A mood impression
The 2015 family business dinner was well attended. The dinner is organized for the 8th time. There are more than 40 guests including several first-time participants. There is a great diversity of family businesses from various sectors such as transportation, retail, fashion, maritime and food industry and with turnover ranging from 50 million to 3 billion. Both the family members themselves and the management are present, but as in other years, also the new generations. The commonality among all guests is in the issues within the family, succession, the children’s desire to be able to decide freely, the parents’ concern not to place too much responsibility on the children, et cetera. The participants speak freely about the family business and the family and what issues are involved. The location de hoge Vuursche provides a pleasant but also confidential atmosphere, which is fostered during dinner but also during after-dinner drinks.
Family business flourishes again
A survey by Clifton Finance shows that after 5 years of contraction, sales within the family business are on the rise again in 2014. Although especially family businesses that operate internationally are doing better, the recovery can be seen broadly across the many segments in the Dutch economy. With this, the crisis seems to be behind us. Research also shows that 46% of family businesses – given the better situation – are considering transferring the business within, or outside, the family between now and five years.
Strategic considerations strongly determine the decision to transfer family businesses outside the family.
The theme for 2015 concerns the question, “What are the considerations in arriving at the decision to transfer the family business outside the family? Not an easy topic for family businesses, which traditionally prefer to transfer the family business within the family. Yet there are conceivable situations in which this is not possible. What considerations must and then must be made? Do personal motives play a role and should the strategic position of the company be considered?
Every company goes through different phases in the course of time. Each phase has its own characteristics and requires certain management and leadership requirements. In the various life stages of the enterprise, markets change rapidly. In these market dynamics, the right choices must be made. Here the position that the family business occupies must be considered. What is the position towards customers and what is the position towards suppliers? Is the bargaining power toward suppliers still good or is the ratio uneven and is there increasing pressure on the company’s profitability? Many family businesses are finding that business is no longer the way it used to be, where agreements were made in trust based on long-term relationships and a balance between the two parties.
In the current times, family businesses are experiencing more and more dominance from the larger “corporate companies” and it is becoming increasingly difficult for the family business to occupy a sustainable market position. There are also many market dynamics on the customer-side and a scale is needed. At the 2015 Family Business Dinner, these issues will be addressed in one of the introductions by speaker Philp Gerzon. The consideration of all these aspects – in addition to the personal aspects – can lead to a situation where the family business can no longer offer sustainable continuity to the employees and a decision must be made to join a strong party in the market.
Find the right buyer
Should the decision be made to transfer the business outside the family, a choice can still be made as to which type of buyer is preferred. Does the culture of the buyer match the culture of the family business and will it allow the family business to operate with sufficient autonomy? In general, this is important to retain the people who are used to the family culture. It is then required that a choice can actually be made between various buyers in the market and that any price differences are accepted.
Family members cannot be informed early enough
Another topic that came up was whether and to what extent family members should be informed in a timely manner about the impending sale of the family business. The general opinion is that the family and those involved should be informed in a timely manner, also in view of the transparency that exists these days. This applies not only in the case of a sale of the business, but also in the ongoing course of business. Children cannot be informed and involved in the family business early enough, because sooner or later they will come into contact with the issues and responsibility anyway. The children can be trusted not to share information candidly. The natural attitude in the family business is one of modesty and confidentiality. The children sense this seamlessly and will never, intentionally or unintentionally, speak out.
After an enjoyable evening, we all returned home with some new insights and everyone is already looking forward to next year’s dinner which will take place on Nov. 9.
By: Maarten Vijverberg