celebrating the growth of mid-sized family …
TRANSCRIPT
CELEBRATING THE GROWTH OF MID-SIZED FAMILY BUSINESSES
2 T O P 5 0 G LO B A L C H A L L E N G E R S B A C K G R O U N D
B A C K G R O U N D
2BACKGROUND.
3FOREWORD.
4SECTION ONE. THE TOP 50 GLOBAL CHALLENGERS LIST.
9SECTION TWO. Q & A WITH CITI PRIVATE BANK.
10SECTION THREE. DRIVERS OF GROWTH.
14SECTION FOUR. UP CLOSE WITH THE GLOBAL CHALLENGERS.
17SECTION FIVE. COMMENT BY THE FAMILY BUSINESS CONSULTING GROUP.
19SECTION SIX. THE GLOBAL CHALLENGERS COMPARED.
20SECTION SEVEN. THE GLOBAL CHALLENGERS VS GLOBAL TITANS.
21SECTION EIGHT. LOOKING TO THE FUTURE.
22APPENDIX.
23ABOUT.
T he Top 50 Global Challengers initiative celebrates the growth of mid-sized (middle market) family businesses around the world.
In order to be considered for the list of Top 50 Global Challengers, companies had to have turnover of between $200 million – $6 billion, be at least 50% family-owned and have second generation family members or later involved in the business. The final qualifying and ranking criterion, sales growth, was calculated by taking an average of the two most recent years of annual growth.
In addition to the Top 50 Global Challengers, a list of Ones to Watch comprises successful family businesses nominated by leading family advisors and businesses. These companies did not qualify because one or more of the qualifying criteria weren’t met or there was insufficient information to assess them.
Prospective family businesses for the initiative were identified in three ways:
• Direct entry by family businesses following the promotion of the initiative within the Campden Wealth community and publicity by CampdenFB.
• Nominations of family businesses from the advisory community that Campden Wealth has built up.
• Extensive secondary research on family businesses utilising the Campden’s database of family businesses and institutional knowledge.
All the data on the profiled companies was either sourced from the family businesses themselves (marked at ‘P’ for primary) or through publicly available information (marked with ‘S’ for secondary). Much of the secondary data was obtained from the profiled companies’ websites with some level of judgement applied. While due care was taken, this data was not verified by the company, and therefore its accuracy cannot be guaranteed. All of the tables and charts in this supplement show simple averages of the company data, no weighting has been applied.
In its first year, the initiative enjoyed tremendous support from the family business community, and we are very grateful to the 25 family businesses that directly participated as well as the family business advisors who nominated a total of 32 family businesses. We would specifically like to thank the following:• Family Firm Institute• Judy Green• Fernanda Hurtado• Professor Guido Corbetta• Jennifer Ho• Laura Seibold• Mateusz Figaszewski• Professor Kavil Ramachandran• Simon Minder• Andrew Keyt• Dr. Haluk Alacaklioglu• Guillermo Salazar• Mihaela Harsan• Professor Annie Koh• Business Families Institute (BFI) at
Singapore Management University• Kevin Au.
Identifying the Top 50 Global Challengers
S U M M A R Y
3T O P 5 0 G LO B A L C H A L L E N G E R S F O R E W O R D
F O R E W O R D
T he Global Family Office team at Citi Private Bank are very committed to serving the needs of Family Businesses and the Family Office sector as a key component
of our own growth strategy. Being able to align ourselves closely with this group, understanding the common characteristics of these multi-generational families and identifying what we believe are the key factors behind their success, was a motivating force behind this new piece of research which we commissioned in partnership with Campden Wealth.
The Top 50 Global Challengers seeks to identify and analyse trends within the fastest growing family businesses around the world and will continue to monitor changes in future years as it builds upon and substantiates this year’s findings.
As we look at the families in the report, many of whom are globally renowned names, a range of patterns and distinguishing features of these businesses become clear.
In its first iteration the research strongly suggests that being part of a family business offers certain advantages that can lead to superior growth in their chosen sectors.
• Family businesses have embraced globalisationThe top 50 businesses are geographically spread across the six key regions although there is a predominance in Europe and the US. While these companies may originate in the older economies, their operating businesses reach far and wide across all continents.
• A single sector focus is an important strategic differentiator of companies in the list
Of the families in the list the vast majority operate in one sector. This laser focus has allowed them to be successful in multiple markets across their global footprints.
• These successful businesses mostly operate in the secondary economy producing goods
Many of the family businesses in the list focus on mass market production for consumers. This is particularly well suited to multi-generational family companies who can build brand names and grow organically without heavy capital investments in the early stages.
• Families in the list benefit from longevity and continuity
The research demonstrates that engagement of family members is common and consistent across regional geographies. Of the businesses in the list 84% still have one to four family members active in the business.
• People are at the heart of the business Family businesses in the list are typically large
employers which is good news for the local economies in which they operate. The average size of companies in the list is around 15,000 employees. This can mainly be attributed to the type of businesses they run, but nonetheless is a differentiator.
We are excited to have brought this report to life and we hope you find the report insightful and useful in your own business. We sincerely thank all those who participated in the survey and interviews, and provided us with such valuable insights.
