Atradius Collections has acquired Pro Kolekt from KF Finance. Pro Kolekt is active in 8 countries in South-East Europe in the collection of outstanding receivables in the B2B market segment. With the acquisition of Pro Kolekt, Atradius Collections strengthens its market position in this region. A local presence in the market is essential for Atradius customers to be able to approach the debtor in the local language with the right approach. The Atradius Collections network is the most integrated IT infrastructure in the collection industry. Therefore, this means that synergy benefits and further growth can be realized quickly in the event of an acquisition.
Together with the Atradius Collections team, Clifton Finance has established an acquisition strategy based on which suitable companies in various countries have been approached. We worked closely with Sazun to approach parties in South-East Europe. Sazun is a valuable partner office of Clifton Finance with whom we have a good long-term working relationship. This local presence of our partner organization enabled us to find and approach suitable companies for Atradius.
At the same time, Clifton Finance maintained intensive contact with the decision-makers within the Atradius Collections organization in the Netherlands. In this way, a transaction could be realized with the right partner. Clifton Finance supported Atradius Collections in the entire acquisition process, including the acquisition strategy, approach of potential acquirers, as well as the negotiations and structuring of the transaction.
It will not have escaped your notice that after the quiet “interwar” of the Corona era, a multitude of new developments are coming at us at a rapid pace. There are many geopolitical challenges on the global stage. In the Dutch market, themes for family businesses are playing out in the areas of:
Increasing regulations and legislation around sustainability
Changing labor market
Changing supervisory standards
Themes with very different perspectives. As a company you need to be well prepared to deal with the multitude of challenges in such a broad field. This, of course, in addition to “normal” business operations and strategic choices around the specific market and products. Where are these changes actually leading us? What are the implications for family businesses and especially for the new generation that should take over?
Patagonia effect
This plays out all the more because in far from all cases the new generation is either willing or able to take over the family business. In America, the founder of the American clothing company Patagonia, Yvon Chouinard, chose a different route with his children. He struck out on this path back in 1985, when he decided to devote 1% of sales to sustainability. Patagonia now has sales of €3 billion and makes €100 million in profit. In 2022, Yvon Chouinard did not transfer the company to his children, but relinquished his ownership of the company by transferring it to a trust organization. The profits will be used alongside sustainable projects to put climate change better on the social agenda. In the Netherlands, such a construction is virtually impossible because of our tax system. This is a pity, because through such a construction more money could be available for sustainability initiatives. See also Ineke Koele: The Patagonia Revolution.
Regulation in the field of CSRD
Of course, it can be less rigorous than this Patagonia example to still contribute to society and the environment. But the trend is to inescapable, see also our article on innovation. Indeed, there are more and more obligations to pay attention to sustainability.
The Corporate Sustainability Reporting Directive (CSRD) already announces the new regime and indicates the necessary changes for companies in this area.
The CSRD regulations taking effect from next year are aimed at improving the quality and transparency of corporate sustainability reporting. Companies that meet two of the three criteria are expected to follow the new regulations. The relevant criteria are: 1) more than 250 employees, 2) more than €40M turnover, and 3) more than €20M total assets. In the Netherlands, more than 2,000 companies will meet these criteria, according to a KPMG estimate. In 2024, 2025 and 2026, the first guidelines will be phased in, and by 2028 most companies will have to comply. Under the new regulations, companies will be required to provide more and better information about their sustainability performance. There will have to be more emphasis on corporate (social) responsibility. The interests of all the company’s “stakeholders,” including customers, suppliers, employees and society at large, will have to be taken into account.
Although the rules are initially aimed primarily at large corporations and listed companies, family businesses will also have to comply with the new requirements in the near future. It is therefore important that family businesses are aware of the developments in sustainability reporting and take timely measures to improve their reporting and communication in this area.
