If you are like most business owners, you have likely spent years or even decades building your company from the ground up. You have overcome challenges, built trust with customers, nurtured employees, and turned your ideas into something real.
But as years go by, every business owner will eventually reach their retirement age, and that is when an important question begins to surface: “what happens to my business after I step away?”
For many small and medium-sized enterprise (SME) owners, the thought of succession often comes later than it should. Between daily operations, market demands, and managing people, it is quite natural for long-term planning to be easily overlooked. But, without a clear plan in place, the business you have poured your life into could face an uncertain future once you decide to slow down or retire.
A Growing Succession Challenge Among SMEs
Across Asia, SMEs form the backbone of national economies, but the truth is that many business owners who founded their companies in the 1980s and 1990s are now approaching retirement, without a clear successor in sight.
In Malaysia, for instance, SMEs make up nearly 97% of all businesses, contributing 39.5% of the nation’s gross domestic profit (GDP) in 2024, according to the Department of Statistics. However, based on a recent study by PwC, only 15% of the Malaysian SMEs have a robust succession plan in place. Similar trends can be observed across Singapore, Thailand, Vietnam, and other Southeast Asian countries too.
“My children have their own careers, and they are not interested in continuing the business.”
“My kids studied overseas, and now they only come back to Malaysia for holidays.”
“I have worked long enough, but I do not have a suitable successor to take over, so I must keep running it.”
“If I retire, the company will likely have to close.”
All these voices sound familiar, correct? Yes, these are not rare stories, they are the reality for thousands of profitable, well-established SMEs today. Many of these businesses are not struggling because of poor performance, but simply because there is no one ready to carry the legacy forward.
The next generation often has different aspirations. Trusted employees may lack the capital or readiness to take over. And when ownership passes by default to family members or beneficiaries unfamiliar with the business, the result can be uncertainty, conflict, and loss of value.
This succession gap does not just affect individual businesses – it also brings impacts to jobs, supply chains, and the continuity of local industries that have supported communities for decades.
So, What Exactly Is Business Succession? Why Does It Matter?
Business succession refers to the process of transferring the ownership, leadership, and management responsibilities of a business from one party to another. It is not simply about signing over shares or appointing a new director, it is about ensuring the entire ecosystem of your business continues smoothly.
A proper succession plan considers every element of transition, including:
- Ownership and equity: shares, assets, or the business entity itself
- Leadership roles: management responsibilities, decision-making, strategic direction
- Operational know-how: systems, operational processes, intellectual property
- People and culture: employees, company culture, customer relationships, brand reputation
In essence, it is about preserving the business you have built and passing it into capable hands that can sustain and grow it further. Without a proper succession planning, even profitable, well-established businesses can face serious risks. When a founder retires or steps down without a clear plan, operations can stall, leadership becomes fragmented, uncertainty may cause employees or clients to lose confidence, and the organization can lose its direction.
For employees, the uncertainty surrounding the company’s future can cause anxiety, prompting key talents to leave. For clients and suppliers, it can erode confidence and trust. For family members, the lack of clarity may lead to emotional or financial disputes over ownership and control.
Succession planning is, therefore, not just a “nice-to-have” – it is an essential part of responsible leadership. It protects everything you have built and ensures that your business legacy continues to make an impact, even after you have stepped away.
What Are the Succession Options, and Which Path Fits Best?
There is no one-size-fits-all approach to business succession. Every company is unique, and so are the circumstances, goals, and people behind it. What matters most is choosing a path that safeguards your business continuity, reflects your values, and supports those who have grown alongside you. Here are some of the most common succession approaches, each with its own opportunities and challenges:
1. Family Succession
Passing the business to a family member is often the most traditional and emotionally preferred route. It keeps the company within the family, allowing the next generation to carry on the values, reputation, and relationships built over time. Customers, suppliers, and employees who are already familiar with the family often view this as a reassuring sign of stability and long-term commitment.
Many entrepreneurs originally started their businesses with this vision in mind – to create something their children could one day inherit and continue. When it works well, family succession allows wealth and opportunity to be passed from one generation to the next, ensuring the business continues to contribute to the family’s future.
However, things have changed over the decades. The younger generation today often pursues different passions or builds careers outside the family business. Even when there is interest, not all successors may have the experience or leadership readiness to take over. Without careful planning, mentorship, and alignment, family succession can lead to tension or business decline over time.
2. Internal Leadership / Employee Succession
Another option is to groom a successor from within – a trusted employee who already understands the business and shares the founder’s values. This approach offers continuity and reassurance to employees and clients, as leadership transitions internally to someone familiar with the company’s operations and culture.
In practice, internal succession requires long-term preparation. The owner must identify potential successors early and provide them with guidance, exposure, and management training to prepare them for future leadership. This transition can also include a gradual handover period, where the founder stays involved as an advisor or mentor.
