Geplaatst: 14 January 2022

Family business or private equity: two different worlds

Geplaatst: 8 December 2021

Balans Schoonmaak acquires Berko Schoonmaakdiensten

Patience is a virtue

 

After working in cleaning for almost 40 years, the DGA was eager to hand over the business. Together with his spouse Brigitta and several loyal employees, he built up a reliable company. There was great interest in the market for the company, which had a nice customer base. “We explicitly looked for a buyer who would fit well with the culture of the company and found it in the Balans Group,” says Eric van Gijn. “Clifton Finance helped us well in the selection of the final buyer and they provided good insight into what profits the new owner could realize with the company. I experienced the cooperation with Clifton Finance as very pleasant. We were advised clearly. My questions were answered with great patience and Clifton Finance helped ensure that the sale of our beautiful company BERKO Schoonmaakdiensten B.V. went smoothly. We can recommend Clifton Finance to anyone looking to sell their business. Reliable, clear, professional and very fast and good communication.”

“Although I was impatient and there was a lot more involved than I thought, the transaction was completed well and I am now a free man. Without their help, I would not have succeeded!”

Eric and Brigitta van Gijn, 2021

Geplaatst: 2 December 2021

Succession in a Family Business

8 lessons from practice

A successful business succession within a family business by the next generation, is never guaranteed. Fortunately, the owner can properly prepare for the acquisition of his business and increase the chances of success. While working as an advisor to family businesses over the years, We have learned the following eight valuable lessons in this area.

Who will take the baton from me? For many family owners, this is a question that keeps them up at night. This is not without reason. Selling a business or transferring a business to the next generation is a serious matter. The incumbent owner has put his heart and soul into his business and the same often applies to the generations that preceded him. Is the transfer not going well? Then the progress of the family business is at risk and family relationships come under pressure. In short, there is a lot at stake.

Lesson 1: Think strategically

Simply leaving the family business to the children for succession and assuming that the business will continue to exist as a result, is not a realistic thought. It is important to think about the strategic position of the business in advance. Ultimately, the strategy that was once deployed may have become obsolete. To ensure the future of the company, a new strategy is often needed. To do this one can perform a strength-weakness analysis that can show whether the company is able to continue to exist independently in the future. Afterwards, map out the facts, determine (again) the vision and mission, and make choices about who or what the organization wants to be. After all, the future of the company is determined by more than just the next generation.

Lesson 2: You are not like your children

A trap that many family business owners fall into when it comes to business succession of the family business is that they think the next generation will want to- and can run the business with as much passion and commitment as they did themselves. However, this is far from the case as has been shown. Times have changed and are changing. Today’s generation does not just want to work and make money. This generation also want their lives to be meaningful and that means they are looking for a healthy work-life balance. Another reason is that their partners are often busy with their own careers as well. Therefore, it is important to take this mentality into account when transferring the business. In fact, this means that the organization must be stronger than ever to achieve a successful transfer.

Lesson 3: Have faith in the youth

One of the most important lessons we have learned over the years as advisors to family businesses is that the departing owner must give the next generation the benefit of the doubt much more than he intends to do. The younger generation of successors may have a different mentality and is not always willing to devote all their free time to the business. They also may not always have the right prior education or competencies. But one thing is for sure: a scion of the younger generation by definition brings a new zest and new insights. He or she usually finds it easier to connect with the new era and the opportunities it brings than an older generation of leaders does. This is a bonus for the company that should not be underestimated in the case of family business’ succession.

Lesson 4: Don’t be afraid of innovation

This lesson ties in seamlessly with the previous one. Family businesses are often conventional and conservative in their views on the direction of the company and how the company should be run. A new generation can bring a new impetus to this, but they cannot do this alone. That new impetus must also be guaranteed by the external parties involved in the company. Think of the business consultant or accountant. As long as the ‘blood groups’ of these external parties do not innovate, a younger generation can do little with the ideas they have. In short, don’t be afraid of innovation and for it to come through to all parties involved.

