Johnny Ludvigsen & Niels Ole Svendstrup Jensen

Student thesis: Master thesis


This thesis has been written as a part of the MSc (Business Administration and Auditing) programme at the Copenhagen Business School. Our objective of this thesis is to create clarity as to the problems arising in relation to succession processes within families. In order to solve this problem, we use as basis a family-owned enterprise which the father wishes to pass on by succession to one of his sons in the best possible manner. The other son of the father has no interest in making a career within the family enterprise. On this basis, we outline our problem, i.e., how a transferor transfers a personal enterprise to an acquirer in the most appropriate manner. The most appropriate succession process accordingly takes into account the transferor’s requests for ensuring his future pension and the acquirer’s limited financial affairs. In order to answer this primary problem, we apply as basis the following sub-questions: · Which considerations are to be made before an actual succession process? · Which models are applicable to the succession process, and which advantages and disadvantages are connected to the individual models? · How is the unlisted private limited company valuated? · Which consequences does each model have to the parties involved? · Which of the models are most appropriate for the succession process? By our analyses within the individual sub-questions we conclude that the introductory considerations are to involve the whole family for the purpose of carrying through the succession process in the most appropriate manner to all parties involved. Openness and interaction are important factors in the introductory considerations. 2 After the analysis of the introductory considerations, we analyse the advantages and disadvantages of each succession process model for the purpose of finding the models which are most appropriate to our case family. In order to give more depth and clarity to the analysis, we incorporate a number of calculation examples where, among other things, we valuate the unlisted shares. The introductory considerations, the valuation and the analysis of the succession process models end up in a plan for the actual succession process. We recommend that a tax-exempt company conversion be the first step. The purpose thereof is to convert the personal enterprise into a company as we concluded that the company structure by which the father could gradually transfer the ownership of his enterprise to his son was the most appropriate method. After this, a tax-exempt exchange of shares is performed so that the father establishes a holding company which is to be used as cash pile and thereby mature the operating company in terms of sale for the succession process. After the holding structure has been set, a tax-exempt demerger is performed for the purpose of having the property and the operating company placed in each its own company. The final part of the plan is for the son to establish a holding company which will gradually purchase the shares of the operating company by use of the A/B model. We will end up with a company structure by which the father, through his holding company, owns the property and a percentage of the operating company which is slowly transferred to the son’s holding company.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2010
Number of pages158