Family Business Owners (FBO): the formula for success for family businesses

Marc Vankeirsbilck - Regional Director South West Flanders

For many years now, Degroof Petercam has had a strong focus on family businesses via its '

Family Business Owners

' (FBO) teams. This FBO approach works and has turned out to be a formula for success that provides real added value for family businesses. As a consequence, family business owners-entrepreneurs are increasingly making use of

the expertise within these teams

. We asked Vincent Jamaer, Executive Director Corporate Finance, about the current state of affairs regarding FBO. We will gain insight into how the FBO team works for owners-entrepreneurs.

Family businesses often regard us as being part of the family: our enterprising DNA and discretion are the most important reasons for this.

Our network for family businesses extends far beyond our borders

Our Executive Director explains: "With a Corporate Finance Team of 27 dealmakers in Belgium, we are one of the most active players on the Belgian market. With our regional offices, we have a local presence and can work together closely with our clients. The private bankers within our group are a precious link within this local FBO approach. On the other hand, Belgian family businesses are also increasing their international activities; therefore, the vast majority of our work contains a cross-border element.

It is exactly for this reason that we have been expanding our teams in Paris, Amsterdam and Luxembourg in recent years and we also joined the international IMAP network, a collaboration of investment banks and boutiques with a similar approach, several years ago. In this manner, we want to remain close to our clients, literally and figuratively and still offer our clients a good service beyond our borders." And he adds: "Our proven expertise in the area of mergers and acquisitions, valuations, debt restructuring, bond issues and capital market operations is now being acknowledged both in Belgium and abroad. Nevertheless, it is mostly our enterprising DNA and discretion that ensure that family businesses regard us as part of the family."

The pandemic and our activities for family businesses

"The Covid-19 situation has had a major impact on our clients." Vincent confirms, "as well as on the activities that we carry out for them. Practically every one of our clients has had to adjust to the changed circumstances. The Covid-19 outbreak, and all of its consequences, was one of unprecedented scope and with a strong element of surprise. The impact thus affects everyone.

Although there are clear differences concerning the context and the needs, for which Degroof Petercam always seeks to provide customised solutions." Vincent clarifies his point of view: "Obviously, there are companies in this economic situation that are being struck. We see many cases where the cash flows are negatively affected very abruptly and therefore, unexpectedly. Depending on the buffers that the company built up in the past years, this can create a precarious situation. In these cases, we act as a partner for these clients.

As a long-term partner, they can also count on us in difficult times. We provide advice to our clients on debt restructuring, a capital increase, negotiations with banks and co-shareholders, to help them make it through this period. In this context, our complete independence is essential for our clients and gives them the necessary confidence. On the other side of the spectrum, there are also clients whose business has received an extra impulse due to the Covid-19 situation, such as certain scale-ups, technology and healthcare companies with a valuable product range in these exceptional times.

They also rely on our expertise to be able to capitalise on and, if possible, accelerate this growth. In this case, it will be more of a challenge to sustain the increase when the pandemic blows over, and the market stabilises.

Many other family businesses pressed the pause button, and the lockdown provided extra time and opportunity for the owners-entrepreneurs to reconsider their business. At present, many owners-entrepreneurs are interested in re-examining their strategic considerations together with our experts to assess the feasibility and timing." Vincent Jamaer concludes that, in general, the activities and our interaction with clients increased instead of decreased during the Covid-19 lockdown.

That many family businesses are still calling on our expertise today, strengthens our ambition to serve them even better.

The activities for family businesses increased during the corona crisis

Increased? That's remarkable, and this in a period in which the activities of family businesses declined and M&A activities plunged worldwide. How is this possible? Vincent explains: "In this crisis, we see the confirmation that we act as a real trusted advisor for our clients in the long run, and therefore also under any circumstances. Our reputation is one of confidentiality, integrity, independence and professionalism. We are close to our clients, and we are flexible and financially stable. These values are even more important in times of unforeseen circumstances or when one is confronted with certain high impact events. The pandemic led to these unforeseen circumstances; while Degroof Petercam provided for trusted support. We are not only being consulted for ad-hoc Corporate Finance advice but even more so as sparring partners to help define the company's strategy for the future.

