point of view. Most difficulties were experienced in
businesses that were selling to an outsider and did not have a buyer
lined up.
Nearly all the interviewed believed that the new generation will bring
new life to the business and develop it further. Business transfer was
seen in most cases as natural and positive, and as a factor that improves
the business.
In the Joensuu region, a common feature among the interviewed was that
the entrepreneurs did not start to seek for information on implementing
the transfer until it was already decided that a transfer would occur.
In most cases, operation after the transfer had not been thought of
and issues such as retirement had not been clarified in advance. A
business transfer is almost like buying a car; when the fever strikes the
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development of for example prices for used cars is actively followed, but
before this activation period these issues have held no interest.
The basic principle in Finland is that the business is run until retirement.
The culture in general does not encourage entrepreneurship as one
period in the professional life, which could include 5-10 years as an
entrepreneur after which the business activity is changed into something
different.
Greece
In Greece, a family company does not necessarily have to be small.
For example, in the Athens stock exchange, 59% of the companies are
considered family businesses. Business transfers are usually carried out
due to the fact that the owners retire on a pension. However, the number
of transfers that are carried out due to personal reasons is increasing.
Similarly, there is an increase in the number of family-owned companies
that are transferred outside the family by selling to third parties.
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The Greek state has recently been taking measures to facilitate business
transfers, especially in respect to taxation, business licenses, and legal
forms of companies. However, financing initiatives, support services,
and an Internet-based market place are missing. It can be concluded
that the REINO project, by aiming to set up the Business Renewal Centre
and the e-market place, and to activate Greek Chamber of Commerce
and Industries` response to the generation shift issue, will make a
major contribution towards improving the business transfer context in
Greece.
Italy
At a national level there are more than 5 million companies of which
more than 1.1 million have operated over 18 years: these companies
can be considered potential clients for the REINO project, because one
of the first steps/goals is the increase in general awareness. In general,
the European data shows that an entrepreneurial life lasts approximately
28 years and the business transfer processes last about 8-10 years.
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INTRODUCTION
In the old days businesses were usually transferred inside the family,
while selling and buying of micro businesses was not as commonplace
as today. Now, and even more in the future, transfers to third parties
or employees are increasingly common. Our research through REINO
project shows that micro businesses need support for finding a successor
in the context of generation shift and otherwise. Thereby it is necessary
to raise awareness of the need for entrepreneurs to prepare the transfer
of their businesses well in advance. It is also crucial to pro-actively
support potential successors by raising awareness of business transfer
opportunities, and providing them with suitable financial tools and
consulting options.
Some economists argue that the loss of a small business is not a problem
because market forces will replace the lost business. In bigger towns
and cities this argument might be valid, but in remote or rural areas the
loss of local businesses is a real problem because a closure may result
in trade and employment being transferred to the next larger town.
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Each of the county analyses consists of the following five main themes:
statistical data, business transfer service providers, national frame
of reference, personal observations and company-specific interviews.
The company-specific interviews are based on a questionnaire drafted
together by Seinäjoki University of Applied Sciences and KOSEK. KOSEK
has provided the guidelines, for example the contents, for implementing
the country analyses. However, the partners had the freedom to choose
how to emphasize different subjects.
The four country analyses included in this report are edited and abridged
versions. The transnational Co-ordinator of the REINO project, Mr Ari
Peltoniemi, has acted in the role of editor and adapter. He has also written
the summary and the introduction of this report. Representatives of the
partner countries have delivered the contents of the country analyses.
The country analyses can be found in full and non-edited forms on the
project website www.reinoproject.eu.
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INTRODUCTION
The above should be seen in proportion to the fact that there are over
450 000 companies in Denmark, and out of them 21% are situated
in the South Danish Region. 364 000 of these have less than ten
employees. This means that 72 per cent of all the firms in Denmark
are so-called micro companies, and they employ the largest part of the
Danish workforce. These firms are typically led by the owner and are an
important foundation for the development and enterprise of the Danish
industry. This type of leader is usually defined as a person who owns
a considerable part of the company and who, at the same time, is in
charge of the company’s top management and has invested personal
funds.
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In 2000 there were about 283 000 active companies in Denmark. That
corresponds to one company for every ten Danes on the labour market.
The Danish economy is characterized by many small companies and
only a few large companies. 92 per cent of the Danish companies have
fewer than 10 employees, while less than 2 per cent have over 50
employees (Statistics Denmark).
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However, there has been a development for more new companies being
established as corporations, primarily as limited (Ltd.) and private
limited companies (Plc.). In 2000, corporate companies made up for 18
per cent of the newly established companies, compared with 6-7 per
cent between 1992 and 1995. It should be noted that when establishing
a company, a certain amount of capital is required, which makes it more
difficult to start a company in corporate form.
The establishment frequency for the South Danish region has a third place
with 4.15% compared with the other Danish regions. The metropolitan
region comes in first with a frequency amounting to 6.56%.
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The total estimate shows that just under 100 000 companies out of
approximately 500 000 within the private sector face ceasing of operations
or transfer during the next ten years. The question is what this large
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Fig. Estimate over companies to be handed-over in Denmark, compared with the South Danish
Region.
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In the eight companies who had carried out a generational transfer, the
age of the new owner was between 35 and 60. In other words, nothing
significant can be said about the typical age of buyers of companies.
In the six companies which planned or were about to plan a business
transfer there was a clearer age profile because 5 out of 6 owners were
over 60 years.
Within the eight companies which had carried out a generational transfer
the legal form of the business was as follows:
• 3 Plc companies
• 2 Ltd companies
• 3 sole proprietors
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Concerning the size of the companies, the following can be drawn up:
The most essential growth parameters were profit, market shares and an
increasing number of employees. There were no significant differences
between the companies, whether the owner had changed or not.