Peter CharringtonGlobal Head, Citi Private Bank
Welcome to the inaugural Citi Private Bank/Campden Wealth Top 50 Global Challengers report
4 T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N O N E
ONE
123456789
1011121314151617181920212223242526272829303132333435363738394041424344454647484950
Meridian Health Plan D&L Industries Inc. KBZ Group Van Oord IMA Sunray Woodcraft ConstructionIndustrias Bachoco The Middlesex Corporation Brembo Ottobock Webasto Dräxlmaier Group Hermès Italtile Molinos Río de la Plata International Container Terminal Services Jarir Marketing Company Dunelm 84 Lumber Carozzi Jet Airways Société BIC illy AgrosuperFesto Dot Foods Amerco Thermax Tamedia Solaris Bus & Coach S.A. Gianni Versace Leprino Foods Company Dabur PHW Group Hirschvogel Automotive Group Grupo Famsa Grupo Elektra Brown-Forman Grupo Rotoplas VKR Holding Weis Markets Americana Group Gebrüder Weiss MANE Groupe Pomona Crystal Group Vorwerk & Co. Beumer GroupXignux American Hotel Register Co
100.0% 68.7% >50% 78.5% 57.3%
100.0% 73.0%
100.0% 53.5%
100.0% 100.0% 100.0%
71.3% 56.0% 75.4% 61.0% 50.0% 55.0%
100.0% 54.5% 51.0% 59.5%>50%
100.0% 100.0% 100.0% 56.0% 62.0% 72.0% >50%
80.0% 100.0% 68.0%
100.0% 63.0% 64.0% 72.0% 67.4%51.8%
100.0% 65.0% 67.0%
100.0% 100.0% 100.0%
>50% 100.0% 100.0% 100.0% 100.0%
Second Second Second Fourth Second Second Second Second Second Third Fourth Second Sixth Second Second Third Third Second Second Fourth Second SecondThird Second Third Third Second Third Fifth Second Third Second Fifth Third Third Second Third Fifth Second Second Third Second Third Fourth Third Second Third Second Second Third
North America Asia-Pacific Asia-Pacific Europe Europe Asia-Pacific Latin America North America Europe Europe Europe Europe Europe Africa Latin America Asia-Pacific Middle East Europe North America Latin America Asia-Pacific Europe Europe Latin America Europe North America North America Asia-Pacific Europe Europe Europe North America Asia-Pacific Europe Europe Latin America Latin America North America Latin America Europe North America Middle East Europe Europe Europe Asia-Pacific Europe Europe Latin America North America
3,370420480
2,8101,260
2502,690
2902,3001,2403,2404,0005,430
2501,9701,0501,720
8202,5001,0203,1702,350
4902,3002,8905,7803,280
8301,070
400720
3,0001,2702,6401,020
8203,8004,096
2902,6302,8803,2001,4201,0503,4601,6903,780
8602,170
860
47.3% 42.5% 31.1% 25.3% 24.1% 21.6% 16.9% 15.3% 15.1% 14.6% 13.7% 13.7% 13.6% 13.3% 12.3% 11.8% 10.3% 10.2%
9.5% 9.5% 9.4% 9.1% 8.3% 7.8% 7.6% 7.5% 7.5% 7.0% 6.1% 6.0% 5.6% 5.6% 5.4% 4.8% 4.6% 4.5% 4.2% 4.0% 4.0% 4.0% 3.4% 3.3% 3.3% 2.8% 2.7% 2.6% 2.4% 2.3% 1.8% 1.0%
SPPSSPSPSSSSSSSSSSSSSSPSSSSSSPSSSSSSSSSSSSSSSPSSSP
COMPANY GENERATION MANAGING THE COMPANY
REGION HEADQUARTERS
REVENUE 2015 (USD MILLION)
P/S*
RANK
ING AVERAGE
ANNUAL GROWTH
FAMILY OWNERSHIP
The Top Global Challengers list
* P= Data supplied by the company S= Data gathered through publically available secondary sources
5T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N O N E
Zegna Ricola REHAU maxon motor Leister LATAM Airlines La Farga Jungheinrich Johannesbad GruppeInci Holding Hess Family Wine Estates Henkel Grupo Comeca Gebr. Heinemann Fildas Ferragamo Ferag Uludağ Beverage Dr. Reddy’s Laboratories Corpbanca Bavaria BreweryApollo Hospitals Ammann Group
100.0% 100.0%
—100.0% 100.0%
25.0% 100.0% 53.0%
—100.0% 100.0%
61.0% ——
100.0% 68.0%
—100.0% 26.0% 39.0%
100.0% 34.0%
100.0%
Fourth Third Second Third Second Second Second Second Third Third Fifth Sixth —Fourth First Second Second Third Second Second Seventh Second Sixth
Europe Europe Europe Europe Europe Latin America Europe Europe Europe Middle East Europe Europe Latin America Europe Europe Europe Europe Middle East Asia-Pacific Latin America Europe Asia-Pacific Europe
COMPANY GENERATION MANAGING THE COMPANY
REGION HEADQUARTERS
FAMILY OWNERSHIP
Ones To Watch
T he Top 50 Global Challengers operate in a total of 14 sectors, but these sectors are predominantly in the
secondary economy, i.e. production of goods from raw materials. Professor Guido Corbetta, Chair of Strategic Management for the Italian Association of Family Companies, suggests various reasons why family businesses may be suited to the secondary economy. He points to the “diversified nature of the secondary economy” and the fact that having “founders and family can be a strategic advantage” for family businesses.
Looking in more detail into the specific sectors, there is a common theme of focusing on mass market production for consumers. The top
Growing in the secondary economy
sectors are Retail, Consumer Goods and Lifestyle (24%) and Agriculture, Food and Beverage (24%) which are both industries which centre on consumers’ needs. These traditional
NATURE OF SECTORAGRICULTURE, FOOD AND BEVERAGE
RETAIL, CONSUMER GOODS AND LIFESTYLESUPPLY CHAIN
INFRASTRUCTURE AND URBAN DEVELOPMENTAUTOMOTIVE
MANUFACTURINGGLOBAL HEALTH AND HEALTHCARE
ENERGY TECHNOLOGIES AND ENERGY UTILITIESAVIATION AND TRAVEL
BANKING AND CAPITAL MARKETSINSURANCE AND ASSET MANAGEMENT
CHEMISTRY AND ADVANCED MATERIALSMEDIA, ENTERTAINMENT AND INFORMATION
MINING AND METALS
24%24%
14%10%10%
8%8%8%
6%6%
4%2%2%2%
sectors are an ideal environment for multi-generational family businesses to utilise their established household names and brands. Professor Annie Koh, from BFI, highlights that these
6 T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N O N E
are sectors where consumers can relate closely to the families behind the brands. The third largest sector, Supply Chain, is closely associated with the first two and accounts for 14% of the Global Challengers. The distinct nature of this group is further reinforced by the comparison below of the sector split of the Top 50 Global Challengers (by revenue) and the global MSCI (by market capitalisation). The Global Challengers are strongly concentrated around the secondary economy, at the expense of the tertiary economy.
Our analysis of the sectors of operation clearly reveals that these family businesses are masters of one trade, rather than jacks of all trades. The vast majority of the Top 50 operate in just one sector, with only seven family businesses acting across more than one sector. Professor Annie Koh highlights this by saying: “Essentially, many of the businesses that are in single sectors focus on building excellence in those areas.” This narrow focus is unquestionably important to their success, allowing them to devote the necessary time to develop their product range and then push it out in the market. It also helps to explain their international footprint – growth has come through selling one-sector products into multiple markets, rather than vice versa.
ONE
A global list
BUSINESS HEADQUARTERS
AFRICAASIA-PACIFICEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICA
2%16%
44%16%
4%
18%T he global nature of family businesses and family business success is reflected in the Top 50 Global
Challengers list, with businesses from six different regions represented.
The biggest representation (44%) of Global Challengers comes from Europe, which has long
Free trade is obviously central to the success of this ‘one sector multiple markets’ strategy, and most recent trends are not encouraging in this respect. The World Trade Organization’s Statistical Review 2016 reported that the overall stock of trade-restrictive measures is continuing to increase, albeit that the picture differs around the world.
Guillermo Salazar, Managing Partner of Exaudi Family Business Consulting and a member of the FFI GEN Faculty, notes that in Latin America it is becoming easier for businesses to sell into other countries as a result of a concerted effort by the regional governments to lower their tax barriers and open up their markets.