Structure regime at family businesses
Because the interests of the companies’ stakeholders and social responsibility must increasingly be considered, companies will also have to operate more openly. This also has implications for the supervision of family businesses. Many larger family businesses still operate traditionally and do not always meet the new requirements around this supervision, according to a survey of family business specialists. The regulation for so-called statutory two-tier companies requires the establishment of an external Supervisory Board, among other rules.
A statutory two-tier company is subject to the requirement that its capital has a value of at least €16 million and at least 100 employees are active in the Netherlands. A works council (OR) must then be in place, and this is usually where the shoe pinches. In many cases, no works council is appointed because there is simply no interest in it or it is not sufficiently encouraged.
Although no recent studies or publications on this subject can be found, the general impression is that still a very large proportion of family businesses have not applied the structure regime despite the size of the company.
Step-by-step adaptation to a new model
The above developments are a consequence of the increasingly important social responsibilities, also for a family business. Responsibilities that go beyond the interests of the company itself or the interests of shareholders.
This may require an adaptation of John Davis’ 3 circle model, widely used in family businesses. This model identifies three interests of a family business. These interests that interfere with each other and also overlap are expressed in three circles. An interplay of these three interests (circles) is necessary to create a strong company.
Figure 1. The Three-Circle Model of the Family Business System was developed by Renato Tagiuri and John Davis at Harvard Business School, and disseminated in working papers beginning in 1978. It was first published in Davis’ dissertation.
The increase in societal issues such as climate change, CSRD guidelines or changing supervision may make it necessary to adapt the model. This longer-term thinking, by the way, is in the DNA of many family businesses. In this sense, the social trend toward greater sustainability is playing into the hands of many family businesses. The question is then more how to fit this better into the model of family businesses.
Framework round the three circles
Social interests and regulations, also called the eco-system in which the family business operates, are, in our opinion, the framework around the three circles in the model. By focusing on this domain, the family business can become aware of the opportunities and threats coming from outside. Based on this, it can adapt to changes in the market and regulatory environment.
This can help make the company more resilient and better able to grow in the long run. But sustainable and socially responsible.
Opportunity for the new generation
Transferring the family business to the next generation may therefore remain attractive to this younger generation. They are more motivated to take over the family business because they can set up the business sustainably and use it as leverage to achieve personal and socially sustainable ambitions.
For more information about this article call Thomas van ‘t Westeinde (0624406144), Gonneke van der Lee (06 52466518) or Maarten Vijverberg (06 55853074)
In November 2022, the ChatGPT platform will be publicly available. The platform was founded by OpenAI and in recent weeks news reports have already come out about possible collaborations with Microsoft. These reports contained much speculation about the possibilities and dangers. Over lunch, there was also a lot of discussion about it in our office. We decided to see if this software would help us finish our work for the day faster.
Before selling the business, an IM is created, which can then be used to approach parties. This is a time-consuming process that mainly involves processing a lot of information. This seems ideal for a language model such as ChatGPT, so we started working on that. The queries below serve as examples, these are not our real transactions at the moment.
Question to ChatGPT:
I would like an information memorandum for the sale of the company Pon of 1 page with a chart. In this I would like to have: – The history of the company – Information about the company’s market position – A description of the revenue model and financial information, such as a multi-year overview at the balance sheet and earnings level and the EBITDA. Finally, I would like the EBITDA multiple of a recent comparable transaction.
ChatGPT’s response: Selling Pon
Pon is a family-owned company that was founded in 1895 and has since grown into one of the largest distributors of technology and industrial products in the Netherlands. The company has a solid market position and generates sales of €8 billion a year.
Pon’s revenue model is based on the sale of technology and industrial products, including machinery, tools, electronics and automation. Pon is also active in services, including maintenance, repair, installation and engineering.