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Some A lot of
No knowledge
knowledge knowledge
Information on customers 3 2 3
Information on suppliers 1 2 5
Information on competitors’ knowhow 1 5 2
Information on tacit knowledge within
6 2 0
the company
Information on the staff 3 2 3
Confidence-building measures in
3 2 3
relation to staff
Information on stakeholders 1 0 4
Information on the field 0 3 5
Information on the processes 0 3 5
Information on marketing 3 1 4
Information on administration 1 5 1
Information on the sector 0 4 3
Typically, the new owners were well informed of the hard values, such
as the processes in the company, the line of business and the interest
groups. Then again, there was a lot less knowledge of the soft values
within the companies. There was considerably less information on tacit
knowledge, as well as on the employees and the clients of the company.
Compared with prior projects, this tendency is not untypical in business
transfers in Denmark.
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In this way, the possibility for a family member to take over the company
was not relevant for most of the interviewed companies. Either they
had not thought about it at all or the other family members were not
interested (in most cases). Finally, it can be concluded that in some
cases the family members did not have the necessary qualifications to
be able to take over and continue the business.
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The results show that the project was a success and has given the
participants a lot of benefit. Some of the benefits are, for example, a
successful improvement of the interview guide and guidelines, a model
for diagnose, and alteration of organizational culture. The improved
interview guide and guidelines have been received positively by
the advisors, who, among other things, have obtained an improved
questioning technique through the user-friendly questionnaire. In this
way the advisors have gained qualifications to localize silent assets and
cultural values.
Similarly, the advisors have been very positive towards the improved
culture analysis model, which especially has contributed to new
perspectives when it comes to providing counselling for companies.
The instructions in both the advisors’ and the entrepreneurs’ courses
were evaluated as positive with good contents, good contributions and
discussions. Especially the entrepreneurs were satisfied, and they praised
the course for having been targeted to them. The majority of both the
entrepreneurs and the owner-managers express large contentment with
the counselling they have received. Similarly, both the entrepreneurs
and the owner-managers have experienced a development when it
comes to taking over and handing over a company.
The primary methods and tools of the project constitute a process which
clarifies the silent assets of the company, i.e. special competence,
relations, and especially the unique culture surrounding the company.
These conditions are crucial for the transfer to be optimal.
Personal experiences
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primarily has its focus on business results, and the legal and financial
aspects of the transfer. The company’s silent assets are not included
or are mentioned in passing in the counselling the buyer receives. The
reason for this is among other things that the existing methods, tools
and qualifications are not sufficient. Investigations show that the lacking
focus on the silent assets contributes to the fact that more than half of
the mergers and acquisitions are unsuccessful.
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owner-manager.
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Government
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Regional operators
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The business service offices typically carry out the initial problem solving,
for instance for a company owner who seeks additional information
and guidance on a business transfer. When the business offices find it
appropriate, the assignment is passed on to the Business Link centre
which then will ensure an optimal process for the company. This service
is free of charge. If specific financial and/or legal counselling is needed
the Business Link centre will refer to private specialists, who then will
solve the specific problems on normal market terms.
Private sector
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FIH A/S invests in and offers liable and convertible loans to companies
in Denmark. They have focus on companies in stage of expansion and
new orientation. All in all, their objective is to provide buyout/buyin
investments in connection with generational transfers or industrial spin-
offs. FIH A/S exerts active ownership.
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Training
The objective of the courses was that the advisors had to learn and
be trained by new methods and tools to help clarify companies’ core
competences and culture. The participants were to write a short
report which clarified the obvious improvement areas, the company’s
core competences and culture, and a plan for a business transfer. The
courses were a success; however, they also showed that there was need
for further competence development on implementing the process in
companies. New courses will be set up during 2007 according to need.
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Financing
Succession means that potential profit taxes are not released in the
transfer, and in this way does not influence the assignor’s income
statement. The succession is not only to the seller’s advantage, but
also to the buyer’s, because the latent tax will be reflected in the price
of the company.
Entrepreneurs who apply for venture capital are guided through the
often quite complicated terms, for example the classes of shares
with liquidation preferences, the determination of convertible debt
instruments, dilution clauses, the right of first refusal etc.
It is also possible to take over the company’s assets over a longer period
of time, for example one quarter at the time of the transfer, and the
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Furthermore, the financing eases if the buyer decides not to take over
the properties. It is also possible to arrange so that the seller leases the
furniture and equipment to the buyer who then acquires them after a
certain number of years. Obviously, these possibilities have advantages
and disadvantages depending on the situation. The problem is that it is
the seller who takes the highest risk.
Taxation
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Ltd. and Plc. companies have to pay corporate tax of 30%. New companies
have to pay tax on account twice a year – in March and November. The
tax is calculated as half of the average tax amount of the latest three
years. During the first two years, when the tax on account cannot be
calculated, the company can pay a voluntary amount. Assets that are
withdrawn as salary are taxed as personal income by up to the rate of
60% (labour market contribution is paid first).
Legislation
The 1st July 2002 the possibility to take over a company without taxation
was expanded to not only apply to close family members but also to close
employees who work for the company. The new regulations ensure that
more suitable people have the possibility to continue a business. The
requirement for the employee is an at least 3 years’ fulltime employment
within the company during the last 4 years before the transfer. This
change complies with what the business community has for years been
requesting for. The new rules also mean that consolidated corporations
can be transferred without taxation; until 1st July 2002, a consolidated
corporation could have problems with the generational transfer if a too
large percentage (25%) of its assets were real property or securities.
