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Family business


In business as in life, relationships matter – especially when family is involved

Published 13 March 2024 in Leadership • 6 min read

IMD’s Peter Vogel outlines three lessons that non-family leaders can learn from the Sika takeover battle.

The longest corporate takeover battle in the history of Switzerland pitted Sika, a domestic chemical manufacturer, against Saint-Gobain, a French conglomerate. The seed of this dispute wasn’t a clash between competitors, but rather the loss of trust between the business’s family owners and its non-family leaders.

Sika was a very successful family-controlled firm from 1910 until the 1990s, when the Burkard family gave up the reins of the company and stepped back from operational leadership. Yet, through their investment vehicle, the Schenker-Winkler Holding (SWH), and under a dual share structure, the family continued to own 16.1% of the capital and controlled 52.4% of the voting rights and had three (out of nine) board seats in the operational entity.

After several years of perceived exclusion from the running of the business at the hands of non-family leaders, majority voting rights enabled the next generation to take matters into their own hands, and in 2014, just one year after their mothers’ death, they signed an agreement to sell the shares to Saint-Gobain at an 80% premium on top of market value.

The announcement that Saint-Gobain had acquired the Burkard family’s shares, thereby becoming the majority shareholder, came as a complete surprise to Sika’s board of directors and management. The resulting takeover battle continued until 2020. But what made a family who had pledged their commitment to the company at the 100th anniversary of its foundation, suddenly decide to sell their shares in secret just a few years later?

The answer is obviously complex and involves many factors. But one factor that stands out is the loss of trust between the family members and the board of directors. It would appear that both sides neglected investing more into nurturing these relationships; to such an extent that it broke down irreparably, leading the family to turn their backs on the business. The Sika case provides other family business leaders with valuable lessons as to how carefully they should navigate the relationship with family owners:

  • Non-family leaders must understand the importance of maintaining a healthy dynamic between family owners, board members and management.
  • They should be aware of the delicate nature of these relationships and how mishandling can easily cause them to become fraught.
  • They should prioritize these relationships, putting significant time and effort into keeping family owners on-side in terms of the direction of the business.

Lesson 1: Maintain a healthy dynamic

Leaders of a family-owned business must maintain the relationship dynamic between family owners, the board, and the management. For non-family leaders, that means ensuring that lines of communication are always open and that family members’ ideas and opinions are treated with respect, in order to nurture a trusting relationship. It also involves confirming that all sides are working toward the same goal. So, there should be clarity on governance, and the roles and responsibilities across the different stakeholder groups.

Of course, it lies with the family owners to provide a clear ownership strategy and family governance, including family employment policies and proactive succession planning. But it’s up to the non-family professionals – the board and the management – to support these policies as part of a strong, supportive business relationship.

Lesson 2: Relationships must be continuously nurtured

The Sika case illustrates the problems that can occur when transitioning from a family-led business to a professionally led enterprise: the relationship between family owners and non-family professionals can easily become fraught.

coffee break
To nurture such relationships, it is important for the non-family leadership team to have a personal, rather than simply a business, connection with family members

When Sika transitioned to an 84% public shareholding, the focus of non-family leaders naturally shifted onto pleasing that majority. In so doing, however, they failed to maintain the relationship with the anchor shareholder – the family owners. Although the family had a minority share of the business, they still held the majority of the voting rights. This empowered the Burkard family to discreetly sell their shares to Saint-Gobain, without feeling compelled to consult the board first. This caused such a stir in Swiss business circles that the value of the shares of many companies with a similar ownership model dropped by up to 25%. Meanwhile, the Sika board retaliated by limiting the family’s voting rights to 5%, as per Sika’s corporate code – thereby triggering a drawn-out takeover dispute.

The Sika story illustrates the importance of these relationships. Had that drift been prevented, it is likely that the family would have at least consulted the board before going ahead with the sale. This is why one of the core responsibilities of professional managers and board members in a family-controlled enterprise is to maintain alignment of family and non-family leadership.

Lesson 3: Non-family leaders should prioritize relationships with family owners

To nurture such relationships, it is important for the non-family leadership team to have a personal, rather than simply a business, connection with family members. This requires time, effort, and possibly a little sacrifice in order to make the family feel that the business’s leadership is really on their side.

In the case of Sika, problems arose when family members began to feel that they no longer had a voice in their own business. It can be argued that the family should not have relinquished control so easily but it behooves non-family leaders to ensure that no family member feels left behind or left out – especially if those family members continue to enjoy majority voting rights. The competitiveness, drive and sometimes ruthlessness may all be necessary qualities of a business leader when dealing with rivals, but these are not appropriate when dealing with the family that is at the heart of the business.

The C-suite and board members in a family enterprise must accept a high degree of responsibility for stewardship of the business. They must show humility when interacting with members of the family that, after all, started the business, and respect its legacy and traditions, as well as the way the family wants to run things in future. In short, communication and trust are the keys.

Key takeaways

Keeping a close relationship with the family is good for business.
In a hard-nosed business environment, it may seem counterintuitive, but in a family-owned enterprise, the family must come before the business. After all, it is the family that will decide the future of the business and a loss of trust and respect could have dire consequences.
Non-family leaders should not underestimate the power and independence of family members.
Assuming that the family will sit back and allow its paid representatives to call all the shots can result in their pulling the rug from under the leadership’s carefully planned arrangements.
Non-family leaders must strive sensitively to maintain relationships with family members.
The skills that leaders rely on at the negotiating table are not the same as those required for the internal management of a family-owned enterprise. A non-family leader must deploy diplomacy, and show humility and respect to become a trustworthy steward of the business in the eyes of the family owners.
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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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