Financial information:
Multi-year statement at balance sheet level: Equity: € 1 billion (2022) Debt capital: € 700 million (2022) Multi-year overview at profit and loss level: Net profit: € 150 million (2022) Turnover: € 8 billion (2022) EBITDA: €250 million (2022) Graph:
[Insert chart showing Pon’s EBITDA growth over the past 5 years]. EBITDA multiple: 8x (comparable to recent transaction in similar market)
Pon is a strong company with a solid market position and a sound financial base. We believe that selling Pon is an attractive opportunity for interested parties, with an attractive multiple of 8x EBITDA.
After initial searches, it becomes clear that ChatGPT can filter global information, but does not meet specific values. However, financial data from 2022 does emerge. Interested, we ask further about other family businesses or similar companies we have done successful transactions for.
Question for ChatGPT: Sell Clifton Finance
I would like an information memorandum for the sale of the company Clifton Finance of 1 page with a chart. In it, I would like to have: – The history of the company – Information about the company’s market position – A description of the revenue model and financial information, such as a multi-year overview at balance sheet and earnings level and EBITDA. Finally, I would like the EBITDA multiple of a recent comparable transaction
ChatGPT’s response:
Clifton Finance was founded in [year] and has since grown into a leading player in the [industry]. Our customers value us for our [unique selling points].
Currently, we have established a solid market position, with a [percentage] share in the [industry] and a growing number of clients in [countries/regions]. Our revenue model is based on [selling products/services] with attractive margins.
Our financial performance is strong, with consolidated EBITDA of [amount] in [recent period]. The balance sheet is healthy, with [capital/debt ratios] and a solvency of [percentage]. Just as our multi-year review of the balance sheet and earnings level is available on request.
A recent comparable transaction in our industry had an EBITDA multiple of [amount]. We believe our solid market position and healthy financial performance justify a similar or even higher multiple.
Chart: [Information on historical financial performance of the company, such as revenue growth and EBITDA margin].
It soon becomes clear that we need to stay in the office for the rest of the day. The template used by ChatGPT cannot be completed further for companies which publish less information online. Although we have obviously grown and our clients appreciate us, fortunately for ChatGPT it is not possible to say what our competences are.
If you are looking for an advisor who can assist you in the merger and acquisition process, please feel free to contact us call Gonneke van der Lee (06 52466518) or Maarten Vijverberg (06 55853074)
In the last quarter of 2022, it was already visible that the takeover market was tilting. It was clear that the impact of the war in Ukraine and the ensuing international crisis on the energy market were having an effect on economic developments. The first half of 2022 showed a prosperous growth in the number of transactions and an increase in transaction volume. In the second half of 2022 the market tilted. The level of transactions in both size and volume was a lot lower1. In October last year, we therefore wrote about a possible tilt in the merger and acquisition market, see: Everything is rising, but for how long? Will the M&A market tilt?
Given current market developments, this now seems easily explainable and obvious, but in October 2022, most other indicators were still positive. In particular, the low unemployment rate and shortage of suitable labour were positive indicators which meant sentiment was still positive initially. At the time, the advantages seemed to far outweigh the disadvantages. Eventually, the market turned and, over time, several factors turned negative, causing the M&A market to deteriorate rapidly.
Globally, the M&A market also stopped growing. In the US alone, major investment banks announced much lower results due to the dramatic decline in M&A transactions.
Reasons for the M&A market downturn
There are a number of reasons why the market has stopped growing.
Higher interest rates, lower prices
High interest rates affect company valuations. High interest rates mean that company valuations are lower, as companies are discounted at a higher discount rate. Sellers often struggle to adjust their price expectations downwards. The business is seen as a ‘life’s work’ and business owners do not see the risks as much as the buyer. In contrast, the buyer faces higher financing costs and will factor this in when considering what price can be financed.
Rising costs and uncertain market
Most sectors do face rising costs such as energy, labour and interest costs. A few sectors are hit harder by the current circumstances, e.g. horticulture or construction. Within these sectors, the sharply rising energy price in particular plays a huge role. But uncertainty about nitrogen policy is also causing major investments to be postponed. Companies are also mostly struggling to fill open jobs at acceptable wages in the short term.