This was not appropriate so the percentage was increased to 50% from
1st July 2002.
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Who should take over the company? Typically, it is the family, one
or several employees, a competitor, a business partner, or a third person
who simply wants his own company, who takes over the company. As
a starting point it can be assumed that the price which can be obtained
in a generational transfer is at the lowest if the company is handed
over to family, while the highest price is usually obtained by selling to a
competitor or a business partner.
The company has to be paid for, whether the transfer occurs with or
without succession. This means that even if the transfer is conducted
by succession, it cannot be avoided that the person who takes over the
company has to pay for it.
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If the value of the company’s shares still is near a price of 100, the
shareholder only has to conduct a normal transfer of his shares to a
newly established company. No money is needed for this, because the
company is established by paying in shares.
The extent of the challenge became realistic at one point when the
owner’s health started to fail, and at the same time it became clear that
no one in the family wanted to take over the company. Nevertheless,
years passed before the owner-manager seriously began to think of
how he can ensure his employees’ interests and at the same time obtain
profit so that he would be economically secured. The owner has totally
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In this way, the buyer has a better opportunity to finance the purchase
and the operation. In this case the buyer pays an amount in cash for the
takeover of all the immaterial rights. This means that enough money is
left for the operation and expansion of the company.
The seller’s risk is limited because he still owns the buildings and has a
leasing contract. If all goes well the seller’s economical profit is larger
while it also has taxation advantages. The alternative was to close the
company.
The buyer has a unique opportunity to try being self-employed with the
seller functioning as a mentor and a resource. The buyer’s risk is limited.
The investment can be paid back over the company’s profit growth.
Case 3: An ownership change fails after two years with the new
and the old owner. Before the takeover the company was marked by
clan culture, a family-oriented culture. The employees’ productivity and
commitment were at their peak. The takeover was conducted without
warning and the new owner was quickly presented by the seller. No
significant information was given to the 8 employees, and radical
production changes were made instantly. It was rumoured that the
new owner wanted to flag out the production. Quite quickly, two key
employees in production resign. The culture becomes more hierarchical,
with a lot of supervision and control. The productivity and quality
decreases drastically and the good customers choose not to do business
with the company. Gradually, the profitability decreases and in the end
the company applies for an administration order. The result is that the
seller takes over what is left and gets the company back on track.
What went wrong here was that the new owner was not humble towards
the valuable cultural heritage. The buyer was not aware of the company’s
true values and therefore was not able to use them as a starting point.
The examples which are taken from concrete processes show that the
whole process should be taken into consideration, and the model can
for example include:
• Economical considerations for the buyer/seller
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The examples also show that even companies with relatively small
income can be successfully transferred. However, this requires that the
seller is realistic in proportion to the sales price and is aware that he/
she often has to enter into a certain risk and involvement.
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CONCLUSIONS
The first phase is to clarify the company’s structure and value. Can it
be sold? At what price? Who can be interested and how can the transfer
take place? Here, it is typical that an accountant gives advice.
The second phase consists of mapping out the company’s silent assets
and finding out if there are areas to be improved and potentials to be
further developed. The company should also develop itself before the
transfer. Here, it is typically a specialist from the public industrial service
that provides advice.
The third phase is to implement the identified improvement areas and
to prepare a plan for how the company is best transferred. Here, it is
usually an expert from the public industrial service who is the mentor.
The fourth phase then consists of seeking for interested buyers. Set
the company for sale, seek out interested parties and advertise (e.g.
anonymously) in media which are of interest to potential buyers, e.g.
www.match-online.dk. In this phase it will often be a lawyer who is the
advisor.
The fifth and last phase is the actual sales process where the buyer
gains full insight into the business goals before the actual decision is
made.
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• Clarification: Desires for the future are decided, and this is the
starting point for the planning.
• Planning: Who is the optimal future owner? Possibly a new
company structure with conversion from sole proprietorship into
company, formation of a holding company, division into several
companies, spin-offs etc.
• Sales maturation: The most important thing is to preserve the
company’s silent assets, know-how and customers, which are the
basis for future operation.
• Preparation for sale: Documentation of the products. Are
there any existing descriptions, manuals etc, which are stored
only in the owner’s mind? A decision of which assets are to be
enclosed in the sale has to be made. A possible separation of
the private residence and the company property could be made.
During the planning, the company’s financing has to be tailored
for the sale, and it has to comply with the buyer’s interests.
Potential personally provided securities, collaterals etc have to be
liquidated.
• The sales process: A counsellor for the process has to be
found, and a person who is in charge of the actual sale. This can
be done by the manager himself, his accountant or a company
broker.
• A company description has to be prepared with a realistic
and informative description of the company’s business goals,
organization, financial key figures, market and competition
situation, sales conditions, starting price etc.
• The company description has to form a sufficient basis for the
buyer, and must not include sensitive information. This can be
given later under further progress and for example in return
for a signature on a declaration of intent which expresses the
willingness and possibility to complete a business transfer.
• The sales negotiations: The negotiations have to be planned
so that the buyer’s interest is maintained throughout the process
and information has to be passed on in the right tempo and
order. A decision has to be made on when potential negotiations
with another buyer have to be ended, when the buyer can learn
more about the company and the employees, when the parties’
counsellors can be brought in etc.
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ACKNOWLEDGEMENTS
In connection with the composition of the analysis, knowledge and
experience is used from a number of people who have researched the
area.
