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“Shareholders should not worry; we take care of the company.”

These words are from Jan Boone, CEO of Lotus Bakeries. They are provocative, as corporate governance issues and minority investors protection can be concerns when investing in family businesses. But, when I heard them, I was pleased. I was not worried. I knew the company as a long-time consumer of their products. As a financial analyst, I studied the business, met Mr Boone, and visited one of their factories in Lembeke, Belgium. In our investment process, we look for well-managed companies with a strong product, able to generate attractive returns on capital and whose value can compound over time. The company classified as a candidate for our portfolios.  

Lotus Bakeries has produced and marketed traditional biscuits since 1932. Its best-known product is the tasty biscoff, a Belgian speciality made of sugar and cinnamon. Brand and quality are important to the family. The brand has a very strong foothold in its core markets. The company has access to several promising growth opportunities to invest its cash at attractive returns. The company is in its fourth generation. The family owns the majority of the voting rights and has always been involved in the day-to-day business. It is a discrete, cohesive, socially responsible, hands-on and long-term-thinking entrepreneurial family. They have done and are continuing to do a great job. Jan Boone’s words resonated as confirmation that we were in the presence of a great family business.

The day we met Lotus Bakeries was also the start of a journey that led to the launch, two years ago, of our BL-European Family Businesses fund. It is usually recognised that listed family companies tend to have a long-term-oriented strategy showing consistency in their decision-making process. They are somehow more cautious, but seemingly more successful, in their capital allocation. They develop strong business relationships and focus on core products. These translate into a more stable risk profile and better resilience in difficult economic times.

As investors, we have learned to consider some specific features of family businesses to help us find enduring and successful companies that simultaneously reduce the threat of corporate governance issues.

Legacy thanks to prepared succession

Family entrepreneur shareholders will generally agree that they do not own the company, they borrow it from future generations. There is a strong commitment to safeguard, develop and pass on the company to the next generation in the most promising conditions. Whether they transfer leadership and/or ownership, families need to be pro-active about succession.  

Succession is not a moment in time in the company lifecycle. With the passing of generations comes a new dynamic. But critically important is that the culture and values are maintained and shared throughout the generations. The best-performing multi-generation family businesses have succeeded by adhering to their roots and to the mindset put forward by the founder. They embrace succession as a long-term process and do extensive work to prepare the next generation. The best transition happens when a successor is willing and prepared to take over and when there is common agreement within the family and understanding inside the organisation.                                          

Datalogic, a leading Italian manufacturer of barcode readers – whose founder, Romano Volta, invented the technology while working at the University of Bologna – just went through this process successfully. In 2014 his daughter, Valentina Volta, 38 years old at the time, was named CEO, with her father staying as President. Ms Volta was very close to her father and the company, knowing it as an insider. She knew the values that were important to her father. Before joining Datalogic, she acquired significant value-added experience outside the company. She eventually decided to join the family company when her father was reaching retirement age. Appropriately trained and prepared, Ms Volta had the professional and cultural qualifications, and the choice was accepted and understood by the Board and the company. The succession is going smoothly.

Stability through a strong Board

Good governance is an indispensable prerequisite to safeguard balance and trust within the family and between the various stakeholders. As such, the Board is greatly enhanced when composed of both family and independent members. The cohesion of the family is critical to the lasting success of the company. Family members sitting on the Board have the role of being trusted advisers, carrying the memory of the company over the years (and the cycles), knowing how decisions could affect family dynamics. Independent members sitting on the Board are a sign of maturity from the family. They provide stability and objectivity, bringing fresh ideas, valuable skills and the potential to resolve conflicts of interest, and they and assist in continuity planning.

Bossard, founded in 1831 in Zug, Switzerland, is a leading global distributor of screws and partner to its clients for the outsourcing of this part of their supply chain. The family went through difficult times in the early 2000s. In 2001, Peter Bossard, Chairman, and in 2004, Heinrich Bossard, CEO, died respectively from murder and a plane crash. The cohesion of the family and trust within the Board and the company enabled the organisation to go through these terrible times, without disruption to the business or conflict in appointing successors. Family members took back the Chairmanship in 2007 (Thomas Schmuckli) and will resume the CEO responsibility next April (Daniel Bossard).

