succeeding for generations...succeeding for generations 2. the eight key areas (2) managing capital...

Succeeding for generations

Current thinking in Family Owned BusinessesLviv, 4 June 2013

Heinrich Christen


What makes family businesses stronger


1. What makes family businesses exceptionally successful ?

Family

Business

Managingcapital

Sustaining growth andprofitability

Managing and retaining talent

Culture and responsibility

Balancing risk

Nextgenerationplanning

Effective tax management

Future management

structure

The growth DNA of family business


2. The eight key areas (1)Future management structure

► Family or Business First Strategy ?

► Selection of key people

► Contingency management

► Family charter

► Non-family executive appointments

► Organizational design

► Governance

► Ownership decisions


2. The eight key areas (2)Managing capital

Financing growth strategies

Operating capital management

Restructuring and refinancing

Portfolio optimization

Preparing for IPO

MBOs/MBIs

Private-equity investments

Exit and trade sale

► Capital needs for future growth► Equity vs. debt► Debt ratios► IPO on the horizon?► IPO readiness► Asset allocation► Wealth allocation


2. The eight key areas (3)Sustaining growth and profitability

► New product development

► Penetrating new markets

► Penetrating new sectors

► Expanding resources

► New cooperative processes

Expansion decisions

Investment instrumentsLong-term aims


2. The eight key areas (4)Managing and retaining talent

►Bring "outsiders" into the family circle►Recruiting and retaining family

and non-family talent►Increasing motivation

(incentives)►Creating an employee-built

brand►Developing the culture and

values of the business for generations to come


2. The eight key areas (5)Culture and responsibility

►Corporate culture►Corporate social responsibility►Professional philanthropy►Foundation establishment


2. The eight key areas (6)Balancing risk

►Risk attitude/risk appetite►Balance ►Protecting your assets►Risk evaluation►Conflicts of interest►Big risk: divorce►Governance►Compliance


2. The eight key areas (7)Next-generation planning

Future ownership stakes/

company management

Inheritance taxGovernance

Conflicts

Emotional transition process

Mentoring

Handing over the reins

►Who will run the business in the future?►Who is deciding this?►What are the criteria?►Late parenthood syndrome vs.

ever earlier exit dates


2. They eight key areas (8)Effective tax management

► Personal tax

► Corporate tax

► International issues/transfer pricing

► Family trust management


The Big Mistakes of FOB

► No clear strategy

► Lack of open and constructive dialog in the family► Lack of open and constructive dialog family - management

► Loyalty over competence► Unrealistic cash drawings from company

► Involve the family too little and too late. Neglect the history.► Start succession planning too late: reduced time limits your options and your

margins of error► Succession planning too narrow: think of all options!

► No significant outsiders on the board/lack of professional corporate governance


The Must Do‘s

► Develop a clear family AND a business strategy

► Address conflicts of interest in an open way!

► Develop a family charter and live the process. Special focus on entry process and promotions. Accept that the process can be long, sometimes cumbersome and not linear !

► Develop a diverse and competent board with FOB owners AND corporate experiences

► Do SHAs and marriage contracts as early and clearly as possible► Develop clear rules for employment and remuneration in the FOB► Get a strong outsider as a moderator for the family if necessary

► Develop a clear talent policy. Competence first!

► Cultivate your family rituals and your family history


The Must Do‘s (2)

► Educate the young ! Educate and involve the in-laws! ► Running a FOB is not always fun – prepare yourself for the pain and find a

friend to cry to !► Before entering the FOB, do your own Due Diligence diligently: do I really

want this ? Can I do this? what if it goes wrong?

v Do not forget: a healthy non-family business is better for all involved than a sick family (business)!


Appendix: Ernst & Young and Family Owned Businesses


4. We are involved in research and teaching on the subject of family business

► Regular studies on the situation and opinions of family businesses

► Chair of family business at the University of St. Gallen

Our extensive experience is enhanced by academic research into every aspect of the fascinating subject of family business.

We regularly publish studies that examine the challenges faced by and the outlook for family businesses.

In addition, we pass on the knowledge we have accumulated to others: to this end, we have set up a chair of family business at the University of St. Gallen, Switzerland.


4. Entrepreneur Of The Year: the largest family business network in the world

We gain valuable insights into families and their businesses, not least as the initiator of:

► Entrepreneur Of The Year

This annual international business award, which we established in 1986, involves several categories with events in over 50 countries.

The finalists and winners provide particularly striking examples of strategies for long-term success.

Many countries have now a Family Business Award.

Entrepreneur Of The Year:also a platform for family businesses


5. Helping the next generation: With Ernst & Young's Junior Academy

Can you inherit entrepreneurial spirit? Children from family businesses can find out at Ernst & Young's:

► Junior Academy

This exclusive programs allow the young people from successful family businesses and children of Ernst & Young entrepreneurs to put their business abilities to the test and take them to the next level. We offer Junior Academy courses worldwide in cooperation with well-known business schools.