The above developments do not contribute to sentiment and will lead to uncertainty and reticence among buyers.
Results go down
Rising costs are putting pressure on companies’ results. It may also be more difficult to maintain or grow sales.
In December, CBS published a contraction of 0.2% for Dutch GDP. A slight decline, but depending on the figures from the fourth quarter, the Dutch economy could turn into a recession. This ultimately means that the starting points of companies that would want to sell are less favourable.
The data the bankruptcies within the Dutch SME sector even show a sharp increase in the number of bankruptcies. After the almost endless COVID-19 support, companies are now being hit for the first time2.
Blowing off transaction
The uncertainty in the market is also reflected in the fact that the number of deals being called off increased in 2022. One in five deals were called off in 2022, while about 26% are shelved. This is according to a new survey by M&A platform Datasite3. Putting the deal on hold or calling it off may be due to disappointing results or market dynamics that make the risks considered greater or too great.
Scale remains a key positive driver for the M&A market
Ultimately, there are also positive elements that actually drive the growth of the M&A market. The M&A market is ultimately driven by the drivers of active and strong companies. A key driver is economies-of-scale, or economies of scale.
What is the benefit of economies of scale?
In today’s era, markets and processes are becoming increasingly complex and challenging. The world before COVID-19 and the Ukraine war is completely different from the world of today. Another example is the rapidly growing regulatory environment and need for social reporting. Even smaller companies will have to comply with ESG regulations and stricter environmental legislation in the near future, and this is not infrequently a major challenge.
The advantage of an acquisition or merger is that a larger company is created. With this, all kinds of synergies can be realised. But costs can also be better spread. When the company is larger in size, it is also more resilient to complex problems. Especially recently, we have seen a sharp increase in complexity and this is increasingly a ‘driver’ for a merger or acquisition. In 2022, this was visible at supermarket chain Jan Linders, which announced that it would continue as a franchise organisation under the Albert Heijn Label to better cope with the increasing IT/automation challenges.
Examples of focus areas where complexity has only increased are:
Labour market
Supply chain
Technological requirements
Increased regulations around sustainability
In our view, these focus areas are the new drivers of the mergers and acquisitions market, which will resume growth in 2023 after a two- to three-quarter lull. Transactions may then be concluded at lower prices than in the past two years, but especially in the light of a somewhat longer history- still on terms attractive also for the seller. A new balance will thus lead to market recovery.
For more information about this article call Gonneke van der Lee (06 52466518) or Maarten Vijverberg (06 55853074)
In more and more family businesses, the children are succeeding the post-war generation and a new generation is taking over. This new generation has a different mindset than the older generation and has grown up in a different era, often more digital and with a different attitude to life and ‘work-life balance’ (see our blog on work-life balance in family businesses).
The older generation sometimes has more concerns about the future and associated risks than the new generation. These risks – if not due to previous experiences – are then assessed as high. As a result, the old generation sometimes tends to put a bit more faith in existing patterns and in how things have gone in the past. In other words, they may be more risk-averse. This can bite with a desire for innovation from new generations of the family business.
The dynamic between innovating change and still managing risk well is a difficult dilemma. Questions that arise are: What do we stand for as a company and as a family? Do we dare to use the innovative power of the next generation? How do we deal with the desire for sustainability in society and at the family business. (Source: Family Business Dinner 2022 / DekuyperConcepts / CliftonFinance / Wintertaling)
Renewal is a must
Especially after a period with the focus on the global pandemic, there is currently a lot of focus on renewal within the family business.
This renewal is often not only focused on the technical innovations of the company and production. It may also focus on a new market approach , a new form of communication or the loyalty of staff and end customers. Sustainability also plays an important role here for many companies.
