A comment: Buy-outs of SMEs

The Association of SME Lift Companies (VmA) has recently observed a marked increase in buy-outs of small and medium-sized lift companies by the Big 4. Since 1 January 2023, seven member companies have been bought out alone in the sphere of the VmA.

As a result, in something over a year, the VmA has lost almost ten percent of its members, since according to the statutes, membership lapses upon sale to a group.

A comment by Udo Niggemeier

When you speak to former owners of companies and ask for the reasons for the sale, the answer is usually that finding a successor was the problem. When younger entrepreneurs sell, the shortage of skilled labour, the attitude to work of younger employees and the regulatory and official conditions’ misery are also mentioned as motives.

Lately, a new motive has been added: the bleak economic outlook in Germany, which for the most part has arrived with a delay of two to three years in lift building. Association colleagues, who have more exposure to new construction, speak of drops in orders of up to 50 percent. On top of this, the sales returns on sales to groups have more than doubled in recent years.

What counts here is no longer just taking over maintenance agreements but to an increasing extent acquiring skilled labour too. Experts in small and medium-sized companies often have much wider knowledge than experts in groups and can therefore be deployed more flexibly – this is particularly true of in the fields of repair/maintenance and modernisation.

Young women as successors

The small and medium-sized companies in the lift sector are also struggling to find company successors. However, lately it is also observable that there is a greater trend for the founder’s own children or children of close relatives to take on the company succession. It is striking that these are increasingly often young women.

Selling to investors is also a conceivable model but usually fails to overcome the offers of groups, which are much higher than those of "normal" investors. Models involving transfer to the company’s own employees hold the risk that it will not be possible to make the payments agreed in future based on the profitability of the company. In the case of several large family companies in Germany, it was noticeable that one generation was left out.

Restricted competition

For customers, every buy-out means a further restriction in competition. The companies often continue to be run under the old name. This can result in several companies putting in bids in a call for tenders but on closer examination these turn out all to be from the same provider. It is also observable on the market that instead of practical modernisation, replacement lifts using group products are offered.

These may at first sight appear to be cheaper but when the investment is considered over twenty to thirty years, a very different picture emerges. You can decide for yourself whether this is ecological and sustainable when considered overall.

New company launches

However, apart from group buy-outs, one can see that there are an increasing number of new companies being launched. The founders are often technicians from the companies sold, who dislike the new company processes. But there are also employees from the lower management or sales in the groups who set up for themselves.

It is in all our interests that we continue to have sturdy regional SMEs in the lift sector. The associations are called on to create platforms where young entrepreneurs and successors can gather and exchange information. GAT with its "Next Generation" meeting is a positive example here. Politicians should strive to reduce bureaucracy, simplify regulations and promote start-ups. Operators should rely more on quality and open systems than getting whatever is the cheapest price at the moment. Entrepreneurs should strive to arrange their succession early on.

If we all pull together, there will continue to be group-neutral SMEs and as a result fair and open competition in the lift sector. If this does not happen, the market will in future be dominated by just a few big companies. The consequences of this can be seen in other sectors.

The author is the Chairman of the Association of SME Lift Companies.

More information: vma.de