REFERENCES
Furthermore, a number of information sources, relevant projects and
surveys have been used and referred to in the analysis:
• Denmark in Numbers from Statistics Denmark 2007
• Statistics Denmark (Statistical Yearbook 2006)
• National Agency for Enterprise and Construction
• GEM High-Expectation Entrepreneurship 2005
• Generationsskifte i små og mellemstore virksomheder af Susanne
Green Svendsen
• Invest In Denmark
• The Danish National Association of Local Authorities, the Danish
Ministry of Science, Technology and Innovation.
• OECD, Education at a glance 2003
• The Danish Ministry of Taxation (Generationsskifte -
erhvervspolitiske perspektiver - SKM)
• Statistical Yearbook 2006 from Statistics Denmark
ANNEXES
• Denmark in Numbers from Statistics Denmark 2007 (Denmark in
numbers 2007.pdf)
• Statistics Denmark (Statistical Yearbook 2006, General business
statistics 2001 - 2005.pdf)
• GEM High-Expectation Entrepreneurship 2005 (GEM 2005.pdf)
• Generationsskifte i små og mellemstore virksomheder - SGS.pdf
• Invest In Denmark (Contact_Aug2006.pdf & Facts_Taxation_
Aug2006.pdf)
• Questioning frame: Survey_Transfer_Implemented.doc
• Questioning frame: Survey_Transfer_Ongoing_Preparing.doc
Most of the annexes are in Danish and obtainable at request.
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INTRODUCTION
Within the next ten years, 70 000-80 000 businesses in Finland will face
finding a successor due to retirement of the current entrepreneur or
due to other matters related to ageing of the entrepreneur. According to
different estimates, approximately 40 per cent of businesses in Finland
facing a business transfer do not know who the successor will be.
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Business transfer service providers are also covered in the analysis. The
service providers are examined on both regional and national level. Out
of private service providers, different institutions, expert organisations,
and business brokers are discussed. In addition, public and private
financing institutions are described, along with instances that provide
training.
This report was not written in a technical sense but it was completed
to provide ideas and best practises for further actions, as well as basis
for comparison between the partners of the REINO project in different
countries.
All in all, there are approximately 7 000 businesses in North Karelia, out
of which more than 5 000 are located in the Joensuu region. The size
of the businesses follows the national trend, i.e. over 90 per cent of the
companies have less than 10 employees.
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Finland
Several separate studies and statistics estimate that in Finland there will
be 70 000-80 000 businesses facing a transfer of ownership within the
next ten years due to reasons related to ageing. In different evaluations,
finding a competent successor is raised as the most challenging aspect
of business transfers. According to separate estimates, approximately
40 per cent of businesses facing a business transfer do not have a
successor lined up.
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Central Ostrobothnia
Examining the age structure in Central Ostrobothnia, it is clear that
there are more people advanced in age than people who are for
example 30-40 years old. Such age structure is due to the large age
groups that were born after the World War II. It can be estimated that
within the next ten years a significant proportion, approximately 40
per cent of the entrepreneurs will face a generation transfer, ownership
transfer or ceasing operations. In Central Ostrobothnia this means that
approximately 1 000 businesses will face such a situation within the
next ten years.
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A common feature for the cases studied was that they did not approach
the process long-term, but started to seek information on implementing
the transfer when it was already decided that a transfer would occur. In
most cases, operation after the transfer had not been thought of and
issues such as retirement had not been clarified in advance. According
to the business transfer experts at the regional development company
Josek Ltd, this occurs in almost all cases and is especially highlighted
within micro companies. A business transfer is almost like buying a car;
when the fever strikes the development of for example prices for used
cars is actively followed, but before this activation period these issues
have held no interest.
All the companies that responded to the interview stated that they were
aware of where to find guidance and had contacted a contact person
at Josek. This shows that the long-term process of promoting business
transfer guidance has reached the entrepreneurs.
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All in all, it can be said that in most cases business transfers were
started without prior planning, and the business advisors at Josek were
consulted in all situations. It was also a surprise to the interviewed
that the end result could be different from what was expected at the
beginning of the process.
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Currently it seems that most business transfers will occur between the
years 2010 and 2014. 43 per cent of the respondents estimated their
retirement to occur during those years. Most of the retirees that had
children (nearly 60 per cent) responded that they will let their children
choose whether they want to take over the business or not. Not all of
the entrepreneurs that had children hoped their children to become
entrepreneurs or take over their parents’ business: approximately one
quarter of the entrepreneurs represented this opinion. In fact, there
were more entrepreneurs that did not want their children to take over
the business than those who did. Only 15 per cent hoped that the next
generation would continue the business. 72 per cent of the respondents
had requested an estimate on their pension; 60 per cent stated their
statutory pension to be meagre, 37 per cent considered it reasonable
and 5 per cent were satisfied with it.
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Nearly all the interviewed entrepreneurs said that they needed more
information on business transfers and wanted professional help in
technical aspects such as taxation, value determination, legislation, and
financing. The entrepreneurs expressed a wish that in the beginning of
the process there would be a neutral party to activate the process, offer
information, and provide an expert.
The need for support in emotional issues also appeared from the
interviews. Several respondents stated that it is difficult for them to
step aside and transfer responsibility to the younger generation. The
entrepreneurs who had a successor in their own family felt that it
was easier for them to step aside because the successor was already
familiar with the business and its operations and was qualified from
the transferor’s point of view. Most difficulties were experienced in
businesses that were selling to an outsider and did not have a buyer
lined up. Entrepreneurs in these businesses were also reluctant to put
the business up for public sale. The more plans the entrepreneur has for
after the transfer, the easier stepping aside seems to be.
Nearly all the interviewed believed that the new generation will bring
new life to the business and develop it further. Business transfer was
seen in most cases as natural and positive, and as a factor that improves
the business.
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organization.
