The recent financial turmoil in many ways might have affected family owned businesses. Be it through the exposure to further specific industry issues/downturn due to a lack of diversification of the family wealth or be it because the available financial reserves have suffered significantly, e.g. due to operational and/or financial losses incurred or working capital surges.
In addition, the Trends Top 30.000 survey showed self-financing of companies in general at its lowest over the last 3 years (2008). While the reasons and sources thereof can be quite diverse (lower profits, more distribution or increased liabilities), self-financing might still be further hit by the effects of the economic crisis in 2009 (and …2010) and this at a moment of increased need of finance. Demand for financial resources is therefore likely to increase in the mid-term (even if funds are available within the company – cfr. Trends Top 30.000, ‘Loans to safeguard savings’ in 1 out of 4 companies).
Any given family business therefore needs to ask itself the existential question on how to continue. Whether it is its ambition to do so on a fully stand-alone basis (and whether from a financial/wealth point of view it is capable to do so), whether (temporarily) a certain level of external capital is required or whether the family wants to sell its business. Even in the first scenario, it is highly likely (and recommended) that the family diversifies its activities and hence is likely to make divestments/acquisitions. Needless to say that in the other scenarios, family businesses are likely to bring new oxygen to the M&A market in the mid-term.
Credit restraints and a weaker operating environment have shifted attention in the sector toward smaller deals, minority stakes, divestitures and distressed targets. The three largest announcements during the first half of the year could be classified as “midmarket” and all related to minority purchases or purchases of remaining interest.
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