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Succession in a family business: when an external managing director makes sense

Family business succession in Austria and Germany: when an external managing director makes sense, how to set up governance and which mistakes to avoid.

By David Ertler · 10 November 2026 · 5 min read

Over the coming years, a large number of family businesses in Austria and Germany will change hands. Many owners are asking not only who should own the company one day, but also who can run it. This article puts the figures in context, describes when an external managing director is the better answer, and what the family and its boards should settle first.

The succession wave in figures

Austria: According to a study by KMU Forschung Austria, commissioned by the Austrian Economic Chamber (WKÖ) and the economics ministry, around 56,600 employer businesses are due for handover by 2035, about a quarter of all employer businesses. They employ almost 780,000 people, around 350,000 of them in manufacturing and trade alone. 55 per cent of handovers already take place outside the family, and the share is rising. Owners name financing by the successor (70 per cent) and the tax burden (66 per cent) as the biggest obstacles.

Germany: The Institut für Mittelstandsforschung (IfM) Bonn estimates that around 186,000 companies will need a successor between 2026 and 2030. According to KfW's succession monitor of January 2026, 545,000 small and mid-sized companies intend to arrange a succession by the end of 2029. For the first time, more owners plan to close their business: 569,000. In 2025, 57 per cent of owners in the German Mittelstand were 55 or older. A meta-analysis of 23 studies by IfM Bonn finds that 54 per cent of family businesses stay in the family at handover, 17 per cent pass to employees and 29 per cent to outside buyers.

These figures describe the transfer of ownership. Who leads the business afterwards is a separate question.

Ownership and leadership are two successions

In many family businesses, ownership and leadership have rested with the same person for decades. At succession, they can be separated. That leaves four basic routes:

The family keeps ownership and a family member takes over leadership.
The family keeps ownership and an external managing director takes over leadership.
Management takes over ownership and leadership, for example through a management buy-out.
The company is sold.

The second route is often considered too late. It allows the family to remain owners without anyone from the family having to carry operational responsibility.

When an external managing director makes sense

Conversations with owners and advisory boards point to a few recurring situations:

The next generation does not want to lead, or is not ready yet. An external managing director can bridge a number of years, provided this is agreed from the outset.
The company has outgrown the family. New markets, plants abroad or external financing call for experience the family does not have.
Several family branches are involved. A managing director with no family ties finds it easier to stay neutral than a cousin.
A sale or outside investment is conceivable in a few years. Professional management makes the company less dependent on individuals.

The external route works less well when the owner is not prepared to hand over decisions. An external managing director without real authority rarely stays long.

What an external managing director wants to know

An experienced managing director considering a move into a family business examines the family as closely as the family examines them. Four questions are central:

What authority will I really have? Not the title, but the list of decisions they can take without checking first.
Who is my counterpart? The senior owner, the shareholders' meeting, an advisory board, or all three? Unclear reporting lines are a warning sign for candidates.
What is the outlook for the role? A five-year bridge is a different offer from a leadership role with no end date. Either can work if it is stated openly.
How will I share in long-term success? In a company without listed shares, this needs its own solutions, such as multi-year profit targets or phantom equity.

Owners who answer these questions before the search talk to candidates about substance rather than uncertainty.

Governance: who decides what

With an external managing director, the family becomes the principal. That requires rules that were not needed before.

Shareholders' meeting: In an Austrian GmbH, it appoints and dismisses the managing director. It should agree beforehand which decisions it reserves for itself, such as investments above a certain threshold, acquisitions or borrowing.

Advisory board or supervisory board: An advisory board is not required by law for a GmbH. A supervisory board is, once the company employs more than 300 people on average (section 29 GmbHG). The German Governance Code for Family Businesses recommends an advisory board as size and complexity grow. For an external managing director, a board with independent members is often a reason to join. It provides a counterpart that is not made up of the family alone.

The family's role: Family members working in the business report to the new managing director. Those who do not work in the business act through the boards. Many families set these rules down in a family constitution. What matters is that the managing director knows whom to talk to about which question.

Rules of procedure: Approval rights, reporting lines and information rights belong in writing before the search begins.

Common mistakes

Starting too late. Succession often begins only when it has become urgent. Yet financing and tax, the biggest hurdles according to KMU Forschung Austria, need lead time.
The predecessor stays in the office. Someone who is still in the building every day and still asked by staff weakens the successor, even without meaning to.
An advisory board made up of confidants. The long-standing tax adviser and the friend from business are valuable, but they do not replace an independent view of strategy and management.
An unclear outlook for the next generation. If it remains open whether and when a family member is to take over, the external managing director will plan differently from what the family expects.
Pay by family standards. Owners used to paying themselves modestly often underestimate what an external managing director costs.

How owners can prepare the search itself and shape the first hundred days is covered in our article The first managing director from outside the family. The process and timing of a search are explained in How does a managing director search work, and pay data is in What does a managing director earn in Austria.

My point: the question is rarely whether the family is willing to let go. It is whether the family decides beforehand what it is letting go of, and what it is not.

Frequently asked questions

How many family businesses in Austria face succession?

According to KMU Forschung Austria, around 56,600 employer businesses with almost 780,000 employees are due for handover by 2035. 55 per cent of handovers take place outside the family.

Can the family remain owners if an external managing director runs the business?

Yes. Ownership and leadership can be separated. The family then acts through the shareholders' meeting and an advisory or supervisory board. Which decisions it reserves for itself should be set out in writing before the appointment.

Does a family business need an advisory board?

Not by law. In Austria, a GmbH needs a supervisory board once it employs more than 300 people on average (section 29 GmbHG). A voluntary advisory board with independent members helps many families work with an external managing director.

When is an external managing director the better solution?

Often when the next generation does not want to lead or is not ready yet, when the company has outgrown the family's experience, or when several family branches are involved. The precondition is that the owner hands over real authority.

Sources

Confidential first conversation