The results of the study strengthened the idea that the entrepreneurs do
not prepare for the business transfer early enough, and even technical
preparation is dealt with too late. A surprising finding was that only 30
per cent of the interviewed had a successor figured out, whereas 70 per
cent of the businesses did not know what will happen to the business
when the business transfer issue is current. It was also a surprise
to realize that a large proportion of the service sector saw ceasing
operations as the only option after the retirement of the entrepreneur.
This was highlighted in scarcely populated areas, causing deterioration
of the service structure.
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The buyer and the seller are not familiar with each other’s
approach to business transfers;
Buyers buy the future, and sellers sell the past. This becomes evident
in different views on the value of the business, needs for development,
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and maintaining traditions. The seller demands a price for life’s work,
which the buyer is not willing to pay.
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Government
Ministry of Labour
The role of the Ministry of Labour is limited mostly to contributing financial
aid to start-up companies. When limiting the term ‘start-up’ solely to
new businesses, business transfers are eliminated from receiving this
type of financial aid. The Ministry should consider business transfers in
the same light as starting a new business.
Regional Operators
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Private Sector
Different Organizations
In addition to different organizations, the Federation of Finnish
Enterprises with its regional operators has taken a role in developing
business transfers. The federation has for example produced material
to ease the process, organized conferences on business transfers, and
created an Internet-based forum for selling and buying businesses. It
has kept the topic up and developed the guidance on business transfers
on a national level, for example guidance by telephone. (www.yrittajat.
fi)
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Training
Successor training
Established training that systematically goes through each step of the
business transfer process from the successors’ point of view is not
readily available, and therefore it has to be composed of other existing
services. There are not enough business transfer services combined to
the training, especially private experts that are needed in the process
of buying.
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Financing
Taxation
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Legislation
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The price of the service is €840 and it includes three days of consultation.
At the end of the analysis the business receives a plan for generation
change with recommendations on how to proceed. The service can be
continued with further consultation priced at €300 per day. The quality
is maintained by selecting experts with versatile expertise in business
administration, as well as in taxation and legislation. All the experts
have completed training and a demonstration of skills on the subject.
Business loan
Financing institution Finnvera plc offers financing for business transfers.
These loans are meant to be used when starting a business, buying a part
of an existing business or when raising the capital of the business.
Start-Up Funding
Through labour administration it is possible to obtain funding for personal
expenses in relation to starting a business. The amount is not huge, but
the symbolic value is. The maximum of start-up funding that can be
obtained is for 10 months with €600/month.
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The main difference between the OSUVA and the Yrityspörssi services is
that a representative of OSUVA becomes acquainted with each business
placed for sale and performs an analysis of its current state. In addition,
all interested in the business are directed to the representative.
Information on businesses for sale is given out to the interested only
after they have signed a nondisclosure agreement. Going forward, the
representative acts as an impartial expert for both parties and guides
the sales process.
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www.jatkajat.fi - database
A part of the activities of Jobs and Society is a service aimed for people
planning to start a business, as well as for people planning to sell
their business. The principle of the database is that the transferor can
check the database for suitable successors. Successor candidates fill
in a curriculum vitae, based on which the service provider evaluates
readiness for entrepreneurship. The basic information on the CV will be
published anonymously on the database.
Within the project, a database has been created for buyers and
transferors. An impartial expert composes an analysis of the business.
Based on the analysis the business receives recommendations on
experts in the private sector who will handle specific actions, such as
taxation, legislation, value determination, etc.
(www.pirkanmaanyrittajat.fi)
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CONCLUSIONS
The public sector should build a consistent and clear concept to assist
in business transfers. This service has to guarantee a neutral channel
providing impartial information and coordination in detail in business
transfers. Consultation should be supported by coordinated and high-class
material, training, guidance, and tools for assistance. Private experts,
investors, tax authorities, etc should be linked closely, and adequate
training should be provided for both transferors and successors.
Sellers and buyers often have a different view on the transfer process,
for example on the value of the business. Differences in point of views
often create a divide between the involved parties. More uniform
methods should be created to approach the transfer, for example by
establishing consultation on the creation of a business transfer plan and
better taking into account the buyers’ point of view.
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Currently there are better planned and coordinated services available for
starting a new business than continuing existing operations. Business
transfers are to be associated with starting a business with equal support
from the society.
Several studies have aimed to determine the total number of upcoming
business transfers. There is no need to contest the total number, but
a critical approach should be taken regarding the numbers presented
in studies and in the media. If the numbers are modified according to
the characteristics of transferable businesses the number of potential
transfers would drop drastically. In the future it is important to note if
the business has potential for transfer, and not just stare at the total
number of business transfers. This would require more detailed statistics
on successful and failed business transfers, as well as improvement in
finding potential businesses for transfer and providing better services
for them.
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References
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INTRODUCTION
This report is the deliverable of the Action 2.1 Baseline analysis of the
REINO project. Its objective is on the one hand to describe how Greek
entrepreneurs face the business transfer challenge and how the Greek
state supports them in this respect; on the other hand, the purpose of
this report is to provide a basis for the pilot actions in Greece.
The report is divided into two parts. The first part deals with the business
transfer context in Greece; it discusses the institutional, legal, financial,
tax, and support services provided. The data collection in the first part
was carried out mostly through desk research and some interviews with
government officials. It shows that the Greek state has been relatively
slow in responding to the 1994 EC Recommendation, since many of
the 14 initially recommended measures are pending even today. At
the moment, however, there are several state organizations and cross-
cutting teams of government officials dealing with business transfers,
as new legislation was introduced in November 2006. Tax incentives for
all categories of business transfers were introduced. Later in the year,
additional legislation facilitated the licensing for the operation of certain
types of business activities when transferred. However, in these state
initiatives there is still a lack of hands-on support services facilitating
business transfers. In this sense, the contribution of the REINO project
is crucial.