Consequently, there is more of a recurring element in our work than one another would expect. Clients do not regard us as consultants or project managers, and we are not selling them any specific products. With our expertise, many owners-entrepreneurs regarded us more as 'travel companions'. They know that our advice is objective, that we have an independent view, and that what we discuss remains confidential. So, it provides the necessary assurance to discuss matters freely. And when the company comes to take critical strategic decisions, we provide tailored solutions. Vincent Jamaer realises that it is privileged to be so close to entrepreneurs.

He concludes: "During more difficult times, it is our sincere intention to help our loyal partners (as this is how we view our clients) navigate these rough seas and define and execute their long-term strategy. That many family businesses also call on us today, strengthens us in our ambition to serve them even better."

The work of an investment banker after corona

What about the period after corona? New times? What effect is the pandemic having on the field in which you work? Vincent Jamaer sheds light upon the many questions. He continues: "In the period after corona, a new 'normal' could still probably arise about cross-border mergers and acquisitions. If a de-globalisation trend should unfold, we expect that companies will want to restructure their supply chains with a focus on domestic purchases. A playing field will thus arise in which transactions could be triggered faster.

On the one hand, there will be companies whose performance will have lost its lustre due to the impact of Covid-19. A climate with weaker competitors always offers the opportunity for consolidation by more powerful market players. In this context, opportunities will arise for potential buyers. On the other hand, many entrepreneurs take the time - when their companies are closed, or their business activities have declined - to re-examine their business and their future strategy. They often do that in combination with in-depth personal reflections during a lockdown on health, family, work-life balance, succession, etc.

In our experience, this often leads to a more open attitude towards the possibility of external shareholders and selling the company ultimately." "And what about the M&A activities?" They will most likely pick up in the second half of the year. For companies with permanent restarting problems, our debt advisory and capital restructuring services will continue to be relevant to create the necessary liquidity. Although, indeed, family businesses generally score well on resilience.

M&A activities and valuation developments

Vincent Jamaer believes that M&A activities may pick up in the second half of the year, but what about valuation developments. An essential question for the Executive Director. He clarifies: "It is undoubtedly still early days to make any firm predictions about this. Many factors influence valuations. That the upward trend in the past years, with high valuations for nearly every company, will not continue unabated is understandable.

However, we think that valuation levels between companies will start to vary more, given the significant differences that we now see between companies. For instance, the corona situation exposed the weaknesses of the business operations of some companies and/or their sector. Therefore, it is likely that this will hurt their valuations firmly and rightly so. However, other companies used their knowledge and expertise to demonstrate their flexibility and/or creativity and were able to capitalise on the changed circumstances and make steady progress financially. It that case, it would be bizarre to revise the valuation estimates downward. Even when there is a one-off negative impact on the financial results due to Covid-19, it's probably regarded as exceptional. Therefore the valuation does not have to implode.

Apart from the company, the economic climate will also play a decisive role. The expectation that both consumption and investment levels will remain low - as long as there is still uncertainty - can also affect the sentiment. However, due to the monetary policy in recent years, there is still a lot of liquidity in the market. Parties such as Private Equity funds continue to look for opportunities to put this money to work and by doing so also support valuations. However, an important question remains regarding how banks will deal with new funding requirements of potential buyers to finance acquisitions. Since this also has an essential impact on the valuation aspect."

Selling your company before or during the corona period

Do you wish to sell your company? Before or during the corona period? Vincent advises: "The Covid-19 situation has, understandably, led to worry and anxiety among many, and that often has a paralysing effect. However, when you are considering selling your company, it is never too early to start preparing for this. Such a preparatory phase can prove to be very valuable. It may not only provide added value financially, but thorough preparation will also lay the groundwork for deal certainty and a less time-consuming acquisition process.

Like running a business, it is critical to think ahead and look for the future. Just focusing on the pandemic seems not the best thing to do. Together with a large number of family business entrepreneurs, we are also using this period to prepare the company for the future. Allowing external parties to become shareholders in family businesses is usually prompted by succession issues, personal wishes of the shareholders or strategic considerations, and these have not changed as a result of the corona crisis. Consequently, we consider it more logical in those cases to focus on analysis and preparation than to postpone the whole preparation. That the preparatory process would then take longer is not a problem whatsoever. After all, we are in it for the long term."

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