"It's Okay Without Children"... Successive Cases of Third-Party M&A Business Succession

Establishment of M&A Support Center by the Ministry of SMEs and Startups
Consulting and Acquisition Funding Support Provided

Recently, there have been a series of cases where elderly CEOs without successors have successfully transferred their companies to third parties through mergers and acquisitions (M&A).

On July 8, the Ministry of SMEs and Startups announced that there have been two successful cases in which small and medium-sized enterprises (SMEs) with CEOs aged 60 or older and more than 20 years of business history were transferred to third parties. Company A, which had operated a waste battery recycling business for 23 years, sold the company to another SME in the same field that was seeking to expand its business. Company B, after running a waste management business for 25 years, sold the company to an SME in the same industry due to difficulties in passing it on to children.

In this process, the Korea Technology Finance Corporation provided M&A consulting by facilitating meetings between the management teams of the target and acquiring companies, conducting on-site investigations, and offering guarantee support for acquisition funds, thereby supporting the success of the M&A deals. Through these M&As, both companies were able to transfer their accumulated technology and management expertise, as well as secure employment stability for their employees.

Due to demographic changes, the proportion of CEOs aged 60 or older in manufacturing SMEs has increased 2.4 times over the past 10 years. While many SME owners wish to pass their businesses on to their children, more than 40% of SMEs that do not consider family succession give up on it because they either have no children to succeed them, their children refuse to take over, or their children lack the necessary capabilities. As an alternative, more than 60% are considering options such as hiring professional managers or selling the company, indicating a growing demand for third-party business succession.

In response, since January this year, the Ministry of SMEs and Startups has established an "M&A Support Center" within the Korea Technology Finance Corporation to provide general M&A support and assist elderly CEOs who have difficulty with family succession in transferring their businesses to third parties through M&A. The center offers comprehensive third-party succession services, including: operating an M&A transaction information network, providing brokerage support, building an M&A partners network, offering M&A guarantees, and protecting technology.

The Ministry plans to further strengthen the support infrastructure for business succession through M&A, anticipating an increase in demand for M&A-type succession among SMEs facing difficulties with family succession amid the ongoing aging trend.

Kim Jungjoo, Director of SME Strategy Planning, stated, "In an aging society, ensuring smooth business succession is not just an issue of the survival of individual companies, but a critical policy task for the sustainable growth of our economy and employment stability." He added, "We will strengthen policy support, including the enactment of special laws and the establishment of support infrastructure, so that SMEs facing difficulties with family succession do not encounter obstacles in third-party business succession through M&A."