A global survey in 2022 by PWC showed that while sustainability is a focus of attention, innovation in a broad sense is even higher among family businesses. The survey revealed that 44% of family businesses are engaged in innovation while ‘only’ 28% of family businesses worldwide are engaged in sustainability. In the Netherlands, the focus on sustainability could be even higher and innovation is also often combined with a greater focus on sustainability.
From our own practice, we know that in the Netherlands, sustainability is taken seriously at Dutch family businesses. Moreover, family businesses are less guided by external factors such as subsidies and legislation. The desire to invest sustainably stems from the fact that family businesses feel more responsible for the future generation, according to a study by RSM and Nijrenrode Business University. This focus on sustainability stems from a sense of duty, according to Roberto Flören of Nyenrode University.
A changing of the guard actually offers opportunities
As mentioned, the younger generation will often view issues such as renewal and innovation differently. New projects aimed at innovation and sustainability can be well supported by the younger generation of the family. This gets them involved in the family business on a subject they themselves are interested in and can also make a difference.
The FD of 25 April 2022 discusses the contradictions between old and new generation when it comes to sustainability and innovation. ‘ Especially the importance attached to sustainability often creates conflicts with the older generation’. ‘The older generation represented by the pater familias often determines what happens, rightly or wrongly’ it reads.
We do not recognise this situation so strongly. With many families, the sustainability agenda is actually an opportunity to involve the younger generation and give their input a face. Many innovations put sustainability first and kill two birds with one stone. A survey by the Landelijk Expertisecentrum Familiebedrijven (LEF) shows that family businesses actually score well on innovation. (Opportunities and bottlenecks in family business 2020; Ilse Matser and Judith van Helvert). The younger generation will also catch on to innovation and sustainability. They are aware that addressing these issues will partly affect their future and that of their children. They are also willing to make sacrifices when it comes to financial constraints or luxuries, or travel restrictions. This is caused by a greater awareness and willingness to start with yourself.
Generation Z and future prospects
We do understand that this effect will only become more evident in time. After all, it is precisely generation Z – the people in their twenties and thirties – that attaches great importance to sustainability and this generation does not yet have a real say in the board rooms of Dutch family businesses. Presumably, over a 10-year period, their influence will be greater and the effects of the sustainability calendar and innovations will be explicitly reflected in the policies of family businesses. In any case, this is a good future prospect that is so important especially for the younger generation.
Despite the effects of COVID-19, the merger and acquisition market has shown stable growth in recent years. The economy in the Netherlands is also still strong. Will this change with the recent developments in the energy market?
Rise in Dutch takeover market in early 2022
The Dutch economy still shows a positive picture in 2022 and continues to grow steadily in 2022 now that all measures and restrictions are completely gone1. Not only is the Dutch economy growing, but also the merger and acquisition market is doing well. In the first half of 2022, the number of transactions increased compared to 2021. Moreover, all the turmoil worldwide has not yet had an effect on valuations. These have remained the same as in 2021, according to figures from Brookz2.
What is striking, however, is that in the EBITDA valuations of the Netherlands compared to abroad are quite a bit lower. For example, pharmaceutical companies in Ireland and England are worth 8.4 times the EBITDA multiple. While in the Netherlands they were sold for an average of 6.35 times the EBITDA multiple. In retail, the same difference occurs compared to France. Whereas French retail companies sold for 5.1 times the EBITDA multiple, in the Netherlands an average of 3 times the EBITDA multiple was paid2. One explanation could be that the transactions in the Netherlands are smaller, so often the multiple will also be somewhat lower.
Rising inflation, rising costs
In August 2022, inflation will have risen further to 12.0%, the last time this occurred in the Netherlands was in 19755. Companies will have to take into account to pass on this inflation in products, in order not to compromise on business results due to the increase in costs. In short, costs will rise in the coming period which will further fuel inflation.
The effect of high inflation makes doing a business valuation a careful exercise. To properly incorporate all aspects, a good analysis of how inflation affects expected returns and costs is needed. But perhaps just as important, what cost increases can or cannot be passed on in price and thus in sales. Forecasting a company’s financial future has become even more uncertain in these times.