Lesson 5: Send children out

Over the years I have seen that children of owners in the succession of a family business who – before taking over the baton – have first worked outside the company perform better than the children who have never looked elsewhere. At ‘someone else’, they acquire knowledge and skills they would never have learned in their own family business. They also get honest and critical feedback that they often get less at their own company. And taking a break from the family business often only whets the appetite for a career in their own company.

Lesson 6: Take your time

Transfers take years of time. Time that is necessary for the introduction of the next generation to the company in a playful manner. This time is also necessary to slowly but surely give them more responsibilities. But you also need time to offer the future successor an educational path and preferably to allow him to gain experience outside his own organization. Moreover, a family business has often only grown over the years, such that a successor by definition needs more time to get the grips of it and needs more experience than his or her predecessor. In short, take your time. You cannot start the process of transfer early enough.

Lesson 7: Organize professional governance

A successful transfer stands or falls with a good system of professional supervision. It must be clear, for example, who coordinates the decisions that the organization takes with the supervisors? What is the expertise of the various supervisors? What are the divisions of roles, and so on. But it is also important that the supervisory body be independent. So preferably no family members or people from your own circle should be appointed as supervisors. A deliberately selected professional supervisor will quickly provide more value for the company than a casual friend.

Lesson 8: Get out and let go!

Perhaps this is the most important lesson of all. A transfer can only be successful if the separating owner actually leaves and gives the next generation the space to do it themselves. So let go. The owner should also not want to play a role as commissioner or advisor. By continuing to look over their shoulder, the next generation will feel that they are not good enough. They will not feel free to do business the way they want to and this will extinguish part of the ‘fire’. They will then be inclined to run the business the way their predecessor did and always look for approval. This will in any case hinder further growth and innovation.

Would you like to know more about business succession in the family business? Please contact us for a free consultation.

Please contact Clifton Finance at: Maarten Vijverberg +31 6 55853074 or Gonneke van der Lee +31 6 52466518.

Read here the article about succession within family businesses published in the magazine PE business succession (Dutch)

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Geplaatst: 26 October 2021

The time is right for new forms of succession in family owned businesses

The impact of business succession on the work-life balance of the next generation is obviously considerable. Within this theme, however, some nuancing has taken place over the past two years. We discussed this with Maarten Vijverberg, partner and specialist in business succession and acquisitions at Clifton Finance. We talked about the increased role of sustainability, the influence of the coronapandemic and mixed forms within business succession.

Younger generations, in contrast to the self-sacrificing previous generations, have no intention of making major concessions. The younger generation also wants to have a vibrant private life. Friends, family, the occasional Saturday afternoon on the sidelines of the soccer or field hockey field. This image does not include working for the company seven days a week. This was the – until recently – prevailing view regarding business succession and how the next generation views its own work-life balance. Maarten Vijverberg also spoke about this in similar terms with Fambizz in 2019.

How different does the world look in 2021? No, the younger generation still does not necessarily want to sit in an office seven days a week. But they don’t have to anymore.

The corona pandemic has made the business world realize that working from home is also fine. Just as, across the board, the digitisation issue has become even more important within the family business. Vijverberg: “As of March 2020, the business world could no longer continue in the usual way.” As a result, nowadays the boardroom is no longer just about operational excellence. “It is also much more about digitization themes such as cybersecurity and future-proof networks. Topics that are much more within the area of interest of the younger generation of leaders.”

Vijverberg sees that the younger generations are indeed taking responsibility for the latter themes. “In the area of digital transformation, they can really take a leading role, which greatly increases their commitment to the family business.”

Sustainability

Another theme that has gained momentum in the past two years and with which younger generations are preparing for a prominent role within the family business is sustainability. “We have become even more aware of our ecological footprint, and how family businesses can contribute to this .”

