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  • Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 1/23/2014

The transfer of family businesses 

The transfer of family businesses
French newspaper Les Echos recently published a special edition on “The transfer of family businesses”. Cecile Desjardins’ article, The “family business” test transmission, discussed the transition of businesses from generation to generation. Desjardins notes that despite the desire to pass on the business, only a minority actually does.

According to Desjardins, the key is anticipation. As an example of a rare, but smooth, transition, Desjardins mentions food services group, Sodexo, whose Board of Directors recently appointed Sophie Bellon to succeed her father, Pierre Bellon, in two years’ time – a real-life example of a successful family transition.


Sophie Bellon was selected as the chosen successor of the family-controlled firm – a pure example of governance at work, with the independent Board of Directors taking responsibility for the selection process.

The transmission of businesses from generation to generation

According to Desjardins, what makes the Sodexo Group’s smooth transfer all the more exemplary is the fact that many families are torn apart when passing from one generation to another? Desjardins lists groups such as Hermès, L’Oréal, Lacoste, Taittinger, Jacques Dessange, and Galeries Lafayette, who suffered in the transition process.


Despite a desire for succession amongst the vast majority of business leaders (60 to 90% of business leaders, according to studies), only a small proportion of family businesses actually transfer to the next generation. The figure is 14% in France, according to a recent report by the Institute Montaigne, compared to 51% in Germany, and 70% in Italy.


Globally, only 13% of family businesses pass to the third generation, and 3% in the fourth generation. Luc Darbonne, president of FBN France, was quoted as saying:


“Transmission (to the next generation) does not necessarily pass through the management, which may be outside the business, but by the ownership, governance, and especially by the values of the company.”

A successful family transfer

By succeeding every 20 or 30 years, a new generation of the family business is created. But this is not without risk. As the author recalls, “the family is a group of individuals united by blood and scrambled by money matters”. This is especially true when the family and business face real financial challenge and a heritage to carry across the business.


Valérie de Marsac, a lawyer who specializes in advising family businesses, was quoted as saying:


“In a family, there is the best and the worst. If they are not resolved, conflict can be very destructive and when a company is in play, it will suffer. Each passage marks the death of a generation, and sometimes a branch.”


The intergenerational transmission is even more delicate than emotional difficulties when you consider additional legal, financial, and taxation issues.

The transition process

So how do groups like French jeweller Mellerio dits Meller, the oldest family company in Europe, make it to their 400th anniversary? Or Jean Roze, a family business since the 17th century, now in their 13th generation? Or Revol Porcelaine, a family-run business since 1789, now in its 11th generation? The key seems to lie in the upstream preparation of the successor, and also in the use of external friends, Boards, or Directors who will add some neutrality to balance family passions.


Read the original article published on 11 December 2013 by Cecile Desjardins here: Le “Family Business” à l’épreuve de la transmission.

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.
 

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