GLOBAL CHALLENGERS
SECTOR SPLIT. TOP 50 (BY REVENUE) VS MSCI (BY MARKET CAPITALISATION)
CONSUMER DISCRETIONARY
INDUSTRIALS
CONSUMER STAPLES
FINANCIALS
UTILITIES
HEALTHCARE
INFORMATION TECHNOLOGY
ENERGY
MATERIALS
TELECOMMUNICATION SERVICES
REAL ESTATE
34%
20%
0%
0%
0%
6%
0%
0%
8%
2%
30%12%
9%
7%
16%
6%
3%
3%
4%
19%
11%
11%
*Note: Totals do not add up to 100% due to roundings MSCI
7T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N O N E
been a traditional heartland of family businesses. The individual performances of these companies are particularly impressive when seen against the backdrop of generally sluggish economic growth within the continent which has averaged around 0.9% during 2013-2015.
There is also good representation from other parts of the world. Global Challengers from North America account for 18% of the Top 50 list, helped in part by the relatively healthy growth achieved by both the US and Canada over the period. The emerging markets are also well represented, with Latin American companies making up 16% of the Top 50 and Asia-Pacific accounting for 16%.
The global nature of these businesses is even more powerfully illustrated in the operational footprint that they have around the world.
T he sectors in which the Top 50 Global Challengers operate inevitably mean that they
are large employers of people. Despite technological advances, over time manpower is still a key input when businesses are looking to manufacture large numbers of goods. On average, the Global Challengers employ 15,000 workers
People are at the heart
each. A breakdown of employment figures shows that 40% of the Global Challengers employ over 10,000 workers and 12% employ between 6,000 and 9,999. The employment figures underscore the economic and social importance of these companies, and initiatives like this from Campden Wealth and Citi Private Bank to celebrate their success.
AFRICAASIA-PACIFICEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICA
ACTIVITY BY REGIONS
80%
70%
60%
50%
40%
30%
20%
10%
0%
54%58%
72%66%
50%
74%
PEOPLE EMPLOYED
20%
28%12%
40%
1 — 2,9993,000 — 5,9996,000 — 9,99910,000 +
NUMBER OF REGIONS ACTIVE IN
123456
32%
6%6%8%8%
40%
On average, the Top 50 Global Challengers are active across 3.7 regions. This shows very clearly that the family businesses have embraced globalisation, and that access to multiple markets is key to their growth (see section three for more on the drivers of growth).
Looking across the various regions, we see that nearly two-thirds of the
Top 50 Global Challengers operate in North America (74%) and Europe (72%). But they are heavily committed all around the world, with many operating in Latin America (66%), a natural next step for many North American-based family businesses. While Asia-Pacific (58%) and Africa (54%) are the next most popular locations for business activity.
The individual performances of these companies are particularly impressive when seen against the backdrop of generally sluggish economic growth
8 T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N O N E
O ne of the possible consequences of focusing on ‘growth’ as the ranking criterion in an initiative
such as this, is that the resulting list is dominated by smaller companies that don’t have the inertial pull of large historic turnover numbers. Encouragingly, our Top 50 Global Challengers reveals that size is not
Size isn’t an obstacle for growth
an impossible obstacle when looking to achieve growth, with good representation from family businesses across the range of sales. Clearly, the opportunities for rapid growth are present even for the larger family businesses, if they follow the right strategies.
It is also important to mention the benefits of longevity for these businesses. The average founding date of the Top
50 is 1942, with 54% of them now in the second generation and 28% in the third generation. Over this time, they have withstood all manner of internal and external challenges, which will have helped them to manage the many economic and political challenges of recent times. Like size, age is no barrier to the growth of family businesses, and indeed could well be an advantage.
SPREAD OF REVENUES
RE
VE
NU
E 2
015
(U
SD
MIL
LIO
NS
)
R A N K E D T O P 5 0 G L O B A L C H A L L E N G E R S
6,000
5,000
4,000
3,000
2,000
1,000
01 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
REVENUE 2015 (USD MILLIONS)
ONE
Why no technology companies?
A mong the many lists and awards celebrating business growth globally, one sector is
always well represented: technology. For some, the most surprising characteristic of the Top 50 Global Challengers may be its complete lack of technology companies. Not even one makes it into the list. There are a number of reasons why this is the case.
First, our list specifically examines multi-generational family businesses. Considering that the information technology revolution began only in the 1970s, there are few multi-generational technology companies around. The table below shows the founding date of the largest technology companies listed on the Nasdaq, and shows
LARGEST TECHNOLOGY COMPANIES ON NASDAQ
COMPANY
APPLE INC.ALPHABE T INC.MICROSOF T CORPORATIONFACEBOOK, INC.INTEL CORPORATIONCISCO SYSTEMS, INC.
19802004 (AS GOOGLE)1986201219711990
197619981975200419681984
YEAR OF IPO YEAR OF FOUNDING
how young they are when compared with the average founding date of the Global Challengers – 1942.
Another point highlighted by a couple of family business advisors and the Campden leadership team is that technology sector companies require high capital investments at the front end. Guillermo Salazar explains: “For technology companies it is all about speed to market and getting scale very quickly. This is incompatible with the family business structure where the funding is internal.” In many cases it will also be beyond the risk appetites of families that have the necessary capital, recognising that technology companies have high failure rates.
While these factors explain the current dearth of technology companies, there is some room for
optimism that this sector may one day feature in the list. Within existing family businesses, we may well see next generation family members create or develop technology-centred offshoots of family businesses, predicts Andrew Keyt, CEO/President of FBN North America. This point is also highlighted by Professor Annie
Koh saying that the next generation are “leveraging on technology to complement and enhance the competitiveness of the family’s core businesses.” In time, and in sufficient numbers to survive the inevitable attrition, some of these may well enter our list of successful middle market companies.
9T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N T W O
TWO
How do you explain the specific sector focus of the family businesses? The report highlights that even though the Top 50 Global Challengers operate in a total of 14 sectors, there seems to be a focus on only a few: Agriculture, Food and Beverage (24%) and Retail, Consumer Goods and Lifestyle (24%). These sectors have benefited from significant population growth, urbanisation, mass market production and a focus on meeting consumer demands. With the advantage of requiring relatively low capital investment in the early stages, families and their businesses have developed strong and often highly competitive ecosystems within these sectors. But consumer behaviour and needs are changing, and they will need to broaden their focus and adapt to these changes. The future of globalisation, demographics, inequality, specific geopolitical risks and the pace of technological change all serve as catalysts towards this.
How is it that so few technology-focused family businesses appear in the Top 50 Global Challengers? The study shows that most successful family businesses have been multi-generational ones with succession plans. Bear in mind that the technological revolution – as we know it – emerged in the 1970s and blossomed in the 1980s and 1990s. The average founding date of the Global Challengers, by comparison, was only 1942. Today, significant wealth is being generated in diverse and innovative technology areas, amidst the meteoric rise of the Internet of Things, blockchain, alternative investments and the sharing economy. Younger generations are very linked to these new trends and technologies, and are able to respond to the ferocity of change. They are also able to expose their elder relatives to the potential of technology, and help change how businesses operate. Whilst this – amongst other factors – leads us to believe that the technology sector will be better represented in future lists, lines will increasingly blur as traditional sectors embrace technology, as beneficiaries rather than as operators (e.g. robotics in agriculture).