Sustainability is also a topic that younger generations are much more attracted to. “They are picking up this gauntlet just as well, where the incumbent, older generation cannot always imagine it.” Vijverberg recently experienced this up close, within a family business in which he is involved from Clifton Finance. “The younger generation emphatically pushed this subject forward as a spearhead. Although it was not immediately clear to the incumbent management what this would entail. The company did eventually adapt to this and the family business has taken a sustainable turn.”

Their interest in and commitment to themes such as digitization, cybersecurity and sustainability mean that succeeding generations become more involved in the family business on a project basis. “In this way, you enthuse them more on a part-task basis, rather than requiring them to take an interest in the entire family business at once. The latter can be a challenge in some cases.”

Mixing forms within succession

Boarding up and setting out lines of communication in partial areas within the family business illustrates another change that Vijverberg has seen take place over the past 2.5 years. Vijverberg: “There are many more mixed forms emerging in which the family remains involved in the family business, but is no longer necessarily active in an operational role. For example, they only take on a supervisory role, while third parties manage the company. In doing so, they do take on a major involvement. Or the family is only involved in the company on a project basis. This can be in the area of the aforementioned themes. However, this can also be done through other projects that are important and to which the family can make an additional contribution.”

A development that, in turn, fits in perfectly with the previously mentioned desired work-life balance, to which younger generations attach so much importance. “The time they put into the family business, they spend on themes and projects they like. This is where the younger generation can put their energy and expertise. As a family you must of course be open to such constructions.”

Extra capital

It is not only the next generation that benefits from these blends: the family business and the management – which in more and more cases still barely contains family members – also benefit. “As a board of directors, you have additional assets in this way when you can involve people from the entrepreneurial family in projects whose sole purpose is to improve the organization.”

Letting go also becomes a lot easier for older generations in this way. Vijverberg: “It naturally inspires confidence when successors can focus purely on areas with which they themselves have a great deal of affinity. It is fantastic that the currently important themes fit in well with this and this offers room for new forms of business succession.” The current era lends itself perfectly for this, according to Vijverberg. “Thanks to developments at the macro level, as a family business you now have the opportunity to give younger generations an important role. This can be done by involving the younger generation precisely on a project basis and not only in terms of supervision.”

Maarten Vijverberg:

Many more mixed forms of business succession are emerging, where the family remains involved in the family business, but is no longer necessarily active in an operational role.

Geplaatst: 17 September 2021

Will the merger and acquisition market break records in 2021?

At the beginning of the year, we wrote in one of our blogs that 2021 would be a good year to sell the company. The figures for the first half of the year very much confirm this.

 

Market to € 4000 billion in 8 months

The figures recently presented by Refinitiv show that the assumption that 2021 would be a good merger and acquisition year have already been fulfilled. The merger and acquisition market is heading toward the €4000 billion transaction value worldwide over the first eight months. In particular, a number of large international transactions were announced during the summer.

There are a number of notable transactions in the global market: NVIDIA’s acquisition of Arm Holdings creating a global player in Artificial Intelligence. This transaction alone involves some €34 billion. A second example is the acquisition by Zoom video-communication of Five9 for €12.5 billion.

But the merger and acquisition market in the Netherlands is also gaining considerable momentum. Over the first half of the year, 362 transactions were announced compared to 308 in the first half in 2020.

Examples of the somewhat larger transactions are the sale of T-Mobile to two venture capital parties, British Apax Partners and American Warburg Pincus. Another example is DSM’s sale of its resins and functional materials to an industry peer and the announced merger of Talpa and RTL.

Market growth is often caused by multiple factors. In 2021, these all seem to coincide.

 

Emotional factor, the return of confidence in the economy

Part of the market’s recovery is due to the return of confidence in the economy and the recovery of the markets after the covid crisis. This gives a catch-up effect to the number of mergers and acquisitions that were previously delayed. We see this especially in the last few months. But this is not the main factor of growth. More importantly, the corona period has also had other effects especially in the SME market. Entrepreneurs have become more aware of the vulnerability of the business and the organization because of the past period.