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Economic
Total 0-4 5-9 10-19 20-29 30-49 50-99 over
sector
100
General total 879 318 844 567 17 713 8 588 2 908 2 335 1 534 1 323
Agriculture, 18 120 17 480 122 83 29 21 13 12
forestry, farming,
hunting
Wholesale & 307 298 296 374 6 282 2 658 788 569 344 283
retail
Hotel and 103 961 99 369 2 567 1 148 375 276 129 97
catering
Transport, 46 957 45 120 957 463 156 117 82 62
logistics,
communication
Intermediary 3 640 3 499 51 22 12 19 15 32
financial
organizations
Real estate 112 335 109 997 1 186 577 192 139 123 121
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The reasons for and types of business transfers differ due to many
factors, such as the size of the companies and their legal form.
ibid
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Table 3 shows that almost 1.29% of all SMEs are transferred by onerous
cause, 0.14% by gratuitous cause, and 0.50% by concentration-
absorption. The major reasons for transfer in Greece seem to be the
change in company variables (47.94%) and the change in partnership
(49.90%).
Then again, it seems that the onerous and gratuitous causes are more
significant in the transfers of micro companies than those of small or
medium-sized companies.
Business transfers are usually carried out due to the fact that the owners
retire on a pension. However, the number of transfers that are carried
out due to personal reasons is increasing. Similarly, there is an increase
in the number of family-owned SMEs that are transferred outside the
family by selling to third parties.
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Some conclusions
1. At the moment, Greek SMEs face a number of challenges. One of
them is their low productivity. It has been attributed to various
factors, such as limited knowledge-intensive business activities,
limited utilization of modern technology, insufficient organization
of production, as well as outdated methods of management,
marketing and administration.
2. Greek SMEs, like SMEs all over the world, are confronted with
difficulties due to the higher risks characterizing them, the lack of
sufficient guarantees, as well as their family-oriented character.
3. Greek SMEs also face many bureaucratic, unpredictable and time-
consuming procedures. This might be one of the reasons why
business transfers are strongly taking place inside the family i.e.
in a friendly and controllable context.
4. Business transfers in Greece:
• Complexity of the procedures required for the transfer.
• Greek legislation does not provide the appropriate methods and
tools for the entrepreneurs to facilitate the transfer.
• Entrepreneurs’ unawareness of the continuity problem of their
businesses.
• Emotional or psychological barriers.
• Size of the enterprises.
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As Transferor is considered:
Entrepreneurs who are going to retire due to age; entrepreneurs
who cease or change their entrepreneurial activity (early retirement,
occupational change etc); entrepreneurs who face an unforeseen
situation (divorce, illness, death etc).
Greece is the most centralized country in the EU, at least among the
EU-15. When discussing public sector business transfer initiatives, it is
necessary to distinguish between national and sub-national levels.
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Tax incentives
For business transfers the following tax measures are in force:
• Profits or benefits resulting from the company’s transfer to non-
related persons are taxed by rate 20%.
• The real value of the entire enterprise or subsidiary company
that is transferred by onerous cause to first or second-degree
relatives is taxed once with coefficient of 1,2% or 2,4%
respectively. The same coefficients are in effect for the transfer of
individual enterprises, portions or shares in limited partnerships,
unlimited general partnerships or limited companies, to first or
second-degree relatives in case of inheritance, gift or parents as
beneficiaries.
Company law
(i) Sole proprietorship companies
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• Limited Partnership
• Limited company
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Labour law
• Directive 77/187/EOK ensures the workers’ rights to work and
pension after the business transfer has taken place. Greece
has harmonized its national policy to this Directive through
Presidential Decree 572/1988, which was subsequently replaced
by Presidential Decree 187/ 2002, through which Greek
legislation adapted to the updated EU legislations.
• Law 2112/1920 Article 6 (which is the foundational company
law in modern Greece) was introduced even before the EU
legislation and provided for the workers’ rights in case of change
of employer.
- Legal aspects
• Implementation of the possibility of SMEs, in connection with the
transfer, to change their legal form from sole proprietorship to plc
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- Support structures
• Research and studies of the economic impacts, procedures,
problems and the results of business transfers in Greece.
• Public awareness regarding the appropriate processes and
requirements concerning business transfers, and the production
of information that will contribute to an efficient brainstorming of
company owners about the transfers. One of the main reasons
for the business transfers failing in Greece is that the required
processes have been started too late. According to experts, the
planning of the transfer may last 5-10 years. Unfortunately,
the entrepreneurs very often avoid discussing or planning the
transfer. The information campaign regarding the transfer process
will contribute to the awareness of the entrepreneurs as well as
to the implementation of the preparations required.
- Raising awareness
• Organization of information events concerning legislation,
taxation and financial framework of business transfers for legal
heirs/successors, third parties (executives, potential buyers
etc), entrepreneurs at the age of retirement and for potential
successors.
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Chambers of Commerce
The Greek Chambers of Commerce, in spite of the fact that they are the
par excellence business support organizations in Greece, still have not
yet tackled the business transfer problem. One of the main obstacles is
the lack of an electronic business registry. The establishment of an e-
business registry involves the Ministry of Development, all the CCIs, the
Ministry of Economics and Finance, prefectural administrations, and the
Ministry of Justice through its regional courts. One of the reasons for
this delay is that e-business models and e-infrastructure is still lagging
behind in Greece.
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real estate agencies are involved in business sales, and there are also
consultancies specialized in mergers and acquisitions.
