Family Businesses - the future of investing?


The FT in a recent opinion piece draws together some interesting data about the performance of listed businesses where family share ownership accounts for a significant proportion of the voting rights and that it "leads to the idea that the family involvement in itself leads to outperformance." Merryn Somerset Webb suggests that "family companies often end up with a stronger sense of social corporate responsibility and long-term stewardship…"

It looks to us that several themes are drawing to together; governance and executive remuneration have been under increased scrutiny recently (not just as result of the Covid-19 Pandemic); there has been a steady increase in interest and demand for ESG investing; and there has been much comment and discussion about business resilience and the pace of growth.

Does investment in family businesses give investors access to companies with a longer term view on growth and investment? With a more social and potentially environmental conscience? Could they meet the demand for sound growth and return but not at any cost?

How can family businesses make the most of this increased interest? We understand that some Private Equity firms have been exploring the family business environment and what investments and returns from those businesses might look like. The article highlights some of the listed success stories, will the capital markets draw those family businesses looking to the next stages of growth?

Family businesses looking to capitalise on investor interest need to think careful about how their investors' financial ambitions align with the company's brand purpose. How will investor interests and demands impact governance and decision making, succession planning?

Finally, how might businesses that are not family owned look to engender some of the values that family businesses are said to hold? How can entrepreneurs look to their work-forces and communities to build resilient businesses interested in long term growth?

We will look to explore some of these issues in more detail over forthcoming posts….

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Family values are well worth following for investors Every study I know suggests that listed family firms outperform