Also, in recent years it has been “all hands on deck” and entrepreneurship has taken a lot of energy. As a result, owners are more willing to consider selling the business. They want to secure some or all of their assets. This leaves them more time for other important things in life that have become more important due to the covid crisis. This is also evident from a recent survey in the U.S. by private wealth firm Clarfeld at https://bit.ly/3kgbYGb.

 

Economic drivers

The changing economic situation revealed several new vulnerabilities and challenges. Perhaps the most important is distribution. The recent period showed that dependence on a complex logistics chain creates increased risk. To mitigate these risks, there is a great need for sourcing in one’s own region instead of just-in-time deliveries from various continents. Companies are literally shortening the chain by looking for reliable suppliers. Close to home, but also in the classic sense of the word by outsourcing less and thus vertically integrating also through acquisitions.

Price increases of raw materials and transport and limited availability of personnel are important developments. But also digitalization, remote working and its facilitation, makes companies revise business models. All this has a positive effect on the merger and acquisition market.

 

New market order through greater scale

In addition, a traditional economic driver of the M&A market has returned and that is “scale. Driven by increasing challenges and increased risks, consolidation is taking place in various sectors. Once the consolidation is underway, a new market order emerges and other parties in the sector cannot be left behind. The sale of the Deen supermarkets to Ahold, Vomar, and DirkDeka and the merger between Coop and Plus are good examples.

 

Private equity firms fuel the market

The big driver of many transactions continues to be private equity firms.

They were initially concerned about developments in their own portfolios in 2020. Depending on the composition of the portfolio and the sectors in which they operated, losses remained limited. Indeed, many portfolio companies experienced strong growth and this stimulated the acquisition drive.

The low interest rate environment ensured that even more capital flowed to private equity funds. They therefore have at their disposal well-filled funds to be invested over a limited number of years. In addition, the low interest rates also ensure that acquisitions can be financed relatively cheaply. With large teams able to process transactions and driven by low interest rates, private equity currently has tremendous acquisition power. CMS Europe’s 2022 merger and acquisition outlook survey shows that 71% of respondents agree that financial buyers are now in a better position to take advantage of the opportunities created by covid-19.

 

All signs on green

After a decline in 2020, corporate valuations are on the rise again. The main cause is again very low interest rates and high demand. See also our blog: https://www.cliftonfinance.com/markt-gunstig-om-bedrijf-te-verkopen/

Various market surveys also show that multiples are rising, and that may again win over the still doubtful shareholder.

So for now all signs are green. We are getting used to the constantly rising share prices and announcements of yet another merger. Our expectation is that the prelude to 2022 is good and that this trend can be continued for the time being.

 

We can help you

Are you considering selling the company and waiting for the right time? Are you perhaps considering transferring the business to management or the next generation in the family? We can advise you on the marketability of your business. Especially in these market conditions, as the market seems favorable to sell the company in 2022. We advise you on the possible valuation or what you can do to make your business sale-ready.

Geplaatst: 16 March 2021

Family business Gooskens Wood is successfully holding onto its stock. Especially now.

Talking about a successful decision in hindsight is always easy. But reading about it in hindsight can also be instructive. This also applies to the choices made by family-owned Gooskens Hout during the corona crisis. The spruce lumber supplier did not tack on a sell-off. In consultation with its all-new supervisory board (SB), it relied on its unique selling point. We spoke to CFO Ine van Gerwen-Gooskens and Supervisory Board chairman Maarten Vijverberg.

With a continuously available stock of over 50,000 m³ of pinewood, Gooskens Hout from Hoogeloon in Brabant is the largest supplier of pinewood in the Benelux. The sixth generation is now at the helm of the organization, in the person of Ine van Gerwen-Gooskens and her nephew Hein Gooskens. When the corona epidemic shook the minds – and our economy – in March 2020. The family business Gooskens Hout, founded in 1863, also had to decide how to anticipate the possible financial consequences. But that wasn’t the only challenge. As “old and familiar” as the bond is between the family and its employees, many of whom have been with it for years, cooperation with the SB was new. The full external board had been appointed barely a month ago when the crisis began.

