Family Businesses Weather the Crisis Better and Continue to Hire
Medium to large family businesses are resilient, and they are persevering in the face of the crisis. The fifth edition of the AUB Observatory on all family businesses in Italy with revenues greater than 50 million euros, promoted by AIdAF (Chapter Family Business Network), UniCredit Group, the AIdAF-Alberto Falck Chair in Strategic Management in Family Business at Università Bocconi and the Milan Chamber of Commerce, points out that at the end of 2012, 58% of medium to large businesses (with revenues greater than 50 million euros) were under family management, a percentage slightly higher compared to 57.4% during the previous year.
In addition, the data confirm that family businesses have increased their number of employees during the long crisis: from 2007 to 2012, employment increased by 5.7%.
The study, by Guido Corbetta, Alessandro Minichilli and Fabio Quarato, is based on the analysis of financial reports from all the 4,249 medium to large family businesses in Italy.
Confirming the resilience of the family-owned model, during the long period of crisis, only 8.3% of family companies were affected by irregularities such as transfers of control, mergers and liquidations, against 10.4% of ownership coalitions and partnerships, 13.4% of multinational subsidiaries and 14.6% of state controlled companies. Nevertheless, it should be noted that between 2007 and 2012, even if the overall number of family businesses on the Observatory's radar remained essentially stable, a good third of them changed, testimony to how the crisis has surely left its mark and is still leaving its mark on the fabric of the Italian economy, but also to the fact that in spite of everything, growth and competition on global markets can occur.
After reacting better than other companies at the initial signs of recovery during the 2010-2011 two-year period, family businesses recorded a decrease in revenue greater than the average in 2012: -2.8% against -1.3%. The data from other companies, however, was influenced by growth (+4.7%) for state companies, which seemed to benefit from a certain protection from the crisis. Not all other types did better than family companies: multinationals, in fact, recorded a drop of 2.9% and companies controlled by private equity were down 4.2%.
Operational profitability of family businesses continued to be greater than that of others (+0.4%), but the gap decreased over time, while the ability to repay debt worsened, measured by the PFN/EBITDA ratio, which was 6.4 compared to 5.6 for other companies of the same size. Lastly, family businesses were confirmed as those less dependent on third-party capital: the ratio of indebtedness dropped to 5.2, from 5.8 in 2011.
"We have identified eight challenges," says Guido Corbetta, holder of the AIdAF-Alberto Falck Chair in Strategic Management in Family Business, "that family businesses have to face in order to revamp their competitiveness: avoid obligatory coexistence between generations, in the form of multiple general directors; plan the succession of top management before it's too late; overcome the glass ceiling that limits the professional growth of women; balance family leadership and a family board; instill a non-family culture; increase the ability to make acquisitions; change the geographical focus of direct investments abroad; and understand private equity."