CONCLUSIONS
The Greek state has recently been taking measures facilitating business
transfers, especially in respect of taxation, business licenses, and legal
forms of companies. However, financing initiatives, support services,
and an Internet-based market place are missing. It can be concluded
that the REINO project, by aiming to set up the Business Renewal
Centre and the e-market place, will make a major contribution towards
improving the business transfer context in Greece.
Sample
• NUMBER: 85 small and micro companies
• REGIONS: Piraeus and Voiotia
• PERIOD: January – April 2007
• BRANCH: the service sector (‘closed professions’ excluded, see p.
3 SAMPLE, BRANCHES), commerce, manufacturing, construction
Implementation Methodology
- Structured questionnaire; the model from the leading REINO
partner was slightly modified and translated into Greek
- Experts from the European Profiles SA
- Support from the UHCCI:
• Workshops in the CCIs of Athens, Piraeus and Voiotia; meetings
with local entrepreneurs
• Individual meetings and interviews with entrepreneurs
Analysis of results
General information
• [a] Years of operation: 49% of the interviewed enterprises
have operated more than 20 years, and about 12% between
20-25 years. [b] Gender: 66% of the entrepreneurs are male,
and 34% are female. [c] Location: 29% of the enterprises are
located in Athens or in Piraeus and 34% in Voiotia. [d] Legal
form: 45% of the enterprises are sole entrepreneurships,
16% are limited companies, and 16% are unlimited general
partnerships. [e] Branch. 32% of the enterprises are active
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Key findings
- First observation: business transfer is a family affair
• 52% of the interviewees regard the future of the business as a
purely family affair (generation change).
• only 23% expect a profitable sale of their business.
• 92% of successors are identified within the immediate social
surroundings of the transferor (close family and friends); only
8% seek for successors through the market.
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10 Transfer of businesses –continuity through a new beginning - Final report of the MAP
2002 project, DG Enterprise, August 2003 http://ec.europa.eu/internal_market/qualifications/regprof/
regprofs/dsp_bycountry.cfm
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The conclusion is that the project has not been able to help
those that needed it the most, because of the wider, institutional
problems.
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INTRODUCTION
This report aims to summarize the situation in the region of Veneto and
Italy as a whole, in terms of business transfers in general and business
transfer issues in detail (services, tools, good practices, trends).
For the REINO project, these types of businesses are very important.
In fact, the state of the production system in Veneto cannot be fully
understood without a look at the performance of the artisan companies,
which – if we exclude agriculture – account for about 40 per cent of the
production units operating in the region.
In 2006, once again the increase was predominantly due to the growth
in the number of companies limited by shares. Following the boom
recorded in the three-year period 2001-03, which was a result of the
amendments and additions made to the framework law on artisan
enterprises, the number of limited companies levelled off in the two-
year period between 2004 and 2005, and increased by 18.1% in 2006,
bringing the total number to 5 192 companies.
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understand the state of the crafts and small enterprise sector. According
to the semiannual survey by Confartigianato del Veneto, the regional
crafts association in Veneto, the resulting picture looks encouraging.
Year 2006 closed with a total increase in turnover of 0.6%, which was
especially optimistic for the manufacturing sector (+2.6%). The turnover
reflects the trends and proportions of the evolution of demand, which
grew by 0.8% overall and +2.6% in the manufacturing sector.
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These indicators have been used to contrast the position of Veneto with
that of the following regions: Piedmont, Lombardy, Emilia Romagna,
Tuscany, Catalonia, Baden-Württemberg, Bayern and Rhône-Alpes.
If reference is made to the ratio between the expenditure for R&D and
GDP, Veneto ranks rather below the represented European countries
(0.7% in 2003), especially if we compare the results achieved by the
German regions of Bayern and Baden-Württemberg, whose innovation
potential has already exceeded the 3% target set in Lisbon. Even the
percentage of R&D expenditure funded by the private sector is still far
from the target of two thirds of the total amount, standing as it does at
a mere 45.2%.
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and the Spanish region of Catalonia (23,5%). All the other represented
regions perform above the EU-25 average. It is interesting to note that
within this category of workers, in Italy graduates represent around 36%
of the total (34.9% in Veneto), while the percentage exceeds 50% in
the other European regions, with Catalonia soaring above everyone else
with 74.6%. This indicator shows that the demand for highly trained
graduates is limited, compared to the percentage of workers who attend
vocational training courses during their working life.
However, when contrasted with the region’s position on the eve of the
Lisbon summit (1999), there are clear signs of encouragement for Veneto,
notably a slight progress in the field of innovation. More specifically,
compared to the considered European regions, Veneto shows increase
in the amount of R&D financed by the private sector (+2.7%), in the
percentage of human resources over the total workforce employed in
S&T (+4.8%) and the percentage of people working in high tech services
(+1%)
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The latest report considers 7 indicators that are available for 203 regions
of the EU-25:
- population that attended post-secondary education (age group
25-64, year 2004);
- attendance of vocational training initiatives (age group 25-64,
year 2004);
- workers employed in medium-high/high technology
manufacturing activities (of total workforce);
- workers employed in high-technology services (of total
workforce);
- public expenditure for R&D (% of GDP);
- private expenditure for R&D (% of GDP);
- number of patent applications submitted to the EPO (per million
inhabitants).
11 The 2006 edition of the European Innovation Scoreboard (EIS) report was drawn up by the
Maastricht Economic Research Institute on Innovation and Technology (MERIT) and by the European
Commission’s Joint Research Centre (Institute for the Protection and Security of the Citizen). The EIS is a
tool that was developed by the European Commission as a follow-up to the Lisbon strategy, with the aim of
assessing and comparing the performance of European Union Member States in the field of innovation.