 

Getting acquainted via webcam

“When you are busy with your business 24/7, you can become business blind. Then it’s nice to spar with people who let you look at your business operations differently,” said Van Gerwen-Gooskens. However, that ‘looking’ was done exclusively through online meeting programs. Vijverberg: “Whereas normally one supervisory board member is replaced by another, in this case a whole new board took office. Without knowing each other, or having the opportunity to meet. Yet in the end it worked very nicely. Because we did not know each other, there were no mutual prejudices. And because we were forced to meet remotely, we consulted more often than if we were to meet on location.”

 

A very different kind of crisis

Despite a good click between board and supervisory board, there was a difficult question that needed to be answered quickly: how to deal with the crisis? Van Gerwen-Gooskens: “We looked closely at the liquidity forecasts and market analyses. The lion’s share of our turnover is construction-related. We based ourselves on the premise that in the Netherlands there is much and fast construction to be done and that this requires timber. We also took into account what the last 250 years have taught us in terms of the economic climate. During crises, delivery times and purchase prices are more attractive and after times of contraction comes increase. Especially when competitors are forced to sell their working capital, this is a good reason to invest. From these considerations, Hein and I entered into discussions with the Supervisory Board. Maarten then rightly pointed out to us that this is a different crisis than twelve years ago.”

Vijverberg: “Then banks turned off the money taps. Whereas now the government is offering state support. That is a completely different signal.” Gooskens Hout took advantage of the regulations in place to be on the safe side. The government compensation eventually turned out to be unnecessary and was paid back. “As a regulator, you want to have all the certainties so as not to jeopardize the company. But it did become clear to me fairly quickly that Gooskens’ stockholding choice was a strong decision,” said the SB chairman. Vijverberg: “Many family businesses opt for their cash flow in times of crisis, or go with partners. Simply because they are too small and vulnerable. But in this case we are talking about an organization with a good market position, a large size and solid reserves.

 

The result

The strategy of holding stock had more than the desired effect. While spruce prices rose due to declining supply from competitors, demand grew. In part due to additional orders from the U.S. and the predicted pressure from construction at home. The Gooskens family’s courage to invest even in tough times is as old as the company itself.

In a 2013 interview, a note from 1913 for the purchase of a 550-gilder saw comes up. Hein Gooskens said of it in that interview, “Even now we are investing heavily. Especially now. If demand grows again after the crisis, we have the capacity to absorb it.” Not only did the family business have it right at that time. She also uttered the famous words, “especially now,” back then. Whether the Gooskens family possesses a crystal ball is unclear. What is certain, however, is that her wooden heart for the business seems to bring with it a bright future.

Geplaatst: 22 February 2021

Market seems favorable to sell the company in 2021

In the current market, due to the corona effect, we see a decline in the number of merger and acquisition transactions. Unjustified because conditions and prices are excellent. Here’s why:

 

Rising prices in the stock market

It will not have escaped anyone’s notice that the stock market has developed very well in recent months. Despite the corona perils, expectations are very positive. Prices in the stock market have skyrocketed. The price-to-earnings ratios of many companies, i.e. valuations, are high. A big chunk of a positive outlook for the future is being drawn. The question here is whether this development is also reflected in a positive merger and acquisition market?

The positive price development in the merger and acquisition market

In the merger and acquisition market, we also see the price increases of the stock market. Transactions involving listed companies as buyers or sellers have high valuations, i.e. high multiples. But this is as yet only for transactions involving listed companies, the so-called public sphere. For transactions in the “private sphere,” i.e. unlisted companies, multiples have always been at lower levels. What is the trend in the value of these private transactions?