The programs are organized by age group:

► First Program (16–20)

► Advanced Program (21–25)

► Excellence Program (26–30)

“Before I did the program, I had a vague feeling that I should join the company. Now I know that I've actually got what it takes."Joachim

"It was hugely important for me to see that there are lots of different types of management approach. I only knew my father's." Sindy


6. We offer networks and platforms for people to meet and exchange views

Exchanging views with companies in a similar situation and facing similar issues has opened up new perspectives for many of our clients.

We are therefore committed to hosting various events at which we not only provide information but also give our clients an opportunity to exchange views with people from other family businesses.

Our activities in this area include:

► Roundtable discussions, which we offer in cooperation with partner companies

► Our Entrepreneur Of The Year program

► Weekend event and annual study trip to an emerging market as part of our Entrepreneur Of The Year program

On request, we can also put you in touch with companies similar to your own.


7. We open doors for you worldwide

Ernst & Young is a global organization with 152,000 employees in 140 countries.

Wherever you do business, or intend to business in the near future, we are close at hand. Whether you need support to enter new markets, pave the way for your IPO or gain rapid access to information on urgent customs issues: the answer to your questions only a phone call away.

Ernst & Young:present and at your service in 140 countries around the world



In addition to many local offices, we have "door openers" to four of the world's most important markets through:

Our competence centers for

► China

► India and

► Russia

Multilingual staff at these four facilities can help smooth your way into new markets.

Our local know-how and contacts are your fast track to new markets worldwide.



In addition, companies from the DACH region have access to over 30:

► German-speaking Business Centers (GBCs)

located in the key centers of business around the world.

Leveraging their in-depth understanding of the local situation, their valuable contacts and their knowledge of the local language, our GBC colleagues help you achieve your goal as quickly as possible.


8. Your contact at Ernst & Young is also an entrepreneur

Your advisor will be a partner at Ernst & Young and therefore also a stakeholder in the company. The fact of also being an entrepreneur and having responsibility means that the advisor is in a better position to understand and advise companies.

Whether your focus is on revenue, next-generation planning, or managing and retaining talent: the topics that interest you are the topics that interest your contacts at Ernst & Young. Their day-to-day experience as entrepreneurs, together with their experience gained in many successful projects, make them invaluable advisors for families and their businesses.


9. Your industry is our industry

Every industry has its own specific challenges. That is why we have a global network of dedicated teams for each industry.

Each team focuses exclusively on the current situation in its particular industry, the associated issues and the best approaches to solving them.

Our industries

► Consumer Products

► Automotive

► Cleantech

► Financial Services

► Government & Public Sector

► Life Sciences

► Media and Entertainment

► Mining and Metals

► Oil and Gas

► Private equity

► Power and Utilities

► Real Estate

► Technology

► Telecommunications


10. All the benefits – a single point of contact: our Family Business Center of Excellence

We have pooled our knowledge of what makes today’s family businesses strong and successful in our:

► Ernst & Young Family Business Center of Excellence.

This global network of teams is dedicated exclusively to family businesses and the specific challenges they face.

What this means for you:

Your central point of contact gives you access to all the benefits of our extensive competencies in family businesses and our global network.

