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Malta Business Review
FAMILY BUSINESS
Multi-generational entrepreneurs
By Marcela Kunva
Mirabaud family business was founded
in 1819. Today, two of the four managing
partners represent the sixth and seventh
generations of the banking family. Nicolas
Mirabaud, member of the executive
committee of Mirabaud & Cie SA, says:
“The main difficulty with succession is to
ensure the continuity of activity throughout
different generations. You need to be able to
build on the know-how you have acquired,
but at the same time also need to prepare
for the future through innovation.”
Jonathan Giles, who is a managing director
at Rathbone Investment Management
International, agrees and adds: “I find it is
commonplace that there is a lack of clear
and agreed family guidelines on how the
operating company ties in with the wider
family objectives such as philanthropy, next
generation succession and whether the rest
of the family want to be involved in running
the company. I usually recommend, to
families we advise, that they create a family
constitution, which sets out succession issues
and the scope of the family office to support
the business.”
Giles goes on to say that this kind of
constitution needs to address governance
weaknesses. “There needs to be collective
agreement in such a document, which sets
out clearly the authority given to family
members and it is vital to align their passion,
experience and skills with the agreed family
objectives and values. The constitution needs
to be written clearly so the limits of their
authority are established and supervisory
controls are put in place.
According to Khaled Said, who is a founding
partner at private investment office, Capital
Generation Partners, the greatest difficulty is
hiring the right talent to work alongside the
family “For families to have access to the best
investment opportunities across geographies,
sectors and asset classes they will need to hire
quite a large team of specialists, or decide
to outsource to a provider who can focus
on what they need and then manage that
relationship closely,” says Said.
“I find it is commonplace
that there is a lack of clear
and agreed family guidelines
on how the operating
company ties in with the
wider family objectives"
But there are also advantages in running a
family business which, generally will have
fewer external shareholders which means
decision making can be more thoughtful.
Alexander S. Hoare, partner and former CEO
of C. Hoare & Co, says: “None of our partners
have any interest in quarterly earnings,
market share, executive share options and
such drivers at other companies. We share a
long term perspective which makes it easier
to take longer timeline decisions. An example
might be seen in the legacy systems which
successive management teams of clearing
banks have not invested in.”
Like all businesses, a family business will face
risks and there’s a lot that can go wrong. Said
says: “Human risk, investment risk, lack of
rigour or lack of process can really hamper
any family business.” Giles agrees and adds
that with the growth in social media, that
training and guidance from outside specialists
on reputation protection is a worthwhile
investment. “Analysing the digital footprint
of family members to see what exposures
have been created is an important first step.
This creates a digital audit and a remediation
plan to protect the family from, for example,
a cyber-attack or negative headlines.
Educating the family on social media posts so
they understand their vulnerabilities is also
important.” While aware of all the external
risks, Mirabaud also points out that succession
can mean simply losing the entrepreneurial
spirit that ignited the business originally
which he cites as a major risk. Giles adds a
point about family offices and their costs. “On
top of running a business, if there is a sole
family office to manage their investments
then there are large cost implications which
can range from c£2-£4m annually. This means
you need c£300m in ‘balance sheet’ value to
justify such its existence.
Alexander S. Hoare concludes: “There are
many macroeconomic and geopolitical
things that could happen, but our job is to
manage our way through these. Assuming
we prosper during property crashes, through
Brexit, through a Labour government, and
keep out cyber criminals, then what could go
wrong? Answer: a family business can be too
successful, spoil their upcoming generation
and then make bad decisions. In point of fact it
happened to the sixth generation at the bank,
and the seventh generation subsequently
took us off course, simply because they were
spoiled and entitled.” MBR
Credit: Citywealth; Jones Publishing Ltd.
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