 

Stable development for SMEs

It is difficult to find reliable data for this specific market because the acquisition price of many transactions is not disclosed. In the Netherlands, for example, we have the Brookz Acquisition Barometer, which is based on a survey of merger and acquisition advisors. This is a fairly large group but it is not objective and complete data. This shows a decline in so-called multiples in the first half of 2020 and a slight recovery in the second half of that year. The US data show a more stable picture for the smaller transactions, valuations remain at the same level for 2020 as well. It could just be that the recovery in America is our foreland in the Netherlands.

 

In theory, valuations should rise

So there is a difference in valuations and associated multiples depending on both the nature of the transaction (public/private) and the size of a deal. This difference is not only in the absolute level of the price, but also whether this price shows a downward or upward trend. This is actually not justifiable when looking at the factors of a valuation. In theory, valuations of SMEs should also rise. After all, the same basic rules apply to both large and small companies.

 

Falling interest rates could drive up prices

The main reason for the increase in the valuation of larger companies is falling interest rates.

After all, interest rates are historically low and have fallen even further in 2020. This interest rate factor is reflected in companies’ stock valuations. An equity valuation is nothing more than a valuation of a company’s earning power in the future. Here, future cash flows are mapped out and calculated to today’s value. This calculation of the value is done with a so-called discount rate. This includes, among other elements, the interest rate. And the lower the interest rate, the higher the valuation.

A multiple such as a P/E ratio or an EBITDA factor is actually a derivative of a more complex equity valuation. The higher the valuation, the higher the multiple.

 

High competition due to insufficient supply and high demand

But the price is also ultimately determined by supply and demand. Our daily practice shows that there is relatively little supply of good companies of sufficient size. However, there is a lot of demand, both from companies looking to grow in their market through acquisitions and from financial investors looking to buy nice companies.

And financial investors in particular are ubiquitous in the M&A market. With almost unlimited amounts of (pension) money in their investment funds, they are diligently looking for suitable investments. In almost every sales process, you come across financial investors as potential buyers. These investors graze the market for good candidates to buy. They do so directly through their own network and contacts and through corporate finance advisors. This leads to more demand for entrepreneurs looking to sell their businesses in 2021.

 

Competitive market drives up price but also process becomes more difficult

So because the market is highly competitive, sales processes are also highly competitive. This ultimately drives up not only the price but the various bidders often have to bid against the competitor until the last moment in the process. Where previously only one or two parties did the due diligence, we now often see many more parties doing due diligence simultaneously. This is in the hope of then making the winning bid. And where in the past a due diligence could sometimes lead to a downward adjustment of the price, in this competitive field it will not happen easily. Hardly surprising for a selling party. All the more important to choose a good (process) advisor in this process. This is to manage the multitude of buyers well and make the best use of the negotiating power. See also our blog ‘Setting up a data room when selling a business’: http://bit.ly/3pml7MI

 

We can help you

Are you considering selling the business and waiting for the right time? Are you perhaps considering transferring the business to management or the next generation in the family? We can advise you on the marketability of your business. Especially in these market conditions, as the market seems favorable to sell the company in 2021. We will advise you on the possible valuation or what you can do to make your business sale-ready.

Call Clifton Finance:

Gonneke van der Lee +31 6 52466518 or Maarten Vijverberg +31 6 55853074.

Geplaatst: 21 May 2017

Succession of family business: who will follow?

Succession is an ongoing topic of interest within family businesses. After all, who continues the life’s work of parent, grandparent or great-grandparent?

A family business is a business that is passed down from parent to child and thus remains within the family for generations. This romanticized image of transfer is a beautiful principle at first glance, but it must be done with care. Even if it should take place at all. Because transfer within the family is not a given. Not only the family circumstances must be considered – in case a transfer is at issue – but also the company itself, the market in which it operates and its financial position. A good analysis of this gives a picture of the competitive strength and the possibilities for the future. For this purpose, a company can, for example, use a SWOT analysis. Often, however, when the issue of “succession” arises, the focus is exclusively on the family and decisions are made primarily on an emotional basis.

