Conditions for family succession
It is important that family succession is only sensible when a number of basic conditions have been fulfilled:
- the family must possess suitable candidate-successors, who opt with full conviction for the family business;
- an actual commitment on the part of the family to continue the family business must appear from the family strategic plan;
- the family must share the same owner´s vision;
- the chosen strategy must make it possible for the family business to remain in family hands.
Sale of the family business
Under certain circumstances, the sale of the family business will be an alternative that one must (dare to) look at head on.
For many family entrepreneurs, that is no easy thing. After all, for most entrepreneurs the formation and development of the family business entailed not just a financial, but also an emotional investment. Moreover, they fear that the dynamics and other positive characteristics of the family business will dissipate once it is sold to another (non-family) company. Close ties with the personnel can also frequently stand in the way of a sale. Finally, family entrepreneurs often have difficulties with the fact that a buyer would change the culture of the family business or position it in a new market segment.
Nevertheless, a sale is sometimes the only way out, when family succession is impossible due to the absence of successors (or competent ones). Other pro sale arguments can be:
- the entrepreneur has insufficient financial resources to be able to comfortably withdraw from the family business;
- the family relations make a family succession impossible;
- the economic future prospects of the family business aren´t all that rosy;
- the family no longer has a shared owner´s vision;
- the sector in which the family business is active is undergoing a consolidation, so that continuing on one´s own is too risky;
- the entrepreneur has lost his interest in the family business;
- the entrepreneur was made an offer so attractive that he can´t turn it down.
In light of the emotional aspects which accompany a potential sale, an objective approach is recommended. This also applies when it comes to evaluating the possible interested parties.
Family control and outside manager
When a family succession is impossible and the family does not want to sell the family business, a call can be made on an outside manager to lead the company, whether temporarily or not. In this way the family can retain control over the family business, but it finds a solution to the shortcomings on the management level.
Outside managers generally stimulate the professionalisation of the family business. They can also bring in interesting new ideas which facilitate the growth of the family business.
Working with an outside manager can only be successful if a high degree of mutual trust exists between the two parties. This is understandable, since the family is entrusting its principal possession to a third party, while the latter is allowing his career to be significantly defined by the family.
In choosing the outside manager, one must make sure that he clearly understands that he will be working in a family business, with all the advantages and drawbacks that this entails. Many outside managers adopt a radical attitude and completely ignore the family factor. This is rarely successful and frequently ends in the premature dismissal of the professional manager. By contrast, a good outside manager regards the family as a major stakeholder with which he deals constructively.
In certain cases it can be useful for the family business to call on an interim manager. The latter handles the management of the family business while the family successors are being groomed for their future task. Moreover they can be very valuable as mentors of the successors. Studies have demonstrated that, from an economic point of view, calling on such an interim manager can be an excellent choice.
Jozef LIEVENS is a lawyer and partner in the Eubelius law firm. He is managing director of the Institute for Family Business and FBNet Belgium. He teaches a family business course at the European University College Brussels (EHSAL). He is a Fellow of the American Family Firm Institute. His website is: www.familiebedrijf.be |
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