Where do you see the limitations for growth and what growth strategies would you recommend? Much of the business growth seems to have been achieved organically by increasing the scale of production, capturing market share and customer base expansion. However, this type of organic growth can plateau after growing exponentially in the initial stages. These limits can be challenged by the family businesses in numerous ways: by investing in training, embracing new production and marketing techniques, applying more radical ‘out of the box’ thinking and through acquisition opportunities in undervalued or synergistic businesses. We have also identified a couple of other options here. First, by hiring third-party consultants
or business strategists at critical junctures, family businesses can bring additional skills, knowledge and an edge to their board. Second, business can innovate and embrace new trends and technologies to increase efficiency, performance and output. The organisation’s ability to innovate is one of the key capabilities to be competitive in the 21st century.
How can Corporate Social Responsibility (CSR) contribute to the success of the family businesses? Strong CSR can help build the reputation of companies, as well as their controlling families and key stakeholders. Doing good for society and the environment, and philanthropy help consumers associate and build loyalty with brands. Having a rigorous CSR policy may also translate into higher ethics and stronger governance in the business – something that has been demonstrated to bring shareholder value. As discussed in the Top 50 Global Challengers report, manpower is still a key input (40% employ over 10,000 workers and 12% between 6,000-9,999). CSR could give rise to an improved work culture and environment as well as a more committed workforce.
Is multi-generational involvement in a family business something that’s likely to continue as a business expands? As demonstrated, family members often remain in the saddle or involved in some way over multiple generations. This can take varying forms though – and at different levels within organisations. Having the family deeply embedded in the business can often lead to stronger decision-making and a firmer commitment to the family vision and business strategy. However, maintaining strong engagement across disparate generations, frequently with other interests, is a challenge that families face, and, over time, generational involvement may recede in favour of management professionals.
Another viewReflections on the current list and how it may change
Q & A WITH PHILIP WATSON, GLOBAL HEAD, INVESTMENT LAB, CITI PRIVATE BANK
10 T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N T H R E E
THRE
E
Drivers of Growth
O ur analysis of the strategies being followed by the Global Challengers reveals that much of the
growth was achieved the hard way – organically – despite generally trying economic conditions in many of the world’s largest economies.
The most common organic growth strategies pursued were ‘increasing market share’ (evidenced among 90% of the Top 50 Global Challengers) followed by customer base expansion (84%). This certainly ties in with the large geographic footprints of these companies. At the same time as looking outward, they have also been making internal investments, specifically in the way of increased capacity (74%) and product improvement (76%).
But growth hasn’t just been of the organic variety. A significant 62% of the Global Challengers have also pursued acquisitions. Importantly, these acquisitions have largely been within their existing sectors,
Section one identified some headline characteristics of the Top 50 Global Challengers. This next section looks deeper into these companies to understand other key factors behind their success.
Growing the hard way — organically
ORGANIC GROWTH STRATEGY
INORGANIC GROWTH STRATEGY
INCREASING MARKET SHARE
CUSTOMER BASE EXPANSION
PRODUCT DEVELOPMENT/DIFFERENTIATION
INCREASING CAPACITY/OUTPUT
R&D
INCREASING HEADCOUNT
PATENT DEVELOPMENT
ACQUISITIONS
JOINT VENTURES
INDUSTRY/SECTOR DIVERSIFICATION
MERGERS
90%
62%
84%
44%
74%
44%
42%
76%
38%
62%
36%
underscoring the merits of a focused strategy. Traditionally, many family businesses have been guilty of shying away from acquisitions because of their capital requirements and execution risks.
Andrew Keyt observes an important shift in this regard:
“I think you are seeing high-functioning family businesses start to realise that organic growth has its limits. That strategically there are risks to developing everything yourself, and acquisitions can be very effective in driving growth.”
Strategically there are risks to developing everything yourself, and acquisitions can be very effective in driving growth
11T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N T H R E E
Function decides form
T he Top 50 Global Challengers tend to organise themselves along practical lines, rather
than hierarchical ones. The two most common arrangements are by function (72%) or along product lines (72%), followed by geographic considerations (54%), with many exhibiting a combination of structures through their organisations. These practical arrangements all have the benefits of being scalable, which is very important for fast growing businesses. members, and also managers that
report to families, to approve different strategies for different markets or segments. If, for example, Poland needs a different strategy than France, you can explain this to the owner, and receive a quick yes or no.” Multi-nationals, by comparison, are well equipped to define processes and systems but less adaptable when it comes to the needs of specific markets. This point was echoed by a manager from a Top 50 Global Challengers, and may well be a source of competitive advantage for family businesses when it comes to their global expansion. 72%
FUNCTIONALDIVISIONAL BY PRODUCTDIVISIONAL BY AREAFLATMATRIXTALL
72%
54%50%
40%36%
ORGANISATIONAL STRUCTURE
CHAIRPERSON OR BOARD MEMBER
DIRECTOR
PRESIDENT
CEO
VICE PRESIDENT
PARTNER
COO
CFO
CIO, CMO, CRO, CTO
92%
56%
44%
26%
16%
14%
6%
6%0%
POSITION FILLED BY FAMILY MEMBERS
Interestingly, family involvement is remarkably consistent among the Global Challengers, with no significant differences in evidence by generation. The clear majority (84%) have between one and four family members active within the family business, with the remainder having between five and 14. They are typically involved at the board level, with some family members also serving in senior executive roles.
Fernanda Hurtado, CEO of Family Business Association of Chile and a political scientist at Universidad Católica, observes that the nature of family engagement evolves over time. “As we go to second and third generations, external professionals will be hired for more administrative or managerial positions but key members of the family will generally remain within the structure and also on the board.”
There are certainly advantages and disadvantages to family involvement in an executive capacity. Professor Guido Corbetta comments that family businesses can be very fast and adaptable when it comes to decision-making. “It is much easier for family
As we go to second and third generations, external professionals will be hired [...] but key members of the family will generally remain within the structure
12 T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N T H R E E
Corporate governance needs attention
CSR is at the centre of these businesses
THRE
E
I n a rapidly growing business, it is easy to imagine how corporate governance might be overlooked in favour of more immediate
business needs. Our review of corporate governance – albeit partly dependent on self-reporting by the businesses – suggests that this is the case in many businesses. The Global Challengers are doing better when it comes to the selection of directors and the appointment of non-executive directors, and worse at the formalisation of roles, risk management and succession plans.
This is an area that these high growth family businesses need to address if they are to sustain their success in the longer term. Professor Guido Corbetta describes it as “probably the most important” thing to address in family companies, with benefits for strategy, growth and
C orporate social responsibility (CSR) policies are very much in evidence among the Top 50 Global Challengers.
