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Family business merger Firmenich

Family business

The anatomy of a merger: ensuring the long-term future of a family firm

Published 17 January 2023 in Family business • 7 min read

To sell, merge, list or delist is a difficult decision that many business-owning families face at some point. Peter Vogel reflects on just such a turning point in the history of Firmenich, a 127-year-old Swiss family business which earlier this year announced its decision to merge with publicly listed ingredients and bioscience group DSM.

Family enterprises are among the oldest and most important organizations in the world, and they play a crucial role in the world economy and society. They are however confronted with unique challenges, many of which are more pronounced in today’s fast-paced, uncertain, and highly volatile environment, with industry dynamics becoming increasingly competitive, requiring families to rethink some of their core principles and beliefs.

To ensure multi-generational unity and success, enterprising families need to successfully navigate these turbulent times by building on their core strengths – a solid financial foundation, strong values, multi-stakeholder decision making, loyalty and a long-term perspective. At the same time, they need to embrace the new world and think about ways to challenge the status quo and think about the most adequate setup for future success.

This was the situation that the Firmenich family was facing, and ultimately led to the announcement in May 2022 that Firmenich had entered into an agreement with publicly listed Dutch group DSM, to merge the two businesses and create DSM-Firmenich. The new entity is “uniquely positioned to anticipate and address evolving consumer needs”, according to a joint statement by the two companies at the time. DSM-Firmenich is set to be an industry leader in nutrition, beauty and wellbeing.

Described as a “merger of equals”, the joint entity will see DSM shareholders holding 65.5% of the new company and Firmenich 34.5%. The agreement will also generate a cash payout of €3.5 billion for Firmenich shareholders. The deal is still subject to customary conditions, including obtaining relevant regulatory clearances and completing relevant employee consultation procedures. DSM has said it expected the merger to be finalized by the end of the first quarter of 2023.

So, what led the Firmenich family to consider this transaction, and what enabled the two parties to get to the point of agreeing that a combination of the businesses was the best way forward? A few weeks ago, I had the opportunity to speak with four members of the family about this important decision – what led to it, how it came about and what is coming next for the family – deriving some important insights for other privately held businesses.

A forward-looking and strategic move

Let’s take a step back and examine the industries each company is in. The flavors and fragrances industry is undergoing a period of transformation driven by shifts in customer needs and the blurring of lines with adjacent industries. This has led to a cycle of consolidation and the entrance of new players in this industry. Despite being the solid industry leader, Firmenich was not unaware of the disruptive forces at play and naturally considered various strategic options to not only maintain their leading position but to actually lay the foundation for an even brighter future.

Moreover, the Firmenich family and as a consequence the number of shareholders has grown over the decades – from 15 in 1990 to more than 40 today. Decision making in a growing shareholder group isn’t always easy and certainly does not get any easier in future generations. However, because of their “business first” mentality the family came to an agreement on this merger to ensure future competitiveness.

Upon the retirement of Boisdron, Patrick Firmenich was elected chairman and the family retrieved what it believes is optimal governance for a family company: a family chairman and a non-family CEO

The family had been talking for some time about the best way forward and had been considering a number of strategic options, including a merger as well as an initial public offering (IPO). Through this multi-year process the family gained expertise and confidence, which served it well when the right offer came along.

The DSM opportunity proved to be well-timed, presenting the company with the kind of positive synergies the family was looking for — something an IPO or a merger with a direct competitor would not have offered. After several months of discussions with DSM, the decision was taken that this was the best way forward for the company and for the family.

By merging with DSM the two companies believe that they will leverage world-class science and complementary capabilities in fragrance, taste, texture and nutrition and will be able to boost innovation in new high-growth segments.

‘Business first’ from the beginning

As in all large families there are different opinions. While some members of the family believed that it would be better to remain private rather than to merge or list, there was no doubt that the interests of the company and the people whose lives depend on it should come first.

Having a solid governance model in place, such as the Firmenich family does, helps to reach decisions effectively. There was a deep understanding among shareholders that they had a responsibility to ensure the longevity of the business, especially for the sake of the company’s 11,000 employees.

While family members admit that there were some difficult discussions over the need to merge with DSM, these always remained constructive, with a policy of open communication in responding to the needs and concerns of all shareholders.

Managing the transition

DSM’s joint CEOs, Geraldine Matchett and Dimitri de Vreeze will be co-CEOs of the combined firm. The board will be led by DSM chairman Thomas Leysen, while Firmenich chairman Patrick Firmenich will serve as vice-chairman of the new entity. DSM-Firmenich will have its corporate principal headquarters and exclusive tax residence in Switzerland.

The fact that Firmenich has had decades-long commitment to good governance – including highly professionalized board and leadership – has been an important cornerstone in facilitating the transaction and is likely to help make the transition smoother than it may be for other firms that may not adhere to the same levels of transparency and professionalism.

Decision making in a growing shareholder group isn’t always easy and certainly does not get any easier in future generations.

The firm has had external members on its board for more than 30 years, and had its first external chairman in 2000, which was a big change for Firmenich. In 2014, it took a further step forward in terms of governance best practice, appointing Gilbert Ghostine as a non-family CEO. To ensure Gilbert would have the freedom to operate independently, the shareholders appointed Yves Boisdron as a non-family chairman. Patrick Firmenich took the role of vice-chairman in what effectively was a “cooling-off” period. Upon the retirement of Boisdron, Patrick Firmenich was elected chairman and the family retrieved what it believes is optimal governance for a family company: a family chairman and a non-family CEO.

What next for the Firmenich family?

With a large shareholder base, it is normal that there are different aspirations. While some will wish to stay together in this new adventure, ensuring that the legacy of the company carries on proudly into the future, others might want to go forward as independents, while those remaining will grab this opportunity to build a new story.

Naturally, family members have some reservations about the future of the family and the company in this new structure with the consensus being that they hope that the culture,

values and sense of belonging of the employees will remain. However, the family knows that in reality their influence will decrease over time and there is an understanding that this is something they will have to accept.

Sustainability has always been one of Firmenich’s strengths and an expression of family values and this is something that we can expect the family shareholders to continue to champion in the new merged entity.

The launch of dsm-firmenich, players and innovators in nutrition, health, and beauty.
Following the announcement of their merger of equals on May 31, 2022, the Company launched a voluntary public exchange offer for all the issued and outstanding ordinary shares in DSM's share capital

Firmenich is the 2011 winner of the IMD Global Family Business Award as well as the 2019 winner of the IMD Sustainability in Family Business Award.


Peter Voegel - IMD Professor

Peter Vogel

Professor of Family Business and Entrepreneurship at IMD

Peter Vogel is Professor of Family Business and Entrepreneurship, Director of the Global Family Business Center, and Debiopharm Chair for Family Philanthropy at IMD. He is Program Director of Leading the Family Business, Leading the Family Office, and Lean Entrepreneurship. Named in the Poets&Quants 2022 list of the best 40 MBA professors under the age of 40, Peter has been published in peer-reviewed academic journals and has written a number of books, book chapters, and scientific and practitioner-oriented reports.


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