Increased employment
Holland’s employment figures also continue to rise. With this, Holland’s unemployment rates have been falling for seven quarters in a row6. This offers a lot of demand from, for example, staffing companies and employment agencies. Consequently, this sector has shown strong growth on average last period7. This growth provides a real driver for mergers and acquisitions in this sector. We therefore see increasing transaction turnover in this market segment.
Favorable dollar exchange rate effects play into the hands of U.S. buyers
Recent research shows increasing interest from U.S. parties in making acquisitions in Europe. Indeed, a favorable dollar exchange rate means that European companies are priced favorably8. This could explain the rise in international transactions in the Brookz report, in which 20% of completed SME transactions involved international buyers.
Whether this effect continues is difficult to estimate. Meanwhile, US interest rates are already a lot higher so the cost of financing has also increased. The higher interest rate in the US will also have an effect on the valuation of companies, as mentioned above. This will depend on the financing mix but also on the currency chosen for the purchase.
So are there no bad news for the merger and acquisition market?
Yes indeed, because we are seeing more and more signs that the market is tilting. Internationally, a turnaround in the number of transactions can already be observed9. In the Dutch market, the picture is still mixed. In certain sectors there is clearly a real decline. Not only are there fewer transactions, but entire industries have shut down work, temporarily or otherwise. Rising energy prices is the big culprit. If quitting is not an option due to the organization or nature of the business, the company will pass the higher costs back into prices. Regardless, this cascading effect has an effect on the companies’ returns and thus the valuations of these companies. All these aspects do not seem to be good drivers for the Dutch M&A market.
Private Equity suffers from higher interest costs
There is also a negative effect of higher interest costs in financing M&A transactions. This higher interest rate on financing the transactions affects their decision especially for Private Equity. They will suffer from higher interest rates possibly financing more with equity or want to pay less for the transaction. In addition, when interest rates are higher, less money flows into Private Equity because institutional investors have more alternative investment options with sufficient returns.
Where are the opportunities? Are there bargains in the market?
A more reserved attitude of Private Equity in the M&A market certainly offers more opportunities for family businesses that finance transactions more conservatively. Especially family capital with ”a longer breath” will be able to benefit from these market developments. They can look out for bargains in the market.
Clifton Finance has joined the recently established Nederlands Gilde van Familiebedrijf specialisten (Dutch Guild of Family Business Specialists) (NGFB). Advisors and specialists from various disciplines and fields have united to form the NGFB. The objective of the NGFB is to develop and combine knowledge and expertise. In this way, family businesses in need of knowledge and expertise can easily find the right specialist. The guild provides a guarantee of the quality of its member advisors. We mediate this through professional selection and quality reviews with a view to specializing in consulting for family businesses.
Family businesses operate from their own perspective and background, therefore they require specific advice. The initiative came about partly from the desire to transfer this specific expertise to a new generation of advisors.
Strongly growing family businesses
The Netherlands has approximately 250 large, medium and small family businesses. It is a diverse group of companies, which make an important contribution to the economic development of the Netherlands. They employ about 2 ½ million people. Family businesses are also faced with the essential social and economic developments. There is an increasing complexity, which is caused by the rapidly growing size of family businesses.
Family businesses used to be very reluctant to hire external advisors. Instead, the current trend is more toward increasing use of external advisors. Specialization and thorough knowledge of the specific situation of family businesses is essential here. The association is committed to knowledge development and further development of the profession, which consists of various disciplines ranging from organizational advice, estate planning as well as merger and acquisition advice.
The NGFB is a platform for entrepreneurial families and family businesses seeking expertise and guidance on issues relating to the business, ownership and/or the family. It is also a closed community for its affiliates, where expertise can be shared and the interests of family businesses can be advocated externally.