Ernst & YoungFamily Business

Center of Excellence

Central advisor Advisingcompany

Upd

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on

rele

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ange

s Ju

nior

Aca

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y


Some of the family businesses we serve

Adolf Würth Gmbh & Co., Germany

Artsana Group,Italy

Barceló Corporacion Empresarial, SA, Spain

Bauda, Norway

Bemido SA,Switzerland

BYGMA Denmark

Jason Shipping ASA, Norway

Choice Hotels Scandinavia, Norway

Cofra Holding AG, Switzerland

De Agostini Editore SPA, Italy

De’ Longhi S.p.A., Italy

Dr. Alexander Wacker Familiengesellschaft mbH,Germany

Eitzen Maritime Services 12), Norway

Esteve SPA, Spain

Ferd Holding,Norway

Fiat SpA,Italy

Fleggaard Holding, Denmark

Geobra GmbH & Co KG/Brandstaetter Group (Playmobil), Germany

GK Konsern,Norway

Globus Holding GmbH & Co. KG, Germany

Hunter Douglas N.V.,The Netherlands

Italmobiliare S.P.A.,Italy

Jacobs Stiftung (Adecco, Barry Callebaut),Switzerland

JC Decaux Sa, France

Johan G Olsen, Norway

KIRKBI A/S, Denmark

Liebherr-International SA, Switzerland

LVMH Moët Hennessy Louis Vuitton, France

Maxingvest ag, Germany

MøllerGruppen, Norway

Obeikan Investment Group, Dubai

Olav Thon Eiendomsselskap ASA(Thon Gruppen), Norway

Oras Investment Oy, Finland

Peterson, Norway

Porsche Automobil Holding SE, Germany

Porsche Holding GmbH, Austria

Ramsbury Invest AB (H&M Hennes & Mauritz AB), Sweden

Red Bull GmbH, Austria

Rockwool A/S, Denmark

Edmond de Rothschild Holding SA, France

Schaeffler Gruppe, Germany

SGS SA, Switzerland

Soc Financiere Yves Rocher, France

Tengelmann Warenhandelsgesellschaft KG

Tetra Laval Holdings B.V., The Netherlands

Torghatten, Norway

Torvald Klaveness, Norway

Umoe, Norway

Visma, Norway

Wal-Mart Stores Inc., USA

Wendel Investissement Holding, France


Ernst & Young: Facts and figures III. Three foundations for lasting success

We advise your company andyour family on virtually every conceivable issue

► With services specially tailored to the requirements of family businesses

► To promote lasting improvements in your company’s performance

► In family conflict situations

► For the long term, wherever possible

► We are happy to work with your current consultants/financial team

We provide up-to-date information from the fields of finance, tax and law

► We regularly inform you of any changes in areas relevant to your business

► We show you proven best-practice strategies from our engagements worldwide

Our team is part of a global network with 152,000 members in 140 countries

► No matter where you do business, we are close to hand

► Take advantage of our local know-how, our contacts and our knowledge of the local language

► We have special Ernst & Young competence centers and German-speaking Business Centers in more than 30 countries

Advisory services

Information Network


Ernst & Young: Facts and figures IV. Our services, our aims

Our service lines

► Assurance

► Tax

► Transaction Advisory Services

► Advisory Services(risk management and IT advisory services)

Our network

► 152,000 employees in 140 countries

► 22 offices in Germany with 7,000 employees

► Special competence centers for key markets worldwide

► Global Alliance Partner of the Family Business Network International (FBN-I)

Our aims

► To enable your company to unlock its potential

► To promote maximum performance

► To foster long-term cooperation

What sets us apart

► We support all stages of your projects, including implementation and final completion

► We offer full or partial services, as required


1. We understand what motivates families and businesses

Family businesses face considerable challenges. Our aim is to build on your strengths and help you compensate for any potential weaknesses – in other words, to strike a balance that nurtures and leverages the best aspects of family and business.

In order to give these two areas equal consideration, our services adopt:

► A comprehensive approach

and are tailored to the particular requirements of the company and family members.

We regularly showcase the issues that motivate family businesses in our exclusive Entrepreneur magazine.

Family

Business



Owners of family businesses are often under particular pressure because they are not only committed to their company’s success, but also have to take into account the family's traditions and interests. This often leads to conflict situations.

Desire for outstanding business performance

Desire for family participation based on mutual agreement

Family obligations

► Managing family assets

► Upholding family values

► Structured family involvement

Business obligations

► Operating result

► Solid management mechanisms

► Maintaining control by the familyFamily

Business



Our advisory services on the family side

► Income/capital planning

► Planning for retirement

► Transaction planning

► Capital formation and transfer of assets

► Planning philanthropic activities

► Establishing and managing trusts/foundations

► Emotional transition processes

► Planning tax risk

► Tax and legal questions regarding income, real estate, endowments, trusts and inheritance

► Planning tax migration

► Cross-border investments and transactions

► Real estate portfolio: advisory services and management

► Arbitration in family conflicts



Our advisory services on the business side

► Financing growth

► International expansion

► Corporate governance

► Financial reporting

► Exit and trade sale

► Risk management

► Operating improvements

► Business valuations

► Audit services

► Portfolio optimization

► Transactions

► Supply chain optimization

► Human resources management

► Succession planning

► Tax compliance and tax disputes

► IT security

► Climate change and sustainability

► Clean technologies and ethical business practices

Erfolgreich über Generationen

2. We know what makes family businesses exceptionally successful

The success of a family business is not just a matter of luck; it is the result of a series of sound decisions.

Each family business is unique. Over the years, however, we have found that exceptionally successful family businesses are particularly strong in:

► Eight key areas

Our advisory services therefore aim to help you achieve lasting improvements in your company's performance in precisely these areas, enabling you to achieve outstanding success.

The most successful family businesses concentrate on the following eight areas…


And finally, a few word about our beginnings:Our history

1848Founding ofWhinney, Smith & Whinney

1894Founding ofStuart & Young

1903Founding ofErnst & Ernst

1903Founding ofArthur Young & Co.

1989Merger ofArthur Young and Ernst & Whinney to form Ernst & Young

1979 Merger with

Whinney Murray, Ernst & Ernst and Turquands

Barton Mayhew to formErnst & Whinney

1913 Founding ofAndersen, DeLany & Co.Arthur Andersen

2002Merger withArthur Andersen

Name change toErnst & Young AG

1995Datag teams up with Schitag Ernst & Young-Gruppe

1997Merger ofSchitag Ernst & Young Deutsche Allgemeine Treuhand AG with Ernst & Young GmbH

1991Schitag

becomes partner of Arthur Young & Co.

1919 Founding of Schwäbische Treuhand Aktiengesellschaft Schitag

Founding of Allgemeine Treuhand AGDatag

1999Name change toErnst & Young Deutsche Allgemeine Treuhand AG


Heinrich ChristenPartner in charge of Entrepreneur Of The Year

Head Center of Excellence Family-Owned BusinessesErnst & Young Ltd.Maagplatz 1CH-8010 ZürichTel +41 58 286 34 85Mobile +41 58 289 34 85Fax +41 58 286 30 00eMail [email protected]

Contact:

mailto:[email protected]

succeeding for generations...succeeding for generations 2. the eight key areas (2) managing capital...

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