Their policies often span a range of areas, but are nearly ubiquitous when it comes to how the companies impact society and the environment. Like all companies, there are increasing requirements and expectations in these areas, particularly for companies that produce goods for the consumer markets, like so many of the Global Challengers. These businesses also have the link to families, whose values need to be reflected and reputations preserved.
performance. Corporate governance serves an important role not only in minimising potential conflicts of interest between the family and their business, but also in challenging the prevailing thinking, identifying possible disrupters, pushing the
“I think that for a lot of families, CSR is a must because it’s important for the reputation of the company, but it’s also important for the reputation of the family,” comments Professor
business forward and attracting the best talent, according to Andrew Keyt. For fast growing family businesses, there is an acute need to bring in more talent to ensure that the human capital can keep pace with the business needs.
Guido Corbetta. Fernanda Hurtado notes that the next generation family members are also speaking up on responsible business practice. “The new generations are more willing to get involved in the company if its policies towards CSR and sustainability are clear and up-to-date with the current social and economic trends and outlook.” These policies are therefore a powerful tool to ensure that future generations remain active in the family business. Professor Annie Koh also notes that the public listing of family businesses can be a powerful catalyst for progress in the areas of CSR and corporate governance.
STRATEGIC SELECTION OF DIRECTORS BY SKILLS AND VALUE-ADD
INDEPENDENT NON-EXECUTIVE DIRECTORS
CHARTERS DOCUMENTING ROLES AND RESPONSIBILITIES
CHARTERS DOCUMENTING CORE VALUES AND OBJECTIVES
SUPPORTIVE COMMITTEE STRUCTURES
RISK MANAGEMENT FRAMEWORK(S)
SUCCESSION PLAN(S)
EXISTENCE OF BOARD GOVERNANCE ELEMENTS
64%
50%
48%
48%
46%
44%
44%
For a lot of families, CSR is a must because it’s important for the reputation of the company, but it’s also important for the reputation of the family
13T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N T H R E E
REPORTS IMPACT ONPROCEDURES FOR
CSR: POLICIES AND REPORTING
SOCIAL IMPACT
EMPLOYEE INVOLVEMENT
ENVIRONMENTAL IMPACT
CUSTOMER ENGAGEMENT
DIVERSITY
SUPPLIER ENGAGEMENT
72%
66%
68%
44%
38%
22%
86%
82%
74%
56%
56%
42%
Another all-important stakeholder for family businesses is their employees, and some 74% have policies in this area. Global Challengers are certainly large employers of people and surveyed managers from this group put having a ‘committed workforce’ and ‘clearly articulated mission and values’ as their single biggest strengths. This is undisputedly an important factor in the Global Challengers’ success.
Family businesses are marginally less likely to report the impact of CSR policies. One advisor comments “family businesses have not been skilled in terms of communication, but this is changing and more family businesses are investing also in communication around their CSR policies.”
WHICH OF THE FOLLOWING WOULD YOU IDENTIFY AS CORE STRENGTHS OF THE BUSINESS? (TOP 6 RESPONSES)
CLEARLY ARTICULATED MISSION AND VALUES
COMMITTED WORKFORCE
UNDERSTANDING OF KEY MARKETS OR CONSUMERS
COMPETITIVE MARKET POSITIONING/BRAND LOYALTY
INDEPENDENT, PRIVATE OR ALTERNATIVE SOURCES OF CAPITAL
CLEAR SUCCESSION PLAN/INVOLVEMENT OF THE NEXT GENERATION
75%
75%
63%
50%
50%
50%
Five key ingredients for success
D istilling the analysis provided in sections one and three, it is possible to hypothesise five key ingredients
for the success of high growth family businesses. These are all areas that we will look to test out and explore further in future iterations of the Top 50 Global Challengers.
Maintaining focus on specific sectors Internationalising and gaining market share Focusing on organic growth but being open
to acquisitions Being responsible corporate citizens Getting the best out of large workforces
14 T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N F O U R
FOUR Up close with the Global Challengers
The Middlesex Corporation
The i
mag
es u
sed
are f
or d
emon
stra
tive p
urpo
ses o
nly
US -based company, The Middlesex Corporation, is one of the youngest
family businesses in the list of Global Challengers having been founded in 1972. It was set up by Robert W. Pereira and is now managed by his son Robert W. Pereira II. Looking to find out more about what drives the successful growth of The Middlesex Corporation we spoke to Robert W. Pereira II, about how they managed 15.3% average growth since 2013.
While the average Global Challenger tends to focus on one sector, The Middlesex Corporation has seen great success through diversifying its products and services over different sectors. However, these are very much complementary. Beginning in construction, a next logical step is energy, particularly “maintenance and repair of electric lines, gas lines, propane farm builds, tank farm building, and maintenance and repair of facilities” highlights Pereira. While not operating internationally, The Middlesex Corporation has expanded regionally within the US, from “North-Eastern states, such as New England and New York to South Eastern States such as Georgia and Florida.”
For this expansion to succeed Pereira has made his workforce a top priority. “The key to our success has been the strength of our people and their willingness to grow, have the same vision for the future that we have, and be proud of that.”
Another factor for the success of the business is the safety of their people. “30, 40 years ago, safety was not a top priority in our industry, nor in our organisation. Over the course of the past 20 years, my dad has refocused and really pushed the core value of safety. It has been one of the drivers of our success.” With the workforce being so important for their growth, it is no wonder that safety is a leading principle for the family business.
Asked what the benefits of family ownership are for the business, Pereira echoed many family business advisors saying, “Ease of access to the ownership of the organisation means that we can make fast decisions without having to follow any specific guidelines or processes. It allows us to move faster as an organisation.”
As well as this, looking long term was a strength of 100% family business ownership. “We are definitely not thinking about the next quarter; we are thinking about the next 10 or 15 years constantly. This gives us a better long-term focus on the business rather than a short-term focus.”
15T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N F O U R
Phot
os: ©
Van
Oord
Van Oord
T he fastest growing European family business, Van Oord is a specialist marine engineering
company. The foundations for the company as it exists today were laid in 1868 by Govert van Oord, and the van Oord family still control 78.5% of the shares. Similar to many of our family businesses, Van Oord is a leader within their original specialisation of dredging. However, Van Oord has managed to strategically diversify into offshore oil, gas and windfarms.
For those who are unaware, dredging involves bringing up earth from the seabed for either excavation purposes, land reclamation or sea and coastal defence. It generally involves using specialised machines and ships in order to carry this out. A famous example of this is the Suez Canal in Egypt.
Managing to achieve 25% growth on average over the period is largely attributable to its work on large-scale projects, in particular the completion of: the Second Suez
Canal, Luchterduinen offshore wind park and Gemini wind park. Van Oord operates on a global scale, and is clearly benefiting from the increase in large-scale projects in emerging regions such as the Middle East. It has recently completed significant projects in Kuwait and Kazakhstan.
