European succession in the age of expensive credit

22 October 2025

Thousands of family-controlled firms across Europe are preparing for a generational handover at a time when the economic landscape looks very different from that faced by their founders and parents.

Europe is home to nearly half of the world’s 500 biggest listed family businesses.^[1] Within the next decade, nearly two-fifths of Europe’s family-owned firms anticipate a transition in leadership or ownership.^[2]

Around 450,000 businesses in Europe change owners every year, but the financial implications of those transfers can be complex.^[3]^,^[4] For inheritors, generational transfers often come with a heavy tax burden than can trigger a short-term liquidity crunch. Heirs may need to buy shares to secure control or look to external financing to pursue other interests. Lenders, meanwhile, can be reluctant to extend credit to next-generation borrowers who lack their parents’ track record.

Putting in place professional structures like management teams, outside board members, and family business advisors can boost the chances of securing bank loans for succession. But many firms still operate informally, and the new generation’s disruptive ideas often raise eyebrows among managers and investors.

For today’s heirs, their ambition is also colliding with an unforgiving environment. Inflation has become a structural concern and interest rates remain high by recent standards. With stricter rules making bank loans harder to get, banks are pointing successors toward IPOs or private lenders.^[5] Private debt has taken off — especially direct lending — and now plays a big role in helping family businesses change hands.^[6]

Private loans can be pricey — with high interest rates and onerous conditions — making it harder for successors to get ahead. That’s why some are turning to other options like mezzanine financing or equity-backed loans.

These can be easier to afford and might help them grow the business faster than inflation, all while keeping the family name strong.

Keeping it in the family in a globalized world

European family business heirs are facing a tougher competitive field than their predecessors. In the past, strong domestic brands and stable local demand often sufficed; today, global supply chains, digital disruption, professionalization and scale advantages increasingly determine survival.^[7]^,^[8]

Luckily, Europe’s reputation for quality and heritage still commands a premium. Many of the continent’s family-run groups — from Italy’s Prada to Germany’s Schaeffler Group — have leveraged generational change to transform artisanal or industrial foundations into globally recognized enterprises.

To sustain margins, successors may have to look outward — expanding into new markets and acquiring global capabilities, even as competition intensifies from Asian and US peers. For many European family businesses, that means shrugging off a conservative mindset geared towards socioemotional wealth and reputation within their domestic market rather than international recognition.^[9]

But Europe is changing rapidly: Spanish beauty and fragrance firm Puig, for example, went public in 2024 and essentially operates as a fund, helping founder-run beauty enterprises achieve international scale.^[10] Others are being invited by private equity firms and other institutional investors to pursue strategic partnerships or sell minority equity stakes to fund international growth while preserving family influence.^[11]

Still, selling equity can be emotionally fraught. Beyond the dilution of ownership, it can be read internally as a loss of confidence in the family’s stewardship. Many inheritors remain reluctant to cede shares built over generations — especially when those shares carry symbolic weight. Outside investment may come with new expectations of swift growth and measurable returns, which risk diluting family values that underpin their success.

For some heirs, credit might be necessary in redefining business models or pursuing new ventures altogether. For example, Brad Harris, son of Australian travel agency Flight Centre co-founder Geoff Harris, launched a corporate training firm to institutionalize leadership — inspired, in part, by seeing the errors of his father’s informal ways.^[12] However, he had to self-finance the venture.

Equity-backed financing can help successors secure non-recourse credit, while preserving long-term exposure.

The old adage that “the first generation builds, the second expands, and the third squanders” has long haunted family enterprises. Yet in today’s Europe, successor generations are often highly educated, globally exposed, and willing to professionalize operations while preserving family values. A sophisticated ecosystem of advisors, lenders, and alternative financiers exists to support them in their ambitions.

Ultimately, alternative capital in its many forms can help Europe’s family dynasties navigate intergenerational transitions more effectively, while also helping successors access the financing they need to ensure businesses not only endure — but evolve.

[1] https://www.ey.com/en_gl/insights/family-enterprise/family-business-index

[2] https://www.ey.com/en_lu/insights/private-equity/family-owned-businesses-the-role-of-private-equity-in-succession-planning

[3] https://www.ecgi.global/system/files/2024-10/the-financial-burden-of-passing-on-the-legacy-exploring-succession-financing-in-family-firms.pdf

[4] https://data.ecb.europa.eu/data/datasets/MIR/MIR.M.U2.B.A2I.AM.R.A.2240.EUR.N

[5] https://www.ubs.com/global/en/assetmanagement/insights/investment-outlook/the-red-thread/trt-mid-year-2025/articles/structural-shifts-in-europes-credit-ecosystem.html

[6] https://www.muzinich.com/opinions/2024-06-12-european-private-credit-waiting-for-the-next-big-leap

[7] https://cfeg.com/insights-research/globalization

[8] https://kpmg.com/cy/en/home/insights/2025/07/heritage-and-innovation–the-future-of-family-businesses.html

[9] https://ssrn.com/abstract=4027437

[10] https://www.ft.com/content/25007681-8ba8-4fa5-89a2-b54d44f7325d

[11] https://www.ey.com/en_lu/insights/private-equity/family-owned-businesses-the-role-of-private-equity-in-succession-planning

[12] https://altoo.io/legacy-and-latitude-how-heirs-build-their-own-path/

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