This is not an unusual case. Bankers, who watch the management and financial conditions of small and medium-sized enterprises up close, widely expect such cases to increase.
Indeed, among the 1,500 SMEs that had agreements with Woori Bank's corporate finance centers as of the end of August, 631, or 42.1%, had chief executives aged 60 to 69, while 15.1% were 70 to 79 and 1.9% were 80 or older. By company age, 257 firms, or 17.1%, have operated for 30 to 39 years, and 96, or 6.4%, for 40 years or more.
The problem is that, as at B, many companies' children do not want to take over. In the same vein, 44.8% of Woori Bank's partner firms are considering a sale to a third party. "There are more than a few cases where an owner's child tries it for five years or more and then says they can't do it," an official at a commercial bank said on the 15th. "Many chief executives raised their children well, and those children go into professions such as medicine, academia and law, so they don't want to run a manufacturing business."
Notably, the smaller the manufacturer, the greater the concern. Broken down by revenue, 79.4% of the partner firms had sales below 50 billion won. Firms with 50 billion to 99.9 billion won accounted for 13.1%, and those with 100 billion won or more for 7.5%. By headcount, 67.9% of the partner companies had fewer than 50 full-time employees. That means smaller companies are the least likely to have settled on a succession plan.
Business circles note that many of these companies have built decades of operating history while creating jobs in their local communities. Selling to a private equity firm is one option for a third-party sale, but many worry that employment could become unstable in that case. Private equity firms are also unlikely to take interest in small companies.
For that reason, industry officials cite employee succession as a realistic alternative. Employees have a strong understanding of the company's technology, organizational culture and industrial ecosystem, including its business partners, which helps preserve business continuity. Park No-geun, a professor of business administration at Hankuk University of Foreign Studies, said, "Employee succession is an effective alternative that can achieve both technological capability and employment stability."
Major economies already have systems in place to support employee succession. After Japan became a super-aged society in 2007 and business closures and suspensions among SMEs surged, it enacted a law to facilitate management succession and support third-party succession. Through its special taxation measures law, Japan provides benefits such as tax credits for capital investment tied to business succession and reduced acquisition taxes on real estate.
Japan also expanded funding support for employees taking over. As of 2024, family succession and employee succession each accounted for 35% of cases in Japan. Kim Yu-jae, head of Woori Bank's business succession support center, said, "In Japan, policy financial institutions and local governments actively provide guarantees so that funds can be raised smoothly during employee succession."
The United States supports employee buyouts through leveraged employee stock ownership plans. When a majority shareholder of an unlisted company sells 30% or more of total shares to an ESOP, taxation is deferred, and when employees pursue an acquisition, the Small Business Administration provides guarantees of up to 85%.
Academics advise that Korea should further expand public institutions' guarantees for employee acquisition financing as well as tax support. The Ministry of Economy and Finance said in this year's tax reform plan that it would create a capital gains tax reduction for third-party business succession by "employees who have worked continuously at the company being succeeded for five years or more," but analysts say that alone is not enough.
Demand for financing on the ground is considerable. Woori Bank has completed succession support consulting for 269 partner companies. Of those, 11 involved corporate valuations and M&A advisory work. Lending backed by the Korea Technology Finance Corporation's M&A agreement guarantees reached 16 billion won across four deals. Ahn Dong-hyun, a professor of economics at Seoul National University, said, "Realistically, SMEs can only complete succession with government support," adding, "Support such as guarantees from policy financial institutions or acquisition financing must accompany it."
