Page 25 from: April 2012

25April 2012

neurship and an unshakeable commitment to

the recycling sector, and to the success of their

family business within it. They bring flexibility

and the capacity to make quick decisions. Also,

by their very nature, family businesses have the

highest motivation for success and for growth.’

So what is the main problem that
family businesses tend to encounter?
‘In many cases, family businesses are blessed

with great vision. Over the course of many years

and sometimes generations, they have grown

to understand the sector in which they operate

and have used this knowledge to innovate and

expand. However, patriarchal leadership can

sometimes stifle the vision of others within the

family set-up; the person or persons heading

the business can be resistant to fresh ideas, or

simply ideas that are not their own. In effect,

there is no real management besides the owner,

with the result that the management develop-

ment of the younger genera-

tion and of other members of

staff is held back. I have seen

many situations in which, even

when the owner is in his seven-

ties, he is still not ready to con-

sider leaving the reins to the

next generation.

Also, when just one person is in total control of

a company, this can lead to impulsive decision-

taking. Many family businesses would benefit

from having advisors – or even an advisory

board – as a safeguard.’

What other problems have you
witnessed when it comes to family
ownership and leadership?
‘Other difficulties often faced by family busi-

nesses include: a lack of finance and/or financ-

ing options; inadequate organisational struc-

tures; hidden pitfalls relating to, for example,

taxes and business practices; sales to only a lim-

ited number of outlets; inorganic growth, or a

company expanding too fast beyond its core

strengths; and excessive investment related to

weak financial planning and control. When all

or many of these problems are rolled together,

a family company can become almost ‘untrans-

ferrable’, especially if potential buyers believe

the main value of the business is locked up in

the experience, expertise and contacts of the

retiring entrepreneur.

From what I have said, it might sound as

though the negatives outweigh the positives for

family enterprises, but I should add that prob-

ably three quarters of family businesses I have

encountered are professionally driven and led.’

What part does – or should – planning
play when selling a family business or
passing it on to the next generation?
‘In terms of passing on ownership, the owner

often has not planned for this and is not ready

to do so. It is believed that about 25% of all

company transactions in the family business

sector are due to unexpected illness or to an

accident. And a surprisingly large number of

family-led companies have not considered what

would happen in terms of leadership succession

in the event of the departure of one or more

owners. Lack of time then tends to become the

enemy because a decision must be made quick-

ly; also, there is often a lack of knowledge of the

possibilities and of the procedure. They often

address issues like this too late in the day.

Such difficult situations can be prevented by a

more organised approach to succession such as

making provision for a replacement at the head

of a business. Tax payments can also be reduced

by making the next generation an owner at an

earlier stage. Other possibilities to consider

when planning the future of a business could

include: marital contracts; provisions in wills;

and other financial provisions.

There have also been plenty of examples, par-

ticularly in larger companies, where an entre-

preneur has external advisors like a board or

banks, and so is often given advice on such mat-

ters before even seeking it. For smaller enter-

prises in which, say, only a father and son are

involved, it would still make sense for the

former to inform someone officially – for exam-

ple, a notary – that his intention is to pass the

business on to his son. This could avoid unnec-

essary problems, for example, in the event of a

sudden death.’

Would it be fair to say that selling
on a business can be a particularly
painful and difficult exercise when
it’s a family enterprise?
‘The best entrepreneurs and traders find them-

selves in a completely alien situation when they

come to the point of selling their businesses. It

is in nearly every case a once-in-a-lifetime

negotiation. His reputation and pride, the

realisation of substantial gains for his future or

for that of his heirs, the prospect of ‘his’ com-

pany falling under new owner-

ship and a host of other factors

make it a unique and emotion-

ally draining exercise. Agreeing

the right terms for the transac-

tion, including social consid-

erations and an appropriate

price, makes this process very

complex. Experience shows that the gap

between the price ideas of the seller and the

purchaser can be quite substantial. In these

circumstances, a negotiator or moderator can

be of great help.

The sale of a company should never be con-

ducted solely by the owner. The involvement of

a first-class mergers and acquisitions specialist

is essential due to the complexity of the transac-

tion. The advice and mediation of a profes-

sional and experienced M & A consultant will

be based on both a national and international

perspective. For example, an overseas rather

than a domestic buyer might help in maintain-

ing a company’s independence and in realising

a better price because of the higher ‘market

entry’ fee. In effect, the buyer is paying for the

existing set-up’s knowledge and expertise of a

market, as well as for its existing market share.’

‘Family businesses have always
been, and remain, at the backbone

of the recycling industry.’

Björn Voigt – Make planning a priority

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