Interestingly, in order to continue its expansion into the offshore wind farm industry, Van Oord has looked to use acquisitions as a growth strategy in order to achieve this. Recently it acquired a German company active in the wind farm construction process. As cleaner energy is gaining traction around the world, expansion into wind technology will no doubt benefit the company in years to come.
Reporting environmental impact is clearly of business interest for Van Oord, and they have taken an active role, along with other major Dutch companies, in ensuring that they encourage the Dutch government to meet Paris climate objectives by 2050.
16 T O P 5 0 G LO B A L C H A L L E N G E R S
American Hotel Register Company
S E C T I O N F O U R
FOUR
I t is safe to say that the American Hotel Register Company has come a long way. Established in 1865,
American Hotel transformed from a business printing guest registration books for local hotels, into a global supply and distribution company, which currently serves a broad variety of customers in 170 countries. We spoke to Angela Korompilas, CEO, who told us their story.
Similar to other family businesses within the list, American Hotel operates globally, focusing on one sector providing the best and broadest selection of hospitality products and services to their customers. What makes them stand out, however, is a high level of diversification across customer segments. Korompilas explains, “When we started transforming into a distribution company, we recognised the importance of customer and segment diversification, which has proven to be critical for our success. In addition to hotels, we also concentrate on education, healthcare, government, gaming and funeral supplies.”
According to Korompilas, American Hotel’s ability to listen to their customers and respond to their needs helps them succeed. “We ask our customers to tell us how and where we should serve them. In this way we gain their commitment and build lasting partnerships.”
Critical to remain relevant to the industry’s evolving needs, American Hotel has expanded internationally over the last five years with acquisition being a major part of their strategy. This approach helped them to realise their global aspirations more quickly and better serve their customers’ expanding needs by providing streamlined supply chain management and consistent, high quality service. According to Korompilas, the company has a strong potential to grow even further in the near future. “We made an acquisition of a company based in
Amsterdam back in 2011. And we have since announced an acquisition in Asia-Pacific that will give us access to seven additional offices throughout the region. This will allow us to serve an additional 40 countries.”
Korompilas identifies people and their relationship-building skills with customers as the greatest asset that will help American Hotel succeed in the long term. “The ability of our people to forge relationships with corporate HQs, management companies and individual properties, down to housekeepers, engineers and managers is by far the most important driver of success.”
The company is currently chaired by the third generation, with the fourth being actively involved in the business. Family ownership comes with a strategic advantage according to Korompilas. “Everything we do is based on long-term investments and growth, relevant for future generations. Our goals are set within the context of this long-term outlook and is by far the best strategic advantage we have.”
Unsurprisingly, well-structured corporate and family governance is a priority for the family.
Korompilas explains that along with the valuable contribution of three independent board members, the family is currently looking to establish a family governance model to determine how family members will efficiently interact with and effectively contribute to the future direction and success of American Hotel for generations to come. Th
e im
ages
use
d ar
e for
dem
onst
rativ
e pur
pose
s onl
y
17T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N F I V E
O ur work with hundreds of family firms annually across revenue size, sector and geography suggests the
most effective ones focus—across the family, ownership and management groups—on continuity, rather than just succession of leadership and ownership across generations. They prioritise ongoing growth and evolution over time-limited, transactional hand-offs.
The next question, then, is how do family firms promote continuity within their businesses and families? We see the behaviours that support success and continuity as falling into four key, related areas.
Education of owners and the broader familyThe most effective family business owners are involved shareholders, even when they don’t work in the business. But to be involved, they need to understand key dimensions of family enterprise and ownership. In fact, we believe an appropriate family-business owner “job description” would involve the ability to define vision, understand business context, clarify expectations to management, articulate values and develop governance.
In that context, here are several specific areas effective business families
help ownership groups and broader families to understand: • The difference between owner
and investor: They help owners understand that they’re not just investors, but stakeholders with an emotional investment in the company they own and a sense of accountability for its actions.
• Ownership as impact: Effective families help shareholders to see that their business ownership can allow them to have an impact in multiple ways.
• Business and governance: Owners need to understand the culture of the business and how they can contribute to it, the basics of the business strategy and how they can monitor its changes and impact, and what governance means for both the business and family.
To help members understand these and other areas, successful families take advantage of a range of learning opportunities.
Families that understand how critical ownership education is start the process when the rising generation is very young, introducing information about the family’s history/values, business and governance a little at a time, developing shareholders who feel more connected to and knowledgeable about the business they own. That creates a strong, lasting culture of continuity and capability that promotes the enterprise’s health.
Shareholder Alignment Having the support of an aligned shareholder group enables executive
Four drivers of successful family enterpriseFamily enterprises continue to be powerful global business and economic forces, outperforming non-family businesses on multiple dimensions. Today, multi-generational family firms continue to grow profitably worldwide. What drives their success?
BY DREW MENDOZA, MANAGING PRINCIPAL, THE FAMILY BUSINESS CONSULTING GROUP
The most effective family business owners are involved shareholders, even when they don’t work in the business
FIVE
18 T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N F I V E
FIVE
leaders of a family firm to pursue high-value long-term strategies that drive competitive benefits. In short, an aligned ownership group that speaks with “one voice” is a major asset to the business, enabling management to focus on mission and strategy without concern for shareholder disputes.
Successful families generally align around a view that emphasises stewardship, rather than focusing excessively on short-term results. Ownership alignment around this value and others informs business decisions for four key areas under the acronym “GRPL”:• Growth: How fast do owners want
the business to grow? How large do they want it to become? Do they favour growth in revenues or profitability?
• Risk: What risks are they willing to take and what does that mean for business strategy?
• Profits: What level of profitability do owners want—ideally and at a minimum?
• Liquidity: What kind of dividends do owners seek? What do they prefer with regard to their ability to convert business assets to cash? What does this mean for share-redemption policies?
Effective families help owners gain alignment around GRPL and what that means for their vision for the business and ownership structure, whether through informal family and shareholder meetings or more formal work with outside advisors.
Family GovernanceThe owning family develops the corporate board, but must also create strong family governance structures and processes to facilitate decision-making, communication of the family’s preferences to the business, development of future leaders and owners, and other activities.
Effective families develop a range of family-governance elements including:• Shareholder assemblies/meetings;
• Family councils responsible for the alignment of families’ policies and practices, and communication of family-related goals to boards/businesses; and
• Family constitutions, which are “living documents” that state families’ core values and visions, and the composition of key governance bodies and policies related to family participation.
We have found strong business and family governance gets a broader range of family members involved and establishes systems, policies and practices regarding family employment and compensation, shareholder liquidity, board and family council succession, and many other potentially fraught issues that can cause conflict. Good family governance also helps to maintain the family’s connection to the business especially as members become more distant and dispersed in the third and later generations.
Importantly, effective family governance also promotes what we think of as “parallel planning” for the family and the business, to ensure that the nature and direction of the business is aligned with the overall goals of the family. In fact, family governance is very much focused on continuity, whether crafting the owners’ vision or preparing next-generation leaders and owners.