12 The method is described in full in “Hugo Hollanders - 2006 European Regional Innovation
Scoreboard (2006 RIS)
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By breaking the indicator down into its components, the main features
identified for Veneto are the relative weakness of private investments in
R&D (a problem shared by all the Italian regions, with the exception of
Piedmont and Lombardy) and the number of science graduates working
in S&T, while its strength lies in the relatively high number of science
graduates employed in the medium-high technology manufacturing
sector.
The latter indicator in particular shows results that exceed the European
average, while as for the remaining indicators Veneto lags behind
especially in terms of performance in private investments and R&D.
If on the one hand there are concrete constraints relating to the need to
update Eurostat indicators, on the other hand the model apparently only
partly explains why Veneto manages to stand amongst the European
Regions with a per capita income of 27 385 euro (assessed on an
equal purchasing power basis), which is higher than both the EU-15
(€24 336) and the EU-25 (€22 414) averages. If innovation is taken as
an indication of an area’s economic growth, presumably there are some
specific features that characterize the region’s system that have not
been picked up or that are hard to measure, but which are essential in
drawing the full picture of innovation in Veneto’s economic system.
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In addition, there are three further issues that are essential for the
economy of Veneto: the first issue is linked to the economy’s strong drive
towards the international markets, the second relates to the presence of
production districts or clusters, while the third relates to the presence of
large industrial leaders in their respective fields of industry.
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Italy
At a national level there are more than 5 million companies, shared in 16
official business lines (NACE code). More than 1.1 million have operated
over 18 years: these companies are, in our opinion, potential clients for
the REINO services, because one of the first steps/goals is the increase
in general awareness. Why do we consider this kind of parameter?
Legal status
Sole shareholder companies still account for over 60% of the total,
general partnership companies about 20% and limited companies only
15%. Nevertheless, if we consider the trend during the last 5-10 years,
we can note a positive increase in the number of limited companies.
This kind of legal status is more useful in regard to business transfer
processes, because the problems can be solved by modern tools.
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Legal status
Sole shareholder companies still account for over 62% of the total,
general partnership companies about 20% and limited companies
only 15%. For the REINO project, these 288 000 micro companies
are the direct target, because the project focuses specifically on micro
companies.
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We can only add a recent analysis carried out on March 2007 by the
Fondazione Nordest, a development organization of the Italian North-
East region. The study indicates:
- approximately 64% of the Venetian companies are facing a
business transfer (at present and in the middle term, i.e. the
next fifty years);
- considering the risks, 85% of the company representatives stated
that “we can carry out the transfer without problems or help”
(only 15% said that the business transfer issue is difficult and
complex).
This means that the problem in the region exists but, at the same
time, there is not enough awareness, especially among senior company
founders/owners.
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Government
No specific governmental/centralized services are available.
Nevertheless, owing to the Ministry of Development and Innovation
and the involvement of the National Chamber of Commerce there is
now a general and national virtual network (public/private), which was
launched two years ago. This development created a good and pro-active
environment at a national level, where many operators can interact with
and support each other.
Regional operators
- Public: some regions developed innovative and effective services
for the business transfer processes and financed pilot initiatives
(i.e. Veneto, Lombardy, Friuli Venezia Giulia, Marche, Emilia
Romagna).
- Quasi institutional/private: owing to the public initiatives, some
focused instances (i.e. special agencies, regional development
agencies, several trade associations) started to provide a wide
offer of qualified services.
Private sector
There are many types of experts and different levels of intervention
(general information, initial guidance, consultation and training):
- expert organizations, small or medium, with good and wide
experiences in the field of business transfer, that can support
the whole process (growth of awareness, research, training and
consultation) at the local/regional and national/transnational
level;
- organizations, usually medium-size, with an appreciated, but not
focused, experiences in the field of business transfer, that can
give support in some phases of the process;
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CONSULTANCIES
www.studiocentroveneto. A business consultancy focused on
com business transfer services, research,
training, and development.
www.contractmanager.it A temporary manager consultancy,
specialized also in business transfers.
http://www. A business consultancy that offers
shortconnection.com business transfer services.
http://www.altadirezione. A business consultancy offering business
it/CD/CD10 transfer services.
http://www.studiobarale. A business consultancy offering business
it/Passaggio_ transfer services.
generazionale.html
http://www. Technical and fiscal information on
euromedfinanza.it/ business transfers. Created for giving
support on venture capital, private
equity, and stock exchange.
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Financing
At the moment, in Italy there are no specific services/funds for business
transfer processes. In general, banks offer traditional services to the
SMEs; only some financial institutions have started pilot initiatives (e.g.
marketplace databases, innovative loans).
Taxation
At the moment, in Italy there are no specific fiscal laws for business
transfer processes, with one exception: in Oct. 2002 the Government
abolished the inheritance and gift taxes. The new government has
reintroduced a light taxation policy (depending on the typology of the
goods and on the level of family relationship).
Legislation
In general, at a national or regional level there are no specific laws
for business transfer processes, with one exception: the Veneto region
approved, in March 2005, a draft law, which is still the first of its kind
at a European level.
In synthesis, the draft law consisted of two parts:
• Observatory, i.e. a regional renewal centre, in which data,
experiences, tools and initiatives are collected, and always up-to-
date.
• Measures for MSMEs, i.e. support services for companies, in term
of financial aid.
Best practices
See the list of projects and initiatives above.
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CONCLUSIONS
Sources of information:
- the Stock View – Infocamere database (most recent data from
Dec. 2006);
- Istat (national statistical institute) database;
- Own research and surveys;
- Data collected on the Internet.
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REINO aims to
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