The challenge, however, lies in readiness. Not all SMEs have a deep management bench or formal leadership development programs similar to how large corporations do. And even when the right person exists, financing the transfer or balancing ownership structure can be complex.
3. Co-Owner or Partner Succession
For businesses with multiple shareholders or partners, transferring ownership to an existing co-owner could be an effective way to ensure continuity. A co-owner already understands the business’s operations, culture, and goals, and is likely committed to its long-term success. This option works particularly well for companies where founders share mutual trust and have aligned visions. However, to avoid future disputes, it is important to formalize succession arrangements early – ideally through buy-sell agreements or clearly defined valuation methods. Doing so ensures that the transition remains smooth and fair, even in the event of retirement, illness, or unexpected circumstances.
4. Mergers and Acquisitions (M&A)
In recent years, M&A has become one of the most strategic and sustainable succession options. Through M&A, ownership is transferred to another company, investor, or partner who shares similar values or complementary strengths, while the company will continue with its business, employment, brand and legacy. This approach is especially ideal for founders who do not have a clear successor in place. It allows them to exit on their own terms, whether through a full sale or gradual transition, while bringing in new energy, resources, and expertise to sustain and grow the business.
That said, awareness of M&A as a succession tool among SMEs in Malaysia and across Southeast Asia remains relatively low. Many business owners still associate M&A with large corporations or worry that it might disrupt their employees or alter the company’s identity. In reality, M&A often achieves the opposite. It has become increasingly accessible for SMEs, offering a practical solution for those seeking continuity and stability. By partnering with domestic or overseas buyers who appreciate their know-how, market presence, and legacy, SMEs can find successors who not only bring financial resources but also share their values and vision for long-term growth. With the right guidance, M&A helps good businesses continue their growth journey, safeguard jobs, and contribute to the local economy under capable new leadership.
Why M&A is the Most Strategic and Sustainable Exit Strategy
While each succession path has its merits, M&A stands out as one of the most strategic options that balances continuity, flexibility, and value creation, for SME owners. Here is why it has slowly emerged as a practical and forward-looking path in today’s business environment:
1. Ensures Business Continuity
Through M&A, the business does not have to wind down – it continues to operate, grow, and evolve under new ownership. This provides stability for employees, customers, and suppliers alike. The incoming owner brings fresh resources, leadership, and networks to keep the company competitive and future ready.
2. Maximizes Value for the Owner
M&A allows founders to realize the true market value of their business, or in other words, monetize the hard work for the past few decades, which is often higher than what could be achieved through a simple sale, family transfer, or closure. With experienced advisors like Nihon M&A Center, business owners can identify the right strategic investors, negotiate favorable terms, and structure the deal in a way that reflects both the company’s worth and the founder’s aspirations.
3. Explores New Growth Opportunities
A suitable buyer often brings more than just capital. They may introduce new resources, such as technology, management expertise, or new market access, all of which can propel the company’s next stage of growth. At the same time, employees also benefit from greater career or learning opportunities, while customers continue to enjoy expanded products and services.
4. Preserves the Founder’s Legacy
M&A ensures continuity. It ensures that the founder’s values, brand identity, and company culture continue under a like-minded successor. It’s not about selling out – it is about handing over the reins to someone who shares the same vision and is committed to carrying that legacy forward.
5. Offers Flexibility in Transition
Every business and every founder’s journey is different. M&A provides flexibility to design a transition that suits personal goals and needs. Some founders may prefer a full exit, a phased handover, or some choose to stay on temporarily as advisors to guide the new management. This adaptability makes M&A particularly suitable for SMEs where the founder’s experience and relationships remain integral to the business.
Planning Early with the Right Partner for a Smooth Transition
Business succession is not an event – it is a process that takes time, preparation, and the right support. A successful succession does not happen overnight, it often begins years before retirement, giving business owners time to assess their options, strengthen their operations, and plan a smooth handover aligned with their long-term goals.
At Nihon M&A Center, our philosophy has always been rooted in one belief: “M&A is not just about selling a company, it is about continuing a legacy that a founder has built with years of passion and hard work.” Since our establishment in Japan more than 30 years ago, we have supported thousands of SME owners in navigating their succession journeys with confidence.
Our mission is simple – to assist companies to continue and prosper through M&A. Whether in Malaysia or across Southeast Asia, we serve as a bridge between SMEs and investors who not only bring financial resources but also the right mindset to continue growing the business and nurturing its people. Because at Nihon M&A Center, we believe every business has a story worth continuing — and every founder deserves to see their life’s work live on.
Retirement does not have to mark the end of your business. With thoughtful planning and the right guidance, it can be the beginning of a new chapter — one where your business continues to grow, your employees thrive, and your legacy endures.
Ready to Begin Your Succession Journey? Contact Us now to understand how our experienced consultants can help you navigate the succession process with confidence, ensuring that your business continues to grow, even beyond you.