Development of the Board ChairFor a family business board to serve the enterprise well, directors must
have an understanding of the values, vision, culture and goals of the family ownership group, in line with what we have presented here so far.
That means the board chair—whether a family member or not—needs deep understanding of both the family and the business, and an ability to communicate between the two, serving as a sort of “translator” and advisor across all three domains of family enterprise: family, ownership and management.
An effective chair uses their knowledge and experience, further, to create effective expectations, communications and working norms for the board; promote greater organisational accountability; establish trust and transparency among stakeholders; and help recruit the most effective family and independent directors.
Effective board chairs often have deep experience with the family, business and industry, but this experience may be developed further through formal and informal means before ascending to the role.
In summary, there’s no single formula for a successful family enterprise. Every family that finds success with business will offer a unique story for how they got there.
But the most effective ones we’ve observed harness the drivers described here to promote continuity of both business and family. They educate owners and other family members on key dimensions, align shareholders to create truly collective values and vision, engage in the hard work of creating family governance structures and processes, and develop board chairs who can unify the family and business effectively.
In the bigger picture, effective business families “walk slowly to go far,” approaching multi-dimensional challenges with enthusiasm, diligence and care, celebrating success and learning from setbacks. That approach is most likely to yield the meaningful continuity such families seek across generations.
There’s no single formula for a successful family enterprise. Every family that finds success with business will offer a unique story for how they got there
19T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N S I X
SIXThe Global Challengers compared
S eparately analysing the nature of the Top 25 Global Challengers, the 26-50 Global Challengers,
and the Ones to Watch, reveals some interesting results.
58% of the Top 25 Global Challengers operate in the Agriculture, Food and Beverage (29%) and Retail, Consumer Goods and Lifestyle (29%). Compare this to 20% of the 26-50 Global Challengers, and only 17%
of the Ones to Watch being based in Agriculture, Food and Beverage sectors. Supply Chain family businesses consist of 20% of the slower growing segment compared to only 8% of the fastest growing.
With a bias towards organic growth, all three segments have high proportions of businesses looking to grow through increasing market share, however, almost all of the Top 25 Global Challengers are looking to grow through this method compared to 84% and 74% for the 26-50 Global Challengers and Ones to Watch respectively. Interestingly, for all three segments there is less focus on growth through increasing headcount.
In terms of inorganic growth strategies, there is less focus on industry/sector diversification for the Top 25 Global Challengers, with only 38% of the fastest growing family businesses looking to diversify across sectors. This reinforces the strong theme of sectoral focus that comes through in the analysis.
TOP 25 GLOBAL CHALLENGERS
TOP 25 GLOBAL CHALLENGERS
26-50 GLOBAL CHALLENGERS
26-50 GLOBAL CHALLENGERS
ONES TO WATCH
ONES TO WATCH
AGRI
CULT
URE,
FOOD
AN
D BE
VERA
GES
RETA
IL, C
ONSU
MER
GO
ODS
AND
LIFES
TYLE
SUPP
LY C
HAIN
MAN
UFAC
TURI
NG
AUTO
MOT
IVE
GLOB
AL
HEAL
TH A
ND
HEAL
THCA
RE
INFR
ASTR
UCTU
RE
AND
URBA
N DE
VELO
PMEN
T
AVIA
TION
AND
TR
AVEL
BANK
ING
AND
CAPI
TAL M
ARKE
TS
INSU
RANC
E AN
D AS
SET
MAN
AGEM
ENT
CHEM
ISTR
Y AN
D AD
VANC
ED
MAT
ERIA
LS
MED
IA,
ENTE
RTAI
NMEN
T AN
D IN
FORM
ATIO
N
MIN
ING
AND
MET
ALS
ENER
GY
TECH
NOLO
GIES
AN
D EN
ERGY
UT
ILITI
ES
SECTOR
29%
63%
29%
46%
8%
38% 38%
8% 8%
13% 13%
4% 4%0%
8% 8%4% 4%
20%
60%
16%
44%
20%
40%
8% 8% 8% 8%12%
8%4%4%
0% 0% 0%
17%
70%
13%
52% 52% 52%
22%
22%
26%
13%
0% 0%4% 4%
0%4%
0% 0% 0%
TOP 25 GLOBAL CHALLENGERS 26-50 GLOBAL CHALLENGERS ONES TO WATCH
ORGANIC GROWTH STRATEGY
INORGANIC GROWTH STRATEGY
ACQUISITIONS JOINT VENTURES MERGERS INDUSTRY/SECTORDIVERSIFICATION
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
INCREASING MARKET SHARE
CUSTOMER BASE EXPANSION
INCREASING CAPACITY/OUTPUT
PRODUCT DEVELOPMENT/DIFFERENTIATION
R&D
INCREASING HEADCOUNT
PATENT DEVELOPMENT
20 T O P 5 0 G LO B A L C H A L L E N G E R S
T he Global Titans are the 30 largest wholly-owned family businesses in the world. The data was
gathered for a private client in 2015 but is available for reference here in its complete form, for the first time publicly.
Comparing the Global Titans with the Top 25 Global Challengers, we see that both segments favour traditional sectors; however the Global Titans do also have some presence in higher technology sectors. Importantly, the Global Titans are active across more sectors, 3.5 on average, compared to 1.4. This may simply be a function of the need to secure further growth through diversification.
Our analysis of the Global Titans revealed the startling finding that all of the largest wholly-owned family businesses are based either in Europe (57%) or North America (43%). Both these regions offer large, stable, family-business friendly economies, and don’t have the intense pressure on companies to grow quickly, often resulting in the dilution of family shareholding. Global Challengers, by contrast, are more widely distributed across the world than the Global Titans, but there is still a bias towards Europe. Importantly, both the Global Challengers and Global Titans operational footprints are global, underlining the importance of internationalising in achieving growth.
Global Challengers favour inorganic growth compared to the Global Titans perhaps due to their higher growth aspirations. Another factor could be that the Global Titans are wholly owned by families meaning they are less beholden to shareholders pursuing high growth in the short-term.
