When ownership and business merge

Can all owner managers raise their red card? moderator Per Rystrøm asked and immediately a forrest of red cards spread. That is how the conference "When ownership and business merge" opened on April 12 2018 in Industriens Hus. The red cards as 80% of the participants handed up testified a strong representation of owner managers at the conference. At the same time, it proves that there is a great interest from the owner managers to learn more about ownership management.

- Denmark must be the world's most attractive country to work in and for. The biggest barrier for creating more growth is the predominant lack of employees - a lack of hands and heads. Another big challenge for businesses to continue growth is unclear rules and political zigzag courses - companies need political agreements that commit the politicians. But the owner managers also face another challenge - the planning of the change of ownership. Many owner managers experience it as a loss of identity when they need to pass on the keys to their company. Owner managers must start thinking about it on an early stage, but there is a tendency to postpone it - and that has major consequences for the business, the growth and the culture of the company. That was the words from the CEO of the Confederation of Danish Industry (DI) Karsten Dybvad who welcomed the participants at the conference.

The strengths and challenges

And exactly the strengths and challenges of the owner managers were themes for Niels Bohr Professor Morten Bennedsen's presentation. Morten Bennedsen has done research for years on how family-owned and owner-managed businesses really achieve their success, and he outlined the essence of family-owned and owner-managed businesses.

- The strengths of owner-managed businesses include their ability to solve challenges, be productive and carry on the business. Ownership resources affect the way in which owner managers operate, and intangible assets have an effect on owner-managed business to a different extent than non owner-managed businesses. The brand, history, value-based management, network, contact with political institutions and regulations of the company can be inherited generation after generation and successful strategies are often based on strong ownership resources, says the research of Morten Bennedsen.

What owner managers face major challenges in is the succession planning - what will happen 10, 20, 30 years in the future? And where is the business going? In addition, changes in demand, capital, digitization, labor, regulation and inheritance tax can also play a part.

Morten Bennedsen pointed out three challenges in connection with the companies' ability to grow: ambitions, changes and delegation. Growth is often not the main priority and there may be a lack of drive to take the company to the next level. Changes such as outsourcing and employee loss, as well as delegation of tasks, can also be difficult elements for owner managers. Finally, Morten Bennedsen mentioned some important take-aways that he wanted the participants and the owner managers of the conference to take home:

- "You are a dominant part of the Danish business industry. You are good at using your strategic strengths. You must acknowledge your limitations and find solutions. And you need to get started with a structured transition planning!"

In order to investigate what the owner managers think of ownership management, the participants were asked to write down three words they think are the strengths of owner-managed or family-owned businesses. The words that were written the most times were words like commitment, passion, long-term thinking, stability, drive and flexibility. Next, the participants were asked to write down three words which they consider to be the biggest challenges for owner-managed or family-owned businesses: generational change, delegation, risk willingness, management capacity, emotions and man power characterized the biggest challenges in owner-managed businesses.

Strong support from the government

The Minister of Finance Kristian Jensen expressed a strong wish from government to support the owner-managed and family-owned businesses. "Family-owned businesses represent the backbone of Danish business and not only the big ones such as Lego, Danfoss, Grundfoss - also the small and medium-sized Danish businesses. In the 90's nobody wanted to be an entrepreneur - today it is trendy and there are several TV-shows revolving around it". We would like from to support these businesses," said the Minister of Finance when he stood on stage to talk about the economic policy of the government and the growth throughout Denmark. "There is a progress in the country's GDP with a growth of 2.2% and a historically high employment rate right now. We will do everything to extend that," he continued.

The Minister for Industry, Business and Financial Affairs Brian Mikkelsen also believed that the government has a commitment to family-owned businesses: "One thing is how the company can prepare for tomorrow's challenges - another thing is how we as politicians can do it. We must ensure the Danish work places". That is why the government has secured better regulatory framework conditions for generational changes in family-owned businesses with the new Finance Act in 2016. The Finance Act included a gradual reduction of the inheritance tax and the government has an ambition to completely eliminate taxation by 2025, said the Minister for Industry, Business and Financial Affairs.

The succesful change of ownership

Later that day a number of Danish businesses came on stage to share their experiences with generational change. The CEO of Nordsjællands Metalstøberi A/S, Marianne Strauss, said among other things, that her employees like continuity and that the company is highly "person-based", which can be a challenge for an owner-managed business. They have also tried having a board and acknowledge the value thereof, but it can also bring a lot of noise and should not be for any price, she said. It is important for the company that they constantly strive to be attractive in relation to a possible sale - if somebody were to make a bid.

A part of the 4th generation, Camilla Haustrup Hermansen, Plus Pack's Director of Business Development and Marketing, said that with a brother as CEO and a father in the Board, being a family-owned business is very important: "We're utilizing the fact that we are family-owned to the max. We tell the story that we have existed for a 100 years and it also makes our employees feel proud," she said. When asked what she and her brother have done to gain authority in the company and not just being their father's children, the answer was clear: "it is about delivering results and that takes time. One has to drive growth and results speak for themselves. Only then the authority to make difficult decisions will be gained".

CEO of Ancotrans A/S, Anne Kathrine Steenbjerge, recognizes the challenges of taking over father's company. She has not only had to change do a generational change with her father, but also the managers in the company who have known her since she was a child.

Assistant Professor at the Centre for Owner-managed Businesses Ellen M. Korsager then revealed how far the Danish owner managers are with their exit planning:

Research shows that two out of three managers have thought about how a change of ownership should look, while one in three has not yet thought about it. Out of the owner managers who have thought about ownership change, 63% are either in the planning process or have prepared a plan while one third has not started planning. In relation to the managers' plans, one out of four is planning a generational change within the family or a sale of the company. 71% of those who have chosen a successor have chosen one whom they are related to, Ellen M. Korsager revealed.

The Centre for Owner-managed Business has developed the ownership strategy map "Ejerstrategi-kortet" which is a planning tool to help owner managers start planning the future ownership and leadership of their business. The owner strategy map provides specific guidelines on how to incorporate future management and ownership in businesses and 1,300 owner managers and advisors have already used the tool.

Thus, messages about challenges and strengths of the Danish owner-managed businesses were the main focus that day. But in particular one message broke through and applies to all Danish owner-managed businesses: owner managers find the challenge of an ownership change difficult but without proper planning, it can have serious consequences for the future of the company.