ICE Utility Professionals joins Value8’s interim professionals. This was preceded by a careful and intensive process partly prompted by the corona crisis. The sales process was actually initiated as soon as there was a prospect of market recovery. Due to the rapid market recovery, it was important to map out the company thoroughly so that the eventual buyer could estimate the company’s future value.
ICE was looking for an investor who could take the company to the next phase and also further invest in the company’s scale. Value8, with investments in similar services, was a good fit and could add value to the company.
Together with ICE’s DGA, Marcel van Staa, Clifton Finance got the job done and managed to present the company convincingly to potential buyers. Marcel: “You have to prepare well for something like this and timing is essential. In the end, thanks to Clifton Finance’s good connections with Value8, we found a party that matches ICE very well and can get the full potential out of it, while I will still be involved in the coming years.” “The role of Clifton Finance really helped in this” says also Peter Paul de Vries, foreman of Value8.
The personal approach characterised this transaction and was appreciated by all parties.
In more and more family businesses, the children are succeeding the post-war generation and a new generation is taking over. This new generation has a different mindset than the older generation and has grown up in a different time, often more digital and with a different attitude to life and “work-life balance”.
The older generation sometimes has more concerns about the future and the associated risks than the new generation. These risks – whether or not due to previous experiences – are then assessed as great. As a result, the old generation sometimes tends to rely more on existing patterns and on how things have gone in the past. In other words, they may be more risk-averse. This can bite with a desire for innovation from new generations of the family business.
The dynamic between innovating change and still managing risk well is a difficult dilemma. Questions that come up are: What do we stand for as a company and as a family? Do we dare to use the innovative power of the next generation? How do we deal with the desire for sustainability in society and at the family business. (Source: Family Business Dinner 2022 / DekuyperConcepts / CliftonFinance / Wintertaling)
Renewal is a must
Especially after a period with the focus on the global pandemic, there is currently a lot of focus on renewal within the family business.
This renewal is often not only focused on the technical innovations of the company and production. It can also focus on a new market approach , a new form of communication or the loyalty of staff and end customers. Sustainability also plays an important role here for many companies.
A global survey in 2022 by PWC shows that sustainability does have attention, but that innovation in a broad sense is even more important for family businesses. The survey revealed that 44% of family businesses are engaged in innovation while “only” 28% of family businesses worldwide are engaged in sustainability. In the Netherlands, the focus on sustainability could be even higher and innovation is also often combined with increased attention to sustainability.
From our own practice, we know that in the Netherlands sustainability is taken seriously at Dutch family businesses. In fact, family businesses are less guided by external factors such as subsidies and legislation. The desire to invest sustainably stems from the fact that family businesses feel more responsible for the future generation, according to a study by RSM and Nyenrode Business University. This focus on sustainability stems from a sense of duty, according to Roberto Flören of Nyenrode University.
A changing of the guard actually offers opportunities
The younger generation will often look differently at issues such as renewal and innovation. New projects aimed at innovation and sustainability can be well supported by the younger generation of the family. This gets them involved in the family business on a subject in which they themselves are interested and can also make a difference.
The FD of April 25, 2022 discusses the contradictions between old and new generation when it comes to sustainability and innovation. ‘ Especially the importance attached to sustainability often creates conflicts with the older generation’. ‘The older generation represented by the pater familias often determines what happens, for better or worse,’ it reads.
We do not recognize this situation so strongly. With many families, the sustainability agenda is actually an opportunity to involve the younger generation and give their input a face. Many innovations put sustainability first and kill two birds with one stone. A study by the Landelijk Expertisecentrum Familiebedrijven (LEF) shows that family businesses actually score well on innovation. (Opportunities and bottlenecks in the family business 2020; Ilse Matser and Judith van Helvert). The younger generation will also catch on to innovation and sustainability. They are aware that addressing these issues will help influence their future and that of their children. They are also willing to make sacrifices when it comes to financial constraints or luxuries, or travel restrictions. This is caused by a greater awareness and willingness to start with yourself.