S E C T I O N S E V E N
SEVE
N
The Global Challengers vs Global Titans
SECTOR
TOP 25 GLOBAL CHALLENGERS
TOP 25 GLOBAL CHALLENGERS
TOP 25 GLOBAL CHALLENGERS
GLOBAL TITANS
GLOBAL TITANS
GLOBAL TITANS
12%4%
16%
44%
20%
4%
60%
44%36% 36%
43%
0%0%
57%
0% 0%
40%
13%3%
10%
BUSINESS HEADQUARTERS
INORGANIC GROWTH STRATEGY
NORTH AMERICA MIDDLE EASTLATIN AMERICAEUROPE ASIA-PACIFIC AFRICA
ACQUISITIONS JOINT VENTURES MERGERS INDUSTRY/SECTORDIVERSIFICATION
SECTOR
AGRICULTURE, FOOD AND BEVERAGES
RETAIL, CONSUMER GOODS AND LIFESTYLE
GLOBAL HEALTH AND HEALTHCARE
AUTOMOTIVE
INFORMATION TECHNOLOGY
PROFESSIONAL SERVICES
INVESTORS
TELECOMMUNICATIONS
INFRASTRUCTURE AND URBAN DEVELOPMENT
AVIATION AND TRAVEL
BANKING AND CAPITAL MARKETS
INSURANCE AND ASSET MANAGEMENT
CHEMISTRY AND ADVANCED MATERIALS
MEDIA, ENTERTAINMENT AND INFORMATION
OIL AND GAS
MINING AND METALS
ENERGY TECHNOLOGIES AND ENERGY UTILITIES
32%
24%
12%
12%
8%
8%
8%
4%
4%
4%
4%
0%
0%
0%
0%
0%
0%
50%
50%
7%
10%
3%
7%
13%
SUPPLY CHAIN 12%37%
17%
13%
10%
27%
3%
17%
17%
13%
7%
10%
MANUFACTURING 0%8%
21T O P 5 0 G LO B A L C H A L L E N G E R S S E C T I O N E I G H T
Note: Due to rounding percentages may not to add up to 100%.
EGHTLooking to the future
T his study of Global Challengers has not only celebrated the success of individual family businesses
but also the nature of the collective. The study has identified the following ingredients for success:1. Maintaining focus on specific
sectors2. Internationalising and gaining
market share3. Focusing on organic growth but
being open to acquisitions4. Being responsible corporate
citizens5. Getting the best out of large
workforcesOur subsequent examinations
of the sub-segments of the Global Challengers list and comparison with the Global Titans have supported a number of these ingredients. We will look to test them out further in future, but for now it is interesting to think how future scenarios may impact these growth drivers, and by extension, the success of family businesses.
One increasingly likely future scenario is the rise of more isolationist policies, which may restrict or prevent trade between countries. This would be a significant threat to the second growth driver, internationalisation, which has been absolutely central to the success of the Global Challengers, and also the Global Titans. It might also have implications for the first growth driver, as aspiring family businesses look for new ways to drive their growth, including diversification into new sectors, which would certainly bring many complications for business managers.
The singular lack of multi-generational family businesses in the technology sector has generated some interesting discussion in this report, and it is also interesting to consider how technology may impact the more traditional sectors
in which the Global Challengers operate. Our survey of eight of the Top 50 Global Challengers provides some insight into how these managers view the impact of technology on their businesses.
In essence, it is seen primarily as a business enabler – helpful for managing costs, providing routes to market and supporting business models. But it isn’t seen as being too much of a threat, and this may be a mistake. Certainly, Andrew Keyt argues that “one of the biggest risks for family businesses is not following the evolution of technology as much as they should. I think that family businesses have to be particularly aware of disruptive technology and start to push the boundaries of their thinking about what types of technologies might disrupt their
industries.” The external viewpoint provided through good corporate governance and the involvement of the next generation of family members has an important role to play in helping family offices understand and manage this threat.
The final future scenario is the possibility of a future economic slowdown or crisis. Our small-scale survey of managers from the Top 50 Global Challengers reflects some concern for the economic outlook, particularly at a global level. While weaker economic conditions would certainly be unhelpful for family businesses, the resilience in evidence among this year’s Global Challengers shows what these dynamic organisations can do against the odds, and bodes well for the future.
WHAT IS YOUR VIEW OF THE IMPACT OF TECHNOLOGY ON THE BUSINESS?
WHAT IS YOUR OUTLOOK FOR 2017?
IT ALLOWS US TO BE MORE COST EFFECTIVE
IT’S AN IMPORTANT ROUTE TO MARKET
IT’S AN ENABLER TO NEW BUSINESS MODELS
IT DOESN’T HAVE A MATERIAL IMPACT
IT’S A THREAT TO EXISTING REVENUE STREAMS
86%
14%
14%
57%
71%
GLOBAL ECONOMY
29% 29% 29%
43%
0%
BETTER ABOUT THE SAME WORSE I DON’T KNOW
LOCAL/DOMESTIC ECONOMY
43%
14% 14%
22 T O P 5 0 G LO B A L C H A L L E N G E R S A P P E N D I X
Appendix. Global Titans
Below is a list of the 30 largest wholly-owned family businesses in the world, with revenue data and country of origin.
123456789
101112131415161718192021222324252627282930
Schwarz Group
Koch Industries
IKEA Group
Mars
Love’s Travel Stops & Country Stores
BCD Group
Heraeus
Sonepar
Reyes Holdings
C&S Wholesale Grocers
Bertelsmann
Marquard & Bahls
Frère-Bourgeois Holdings
HE Butt Grocery
CH Boehringer Sohn
Tetra Laval International
SHV Holdings
Enterprise Holdings
Rethmann Group
Meijer
Adolf Würth
Liebherr-International
Ferrero International
Benteler International
Axel Johnson
SC Johnson & Son
Advance Publications
JM Family Enterprises
Wegmans Food Markets
Perdue Farms
$89.4bn
$40.0bn
$35.0bn
$33.0bn
$26.0bn
$24.0bn
$23.5bn
$22.4bn
$22.0bn
$21.7bn
$21.7bn
$21.1bn
$21.0bn
$20.0bn
$18.7bn
$17.4bn
$16.5bn
$16.4bn
$15.3bn
$15.0bn
$12.9bn
$11.8bn
$10.3bn
$9.9bn
$9.9bn
$9.6bn
$8.0bn
$7.6bn
$7.4bn
$6.0bn
Germany
US
Netherlands
US
US
Netherlands
Germany
France
US
US
Germany
Germany
Belgium
US
Germany
Switzerland
Netherlands
US
Germany
US
Germany
Switzerland
Luxembourg
Austria
Sweden
US
US
US
US
US
COMPANY COUNTRY OF ORIGIN
RANK
ING TURNOVER
2014
23T O P 5 0 G LO B A L C H A L L E N G E R S A B O U T
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Research TeamStuart RutherfordDirector of ResearchBrenda O’DonnellResearch ConsultantZuzanna SojkaQuantitative Research ManagerPhilip BlackburnResearch AssociateElisa BarbataDesigner
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their second generation. Campden Wealth further enhanced its international reach and community with the acquisition of the Institute for Private Investors (IPI), the leading membership network of private investors in the United States, founded in 1991 and with the establishment of Campden Family Connect PVT. Ltd a joint venture with the Patni Family in Mumbai, India in 2015.
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Citi Private Bank is a business of Citigroup Inc. (“Citigroup”), which provides its clients access to a broad array of products and services available through bank and non-bank affiliates of Citigroup. Not all products and services are provided by all affiliates or are available at all locations. In the US, brokerage products and services are provided by Citigroup Global Markets Inc. (“CGMI”), member SIPC. Accounts carried by Pershing LLC, member
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