French SME succession crisis intensifies

France faces a growing challenge as a significant portion of its small and medium-sized enterprise (SME) leaders, born in the 1950s and 1960s, approach retirement age. According to economist Alain Tourdjman, nearly 29 percent of SME and medium-sized company leaders are over 60, compared to 15 percent two decades ago.

Retirement wave threatens business continuity

Over the next decade, nearly 500,000 business leaders are expected to retire, with many struggling to find successors. In 2022, these older leaders employed around 3 million people, yet the market for business succession remains limited. Only about 37,000 companies were sold or transferred in 2024.

Regional disparities in business succession

The challenge of finding successors varies by region, with areas like Brittany and Pays de la Loire performing better than Hauts-de-France. This issue affects the local economy, as the productive fabric of regions depends on successful business transitions.

Papin Pact aims to ease succession

Named after SME minister Serge Papin, the Papin Pact is a proposed policy in the finance bill aiming to facilitate business succession. It encourages internal transfers by reducing transfer fees and increasing tax discounts for retiring business owners who pass on their companies to employees.

Challenges remain in implementing the plan

Despite the policy’s potential benefits, practical obstacles persist. Many business leaders do not plan their succession more than two years in advance, while transferring a business can take two to six years. Additionally, successors often lack the necessary capital and skills to manage a business effectively.

Alternative models offer insights

The cooperative movement, with its 2,700 Scop companies, provides an alternative approach by sharing both risk and capital among members. This model highlights the need for broader strategies to ensure business continuity, as demographic trends continue to shape the future of French SMEs.