 

Strategic Analysis

In order to address the issue in a balanced way, a strategic business analysis will first have to take place. Then it will become clear whether the company can continue to exist independently and whether it makes sense to maintain family business status because it offers added value. And that added value concerns more than emotional motivations such as “pride” and “wanting to continue a family tradition. More important is whether the company has a right to exist in the future and can at least maintain its market position. Emotions are a part of family businesses. At an important moment like succession, it pays to test whether the emotions are real and what in reality are the opportunities and threats for the company. For example, the business analysis may show that the company’s financial or market position is not strong enough to transfer it to the next generation or that it makes sense to sell a part of the business. When a company does not have a clear picture of its position and does not know in which areas the organization needs to be improved, a clear mission and strategy are also often lacking, leaving any next generation in the dark.

 

Is the next generation capable enough?

If the analysis shows that the company has a sufficiently strong position for independent survival and succession within the family is a possibility, entirely different challenges present themselves. For example, the fact that son or daughter is not capable, or because appointing or not appointing a family member as head of the company may cause mutual conflicts. And who is the most suitable candidate for succession? This question must also be answered within the family.

The issue of succession is and remains a complex one within a family business. Both on the emotional and the rational level. For example, an owner/DGA of a family business may have difficulty relinquishing his position because it also requires him to relinquish his position of power, control and status. Also, not wanting to hurt family members may influence the choice to delay decision-making. And succession is further complicated when no new family generation is available. Socio-demographic developments that mean the number of children per family has declined over the decades and young people today are far from all wanting to work full-time, mean that succession within the family is no longer always a given.

 

Succession within the family

There can be several reasons for choosing to appoint a successor within a family business: Death, Disability, Retirement or Divorce, in short OASE. When succession occurs within the family, it is obviously necessary to determine who from the next generation will take over the business. Often this is a process that has already been set in motion years ago, and often the future “crown prince” or “crown princess” has been working in their own business for some time. Sometimes also – and this is advisable – the potential successor from the family works in an external organization to gain experience outside the door. This ensures that the company will later still bring in “fresh blood,” and the family member in question gets the chance to learn real lessons that he or she is often spared in the own family business. Be that as it may, it must be clear that the potential successor has a desire to take over the business and he or she must also be suitable for it. By having the candidate in question tested in a timely manner for competencies, personality, motivation, and so on, it becomes clear whether he or she meets the prerequisites. If the family member in question still lacks skills or competencies, time should be taken for training and guidance. Sometimes it is also advisable – once the succession has taken place – to put an external administrator or professional next to the succeeding family member for a longer period of time. In this way, the missing competencies are compensated for and the family member at the helm has the opportunity to learn from the knowledge and experience of an external.

 

External director: right man, right place

Succession, by the way, does not always have to be filled with your own family members. Sometimes it is desirable or even necessary to have the company run entirely by an external director. For example, to bridge a period before the next generation is able to take the helm, to supplement the competencies of the available family members, or because there is simply no suitable next generation available. Incidentally, the majority of family businesses do not consider it necessary for succession to be carried out by family members. More value is placed on “the right man in the right place. This is partly due to the fact that family businesses also realize that when succession within the family is not possible, this does not have to mean the end of the family business. After all, control can be arranged in various ways: through share ownership, through a Foundation Trust Office (STAK) or by having family members sit on the Supervisory Board. In addition, among potential external successors, the family business values entrepreneurship and affinity with the family values at least as much as the education or experience of the successor. The idea that external directors feel less connected to the family business often proves unfounded in practice.

A prerequisite is that the right candidate is selected. Family businesses often face a choice in this regard. Either they can choose a director who fits in seamlessly with the culture and vision of the family but is not the best on the list in terms of management experience. Or they can choose a director who has more than earned his spurs in the business world, but who does not have sufficient affinity with the family business. The trick is to keep looking for a candidate who is both experienced and sufficiently in touch with the family business.

