Family succession vs external sale: weighing the pros and cons
Introduction
You have built your business over decades. Today, the time for succession is approaching. A central question arises: transfer to a family member or sell to an external buyer?
This decision is not just about numbers. It shapes the future of your SME, your entrepreneurial legacy, and often the family balance. On one hand, family succession (FBO - Family Buy-Out) preserves values and continuity. On the other, external sale (MBI - Management Buy-In) opens access to a wider pool of qualified buyers and can maximise valuation.
In Switzerland, where 75,000 businesses will need to change hands by 2030, this question concerns thousands of entrepreneurs. Each situation is unique: available skills within the family, financial expectations, company culture, relational dynamics.
This guide objectively compares both options. You will discover their respective advantages and disadvantages, concrete decision criteria, and how to choose the path best suited to your context. Some sellers even opt for a hybrid approach, combining both models.
📌 Summary (TL;DR)
Family succession (FBO) preserves values and ensures continuity, but limits the choice of successors and can create family tensions. External sale (MBI) widens options, often optimises valuation and professionalises the process, whilst involving a loss of family control.
The choice depends on your priorities: favour FBO if a competent and motivated family successor exists. Opt for MBI if no family member is interested or qualified, or if maximum valuation is a priority. A hybrid approach remains possible in certain cases.
📚 Table of contents
Family succession (FBO): keeping the business in the family
Family Buy-Out (FBO) involves transferring your business to a family member: child, nephew, or sometimes a long-standing employee considered as such. In Switzerland, this option remains popular with many SME owners who wish to preserve the family legacy.
This form of family business succession enables natural continuity. The successor often knows the business for years, which facilitates the transition. However, this familiarity can also mask significant challenges that must be anticipated.
The advantages of family succession
Family succession offers several concrete benefits:
- Continuity of values: The company culture and relationships with clients and employees are preserved
- In-depth knowledge: The successor already knows the workings of the business, its strengths and weaknesses
- Gradual transition: Possibility to support the successor over several years
- Intrinsic motivation: Family attachment strengthens the successor's commitment
- Established trust: Trust relationships facilitate discussions and decisions
The disadvantages and challenges of FBO
Despite its appeal, family succession carries real risks:
- Insufficient skills: The family successor does not always have the necessary qualifications to run the business
- Emotional tensions: Family conflicts can contaminate business decisions
- Undervalued price: The sale price is often below market due to family sentiment
- Complex financing: The successor sometimes struggles to obtain the necessary funds
- Difficulty letting go: The seller interferes in management, hindering the successor's autonomy
External sale (MBI): opening to external buyers
Management Buy-In (MBI) refers to the sale to a buyer external to the business and the family. This could be an entrepreneur, an executive in transition, or an investor seeking to develop their portfolio.
In Switzerland, with 75,000 businesses to be transferred by 2030, the market for external buyers is expanding. This option provides access to a wider pool of qualified and motivated candidates.
The advantages of external sale
The FBO vs MBI balance tips towards MBI in several situations thanks to these advantages:
- Market valuation: Sale price corresponding to the real value of the business
- Qualified buyers: Access to candidates with specific skills and experience
- Clean break: Clear separation facilitating the seller's departure
- New perspectives: The buyer brings a fresh outlook and complementary skills
- Wider visibility: Platforms like Leez provide access to a wide network of acquirers
The disadvantages of external sale
External sale also presents challenges to anticipate:
- Loss of legacy: The family identity of the business may disappear
- Cultural change: Risk of transformation of company culture and values
- Complex process: The sale requires time and rigorous preparation
- Demanding confidentiality: Need to protect sensitive information during the process
- Uncertainty for employees: The buyer may restructure the team
Comparative table: FBO vs MBI
| Criterion | Family succession (FBO) | External sale (MBI) |
|---|---|---|
| Sale price | Often below market | Market price valuation |
| Transition duration | Long and gradual | Shorter and structured |
| Emotional complexity | High (family relationships) | Low (professional relationship) |
| Buyer qualification | Variable, not always optimal | Selection based on skills |
| Financing | Often complex | More structured and professional |
| Cultural continuity | Strong | Uncertain |
When to favour family succession?
Family succession is relevant in these concrete situations:
- Competent and motivated successor: A family member possesses the qualifications and genuine desire to take over
- Essential family values: Family identity is at the heart of the business model
- Continuity as priority: Maintaining client and employee relationships takes precedence over maximising price
- Time available: You can support the successor over several years
In these cases, accepting a price below market can be justified by preserving the legacy.
When to opt for an external sale?
MBI is the right choice when:
- No family successor: No family member has the skills or motivation
- Value maximisation: You wish to obtain the best price for your retirement
- Specific skills required: The business requires expertise that the family does not possess
- Clean break desired: You want to turn the page completely
To assess the value of your business and make it visible to qualified buyers, Leez offers the necessary tools.
The hybrid option: combining both approaches
Between FBO vs MBI, mixed solutions exist to address complex situations:
- Partial sale: The family retains a minority share whilst the external buyer takes control
- Family-external partnership: A family member and an external buyer co-manage the business
- Gradual transition: Temporary external management before complete family buyback
- Progressive buyout: The family successor acquires the business in stages
These hybrid models allow combining family continuity and external skills.
Getting support for your decision
Choosing between family succession and external sale requires professional support. Fiduciaries, lawyers and M&A advisers provide technical expertise and an objective perspective.
The Leez partner network is available without obligation to guide you. These experts help you objectively assess the options and avoid the common mistakes that compromise successions.
The decision between family succession and external sale is not simply a financial calculation. It shapes the future of your business, your teams and your entrepreneurial legacy. Each option presents distinct advantages: FBO favours continuity and values, whilst MBI opens access to new skills and potentially higher valuation.
The key is to objectively assess your situation: the real capacity of your relatives to take over the business, your financial objectives, and the strategic needs of your SME. Hybrid solutions also offer interesting compromises to reconcile these different dimensions.
Whatever path you choose, rigorous preparation and appropriate support remain crucial. Estimate the value of your business free of charge to lay the foundations for an informed decision, or explore our network of experts to receive support in this strategic reflection.
