The possible next IPO from one of the leading family businesses: Puig. Reference as a company and as a business family. Founded in the early 20th century, expanded and internationalized by the four brothers of the second generation, with the third currently in government and the fourth coming of age.
The company of the founder is not the same as that of brothers or cousins, not to mention first cousins. As generations pass, the law of entropy causes increasing detachment and divergent visions if action is not taken to maintain unity. DNA does not guarantee the transmission of business capabilities, Therefore, it is to the benefit of the owning family that, if the business grows and they wish to continue with it, the management and even the government are outsourced, as a better guarantee of the professionalism of both. The ideal is that “neither the company needs the family, nor the family the company.”
Liquidity or new resources
When the company acquires a certain size, it can be considered whether to also externalize part of the property, entering into a fund or going public. When planning the generational change, it may be one of the options to take into account. The listing of the family business is the maximum expression of its professionalization. Independent governance structures (board of directors) and maximum transparency are required. Going public gives liquidity to shares, facilitating the always complicated determination of its value, and allows access to a market for buying and selling. Although both may have different objectivity and ease depending on whether they are listed on the continuous or alternative market.
Some do not contribute for fear of losing the reins. Others, however, plan to maintain them even if they are in the minority.
The exit to the stock market can be with existing shares, to simply provide liquidity, or with the issuance of new ones, to obtain resources. An important question that the business family must ask itself when going public is with what percentage of the capital to do so, what is technically known as free-float. In Inditex it is above 25%; in Cementos Molins, over 10%. If it exceeds 50%, the family runs the risk of losing control, although there are business families such as the pharmacist Reig Jofre who plan to maintain the reins while being in the minority. Some business families they don’t quote because of that fearis the case of Corporación Alimentaria Guissona (although the Alsinas claim that it is not a family business) when it decided to stop the IPO process.
A listed family business is not the same as an unlisted one, a board of directors or a general meeting with your dad, aunts and cousins is not the same as without family members. The listed company has a more short-term vision of profitability and risk assumption, compared to the long term, the continuity and prudence typical of family companies. The manager has more power, more information is shared, the objectives are clearer. Decision processes are more professional and rational, in principle (“all that glitters is not gold”). There are many shareholders and they have the easiest way out. There is a greater tendency towards debt and dividends, compared to the self-financing and reinvestment that characterizes family companies. The duration of the positions is shorter than the “eternal” family ones.
emotional bonding
A study by Credit Suisse and Thomson Reuters shows that listed family companies are consistently more profitable than non-family ones. Surely because family control stops the excesses into which purely investing can fall, as the Enron case reminds us. The listing of the business family, if it wishes to continue being owners in the long term, must take care of the emotional connection and pride of belonging of the shareholders, so that they also wish to continue being owners of a profitable company with a future.
The control of the different members of the clan stops the excesses into which purely investment firms can fall.
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But the vast majority of family businesses They do not even have the size to quote in the market secondary. So, what can they learn from those on the stock market? Good governance practices, which lead to avoiding endogamy, nepotism, secrecy, short-termism, and confusion (of capacity and ownership, of cash, after dinner with the council).
The founder of Puig told one of his sons: “In life there are five important stages: learning to do, doing, teaching to do, doing and stopping doing.” Perhaps with the IPO they will reach the fifth stage as a business family.