Conflicts pre-settled in a family charter

Conflicts and diverging opinions can arise in managing the company. Knowing how to resolve conflicts by addressing the issues will reinforce family ties and the company itself. A value-added tool for the family and for the link between the family and the company is to have a family charter (or family council). It will contribute to the continuity and stability of the risk profile by defining each person’s needs, expectations and roles in order to achieve the target objective. It can also serve to address intergenerational involvement, like training, handover, alignment of competences and interests. It helps manage conflicts of interest and agency costs.

SEB Groupe, the world’s leading small-domestic-appliances company, has gone through five generational transitions. The family counts more than 600 members. SEB is doing business in an extremely competitive environment where consistency and long-term vision are critical. The family stresses that its cohesion through a family charter has been an important factor of success.

Differentiation with family branding

The brand is the family and the family is the brand. Cultivating cohesiveness and unity, securing family values and identifying the family with the company build trust. This might explain why employees, consumers and even other businesses often see family businesses as trustworthy. It also helps in some cases to differentiate from competitors.

Brunello Cucinelli is an Italian luxury company that designs and manufactures luxury ready-to-wear apparel. The company relies on manual skills and craftsmanship, working with an exclusive network of 600 craftsmen around Perugia, Italy. It willingly pays higher salaries than its peers. Mr Cucinelli limits the growth of the company in order not to put excessive pressure on its supply chain, insisting that craftsman cannot grow at 20% a year. To maintain quality, every piece of cloth is checked in the internal control department at Brunello headquarters. Employees with the hardest tasks have an office location with nice views of the gardens. Brunello Cucinelli systematically puts forward this objective of giving work a moral and economic dignity. He calls his company a humanistic company. His philosophy is strongly associated with the brand image of the company and of its products, and clearly positions it in a niche with strong customer loyalty.

Giving back to the community

Families look beyond short-term economic imperatives. They show commitment towards their employees and the environment through their corporate social responsibility and sustainability practices, recognising that human capital is a foundation of success and that being involved in society and local communities shows that the family is committed to the sustainability of the business and its environment. Internally, these practices will strengthen the business through loyalty and dedication, which will drive productivity and flexibility and enrich corporate culture.

Technogym is manufactures and sells high-end fitness equipment. Its founder and president Nerio Alessandri promotes a healthy way of living. He disseminates it through the company and externally. He is not selling equipment to customers; he is a provider of a healthy way of living. He has founded a Wellness foundation, which works with universities, research centres and institutions on human wellbeing and how to improve people’s quality of life. With his foundation, he created  the Wellness Valley project, the first wellness district in Europe – a laboratory of experiences to raise quality of life and leverage wellness as an opportunity for economic development for the Romagna region.

Positives should prevail

Investing in family businesses has its particularities. There are specific risks. Some families can be conservative, others have too closed a pool of directors. In some cases, there is a distortion of voting rights, or conflicts of interest related to asset ownership. But the risks should not be overstated. Integrity and reputation are important to families. In most cases, family shareholders and executives are working for the long-term prosperity of the company.

If chosen wisely, the positives of family businesses will outweigh the negatives. For those that have addressed the challenges of combining the rational world of business with the emotional world of the family, I run my checklists looking for confirmation that Jan Boone’s words could apply. An investment should then prove rewarding for the minority investor.



Ivan Bouillot, Equity Fund Manager

Following two years as portfolio manager and investment advisor at Banque Degroof Luxembourg, Ivan joined Banque de Luxembourg in 2000 as a financial analyst. Since 2004, he has been in charge of European equity investments for the Bank's funds range. Ivan has a degree in Business and Finance from the ICHEC University in Brussels. In 2000, he obtained his CEFA (Certified EFFAS Financial Analyst) diploma and he has been a CFA (chartered financial analyst) charter holder since 2006.

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