Unprecedented decline in business transfers in 2020

[May 2021] For more than 10 years, BPCE L'Observatoire has been analyzing the business transfer market. In this new article, the economists at BPCE take a new look at the impact of Covid-19 on the transfer of company ownership in an article that appeared in the SME Report published by Bpi France in May 2021.

The transfer of ownership is a stage in a company’s life cycle that is more difficult to define – and is frequently less well documented – than its creation or liquidation. This article sets out to provide an overview of ownership transfer operations on a scale encompassing all companies but focusing more particularly on SMEs and intermediate-sized enterprises (ISEs), using a temporal, sector-specific, and territorial approach.

No increase in the number of company transfers despite the ageing of managers over the past 10 years

The number of business transfers has been following a downward trend over the past decade, from 45,815 in 2010 to 37,111 transactions in 2019. Several findings emerge from this study: 

  • Predominant impact of the company’s size: there has been an almost uninterrupted decline in the number of transfers of very small enterprises (VSEs) with no employees whereas the transfer of companies with employees (excluding large corporations) experienced an initial period of decline between 2010 and 2015 followed by a second period of increase between 2015 and 2019.
  • Minor impact of the age factor: the demographic ageing of the population – and therefore of SME and ISE managers – has not led to a wave of business transfers. In fact, the intentions of older managers to transfer ownership of their companies – naturally more frequent in this demographic – only partially result in an actual sale (the manager’s lack of preparedness, the excessively time-consuming management of day-to-day activities, etc.). 
  • See the article for the sector-specific effects and territorial analysis.

A cautious, wait-and-see approach to the transfer of company ownership in 2020

In 2020, 31,300 company transfer operations were recorded in France, down 16% from the total of 37,100 in 2019.

  •  The number of mergers and splits rose by 7% in 2020, while other types of transfer – chiefly the sale of business assets and operations, as well as the transfer of lease management rights – fell by 20%.
  • The sectors most affected by the health crisis also saw a greater decline in business transfers in 2020. 

Uncertainties about the economic and health situation have led potential buyers and sellers to adopt a wait-and-see attitude: it’s difficult to assess the economic health of a business based on the 2020 financial year, and the wait-and-see attitude is linked to health restrictions and the degree of compatibility of the business with the new digital, organizational and environmental business context, etc.