 

Letting go: Distancing must be done

A director or owner of a business does not always have the opportunity to carefully plan the succession. However, such planning is necessary. Family businesses should keep in mind that arranging succession properly is a process that takes years. The earlier one thinks about this and the better the business plan, vision and strategy are put on paper, the easier the transfer will be. It is then up to the director who is leaving the family business to create the right conditions for the next generation by distancing himself or herself from it and, at most, taking on an advisory role. He or she should no longer be involved in day-to-day management. Only then will the new generation have room to take up its own position. Too often, a retiring director still finds it difficult to let go of control. It is a trap that many family businesses fall into. But distancing oneself is necessary.

 

Source: Clifton Finance 2015

 

Geplaatst: 3 November 2014

Internationally oriented family business does better

Family businesses often mistakenly think that doing business abroad involves too much risk. The opposite is true. The risks actually decrease when expanding across the border by spreading out sales territories.

Companies operating abroad have fared better during the crisis than entrepreneurs focusing solely on the Netherlands. Various studies show that internationally operating family businesses recover faster from the crisis than other businesses. It is also notable that internationally active companies remained more active with mergers and acquisitions during the difficult period.

 

Mutual differences

Incidentally, it appears that across the board the margins of family businesses have been under pressure over the past three years. The differences between them are great. The agri-food sector scores well above average; they are strongly internationally oriented. Retailers generally score less well. They focus mainly on the Dutch market and run into reduced consumer confidence.

 

Higher profitability

Nevertheless, many family businesses are reluctant to internationalize for fear of the risks. The studies prove otherwise. With customers across borders, risks are spread. That translates into higher profitability. But beware that internationalization should not be an escape. Family businesses must first have their position in their own country in order before crossing the border.

Geplaatst: 2 November 2014

Five reasons for a family business to sell the business.

‘A third of family businesses want to sell business now,’ was the headline in the Financieel Dagblad on December 9. The article referred to a study by ING Economics Bureau, Nyenrode Business University and FBNed. The main reason for selling concerns reaching retirement age. But for larger companies, the fact that children can take over the business more cheaply also counts. “Due to the continuing economic headwinds, the business is valued low,” the article says.

 

Transferring to the children

What is clear is that the analysis focuses on transferring the business to children within the family rather than external buyers. After all, with a transfer to the children, it is an advantage that the business is not highly valued. But that is also where the shoe pinches immediately. Not all family businesses will prefer to transfer the business within the family. Whether this is possible depends on many factors, such as the suitability and age of the children, but also whether a takeover fits in with personal ambitions. After all, the new generation has different goals than their parents. Also, the (strategic) market position of the company must be so strong that the new generation has confidence in the future of the company. After all, a transfer often requires additional financing to pay for the transaction, and the younger management just has to be able to cope with the current market challenges and keep the company healthy.

 

Transfer to an outside buyer

Now what if none of this is the case and a transfer to an outside party is the only choice? So is now a good time to sell the business? I think so. Assuming the business is healthy and performing decently. Because when a company is in bad weather, it better not think about selling. Not to an outside party, and certainly not to the family. First, it will have to put its house in order. But assuming the company is performing reasonably, there are plenty of reasons to sell now. I will list the most important five:

1. It is always better to sell in an up economy than a down economy. After all, the value of the company is determined by its future earning power.
2. Economically, things may not yet be going for the wind in consumers’ perceptions, but in the stock market and in investment land, sentiments are good. This is reflected in the higher calculation factors currently used for enterprise value and a rising stock market.
3. Last year, private equity parties invested relatively little in companies. Almost all investors still adopted a wait-and-see attitude. However, many investors are eager to acquire companies for the coming year. And are too few candidates for the huge amount of money available for investment.
4. Family businesses have attracted enormous interest from institutions, banks, accountants and other service providers in recent years. After all, they have performed well during the economic crisis. This has increased the recognition and appreciation of family businesses.
5. In the new (rising ) economy there will be many changes in the pipeline such as digitalization, new forms of distribution and new margin distributions due to greater transparency. The size of companies becomes increasingly important in this new era so joining the bigger brother or a capital powerful invested is not a bad idea.

By: Maarten Vijverberg