Monday March 19th, 2018
El Economista en su número del 15 de Marzo publica artículo de Elías Martínez, socio de IMAP Albia Capital
In the realm of the family enterprise, situations in which there is a debate on the company model and on the convenience of opening the shareholders to third partners are not exceptional.
Situations derived from how to finance relevant projects (investments, acquisition of companies, etc), how to give exit to divergent partners or without interest in the future of the company, or disinvestment to create cash, are circumstances in which the entry of an external partner can make sense.
In our professional experience, we have known family enterprises that facing the possibility of approaching ambitious projects, they have renounced to them, valuing exclusively their own available resources and not considering the possible incorporation of new partners, for the fact that they don´t want to lose their familiar character.
This does not mean it is an incorrect approach, but it is a self-limitation and probably if they had valued the alternatives and had shared their efforts, they could have reached more ambitious goals and aims.
There also exist examples of family enterprises that have shared projects with third partners and that have obtained important milestones supporting their familiar character (There are very significant examples in sectors such as automotion, hotels, food, etc …).
Sometimes there is a tendency to confuse being a family enterprise with having 100% of the partners as members of the family.
In general, the potential third industrial or financial partners see the family enterprise as a very interesting alternative, since their philosophy of effort, delivery, passion for the well done things, are typically highly valued characteristics.
For those family enterprises that are in the process of considering the possibility of incorporating external partners, it is advisable to follow some guidelines, which should allow them to value the alternatives and gain the necessary convictions before initiating the search:
Firstly, explain the reasons for which I need an external partner. They can be related to the business or be external (processes of growth, improvement of image, possibility of sale, etc) or intern (generational relief, professionalization, exit of partners, to create cash, etc).
The second reflection is the availability to share the decisions, losing autonomy in the management.
Taken the decision to continue forward, the following step is to define which type of operation is the considered one. Aspects like the volume of resources looked, majority versus minority, implication in the management, permanent or temporary partners, etc, must be clear.Based on it, we will choose solutions more in line with the familiar continuity or the transfer of the majority sale of 100 % of the property of the company, losing the familiar profile.
Choice of the kind of partner, which depends on which is the conclusion of the previous process and that can be of a more financial or industrial profile. Clearly knowing the motivations that move the financial partners (profitability) or the manufacturers (strategic), helps to make the most suitable choice.
As soon as the family has the project clear, what they want or expect from the new partner and what it is ready to offer, it is the moment to initiate the process of search of the potential partner.
To approach an ordered process, to have the company prepared to overcome successfully the examination to which it is going to be submitted by the potential third partners, increases considerably the possibilities of success and improves the internal and external perception of the own company.
Nowadays the financial partners and the industrial groups have abundant liquidity to take part in managerial projects, special interest in those related with family enterprises.
According to the report of the Spanish Association of Capital, Growth and Investment (ASCRI) recently published, the year 2017 was record investment in companies with 4.900 Million Euros invested, distributed in 679 investments.
In size of deals, 86,7 % was of less than 5 million Euros, which is a sample of the interest of the sector in the middle market.
With these numbers the idea that the financial partners are only for big deals is demythologized. The sector has developed enough to be able to affirm that there are investors for the different stadiums of development of the company.
Proof of it is also the information of investment in early phases (Venture Capital) with 519 investments and a few funds contributed of 494 Million Euros (less than 1 Million Euros of average).
The set of national private investors has a liquidity of between 3.500 and 4.000 million Euros to invest in Spanish companies.
Debt Funds whose resources do not contribute as the capital, but as debt, have been consolidated, which does not concern the capital structures and are a good option for the family enterprises that do not want external partners in the capital of the company.
Another information on the investor appetite is that the year 2017 has been a very active year in Spain in corporate deals, with 1.214 operations (according to Thomson Reuters).
Therefore, success and obtaining the incorporation of a new partner to the company is going to depend on having done a suitable internal previous reflection, the quality of the project, the suitable preparation of the company for the landing of a third party and of a professional management of the process.