Family-owned businesses account for 80% of all companies in Europe. On average they drive 55% of Gross National Product and are smaller than non-family companies. Nevertheless, they rank among the continent's largest enterprises, including listed companies. In most European countries family-owned companies provide more jobs than other companies.

Governance at a family-owned company

Two worlds come together in a family business: the family and the company.

The family will be concerned mainly with running the business and being rewarded for their efforts. The family will face emotional and strategic decisions, like innovation and expansion, efficiency and market focus, harmony between family members, loyalty, accrual of private wealth, succession and continuity.

The company is the vehicle that must fulfil these expectations. It calls for professional governance and structure. It also calls for the right people to give organisation added value. Those who want the best for the company and want it to remain in the family must be bold enough to review its mission, strategy and structure. Few family companies survive beyond the second-generation and rarely get further than the third.

An essential ingredient for family companies are outside directors - i.e. not shareholder or family members - who bring key competences to the business. These may be additional competences, or perhaps even competences needed for a strategic objective. Professional governance is pivotal to the successful development of a family company, especially at a time when competition is mounting and customers and stakeholders are becoming more and more demanding.

Directors from outside the company put decision-making into the right perspective and ask the right questions at the right time. It's like getting a second opinion. The board of management in a family company is often a discussion platform rather than a decision-making body. The family members will still want to have their say, but with outside expertise they can rely on getting impartial, objective advice given on purely business grounds.

Variants for a registered board of management with non-family members include the family council and family charter. The board or forum convenes the family members and advisers (external or otherwise). A family charter cements clear rules and allocates roles and demarcates tasks and responsibilities for the family members and directors who have decision-making powers.

Strategic added value of professionalisation

Professionalisation helps the company structurally build on its strategy and use the right means. Most important of all, this kind of professionalisation clears the way for succession.

This raises the following questions regarding shareholdership: who started the company, who owns what, how will personal capital and patrimony be separated from the company revenues and property? Is bringing in a financial partner or private equity a precondition for further growth and return on investment? Or can personal financial resources, assets and the cash flow the valorised to finance expansion or diversification? Which legal and financial structures will produce the best result? Has succession been properly arranged and is it certain that it will not jeopardise the company?

Sooner or later, many family companies want to expand their business through internationalisation, diversification or acquisitions. This is specialised multidisciplinary work. Financial, legal, structural and even cross-border aspects are interrelated. Steps like this are often accompanied by far-reaching changes in the business environment, organisation and shareholder structure. Today, one third of all family companies engage consultants for acquisitions and financial structuring with a view to selling # the company or succession.

The eight best practices of successful family companies are:

• a clear and strong vision built on a set of values;
• attention to permanent entrepreneurship, without shying away from opportunistic growth, change or risk;
• a strategy that is regularly reviewed or perhaps completely overhauled;
• openness for governance structures, with a strong board of management that considers long-term options;
• a clear allocation of roles between all players in the family company, both active and passive;
• transparency and internal communication;
• an exit strategy for shareholders through the purchase of shares in the company or other techniques.

Enterprise/entrepreneur emerge stronger after professionalisation

More and more successful family companies are considering selling their business early to pursue new ambitions. They want to complete the sale as efficiently and profitably as possible. This necessitates a complete reshuffle of their own capital and the company's capital.

Fortis Corporate Advisory specialises in assisting shareholders who want to take over a company or to leave a company to somebody else. The teams of consultants put forward the best solutions to support initiatives by family companies, in line with the company's possibilities and ambitions, nationally and internationally.

With the client Fortis Corporate Advisory thoroughly examines all relevant matters and offers an appropriate range of services. These may include valuation, finding the right buyers and providing support in takeover negotiations.

Fortis Corporate Advisory has two trump cards:

• cross-border services thanks to the network of the Fortis Group, with extensive knowledge of national markets, companies and regulatory regimes;
• strategic assessment of the transactions and their timing in the client's interests.

Fortis further specialises in:

• structuring of investment capital (venture or development capital);
• financial advice and financing for the purchasing of companies: financing with shareholders' equity, acquisition financing, mezzanine debt and bridging loans;
• bespoke services for leveraged or management buy-ins/buy-outs: a dedicated approach using both shareholders' equity and borrowed equity; with protection against non-fulfilment of future obligations; securing the takeover for the right price;
• optimisation of the legal structure of the company.