Generation Z and future prospects
We do understand that this effect will only become more evident over time. After all, it is precisely generation Z – the people in their twenties and thirties – who attach great importance to sustainability, and this generation does not yet really have a say in the board rooms of Dutch family businesses. Presumably, over a 10-year period, their influence will be greater and the effects of the sustainability calendar and innovations will be explicitly reflected in the policies of family businesses. In any case, this is a good future perspective that is so important especially for the younger generation.
In more and more family businesses, the children are succeeding the post-war generation and a new generation is taking over. This new generation has a different mindset than the older generation and has grown up in a different time, often more digital and with a different attitude to life and “work-life balance”.
The older generation sometimes has more concerns about the future and the associated risks than the new generation. These risks – whether or not due to previous experiences – are then assessed as great. As a result, the old generation sometimes tends to rely more on existing patterns and on how things have gone in the past. In other words, they may be more risk-averse. This can bite with a desire for innovation from new generations of the family business.
The dynamic between innovating change and still managing risk well is a difficult dilemma. Questions that come up are: What do we stand for as a company and as a family? Do we dare to use the innovative power of the next generation? How do we deal with the desire for sustainability in society and at the family business. (Source: Family Business Dinner 2022 / DekuyperConcepts / CliftonFinance / Wintertaling)
Renewal is a must
Especially after a period with the focus on the global pandemic, there is currently a lot of focus on renewal within the family business.
This renewal is often not only focused on the technical innovations of the company and production. It can also focus on a new market approach , a new form of communication or the loyalty of staff and end customers. Sustainability also plays an important role here for many companies.
A global survey in 2022 by PWC shows that sustainability does have attention, but that innovation in a broad sense is even more important for family businesses. The survey revealed that 44% of family businesses are engaged in innovation while “only” 28% of family businesses worldwide are engaged in sustainability. In the Netherlands, the focus on sustainability could be even higher and innovation is also often combined with increased attention to sustainability.
From our own practice, we know that in the Netherlands sustainability is taken seriously at Dutch family businesses. In fact, family businesses are less guided by external factors such as subsidies and legislation. The desire to invest sustainably stems from the fact that family businesses feel more responsible for the future generation, according to a study by RSM and Nyenrode Business University. This focus on sustainability stems from a sense of duty, according to Roberto Flören of Nyenrode University.
A changing of the guard actually offers opportunities
The younger generation will often look differently at issues such as renewal and innovation. New projects aimed at innovation and sustainability can be well supported by the younger generation of the family. This gets them involved in the family business on a subject in which they themselves are interested and can also make a difference.
The FD of April 25, 2022 discusses the contradictions between old and new generation when it comes to sustainability and innovation. ‘ Especially the importance attached to sustainability often creates conflicts with the older generation’. ‘The older generation represented by the pater familias often determines what happens, for better or worse,’ it reads.
We do not recognize this situation so strongly. With many families, the sustainability agenda is actually an opportunity to involve the younger generation and give their input a face. Many innovations put sustainability first and kill two birds with one stone. A study by the Landelijk Expertisecentrum Familiebedrijven (LEF) shows that family businesses actually score well on innovation. (Opportunities and bottlenecks in the family business 2020; Ilse Matser and Judith van Helvert). The younger generation will also catch on to innovation and sustainability. They are aware that addressing these issues will help influence their future and that of their children. They are also willing to make sacrifices when it comes to financial constraints or luxuries, or travel restrictions. This is caused by a greater awareness and willingness to start with yourself.
Generation Z and future prospects
We do understand that this effect will only become more evident over time. After all, it is precisely generation Z – the people in their twenties and thirties – who attach great importance to sustainability, and this generation does not yet really have a say in the board rooms of Dutch family businesses. Presumably, over a 10-year period, their influence will be greater and the effects of the sustainability calendar and innovations will be explicitly reflected in the policies of family businesses. In any case, this is a good future perspective that is so important especially for the younger generation.
